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 period  ended March 31, 2009**                                                                                                                                              |
| ** ** | ** **                                                                                                                                                                                           |
| **o**      | **Transition report pursuant to  Section 13 or 15(d) of the Securities Exchange Act of 1934**                                                                                              |
| ** ** | ** **                                                                                                                                                                                           |
| ** ** | **For the transition period  from              to               ** |

 

**Commission File Number: 000-19889**

 

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

(Exact name of registrant as specified in its 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**(Address of  principal executive offices) | ** ** | **+ 44 1256 75 2000**  (Registrant’s telephone number, including area code) |

 

Indicateby check mark whether the registrant (1) has filed all reports required tobe filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject tosuch filing requirements for the past 90 days.  Yes x No o

 

Indicateby check mark whether the registrant has submitted electronically and posted onits corporate Web site, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 ofthis chapter) during the preceding 12 months (or for such shorter period thatthe registrant was required to submit and post such files).  Yes o No o

 

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated filer, a non-accelerated filer, or a smaller reportingcompany.  See the definitions of “largeaccelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2of the Exchange Act.  (Check one):

 

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

 

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

 

Thenumber of limited partnership units of the registrant outstanding as of May 5,2009 was 56,935.

 

 

 

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**TABLE OF CONTENTS**

 
| ** **    | ** **                                                                                                | **Page  Number** |
|---------------|-----------------------------------------------------------------------------------------------------------|------------------|
|          | **PART I.  FINANCIAL INFORMATION**                                                                   |             |
| Item 1.  | Financial Statements                                                                                      | 5                |
|          | Condensed  Consolidated Balance Sheets as of March 31, 2009 and December 31,  2008              | 5                |
|          | Condensed  Consolidated Statements of Operations for the Three Months Ended  March 31, 2009 and 2008 | 6                |
|          | Condensed  Consolidated Statements of Cash Flows for the Three Months Ended  March 31, 2009 and 2008 | 7                |
|          | Notes to  Condensed Consolidated Financial Statements                                                     | 8                |
| Item 2.  | Management’s Discussion and Analysis of  Financial Condition and Results of Operations               | 12               |
| Item 3.  | Quantitative and Qualitative Disclosures  About Market Risk                                               | 17               |
| Item 4.  | Controls and Procedures                                                                                   | 18               |
|          | **PART II.  OTHER INFORMATION**                                                                      |             |
| Item 1.  | Legal Proceedings                                                                                         | 19               |
| Item 1A. | Risk Factors                                                                                              | 19               |
| Item 2.  | Unregistered Sales of Equity Securities and  Use of Proceeds                                              | 19               |
| Item 3.  | Defaults Upon Senior Securities                                                                           | 19               |
| Item 4.  | Submission of Matters to a Vote of Security  Holders                                                      | 19               |
| Item 5.  | Other Information                                                                                         | 19               |
| Item 6.  | Exhibits                                                                                                  | 19               |
| SIGNATURES    |                                                                                                      | 20               |

 

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**IntroductoryNote**

 

In thisquarterly report, unless the context otherwise requires, the terms “we”, “us”, “our”and similar terms refer to South Hertfordshire United Kingdom Fund, Ltd.and its subsidiaries, and “Virgin Media” refers to the consolidated business ofVirgin Media Inc. and its subsidiaries, as further described herein.

 

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

 

Variousstatements contained in this document constitute “forward-looking statements”as that term is defined under the Private Securities Litigation Reform Act of1995.  Words like “believe”, “anticipate”,“should”, “intend”, “plan”, “will”, “expect”, “estimate”, “project”, “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 VirginMedia Inc., the ultimate parent company of our general partner;

 

·                       the lack of an established trading market forour partnership interests;

 

·                       conflicts of interest between us and VirginMedia and its affiliates;

 

·                       our reliance on a limited franchise area;

 

·                       the risks to Virgin Media’s business set forthbelow, which are risks that we share as a result of our reliance on, andintegration with, Virgin Media;

 

·                       Virgin Media’s ability to compete with a rangeof other communications and content providers;

 

·                       Virgin Media’s ability to manage customerchurn;

 

·                       Virgin Media’s ability to maintain and upgradeits networks in a cost-effective and timely manner;

 

·                       Virgin Media’s ability to implement itsrestructuring plan successfully and realize the anticipated benefits;

 

·                       the general deterioration in economicconditions;

 

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

 

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

 

·                       Virgin Media’s ability to provide attractiveprogramming at a reasonable cost;

 

·                       Virgin Media’s ability to control unauthorizedaccess to its network;

 

·                       the effect of technological changes on VirginMedia’s businesses;

 

·                       Virgin Media’s reliance on single-sourcesuppliers for some equipment, software and services and third partydistributors of its mobile services;

 

·                       currency and interest rate fluctuations;

 

·                       Virgin Media’s ability to fund debt serviceobligations through operating cash flow and refinance its debt obligations;

 

·                       Virgin Media’s ability to obtain additionalfinancing in the future;

 

·                       Virgin Media’s ability to comply withrestrictive covenants in its indebtedness agreements; and

 

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·                       the extent to which Virgin Media’s future cashflow will be sufficient to cover its fixed charges.

 

Theseand other factors are discussed in more detail under “Risk Factors” andelsewhere in our annual report on Form 10-K for the year ended December 31,2008, as filed with the Securities and Exchange Commission, or SEC, on March 16,2009.  We assume no obligation to updateour forward-looking statements to reflect actual results, changes inassumptions or changes in factors affecting these statements.

 

**Exchange Rates**

 

Thefollowing table sets forth, for the periods indicated, the high, low, periodaverage and period end noon buying rate in the City of New York for cabletransfers as certified for customs purposes by the Federal Reserve Bank of NewYork expressed as U.S. dollars per £1.00. The noon buying rate of the pound sterling on March 31, 2009 was$1.4300 per £1.00.

 
| ** **                                           | ** ** | **U.S. dollars per £1.00** | ** ** |
|------------------------------------------------------|------------|------------------------------------------------|------------|
| **Three months ended March 31,** | ** ** | **Period End**                            | ** ** | **Average (1)** | ** ** | **High** | ** ** | **Low** | ** ** |
| 2008                                                 |       | $                                              | 1.9855     |   | $ | 1.9871 |   | $ | 2.0311 |   | $ | 1.9405 |   |
| 2009                                                 |       | 1.4300                                         |       | 1.4330 |   | 1.5254 |   | 1.3658 |   |
|                                                      |            |                                                |            |  |  |  |  |  |  |  |  |  |  |

 

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(1)                       The average rate isthe average of the noon buying rates on the last day of each month during therelevant period.

