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 or15(d) of the Securities Exchange Act of 1934**

 

**For the quarterly period ended June 30,2010**

 

**o**                   **Transition report pursuant to Section 13 or15(d) of the Securities Exchange Act of 1934**

 

**For the transition period from             to                 **

 

**CommissionFile Number: 000-19889**

 

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**South Hertfordshire United KingdomFund, Ltd.**

(Exact name of registrant asspecified 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** | ** ** | **+ 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 allreports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for such shorterperiod that the registrant was required to file such reports), and (2) hasbeen subject to such filing requirements for the past 90 days.  Yes x No o

 

Indicate by check mark whether the registrant has submittedelectronically and posted on its corporate Web site, if any, every InteractiveData File required to be submitted and posted pursuant to Rule 405 ofRegulation S-T (§232.405 of this chapter) during the preceding 12 months (orfor such shorter period that the registrant was required to submit and postsuch files).  Yes o No o

 

Indicate by check mark whether the registrant is a large acceleratedfiler, an accelerated filer, a non-accelerated filer, or a smaller reportingcompany.  See the definitions of “largeaccelerated filer,” “accelerated filer” and “smaller reporting company” inRule 12b-2 of 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) |   |                             |

 

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

 

The number of limited partnership units of the registrant outstandingas of August 3, 2010 was 56,935.

 

 

 

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**TABLE OFCONTENTS**

 
| ** **    | ** **                                                                                                      | ** ** | **Page  Number** |
|---------------|-----------------------------------------------------------------------------------------------------------------|------------|------------------|
|          |                                                                                                            |       |             |
| ** **    | **PART I.  FINANCIAL INFORMATION**                                                                         |       | 5                |
| Item 1.  | Financial  Statements                                                                                           |       | 5                |
|          | Condensed Consolidated Balance Sheets as of  June 30, 2010 and December 31, 2009                      |       | 5                |
|          | Condensed Consolidated Statements of Operations for  the Three and Six Months Ended June 30, 2010 and 2009 |       | 6                |
|          | Condensed Consolidated Statements of Cash Flows for  the Six Months Ended June 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                                                     |       | 19               |
| Item 4.  | Controls and Procedures                                                                                         |       | 19               |
|          |                                                                                                            |       |             |
| ** **    | **PART II.OTHER INFORMATION**                                                                              |       | 20               |
| Item 1.  | Legal Proceedings                                                                                               |       | 20               |
| Item 1A. | Risk Factors                                                                                                    |       | 20               |
| Item 2.  | Unregistered  Sales of Equity Securities and Use of Proceeds                                                    |       | 20               |
| Item 3.  | Defaults  Upon Senior Securities                                                                                |       | 20               |
| Item 4.  | (Removed and  Reserved)                                                                                         |       | 20               |
| Item 5.  | Other Information                                                                                               |       | 20               |
| Item 6.  | Exhibits                                                                                                        |       | 20               |
| SIGNATURES    |                                                                                                            |       | 21               |

 

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In this quarterly report, unless the context otherwise requires, theterms “we”, “us”, “our” and similar terms refer to South Hertfordshire UnitedKingdom Fund, Ltd. and its subsidiaries, and “Virgin Media” refers to theconsolidated business of Virgin Media Inc. and its subsidiaries, asfurther described herein.

 

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

 

Various statements contained in this document constitute “forward-lookingstatements” as that term is defined under the Private Securities LitigationReform Act of 1995. Words like “believe”, “anticipate”, “should”, “intend”, “plan”,“will”, “expects”, “estimates”, “projects”, “positioned”, “strategy” andsimilar expressions identify these forward-looking statements, which involveknown and unknown risks, uncertainties and other factors that may cause ouractual 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 thecontinued support of Virgin Media;

 

·                  the lack of an establishedtrading market for our partnership interests;

 

·                  conflicts of interestbetween us and Virgin Media and its affiliates;

 

·                  our reliance on a limitedfranchise area;

 

·                  the risks to Virgin Media’sbusiness set forth below, which are risks that we share as a result of ourreliance on, and integration with, Virgin Media;

 

·                  Virgin Media’s ability tocompete with a range of other communications and content providers;

 

·                  the effect of technologicalchanges on Virgin Media’s business;

 

·                  Virgin Media’s ability tomaintain and upgrade its networks in a cost-effective and timely manner;

 

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

 

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

 

·                  Virgin Media’s reliance onthird-party suppliers and contractors to provide necessary hardware, softwareor operational support;

 

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

 

·                  Virgin Media’s ability tomanage customer churn;

 

·                  general economic conditions;

 

·                  Virgin Media’s ability toprovide attractive programming at a reasonable cost;

 

·                  Virgin Media’s ability toimplement its restructuring plan successfully and realize the anticipatedbenefits;

 

·                  currency and interest ratefluctuations;

 

·                  Virgin Media’s ability tofund debt service obligations and refinance its debt obligations;

 

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

 

·                  Virgin Media’s ability tocomply with restrictive covenants in its indebtedness agreements.

 

These and other factors are discussed in more detail under “RiskFactors” and elsewhere in our annual report on Form 10-K for the yearended December 31, 2009, as filed with the Securities and ExchangeCommission, or SEC, on March 17, 2010. We assume no obligation to updateour forward-looking statements to reflect actual results, changes inassumptions or changes in factors affecting these statements.

 

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**Exchange Rates**

 

The following table sets forth, for the periods indicated, the high,low, period average and period end noon buying rate in the City of New York forcable transfers as certified for customs purposes by the Federal Reserve Bankof New York expressed as U.S. dollars per £1.00. The noon buying rate of thepound sterling on June 30, 2010 was $1.4947 per £1.00.

 
| ** **                               | ** ** | **U.S. dollars per £1.00** | ** ** |
|------------------------------------------|------------|------------------------------------------------|------------|
| **Six  months ended June 30,** | ** ** | **Period End**                            | ** ** | **Average (1)** | ** ** | **High** | ** ** | **Low** | ** ** |
| 2009                                     |       | $                                              | 1.6452     |   | $ | 1.5067 |   | $ | 1.6547 |   | $ | 1.3658 |   |
| 2010                                     |       | 1.4947                                         |       | 1.5197 |   | 1.6370 |   | 1.4344 |   |
|                                          |            |                                                |            |  |  |  |  |  |  |  |  |  |  |

 

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(1)                     The average rate is theaverage of the noon buying rates on the last day of each month during therelevant 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 sterling amounts as of June 30,2010 are translated to U.S. dollars at an exchange rate of $1.4947 to £1.00,all amounts disclosed for the six months ended June 30, 2010 are based onan average exchange rate of $1.5268 to £1.00, and all amounts disclosed for thesix months ended June 30, 2009 are based on an average exchange rate of$1.4929 to £1.00. All amounts disclosed as of December 31, 2009 are basedon an exchange rate of $1.6167 to £1.00. U.S. dollar amounts for the threemonths ended June 30, 2010 and 2009 are determined by subtracting the U.S.dollar converted financial result for the three months ended March 31,2010 and 2009 from the U.S. dollar converted financial result for the sixmonths ended June 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 theexchange rates for 2010 and 2009 has affected the U.S. dollar comparisonssignificantly.

