Table of Contents

 

 

 

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

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**FORM 10-Q**

 

**(Mark One)**

 

| **x** | **Quarterly report pursuant to Section 13 or  15(d) of the Securities Exchange Act of 1934** |
|-------|--------------------------------------------------------------------------------------------------------|

 

**For the quarterly periodended September 30, 2010**

 

| **o** | **Transition report pursuant to Section 13 or  15(d) of the Securities Exchange Act of 1934** |
|-------|---------------------------------------------------------------------------------------------------------|

 

**For the transition periodfrom             to             **

 

**Commission File Number:000-19889**

 

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**South Hertfordshire United Kingdom Fund, Ltd.**

(Exact name of registrant as specified inits charter)

 

| **Colorado**  (State or other jurisdiction of incorporation or organization)           | ** ** | **84-1145140**  (I.R.S. employer identification no.)       |
|----------------------------------------------------------------------------------------|------------|------------------------------------------------------------|
|                                                                                   |       |                                                       |
| **Media House, Bartley Wood Business Park, Hook,  Hampshire,  RG27 9UP, England** | ** ** | **+ 44 1256 75 2000**                                      |
| (Address  of principal executive offices)                                              |       | (Registrant’s  telephone number, including area code) |

 

Indicate by check mark whether the registrant(1) has filed all reports required to be filed by Section 13 or15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was required tofile such reports), and (2) has been subject to such filing requirementsfor the past 90 days. Yes x No o

 

Indicate by check mark whether the registrant hassubmitted electronically and posted on its corporate Web site, if any, everyInteractive Data File required to be submitted and posted pursuant toRule 405 of Regulation S-T (§232.405 of this chapter) during the preceding12 months (or for such shorter period that the registrant was required tosubmit and post such files). Yes o No o

 

Indicate by check mark whether the registrant is alarge accelerated filer, an accelerated filer, a non-accelerated filer, or asmaller reporting company. See the definitions of “large accelerated filer,” “acceleratedfiler” and “smaller reporting company” in Rule 12b-2 of the ExchangeAct.  (Check one):

 

| Large  accelerated filer o              |   | Accelerated  filer o              |
|----------------------------------------------|--------|-----------------------------------|
|                                         |   |                              |
| Non-accelerated  filer x                |   | Smaller  reporting company o |
| (Do  not check if smaller reporting company) |   |                              |

 

Indicate by check mark whether the registrant is ashell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

 

The number of limited partnership units of theregistrant outstanding as of November 5, 2010 was 56,935.

 

 

 

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Table ofContents

 

**TABLE OF CONTENTS**

 
| ** **    | ** **                                                                                                            | **Page  Number** |
|---------------|-----------------------------------------------------------------------------------------------------------------------|------------------|
|          |                                                                                                                  |             |
|          | **PART I.  FINANCIAL INFORMATION**                                                                               | 5                |
| Item 1.  | Financial  Statements                                                                                                 | 5                |
|          | Condensed Consolidated Balance Sheets as of  September 30, 2010 and December 31, 2009                       | 5                |
|          | Condensed Consolidated Statements of Operations for  the Three and Nine Months Ended September 30, 2010 and 2009 | 6                |
|          | Condensed Consolidated Statements of Cash Flows for  the Nine Months Ended September 30, 2010 and 2009           | 7                |
|          | Notes to Condensed Consolidated Financial Statements                                                                  | 8                |
| Item 2.  | Management’s  Discussion and Analysis of Financial Condition and Results of Operations                           | 11               |
| Item 3.  | Quantitative  and Qualitative Disclosures About Market Risk                                                           | 21               |
| Item 4.  | Controls and  Procedures                                                                                              | 21               |
|          |                                                                                                                  |             |
|          | **PART II.  OTHER INFORMATION**                                                                                  | 22               |
| Item 1.  | Legal Proceedings                                                                                                     | 22               |
| Item 1A. | Risk Factors                                                                                                          | 22               |
| Item 2.  | Unregistered  Sales of Equity Securities and Use of Proceeds                                                          | 22               |
| Item 3.  | Defaults  Upon Senior Securities                                                                                      | 22               |
| Item 4.  | (Removed and  Reserved)                                                                                               | 22               |
| Item 5.  | Other Information                                                                                                     | 22               |
| Item 6.  | Exhibits                                                                                                              | 22               |
| SIGNATURES    |                                                                                                                  | 23               |

 

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In this quarterly report, unless the contextotherwise requires, the terms “we”, “us”, “our” and similar terms refer toSouth Hertfordshire United Kingdom Fund, Ltd. and its subsidiaries, and “VirginMedia” refers to the consolidated business of Virgin Media Inc. and itssubsidiaries, as further described herein.

 

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**“Safe Harbor” Statement under thePrivate Securities Litigation Reform Act of 1995:**

 

Various statements contained in this documentconstitute “forward-looking statements” as that term is defined under thePrivate Securities Litigation Reform Act of 1995. Words like “believe”, “anticipate”,“should”, “intend”, “plan”, “will”, “expects”, “estimates”, “projects”, “positioned”,“strategy” and similar expressions identify these forward-looking statements,which involve known and unknown risks, uncertainties and other factors that maycause our actual results, performance or achievements or industry results to bematerially different from those contemplated, projected, forecasted, estimatedor budgeted, whether expressed or implied, by these forward-looking statements.These factors, among others, include:

 

·             our reliance on the continued support of Virgin Media;

 

·             the lack of an established trading market for our partnership interests;

 

·             conflicts of interest between us and Virgin Media and its affiliates;

 

·             our reliance on a limited franchise area;

 

·             the risks to Virgin Media’s business set forth below, which are risksthat we share as a result of our reliance on, and integration with, VirginMedia;

 

·             Virgin Media’s ability to compete with a range of other communicationsand content providers;

 

·             the effect of technological changes on Virgin Media’s business;

 

·             Virgin Media’s ability to maintain and upgrade its networks in acost-effective and timely manner;

 

·             possible losses in Virgin Media’s revenues due to systems failures;

 

·             Virgin Media’s ability to control unauthorized access to its network;

 

·             Virgin Media’s reliance on third-party suppliers and contractors toprovide necessary hardware, software or operational support;

 

·             Virgin Media’s continued right to use the Virgin name and logo;

 

·             Virgin Media’s ability to manage customer churn;

 

·             general economic conditions;

 

·             Virgin Media’s ability to provide attractive programming at a reasonablecost;

 

·             Virgin Media’s ability to implement its restructuring plan successfullyand realize the anticipated benefits;

 

·             currency and interest rate fluctuations;

 

·             Virgin Media’s ability to fund debt service obligations and refinanceits debt obligations;

 

·             Virgin Media’s ability to obtain additional financing in the future; and

 

·             Virgin Media’s ability to comply with restrictive covenants in itsindebtedness agreements.

 

These and other factors are discussed in moredetail under “Risk Factors” and elsewhere in our annual report onForm 10-K for the year ended December 31, 2009, as filed with theSecurities and Exchange Commission, or SEC, on March 17, 2010. We assumeno obligation to update our forward-looking statements to reflect actualresults, changes in assumptions or changes in factors affecting thesestatements.

 

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**Exchange Rates**

 

The following table sets forth, for the periodsindicated, the high, low, period average and period end noon buying rate in theCity of New York for cable transfers as certified for customs purposes by theFederal Reserve Bank of New York expressed as U.S. dollars per £1.00. The noonbuying rate of the pound sterling on September 30, 2010 was $1.5731 per£1.00.

 
| ** **                                              | ** ** | **U.S. dollars per £1.00** | ** ** |
|---------------------------------------------------------|------------|------------------------------------------------|------------|
| **Nine months ended September 30,** | ** ** | **Period End**                            | ** ** | **Average (1)** | ** ** | **High** | ** ** | **Low** | ** ** |
| 2009                                                    |       | $                                              | 1.6004     |   | $ | 1.5489 |   | $ | 1.6977 |   | $ | 1.3658 |   |
| 2010                                                    |       | 1.5731                                         |       | 1.5332 |   | 1.6370 |   | 1.4344 |   |
|                                                         |            |                                                |            |  |  |  |  |  |  |  |  |  |  |

 

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(1)                       The average rate is the average of the noon buying rates on the last dayof each month during the relevant period.

 

The above rates may differ from the actual ratesused in the preparation of the condensed consolidated financial statements andother financial information appearing in this quarterly report. Our inclusionof these exchange rates is not meant to suggest that the pound sterling amountsactually represent these U.S. dollar amounts or that these amounts could havebeen converted into U.S. dollars at any particular rate, if at all.

