**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**FORM 10-K**

 

**x****      ****ANNUAL REPORT PURSUANT TO SECTION 13OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

 

**For thefiscal year ended December 31, 2009**

 

**or**

 

**o****         ****TRANSITION REPORT PURSUANTTO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

 

**For thetransition period from to**

 

**Commissionfile number: 000-53209**

 

**Adelphia Recovery Trust**

(Exactname of registrant as specified in its charter)

 

| **Delaware**                                                    | ** ** | **11-6615508**                        |
|-----------------------------------------------------------------|------------|---------------------------------------|
| (State  or other jurisdiction of incorporation or organization) |       | (I.R.S.  Employer Identification No.) |

 

**919 North Market Street, 17th Floor, P.O. Box 705**

**Wilmington, Delaware 19899**

(Address of Principal Executive Offices) (Zip Code)

 

**302-652-4100 Attn: Dean Ziehl**

(Registrant’stelephone number, including area code)

 

**Securities registered pursuant to Section 12(g) ofthe Act:**

**CVV Series ACC-7 Interests**

(Title of Classes)

 

Indicate by check mark if theregistrant is a well-known seasoned issuer, as defined in Rule 405 of theSecurities Act.  Yes  o  **No  ****x**

 

Indicate by check mark if theregistrant is not required to file reports pursuant to Section 13 or Section 15(d) ofthe Act.  Yes  o  **No  ****x**

 

**Note**— Checking thebox above will not relieve any registrant required to file reports pursuant to Section 13or 15(d) of the Exchange Act from their obligations under those Sections.

 

Indicate by check markwhether the registrant (1) has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding 12months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements forthe past 90 days.  **Yes  ****x****  **No  o

 

Indicate by check markwhether the registrant has submitted electronically and posted on its corporateWeb site, if any, every Interactive Data File required to be submitted andposted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter)during the preceding 12 months (or for such shorter period that the registrantwas required to submit and post such files).  Yes  o  No  o

 

Indicate by check mark ifdisclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, tothe best of registrant’s knowledge, in definitive proxy or informationstatements incorporated by reference in Part III of this Form 10-K orany amendment to this Form 10-K.  **Yes  ****x**  No  o

 

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, or a smaller reporting company. See the definitions of “largeaccelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2of the Exchange Act.

 

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

 

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2 of theAct).  Yes  o  **No  ****x**

 

State the aggregate marketvalue of the voting and non-voting common equity held by non-affiliatescomputed by reference to the price at which the common equity was last sold, orthe average bid and asked price of such common equity, as of the last businessday of the registrant’s most recently completed second fiscal quarter.

 

$0

 

**Note.**—If adetermination as to whether a particular person or entity is an affiliatecannot be made without involvingunreasonable effort andexpense, the aggregate market value of the common stock held by non-affiliatesmay be calculated on the basis of assumptions reasonable under thecircumstances, provided that the assumptions are set forth in this Form.

 

APPLICABLE ONLY TOREGISTRANTS INVOLVED IN BANKRUPTCYPROCEEDINGS DURING THE PRECEDINGFIVE YEARS:

 

Indicate by check markwhether the registrant has filed all documents and reports required to be filedby Section 12, 13 or 15(d) of the Securities Exchange Act of 1934subsequent to the distribution of securities under a plan confirmed by a court.  Yes  o  No  o

 

(APPLICABLE ONLY TO CORPORATEREGISTRANTS)

 

Indicate the number of sharesoutstanding of each of the registrant’s classes of common stock, as of thelatest practicable date.

 

DOCUMENTS INCORPORATED BYREFERENCE

 

List hereunder the followingdocuments if incorporated by reference and the Part of the Form 10-K(e.g., Part I, Part II, etc.) into which the document is incorporated: (1) Any annual report tosecurity holders; (2) Any proxy or information statement; and (3) Anyprospectus filed pursuant to Rule 424(b) or (c) under theSecurities Act of 1933. The listed documents should be clearly described foridentification purposes (e.g., annual report to security holders for fiscalyear ended December 24, 1980).

 

 

 

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**PART I**

 

**Item 1.Business.**

 

Overview

 

The Adelphia Recovery Trust(the “ART”) was formed in 2007 as a Delaware statutory trust pursuant to thatcertain First Modified Fifth Amended Joint Chapter 11 Plan of Reorganization(the “Plan”) of Adelphia Communications Corporation (“Adelphia”) and certain ofits subsidiaries. The purpose of the ART is to prosecute the various causes ofaction transferred to the ART pursuant to the Plan (the “Causes of Action”) anddistribute to the owners (the “Holders”) of the interests in the ART (“Interests”)the net proceeds of such Causes of Action, according to the relative prioritiesestablished pursuant to the Plan, subject to the retention of various amountsto fund the prosecution of those Causes of Action and operations of the ART.Pursuant to the Plan, in addition to the Causes of Action, Adelphia transferred$25 million in cash to the ART and paid certain expenses of the ART, in orderto fund the initial expenses of operation. The ART has no purpose other than toprosecute its Causes of Action and to distribute net proceeds to Holders.

 

Adelphia and certain of itssubsidiaries filed for bankruptcy protection under Chapter 11 of the BankruptcyCode (the “Code”) in June 2002. During the bankruptcy, on July 31,2006 substantially all of the assets of Adelphia were sold for a combination ofcash and stock in Time Warner Cable (“TWC”). In late 2006, representatives ofvarious groups of creditors reached agreement on the allocation anddistribution of the cash, TWC stock, other proceeds from the sale of estateassets and relative priorities to any distributions arising from the Causes ofAction contributed to the ART. This agreement was embodied in the Plan, whichwas confirmed in January 2007 and became effective on February 13,2007. Under the Plan, the creditors and equity holders of Adelphia and certainof its subsidiaries received one or more of the following: cash, TWC stock,rights to future distributions from Adelphia excess reserves up to payment infull and the Interests.

 

Interests allocated toholders of disputed claims and equity interests were deemed transferred to areserve that is a “disputed ownership fund” for tax purposes (pursuant to thePlan and U.S. Treasury Regulations Section 1.468B-9(c)). The disputedownership fund (the “ART DOF”) is a separate taxable entity. The ART DOF andissues relating to the ART DOF are not the subject of this Form 10-K.

 

The ART will dissolve uponthe earlier of the distribution of all of its assets to the Holders or thefifth anniversary of its creation. However, the Bankruptcy Court for theSouthern District of New York (the “Bankruptcy Court”) may approve an extensionof the term if deemed necessary for the purposes of resolving the Causes ofAction and distributing the net proceeds to Holders.

 

As set forth in the Plan andthe Declaration of Trust for the ART, as amended (the “Declaration”), the ARTis administered by five trustees (the “Trustees”). These Trustees areauthorized to carry out the purposes of the ART. In particular, the Trustees areresponsible for protecting, maintaining, liquidating to cash and maximizing thevalue of the Causes of Action contributed to the ART, whether by litigation,settlement or otherwise.

 

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Distributions

 

Pursuant to the Plan and theDeclaration, distributions to Holders are net of any costs and expensesincurred by the ART in connection with administering, litigating or otherwiseresolving the various Causes of Action. Such amounts withheld from distributionmay also include fees and expenses of the Trustees, premiums for directors andofficers insurance, and other insurance and fees and expenses of attorneys andconsultants. Distributions will be made only from assets of the ART and only tothe extent that the ART has sufficient assets (over amounts retained forcontingent liabilities and future costs and expenses) to make such payments inaccordance with the Plan and the Declaration. No distribution is required to bemade to any Holder unless such Holder is to receive in such distribution atleast $25.00 (per Holder class, name and address), or unless such distributionis the final distribution to such Holder pursuant to the Plan and theDeclaration.

 

Distributions will be madeat the sole discretion of the Trustees in accordance with the provisions of thePlan and the Declaration. As of the date hereof, the Trustees have determinedthe present best course of action is to retain the existing cash in reserve toadminister the ART and fund the prosecution of the Causes of Action.Consequently, there have been no distributions through the date of this Form 10-Kand none have been announced.

 

The ART Trustees willcontinue to assess the adequacy of funds held for all potential costs andexpenses of the ART and will distribute ART excess assets, if any, to Holders.If and when such a distribution occurs, it will be made according to thewaterfall priority established in the Plan and discussed herein.

 

ART Operations andManagement

 

Overview

 

The Trustees are Mr. BryanE. Bloom, Mr. Lee S. Hillman, Mr. David P. Stowell, Mr. Ralph J.Takala and Mr. Dean A. Ziehl. The Trustees were appointed by variousgroups of creditors of the Adelphia estate. The Trustees have authority tocarry out the purposes of the ART.

 

The ART is required to havea Delaware Trustee, and also has an Institutional Trustee. The Delaware Trusteeof the ART is Bank of New York Mellon (Delaware) and has been appointed for thepurpose of fulfilling the requirements of the Delaware Statutory Trust Act. TheInstitutional Trustee of the ART is Bank of New York Mellon. The InstitutionalTrustee is responsible for authentication of ART certificates (for Interests)distributed to Holders, the distribution through a paying agent of amounts dueto Holders and the taking of all actions that may be necessary or appropriatefor the preservation and the continuation of the ART’s valid existence, rights,franchises, and privileges as a statutory trust. Quest Turnaround Advisors,L.L.C. (“Quest”) is the plan administrator (the “Plan Administrator”) of thedebtors named in the Plan (the “Debtors”). Pursuant to the terms of the PlanAdministrator Agreement between Quest and the Debtors, Quest and the Debtorsagreed with each other to provide certain administrative services to the ART.In order to facilitate the provision of such administrative services, the ARThas appointed Quest as the trust administrator of the ART (in that capacity,the “Trust Administrator”). The Bankruptcy Court has retained exclusivejurisdiction over all matters relating to the ART.

 

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The Trustees

 

The ART does not havedirectors, executive officers or employees. The Trustees have the duty andauthority to take actions necessary to protect, maintain, liquidate to cash andmaximize the value of its Causes of Action, whether by litigation, settlementor otherwise. The Declaration includes the following material duties and powersof the Trustees:

 

· taking any action necessaryor desirable to carry out the purposes of the ART;

· maintaining the value ofthe assets of the ART;

· making distributions to theHolders;

· determining reserves tocover future costs and expenses associated with the ART;

· causing the ART to retainprofessionals or employees or agents as they may deem necessary to aid in theperformance of their responsibilities pursuant to the terms of the Declarationand the Plan, including the prosecution of Causes of Action and the liquidationand distribution of the assets of the ART;

· causing the ART to pay allcosts and expenses incurred in connection with the prosecution of Causes ofAction and the administration of the ART;

· filing any and all taxreturns with respect to the ART;

· causing valuations ofproperty transferred to and held by the ART to be made for all United Statesfederal income tax purposes; and

· winding up the affairs andliquidation of the ART.

 

A Trustee may be removed,but only by (i) the creditor(s) who appointed such Trustee or (ii) BankruptcyCourt order made after such notice and hearing as the Bankruptcy Court maydirect. Any motion to remove a Trustee must be for cause shown and can only bebrought by the Official Committee of Unsecured Creditors of AdelphiaCommunications Corporation (the “Creditors Committee”).

 

Upon the death, resignation,removal or incompetency (determined by a court of competent jurisdiction) of aTrustee, the applicable creditor(s) who initially appointed such Trusteewill have the authority to appoint a successor Trustee, provided, however, thatif such creditor(s) does not make such appointment within 40 days of suchdeath, resignation, removal or determination of incompetency, a majority of theremaining Trustees will have the power to appoint a successor Trustee. If asuccessor Trustee has not been appointed within 60 days of such written notice,the remaining Trustees may petition the Bankruptcy Court to appoint a successorTrustee.

 

Trust Administrator

 

The Plan AdministratorAgreement between Quest and the Debtors provides that the Plan Administratorwill, among other things, cause the Debtors to perform bookkeeping, accounting,financial reporting and other administrative functions of the ART, asreasonably requested by the Trustees and necessary or desirable to support theART. In addition, the Plan Administrator will cause the Debtors to providesupport for the Causes of Action, including: maintaining and providing the ARTwith access to the books, records and other documents of the Debtors andproviding the ART with access to those employees of the Debtors that performsuch administrative services. The Plan Administrator also supervises theDebtors in performing the foregoing functions

 

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for the ART. Finally, thePlan Administrator assists the ART in the preparation of and execution ofrequired reports, forms or applications for filing with the SEC or othergovernmental authorities.

 

In order to facilitate theprovision of the services described above, the ART has appointed Quest as theTrust Administrator of the ART. In that capacity, the ART has requested thatthe Trust Administrator, under direction of the Trustees, provide the followingservices:

 

· assist in the preparationof the financial statements of the ART, including quarterly and annualstatements;

· assist with establishing,maintaining and evaluating disclosure controls and procedures as defined in Rules 13a-15(e) and15d-15(e) of the Securities Exchange Act of 1934, as amended (“ExchangeAct”) and internal controls over financial reporting as defined in Exchange ActRules 13a-15(f) and 15d-15(f), as applicable to the ART;

· assist the ART in thepreparation and submission of all filings required of the ART under theExchange Act;

· sign Exchange Act filings (Form 10,Form 10-K and otherwise) in its capacity as Trust Administrator, includingthe certifications required by Sections 302 and 906 of the Sarbanes-Oxley Actof 2002; and

· assist the ART in suchother matters as reasonably requested by the Trustees to enable the ART tocomply with the Exchange Act and the Exchange Act Rules.

 

For its role as PlanAdministrator, Quest is compensated exclusively by the Debtors. The ART doesnot pay Quest any additional amounts of compensation for serving as either PlanAdministrator or Trust Administrator. The ART is required to reimburse Questand the Debtors for out-of-pocket expenses incurred in performance of serviceson behalf of the ART.

 

Pursuant to the PlanAdministrator Agreement, Quest may be removed as Plan Administrator of theDebtors by the Trustees for cause, upon notice, or without cause, upon 30 daynotice. The Trustees may remove Quest as Trust Administrator at any time.

 

**Item 1A.Risk Factors.**

 

**The ART iscontrolled by the Trustees and the Holders have no authority regardingdecisions made on behalf of the ART**

 

All decisions concerning theconduct of the Causes of Action and distribution of assets of the ART are to bemade by the Trustees, in accordance with the terms of the Plan and Declaration.A decision to settle a Cause of Action requires the approval of a majority ofthe Trustees. Generally, the Holders have no right to elect or remove aTrustee. A Trustee may be removed, but only by (i) the creditor (s) whoappointed such Trustee or (ii) Bankruptcy Court order made after suchnotice and hearing as the Bankruptcy Court may direct. Any motion to remove aTrustee must be for cause shown and can only be brought by the CreditorsCommittee.

 

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**The ART maynot be successful in litigating the Causes of Action or if the ART issuccessful, there could be a significant delay before any recovery is obtainedand distributed**

 

It is not possible topredict whether any distributions will be made to the Holders or, if anydistributions are made, the timing and amount of those distributions. The ARTwill only make distributions to the Holders if and to the extent that itreceives proceeds from the Causes of Action, and then only to the extent thatthe proceeds from the Causes of Action exceed any amounts withheld by theTrustees to fund the prosecution of remaining Causes of Action and operationsof the ART. There can be no assurance that the ART will obtain a favorablejudgment or settlement with respect to any particular Cause of Action. Inaddition, if there is a recovery, there can be no assurance as to the timing ofany such recovery. To the extent the Causes of Action do not ultimately resultin a judgment or settlement favorable to the ART, the value of the Interestswill decrease.

 

**Holderswill have only limited rights against the Trustees and the Trustees havelimited liability to the ART**

 

The Declaration providesthat the Institutional Trustee, the Delaware Trustee and the Trustees (andtheir respective affiliates, directors, officers, employees andrepresentatives) and any officer, employee or agent of the ART or itsaffiliates will have no liability to the ART or the Holders except for (i) actsor omissions of the Trustees undertaken with the deliberate intent to injurethe Holders or with reckless disregard for the best interests of the Holdersand (ii) acts or omissions of the Institutional Trustee or DelawareTrustee undertaken with gross negligence, willful misconduct or bad faith. Anyliability of the Trustees will be limited to actual, proximate and quantifiabledamages.

 

The Declaration furtherprovides that, with certain exceptions, no Holder has the right to instituteany action or proceeding against the Trustees or otherwise under theDeclaration unless the Holder has given the Institutional Trustee writtennotice of default and unless the requisite Holders have joined in the requestfor such action or proceeding. “Requisite Holders” means the Holders holdingInterests that would be entitled to receive more than fifty percent of ahypothetical $50 million distribution of the ART, if such distribution weremade as of a date for such determination as reasonably fixed by the Trustees.

 

The Declaration providesthat the Holders have no voting rights (except in connection with certainamendments to the Declaration and except for limited rights in connection withthe appointment of a successor Institutional Trustee or Delaware Trustee) andno rights to dividends, liquidation preferences or other distributions otherthan their pro rata share of the net proceeds of the Causes of Action actuallydistributed by the Trustees pursuant to the Plan and Declaration.

 

**Even ifthere is a recovery based on the Causes of Action, there can be no assurancesthat there will be sufficient funds to make any distributions to Holders**

 

Even if the ART obtains asettlement or award based on the Causes of Action, there can be no assurancethat the Holders will receive any proceeds from such settlement or award. Priorto Holders receiving any payments, the Trustees will pay all of the expenses ofthe ART and may set aside funds for future expenses or contingencies of theART. Furthermore, distributions (if any) to a particular class of Interests iscontingent upon payment in full (or in some cases, in part) to classes ofInterests with higher distribution priorities.

 

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**Potentialconflicts of interest exist among the classes of Interests**

 

The existence of separateclasses of Interests and the different distribution priority of each classcould give rise to occasions when the interests of the Holders could diverge,conflict or appear to diverge or conflict. Operational and financial decisionsby the Trustees regarding the litigation could favor one group of Holders overanother, adversely affecting the market value of a particular class ofInterests or the distribution to that particular class of Interests. Forexample, the decision to settle a Cause of Action for a smaller amount thanthat which could potentially be recovered through litigation could favor thoseclasses of Interests with a higher distribution priority in the waterfall, asthose classes would be more likely to ultimately receive a distribution withrespect to such a settlement as opposed to those with a lower distributionpriority in the waterfall.

 

**There is notrading market for the Interests, which could limit liquidity, and it may bedifficult to establish a price per Interest**

 

There is no currentestablished trading market for the Interests and the ART does not intend toseek to have the Interests listed on an exchange or a national market. There isminimal trading in the over the counter market as quoted by Pink OTC Markets, Inc.,which has limited liquidity.

 

The price of the Interestsmay depend on a number of factors, including (but not limited to) the nature ofcourt decisions, speculation about the outcome of the Causes of Action and thesufficiency of the funds available to the ART to prosecute the Causes ofAction.

 

There may be wide fluctuationsin the price of the Interests. See Management’s Discussion and Analysis ofFinancial Condition and Results of Operations included in Item 7 of this Form 10-K.

 

**The outcomeof litigation is inherently speculative and limited information regarding thedevelopments and potential outcomes of litigation will be available; therefore,it may be difficult for Holders to assess the amount of recovery**

 

The ART files annual reportson Form 10-K and quarterly reports on Form 10-Q that will include anoverview of the status of the pending Causes of Action. The ART will alsoadvise Holders if there is a material final judicial decision in any of theCauses of Action or any material settlements. The ART’s ability to disclosedetails of the Causes of Action in this filing or in future public filings maybe limited, however, by the inherent nature and rules of judicialproceedings, including, among other things, proceedings and filings that aresealed by a court, matters involving attorney-client and work product privilegeand proceedings that are conducted on a confidential basis by agreement of theparties, such as settlement negotiations. Furthermore, due to the speculativenature of litigation, it may be difficult for holders to make a meaningful determinationof the potential outcome on any Cause of Action.