 

Theabove rates may differ from the actual rates used in the preparation of thecondensed consolidated financial statements and other financial informationappearing in this quarterly report.  Ourinclusion of these exchange rates is not meant to suggest that the poundsterling amounts actually represent these U.S. dollar amounts or that theseamounts could have been converted into U.S. dollars at any particular rate, ifat all.

 

Unless weotherwise indicate, all U.K. pound sterling amounts as of March 31, 2009are translated to U.S. dollars at an exchange rate of $1.4300 to £1.00, allamounts disclosed for the three months ended March 31, 2009 are based onan average exchange rate of $1.4351 to £1.00, and all amounts disclosed for thethree months ended March 31, 2008 are based on an average exchange rate of$1.9788 to £1.00.  All amounts disclosedas of December 31, 2008 are based on an exchange rate of $1.4619 to£1.00.  All rates are based on the noonbuying rate in the City of New York for cable transfers as certified forcustoms purposes by the Federal Reserve Bank of New York.  The variation among the exchange rates for2009 and 2008 has affected the U.S. dollar comparisons significantly.

 

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**PART I.  FINANCIAL INFORMATION**

 

**ITEM 1.  FINANCIAL STATEMENTS**

 

**SOUTHHERTFORDSHIRE UNITED KINGDOM FUND, LTD.**

**(A LimitedPartnership)**

**CONDENSEDCONSOLIDATED BALANCE SHEETS**

**(unaudited)**

 
| ** **                                                                                              | ** ** | **March 31,** | ** ** | **December 31,** | ** ** |
|---------------------------------------------------------------------------------------------------------|------------|--------------------|------------|-----------------------|------------|
| ** **                                                                                              | ** ** | **2009**           | ** ** | **2008**              | ** ** |
| ** **                                                                                              | ** ** | ** **         | ** ** | **(Adjusted)**        | ** ** |
| **Assets**                                                                                              |       |               |       |                  |       |
| Fixed assets, net                                                                                       |       | $                  | 39,644,992 |                  | $          | 41,405,661 |   |
| **Total assets**                                                                                        |       | 39,644,992         |       | 41,405,661            |       |
|                                                                                                    |       |               |       |                  |       |
| **Liabilities and Partners’  Deficit**                                                             |       |               |       |                  |       |
| Current liabilities                                                                                     |       |               |       |                  |       |
| Accounts payable to affiliates and related  parties                                                     |       | $                  | 41,562,788 |                  | $          | 43,807,690 |   |
| Total liabilities                                                                                       |       | 41,562,788         |       | 43,807,690            |       |
|                                                                                                    |       |               |       |                  |       |
| **Partners’ Capital (Deficit)**                                                                    |       |               |       |                  |       |
| General Partner                                                                                         |       |               |       |                  |       |
| Contributed capital                                                                                     |       | 1,000              |       | 1,000                 |       |
| Accumulated deficit                                                                                     |       | (507,693           | )          | (511,003              | )          |
|                                                                                                    |       | (506,693           | )          | (510,003              | )          |
| Limited Partners                                                                                        |       |               |       |                  |       |
| Contributed capital, net (56,935 units  outstanding at  March 31, 2009 and December 31, 2008) |       | 48,817,997         |       | 48,817,997            |       |
| Accumulated deficit                                                                                     |       | (49,980,611        | )          | (50,308,283           | )          |
|                                                                                                    |       | (1,162,614         | )          | (1,490,286            | )          |
|                                                                                                    |       |               |       |                  |       |
| Partners’ Deficit                                                                                  |       | (1,669,307         | )          | (2,000,289            | )          |
|                                                                                                    |       |               |       |                  |       |
| Accumulated other comprehensive loss                                                                    |       | (951,510           | )          | (927,229              | )          |
| Total South Hertfordshire United Kingdom  Fund, Ltd. Partners’ deficit                             |       | (2,620,817         | )          | (2,927,518            | )          |
|                                                                                                    |       |               |       |                  |       |
| Noncontrolling interest                                                                                 |       | 703,021            |       | 525,489               |       |
| Total Partners’ deficit                                                                            |       | (1,917,796         | )          | (2,402,029            | )          |
| **Total Liabilities and  Partners’ Deficit**                                                       |       | $                  | 39,644,992 |                  | $          | 41,405,661 |   |

 

See accompanying notes.

 

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**SOUTHHERTFORDSHIRE UNITED KINGDOM FUND, LTD.**

**(A LimitedPartnership)**

**CONDENSEDCONSOLIDATED STATEMENTS OF OPERATIONS**

**(Unaudited)**

 
| ** **                                                                                                                                | ** ** | **Three months ended** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                                                                                                | ** ** | **March 31,**               | ** ** |
| ** **                                                                                                                                | ** ** | **2009**                         | ** ** | **2008** | ** ** |
| ** **                                                                                                                                | ** ** | ** **                       | ** ** | **(Adjusted)** | ** ** |
| **Revenues**                                                                                                                              |       | $                                | 6,622,104  |   | $ | 9,366,598 |   |
|                                                                                                                                      |       |                             |       |   |   |
| **Costs and expenses**                                                                                                                    |       |                             |       |   |   |
| Operating costs                                                                                                                           |       | (2,716,403                       | )          | (3,923,811 | ) |
| Allocated overhead                                                                                                                        |       | (2,301,640                       | )          | (3,169,304 | ) |
| Management fees                                                                                                                           |       | (331,105                         | )          | (468,330 | ) |
| Selling, general and administrative  expenses                                                                                             |       | (39,389                          | )          | (20,687 | ) |
| **Operating income**                                                                                                                      |       | 1,233,567                        |       | 1,784,466 |   |
|                                                                                                                                      |       |                             |       |   |   |
| **Other expenses**                                                                                                                        |       |                             |       |   |   |
| Interest payable to General Partner and  affiliates                                                                                       |       | (752,640                         | )          | (1,231,265 | ) |
| Exchange gains (losses)                                                                                                                   |       | 39,728                           |       | (1,455 | ) |
|                                                                                                                                      |       |                             |       |   |   |
| **Net profit**                                                                                                                            |       | 520,655                          |       | 551,746 |   |
|                                                                                                                                      |       |                             |       |   |   |
| Less: Profit attributable to noncontrolling  interest                                                                                     |       | (189,673                         | )          | (107,777 | ) |
| **Net profit attributable to  South Hertfordshire United Kingdom Fund, Ltd.**                                                             |       | $                                | 330,982    |   | $ | 443,969 |   |
|                                                                                                                                      |       |                             |       |   |   |
| **Allocation of net profit attributable  to South Hertfordshire United Kingdom Fund, Ltd.**                                               |       |                             |       |   |   |
| General Partner                                                                                                                           |       | $                                | 3,310      |   | $ | 4,440 |   |
| Limited Partners                                                                                                                          |       | 327,672                          |       | 439,529 |   |
| **Net profit attributable to  South Hertfordshire United Kingdom Fund, Ltd.**                                                             |       | $                                | 330,982    |   | $ | 443,969 |   |
|                                                                                                                                      |       |                             |       |   |   |
| **Net profit attributable to  South Hertfordshire United Kingdom Fund, Ltd. allocated to limited partners per  limited partnership unit** |       | $                                | 5.76       |   | $ | 7.72 |   |
| **Average number of limited  partnership units outstanding**                                                                              |       | 56,935                           |       | 56,935 |   |

 

See accompanying notes.