 

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**PART I.  FINANCIALINFORMATION**

 

**ITEM 1.FINANCIAL STATEMENTS**

 

**SOUTHHERTFORDSHIRE UNITED KINGDOM FUND, LTD.**

**(A LimitedPartnership)**

**CONDENSED CONSOLIDATED BALANCE SHEETS**

** **
| ** **                                                                                             | ** ** | **June 30,** | ** ** | **December 31,** | ** ** |
|--------------------------------------------------------------------------------------------------------|------------|-------------------|------------|-----------------------|------------|
| ** **                                                                                             | ** ** | **2010**          | ** ** | **2009**              | ** ** |
| ** **                                                                                             | ** ** | **(unaudited)**   | ** ** | ** **            | ** ** |
| **Assets**                                                                                             |       |              |       |                  |       |
|                                                                                                   |       |              |       |                  |       |
| Deferred  tax asset                                                                                    |       | $                 | 854,124    |                  | $          | 1,626,861 |   |
| Fixed  assets, net                                                                                     |       | 38,413,011        |       | 42,685,169            |       |
| **Total assets**                                                                                       |       | 39,267,135        |       | 44,312,030            |       |
|                                                                                                   |       |              |       |                  |       |
| **Liabilities and Partners’ Capital**                                                             |       |              |       |                  |       |
| Current  liabilities                                                                                   |       |              |       |                  |       |
| Accounts  payable to affiliates and related parties                                                    |       | $                 | 35,436,983 |                  | $          | 41,618,716 |   |
| Total  liabilities                                                                                     |       | 35,436,983        |       | 41,618,716            |       |
|                                                                                                   |       |              |       |                  |       |
| **Partners’ Capital**                                                                             |       |              |       |                  |       |
| General  Partner                                                                                       |       |              |       |                  |       |
| Contributed  capital                                                                                   |       | 1,000             |       | 1,000                 |       |
| Accumulated  deficit                                                                                   |       | (469,632          | )          | (481,112              | )          |
|                                                                                                   |       | (468,632          | )          | (480,112              | )          |
| Limited  Partners                                                                                      |       |              |       |                  |       |
| Contributed  capital, net (56,935 units outstanding at June 30, 2010 and  December 31, 2009) |       | 48,817,997        |       | 48,817,997            |       |
| Accumulated  deficit                                                                                   |       | (46,212,545       | )          | (47,349,062           | )          |
|                                                                                                   |       | 2,605,452         |       | 1,468,935             |       |
|                                                                                                   |       |              |       |                  |       |
| Partners’  capital                                                                                |       | 2,136,820         |       | 988,823               |       |
|                                                                                                   |       |              |       |                  |       |
| Accumulated  other comprehensive loss                                                                  |       | (1,086,827        | )          | (700,000              | )          |
| Total  South Hertfordshire United Kingdom Fund Ltd. Partners’ capital                             |       | 1,049,993         |       | 288,823               |       |
|                                                                                                   |       |              |       |                  |       |
| Noncontrolling  interest                                                                               |       | 2,780,159         |       | 2,404,491             |       |
| Total  Partners’ capital                                                                          |       | 3,830,152         |       | 2,693,314             |       |
|                                                                                                   |       |              |       |                  |       |
| **Total Liabilities and Partners’ Capital**                                                       |       | $                 | 39,267,135 |                  | $          | 44,312,030 |   |

 

Seeaccompanying notes.

 

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**SOUTHHERTFORDSHIRE UNITED KINGDOM FUND, LTD.**

**(A LimitedPartnership)**

**CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS**

**(unaudited)**

 
| ** **                                                                                                                                    | ** ** | **Three  months ended** | ** ** | **Six  months ended** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------|------------|-----------------------|------------|
| ** **                                                                                                                                    | ** ** | **June 30,**       | ** ** | **June 30,**     | ** ** |
| ** **                                                                                                                                    | ** ** | **2010**                | ** ** | **2009**              | ** ** | **2010** | ** ** | **2009** | ** ** |
| ** **                                                                                                                                    |       |                    |       |                  |       |   |   |   |   |
| **Revenue**                                                                                                                                   |       | $                       | 6,906,233  |                  | $          | 7,207,941 |   | $ | 13,883,231 |   | $ | 13,830,045 |   |
|                                                                                                                                          |       |                    |       |                  |       |   |   |   |   |
| **Costs and expenses**                                                                                                                        |       |                    |       |                  |       |   |   |   |   |
| Operating  costs                                                                                                                              |       | (2,185,282              | )          | (2,850,604            | )          | (4,523,382 | ) | (5,567,007 | ) |
| Allocated  overhead                                                                                                                           |       | (2,479,297              | )          | (2,647,252            | )          | (4,980,022 | ) | (4,948,892 | ) |
| Management  fees                                                                                                                              |       | (345,312                | )          | (360,397              | )          | (694,162 | ) | (691,502 | ) |
| Selling,  general and administrative expenses                                                                                                 |       | (40,714                 | )          | (24,788               | )          | (137,750 | ) | (64,177 | ) |
| **Operating income**                                                                                                                          |       | 1,855,628               |       | 1,324,900             |       | 3,547,915 |   | 2,558,467 |   |
|                                                                                                                                          |       |                    |       |                  |       |   |   |   |   |
| **Other expenses**                                                                                                                            |       |                    |       |                  |       |   |   |   |   |
| Interest  payable to General Partner and affiliates                                                                                           |       | (764,738                | )          | (758,850              | )          | (1,511,892 | ) | (1,511,490 | ) |
| Exchange  gains (losses)                                                                                                                      |       | 69,914                  |       | (271,236              | )          | 344,984 |   | (231,508 | ) |
|                                                                                                                                          |       |                    |       |                  |       |   |   |   |   |
| **Net profit before taxes**                                                                                                                   |       | 1,160,804               |       | 294,814               |       | 2,381,007 |   | 815,469 |   |
| Income  tax expense                                                                                                                           |       | (345,600                | )          | —                |       | (663,929 | ) | **—** |   |
|                                                                                                                                          |       |                    |       |                  |       |   |   |   |   |
| **Net profit**                                                                                                                                |       | 815,204                 |       | 294,814               |       | 1,717,078 |   | 815,469 |   |
| ** **                                                                                                                                    |       |                    |       |                  |       |   |   |   |   |
| Less:  Profit attributable to noncontrolling interest                                                                                         |       | (296,229                | )          | (213,825              | )          | (569,081 | ) | (403,498 | ) |
| **Net profit attributable to South Hertfordshire United Kingdom  Fund, Ltd.**                                                                 |       | $                       | 518,975    |                  | $          | 80,989 |   | $ | 1,147,997 |   | $ | 411,971 |   |
|                                                                                                                                          |       |                    |       |                  |       |   |   |   |   |
| **Allocation of net profit attributable to South  Hertfordshire United Kingdom Fund, Ltd.**                                                   |       |                    |       |                  |       |   |   |   |   |
| General  Partner                                                                                                                              |       | $                       | 5,190      |                  | $          | 810 |   | $ | 11,480 |   | $ | 4,120 |   |
| Limited  Partners                                                                                                                             |       | 513,785                 |       | 80,179                |       | 1,136,517 |   | 407,851 |   |
| **Net profit attributable to South Hertfordshire United Kingdom  Fund, Ltd.**                                                                 |       | $                       | 518,975    |                  | $          | 80,989 |   | $ | 1,147,997 |   | $ | 411,971 |   |
| ** **                                                                                                                                    |       |                    |       |                  |       |   |   |   |   |
| **Net profit attributable to South Hertfordshire United Kingdom  Fund, Ltd. allocated to limited partners per limited partnership unit** |       | $                       | 9.02       |                  | $          | 1.41 |   | $ | 19.96 |   | $ | 7.16 |   |
| **Average number of limited partnership units outstanding**                                                                                   |       | 56,935                  |       | 56,935                |       | 56,935 |   | 56,935 |   |

 

See accompanying notes.