 

**A Holder’stax liability could exceed distributions**

 

If the ART has income for ataxable year, the appropriate portion of that income may be includable in aHolder’s taxable income, whether or not any cash is actually distributed to theHolder by the ART. The Plan and Declaration permit the Trustees to reservecertain amounts to fund, among other things, operating and other expenses, anddo not contain a mandatory tax distribution provision. Therefore, for anyparticular year there may be no distribution or a distribution that is lessthan a Holder’s tax liability on its share of the income of the ART.

 

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**Certaintax positions are subject to challenge by the Internal Revenue Service**

 

Certain tax positions takenby the ART could be challenged by the Internal Revenue Service. If successful,such challenge could result in additional taxable income or accelerated incomerecognition to the Holders. For tax purposes, the ART’s assets were deemedtransferred by the bankruptcy estate to the Holders, who then contributed themto the ART. The ART was required to value the assets transferred to it on theformation of the trust and to notify Holders of those valuations. The Holderswere then responsible for determining their individual tax consequences of thetransfer. Because the assets are litigation claims against third parties, theyare difficult to value with precision. The Internal Revenue Service coulddisagree with the value determined by the ART, and if the IRS were to sustain ahigher valuation that could result in additional taxable income to the Holders.In addition, the ART has taken the position that recoveries from settlementsand litigation constitute basis recovery first, and any additional recoverieswill be treated as gain. The Internal Revenue Service could take a differentposition with respect to basis recovery, which if successful would accelerate thetiming of income recognition.

 

**The ART’sability to recover a judgment or settlement payment may be affected by thefinancial condition of a defendant**

 

Adverse economic conditionsaffecting, or the financial condition of, a defendant may affect the ART’sability to collect a judgment or settlement payment from that defendant or maycause a delay in such collection.

 

**Item 1B.Unresolved Staff Comments.**

 

Not applicable.

 

**Item 2.Properties**.

 

The ART does not own orlease any physical properties.

 

**Item 3. LegalProceedings.**

 

***Pending Causes of Action***

 

Bank Litigation

 

OnJuly 6, 2003, the Creditors Committee filed a complaint (the “CreditorsCommittee Complaint”) in the Bankruptcy Court for the Southern District of NewYork against Adelphia’s pre-petition commercial banks and lenders, Adelphia’sformer investment bankers and financial advisors, and assignees of Adelphia’spre-petition bank debt. The Creditors Committee Complaint asserted 52 Causes ofAction seeking (a) recovery as fraudulent transfers the principal andinterest paid by Adelphia to defendants, (b) avoidance as fraudulentobligations Adelphia’s obligations, if any, to repay the defendants, (c) recoveryof damages for fraud and breaches of fiduciary duties to Adelphia and foraiding and abetting fraud and breaches of fiduciary duties by members of theRigas family relating to Adelphia’s credit facilities, (d) equitabledisallowance, subordination or recharacterization of each of the defendants’claims in Adelphia’s bankruptcy cases, (e) avoidance and recovery ofpreferential transfers made to certain defendants shortly prior to Adelphia’sbankruptcy filing, and (f) recovery of damages for violations of the BankHolding Company Act (“BHCA”).   Inaddition,

 

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theCreditors Committee and Adelphia moved in the Bankruptcy Court seekingauthority for the Committee to prosecute these claims together with Adelphia(the “Standing Motion”).

 

OnJuly 31, 2003, the Official Committee of Equity Security Holders forAdelphia filed a motion with the Bankruptcy Court to assert additional claimsagainst the defendants in the form of an intervenor complaint. The EquityCommittee was granted leave to file its complaint (the “Equity CommitteeComplaint”), which joined certain of the claims asserted in the CreditorsCommittee Complaint and also asserted new claims against the investment bankdefendants for fraudulent concealment and against the agent bank and investmentbank defendants for fraud and RICO violations.

 

Variousdefendants moved to dismiss both complaints and filed objections to theStanding Motion.  On August 30,2005, the Bankruptcy Court granted the Standing Motion, holding that theCreditors Committee had standing to pursue the claims in the Original Complainton behalf of, and together with, Adelphia.  On February 9, 2006, while the motions to dismiss were stillpending, the United States District Court for the Southern District of New York( the “District Court” ) granted a motion filed by certain defendants towithdraw the reference to the Bankruptcy Court, subject to the proviso, withthe consent of all parties, that the motions to dismiss would remain with theBankruptcy Court for decision.   On February 13,2007, the claims asserted in the Creditors Committee Complaint and the EquityCommittee Complaint was transferred to the ART pursuant to the Plan.

 

In2007, the Bankruptcy Court issued separate decisions with respect to each ofthe two complaints.   *In re Adelphia Commc’ns Corp.*, 365 B.R.24, 62 (Bankr. S.D.N.Y. 2007); *In reAdelphia Commc’ns Corp.*, Adversary No. 03-04942 (REG), 2007 WL2403553 at *11 (Bankr. S.D.N.Y. Aug. 17, 2007). In the first decision, theBankruptcy Court sustained the fraudulent transfer claims, the aiding andabetting breach of fiduciary duty claims, the breach of fiduciary duty, grossnegligence, and negligence claims against certain defendants, the equitablesubordination and disallowance claims, the BHCA claim, and the voidablepreference claims in the Creditors Committee Complaint, but dismissed, withleave to replead, the claims for aiding and abetting fraud. In the seconddecision, the Bankruptcy Court dismissed the additional claims asserted in theEquity Committee’s Complaint, but granted leave to replead the claims for fraudand fraudulent concealment.

 

OnJuly 10, 2007, all of the original moving defendants sought leave toappeal with respect to all the claims in the Creditors Committee’s Complaintthat the Bankruptcy Court had declined to dismiss. The District Court deniedleave to appeal from the rulings that sustained the fraudulent transfer claims,the voidable preference claims, and the equitable subordination claims, butgranted leave to appeal on certain discrete issues of law concerning the ART’sstanding, application of the BHCA, the existence of equitable disallowanceunder the Code, and the existence of aiding and abetting breach of fiduciaryduty liability under Pennsylvania law as well as the adequacy of the pleadingson that claim. *Adelphia Recovery Trust v.Bank of Am., N.A.*, No. 05 Civ. 9050 (LMM), 2007 WL 2585065(S.D.N.Y. Sept. 05, 2007); *Adelphia RecoveryTrust v. Bank of Am., N.A.*, No. 05 Civ. 9050 (LMM), 2007 WL2890220 (S.D.N.Y. Sept. 28, 2007).

 

OnOctober 31, 2007, while the appeal was pending, the ART filed an AmendedComplaint. The Amended Complaint (i) consolidated the two earliercomplaints into a single complaint; (ii) added additional allegations tosupport the claims on which the Bankruptcy Court granted leave to replead(aiding and abetting fraud, fraudulent concealment, and fraud); and (iii) addedas defendants

 

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approximately380 new entities that became assignees of the Adelphia bank debt after theoriginal complaints were filed. Certain defendants filed motions to dismiss theAmended Complaint and certain defendants filed answers to the Amended Complaintand counterclaims for indemnification, contribution, breach of contract, andfraud.  The ART filed answers to thosecounterclaims asserting various affirmative defenses, including the defensethat the Confirmed Adelphia Bankruptcy Plans bar counterclaims except for thepurpose of limiting, reducing, offsetting, or defeating the defendants’liability to the Trust.

 

OnJanuary 17, 2008, the District Court issued its decision on appeal of theBankruptcy Court’s opinion on the motions to dismiss the Creditor Committee’scomplaint.  In that opinion, the DistrictCourt concluded, *inter alia*, thatthe ART had standing to assert the tort claims and the Bankruptcy Courtproperly had sustained the claims for aiding and abetting breach of fiduciaryduty and equitable disallowance. The District Court dismissed the BHCA claimwith leave to replead to cure an ambiguity in the original allegations. *Adelphia Recovery Trust v. Bank of Am*., *N.A*., No. 05 Civ. 9050 (LMM), 2008 WL217057 at *6, 13 (S.D.N.Y. Jan. 17, 2008). The BHCA claim subsequently wasreplead in a Second Amended Complaint filed March 4, 2008.   Thereafter, certain defendants filed motionsto dismiss the replead BHCA claim set forth in the Second Amended Complaint.

 

OnJune 18, 2008, the District Court dismissed certain fraudulent transferclaims, voidable preference claims, and equitable subordination anddisallowance claims.   A final judgment wasentered on those claims as well as certain other claims dismissed in 2007 bythe Bankruptcy Court.  The ART filed atimely notice of appeal and the appeal is fully briefed and awaiting oralargument in the Second Circuit Court of Appeals.

 

With respect to the motionsto dismiss the tort and BHCA claims, the District Court entered an order on May 6,2009, sustaining the Trust’s aiding and abetting fraud and breach of fiduciaryduty claims, sustaining in part and dismissing in part the Trust’s fraud claim,and dismissing the Trust’s fraudulent concealment claim.  The District Court sustained avoidance claimsagainst lenders concerning margin loans to the Rigases that Adelphiarepaid.  On July 27, 2009, theDistrict Court dismissed the BHCA claim against three Defendants:  Fuji Bank Limited, Texas Dominion (Texas)LLC, and Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A., New York Branch.Following that ruling and pursuant to stipulation, the District Court dismissedthe BHCA claim against CIBC, Inc., Merrill Lynch Capital Corp., The Bankof Nova Scotia and Morgan Stanley Senior Funding, Inc.,  with leave to reinstate in the event that theDistrict Court’s July 27, 2009 Order is reversed.

 

On March 6, 2009,Defendants moved to strike the Trust’s jury demand on the tort and BHCA claimsbased on jury trial waivers contained in credit agreements executed by certainAdelphia subsidiaries (the “Obligor Debtors”). On July 8, 2009, the District Court denied Defendants’ motion withrespect to all claims brought by the Trust standing in the shoes ofAdelphia  and certain fraud claimsbrought by the Trust standing in the shoes of the Obligor Debtors, but grantedthe motion with regard to the remaining claims brought by the Trust standing inthe shoes of the Obligor Debtors.   On October 30,2009, Defendants filed a second motion to strike the Trust’s jury demand onadditional grounds.  That motion has beenfully briefed and is pending.

 

On October 2, 2009,Defendants moved for an order that the Trust lacks standing to pursue tort andBHCA claims standing in the shoes of Adelphia.  On December 21, 2009 the District Court granted the motion.  On January 25, 2010, the Trust moved forreconsideration or in the alternative,

 

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certification of the rulingto the Second Circuit Court of Appeals. The Trust’s reconsideration motion isbeing briefed by the parties.

 

On November 18, 2009,Defendants moved for summary judgment on all remaining state law tort claimsbased on the affirmative defense of *in pari delicto.*   The Investment Banks separately moved forsummary judgment on the fiduciary duty and gross negligence claims pendingagainst them.   The Trust filed itsresponses to those motions on February 12, 2010. On March 2, 2010,Defendants filed additional motions for summary judgment on all remaining tort,fraudulent concealment and BHCA claims.

 

Underthe schedule established by the District Court, trial on the pending tort,fraudulent conveyance, and BHCA claims will commence on September 13,2010.

 

Atthis time, the ART cannot predict the outcome of these proceedings or estimatethe possible financial effect of these proceedings on the ART’s financialstatements.

 

SabresLitigation

 

On February 17, 2009,the District Court for the Western District of New York issued a final judgmentgranting a permanent injunction against the prosecution of fraudulentconveyance claims against Key Bank, N.A., Fleet National Bank, and HSBC BankUSA, N.S. (collectively, the “Sabres Banks”), by the Trust in the BankLitigation pending in the Southern District of New York.  The fraudulent conveyance claims against theSabres Banks involve Adelphia’s purchase of and payments on certain loans madeby the Sabres Banks to the Buffalo Sabres hockey team.  The Trust appealed the injunction to theSecond Circuit Court of Appeals.  Theappeal was argued on November 4, 2009, and the parties are awaitingdecision.

 

On March 4, 2009, thefraudulent conveyance claims, as well as claims for aiding and abetting breachof fiduciary duty and equitable subordination or disallowance that the ART hadasserted against the Sabres Banks in the Bank Litigation were severed andtransferred by the District Court for the Southern District of New York to theDistrict Court for the Western District of New York.  The District Court for the Western Districtof New York has stayed further proceedings with respect to those claims pendinga ruling from the Second Circuit Court of Appeals on the Trust’s appeal fromthe injunction.

 

Atthis time, the ART cannot predict the outcome of these proceedings or estimatethe possible financial effect of these proceedings on the ART’s financialstatements.

 

Prestige

 

On June 24, 2004, theUnsecured Creditors’ Committee filed an adversary action against PrestigeCommunications of NC, Inc., Jonathan J. Oscher, Lorraine Oscher McClain,Robert F. Buckfelder, Buckfelder Investment Trust, and Anverse, Inc. inthe Bankruptcy Court for the Southern District of New York.   In a decision dated January 8, 2008,the District Court withdrew the reference to the Bankruptcy Court in thePrestige action and transferred the case to the District Court.

 

ThePrestige action seeks to recover fraudulent transfers in connection withAdelphia’s purchase of the assets of Prestige Communications of N.C., Inc.,an acquisition that closed on July 5, 2000, as well as a claim that theowners of the Prestige Cable Systems aided and abetted breaches of fiduciaryduty on the part of the Rigas family in connection with the transaction. On October 27,2009,

 

11

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Defendantsmoved for summary judgment on the Trust’s claims.  That motion has been fully briefed and ispending.  No trial date has been set.

 

Atthis time, the ART cannot predict the outcome of these proceedings or estimatethe possible financial effect of these proceedings on the ART’s financialstatements.

 

FPL Litigation

 

On June 24, 2004, theUnsecured Creditors’ Committee filed a fraudulent conveyance complaint againstFPL Group, Inc. and West Boca Security, Inc. (“FPL”) in theBankruptcy Court for the Southern District of New York relating to pre-petitiontransactions.

 

The FPL action seeks torecover an alleged fraudulent transfer arising out of Adelphia’s repurchase of certainof its stock from FPL in January 1999 for $149.5 million.  Under the current scheduling order, factdiscovery is to be completed by May 13, 2010 and dispositive motions shallbe filed by December 14, 2010.  Thetrial is set to begin on June 6, 2011.

 

Atthis time, the ART cannot predict the outcome of these proceedings or estimatethe possible financial effect of these proceedings on the ART’s financialstatements.

 

Avoidance Actions

 

OnJuly 31, 2003, Adelphia and its debtor affiliates filed with theBankruptcy Court their Statements of Financial Affairs, which included aschedule of payments to insider entities made within one year prior to Adelphia’sfiling for bankruptcy and payments to non-insider entities made within ninetydays prior to Adelphia’s filing for bankruptcy. Subsequently, Adelphia engagedin extensive analysis of all such payments to determine if they could beavoided pursuant to certain provisions of the Code.

 

OnApril 20, 2004, Adelphia filed a motion seeking to abandon most of thepotential actions to avoid the pre-petition payments because, among otherreasons, (i) Adelphia believed that pursuing certain of such actionsagainst parties with whom Adelphia was continuing to do business could have asignificant adverse impact on important, ongoing business relationships, and (ii) thecosts associated with pursuing such actions far outweighed any potentialbenefit to the Adelphia debtors’ estates that might otherwise result frombringing such actions. In response to certain objections to Adelphia’s motion,Adelphia amended its initial motion.

 

OnMay 27, 2004, the Bankruptcy Court entered an order tolling all claims toavoid inter-debtor payments and authorizing the abandonment of potentialactions to avoid (i) transfers to taxing authorities; (ii) transfersto human resource providers engaged in business with Adelphia; (iii) transfersdetermined to have been made in the ordinary course of business; and (iv) certaintransfers deemed *de minimis*. Asto the remainder of the transfers made by Adelphia during the relevant one-yearand ninety-day periods prior to the bankruptcy filing, Adelphia either (i) enteredinto tolling agreements with the transferee extending Adelphia’s time toinitiate an action, or (ii) filed a complaint and initiated an adversaryproceeding against the transferee.

 

Asof June 25, 2004, Adelphia secured approximately 250 tolling agreementswith various transferees, including members of the Rigas family, the Rigasfamily entities, former executives James Brown and Michael Mulcahey, and formerdirectors Erland Kailbourne, Dennis Coyle, Leslie Gelber, and Peter Metros,among others. Certain of these tolling agreements have been amended 

 

12

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fromtime to time. In addition, Adelphia filed approximately 150 complaints in theBankruptcy Court commencing actions to avoid certain pre-petition transfers andpayments. Some of those complaints have since been dismissed after furtherinvestigation.

 

OnJuly 21, 2004, the Bankruptcy Court temporarily stayed all activity in theavoidance actions commenced by Adelphia and approved notice and serviceprocedures in connection therewith.

 

Atthis time, the ART cannot predict the outcome of these proceedings or estimatethe possible financial effect of these proceedings on the ART’s financialstatements.

 

***Settled Litigation***

 

MotorolaLitigation

 

OnJune 22, 2006, Adelphia filed an adversary complaint against Motorola, Inc.and certain of its subsidiaries (“Motorola”), as well as transferees of claimsfiled by Motorola in the Adelphia bankruptcy cases in the Bankruptcy Court forthe Southern District of New York. The complaint seeks recovery for (a) Motorola’saiding and abetting breaches of fiduciary duty by members of the Rigas familyin manipulating Adelphia’s financial statements and performance results for thefiscal years 2000 and 2001; (b) avoidance and recovery of preferential andfraudulent transfers made to Motorola of more than $60 million; (c) avoidanceof purported (but unperfected) liens asserted by Motorola; and (d) equitabledisallowance or subordination of Motorola’s claims in the Adelphia bankruptcycases (the total face amount of which is approximately $66.6 million).    The ART was added as a co-plaintiff withAdelphia after February 13, 2007.

 

OnOctober 26-30, 2009, the Bankruptcy Court conducted a trial on the soleissue of Adelphia’s claim to equitably subordinate or disallow the Motorolaclaim against the estate.  Before theBankruptcy Court issued its decision, a settlement was reached among ART,Adelphia, and Motorola.   The BankruptcyCourt entered an order approving the settlement on December 14, 2009, noobjections to the settlement were filed, the settlement became final, and theaction was dismissed with prejudice.   Pursuantto the settlement, Motorola made a payment of $40 million to the ART on December 29,2009. In connection with the settlement with Motorola, the ART issued a totalof 57,274,499 ACC-2 Interests to Bear, Stearns & Co. Inc., DKAcquisition Partners L.P. and Varde Investment Partners, L.P. on December 30,2009.

 

Rosensweig and TowLitigation

 

OnAugust 3, 2007, the ART announced the settlement of various pendingadversary actions and bankruptcy claims pending in the Bankruptcy Court for theSouthern District of New York involving Leonard Tow, his wife, and DavidRosensweig, the Trustee of two trusts created in connection with Tow’s exerciseof his right to terminate his employment as the Chief Executive Officer ofCentury Communications Corporation when Adelphia acquired Century in 1999. Thesettlement provided for a cash payment to the ART of approximately $15.8million and an interest-bearing note in the principal amount of approximately$4.9 million issued by Adelphia with simple, non-compounding, interest thereonat the rate of 8%. That note is recourse only Adelphia’s proceeds from lifeinsurance policies on the lives of Mr. Tow and his wife, the proceeds ofwhich policy shall not be paid until the death of the last to die of Mr. Towand his wife. The Bankruptcy Court entered an order approving the settlement onSeptember 6, 2007.

 

13

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Deloitte &Touche Litigation

 

OnNovember 6, 2002, Adelphia filed a lawsuit against Deloitte &Touche LLP (“Deloitte”), Adelphia’s former independent auditor, for accountingmalpractice in Pennsylvania state court. Adelphia alleged that Deloitte (i) failedto conduct an audit in accordance with generally accepted auditing standardsand (ii) provided an opinion that Adelphia’s financial statementsconformed with generally accepted accounting principles when Deloitte allegedlyknew or should have known that those financial statements did not so conform.