 

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**SOUTHHERTFORDSHIRE UNITED KINGDOM FUND, LTD.**

**(A LimitedPartnership)**

**CONDENSEDCONSOLIDATED STATEMENTS OF CASH FLOWS**

**(Unaudited)**

 
| ** **                                                                         | ** ** | **Three months ended** | ** ** |
|------------------------------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                                         | ** ** | **March 31,**               | ** ** |
| ** **                                                                         | ** ** | **2009**                         | ** ** | **2008** | ** ** |
| ** **                                                                         | ** ** | ** **                       | ** ** | **(Adjusted)** | ** ** |
| **Cash flows from operating  activities**                                          |       |                             |       |   |   |
| Net profit                                                                         |       | $                                | 520,655    |   | $ | 551,746 |   |
| Adjustments to reconcile net profit to net  cash provided by operating activities: |       |                             |       |   |   |
| Depreciation                                                                       |       | 1,006,777                        |       | 1,652,623 |   |
| Change in operating assets and liabilities:                                        |       |                             |       |   |   |
| Decrease in accounts payable to affiliates  and related parties                    |       | (1,386,647                       | )          | (1,744,100 | ) |
| **Net cash provided by  operating activities**                                     |       | 140,785                          |       | 460,269 |   |
|                                                                               |       |                             |       |   |   |
| **Cash flows from investing  activities**                                          |       |                             |       |   |   |
| Purchase of fixed assets                                                           |       | (140,785                         | )          | (460,269 | ) |
| **Net cash used in investing  activities**                                         |       | (140,785                         | )          | (460,269 | ) |
| Movement in cash                                                                   |       | —                           |       | — |   |
| 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 CONSOLIDATEDFINANCIAL STATEMENTS**

 

**Note 1 — Basis of Presentation**

 

***Formation and Business***

 

SouthHertfordshire United Kingdom Fund, Ltd., or the Partnership, a Coloradolimited partnership, was formed on December 23, 1991, in connection with apublic offering of its limited partnership 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 a subsidiary of VirginMedia Inc., or Virgin Media, is the general partner, or the GeneralPartner, of the Partnership.

 

Wehold 66.7% of the shares of NTL (South Hertfordshire) Limited, or NTL SouthHerts, which is principally engaged in the development, construction,management and operation of broadband communications networks for telephone,cable television and 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 indirectly holds the remaining 33.3% of the shares of NTL SouthHerts.  We are reliant on the support ofVirgin Media, the ultimate parent company of the General Partner, to continueour operations as a going concern.

 

We, as well as Virgin Media, file annual, quarterly,and current reports with the Securities and Exchange Commission, or SEC.  You may read and copy any materials we orVirgin Media file with the SEC at the SEC’s Public Reference Room at100 F Street, N.E., Washington D.C. 20549. You may obtain information on the operation of the Public Reference Room bycalling the SEC at 1-800-SEC-0330.  Youmay also access electronically the information we file with the SEC via itswebsite, located at *http://www.sec.gov*.Virgin Media is incorporated in the State of Delaware, UnitedStates.  Its principal executive officeis located at 909 Third Avenue, Suite 2863, New York, New York 10022,United States, and its telephone number is (212) 906-8440.

 

***Basis ofPresentation***

 

Wehave prepared the accompanying unaudited condensed consolidated financialstatements in accordance with U.S. generally accepted accounting principles, orGAAP, for interim financial information and with the rules and regulationsof the SEC.  Accordingly, they do notinclude all of the information and footnotes required by GAAP for completefinancial statements.  In the opinion ofour management, all adjustments (consisting only of normal recurringadjustments) considered necessary for a fair presentation have beenincluded.  Results of operations for thethree months ended March 31, 2009 are not necessarily indicative ofresults to be expected for the full year ending December 31, 2009.  For further information, refer to theconsolidated financial statements and footnotes thereto included in our annualreport on Form 10-K for the year ended December 31, 2008, as filedwith the SEC on March 16, 2009.

 

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**SOUTH HERTFORDSHIRE UNITEDKINGDOM FUND, LTD.**

**(A Limited Partnership)**

**NOTES TO CONSOLIDATED FINANCIALSTATEMENTS (Continued)**

 

**Note 2 — ComprehensiveProfit**

 

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

 
| ** **                               | ** ** | **Three months ended  March 31, 2009**                     | ** ** | **Three months ended  March 31, 2008** | ** ** |
|------------------------------------------|------------|-----------------------------------------------------------------|------------|---------------------------------------------|------------|
| ** **                               | ** ** | **Partners of South  Hertfordshire United  Kingdom Fund, Ltd.** | ** ** | **Noncontrolling   interest**               | ** ** | **Total** | ** ** | **Total** | ** ** |
| ** **                               | ** ** | ** **                                                      | ** ** | ** **                                  | ** ** | ** ** | ** ** | **(Adjusted)** | ** ** |
| Net profit                               |       | $                                                               | 330,982    |                                        | $          | 189,673 |   | $ | 520,655 |   | $ | 551,746 |   |
| Foreign currency translation adjustments |       |                                                            | (24,281    | )                                           | (12,141    | ) | (36,422 | ) | 1,601 |   |
| Comprehensive profit                     |       | $                                                               | 306,701    |                                        | $          | 177,532 |   | $ | 484,233 |   | $ | 553,347 |   |

 

**Note 3— Investment in Subsidiary**

 

NTLSouth Herts is a U.K. corporation which is principally engaged in thedevelopment, construction, management and operation of broadband communicationnetworks for telephone, cable television and internet services in the SouthHertfordshire franchise area, located adjacent to the northwest perimeter ofGreater London, England (the “South Herts System”).   NTL South Herts is owned 66.7% by thePartnership and 33.3% by Virgin Media. Virgin Media also owns the General Partner.  The General Partner provides consultingservices to the Partnership and may delegate some or all of the consultingservices to Virgin Media or to other affiliates.  Virgin Media, through its subsidiaries,including its interest in NTL South Herts, provides broadband internet access,telephone and television services to approximately 4.8 million residentialon-net cable customers as at March 31, 2009.