 

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**SOUTHHERTFORDSHIRE UNITED KINGDOM FUND, LTD.**

**(A LimitedPartnership)**

**CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(unaudited)**

 
| ** **                                                                         | ** ** | **Six  months ended** | ** ** |
|------------------------------------------------------------------------------------|------------|-----------------------|------------|
| ** **                                                                         | ** ** | **June 30,**     | ** ** |
| ** **                                                                         | ** ** | **2010**              | ** ** | **2009** | ** ** |
|                                                                               | ** ** | ** **            |       |   |   |
| **Cash flows from operating activities**                                           |       |                  |       |   |   |
| Net  profit                                                                        |       | $                     | 1,717,078  |   | $ | 815,469 |   |
|                                                                               |       |                  |       |   |   |
| Adjustments  to reconcile net profit to net cash provided by operating activities: |       |                  |       |   |   |
| Depreciation                                                                       |       | 2,025,927             |       | 2,077,979 |   |
| Deferred  income taxes                                                             |       | 663,929               |       | — |   |
| Change  in operating assets and liabilities:                                       |       |                  |       |   |   |
| Decrease  in accounts payable to affiliates and related parties                    |       | (3,471,371            | )          | (2,581,457 | ) |
| **Net cash provided by operating activities**                                      |       | 935,563               |       | 311,991 |   |
|                                                                               |       |                  |       |   |   |
| **Cash flows from investing activities**                                           |       |                  |       |   |   |
| Purchase  of fixed assets                                                          |       | (935,563              | )          | (311,991 | ) |
| **Net cash used in investing activities**                                          |       | (935,563              | )          | (311,991 | ) |
| Increase  (decreased) in cash and cash equivalents                                 |       | —                |       | — |   |
| Cash  and cash equivalents at beginning of period                                  |       | —                |       | — |   |
| Cash  and cash equivalents at end of period                                        |       | $                     | —     |   | $ | — |   |

 

Seeaccompanying notes.

 

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**SOUTHHERTFORDSHIRE UNITED KINGDOM FUND, LTD.**

**(A LimitedPartnership)**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**(unaudited)**

 

**Note 1 — Basis of Presentation**

 

***Formation and Business***

 

South Hertfordshire United Kingdom Fund, Ltd., or the Partnership,a Colorado limited partnership, was formed on December 23, 1991, inconnection with a public offering of its limited partnership interests.  The Partnership was formed to acquire,construct, develop, own and operate cable television/telephone systems in theU.K. NTL Fawnspring Limited, a U.K. corporation and an indirect wholly ownedsubsidiary of Virgin Media Inc., is the general partner, or the GeneralPartner, of the Partnership.

 

We hold 66.7% of the shares of NTL (South Hertfordshire) Limited, orNTL South Herts, 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 Inc. indirectly holds the remaining 33.3% of the shares ofNTL 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.

 

***Basis of Presentation***

 

We have prepared the accompanying unaudited condensed consolidatedfinancial statements in accordance with U.S. generally accepted accountingprinciples, or U.S. GAAP, for interim financial information and with therules and regulations of the Securities and Exchange Commission, or SEC.Accordingly, they do not include all of the information and footnotes requiredby U.S. GAAP for complete financial statements. In the opinion of our management,all adjustments (consisting only of normal recurring adjustments) considerednecessary for a fair presentation have been included.  Results of operations for the three and sixmonths ended June 30, 2010 are not necessarily indicative of results to beexpected for the full year ending December 31, 2010. For furtherinformation, refer to the consolidated financial statements and footnotesthereto included in our annual report on Form 10-K for the year endedDecember 31, 2009, as filed with the SEC, on March 17, 2010.

 

**Note 2 — Comprehensive Profit**

 

Comprehensive profit includes net profit as well asother comprehensive profit.  Our othercomprehensive profit consists of changes in cumulative foreign currencytranslation adjustments.  Comprehensiveprofit comprises:

 
| ** **                                | ** ** | **Three  months ended**                                               | ** ** |
|-------------------------------------------|------------|-----------------------------------------------------------------------|------------|
| ** **                                | ** ** | **June 30,  2010**                                               | ** ** |
| ** **                                | ** ** | **Partners of South  Hertfordshire  United Kingdom  Fund, Ltd.** |       | **Noncontrolling  interests** | ** ** | **Total** | ** ** |
| ** **                                | ** ** | ** **                                                            | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net  profit                               |       | $                                                                     | 518,975    |   | $ | 296,229 |   | $ | 815,204 |   |
| Foreign  currency translation adjustments |       | (80,130                                                               | )          | (40,066 | ) | (120,196 | ) |
| Comprehensive  profit                     |       | $                                                                     | 438,845    |   | $ | 256,163 |   | $ | 695,008 |   |

 
| ** **                                | ** ** | **Six  months ended**                                                  | ** ** |
|-------------------------------------------|------------|------------------------------------------------------------------------|------------|
| ** **                                | ** ** | **June 30,  2010**                                                | ** ** |
| ** **                                | ** ** | **Partners  of South  Hertfordshire  United Kingdom  Fund, Ltd.** | ** ** | **Noncontrolling  interests** | ** ** | **Total** | ** ** |
|                                      |       |                                                                   |       |   | ** ** | ** ** | ** ** |
| Net  profit                               |       | $                                                                      | 1,147,997  |   | $ | 569,081 |   | $ | 1,717,078 |   |
| Foreign  currency translation adjustments |       | (386,827                                                               | )          | (193,413 | ) | (580,240 | ) |
| Comprehensive  profit                     |       | $                                                                      | 761,170    |   | $ | 375,668 |   | $ | 1,136,838 |   |

 

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**SOUTHHERTFORDSHIRE UNITED KINGDOM FUND, LTD.**

**(A LimitedPartnership)**

**NOTES TOCONSOLIDATED FINANCIAL STATEMENTS**

**(unaudited)**

** **

**Note 2 — ComprehensiveProfit (Continued)**

 
| ** **                                | ** ** | **Three  months ended**                                                | ** ** |
|-------------------------------------------|------------|------------------------------------------------------------------------|------------|
| ** **                                | ** ** | **June 30,  2009**                                                | ** ** |
| ** **                                | ** ** | **Partners  of South  Hertfordshire  United Kingdom  Fund, Ltd.** | ** ** | **Noncontrolling  interests** | ** ** | **Total** | ** ** |
|                                      |       |                                                                   |       |   | ** ** | ** ** | ** ** |
| Net  profit                               |       | $                                                                      | 80,989     |   | $ | 213,825 |   | $ | 294,814 |   |
| Foreign  currency translation adjustments |       | 238,385                                                                |       | 119,192 |   | 357,577 |   |
| Comprehensive  profit                     |       | $                                                                      | 319,374    |   | $ | 333,017 |   | $ | 652,391 |   |

 
| ** **                                | ** ** | **Six  months ended**                                                  | ** ** |
|-------------------------------------------|------------|------------------------------------------------------------------------|------------|
| ** **                                | ** ** | **June 30,  2009**                                                | ** ** |
| ** **                                | ** ** | **Partners  of South  Hertfordshire  United Kingdom  Fund, Ltd.** | ** ** | **Noncontrolling  interests** | ** ** | **Total** | ** ** |
|                                      |       |                                                                   |       |   | ** ** | ** ** | ** ** |
| Net  profit                               |       | $                                                                      | 411,971    |   | $ | 403,498 |   | $ | 815,469 |   |
| Foreign  currency translation adjustments |       | 214,104                                                                |       | 107,051 |   | 321,155 |   |
| Comprehensive  profit                     |       | $                                                                      | 626,075    |   | $ | 510,549 |   | $ | 1,136,624 |   |