 

OnAugust 3, 2007, the ART announced that it had reached a settlement withDeloitte to resolve the claims between Adelphia, the ART, and Deloitte inexchange for consideration of $167.5 million, subject to the approval of theBankruptcy Court. The Bankruptcy Court entered an order approving thesettlement on August 16, 2007.

 

***ContingentLiabilities***

 

Litigation IndemnificationFund Litigation

 

Pursuantto the Third Modified Fourth Amended Joint Plan of Reorganization Under Chapter11 of the Bankruptcy Code for Century-TCI Debtors and Parnassos Debtors (the “JVPlan”), which became effective on July 31, 2006; the First Modified FifthAmended Joint Chapter 11 Plan for Adelphia Communications Corporation andCertain of Its Affiliated Debtors (the “Main Plan”), which became effective on February 13,2007; and certain other orders entered by the Bankruptcy Court, litigationindemnification funds (each, a “LIF”) were created to provide certaindefendants in the Bank Litigation (see above) provisional and conditionalreimbursement of legal fees and expenses expected to be incurred in connectionwith defending litigation involving certain credit facilities.

 

TheJV LIF, established in the initial amount of $10 million, was created to fundcertain allowable claims for indemnification arising under the Parnassos andCentury-TCI prepetition credit facilities.  Subject to certain conditions,the JV LIF is “evergreen” ; in other words, the JV Plan provides theJV LIF will be replenished under certain conditions, such as “upon the receipt.. . . of net proceeds of any Designated Litigation” after first deducting anyrequired distribution to the government.

 

TheMain Plan LIFs are fixed in amounts and not subject to replenishment. Because the JV LIF is evergreen, whereas the Main Plan LIFs are capped, theallocation of defense costs among the categories of LIFs is a matterof economic significance to Adelphia and the ART.

 

Century-TCIand Parnassos lenders (the “JV Lenders”) have asserted claims that in theaggregate of approximately $13 million (“JV LIF Claims”) against the evergreenJV LIF.  Adelphia has asserted that certain defendants in the BankLitigation are not entitled to reimbursement from the JV LIF on the basis,among others, that the JV LIF claims are improper.  On November 13,2008, certain of those claimants filed, or subsequently joined in, the *Motion of the Bank of Nova Scotia, Citibank N.A. andThe Ad Hoc Committee of Non-Agent Secured Lenders in the Parnassos andCentury-TCI Facilities for Payment of Bank Lender Post Effective Date FeeClaims and to Compel Compliance of the Plan Administrator (defined in the JVPlan as Adelphia) and the Art with the Third Modified Fourth Amended Joint Planof Reorganization Under Chapter 11 of the Bankruptcy Code and the Century TCIStipulation* (the “LIF Motion”).  Other claimants have not takenany action.

 

14

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TheBankruptcy Court has stated that it will hold an evidentiary hearing on theMotion, which the parties have asked to be scheduled during the week of May 3,2010. If the Bankruptcy Court grants the LIF Motion, the JV LIFmay need to be replenished to indemnify the future defense costs of the JVLenders.  In addition, the BankruptcyCourt could determine that the JV LIF must be replenished by the amount of thedisputed JV LIF Claims while the dispute is still pending.

 

Atthis time, the ART cannot predict the outcome of these proceedings or estimatethe possible financial effect of these proceedings on the ART.

 

15

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**Item 4. Reserved**

 

**PART II**

 

**Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and IssuerPurchases of Equity Securities.**

 

On June 4, 2008, theBankruptcy Court granted the ART’s motion for approval to amend the Declarationto remove the ART’s obligation to list the Interests on any national exchange.The amendment was a condition to the ART’s receipt of a private letter rulingfrom the Internal Revenue Service confirming the ART’s treatment for taxpurposes as a pass-through grantor trust so that litigation proceeds generallywill not be subject to taxation at the trust level.

 

There is no establishedmarket for any class of Interests. The Interests have not been quoted in theautomated quotation system of a registered securities association nor havethere been any quotations of any bids for the Interests.

 

As of December 31,2009, the approximate number of record holders in each class of Interests wasas follows:

 
| ** **     | ** ** | **Holders** | ** ** |
|----------------|------------|-------------|------------|
| **Class**      | ** ** | **(#)**     | ** ** |
| RF             |       | 1           |       |
| Arahova        |       | 57          |       |
| FrontierVision |       | 14          |       |
| FPL            |       | 3           |       |
| Olympus        |       | 11          |       |
| ESL            |       | 1           |       |
| ACC-1          |       | 82          |       |
| ACC-2          |       | 191         |       |
| ACC-3          |       | 28          |       |
| ACC-4          |       | 61          |       |
| ACC-5          |       | 1           |       |
| ACC-6B         |       | 30          |       |
| ACC-6B1        |       | 1           |       |
| ACC-6D         |       | 42          |       |
| ACC-6D1        |       | 2           |       |
| ACC-6E/F       |       | 48          |       |
| ACC-6E/F1      |       | 3           |       |
| ACC-7          |       | 2,665       |       |
| ACC-7A         |       | 28          |       |
| **Total**      | ** ** | **3,269**   | ** ** |

 

The Interests were issued tocertain creditors of the Adelphia bankruptcy estate pursuant to the Plan andtheir issuance was exempt from the registration requirements of the SecuritiesAct of 1933, as amended, pursuant to Section 1145 of the Code. Generally,a creditor received one Interest for each dollar of such creditor’s claimdeficiency as of the effective date of the plan, February 13, 2007 (“EffectiveDate”). The deficiency was equal to the amount of such creditor’s allowed claimplus, in some cases, post-petition accrued interest, less any distributions tosuch creditor pursuant to the Plan. In the case of CVV Series ACC-7Interests, each creditor received one Interest for each share of Adelphia Class ACommon Stock owned with no regard to dollar value.

 

16

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**Descriptionof Securities**

 

Nineteen classes ofclaimants and equity groups received Interests in the ART. A description of the19 classes that received Interests is set forth in the table below.

 

17

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**Descriptionof Classes of Interests in the Adelphia Recovery Trust**

 
| **Series**                | ** **     | **Description**                                                                  |
|---------------------------|----------------|----------------------------------------------------------------------------------|
| RF                        |           | Restitution  Fund administered by US Attorney General and the SEC for investors. |
|                      |           |                                                                             |
| Subsidiary  Debtor Claims |           |                                                                             |
|                      | Arahova        |                                                                             | Senior  Notes issued by Century Communications prior to an assumption of the  company’s debt by Adelphia Communications Corporation (“ACC”) in an acquisition  of Century Communications |
|                      | FrontierVision |                                                                             | Senior  Notes issued by FrontierVision Holdings prior to the assumption of the company’s  debt by ACC in an acquisition of FrontierVision |
|                      | FPL            |                                                                             | Claims  arising in connection with a note issued by Ft. Myers Acquisition Limited  Partnership to Olympus Communications, L.P., assigned to West Boca  Security, Inc., and further assigned to Lehman Commercial  Paper, Inc. |
|                      | Olympus        |                                                                             | Senior  Notes issued by Olympus Communications, L.P. (a joint venture between ACC and  unaffiliated third parties that was eventually wholly-owned by ACC) and  Olympus Capital Corporation |
|                      |           |                                                                             |   |
| **                        | ESL(1)         |                                                                             | Subsidiary  debtor Existing Securities Law claims |
|                      |           |                                                                             |   |
| ACC Debtor Claims         |           |                                                                             |
|                      | ACC-1          |                                                                             | Senior  Notes issued by ACC |
|                      | ACC-2          |                                                                             | ACC  Trade claims |
|                      | ACC-3          |                                                                             | ACC  Other Unsecured claims |
|                      | ACC-4          |                                                                             | Convertible  Subordinated Notes issued by ACC |
|                      |           |                                                                             |   |
| ACC Equity Interests      |           |                                                                             |
|                      | ACC-5(1)       |                                                                             | ACC  Existing Securities Law claims |
|                      | ACC-6B         |                                                                             | ACC  Series B Preferred Stock |
|                      | ACC-6B1(1)     |                                                                             | ACC  Series B Preferred Stock Existing Securities Law claims |
|                      | ACC-6D         |                                                                             | ACC  Series D Preferred Stock |
|                      | ACC-6D1(1)     |                                                                             | ACC  Series D Preferred Stock Existing Securities Law claims |
|                      | ACC-6EF        |                                                                             | ACC  Series E/F Preferred Stock |
|                      | ACC-6EF1(1)    |                                                                             | ACC  Series E/F Preferred Stock Existing Securities Law claims |
|                      | ACC-7          |                                                                             | ACC  Common Stock |
|                      | ACC-7A(1)      |                                                                             | ACC  Common Stock Existing Securities Law claims |

 

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**   Subsidiary-preexisting equity claims

 

(1)       For each of these categories ofInterests, each holder of a disputed claim was awarded one unit

 

Each class of Interest has adifferent distribution priority. As set forth in the distribution prioritywaterfall below, distributions (if any) to certain classes of Interests arecontingent upon payment in full (or in some cases, in part) to classes ofInterests with higher distribution priorities. In connection with adistribution, Holders are entitled to receive their pro rata portion of astated amount and dividends on such stated amount, the rate of which is setforth in the Plan for each class of Interests. However, Holders of CVV Series RFInterests, CVV Series ACC-6B, CVV Series ACC-6B1, CVV Series ACC-6D,CVV Series ACC-6D1, CVV Series ACC-6E/F, CVV Series ACC-6E/F1,CVV Series  ACC-7 and CVV Series ACC-7A Interests do not earndividends on their stated amount. A schedule summarizing the distributionpriority waterfall is set forth below.

 

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ART DISTRIBUTION WATERFALL(1)

 

**December 31, 2009**

 
| **Aggregate  Distribution (2)** | ** ** | **Distribution  Description (3)**                                                                                                                                                                                                                                               | ** ** | **ART  Distribution Recipient** | ** ** |
|---------------------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------|------------|
| Up to  230,000,000              |       | Until RF holders have  received an aggregate $115 million                                                                                                                                                                                                                       |       | Series RF                  |       | 50.00 | % |
| Series Arahova             |       | 22.94                                                                                                                                                                                                                                                                           | %          |
| Series ACC-1               |       | 21.36                                                                                                                                                                                                                                                                           | %          |
| Series Olympus             |       | 2.50                                                                                                                                                                                                                                                                            | %          |
| Series FrontierVision      |       | 1.25                                                                                                                                                                                                                                                                            | %          |
| Series ACC-2               |       | 1.12                                                                                                                                                                                                                                                                            | %          |
| Series ACC-3               |       | 0.45                                                                                                                                                                                                                                                                            | %          |
| Series FPL                 |       | 0.38                                                                                                                                                                                                                                                                            | %          |
|                            |       |                                                                                                                                                                                                                                                                            |       |                            |       |   |   |
| 230,000,001 -  542,000,000      |       | Until  Series Olympus has received aggregate distributions of $16 million plus  the Olympus Fees, plus accrued post-Effective Date dividends                                                                                                                               |       | Series Arahova             |       | 45.87 | % |
| Series ACC-1               |       | 42.73                                                                                                                                                                                                                                                                           | %          |
| Series Olympus             |       | 5.00                                                                                                                                                                                                                                                                            | %          |
| Series FrontierVision      |       | 2.50                                                                                                                                                                                                                                                                            | %          |
| Series ACC-2               |       | 2.25                                                                                                                                                                                                                                                                            | %          |
| Series ACC-3               |       | 0.90                                                                                                                                                                                                                                                                            | %          |
| Series FPL                 |       | 0.75                                                                                                                                                                                                                                                                            | %          |
|                            |       |                                                                                                                                                                                                                                                                            |       |                            |       |   |   |
| 542,000,001 -  1,165,000,000    |       | Until cumulative  distribution is $1,165 million                                                                                                                                                                                                                                |       | Series Arahova             |       | 48.37 | % |
| Series ACC-1               |       | 45.06                                                                                                                                                                                                                                                                           | %          |
| Series FrontierVision      |       | 2.50                                                                                                                                                                                                                                                                            | %          |
| Series ACC-2               |       | 2.37                                                                                                                                                                                                                                                                            | %          |
| Series ACC-3               |       | 0.95                                                                                                                                                                                                                                                                            | %          |
| Series FPL                 |       | 0.75                                                                                                                                                                                                                                                                            | %          |
| ** **                      | ** ** | ** **                                                                                                                                                                                                                                                                      | ** ** | ** **                      | ** ** | ** ** | ** ** |
| 1,165,000,001 -  3,562,000,000  |       | Until  Series Arahova has received $625 million plus the Arahova Fees plus  accrued post-Effective Date dividends                                                                                                                                                          |       | Series ACC-1               |       | 76.60 | % |
| Series Arahova             |       | 14.51                                                                                                                                                                                                                                                                           | %          |
| Series ACC-2               |       | 4.03                                                                                                                                                                                                                                                                            | %          |
| Series FrontierVision      |       | 2.50                                                                                                                                                                                                                                                                            | %          |
| Series ACC-3               |       | 1.61                                                                                                                                                                                                                                                                            | %          |
| Series FPL                 |       | 0.75                                                                                                                                                                                                                                                                            | %          |
|                            |       |                                                                                                                                                                                                                                                                            |       |                            |       |   |   |
| 3,562,000,001 -  4,359,000,000  |       | Until Series FPL  has received aggregate distributions of $6.2 million plus Default Interest,  plus accrued post-Effective Date dividends (ACC -1 Paid in Full)                                                                                                            |       | Series ACC-1               |       | 90.11 | % |
| Series ACC-2               |       | 4.74                                                                                                                                                                                                                                                                            | %          |
| Series FrontierVision      |       | 2.50                                                                                                                                                                                                                                                                            | %          |
| Series ACC-3               |       | 1.90                                                                                                                                                                                                                                                                            | %          |
| Series FPL                 |       | 0.75                                                                                                                                                                                                                                                                            | %          |
|                            |       |                                                                                                                                                                                                                                                                            |       |                            |       |   |   |
| 4,359,000,001 -  4,387,000,000  |       | Until Series FPL  has received aggregate distributions of $6.2 million plus Default Interest,  plus accrued post-Effective Date dividends                                                                                                                                  |       | Series ACC-2               |       | 69.11 | % |
| Series ACC-3               |       | 27.64                                                                                                                                                                                                                                                                           | %          |
| Series FrontierVision      |       | 2.50                                                                                                                                                                                                                                                                            | %          |
| Series FPL                 |       | 0.75                                                                                                                                                                                                                                                                            | %          |
|                            |       |                                                                                                                                                                                                                                                                            |       |                            |       |   |   |
|                            |       | Until  Series FrontierVision has received aggregate                                                                                                                                                                                                                        |       | Series ACC-2               |       | 69.65 | % |
|                            |       | distributions of $85  million plus 80% of the FrontierVision                                                                                                                                                                                                                    |       | Series ACC-3               |       | 27.85 | % |
| 4,387,000,001-                  |       | Fees, plus accrued  post-Effective Date dividends (ACC-3                                                                                                                                                                                                                        |       | Series FrontierVision      |       | 2.50 | % |
| 4,451,000,000                   |       | Paid in Full)                                                                                                                                                                                                                                                                   |       |                            |       |   |   |
|                            |       |                                                                                                                                                                                                                                                                            |       |                            |       |   |   |
|                            |       | Until  Series FrontierVision has received aggregate                                                                                                                                                                                                                        |       | Series ACC-2               |       | 97.50 | % |
| 4,451,000,001 -                 |       | distributions of $85  million plus 80% of the FrontierVision                                                                                                                                                                                                                    |       | Series FrontierVision      |       | 2.50 | % |
| 4,467,000,000                   |       | Fees, plus accrued  post-Effective Date dividends                                                                                                                                                                                                                          |       |                            |       |   |   |
|                            |       |                                                                                                                                                                                                                                                                            |       |                            |       |   |   |
| 4,467,000,001 -  4,494,000,000  |       | Until the holders of  Claims in Class ACC Notes and in Classes ACC Trade and ACC Other  Unsecured have been paid in full including Case Contract Interest (ACC Notes)  and Case 8% Interest (ACC Trade and ACC Other Unsecured) and accrued  post-Effective Date Dividends |       | Series ACC-2               |       | 100.00 | % |
|                            |       |                                                                                                                                                                                                                                                                            |       |                            |       |   |   |
| 4,494,000,001 -  4,551,000,000  |       | Until the additional  distribution to the Series Arahova Interests equals $50 million plus  accrued post-Effective Date dividends at a rate of 5% per annum                                                                                                                |       | Series Arahova             |       | 100.00 | % |
|                            |       |                                                                                                                                                                                                                                                                            |       |                            |       |   |   |
| Not Quantifiable                |       | Until ESL holders have  received Payment in Full of their Claims and Case 8% interest plus accrued  post-Effective Date dividends                                                                                                                                               |       |                            |       |   |   |
|                            |       |                                                                                                                                                                                                                                                                            |       |                            |       |   |   |
| Not Quantifiable                |       | Until ACC-4 holders  have received the full amount of their Allowed Claims plus Case Contract  Interest plus accrued post-Effective Date dividends                                                                                                                              |       |                            |       |   |   |
|                            |       |                                                                                                                                                                                                                                                                            |       |                            |       |   |   |
| Not Quantifiable                |       | Until ACC-5 holders  have received the full amount of their Allowed Claims plus Case 8% interest  plus accrued post-Effective Date dividends                                                                                                                                    |       |                            |       |   |   |
|                            |       |                                                                                                                                                                                                                                                                            |       |                            |       |   |   |
| Not Quantifiable                |       | Until ACC-6 holders  receive distributions in accordance with the relative priorities established  by the Liquidation Preferences governing the shares of  ACC Preferred Stock and the Bankruptcy Code                                                                     |       |                            |       |   |   |
|                            |       |                                                                                                                                                                                                                                                                            |       |                            |       |   |   |
| Not Quantifiable                |       | Each ACC-7 holder is  entitled to receive a pro rata share of any distributions remaining                                                                                                                                                                                       |       |                            |       |   |   |

 

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(1) Capitalizedterms used but not otherwise defined have the respective meaning given to themunder the Plan. Aggregate distributions and ART distribution percentages are asof December 31, 2009.

(2) Pursuant to theterms of the Plan, certain series of Interests are entitled to post-EffectiveDate dividends on certain amounts due to the corresponding class of claims. Forpurposes of calculating the reference amount on which post-Effective Datedividends accrue, the distribution of the true-up Holdback is treated as if itoccurred on the Effective Date.

(3) Unless otherwisestated, post-Effective Date dividends accrue at a rate of 8.9% per annum.

 

19

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The Declaration does notprovide the Holders any voting rights (except in connection with certainamendments to the Declaration and except for limited rights in connection withthe appointment of a successor Institutional Trustee or Delaware Trustee). Thebeneficial interests are freely transferable and tradable, although they arenot listed on any exchange.

 

Distributions will be madeto the Holders from amounts recovered through resolution of the Causes ofAction, and any other cash held by the ART, subject to, among other things, theestablishment of reasonable reserves for contingent liabilities and futurecosts and expenses. Pursuant to the Plan and the Declaration, all distributionsare net of any costs and expenses incurred by the ART in connection withadministering, litigating or otherwise resolving the various Causes of Actionof the ART and operating the ART.

 

Amounts withheld and notdistributed may also include fees and expenses of the Trustees, premiums fordirectors and officers insurance, and other insurance and fees and expenses ofattorneys and consultants. Distributions will be made only from assets of theART and only to the extent that the ART has sufficient assets (over reservesfor contingent liabilities and future costs and expenses) to make such paymentsin accordance with the Plan and the Declaration. No distribution is required tobe made to any Holder unless such Holder is to receive in such distribution atleast $25.00 (per Holder class, name and address), or unless such distributionis the final distribution to such Holder pursuant to the Plan and theDeclaration.