 

Unless we otherwise indicate, all U.K. pound sterlingamounts as of September 30, 2010 are translated to U.S. dollars at anexchange rate of $1.5731 to £1.00, all amounts disclosed for the nine monthsended September 30, 2010 are based on an average exchange rate of $1.5351to £1.00, and all amounts disclosed for the nine months endedSeptember 30, 2009 are based on an average exchange rate of $1.5423 to£1.00. All amounts disclosed as of December 31, 2009 are based on anexchange rate of $1.6167 to £1.00. U.S. dollar amounts for the three monthsended September 30, 2010 and 2009 are determined by subtracting the U.S.dollar converted financial result for the six months ended June 30, 2010and 2009 from the U.S. dollar converted financial result for the nine monthsended September 30, 2010 and 2009, respectively. All rates are based onthe noon buying rate in the City of New York for cable transfers ascertified for customs purposes by the Federal Reserve Bank ofNew York. The variation among the exchange rates for 2010 and 2009has affected the U.S. dollar comparisons significantly.

 

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**PART I.  FINANCIAL INFORMATION**

 

**ITEM 1. FINANCIALSTATEMENTS**

 

**SOUTH HERTFORDSHIRE UNITEDKINGDOM FUND, LTD.**

**(A Limited Partnership)**

**CONDENSED CONSOLIDATED BALANCE SHEETS**

** **
| ** **                                                                                                 | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|------------------------------------------------------------------------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                                                                                                 | ** ** | **2010**               | ** ** | **2009**              | ** ** |
| ** **                                                                                                 | ** ** | **(unaudited)**        | ** ** | ** **            | ** ** |
| **Assets**                                                                                                 |       |                   |       |                  |       |
|                                                                                                       |       |                   |       |                  |       |
| Deferred tax asset                                                                                         |       | $                      | 478,026    |                  | $          | 1,626,861 |   |
| Fixed assets, net                                                                                          |       | 39,711,964             |       | 42,685,169            |       |
| **Total assets**                                                                                           |       | 40,189,990             |       | 44,312,030            |       |
|                                                                                                       |       |                   |       |                  |       |
| **Liabilities and Partners’  Capital**                                                                |       |                   |       |                  |       |
| Current liabilities                                                                                        |       |                   |       |                  |       |
| Accounts payable to affiliates and related parties                                                         |       | $                      | 35,228,604 |                  | $          | 41,618,716 |   |
| Total liabilities                                                                                          |       | 35,228,604             |       | 41,618,716            |       |
|                                                                                                       |       |                   |       |                  |       |
| **Partners’ Capital**                                                                                 |       |                   |       |                  |       |
| General Partner                                                                                            |       |                   |       |                  |       |
| Contributed capital                                                                                        |       | 1,000                  |       | 1,000                 |       |
| Accumulated deficit                                                                                        |       | (466,415               | )          | (481,112              | )          |
|                                                                                                       |       | (465,415               | )          | (480,112              | )          |
| Limited Partners                                                                                           |       |                   |       |                  |       |
| Contributed capital, net (56,935 units outstanding at September 30,  2010 and December 31, 2009) |       | 48,817,997             |       | 48,817,997            |       |
| Accumulated deficit                                                                                        |       | (45,894,017            | )          | (47,349,062           | )          |
|                                                                                                       |       | 2,923,980              |       | 1,468,935             |       |
|                                                                                                       |       |                   |       |                  |       |
| Partners’ capital                                                                                     |       | 2,458,565              |       | 988,823               |       |
|                                                                                                       |       |                   |       |                  |       |
| Accumulated other comprehensive loss                                                                       |       | (783,934               | )          | (700,000              | )          |
| Total South Hertfordshire United Kingdom Fund Ltd. Partners’ capital                                  |       | 1,674,631              |       | 288,823               |       |
|                                                                                                       |       |                   |       |                  |       |
| Noncontrolling interest                                                                                    |       | 3,286,755              |       | 2,404,491             |       |
| Total Partners’ capital                                                                               |       | 4,961,386              |       | 2,693,314             |       |
|                                                                                                       |       |                   |       |                  |       |
| **Total Liabilities and Partners’  Capital**                                                          |       | $                      | 40,189,990 |                  | $          | 44,312,030 |   |

 

See accompanying notes.

 

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**SOUTH HERTFORDSHIRE UNITEDKINGDOM FUND, LTD.**

**(A Limited Partnership)**

**CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS**

**(unaudited)**

** **
| ** **                                                                                                                                     | ** ** | **Three months ended** | ** ** | **Nine months ended** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| ** **                                                                                                                                     | ** ** | **September 30,**           | ** ** | **September 30,**          | ** ** |
| ** **                                                                                                                                     | ** ** | **2010**                         | ** ** | **2009**                        | ** ** | **2010** | ** ** | **2009** | ** ** |
| ** **                                                                                                                                     | ** ** | ** **                       | ** ** | ** **                      | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Revenue**                                                                                                                                    |       | $                                | 7,280,843  |                            | $          | 7,198,079 |   | $ | 21,164,074 |   | $ | 21,028,124 |   |
|                                                                                                                                           |       |                             |       |                            |       |   |   |   |   |
| **Costs and expenses**                                                                                                                         |       |                             |       |                            |       |   |   |   |   |
| Operating costs                                                                                                                                |       | (2,206,108                       | )          | (2,474,802                      | )          | (6,729,490 | ) | (8,041,809 | ) |
| Allocated overhead                                                                                                                             |       | (2,586,964                       | )          | (2,460,936                      | )          | (7,566,986 | ) | (7,409,828 | ) |
| Management fees                                                                                                                                |       | (364,042                         | )          | (359,904                        | )          | (1,058,204 | ) | (1,051,406 | ) |
| Selling, general and administrative expenses                                                                                                   |       | (45,580                          | )          | (32,833                         | )          | (183,330 | ) | (97,010 | ) |
| **Operating income**                                                                                                                           |       | 2,078,149                        |       | 1,869,604                       |       | 5,626,064 |   | 4,428,071 |   |
|                                                                                                                                           |       |                             |       |                            |       |   |   |   |   |
| **Other expenses**                                                                                                                             |       |                             |       |                            |       |   |   |   |   |
| Interest payable to General Partner and affiliates                                                                                             |       | (750,732                         | )          | (731,721                        | )          | (2,262,624 | ) | (2,243,211 | ) |
| Exchange (losses) gains                                                                                                                        |       | (236,181                         | )          | 56,613                          |       | 108,803 |   | (174,895 | ) |
|                                                                                                                                           |       |                             |       |                            |       |   |   |   |   |
| **Net profit before taxes**                                                                                                                    |       | 1,091,236                        |       | 1,194,496                       |       | 3,472,243 |   | 2,009,965 |   |
| Income tax expense                                                                                                                             |       | (414,340                         | )          | —                          |       | (1,078,269 | ) | — |   |
|                                                                                                                                           |       |                             |       |                            |       |   |   |   |   |
| **Net profit**                                                                                                                                 |       | 676,896                          |       | 1,194,496                       |       | 2,393,974 |   | 2,009,965 |   |
|                                                                                                                                           |       |                             |       |                            |       |   |   |   |   |
| Less: Profit attributable to noncontrolling interest                                                                                           |       | (355,151                         | )          | (407,249                        | )          | (924,232 | ) | (810,747 | ) |
| **Net profit attributable to South  Hertfordshire United Kingdom Fund, Ltd.**                                                             |       | $                                | 321,745    |                            | $          | 787,247 |   | $ | 1,469,742 |   | $ | 1,199,218 |   |
|                                                                                                                                           |       |                             |       |                            |       |   |   |   |   |
| **Allocation of net profit attributable  to South Hertfordshire United Kingdom Fund, Ltd.**                                               |       |                             |       |                            |       |   |   |   |   |
| General Partner                                                                                                                                |       | $                                | 3,217      |                            | $          | 7,872 |   | $ | 14,697 |   | $ | 11,992 |   |
| Limited Partners                                                                                                                               |       | 318,528                          |       | 779,375                         |       | 1,455,045 |   | 1,187,226 |   |
| **Net profit attributable to South  Hertfordshire United Kingdom Fund, Ltd.**                                                             |       | $                                | 321,745    |                            | $          | 787,247 |   | $ | 1,469,742 |   | $ | 1,199,218 |   |
|                                                                                                                                           |       |                             |       |                            |       |   |   |   |   |
| **Net profit attributable to South  Hertfordshire United Kingdom Fund, Ltd. allocated to limited partners per  limited partnership unit** |       | $                                | 5.59       |                            | $          | 13.69 |   | $ | 25.56 |   | $ | 20.85 |   |
| **Average number of limited partnership  units outstanding**                                                                                   |       | 56,935                           |       | 56,935                          |       | 56,935 |   | 56,935 |   |

 

See accompanying notes.