 

**Note 3 — Transactions with the General Partnerand Affiliated Entities**

 

***Consulting and Management Fees***

 

An affiliate of the General Partner is entitled to be paid a consultingfee by NTL South Herts.  During theconstruction phases of the South Herts System, this consulting fee was 2% ofconstruction costs.  Since completion ofconstruction of each portion of the system, the consulting fee for thecompleted portion has been 5% of the gross revenue, excluding revenue from thesale of cable television/telephone systems. The consulting fee is calculated and payable monthly. Consulting feespaid or payable by NTL South Herts for the three months ended June 30,2010 and 2009 were $345,312 and $360,397, respectively.  Consulting fees paid or payable by NTL SouthHerts for the six months ended June 30, 2010 and 2009 were $694,162 and$691,502, respectively.  These amountswere expensed in the condensed consolidated statements of operations.

 

***Distribution Ratios and Reimbursement***

 

Any Partnership distributions made from cash flows (defined as cashreceipts derived from routine operations, less debt principal and interestpayments and cash expenses) are allocated 99% to the limited partners and 1% tothe General Partner.  Any distributionsother than interest 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.

 

The General Partner and its affiliates are entitled to reimbursementfrom NTL South Herts for direct and indirect expenses allocable to theoperation of the South Herts System, and from the Partnership for direct andindirect expenses allocable to the operation of the Partnership which include,but are not limited 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 June 30,2010 and 2009, reimbursement made by NTL South Herts and the Partnership to theGeneral Partner or its affiliates for any allocable direct and indirectexpenses totaled $2,479,297 and $2,647,252, respectively. During the six monthsended June 30, 2010 and 2009, reimbursement made by NTL South Herts andthe Partnership to the General Partner or its affiliates for any allocabledirect and indirect expenses totaled $4,980,022 and $4,948,892, respectively.

 

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**SOUTHHERTFORDSHIRE UNITED KINGDOM FUND, LTD.**

**(A LimitedPartnership)**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

**(unaudited)**

 

**Note 3 — Transactions with the General Partnerand Affiliated Entities (Continued)**

 

The General Partner and its affiliates may make advances to, and defercollection of fees and allocated expenses owed by, the Partnership, althoughthey are not required to do so. The Partnership is charged interest on suchadvances and deferred amounts at a rate equal to the General Partner’s orcertain affiliates’ effective average cost of debt financing from unaffiliatedentities, which does not differ from their weighted average cost of debtfinancing.  For the three months ended June 30,2010 and 2009, affiliates of the General Partner charged the Partnershipaggregated interest, bank fees and finance charges of $678,587 and $724,742,respectively, relating to non-permanent loans, and an affiliate of the GeneralPartner charged the Partnership interest on advances of $86,151 and $34,108,respectively. For the six months ended June 30, 2010 and 2009, affiliatesof the General Partner charged the Partnership aggregated interest, bank feesand finance charges of $1,347,556 and $1,445,211, respectively, relating tonon-permanent loans, and an affiliate of the General Partner charged thePartnership interest on advances of $164,336 and $66,279, respectively. The GeneralPartner and its affiliates are entitled to recover interest on the full amountof non-permanent loans they provide to the Partnership or NTL South Herts andthe portion of bank fees and deferred financing costs relating to Virgin Media’ssenior credit facility allocable to the Partnership or NTL South Herts.

 

**Note 4 — Recent Accounting Pronouncements**

 

In September 2009, the Financial Accounting Standards Board, orFASB, ratified new accounting guidance for existing multiple-element revenuearrangements. The revised multiple-element revenue arrangements guidance willbe effective for the first annual reporting period beginning on or afterJune 15, 2010 and may be applied retrospectively for all periods presentedor prospectively to arrangements entered into or materially modified after theadoption date. Early adoption is permitted provided that the revised guidanceis retroactively applied to the beginning of the year of adoption. We have notyet adopted the provisions of this guidance and are evaluating the impact onour consolidated financial statements.

 

**Note 5 — Income taxes**

 

For the three and six months ended June 30, 2010, income taxexpense was $345,600 and $663,929, respectively. 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 at December 31,2009. There was no income tax expense for the three and six months ended June 30,2009.

 

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

 

**Overview**

 

We are 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 the U.K.Upon acquisition of our system, our primary investment objective was to obtaincapital appreciation in the value of our investment in the system over the termthat the investment is held by us.

 

We hold 66.7% of the shares of NTL South Herts, which is principallyengaged in the development, construction, management and operation of broadbandcommunications networks for telephone, cable television and internet servicesin the U.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 remaining 33.3%of the shares of NTL South Herts. We are reliant on the support of Virgin MediaInc., the ultimate parent company of the General Partner, to continue ouroperations as a going concern.

 

We derive our revenue principally from monthly fees and usage charges.Our packaging of services and pricing are designed to encourage our residentialcustomers 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 charged to us by asubsidiary of Virgin Media Inc. for the provision of network services andsupport, the use of Virgin Media’s national backbone telephone network forcarriage of our telephone traffic, as well as the provision of technicalinfrastructure and network capacity by Virgin Media for our subscriptioninternet access service and digital television services, the provision ofcorporate services, including finance, legal, human resources and facilityservices, and for the provision of IT services, including our use of therelated 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 for doubtfulaccounts.

 

In the second quarter of 2009, the General Partner agreed to thetransfer of customer and supplier contracts relating to NTL South Herts’premium TV services, resulting in a transfer of revenue and costs to FutureEntertainment Sarl, a wholly owned subsidiary of Virgin Media, which witheffect from June 1, 2009, carries substantially all Virgin Media’s premiumTV channels and associated revenue and costs. This has resulted in a decline inrevenues earned by NTL South Herts along with a decline in the costs incurred,but as these services were loss making, it has not been detrimental to theresults of operations or financial position of NTL South Herts.

 

**Factors Affecting Our Business**

 

Our residential customers account for the majority of our totalrevenue. The number of residential customers, the number and types of servicesthat each customer uses and the prices we charge for these services drive ourrevenue. Our profit is driven by the relative margins on the types of serviceswe provide to these customers and by the number of services that we provide tothem. For example, broadband internet is more profitable than our televisionservices and, on average, our “triple-play” customers are more profitable than “double-play”or “single-play” customers. Our packaging of services and our pricing aredesigned to encourage our customers to use multiple services such astelevision, telephone and broadband at a lower price than each stand-aloneproduct on a combined basis. Factors particularly affecting our businessinclude general macroeconomic factors, currency movements, integration andrestructuring activities, churn, average revenue per user, competition, capitalexpenditures and seasonality.