 

The Interests only representa right to receive a pro rata portion of the distributions from the ART to eachrespective class of Interests, pursuant to the terms of the Plan and theDeclaration. The Holders have no right with respect to, or interest in, (i) theCauses of Action, (ii) the Debtors or (iii) any amount with respectto the Causes of Action, including any judgment or settlement proceeds.

 

Distributions will be madeat the sole discretion of the Trustees in accordance with the provisions of thePlan and the Declaration. As of the date hereof, the Trustees have determinedthe present best course of action is to retain the existing cash in reserve toadminister the ART and fund the prosecution of the Causes of Action.Consequently, there have been no distributions through the date of this Form 10-Kand none have been announced.

 

Inconnection with the settlement with Motorola, the ART issued a total of57,274,499 ACC-2 Interests to Bear, Stearns & Co. Inc., DK AcquisitionPartners L.P. and Varde Investment Partners, L.P. on December 30,2009.  The ACC-2 Interests were issuedwithout registration pursuant to Section 4(2) of the Securities Actof 1933, as amended.

 

20

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**Item 6.Selected Financial Data.**

 

**SelectedFinancial Data**

 

The Selected Financial Datashould be read in conjunction with the financial statements and related notes,which are included in Item 8 below, and “Management’s Discussion and Analysisof Financial Statements and Results of Operations” included in Item 7.

 

**Summary of Changes in Net Assets**

 
| ** **                          | ** ** | **For the   year ended  December 31, 2009** | ** **  | **For the   year ended  December 31, 2008** | ** ** | **February 13, 2007   (date established) to  December 31, 2007** | ** ** |
|-------------------------------------|------------|--------------------------------------------------|-------------|--------------------------------------------------|------------|----------------------------------------------------------------------------|------------|
|                                |       |                                             |        |                                             |       |                                                                       |       |
| **Net assets, beginning of period** |       | $                                                | 166,269,617 |                                             | $          | 187,988,198                                                                |       | $ | — |   |
| Revenues                            |       | 40,807,190                                       |        | 5,866,860                                        |       | 192,597,684                                                                |       |
| Expenses                            |       | 39,670,415                                       |        | 27,585,441                                       |       | 30,653,236                                                                 |       |
| Net  Income (Loss)                  |       | 1,136,775                                        |        | (21,718,581                                      | )          | 161,944,448                                                                |       |
| Contributions  from Debtor          |       | —                                           |        | —                                           |       | 26,043,750                                                                 |       |
| **Net  assets, end of period**      |       | $                                                | 167,406,392 |                                             | $          | 166,269,617                                                                |       | $ | 187,988,198 |   |

 

**Summary of Balance Sheet Items**

** **
| ** **         | ** ** | **As of   December 31, 2009** | ** **  | **As of   December 31, 2008** | ** ** | **As of   December 31, 2007** | ** ** |
|--------------------|------------|------------------------------------|-------------|------------------------------------|------------|------------------------------------|------------|
|               |       |                               |        |                               |       |                               |       |
| Total  Assets      |       | $                                  | 170,717,913 |                               | $          | 166,820,488                        |       | $ | 194,808,000 |   |
| Total  Liabilities |       | $                                  | 3,311,521   |                               | $          | 550,871                            |       | $ | 6,819,802 |   |

 

21

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**Item 7.Management’s Discussion and Analysis of Financial Condition and Results ofOperations.**

 

**Management’s Discussion and Analysis**

 

Overview

 

The Adelphia Recovery Trustwas formed as a Delaware statutory trust pursuant to that certain FirstModified Fifth Amended Joint Chapter 11 Plan of Reorganization of Adelphia andcertain of its subsidiaries. The purpose of the ART is to prosecute the variouscauses of action transferred to the ART pursuant to the Plan and distribute tothe owners of the Interests in the ART the net proceeds of such Causes ofAction, according to the relative priorities established pursuant to the Plan,subject to the retention of various amounts to fund the prosecution of thoseCauses of Action and operations of the ART. Pursuant to the Plan, in additionto the Causes of Action, Adelphia transferred $25 million in cash to the ARTand paid certain expenses of the ART, in order to fund the initial expenses ofoperation.

 

Adelphia and certain of itssubsidiaries filed for Chapter 11 bankruptcy protection in June 2002.During the bankruptcy, on July 31, 2006 the assets of Adelphia were soldfor a combination of cash and stock in Time Warner Cable, Inc. (“TWC”). Inlate 2006, representatives of various groups of creditors reached agreement onthe allocation and distribution of the cash, TWC stock, other proceeds from thesale of estate assets and relative priorities to any Distributions arising fromthe Causes of Action contributed to the ART. This agreement was embodied in thePlan, which was confirmed in January 2007 and became effective on theEffective Date. Under the Plan, the creditors and equity holders of Adelphiaand certain of its subsidiaries received one or more of the following: cash,TWC stock, rights to future distributions from Adelphia excess reserves up topayment in full and the Interests.

 

The ART will dissolve uponthe earlier of the resolution of all Causes of Action and the distribution ofall of its assets to the Holders or the fifth anniversary of its creation.However, the Bankruptcy Court may approve an extension of the term if deemednecessary for the purposes of resolving the Causes of Action and distributingthe net proceeds to Holders.

 

As set forth in the Plan andthe Declaration of Trust for the ART, as amended (the “Declaration”), the ARTis administered by five Trustees. These Trustees are authorized to carry outthe purposes of the ART. In particular, the Trustees are responsible forprotecting, maintaining, liquidating to cash and maximizing the value of theCauses of Action contributed to the ART, whether by litigation, settlement orotherwise. The recoveries from settled Causes of Action and preferences fromthe Effective Date through December 31, 2009 have amounted to $ 229.7million.  The recoveries from settledCauses of Action and preferences for the years ended December 31, 2009 and2008 and the period from February 13, 2007 (date established) to December 31,2007 are set forth below.

 

22

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| ** **                 | ** ** | ** **                 | ** ** | ** **                 | ** ** | **For  the period**             | ** ** |
|----------------------------|------------|----------------------------|------------|----------------------------|------------|---------------------------------|------------|
| ** **                 | ** ** | ** **                 | ** ** | ** **                 | ** ** | **from February 13, 2007** | ** ** |
| ** **                 | ** ** | **Year ended**             | ** ** | **Year ended**             | ** ** | **(date established) to**       | ** ** |
| ** **                 | ** ** | **December 31, 2009** | ** ** | **December 31, 2008** | ** ** | **December 31, 2007**      | ** ** |
| Motorola                   |       | $                          | 40,000,000 |                       | $          | —                          |       | $ | — |   |
| Tow  / Rosensweig          |       | —                     |       | 200,206                    |       | 20,696,702                      |       |
| Various  preference claims |       | —                     |       | 1,160,194                  |       | 100,000                         |       |
| Deloitte                   |       | —                     |       | —                     |       | 167,500,000                     |       |
| Total                      |       | $                          | 40,000,000 |                       | $          | 1,360,400                       |       | $ | 188,296,702 |   |

 

Distributions

 

Pursuant to the Plan and theDeclaration, distributions to Holders are net of any costs and expensesincurred by the ART in connection with administering, litigating or otherwiseresolving the various Causes of Action. Such amounts withheld beforedistribution may also include fees and expenses of the Trustees, premiums fordirectors and officers insurance, taxes and other insurance and fees andexpenses of attorneys and consultants. Distributions will be made only fromassets of the ART and only to the extent that the ART has sufficient assets(over amounts retained for contingent liabilities and future costs andexpenses) to make such payments in accordance with the Plan and theDeclaration. No distribution is required to be made to any Holder unless suchHolder is to receive in such distribution at least $25.00 (per Holder class,name and address), unless such distribution is the final distribution to suchHolder pursuant to the Plan and the Declaration.

 

Distributions will be madeat the sole discretion of the Trustees in accordance with the provisions of thePlan and the Declaration. As of the date hereof, the Trustees have determinedthe present best course of action is to retain the existing cash in reserve toadminister the ART and fund the prosecution of the Causes of Action.Consequently, there have been no distributions through the filing date of this Form 10-Kand none have been announced.

 

The ART Trustees willcontinue to assess the adequacy of funds held for all potential costs andexpenses of the ART and may distribute ART excess assets, if any, to Holders.Such distribution will be made according to the waterfall priority establishedin the Plan and discussed herein.

 

23

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As of December 31,2009, the number of Interests outstanding in each series eligible to receive aDistribution is as follows:

 
| **CVV Series of Interest:** | ** ** | **As of December  31, 2009** | ** ** |
|----------------------------------|------------|-----------------------------------|------------|
| Series RF                   |       | 115,000,000                       |       |
| Series Arahova              |       | 722,639,681                       |       |
| Series FrontierVision       |       | 86,600,001                        |       |
| Series FPL                  |       | 25,575,129                        |       |
| Series Olympus              |       | 17,000,001                        |       |
| Series ACC-1                |       | 4,839,988,165                     |       |
| Series ACC-2                |       | 339,207,788                       |       |
| Series ACC-3                |       | 119,430,302                       |       |
| Series ESL  (1)             |       | 17                                |       |
| Series ACC-4                |       | 1,790,968,272                     |       |
| Series ACC-5  (1)           |       | 458                               |       |
| Series ACC-6B               |       | 150,000,000                       |       |
| Series ACC-6B1  (1)         |       | 3                                 |       |
| Series ACC-6D               |       | 575,000,000                       |       |
| Series ACC-6D1  (1)         |       | 229,004                           |       |
| Series ACC-6E/F             |       | 935,812,456                       |       |
| Series ACC-6E/F1  (1)       |       | 277,210                           |       |
| Series ACC-7                |       | 217,022,640                       |       |
| Series ACC-7A  (1)          |       | 1,537,766,752                     |       |

 

----

(1) For each of thesecategories of Interests (which include disputed claims), each holder of adisputed claim was awarded one Interest. The number of Interests is expected tochange based on the resolution of disputed claims.

 

**Results ofOperations**

**Year ended December 31,2009 versus year ended December 31, 2008**

 

Total revenues as set forthbelow, increased to $40.8 million in 2009 compared to $5.9 million in 2008 dueto the settlement of the Motorola Cause of Action. Settlement recoveries shouldnot be considered as an indicator of future revenue performance of the ART asART revenue derived from Cause of Action settlements, if they occur, will behighly variable and unpredictable. The related legal proceedings could continuefor years.

 
| ** **                               | ** ** | **For the year ended December 31, 2009** | ** ** | **For the year ended December 31, 2008** | ** ** |
|------------------------------------------|------------|-----------------------------------------------|------------|-----------------------------------------------|------------|
|                                     |       |                                          |       |                                          |       |
| **Revenues**                             |       |                                          |       |                                          |       |
| Litigation  - court approved settlements |       | $                                             | 40,000,000 |                                          | $          | 200,206 |   |
| Litigation  - other settlements          |       | —                                        |       | 1,160,194                                     |       |
| Interest  income                         |       | 807,190                                       |       | 4,506,460                                     |       |
| Total  revenues                          |       | $                                             | 40,807,190 |                                          | $          | 5,866,860 |   |

 

24

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Settlement revenues in 2009were $40.0 million compared to settlement revenues of $1.4 million in 2008. In2009, revenue from recoveries increased by $38.6 million due to the settlementof the Motorola Cause of Action. The Motorola Cause of Action had been inprocess since the Effective Date with all of the related professionallitigation costs advanced by Adelphia per agreement 

between the ART and Adelphiaas more fully discussed with operating expenses below.  In 2008 there were two preference recoveriesby the ART which totaled $1.2 million. In addition, there was $0.2 million ofadditional proceeds from the Tow litigation settled in 2007.

 

As of the date of this Form 10-K,there remain other Causes of Action such as those described in Item 3 of this Form 10-K.At this time there is no way to estimate or project potential recoveries orwhether there will be any recoveries from these Causes of Action.

 

Both 2009 and 2008 includeinterest income from invested cash balances. Interest totaled $0.8 million in2009 which has decreased from $4.5 million in 2008 due to lower averageinvested cash balances in 2009 and due to significant reductions in investmentyields. Investment yield reductions were expected due to global and domesticeconomic conditions and were not caused by a change in investment strategy ofthe ART.

 

Operating expenses of theART as set forth below, increased in 2009 to $39.7 million from $27.6 millionin 2008. The increase was due to increased professional litigation expensesfrom pursuing Causes of Action in 2009 offset by reductions in both general andadministrative and professional administrative expenses.

 
| ** **                             | ** ** | **For the year  ended   December 31, 2009** | ** ** | **For the year  ended  December 31, 2008** | ** ** |
|----------------------------------------|------------|---------------------------------------------|------------|--------------------------------------------|------------|
|                                   |       |                                        |       |                                       |       |
| **Operating expenses**                 |       |                                        |       |                                       |       |
| General and administrative expenses    |       | $                                           | 2,089,464  |                                       | $          | 2,434,354 |   |
| Professional expenses - litigation     |       | 37,255,189                                  |       | 23,138,236                                 |       |
| Professional expenses - administrative |       | 325,762                                     |       | 2,012,851                                  |       |
| Total operating expenses               |       | $                                           | 39,670,415 |                                       | $          | 27,585,441 |   |

 

Professional litigationexpenses increased in 2009 by $14.1 million to $37.3 million from $23.1 millionin 2008 primarily due to an increase of $13.1 million in expenses related tothe prosecution of the Bank and Prestige Causes of Action. In addition, under anagreement between the ART and Adelphia, Adelphia had advanced the payment ofprofessional expenses associated with prosecuting the Motorola Cause of Actionsince the Effective Date. In connection with the Motorola settlement, the ARTand Adelphia reached agreement on the professional expenses to be paid by theART to Adelphia for the prosecution of the Motorola Cause of Action. Pursuantto the settlement with Adelphia the ART paid $1.2 million for professionallitigation costs associated with the Motorola Cause of Action thus increasingcosts in 2009 from 2008 by $1.2 million. Other miscellaneous professionallitigation costs decreased $0.2 million in 2009 from 2008.

 

25

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The costs related to theprosecution of the various Causes of Action are substantial. The ART cannot becertain at this time of the total costs of prosecuting the remaining Causes ofAction or the timing and amount of future recoveries if any. Additionally, theART’s primary expense relates to professional fees incurred to prosecute theCauses of Action. The ART may retain additional professionals in the future,which would increase the ART’s expenses. The ART may be adversely impacted ifthe cost for these services were to increase significantly, if a professionalproviding services required replacement or to be supplemented, or if the costfor these services were to vary from the expected amount. Expenses for 2009 maynot be indicative of future expenses, which may be significantly higher.

 

Professional administrativeexpenses decreased in 2009 by $1.7 million to $0.3 from $2.0 million in 2008.The decrease is due to reduced professional time and resources required forSEC, tax and ART governance matters in 2009 than for 2008 which included additionaltime and resources for start-up activities associated with the ART formationand initial filings.

 

General and administrativeexpenses decreased in 2009 by $0.3 million to $2.1 from $2.4 million in 2008.The decrease is due to reduced Trustee compensation, insurance costs and bankand audit fees.

 

The net income for the yearended December 31, 2009 of $1.1 million is $22.8 million more than the2008 net loss of $21.7 million. The significant difference is related to theincreased settlement revenues in 2009 vs 2008 of $38.6 million offset bydecreased investment income of $3.7 million and increased operating expenses of$12.1 million in 2009, all as discussed in more detail above.

 

**Year ended December 31,2008 versus the period from February 13, 2007 (date established) to December 31,2007**

 

Total revenues as set forthbelow, decreased to $5.9 million in 2008 compared to $192.6 million in 2007 dueto the significant recoveries from the Cause of Action settlements by the ARTin 2007 and offset by lower interest income.

 
| ** **                               | ** ** | **For the year ended   December 31, 2008** | ** ** | **For the period from   February 13, 2007   (date established) to   December 31, 2007** | ** ** |
|------------------------------------------|------------|-------------------------------------------------|------------|---------------------------------------------------------------------------------------------------|------------|
|                                     |       |                                            |       |                                                                                              |       |
| **Revenues**                             |       |                                            |       |                                                                                              |       |
| Litigation  - court approved settlements |       | $                                               | 200,206    |                                                                                              | $          | 188,196,702 |   |
| Litigation  - other settlements          |       | 1,160,194                                       |       | 100,000                                                                                           |       |
| Interest  income                         |       | 4,506,460                                       |       | 4,300,982                                                                                         |       |
| Total  revenues                          |       | $                                               | 5,866,860  |                                                                                              | $          | 192,597,684 |   |

 

Settlement revenues in 2008were $1.4 million compared to settlement revenues of $188.3 million in 2007. In2008, revenue from recoveries included a final payment related to the Tow Causeof action for $0.2 million and various preference recoveries of $1.1 million.In 2007, revenue from recoveries included settlements from the Tow Cause ofAction of $20.7 million, the Deloitte Cause of Action of $167.5 million andfrom various preference recoveries of $0.1 million.

 

26

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Both 2008 and 2007 includeinterest income from invested cash balances. Interest totaled $4.5 million in2008 which increased from $4.3 million in 2007 due to higher average invested cash balances and afull year of performance in 2008 but offset by reductions in investment yields.Investment yield reductions were expected due to global and domestic economicconditions and were not a result of a change in investment strategy of the ART.

 

Operating expenses of theART as set forth below, decreased in 2008 to $27.6 million from $30.7 millionin 2007. The decrease was due to reduced professional litigation andprofessional administrative expenses in 2008 offset by increased general andadministrative expenses.

 
| **Operating expenses**                  |   |       |       |       |   |
|-----------------------------------------|--------|------------|------------|------------|--------|
| General  and administrative expenses    |   | $          | 2,434,354  |       | $      | 1,854,119 |   |
| Professional  expenses - litigation     |   | 23,138,236 |       | 26,417,616 |   |
| Professional  expenses - administrative |   | 2,012,851  |       | 2,381,501  |   |
| Total  operating expenses               |   | $          | 27,585,441 |       | $      | 30,653,236 |   |

 

Professional litigationexpenses decreased in 2008 by $3.3 million to $23.1 million from $26.4 millionin 2007 primarily due to reduced professional expenses from pursuing Causes of Actionin 2008. Specifically, the settlement related to the Deloitte Cause of Actionin 2007, as mentioned above, resulted in reduced professional costs in 2008.

 

Professional administrativeexpenses decreased in 2008 by $0.4 million to $2.0 in 2008 from $2.4 million in2007. The decrease was due to reduced professional time and resources requiredfor SEC, tax and ART governance matters in 2008 compared to 2007 which includedadditional time and resources for start-up activities associated with the ARTformation and initial filings.

 

General and administrativeexpenses increased in 2008 by $0.6 million to $2.4 from $1.8 million in 2007.The increase was due to increased Trustee compensation and expenses of $0.5million, increased audit and tax compliance expenses of $0.2 offset bydecreased insurance expenses.

 

The net loss for the year ended December 31, 2008of $21.7 million was $183.6 million less than the 2007 net income of $161.9million. The difference is due to the lower settlement revenues in 2008 of$186.9 million offset by slightly higher investment income of $0.2 million andreduced operating expenses of $3.1 million in 2008.

 

**FinancialCondition and Cash Flows**

 

The ART’s sources ofliquidity result from (a) the $25 million transferred to the ART byAdelphia pursuant to the Plan on the Effective Date, (b) the successfulresolution of Causes of Action and (c) earnings on invested cash balances.Receipts from these sources are used to pay professional and operating expensesof the ART and as distributions to the Holders after reserving cash required topay future professional and operating expenses of the ART. After carefulevaluation of future needs the Trustees have determined that the present bestcourse of action is to retain the existing cash in reserve to administer theART and fund the prosecution of the Causes of Action. Consequently, there havebeen no distributions through the date of this Form 10-K and none havebeen announced.