 

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**SOUTH HERTFORDSHIRE UNITEDKINGDOM FUND, LTD.**

**(A Limited Partnership)**

**CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(unaudited)**

 
| ** **                                                                        | ** ** | **Nine months ended** | ** ** |
|-----------------------------------------------------------------------------------|------------|---------------------------------|------------|
| ** **                                                                        | ** ** | **September 30,**          | ** ** |
|                                                                              | ** ** | **2010**                        | ** ** | **2009** | ** ** |
| ** **                                                                        | ** ** | ** **                      | ** ** | ** ** | ** ** |
| **Cash flows from operating  activities**                                         |       |                            |       |   |   |
| Net profit                                                                        |       | $                               | 2,393,974  |   | $ | 2,009,965 |   |
|                                                                              |       |                            |       |   |   |
| Adjustments to reconcile net profit to net cash provided by operating activities: |       |                            |       |   |   |
| Depreciation                                                                      |       | 2,967,958                       |       | 3,202,353 |   |
| Deferred income taxes                                                             |       | 1,078,269                       |       | — |   |
| Change in operating assets and liabilities:                                       |       |                            |       |   |   |
| Decrease in accounts payable to affiliates and related parties                    |       | (5,256,917                      | )          | (4,716,346 | ) |
| **Net cash provided by operating  activities**                                    |       | 1,183,284                       |       | 495,972 |   |
|                                                                              |       |                            |       |   |   |
| **Cash flows from investing  activities**                                         |       |                            |       |   |   |
| Purchase of fixed assets                                                          |       | (1,183,284                      | )          | (495,972 | ) |
| **Net cash used in investing  activities**                                        |       | (1,183,284                      | )          | (495,972 | ) |
| Increase (decrease) in cash and cash equivalents                                  |       | —                          |       | — |   |
| Cash and cash equivalents at beginning of period                                  |       | —                          |       | — |   |
| Cash and cash equivalents at end of period                                        |       | $                               | —     |   | $ | — |   |

 

See accompanying notes.

 

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**SOUTH HERTFORDSHIRE UNITEDKINGDOM FUND, LTD.**

**(A Limited Partnership)**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**(unaudited)**

 

**Note 1 — Basis ofPresentation**

 

***Formation andBusiness***

 

South Hertfordshire United Kingdom Fund, Ltd.,or the Partnership, a Colorado limited partnership, was formed onDecember 23, 1991, in connection with a public offering of its limitedpartnership interests.  The Partnership was formed to acquire, construct,develop, own and operate cable television/telephone systems in the U.K. NTLFawnspring Limited, a U.K. corporation and an indirect wholly owned subsidiaryof Virgin Media Inc., is the general partner, or the General Partner, ofthe Partnership.

 

We hold 66.7% of the shares of NTL (SouthHertfordshire) Limited, or NTL South Herts, which is principally engaged in thedevelopment, construction, management and operation of broadband communicationsnetworks for telephone, cable television and internet services in theU.K.  As a result of our ownership of 66.7% of the shares of NTL SouthHerts, for accounting purposes, we have consolidated the results of NTL SouthHerts with our results.  Virgin Media Inc. indirectly holds the remaining33.3% of the shares of NTL South Herts.  We are reliant on the support ofVirgin Media Inc., the ultimate parent company of the General Partner, tocontinue our operations as a going concern.

 

***Basis ofPresentation***

 

We have prepared the accompanying unaudited condensedconsolidated financial statements in accordance with U.S. generally acceptedaccounting principles, or U.S. GAAP, for interim financial information and withthe rules and regulations of the Securities and Exchange Commission, orSEC. Accordingly, they do not include all of the information and footnotesrequired by U.S. GAAP for complete financial statements. In the opinion of ourmanagement, all adjustments (consisting only of normal recurring adjustments)considered necessary for a fair presentation have been included.  Resultsof operations for the three and nine months ended September 30, 2010 arenot necessarily indicative of results to be expected for the full year endingDecember 31, 2010. For further information, refer to the consolidated financialstatements and footnotes thereto included in our annual report onForm 10-K for the year ended December 31, 2009, as filed with theSEC, on March 17, 2010.

 

**Note 2 — Comprehensive Profit**

 

Comprehensive profit includes net profit as well asother comprehensive profit.  Our other comprehensive profit consists ofchanges in cumulative foreign currency translation adjustments. Comprehensive profit comprises:

 
| ** **                               | ** ** | **Three months ended**                                                     | ** ** |
|------------------------------------------|------------|--------------------------------------------------------------------------------------|------------|
| ** **                               | ** ** | **September 30, 2010**                                                     | ** ** |
| ** **                               | ** ** | **Partners of South  Hertfordshire  United Kingdom  Fund, Ltd.** | ** ** | **Noncontrolling  interests** | ** ** | **Total** | ** ** |
| ** **                               | ** ** | ** **                                                                           | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net profit                               |       | $                                                                                    | 321,745    |   | $ | 355,151 |   | $ | 676,896 |   |
| Foreign currency translation adjustments |       | 302,893                                                                              |       | 151,445 |   | 454,338 |   |
| Comprehensive profit                     |       | $                                                                                    | 624,638    |   | $ | 506,596 |   | $ | 1,131,234 |   |

 
| ** **                               | ** ** | **Nine months ended**                                                      | ** ** |
|------------------------------------------|------------|--------------------------------------------------------------------------------------|------------|
| ** **                               | ** ** | **September 30, 2010**                                                     | ** ** |
| ** **                               | ** ** | **Partners of South  Hertfordshire  United Kingdom  Fund, Ltd.** | ** ** | **Noncontrolling  interests** | ** ** | **Total** | ** ** |
|                                     |       |                                                                                 |       |   |   |   |   |
| Net profit                               |       | $                                                                                    | 1,469,742  |   | $ | 924,232 |   | $ | 2,393,974 |   |
| Foreign currency translation adjustments |       | (83,934                                                                              | )          | (41,968 | ) | (125,902 | ) |
| Comprehensive profit                     |       | $                                                                                    | 1,385,808  |   | $ | 882,264 |   | $ | 2,268,072 |   |

 

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**SOUTH HERTFORDSHIRE UNITEDKINGDOM FUND, LTD.**

**(A Limited Partnership)**

**NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS (Continued)**

**(unaudited)**

 

**Note 2 — ComprehensiveProfit (Continued)**

 
| ** **                               | ** ** | **Three months ended**                                                     | ** ** |
|------------------------------------------|------------|--------------------------------------------------------------------------------------|------------|
| ** **                               | ** ** | **September 30, 2009**                                                     | ** ** |
| ** **                               | ** ** | **Partners of South  Hertfordshire  United Kingdom  Fund, Ltd.** | ** ** | **Noncontrolling  interests** | ** ** | **Total** | ** ** |
| ** **                               | ** ** | ** **                                                                           | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net profit                               |       | $                                                                                    | 787,247    |   | $ | 407,249 |   | $ | 1,194,496 |   |
| Foreign currency translation adjustments |       | (53,451                                                                              | )          | (26,727 | ) | (80,178 | ) |
| Comprehensive profit                     |       | $                                                                                    | 733,796    |   | $ | 380,522 |   | $ | 1,114,318 |   |

 
| ** **                               | ** ** | **Nine months ended**                                                      | ** ** |
|------------------------------------------|------------|--------------------------------------------------------------------------------------|------------|
| ** **                               | ** ** | **September 30, 2009**                                                     | ** ** |
| ** **                               | ** ** | **Partners of South  Hertfordshire  United Kingdom  Fund, Ltd.** | ** ** | **Noncontrolling  interests** | ** ** | **Total** | ** ** |
|                                     |       |                                                                                 |       |   |   |   |   |
| Net profit                               |       | $                                                                                    | 1,199,218  |   | $ | 810,747 |   | $ | 2,009,965 |   |
| Foreign currency translation adjustments |       | 160,653                                                                              |       | 80,324 |   | 240,977 |   |
| Comprehensive profit                     |       | $                                                                                    | 1,359,871  |   | $ | 891,071 |   | $ | 2,250,942 |   |

 

**Note 3 — Transactions withthe General Partner and Affiliated Entities**

 

***Consulting andManagement Fees***

 

An affiliate of the General Partner is entitled tobe paid a consulting fee by NTL South Herts.  During the constructionphases of the South Herts System, this consulting fee was 2% of constructioncosts.  Since completion of construction of each portion of the system,the consulting fee for the completed portion has been 5% of the gross revenue,excluding revenue from the sale of cable television/telephone systems. Theconsulting fee is calculated and payable monthly. Consulting fees paid orpayable by NTL South Herts for the three months ended September 30, 2010and 2009 were $364,042 and $359,904, respectively. Consulting fees paid or payableby NTL South Herts for the nine months ended September 30, 2010 and 2009were $1,058,204 and $1,051,406, respectively. These amounts were expensedin the condensed consolidated statements of operations.