 

***General Macroeconomic Factors.*** Generalmacroeconomic factors in the U.K. have an impact on our business. For example,during an economic slowdown, potential and existing customers may be lesswilling or able to purchase our products or upgrade their services. We may alsoexperience increased churn and higher 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.

 

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***Integration and RestructuringActivities.*** In the fourth quarter of 2008, Virgin Mediacommenced the implementation of a restructuring plan aimed at driving furtherimprovements in Virgin Media’s and our operational performance and eliminatinginefficiencies in order to create a fully-integrated, customer-focusedorganization. Virgin Media anticipates significant cost savings from the planand that the annual savings from and after 2010 will exceed the annual costsincurred in connection with the plan. These costs will include purchases offixed assets, lease and contract exit costs, employee termination costs andother restructuring and restructuring-related expenses, some of which will beclassified as restructuring costs. During the quarter, Virgin Media indentifiedfurther savings through the expansion of the program and revised the estimatedtotal costs 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.

 

***Capital Expenditures.*** Our businessrequires substantial capital expenditures on a continuing basis for variouspurposes, including expanding, maintaining and upgrading our cable 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, VirginMedia’s and our liquidity and the availability of cash to fund capital projectsare important drivers of our revenue. When Virgin Media’s and our liquidity isrestricted, so is our ability to meet our capital expenditure requirements.

 

***Churn.*** Churn is theproportion of customers who stop subscribing to any of our services. Anincrease in our churn can lead to increased costs and reduced revenue. Wecontinue to focus on improving our customer service and enhancing and expandingour service offerings to existing customers in order to manage our churn rates.Our ability to reduce our churn rates beyond a base level is limited by factorssuch as competition, the economy and customers moving outside our networkservice area, in particular during the summer season. Managing our churn ratesis a significant component of our business plan. Our churn rates may increaseif our customer service is seen as unsatisfactory, if we are unable to delivera service without interruption, if we fail to match offerings by ourcompetitors, if we increase our prices, if there is an improvement in the U.K.housing market or if there is a prolonged economic downturn.

 

***ARPU.*** Averagerevenue per user, or ARPU, is a measure Virgin Media uses to evaluate howeffectively it is realizing potential revenue from its residential cablecustomers on its network. Virgin Media believes that its “triple-play” cableoffering 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 toacquire and retain customers and increase revenue depends on our competitivestrength. There is significant and increasing competition in the market for ourconsumer services, including broadband and telephone services offered by BTGroup plc, or BT; resellers or local loop unbundlers, such as British SkyBroadcasting Group plc, or BSkyB, and Talk Talk Telecom Group PLC;alternative internet access services like DSL; satellite television servicesoffered by BSkyB and by BBC and ITV through Freesat; free-to-air digitalterrestrial television offered through Freeview; and internet protocoltelevision offered by BT. In addition, certain competitors, such as BT andBSkyB, are dominant in markets in which we compete and may use their dominancein those markets to offer bundled services that compete with our productofferings. As a result of increased competition, we have had to, and may berequired to continue to, adjust our pricing and offer discounts to new andexisting customers in order to attract and retain customers.

 

***Seasonality.*** Some revenuestreams are subject to seasonal factors. For example, telephone usage revenueby residential customers tends to be slightly lower during summer holidaymonths. Our churn rates include persons who disconnect their service because ofmoves, resulting in a seasonal increase in our churn rate during the summermonths when higher levels of U.K. house moves occur and students leave theiraccommodation between academic years.

 

**Critical Accounting Policies**

 

Thepreparation of our consolidated financial statements requires us to makeestimates that affect the reported amounts of assets, liabilities, revenues andexpenses, and related disclosure of contingent assets and contingent liabilities.We base our judgments on historical experience and on various other assumptionsthat we believe are reasonable under the circumstances, the results of whichform the basis for making estimates about the carrying values of assets andliabilities that are not readily apparent from other sources. Actual resultsmay differ from these estimates under different assumptions or conditions.

 

For a discussion of the accounting judgments and estimates that we haveidentified as critical in the preparation of our consolidated financialstatements, please refer to our annual report on Form 10-K for the yearended December 31, 2009, as filed with the SEC on March 17, 2010.

 

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**Consolidated Results of Operations**

 

***Three Months Ended June 30,2010 and 2009***

 

We present below summarized consolidated financial information in U.S.dollars and U.K. pounds sterling for the three months ended June 30, 2010and 2009:

 
| ** **                                    | ** ** | **Three  months ended** | ** ** | ** ** | ** ** | **Three  months ended** | ** ** | ** ** | ** ** |
|-----------------------------------------------|------------|-------------------------|------------|------------|------------|-------------------------|------------|------------|------------|
| ** **                                    | ** ** | **June 30,**       | ** ** | **%**      | ** ** | **June 30,**       | ** ** | **%**      | ** ** |
| ** **                                    | ** ** | **2010**                | ** ** | **2009**   | ** ** | **Change**              | ** ** | **2010**   | ** ** | **2009** | ** ** | **Change** | ** ** |
|                                          | ** ** | ** **              | ** ** | ** ** | ** ** | ** **              | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Revenue                                       |       | $                       | 6,906,233  |       | $          | 7,207,941               |       | (4.2       | )          | £ | 4,624,028 |   | £ | 4,649,494 |   | (0.5 | ) |
| Operating  costs                              |       | (2,185,282              | )          | (2,850,604 | )          | (23.3                   | )          | (1,465,025 | )          | (1,836,157 | ) | (20.2 | ) |
| Allocated  overhead                           |       | (2,479,297              | )          | (2,647,252 | )          | (6.3                    | )          | (1,659,941 | )          | (1,711,133 | ) | (3.0 | ) |
| Management  fees                              |       | (345,312                | )          | (360,397   | )          | (4.2                    | )          | (231,202   | )          | (232,475 | ) | (0.5 | ) |
| Selling,  general and administrative expenses |       | (40,714                 | )          | (24,788    | )          | 64.2                    |       | (28,066    | )          | (15,541 | ) | 80.6 |   |
| Operating  income                             |       | 1,855,628               |       | 1,324,900  |       | 40.1                    |       | 1,239,794  |       | 854,188 |   | 45.1 |   |
| Interest  expense                             |       | (764,738                | )          | (758,850   | )          | 0.8                     |       | (511,659   | )          | (488,001 | ) | 4.8 |   |
| Exchange  gains (losses)                      |       | 69,914                  |       | (271,236   | )          |                    |       | 49,761     |       | (182,756 | ) |   |   |
| Income  tax expense                           |       | (345,600                | )          | —     |       |                    |       | (230,950   | )          | — |   |   |   |
|                                          |       |                    |       |       |       |                    |       |       |       |   |   |   |   |
| Net  profit                                   |       | 815,204                 |       | 294,814    |       | 176.5                   |       | 546,946    |       | 183,431 |   | 198.2 |   |
| Noncontrolling  interest                      |       | (296,229                | )          | (213,825   | )          | 38.5                    |       | (197,957   | )          | (138,111 | ) | 43.3 |   |
| Net  profit attributable to South Herts       |       | $                       | 518,975    |       | $          | 80,989                  |       |       |       | £ | 348,989 |   | £ | 45,320 |   |   |   |

 

*Revenue*

 

For the three months ended June 30, 2010, revenue decreased by4.2% to $6.9 million from $7.2 million for the three months ended June 30,2009, and revenue expressed in pounds sterling was £4.6 million for both thethree months ended June 30, 2010 and the three months ended June 30,2009. Revenue expressed in pounds sterling was relatively unchanged as theimpact on revenue of the transfer, in the second quarter of 2009, of customerand supplier contracts relating to the NTL South Herts’ premium TV services toFuture Entertainment Sarl, a wholly owned subsidiary of Virgin Media Inc., waslargely offset by selective price increases and the impact of the growth intotal customer numbers and triple-play customers.

