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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   ----------

                                    FORM 10-K

(MARK ONE)

|X|   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
      ACT OF 1934

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001

                                       OR

|_|   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
      EXCHANGE ACT OF 1934

                 For the transition period from _____ to ______
                         Commission File Number 0-11258

                                   ----------

                                 WORLDCOM, INC.
             (Exact name of registrant as specified in its charter)

            GEORGIA                                        58-1521612
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)

500 CLINTON CENTER DRIVE, CLINTON, MISSISSIPPI               39056
   (Address of principal executive offices)                (Zip Code)

                                 (601) 460-5600
               Registrant's telephone number, including area code:

        Securities registered pursuant to Section 12(b) of the Act: None

          Securities registered pursuant to Section 12(g) of the Act:

                      WORLDCOM GROUP STOCK, $.01 PAR VALUE
                         MCI GROUP STOCK, $.01 PAR VALUE
                   RIGHTS TO PURCHASE SERIES 4 PREFERRED STOCK
                   RIGHTS TO PURCHASE SERIES 5 PREFERRED STOCK

                                   ----------

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. |X|

The aggregate market value of the voting stock held by non-affiliates of the
registrant as of February 28, 2002 was:

             WorldCom group Stock, $.01 par value: $22,156,502,684
               MCI group Stock, $.01 par value: $810,400,477


   Common shares outstanding as of February 28, 2002, net of treasury shares:

                      WorldCom group Stock: 2,962,645,459
                          MCI group Stock: 118,325,109

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive proxy statement of the registrant for the
registrant's 2002 Annual Meeting of Shareholders, which definitive proxy
statement will be filed with the Securities and Exchange Commission not later
than 120 days after the registrant's fiscal year end of December 31, 2001, are
incorporated by reference into Part III.
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                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----

Cautionary Statement Regarding Forward-Looking Statements .................    1

                                     PART I
Item 1.   Business ........................................................    2
Item 2.   Properties ......................................................   25
Item 3.   Legal Proceedings ...............................................   25
Item 4.   Submission of Matters to a Vote of Security Holders .............   25

                                    PART II
Item 5.   Market for Registrant's Common Equity and Related
          Shareholder Matters .............................................   25
Item 6.   Selected Financial Data .........................................   27
Item 7.   Management's Discussion and Analysis of Financial Condition
          and Results of Operations .......................................   40
Item 7A.  Quantitative and Qualitative Disclosures About Market Risk ......   68
Item 8.   Financial Statements and Supplementary Data .....................   69
Item 9.   Changes in and Disagreements with Accountants on Accounting and
          Financial Disclosure ............................................   70

                                    PART III
Item 10.  Directors and Executive Officers of the Registrant ..............   70
Item 11.  Executive Compensation ..........................................   70
Item 12.  Security Ownership of Certain Beneficial Owners and Management ..   70
Item 13.  Certain Relationships and Related Transactions ..................   70

                                    PART IV
Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K .   70
Signatures ................................................................   72
Index to Financial Statements and Financial Statement Schedule ............  F-1
Exhibit Index .............................................................  E-1
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            CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

            The following statements are or may constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995:

            (i)   any statements contained or incorporated herein regarding
                  possible or assumed future results of operations of WorldCom's
                  business, anticipated cost savings or other synergies, the
                  markets for WorldCom's services and products, anticipated
                  capital expenditures, the outcome of euro conversion efforts,
                  regulatory developments or competition;

            (ii)  any statements preceded by, followed by or that include the
                  words "intends," "estimates," "believes," "expects,"
                  "anticipates," "should," "could," or similar expressions; and

            (iii) other statements contained or incorporated by reference herein
                  regarding matters that are not historical facts.

            Because such statements are subject to risks and uncertainties,
actual results may differ materially from those expressed or implied by such
forward-looking statements; factors that could cause actual results to differ
materially include, but are not limited to:

o     economic uncertainty;

o     the effects of vigorous competition;

o     the impact of technological change on our business, alternative
      technologies, and dependence on availability of transmission facilities;

o     risks of international business;

o     regulatory risks in the United States and internationally;

o     contingent liabilities;

o     uncertainties regarding the collectibility of receivables;

o     risks associated with debt service requirements and our financial
      leverage;

o     uncertainties associated with the success of acquisitions;

o     the ongoing war on terrorism; and

o     the other risks referenced from time to time in WorldCom's filings with
      the Securities and Exchange Commission.

            Potential purchasers of WorldCom capital stock are cautioned not to
place undue reliance on such statements, which speak only as of the date
thereof.

            The cautionary statements contained or referred to in this section
should be considered in connection with any subsequent written or oral
forward-looking statements that may be issued by WorldCom or persons acting on
its behalf. We undertake no duty to update these forward-looking statements,
even though our situation may change in the future.


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                                     PART I

ITEM 1. BUSINESS

GENERAL

            Organized in 1983, WorldCom, Inc., a Georgia corporation, provides a
broad range of communications services to both U.S. and non-U.S. based
businesses and consumers. We are a global communications company utilizing a
strategy based on being able to provide service through our own facilities
throughout the world instead of being restricted to a particular geographic
location. We call this our "on-net" strategy. The on-net approach allows our
customers to send data or voice communications across town, across the U.S., or
to any of our networks in Europe or Asia, often without ever leaving our
networks. The on-net approach provides our customers with superior reliability
and low operating costs. Our core business is communications services, which
includes voice, data, Internet and international services.

            On June 7, 2001, our shareholders approved a recapitalization
involving the creation of two separately traded tracking stocks:

      o     WorldCom group stock, which is intended to reflect the performance
            of our data, Internet, international and commercial voice businesses
            and is quoted on The Nasdaq National Market under the trading symbol
            "WCOM", and

      o     MCI group stock, which is intended to reflect the performance of our
            consumer, small business, wholesale long distance voice and data,
            wireless messaging and dial-up Internet access businesses and is
            quoted on The Nasdaq National Market under the trading symbol
            "MCIT".

            In connection with the recapitalization, we amended our articles of
incorporation to replace our existing common stock with two new series of common
stock that are intended to reflect, or track, the performance of the businesses
attributed to the WorldCom group and the MCI group. Effective with the
recapitalization on June 7, 2001, each share of our existing common stock was
changed into one share of WorldCom group stock and 1/25 of a share of MCI group
stock.

            A tracking stock is a separate class of a company's common stock
intended to provide a return to investors based upon the financial performance
of a distinct business unit of the company, sometimes referred to as the
targeted business. These targeted businesses are collections of businesses that
we have grouped together in order for us to issue WorldCom group stock and MCI
group stock. The ownership of the targeted business does not change, and while
each of the classes of stock trade separately, all shareholders are common
shareholders of a single company, WorldCom, and are subject to all risks of an
investment in WorldCom as a whole.

            During the second quarter of 2001, we declared the initial quarterly
dividend for the MCI group stock. A cash dividend of $0.60 per share of MCI
group stock, or approximately $70 million in the aggregate, was paid on October
15, 2001 to shareholders of record as of the close of business on September 28,
2001. Dividends of $0.60 per share of MCI group stock were also declared during
the third and fourth quarters of 2001 which have been or will be paid in 2002.

            The MCI group was initially allocated notional debt of $6 billion
and our remaining debt was allocated on a notional basis to the WorldCom group.
We intend, for so long as the WorldCom group stock and the MCI group stock
remains outstanding, to include in our filings under the Securities Exchange Act
of 1934, as amended, the combined financial statements of each of the WorldCom
group and the MCI group. These combined financial statements will be prepared in
accordance with accounting principles generally accepted in the United States,
and in the case of annual financial statements, will be audited. These combined
financial statements are not legally required under current law or SEC
regulations.


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            Voting rights of the holders of the WorldCom group stock and the MCI
group stock are prorated based on the relative market values of WorldCom group
stock and MCI group stock. We will conduct shareholder meetings that encompass
all holders of voting stock. The WorldCom group and the MCI group shareholders
will vote together as a single class on all matters brought to a vote of
shareholders, including the election of our directors.

            Our board of directors may at any time convert each outstanding
share of MCI group stock into shares of WorldCom group stock at 110% of the
relative trading value of MCI group stock for the 20 days prior to the
announcement of the conversion. No premium will be paid on a conversion that
occurs after June 7, 2004.

            If all or substantially all of the WorldCom group or MCI group
assets are sold, either: (i) the relevant shareholders will receive a
distribution equal to the fair value of the net proceeds of the sale, either by
special dividend or by redemption of shares; or (ii) each outstanding share of
MCI group stock will be converted into shares of WorldCom group stock at 110% or
100% of the relative trading value of MCI group stock for a 10 trading day
period following the sale.

            We serve as a holding company for our subsidiaries' operations.
References herein to WorldCom, "we," "our," or "us" include WorldCom, Inc. and
our subsidiaries, unless the context otherwise requires. Additionally,
information in this document has been revised to reflect the stock splits of our
common stock.

BUSINESS COMBINATIONS

            INTERMEDIA. On July 1, 2001, we acquired Intermedia Communications
Inc. for approximately $5.8 billion, including assumed long-term debt, pursuant
to the merger of a wholly owned subsidiary with and into Intermedia, with
Intermedia continuing as the surviving corporation and as a subsidiary of
WorldCom. As a result of the Intermedia merger, we acquired a controlling
interest in Digex, Incorporated, or Digex, a provider of managed Web and
application hosting services. In connection with the Intermedia merger,
stockholders of Intermedia received one share of WorldCom group stock (or 57.1
million WorldCom group shares in the aggregate) and 1/25th of a share of MCI
group stock (or 2.3 million MCI group shares in the aggregate) for each share of
Intermedia common stock they owned. Holders of Intermedia preferred stock, other
than Intermedia's 13.5% Series B Redeemable Exchangeable Preferred Stock due
2009, or Intermedia Series B Preferred Stock, received one share of a class or
series of our preferred stock, with substantially identical terms, which were
established upon consummation of the Intermedia merger. As a result of the
merger with Intermedia, we own approximately 90% of the voting securities of
Intermedia.

            Upon effectiveness of the merger with Intermedia, the then
outstanding and unexercised options for shares of Intermedia common stock were
converted into options exercisable for an aggregate of approximately 10 million
shares of WorldCom group stock having the same terms and conditions as the
Intermedia options, except that the exercise price and the number of shares
issuable upon exercise were divided and multiplied, respectively, by 1.0319. The
merger with Intermedia was accounted for as a purchase.

            The purchase price in the Intermedia merger was allocated based on
appraised fair values at the date of acquisition. This resulted in an excess
purchase price over net assets acquired of $5.1 billion of which $67 million was
allocated to customer lists, which will be amortized over approximately four
years on a straight line basis. The remaining excess of $5.0 billion has been
allocated to goodwill and tradename which are not subject to amortization and
the goodwill is not expected to be deductible for tax purposes.

            In connection with the Intermedia merger, the Antitrust Division of
the Department of Justice required us to dispose of Intermedia's Internet
service provider business, which provided integrated Internet connectivity
solutions and effective December 1, 2001, we sold substantially all of the
Internet related assets for approximately $12 million. In addition to this
required divestiture, we also committed to a plan to sell Intermedia's Advanced
Building Network business, which provides centralized telecommunications
services in multi-tenant commercial office buildings, and the systems
integration business through which Intermedia sells, installs, operates and
maintains business telephony customer premise equipment for its customers. We
included the appraised fair values of these assets to be disposed of in our
initial allocation of the Intermedia purchase price and also included


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accrued anticipated losses expected to be incurred through disposal date. Any
difference between the actual results of operations and the amounts accrued will
result in an adjustment of goodwill unless there is a difference resulting from
a post-merger event. We anticipate that we will complete the planned disposals
of the remaining identified businesses before the third quarter of 2002.

            Since the Intermedia merger, we initiated plans to improve cash flow
and operating results by reorganizing and restructuring Intermedia's operations.
These plans include workforce reductions and other administrative cost savings,
the discontinuance of all product lines with unacceptable or negative margins
and the ultimate disposal of all assets associated with such product lines or
businesses.

            SKYTEL COMMUNICATIONS. On October 1, 1999, we acquired SkyTel
Communications, Inc., pursuant to the merger of SkyTel with and into a wholly
owned subsidiary of WorldCom. Upon consummation of the SkyTel merger, the wholly
owned subsidiary was renamed SkyTel Communications, Inc. SkyTel is a leading
provider of nationwide messaging services in the United States. SkyTel's
principal operations include one-way messaging services in the United States,
advanced messaging services on the narrow band personal communications services
network in the United States and international one-way messaging operations.

            As a result of the SkyTel merger, each outstanding share of SkyTel
common stock was converted into the right to receive 0.3849 shares of WorldCom
common stock, par value $.01 per share, or approximately 23 million WorldCom
common shares in the aggregate. Holders of SkyTel's $2.25 Cumulative Convertible
Exchangeable Preferred Stock received one share of WorldCom Series C $2.25
Cumulative Convertible Exchangeable Preferred Stock for each share of SkyTel
preferred stock held. The SkyTel merger was accounted for as a
pooling-of-interests; and accordingly, our financial statements for periods
prior to the SkyTel merger have been restated to include the results of SkyTel.

            MCI. On September 14, 1998, we acquired MCI Communications
Corporation for approximately $40 billion, pursuant to the merger of MCI with
and into a wholly owned subsidiary of WorldCom. Upon consummation of the MCI
merger, the wholly owned subsidiary was renamed MCI Communications Corporation.
MCI became a wholly owned subsidiary of WorldCom. Through the merger with MCI,
we acquired one of the world's largest and most advanced digital networks,
connecting local markets in the United States to more than 280 countries and
locations worldwide.

            As a result of the merger with MCI, each outstanding share of MCI
common stock was converted into the right to receive 1.86585 shares of WorldCom
common stock or approximately 1.13 billion WorldCom common shares in the
aggregate, and each share of MCI Class A common stock outstanding (all of which
were held by British Telecommunications plc) was converted into the right to
receive $51.00 in cash or approximately $7 billion in the aggregate. The funds
paid to British Telecommunications were obtained by WorldCom from (i) available
cash as a result of our $6.1 billion public debt offering in August 1998; (ii)
the sale of MCI's Internet backbone facilities and wholesale and retail Internet
business to Cable and Wireless plc for $1.75 billion in cash on September 14,
1998; (iii) the sale of MCI's 24.9% equity stake in Concert Communications
Services to British Telecommunications for $1 billion in cash on September 14,
1998; and (iv) availability under our commercial paper program and credit
facilities.

            Upon effectiveness of the merger with MCI, the then outstanding and
unexercised options exercisable for shares of MCI common stock were converted
into options exercisable for an aggregate of approximately 125 million shares of
WorldCom common stock having the same terms and conditions as the MCI options,
except that the exercise price and the number of shares issuable upon exercise
were divided and multiplied, respectively, by 1.86585. The merger with MCI was
accounted for as a purchase.


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            EMBRATEL. On August 4, 1998, MCI acquired a 51.79% voting interest
and a 19.26% economic interest in Embratel Participacoes S.A., Brazil's
facilities-based national and international communications provider, for
approximately R$2.65 billion (U.S. $2.3 billion). The purchase price was paid in
local currency installments, of which R$1.06 billion (U.S. $916 million) was
paid on August 4, 1998, R$795 million (U.S. $442 million) was paid on August 4,
1999, and the remaining R$795 million (U.S. $444 million) was paid on August 4,
2000. Embratel provides domestic long distance and international
telecommunications services in Brazil, as well as over 40 other communications
services, including leased high-speed data, Internet, frame relay, satellite and
packet-switched services. Operating results for Embratel were consolidated in
our accompanying consolidated financial statements from the date of the MCI
merger through 2000.

            During the second quarter of 2001, we reached a long-term strategic
decision to restructure our investment in Embratel. The restructuring included
the resignation of certain Embratel board of directors seats, the irrevocable
obligation to vote a portion of our common shares in a specified manner and the
transfer of certain economic rights associated with such shares to an unrelated
third party. Based on these actions, the accounting principles generally
accepted in the United States prohibit the continued consolidation of Embratel's
results. Accordingly, we have deconsolidated Embratel's results effective
January 1, 2001.

            COMPUSERVE. On January 31, 1998, WorldCom acquired CompuServe
Corporation for approximately $1.3 billion, pursuant to the merger of a wholly
owned subsidiary of WorldCom, with and into CompuServe. Upon consummation of the
merger with CompuServe Corporation, CompuServe Corporation became a wholly owned
subsidiary of WorldCom.

            As a result of the merger with CompuServe Corporation, each share of
CompuServe Corporation common stock was converted into the right to receive
0.609375 shares of WorldCom common stock or approximately 56 million WorldCom
common shares in the aggregate. Prior to the merger with CompuServe Corporation,
CompuServe Corporation operated primarily through two divisions: Interactive
Services and Network Services. Interactive Services offered worldwide online and
Internet access services for consumers, while Network Services provided
worldwide network access, management and applications, and Internet services to
businesses. The merger with CompuServe Corporation was accounted for as a
purchase.

            ANS. On January 31, 1998, we also acquired ANS Communications, Inc.
from America Online, Inc. for approximately $500 million, and entered into five
year contracts with AOL under which WorldCom and its subsidiaries provide
network services to AOL. Additionally, AOL acquired CompuServe's Interactive
Services division and received a $175 million cash payment from WorldCom.
WorldCom retained the CompuServe Network Services division. ANS provided
Internet access to AOL and AOL's subscribers in the United States, Canada, the
United Kingdom, Sweden and Japan. The transaction with AOL was accounted for as
a purchase.

            BROOKS FIBER PROPERTIES. On January 29, 1998, WorldCom acquired
Brooks Fiber Properties, Inc. pursuant to the merger of a wholly owned
subsidiary of WorldCom, with and into Brooks Fiber Properties. Upon consummation
of the merger with Brooks Fiber Properties, Brooks Fiber Properties became a
wholly owned subsidiary of WorldCom. Prior to the merger, Brooks Fiber
Properties acquired and constructed its own state-of-the-art fiber optic
networks and facilities and leased network capacity from others to provide long
distance carriers, Internet Service Providers, wireless carriers and business,
government and institutional end users with an alternative to the incumbent
local exchange carriers for a broad array of high quality voice, data, video
transport and other telecommunications services.

            As a result of the merger with Brooks Fiber Properties, each share
of Brooks Fiber Properties common stock was converted into the right to receive
2.775 shares of WorldCom common stock or approximately 109 million WorldCom
common shares in the aggregate. The merger with Brooks Fiber Properties was
accounted for as a pooling-of-interests; and accordingly, our financial
statements for periods prior to the merger with Brooks Fiber Properties have
been restated to include the results of Brooks Fiber Properties.


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                                    BUSINESS

            Following are descriptions of the businesses attributed to each of
the WorldCom group and the MCI group. Although we are describing these
businesses separately in order to give you a better understanding of the assets
attributed to each group, the two groups are not separate legal entities.

            The assets attributed to the WorldCom group include all of our
network assets except voice switches, which are used to forward audio and data
information from one point to another, and dial-up Internet modems, and also
include cash, investments, buildings, furniture, fixtures and equipment, and the
goodwill, other intangible assets, other long-term assets and other current
assets associated with the businesses attributed to the WorldCom group. The
assets attributed to the MCI group include voice switches, dial-up Internet
modems and the goodwill, other intangible assets, other long-term assets and
other current assets associated with the businesses attributed to the MCI group.
For a further discussion of the assets attributed to the groups and the
allocation methods used to allocate the assets, see the management's discussion
and analysis of financial condition and results of operations, which is
incorporated by reference herein.

            Certain financial information about operations by segment and by
geographic area for 1999, 2000 and 2001 is included in note 14 to our notes to
our consolidated financial statements and is incorporated herein by reference.

                            WORLDCOM GROUP OPERATIONS

OVERVIEW

            Our businesses attributed to the WorldCom group include:

o     data services such as frame relay, asynchronous transfer mode and Internet
      protocol networks which provide a full spectrum of public and private
      network options for any data transmission requirement;

o     Internet related services, including:

      o     always-on connections to the Internet, which we refer to as
            dedicated access;

      o     secure communication over the Internet allowing a business to link
            various sites and employees, which we refer to as a virtual private
            network;

      o     high speed and always-on digital connections to the Internet, which
            we refer to as digital subscriber lines; and

      o     web site management and web-enabled products which provide customers
            with the hardware, software and monitoring for their web sites;

o     the design, implementation and ongoing management of a customer's
      communications system;

o     commercial voice services; and

o     international communications services.

We believe we are positioned to utilize these global assets to provide
traditional communications services, emerging e-commerce services, and WorldCom-
provided managed or outsourced services to customers in major markets around the
globe.

            The businesses attributed to the WorldCom group accounted for 60.7%
of our revenues, 101.7% of our net income and 88.4% of our assets for the year
ended December 31, 2001. For the year ended December 31, 2000 the WorldCom group
accounted for 58.2% of our revenues, 62.0% of our net income and 85.2% of our
assets.


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            We have extensive networks that connect metropolitan centers and
various regions throughout the world. As of December 31, 2001, our networks that
connect metropolitan centers covered approximately 58,800 route miles, with an
additional 10,900 route miles of local connections to customers worldwide. We
also had over 2,500 centers where our equipment connects to the local phone
company for call termination, which we call points of presence, 2,092 data
switches, which forward information to its proper address, and connected 124
cities across North America, Europe, the Middle East, Africa, Latin America and
Asia.

            Using our Internet protocol infrastructure, we intend to continue
our expansion into higher growth, next generation services, such as virtual
private networks which use Internet protocol technology, web centers that allow
customers to interact with sales and service agents over the Internet, the
telephone or e-mail, and Internet content delivery services. We believe the
breadth and scale of these services differentiate our offerings from those of
our competitors and meet our customers' increasingly complex communications
needs, highlighting the unique quality and reach of our networks.

            We are positioning the company for leadership in the high growth
segments of our industry. Our merger with Intermedia and resulting controlling
interest in Digex provides us with a strong foothold in the managed hosting
arena. Managed hosting services include providing the computer hardware,
software, network technology and systems management necessary to offer customers
comprehensive outsourced web site hosting solutions. We believe this position,
combined with our extensive facilities-based network assets and corporate
customer base, should create a strong competitor for e-commerce services and a
platform for leadership in our target segments of U.S. and non-U.S. based
corporations.

INDUSTRY

            For several years, the communications industry has been undergoing a
dramatic transformation due to several factors including:

      o     technological advances such as the Internet;

      o     rapid development of new services and products;

      o     the Telecommunications Act of 1996, or the Telecom Act;

      o     the deregulation of communications services markets in selected
            countries around the world; and

      o     the entry of new competitors in existing and emerging markets.

            These are only a few of the forces impacting the communications
industry today. However, each of these factors is driven by the rapid
development of data services that are replacing traditional voice services. The
development of frame relay, asynchronous transfer mode and Internet protocol
networks has dramatically transformed the array and breadth of services offered
by telecommunications carriers.

            The use of the Internet, including intranets and extranets, which
are private, secure communications networks, continues to grow, although at a
slower pace than in recent years. Internet growth continues to be driven by a
number of factors, including expanding availability of high speed or broadband
access, improvements in network architectures and increasing numbers of
network-enabled applications and devices. In spite of slower overall market
growth, the Internet remains an important global communications and commerce
medium. The Internet represents an opportunity for enterprises to interact in
new and different ways with both existing and prospective customers, employees,
suppliers and partners.


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            The market for data communications and Internet access and related
products is characterized by rapidly changing technology, evolving industry
standards, emerging competition and frequent new product and service
introductions. We believe that the TCP/IP, where we use fiber optic or
copper-based telecommunications infrastructure, will continue to be the primary
protocol and transport infrastructure for Internet-related services. TCP/IP
combines two protocols, transmission control protocol and Internet protocol, to
establish a connection between two devices so that streams of data can be sent
between them. Session initiated protocols, or SIPs, are emerging as the basis
for carrier-grade platforms from which enterprises will use SIP-enabled devices,
such as "Internet telephones" to communicate within and outside the enterprise.
Emerging transport alternatives include wireless cable modems and satellite
delivery of Internet information. Alternative protocols, which are proprietary
or allow systems using different formats to transfer data to communicate with
each other, have been and are being developed. We are also participating in
trials of next generation, more advanced technology.

            Developments in technology are further increasing the capacity and
lifespan of previously deployed fiber optic cables. Throughout 2002, we plan to
continue to deploy high capacity broadband systems and fiber optic systems, both
of which function to connect different networks, and long distance transmission
systems which are not subject to signal deterioration. These network investments
result in reduced regeneration requirements for long distance transmissions and
higher bandwidth capacity from existing fiber optic cables which enhances our
ability to serve global businesses cost effectively.

STRATEGY

            Our objective is to use our strategic assets and customer base to be
a leader in each of our target segments and deliver long-term sustainable
growth. Key elements of our strategy include:

            TARGET HIGH GROWTH DATA BUSINESSES: Our strategy is to focus
primarily on higher growth and higher value-added data services that we can
provide utilizing our extensive, high quality global networks. We believe this
will decrease our reliance on traditional voice services, which have experienced
pricing pressures in recent years.

            CONTINUE OUR FOCUS ON CORPORATE ENTERPRISES: We are continually
realigning our businesses with the customer bases they serve. We expect to
further focus our resources, including assets, technical expertise and marketing
skills, to better serve and grow our presence with corporate enterprise
customers.

            RAPIDLY DEPLOY MANAGED WEB HOSTING SERVICES: We plan to take
advantage of the managed web hosting and data capabilities of Digex acquired
through our merger with Intermedia. By combining Digex's comprehensive portfolio
of hosting products with our extensive networks and customer relationships, we
believe we will be able to strongly compete for e-commerce services.

            AGGRESSIVELY EXPAND VIRTUAL PRIVATE NETWORK SERVICES USING INTERNET
PROTOCOL: Virtual private networks are private corporate communications networks
and are often replacing or supplementing private line or frame relay networks as
a cost effective and flexible solution for mid-sized and large corporate
enterprises. We view this segment as a key contributor to our future growth and
an integral part of our high-value service strategy. With our network
capabilities, we intend to leverage the global reach and quality of our networks
to capitalize on this higher growth and higher margin segment.

            MAINTAIN LEADERSHIP IN INTERNET DATA TRANSPORT AND ACCESS: We plan
to remain at the forefront of Internet protocol implementation worldwide. We
expect Internet protocol services such as virtual private networks and
e-business applications to proliferate and we plan to use our tradition of
pioneering innovative Internet infrastructure services to expand our Internet
value-added services.

            EXPAND GLOBALLY: We intend to leverage our global network
capabilities by integrating existing platforms and deploying selected
technologies. We believe this will allow us to expand product coverage while
reducing costs. The net result to our customer is a portfolio of competitive
products with global reach. We believe that international growth will continue.


                                       8
<Page>

            UTILIZE OUR EXTENSIVE NETWORKS: We plan to continue to utilize our
networks to benefit our customers and reduce our costs. The global reach and
quality of our networks enable us to provide complex services at low operating
costs as a result of our facilities-based, on-net approach. The on-net approach
allows our customers to send data streams or voice traffic locally, across the
United States, or to any of our facilities-based networks in Europe, Africa or
Asia, without ever leaving our networks. We believe this approach lowers our
operating costs and provides our customers with superior reliability and quality
of service. Our networks are also highly adaptable for future capacity
expansions at lower per unit costs, and are designed to cost-effectively
integrate future generations of optical-networking components to enhance
efficiency and quality.

DESCRIPTION OF SERVICES

            We provide a broad range of enhanced data and voice communications
and managed network services through our direct commercial sales force of
approximately 8,000 people. Core services include data services, Internet
services, commercial local and long distance voice communications and
international communications services.

            DATA SERVICES

            The ability of businesses to transmit data within their company or
outside to business partners is a critical function today. Over the last 10
years, businesses made significant investments in software development and
equipment purchases to effectively process and transmit this data and
information. The Internet also introduced yet another means to communicate
digitally worldwide.