 

**Note 4 — Transactionswith the General Partner and Affiliated Entities**

 

***Consulting andManagement Fees***

 

Anaffiliate of the General Partner is entitled to be paid a consulting fee by NTLSouth Herts.  During the constructionphases of the South Herts System, this consulting fee was 2% of constructioncosts.  Since completion of constructionof each portion of the system, the consulting fee for the completed portion hasbeen 5% of the gross revenue, excluding revenue from the sale of cabletelevision/telephone systems.  Theconsulting fee is calculated and payable monthly.  Consulting fees paid or payable by NTL SouthHerts for the three months ended March 31, 2009 and 2008 were $331,105 and$468,330, respectively. These amounts were expensed in the statement ofoperations.

 

***DistributionRatios and Reimbursement***

 

AnyPartnership distributions made from cash flow (defined as cash receipts derivedfrom routine operations, less debt principal and interest payments and cashexpenses) are allocated 99% to the limited partners and 1% to the GeneralPartner.  Any distributions other thaninterest income on limited partner subscriptions earned prior to the acquisitionof the Partnership’s first cable television system or from cash flow, such asfrom the sale or refinancing of a system or upon dissolution of thePartnership, will be made as follows: 99% to the limited partners and 1% to theGeneral Partner until any negative balances in the limited partners’ capitalaccounts are reduced to zero; 100% to the General Partner until any negativebalance in its capital account is reduced to zero; 99% to the limited partnersand 1% to the General Partner until the balance in the limited partners’capital accounts is equal to their adjusted capital contribution plus a 12%return; 100% to the General Partner until the balance in its capital account isequal to its adjusted capital contribution, and any remaining income or gainshall be allocated 75% to the limited partners and 25% to the General Partner.

 

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**SOUTH HERTFORDSHIRE UNITEDKINGDOM FUND, LTD.**

**(A Limited Partnership)**

**NOTES TO CONSOLIDATED FINANCIALSTATEMENTS (Continued)**

 

TheGeneral Partner and its affiliates are entitled to reimbursement from NTL SouthHerts for direct and indirect expenses allocable to the operation of the SouthHerts System, and from the Partnership for direct and indirect expensesallocable to the operation of the Partnership which include, but are notlimited to, salaries of any full or part-time employees, rent, supplies,telephone, travel, and restructuring and other charges.  The General Partner believes that themethodology used in allocating these expenses is fair and reasonable.  During the three months ended March 31,2009 and 2008, reimbursement made by NTL South Herts and the Partnership to theGeneral Partner or its affiliates for any allocable direct and indirectexpenses totaled $2,301,640 and $3,169,304, respectively.

 

TheGeneral Partner and its affiliates may make advances to, and defer collectionof fees and allocated expenses owed by, the Partnership, although they are notrequired to do so.  The Partnership ischarged interest on such advances and deferred amounts at a rate equal to theGeneral Partner’s or certain affiliates’ effective average cost of debtfinancing from unaffiliated entities, which does not differ from their weightedaverage cost of debt financing.  For thethree months ended March 31, 2009 and 2008, affiliates of the GeneralPartner charged the Partnership aggregated interest, bank fees and financecharges of $720,469 and $1,184,617, respectively, relating to non-permanentloans, and an affiliate of the General Partner charged the Partnership intereston advances of $32,171 and $46,648, respectively.  The General Partner and its affiliates areentitled to recover interest on the full amount of non-permanent loans theyprovide to the Partnership or NTL South Herts and the portion of bank fees anddeferred financing costs relating to Virgin Media’s senior credit facilityallocable to the Partnership or NTL South Herts.

 

**Note 5 — RecentAccounting Pronouncements**

 

In December 2007,the Financial Accounting Standards Board, or FASB, issued Statement No. 160*, Noncontrolling Interests in Consolidated Financial Statements—anAmendment of ARB No. 51*, or FAS 160. FAS 160 establishesrequirements for ownership interests in subsidiaries held by parties other thanourselves (sometimes called ‘‘minority interests’’) to be clearly identified,presented, and disclosed in the consolidated statement of financial positionwithin equity, but separate from the parent’s equity. All changes in the parent’sownership interests are required to be accounted for consistently as equitytransactions and any noncontrolling equity investments in unconsolidatedsubsidiaries must be measured initially at fair value. Additionally, FAS 160requires that net income or loss and comprehensive income or loss be attributedto the parent entity and the noncontrolling interest.  Before the adoption of FAS 160, the portionof operations relating to the noncontrolling interest was reflected in thestatement of operations as an income or expense item in the calculation of netincome or loss.  FAS 160 is effective, ona prospective basis, for fiscal years beginning after December 15, 2008;however, presentation and disclosure requirements must be retrospectivelyapplied to comparative financial statements. We adopted FAS 160 effective January 1,2009 and have classified noncontrolling interest (previously minority interest)as a component of equity for all periods presented.   We also made the required adjustments toreflect the net profit or loss and comprehensive profit or loss as beingattributable to the Partnership for all period presented.  Such adjustments had the following impact onour previously reported condensed consolidated statement of operations for thethree month period ended March 31, 2008.

 
| ** ** | ** ** | **As Reported** | ** ** | **Adjustments** | ** ** | **As Adjusted** | ** ** |
|------------|------------|----------------------|------------|-----------------|------------|----------------------|------------|
|       |       |                 |       |            |       |                 |       |
| Net profit |       | $                    | 443,969    |            | $          | 107,777              |       | $ | 551,746 |   |
|            |            |                      |            |                 |            |                      |            |  |  |  |

 

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**SOUTH HERTFORDSHIRE UNITEDKINGDOM FUND, LTD.**

**(A Limited Partnership)**

**NOTES TO CONSOLIDATED FINANCIALSTATEMENTS (Continued)**

 

The following tablepresents a reconciliation of the beginning and the ending carrying amounts oftotal equity attributable to the Partnership and equity attributable to thenoncontrolling interests.

 
| ** **                       | ** ** | ** ** | ** ** | **Accumulated**              | ** ** | **General partners** | ** ** | **Limited Partners** | ** ** | **Non-**        | ** ** |
|----------------------------------|------------|------------|------------|------------------------------|------------|---------------------------|------------|---------------------------|------------|-----------------|------------|
| ** **                       | ** ** | ** ** | ** ** | **other comprehensive** | ** ** | **Contributed**           | ** ** | **Accumulated**           | ** ** | **Contributed** | ** ** | **Accumulated** | ** ** | **controlling** | ** ** |
| ** **                       | ** ** | **Total**  | ** ** | **loss**                     | ** ** | **capital**               | ** ** | **deficit**               | ** ** | **capital**     | ** ** | **deficit** | ** ** | **interest** | ** ** |
|                             |       |       |       |                         |       |                      |       |                      |       |            |       |   |   |   |   |
| December 31,2008            |       | $          | (2,402,029 | )                            | $          | (927,229                  | )          | $                         | 1,000      |            | $          | (511,003 | ) | $ | 48,817,997 |   | $ | (50,308,283 | ) | $ | 525,489 |   |
|                             |       |       |       |                         |       |                      |       |                      |       |            |       |   |   |   |   |
| Net  profit                      |       | 520,655    |       | —                       |       | —                    |       | 3,310                     |       | —          |       | 327,672 |   | 189,673 |   |
| Currency  translation adjustment |       | (36,422    | )          | (24,281                      | )          | —                    |       | —                    |       | —          |       | — |   | (12,141 | ) |
| March 31,  2009             |       | $          | (1,917,796 | )                            | $          | (951,510                  | )          | $                         | 1,000      |            | $          | (507,693 | ) | $ | 48,817,997 |   | $ | (49,980,611 | ) | $ | 703,021 |   |

 

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

 

**Overview**

 

Weare a Colorado limited partnership that was formed in December 1991pursuant to the public offering of our limited partnership interests for thepurpose of acquiring one or more cable television/telephone systems in theU.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.

