Folders disappear when thunderbird upgraded to 3.x

I am using Thunderbird on Windows XP Pro. Recently i upgraded the thunderbird to Tb 3.1 from 2.x I can see that all my sub folders have disappeared. The 'Unified Folder' tab shows basic folders, however 'All Folders' tab does not show any folders at all.

Fig 1 shows the folders in 'Unified Folders' tab:

To explain my problem better, i have included the images.

Fig 2 shows the folders in 'All Folders' tab:

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