            We continue to make significant investments in network technologies
to satisfy the continuing demand in high bandwidth data processing. Our global
frame relay, asynchronous transfer mode and Internet protocol networks provide a
full spectrum of public and private network options for any data transmission
requirement. The ability to interconnect and to increase the bandwidth capacity
of these networks protects customers' existing investments in established
networks while taking advantage of the newest technologies.

            Frame Relay: Frame relay is a high-speed communications technology
that divides the information into frames or packets. Each frame has an address
that the network uses to determine the destination of the frame. The frames
travel through a series of switches within the frame relay network to arrive at
their destination. This technology gives businesses a cost-effective, flexible
way to connect local area networks, system network architecture, voice, and
Internet protocol-based applications. Local area networks are computer networks
which span a relatively small area and system network architecture is a protocol
for connecting computers.

            Our frame relay service, which is operated over our own facilities,
is available in 46 countries and is supplemented by network-to-network interface
partnerships that reach additional locations worldwide. These networks allow us
to provide our customers around the globe with the highest quality standards of
service.

            Asynchronous Transfer Mode: Our on-net asynchronous transfer mode
service is a technology and protocol structure that integrates data, voice, and
video over a single communications network while offering a variety of access
speeds and multiple service categories. Asynchronous transfer mode technology is
able to service both the local area networks and wide area networks, which are
computer networks spanning a large geographic area, providing scalability for
users' current and future needs.

            Our asynchronous transfer mode services use our highly redundant
OC-48 backbone to obtain these networking advantages. OC-48 refers to a type of
high speed optical carrier and backbone refers to the network connecting the
system. These public data networking services offer a number of different access
speeds and support multiple classes of service to meet customers' application
needs. The nature of the services provides users with the security and control
of a private network, plus the flexibility and economies of a public network.
Our asynchronous transfer mode services allow for the consolidation of
applications into a single network service, reducing network, equipment and
operational costs.


                                       9
<Page>

            Data services revenue for 2001 grew by approximately 16.7% to $8.6
billion, or 24.5% of WorldCom total revenues, versus $7.4 billion, or 18.9% of
WorldCom total revenues, for 2000 and $5.8 billion, or 16.2% of WorldCom total
revenues, for 1999.

            INTERNET SERVICES

            As a leading Internet backbone provider, we offer a comprehensive
range of Internet access and value-added options, applications and services
tailored to meet the needs of businesses and other telecommunications providers.
Our Internet products and services include dedicated Internet access, managed
networking services and applications (such as virtual private networks), web
hosting and electronic commerce and transaction services (such as web centers
and credit card transaction processing).

            Internet Access and Transport: Our Internet infrastructure is based
on our OC-192c and OC-48c optical networks which use a combination of
asynchronous transfer mode, frame relay and router technologies at the transport
layer for both metropolitan and inter-regional connectivity. This network
infrastructure enables customers to access the Internet through dedicated lines.
Once connected, the customer's traffic is routed through our networks to the
desired Internet location, whether on our networks or elsewhere on the Internet.

            Through our networks, we offer the following access products to our
customers:

o     high speed T1 / T3 connections;

o     Internet gateway services which provide the hardware and software to link
      a customer's network to the Internet;

o     frame relay to Internet protocol connections;

o     asynchronous transfer mode to Internet protocol connections;

o     digital subscriber line; and

o     metropolitan area exchanges asynchronous transfer mode.

            These access options provide the variety of bandwidth choices
required for all business types and sizes.

            Virtual Private Networks: We provide virtual private networks on
public and shared environments for small and large customers. Our customers use
virtual private networks to connect their corporate intranets, data centers,
remote users, and the World Wide Web via the public Internet.

            Our virtual private network service includes built-in encryption,
bandwidth prioritization and 24-hour centralized management and monitoring
services. Virtual private network services are already available in 26
countries, with continued expansion planned.

            Managed Hosting for Business on the Internet: We are a leading
managed hosting provider for businesses on the Internet. Our suite of services
include:


                                       10
<Page>

      o     web site management services, such as operating and supporting
            Windows NT and UNIX based dedicated servers;

      o     application hosting services, such as application support for
            various operating systems, web servers, directory services, database
            servers, application servers and commerce suites;

      o     integrated business solutions, such as e-commerce, business
            intelligence and office solutions; and

      o     enterprise and professional services, such as fire wall management,
            stress testing, customized web site activity reporting and enhanced
            security service.

            We deliver our services from geographically distributed, advanced
Internet data centers that are connected to our dedicated and redundant Internet
backbone network. Our tailored solutions are designed to integrate with existing
enterprise systems architectures and to enable customers to outsource the
monitoring, administration and optimization of their equipment, applications and
overall Internet operations.

            Through our controlling interest in Digex, we have been able to
expand our web hosting by providing a comprehensive portfolio of hosting
products and services for mid-sized and large businesses. These services enable
businesses to more rapidly and cost-effectively deploy secure and reliable
business solutions, including on-line financial services, on-line procurement,
electronic retailing and customer self-service applications, to our customers
over the Internet.

            Internet services revenue for 2001 grew by approximately 28.7% to
$3.2 billion, or 9.0% of WorldCom total revenues, versus $2.5 billion, or 6.3%
of WorldCom total revenues, for 2000 and $1.6 billion, or 4.3% of WorldCom total
revenues, for 1999.

            COMMERCIAL LOCAL AND LONG DISTANCE VOICE COMMUNICATIONS

            We provide a single source for integrated local and long distance
telecommunications services and facilities management services to businesses,
government entities and other telecommunications companies.

            The market for local exchange services consists of a number of
distinct service components. These services include:

      o     local network services, which generally include basic dial tone and
            private line services;

      o     network access services, which consist of the local portion of long
            distance telephone calls; and

      o     long distance network services.

            We also offer a broad range of related services that enhance
customer convenience, add value and provide additional revenue sources. Advanced
toll-free services offer features for caller and customer convenience, including
a variety of call routing and call blocking options, customer reconfiguration,
termination overflow to switched or dedicated lines, dialed number
identification service, real-time automatic number identification and flexible
after-hours call handling services.

            Commercial local and long distance voice services revenues for 2001
were $6.6 billion, or 18.7% of WorldCom total revenues, versus $7.0 billion, or
18.0% of WorldCom total revenues, for 2000 and $7.4 billion, or 20.7% of
WorldCom total revenues, for 1999.


                                       11
<Page>

            INTERNATIONAL OPERATIONS

            Our global strategy is enabled by our position as an owner of
telecommunications infrastructure throughout Europe, the Middle East, Africa,
Asia Pacific and North America. Our international strategy is to use this
foundation to design and deliver product sets and features globally so that
multinational enterprises enjoy a consistency in service performance regardless
of geography.

            We provide switched voice, private line, and/or value-added data
services over our own facilities and leased facilities in the United Kingdom,
Germany, France, the Netherlands, Sweden, Switzerland, Belgium, Italy, Ireland,
Luxembourg, Denmark, Finland, Hungary, Poland, Portugal, the Czech Republic,
Greece, Israel, Austria, Norway and Spain. We operate metropolitan digital fiber
optic networks in London, Paris, Frankfurt, Hamburg, Dusseldorf, Amsterdam,
Rotterdam, Stockholm, Brussels, Zurich, Geneva, Dublin and Milan. We also offer
international services over owned and leased facilities in selected Asian and
African markets, including Australia, Japan, Hong Kong, Singapore, New Zealand,
Indonesia, Malaysia, Thailand, Philippines, Taiwan, South Korea, China, India,
South Africa, Botswana, Namibia, Kenya and Zambia. We were granted authority in
the first quarter of 1998 to serve as a local and international facilities-based
carrier in Australia and Japan and now operate metropolitan digital fiber optic
networks in Sydney, Melbourne, Osaka and Tokyo. In early 2000 we were also
granted a Type 1 license in Singapore, where we also operate a metropolitan
digital fiber network.

            Data centers are being deployed throughout Europe and Asia Pacific,
interconnected with the global networks, allowing us to expand into new business
areas using our worldwide telecommunications infrastructure as the platform for
technology and service expansion.

            Our equity investment in Embratel further extends our
local-to-global-to-local strategy. Embratel's business consists principally of
providing intra-regional long distance, inter-regional long distance and
international long distance telecommunications services as well as data
communications, text, Internet services and mobile satellite and maritime
communications services. Embratel operates under a domestic long distance
concession and an international long distance concession granted by Brazil's
Agencia Nacional de Telecomunicacoes.

            During the second quarter of 2001, we reached a long-term strategic
decision to restructure our investment in Embratel. The restructuring included
the resignation of certain Embratel board of directors seats, the irrevocable
obligation to vote a portion of our common shares in a specified manner and the
transfer of certain economic rights associated with such shares to an unrelated
third party. Based on these actions, the accounting principles generally
accepted in the United States prohibit the continued consolidation of Embratel's
results. Accordingly, we have deconsolidated Embratel's results effective
January 1, 2001.

            Revenues from international operations for 2001 were approximately
$3.0 billion, or 8.5% of WorldCom total revenues, versus $5.9 billion, or 15.0%
of WorldCom total revenues, for 2000 and $4.4 billion, or 12.2% of WorldCom
total revenues for 1999. Excluding Embratel in the 2000 period, international
revenues increased 25.8% from $2.4 billion, or 6.7% of WorldCom total revenues
for 2000.

FACILITIES

            NETWORKS

            We own domestic long distance, international and multi-city local
service fiber optic networks with access to additional fiber optic networks
through lease agreements with other carriers. Additionally, we own and lease
trans-oceanic cable capacity in the Atlantic and Pacific Oceans.

            Deployed in business centers throughout the United States, Western
Europe, the United Kingdom, Australia and Japan, our local networks are
constructed using a closed loop which is referred to as ring topology.
Transmission networks are based on optical network equipment. Network backbones
and local networks are installed in rights-of-way owned by us or leased from
third parties such as utilities, railroads, long distance carriers, state
highway


                                       12
<Page>

authorities, local governments and transit authorities. Lease arrangements are
generally executed under multi-year terms with renewal options and are
non-exclusive.

            The long distance and local networks are protected by systems that
are capable of restoring backbone traffic in the event of an outage in
milliseconds. In addition, long distance and local switched traffic is
dynamically rerouted via switch software to any available capacity to complete
calls.

            To serve customers in buildings that are not located directly on the
fiber networks, we utilize leased T-3s, T-1s or local connections obtained from
the traditional local phone companies, competitive local exchange carriers and
other carriers who serve these buildings.

            Our Internet infrastructure is based on our OC-192c and OC-48c
optical networks which use a combination of asynchronous transfer mode, frame
relay and router technologies to transport data.

            We are deploying technology that integrates wide area networks for
businesses with the public switched telecommunications network utilizing
voice-over-Internet protocol gateways and session initiated protocol, which will
provide businesses with a wide range of Internet voice and messaging services.

            The WorldCom group is allocated an expense and the MCI group is
allocated a corresponding decrease in depreciation expense for the use by the
WorldCom group of the business voice switches attributed to the MCI group. The
allocation is equal to a proportion, based on usage, of the MCI group's related
costs. All other material transactions between the groups are intended to be on
an arm's-length basis.

            Internationally, we own or lease fiber optic capacity on most major
international undersea cable systems in the Pacific and Atlantic Ocean regions.
We also own fiber optic capacity for services to Eastern Europe, Asia, Central
America, South America and the Caribbean. Furthermore, we own and operate 36
international gateway satellite earth station antennas, which enable us to
extend public switched and private line voice and data communications to and
from locations throughout the world.

            Our network statistics, excluding Embratel, are as follows:

<Table>
<Caption>
                                                           DECEMBER 31,    DECEMBER 31,
                                                               2000            2001
                                                           ----------------------------
<S>                                                          <C>             <C>
Domestic and international long distance route miles ..          56,496          58,832
Local domestic and international route miles ..........          10,153          10,937
Voice grade equivalents ...............................      65,537,123      76,415,566
Buildings connected ...................................          61,674          79,383
Domestic telecom collocations .........................             477             531
Facilities based cities ...............................             123             124
</Table>

            DATA NETWORK SWITCHING

            Our asynchronous transfer mode networks utilize our intracity fiber
connections to customers, asynchronous transfer mode switches and high-capacity
fiber optic networks. Asynchronous transfer mode is a switching and transmission
technology based on encapsulation of information in short (53-byte) fixed-length
packets or "cells." Asynchronous transfer mode switching was specifically
developed to allow simultaneous switching and transmission of mixed voice, data
and video (sometimes referred to as "multimedia" information at various rates of
transmission). In addition, characteristics of asynchronous transfer mode
switching allow switching information to be directly encoded in integrated
circuitry rather than in software.

            Our frame relay networks utilize our owned and maintained frame
relay switches and our high-capacity fiber optic networks to provide data
networking services to commercial customers. Networking equipment at customer
sites


                                       13
<Page>

connects to our frame relay switches which in turn are connected to each other
via our extensive fiber optic networks. Frame relay utilizes variable length
frames of data to transport customer data from one customer location across our
networks to another customer location. Customers utilize the frame relay
technology to support traditional business applications such as connecting local
networks and financial applications.

RATES AND CHARGES

            Domestic and international business switched voice services
originating in the United States are primarily billed in six-second increments;
other rate structures bill in 18, 30 or 60 second increments. Switched voice
services originating in international markets are billed in increments subject
to local market conditions and interconnect agreements. Switched long distance
services are billed in arrears, with monthly billing statements itemizing date,
time, duration and charges. Local charges may be billed in arrears or in
advance. Fixed recurring charges are billed in advance while metered charges are
billed in arrears. Data services are generally billed a fixed rate per circuit
and, depending on the service, a separate fixed network port charge. Data
service rates are based on the speed of transmission, and depending on the
service type, may be billed in arrears or in advance. Private line services are
billed monthly in advance, with the invoice indicating applicable rates by
circuit. Our rates are generally designed to be competitive with those charged
by other long distance and local carriers.

            Our Internet access products are sold in the United States and in
many foreign countries for both domestic and global Internet services. Prices
vary, based on service type. Due to various factors, such as available
telecommunications technology, foreign government regulation and market demand,
the service options offered outside of the United States vary as to speed, price
and suitability for various purposes.

SALES AND MARKETING

            We market our business communications services primarily through a
direct sales force targeted at markets defined by both communications needs and
geographies. Our commercial sales force of approximately 8,000 people, also
provides advanced data specialization for the domestic and international
marketplaces, including private line services.

            Our sales force can be grouped primarily into three channels. The
first targets small to large U.S.-centric enterprises in the U.S. The second
addresses the same small to large enterprises outside the U.S. The third channel
serves the largest 250 multinational corporations with a unified sales and
service organization that mirrors the customers' own operations.

            In each of our geographic markets, we employ full service support
teams that provide our customers with prompt and personal attention. Our
localized management, sales and customer support are designed to engender a high
degree of customer loyalty and service quality.

            Additionally, during 2001 we launched an online sales and support
channel that complements our activities to reach smaller U.S.-based businesses.
This web-based channel offers a suite of basic data and voice services in a
cost-efficient manner.

COMPETITION

            The telecommunications industry is extremely competitive, and we
expect that competition will intensify in the future. We face substantial
competition in each of our business segments. Some of our existing and potential
competitors have financial and other resources significantly greater than ours.
Moreover, some of these providers presently enjoy advantages as a result of
their historic monopoly control over local exchange facilities. A number of
traditional and emerging competitors have made significant investments in
advanced fiber optic network facilities. In addition to voice and data
competition from long distance service competitors, a number of facilities-based
competitive local exchange carriers and cable television multi-system operators
plan to offer local telecommunications


                                       14
<Page>

services in major U.S. cities over their own facilities or through resale of the
local exchange carriers' or other providers' services.

            Increasingly, we also must compete with equipment vendors and
consulting companies in emerging Internet service markets. Companies have
obtained or expanded their Internet-based services as a result of network
deployment, acquisitions and strategic investments. We expect these acquisitions
and strategic investments to increase, thus creating significant new
competitors. Furthermore, we expect these firms to devote greater resources to
develop new competitive products and services and to market those and existing
products and services.

            Overseas, we compete with new entrants as well as with incumbent
providers, some of which still are partially government-owned, have special
regulatory status along with the exclusive rights to provide services, and
virtually all of which have historically dominated their local, domestic long
distance and international services business. These incumbent providers enjoy
numerous competitive advantages including existing facilities, customer loyalty,
and substantial financial resources. We often must rely on facilities or
termination services from these incumbent providers. We also compete with other
service providers, some of which are affiliated with incumbent providers in
other countries. We devote extensive resources to obtaining regulatory approvals
necessary to operate overseas, and to obtain access to and interconnect with the
incumbent's network on a non-discriminatory basis. In Europe, we compete
directly with companies such as British Telecom, Deutsche Telekom, Cable &
Wireless, France Telecom and Equant, global telecommunications alliances and
with regional Internet service providers such as Terra and Oleane.

            The development of new technologies and increased availability of
domestic and international transmission capacity may also give rise to new
competitive pressures. For example, even though fiber optic networks, such as
those used by us, are now widely used for long distance transmission, it is
possible that the desirability of these networks could be adversely affected by
changing technology. The telecommunications industry is in a period of rapid
technological evolution, marked by the introduction of new routing and switching
technologies, new services, and increasing wireless, satellite and fiber optic
transmission capacity for services similar to those provided by us. We cannot
predict with certainty which of many possible future product and service
offerings will help maintain our competitive position or what expenditures will
be required to develop and provide these products and services. Nor can we
predict whether spectrum rights that we hold will be affected by regulatory
decisions to re-allocate spectrum for other uses, or whether current deployment
plans for our multichannel multipoint distribution services will be sustainable
if spectrum reallocation occurs.

            Under the Telecom Act and ensuing federal and state regulatory
initiatives, many barriers to local exchange competition are being eliminated.
The introduction of competition, however, also establishes, in part, the ability
of the traditional local phone companies to provide inter-LATA long distance
services within a particular region. Local access and transport area, or LATA,
refers to an area within a geographic region. To date, the FCC has granted
applications by Verizon for the states of New York, Massachusetts, Pennsylvania,
Connecticut and Rhode Island and by SBC for Texas, Kansas, Oklahoma, Missouri
and Arkansas to provide in-region inter-LATA services. We believe the
traditional local phone companies will continue to seek to enter these markets
given their ownership of extensive facilities in their local service regions,
their long-standing customer relationships and their very substantial capital
and other financial resources. As the traditional local phone companies are
allowed to offer in-region long distance services in additional states, they
will be in a position to offer single source local and long distance service
similar, if not superior, to that being offered by us. We expect that increased
competition will result in additional pricing and margin pressures in the
domestic telecommunications services business. In addition, wireless carriers
increasingly compete for consumers through nationwide or regional "bucket of
minutes plans." Indeed, wireless competition and the availability of inexpensive
long-haul transport has already significantly reduced consumer long distance
pricing, and as a result negatively affected the profitability of traditional
service providers. As rates stabilize, we expect to compete effectively as a
result of our innovation, quality and diversity of services, our ability to
offer a combination of services, and our level of customer service.

            As noted, we offer data communications and Internet-based services,
including web hosting, collocation services, virtual private network services,
dedicated and wholesale Internet access, and related services. This is an


                                       15
<Page>

extremely competitive business and we expect that competition will intensify in
the future. We believe that the ability to compete successfully in this arena
depends on a number of factors, including:

      o     industry presence;

      o     the ability to expand rapidly;

      o     the capacity, reliability and security of network infrastructure;

      o     ease of access to and navigation on the Internet;

      o     the pricing policies of our competitors and suppliers;

      o     the timing of the introduction of new products and services by us
            and our competitors;

      o     our ability to support industry standards; and

      o     industry and overall economic trends.

Our success will depend heavily upon our ability to provide high quality data
communications services, including Internet connectivity and value-added
Internet services, at competitive prices.

EMPLOYEES

            Through our businesses attributed to the WorldCom group, we employed
a total of approximately 61,800 full and part-time personnel, including Digex,
as of February 28, 2002, approximately 400 of whom are represented by organized
labor organizations. We consider our relationship with these employees to be
good.

PATENTS, TRADEMARKS, TRADENAMES AND SERVICE MARKS

            We actively pursue the protection of intellectual property rights in
the United States and relevant foreign jurisdictions. Our continuing efforts
have produced numerous issued patents and pending patent applications on
innovative technology.

            All tradenames, including the MCI tradename and the other related
MCI tradenames, have been attributed to the WorldCom group. The MCI group will
be allocated an expense and the WorldCom group will be allocated a corresponding
decrease in depreciation and amortization expense for use of the MCI tradenames
for the next four years based on the following schedule:

                               2002: $30.0 million
                               2003: $35.0 million
                               2004: $40.0 million
                               2005: $45.0 million

            Any renewal or termination of use of the MCI tradename by the MCI
group will be subject to the general policy that our board of directors will act
in the best interests of WorldCom. For each of the years ended December 31,
1999, 2000 and 2001, depreciation and amortization expense associated with the
MCI tradenames allocated to the WorldCom group was decreased by $27.5 million
per annum for use of the MCI tradenames by the MCI group.

REGULATION AND LITIGATION

            We are involved in legal and regulatory proceedings that are
incidental to our business and have included loss contingencies in other current
liabilities and other liabilities for these matters in our financial statements.
In some


                                       16
<Page>

instances, rulings by federal, state and international regulatory authorities
may result in increased operating costs to us. The results of these various
legal and regulatory matters are uncertain and could have a material adverse
effect on our consolidated results of operations or financial position.

            REGULATION

            We are subject to varying degrees of federal, state, local and
international regulation. In the United States, our subsidiaries are most
heavily regulated by the states, especially for the provision of local exchange
services. Our subsidiaries must be certified separately in each state to offer
local exchange and intrastate long distance services. No state, however,
subjects us to rate of return regulation, nor are we currently required to
obtain FCC authorization for installation or operation of our network facilities
used for domestic services, other than licenses for specific multichannel
multipoint distribution services, wireless communications service and
terrestrial microwave and satellite earth station facilities that utilize radio
frequency spectrum. FCC approval is required, however, for the installation and
operation of our international facilities and services. We are subject to
varying degrees of regulation in the foreign jurisdictions in which we conduct
business, including authorization for the installation and operation of network
facilities. Although the trend in federal, state and international regulation
appears to favor increased competition, no assurance can be given that changes
in current or future regulations adopted by the FCC, state or foreign regulators
or legislative initiatives in the United States or abroad would not have a
material adverse effect on us.

            In August 1996, the FCC established nationwide rules pursuant to the
Telecom Act designed to encourage new entrants to compete in local service
markets through interconnection with the traditional local phone companies,
resale of traditional local phone companies' retail services, and use of
individual and combinations of unbundled network elements, owned by the
traditional local phone companies. Unbundled network elements are defined in the
Telecom Act as any "facility or equipment used in the provision of a
telecommunication service," as well as "features, function, and capabilities
that are provided by means of such facility or equipment." In January 1999, the
Supreme Court of the United States confirmed the FCC's authority to issue the
rules, including a pricing methodology for unbundled network elements. On
remand, the FCC clarified the requirement that traditional local phone companies
make specific unbundled network elements available to new entrants. The
traditional local phone companies have sought reconsideration of the FCC's order
and have petitioned for review of the order in the United States Court of
Appeals for the D.C. Circuit. That case is pending.

            In its January 1999 decision, the Supreme Court remanded to the
United States Court of Appeals for the Eighth Circuit various substantive
questions concerning the FCC's rules for pricing unbundled network elements. In
July 2000, the Eighth Circuit upheld the use of a forward-looking methodology
but struck down the portion of the rule that calculates costs based on efficient
technology and design choices. At the request of various parties, including us,
the Supreme Court is reviewing the Eighth Circuit's decision. The Supreme Court
heard oral argument in October 2001, and a ruling is expected in the first half
of 2002.

            In December 1999, the FCC concluded that in providing high-speed
digital subscriber line services, the incumbent local phone companies should be
required to share primary telephone lines with competitive local exchange
carriers, and the FCC identified the high frequency portion of the loop as a
network element. In January 2001, the FCC clarified that the requirement to
share lines applies to the entire loop, even where the traditional incumbent
local phone company has deployed fiber in the loop. Under the order, the
incumbent local phone companies must permit competing carriers to self-provision
or partner with a data carrier in order to furnish voice and data service on the
same line. The incumbent local phone companies have appealed these two rulings
and we have intervened in support of the FCC.

            In December 2001 and February 2002, the FCC issued a series of
Notices of Proposed Rulemaking, seeking to streamline and simplify the
requirements imposed on traditional local phone companies with respect to
unbundled network elements, broadband Internet access, and advanced services.
Comments are due during the spring of 2002, and decisions are expected before
the end of 2002. WorldCom cannot predict the outcome of these proceedings.
However, if regulations are streamlined or removed, there are elements and
combinations of elements upon which


                                       17
<Page>

WorldCom relies to provide local services, broadband and advanced services that
might no longer be required as a matter of federal regulation.

            The Telecom Act requires traditional local phone companies to
petition the FCC for permission to offer long distance services for each state
within their region. Under section 271 of the Telecom Act, for these
applications to be granted, the FCC must find, among other things, that the
traditional local phone company has demonstrated that it has satisfied a
14-point competitive checklist to open its local network to competition and that
granting the petition is in the public interest. To date, the FCC has rejected
five traditional local phone company applications and it has granted ten:
Verizon's for New York, Massachusetts, Connecticut, Pennsylvania and Rhode
Island and SBC's for Texas, Kansas, Oklahoma, Missouri and Arkansas. WorldCom
and other competitive carriers appealed to the D.C. Circuit the approvals for
Kansas, Oklahoma and Massachusetts. On December 28, 2001, the D.C. Circuit
decided that the FCC had not adequately addressed whether the prices charged for
leasing network elements by SBC in Kansas and Oklahoma create a price squeeze
which violated the standards for SBC to gain long distance approval. Without
vacating the approval, the D.C. Circuit remanded the case to the FCC for it to
address the price squeeze issue. A briefing schedule has not been established
for the Massachusetts appeal. BellSouth has filed applications to offer long
distance service for Georgia and Louisiana, and Verizon has filed applications
for Vermont and New Jersey. Other applications may be filed at any time. We have
challenged, and will continue to challenge, any application that does not
satisfy the requirements of section 271 or the FCC's local competition rules. To
date, these challenges have focused on the pricing of unbundled network elements
and on the adequacy of the traditional local phone companies' operations support
systems. In addition, legislation has been introduced in Congress that would
have the effect of allowing traditional local phone companies to offer in-region
long distance data services without satisfying section 271 of the Telecom Act
and/or of making it more difficult for competitors to resell incumbent local
phone company high-speed Internet access services or to lease the unbundled
network elements used to provide these services. To date, WorldCom and others
have successfully opposed these legislative initiatives.

            In February 1999, the FCC issued a Declaratory Ruling and Notice of
Proposed Rulemaking regarding the regulatory treatment of calls to Internet
service providers. Prior to the FCC's order, over thirty state public utility
commissions issued orders finding that carriers, including us, are entitled to
collect reciprocal compensation for completing calls to Internet service
providers under the terms of their interconnection agreements with traditional
local phone companies. Many of these public utility commission decisions were
appealed by the traditional local phone companies and, since the FCC's order,
many traditional local phone companies have filed new cases at the public
utility commissions or in court. We petitioned for review of the FCC's order in
the D.C. Circuit, which vacated the order and remanded the case to the FCC for
further proceedings. In April 2001, the FCC issued an Order on Remand and Report
and Order asserting jurisdiction over calls to Internet service providers and
establishing a three-year transitional scheme of decreasing reciprocal
compensation rates. We filed a petition for review of the FCC's order with the
D.C. Circuit, and the Court heard oral arguments on February 12, 2002.