 

27

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Givencash and cash equivalent balances as of December 31, 2009 totalingapproximately $164.3 million and expected expenses and other potentialdisbursements, the ART does not expect a deficiency in liquidity in the nexttwelve months. Due to the uncertain nature of future revenues and expensesbeyond twelve months, it is not possible to be certain that current liquiditywill be adequate to cover all the future financial needs of the ART. Incurringdebt, creating contingent obligation agreements and or seeking methods toreduce legal professional and administrative costs are all strategies thatcould be undertaken to address liquidity issues should they arise.

 

These strategies couldimpact the ART’s ability to maximize recoveries from Causes of Action. Thenature of the ART’s operation does not give rise to capital expenditures andthere are no current or expected commitments for capital expenditures in thenext twelve months. Should a need for capital expenditures arise, the ART wouldfund the requirement from existing assets. Additionally, the ART currently hasno long-term contracts or other long term obligations.

 

Cash and cash equivalentbalances at December 31, 2009 of approximately $164.3 million haveincreased approximately $3.3 million over the balance at December 31, 2008due to a net income for the twelve months ended December 31, 2009 ofapproximately $1.1 million and additional cash provided by operating activitiesof approximately $2.2 million, primarily related to the increase of $2.8million in accrued expenses. Other uses of cash from operating activitiesinclude the purchase of prepaid insurance and the accrual of interest on asettlement receivable totaling $0.6 million.

 

Available cash is investedin either FDIC insured deposit accounts or a money market fund invested inshort-term U.S. Treasury and government agency securities, including repurchaseagreements collateralized fully by U.S. Treasury and government agencysecurities.

 

**Debt andOther Long-term Obligations**

 

The ART has no debt, capitalor operating lease or other long-term obligations and has no current plans toincur such obligations.

 

**CriticalAccounting Policies**

 

Basis of accounting

 

The ART has assessed therequirements to report under the liquidation basis of accounting. At this timethe liquidation basis of accounting has been deemed inappropriate due to theongoing and extended nature of the work concerning the Causes of Action and theadequacy of the cash required to fund the required work. Consequently, the ARTwill report under United States generally accepted accounting principles forgoing-concern entities. The ART will periodically assess the need to adopt theliquidation basis of accounting subject to current facts and circumstancesrelated to the adequacy of the ART’s liquidity and the status of the remainingCauses of Action.

 

28

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Fair value estimates

 

As noted in the footnotes tothe financial statements in Item 8, the ART has assessed the fair value of itsnote receivable and accrued interest to be $4.4 million as of December 31,2010. The market value of the note receivable was calculated using a discountedcash flow model. The discount rate was derived using the published yield on the10 year benchmark treasury bond plus the average reported spread on certainpublic unsecured bonds of the life insurance companies that provided the Towlife insurance policies, the proceeds from which will pay the note andinterest. The maturity date was derived using the life expectancy of LeonardTow and his wife based on the 2004 Period Life Table published by the SocialSecurity Administration.

 

NewAccounting Pronouncements

 

There are no new accounting standards that the ART isrequired to adopt which will likely have a material effect on its financialstatements.

 

**CautionaryStatement Regarding Risks and Uncertainties That May Affect Future Results**

 

This report on Form 10-Kcontains forward-looking statements about the business, financial condition andprospects of the ART. The actual results of the ART could differ materiallyfrom those indicated by the forward-looking statements because of various risksand uncertainties, including, without limitation, the number and amounts oflitigations and/or settlements which are successful, delays in obtainingproceeds, the amount of funding required for the litigations and otheroperating expenses, economic conditions, changes in tax and other governmental rules andregulations applicable to the ART, and other risks identified and described inItem 1A- Risk factors. These risks and uncertainties are beyond the ability ofthe ART to control, and in many cases, the ART cannot predict the risks anduncertainties that could cause its actual results to differ materially fromthose indicated by the forward-looking statements. When used in this report thewords “believes,” “estimates,” “plans,” “expects,” and “anticipates” andsimilar expressions as they relate to the ART or its management are intended toidentify forward-looking statements.

 

**Item 7A.Quantitative and Qualitative Disclosures About Market Risk.**

 

The ART invests cash andcash equivalents in either FDIC insured deposit accounts or a money market fundinvested in short-term U.S. Treasury and government agency securities,including repurchase agreements collateralized fully by U.S. Treasury andgovernment agency securities. The money market fund has a 36 day effectiveaverage maturity for the underlying securities. Interest income is subject tointerest rate fluctuations.

 

29

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**Item 8. Financial Statements andSupplementary Data.**

 

**Adelphia Recovery Trust**

**Index to Financial Statements**

 

**Financial Statements**

 
| Report of Independent Registered  Public Accounting Firm                                                                                                                                                                | 31     |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                                                                                    |   |
| Balance Sheets as of  December 31, 2009 and December 31, 2008                                                                                                                                                 | 32     |
|                                                                                                                                                                                                                    |   |
| Statements of Operations and Changes in Net Assets for  the years ended December 31, 2009 and December 31, 2008 and for the  period from February 13, 2007 (date established) to December 31,  2007 | 33     |
|                                                                                                                                                                                                                    |   |
| Statements  of Cash Flows for the years ended December 31, 2009 and  December 31, 2008 and for the period from February 13, 2007 (date  established) to December 31, 2007                           | 34     |
|                                                                                                                                                                                                                    |   |
| Notes to Financial Statements                                                                                                                                                                                           | 35     |

 

30

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**REPORTOF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

 

Tothe Trustees of the

 

AdelphiaRecovery Trust

 

We have auditedthe accompanying balance sheets of the Adelphia Recovery Trust (the “ART”) asof December 31, 2009 and 2008, and the related statements of operationsand changes in net assets, and cash flows for the years then ended and for theperiod from February 13, 2007 (date established) to December 31,2007.  These financial statements are theresponsibility of the ART’s Trustees. Our responsibility is to express an opinion on these financialstatements based on our audits.

 

We conducted our auditsin accordance with the standards of the Public Company Accounting OversightBoard (United States). Those standards require that we plan and perform theaudit to obtain reasonable assurance about whether the financial statements arefree of material misstatement. The ART is not required to have, nor were weengaged to perform, an audit of the ART’s internal control over financialreporting. An audit includes consideration of internal control over financialreporting as a basis for designing audit procedures that are appropriate in thecircumstances, but not for the purpose of expressing an opinion on theeffectiveness of the ART’s internal control over financial reporting.Accordingly, we express no such opinion. An audit includes examining, on a testbasis, evidence supporting the amounts and disclosures in the financialstatements. An audit also includes assessing the accounting principles used andsignificant estimates made by the ART’s Trustees, as well as evaluating theoverall financial statement presentation. We believe that our audits provide areasonable basis for our opinion.

 

Inour opinion, the financial statements referred to above present fairly, in allmaterial respects, the financial position of the ART as of December 31,2009 and 2008 and the results of its operations and its cash flows for theyears then ended and for the period from February 13, 2007 to December 31,2007 in conformity with accounting principles generally accepted in the UnitedStates of America.

 

 
| /s/  UHY LLP           |   |   |
|------------------------|--------|--------|
|                   |   |
| New Haven, Connecticut |   |
| March 10, 2010    |   |

 

31

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**AdelphiaRecovery Trust**

**Balance Sheets**

 
| ** **                            | ** ** | **As of   December 31, 2009** | ** **  | **As of   December 31, 2008** | ** ** |
|---------------------------------------|------------|------------------------------------|-------------|------------------------------------|------------|
|                                  |       |                               |        |                               |       |
| **Assets**                            |       |                               |        |                               |       |
| Cash  and cash equivalents            |       | $                                  | 164,327,745 |                               | $          | 161,057,351 |   |
| Prepaid  assets                       |       | 611,363                            |        | 374,356                            |       |
| Note  and accrued interest receivable |       | 5,778,805                          |        | 5,388,781                          |       |
| Total  assets                         |       | $                                  | 170,717,913 |                               | $          | 166,820,488 |   |
|                                  |       |                               |        |                               |       |
|                                  |       |                               |        |                               |       |
| **Liabilities and net assets**        |       |                               |        |                               |       |
| Accrued  expenses                     |       | $                                  | 3,311,521   |                               | $          | 550,871 |   |
| Total  liabilities                    |       | 3,311,521                          |        | 550,871                            |       |
|                                  |       |                               |        |                               |       |
| Net  assets                           |       | 167,406,392                        |        | 166,269,617                        |       |
|                                  |       |                               |        |                               |       |
| **Total liabilities and net assets**  |       | $                                  | 170,717,913 |                               | $          | 166,820,488 |   |

 

See accompanying notes tofinancial statements.

 

32

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**AdelphiaRecovery Trust**

**Statements of Operations and Changesin Net Assets**

 
| ** **                               | ** ** | **For the year ended  December 31, 2009** | ** **  | **For the year ended  December 31, 2008** | ** ** | **For the period from  February 13, 2007  (date established) to  December 31, 2007** | ** ** |
|------------------------------------------|------------|------------------------------------------------|-------------|------------------------------------------------|------------|------------------------------------------------------------------------------------------------|------------|
| **Revenues**                             |       |                                           |        |                                           |       |                                                                                           |       |
| Litigation  - court approved settlements |       | $                                              | 40,000,000  |                                           | $          | 200,206                                                                                        |       | $ | 188,196,702 |   |
| Litigation  - other settlements          |       | —                                         |        | 1,160,194                                      |       | 100,000                                                                                        |       |
| Interest  income                         |       | 807,190                                        |        | 4,506,460                                      |       | 4,300,982                                                                                      |       |
| Total  revenues                          |       | 40,807,190                                     |        | 5,866,860                                      |       | 192,597,684                                                                                    |       |
|                                     |       |                                           |        |                                           |       |                                                                                           |       |
|                                     |       |                                           |        |                                           |       |                                                                                           |       |
| **Operating expenses**                   |       |                                           |        |                                           |       |                                                                                           |       |
| General  and administrative expenses     |       | 2,089,464                                      |        | 2,434,354                                      |       | 1,854,119                                                                                      |       |
| Professional  expenses - litigation      |       | 37,255,189                                     |        | 23,138,236                                     |       | 26,417,616                                                                                     |       |
| Professional  expenses - administrative  |       | 325,762                                        |        | 2,012,851                                      |       | 2,381,501                                                                                      |       |
| Total  operating expenses                |       | 39,670,415                                     |        | 27,585,441                                     |       | 30,653,236                                                                                     |       |
|                                     |       |                                           |        |                                           |       |                                                                                           |       |
| **Net income (loss)**                    |       | 1,136,775                                      |        | (21,718,581                                    | )          | 161,944,448                                                                                    |       |
|                                     |       |                                           |        |                                           |       |                                                                                           |       |
| **Net assets, beginning of period**      |       | 166,269,617                                    |        | 187,988,198                                    |       | —                                                                                         |       |
| Contributions  from Debtor               |       |                                           |        |                                           |       |                                                                                           |       |
| Cash                                     |       | —                                         |        | —                                         |       | 25,000,000                                                                                     |       |
| Non-cash                                 |       | —                                         |        | —                                         |       | 1,043,750                                                                                      |       |
|                                     |       |                                           |        |                                           |       |                                                                                           |       |
| **Net assets, end of period**            |       | $                                              | 167,406,392 |                                           | $          | 166,269,617                                                                                    |       | $ | 187,988,198 |   |

 

See accompanyingnotes to financial statements.

 

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**AdelphiaRecovery Trust**

**Statements of Cash Flows**

 
| ** **                                                                                        | ** ** | **For the year   ended December   31, 2009** | ** **  | **For the   year ended  December 31,   2008** | ** ** | **For the period from  February 13, 2007  (date established) to  December 31, 2007** | ** ** |
|---------------------------------------------------------------------------------------------------|------------|--------------------------------------------------------|-------------|----------------------------------------------------|------------|------------------------------------------------------------------------------------------------|------------|
|                                                                                              |       |                                                   |        |                                               |       |                                                                                           |       |
| **Operating activities**                                                                          |       |                                                   |        |                                               |       |                                                                                           |       |
| Net  income (loss)                                                                                |       | $                                                      | 1,136,775   |                                               | $          | (21,718,581                                                                                    | )          | $ | 161,944,448 |   |
| Adjustments  to reconcile net income (loss) to net cash provided (used) by operating  activities: |       |                                                   |        |                                               |       |                                                                                           |       |
| Insurance  funded by Debtor                                                                       |       | —                                                 |        | —                                             |       | 1,043,750                                                                                      |       |
| Changes  in operating assets and liabilities:                                                     |       |                                                   |        |                                               |       |                                                                                           |       |
| Prepaid  assets                                                                                   |       | (237,007                                               | )           | (249,686                                           | )          | (124,670                                                                                       | )          |
| Note  and accrued interest receivable                                                             |       | (390,024                                               | )           | (390,024                                           | )          | (4,998,757                                                                                     | )          |
| Accrued  expenses                                                                                 |       | 2,760,650                                              |        | (6,268,931                                         | )          | 6,819,802                                                                                      |       |
| Net  cash provided (used) by operating activities                                                 |       | 3,270,394                                              |        | (28,627,222                                        | )          | 164,684,573                                                                                    |       |
|                                                                                              |       |                                                   |        |                                               |       |                                                                                           |       |
| **Financing activities**                                                                          |       |                                                   |        |                                               |       |                                                                                           |       |
| Contribution  from Debtor - cash                                                                  |       | —                                                 |        | —                                             |       | 25,000,000                                                                                     |       |
| Net  cash provided by financing activities                                                        |       | —                                                 |        | —                                             |       | 25,000,000                                                                                     |       |
|                                                                                              |       |                                                   |        |                                               |       |                                                                                           |       |
| **Net change in cash and cash equivalents**                                                       |       | 3,270,394                                              |        | (28,627,222                                        | )          | 189,684,573                                                                                    |       |
| **Cash and cash equivalents, beginning of period**                                                |       | 161,057,351                                            |        | 189,684,573                                        |       | —                                                                                         |       |
| **Cash and cash equivalents, end of period**                                                      |       | $                                                      | 164,327,745 |                                               | $          | 161,057,351                                                                                    |       | $ | 189,684,573 |   |

 

See accompanying notes to financial statements

 

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**AdelphiaRecovery Trust**

**Notesto Financial Statements**

**December 31,2009**

 

****1.             Natureand Purpose****

 

The Adelphia RecoveryTrust (the “ART”) is a Delaware statutory trust. The ART was created at theexpense of Adelphia Communications Corporation (“Adelphia”) and certain of itssubsidiaries (together with Adelphia the “Debtors”). The ART was established onFebruary 13, 2007 pursuant to the First Modified Fifth Amended JointChapter 11 Plan of Reorganization of Adelphia Communications Corporation andCertain Affiliated Debtors (the “Plan”), which was confirmed by the UnitedStates Bankruptcy Court for the Southern District of New York (the “BankruptcyCourt”) by an order dated January 5, 2007. The ART became effective February 13,2007 (the “Effective Date”). The ART holds certain litigation claimstransferred to it pursuant to the Plan against various third parties (the “Causesof Action”). The Causes of Action transferred to the ART for resolution wererecorded at the nominal amount of $1. The ART exists to resolve the Causes ofAction through litigation or settlement for the holders of interests (the “Holders”)in the ART. The Holders on the Effective Date were the restitution fundestablished under the Plan by the U.S. Treasury (the “Restitution Fund”) andcertain creditors and equity holders of the Debtors. The ART will distribute tothe Holders the net proceeds from resolving the Causes of Action, less amountswithheld for the costs of administering the ART and prosecuting the remainingCauses of Action.

 

The ART will dissolve upon the earlier of thedistribution of all of its assets to the Holders or the fifth anniversary ofits creation. However, an extension of the term may be granted by theBankruptcy Court if deemed necessary to resolve the remaining Causes of Actionand or for distributing the net proceeds to the Holders. Any extension must beapproved by the Bankruptcy Court within six months of the beginning of eachsuch extension.

 

The ART is administered by five individual trustees(the “Trustees”) who were appointed by creditors of the Adelphia estate. TheART had no employees through December 31, 2009. The Trustees engage thirdparty professionals and others including a trust administrator (the “TrustAdministrator”), which along with Adelphia, assist the Trustees inadministering the activities of the ART. The Trustees have the duty andauthority to take actions necessary to protect, maintain, liquidate to cash andmaximize the Causes of Action, whether by litigation, settlement or otherwise.  The time frame for ultimate resolution of anyof the Causes of Action cannot be estimated. For a description of the ongoingCauses of Action see Note 7.

 

On the Effective Date, Adelphia contributed$25,000,000 to the ART and paid certain expenses of the ART, to fund theinitial costs of operation. Additional amounts appropriate to prosecuteoutstanding Causes of Action or otherwise fund the activities of the ART willbe obtained from any proceeds received from resolved Causes of Action, throughearnings on ART investments or through loans from third parties includingAdelphia. These amounts, and any amounts held pending distribution to theHolders, will be the only amounts held by the ART.

 

Pursuant to the Plan and the Declaration of Trust asamended (the “Declaration”), the Trustees are permitted to retain amounts forcontingent and future costs and expenses. Pursuant to the Plan and theDeclaration, all distributions are net of any costs and expenses incurred bythe ART in connection with administering, litigating or otherwise resolving thevarious Causes of Action of the ART. The distribution of any net proceeds fromsettlements or judgments will be made at the sole discretion of the Trustees inaccordance with the Plan and the Declaration. As of the date hereof, theTrustees have determined to retain the existing cash and cash equivalents toadminister the ART and fund the prosecution of the pending Causes of Action.Therefore, there have been no distributions through the date of this 10-K andnone have been announced.

 

**2.             SignificantAccounting Policies**

 

**Use ofEstimates**

 

The financial statementswere prepared in conformity with accounting principles generally accepted inthe United States and require the ART to make estimates and assumptions thataffect the reported amounts of assets and liabilities and disclosure ofcontingent assets and liabilities. Actual results are likely to differ fromthose estimates and those differences may be significant.

 

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**Cash andCash Equivalents**

 

The ART considers allhighly liquid investments purchased with a maturity of three months or less tobe cash equivalents. Substantially all cash and cash equivalents are held inthe trust department of a financial institution. The amount on deposit exceedsthe federally insured limit. As of December 31, 2009 and 2008substantially all cash equivalents consist of money market funds which areinvested in US Government Treasury obligations in accordance with the ARTinvestment policy.

 

**Income Taxes**

 

The ART is not subject to federal or state incometaxes. The ART is not aware of any transactions or events up to and including December 31,2009 that would subject it to federal or state income taxes. Further, the ARThas no unrecognized income tax benefits as of December 31, 2009 and 2008nor are there any amounts required to be included in the financial statementsfor interest or penalties on unrecognized income tax benefits.

 

The Plan and Declaration provide that, for federalincome tax purposes, the ART was deemed to be formed in two steps.  The contribution by Adelphia of $25 millionfor the purpose of pursuing the Causes of Action, the Causes of Action and anyand all other property transferred to the ART (together, the “ART Property”)were treated first as a deemed transfer of the ART Property to the holders ofclaims and equity interests who receive interests in the ART (“Interests”) (inproportion to the fair market values of the Interests they receive). This wasfollowed by a deemed transfer by each such holder of its interest in the ARTProperty to the ART, in exchange for Interests.

 

The Holders are treated as the grantors of the ART andthe Trustees have and will continue to file tax returns for the ART as a “grantortrust” pursuant to Section 1.671-4(a) of the U.S. TreasuryRegulations. The ART obtained a private letter ruling from the Internal RevenueService confirming the ART’s treatment for tax purposes as a pass-throughgrantor trust.  As a condition toreceiving that private letter ruling, the ART amended its Declaration toeliminate the Trustees’ obligation under the Declaration of Trust to “usereasonable best efforts and with the approval of the Bankruptcy Court to havethe [ART] interests ... listed on a national securities exchange.”  On June 4, 2008, the United StatesBankruptcy Court for the Southern District of New York granted the Trust’smotion to so amend the ART’s Declaration.