 

*Expenses*

 

*Operatingcosts*

 

Operatingcosts include cost of goods sold and depreciation of fixed assets related tothe network. For the three months ended June 30, 2010, operating costsdecreased by 23.3% to $2.2 million from $2.9 million for the threemonths ended June 30, 2009, and operating costs expressed in poundssterling decreased by 20.2% to £1.5 million for the three months ended June 30,2010 from £1.8 million for the three months ended June 30, 2009. Thereduction in operating costs was primarily driven by the impact on cost ofgoods sold of the transfer, in the second quarter of 2009, of customer andsupplier contracts relating to NTL South Herts’ premium TV services. For thethree months ended June 30, 2010 and 2009, depreciation expense includedin operating costs was $908,153, or £610,940, and $1,071,202, or £690,370,respectively.

 

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*Allocatedoverhead*

 

Forthe three months ended June 30, 2010, allocated overhead decreased by 6.3%to $2.5 million from $2.6 million for the three months ended June 30,2009, and allocated overhead expressed in pounds sterling, of £1.7 million, wasunchanged.  The business of NTL SouthHerts is managed as an integral part of Virgin Media. The combined costs ofmanaging the larger group are allocated to each entity within the Virgin Mediagroup, including NTL South Herts, on a consistent and proportional basisaccording to the level of trading in that entity. Allocated overhead expressedin pounds sterling was unchanged which is in line with Virgin Media’s cost basewhich was also relatively unchanged.

 

*Managementfees*

 

Forthe three months ended June 30, 2010, management fees decreased by 4.2% to$345,312 from $360,397 for the three months ended June 30, 2009, andmanagement fees expressed in pounds sterling were relatively unchanged at£231,202 for the three months ended June 30, 2010, as compared with£232,475 for the three months ended June 30, 2009. Management fees arecharged as a percentage of revenue and changes in management fees are thereforea direct reflection of changes in revenue.

 

*Selling,general and administrative expenses*

 

For the three months ended June 30, 2010,selling, general and administrative expenses increased to $40,714, or £28,066,from $24,788, or £15,541, for the three months ended June 30, 2009. Theincrease was primarily due to higher audit fees and investor relations’ servicecosts.

 

*Interestexpense*

 

For the three months ended June 30, 2010,interest expense remained relatively unchanged at $764,738, as compared with$758,850 for the same period in 2009, and interest expense expressed in poundssterling, of £511,659 for the three months ended June 30, 2010 wasslightly higher than £488,001 for the same period in 2009. The increase ininterest expense from higher interest rates in the period and higher allocatedbank fees and finance costs was offset by a decrease in interest due to lowerbalances outstanding on which interest is charged.

 

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

 

*Exchangegains or losses*

 

For the three months ended June 30, 2010,foreign currency exchange gains were $69,914, or £49,761, as compared withlosses of $271,236, or £182,756, for the three months ended June 30, 2009.The change in foreign currency exchange gains was primarily attributable tofluctuations in the value of the U.S. dollar on certain of our liabilities andtransactions. The value of the U.S. dollar strengthened by approximately 8%against the pound sterling from December 31, 2009 to June 30, 2010.Our results of operations will continue to be affected by foreign exchange ratefluctuations.

 

*Income taxexpense*

 

For the three months ended June 30, 2010,income tax expense was $345,600 or £230,950. 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 at December 31,2009. There was no income tax expense for the three months ended June 30,2009.

 

*Noncontrollinginterest*

 

During the three months ended June 30, 2010,the profit attributable to the noncontrolling interest was $296,229, or£197,957, as compared with $213,825, or £138,111, for the three months ended June 30,2009. This was due to the increased profitability of the operating entity.

 

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

 

For the three months ended June 30, 2010, netprofit attributable to South Hertfordshire United Kingdom Fund, Ltd. was$518,975, or £348,989, as compared with $80,989, or £45,320, for the threemonths ended June 30, 2009, primarily due to the reasons described above.

 

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***Six Months Ended June 30, 2010and 2009***

 

We present below summarized consolidated financial information in U.S.dollars and U.K. pounds sterling for the six months ended June 30, 2010and 2009:

 
| ** **                                    | ** ** | **Six  months ended** | ** ** | ** ** | ** ** | **Six  months ended** | ** ** | ** ** | ** ** |
|-----------------------------------------------|------------|-----------------------|------------|------------|------------|-----------------------|------------|------------|------------|
| ** **                                    | ** ** | **June  30,**         | ** ** | **%**      | ** ** | **June  30,**         | ** ** | **%**      | ** ** |
| ** **                                    | ** ** | **2010**              | ** ** | **2009**   | ** ** | **Change**            | ** ** | **2010**   | ** ** | **2009** | ** ** | **Change** | ** ** |
| ** **                                    | ** ** | ** **            | ** ** | ** ** | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Revenue                                       |       | $                     | 13,883,231 |       | $          | 13,830,045            |       | 0.4        |       | £ | 9,093,025 |   | £ | 9,263,879 |   | (1.8 | ) |
| Operating costs                               |       | (4,523,382            | )          | (5,567,007 | )          | (18.7                 | )          | (2,962,655 | )          | (3,728,989 | ) | (20.6 | ) |
| Allocated  overhead                           |       | (4,980,022            | )          | (4,948,892 | )          | 0.6                   |       | (3,261,738 | )          | (3,314,952 | ) | (1.6 | ) |
| Management fees                               |       | (694,162              | )          | (691,502   | )          | 0.4                   |       | (454,652   | )          | (463,194 | ) | (1.8 | ) |
| Selling, general  and administrative expenses |       | (137,750              | )          | (64,177    | )          | 114.6                 |       | (90,221    | )          | (42,988 | ) | 109.9 |   |
| Operating income                              |       | 3,547,915             |       | 2,558,467  |       | 38.7                  |       | 2,323,759  |       | 1,713,756 |   | 35.6 |   |
| Interest expense                              |       | (1,511,892            | )          | (1,511,490 | )          | 0.0                   |       | (990,236   | )          | (1,012,452 | ) | (2.2 | ) |
| Exchange gains  (losses)                      |       | 344,984               |       | (231,508   | )          |                  |       | 225,952    |       | (155,073 | ) |   |   |
| Income tax  expense                           |       | (663,929              | )          | —     |       |                  |       | (434,850   | )          | — |   |   |   |
|                                          |       |                  |       |       |       |                  |       |       |       |   |   |   |   |
| Net profit                                    |       | 1,717,078             |       | 815,469    |       | 110.6                 |       | 1,124,625  |       | 546,231 |   | 105.9 |   |
| Noncontrolling  interest                      |       | (569,081              | )          | (403,498   | )          | 41.0                  |       | (372,728   | )          | (270,278 | ) | 37.9 |   |
| Net profit  attributable to South Herts       |       | $                     | 1,147,997  |       | $          | 411,971               |       | 178.7      |       | £ | 751,897 |   | £ | 275,953 |   | 172.5 |   |

 

*Revenue*

 

For the six months ended June 30, 2010, revenue increased by 0.4%to $13.9 million from $13.8 million for the six months ended June 30,2009, and revenue expressed in pounds sterling decreased by 1.8% to £9.1million for the six months ended June 30, 2010 from £9.3 million forthe six months ended June 30, 2009. The decrease in revenue expressed inpounds sterling was primarily due to the impact on revenue of the transfer, inthe second quarter of 2009, of customer and supplier contracts relating to theNTL South Herts’ premium TV services to Future Entertainment Sarl, a whollyowned subsidiary of Virgin Media Inc., partially offset by selective priceincreases and the impact of the growth in total customer numbers andtriple-play customers.