            It is possible that spectrum rights held may be disrupted by FCC
decisions to re-allocate some or all of that spectrum to other services. If this
re-allocation were to occur, we cannot predict whether current deployment plans
for our multi-channel multipoint distribution service services will be
sustainable.

            LITIGATION

            In November 2000, class action complaints were filed in the United
States District Courts for the Southern District of Mississippi, the Southern
District of New York, and the District of Columbia against WorldCom and some of
our executive officers. All of these actions were consolidated in the Southern
District of Mississippi on March 27, 2001, along with another purported class
action lawsuit filed on behalf of individuals who purchased stock in Intermedia
between September 5 and November 1, 2000, which action asserts substantially
similar claims and alleges that after the announcement of the
WorldCom-Intermedia merger, the price of Intermedia stock was tied to the price
of WorldCom stock. On June 1, 2001, the plaintiffs filed a consolidated amended
complaint. Among other things, the consolidated amended complaint alleged that
statements regarding WorldCom's revenues, the integration of MCI, the success of
UUNET Technologies, and the expansion of WorldCom's network were false;
WorldCom's financial disclosures were false; and WorldCom's announcement of its
"generation d" initiative


                                       18
<Page>

was misleading. Based on these allegations, the consolidated amended complaint
asserts claims for violation of Section 10(b) of the Securities Exchange Act of
1934 and Rule 10b-5 promulgated thereunder and Section 20(a) of the Securities
Exchange Act of 1934. The consolidated amended complaint seeks to certify a
class of persons who purchased WorldCom shares between February 10, 2000 and
November 1, 2000, inclusive; it does not assert separate claims on behalf of
purchasers of Intermedia shares. On August 7, 2001, WorldCom and the individual
defendants filed a motion to dismiss the consolidated amended complaint in its
entirety. We believe that the factual allegations and legal claims asserted in
the consolidated amended complaint are without merit and intend to defend them
vigorously.

            In August 1997, three complaints were filed in the United States
District Court for the District of Columbia, as class actions on behalf of
purchasers of MCI shares. The three cases were consolidated on April 1, 1998. On
or about May 8, 1998, the plaintiffs in all three cases filed a consolidated
amended complaint alleging, on behalf of purchasers of MCI's shares between July
11, 1997 and August 21, 1997, inclusive, that MCI and some of its officers and
directors failed to disclose material information about MCI, including that MCI
was renegotiating the terms of the MCI BT merger agreement. The consolidated
amended complaint seeks damages and other relief. WorldCom and the other
defendants have moved to dismiss the consolidated amended complaint.

                              MCI GROUP OPERATIONS

OVERVIEW

            We provide a broad range of retail and wholesale communications
services, including long distance voice and data communications, consumer local
voice communications, wireless messaging, private line services and dial-up
Internet access services. Our retail services are provided to consumers and
small businesses in the United States. We are the second largest carrier of long
distance telecommunications services in the United States. We provide services
such as: basic long distance telephone service, dial around, collect calling,
operator assistance and calling card services (including prepaid calling cards)
and toll-free or 800 services to approximately 20 million residential and small
business customers and over 470 carriers and other resellers. We offer these
services individually and in combinations. Through combined offerings, we
provide customers with benefits such as single billing, unified services for
multi-location companies and customized calling plans. Our wholesale businesses
include wholesale voice and data services provided to carrier customers and
other resellers, and dial-up Internet access services.

            Our management's goal is to use our existing market positions and
assets opportunistically to optimize cash flow, while paying dividends and
retiring the debt attributed to the MCI group. Available cash flow, after
dividend payments, will be available for debt repayments and possible share
repurchases. The businesses attributed to the MCI group have significant assets,
including the nationally recognized brand, extensive customer relationships, 19
call centers with highly effective sales representatives and a tradition of
developing innovative calling plans that enhance customer retention. Management
believes it can leverage these strengths to deliver new services and to bundle
existing services.

            The businesses attributed to the MCI group accounted for 39.3% of
our revenues, (1.7)% of our net income and 13.4% of our assets for the year
ended December 31, 2001. For the year ended December 31, 2000, the MCI group
accounted for 41.8% of our revenues, 38.0% of our net income and 14.8% of our
assets.

INDUSTRY

            The communications services industry continues to change both
domestically and internationally, providing significant opportunities and risks
to the participants in these markets. In the United States, the Telecom Act
significantly impacted our business by establishing a statutory framework for
opening the U.S. local service markets to competition and by allowing the
traditional local phone companies to provide in-region long distance services.
In addition, prices for long distance minutes and other basic communications
services declined as a result of competitive pressures, the introduction of more
efficient networks and advanced technologies, product substitution, and
deregulation. Competition in these segments is based more on price and less on
other differentiating factors that


                                       19
<Page>

appeal to the larger business market customers including: range of services
offered, bundling of products, customer service, and communications quality,
reliability and availability.

            The wholesale business is currently undergoing a similar
transformation. The decreasing number of switchless long distance resellers
combined with the intense competition has led to significant price declines and
margin pressure.

            The consumer and small business long distance segment is
characterized by rapid deregulation and intense competition among long distance
providers, and more recently, traditional local phone companies. Under the
Telecom Act, traditional local phone companies may offer long distance services
in a state within its region if the FCC finds first, that the traditional local
phone company's service territory within the state has been sufficiently opened
to local competition and second, that allowing the traditional local phone
company to provide these services is in the public interest. We have challenged,
and will continue to challenge, any application that does not meet the criteria
envisioned by the Telecom Act or the related rules relating to local competition
issued by the FCC.

STRATEGY

            Because of changes in the communications industry, our objective is
to leverage the assets attributed to the MCI group and our established market
presence to maximize cash flow returns from our mature businesses attributed to
the MCI group. With respect to the businesses attributed to the MCI group we
intend to:

            OPTIMIZE RESOURCES: We intend to focus our strategies on enhancing
margins and cash flow. We expect to be opportunistic and undertake only those
initiatives that can generate cash flow without significant capital commitment.

            LEVERAGE MCI BRAND: The internationally recognized MCI brand will be
an important component of our marketing initiatives.

            LEVERAGE MARKETING CHANNELS: We intend to enhance the utilization of
our existing telemarketing centers and mass-market distribution channels to grow
our customer base, enhance customer retention and expand our consumer product
offerings.

            EXPAND LOCAL SERVICES: We have entered local communications markets
in New York, Pennsylvania, Texas, Illinois, Michigan, Georgia, California,
Florida and Ohio and will selectively evaluate similar opportunities.

            IMPROVE OPERATIONS SUPPORT SYSTEMS AND AUTOMATION: We intend to
continue to improve operations support systems and increase automation to
improve efficiency, enhance customer service and develop a platform for more
value-added services.

            CONTINUE TO LEVERAGE ADVANCED NETWORKS: We intend to continue to
leverage WorldCom's extensive, advanced and scaleable fiber optic networks to
provide differentiated services at competitive rates.

DESCRIPTION OF SERVICES

            The MCI group's services include long distance voice communications,
local voice communications, wireless messaging and other services, wholesale
communications services as well as dial-up Internet access. We believe that our
assets attributed to the MCI group, including the call centers, sales
representatives, customer relationships and our significant marketing skills
will allow us to expand our products and services to our existing consumer base
without significantly increasing capital spending.

            LONG DISTANCE VOICE COMMUNICATIONS

            We are the second largest provider of long distance
telecommunications services in the United States, including consumer, small
business and wholesale. We offer domestic and international voice services,
including


                                       20
<Page>

basic long distance telephone, dial around, collect calling, operator assistance
and calling card (including prepaid cards), 800 services, and directory
services. Long distance voice services are offered individually or combined as a
bundle with other services such as local voice services. Our market position in
the long distance voice segment is sustained by our telemarketing and other
marketing channels and marketing support for the MCI brand. In the year ended
December 31, 2001, we provided 94.7 billion minutes of service compared to 104.4
billion in 2000 and 92.9 billion minutes in 1999. For the year ended December
31, 2001, long distance services, including consumer, small business, wholesale
and alternative channels, provided $10.2 billion of revenues, or 28.9% of
WorldCom total revenues, versus $12.4 billion of revenues, or 31.7% of WorldCom
total revenues, for 2000 and $12.6 billion of revenues, or 35.0% of WorldCom
total revenues, for 1999.

            CONSUMER LOCAL VOICE COMMUNICATIONS

            We are aggressively, yet prudently expanding our local service and
we have selectively entered local exchange markets, including New York,
Pennsylvania, Texas, Illinois, Michigan, Georgia, California, Florida and Ohio.
We provide local toll and switched access services to residential and small
business customers, typically through our own switches and through unbundled
network elements leased from traditional local phone companies. We usually lease
the underlying traditional local phone company network elements as a bundle,
consisting of seven elements, most notably the local wire to the customer, the
switch equipment, and call switching. We pay the traditional local phone company
a monthly fee for the local wire to the customer and switch equipment and a
per-minute fee for switching. This mode of service delivery enables us to lower
the cost of providing call origination as well as providing us with call
termination revenue. For those customers who subscribe for both local and long
distance services, we offer an "all-distance" calling plan that bundles the
services at an attractive price for the customer and enhances customer
retention.

            As of December 31, 2001, we had a total of 1.5 million local
exchange customers. Approximately 83% of our local exchange customers also
subscribe to our long distance service. The consolidated local and long distance
subscribers deliver three times the lifetime revenue of standalone long distance
customers due to much higher monthly spending and lower subscriber churn. We
estimate that our market share in New York is 7%, Pennsylvania and Texas are 5%,
Illinois is 6%, Michigan is 9% and Georgia is 4% and local service in
California, Florida and Ohio each generated less than 1% of market share.
Additionally, we are able to reach 41% of all U.S. households in RBOC
territories. For the year ended December 31, 2001, consumer local services
provided $500 million of revenue, or 1.4% of WorldCom total revenues, versus
$179 million, or 0.5% of WorldCom total revenues, for 2000 and $41 million, or
0.1% of WorldCom total revenues, for 1999.

            DIAL-UP INTERNET ACCESS

            Our dial-up Internet access business primarily serves
consumer-oriented Internet service providers that are accessed via dial-up
modems. New technologies, including dedicated access provided by carriers, and
increased competition have caused significant price declines. Although we
believe we are well positioned in this segment due to the strength of our
extensive customer relationships and the scale of our networks, we expect
pricing pressure to continue to negatively affect our business.

            As of December 31, 2001, we managed 3.2 million modems versus 2.8
million modems as of December 31, 2000. In addition, we provided 7.1 billion
hours of Internet access for the year ended December 31, 2001 versus 6.5 billion
hours for 2000 and 4.2 billion hours for 1999. For the year ended December 31,
2001, dial-up Internet access services provided $1.5 billion of revenue, or 4.4%
of WorldCom total revenues, versus $1.6 billion, or 4.2% of WorldCom total
revenues, for 2000 and $1.5 billion, or 4.2% of WorldCom total revenues, for
1999.

            WHOLESALE DATA SERVICES

            Our wholesale data services consist primarily of the sale of private
lines to carrier customers. This service experienced significant pricing
pressure due largely to the entry of new competitors and the build-out of
facilities by our customers allowing them to provide more services over their
own facilities.


                                       21
<Page>

            We anticipate that wholesale data services will increasingly become
a smaller percentage of total revenues as we focus on providing services to
end-customers rather than competitive carriers. For the year ended December 31,
2001, wholesale data services, including wholesale alternative channels,
provided $1.2 billion of revenue, or 3.3% of WorldCom total revenues, versus
$1.4 billion, or 3.7% of WorldCom total revenues, for 2000 and $1.5 billion, or
4.2% of WorldCom total revenues for 1999.

            WIRELESS MESSAGING

            We provide and market our paging services through SkyTel
Communications, Inc., a leading provider of wireless messaging services in the
United States and a wholly owned subsidiary of WorldCom. As of December 31,
2001, SkyTel had approximately 1.1 million units in service in the United States
which included approximately 600,000 domestic one-way units and 540,000 advanced
messaging units. For 2001, these services provided $441 million of revenue, or
1.3% of WorldCom total revenues, versus $549 million, or 1.4% of WorldCom total
revenues, for 2000 and $470 million, or 1.3% of WorldCom total revenues, for
1999.

FACILITIES

            Our long distance voice switches have been allocated to the MCI
group. Domestic long distance services are provided primarily over the fiber
optic communications systems attributed to the WorldCom group. To a lesser
extent, we will continue to utilize transmission facilities leased from other
common carriers. International communications services are provided by submarine
cable systems in which WorldCom holds positions, satellites and facilities of
other domestic and foreign carriers.

            Long distance voice services are provided by long distance voice
switches using circuit switched technology. Voice switches are interconnected
together and provide standard long distance voice services as well as a variety
of value-added services. To reduce capital investment in circuit switches, we
are deploying softswitches to process Internet dial-up access independent of our
circuit switches. The softswitches are general-purpose based computer systems
which route calls directly to the public Internet.

            Our dial-up Internet access network consists of equipment and
network configurations all generally designed to terminate inbound Internet data
calls from end users. Generally, the equipment consists of network access
servers, which are general purpose computing devices containing concentrated
quantities of digital modems. The equipment in off-net locations is, in many
cases, owned and operated by the traditional local phone company pursuant to
service arrangements. The remaining equipment is owned and maintained in our own
facilities or in leased co-location facilities.

            The MCI group is allocated an expense and the WorldCom group is
allocated a corresponding decrease in depreciation and amortization expense for
the use by the MCI group of the fiber optic systems and buildings, furniture,
fixtures and equipment attributed to the WorldCom group. The expense is equal to
a proportion, based on usage, of the WorldCom group's related costs. All other
material transactions between the groups are intended to be on an arm's-length
basis.

            Most of our customers access their services through local
interconnection facilities provided by the traditional local phone companies. We
utilize unbundled network elements to provide local services in New York,
Pennsylvania, Texas, Illinois, Michigan, Georgia, California, Florida and Ohio.
As we expand in other markets upon deregulation and market evaluation, we expect
to continue to utilize unbundled network elements to offer local communications
services.

            Collectively, we own 19 call centers, which range in size from
40,000 square feet to over 100,000 square feet.


                                       22
<Page>

RATES AND CHARGES

            We charge switched customers on the basis of a fixed rate per line
plus minutes or partial minutes of usage at rates that vary with the distance,
duration and time of day of the call. For local service, customers are billed a
fixed charge plus usage or flat rated charges depending on the plan chosen by
the customer. The rates charged are not affected by the particular transmission
facilities selected by us. Additional discounts are available to customers who
generate higher volumes of monthly usage. Our dial-up Internet access prices
vary based on service type.

SALES AND MARKETING

            We believe our sales and marketing capabilities are one of our
strongest competitive advantages. Telemarketing is a fundamental component of
the sales effort for residential and small business customers. Typically, over
50% of our residential and small business installations are sold through some
7,700 telemarketers based in 19 call centers nationwide. Our marketing partners,
in turn, are a key competitive advantage for differentiating long distance
sales, offering consumers the opportunity to earn frequent flyer miles, free
video rentals, and similar awards based on long distance usage. Over 46% of
subscription long distance minutes are generated by our 6.2 million partner
customers.

            We also increased our market share among high spending international
callers through broad-based marketing efforts. Moreover, we have successfully
launched branded transaction products such as "10-10-220" and "1-800-Collect."
Our industry leading "10-10-220" product provides a unique way for customers to
save on every call and helps maintain strong brand recognition.

            Alternate marketing channels include direct sales agents and prepaid
card distribution. There are over 400 sales agents throughout the United States
marketing to consumers and small businesses through marketing groups. We retain
a leading position in the prepaid calling card market as well.

            Through our direct sales force, we market various services to
resellers including customers such as Verizon. We are a leader in the dial-up
Internet access market segment with all major Internet service providers as
wholesale customers, including, among others, AOL, Earthlink, and MSN.

COMPETITION

            The telecommunications industry is extremely competitive, and we
expect that competition will intensify in the future. In each of our business
segments, we face intense competition from other service providers. The primary
competitors in the domestic and international consumer segments are AT&T, Sprint
and, where they are permitted to offer in-region long distance service, Verizon
and SBC. We also compete against other facilities-based long distance providers,
such as Qwest. The traditional local phone companies presently have numerous
advantages as a result of their historic monopoly control over local exchanges,
and some of our existing and potential competitors have financial and other
resources significantly greater than ours. A continuing trend toward business
combinations and alliances in the telecommunications industry may create
significant new competitors.

            Under the Telecom Act and ensuing federal and state regulatory
initiatives, many barriers to local exchange competition are being eliminated.
The introduction of competition, however, also establishes, in part, the ability
of the traditional local phone companies to provide inter-LATA long distance
services. To date, the FCC granted applications by Verizon for the states of New
York, Massachusetts, Pennsylvania, Connecticut and Rhode Island and by SBC for
Texas, Kansas, Oklahoma, Missouri and Arkansas to provide in-region inter-LATA
services. We believe the traditional local phone companies will continue to seek
to enter these markets given their ownership of extensive facilities in their
local service regions, their long-standing customer relationships and their very
substantial capital and other financial resources. As the traditional local
phone companies are allowed to offer in-region long distance services in
additional states, they will be in a position to offer single source local and
long distance service similar, if not superior, to that being offered by us. We
expect that increased competition will result in additional pricing and margin
pressures in the domestic telecommunications services business. In addition,
wireless carriers increasingly


                                       23
<Page>

compete for consumers through nationwide or regional "bucket of minutes plans."
Indeed, wireless competition and the availability of inexpensive long-haul
transport has already significantly reduced consumer long distance pricing, and
as a result negatively affected the profitability of traditional service
providers. As rates stabilize, we expect to compete effectively as a result of
our innovation, quality and diversity of services, our ability to offer a
combination of services, and our level of customer service.

            We expect increased competition from providers determined to exploit
technologies which may reduce the cost of providing services. We are working to
develop these services and expect to be at the forefront of these technological
developments and to leverage them to protect and grow market share, to increase
revenues and profitability, and to retain customers.

            We also face intense competition in offering wholesale services,
small business services, dial-up Internet, and paging and prepaid calling card
services. In wholesale services, we compete directly with traditional network
access providers such as AT&T and Sprint. We obtain network capacity from our
businesses attributed to the WorldCom group and provide wholesale service to
other carriers in competition with a variety of facilities-based carriers. There
can be no assurance that we will continue to be successful in this segment. In
the small business customer segment, we compete against traditional local phone
companies and numerous other competitive carriers offering local services, long
distance services, or both. Other carriers, particularly competitive local
exchange carriers, are aggressively pursuing this segment of the market. Our
paging business competes directly with traditional one-way paging providers, and
recently experienced significant competition and product substitution from other
advanced wireless data service providers, including two-way paging services
providers and wireless service providers. Prepaid calling cards are also in an
intensely competitive segment where many carriers resell cheaper aggregated
international minutes through this medium and where wireless products are
further compressing pricing.

EMPLOYEES

            Through our businesses attributed to the MCI group, we employed a
total of approximately 23,200 full and part-time personnel as of February 28,
2002 none of whom are represented by organized labor unions. We consider our
relationship with these employees to be good.

PATENTS, TRADEMARKS, TRADENAMES AND SERVICE MARKS

            All tradenames, including the MCI tradename and the other related
MCI tradenames, have been attributed to the WorldCom group. The MCI group will
be allocated an expense and the WorldCom group will be allocated a corresponding
decrease in depreciation and amortization expense for the use of the MCI
tradenames for the next four years based on the following schedule:

                               2002: $30.0 million
                               2003: $35.0 million
                               2004: $40.0 million
                               2005: $45.0 million

            Any renewal or termination of use of the MCI tradename by the MCI
group will be subject to the general policy that our board of directors will act
in the best interests of WorldCom. For each of the years ended December 31,
1999, 2000 and 2001, an expense of $27.5 million per annum was allocated to the
MCI group for use of the MCI tradenames.

REGULATION AND LITIGATION

            We are involved in legal and regulatory proceedings that are
incidental to our business and have included loss contingencies in other current
liabilities and other liabilities for these matters in our financial statements.
In some instances, rulings by federal and state regulatory authorities may
result in increased operating costs to us. The results of these various legal
and regulatory matters are uncertain and could have a material adverse effect on
our


                                       24
<Page>

consolidated results of operations or financial position. See the information
contained in "Item 1. Business-Business-WorldCom group Operations-Regulation and
Litigation," which is incorporated by reference herein, for a discussion of
regulation and litigation matters.

ITEM 2. PROPERTIES

            The information contained in "Item 1. Business-Business-WorldCom
group Operations-Facilities" and "-MCI group Operations-Facilities" is hereby
incorporated by reference.

ITEM 3. LEGAL PROCEEDINGS

            We are involved in legal and regulatory proceedings generally
incidental to our business. In some instances, rulings by federal and some state
regulatory authorities may result in increased operating costs to us. As
indicated above in Item 1. Business or in note 9 to our notes to consolidated
financial statements, which are incorporated herein by reference, the results of
these various legal and regulatory matters are uncertain and could have a
material adverse effect on our consolidated results of operations or financial
position.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

            None

                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

            The shares of WorldCom group stock and MCI group stock have been
quoted on The Nasdaq National Market under the symbols "WCOM" and "MCIT,"
respectively, since our recapitalization on June 7, 2001. Prior to June 7, 2001,
WorldCom, Inc. common stock was quoted on The Nasdaq National Market under the
symbol "WCOM." The following table sets forth the high and low sales prices per
share of WorldCom, Inc. common stock, WorldCom group stock and MCI group stock
as reported on The Nasdaq National Market based on published financial sources
and the dividends declared per MCI group share for the periods indicated.

<Table>
<Caption>
                                               WORLDCOM, INC.                 WORLDCOM
                                                COMMON STOCK                 GROUP STOCK                 MCI GROUP STOCK
                                                ------------                 -----------                 ---------------
                                                                                                                           DIVIDEND
                                             HIGH           LOW          HIGH           LOW      HIGH           LOW        DECLARED
                                             ----           ---          ----           ---      ----           ---        --------
<S>                                         <C>           <C>           <C>           <C>       <C>           <C>           <C>
2000
First Quarter ...........................   $55.00        $40.63        $   --        $   --    $   --        $   --        $   --
Second Quarter ..........................    47.00         35.88            --            --        --            --            --
Third Quarter ...........................    49.97         25.25            --            --        --            --            --
Fourth Quarter ..........................    30.44         13.50            --            --        --            --            --

2001
First Quarter ...........................    23.50         14.25            --            --        --            --            --
Second Quarter (through June 7, 2001) ...    21.52         17.25            --            --        --            --            --
Second Quarter (starting June 7, 2001) ..       --            --         18.10         13.27     22.50         15.02          0.60
Third Quarter ...........................       --            --         15.90         11.50     17.22         11.00          0.60
Fourth Quarter ..........................       --            --         16.06         11.79     15.40         10.90          0.60
</Table>


                                       25
<Page>

            As of February 28, 2002, there were 2,962,645,459 shares of WorldCom
group stock issued and outstanding, net of treasury shares, held by
approximately 64,000 shareholders of record, and 118,325,109 shares of MCI group
stock issued and outstanding, net of treasury shares, held by approximately
53,000 shareholders of record.

            Prior to the recapitalization, we did not pay cash dividends on our
common stock and we have never paid cash dividends on the WorldCom group stock.
The policy of our board of directors is to retain earnings attributed to the
WorldCom group to provide funds for the operation and expansion of its
businesses.

PREFERRED STOCK

            In connection with the Intermedia merger, we issued the following
series of preferred stock, which are mandatorily redeemable:

<Table>
<Caption>
                                                NUMBER OF
                                                PREFERRED                    ANNUAL                AGGREGATE # OF SHARES CONVERTIBLE
                                                  SHARES      LIQUIDATION   DIVIDEND                    AT THE OPTION OF HOLDER
                                                AUTHORIZED,   PREFERENCE       PER     ASSOCIATED  ---------------------------------
                                                ISSUED AND   PER PREFERRED  PREFERRED  DEPOSITORY       WORLDCOM        MCI GROUP
                                               OUTSTANDING       SHARE        SHARE      SHARES       GROUP SHARES        SHARES
                                               -------------------------------------------------------------------------------------
<S>                                              <C>             <C>           <C>     <C>              <C>              <C>
Series D Junior Convertible preferred stock,
   par value $0.01 per share                      53,724         $2,500        $175    5,372,410        6,905,398        276,215
Series E Junior Convertible preferred stock,
   par value $0.01 per share                      64,047         $2,500        $175    6,404,690        5,295,766        211,830
Series F Junior Convertible preferred stock,
   par value $0.01 per share                      79,600         $2,500        $175    7,960,000        4,729,649        189,185
Series G Junior Convertible Participating
   preferred stock, par value $0.01 per share    200,000         $1,000        $ 70          n/a        5,555,555        222,222
</Table>

            On August 20, 2001, the holder of our Series G preferred stock
exercised its right to require us to redeem all of the outstanding Series G
preferred stock at par plus accrued dividends, or approximately $200 million in
the aggregate.

            The Series D, E and F preferred stock are currently redeemable in
whole or in part, at our option for cash plus accrued and unpaid dividends at
rates commencing with 103%, declining to 100% in 2004 and thereafter for the
Series D and E preferred stock and commencing with 104%, declining to 100% in
2005 and thereafter for the Series F preferred stock.

            Dividends on the Series D, E and F preferred stock are payable in
cash or shares of our common stock, at our election on each July 15, October 15,
January 15 and April 15. To date, we have paid these dividends in cash and we
expect to continue to pay cash dividends on our Series D, E and F preferred
stock.

            The Series D, E and F preferred shareholders are generally entitled
to one-tenth of a vote per share of Series D, E or F preferred stock on all
matters voting together with the WorldCom common shareholders as a single class.

            In October 2001, we exercised our option to redeem all of our
outstanding Series B Preferred Stock. Prior to the redemption date,
substantially all of the holders of our Series B Preferred Stock elected to
convert the preferred stock into 0.1460868 shares of WorldCom group stock and
0.005843472 shares of MCI group stock for each share of Series B Preferred Stock
held.

            In January 2000, each outstanding share of WorldCom Series C $2.25
Cumulative Convertible Exchangeable Preferred Stock was redeemed by WorldCom for
$50.75 in cash, or approximately $190 million in the aggregate.


                                       26
<Page>

ITEM 6. SELECTED FINANCIAL DATA

                 SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA

            We derived the selected historical consolidated financial data
presented below as of and for the five years ended December 31, 2001 from our
consolidated financial statements and related notes, which include the WorldCom
group and the MCI group. Our audited consolidated financial statements for each
of the years ended December 31, 1999, 2000 and 2001 are included in this Form
10-K. The pro forma net income per share data set forth below give effect to the
recapitalization as though the recapitalization had occurred on January 1, 1999.