 

Wehold 66.7% of the shares of NTL South Herts, which is principally engaged inthe development, construction, management and operation of broadbandcommunications networks for telephone, cable television and internet servicesin the U.K.  As a result of our ownershipof 66.7% of the shares of NTL South Herts, for accounting purposes we haveconsolidated the results of NTL South Herts with our results.  Virgin Media indirectly holds the remaining33.3% of the shares of NTL South Herts. We are reliant on the support of Virgin Media, the ultimate parentcompany of the General Partner, to continue our operations as a going concern.

 

Wederive our revenue principally from monthly fees and usage charges.  Our packaging of services and pricing aredesigned to encourage 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.

 

Ourexpenses include certain costs that are charged to us by a subsidiary of VirginMedia for the provision of network services and support, the use of VirginMedia’s national backbone telephone network for carriage of our telephonetraffic, as well as the provision of technical infrastructure and networkcapacity by Virgin Media for our subscription internet access service and digitaltelevision services, the provision of corporate services, including finance,legal, human resources and facility services, and for the provision of ITservices, including our use of the 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.

 

**Factors Affecting Our Business**

 

Ourresidential customers account for the majority of our total revenue.  The number of residential customers, thenumber and types of services that each customer uses and the prices we chargefor these services drive our revenue. Our profit is driven by the relative margins on the types of services weprovide to these customers and by the number of services that we provide tothem.  For example, broadband internet ismore profitable than our television services and, on average, our “triple-play”customers are more profitable than “double-play” or “single-play”customers.  Our packaging of services andour pricing are designed to encourage our customers to use multiple servicessuch as television, telephone and broadband at a lower price than eachstand-alone product on a combined basis. Factors particularly affecting our business include generalmacroeconomic factors, currency movements, integration and restructuringactivities, customer churn, average revenue per user, competition, capitalexpenditures and seasonality.

 

***GeneralMacroeconomic Factors. ***General macroeconomic factors in the U.K. have an impact on ourbusiness.  For example, during an economicslowdown, consumers may be less willing, or able topurchase our products or upgrade their existing services.  We may also experience increased churn andhigher bad debt expense.

 

***Currency Movements. ***Becausesubstantially all of our revenue and operating costs are earned and paid inU.K. pounds sterling, but we report our financial results in U.S. dollars, ourfinancial results are impacted by currency fluctuations which are unrelated toour underlying results of operations.

 

***Integrationand Restructuring Activities. ***In the fourth quarter of 2008,Virgin Media commenced the implementation of a new restructuring plan aimed atdriving further improvements in Virgin Media’s and our operational performanceand eliminating inefficiencies in order to create a fully-integrated,customer-focused organization.  WhileVirgin Media anticipates significant cost savings from the plan and that theannual savings from and after 2010 will exceed the annual costs, it expects that2009 costs will exceed 2009 savings.  Thesecosts will include employee termination costs, lease and contract exit costs,purchases of fixed assets and other related expenses.  In total, Virgin Media expects to incuroperating expenditures of between £140 million to £160 million andcapital expenditures of between £30 million to £40 million inconnection with this plan over a three-year period.  Virgin Media’s and our financial performancemay be negatively affected if Virgin Media is unable to implement itsrestructuring plan successfully and realize the anticipated benefits.

 

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***Customer Churn***.  Customer churn is a measure of the number ofcustomers who stop subscribing to our services. An increase in our customer churn can lead to increased costs andreduced revenue.  We continue to focus onimproving our customer service and enhancing and expanding our serviceofferings to existing customers in order to manage our customer churnrate.  Our ability to reduce our customerchurn rate beyond a base level is limited by factors like competition, theeconomy and customers moving outside our network service area, in particularduring the summer season.  Managing ourcustomer churn rate is a significant component of our business plan.  Our customer churn rate may increase if ourcustomer service is seen as unsatisfactory, if we are unable to deliver ourservices over our network without interruption, if we fail to match offeringsby our competitors, if we increase our prices, if there is an improvementin the U.K. housing market or if there is a prolonged economic downturn.

 

***ARPU***.  Average revenue per user, or ARPU, is ameasure Virgin Media uses to evaluate how effectively it is realizing potentialrevenue from its residential cable 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 abilityto acquire and retain customers and increase revenue depends on our competitivestrength.  There is significant andincreasing competition in the market for our consumer services, includingbroadband and telephone services offered by BT Group plc, or BT; and resellersor local loop unbundlers, such as British Sky Broadcasting Group plc, orBSkyB, and Carphone Warehouse (Talk Talk); alternative internet access serviceslike DSL; satellite television services offered by BSkyB and by BBC and ITVthrough Freesat; digital terrestrial television offered through Freeview; andinternet protocol television offered by Tiscali S.p.A. and BT.  Our business services also face a range ofcompetitors, including BT and Cable & Wireless plc.  Certain competitors, such as BT and BSkyB,are dominant in markets in which we compete and may use their dominance inthose markets to offer bundled services that compete with our productofferings.  As a result of increasedcompetition, we have had to, and may be required to continue to, adjust ourpricing and offer discounts to new and existing customers in order to attractand retain customers.

 

***Capital Expenditures***.  Our business requires substantial capitalexpenditures on a continuing basis for various purposes, including expanding,maintaining and upgrading our network, investing in new customer acquisitions,and offering new services.  If VirginMedia and we do not continue to invest in our network and in new technologies,our ability to retain and acquire customers may be hindered.  Therefore, Virgin Media’s and our liquidityand the availability of cash to fund capital projects are important drivers ofour revenue.  When Virgin Media’s and ourliquidity is restricted, so is our ability to meet our capital expenditurerequirements.

 

***Seasonality****.*  Some revenuestreams are subject to seasonal factors. For example, telephone usage revenue by residential customers andbusinesses tends to be slightly lower during summer holiday months.  Our customer churn rates include persons whodisconnect their service because of moves, resulting in a seasonal increase inour churn rates during the summer months when higher levels of U.K. house moveshave traditionally occurred and students leave their accommodation betweenacademic years.