 

*Expenses*

 

*Operating costs*

 

Operating costs include cost of goods sold and depreciation of fixedassets related to the network. For the six months ended June 30, 2010,operating costs decreased by 18.7% to $4.5 million from $5.6 millionfor the six months ended June 30, 2009, and operating costs expressed inpounds sterling decreased by 20.6% to £3.0 million for the six monthsended June 30, 2010 from £3.7 million for the six months endedJune 30, 2009.  The reduction inoperating costs was primarily driven by the impact on cost of goods sold of thetransfer, in the second quarter of 2009, of customer and supplier contractsrelating to NTL South Herts’ premium TV services. For the six months endedJune 30, 2010 and 2009, depreciation expense included in operating costswas $2,025,927, or £1,326,911, and $2,077,979, or £1,391,908, respectively.

 

*Allocatedoverhead*

 

For the six months ended June 30, 2010, allocated overheadincreased by 0.6% to $5.0 million from $4.9 million for the six months endedJune 30, 2009. For the six months ended June 30, 2010, allocatedoverhead expressed in pounds sterling, of £3.3 million, was relativelyunchanged as compared with the six months ended June 30, 2009. Thebusiness of NTL South Herts is managed as an integral part of Virgin Media. Thecombined costs of managing the larger group are allocated to each entity withinthe Virgin Media group, including NTL South Herts, on a consistent andproportional basis according to the level of trading in that entity. Allocatedoverhead expressed in pounds sterling was relatively unchanged in line withVirgin Media’s overall cost base.

 

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*Managementfees*

 

For the six months ended June 30, 2010, management fees increasedby 0.4% to $694,162 from $691,502 for the six months ended June 30, 2009,and management fees expressed in pounds sterling decreased by 1.8% to £454,652for the six months ended June 30, 2010 from £463,194 for the sixmonths ended June 30, 2009. Management fees are charged as a percentage of revenue and changes inmanagement fees are therefore a direct reflection of changes in revenue.

 

*Selling, general and*administrative*expenses*

 

For the six months ended June 30, 2010, selling, general andadministrative expenses increased to $137,750, or £90,221, from $64,177, or£42,988, for the six months ended June 30, 2009.  The increase was primarily due to higheraudit fees.

 

*Interest expense*

 

For the six months ended June 30, 2010, interest expense remainedrelatively unchanged at $1.5 million as compared with the same period in 2009,and interest expense expressed in pounds sterling decreased by 2.2% to £990,236for the six months ended June 30, 2010 from £1,012,452 for the sixmonths ended June 30, 2009. This decrease was primarily due to a loweraccounts payable to affiliates and related parties balance, arising fromincreased profitability, partially offset by higher interest rates in theperiod and higher allocated bank fees and finance costs.

 

We paid no cash interest for the six months ended June 30, 2010and 2009.

 

*Exchange gains or**losses*

 

For the six months ended June 30, 2010, foreign currency exchangegains were $344,984, or £225,952, as compared with losses of $231,508, or£155,073, for the six months ended June 30, 2009.  The change in foreign currency exchangelosses was primarily attributable to fluctuations in the value of the U.S.dollar on certain of our liabilities and transactions.  The value of the U.S. dollar strengthened byapproximately 8% against the pound sterling from December 31, 2009 toJune 30, 2010. Our results of operations will continue to be affected byforeign exchange rate fluctuations.

 

*Income tax expense*

 

For the six months ended June 30, 2010, income tax expense was$663,929 or £434,850. The income tax expense relates to the partial utilizationof the deferred 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 months ended June 30, 2009.

 

*Noncontrolling interest*

 

During the six months ended June 30, 2010, the profit attributableto the noncontrolling interest was $569,081, or £372,728, as compared with$403,498, or £270,278, for the six months ended June 30, 2009.

 

*Net profit attributable to South Hertfordshire UnitedKingdom Fund, Ltd.*

 

For the six months ended June 30, 2010, net profit attributable toSouth Hertfordshire United Kingdom Fund, Ltd. was $1,147,997, or £751,897,as compared with $411,971, or £275,953, for the six months ended June 30,2009, primarily due to the reasons described above.

 

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***Selected Operating Data***

 

The following table sets forth certain data concerning our residentialcable customers for the last five quarters:

 
| ** **                      | ** ** | **June 30,** | ** ** | **March 31,** | ** ** | **December 31,** | ** ** | **September 30,** | ** ** | **June 30,** | ** ** |
|---------------------------------|------------|-------------------|------------|--------------------|------------|-----------------------|------------|------------------------|------------|-------------------|------------|
| ** **                      | ** ** | **2010**          | ** ** | **2010**           | ** ** | **2009**              | ** ** | **2009**               | ** ** | **2009**          | ** ** |
|                            |       |              |       |               |       |                  |       |                   |       |              |       |
| Total  customers                |       | 34,530            |       | 34,160             |       | 33,668                |       | 33,476                 |       | 33,399            |       |
| Digital  television subscribers |       | 27,088            |       | 27,418             |       | 26,911                |       | 26,602                 |       | 26,217            |       |
| Broadband  internet subscribers |       | 28,733            |       | 28,235             |       | 27,511                |       | 27,090                 |       | 26,785            |       |
| Telephony  subscribers          |       | 30,319            |       | 30,059             |       | 29,646                |       | 29,424                 |       | 29,284            |       |
| Average  monthly churn (1)      |       | 1.2               | %          | 1.1                | %          | 1.4                   | %          | 1.5                    | %          | 1.3               | %          |

 

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(1)         Churn is calculated by takingthe total number of customers disconnecting from our services during the monthand dividing them by the average number of customers during the month. Averagemonthly churn during the quarter is the average of the three monthly churncalculations within the quarter.

 

**Condensed Consolidated Statement of Cash Flows**

 

In the six months ended June 30, 2010, we generated $935,563 fromour operating activities compared with $311,991 in the six months ended June 30,2009, which was used to purchase fixed assets including equipment for customerinstallations. Our cash provided by operating activities increased primarilydue to an improved operating result.

 

**Liquidity and CapitalResources**

 

***Outstanding Indebtedness***

 

We have no financing independent of Virgin Media. We are reliant uponthe support of Virgin Media to continue our operations. As of June 30,2010, we had consolidated current liabilities of $35.4 million due toVirgin Media group companies compared with $41.6 million as ofDecember 31, 2009 and $45.9 million as of June 30, 2009.