            You should read the selected financial data together with our
audited consolidated financial statements and the "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included in this
document. In reading the following selected financial data, please note the
following:

      o     On September 14, 1998 we completed our merger with MCI. The MCI
            merger was accounted for as a purchase; accordingly, the operating
            results of MCI are included from the date of that acquisition.

      o     During the second quarter of 2001, we reached a long-term strategic
            decision to restructure our investment in Embratel. Based on actions
            taken during the second quarter, the accounting principles generally
            accepted in the United States prohibit the continued consolidation
            of Embratel's results. Accordingly, our equity in Embratel's
            earnings for 2001 is reported in miscellaneous income.

      o     Results for 2001 include pre-tax costs of $865 million related to
            the write-off of investments in certain publicly traded and
            privately held companies, $23 million as a result of costs
            associated with the tracking stock capitalization, $207 million
            associated with domestic and international severance packages and
            other costs related to our 2001 workforce reductions, and $48
            million associated with our proportionate share of a receivables
            write-down at Embratel.

      o     Results for 2000 include a pre-tax charge of $93 million associated
            with the termination of the Sprint Corporation merger agreement,
            including regulatory, legal, accounting and investment banking fees
            and other costs, and a $685 million pre-tax charge associated with
            specific domestic and international wholesale accounts that were no
            longer deemed collectible due to bankruptcies, litigation and
            settlements of contractual disputes that occurred in the third
            quarter of 2000.

      o     In 1998, we recorded a pre-tax charge of $196 million in connection
            with the Brooks Fiber Properties, Inc. merger, the MCI merger and
            the asset write-downs and loss contingencies. The charge included
            $21 million for employee severance, $17 million for Brooks Fiber
            Properties direct merger costs, $38 million for conformance of
            Brooks Fiber Properties accounting policies, $56 million for exit
            costs under long-term commitments, $31 million for write-down of a
            permanently impaired investment and $33 million related to asset
            write-downs and loss contingencies associated with the Brooks Fiber
            Properties merger and the MCI merger. Additionally, in connection
            with 1998 business combinations, we made allocations of the purchase
            price to acquired in-process research and development totaling $429
            million in the first quarter of 1998 related to the CompuServe
            Corporation merger and the acquisition of ANS Communications, Inc.
            and $3.1 billion in the third quarter of 1998 related to the MCI
            merger.

      o     In connection with debt refinancings, we recognized in 1997 and 1998
            extraordinary items of $3 million and $129 million, respectively,
            net of taxes, consisting of unamortized debt discount, unamortized
            issuance cost and prepayment fees.

      o     We adopted the American Institute of Certified Public Accountants'
            Statement of Position 98-5, "Reporting on the Costs of Start-Up
            Activities" as of January 1, 1998. The cumulative effect of this
            change in accounting principle resulted in a one-time, non-cash
            expense of $36 million, net of taxes. This expense represented
            start-up costs incurred primarily in conjunction with the
            development and construction of the advanced messaging


                                       27
<Page>

            network of SkyTel Communications, which are required to be expensed
            as incurred in accordance with this accounting standard.

      o     During the fourth quarter of 2000, we implemented Staff Accounting
            Bulletin No. 101, "Revenue Recognition in Financial Statements", or
            SAB 101, which requires certain activation and installation fee
            revenues to be amortized over the average life of the related
            service rather than be recognized immediately. Costs directly
            related to these revenues may also be deferred and amortized over
            the customer contract life. As required by SAB 101, we retroactively
            adopted this accounting effective January 1, 2000, which resulted in
            a one-time expense of $85 million, net of income tax benefit of $50
            million.

<Table>
<Caption>
                                                                    AT OR FOR THE YEARS ENDED DECEMBER 31,
                                                           -----------------------------------------------------------
                                                             1997         1998        1999        2000          2001
                                                           --------     --------     -------    --------     ---------
                                                                    (IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S>                                                        <C>          <C>          <C>        <C>          <C>
OPERATING RESULTS:
Revenues ..............................................    $  7,643     $ 17,617     $35,908    $ 39,090     $  35,179
Operating income (loss) ...............................         982         (942)      7,888       8,153         3,514
Income (loss) before cumulative effect of accounting
   change and extraordinary items .....................         185       (2,560)      4,013       4,238         1,501
Cumulative effect of accounting change ................          --          (36)         --         (85)           --
Extraordinary items ...................................          (3)        (129)         --          --            --
Net income (loss) applicable to common shareholders ...         143       (2,767)      3,941       4,088         1,384
Earnings (loss) per common share:
Income (loss) before cumulative effect of accounting
   change and extraordinary items:
   Basic ..............................................        0.10        (1.35)       1.40        1.46
   Diluted ............................................        0.10        (1.35)       1.35        1.43
Net income (loss):
   Basic ..............................................        0.10        (1.43)       1.40        1.43
   Diluted ............................................        0.09        (1.43)       1.35        1.40
WorldCom group pro forma net income per share (1):
   Basic ..............................................          --           --        0.81        0.88          0.48
   Diluted ............................................          --           --        0.78        0.87          0.48
MCI group pro forma net income (loss) per share (1):
   Basic and diluted ..................................          --           --       14.32       13.52         (0.20)
Dividends declared per MCI group share ................          --           --          --          --          1.80
Weighted-average shares:
   Basic ..............................................       1,470        1,933       2,821       2,868
   Diluted ............................................       1,516        1,933       2,925       2,912
FINANCIAL POSITION:
Total assets ..........................................    $ 24,400     $ 87,092     $91,072    $ 98,903     $ 103,914
Long-term debt ........................................       7,811       16,448      13,128      17,696        30,038
Company obligated mandatorily redeemable and other
   preferred securities ...............................          --          798         798         798         1,993
Shareholders' investment ..............................      14,087       45,241      51,238      55,409        57,930
</Table>

----------

(1)   The WorldCom group stock and the MCI group stock pro forma net income per
      share calculations were calculated using the two-class method, by dividing
      the earnings allocated to each series of common stock by the number of
      shares of that series outstanding for the relevant period. The earnings
      allocated to each series of common stock was determined based on the net
      income or loss amounts of the relevant group determined in accordance with
      accounting principles generally accepted in the United States consistently
      applied. The number of shares of each series prior to the recapitalization
      was determined by assuming that there were the same number of shares of
      WorldCom group stock outstanding for the periods as there were for our
      existing stock and that the


                                       28
<Page>

      number of shares of MCI group stock outstanding for the periods equaled
      1/25 of that amount. For 1999, the WorldCom group share amounts equaled
      2,821 million (basic) and 2,925 million (diluted) and the MCI group share
      amounts equaled 115 million for both the basic and diluted computations.
      For 2000, the WorldCom group share amounts equaled 2,868 million (basic)
      and 2,912 million (diluted) and the MCI group share amounts equaled 115
      million for both the basic and diluted computations. For 2001, the
      WorldCom group share amounts equaled 2,923 million (basic) and 2,933
      million (diluted) and the MCI group share amounts equaled 117 million for
      both the basic and diluted computations. The combined financial statements
      of the WorldCom group and the MCI group do not present earnings per share
      because the WorldCom group stock and the MCI group stock are series of
      common stock of WorldCom and because the WorldCom group and the MCI group
      are not legal entities with their own capital structure.

                SELECTED HISTORICAL CONSOLIDATING FINANCIAL DATA

            The following schedules present balance sheet, statement of
operations and statement of cash flows data of the WorldCom group, the MCI group
and WorldCom for each of the three years ended December 31, 2001. We have
presented this information to illustrate the financial results of the WorldCom
group and the MCI group and how the financial results of these groups relate to
the consolidated results of WorldCom. This information, which has been prepared
in accordance with accounting principles generally accepted in the United
States, should be read together with the audited financial statements of each of
WorldCom, the WorldCom group and the MCI group and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included in this Form
10-K.

            The balance sheets, statements of operations and statements of cash
flows of WorldCom, the WorldCom group and the MCI group for the years ended
December 31, 1999, 2000 and 2001 have been derived from the audited financial
statements which are included in this Form 10-K.

            The financial information reflects the performance of the businesses
attributed to each of the WorldCom group and the MCI group and includes the
attribution and allocation of our assets, liabilities, revenues and expenses
between the WorldCom group and the MCI group in accordance with our tracking
stock policy, which has been consistently applied for all periods presented, and
requires:

      o     centralized management of most financial activities, under which the
            MCI group will generally not be allocated any cash balances;

      o     debt allocated to the MCI group to carry an interest rate equal to
            the weighted-average interest rate, excluding capitalized interest,
            of WorldCom plus a spread based upon rates at which the MCI group
            would borrow if it was a wholly owned subsidiary of WorldCom but did
            not have the benefit of any guarantee by WorldCom. Each group's
            allocated debt increases or decreases by the amount of any net cash
            generated by, or required to fund, the group's operating activities,
            investing activities, dividend payments, share repurchases and other
            financing activities;

      o     the MCI group to be allocated an expense for use of our fiber optic
            systems, which are attributed to the WorldCom group, and the
            WorldCom group to be allocated an expense for use of our business
            voice switched services, which are attributed to the MCI group. The
            fees for each of these services will be equal to a portion, based on
            usage, of the applicable costs and results in a corresponding
            decrease in the other group's related depreciation expense;

      o     the transfer of assets and liabilities between the businesses
            attributed to one group and the businesses attributed to the other
            group to be at fair value, and all other material transactions
            between the groups are intended to be on an arm's-length basis.
            These other transactions initially consist of the MCI group's use of
            buildings, furniture and fixtures and the MCI tradenames, which
            assets have been attributed to the WorldCom group. The MCI group
            will be allocated a portion, based on usage, of the applicable
            costs, which will result in a corresponding decrease in the WorldCom
            group's related depreciation and amortization expense;


                                       29
<Page>

      o     the cost of shared corporate services and related balance sheet
            amounts to be attributed to each of the groups based upon
            identification of the services specifically benefiting the group.
            Where determinations based on specific identification are
            impractical, other methods and criteria are used to make allocations
            between the groups, such as number of employees and total line costs
            or revenues generated by each group; and

      o     the tax expense or benefit allocable to the MCI group to be the
            amount the MCI group would have incurred had it filed tax returns as
            a separate taxpayer and the tax expense allocable to the WorldCom
            group to be the excess, if any, of our tax expense over the tax
            expense or benefit allocable to the MCI group. Tax benefits that
            cannot be used by a group generating those benefits but can be used
            on a consolidated basis are credited to the group that generated
            those benefits.

            Our board of directors or any special committee appointed by our
board of directors may, without shareholder approval, change the policies set
forth in our policy statement. Our board of directors or any special committee
appointed by our board of directors also may, without shareholder approval,
adopt additional policies or make exceptions with respect to the application of
the policies described in our policy statement in connection with particular
facts and circumstances, all as they may determine to be in the best interests
of WorldCom. Our board is subject to fiduciary duties to all of WorldCom's
shareholders as one group, not to the holders of any series of stock separately.
Any changes or exceptions will be made after a determination by our board of
what is in the best interests of WorldCom as a whole, which may be detrimental
to the interests of the holders of one series of stock.


                                       30
<Page>

                           CONSOLIDATING BALANCE SHEET
                                  (IN MILLIONS)

<Table>
<Caption>
                                                                      AT DECEMBER 31, 1999
                                                       -------------------------------------------------
                                                       WORLDCOM         MCI
                                                         GROUP         GROUP   ELIMINATIONS(1)  WORLDCOM
                                                       --------       -------  ---------------  --------
<S>                                                     <C>           <C>           <C>          <C>
Current assets                                          $ 9,037       $ 2,263       $(976)       $10,324
Property and equipment, net                              26,227         2,391          --         28,618
Goodwill and other intangibles                           37,252        10,056          --         47,308
Other assets                                              4,717           105          --          4,822
                                                        -------       -------       -----        -------
   Total assets                                         $77,233       $14,815       $(976)       $91,072
                                                        =======       =======       =====        =======

Current liabilities                                     $12,694       $ 5,491       $(976)       $17,209
Long-term debt                                            7,128         6,000          --         13,128
Noncurrent liabilities                                    5,276           824          --          6,100
Minority interests                                        2,599            --          --          2,599
Company obligated mandatorily redeemable
   preferred securities                                     798            --          --            798
Shareholders' investment                                 48,738         2,500          --         51,238
                                                        -------       -------       -----        -------
   Total liabilities and shareholders' investment       $77,233       $14,815       $(976)       $91,072
                                                        =======       =======       =====        =======
</Table>

----------
(1)   Represents the elimination of intergroup receivables and payables
      associated with other intergroup allocations between the WorldCom group
      and the MCI group. The WorldCom group had a net receivable from the MCI
      group of $976 million and the MCI group had a corresponding net payable to
      the WorldCom group.


                                       31
<Page>

                      CONSOLIDATING STATEMENT OF OPERATIONS
                                  (IN MILLIONS)

<Table>
<Caption>
                                                                                 YEAR ENDED DECEMBER 31, 1999
                                                                   -------------------------------------------------------
                                                                   WORLDCOM           MCI
                                                                     GROUP           GROUP      ELIMINATIONS      WORLDCOM
                                                                   --------          -----      ------------      --------
<S>                                                                <C>             <C>             <C>            <C>
Revenues                                                           $ 19,736        $ 16,172        $    --        $ 35,908
Operating expenses:                                                --------        --------        -------        --------
    Line costs:
        Attributed costs (1)                                          7,841           6,898             --          14,739
        Intergroup allocated expenses (2)                                64             189           (253)             --
    Selling, general and administrative:
        Attributed costs (1)                                          2,594           3,113          3,228           8,935
        Shared corporate services (3)                                 1,601           1,627         (3,228)             --
        Other intergroup allocated expenses (4)                          --             331           (331)             --
    Depreciation and amortization:
        Attributed costs (1)                                          3,533             821             --           4,354
        Intergroup allocated expenses (5)                              (520)            (64)           584              --
    Other charges                                                        (8)             --             --              (8)
                                                                   --------        --------        -------        --------
Total                                                                15,105          12,915             --          28,020
                                                                   --------        --------        -------        --------
Operating income                                                      4,631           3,257             --           7,888
Interest expense                                                       (460)           (506)            --            (966)
Miscellaneous income                                                    237               5             --             242
                                                                   --------        --------        -------        --------
Income before income taxes and minority interests                     4,408           2,756             --           7,164
Provision for income taxes                                            1,856           1,109             --           2,965
                                                                   --------        --------        -------        --------
Income before minority interests                                      2,552           1,647             --           4,199
Minority interests                                                     (186)             --             --            (186)
                                                                   --------        --------        -------        --------
Net income before distributions on mandatorily
    redeemable preferred securities                                   2,366           1,647             --           4,013
Distributions on mandatorily redeemable preferred securities
    and other preferred dividend requirements                            72              --             --              72
                                                                   --------        --------        -------        --------
Net income                                                         $  2,294        $  1,647        $    --        $  3,941
                                                                   ========        ========        =======        ========
</Table>

----------
(1)   Attributed costs represent costs directly incurred by or attributed to the
      WorldCom group and the MCI group and do not include any intergroup
      allocations.
(2)   The WorldCom group was allocated $64 million for its usage of our business
      voice switches, which have been attributed to the MCI group, and the MCI
      group was allocated $189 million for its usage of our fiber optic systems,
      which have been attributed to the WorldCom group.
(3)   Our shared corporate services (such as executive management, human
      resources, legal, regulatory, accounting and tax, treasury, strategic
      planning and information systems support) have been allocated to the
      WorldCom group and the MCI group in the amounts of $1.6 billion and $1.6
      billion, respectively.
(4)   The MCI group was allocated $303 million of costs related to its use of
      buildings, furniture and fixtures and $28 million for use of the MCI
      tradenames, which assets have been attributed to the WorldCom group.
(5)   A credit of $492 million and $64 million to depreciation expense has been
      recorded by the WorldCom group and the MCI group, respectively, to reflect
      the allocation of a portion of the applicable costs for the use by the
      WorldCom group of the business voice switches attributed to the MCI group,
      and the proportionate use by the MCI group of the fiber optic systems and
      buildings, furniture and fixtures attributed to the WorldCom group.
      Additionally, a credit of $28 million to amortization expense has been
      recorded by the WorldCom group to reflect the charge to the MCI group for
      use of the MCI tradenames.


                                       32
<Page>

                      CONSOLIDATING STATEMENT OF CASH FLOWS
                                  (IN MILLIONS)

<Table>
<Caption>
                                                                           YEAR ENDED DECEMBER 31, 1999
                                                               --------------------------------------------------
                                                               WORLDCOM           MCI
                                                                 GROUP           GROUP    ELIMINATIONS   WORLDCOM
                                                               --------          -----    ------------   --------
<S>                                                            <C>             <C>             <C>       <C>
Cash flows from operating activities:
Net income                                                     $  2,366        $  1,647        $--       $  4,013
Adjustments to reconcile net income to net cash provided
  by operating activities:                                        4,986           2,006         --          6,992
                                                               --------        --------        ---       --------
  Net cash provided by operating activities                       7,352           3,653         --         11,005
                                                               --------        --------        ---       --------

Cash flows from investing activities:
Capital expenditures                                             (7,929)           (787)        --         (8,716)
Acquisitions and related costs                                     (786)           (292)        --         (1,078)
All other investing activities, net                                 670            (431)        --            239
                                                               --------        --------        ---       --------
  Net cash used in investing activities                          (8,045)         (1,510)        --         (9,555)
                                                               --------        --------        ---       --------

Cash flows from financing activities:
Principal repayments on debt, net                                (2,894)             --         --         (2,894)
Attributed stock activity of WorldCom, Inc.                         886              --         --            886
Intergroup advances, net                                          2,097          (2,097)        --             --
All other financing activities, net                                 (72)             --         --            (72)
                                                               --------        --------        ---       --------
  Net cash provided by (used in) financing activities                17          (2,097)        --         (2,080)
Effect of exchange rate changes on cash                            (221)             --         --           (221)
                                                               --------        --------        ---       --------
Net increase (decrease) in cash and cash equivalents               (897)             46         --           (851)
Cash and cash equivalents beginning of period                     1,703              24         --          1,727
                                                               --------        --------        ---       --------
Cash and cash equivalents end of period                        $    806        $     70        $--       $    876
                                                               ========        ========        ===       ========
</Table>


                                       33
<Page>

                           CONSOLIDATING BALANCE SHEET
                                  (IN MILLIONS)

<Table>
<Caption>
                                                                       AT DECEMBER 31, 2000
                                                       ---------------------------------------------------
                                                       WORLDCOM         MCI
                                                         GROUP         GROUP    ELIMINATIONS(1)   WORLDCOM
                                                       --------        -----    ---------------   --------
<S>                                                     <C>           <C>           <C>            <C>
Current assets                                          $ 8,092       $ 2,312       $  (649)       $ 9,755
Property and equipment, net                              35,177         2,246            --         37,423
Goodwill and other intangibles                           36,685         9,909            --         46,594
Other assets                                              5,939           168          (976)         5,131
                                                        -------       -------       -------        -------
   Total assets                                         $85,893       $14,635       $(1,625)       $98,903
                                                        =======       =======       =======        =======

Current liabilities                                     $14,213       $ 4,109       $  (649)       $17,673
Long-term debt                                           11,696         6,000            --         17,696
Noncurrent liabilities                                    3,648         2,063          (976)         4,735
Minority interests                                        2,592            --            --          2,592
Company obligated mandatorily redeemable
   preferred securities                                     798            --            --            798
Shareholders' investment                                 52,946         2,463            --         55,409
                                                        -------       -------       -------        -------
   Total liabilities and shareholders' investment       $85,893       $14,635       $(1,625)       $98,903
                                                        =======       =======       =======        =======
</Table>

(1)   Represents the elimination of intergroup receivables and payables
      associated with other intergroup allocations between the WorldCom group
      and the MCI group. The WorldCom group had a net receivable from the MCI
      group (and the MCI group had a corresponding net payable to the WorldCom
      group) of $1.6 billion, of which $649 million was classified as current
      with the remainder classified as long-term.


                                       34
<Page>

                      CONSOLIDATING STATEMENT OF OPERATIONS
                                  (IN MILLIONS)

<Table>
<Caption>
                                                                                  YEAR ENDED DECEMBER 31, 2000
                                                                   --------------------------------------------------------
                                                                   WORLDCOM          MCI
                                                                     GROUP           GROUP       ELIMINATIONS      WORLDCOM
                                                                   --------          -----       ------------      --------
<S>                                                                <C>             <C>             <C>             <C>
Revenues                                                           $ 22,755        $ 16,335        $     --        $ 39,090
                                                                   --------        --------        --------        --------
Operating expenses:
   Line costs:
       Attributed costs (1)                                           8,658           6,804              --          15,462
       Intergroup allocated expenses (2)                                 87             373            (460)             --
   Selling, general and administrative:
       Attributed costs (1)                                           3,682           2,981           3,934          10,597
       Shared corporate services (3)                                  2,007           1,927          (3,934)             --
       Other intergroup allocated expenses (4)                           --             254            (254)             --
   Depreciation and amortization:
       Attributed costs (1)                                           3,907             971              --           4,878
       Intergroup allocated expenses (5)                               (627)            (87)            714              --
                                                                   --------        --------        --------        --------
Total                                                                17,714          13,223              --          30,937
                                                                   --------        --------        --------        --------
Operating income                                                      5,041           3,112              --           8,153
Interest expense                                                       (458)           (512)             --            (970)
Miscellaneous income                                                    385              --              --             385
                                                                   --------        --------        --------        --------
Income before income taxes, minority interests and
   cumulative effect of accounting change                             4,968           2,600              --           7,568
Provision for income taxes                                            1,990           1,035              --           3,025
                                                                   --------        --------        --------        --------
Income before minority interests and cumulative
   effect of accounting change                                        2,978           1,565              --           4,543
Minority interests                                                     (305)             --              --            (305)
                                                                   --------        --------        --------        --------
Income before cumulative effect of accounting change                  2,673           1,565                           4,238
Cumulative effect of accounting change                                  (75)            (10)                            (85)
                                                                   --------        --------        --------        --------
Net income before distributions on mandatorily
   redeemable preferred securities                                    2,598           1,555              --           4,153
Distributions on mandatorily redeemable preferred securities
   and other preferred dividend requirements                             65              --              --              65
                                                                   --------        --------        --------        --------
Net income                                                         $  2,533        $  1,555        $     --        $  4,088
                                                                   ========        ========        ========        ========
</Table>

(1)   Attributed costs represent costs directly incurred by or attributed to the
      WorldCom group and the MCI group and do not include any intergroup
      allocations.
(2)   The WorldCom group was allocated $87 million for its usage of our business
      voice switches, which have been attributed to the MCI group, and the MCI
      group was allocated $373 million for its usage of our fiber optic systems,
      which have been attributed to the WorldCom group.
(3)   Our shared corporate services (such as executive management, human
      resources, legal, regulatory, accounting and tax, treasury, strategic
      planning and information systems support) have been allocated to the
      WorldCom group and the MCI group in the amounts of $2.0 billion and $1.9
      billion, respectively.
(4)   The MCI group was allocated $226 million of costs related to its use of
      buildings, furniture and fixtures and $28 million for use of the MCI
      tradenames, which assets have been attributed to the WorldCom group.
(5)   A credit of $599 million and $87 million to depreciation expense has been
      recorded by the WorldCom group and the MCI group, respectively, to reflect
      the allocation of a portion of the applicable costs for the use by the
      WorldCom group of the business voice switches attributed to the MCI group,
      and the proportionate use by the MCI group of the fiber optic systems and
      buildings, furniture and fixtures attributed to the WorldCom group.
      Additionally, a credit of $28 million to amortization expense has been
      recorded by the WorldCom group to reflect the charge to the MCI group for
      use of the MCI tradenames.


                                       35
<Page>

                      CONSOLIDATING STATEMENT OF CASH FLOWS
                                  (IN MILLIONS)

<Table>
<Caption>
                                                                           YEAR ENDED DECEMBER 31, 2000
                                                               ---------------------------------------------------
                                                               WORLDCOM          MCI
                                                                 GROUP          GROUP      ELIMINATIONS   WORLDCOM
                                                               --------         -----      ------------   --------
<S>                                                            <C>             <C>             <C>        <C>
Cash flows from operating activities:
Net income                                                     $  2,598        $  1,555        $ --       $  4,153
Adjustments to reconcile net income to net cash provided
  by operating activities:                                        2,732             781          --          3,513
                                                               --------        --------        ----       --------
  Net cash provided by operating activities                       5,330           2,336          --          7,666
                                                               --------        --------        ----       --------

Cash flows from investing activities:
Capital expenditures                                            (10,984)           (500)         --        (11,484)
Acquisitions and related costs                                      (14)             --          --            (14)
All other investing activities, net                              (2,614)           (273)         --         (2,887)
                                                               --------        --------        ----       --------
  Net cash used in investing activities                         (13,612)           (773)         --        (14,385)
                                                               --------        --------        ----       --------

Cash flows from financing activities:
Principal borrowings on debt, net                                 6,377              --          --          6,377
Attributed stock activity of WorldCom, Inc.                         585              --          --            585
Intergroup advances, net                                          1,592          (1,592)         --             --
All other financing activities, net                                (339)             --          --           (339)
                                                               --------        --------        ----       --------
  Net cash provided by (used in) financing activities             8,215          (1,592)         --          6,623
Effect of exchange rate changes on cash                             (19)             --          --            (19)
                                                               --------        --------        ----       --------
Net decrease in cash and cash equivalents                           (86)            (29)         --           (115)
Cash and cash equivalents beginning of period                       806              70          --            876
                                                               --------        --------        ----       --------
Cash and cash equivalents end of period                        $    720        $     41        $ --       $    761
                                                               ========        ========        ====       ========
</Table>


                                       36
<Page>

                           CONSOLIDATING BALANCE SHEET
                                  (IN MILLIONS)

<Table>
<Caption>
                                                                         AT DECEMBER 31, 2001
                                                        ------------------------------------------------------
                                                        WORLDCOM         MCI
                                                          GROUP         GROUP      ELIMINATIONS(1)    WORLDCOM
                                                        --------        -----      ---------------    --------
<S>                                                     <C>            <C>            <C>             <C>
Current assets                                          $  8,179       $  1,926       $   (900)       $  9,205
Property and equipment, net                               36,792          2,017             --          38,809
Goodwill and other intangibles                            40,818          9,719             --          50,537
Other assets                                               6,112            227           (976)          5,363
                                                        --------       --------       --------        --------
   Total assets                                         $ 91,901       $ 13,889       $ (1,876)       $103,914
                                                        ========       ========       ========        ========

Current liabilities                                     $  5,915       $  4,195       $   (900)       $  9,210
Long-term debt                                            24,533          5,505             --          30,038
Noncurrent liabilities                                     3,742          1,876           (976)          4,642
Minority interests                                           101             --             --             101
Mandatorily redeemable and other
   preferred securities                                    1,993             --             --           1,993
Shareholders' investment                                  55,617          2,313             --          57,930
                                                        --------       --------       --------        --------
   Total liabilities and shareholders' investment       $ 91,901       $ 13,889       $ (1,876)       $103,914
                                                        ========       ========       ========        ========
</Table>

(1)   Represents the elimination of intergroup receivables and payables
      associated with other intergroup allocations between the WorldCom group
      and the MCI group. The WorldCom group had a net receivable from the MCI
      group (and the MCI group had a corresponding net payable to the WorldCom
      group) of $1.9 billion, of which $900 million was classified as current
      with the remainder classified as long-term.