 

Items of income, gain, loss, deduction and other taxitems have been and will be allocated to the Holders that would be entitled toreceive such items if they constituted cash distributions or reductionstherefrom. The Holders are responsible for the payment of taxes on a currentbasis that result from such allocations whether or not cash is distributed.

 

Asof December 31, 2009 and 2008 the net tax basis of the ART isapproximately $509 million and $512 million higher than the reported amount ofnet assets in the ART financial statements.

 

**RevenueRecognition**

 

Revenue from Causes ofAction is recognized when collection is reasonably assured and:

 

For settlements that arenot submitted to the Bankruptcy Court for approval, when thesettlement agreement is fully executed by all parties to the agreement.

 

For settlements that aresubmitted for Bankruptcy Court approval, when an order entered by theBankruptcy Court approving the settlement becomes a final order and is notsubject to appeal.  Settlementscollected but subject to appeal are recorded as deferred settlement revenueuntil the time for appeal expires.

 

For judgments, when ajudgment entered by the Bankruptcy Court becomes a final judgment and is notsubject to appeal or such appeal when made is determined to be frivolous orhave a remote chance of success.

 

The ART is currently in the process of prosecutingnumerous Causes of Action as discussed in Note 7.

 

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**NewAccounting Pronouncements**

 

There are no new accounting pronouncements that theART is required to adopt which will likely have a material effect on itsfinancial statements.

 

**3.             Notes Receivable**

 

OnAugust 3*,*2007 the ART settled a Cause of Action andreceived an unsecured note bearing simple (non-compounding) interest, at a rateof 8%, in the principal amount of $4,875,250. The Court approved the settlementof that Cause of Action on September 6, 2007. The note is recourse only tothe proceeds of a $28 million life insurance policy on the lives of Mr. LeonardTow and his wife, the proceeds of which policy shall not be paid until thedeath of the last to die of Mr. Tow and his wife. Payment of the principaland interest is not expected before December 31, 2010.  As of December 31, 2009, and 2008 thebalance under the note was $5,778,805 and $5,388,781 respectively comprised ofthe principal amount of the note and accrued interest of $903,555 and $513,531respectively. Principal and accrued interest are considered fully collectable.

 

**4.**             **Other Related Party Transactions and Prepaid Expenses**

 

In 2009 Adelphia wasdirected by the ART Trustees to pre-pay certain bank fees in the amount of$30,000 and director and officer insurance premiums in the amount of $817,594.The remaining prepaid portion of these costs as of December 31, 2009 was$611,363.

 

In 2008 the ART paid $908,438in D&O insurance premiums. There remained a prepaid insurance balance of$374,356 as of December 31, 2008.

 

In 2007 Adelphia paiddirector and officer insurance premiums of $1,043,750 on behalf of the ART. TheART has characterized the payment as a non-cash contribution from Adelphia.

 

The Trust Administratorand Adelphia continue to provide administrative support to the ART includingmaintaining electronic data and paper documents used in prosecuting the Causesof Action, support for Holder distributions when they might occur (includingmaintenance of data related to the implementation of Plan provisions) andfinancial reporting.  These services haveand will continue to be provided at no cost to the ART under the terms ofvarious agreements between the ART, the Trust Administrator and Adelphia. TheART financial statements do not reflect any amounts for these services.

 

**5.             FairValue of Financial Instruments**

 

As of December 31,2009 and 2008 the fair value of cash and cash equivalents, and accrued expensesapproximate their carrying values. Further, the fair value of the notereceivable and accrued interest approximated $4.4 million as of December 31,2009 and $4.2 million as of December 31, 2008. Fair value of the notereceivable was estimated using unobservable inputs (i.e. Level 3 as definedunder generally accepted accounting principles in the United States).

 

**6.****                                                       ****Trustee Compensation**

 

After December 31, 2007 the Official Committee ofUnsecured Creditors of Adelphia Communications Corporation and all of itsAffiliated Debtors-In-Possession (the “Creditors Committee”) agreed to Trusteecompensation of $43,750 per quarter, or $175,000 annually, retroactive to January 1,2007. The incremental annual compensation, of $25,000 per Trustee for 2007above amounts previously paid as interim compensation, was paid and recognizedas expense in 2008.

 

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Under an agreement with the Official Committee ofUnsecured Creditors of Adelphia Communications Corporation and all of itsAffiliated Debtors-In-Possession (the “Creditors Committee”), in 2009  each of the five Trustees received annualbase compensation of $175,000 paid at the beginning of each quarter in theamount of $43,750.  The Trustees mayaward reasonable additional service compensation to any Trustee for additionalservice to the ART. The aggregate amount of additional service compensationdistributed to all Trustees as a group in a year may not exceed $350,000. Theamounts paid and expensed as additional service compensation in 2009 totaled$230,000. This was authorized and paid in 2009 for Trustee services rendered in2008.  As of the date of this report$305,000 of additional service compensation was awarded for 2009 service. Thedecision and obligation to award additional service compensation and therelated payment were both finalized after December 31, 2009 and thus willbe expensed in 2010.

 

Incentive compensation may be awarded in conjunctionwith the termination of the ART, based on the amount of aggregate distributionsto the Holders over the existence of the ART. The Incentive Compensation foreach Trustee shall equal (A + B - (C)) divided by 5, where:

 

(A) equals 60 basis points of the amountdistributable to the Holders in an aggregate amount of distributions to Holdersof up to $1,500,000,000;

 

(B) equals 110 basis points of the amountdistributable to Holders in an aggregate amount of distributions to Holders of $1,500,000,000or more; and

 

(C) equals the amounts paid or attributable tothe Trustees as Base Compensation and Additional Service Compensation in total(for the avoidance of doubt, the sum of the Base Compensation and AdditionalService Compensation during the existence of the ART shall be applied as acredit and deducted from any sums payable to any Trustee under (A) and (B) above).

 

Incentive Compensation for a Trustee shall never beless than zero. That is, the Base Compensation and the Additional ServiceCompensation shall be retained by the Trustees regardless of whether anyIncentive Compensation is due.

 

**7.             Causesof Action**

 

***Pending Causes of Action***

 

Bank Litigation

 

OnJuly 6, 2003, the Creditors Committee filed a complaint (the “CreditorsCommittee Complaint”) in the Bankruptcy Court for the Southern District of NewYork against Adelphia’s pre-petition commercial banks and lenders, Adelphia’sformer investment bankers and financial advisors, and assignees of Adelphia’spre-petition bank debt. The Creditors Committee Complaint asserted 52 Causes ofAction seeking (a) recovery as fraudulent transfers the principal andinterest paid by Adelphia to defendants, (b) avoidance as fraudulentobligations Adelphia’s obligations, if any, to repay the defendants, (c) recoveryof damages for fraud and breaches of fiduciary duties to Adelphia and foraiding and abetting fraud and breaches of fiduciary duties by members of theRigas family relating to Adelphia’s credit facilities, (d) equitabledisallowance, subordination or recharacterization of each of the defendants’claims in Adelphia’s bankruptcy cases, (e) avoidance and recovery ofpreferential transfers made to certain defendants shortly prior to Adelphia’sbankruptcy filing, and (f) recovery of damages for violations of the BankHolding Company Act (“BHCA”).  Inaddition, the Creditors Committee and Adelphia moved in the Bankruptcy Courtseeking authority for the Committee to prosecute these claims together withAdelphia (the “Standing Motion”).

 

OnJuly 31, 2003, the Official Committee of Equity Security Holders forAdelphia filed a motion with the Bankruptcy Court to assert additional claimsagainst the defendants in the form of an

 

38

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intervenorcomplaint. The Equity Committee was granted leave to file its complaint (the “EquityCommittee Complaint”), which joined certain of the claims asserted in theCreditors Committee Complaint and also asserted new claims against theinvestment bank defendants for fraudulent concealment and against the agentbank and investment bank defendants for fraud and RICO violations.

 

Variousdefendants moved to dismiss both complaints and filed objections to theStanding Motion.  On August 30,2005, the Bankruptcy Court granted the Standing Motion, holding that theCreditors Committee had standing to pursue the claims in the Original Complainton behalf of, and together with, Adelphia. On February 9, 2006, while the motions to dismiss were stillpending, the United States District Court for the Southern District of New York( the “District Court” ) granted a motion filed by certain defendants towithdraw the reference to the Bankruptcy Court, subject to the proviso, withthe consent of all parties, that the motions to dismiss would remain with the BankruptcyCourt for decision.  On February 13,2007, the claims asserted in the Creditors Committee Complaint and the EquityCommittee Complaint was transferred to the ART pursuant to the Plan.

 

In2007, the Bankruptcy Court issued separate decisions with respect to each ofthe two complaints.  *In re Adelphia Commc’ns Corp.*, 365 B.R.24, 62 (Bankr. S.D.N.Y. 2007); *In reAdelphia Commc’ns Corp.*, Adversary No. 03-04942 (REG), 2007 WL2403553 at *11 (Bankr. S.D.N.Y. Aug. 17, 2007). In the first decision, theBankruptcy Court sustained the fraudulent transfer claims, the aiding andabetting breach of fiduciary duty claims, the breach of fiduciary duty, grossnegligence, and negligence claims against certain defendants, the equitablesubordination and disallowance claims, the BHCA claim, and the voidablepreference claims in the Creditors Committee Complaint, but dismissed, withleave to replead, the claims for aiding and abetting fraud. In the seconddecision, the Bankruptcy Court dismissed the additional claims asserted in theEquity Committee’s Complaint, but granted leave to replead the claims for fraudand fraudulent concealment.

 

OnJuly 10, 2007, all of the original moving defendants sought leave toappeal with respect to all the claims in the Creditors Committee’s Complaintthat the Bankruptcy Court had declined to dismiss. The District Court deniedleave to appeal from the rulings that sustained the fraudulent transfer claims,the voidable preference claims, and the equitable subordination claims, butgranted leave to appeal on certain discrete issues of law concerning the ART’sstanding, application of the BHCA, the existence of equitable disallowanceunder the Code, and the existence of aiding and abetting breach of fiduciaryduty liability under Pennsylvania law as well as the adequacy of the pleadingson that claim. *Adelphia Recovery Trust v.Bank of Am., N.A.*, No. 05 Civ. 9050 (LMM), 2007 WL 2585065(S.D.N.Y. Sept. 05, 2007); *Adelphia RecoveryTrust v. Bank of Am., N.A.*, No. 05 Civ. 9050 (LMM), 2007 WL2890220 (S.D.N.Y. Sept. 28, 2007).

 

OnOctober 31, 2007, while the appeal was pending, the ART filed an AmendedComplaint. The Amended Complaint (i) consolidated the two earliercomplaints into a single complaint; (ii) added additional allegations tosupport the claims on which the Bankruptcy Court granted leave to replead(aiding and abetting fraud, fraudulent concealment, and fraud); and (iii) addedas defendants approximately 380 new entities that became assignees of theAdelphia bank debt after the original complaints were filed. Certain defendantsfiled motions to dismiss the Amended Complaint and certain defendants filedanswers to the Amended Complaint and counterclaims for indemnification,contribution, breach of contract, and fraud. The ART filed answers to those counterclaims asserting variousaffirmative defenses, including the defense that the Confirmed Adelphia BankruptcyPlans

 

39

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barcounterclaims except for the purpose of limiting, reducing, offsetting, ordefeating the defendants’ liability to the Trust.

 

OnJanuary 17, 2008, the District Court issued its decision on appeal of theBankruptcy Court’s opinion on the motions to dismiss the Creditor Committee’scomplaint.  In that opinion, the DistrictCourt concluded, *inter alia*, thatthe ART had standing to assert the tort claims and the Bankruptcy Courtproperly had sustained the claims for aiding and abetting breach of fiduciaryduty and equitable disallowance. The District Court dismissed the BHCA claimwith leave to replead to cure an ambiguity in the original allegations. *Adelphia Recovery Trust v. Bank of Am*., *N.A*., No. 05 Civ. 9050 (LMM), 2008 WL217057 at *6, 13 (S.D.N.Y. Jan. 17, 2008). The BHCA claim subsequently wasreplead in a Second Amended Complaint filed March 4, 2008.  Thereafter, certain defendants filed motionsto dismiss the replead BHCA claim set forth in the Second Amended Complaint.

 

OnJune 18, 2008, the District Court dismissed certain fraudulent transferclaims, voidable preference claims, and equitable subordination and disallowanceclaims.  A final judgment was entered onthose claims as well as certain other claims dismissed in 2007 by theBankruptcy Court.  The ART filed a timelynotice of appeal and the appeal is fully briefed and awaiting oral argument inthe Second Circuit Court of Appeals.

 

With respect to the motionsto dismiss the tort and BHCA claims, the District Court entered an order on May 6,2009, sustaining the Trust’s aiding and abetting fraud and breach of fiduciaryduty claims, sustaining in part and dismissing in part the Trust’s fraud claim,and dismissing the Trust’s fraudulent concealment claim.  The District Court sustained avoidance claimsagainst lenders concerning margin loans to the Rigases that Adelphiarepaid.  On July 27, 2009, theDistrict Court dismissed the BHCA claim against three Defendants:  Fuji Bank Limited, Texas Dominion (Texas)LLC, and Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A., New York Branch.Following that ruling and pursuant to stipulation, the District Court dismissedthe BHCA claim against CIBC, Inc., Merrill Lynch Capital Corp., The Bankof Nova Scotia and Morgan Stanley Senior Funding, Inc.,  with leave to reinstate in the event that theDistrict Court’s July 27, 2009 Order is reversed.

 

On March 6, 2009,Defendants moved to strike the Trust’s jury demand on the tort and BHCA claimsbased on jury trial waivers contained in credit agreements executed by certainAdelphia subsidiaries (the “Obligor Debtors”). On July 8, 2009, the District Court denied Defendants’ motion withrespect to all claims brought by the Trust standing in the shoes of Adelphia andcertain fraud claims brought by the Trust standing in the shoes of the ObligorDebtors, but granted the motion with regard to the remaining claims brought bythe Trust standing in the shoes of the Obligor Debtors.  On October 30, 2009, Defendants filed asecond motion to strike the Trust’s jury demand on additional grounds.  That motion has been fully briefed and ispending.

 

On October 2, 2009,Defendants moved for an order that the Trust lacks standing to pursue tort andBHCA claims standing in the shoes of Adelphia. On December 21, 2009 the District Court granted the motion.  On January 25, 2010, the Trust moved forreconsideration or in the alternative, certification of the ruling to theSecond Circuit Court of Appeals. The Trust’s reconsideration motion is beingbriefed by the parties.

 

On November 18, 2009,Defendants moved for summary judgment on all remaining state law tort claimsbased on the affirmative defense of *in pari delicto.*  The Investment Banks separately moved forsummary judgment on the fiduciary duty and gross negligence claims pendingagainst them.

 

40

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The Trust filed itsresponses to those motions on February 12, 2010. On March 2, 2010,Defendants filed additional motions for summary judgment on all remaining tort,fraudulent concealment and BHCA claims.

 

Underthe schedule established by the District Court, trial on the pending tort,fraudulent conveyance, and BHCA claims will commence on September 13,2010.

 

Atthis time, the ART cannot predict the outcome of these proceedings or estimatethe possible financial effect of these proceedings on the ART’s financialstatements.

 

SabresLitigation

 

On February 17, 2009,the District Court for the Western District of New York issued a final judgmentgranting a permanent injunction against the prosecution of fraudulentconveyance claims against Key Bank, N.A., Fleet National Bank, and HSBC BankUSA, N.S. (collectively, the “Sabres Banks”), by the Trust in the BankLitigation pending in the Southern District of New York.  The fraudulent conveyance claims against theSabres Banks involve Adelphia’s purchase of and payments on certain loans madeby the Sabres Banks to the Buffalo Sabres hockey team.  The Trust appealed the injunction to theSecond Circuit Court of Appeals.  Theappeal was argued on November 4, 2009, and the parties are awaitingdecision.

 

On March 4, 2009, thefraudulent conveyance claims, as well as claims for aiding and abetting breachof fiduciary duty and equitable subordination or disallowance that the ART hadasserted against the Sabres Banks in the Bank Litigation were severed andtransferred by the District Court for the Southern District of New York to theDistrict Court for the Western District of New York.  The District Court for the Western Districtof New York has stayed further proceedings with respect to those claims pendinga ruling from the Second Circuit Court of Appeals on the Trust’s appeal fromthe injunction.

 

Atthis time, the ART cannot predict the outcome of these proceedings or estimatethe possible financial effect of these proceedings on the ART’s financialstatements.

 

Prestige

 

On June 24, 2004, theUnsecured Creditors’ Committee filed an adversary action against PrestigeCommunications of NC, Inc., Jonathan J. Oscher, Lorraine Oscher McClain,Robert F. Buckfelder, Buckfelder Investment Trust, and Anverse, Inc. inthe Bankruptcy Court for the Southern District of New York.  In a decision dated January 8, 2008, theDistrict Court withdrew the reference to the Bankruptcy Court in the Prestigeaction and transferred the case to the District Court.

 

ThePrestige action seeks to recover fraudulent transfers in connection withAdelphia’s purchase of the assets of Prestige Communications of N.C., Inc.,an acquisition that closed on July 5, 2000, as well as a claim that theowners of the Prestige Cable Systems aided and abetted breaches of fiduciaryduty on the part of the Rigas family in connection with the transaction.  On October 27, 2009, Defendants movedfor summary judgment on the Trust’s claims. That motion has been fully briefed and is pending.  No trial date has been set.

 

Atthis time, the ART cannot predict the outcome of these proceedings or estimatethe possible financial effect of these proceedings on the ART’s financialstatements.

 

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FPL Litigation

 

On June 24, 2004, theUnsecured Creditors’ Committee filed a fraudulent conveyance complaint againstFPL Group, Inc. and West Boca Security, Inc. (“FPL”) in theBankruptcy Court for the Southern District of New York relating to pre-petitiontransactions.

 

The FPL action seeks torecover an alleged fraudulent transfer arising out of Adelphia’s repurchase ofcertain of its stock from FPL in January 1999 for $149.5 million.  Under the current scheduling order, factdiscovery is to be completed by May 13, 2010 and dispositive motions shallbe filed by December 14, 2010.  Thetrial is set to begin on June 6, 2011.

 

Atthis time, the ART cannot predict the outcome of these proceedings or estimatethe possible financial effect of these proceedings on the ART’s financialstatements.

 

Avoidance Actions

 

OnJuly 31, 2003, Adelphia and its debtor affiliates filed with theBankruptcy Court their Statements of Financial Affairs, which included aschedule of payments to insider entities made within one year prior to Adelphia’sfiling for bankruptcy and payments to non-insider entities made within ninetydays prior to Adelphia’s filing for bankruptcy. Subsequently, Adelphia engagedin extensive analysis of all such payments to determine if they could beavoided pursuant to certain provisions of the Code.

 

OnApril 20, 2004, Adelphia filed a motion seeking to abandon most of thepotential actions to avoid the pre-petition payments because, among otherreasons, (i) Adelphia believed that pursuing certain of such actionsagainst parties with whom Adelphia was continuing to do business could have asignificant adverse impact on important, ongoing business relationships, and (ii) thecosts associated with pursuing such actions far outweighed any potentialbenefit to the Adelphia debtors’ estates that might otherwise result frombringing such actions. In response to certain objections to Adelphia’s motion,Adelphia amended its initial motion.

 

OnMay 27, 2004, the Bankruptcy Court entered an order tolling all claims toavoid inter-debtor payments and authorizing the abandonment of potentialactions to avoid (i) transfers to taxing authorities; (ii) transfersto human resource providers engaged in business with Adelphia; (iii) transfersdetermined to have been made in the ordinary course of business; and (iv) certaintransfers deemed *de minimis*. Asto the remainder of the transfers made by Adelphia during the relevant one-yearand ninety-day periods prior to the bankruptcy filing, Adelphia either (i) enteredinto tolling agreements with the transferee extending Adelphia’s time toinitiate an action, or (ii) filed a complaint and initiated an adversaryproceeding against the transferee.