 

# **CriticalAccounting Policies**

#  

The preparation of our consolidated financial statements requires us tomake estimates that affect the reported amounts of assets, liabilities,revenues and expenses, and related disclosure of contingent assets andcontingent liabilities. We base our judgments on historical experience and onvarious other assumptions that we believe are reasonable under thecircumstances, the results of which form the basis for making estimates aboutthe carrying values of assets and liabilities that are not readily apparentfrom other sources. Actual results may differ from these estimates underdifferent assumptions or conditions.

 

Fora discussion of the accounting judgments and estimates that we have identifiedas critical in the preparation of our consolidated financial statements, pleaserefer to our annual report on Form 10-K for the year ended December 31,2008, as filed with the SEC on March 16, 2009.

 

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**Consolidated Results ofOperations**

 

***Three MonthsEnded March 31, 2009 and 2008***

 

Wepresent below summarized consolidated financial information in U.S. dollars andU.K. pounds sterling for the three months ended March 31, 2009 and 2008:

 
| ** **                                                                | ** ** | **Three months ended** | ** ** | ** **     | ** ** | **Three months ended** | ** ** | ** ** | ** ** |
|---------------------------------------------------------------------------|------------|----------------------------------|------------|----------------|------------|----------------------------------|------------|------------|------------|
| ** **                                                                | ** ** | **March 31,**               | ** ** | **%**          | ** ** | **March 31,**               | ** ** | **%**      | ** ** |
| ** **                                                                | ** ** | **2009**                         | ** ** | **2008**       | ** ** | **Change**                       | ** ** | **2009**   | ** ** | **2008** | ** ** | **Change** | ** ** |
| ** **                                                                | ** ** | ** **                       | ** ** | **(Adjusted)** | ** ** | ** **                       | ** ** | ** ** | ** ** | **(Adjusted)** | ** ** | ** ** | ** ** |
| Revenue                                                                   |       | $                                | 6,622,104  |           | $          | 9,366,598                        |       | (29.3      | )          | £ | 4,614,385 |   | £ | 4,733,474 |   | (2.5 | ) |
| Operating costs                                                           |       | (2,716,403                       | )          | (3,923,811     | )          | (30.8                            | )          | (1,892,832 | )          | (1,982,924 | ) | (4.5 | ) |
| Allocated overhead                                                        |       | (2,301,640                       | )          | (3,169,304     | )          | (27.4                            | )          | (1,603,819 | )          | (1,601,629 | ) | 0.1 |   |
| Management fees                                                           |       | (331,105                         | )          | (468,330       | )          | (29.3                            | )          | (230,719   | )          | (236,674 | ) | (2.5 | ) |
| Selling, general and administrative expenses                              |       | (39,389                          | )          | (20,687        | )          | 90.4                             |       | (27,447    | )          | (10,454 | ) | 162.6 |   |
| Operating income                                                          |       | 1,233,567                        |       | 1,784,466      |       | (30.9                            | )          | 859,568    |       | 901,793 |   | (4.7 | ) |
| Interest expense                                                          |       | (752,640                         | )          | (1,231,265     | )          | (38.9                            | )          | (524,451   | )          | (622,228 | ) | (15.7 | ) |
| Exchange gains (losses)                                                   |       | 39,728                           |       | (1,455         | )          |                             |       | 27,683     |       | (735 | ) |   |   |
|                                                                      |       |                             |       |           |       |                             |       |       |       |   |   |   |   |
| Net profit                                                                |       | 520,655                          |       | 551,746        |       | (5.6                             | )          | 362,800    |       | 278,830 |   | 30.1 |   |
| Noncontrolling interest                                                   |       | (189,673                         | )          | (107,777       | )          | 76.0                             |       | (132,167   | )          | (54,466 | ) | 142.7 |   |
| Net profit attributable to South Hertfordshire  United Kingdom Fund, Ltd. |       | $                                | 330,982    |           | $          | 443,969                          |       | (25.4      | )          | £ | 230,633 |   | £ | 224,364 |   | 2.8 |   |

 

*Revenue*

 

Forthe three months ended March 31, 2009, revenue decreased by 29.3% to $6.6million from $9.4 million for the three months ended March 31, 2008,and revenue expressed in pounds sterling decreased by 2.5% to £4.6 million forthe three months ended March 31, 2009 from £4.7 million for the threemonths ended March 31, 2008.  Thedecrease was primarily driven by lower customer numbers and higher pricediscounting in light of competitive factors in the marketplace.

 

*Expenses*

 

*Operating costs*

 

Operating costs include cost of goods sold and depreciation of fixedassets related to the network. Forthe three months ended March 31, 2009, operating costs decreased by 30.8%to $2.7 million from $3.9 million for the three months ended March 31,2008, and operating costs expressed in pounds sterling decreased by 4.5% to£1.9 million for the three months ended March 31, 2009 from£2.0 million for the three months ended March 31, 2008.  The reduction in operating costs wasprimarily a reflection of lower depreciation, primarily as a result of fixedassets becoming fully depreciated. For the three months ended March 31,2009 and 2008, depreciation expense included in operating costs was $1,006,777,or £701,538, and $1,652,623, or £835,164, respectively.

 

*Allocated overhead*

 

For the three months ended March 31, 2009, allocated overheaddecreased by 27.4% to$2.3 million from $3.2 million for the three months ended March 31, 2008.Allocated overhead expressed in pounds sterling remained broadly flat at £1.6million in the three months ended March 31, 2009 and in the three monthsended March 31, 2008. 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 remainedrelatively constant for the three months ended March 31, 2009 and 2008, inline with Virgin Media’s overall cost base.

 

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*Management fees*

 

For the three months ended March 31, 2009,management fees decreased by 29.3% to $0.3 million from $0.5 million forthe three months ended March 31, 2008, and management fees expressed inpounds sterling decreased by 2.5% to £230,719 for the three months ended March 31,2009 from £236,674  for the three months ended March 31, 2008.  Management fees are chargedas a percentage of revenue and the decrease is therefore a direct reflection ofreduced revenue.

 

*Selling, general and administrative expenses*

 

Forthe three months ended March 31, 2009, selling, general and administrativeexpenses increased to $39,389, or £27,447, from $20,687, or £10,454, for thethree months ended March 31, 2008. The increase is due to higher audit fees and the higher cost of investorrelations’ services.

 

*Interest expense*

 

Forthe three months ended March 31, 2009, interest expense decreased to$0.8 million from $1.2 million for the three months ended March 31,2008, and interest expense expressed in pounds sterling decreased to £0.5million for the three months ended March 31, 2009 from £0.6 millionfor the three months ended March 31, 2008. This decrease was primarily due to a lower accounts payable toaffiliates and related parties balance, arising from increased profitability,together with lower interest rates.