                                       37
<Page>

                      CONSOLIDATING STATEMENT OF OPERATIONS
                                  (IN MILLIONS)

<Table>
<Caption>
                                                                                 YEAR ENDED DECEMBER 31, 2001
                                                                   --------------------------------------------------------
                                                                   WORLDCOM           MCI
                                                                     GROUP           GROUP       ELIMINATIONS      WORLDCOM
                                                                   --------          -----       ------------      --------
<S>                                                                <C>             <C>             <C>             <C>
Revenues                                                           $ 21,348        $ 13,831        $     --        $ 35,179
Operating expenses:                                                --------        --------        --------        --------
    Line costs:
        Attributed costs (1)                                          8,019           6,720              --          14,739
        Intergroup allocated expenses (2)                               101             360            (461)             --
    Selling, general and administrative:
        Attributed costs (1)                                          4,052           3,438           3,556          11,046
        Shared corporate services (3)                                 2,006           1,550          (3,556)             --
        Other intergroup allocated expenses (4)                          --             360            (360)             --
    Depreciation and amortization:
        Attributed costs (1)                                          4,841           1,039              --           5,880
        Intergroup allocated expenses (5)                              (720)           (101)            821              --
                                                                   --------        --------        --------        --------
Total                                                                18,299          13,366              --          31,665
                                                                   --------        --------        --------        --------
Operating income                                                      3,049             465              --           3,514
Interest expense                                                     (1,029)           (504)             --          (1,533)
Miscellaneous income                                                    412              --              --             412
                                                                   --------        --------        --------        --------
Income (loss) before income taxes and minority interests              2,432             (39)             --           2,393
Income tax expense (benefit)                                            943             (16)             --             927
                                                                   --------        --------        --------        --------
Income (loss) before minority interests                               1,489             (23)             --           1,466
Minority interests                                                       35              --              --              35
                                                                   --------        --------        --------        --------
Net income (loss) before distributions on mandatorily
    redeemable preferred securities                                   1,524             (23)             --           1,501
Distributions on mandatorily redeemable preferred securities
    and other preferred dividend requirements                           117              --              --             117
                                                                   --------        --------        --------        --------
Net income  (loss)                                                 $  1,407        $    (23)       $     --        $  1,384
                                                                   ========        ========        ========        ========
</Table>

(1)   Attributed costs represent costs directly incurred by or attributed to the
      WorldCom group and the MCI group and do not include any intergroup
      allocations.
(2)   The WorldCom group was allocated $101 million for its usage of our
      business voice switches, which have been attributed to the MCI group, and
      the MCI group was allocated $360 million for its usage of our fiber optic
      systems, which have been attributed to the WorldCom group.
(3)   Our shared corporate services (such as executive management, human
      resources, legal, regulatory, accounting and tax, treasury, strategic
      planning and information systems support) have been allocated to the
      WorldCom group and the MCI group in the amounts of $2.0 billion and $1.6
      billion, respectively.
(4)   The MCI group was allocated $332 million of costs related to its use of
      buildings, furniture and fixtures and $28 million for use of the MCI
      tradenames, which assets have been attributed to the WorldCom group.
(5)   A credit of $692 million and $101 million to depreciation expense has been
      recorded by the WorldCom group and the MCI group, respectively, to reflect
      the allocation of a portion of the applicable costs for the use by the
      WorldCom group of the business voice switches attributed to the MCI group,
      and the proportionate use by the MCI group of the fiber optic systems and
      buildings, furniture and fixtures attributed to the WorldCom group.
      Additionally, a credit of $28 million to amortization expense has been
      recorded by the WorldCom group to reflect the charge to the MCI group for
      use of the MCI tradenames.


                                       38
<Page>

                      CONSOLIDATING STATEMENT OF CASH FLOWS
                                  (IN MILLIONS)

<Table>
<Caption>
                                                                         YEAR ENDED DECEMBER 31, 2001
                                                             ----------------------------------------------------
                                                             WORLDCOM         MCI
                                                              GROUP          GROUP      ELIMINATIONS     WORLDCOM
                                                             --------        -----      ------------     --------
<S>                                                          <C>            <C>            <C>            <C>
Cash flows from operating activities:
Net income (loss)                                            $ 1,524        $   (23)       $    --        $ 1,501
Adjustments to reconcile net income (loss) to net cash
  provided by operating activities:                            5,081          1,412             --          6,493
                                                             -------        -------        -------        -------
  Net cash provided by operating activities                    6,605          1,389             --          7,994
                                                             -------        -------        -------        -------

Cash flows from investing activities:
Capital expenditures                                          (7,619)          (267)            --         (7,886)
Acquisitions and related costs                                  (206)            --             --           (206)
All other investing activities, net                             (993)          (605)            --         (1,598)
                                                             -------        -------        -------        -------
  Net cash used in investing activities                       (8,818)          (872)            --         (9,690)
                                                             -------        -------        -------        -------

Cash flows from financing activities:
Principal borrowings (repayments) on debt, net                 3,526           (495)            --          3,031
Attributed stock activity of WorldCom, Inc.                      124             --             --            124
Intergroup advances, net                                         (15)            15             --             --
All other financing activities, net                             (555)           (71)            --           (626)
                                                             -------        -------        -------        -------
  Net cash provided by (used in) financing activities          3,080           (551)            --          2,529
Effect of exchange rate changes on cash                           38             --             --             38
                                                             -------        -------        -------        -------
Net increase (decrease) in cash and cash equivalents             905            (34)            --            871
Cash and cash equivalents beginning of period                    720             41             --            761
Deconsolidation of Embratel                                     (216)            --                          (216)
                                                             -------        -------        -------        -------
Cash and cash equivalents end of period                      $ 1,409        $     7        $    --        $ 1,416
                                                             =======        =======        =======        =======
</Table>


                                       39
<Page>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

OVERVIEW

            On June 7, 2001, our shareholders approved a recapitalization
involving the creation of two separately traded tracking stocks: WorldCom group
stock, which is intended to track the separate performance of our data,
Internet, international and commercial voice businesses; and MCI group stock,
which is intended to reflect the performance of our consumer, small business,
wholesale long distance voice and data, wireless messaging and dial-up Internet
access businesses.

            Through the businesses that we have realigned as the WorldCom group,
which have an extensive, advanced facilities-based global communications
network, we provide a broad range of integrated communications and managed
network services to both U.S. and non-U.S. based corporations. Offerings include
data services such as frame relay, asynchronous transfer mode and Internet
protocol networks; Internet related services, including dedicated access,
virtual private networks, digital subscriber lines, web centers encompassing
application and server hosting and managed data services; commercial voice
services; and international communications services.

            Through the businesses that we have realigned as the MCI group, we
provide a broad range of retail and wholesale communications services, including
long distance voice and data communications, consumer local voice
communications, wireless messaging, private line services and dial-up Internet
access services. Our retail services are provided to consumers and small
businesses in the United States. We are the second largest carrier of long
distance telecommunications services in the United States. Our services include:
basic long distance telephone service, dial around, collect calling, operator
assistance and calling card services (including prepaid calling cards) and toll
free or 800 services. We offer these services individually and in combinations.
Through combined offerings, we provide customers with benefits such as single
billing, unified services for multi-location companies and customized calling
plans. Our wholesale businesses include wholesale voice and data services
provided to carrier customers and other resellers and dial-up Internet access
services.

            On July 1, 2001, we acquired Intermedia for approximately $5.8
billion, including assumed long-term debt, pursuant to the merger of a wholly
owned subsidiary with and into Intermedia, with Intermedia continuing as the
surviving corporation and as a subsidiary of WorldCom. As a result of the
Intermedia merger, we acquired a controlling interest in Digex, a provider of
managed Web and application hosting services. In connection with the Intermedia
merger, stockholders of Intermedia received one share of WorldCom group stock
(or 57.1 million WorldCom group shares in the aggregate) and 1/25th of a share
of MCI group stock (or 2.3 million MCI group shares in the aggregate) for each
share of Intermedia common stock they owned. Holders of Intermedia preferred
stock, other than Intermedia Series B Preferred Stock, received one share of a
class or series of our preferred stock, with substantially identical terms,
which were established upon consummation of the Intermedia merger. As a result
of the merger with Intermedia, we own approximately 90% of the voting securities
of Intermedia.

            Since the Intermedia merger, we initiated plans to improve cash flow
and operating results by reorganizing and restructuring Intermedia's operations.
These plans include workforce reductions and other administrative cost savings,
the discontinuance of all product lines with unacceptable or negative margins
and the ultimate disposal of all assets associated with such product lines or
businesses.

            We believe that the Intermedia merger should support our web hosting
expansion by providing a comprehensive portfolio of hosting products and
services for mid-sized and large businesses. Additionally, we expect that Digex
will continue to build its operations and expand its customer base, causing it
to continue to incur operating losses for the foreseeable future, which could
adversely affect our results of operations.


                                       40
<Page>

            During the second quarter of 2001, we reached a long-term strategic
decision to restructure our investment in Embratel. The restructuring included
the resignation of certain Embratel board of directors seats, the irrevocable
obligation to vote a portion of our common shares in a specified manner and the
transfer of certain economic rights associated with such shares to an unrelated
third party. Based on these actions, the accounting principles generally
accepted in the United States prohibit the continued consolidation of Embratel's
results. Accordingly, we have deconsolidated Embratel's results effective
January 1, 2001.

            The following discussion and analysis relates to our financial
condition and results of operations for the years ended December 31, 1999, 2000
and 2001. This information should be read in conjunction with the consolidated
financial statements and notes thereto contained herein, and the combined
financial statements and notes thereto of each of the WorldCom group and the MCI
group contained herein as well as the "Cautionary Statement Regarding
Forward-Looking Statements" in this Form 10-K.

ADDITIONAL DISCUSSION RELATED TO THE WORLDCOM GROUP AND THE MCI GROUP FINANCIAL
STATEMENTS

            Each of the WorldCom group and the MCI group includes the results of
operations shown in the combined statements of operations and the attributed
assets and liabilities shown in the combined balance sheets of the relevant
group. If we acquire interests in other businesses, we intend to attribute those
assets and any related liabilities to our WorldCom group or our MCI group in
accordance with our tracking stock policy statement. All net income and cash
flows generated by the assets will be attributed to the group to which the
assets were attributed and all net proceeds from any disposition of these assets
will also be attributed to that group.

            Although we sometimes refer to such assets and liabilities as those
of the WorldCom group or the MCI group, neither of the groups is a separate
legal entity. Rather, all of the assets of a group are owned by WorldCom and
holders of the WorldCom group stock or the MCI group stock are shareholders of
WorldCom and subject to all of the risks of an investment in WorldCom and all of
its businesses, assets and liabilities.

            We intend, for so long as the WorldCom group stock and the MCI group
stock remains outstanding, to include in filings by WorldCom under the
Securities Exchange Act of 1934, as amended, the combined financial statements
of each of the WorldCom group and the MCI group. These combined financial
statements will be prepared in accordance with accounting principles generally
accepted in the United States, and in the case of annual financial statements,
will be audited. These combined financial statements are not legally required
under current law or SEC regulations.

            Our board of directors or any special committee appointed by our
board of directors may, without shareholder approval, change the policies set
forth in our tracking stock policy statement. Our board of directors or any
special committee appointed by our board of directors also may, without
shareholder approval, adopt additional policies or make exceptions with respect
to the application of the policies described in our policy statement in
connection with particular facts and circumstances, all as they may determine to
be in the best interests of WorldCom. Our board is subject to fiduciary duties
to all of WorldCom's shareholders as one group, not to the holders of any series
of stock separately. Any changes or exceptions will be made after a
determination by our board of what is in the best interests of WorldCom as a
whole, which may be detrimental to the interests of the holders of one series of
stock. The ability to make these changes may make it difficult to address the
future of a group based on the group's past performance.

RESULTS OF OPERATIONS

            The following table sets forth for the periods indicated our
statements of operations as a percentage of our revenues for the periods
indicated:


                                       41
<Page>

<Table>
<Caption>
                                                                                                     FOR THE YEARS ENDED
                                                                                                         DECEMBER 31,
                                                                                                 ---------------------------
                                                                                                 1999       2000        2001
                                                                                                 -----      -----      -----
<S>                                                                                              <C>        <C>        <C>
Revenues .....................................................................................   100.0%     100.0%     100.0%
Line costs ...................................................................................    41.0       39.6       41.9
Selling, general and administrative ..........................................................    24.9       27.1       31.4
Depreciation and amortization ................................................................    12.1       12.5       16.7
                                                                                                 -----      -----      -----
Operating income .............................................................................    22.0       20.9       10.0
Other income (expense):
   Interest expense ..........................................................................    (2.7)      (2.5)      (4.4)
   Miscellaneous .............................................................................     0.7        1.0        1.2
                                                                                                 -----      -----      -----
Income before income taxes, minority interests and cumulative effect of accounting change ....    20.0       19.4        6.8
Provision for income taxes ...................................................................     8.3        7.7        2.6
                                                                                                 -----      -----      -----
Income before minority interests and cumulative effect of accounting change ..................    11.7       11.6        4.2
Minority interests ...........................................................................    (0.5)      (0.8)       0.1
Cumulative effect of accounting change .......................................................      --       (0.2)        --
                                                                                                 -----      -----      -----
Net income ...................................................................................    11.2       10.6        4.3
Distributions on mandatorily redeemable preferred securities and other preferred dividend
   requirements ..............................................................................     0.2        0.2        0.3
                                                                                                 -----      -----      -----
Net income applicable to common shareholders .................................................    11.0%      10.5%       3.9%
                                                                                                 =====      =====      =====
</Table>

YEAR ENDED DECEMBER 31, 2000 VS.
   YEAR ENDED DECEMBER 31, 2001

            For the years December 31, 2000 and 2001, our revenues were as
follows (dollars in millions):

<Table>
<Caption>
                                            2000                    2001
                                   ---------------------   ---------------------
                                                PERCENT                 PERCENT
                                      $         OF TOTAL      $         OF TOTAL
                                   -------      --------   -------      --------
<S>                                <C>            <C>      <C>            <C>
WorldCom group .................   $22,755        58.2%    $21,348        60.7%
MCI group ......................    16,335        41.8      13,831        39.3
                                   -------       -----     -------       -----
                                   $39,090       100.0%    $35,179       100.0%
                                   =======       =====     =======       =====
</Table>

            Reported revenues by category for the years ended December 31, 2000
and 2001 reflect the following changes by category (dollars in millions):

<Table>
<Caption>
                                                                            PERCENT
                                                        2000      2001      CHANGE
                                                      -------    -------    -------
<S>                                                   <C>        <C>         <C>
COMMERCIAL SERVICES REVENUES
   Voice .........................................    $ 7,036    $ 6,591     (6.3)%
   Data ..........................................      7,389      8,620     16.7
   International .................................      2,367      2,977     25.8
   Embratel, net .................................      3,508         --    (100.0)
   Internet ......................................      2,455      3,160     28.7
                                                      -------    -------
TOTAL COMMERCIAL SERVICES REVENUES ...............     22,755     21,348     (6.2)
    Consumer .....................................      7,778      7,227     (7.1)
    Wholesale ....................................      3,388      2,641    (22.0)
    Alternative channels and small business ......      3,541      2,427    (31.5)
    Dial-up Internet .............................      1,628      1,536     (5.7)
                                                      -------    -------
 TOTAL ...........................................    $39,090    $35,179    (10.0)
                                                      =======    =======
</Table>

            Commercial services revenues, which include the revenues generated
from commercial voice, data, international and Internet services, for 2001 were
$21.3 billion versus $22.8 billion for 2000. As previously indicated, during the
second quarter of 2001, we took steps to restructure our investment in Embratel
which resulted in the deconsolidation of Embratel effective January 1, 2001.
Excluding Embratel from the 2000 period, 2001 commercial services revenues
increased 10.9% versus 2000.


                                       42
<Page>

            Voice revenues for 2001 decreased 6.3% over 2000 on traffic growth
of 2.6% The revenue decreases were partially offset by wireless voice revenue
increases of 32.6% for 2001. Excluding wireless voice revenues, commercial voice
revenues decreased 12.7% over 2000. Voice revenues include domestic commercial
long distance and local switched revenues.

            Data revenues for 2001 increased 16.7% over 2000. Data includes both
commercial long distance and local dedicated bandwidth sales. For the year ended
December 31, 2001, approximately 32% of data revenues were derived from frame
relay and asynchronous transfer mode services, where we experienced demand for
capacity increases across the product set as businesses moved more of their
mission-critical applications to their own networks during the period. At the
same time, we continued to experience strong price pressure for data services in
our emerging markets due to competition and the general decline in economic
condition of our customers, which we expect to continue in the foreseeable
future.

            International revenues for 2001 increased 25.8% to $3.0 billion
versus $2.4 billion, excluding Embratel, for 2000. Geographically, Europe grew
18.4% and Asia Pacific and other areas grew 43.9% for 2001. These increases were
partially offset by foreign currency fluctuations that had the effect of
reducing revenues by approximately $160 million in 2001. Although our mix
improved towards a more profitable blend of data versus voice, and retail versus
wholesale, our international business continues to experience significant price
pressure on its products.

            Internet revenues for 2001 increased 28.7% over 2000. Growth was
driven by demand for dedicated circuits as business customers continue to
migrate their data networks and applications to Internet-based technologies
requiring greater amounts of bandwidth. Additionally, Internet revenues for 2001
included $58 million of Digex revenues, after intercompany eliminations, as a
result of the Intermedia merger. During 2001, we began to introduce our new
managed hosting products and virtual private networks on public and shared
environments. We expect these products, which are in the initial phases of their
life cycle, to gradually contribute to our revenue growth over the next several
quarters. Internet revenues include dedicated Internet access, managed
networking services and applications (such as virtual private networks), web
hosting and electronic commerce and transaction services (such as web centers
and credit card transaction processing).

            Consumer revenues for 2001 decreased 7.1% over 2000. The majority of
this decrease is attributed to decreases in calling card, dial around and dial-1
revenues as a result of consumers' substitution of wire line services with
wireless and e-mail. Our consumer local initiatives continued to perform well as
consumer local revenues increased approximately 180% for 2001 versus 2000.

            Wholesale revenues for 2001 decreased 22.0% over 2000. The wholesale
market continued to be extremely price competitive, and this, in addition to
bankruptcies, a reduction in private line circuits related to customer internal
network consolidation and the impact of the September 11th attacks, contributed
to the year-over-year decrease. Wholesale revenues during 2001 were also
impacted by proactive revenue initiatives, which were made to improve the
quality of the wholesale revenue stream as we shift the MCI group's focus from
revenue growth to cash generation.

            Alternative channels and small business revenues for 2001 decreased
31.5% over 2000. Alternative channels and small business includes sales agents
and affiliates, wholesale alternative channels, small business, prepaid calling
card and wireless messaging revenues. These decreases are attributed to pricing
pressures in the wholesale and small business markets which negatively affected
revenue growth and gross margins in this area, and proactive initiatives to
de-emphasize services with unacceptable gross margins as we shift the MCI
group's focus from revenue growth to cash generation.

            Dial-up Internet revenues for 2001 decreased 5.7% over 2000. Our
dial access network has grown 12.7% to approximately 3.2 million modems as of
December 31, 2001, compared with the prior year period. Additionally, Internet
connect hours increased 9.3% to 7.1 billion hours for 2001 versus 2000. These
network usage increases were more than offset by pricing pressure resulting from
the impact of volume discounts, which lowered average revenue per hour by
approximately 17% for 2001 versus 2000.


                                       43
<Page>

            LINE COSTS. For the years ended December 31, 2000 and 2001, our line
costs were as follows (dollars in millions):

<Table>
<Caption>
                                          2000                         2001
                                -----------------------      -----------------------
                                               PERCENT                      PERCENT
                                    $          OF TOTAL          $          OF TOTAL
                                --------       --------      --------       --------
<S>                             <C>             <C>          <C>             <C>
WorldCom group ...........      $  8,745         56.6%       $  8,120         55.1%
MCI group ................         7,177         46.4           7,080         48.0
Intergroup eliminations ..          (460)        (3.0)           (461)        (3.1)
                                --------        -----        --------        -----
                                $ 15,462        100.0%       $ 14,739        100.0%
                                ========        =====        ========        =====
</Table>

            Line costs as a percentage of revenues for 2001 increased to 41.9%
as compared to 39.6% for 2000. Excluding Embratel for the 2000 period, line
costs for 2000 were $13.8 billion, or 38.9% of revenues. The increase as a
percentage of revenues reflects the pricing pressure in the commercial data,
international, Internet and wholesale markets as well as the continued
competitive pricing in the dial-up Internet business which experienced a 17%
decrease in dial-up revenues per hour for 2001 versus 2000. Additionally, line
costs as a percentage of revenues have increased as a result of the decrease in
higher margin calling card and dial around revenues due to wireless substitution
as noted above.

            Line costs were partially offset by foreign currency exchange
fluctuations, which had the effect of reducing line costs as a percentage of
revenues by less than one-half of a percentage point for 2001 as compared to
2000, and by increased data and dedicated Internet traffic over our own
facilities, which positively affected line costs as a percentage of revenues by
more than one-half of a percentage point for 2001.

            The principal components of line costs are access charges and
transport charges. Regulators have historically permitted access charges to be
set at levels that are well above traditional local phone companies' costs. As a
result, access charges have been a source of universal service subsidies that
enable local exchange rates to be set at levels that are affordable. We have
actively participated in a variety of Federal, state, local and international
regulatory proceedings with the goal of bringing access charges to cost-based
levels and to fund universal service using explicit subsidies funded in a
competitively neutral manner. We cannot predict the outcome of these proceedings
or whether or not the results will have a material adverse impact on our
consolidated financial position or results of operations. However, our goal is
to manage transport costs through effective utilization of our networks,
favorable contracts with carriers and network efficiencies made possible as a
result of expansion of our customer base.

            SELLING, GENERAL AND ADMINISTRATIVE. For the years ended December
31, 2000 and 2001, our selling, general and administrative expenses were as
follows (dollars in millions):

<Table>
<Caption>
                                          2000                         2001
                                -----------------------      -----------------------
                                               PERCENT                      PERCENT
                                    $          OF TOTAL          $          OF TOTAL
                                --------       --------      --------       --------
<S>                             <C>             <C>          <C>             <C>
WorldCom group ...........      $  5,689         53.7%       $  6,058         54.8%
MCI group ................         5,162         48.7           5,348         48.4
Intergroup eliminations ..          (254)        (2.4)           (360)        (3.2)
                                --------        -----        --------        -----
                                $ 10,597        100.0%       $ 11,046        100.0%
                                ========        =====        ========        =====
</Table>

            Selling, general and administrative expenses for 2001 were $11.0
billion or 31.4% of revenues as compared to $10.6 billion or 27.1% of revenues
for 2000. Selling, general and administrative expenses for 2000 include a $685
million pre-tax charge ($340 million from the WorldCom group and $345 million
from the MCI group) associated with specific domestic and international
wholesale accounts that were deemed uncollectible due to bankruptcies,
litigation and settlements of contractual disputes that occurred in the third
quarter of 2000. Additionally, selling, general and administrative expenses for
2000 include a $93 million pre-tax associated with the termination of the Sprint
Corporation merger agreement (allocated to the WorldCom group).

            Selling, general and administrative expenses for 2001 include
pre-tax costs of $865 million ($742 million from the WorldCom group and $123
million from the MCI group) related to the write-off of investments in certain
publicly traded and privately held companies, $23 million ($12 million from the
WorldCom group and $11 million


                                       44
<Page>

from the MCI group) as a result of the costs associated with the tracking stock
capitalization and $207 million associated with domestic and international
severance packages and other costs related to our 2001 workforce reductions
($159 million allocated to the WorldCom group and $48 million allocated to the
MCI group).

            Excluding these charges and Embratel in 2000, selling, general and
administrative expenses as a percentage of revenues would have been 28.3% for
2001 versus 25.0% for 2000.

            The increase in selling, general and administrative expenses for
2001 includes increased costs associated with "generation d" initiatives, which
are designed to position us as a leading supplier of e-business solutions, that
include product marketing, customer care, information systems and product
development, employee retention costs, and costs associated with multichannel
multipoint distribution service product development. Additionally, the increase
in selling, general and administrative expenses can be attributed to proactive
initiatives to de-emphasize specific wholesale services revenues with
unacceptable gross margins which began in the fourth quarter of 2000. These
actions resulted in lower revenues, as discussed above, but had no immediate
effect on selling, general and administrative expenses for both the wholesale
and alternative channels and small business channels.

            Selling, general and administrative expenses were offset in part by
foreign currency exchange fluctuations which had the effect of reducing selling,
general and administrative expenses as a percentage of revenues by almost
one-quarter of a percentage point for 2001. Additionally, domestic and
international workforce reductions in the first and fourth quarters of 2001,
helped to stabilize selling, general and administrative expenses during the
remainder of the year.

            DEPRECIATION AND AMORTIZATION. For the years ended December 31, 2000
and 2001, our depreciation and amortization expense was as follows (dollars in
millions):

<Table>
<Caption>
                                          2000                         2001
                                -----------------------      -----------------------
                                               PERCENT                      PERCENT
                                    $          OF TOTAL          $          OF TOTAL
                                --------       --------      --------       --------
<S>                             <C>             <C>          <C>             <C>
WorldCom group ...........      $  3,280         67.3%       $  4,121         70.1%
MCI group ................           884         18.1             938         15.9
Intergroup eliminations ..           714         14.6             821         14.0
                                --------        -----        --------        -----
                                $  4,878        100.0%       $  5,880        100.0%
                                ========        =====        ========        =====
</Table>

            Depreciation and amortization expense for 2001 increased to $5.9
billion or 16.7% of revenues from $4.9 billion or 12.5% of revenues for 2000.
Excluding Embratel in 2000, depreciation and amortization would have been $4.4
billion or 12.3% of revenues for 2000. These increases reflect additional
depreciation associated with 2000 and 2001 capital expenditures as well as
increased depreciation associated with the assets acquired in the Intermedia
merger. Beginning January 1, 2002, we stopped amortizing intangible assets with
indefinite useful lives, including goodwill and tradenames in accordance with
SFAS No. 142 "Goodwill and Other Intangible Assets." Based on current levels of
such assets, this will reduce our amortization expense by approximately $1.3
billion annually.

            INTEREST EXPENSE. Interest expense for 2001 was $1.5 billion or 4.4%
of revenues as compared to $970 million or 2.5% of revenues for 2000. Excluding
Embratel in 2000, interest expense would have been $1.0 billion or 2.8% of
revenues for 2000. For 2000 and 2001, weighted-average annual interest rates on
our long-term debt, excluding Embratel in all periods, were 6.93% and 7.29%
respectively, while weighted-average levels of borrowings were $20.6 billion and
$29.2 billion, respectively. Interest expense for 2001 increased as a result of
higher debt levels from the May 2001 bond offering and debt acquired in the
Intermedia merger.

            Capitalized interest for 2001 was $498 million versus $495 million
for 2000. We expect capitalized interest for 2002 to decline by approximately
$40-$60 million as a result of lower capital expenditure construction. However,
continued debt reduction and interest rate management should partially offset
the impact of lower capitalized interest on interest expense for 2002.

            MISCELLANEOUS INCOME AND EXPENSE. Miscellaneous income for 2001 was
$412 million or 1.2% of revenues compared to $385 million or 1.0% of revenues
for 2000. Miscellaneous income includes investment income, equity in


                                       45
<Page>

income and losses of affiliated companies, the effects of fluctuations in
exchange rates for transactions denominated in foreign currencies, gains and
losses on the sale of assets and other non-operating items.

            PROVISION FOR INCOME TAXES. The effective income tax rate was 38.7%
of income before taxes for 2001 and 40% for 2000. See note 9 of our notes to
consolidated financial statements for a reconciliation of the statutory federal
rate for income taxes to our effective income tax rate.

            CUMULATIVE EFFECT OF ACCOUNTING CHANGE. During 2000, we adopted SAB
101, which requires certain activation and installation fee revenues to be
amortized over the average life of the related service rather than be recognized
immediately. Costs directly related to these revenues may also be deferred and
amortized over the customer contract life. This adoption resulted in a one-time
expense of $85 million, net of income tax benefit of $50 million in the first
quarter of 2000.

            NET INCOME APPLICABLE TO COMMON SHAREHOLDERS. For 2001, we reported
net income applicable to common shareholders of $1.4 billion as compared to $4.1
billion for 2000.