 

Asof June 25, 2004, Adelphia secured approximately 250 tolling agreementswith various transferees, including members of the Rigas family, the Rigasfamily entities, former executives James Brown and Michael Mulcahey, and formerdirectors Erland Kailbourne, Dennis Coyle, Leslie Gelber, and Peter Metros,among others. Certain of these tolling agreements have been amended from timeto time. In addition, Adelphia filed approximately 150 complaints in theBankruptcy Court commencing actions to avoid certain pre-petition transfers andpayments. Some of those complaints have since been dismissed after furtherinvestigation.

 

OnJuly 21, 2004, the Bankruptcy Court temporarily stayed all activity in theavoidance actions commenced by Adelphia and approved notice and serviceprocedures in connection therewith.

 

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Atthis time, the ART cannot predict the outcome of these proceedings or estimatethe possible financial effect of these proceedings on the ART’s financialstatements.

 

***Settled Causes of Action***

 
| ** **                 | ** ** | ** **                 | ** ** | ** **                 | ** ** | **For  the period**             | ** ** |
|----------------------------|------------|----------------------------|------------|----------------------------|------------|---------------------------------|------------|
| ** **                 | ** ** | ** **                 | ** ** | ** **                 | ** ** | **from February 13, 2007** | ** ** |
| ** **                 | ** ** | **Year ended**             | ** ** | **Year ended**             | ** ** | **(date established) to**       | ** ** |
| ** **                 | ** ** | **December 31, 2009** | ** ** | **December 31, 2008** | ** ** | **December 31, 2007**      | ** ** |
| Motorola                   |       | $                          | 40,000,000 |                       | $          | —                          |       | $ | — |   |
| Tow  / Rosensweig          |       | —                     |       | 200,206                    |       | 20,696,702                      |       |
| Various  preference claims |       | —                     |       | 1,160,194                  |       | 100,000                         |       |
| Deloitte                   |       | —                     |       | —                     |       | 167,500,000                     |       |
| Total                      |       | $                          | 40,000,000 |                       | $          | 1,360,400                       |       | $ | 188,296,702 |   |

 

MotorolaLitigation

 

OnJune 22, 2006, Adelphia filed an adversary complaint against Motorola, Inc.and certain of its subsidiaries (“Motorola”), as well as transferees of claimsfiled by Motorola in the Adelphia bankruptcy cases in the Bankruptcy Court forthe Southern District of New York. The complaint seeks recovery for (a) Motorola’saiding and abetting breaches of fiduciary duty by members of the Rigas familyin manipulating Adelphia’s financial statements and performance results for thefiscal years 2000 and 2001; (b) avoidance and recovery of preferential andfraudulent transfers made to Motorola of more than $60 million; (c) avoidanceof purported (but unperfected) liens asserted by Motorola; and (d) equitabledisallowance or subordination of Motorola’s claims in the Adelphia bankruptcycases (the total face amount of which is approximately $66.6 million).  The ART was added as a co-plaintiff withAdelphia after February 13, 2007.

 

OnOctober 26-30, 2009, the Bankruptcy Court conducted a trial on the soleissue of Adelphia’s claim to equitably subordinate or disallow the Motorolaclaim against the estate.  Before theBankruptcy Court issued its decision, a settlement was reached among ART,Adelphia, and Motorola.  The BankruptcyCourt entered an order approving the settlement on December 14, 2009, noobjections to the settlement were filed, the settlement became final, and theaction was dismissed with prejudice.  Pursuantto the settlement, Motorola made a payment of $40 million to the ART on December 29,2009. In connection with the settlement with Motorola, the ART issued a totalof 57,274,499 ACC-2 Interests to Bear, Stearns & Co. Inc., DKAcquisition Partners L.P. and Varde Investment Partners, L.P. on December 30,2009.

 

Rosensweig and TowLitigation

 

OnAugust 3, 2007, the ART announced the settlement of various pendingadversary actions and bankruptcy claims pending in the Bankruptcy Court for theSouthern District of New York involving Leonard Tow, his wife, and DavidRosensweig, the Trustee of two trusts created in connection with Tow’s exerciseof his right to terminate his employment as the Chief Executive Officer ofCentury Communications Corporation when Adelphia acquired Century in 1999. Thesettlement provided for a cash payment to the ART of approximately $15.8million and an interest-bearing note in the principal amount of approximately$4.9 million issued by Adelphia with simple, non-compounding, interest thereonat the rate of 8%. That note is recourse only Adelphia’s proceeds from lifeinsurance policies on the lives of Mr. Tow and his wife, the proceeds ofwhich policy shall not be paid until the death of the last to die of Mr. Towand his wife. The Bankruptcy Court entered an order approving the settlement onSeptember 6, 2007.

 

Deloitte &Touche Litigation

 

OnNovember 6, 2002, Adelphia filed a lawsuit against Deloitte &Touche LLP (“Deloitte”), Adelphia’s former independent auditor, for accountingmalpractice in Pennsylvania state court. Adelphia alleged that Deloitte (i) failedto conduct an audit in accordance with generally accepted auditing standardsand (ii) provided an opinion that Adelphia’s financial statementsconformed with 

 

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generallyaccepted accounting principles when Deloitte allegedly knew or should haveknown that those financial statements did not so conform.

 

OnAugust 3, 2007, the ART announced that it had reached a settlement withDeloitte to resolve the claims between Adelphia, the ART, and Deloitte inexchange for consideration of $167.5 million, subject to the approval of the BankruptcyCourt. The Bankruptcy Court entered an order approving the settlement on August 16,2007.

 

**8.             Contingent Liabilities**

 

Litigation IndemnificationFund Litigation

 

Pursuantto the Third Modified Fourth Amended Joint Plan of Reorganization Under Chapter11 of the Bankruptcy Code for Century-TCI Debtors and Parnassos Debtors (the “JVPlan”), which became effective on July 31, 2006; the First Modified FifthAmended Joint Chapter 11 Plan for Adelphia Communications Corporation andCertain of Its Affiliated Debtors (the “Main Plan”), which became effective on February 13,2007; and certain other orders entered by the Bankruptcy Court, litigationindemnification funds (each, a “LIF”) were created to provide certaindefendants in the Bank Litigation (see above) provisional and conditionalreimbursement of legal fees and expenses expected to be incurred in connectionwith defending litigation involving certain credit facilities.

 

TheJV LIF, established in the initial amount of $10 million, was created to fundcertain allowable claims for indemnification arising under the Parnassos andCentury-TCI prepetition credit facilities.  Subject to certain conditions,the JV LIF is “evergreen” ; in other words, the JV Plan provides theJV LIF will be replenished under certain conditions, such as “upon the receipt.. . . of net proceeds of any Designated Litigation” after first deducting anyrequired distribution to the government.

 

TheMain Plan LIFs are fixed in amounts and not subject to replenishment. Because the JV LIF is evergreen, whereas the Main Plan LIFs are capped, theallocation of defense costs among the categories of LIFs is a matterof economic significance to Adelphia and the ART.

 

Century-TCIand Parnassos lenders (the “JV Lenders”) have asserted claims that in theaggregate of approximately $13 million (“JV LIF Claims”) against the evergreenJV LIF.  Adelphia has asserted that certain defendants in the BankLitigation are not entitled to reimbursement from the JV LIF on the basis,among others, that the JV LIF claims are improper.  On November 13,2008, certain of those claimants filed, or subsequently joined in, the *Motion of the Bank of Nova Scotia, Citibank N.A. andThe Ad Hoc Committee of Non-Agent Secured Lenders in the Parnassos andCentury-TCI Facilities for Payment of Bank Lender Post Effective Date FeeClaims and to Compel Compliance of the Plan Administrator (defined in the JVPlan as Adelphia) and the Art with the Third Modified Fourth Amended Joint Planof Reorganization Under Chapter 11 of the Bankruptcy Code and the Century TCIStipulation* (the “LIF Motion”).  Other claimants have not takenany action.

 

TheBankruptcy Court has stated that it will hold an evidentiary hearing on theMotion, which the parties have asked to be scheduled during the week of May 3,2010. If the Bankruptcy Court grants the LIF Motion, the JV LIFmay need to be replenished to indemnify the future defense costs of the JVLenders.  In addition, the BankruptcyCourt could determine that the JV LIF must be replenished by the amount of thedisputed JV LIF Claims while the dispute is still pending.

 

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Atthis time, the ART cannot predict the outcome of these proceedings or estimatethe possible financial effect of these proceedings on the ART.

 

**9.             Subsequent Events**

 

Subsequent to December 31, 2009 and through March 10,2010 there have been no events that would be material to the financialstatements of the ART including Cause of Action settlements or judgments orHolder distributions or decisions concerning future Holder distributions.

 

**10.          Unaudited Quarterly Financial Data**

 

**2009**

 
| ** **                               | ** ** | **For the quarter  ended March 31,  2009** | ** ** | **For the quarter  ended June 30,  2009** | ** ** | **For the  quarter ended  September 30, 2009** | ** ** | **For the  quarter ended  December 31, 2009** | ** **  | **For the year ended  December 31, 2009** | ** ** |
|------------------------------------------|------------|-------------------------------------------------|------------|------------------------------------------------|------------|-----------------------------------------------------|------------|----------------------------------------------------|-------------|------------------------------------------------|------------|
| **Revenues**                             |       |                                            |       |                                           |       |                                                |       |                                               |        |                                           |       |
| Litigation  - court approved settlements |       | $                                               | —     |                                           | $          | —                                              |       | $                                                  | —      |                                           | $          | 40,000,000 |   | $ | 40,000,000 |   |
| Interest  income                         |       | 328,912                                         |       | 199,254                                        |       | 153,123                                             |       | 125,901                                            |        | 807,190                                        |       |
| Total  revenues                          |       | 328,912                                         |       | 199,254                                        |       | 153,123                                             |       | 40,125,901                                         |        | 40,807,190                                     |       |
|                                     |       |                                            |       |                                           |       |                                                |       |                                               |        |                                           |       |
|                                     |       |                                            |       |                                           |       |                                                |       |                                               |        |                                           |       |
| **Operating expenses**                   |       |                                            |       |                                           |       |                                                |       |                                               |        |                                           |       |
| General  and administrative expenses     |       | 752,324                                         |       | 457,473                                        |       | 465,213                                             |       | 414,454                                            |        | 2,089,464                                      |       |
| Professional  expenses - litigation      |       | 6,134,199                                       |       | 8,789,310                                      |       | 11,338,780                                          |       | 10,992,900                                         |        | 37,255,189                                     |       |
| Professional  expenses - administrative  |       | 110,201                                         |       | 60,467                                         |       | 37,927                                              |       | 117,167                                            |        | 325,762                                        |       |
| Total  operating expenses                |       | 6,996,724                                       |       | 9,307,250                                      |       | 11,841,920                                          |       | 11,524,521                                         |        | 39,670,415                                     |       |
|                                     |       |                                            |       |                                           |       |                                                |       |                                               |        |                                           |       |
| **Net loss**                             |       | $                                               | (6,667,812 | )                                              | $          | (9,107,996                                          | )          | $                                                  | (11,688,797 | )                                              | $          | 28,601,380 |   | $ | 1,136,775 |   |

 

**2008**

 
| ** **                               | ** ** | **For the quarter ended  March 31, 2008** | ** ** | **For the quarter ended  June 30, 2008** | ** ** | **For the quarter ended  September 30, 2008** | ** ** | **For the quarter ended  December 31, 2008** | ** ** | **For the  year ended  December 31, 2008** | ** ** |
|------------------------------------------|------------|------------------------------------------------|------------|-----------------------------------------------|------------|----------------------------------------------------|------------|---------------------------------------------------|------------|-------------------------------------------------|------------|
|                                     |       |                                           |       |                                          |       |                                               |       |                                              |       |                                            |       |
| **Revenues**                             |       |                                           |       |                                          |       |                                               |       |                                              |       |                                            |       |
| Litigation  - court approved settlements |       | $                                              | 200,206    |                                          | $          | —                                             |       | $                                                 | —     |                                            | $          | — |   | $ | 200,206 |   |
| Litigation  - other settlements          |       | 60,000                                         |       | 850,194                                       |       | —                                             |       | 250,000                                           |       | 1,160,194                                       |       |
| Interest  income                         |       | 1,689,819                                      |       | 1,101,159                                     |       | 1,034,219                                          |       | 681,263                                           |       | 4,506,460                                       |       |
| Total  revenues                          |       | 1,950,025                                      |       | 1,951,353                                     |       | 1,034,219                                          |       | 931,263                                           |       | 5,866,860                                       |       |
|                                     |       |                                           |       |                                          |       |                                               |       |                                              |       |                                            |       |
|                                     |       |                                           |       |                                          |       |                                               |       |                                              |       |                                            |       |
| **Operating expenses**                   |       |                                           |       |                                          |       |                                               |       |                                              |       |                                            |       |
| General  and administrative expenses     |       | 515,010                                        |       | 933,470                                       |       | 481,901                                            |       | 503,973                                           |       | 2,434,354                                       |       |
| Professional  expenses - litigation      |       | 6,480,741                                      |       | 5,507,525                                     |       | 5,589,722                                          |       | 5,560,248                                         |       | 23,138,236                                      |       |
| Professional  expenses - administrative  |       | 724,444                                        |       | 940,322                                       |       | 199,329                                            |       | 148,756                                           |       | 2,012,851                                       |       |
| Total  operating expenses                |       | 7,720,195                                      |       | 7,381,317                                     |       | 6,270,952                                          |       | 6,212,977                                         |       | 27,585,441                                      |       |
|                                     |       |                                           |       |                                          |       |                                               |       |                                              |       |                                            |       |
| **Net loss**                             |       | $                                              | (5,770,170 | )                                             | $          | (5,429,964                                         | )          | $                                                 | (5,236,733 | )                                               | $          | (5,281,714 | ) | $ | (21,718,581 | ) |

 

Note: Due the nature of theART’s operations both revenue and operating expenses fluctuate significantlybetween and among reporting periods based on activities and results related tothe Causes of Action.

 

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**Item 9.Changes in and Disagreements with Accountants on Accounting and FinancialDisclosure.**

 

Not applicable.

 

**Item 9A(T).Controls and Procedures.**

 

**Evaluationof Disclosure Controls and Procedures**

 

The ART maintains disclosurecontrols and procedures that are designed to ensure that information requiredto be disclosed in its reports filed under the Securities and Exchange Act of1934, as amended (“Exchange Act”) is recorded, processed, summarized andreported within the time periods specified in the Securities and ExchangeCommission’s rules and forms. Disclosure controls and procedures includecontrols and procedures designed to ensure that such information is accumulatedand communicated to the Trustees and the Trust Administrator as appropriate, toallow timely decisions regarding required financial disclosure.

 

The Trustees and the TrustAdministrator have completed an evaluation of the effectiveness of the designand operation of the ART’s disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e)) promulgated under the Exchange Act as of December 31,2009. Based on their evaluation of the effectiveness of the ART’s disclosurecontrols and procedures (as defined in paragraph (b) of Rules 13a-15or 15d-15), the Trustees and the Trust Administrator concluded that as of December 31,2009, the ART’s disclosure controls and procedures were effective.

 

*Management’sAnnual Report on Internal Control over Financial Reporting*

 

The Trustees are responsiblefor establishing and maintaining adequate internal control over financialreporting, as such term is defined in Exchange Act Rules 13a-15(f) and15d(f). The Trust’s internal control over financial reporting is a processdesigned to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles.

 

The ART’s internal controlover financial reporting includes those policies and procedures that: (1) pertainto the maintenance of records that, in reasonable detail, accurately and fairlyreflect the ART’s transactions and dispositions of its assets; (2) providereasonable assurance that transactions are recorded as necessary to permit thepreparation of financial statements in accordance with generally acceptedaccounting principles in the United States, and that its receipts andexpenditures are being made only in accordance with authorizations of the Trusteesand Trust Administrator; and (3) provide reasonable assurance regardingthe prevention or timely detection of unauthorized acquisition, use ordisposition of the ART’s assets that could have a material effect on itsfinancial statements.

 

The Trustees and the TrustAdministrator of the Trust, performed an assessment of the effectivenessof the ART’s internal control over financial reporting as of December 31,2009, utilizing the criteria described in the *Internal Control - Integrated Framework*,issued by the Committee of Sponsoring Organizations of the TreadwayCommission. The objective of this assessment was to

 

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determine whether the ART’sinternal control over financial reporting was effective at December 31,2009.  Based on this assessment, the Trust Administrator concludedthat the ART’s internal control over financial reporting was effective at December 31,2009.

 

Thisannual report does not include an attestation report of the ART’s independent registeredpublic accounting firm regarding internal control over financial reportingunder the temporary rules of the Securities and Exchange Commission thatpermit the ART to provide only management’s report in this annual report.

 

*Changes inInternal Control Over Financial Reporting*

 

During the quarter ended December 31,2009, there were no changes in the ART’s internal control over financialreporting that have materially affected, or are reasonably likely to materiallyaffect, the ART’s internal control over financial reporting.

 

*Limitationson the Effectiveness of Controls*

 

The Trustees and the TrustAdministrator do not expect that the ART’s disclosure controls and proceduresor its internal control over financial reporting (collectively a controlsystem) will prevent or detect all errors and all fraud. A control system, nomatter how well designed and operated, can provide only reasonable, notabsolute, assurance that the control system’s objectives will be met. Further,the design of a control system must reflect the fact that there are resourceconstraints, and the benefits of controls must be considered relative to theircosts. Because of the inherent limitations in all control systems, noevaluation of controls can provide absolute assurance that all control issuesand instances of fraud, if any, within the Trust have been detected. Theseinherent limitations include the realities that judgments in decision-makingcan be faulty, and that breakdowns can occur because of simple error ormistake.

 

Controls can also becircumvented by the individual acts of some persons, by collusion of two ormore people, or by management override of the controls. The design of anysystem of controls is based in part upon certain assumptions about thelikelihood of future events, and there can be no assurance that any design willsucceed in achieving its stated goals under all potential future conditions.

 

Over time, controls maybecome inadequate because of changes in conditions or deterioration in thedegree of compliance with associated policies or procedures. Because of theinherent limitations in a cost-effective control system, misstatements due toerror or fraud may occur and not be detected.

 

**Item 9B.Other Information**

 

None

 

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**PART III**

 

**Item 10.Directors, Executive Officers and Corporate Governance.**

 

There are five Trustees ofthe ART, each of whom has served since the inception of the ART: Bryan E.Bloom, age 51, presently serves as in-house counsel, analyst and portfoliomanager at W.R. Huff Asset Management Co., L.L.C., an investment managementfirm, and its various affiliates. Mr. Bloom joined Huff in 1994. Prior tothat time, he was a tax partner at the law firm of Shanley & Fisher. Mr. Bloomis currently a director of CKX, Inc., is a director of FXRE Inc. and is onthe board of several private companies. Mr. Bloom serves on the AuditCommittee of the ART.

 

Lee S. Hillman, age 54serves as President of Liberation Advisory Group, LLC and Liberation ManagementServices, LLC, a private management and advisory services consultant tocommercial and investment banks, private equity and hedge funds and growthstage businesses. Previously Mr. Hillman served as Chairman of the Boardand Chief Executive Officer of Power Plate International, a globalmanufacturer, distributor and licensor of health and exercise equipment. Mr. Hillmanpreviously served as President of Power Plate North America since 2005, whichmerged into Power Plate International in February 2006. Mr. Hillmanalso serves on the boards of directors for Lawson Products, Inc. and RCNCorporation. Mr. Hillman serves on the Audit Committee of the ART.

 

David P. Stowell, age 57,presently serves as a professor in the Department of Finance at Kellogg Schoolof Management, Northwestern University, which he joined in March 2005.Prior to this position, Mr. Stowell was a managing director in JP Morgan’sinvestment banking division.