 

Wepaid no cash interest for the three months ended March 31, 2009 and 2008.

 

*Exchange gains (losses)*

 

Forthe three months ended March 31, 2009, foreign currency exchange gainswere $39,728 as compared with losses of $1,455 for the three months ended March 31,2008.  The change in foreign currencyexchange gains (losses) was primarily attributable to fluctuations in the valueof the U.S. dollar on certain of our liabilities and transactions.  The value of the U.S. dollar strengthened byapproximately 2% against the pound sterling from December 31, 2008 to March 31,2009.  Our results of operations willcontinue to be affected by foreign exchange rate fluctuations.

 

*Noncontrolling interest*

 

Duringthe three months ended March 31, 2009, the profit attributable to thenoncontrolling interest was $189,673 compared with $107,777 for the threemonths ended March 31, 2008.

 

*Netprofit attributable to South Hertfordshire United Kingdom Fund, Ltd.*

 

Forthe three months ended March 31, 2009, net profit attributable to SouthHertfordshire United Kingdom Fund, Ltd. was $330,982 as compared with $443,969for the three months ended March 31, 2008, primarily due to the reasonsdescribed above.

 

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***Selected Operating Data***

 

Thefollowing table sets forth certain data concerning our residential cablecustomers for the last five quarters:

 
| ** **                         | ** ** | **March  31,** | ** ** | **December 31,** | ** ** | **September 30,** | ** ** | **June 30,** | ** ** | **March  31,** | ** ** |
|------------------------------------|------------|---------------------|------------|-----------------------|------------|------------------------|------------|-------------------|------------|---------------------|------------|
| ** **                         | ** ** | **2009**            | ** ** | **2008**              | ** ** | **2008**               | ** ** | **2008**          | ** ** | **2008**            | ** ** |
| Homes marketable (1)               |       | 95,554              |       | 96,178                |       | 96,197                 |       | 95,983            |       | 96,405              |       |
| Total customers                    |       | 33,457              |       | 33,495                |       | 33,742                 |       | 34,326            |       | 34,787              |       |
| Digital television subscribers     |       | 26,048              |       | 25,809                |       | 25,057                 |       | 24,763            |       | 24,406              |       |
| Analog television subscribers      |       | 5                   |       | 6                     |       | 350                    |       | 437               |       | 483                 |       |
| Broadband internet subscribers     |       | 26,613              |       | 26,355                |       | 26,026                 |       | 25,982            |       | 25,910              |       |
| Telephony subscribers              |       | 29,245              |       | 29,232                |       | 29,082                 |       | 29,055            |       | 29,097              |       |
| Penetration (homes marketable) (2) |       | 35.0                | %          | 34.8                  | %          | 35.1                   | %          | 35.8              | %          | 36.1                | %          |
| Average monthly churn (3)          |       | 1.2                 | %          | 1.3                   | %          | 1.8                    | %          | 1.6               | %          | 1.2                 | %          |

 

----

| (1)    |   | Homes marketable represents management’s estimate  of the number of homes within our service area that can potentially be served  by our network with minimal connection costs.                                                                                                                                 |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                 |
| (2)    |   | Penetration measures the total number of  customers for our services divided by the number of homes marketable.                                                                                                                                                                                                      |
|   |   |                                                                                                                                                                                                                                                                                                                 |
| (3)    |   | Customer churn is calculated by taking the  total number of customers disconnecting from our services during the month  and dividing them by the average number of customers during the month.  Average monthly churn during the quarter is the average of the three monthly  churn calculations within the quarter. |

 

**Condensed ConsolidatedStatement of Cash Flows**

 

Inthe three months ended March 31, 2009, we generated $0.1 million from ouroperating activities compared with $0.5 million in the three months ended March 31,2008, and used it to purchase fixed assets including equipment for customerinstallations.  Our cash provided byoperating activities decreased primarily due to a reduction in net profitbefore depreciation offset by a reduction in accounts payable to affiliates andrelated parties.

 

**Liquidity and CapitalResources**

 

Wehave no financing independent of Virgin Media. We are reliant upon the support of Virgin Media to continue ouroperations.  As of March 31, 2009,we had consolidated current liabilities of $41.6 million due to Virgin Mediagroup companies compared with $43.8 million as of December 31, 2008 and$64.3 million as of March 31, 2008.

 

Historically,our source of cash has been the net proceeds of our offerings of limitedpartnership interests along with funding from Virgin Media and our principaluses of cash have been capital contributions to NTL South Herts in order tofund our proportionate share of the construction costs of the South HertsSystem and ongoing operations.

 

Accordingly,until such time as NTL South Herts begins to pay dividends on its ordinaryshares (which is not expected in the foreseeable future) we will be required tofund our administrative expenses from borrowings or, theoretically, additionalissuances of limited partnership interests. It is unlikely that we will be able to sell debt or equity securities inthe public markets, at least in the short term, or to obtain financing fromcommercial banks.  Accordingly, we aredependent on Virgin Media for funds to cover operating expenses, and willcontinue to be dependent upon Virgin Media to meet our liquidity requirementsfor the foreseeable future.  We expectthat cash from our operations in 2009 will be utilized fully for the purchaseof fixed assets including connecting new customers to our networks.

 

Virgin Media had £6,180.0 million of debtoutstanding as of March 31, 2009, compared to £6,170.1 million as of December 31,2008 and £6,014.6 million as of March 31, 2008, and£139.6 million of cash and cash equivalents as of March 31, 2009,compared to £181.6 million as of December 31, 2008 and £282.3 millionas of March 31, 2008.  Theincrease in debt since March 31, 2008 and December 31, 2008 isprimarily attributable to the result of changes in foreign exchange rates.

 

Virgin Media’sbusiness is capital intensive and it is highly leveraged. Virgin Media hassignificant cash requirements for operating costs, capital expenditures andinterest expense.  The levels of VirginMedia’s capital expenditures and operating expenditures are affected by thesignificant amounts of capital required to connect customers to its network,expand and upgrade its network and offer new services.  Virgin Media also has significant principalprepayments under its senior 

 

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creditfacility due from 2010 to 2012.  VirginMedia expects that its cash on hand, together with cash from operations andamounts undrawn on its revolving credit facility, will be sufficient for itscash requirements through March 31, 2010. However, Virgin Media’s cash requirements after March 31, 2010 mayexceed these sources of cash.