YEAR ENDED DECEMBER 31, 1999 VS.
  YEAR ENDED DECEMBER 31, 2000

            For the years ended December 31, 1999 and 2000, our revenues were as
follows (dollars in millions):

<Table>
<Caption>
                                          1999                         2000
                                -----------------------      -----------------------
                                               PERCENT                      PERCENT
                                    $          OF TOTAL          $          OF TOTAL
                                --------       --------      --------       --------
<S>                             <C>             <C>          <C>             <C>
WorldCom group ...........      $ 19,736         55.0%       $ 22,755         58.2%
MCI group ................        16,172         45.0          16,335         41.8
                                --------        -----        --------        -----
                                $ 35,908        100.0%       $ 39,090        100.0%
                                ========        =====        ========        =====
</Table>

            Reported revenues by category for the years ended December 31, 1999
and 2000 reflect the following changes by category (dollars in millions):

<Table>
<Caption>
                                                                           PERCENT
                                                     1999         2000      CHANGE
                                                   -------      -------    -------
<S>                                                <C>          <C>           <C>
COMMERCIAL SERVICES REVENUES
   Voice ....................................      $ 7,433      $ 7,036      (5.3)
   Data .....................................        5,830        7,389      26.7
   International ............................        1,624        2,367      45.8
   Embratel, net ............................        2,772        3,508      26.6
   Internet .................................        1,554        2,455      58.0
                                                   -------      -------
TOTAL COMMERCIAL SERVICES REVENUES ..........       19,213       22,755      18.4
   Consumer .................................        7,590        7,778       2.5
   Wholesale ................................        3,943        3,388     (14.1)
   Alternative channels and small business ..        3,142        3,541      12.7
   Dial-up Internet .........................        1,497        1,628       8.8
                                                   -------      -------
TOTAL COMMUNICATIONS SERVICES REVENUES ......       35,385       39,090      10.5
   Other ....................................          523           --        --
                                                   -------      -------
TOTAL .......................................      $35,908      $39,090       8.9
                                                   =======      =======
</Table>

            Commercial services revenues, which include the revenues generated
from commercial voice, data, international and Internet services, for 2000
increased 18.4% to $22.8 billion versus $19.2 billion for 1999.

            Voice revenues for 2000 decreased 5.3% over 1999 on traffic growth
of 6.4% as a result of federally mandated access charge reductions, noted under
line costs below, that were passed through to the customer. The revenue decrease
was partially offset by local voice revenue increases of 17.4% and wireless
voice revenue increases of 104% for 2000. We continued to show significant
percentage gains in local and wireless voice services as customers purchased
"all-distance" voice services from us. However, local revenues and wireless
voice revenues are


                                       46
<Page>

still a relatively small component of total commercial voice revenues. Excluding
local and wireless voice revenues, commercial voice services revenues for 2000
decreased 15.2% over 1999.

            Data revenues for 2000, increased 26.7% over 1999. The revenue
growth for data services was driven by a 32.8% increase in frame relay and
asynchronous transfer mode services. As of December 31, 2000, approximately 35%
of data revenues were derived from frame relay and asynchronous transfer mode
services. We continued to experience strong demand for capacity increases across
the product set as businesses moved more of their mission-critical applications
to their own networks. Additionally, as of December 31, 2000, our domestic local
voice grade equivalents had increased 98% to 65.5 million versus the prior year
amount.

            International revenues for 2000 increased 45.8% to $2.4 billion
versus $1.6 billion for 1999. This includes a 28% increase in revenues from
Europe, and a 119% increase in revenues from Asia and other areas. As of
December 31, 2000, we had 21 international facility based city networks versus
17 in 1999. Additionally, during 2000 we added over 5,000 buildings for a total
of over 15,000 buildings connected on the international networks.

            Embratel revenues for 2000 increased 26.6% to $3.5 billion versus
$2.8 billion for 1999 as a result of a higher number of fixed phone lines and
cellular devices in service within Brazil.

            Internet revenues for 2000 increased 58.0% over 1999. Growth was
driven by demand for dedicated circuits as business customers migrated their
data networks and applications to Internet-based technologies with greater
amounts of bandwidth.

            Consumer revenues for 2000 increased 2.5% over 1999 as the MCI
group's partner marketing programs helped to drive Dial-1 product gains.
Consumer revenue growth was impacted by declines in transaction brands and
calling card services, which were pressured by increasing wireless substitution,
and 10-10-321, which the MCI group no longer actively markets.

            Wholesale revenues for 2000 decreased 14.1% versus 1999 as a result
of price pressure. Wholesale revenues for 2000 were also impacted by proactive
fourth quarter 2000 revenue actions which had the effect of reducing wholesale
revenues by approximately $90 million in the fourth quarter of 2000. These
actions were made to improve the quality of the wholesale revenue stream as we
shift the MCI group's focus from revenue growth to cash generation.

            Alternative channels and small business revenues for 2000 increased
12.7% over 1999. This increase is primarily attributable to internal growth for
wholesale alternative channel voice revenues. We expect that pricing pressures
in the wholesale and small business markets will negatively affect revenue
growth and gross margins in this area and this level of growth will decline in
the foreseeable future as a result of these services being de-emphasized as we
shift the MCI group's focus from revenue growth to cash generation.

            Dial-up Internet revenue growth for 2000 was 8.8% over 1999. Our
dial access network has grown 71% to over 2.8 million modems as of December 31,
2000, compared with 1999. Additionally, Internet connect hours increased 54.8%
to 6.5 billion hours for 2000 versus 1999. These network usage increases were
offset by pricing pressure on dial-up Internet traffic as a result of contract
repricings in the second quarter of 2000, which lowered average revenue per hour
by 25% for 2000 versus 1999.

            Other revenues which, prior to April 1999, consisted of the
operations of SHL Systemhouse Corp. and SHL Systemhouse Co., were $523 million
for 1999. SHL provided information technology services including outsourcing,
information technology consulting, systems integration, private network
management, technology development and applications and systems development. In
April 1999, we completed the sale of SHL to Electronic Data Systems Corporation
for $1.6 billion.


                                       47
<Page>

            LINE COSTS. For the years ended December 31, 1999 and 2000, our line
costs were as follows (dollars in millions):

<Table>
<Caption>
                                          1999                         2000
                                -----------------------      -----------------------
                                               PERCENT                      PERCENT
                                    $          OF TOTAL          $          OF TOTAL
                                --------       --------      --------       --------
<S>                             <C>             <C>          <C>             <C>
WorldCom group ...........      $  7,905         53.6%       $  8,745         56.6%
MCI group ................         7,087         48.1           7,177         46.4
Intergroup eliminations ..          (253)        (1.7)           (460)        (3.0)
                                --------        -----        --------        -----
                                $ 14,739        100.0%       $ 15,462        100.0%
                                ========        =====        ========        =====
</Table>

            Line costs as a percentage of revenues for 2000 decreased to 39.6%
as compared to 41.0% for 1999. The overall improvements are a result of
increased data and dedicated Internet traffic at the WorldCom group, which
positively affected line costs as a percentage of revenues by approximately one
percentage point. Additionally, access charge reductions that occurred in
January 2000 and July 2000 reduced total line cost expense by approximately $245
million for 2000. While access charge reductions were primarily passed through
to customers, line costs as a percentage of revenues were positively affected by
almost one half of a percentage point. These improvements were somewhat offset
by 2000 contract repricings in our dial-up Internet business as noted above and
continued competitive pricing on the dial-up Internet business, which
effectively held the average cost per hour constant although average dial-up
Internet revenues per hour decreased by 25%.

            SELLING, GENERAL AND ADMINISTRATIVE. For the years ended December
31, 1999 and 2000, our selling, general and administrative expenses were as
follows (dollars in millions):

<Table>
<Caption>
                                          1999                         2000
                                -----------------------      -----------------------
                                               PERCENT                      PERCENT
                                    $          OF TOTAL          $          OF TOTAL
                                --------       --------      --------       --------
<S>                             <C>             <C>          <C>             <C>
WorldCom group ...........      $  4,195         47.0%       $  5,689         53.7%
MCI group ................         5,071         56.7           5,162         48.7
Intergroup eliminations ..          (331)        (3.7)           (254)        (2.4)
                                --------        -----        --------        -----
                                $  8,935        100.0%       $ 10,597        100.0%
                                ========        =====        ========        =====
</Table>

            Selling, general and administrative expenses for 2000 were $10.6
billion or 27.1% of revenues as compared to $8.9 billion or 24.9% of revenues
for the year ended December 31, 1999.

            Selling, general and administrative expenses for 2000 include a $93
million pre-tax charge associated with the termination of the Sprint Corporation
merger agreement, including regulatory, legal, accounting and investment banking
fees and other costs, and a $685 million pre-tax charge associated with specific
domestic and international wholesale accounts that were no longer deemed
collectible due to bankruptcies, litigation and settlements of contractual
disputes that occurred in the third quarter of 2000. We maintain general
uncollectible reserves based on historical experience, and specific reserves for
items such as bankruptcies, litigation and contractual settlements that are
established in the period in which the settlement is both estimable and
probable. During the third quarter of 2000, an unprecedented number of our
wholesale customers either filed for bankruptcy or changed their status in
bankruptcy from reorganization to liquidation. This, combined with the third
quarter 2000 declines in stock prices for many companies in the
telecommunications industry and the overall tightening of the capital markets,
which limited the access of many telecommunications providers to the necessary
capital to continue operations, led to our specific write-off of such accounts.
Prior to the third quarter 2000 events, the general uncollectible reserves were,
in our view, adequate. Additionally, under contractual arrangements with
traditional local phone companies and other competitive local exchange carriers,
we billed the traditional local phone companies and competitive local exchange
carriers for traffic originating on the traditional local phone company's or
competitive local exchange carrier's networks and terminating on our network.
The traditional local phone companies and competitive local exchange carriers
have historically disputed these billings, although the collectibility of these
billings had continued to be affirmed by public service commission and FCC
rulings and by the full payment from a traditional local phone company of the
largest past due amount. However, during the third quarter of 2000, court
rulings and Congressional discussions led to our negotiation and settlement with
certain traditional local phone companies and competitive local exchange
carriers for


                                       48
<Page>

these outstanding receivables. Based on the outcome of these negotiations, we
recorded a specific provision for the associated uncollectible amounts.

            Excluding these charges, selling, general and administrative
expenses as a percentage of revenues would have been 25.1% for 2000. Selling,
general and administrative expenses for 2000 includes increased costs associated
with "generation d" initiatives, which are designed to position us as a leading
supplier of e-business solutions, that include product marketing, customer care,
information systems and product development, employee retention costs, and costs
associated with multichannel multipoint distribution service product
development. These increased costs affected selling, general and administrative
expense as a percentage of revenues by approximately two percentage points.

            DEPRECIATION AND AMORTIZATION. For the years ended December 31, 1999
and 2000, WorldCom's depreciation and amortization expense was as follows
(dollars in millions):

<Table>
<Caption>
                                          1999                         2000
                                -----------------------      -----------------------
                                               PERCENT                      PERCENT
                                    $          OF TOTAL          $          OF TOTAL
                                --------       --------      --------       --------
<S>                             <C>             <C>          <C>             <C>
WorldCom group ...........      $  3,013         69.2%       $  3,280         67.3%
MCI group ................           757         17.4             884         18.1
Intergroup eliminations ..           584         13.4             714         14.6
                                --------        -----        --------        -----
                                $  4,354        100.0%       $  4,878        100.0%
                                ========        =====        ========        =====
</Table>

            Depreciation and amortization expense for 2000 increased to $4.9
billion or 12.5% of revenues from $4.4 billion or 12.1% of revenues for 1999.
This increase primarily reflects additional depreciation associated with
increased capital expenditures.

            INTEREST EXPENSE. Interest expense for 2000 was $970 million or 2.5%
of revenues as compared to $966 million or 2.7% of revenues for 1999. For 2000
and 1999, weighted-average annual interest rates on our long-term debt were
7.28% and 7.23% respectively, while weighted-average levels of borrowings were
$21.6 billion and $19.1 billion, respectively.

            Interest expense for 2000 was favorably impacted by increased
construction activity and the associated interest capitalization, offset in part
by higher weighted-average levels of borrowings and higher interest rates on our
variable rate debt and 2000 public debt offerings. Interest expense for 2000 was
also favorably impacted as a result of SHL sale proceeds, investment sale
proceeds and proceeds from the increase in our receivables purchase program in
the third quarter of 1999 used to repay indebtedness under our credit facilities
and commercial paper program.

            MISCELLANEOUS INCOME AND EXPENSE. Miscellaneous income for 2000 was
$385 million or 1.0% of revenues as compared to $242 million or 0.7% of revenues
for 1999. Miscellaneous income includes investment income, equity in income and
losses of affiliated companies, the effects of fluctuations in exchange rates
for transactions denominated in foreign currencies, gains and losses on the sale
of assets and other non-operating items.

            PROVISION FOR INCOME TAXES. The effective income tax rate for 2000
was 40.0% of income before taxes. The 2000 rate is greater than the expected
federal statutory rate of 35% primarily due to the amortization of the
non-deductible goodwill. Excluding non-deductible amortization of goodwill, our
effective income tax rate would have been 35.0%.

            CUMULATIVE EFFECT OF ACCOUNTING CHANGE. During the fourth quarter of
2000, we implemented SAB 101, which requires certain activation and installation
fee revenues to be amortized over the average life of the related service rather
than be recognized immediately. Costs directly related to these revenues may
also be deferred and amortized over the customer contract life. As required by
SAB 101, we retroactively adopted this accounting effective January 1, 2000,
which resulted in a one-time expense of $85 million, net of income tax benefit
of $50 million.


                                       49
<Page>

            NET INCOME APPLICABLE TO COMMON SHAREHOLDERS. For the year ended
December 31, 2000, we reported net income applicable to common shareholders of
$4.1 billion as compared to $3.9 billion for the year ended December 31, 1999.

ATTRIBUTION AND ALLOCATION OF ASSETS, LIABILITIES, REVENUES AND EXPENSES BETWEEN
  THE WORLDCOM GROUP AND THE MCI GROUP

            The following is a discussion of the methods used to attribute and
allocate property and equipment, revenues, line costs, shared corporate
services, intangible assets and financing arrangements to the WorldCom group and
the MCI group. These methods have been consistently applied for the years ended
December 31, 1999, 2000 and 2001. Additionally, our management believes that the
cost allocations outlined below are equitable and provide a reasonable estimate
of the costs attributable to each group.

            PROPERTY AND EQUIPMENT. Property and equipment was attributed to the
WorldCom group and the MCI group based on specific identification consistent
with the assets necessary to support the continuing operations of the businesses
attributed to the respective groups. The balances of property and equipment
attributed to each of the groups as of December 31, 2001 are as follows:

<Table>
<Caption>
                                            WORLDCOM         MCI
                                              GROUP          GROUP        WORLDCOM
                                              -----          -----        --------
                                                         (IN MILLIONS)
<S>                                         <C>            <C>            <C>
Transmission equipment ...............      $ 23,369       $    445       $ 23,814
Communications equipment .............         5,434          2,444          7,878
Furniture, fixtures and other ........        10,583            680         11,263
Construction in progress .............         5,576            130          5,706
                                            --------       --------       --------
                                              44,962          3,699         48,661
Accumulated depreciation .............        (8,170)        (1,682)        (9,852)
                                            --------       --------       --------
                                            $ 36,792       $  2,017       $ 38,809
                                            ========       ========       ========
</Table>

            REVENUES. Revenues have been attributed to the WorldCom group and
the MCI group based on specific identification of the lines of business that are
attributed to the two groups.

            LINE COSTS. Allocated line costs and related liabilities include the
costs of the fiber optic systems attributed to the WorldCom group and the costs
of the business voice switched services attributed to the MCI group. Line costs
have been attributed to the WorldCom group and the MCI group predominantly based
on specific identification of network usage by that group. Where determinations
based on specific usage alone were impractical, we used other allocation
methods, including methods based on the total revenues generated by each group.

            SHARED CORPORATE SERVICES. A portion of our shared corporate
services and related balance sheet amounts (such as executive management, human
resources, legal, regulatory, accounting, tax, treasury, strategic planning and
information systems support) has been attributed to the WorldCom group or the
MCI group based upon identification of such services specifically benefiting
such group. Where determinations based on specific usage alone have been
impractical, we used other allocation methods that we believe are fair,
including methods based on such factors as the number of employees and total
line costs or revenues generated by each group.

            ALLOCATION OF INTANGIBLE ASSETS. Intangible assets include the
excess consideration paid over the fair value of net tangible assets acquired by
us in business combinations accounted for under the purchase method and include
goodwill, channel rights, developed technology and tradenames. These assets have
been attributed to the respective groups based on specific identification and
where acquired companies have been divided between the WorldCom group and the
MCI group, the intangible assets have been allocated based on the respective
fair values at the date of purchase of the related operations attributed to each
group. Our management believes that this method of allocation is equitable and
provides a reasonable estimate of the intangible assets attributable to the
WorldCom group and the MCI group.


                                       50
<Page>

            All tradenames, including the MCI tradename and the other related
MCI tradenames, have been attributed to the WorldCom group. The MCI group will
be allocated an expense, and the WorldCom group will be allocated a
corresponding decrease in depreciation and amortization expense, for the use of
the MCI tradenames for the next four years based on the following schedule:

                              2002: $30.0 million
                              2003: $35.0 million
                              2004: $40.0 million
                              2005: $45.0 million

            Any renewal or termination of use of the MCI tradename by the MCI
group will be subject to the general policy that our board of directors will act
in the best interests of WorldCom. For each of the years ended December 31,
1999, 2000 and 2001, depreciation and amortization expense associated with the
MCI tradenames allocated to the WorldCom group was decreased by $27.5 million
per annum for use of the MCI tradenames by the MCI group.

            Goodwill and other intangibles assigned or allocated to the WorldCom
group and the MCI group as of December 31, 2001 are as follows:

<Table>
<Caption>
                                      WORLDCOM         MCI
                                        GROUP          GROUP        WORLDCOM
                                        -----          -----        --------
                                                   (IN MILLIONS)
<S>                                   <C>            <C>            <C>
Goodwill .......................      $ 40,551       $  9,274       $ 49,825
Tradenames .....................         1,112             --          1,112
Developed technology ...........         1,590            510          2,100
Other intangibles ..............         3,414          1,443          4,857
                                      --------       --------       --------
                                        46,667         11,227         57,894
Accumulated amortization .......        (5,849)        (1,508)        (7,357)
                                      --------       --------       --------
                                      $ 40,818       $  9,719       $ 50,537
                                      ========       ========       ========
</Table>

            FINANCING ARRANGEMENTS. As of January 1, 1999, $6.0 billion of our
outstanding debt was notionally allocated to the MCI group and the remainder of
our debt was notionally allocated to the WorldCom group. Our debt was allocated
between the WorldCom group and the MCI group based upon a number of factors
including estimated future cash flows and the ability to pay debt service and
dividends of each of the groups. In addition, management considered certain
measures of creditworthiness, such as coverage ratios and various tests of
liquidity, in the allocation process. Our management believes that the initial
allocation was equitable and supportable by both the WorldCom group and the MCI
group. The debt allocated to the MCI group bears interest at a rate indicative
of the rate at which the MCI group would borrow from third parties if it was a
wholly owned subsidiary of WorldCom but did not have the benefit of any
guarantee by WorldCom. Interest rates will be calculated on a quarterly basis.
Debt allocated to the MCI group bears an interest rate equal to the
weighted-average interest rate, excluding capitalized interest, of WorldCom debt
plus 1 1/4 percent. Interest allocated to the WorldCom group reflects the
difference between our actual interest expense and the interest expense charged
to the MCI group. Subsequent to the recapitalization, each group's allocated
debt increases or decreases by the amount of any net cash generated by, or
required to fund, the group's operating activities, investing activities,
dividend payments, share repurchases and other financing activities.

            As of December 31, 2001, our receivables purchase program consisted
of a $3.7 billion pool of receivables in which the purchaser owned an undivided
interest, including $2.0 billion sold. The WorldCom group was allocated $2.8
billion of the pool and $1.7 billion of the sold receivables. The MCI group was
allocated the balance. The receivables sold were assigned based on specific
identification where practical, or allocated based on total revenues. Our
management believes that this method of allocation is equitable and provides a
reasonable estimate of the receivables attributable to the groups.


                                       51
<Page>

WORLDCOM GROUP RESULTS OF OPERATIONS

            The following table sets forth for the periods indicated the
WorldCom group's statements of operations in millions of dollars and as a
percentage of its revenues for the periods indicated:

<Table>
<Caption>
                                                                           FOR THE YEARS ENDED DECEMBER 31,
                                                        ----------------------------------------------------------------------
                                                                1999                     2000                     2001
                                                        --------------------     --------------------     --------------------
<S>                                                     <C>            <C>       <C>            <C>       <C>            <C>
Revenues ............................................   $ 19,736       100.0%    $ 22,755       100.0%    $ 21,348       100.0%
Line costs ..........................................      7,905        40.1        8,745        38.4        8,120        38.0
Selling, general and administrative .................      4,195        21.3        5,689        25.0        6,058        28.4
Depreciation and amortization .......................      3,013        15.3        3,280        14.4        4,121        19.3
Other charges .......................................         (8)         --           --          --           --          --
                                                        --------       -----     --------       -----     --------       -----
Operating income ....................................      4,631        23.5        5,041        22.2        3,049        14.3
Other income (expense):
     Interest expense ...............................       (460)       (2.3)        (458)       (2.0)      (1,029)       (4.8)
     Miscellaneous ..................................        237         1.2          385         1.7          412         1.9
                                                        --------       -----     --------       -----     --------       -----
Income before income taxes, minority interests and
     cumulative effect of accounting ................      4,408        22.3        4,968        21.8        2,432        11.4
Provision for income taxes ..........................      1,856         9.4        1,990         8.7          943         4.4
                                                        --------       -----     --------       -----     --------       -----
Income before minority interests and cumulative
     effect of accounting change ....................      2,552        12.9        2,978        13.1        1,489         7.0
Minority interests ..................................       (186)       (0.9)        (305)       (1.3)          35         0.2
Cumulative effect of accounting change ..............         --          --          (75)       (0.3)          --          --
Distributions on other mandatorily redeemable
      preferred securities and other preferred
      dividend requirements .........................         72         0.4           65         0.3          117         0.5
                                                        --------       -----     --------       -----     --------       -----
Net income ..........................................   $  2,294        11.6%    $  2,533        11.1%    $  1,407         6.6%
                                                        ========       =====     ========       =====     ========       =====
</Table>

YEAR ENDED DECEMBER 31, 2000 VS.
  YEAR ENDED DECEMBER 31, 2001

            REVENUES. Reported revenues by category for 2000 and 2001 reflect
the following changes by category (dollars in millions):

<Table>
<Caption>
                                                                         PERCENT
                                                  2000        2001       CHANGE
                                                 -------     -------     -------
<S>                                              <C>         <C>         <C>
COMMERCIAL SERVICES REVENUES
   Voice ....................................    $ 7,036     $ 6,591      (6.3)%
   Data .....................................      7,389       8,620      16.7
   International ............................      2,367       2,977      25.8
   Embratel, net ............................      3,508          --    (100.0)
   Internet .................................      2,455       3,160      28.7
                                                 -------     -------
TOTAL COMMERCIAL SERVICES REVENUES ..........    $22,755     $21,348      (6.2)
                                                 =======     =======
</Table>

            WorldCom group revenues for 2001 were $21.3 billion versus $22.8
billion for 2000. As previously indicated, during the second quarter of 2001, we
took steps to restructure our investment in Embratel which resulted in the
deconsolidation of Embratel effective January 1, 2001. Excluding Embratel from
the 2000 periods, WorldCom group revenues for 2001 increased 10.9% versus 2000.

            Voice revenues for 2001 decreased 6.3% over 2000 on traffic growth
of 2.6%. The revenue decreases were partially offset by wireless voice revenue
increases of 32.6% for 2001. Excluding wireless voice revenues, commercial voice
revenues decreased 12.7% over 2000.


                                       52
<Page>

            Data revenues for 2001 increased 16.7% over 2000. For the year ended
December 31, 2001, approximately 32% of data revenues were derived from frame
relay and asynchronous transfer mode services, where we experienced demand for
capacity increases across the product set as businesses moved more of their
mission-critical applications to their own networks during the period. At the
same time, we continued to experience strong price pressure for data services in
our emerging markets due to competition and the general decline in economic
condition of our customers, which we expect to continue in the foreseeable
future.

            International revenues for 2001 increased 25.8% to $3.0 billion
versus $2.4 billion, excluding Embratel, for 2000. Geographically, Europe grew
18.4% and Asia Pacific and other areas grew 43.9% for 2001. These increases were
partially offset by foreign currency fluctuations that had the effect of
reducing revenues by approximately $160 million in 2001. Although our mix
improved towards a more profitable blend of data versus voice, and retail versus
wholesale, our international business continues to experience significant price
pressure on its products.

            Internet revenues for 2001 increased 28.7% over 2000. Growth was
driven by demand for dedicated circuits as business customers continue to
migrate their data networks and applications to Internet-based technologies
requiring greater amounts of bandwidth. Additionally, Internet revenues for 2001
included $58 million of Digex revenues, net of intercompany eliminations, as a
result of the Intermedia merger. During 2001, we began to introduce our new
managed hosting products and virtual private networks on public and shared
environments. We expect these products, which are in the initial phases of their
life cycle, to gradually contribute to our revenue growth over the next several
quarters. Internet revenues include dedicated Internet access, managed
networking services and applications (such as virtual private networks), web
hosting and electronic commerce and transaction services (such as web centers
and credit card transaction processing).

            LINE COSTS. Line costs as a percentage of revenues for 2001
decreased to 38.0% as compared to 38.4% reported for 2000. Excluding Embratel in
2000, line costs would have been $7.1 billion, or 37.0% of revenues for 2000.
The increase as a percentage of revenues excluding Embratel, reflects the
pricing pressure in the data, international and Internet markets. Line costs
were partially offset by foreign currency exchange fluctuations which had the
effect of reducing line costs as a percentage of revenues by more than one-half
of a percentage point for 2001, and by increased data and dedicated Internet
traffic over our own facilities, which positively affected line costs as a
percentage of revenues by almost three-fourths of one percentage point for 2001.

            SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and
administrative expenses for 2001 were $6.1 billion or 28.4% of revenues as
compared to $5.7 billion or 25.0% of revenues for the prior year period.
Selling, general and administrative expenses for 2000 include a $340 million
pre-tax charge associated with specific domestic and international wholesale
accounts that were deemed uncollectible due to bankruptcies, litigation and
settlements of contractual disputes that occurred in the third quarter of 2000
and a $93 million pre-tax charge associated with the termination of the Sprint
Corporation merger agreement. Selling, general and administrative expenses for
2001 include pre-tax costs of $742 million related to the write-off of
investments in certain publicly traded and privately held companies, $12 million
as a result of the costs associated with the tracking stock capitalization and
$159 million associated with domestic and international severance packages and
other costs related to our 2001 workforce reductions. Excluding these charges
and Embratel in 2000, selling, general and administrative expenses as a
percentage of revenues would have been 24.1% for 2001 versus 22.5% for 2000.

            The increase in selling, general and administrative expenses for
2001 includes increased costs associated with "generation d" initiatives that
include product marketing, customer care, information system and product
development, employee retention costs, and costs associated with multichannel
multipoint distribution service product development.


                                       53
<Page>

            Selling, general and administrative expenses were offset in part by
foreign currency exchange fluctuations which had the effect of reducing selling,
general and administrative expenses as a percentage of revenues by less than
one-half of a percentage point for 2001. Additionally, domestic and
international workforce reductions in the first and fourth quarters of 2001
helped to stabilize selling, general and administrative costs during the
remainder of the year.

            DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
for 2001 increased to $4.1 billion or 19.3% of revenues from $3.3 billion or
14.4% of revenues for 2000. Excluding Embratel in 2000, depreciation and
amortization would have been $2.8 billion or 14.5% of revenues for 2000. The
increase reflects increased depreciation associated with 2000 and 2001 capital
expenditures as well as increased depreciation associated with the assets
acquired in the Intermedia merger. Beginning January 1, 2002, the WorldCom group
stopped amortizing intangible assets with indefinite useful lives, including
goodwill and tradenames in accordance with SFAS No. 142. Based on current levels
of such assets, this will reduce the WorldCom group's amortization expense by
approximately $1.0 billion annually.