 

***DistributionRatios and Reimbursement***

 

Any Partnership distributions made from cash flows(defined as cash receipts derived from routine operations, less debt principaland interest payments and cash expenses) are allocated 99% to the limitedpartners and 1% to the General Partner.  Any distributions other thaninterest income on limited partner subscriptions earned prior to theacquisition of the Partnership’s first cable television system or from cashflows, such as from the sale or refinancing of a system or upon dissolution ofthe Partnership, will be made as follows: 99% to the limited partners and 1% tothe General Partner until any negative balances in the limited partners’capital accounts are reduced to zero; 100% to the General Partner until anynegative balance in its capital account is reduced to zero; 99% to the limitedpartners and 1% to the General Partner until the balance in the limitedpartners’ capital accounts is equal to their adjusted capital contribution plusa 12% return; 100% to the General Partner until the balance in its capitalaccount is equal to its adjusted capital contribution, and any remaining incomeor gain shall be allocated 75% to the limited partners and 25% to the GeneralPartner.

 

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**SOUTH HERTFORDSHIRE UNITEDKINGDOM FUND, LTD.**

**(A Limited Partnership)**

**NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS (Continued)**

**(unaudited)**

 

**Note 3 — Transactions withthe General Partner and Affiliated Entities (Continued)**

 

The General Partner and its affiliates are entitledto reimbursement from NTL South Herts for direct and indirect expensesallocable to the operation of the South Herts System, and from the Partnershipfor direct and indirect expenses allocable to the operation of the Partnershipwhich include, but are not limited to, salaries of any full or part-timeemployees, rent, supplies, telephone, travel, and restructuring and othercharges. The General Partner believes that the methodology used inallocating these expenses is fair and reasonable. During the three monthsended September 30, 2010 and 2009, reimbursement made by NTL South Hertsand the Partnership to the General Partner or its affiliates for any allocabledirect and indirect expenses totaled $2,586,964 and $2,460,936, respectively.During the nine months ended September 30, 2010 and 2009, reimbursementmade by NTL South Herts and the Partnership to the General Partner or itsaffiliates for any allocable direct and indirect expenses totaled $7,566,986and $7,409,828, respectively.

 

The General Partner and its affiliates may makeadvances to, and defer collection of fees and allocated expenses owed by, thePartnership, although they are not required to do so. The Partnership is chargedinterest on such advances and deferred amounts at a rate equal to the GeneralPartner’s or certain affiliates’ effective average cost of debt financing fromunaffiliated entities, which does not differ from their weighted average costof debt financing. For the three months ended September 30, 2010 and2009, affiliates of the General Partner charged the Partnership aggregatedinterest, bank fees and finance charges of $660,470 and $697,222, respectively,relating to non-permanent loans, and an affiliate of the General Partnercharged the Partnership interest on advances of $90,262 and $34,499,respectively. For the nine months ended September 30, 2010 and 2009,affiliates of the General Partner charged the Partnership aggregated interest,bank fees and finance charges of $2,008,026 and $2,142,433, respectively,relating to non-permanent loans, and an affiliate of the General Partnercharged the Partnership interest on advances of $254,598 and $100,778,respectively. The General Partner and its affiliates are entitled to recoverinterest on the full amount of non-permanent loans they provide to thePartnership or NTL South Herts and the portion of bank fees and deferredfinancing costs relating to Virgin Media’s senior credit facility allocable tothe Partnership or NTL South Herts.

 

**Note 4 — Recent AccountingPronouncements**

 

In September 2009, the FinancialAccounting Standards Board, or FASB, ratified new accounting guidance forexisting multiple-element revenue arrangements. The revised multiple-element revenuearrangements guidance will be effective for the first annual reporting periodbeginning on or after June 15, 2010 and may be applied retrospectively forall periods presented or prospectively to arrangements entered into ormaterially modified after the adoption date. We will prospectively apply thenew requirements beginning on January 1, 2011 and are currently evaluatingthe impact on our consolidated financial statements.

 

**Note 5 — Income taxes**

 

For the three and nine months endedSeptember 30, 2010, income tax expense was $414,340 and $1,078,269,respectively. The income tax expense relates to the partial utilization of thedeferred tax asset in respect of carried forward tax losses and taxdepreciation of NTL South Herts recognized as at December 31, 2009. Therewas no income tax expense for the three and nine months endedSeptember 30, 2009.

 

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**Item 2. Management’sDiscussion and Analysis of Financial Condition and Results****of Operations**

 

**Overview**

 

We are a Colorado limited partnership that wasformed in December 1991 pursuant to the public offering of our limitedpartnership interests for the purpose of acquiring one or more cabletelevision/telephone systems in the U.K. Upon acquisition of our system, ourprimary investment objective was to obtain capital appreciation in the value ofour investment in the system over the term that the investment is held by us.

 

We hold 66.7% of the shares of NTL South Herts,which is principally engaged in the development, construction, management andoperation of broadband communications networks for telephone, cable televisionand internet services in the U.K. As a result of our ownership of 66.7% of theshares of NTL South Herts, for accounting purposes we have consolidated theresults of NTL South Herts with our results. Virgin Media Inc. indirectly holdsthe remaining 33.3% of the shares of NTL South Herts. We are reliant on thesupport of Virgin Media Inc., the ultimate parent company of the GeneralPartner, to continue our operations as a going concern.

 

We derive our revenue principally from monthly feesand usage charges. Our packaging of services and pricing are designed toencourage our residential customers to use multiple services like “double-play”telephone and broadband, “double-play” telephone and television or “triple-play”telephone, television and broadband.

 

Our expenses include certain costs that are chargedto us by a subsidiary of Virgin Media Inc. for the provision of networkservices and support, the use of Virgin Media’s national backbone telephonenetwork for carriage of our telephone traffic, as well as the provision oftechnical infrastructure and network capacity by Virgin Media for oursubscription internet access service and digital television services, theprovision of corporate services, including finance, legal, human resources andfacility services, and for the provision of IT services, including our use ofthe related IT systems and equipment. The principal components of Virgin Media’sexpenses include payroll and other employee-related costs; televisionprogramming costs; interconnect costs paid to other carriers relating to calltermination; facility-related costs, such as rent, utilities and rates;marketing and selling costs; repairs and maintenance costs; and allowances fordoubtful accounts.

 

In the second quarter of 2009, the General Partneragreed to the transfer of customer and supplier contracts relating to NTL SouthHerts’ premium TV services, resulting in a transfer of revenue and costs toFuture Entertainment Sarl, a wholly owned subsidiary of Virgin Media, whichwith effect from September 1, 2009, carries substantially all Virgin Media’spremium TV channels and associated revenue and costs. This has resulted in adecline in revenues earned by NTL South Herts along with a decline in the costsincurred, but as these services were loss making, it has not been detrimentalto the results of operations or financial position of NTL South Herts.

 

**Factors Affecting Our Business**

 

Our residential customers account for the majorityof our total revenue. The number of residential customers, the number and typesof services that each customer uses and the prices we charge for these servicesdrive our revenue. Our profit is driven by the relative margins on the types ofservices we provide to these customers and by the number of services that weprovide to them. For example, broadband internet is more profitable than ourtelevision services and, on average, our “triple-play” customers are moreprofitable than “double-play” or “single-play” customers. Our packaging ofservices and our pricing are designed to encourage our customers to usemultiple services such as television, telephone and broadband at a lower pricethan each stand-alone product on a combined basis. Factors particularlyaffecting our business include general macroeconomic factors, currencymovements, integration and restructuring activities, churn, average revenue peruser, competition, capital expenditures and seasonality.

 

***GeneralMacroeconomic Factors.***General macroeconomic factors in the U.K. have an impact on our business. Forexample, during an economic slowdown, potential and existing customers may beless willing or able to purchase our products or upgrade their services. We mayalso experience increased churn and higher bad debt expense.