 

Historically, our source of cash has been the net proceeds of ourofferings of limited partnership interests along with funding from Virgin Mediaand our principal uses of cash have been capital contributions to NTL SouthHerts in order to fund our proportionate share of the construction costs of theSouth Herts System and ongoing operations.

 

Accordingly, until such time as NTL South Herts begins to pay dividendson its ordinary shares (which is not expected in the foreseeable future) wewill be required to fund our administrative expenses from borrowings or,theoretically, additional issuances of limited partnership interests. It isunlikely that we will be able to sell debt or equity securities in the publicmarkets, at least in the short term, or to obtain financing from commercialbanks. Accordingly, we are dependent on Virgin Media for funds to coveroperating expenses, and will continue to be dependent upon Virgin Media to meetour liquidity requirements for the foreseeable future. We expect that cash fromour operations in 2010 will be utilized fully for the purchase of fixed assetsincluding connecting new customers to our networks.

 

Virgin Media’s business is capital intensive and it is highlyleveraged. Virgin Media has significant cash requirements for operating costs,capital expenditures and interest expense. Virgin Media believes that it willbe able to meet its current and medium-term liquidity and capital requirements,including fixed charges, through cash on hand, cash from operations, availableborrowing under its revolving credit facility, and its ability to obtain futureexternal financing.

 

Virgin Media had £6,053.0 million of debt outstanding as of June 30,2010, compared to £5,974.7 million as of December 31, 2009 and£5,898.2 million as of June 30, 2009, and £414.9 million of cashand cash equivalents, compared to £430.5 million as of December 31,2009 and £246.0 million as of June 30, 2009. The increase in debtsince June 30, 2009 is due to adverse movements in exchange rates and, toa lesser extent, an increase in net borrowing. The increase in debt fromDecember 31, 2009 is also due to adverse movements in exchange rates and,to a lesser extent, an increase in net borrowing.

 

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Virgin Media’s long term debt was issued by Virgin Media Inc. andcertain of its subsidiaries that have no independent operations or significantassets other than investments in their respective subsidiaries and receivablesunder intercompany loans.  As a result,they depend upon the receipt of sufficient funds from their respectivesubsidiaries or payments under intercompany loans to meet their obligations. Inaddition, the terms of Virgin Media’s existing and future indebtedness and thelaws of the jurisdictions under which its subsidiaries are organized limit thepayment of dividends, loan repayments and other distributions from them undermany circumstances.

 

Virgin Media’s debt agreements contain restrictions on its ability totransfer cash between groups of its subsidiaries or to us. As a result of theserestrictions, although Virgin Media’s overall liquidity may be sufficient tosatisfy its obligations, it may be limited by covenants in some of its debtagreements from transferring cash to other subsidiaries that might requirefunds. In addition, cross default provisions in its other indebtedness may betriggered if it defaults on any of these debt agreements.

 

For further information concerning Virgin Media’s liquidity and capitalresources and the terms of its various debt facilities, including the newsenior credit facility, see its annual report on Form 10-K for the yearended December 31, 2009 as filed with the SEC on February 26, 2010,and its quarterly report on Form 10-Q for the three and six months ended June 30,2010, as filed with the SEC on August 4, 2010.

 

**Off-Balance Sheet Transactions**

 

As of June 30, 2010 and 2009, we had no off-balance sheetarrangements as defined in Item 303(a)(4) of Regulation S-Kunder the Securities Exchange Act of 1934, as amended.

 

**Contractual Obligations and Commercial Commitments**

 

There have been no material changes in the six months ended June 30,2010 to the information required under this Item from what was disclosed in ourannual report on Form 10-K for the year ended December 31, 2009, asfiled with the SEC on March 17, 2010.

 

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**Item 3.****Quantitativeand Qualitative Disclosures about Market Risk**

 

The functional currency of NTL South Herts is pounds sterling and allrevenue and substantially all costs are incurred in pounds sterling. We reportin U.S. dollars and are therefore exposed to fluctuations in the pound sterlingto U.S. dollar exchange rate.

 

The aggregate potential gain from a hypothetical one-percent decreasein the pound sterling/U.S. dollar exchange rate is approximately $28,000 forthe six months ended June 30, 2010.

 

We have no debt other than amounts due to affiliates. As of June 30,2010 and 2009, we had approximately $35.4 million and $45.9 million,respectively, in amounts due to Virgin Media group companies. Interest onamounts due to affiliates is at a variable rate based on the average rateincurred by Virgin Media. Therefore we are exposed to changes in Virgin Media’sborrowing rate. The aggregate potential loss from a hypothetical one-percentagepoint increase in the interest rate is approximately $192,000 for the sixmonths ended June 30, 2010.

 

**Item 4.Controls and Procedures**

 

*(a) Disclosure Controls and Procedures. *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 InternalControl Over Financial Reporting.*There were no changes in ourinternal control over financial reporting (as such term is defined inRules 13a-15(f) and 15d-15(f) under the Exchange Act) during thefiscal quarter to which this report relates that have materially affected, orare reasonably likely to materially affect, our internal control over financialreporting.

 

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*                                         The Partnershiphas no principal executive officer or principal financial officer. RobertMackenzie and Robert Gale are Directors of NTL Fawnspring Limited, the GeneralPartner of the Partnership.

 

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**PART II. OTHER INFORMATION**

 

**Item 1.Legal Proceedings**

 

Weare involved in various disputes and litigation arising in the ordinary courseof our business. While we do not believe any of these litigation matters aloneor in the aggregate will have a material adverse effect on our financialposition or results of operation, any adverse outcome in one or more of thesematters could be material to our consolidated financial statements for any oneperiod.

 

**Item 1A.Risk Factors**

 

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

 

**Item2.  Unregistered Sales of EquitySecurities and use of Proceeds**

 

None.

 

**Item3.  Defaults Upon Senior Securities**

 

None.

 

**Item 4.  (Removed and Reserved)**

 

**Item5.  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 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 Partnershiphas no principal executive officer or principal financial officer. RobertMackenzie and Robert Gale are Directors of NTL Fawnspring Limited, the GeneralPartner of the Partnership.

 

**                                  Filed herewith.

 

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**SIGNATURES**

 

Pursuant to the requirements of the Securities Exchange Act of 1934,the registrant has duly caused this report to be signed on its behalf by theundersigned 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:August 6, 2010

 

Pursuant to the requirements of the Securities Exchange Act of 1934,this report has been signed below by the following persons on behalf of theregistrant and in the capacities and on the dates indicated.

 
|                       | By:    | /s/  ROBERT MACKENZIE                                                                                                                   |
|----------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------|
|                       |   | Robert  Mackenzie*Director of NTL Fawnspring Limited,  the General Partner of South Hertfordshire United Kingdom Fund, Ltd.** |
|                       |   |                                                                                                                                    |
| Date:  August 6, 2010 |   |                                                                                                                                    |
|                       |   |                                                                                                                                    |
|                       | By:    | /s/  ROBERT GALE                                                                                                                        |
|                       |   | Robert  Gale*Director of NTL Fawnspring Limited,  the General Partner of South Hertfordshire United Kingdom Fund, Ltd.**      |

 

Date:August 6, 2010

 

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