            INTEREST EXPENSE. Interest expense for 2001 was $1.0 billion or 4.8%
of revenues as compared to $458 million or 2.0% of revenues for 2000. Excluding
Embratel in 2000, interest expense would have been $502 million, or 2.6% of
revenues for 2000. Interest expense on borrowings incurred by WorldCom and
allocated to the WorldCom group reflects the difference between WorldCom's
actual interest expense and the interest expense allocated to the MCI group. The
MCI group was allocated interest based on the weighted-average interest rate,
excluding capitalized interest, of WorldCom debt plus 1 1/4 percent.

            Capitalized interest for 2001 was $498 million versus $495 million
for 2000. We expect capitalized interest for 2002 to decline by approximately
$40 - $60 million as a result of lower capital expenditure construction.
However, continued debt reduction and interest rate management should partially
offset the impact of lower capitalized interest on interest expense for 2002.

            MISCELLANEOUS INCOME AND EXPENSE. Miscellaneous income for 2001 was
$412 million, or 1.9% of revenues as compared to $385 million, or 1.7% of
revenues for 2000. Miscellaneous income includes investment income, equity in
income and losses of affiliated companies, the effects of fluctuations in
exchange rates for transactions denominated in foreign currencies, gains and
losses on the sale of assets and other non-operating items.

            PROVISION FOR INCOME TAXES. The effective income tax rate was 38.8%
of income before taxes for 2001 and 40.1% for 2000. See note 10 to the WorldCom
group's combined financial statements for a reconciliation of the statutory
federal rate for income taxes to the WorldCom group's effective income tax rate.

            CUMULATIVE EFFECT OF ACCOUNTING CHANGE. During 2000, we adopted SAB
101, which requires certain activation and installation fee revenues to be
amortized over the average life of the related service rather than be recognized
immediately. Costs directly related to these revenues may also be deferred and
amortized over the customer contract life. This adoption resulted in a one-time
expense of $75 million, net of income tax benefit of $43 million, for the
WorldCom group in the first quarter of 2000.

            NET INCOME. For 2001, the WorldCom group reported net income of $1.4
billion as compared to $2.5 billion for 2000. Pro forma diluted income per
common share for 2001 was $0.48 compared to income per common share of $0.87 for
2000. Pro forma diluted income per share assumes the recapitalization occurred
at the beginning of 2000 and that the WorldCom group stock and MCI group stock
existed for all periods presented.

YEAR ENDED DECEMBER 31, 1999 VS.
   YEAR ENDED DECEMBER 31, 2000

            REVENUES. Revenues for 2000 increased 15.3% to $22.8 billion versus
$19.7 billion for 1999. The increase in total revenues is attributable to
internal growth of the WorldCom group.


                                       54
<Page>

            Reported revenues by category for the years ended December 31, 1999
and 2000 reflect the following changes by category (dollars in millions):

<Table>
<Caption>
                                                                          PERCENT
                                                     1999        2000     CHANGE
                                                   -------     -------    -------
<S>                                                <C>         <C>         <C>
COMMERCIAL SERVICES REVENUES
   Voice .....................................     $ 7,433     $ 7,036     (5.3)
   Data ......................................       5,830       7,389     26.7
   International .............................       1,624       2,367     45.8
   Embratel, net .............................       2,772       3,508     26.6
   Internet ..................................       1,554       2,455     58.0
                                                   -------     -------
TOTAL COMMERCIAL SERVICES REVENUES ...........      19,213      22,755     18.4
    Other ....................................         523          --       --
                                                   -------     -------
TOTAL ........................................     $19,736     $22,755     15.3
                                                   =======     =======
</Table>

            Voice revenues for 2000 decreased 5.3% over 1999 on traffic growth
of 6.4% as a result of federally mandated access charge reductions, noted under
line costs below, that were passed through to the customer. The revenue decrease
was partially offset by local voice revenue increases of 17.4% and wireless
voice revenue increases of 104% for 2000. We continued to show significant
percentage gains in local and wireless voice services as customers purchased
"all-distance" voice services from us. However, local revenues and wireless
voice revenues are still a relatively small component of total commercial voice
revenues. Excluding local and wireless voice revenues, commercial voice services
revenues for 2000 decreased 15.2% over 1999.

            Data revenues for 2000, increased 26.7% over 1999. The revenue
growth for data services was driven by a 32.8% increase in frame relay and
asynchronous transfer mode services. As of December 31, 2000, approximately 35%
of data revenues were derived from frame relay and asynchronous transfer mode
services. We continued to experience strong demand for capacity increases across
the product set as businesses moved more of their mission-critical applications
to their own networks. Additionally, as of December 31, 2000, our domestic local
voice grade equivalents had increased 98% to 65.5 million versus the prior year
amount.

            International revenues for 2000 increased 45.8% to $2.4 billion
versus $1.6 billion for 1999. This includes a 28% increase in revenues from
Europe, and a 119% increase in revenues from Asia and other areas. As of
December 31, 2000, we had 21 international facility based city networks versus
17 in 1999. Additionally, during 2000 we added over 5,000 buildings for a total
of over 15,000 buildings connected on the international networks.

            Embratel revenues for 2000 increased 26.6% to $3.5 billion versus
$2.8 billion for 1999 as a result of a higher number of fixed phone lines and
cellular devices in service within Brazil.

            Internet revenues for 2000 increased 58.0% over 1999. Growth was
driven by demand for dedicated circuits as business customers migrated their
data networks and applications to Internet-based technologies with greater
amounts of bandwidth.

            Other revenues which, prior to April 1999, consisted of the
operations of SHL, were $523 million for 1999. In April 1999, we completed the
sale of SHL to Electronic Data Systems for $1.6 billion.

            LINE COSTS. Line costs as a percentage of revenues for 2000
decreased to 38.4% as compared to 40.1% reported for 1999. The overall
improvement is a result of increased data and dedicated Internet traffic over
WorldCom-owned facilities, which positively affected line costs as a percentage
of revenues by approximately one and one-half percentage points. Additionally,
access charge reductions that occurred in January 2000 and July 2000 reduced
total line cost expense by approximately $95 million for 2000. While access
charge reductions were primarily passed through to customers, line costs as a
percentage of revenues were positively affected by more than a quarter of a
percentage point.

            SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and
administrative expenses for 2000 were $5.7 billion or 25.0% of revenues as
compared to $4.2 billion or 21.3% of revenues for 1999. Selling, general and
administrative


                                       55
<Page>

expenses for 2000 include a $340 million pre-tax charge associated with specific
accounts that were deemed uncollectible due to bankruptcies, litigation and
settlements of contractual disputes that occurred in the third quarter of 2000,
and a $93 million pre-tax charge associated with the termination of the Sprint
Corporation merger agreement, including regulatory, legal, accounting and
investment banking fees and other costs. Excluding these charges, selling,
general and administrative expenses as a percentage of revenues were 23.1% for
2000. Selling, general and administrative expenses for 2000 includes increased
costs associated with "generation d" initiatives that include product marketing,
customer care, information system and product development, employee retention
costs, and costs associated with multichannel multipoint distribution service
product development. These increased costs affected selling, general and
administrative expense as a percentage of revenues by approximately three
percentage points.

            DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
for the year ended December 31, 2000 increased to $3.3 billion or 14.4% of
revenues from $3.0 billion or 15.3% of revenues for 1999. This increase reflects
increased depreciation associated with increased capital expenditures. As a
percentage of revenues, these costs decreased due to the higher revenue base.

            INTEREST EXPENSE. Interest expense for 2000 was $458 million or 2.0%
of revenues as compared to $460 million or 2.3% of revenues for 1999. Interest
expense on borrowings incurred by WorldCom and allocated to the WorldCom group
reflects the difference between WorldCom's actual interest expense and the
interest expense allocated to the MCI group. The MCI group was allocated
interest based on the weighted-average interest rate, excluding capitalized
interest, of WorldCom debt plus 1 1/4 percent.

            MISCELLANEOUS INCOME AND EXPENSE. Miscellaneous income for 2000 was
$385 million or 1.7% of revenues as compared to $237 million or 1.2% of revenues
for 1999. Miscellaneous income includes investment income, equity in income and
losses of affiliated companies, the effects of fluctuations in exchange rates
for transactions denominated in foreign currencies, gains and losses on the sale
of assets and other non-operating items.

            PROVISION FOR INCOME TAXES. The effective income tax rate for 2000
was 40.1% of income before taxes. The 2000 rate is greater than the expected
federal statutory rate of 35% primarily due to the amortization of the
non-deductible goodwill. Excluding non-deductible amortization of goodwill, the
WorldCom group's effective income tax rate would have been 34.1%.

            CUMULATIVE EFFECT OF ACCOUNTING CHANGE. During the fourth quarter of
2000, we implemented SAB 101, which requires certain activation and installation
fee revenues to be amortized over the average life of the related service rather
than be recognized immediately. Costs directly related to these revenues may
also be deferred and amortized over the customer contract life. As required by
SAB 101, we retroactively adopted this accounting effective January 1, 2000,
which resulted in a one-time expense of $75 million, net of income tax benefit
of $43 million for the WorldCom group.

            NET INCOME. For the year ended December 31, 2000, the WorldCom group
reported net income of $2.5 billion as compared to $2.3 billion for the year
ended December 31, 1999.

MCI GROUP RESULTS OF OPERATIONS

            The following table sets forth for the periods indicated the MCI
group's statements of operations in millions of dollars and as a percentage of
its revenues for the periods indicated:

<Table>
<Caption>
                                                                            FOR THE YEARS ENDED DECEMBER 31,
                                                             -------------------------------------------------------------
                                                                    1999                  2000                  2001
                                                             -----------------     -----------------     -----------------
<S>                                                          <C>         <C>       <C>         <C>       <C>         <C>
Revenues .................................................   $ 16,172    100.0%    $ 16,335    100.0%    $ 13,831    100.0%
Line costs ...............................................      7,087     43.8        7,177     43.9        7,080     51.2
Selling, general and administrative ......................      5,071     31.4        5,162     31.6        5,348     38.7
Depreciation and amortization ............................        757      4.7          884      5.4          938      6.8
                                                             --------    -----     --------    -----     --------    -----
Operating income .........................................      3,257     20.1        3,112     19.1          465      3.4
</Table>


                                       56
<Page>

<Table>
<Caption>
                                                                            FOR THE YEARS ENDED DECEMBER 31,
                                                             -------------------------------------------------------------
                                                                    1999                  2000                  2001
                                                             -----------------     -----------------     -----------------
<S>                                                          <C>          <C>      <C>           <C>          <C>     <C>
Other income (expense):
     Interest expense ....................................       (506)    (3.1)        (512)    (3.1)        (504)    (3.6)
     Miscellaneous .......................................          5       --           --       --           --       --
                                                             --------    -----     --------    -----     --------    -----
Income (loss) before income taxes and cumulative effect
     of accounting change ................................      2,756     17.0        2,600     15.9          (39)    (0.3)
Income tax expense (benefit) .............................      1,109      6.9        1,035      6.3          (16)    (0.1)
                                                             --------    -----     --------    -----     --------    -----
Income (loss) before cumulative effect
    of accounting change .................................      1,647     10.2        1,565      9.6          (23)    (0.2)
Cumulative effect of accounting change ...................         --       --          (10)    (0.1)          --       --
                                                             --------    -----     --------    -----     --------    -----
Net income (loss) ........................................   $  1,647     10.2%    $  1,555      9.5%    $    (23)    (0.2)%
                                                             ========    =====     ========    =====     ========    =====
</Table>

YEAR ENDED DECEMBER 31, 2000 VS.
   YEAR ENDED DECEMBER 31, 2001

            REVENUES. Revenues for 2001 decreased 15.3% to $13.8 billion versus
$16.3 billion for 2000. The decrease in total revenues is primarily attributable
to consumers' substitution of wire line services with wireless and e-mail, and
proactive revenue initiatives resulting in services being de-emphasized as we
shift the MCI group's focus from revenue growth to cash generation.

            Reported revenues by category for 2000 and 2001 reflect the
following changes by category (dollars in millions):

<Table>
<Caption>
                                                                          PERCENT
                                                         2000     2001     CHANGE
                                                       -------   -------  -------
<S>                                                    <C>       <C>       <C>
Consumer ...........................................   $ 7,778   $ 7,227    (7.1)
Wholesale ..........................................     3,388     2,641   (22.0)
Alternative channels and small business ............     3,541     2,427   (31.5)
Dial-up Internet ...................................     1,628     1,536    (5.7)
                                                       -------   -------
TOTAL ..............................................   $16,335   $13,831   (15.3)
                                                       =======   =======
</Table>

            Consumer revenues for 2001 decreased 7.1% over 2000. The majority of
this decrease is attributed to decreases in calling card, dial around and dial-1
revenues as a result of consumers' substitution of wire line services with
wireless and e-mail. Our consumer local initiatives continued to perform well as
consumer local revenues increased approximately 180% for 2001 versus 2000.

            Wholesale revenues for 2001 decreased 22.0% over 2000. The wholesale
market continued to be extremely price competitive and this, in addition to
bankruptcies, a reduction in private line circuits related to customer internal
network consolidation and the impact of the September 11th attacks, contributed
to the year-over-year decrease. Wholesale revenues during 2001 were also
impacted by proactive revenue initiatives, which were made to improve the
quality of the wholesale revenue stream as we shift the MCI group's focus from
revenue growth to cash generation.

            Alternative channels and small business revenues for 2001 decreased
31.5% over 2000. Alternative channels and small business includes sales agents
and affiliates, wholesale alternative channels, small business, prepaid calling
card and wireless messaging revenues. These decreases are attributed to pricing
pressures in the wholesale and small business markets which negatively affected
revenue growth and gross margins in this area, and proactive initiatives to
de-emphasize services with unacceptable gross margins as we shift the MCI
group's focus from revenue growth to cash generation.

            Dial-up Internet revenues for 2001 decreased 5.7% over 2000. Our
dial access network has grown 12.7% to approximately 3.2 million modems as of
December 31, 2001, compared with the prior year period. Additionally, Internet
connect hours increased 9.3% to 7.1 billion hours for 2001 versus 2000. These
network usage increases were more than offset by pricing pressure resulting from
the impact of volume discounts, which lowered average revenue per hour by
approximately 17% for 2001 versus 2000.


                                       57
<Page>

            LINE COSTS. Line costs as a percentage of revenues for 2001
increased to 51.2% as compared to 43.9% reported for 2000. The increase was
primarily the result of continued competitive pricing in the dial-up Internet
business as noted above, which experienced a 17% decrease in dial-up revenues
per hour for 2001 versus 2000. Additionally, line costs as a percentage of
revenues increased as a result of pricing pressure in the wholesale markets as
well as the decrease in higher margin calling card and dial around revenues due
to wireless substitution as noted above.

            SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and
administrative expenses for 2001 were $5.3 billion or 38.7% of revenues as
compared to $5.2 billion or 31.6% of revenues for the prior year period.
Selling, general and administrative expenses for 2000 include a $345 million
pre-tax charge associated with specific wholesale accounts that were deemed
uncollectible due to bankruptcies, litigation and settlements of contractual
disputes that occurred in the third quarter of 2000. Selling, general and
administrative expenses for 2001 include pre-tax costs of $123 million related
to the write-off of investments in certain publicly traded and privately held
companies, $11 million as a result of the costs associated with the tracking
stock capitalization and $48 million associated with domestic severance packages
and other costs related to our February 2001 workforce reductions. Excluding
these costs, selling, general and administrative expenses as a percentage of
revenues were 37.4% for 2001 versus 29.5% for 2000.

            The increase in selling, general and administrative expenses can be
attributed to proactive initiatives to de-emphasize specific wholesale services
revenues with unacceptable gross margins which began in the fourth quarter of
2000. These actions resulted in lower revenues, as discussed above, but had no
immediate effect on selling, general and administrative expenses for both the
wholesale and alternative channels. Workforce reductions in the first quarter of
2001 have helped to stabilize selling, general and administrative expenses since
the second quarter of 2001.

            DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
for 2001 increased to $938 million or 6.8% of revenues from $884 million or 5.4%
of revenues for 2000. The increase primarily reflects additional depreciation
associated with 2000 and 2001 capital expenditures. Beginning January 1, 2002,
MCI group stopped amortizing intangible assets with indefinite useful lives,
including goodwill in accordance with SFAS No. 142. Based on current levels of
such assets, this will reduce MCI group's amortization expense by approximately
$300 million annually.

            INTEREST EXPENSE. Interest expense for 2001 was $504 million or 3.6%
of revenues as compared to $512 million or 3.1% of revenues for 2000. Interest
expense on borrowings incurred by WorldCom and allocated to the MCI group was
based on the weighted-average interest rate, excluding capitalized interest, of
WorldCom debt plus 1 1/4 percent. As of January 1, 1999, $6.0 billion of
WorldCom's outstanding debt was notionally allocated to the MCI group. During
2001, the MCI group repaid $495 million of the notionally allocated debt and as
of December 31, 2001 the MCI group's long-term debt balance was $5.5 billion.

            INCOME TAX BENEFIT. The effective income tax rate was 41.0% of loss
before taxes for 2001 versus 39.8% of income before taxes for 2000. See note 8
to the MCI group's combined financial statments for a reconciliation of the
statutory federal rate for income taxes to the MCI group's effective income tax
rate.

            CUMULATIVE EFFECT OF ACCOUNTING CHANGE. During 2000, we adopted SAB
101, which requires certain activation and installation fee revenues to be
amortized over the average life of the related service rather than be recognized
immediately. Costs directly related to these revenues may also be deferred and
amortized over the customer contract life. This adoption resulted in a one-time
expense of $10 million, net of income tax benefit of $7 million for the MCI
group in the first quarter of 2000.

            NET INCOME (LOSS). For 2001, the MCI group reported a net loss of
$23 million as compared to net income of $1.6 billion for 2000. Pro forma
diluted loss per common share for 2001 was $0.20 compared to income per common
share of $13.52 for 2000. Pro forma diluted income per share assumes the
recapitalization occurred at the beginning of 2000 and that the WorldCom group
stock and MCI group stock existed for all periods presented.


                                       58
<Page>

YEAR ENDED DECEMBER 31, 1999 VS.
   YEAR ENDED DECEMBER 31, 2000

            REVENUES. Revenues for 2000 increased 1.0% to $16.3 billion versus
$16.2 billion for 1999. The increase in total revenues is attributable to
internal growth of the MCI group.

            Reported revenues by category for the year ended December 31, 1999
and 2000 reflect the following changes by category (dollars in millions):

<Table>
<Caption>
                                                                           PERCENT
                                                     1999        2000       CHANGE
                                                   -------     -------     -------
<S>                                                <C>         <C>          <C>
Consumer .....................................     $ 7,590     $ 7,778        2.5
Wholesale ....................................       3,943       3,388      (14.1)
Alternative channels and small business ......       3,142       3,541       12.7
Dial-up Internet .............................       1,497       1,628        8.8
                                                   -------     -------
Total revenues ...............................     $16,172     $16,335        1.0
                                                   =======     =======
</Table>

            Consumer revenues for 2000 increased 2.5% over 1999, as the MCI
group's partner marketing programs helped to drive Dial-1 product gains.
Consumer revenue growth was impacted by declines in transaction brands and
calling card services, which were pressured by increasing wireless substitution,
and 10-10-321, which the MCI group no longer actively markets.

            Wholesale revenues for 2000 decreased 14.1% versus 1999 as a result
of price pressure. Wholesale revenues for 2000 were also impacted by proactive
fourth quarter 2000 revenue actions which had the effect of reducing wholesale
revenues by approximately $90 million in the fourth quarter of 2000. These
actions were made to improve the quality of the wholesale revenue stream as we
shift the MCI group's focus from revenue growth to cash generation.

            Alternative channels and small business revenues for 2000 increased
12.7% over 1999. This increase is primarily attributable to internal growth for
wholesale alternative channel voice revenues. We expect that pricing pressures
in the wholesale and small business markets will negatively affect revenue
growth and gross margins in this area and this level of growth will decline in
the foreseeable future as a result of these services being de-emphasized as we
shift the MCI group's focus from revenue growth to cash generation.

            Dial-up Internet revenue growth for 2000 was 8.8% over 1999. Our
dial access network has grown 71% to over 2.8 million modems as of December 31,
2000, compared with 1999. Additionally, Internet connect hours increased 54.8%
to 6.5 billion hours for 2000 versus the prior year. These network usage
increases were offset by pricing pressure on dial-up Internet traffic as a
result of contract repricings in the second quarter of 2000, which lowered
average revenue per hour by 25% for 2000 versus 1999.

            LINE COSTS. Line costs as a percentage of revenues for 2000
increased to 43.9% as compared to 43.8% reported for the prior year period. The
increase was primarily the result of contract repricings in the dial-up Internet
business as noted above and continued competitive pricing on the dial-up
Internet business which effectively held the average cost per hour constant
although average dial-up Internet revenues per hour decreased by 25%.
Additionally, access charge reductions that occurred in January 2000 and July
2000 reduced total line costs by approximately $150 million for 2000. While
access charge reductions were primarily passed through to customers, line costs
as a percentage of revenues was positively affected by one-half of a percentage
point.

            SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and
administrative expenses for 2000 were $5.2 billion or 31.6% of revenues as
compared to $5.1 billion or 31.4% of revenues for the prior year period.
Selling, general and administrative expenses for 2000 include a $345 million
pre-tax charge associated with specific wholesale accounts that were deemed
uncollectible due to bankruptcies, litigation and settlements of contractual
disputes that occurred in the third quarter of 2000. Excluding this charge,
selling, general and administrative expenses as a percentage of


                                       59
<Page>

revenues were 29.5% for 2000. This decrease as a percentage of revenues
primarily results from lower advertising and marketing costs incurred in the
consumer business.

            DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
for 2000 increased to $884 million or 5.4% of revenues from $757 million or 4.7%
of revenues for 1999. These increases primarily reflect additional depreciation
associated with capital expenditures.

            INTEREST EXPENSE. Interest expense for 2000 was $512 million or 3.1%
of revenues as compared to $506 million or 3.1% of revenues for 1999. Interest
expense on borrowings incurred by WorldCom and allocated to the MCI group was
based on the weighted-average interest rate, excluding capitalized interest, of
WorldCom debt plus 1 1/4 percent. As of January 1, 1999, $6.0 billion of
WorldCom's outstanding debt was notionally allocated to the MCI group.

            MISCELLANEOUS INCOME AND EXPENSE. For the year ended December 31,
2000, miscellaneous income was zero as compared to $5 million for 1999.

            PROVISION FOR INCOME TAXES. The effective income tax rate for 2000
was 39.8% of income before taxes. The 2000 rate is greater than the expected
federal statutory rate of 35% primarily due to the amortization of the
non-deductible goodwill. Excluding non-deductible amortization of goodwill, the
MCI group's effective income tax rate would have been 36.7%.

            CUMULATIVE EFFECT OF ACCOUNTING CHANGE. During the fourth quarter of
2000, we implemented SAB 101, which requires certain activation and installation
fee revenues to be amortized over the average life of the related service rather
than be recognized immediately. Costs directly related to these revenues may
also be deferred and amortized over the customer contract life. As required by
SAB 101, we retroactively adopted this accounting effective January 1, 2000,
which resulted in a one-time expense of $10 million, net of income tax benefit
of $7 million at the MCI group.

            NET INCOME. For the year ended December 31, 2000, the MCI group
reported net income of $1.56 billion as compared to $1.65 billion for the year
ended December 31, 1999.

LIQUIDITY AND CAPITAL RESOURCES

            As of December 31, 2001, our total debt, net of cash and cash
equivalents, was $28.8 billion. Additionally, at December 31, 2001, we had
available liquidity of $9.4 billion under our credit facilities and commercial
paper program and cash on hand.

            As of January 1, 1999, the MCI group was notionally allocated $6.0
billion of WorldCom's debt and the remaining outstanding debt was notionally
allocated to the WorldCom group. WorldCom management has a wide degree of
discretion over the cash management policies of both the WorldCom group and the
MCI group. Cash generated by either group can be transferred to the other group
without prior approval of WorldCom's shareholders. Due to the discretion
possessed by management over the cash management policies of both groups,
including the timing and decision of whether to finance capital expenditures, it
may be difficult to assess each group's liquidity and capital resource needs,
and, in turn, the future prospects of each group based on past performance. For
2001, the MCI group generated sufficient cash to repay $495 million of its
allocated notional debt and pay $71 million for dividends on MCI group stock.

            On June 8, 2001, we replaced our existing $7 billion 364-Day
Revolving Credit and Term Loan Agreement with two new credit facilities
consisting of a $2.65 billion 364-Day Facility, and a $1.6 billion Multi-Year
Facility. The 364-Day Facility and the Multi-Year Facility, together with our
$3.75 billion Existing Facility, provide us with aggregate credit facilities of
$8 billion. These credit facilities provide liquidity support for our commercial
paper program and for other general corporate purposes.


                                       60
<Page>

            The Existing Facility and the Multi-Year Facility mature on June 30,
2002 and June 8, 2006, respectively. The 364-Day Facility has a 364-day term,
which may be extended for successive 364-day terms to the extent of the
committed amounts from those lenders consenting thereto, with a requirement that
lenders holding 51% of the committed amounts consent and so long as the final
maturity date does not extend beyond June 8, 2006. Additionally, we may elect to
convert the principal debt outstanding under the 364-Day Facility to a term loan
maturing no later than one year after the conversion date, so long as the final
maturity date does not extend beyond June 8, 2006. The Existing Facility is
subject to annual commitment fees not to exceed 0.25% of any unborrowed portion
of the facilities, and the current commitment fee is 0.11%. WorldCom does not
intend to replace the Existing Facility when it matures on June 30, 2002. The
364-Day Facility and the Multi-Year Facility are subject to annual facility fees
not to exceed 0.20% or 0.25%, respectively, of the average daily commitment
under each such facility (whether used or unused). The current commitment fee on
the 364-Day Facility is 0.07% and the current commitment fee on the Multi-Year
Facility is 0.09%.

            The credit facilities bear interest payable in varying periods,
depending on the interest period, not to exceed six months, or with respect to
any Eurodollar Rate borrowing, 12 months if available to all lenders, at rates
selected by us under the terms of the credit facilities, including a Base Rate
or Eurodollar Rate, plus the applicable margin. The applicable margin for the
Eurodollar Rate borrowing generally varies from 0.35% to 0.75%, and is currently
set at 0.35%, as to loans under the Existing Facility, from 0.29% to 0.80%, and
is currently set at 0.33% as to loans under the 364-Day Facility and 0.27% to
0.75%, and is currently set at 0.31% as to loans under the Multi-Year Facility,
in each case based upon our then current debt ratings.

            The credit facilities are unsecured and require compliance with
various covenants including a financial covenant based on the ratio of total
debt to total book capitalization, which may not exceed 0.68 to 1.00, calculated
on a consolidated basis. The credit facilities also require compliance with
various operating covenants which, among other things, permit the following
transactions so long as we are not in default thereunder:

      o     distributions to shareholders;

      o     the incurrence of additional indebtedness, except that newly secured
            debt or the total debt of the covered subsidiaries, cannot exceed
            10% of the book value of the consolidated assets of WorldCom and the
            covered subsidiaries; and

      o     sales of assets in the ordinary course of business and additional
            sales if after such sales, the aggregate book value of all such
            assets sold during the term of the credit facilities does not
            exceed 20% of the book value of the consolidated assets of WorldCom
            and the covered subsidiaries.

As of the date of this filing, we were in compliance with these covenants.