 

***CurrencyMovements.*** Because substantiallyall of our revenue and operating costs are earned and paid in U.K. poundssterling, but we report our financial results in U.S. dollars, our financialresults are impacted by currency fluctuations which are unrelated to ourunderlying results of operations.

 

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***Integrationand Restructuring Activities.***In the fourth quarter of 2008, Virgin Media commenced the implementation of arestructuring plan aimed at driving further improvements in Virgin Media’s andour operational performance and eliminating inefficiencies in order to create afully-integrated, customer-focused organization. Virgin Media anticipatessignificant cost savings from the plan and that the annual savings from andafter 2010 will exceed the annual costs incurred in connection with the plan.These costs will include purchases of fixed assets, lease and contract exitcosts, employee termination costs and other restructuring andrestructuring-related expenses, some of which will be classified asrestructuring costs. During the second quarter, Virgin Media identified furthersavings through the expansion of the program and revised the estimated totalcosts and extended the completion date through the end of 2012. In total,Virgin Media expects to incur operating expenditures of between£150 million to £170 million and capital expenditures of between£50 million to £60 million in connection with this plan over athree-year period. Virgin Media’s and our financial performance may benegatively affected if Virgin Media is unable to implement its restructuringplan successfully and realize the anticipated benefits.

 

***CapitalExpenditures.*** Our business requiressubstantial capital expenditures on a continuing basis for various purposes,including expanding, maintaining and upgrading our cable network, investing innew customer acquisitions, and offering new services. If Virgin Media and we donot continue to invest in our network and in new technologies, our ability toretain and acquire customers may be hindered. Therefore, Virgin Media’s and ourliquidity and the availability of cash to fund capital projects are importantdrivers of our revenue. When Virgin Media’s and our liquidity is restricted, sois our ability to meet our capital expenditure requirements.

 

***Churn.*** Churn is the proportion of customers who stop subscribing to any of ourservices. An increase in our churn can lead to increased costs and reducedrevenue. We continue to focus on improving our customer service and enhancingand expanding our service offerings to existing customers in order to manageour churn rates. Our ability to reduce our churn rates beyond a base level islimited by factors such as competition, the economy and customers moving outsideour network service area, in particular during the summer season. Managing ourchurn rates is a significant component of our business plan. Our churn ratesmay increase if our customer service is seen as unsatisfactory, if we areunable to deliver a service without interruption, if we fail to match offeringsby our competitors, if we increase our prices, if there is an improvement inthe U.K. housing market or if there is a prolonged economic downturn.

 

***ARPU.*** Average revenue per user, or ARPU, is a measure Virgin Media uses toevaluate how effectively it is realizing potential revenue from its residentialcable customers on its network. Virgin Media believes that its “triple-play”cable offering of television, broadband and fixed line telephone services isattractive to its existing customer base and generally allows Virgin Media toincrease its ARPU by facilitating the sale of multiple services to eachcustomer.

 

***Competition.*** Our ability to acquire and retain customers and increase revenuedepends on our competitive strength. There is significant and increasingcompetition in the market for our consumer services, including broadband andtelephone services offered by BT Group plc, or BT; resellers or local loopunbundlers, such as British Sky Broadcasting Group plc, or BSkyB, and TalkTalk Telecom Group PLC; alternative internet access services like DSL;satellite television services offered by BSkyB and by BBC and ITV throughFreesat; free-to-air digital terrestrial television offered through Freeview;and internet protocol television offered by BT. In addition, certaincompetitors, such as BT and BSkyB, are dominant in markets in which we competeand may use their dominance in those markets to offer bundled services thatcompete with our product offerings. As a result of increased competition, wehave had to, and may be required to continue to, adjust our pricing and offerdiscounts to new and existing customers in order to attract and retaincustomers.

 

***Seasonality.*** Some revenue streams are subject to seasonal factors. For example,telephone usage revenue by residential customers tends to be slightly lowerduring summer holiday months. Our churn rates include persons who disconnecttheir service because of moves, resulting in a seasonal increase in our churnrate during the summer months when higher levels of U.K. house moves occur andstudents leave their accommodation between academic years.

 

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**Critical Accounting Policies**

 

The preparation of our consolidated financialstatements requires us to make estimates that affect the reported amounts ofassets, liabilities, revenues and expenses, and related disclosure of contingentassets and contingent liabilities. We base our judgments on historicalexperience and on various other assumptions that we believe are reasonableunder the circumstances, the results of which form the basis for makingestimates about the carrying values of assets and liabilities that are notreadily apparent from other sources. Actual results may differ from theseestimates under different assumptions or conditions.

 

For a discussion of the accounting judgments andestimates that we have identified as critical in the preparation of ourconsolidated financial statements, please refer to our annual report onForm 10-K for the year ended December 31, 2009, as filed with the SECon March 17, 2010.

 

**Consolidated Results of Operations**

 

***Three MonthsEnded September 30, 2010 and 2009***

 

We present below summarized consolidated financialinformation in U.S. dollars and U.K. pounds sterling for the three months endedSeptember 30, 2010 and 2009:

 
| ** **                                   | ** ** | **Three months ended** | ** ** | ** ** | ** ** | **Three months ended** | ** ** | ** ** | ** ** |
|----------------------------------------------|------------|----------------------------------|------------|------------|------------|----------------------------------|------------|------------|------------|
| ** **                                   | ** ** | **September 30,**           | ** ** | **%**      | ** ** | **September 30,**           | ** ** | **%**      | ** ** |
| ** **                                   | ** ** | **2010**                         | ** ** | **2009**   | ** ** | **Change**                       | ** ** | **2010**   | ** ** | **2009** | ** ** | **Change** | ** ** |
| ** **                                   | ** ** | ** **                       | ** ** | ** ** | ** ** | ** **                       | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Revenue                                      |       | $                                | 7,280,843  |       | $          | 7,198,079                        |       | 1.1        |       | £ | 4,693,747 |   | £ | 4,370,384 |   | 7.4 |   |
| Operating costs                              |       | (2,206,108                       | )          | (2,474,802 | )          | (10.9                            | )          | (1,421,092 | )          | (1,485,178 | ) | (4.3 | ) |
| Allocated overhead                           |       | (2,586,964                       | )          | (2,460,936 | )          | 5.1                              |       | (1,667,573 | )          | (1,489,449 | ) | 12.0 |   |
| Management fees                              |       | (364,042                         | )          | (359,904   | )          | 1.1                              |       | (234,687   | )          | (218,519 | ) | 7.4 |   |
| Selling, general and administrative expenses |       | (45,580                          | )          | (32,833    | )          | 38.8                             |       | (29,204    | )          | (19,912 | ) | 46.7 |   |
| Operating income                             |       | 2,078,149                        |       | 1,869,604  |       | 11.2                             |       | 1,341,191  |       | 1,157,326 |   | 15.9 |   |
| Interest expense                             |       | (750,732                         | )          | (731,721   | )          | 2.6                              |       | (483,690   | )          | (442,006 | ) | 9.4 |   |
| Exchange (losses) gains                      |       | (236,181                         | )          | 56,613     |       |                             |       | (155,075   | )          | 41,674 |   |   |   |
| Net profit before taxes                      |       | 1,091,236                        |       | 1,194,496  |       | (8.6                             | )          | 702,426    |       | 756,994 |   | (7.2 | ) |
| Income tax expense                           |       | (414,340                         | )          | —     |       |                             |       | (267,560   | )          | — |   |   |   |
|                                         |       |                             |       |       |       |                             |       |       |       |   |   |   |   |
| Net profit                                   |       | 676,896                          |       | 1,194,496  |       | (43.3                            | )          | 434,866    |       | 756,994 |   | (42.6 | ) |
| Noncontrolling interest                      |       | (355,151                         | )          | (407,249   | )          | (12.8                            | )          | (229,338   | )          | (255,396 | ) | (10.2 | ) |
| Net profit attributable to South Herts       |       | $                                | 321,745    |       | $          | 787,247                          |       |       |       | £ | 205,528 |   | £ | 501,598 |   |   |   |

 

*Revenue*

 

For the three months endedSeptember 30, 2010, revenue increased by 1.1% to $7.3 million from$7.2 million for the three months ended September 30, 2009, andrevenue expressed in pounds sterling increased by 7.4% to £4.7 million for thethree months ended September 30, 2010, from £4.4 million for the threemonths ended September 30, 2009. Revenue expressed in pounds sterlingincreased due to selective price increases as well as additional customerssubscribing to our services, partially offset by continued decline in fixedline telephony usage and higher price discounting to stimulate customeractivity and retention in light of competitive factors in the marketplace.