 

Significantprincipal payments under Virgin Media’s senior credit facility are due in 2010and 2011.  However, in November 2008,Virgin Media amended the terms of its senior credit facility to defer asignificant portion of these payments to 2012. These changes will only become effective after VirginMedia has made certain principal repayments under the senior credit facilitytotaling £487.0 million, of which £300.0 million was repaid in December 2008and the remaining £187.0 million must be repaid prior to August 2009. Virgin Media believes that itshould be able to meet this prepayment condition using cash flow fromoperations and, if required, from amounts undrawn on its revolving creditfacility.  Assuming the prepaymentcondition is satisfied, Virgin Media expects to be able to address theremaining scheduled principal payments due in 2010 and 2011 through cash flowfrom operations.  However, if VirginMedia were unable to meet the prepayment condition or service these obligationsthrough cash flow from operations, then it would need to secure additionalfunding such as raising additional debt or equity, refinancing its existingfacility, selling assets or using other means. Virgin Media may not be able to obtain financing or sell assets, at allor on favorable terms, or may be contractually prevented by the terms of itssenior notes or its senior credit facility from incurring additionalindebtedness or selling assets.

 

Once theprepayment condition is satisfied, Virgin Media will have significant principalpayments due in 2012 under its senior credit facility that it can address onlyby a comprehensive refinancing of its senior debt and possibly other debtinstruments.  Virgin Media’s ability toimplement such a refinancing successfully is significantly dependent onsustained improvements in the debt capital markets.

 

Virgin Media’sdebt agreements contain restrictions on its ability to transfer cash betweengroups of its subsidiaries or to us.  Asa result of these restrictions, although its overall liquidity may besufficient to satisfy its obligations, it may be limited by covenants in someof its debt agreements from transferring cash to other subsidiaries that mightrequire funds.  In addition, crossdefault provisions in its other indebtedness may be triggered if it defaults onany of these debt agreements.

 

Forfurther information concerning Virgin Media’s liquidity and capital resourcesand the terms of its various debt facilities, see the annual report of VirginMedia Inc. on Form 10-K for the year ended December 31, 2008, asfiled with the SEC on February 26, 2009, and its quarterly report on Form 10-Qfor the three months ended March 31, 2009, as filed with the SEC on May 6,2009.

 

**Off-Balance Sheet Transactions**

 

Asof March 31, 2009 and 2008, we had no off-balance sheet arrangements asdefined in Item 303(a)(4) of Regulation S-K under the SecuritiesExchange Act of 1934, as amended.

 

**Contractual Obligations andCommercial Commitments**

 

Therehave been no material changes in the three months ended March 31, 2009 tothe information required under this Item from what was disclosed in our annualreport on Form 10-K for the year ended December 31, 2008, as filedwith the SEC on March 16, 2009.

 

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

 

Thefunctional currency of NTL South Herts is pounds sterling and all revenue andsubstantially all costs are incurred in pounds sterling.  We report in U.S. dollars and are therefore,exposed to fluctuations in the pound sterling to U.S. dollar exchange rate.

 

Theaggregate potential gain from a hypothetical one-percent decrease in the poundsterling/U.S. dollar exchange rate is approximately $12,000 for the threemonths ended March 31, 2009.

 

Wehave no debt other than amounts due to affiliates.  As of March 31, 2009 and 2008, we hadapproximately $41.6 million and $64.3 million, respectively, in amountsdue to Virgin Media group companies. Interest on amounts due to affiliates is at a variable rate based on theaverage rate incurred by Virgin Media. Therefore we are exposed to changes in Virgin Media’s borrowingrate.  The aggregate potential loss froma hypothetical one-percentage point increase in the interest rate isapproximately $95,000 for the three months ended March 31, 2009.

 

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**Item 4.  Controls and Procedures**

 

 *(a) DisclosureControls and Procedures. *Ourmanagement, with the participation of the chief executive officer and chieffinancial officer of Virgin Media*, has evaluated the effectiveness of ourdisclosure controls and procedures (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 InternalControl Over Financial Reporting.*There were no changes in ourinternal control over financial reporting (as such term is defined in Rules 13a-15(f) and15d-15(f) under the Exchange Act) during the fiscal quarter to which thisreport relates that have materially affected, or are reasonably likely tomaterially affect, our internal control over financial reporting.

 

----

| * |   | The Partnership has no chief executive officer  or chief financial officer. Robert Mackenzie and Robert Gale are Directors of  Virgin Media Directors Limited, which is a Corporate Director of NTL  Fawnspring Limited, the General Partner of the Partnership. |
|---|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

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**PART II. OTHERINFORMATION**

 

**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 of these litigation matters alone or in theaggregate will have a material adverse effect on our financial position orresults of operation, any adverse outcome in one or more of these matters couldbe material to our consolidated financial statements for any one period.

 

**Item 1A.  Risk Factors**

 

Therehave been no material changes to the risk factors disclosed in our annualreport on Form 10-K for the year ended December 31, 2008, as filedwith the SEC on March 16, 2009.

 

**Item 2.  Unregistered Sales of Equity Securities anduse of Proceeds**

 

None.

 

**Item 3.  Defaults Upon Senior Securities**

 

None.

 

**Item 4.  Submission of Matters to a Vote of SecurityHolders**

 

Nomatters were submitted to a vote of our security holders in the quarter ended March 31,2009.

 

**Item 5.  Other Information**

 

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 Principal  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 principal financial officer. Robert Mackenzie and Robert Gale are  Directors of Virgin Media Directors Limited, which is a Corporate Director of  NTL Fawnspring Limited, the General Partner of the Partnership. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                     |
| **     |   | Filed herewith.                                                                                                                                                                                                                                                          |

 

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Table of Contents

 

**SIGNATURES**

 

Pursuantto the requirements of the Securities Exchange Act of 1934, the registrant hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly 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 Virgin Media Directors  Limited,  Corporate Director of NTL Fawnspring Limited,  the General Partner of South Hertfordshire  United Kingdom Fund, Ltd.* |

 

Date: May 11,2009

 

Pursuantto the requirements of the Securities Exchange Act of 1934, this report hasbeen signed below by the following persons on behalf of the registrant and inthe capacities and on the dates indicated.

 
|   | By:    | /s/ ROBERT MACKENZIE                                                                                                                                                                            |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   | Robert Mackenzie*Director of Virgin Media Directors  Limited,  Corporate Director of NTL Fawnspring Limited,  the General Partner of South Hertfordshire  United Kingdom Fund, Ltd.** |

 

Date: May 11,2009

 
|   | By:    | /s/ ROBERT GALE                                                                                                                                                                            |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   | Robert Gale*Director of Virgin Media Directors  Limited,  Corporate Director of NTL Fawnspring Limited,  the General Partner of South Hertfordshire  United Kingdom Fund, Ltd.** |

 

Date: May 11,2009

 

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| * |   | The Partnership has no principal executive  officer, principal financial officer or principal accounting officer. Robert  Mackenzie and Robert Gale are Directors of Virgin Media Directors Limited,  which is a Corporate Director of NTL Fawnspring Limited, the General Partner  of the Partnership. |
|---|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

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