 

Ralph J. Takala, age 70,served as Senior Vice President and Chief Financial Officer of Cumberland Farms, Inc.,a company that operates convenience stores and gas stations and is a wholesalerof refined petroleum products, from December 2006 through December 2008.Prior to that, he worked as an independent financial and business consultant,which included serving as the interim Chief Financial Officer of PicturetelCorp., a manufacturer of video conferencing systems, from 2000 to 2001. Mr. Takalais a Certified Public Accountant and serves as the chairman of the ART AuditCommittee.

 

Dean A. Ziehl, age 57,presently is a partner in the law firm of Pachulski Stang Ziehl &Jones LLP, which he joined in 1983. Mr. Ziehl serves on the board ofdirectors for *Plan*MemberServices Corporation. Mr. Ziehl is the Chairman of the Board of Trustees.

 

The ART is organized underthe laws of the State of Delaware, and the rights of its Trustees are governedby the First Modified Fifth Amended Joint Chapter 11 Plan of Reorganization (“Plan”),the Declaration of Trust, as amended, the Rules and Procedures of the ART,filed as Exhibits 2.1, 3.3 and 3.4, respectively, to this Annual Report on Form 10-K,and Chapter 38 of Title 12 of the Delaware Code, 12 Del. c 8 3Ed, et. seq., asamended from time to time (as so amended, the “Trust Act”).  Due to the fact that it has no full timeemployees and its Trustees have fiduciary responsibilities and because of thegovernance elements contained in the Plan, Declaration of Trust, and the Rules andProcedures, the ART has not enacted a code of ethics.

 

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Trust Administrator

 

Quest Turnaround Advisors,L.L.C., a Connecticut limited liability company, serves as Plan Administratorof the Debtors and as Trust Administrator of the ART. Quest is in the businessof providing interim management, turnaround, crisis management and advisoryservices to Boards of Directors, management and creditors committees. Themembers of Quest who are currently actively engaged in providing services tothe ART include:

 

Jeffrey A. Brodsky, age 51,is a co-founder and a Managing Director of Quest and is leading Quest in itsrole as the Plan Administrator of Adelphia. In addition to his responsibilitieswith Adelphia, Mr. Brodsky serves as the Chairman of the Board, Presidentand CEO of PTV, Inc.  Mr. Brodskyalso serves as non-executive Chairman of the Board of Directors for AboveNet, Inc.and Motor Coach Industries International, Inc. and is a Director ofEuramax International, Inc. and TVMAX, Inc.

 

Barry D. Shalov, age 68, isa Managing Director of Quest, which he joined in 2007. Prior to that time, Mr. Shalovwas a senior partner in the law firm of DLA Piper US LLP, which he joined in2000. Previously, Mr. Shalov was a senior partner with the law firm ofGordon Altman Butowsky Weitzen Shalov & Wein. Currently, Mr. Shalovserves on the board of Cytokine Pharmasciences, Inc.

 

Audit Committee

 

The Audit Committee of theART is appointed by the Trustees to oversee (i) the integrity of thefinancial statements of the ART, (ii) the accounting and financialreporting processes of the ART and its audits, (iii) the independentauditor of the ART and the independence, qualifications and performance of suchauditor, (iv) the performance of the internal audit function andindependent auditor of the ART, in the event that the ART has an internal auditfunction, and (v) the compliance by the ART with legal and regulatoryrequirements. The ART has chosen to apply the independence standards of theNYSE and the SEC’s independence standards set forth in Rule 10(A)-3applicable to audit committee members, to the ART’s audit committee members.The Audit Committee is composed of Mr. Bryan E. Bloom, Mr. Lee S.Hillman, and Mr. Ralph J. Takala (Chairman). The Trustees have determinedthat Messrs. Hillman and Takala are independent. The independent Trusteeshave determined that Mr. Bloom is not independent based on his affiliationwith W.R. Huff Asset Management Co., L.L.C. and its affiliates (collectively “Huff”),which controls Interests in the ART. Additionally, Huff, on behalf of certain of its clients, former clientsand affiliates, had, prior to the commencement of the litigation by theAdelphia bankruptcy estate, commenced separate third party litigation allegingsecurities law violations and other claims against some of the same defendantsas the ART. The Board of Trustees has determined that Ralph J. Takala, Chairmanof the Audit Committee, is an independent financial expert.

 

Risk Oversight

 

The Trustees oversee an enterprise-wide approach to risk management,designed to support the achievement of the organizational objectives of theART, including protecting, maintaining, and maximizing the value of the Causesof Action contributed to the ART, whether by litigation, settlement orotherwise. Pursuant the ART’s Policies and Procedures Manual, the Trustees

 

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periodically identify and analyze risks to the ART’s financial andreporting objectives in order to effectively mitigate them. While the Trusteeshave ultimate oversight responsibility for the enterprise risk management process,the Audit Committee and the Trust Administrator also focuses their review onfinancial risk, such as internal controls over financial reporting andoverseeing the integrity of the financial statements of the ART.

 

Indemnification of theTrustees

 

The Declaration states thatthe ART shall indemnify, to the fullest extent permitted by law, the Trusteesin connection with any threatened, pending or completed action, suit,proceeding or claim, whether civil, criminal, administrative or investigative,arising out of or relating to the ART, the Interests, the issuance ordistribution of the Interest certificates, the Causes of Action, including, butnot limited to, (i) in connection with the prosecution or settlement ofsuch Causes of Action or the enforcement of any determination, judgment ororder with respect thereto and (ii) any decision, determination orapproval by the Trustees regarding the prosecution, disposition, settlement, resolutionor liquidation of any such cause of action, or any acts or omissions of theART, or actions taken by the Trustees in their capacity or purportedly in theircapacity as Trustees, against any and all losses, liabilities, damages,judgments, demands, suits, claims, assessments, charges, fines, penalties andother costs and expenses, including attorneys’ fees and expenses and other feesand expenses associated with the defense of a claim or incurred by the Trusteesin obtaining indemnification under the Declaration, whether or not in a formalproceeding (collectively, “Damages”).

 

Notwithstanding thepreceding paragraph, the ART shall not be required to indemnify a Trustee if itis established in a final judicial determination by clear and convincingevidence that such Damages arose as the result of acts or omissions of the Trusteewith deliberate intent to injure the Holders or with reckless disregard for thebest interests of such Holders. The termination of any action, suit orproceeding by judgment, order, settlement, conviction, or upon a plea of nolocontendere or its equivalent, shall not, of itself, create a presumption thatthe Trustee acted or decided with deliberate intent to injure the Holders orwith reckless disregard for the best interests of such Holders.

 

To the fullest extentpermitted by law, expenses (including attorneys’ fees and expenses) incurred bya Trustee in defending a civil, criminal, administrative or investigativeaction, suit, proceeding or claim referred to above shall be paid by the ART inadvance of the final disposition of such action, suit, proceeding or claimpromptly upon receipt of an undertaking (without bond or security) by or onbehalf of such Trustee to repay such amount if it shall ultimately bedetermined that he is not entitled to be indemnified by the ART as authorizedin the Declaration. The Declaration also authorizes the ART to purchase andmaintain insurance to cover its indemnification obligations and any otherliabilities of the Trustees. The ART maintains applicable policies insuring theART and the Trustees against certain claims.

 

Indemnification of the TrustAdministrator

 

Under the TrustAdministrator Agreement, if the Trust Administrator or any Trust Administratorstaff member (collectively, “Trust Administrator Person”) becomes involved inany capacity in any claim, suit, action, proceeding, or investigation(including, without limitation, any shareholder or derivative action orarbitration proceeding) (collectively, a “Proceeding”) in connection with anymatter in any way relating to, or arising out of the services to be performedby the Trust

 

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Administrator under theTrust Administrator Agreement (including, but not limited to, its role as TrustAdministrator or the role of any staff member as a governor, officer or directorof any of the Debtors), the Debtors (to the extent services are not servicesfor the ART described in the immediately succeeding parenthetical) and the ART(to the extent services are administrative services or other services beingperformed for the ART pursuant to a written request therefore by the Trustees)shall indemnify, defend and hold such Trust Administrator Person harmless tothe fullest extent permitted by law, from and against any losses, claims,damages, liabilities and expenses, except to the extent that it shall bedetermined by a court of competent jurisdiction in a judgment that has becomefinal in that it is no longer subject to appeal or other review that suchlosses, claims, damages, liabilities and/or expenses resulted primarily from thewillful misconduct, gross negligence, bad faith, or fraud of the TrustAdministrator Person.

 

In addition, in the eventthat any Trust Administrator Person becomes involved in any capacity in anyProceeding in connection with any matter in any way relating to, or arising outof the services to be performed by the Trust Administrator under the TrustAdministrator Agreement (except to the extent such Proceeding is a result of orrelated to a Trust Administrator Person’s violation or breach of any of the termsof the Plan, the Trust Administrator Agreement or other applicable order asdetermined by a court of competent jurisdiction in a judgment or finding, asapplicable, that has become final in that it is no longer subject to appeal orother review) the Debtors and the ART (to the extent services are beingperformed for the ART) shall reimburse such Trust Administrator Person for itsreasonable legal and other expenses (including the cost of any investigationand preparation) as such expenses are incurred by such Trust AdministratorPerson in connection therewith, subject to the obligation of such TrustAdministrator Person to repay such reimbursement if it is ultimately determinedthat such Trust Administrator Person is not entitled to such reimbursement.

 

The ART maintains applicablepolicies insuring Quest as the Trust Administrator against certain claims inconnection with its services to the ART.

 

**Item 11.Executive Compensation.**

 

TrusteeCompensation

 
| **Name**          | ** ** | **Fees Earned or  Paid in Cash in  2009 (1)** | ** ** |
|-------------------|------------|-----------------------------------------------|------------|
| Bryan  Bloom      |       | $                                             | 195,000    |   |
| Lee  S. Hillman   |       | $                                             | 195,000    |   |
| David  P. Stowell |       | $                                             | 195,000    |   |
| Ralph  Takala     |       | $                                             | 195,000    |   |
| Dean  Ziehl       |       | $                                             | 400,000    |   |

 

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(1)        In 2009, Dean Ziehl received $175,000 in base compensationand earned $225,000 in additional service compensation which was paid andexpensed in 2010. The four other Trustees received base compensation of$175,000 and $20,000 in additional service compensation.

 

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Each of the five Trusteeswas paid $175,000 as base compensation for services performed in 2009. Thecompensation was paid quarterly at the beginning of each calendar quarter inthe amount of $43,750 per Trustee.

 

In addition, under thecompensation agreement, The Trustees may award, in their sole discretion, additionalreasonable compensation to any Trustee for additional service to the ART (“AdditionalService Compensation”). The aggregate amount of Additional Service Compensationdistributed to all Trustees as a group in a year may not exceed $350,000. AnyAdditional Service Compensation must be approved by a vote of a majority of theTrustees. Additional Service Compensation may be awarded to Trustees forservice on the Audit Committee and for other services above and beyond theexpected level of service, such as for close supervision of the Causes ofAction. Dean Ziehl was awarded $225,000 for his services in 2009 related tosupervision of the Causes of Action. The other four Trustees each were paid$20,000 in 2009 as Additional Service Compensation. Additional ServiceCompensation is based on estimates of hours worked and contributions by theTrustees including, without limitation, supervision and mediation of the Causesof Action and the preparation of the ART’s regulatory filings. 

 

As soon as practicable afterthe termination of the ART, but no later than 2.5 months after the end of thecalendar year in which it terminates, each Trustee may receive additionalcompensation (“Incentive Compensation”). The Incentive Compensation for eachTrustee shall equal (A + B - (C)) divided by 5, where:

 

(A) equals 60 basispoints of the amount distributable to the Holders in an aggregate amount ofdistributions to Holders of up to $1,500,000,000;

 

(B) equals 110 basispoints of the amount distributable to Holders in an aggregate amount ofdistributions to Holders of $1,500,000,000 or more; and

 

(C) equals the amountspaid or attributable to the Trustees as Base Compensation and AdditionalService Compensation in total (for the avoidance of doubt, the sum of the BaseCompensation and Additional Service Compensation during the existence of theART shall be applied as a credit and deducted from any sums payable to anyTrustee under (A) and (B) above).

 

Incentive Compensation for aTrustee shall never be less than zero. That is, the Base Compensation and theAdditional Service Compensation shall be retained by the Trustees regardless ofwhether any Incentive Compensation is due.

 

For its role as TrustAdministrator, Quest is compensated exclusively by the Debtors. The ART doesnot pay Quest any additional amounts of compensation for service as either PlanAdministrator or Trust Administrator. The ART is required to reimburse Questand the Debtors for out-of-pocket expenses incurred in performance of serviceson behalf of the ART.

 

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**Item 12.Security Ownership of Certain Beneficial Owners and Management and RelatedStockholder Matters.**

 

The ART does not have anysecurities that vote for the election of the Trustees and, consequently doesnot have any “voting securities” within the meaning of the Securities ExchangeAct of 1934, as amended, and the regulations thereunder applicable to thedisclosure of 5% holders of voting securities.

 

**Item 13.Certain Relationships and Related Transactions, and Director Independence.**

 

The ART has chosen to applythe independence standards of the NYSE and the SEC’s independence standards setforth in Rule 10A-3 applicable to audit committee members to both theTrustees and the Audit Committee members. The Trustees have determined that Messrs. Hillman,Stowell, Takala and Ziehl are independent. The independent Trustees havedetermined that Mr. Bloom is not independent based on his affiliation withW.R. Huff Asset Management Co., L.L.C. and its affiliates (collectively, “Huff”),which control Interests in the ART. Additionally, Huff, on behalf of certain ofits clients, former clients and affiliates, had, prior to the commencement ofthe litigation by the Adelphia bankruptcy estate, commenced separate thirdparty litigation alleging securities law violations and other claims againstsome of the same defendants as the ART.

 

The Trust Administrator andAdelphia continue to provide administrative support to the ART includingmaintaining electronic data and paper documents used in prosecuting the Causesof Action, financial reporting and support for Distributions when they mightoccur (including maintenance of data related to the implementation of Planprovisions). These services have and will continue to be provided at no cost tothe ART under the terms of various agreements between the ART, the TrustAdministrator and Adelphia. The ART financial statements do not reflect anyamounts for these services.

 

**Item 14.Principal Accounting Fees and Services.**

 

In 2007, the ART appointedUHY LLP as independent auditors. Through March 10, 2010, UHY LLP had acontinuing relationship with UHY Advisors, Inc. (“Advisors”). Under theirrelationship UHY LLP leased auditing staff who were full-time, permanentemployees of Advisors. UHY LLP partners provide non-audit services throughAdvisors. UHY LLP has only a few full-time employees. Therefore, few, if any,audit services performed were provided by permanent full-time employees of UHYLLP. UHY LLP manages and supervises the audit services and the audit staff, andis exclusively responsible for the opinion rendered in connection with itsaudit.

 

(1) AUDIT FEES

 

The aggregate fees billedfor 2009 and 2008 for professional services rendered for the audit of the ART’sannual financial statements and the reviews of its interim condensed financialstatements in the ART’s Form 10-Q filings were approximately $60,000 and$99,000 respectively. The fees disclosed for 2008 have been changed from theamount previously reported of $91,000 to reflect the final billing for servicesrendered.

 

(2) AUDIT RELATED FEES

 

Audit related fees were$20,000 for 2009 for professional services rendered evaluating the design andoperating effectiveness of the internal controls over the process forDistributions. Such services 

 

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were approved by the ART’sAudit Committee of the Trustees in advance of the services being performed. (NoDistributions have been made to date.) There were no audit related fees for2008.

 

(3) TAX FEES

 

None

 

(4) ALL OTHER FEES

 

None

 

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**PART IV**

 

**Item 15.Exhibits and Financial Statement Schedules**

 

(a) The followingdocuments are filed as a part of this report

 

(1) Financialstatements. See the index to the financial statements as presented in Item 8 ofthis filing

 

(b) Exhibits

 
| 2.1*   |   | First  Modified Fifth Amended Joint Chapter 11 Plan of Reorganization of Adelphia  Communications Corporation and Certain of its Affiliated Debtors, effective  February 13, 2007 |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                   |
| 3.1*   |   | Restated  Certificate of Trust, dated February 13, 2007                                                                                                                           |
|   |   |                                                                                                                                                                                   |
| 3.2*   |   | Amendment  to Restated Certificate of Trust, dated March 15, 2007                                                                                                                 |
|   |   |                                                                                                                                                                                   |
| 3.3*   |   | Second  Amended and Restated Declaration of Trust, dated June 4, 2008                                                                                                                  |
|   |   |                                                                                                                                                                                   |
| 3.4*   |   | Rules and  Procedures of Adelphia Recovery Trust                                                                                                                                  |
|   |   |                                                                                                                                                                                   |
| 4.1*   |   | Form of  Certificate Evidencing Undivided Beneficial Interests in the Assets of the  Adelphia Recovery Trust (Global Certificate)                                                 |
|   |   |                                                                                                                                                                                   |
| 4.2*   |   | Form of  Certificate Evidencing Undivided Beneficial Interests in the Assets of the  Adelphia Recovery Trust (Book Entry Certificate)                                             |
|   |   |                                                                                                                                                                                   |
| 10.1*  |   | Plan  Administrator Agreement, dated February 12, 2007                                                                                                                            |
|   |   |                                                                                                                                                                                   |
| 10.2*  |   | Trustee  Compensation Agreement                                                                                                                                                        |
|   |   |                                                                                                                                                                                   |
| 31.1   |   | Section 302  Certificate of Trustee                                                                                                                                               |
|   |   |                                                                                                                                                                                   |
| 31.2   |   | Section 302  Certificate of Trust Administrator                                                                                                                                   |
|   |   |                                                                                                                                                                                   |
| 32.1   |   | Certificate of Trustee  pursuant to 18 U.S.C. 1350 Section 1350, as adopted pursuant to  Section 906 of the Sarbanes Oxley Act of 2002                                       |
|   |   |                                                                                                                                                                                   |
| 32.2   |   | Certificate of Trust  Administrator pursuant to 18 U.S.C. 1350 Section 1350, as adopted  pursuant to Section 906 of the Sarbanes Oxley Act of 2002                           |

 

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*Incorporatedby reference to the Form 10 of Adelphia Recovery Trust (File No. 000-53209)filed April 30, 2008

 

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**SIGNATURES**

 

Pursuant to the requirements of the Securities ExchangeAct of 1934, the Registrant has duly caused this report to be signed on itsbehalf by the undersigned, thereunto duly authorized.

 

 
| Date: March 10, 2010                                                                   |   |
|---------------------------------------------------------------------------------------------|--------|
|                                                                                        |   |
| By: Quest Turnaround  Advisors, LLC

as Trust Administrator of  the Adelphia Recovery Trust |   |
|                                                                                        |   |
| /s/ Jeffrey A. Brodsky                                                                      |   |
| Jeffrey A. Brodsky                                                                          |   |
| Member                                                                                      |

 

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Pursuant to the requirementsof the Securities Exchange Act of 1934, this report has been signed below bythe following persons on behalf of the registrant and in the capacities and onthe dates indicated, including a majority of the Trustees.

 

 
| /s/ BRYAN E. BLOOM        |   | Trustee |
|---------------------------|--------|---------|
| Bryan Bloom               |   |    |
|                      |   |    |
| /s/ LEE S. HILLMAN        |   | Trustee |
| Lee S. Hillman            |   |    |
|                      |   |    |
| /s/ DAVID P. STOWELL      |   | Trustee |
| David P. Stowell          |   |    |
|                      |   |    |
| /s/  RALPH J. TAKALA |   | Trustee |
| Ralph J. Takala           |   |    |
|                      |   |    |
| /s/  DEAN A. ZIEHL   |   | Trustee |
| Dean A. Ziehl             |   |    |

 

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