 

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*Expenses*

 

*Operating costs*

 

Operating costs include cost of goods sold anddepreciation of fixed assets related to the network. For the three months endedSeptember 30, 2010, operating costs decreased by 10.9% to$2.2 million from $2.5 million for the three months endedSeptember 30, 2009, and operating costs expressed in pounds sterlingdecreased by 4.3% to £1.4 million for the three months endedSeptember 30, 2010 from £1.5 million for the three months endedSeptember 30, 2009. The reduction in operating costs was primarily drivenby a reduction in depreciation as a result of fixed assets becoming fully depreciated.For the three months ended September 30, 2010 and 2009, depreciationexpense included in operating costs was $942,031, or £606,486, and $1,124,374,or £684,441, respectively.

 

*Allocated overhead*

 

For the three months ended September 30, 2010,allocated overhead increased by 5.1% to $2.6 million from $2.5 million for thethree months ended September 30, 2009, and allocated overhead expressed inpounds sterling increased by 12.0% to £1.7 million for the three months endedSeptember 30, 2010 from £1.5 million for the three months endedSeptember 30, 2009. The business of NTL South Herts is managed as anintegral part of Virgin Media. The combined costs of managing the larger groupare allocated to each entity within the Virgin Media group, including NTL SouthHerts, on a consistent and proportional basis according to the level of tradingin that entity. Allocated overhead expressed in pounds sterling increased dueto higher network and other operating costs, employee and outsource costs andmarketing costs incurred by Virgin Media.

 

*Management fees*

 

For the three months ended September 30, 2010,management fees increased by 1.1% to $364,042 from $359,904 for the threemonths ended September 30, 2009, and management fees expressed in poundssterling increased by 7.4% to £234,687 for the three months endedSeptember 30, 2010 from £218,519 for the three months endedSeptember 30, 2009. Management fees are charged as a percentage of revenueand changes in management fees are therefore a direct reflection of changes inrevenue.

 

*Selling, general andadministrative expenses*

 

For the three months ended September 30, 2010,selling, general and administrative expenses increased to $45,580, or £29,204,from $32,833, or £19,912, for the three months ended September 30, 2009.The increase was primarily due to higher audit fees.

 

*Interest expense*

 

For the three months ended September 30, 2010,interest expense increased by 2.6% to $750,732, from $731,721 for the threemonths ended September 30, 2009, and interest expense expressed in poundssterling increased by 9.4% to £483,690 for the three months endedSeptember 30, 2010 from £442,006 for the three months endedSeptember 30, 2009. The increase in interest expense resulted from higherinterest rates in the period partially offset by a decrease in interest due tolower balances outstanding on which interest is charged.

 

We paid no cash interest for the three months endedSeptember 30, 2010 and 2009.

 

*Exchange gains or losses*

 

For the three months ended September 30, 2010,foreign currency exchange losses were $236,181, or £155,075, as compared withgains of $56,613, or £41,674, for the three months ended September 30,2009. The change in foreign currency exchange gains was primarily attributableto fluctuations in the value of the U.S. dollar on certain of our liabilitiesand transactions. The value of the U.S. dollar strengthened by approximately 3%against the pound sterling from December 31, 2009 to September 30,2010. Our results of operations will continue to be affected by foreignexchange rate fluctuations.

 

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*Income tax expense*

 

For the three months ended September 30, 2010,income tax expense was $414,340 or £267,560. The income tax expense relates tothe partial utilization of the deferred tax asset in respect of carried forwardtax losses and tax depreciation of NTL South Herts recognized as atDecember 31, 2009. There was no income tax expense for the three monthsended September 30, 2009.

 

*Noncontrolling interest*

 

During the three months ended September 30,2010, the profit attributable to the noncontrolling interest was $676,896, or£434,866, as compared with $407,249, or £255,396, for the three months endedSeptember 30, 2009. This was due to the increased profitability of theoperating entity.

 

*Net profit attributable toSouth Hertfordshire United Kingdom Fund, Ltd.*

 

For the three months ended September 30, 2010,net profit attributable to South Hertfordshire United Kingdom Fund, Ltd.was $321,745, or £205,528, as compared with $787,247, or £501,598, for thethree months ended September 30, 2009, primarily due to the reasonsdescribed above.

 

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***NineMonths Ended September 30, 2010 and 2009***

 

We present below summarized consolidated financialinformation in U.S. dollars and U.K. pounds sterling for the nine months endedSeptember 30, 2010 and 2009:

 
| ** **                                   | ** ** | **Nine months ended** | ** ** | ** ** | ** ** | **Nine months ended** | ** ** | ** ** | ** ** |
|----------------------------------------------|------------|---------------------------------|------------|------------|------------|---------------------------------|------------|------------|------------|
| ** **                                   | ** ** | **September 30,**          | ** ** | **%**      | ** ** | **September 30,**          | ** ** | **%**      | ** ** |
| ** **                                   | ** ** | **2010**                        | ** ** | **2009**   | ** ** | **Change**                      | ** ** | **2010**   | ** ** | **2009** | ** ** | **Change** | ** ** |
| ** **                                   | ** ** | ** **                      | ** ** | ** ** | ** ** | ** **                      | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Revenue                                      |       | $                               | 21,164,074 |       | $          | 21,028,124                      |       | 0.6        |       | £ | 13,786,772 |   | £ | 13,634,263 |   | 1.1 |   |
| Operating costs                              |       | (6,729,490                      | )          | (8,041,809 | )          | (16.3                           | )          | (4,383,747 | )          | (5,214,167 | ) | (15.9 | ) |
| Allocated overhead                           |       | (7,566,986                      | )          | (7,409,828 | )          | 2.1                             |       | (4,929,311 | )          | (4,804,401 | ) | 2.6 |   |
| Management fees                              |       | (1,058,204                      | )          | (1,051,406 | )          | 0.6                             |       | (689,339   | )          | (681,713 | ) | 1.1 |   |
| Selling, general and administrative expenses |       | (183,330                        | )          | (97,010    | )          | 89.0                            |       | (119,425   | )          | (62,900 | ) | 89.9 |   |
| Operating income                             |       | 5,626,064                       |       | 4,428,071  |       | 27.1                            |       | 3,664,950  |       | 2,871,082 |   | 27.7 |   |
| Interest expense                             |       | (2,262,624                      | )          | (2,243,211 | )          | 0.9                             |       | (1,473,926 | )          | (1,454,458 | ) | 1.3 |   |
| Exchange gains (losses)                      |       | 108,803                         |       | (174,895   | )          |                            |       | 70,877     |       | (113,399 | ) |   |   |
| Net profit before taxes                      |       | 3,472,243                       |       | 2,009,965  |       |                            |       | 2,261,901  |       | 1,303,225 |   |   |   |
| Income tax expense                           |       | (1,078,269                      | )          | —     |       |                            |       | (702,410   | )          | — |   |   |   |
|                                         |       |                            |       |       |       |                            |       |       |       |   |   |   |   |
| Net profit                                   |       | 2,393,974                       |       | 2,009,965  |       | 19.1                            |       | 1,559,491  |       | 1,303,225 |   | 19.7 |   |
| Noncontrolling interest                      |       | (924,232                        | )          | (810,747   | )          | 14.0                            |       | (602,066   | )          | (525,674 | ) | 14.5 |   |
| Net profit attributable to South Herts       |       | $                               | 1,469,742  |       | $          | 1,199,218                       |       | 22.6       |       | £ | 957,425 |   | £ | 777,551 |   | 23.1 |   |

 

*Revenue*

 

For the nine months ended September 30,2010, revenue increased by 0.6% to $21.2 million from $21.0 million forthe nine months ended September 30, 2009, and revenue expressed in poundssterling increased by 1.1% to £13.8 million for the nine months endedSeptember 30, 2010 from £13.6 million for the nine months endedSeptember 30, 2009. The increase in revenue expressed in pounds sterlingwas primarily due to selective price increases as well as additional customerssubscribing to our service, partially offset by the impact on revenue of thetransfer, in the second quarter of 2009, of customer and supplier contractsrelating to the NTL South Herts’ premium TV services to Future EntertainmentSarl, a wholly owned subsidiary of Virgin Media Inc., together with continueddecline in fixed line telephony usage and higher price discounting to stimulatecustomer activity and retention in light of competitive factors in themarketplace.

 

*Expenses*

 

*Operating costs*

 

Operating costs include cost of goods sold anddepreciation of fixed assets related to the network. For the nine months endedSeptember 30, 2010, operating costs decreased by 16.3% to$6.7 million from $8.0 million for the nine months endedSeptember 30, 2009, and operating costs expressed in pounds sterlingdecreased by 15.9% to £4.4 million for the nine months endedSeptember 30, 2010 from £5.2 million for the nine months endedSeptember 30, 2009. The reduction in operating costs was primarily drivenby the impact on cost of goods sold of the transfer, in the second quarter of2009, of customer and supplier contracts relating to NTL South Herts’ premiumTV services. For the nine months ended September 30, 2010 and 2009,depreciation expense included in operating costs was $2,967,958, or £1,933,397,and $3,202,353, or £2,076,349, respectively.

 

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*Allocatedoverhead*

 

For the nine months ended September 30, 2010,allocated overhead increased by 2.1% to $7.6 million from $7.4 million for thenine months ended September 30, 2009. For the nine months endedSeptember 30, 2010, allocated overhead expressed in pounds sterlingincreased by 2.6% to £4.9 million from £4.8 million for the nine months endedSeptember 30, 2009. The business of NTL South Herts is managed as an integralpart of Virgin Media. The combined costs of managing the larger group areallocated to each entity within the Virgin Media group, including NTL SouthHerts, on a consistent and proportional basis according to the level of tradingin that entity. Allocated overhead expressed in pounds sterling increased inline with Virgin Media’s overall cost base.

 

*Managementfees*

 

For the nine months ended September 30, 2010,management fees increased by 0.6% to $1,058,204 from $1,051,406 for the ninemonths ended September 30, 2009, and management fees expressed in poundssterling increased by 1.1% to £689,339 for the nine months endedSeptember 30, 2010 from £681,713 for the nine months endedSeptember 30, 2009. Management fees are charged as a percentage of revenueand changes in management fees are therefore a direct reflection of changes inrevenue.

 

*Selling, general and**administrative**expenses*

 

For the nine months ended September 30, 2010,selling, general and administrative expenses increased to $183,330, or£119,425, from $97,010, or £62,900, for the nine months endedSeptember 30, 2009. The increase was primarily due to higher audit fees.

 

*Interest expense*

 

For the nine months ended September 30, 2010,interest expense increased by 0.9% to $2.3 million from $2.2 million for thenine months ended September 30, 2009, and interest expense expressed inpounds sterling increased by 1.3% to £1,473,926 for the nine months endedSeptember 30, 2010 from £1,454,458 for the nine months endedSeptember 30, 2009. The increase in interest expense resulted from higherinterest rates in the period largely offset by a decrease in interest due tolower balances outstanding on which interest is charged.

 

We paid no cash interest for the nine months endedSeptember 30, 2010 and 2009.

 

*Exchange gains or losses*

 

For the nine months ended September 30, 2010,foreign currency exchange gains were $108,803, or £70,877, as compared withlosses of $174,895, or £113,399, for the nine months ended September 30,2009. The change in foreign currency exchange losses was primarily attributableto fluctuations in the value of the U.S. dollar on certain of our liabilitiesand transactions. The value of the U.S. dollar strengthened byapproximately 3% against the pound sterling from December 31, 2009 toSeptember 30, 2010. Our results of operations will continue to be affectedby foreign exchange rate fluctuations.

 

*Income tax expense*

 

For the nine months ended September 30, 2010,income tax expense was $1,078,269, or £702,410. The income tax expense relatesto the partial utilization of the deferred tax asset in respect of carriedforward tax losses and tax depreciation of NTL South Herts recognized as atDecember 31, 2009. There was no income tax expense for the nine monthsended September 30, 2009.

 

*Noncontrolling interest*

 

During the nine months ended September 30,2010, the profit attributable to the noncontrolling interest was $924,232, or£602,066, as compared with $810,747, or £525,674, for the nine months endedSeptember 30, 2009.

 

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*Net profit attributable to SouthHertfordshire United Kingdom Fund, Ltd.*

 

For the nine months ended September 30, 2010,net profit attributable to South Hertfordshire United Kingdom Fund, Ltd.was $1,469,742, or £957,425, as compared with $1,199,218, or £777,551, for thenine months ended September 30, 2009, primarily due to the reasons describedabove.

 

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***SelectedOperating Data***

 

The following table sets forth certain dataconcerning our residential cable customers for the last five quarters:

 
| ** **                     | ** ** | **September 30,** | ** ** | **June 30,** | ** ** | **March 31,** | ** ** | **December 31,** | ** ** | **September 30,** | ** ** |
|--------------------------------|------------|------------------------|------------|-------------------|------------|--------------------|------------|-----------------------|------------|------------------------|------------|
| ** **                     | ** ** | **2010**               | ** ** | **2010**          | ** ** | **2010**           | ** ** | **2009**              | ** ** | **2009**               | ** ** |
|                           |       |                   |       |              |       |               |       |                  |       |                   |       |
| Total customers                |       | 34,829                 |       | 34,530            |       | 34,160             |       | 33,668                |       | 33,476                 |       |
| Digital television subscribers |       | 28,103                 |       | 27,088            |       | 27,418             |       | 26,911                |       | 26,602                 |       |
| Broadband internet subscribers |       | 29,163                 |       | 28,733            |       | 28,235             |       | 27,511                |       | 27,090                 |       |
| Telephony subscribers          |       | 30,539                 |       | 30,319            |       | 30,059             |       | 29,646                |       | 29,424                 |       |
| Average monthly churn (1)      |       | 1.5                    | %          | 1.2               | %          | 1.1                | %          | 1.4                   | %          | 1.5                    | %          |

 

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(1)         Churn is calculated by taking the total number of customersdisconnecting from our services during the month and dividing them by theaverage number of customers during the month. Average monthly churn during thequarter is the average of the three monthly churn calculations within thequarter.

 

**Condensed Consolidated Statementof Cash Flows**

 

In the nine months ended September 30, 2010,we generated $1.2 million from our operating activities compared with $0.5million in the nine months ended September 30, 2009, which was used topurchase fixed assets including equipment for customer installations. Our cashprovided by operating activities increased primarily due to an improvedoperating result.

 

**Liquidity and Capital Resources**

 

***OutstandingIndebtedness***

 

We have no financing independent of Virgin Media.We are reliant upon the support of Virgin Media to continue our operations. Asof September 30, 2010, we had consolidated current liabilities of$35.2 million due to Virgin Media group companies compared with $41.6 millionas of December 31, 2009 and $42.6 million as of September 30, 2009.

 

Historically, our source of cash has been the netproceeds of our offerings of limited partnership interests along with fundingfrom Virgin Media and our principal uses of cash have been capitalcontributions to NTL South Herts in order to fund our proportionate share ofthe construction costs of the South Herts System and ongoing operations.

 

Accordingly, until such time as NTL South Hertsbegins to pay dividends on its ordinary shares (which is not expected in theforeseeable future) we will be required to fund our administrative expensesfrom borrowings or, theoretically, additional issuances of limited partnershipinterests. It is unlikely that we will be able to sell debt or equity securitiesin the public markets, at least in the short term, or to obtain financing fromcommercial banks. Accordingly, we are dependent on Virgin Media for funds tocover operating expenses, and will continue to be dependent upon Virgin Mediato meet our liquidity requirements for the foreseeable future. We expect thatcash from our operations in 2010 will be utilized fully for the purchase offixed assets including connecting new customers to our networks.

 

Virgin Media’s business is capital intensive and itis highly leveraged. Virgin Media has significant cash requirements foroperating costs, capital expenditures and interest expense. Virgin Mediabelieves that it will be able to meet its current and medium-term liquidity andcapital requirements, including fixed charges, through cash on hand, cash fromoperations, available borrowing under its revolving credit facility, and itsability to obtain future external financing.

 

Virgin Media had £5,983.3 million of debtoutstanding as of September 30, 2010, compared to £5,974.7 million asof December 31, 2009 and £5,972.0 million as of September 30,2009, and £609.8 million of cash and cash equivalents, compared to£430.5 million as of December 31, 2009 and £351.6 million as ofSeptember 30, 2009. The increase in debt since September 30, 2009 isdue to adverse movements in exchange rates and, to a lesser extent, an increasein net borrowing. The increase in debt from December 31, 2009 is also dueto adverse movements in exchange rates and, to a lesser extent, an increase innet borrowing.

 

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Virgin Media’s long term debt was issued by VirginMedia Inc. and certain of its subsidiaries that have no independentoperations or significant assets other than investments in their respectivesubsidiaries and receivables under intercompany loans. As a result, theydepend upon the receipt of sufficient funds from their respective subsidiariesor payments under intercompany loans to meet their obligations. In addition,the terms of Virgin Media’s existing and future indebtedness and the laws ofthe jurisdictions under which its subsidiaries are organized limit the paymentof dividends, loan repayments and other distributions from them under manycircumstances.

 

Virgin Media’s debt agreements contain restrictionson its ability to transfer cash between groups of its subsidiaries or to us. Asa result of these restrictions, although Virgin Media’s overall liquidity maybe sufficient to satisfy its obligations, it may be limited by covenants insome of its debt agreements from transferring cash to other subsidiaries thatmight require funds. In addition, cross default provisions in its other indebtednessmay be triggered if it defaults on any of these debt agreements.

 

For further information concerning Virgin Media’sliquidity and capital resources and the terms of its various debt facilities,including the new senior credit facility, see its annual report onForm 10-K for the year ended December 31, 2009, as filed with the SECon February 26, 2010, and its quarterly report on Form 10-Q for thethree and nine months ended September 30, 2010, as filed with the SEC onNovember 8, 2010.

 

**Off-Balance Sheet Transactions**

 

As of September 30, 2010 and 2009, we had nooff-balance sheet arrangements as defined in Item 303(a)(4) ofRegulation S-K under the Securities Exchange Act of 1934, as amended.

 

**Contractual Obligations andCommercial Commitments**

 

There have been no material changes in the ninemonths ended September 30, 2010 to the information required under thisItem from what was disclosed in our annual report on Form 10-K for theyear ended December 31, 2009, as filed with the SEC on March 17,2010.

 

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**Item 3. Quantitative andQualitative Disclosures about Market Risk**

 

The functional currency of NTL South Herts ispounds sterling and all revenue and substantially all costs are incurred inpounds sterling. We report in U.S. dollars and are therefore exposed tofluctuations in the pound sterling to U.S. dollar exchange rate.

 

The aggregate potential gain from a hypotheticalone-percent decrease in the pound sterling/U.S. dollar exchange rate isapproximately $20,000 for the nine months ended September 30, 2010.

 

We have no debt other than amounts due toaffiliates. As of September 30, 2010 and 2009, we had approximately $35.2million and $42.6 million, respectively, in amounts due to Virgin Mediagroup companies. Interest on amounts due to affiliates is at a variable ratebased on the average rate incurred by Virgin Media. Therefore we are exposed tochanges in Virgin Media’s borrowing rate. The aggregate potential loss from ahypothetical one-percentage point increase in the interest rate isapproximately $289,000 for the nine months ended September 30, 2010.

 

**Item 4. Controls andProcedures**

 

*(a) Disclosure Controls andProcedures. *Our management, with theparticipation of the chief executive officer and chief financial officer ofVirgin Media*, has evaluated the effectiveness of our disclosure controls andprocedures (as such term is defined in Rules 13a-15(e) and15d-15(e) under the Securities Exchange Act of 1934, as amended, which werefer to as the Exchange Act) as of the end of the period covered by thisreport. Based on this evaluation, Virgin Media’s chief executive officer andchief financial officer have concluded that, as of the end of such period,these controls and procedures are effective to ensure that information requiredto be disclosed by us in the reports we file or submit under the Exchange Actis recorded, processed, summarized and reported within the time periodsspecified in the Securities and Exchange Commission’s rules and forms.These disclosure controls and procedures include, without limitation, controlsand procedures designed to ensure that information required to be disclosed byus in the reports that we file or submit is accumulated and communicated to ourmanagement, including Virgin Media’s chief executive officer and chieffinancial officer, as appropriate to allow timely decisions regarding requireddisclosure.

 

(b) *Changes in Internal Control Over Financial Reporting.*There were nochanges in our internal control over financial reporting (as such term isdefined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act)during the fiscal quarter to which this report relates that have materiallyaffected, or are reasonably likely to materially affect, our internal controlover financial reporting.

 

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*                                         The Partnership has no principal executive officer or principalfinancial officer. Robert Mackenzie and Robert Gale are Directors of NTLFawnspring Limited, the General Partner of the Partnership.

 

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**PART II. OTHER INFORMATION**

 

**Item 1. Legal Proceedings**

 

We are involved in various disputes and litigationarising in the ordinary course of our business. While we do not believe any ofthese litigation matters alone or in the aggregate will have a material adverseeffect on our financial position or results of operation, any adverse outcomein one or more of these matters could be material to our consolidated financialstatements for any one period.

 

**Item 1A. Risk Factors**

 

There have been no material changes in the riskfactors discussed under “Risk Factors” and elsewhere in our annual report onForm 10-K for the year ended December 31, 2009, as filed with the SECon March 17, 2010.

 

**Item 2.  UnregisteredSales of Equity Securities and use of Proceeds**

 

None.

 

**Item 3.  Defaults UponSenior Securities**

 

None.

 

**Item 4.  (Removed andReserved)**

 

**Item 5.  OtherInformation**

 

None.

 

**Item 6. Exhibits**

** **
| 3.1    | Certificate of Limited Partnership dated December 31, 1991  (Incorporated by reference to Exhibit 3.1 to the Registrant’s Form 10-K for  the year ended December 31, 1994, filed with the Securities and Exchange  Commission on March 31, 1995, File No. 000-19889).                 |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.2    | Amendment to the Certificate of Limited Partnership dated January 31,  1995 (Incorporated by reference to Exhibit 3.2 to the Registrant’s Form 10-K  for the year ended December 31, 1994, filed with the Securities and Exchange  Commission on March 31, 1995, File No. 000-19889). |
| 4.1    | Limited Partnership Agreement dated December 31, 1991 (Incorporated  by reference to the Registrant’s Post-Effective Amendment No. 2 to Form S-1,  filed with the Securities and Exchange Commission on May 6, 1993, File No.  33-48400).                                             |
| 4.2    | Amendment No. 1 to Limited Partnership Agreement dated October 20,  1992 (Incorporated by reference to Exhibit 4.2 to the Registrant’s Form 10-K  for the year ended December 31, 1994, filed with the Securities and Exchange  Commission on March 31, 1995, File No. 000-19889).    |
| 31.1** | Certification of Person Performing Function Similar to the Functions  of Principal Executive Officer,* pursuant to Rule 13a-14(a) under the  Securities Exchange Act of 1934, as amended.                                                                                                  |
| 31.2** | Certification of Person Performing Function Similar to the Functions  of Principal Financial Officer,* pursuant to Rule 13a-14(a) under the  Securities Exchange Act of 1934, as amended.                                                                                                  |
| 32.1** | Certifications of Persons Performing Function Similar to the  Functions of Principal Executive Officer and Chief Financial Officer,  respectively,* pursuant to 18 U.S.C. Section 1350, as adopted pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002.                             |

 

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*                                         The Partnership has no principal executive officer or principalfinancial officer. Robert Mackenzie and Robert Gale are Directors of NTLFawnspring Limited, the General Partner of the Partnership.

 

**                                  Filed herewith.

 

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**SIGNATURES**

 

Pursuant to the requirements of the SecuritiesExchange Act of 1934, the registrant has duly caused this report to be signedon its behalf by the undersigned thereunto duly authorized.

 
|   | SOUTH  HERTFORDSHIRE UNITED KINGDOM FUND, LTD. a Colorado limited partnership |
|--------|------------------------------------------------------------------------------------|
|   |                                                                               |   |
|   | By:                                                                                | NTL FAWNSPRING  LIMITED, its General Partner |
|   |                                                                               |   |
|   | By:                                                                                | /s/ ROBERT  MACKENZIE |
|   |                                                                               | Robert Mackenzie

*Director  of NTL Fawnspring Limited, the General Partner of South Hertfordshire United  Kingdom Fund, Ltd.* |

 

Date: November 10, 2010

 

Pursuant to the requirements of the SecuritiesExchange Act of 1934, this report has been signed below by the followingpersons on behalf of the registrant and in the capacities and on the datesindicated.

 
|                                 | By:    | /s/ ROBERT  MACKENZIE                                                                                                                     |
|--------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------|
|                                 |   | Robert Mackenzie

*Director  of NTL Fawnspring Limited, the General Partner of South Hertfordshire  United Kingdom Fund, Ltd.** |
|                                 |   |                                                                                                                                      |
| Date: November 10, 2010

  |   |                                                                                                                                      |
|                                 |   |                                                                                                                                      |
|                                 | By:    | /s/ ROBERT GALE                                                                                                                           |
|                                 |   | Robert Gale

*Director  of NTL Fawnspring Limited, the General Partner of South Hertfordshire  United Kingdom Fund, Ltd.**      |

 

Date: November 10, 2010

 

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