            On May 9, 2001, we completed the pricing of a public debt offering
of approximately $11.9 billion principal amount of debt securities, based on
currency exchange rates on May 8, 2001. The net proceeds of $11.7 billion have
been or will be used for general corporate purposes, including the repayment of
commercial paper and other debt repayments as outlined below. The public debt
offering consisted of the following series of notes:

<Table>
<Caption>
                                PRINCIPAL                                  INTEREST                 FIRST
                                  AMOUNT                MATURITY           PAYABLE              INTEREST DATE
                           ------------------------------------------------------------------------------------
<S>                        <C>                        <C>                <C>                  <C>
6.50% Notes due 2004       $1.5 billion               May 15, 2004       Semiannually         November 15, 2001
7.50% Notes due 2011       $4.0 billion               May 15, 2011       Semiannually         November 15, 2001
8.25% Notes due 2031       $4.6 billion               May 15, 2031       Semiannually         November 15, 2001
6.75% Notes due 2008       (euro)1.25 billion         May 15, 2008         Annually             May 15, 2002
7.25% Notes due 2008       (pound)500 million         May 15, 2008         Annually             May 15, 2002
</Table>


                                       61
<Page>

            All of the notes, except for the 6.50% Notes due 2004 are
redeemable, as a whole or in part, at our option, at any time or from time to
time, at respective redemption prices equal to the greater of 100% of the
principal amount of the notes to be redeemed or:

      o     In the case of the U.S. dollar notes, the sum of the present values
            of the Remaining Scheduled Payments, as defined therein, discounted,
            on a semiannual basis, assuming a 360-day year consisting of twelve
            30-day months, at the Treasury Rate, as defined therein, plus:

            o     30 basis points for the Notes due 2011, and

            o     35 basis points for the Notes due 2031;

      o     In the case of the euro notes, the sum of the present values of the
            Remaining Scheduled Payments, as defined therein, discounted, on an
            annual basis (based on the actual number of days elapsed divided by
            365 or 366, as the case may be), at the Reference Euro Dealer Rate,
            as defined therein, plus 25 basis points; and

      o     In the case of the sterling notes, the price expressed as a
            percentage (rounded to three decimal places, with .0005 being
            rounded up) at which the Gross Redemption Yield, as defined therein,
            on the outstanding principal amount of the notes on the Reference
            Date, as defined therein, is equal to the Gross Redemption Yield
            (determined by reference to the middle-market price) at 3:00 p.m.
            (London time) on that date on the Benchmark Gilt, as defined
            therein, plus 25 basis points;

plus, in the case of the U.S. dollar notes, the euro notes and the sterling
notes, accrued interest to the date of redemption which has not been paid.

            In connection with the Intermedia merger, we assumed Intermedia's
outstanding debt including $1.2 billion of senior discount notes with interest
rates ranging from 11.25% to 12.5%, $0.9 billion of senior notes with interest
rates ranging from 8.5% to 9.5%, credit facility borrowings of $258 million and
other long-term debt including capital leases of $0.6 billion. We repaid the
Intermedia credit facility borrowings of $258 million and subsequently
terminated Intermedia's credit facility during the third quarter of 2001.
Additionally, on September 28, 2001, we redeemed all of Intermedia's 12.5%
senior discount notes for $337 million. Cash balances were used to repay these
amounts.

            During the third and fourth quarters of 2001, $1.5 billion of 6.125%
senior notes matured, $917 million of floating rate notes matured, we redeemed
all of our outstanding 8.875% senior notes due 2006 for $694 million, we retired
$1.1 billion of our outstanding debt through open market debt repurchases
(including $546 million of outstanding debt assumed in the Intermedia merger)
and we redeemed all of our outstanding Series G preferred stock at par for $200
million. Cash balances were used to repay these amounts.

            Included in WorldCom long-term debt is a $700 million 6.125% senior
note due 2012, which is a remarketable instrument. On April 15, 2002, the
underwriter has an option to remarket the note and we have the option to accept
the remarketing, exchange the note for new 5, 7 or 10-year notes at prevailing
interest rates or redeem the note for cash. Since the note matures in 2012, it
is not included in our 2002 scheduled debt maturities of $172 million.

            Additionally, in February 2002, we liquidated our remaining
investment in News Corporation. We received cash proceeds of $870 million, net
of $60 million for sales discounts and banking fees. The investment's book value
as of December 31, 2001 was approximately $930 million. Therefore, a loss of $60
million will be recognized in miscellaneous income (expense) in the first
quarter of 2002 related to this transaction.

            Our senior debt is currently rated as follows:

<Table>
<Caption>
Rating Agency                         Rating      Outlook
--------------------------------------------------------------
<S>                                   <C>         <C>
Moody's Investors Service             A3          Under review
Standard & Poor's                     BBB+        Negative
Fitch Ratings                         BBB+        Stable
</Table>

Any downgrade in rating will not trigger any events on our outstanding bond
debt, although the cost of future bond offerings may increase. Our credit
facilities contain ratings triggers affecting interest rates and our annual
commitment fee, which are outlined above and are not liquidity triggers.
Additionally, if WorldCom merges or consolidates with another corporation, the
surviving corporation, after giving effect to the merger or consolidation, among
other things, must have a then effective debt rating equal to or higher than
Baa3 by Moody's and BBB- by Standard & Poor's. Further, our $2 billion
receivables purchase program contains rating triggers which reduce the
availability under the program, and if we are rated less than Baa3 by Moody's
and less than BBB- by Standard & Poor's, or if we are not rated by either
agency, then the receivables purchase program is terminated. Our management
frequently communicates with the rating agencies and currently believes that a
downgrade below Baa3 or BBB- is not likely.

OPERATING ACTIVITIES

            For the years ended December 31, 1999, 2000 and 2001, our cash flows
from operations were as follows (dollars in millions):


                                       62
<Page>

<Table>
<Caption>
                                                         1999        2000        2001
                                                       -------     -------     -------
<S>                                                    <C>         <C>         <C>
WorldCom group ...................................     $ 7,352     $ 5,330     $ 6,605
MCI group ........................................       3,653       2,336       1,389
                                                       -------     -------     -------
     Net cash provided by operating activities ...     $11,005     $ 7,666     $ 7,994
                                                       =======     =======     =======
</Table>

            The 2001 increase reflects decreases in accounts receivable and
other working capital requirements, offset by lower operating results in both
the WorldCom group and the MCI group. The 2000 decrease reflects increases in
working capital requirements and deferred tax obligations in both the WorldCom
group and the MCI group, offset by improved operating results in the WorldCom
group.

INVESTING ACTIVITIES

            For the years ended December 31, 1999, 2000 and 2001, our net cash
used in investing activities was as follows (dollars in millions):

<Table>
<Caption>
                                                         1999        2000        2001
                                                       -------     -------     -------
<S>                                                    <C>         <C>         <C>
WorldCom group ...................................     $(8,045)    $(13,612)   $(8,818)
MCI group ........................................      (1,510)        (773)      (872)
                                                       -------     --------    -------
     Net cash used in investing activities .......     $(9,555)    $(14,385)   $(9,690)
                                                       =======     ========    =======
</Table>

            The WorldCom group's primary capital expenditures totaled $7.9
billion in 1999, $11.0 billion in 2000 and $7.6 billion in 2001. Primary capital
expenditures include purchases of transmission, communications and other
equipment. The MCI group's capital expenditures totaled $787 million in 1999,
$500 million in 2000 and $267 million in 2001. The MCI group's capital
expenditures include purchases of switching equipment, dial modems and messaging
and other equipment.

            Investing activities include intangible asset increases at the
WorldCom group of $389 million in 1999, $771 million in 2000 and $367 million in
2001, and at the MCI group of $354 million in 1999, $167 million in 2000 and
$327 million in 2001. Intangible asset additions primarily represent costs
incurred to develop software for internal use.

            Additionally, investing activities include acquisitions and related
costs at the WorldCom group of $786 million in 1999, $14 million in 2000 and
$206 million in 2001 and $292 million at the MCI group in 1999.

FINANCING ACTIVITIES

            For the years ended December 31, 1999, 2000 and 2001, cash provided
by (used in) financing activities was as follows (dollars in millions):

<Table>
<Caption>
                                                                 1999         2000         2001
                                                                -------      -------      -------
<S>                                                             <C>          <C>          <C>
WorldCom group ............................................     $    17      $ 8,215      $ 3,080
MCI group .................................................      (2,097)      (1,592)        (551)
                                                                -------      -------      -------
     Net cash provided by (used in) financing activities ..     $(2,080)     $ 6,623      $ 2,529
                                                                =======      =======      =======
</Table>

            Financing activities include net repayments on debt of $2.9 billion
in 1999 and net proceeds on borrowings on debt of $6.4 billion in 2000 and $3.0
billion in 2001. Financing activities for the MCI group reflect the repayments
of intergroup advances, repayment of notionally allocated debt from WorldCom and
dividends paid.

            Also included in financing activities are proceeds from WorldCom's
common stock issuances of $886 million in 1999, $585 million in 2000 and $124
million in 2001 as a result of WorldCom common stock option and warrant
exercises.


                                       63
<Page>

            Distributions on company obligated mandatorily redeemable and other
preferred securities and dividends paid on other equity securities were $72
million in 1999, $65 million in 2000 and $154 million in 2001. The 2001 increase
represents dividends associated with our Series D, E, F and G preferred stock
which was issued in connection with the Intermedia merger, and dividends paid on
MCI group stock.

            In January 2000, each share of our Series C Preferred Stock was
redeemed by us for $50.75 in cash, or approximately $190 million in the
aggregate. Additionally, on August 20, 2001 the holder of our Series G preferred
stock exercised its right to require us to redeem all of the outstanding Series
G preferred stock at par for $200 million.

            In October 2001, we exercised our option to redeem all of our
outstanding Series B Preferred Stock. Prior to the redemption date,
substantially all of the holders of our Series B Preferred Stock elected to
convert the preferred stock into 0.1460868 shares of WorldCom group stock and
0.005843472 shares of MCI group stock for each share of Series B Preferred Stock
held.

            During the second quarter of 2001, we declared the initial quarterly
dividend for the MCI group stock. A cash dividend of $0.60 per share of MCI
group stock, or approximately $70 million in the aggregate, was paid on October
15, 2001 to shareholders of record as of the close of business on September 28,
2001. Dividends of $0.60 per share of MCI group stock were also declared during
the third and fourth quarters of 2001 which have been or will be paid in 2002.

            The development of our businesses and the installation and expansion
of our domestic and international networks will continue to require significant
capital expenditures. For 2002, the WorldCom group capital expenditures are
expected to be between $5.0 and $5.5 billion and the MCI group capital
expenditures and intangible (software development) spending are expected to be
approximately $500 million.

            We believe that cash flow from operations and available liquidity,
including our credit facilities and commercial paper program and available cash
will be sufficient to meet our capital needs, debt service and dividend
requirements for the next twelve months. However, economic downturns and other
adverse developments, including factors beyond our control, could impair our
ability to service our indebtedness.

CRITICAL ACCOUNTING POLICIES

            Our significant accounting policies are described in Note 1 to the
consolidated and combined financial statements included in Item 8 of this Form
10-K. We believe some of our most critical accounting policies include:

            o     estimating valuation allowances and accrued liabilities
                  associated with revenue reserves and provisions for
                  uncollectible accounts and pending litigation and regulatory
                  matters;

            o     accounting for income taxes;

            o     goodwill and intangibles;

            o     valuation of long-lived and intangible assets, and goodwill;

            o     estimating depreciation and amortization associated with
                  long-lived assets; and

            o     Allocation policies between the Worldcom group and the MCI
                  group

            ESTIMATING VALUATION ALLOWANCES AND ACCRUED LIABILITIES. The
preparation of our consolidated financial statements requires us to make
estimates and assumptions that affect the reported amount of assets and
liabilities as well as the reported amounts of revenues and expenses for the
periods presented. Specifically, our management must make estimates of future
customer credits through the analysis of historical trends and known events.
Significant management judgments and estimates must be made and used in
connection with establishing the revenue reserves associated with discounts
earned on special customer agreements, billing reserves for pricing changes and
customer disputes. Material differences may result in the amount and timing of
our revenue adjustments if management projections differ from actual results.
Similarly, our management must make estimates regarding the collectibility of
our accounts receivable. Management specifically analyzes accounts receivable
including historical bad debts, customer concentrations, customer
credit-worthiness


                                       64
<Page>

and current economic trends when evaluating the adequacy of the allowance for
doubtful accounts. As of December 31, 2001, our accounts receivable balance was
$5.3 billion, net of allowance for doubtful accounts of $1.1 billion.

            We have recorded accruals for loss contingencies in our consolidated
financial statements associated with legal and regulatory proceedings that are
incidental to our business. Such accruals are based on our management's estimate
of the projected liability and range of loss in accordance with applicable
accounting guidance. Because of the uncertainties related to both the amount and
range of loss on the remaining pending matters, management is unable to make a
reasonable estimate of the ultimate liability related to an unfavorable outcome.
As additional information becomes available, we will assess the potential
liability related to our pending matters and revise our estimates. The results
of these various legal and regulatory matters are uncertain and could have a
material adverse affect on our consolidated results of operations or financial
position.

            ACCOUNTING FOR INCOME TAXES. As part of the process of preparing our
consolidated financial statements we are required to estimate our income taxes
in each of the jurisdictions in which we operate. This process involves our
estimating actual current tax exposure for WorldCom together with assessing
temporary differences resulting from differing treatment of items, such as
property, plant and equipment depreciation, for tax and accounting purposes.
Actual income taxes could vary from these estimates due to future changes in
income tax law or results from final tax exam reviews.

            GOODWILL AND INTANGIBLES. Purchase accounting requires extensive use
of accounting estimates and judgments to allocate the purchase price to the fair
market value of the assets and liabilities purchased. In our recording of the
Intermedia merger, we allocated the purchase price among certain identifiable
intangible assets and goodwill based on third party appraisals.

            VALUATION OF LONG-LIVED ASSETS, GOODWILL AND INTANGIBLES. We assess
the impairment of identifiable intangibles, long-lived assets and goodwill
whenever events or changes in circumstances indicate that the carrying value may
not be recoverable. Factors we consider important which could trigger an
impairment review include the following:

            o     significant underperformance relative to expected historical
                  or projected future operating results;

            o     significant changes in the use of our assets or the strategy
                  for our overall business;

            o     significant negative industry or economic trends;

            o     significant decline in our stock price for a sustained period;
                  and

            o     our market capitalization relative to net book value.

            We determine any impairment by comparing the undiscounted future
cash flows estimated to be generated by those assets to their respective
carrying amounts. In the event an impairment exists, a loss is recognized based
on the amount by which the carrying value exceeds the fair value of the asset or
group of assets. If quoted market prices for an asset are not available, fair
market value is determined primarily using the anticipated cash flows discounted
at a rate commensurate with the risk involved. Losses on property and equipment
to be disposed of are determined in a similar manner, except that fair market
values are reduced for the cost to dispose.

            As discussed below, SFAS No. 142, became effective on January 1,
2002 and as a result, we stopped amortizing approximately $45.0 billion of net
goodwill and $1.0 billion of net tradenames. Based on our current levels of such
assets, this will reduce amortization by approximately $1.3 billion annually. In
lieu of amortization, we are required to perform an initial impairment review of
our goodwill and tradenames in 2002 and an annual impairment review thereafter.
We expect to complete our initial impairment review no later than the second
quarter of 2002.

            We currently estimate that we will record an impairment charge upon
completion of the initial impairment review of approximately $15 to $20 billion,
with approximately $1 billion at the MCI group.


                                       65
<Page>

            DEPRECIATION AND AMORTIZATION OF LONG-LIVED ASSETS. We assign useful
lives for long-lived assets based on periodic studies of actual asset lives and
our intended use for those assets. Any change in these asset lives would be
reported in our statement of operations as soon as any change in estimate is
determined. There have been no material changes in asset lives during the three
years ended December 31, 2001.

            ALLOCATION POLICIES BETWEEN THE WORLDCOM GROUP AND THE MCI GROUP.
The financial information for the WorldCom group and the MCI group reflect the
performance of the businesses attributed to each group and includes the
attribution and allocation of our assets, liabilities, revenues and expenses
between the WorldCom group and the MCI group in accordance with our tracking
stock policy. Our management believes that the attribution and allocation
methods used are equitable and provide a reasonable estimate of the costs
attributable to each group. However, it is not practical to determine whether
the allocated amounts represent amounts that would have been incurred on a
stand-alone basis. Our board of directors or any special committee appointed by
our board of directors may, without shareholder approval, change the policies
set forth in our tracking stock policy statement and may adopt additional
policies or make exceptions with respect to the application of the policies
described in our policy statement in connection with particular facts and
circumstances, all as they may determine to be in the best interests of
WorldCom. Our board is subject to fiduciary duties to all of WorldCom's
shareholders as one group, not to the holders of any series of stock separately.
These policies are discussed in this management's discussion and analysis of
financial condition and results of operations as well as in note 1 of the notes
to combined financial statements of the WorldCom group and the MCI group.

RELATED PARTY TRANSACTIONS

            We have entered into certain loan and guaranty arrangements
involving Bernard J. Ebbers, WorldCom's President and Chief Executive Officer,
principally relating to certain obligations to financial institutions secured by
Mr. Ebbers' stock in WorldCom. Following recent declines in the closing price of
the WorldCom group stock, the outstanding debt covered by the WorldCom guaranty
in favor of Bank of America, N.A., or Bank of America, has been repaid and we
have deposited with Bank of America approximately $35 million to collateralize a
letter of credit used to support financing for which Mr. Ebbers is obligated.
The underlying letter of credit is scheduled to expire on February 15, 2003,
subject to renewal, extension or substitution.

            WorldCom made aggregate payments of approximately $198.7 million to
Bank of America pursuant to the guaranty, in addition to the deposit
collateralizing the letter of credit. That amount, together with any amounts
paid or costs incurred by us in connection with the letter of credit, plus
accrued interest at a floating rate equal to that under one of our credit
facilities, is payable by Mr. Ebbers to us on demand. The amount of such
interest accrued through February 28, 2002, is approximately $875,000 and the
interest rate as of that date was 2.15% per annum.

            In addition to the guaranty arrangements, we have also agreed to
loan up to $165 million in principal amount to Mr. Ebbers. These loans are
payable on demand and bear interest at floating rates equal to that under
certain of our credit facilities. As of February 28, 2002, the aggregate
principal amount of indebtedness owed by Mr. Ebbers to us under these loans was
approximately $144.3 million. Accrued interest on these loans is approximately
$5.5 million through February 28, 2002, at interest rates ranging from 2.14% to
2.16% per annum as of that date.

            We have been advised that Mr. Ebbers has used, or plans to use, the
proceeds of the loans from WorldCom principally to repay certain indebtedness
under loans secured by shares of our stock owned by him and that the proceeds of
such secured loans were used for private business purposes. The loans and
guaranty by WorldCom were made following a determination that they were in the
best interests of WorldCom and our shareholders in order to avoid additional
forced sales of Mr. Ebbers' stock in WorldCom. The determination was made by our
Compensation and Stock Option Committee as a result of the pressure on our stock
price, margin calls faced by Mr. Ebbers and other considerations. Such actions
were ratified and approved by our board of directors.

            In connection with the transactions described above, and subject to
certain limitations, and effective upon termination of restrictions under
existing lending agreements, Mr. Ebbers pledged to WorldCom the shares of our
stock owned by him with respect to his obligations under the loans and guaranty
from WorldCom. The pledge of certain of those shares is subordinated to the
prior rights of other lenders and is not currently perfected. Mr. Ebbers also
agreed to indemnify WorldCom for any amounts expended or losses, damages, costs,
claims or expenses incurred under the guaranty or the loans from WorldCom and
has provided information demonstrating that his assets are sufficient to cover
his outstanding obligations to us.

CONTRACTUAL OBLIGATIONS AND COMMITMENTS

            As of December 31, 2001, we had various contractual obligations and
commitments which are more fully disclosed in our notes to consolidated
financial statements. Components of these obligations and commitments include:

      o     our long-term debt, which includes capital leases. The detail of our
            long-term debt maturities is outlined below under "Quantitative and
            qualitative disclosures about market risk";


                                       66
<Page>

      o     our operating leases for office facilities and equipment under
            non-cancelable operating leases having initial or remaining terms of
            more than one year and our obligations under rights-of-way and
            franchise agreements with various entities for use of their
            rights-of way for the installation of our telecommunications
            systems. Total multi-year obligations under operating leases and
            rights-of-way are $3.9 billion and $443 million, respectively, as of
            December 31, 2001;

      o     our outsourcing agreement with EDS pursuant to which we outsource
            portions of our information technology, or IT, operations to EDS.
            EDS has assumed responsibility for our IT system operations at more
            than a dozen of our processing centers worldwide. As of December 31,
            2001, the contractual obligation associated with this multi-year
            contract was $2.4 billion in the aggregate;

      o     our obligations under contractual commitments with traditional local
            phone companies who provide ports to us in co-located facilities,
            which we use for dial-up Internet access. As of December 31, 2001,
            the contractual commitment associated with these contracts was $1.9
            billion in the aggregate. During 2001, we were successful in the
            renegotiation of many of these contracts, at no cost, and as a
            result, the multi-year contractual commitment has been lowered by
            more than $1.1 billion versus the comparable obligation in 2000. We
            will recognize the benefits associated with these savings over the
            next three to five years; and

      o     our obligations associated with the purchase of special access
            circuits from traditional local phone companies under optional
            payment plans which are term and volume discounts off traditional
            local phone company standard pricing. At December 31, 2001, the
            remaining obligations associated with the optional payment discount
            plans are $1.8 billion.

            For a detailed description of our long-term debt and further
disclosure regarding leases and other commitments, please see note 4 and note 8
to our consolidated financial statements, which are incorporated herein by
reference.

RECENTLY ISSUED ACCOUNTING STANDARDS

            In June 2001, the FASB issued SFAS No. 141 "Business Combinations"
and SFAS No. 142 "Goodwill and Other Intangible Assets." SFAS No. 141 requires
business combinations initiated after June 30, 2001, which includes the
Intermedia merger, to be accounted for using the purchase method of accounting
and broadens the criteria for recording intangible assets separate from
goodwill. Recorded goodwill and intangibles will be evaluated against this new
criteria and may result in certain intangibles being subsumed into goodwill, or
alternatively, amounts initially recorded as goodwill may be separately
identified and recognized apart from goodwill. Under the new rules, goodwill and
intangible assets deemed to have indefinite lives will no longer be amortized
but will be subject to annual impairment tests. The statement includes
provisions for the identification of reporting units for purposes of assessing
potential future impairments of goodwill. Upon adoption, we stopped amortizing
intangible assets with indefinite useful lives, including goodwill and
tradenames. Based on current levels of such assets, this will reduce
amortization expense by approximately $1.3 billion annually ($1.0 billion at
WorldCom group and $0.3 billion at MCI group). Additionally, we are conducting
impairment reviews of all intangibles assets with indefinite useful lives and we
expect to complete this assessment no later than the second quarter of 2002, in
accordance with the provisions of SFAS No. 142. Based on our preliminary
analyses, we estimate that as a result of the adoption of SFAS No. 142 we will
reduce goodwill by $15 to $20 billion, with approximately $1 billion of the
reduction at the MCI group.


                                       67
<Page>

            In June 2001, the FASB issued SFAS No. 143 "Asset Retirement
Obligations," which establishes new accounting and reporting standards for legal
obligations associated with retiring assets. The fair value of a liability for
an asset retirement obligation must be recorded in the period in which it is
incurred, with the cost capitalized as part of the related long-lived assets and
depreciated over the asset's useful life. Changes in the liability resulting
from the passage of time will be recognized as operating expenses. SFAS No. 143
must be adopted by 2003. We have not yet quantified the impact of adopting SFAS
No. 143 on our consolidated results of operations or financial position.

            In August 2001, the FASB issued SFAS No. 144 "Accounting for the
Impairment or Disposal of Long Lived Assets," which supersedes both SFAS No. 121
"Accounting for the Impairment of Long-Lived Assets for Long-Lived Assets to be
Disposed Of," and the accounting and reporting provisions for the disposal of a
segment of a business contained in APB Opinion No. 30, "Reporting the Results of
Operations - Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions." SFAS
No. 144 establishes a single accounting model for long-lived assets to be
disposed of by sale and broadens the presentation of discontinued operations.
The provisions of SFAS No. 144 are effective beginning in 2002 and are not
expected to have a material impact on our consolidated results of operations or
financial position.

EURO CONVERSION

            On January 1, 2002, the national currencies of 12 out of the 15
member countries of the European Union were replaced by the euro, a new common
currency and legal tender. We have completed our work to address the many issues
involved with the introduction of the euro, including the conversion of
information technology systems, recalculating currency risk, recalibrating other
financial instruments, and implementing strategies concerning continuity of
contracts. Our processes for preparing taxation and accounting records have been
refined and we do not expect any additional significant costs to be incurred as
a result of any future changes or refinements we may consider necessary. We
believe that our business might be affected in the future by the impact of
increased price transparency, however, we expect to be able to maintain our
margins across our international operations as a result of any pricing changes
that we decide to make purely as a result of the introduction of the euro.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

            Currently, we do not use derivative financial instruments to manage
our interest rate risk. We have minimal cash flow exposure due to general
interest rate changes for our fixed rate, long-term debt obligations. We do not
believe a hypothetical 10% adverse rate change in our variable rate debt
obligations would be material to our results of operations. The tables below
provide information about our risk exposure associated with changing interest
rates on long-term debt obligations that impact the fair value of these
obligations as of December 31, 2000 and 2001.

<Table>
<Caption>
                                                LONG-TERM DEBT (IN MILLIONS OF DOLLARS) AS OF DECEMBER 31, 2000
                                          ---------------------------------------------------------------------------
                                                       AVERAGE                    AVERAGE       FOREIGN      AVERAGE
                                           FIXED       INTEREST      VARIABLE     INTEREST      CURRENCY     INTEREST
EXPECTED MATURITY                           RATE       RATE (%)        RATE       RATE (%)    DENOMINATED    RATE (%)
-----------------                          -----       --------      --------     --------    -----------    --------
<S>                                       <C>            <C>         <C>            <C>         <C>            <C>
2001 .............................        $ 1,609        6.23        $ 5,129        7.06        $   462        9.40
2002 .............................             74        7.75             60        7.30            333        9.29
2003 .............................          1,626        7.27             --          --            178        9.28
2004 .............................          1,049        7.52             --          --            172        9.03
2005 .............................          2,268        6.41             --          --            119        8.83
Thereafter .......................         11,481        7.49             --          --            336        9.47
                                          -------                    -------                    -------
Total ............................        $18,107                    $ 5,189                    $ 1,600
                                          =======                    =======                    =======
Fair Value, December 31, 2000 ....        $17,837                    $ 5,188                    $ 1,551
                                          =======                    =======                    =======
</Table>


                                       68
<Page>

<Table>
<Caption>
                                                LONG-TERM DEBT (IN MILLIONS OF DOLLARS) AS OF DECEMBER 31, 2001
                                          ---------------------------------------------------------------------------
                                                       AVERAGE                    AVERAGE       FOREIGN      AVERAGE
                                           FIXED       INTEREST      VARIABLE     INTEREST      CURRENCY     INTEREST
EXPECTED MATURITY                           RATE       RATE (%)        RATE       RATE (%)    DENOMINATED    RATE (%)
-----------------                          -----       --------      --------     --------    -----------    --------
<S>                                       <C>            <C>         <C>            <C>         <C>            <C>
2002 .............................        $    88        8.68        $    60        4.66        $    24        8.94
2003 .............................          1,657        7.31             --          --             92        8.94
2004 .............................          2,565        6.94             --          --             57        8.92
2005 .............................          2,302        6.44             --          --             47        8.92
2006 .............................          2,613        7.64             --          --             30        8.92
Thereafter .......................         18,548        7.71             --          --          2,127        7.21
                                          -------                    -------                    -------
Total ............................        $27,773                    $    60                    $ 2,377
                                          =======                    =======                    =======
Fair Value, December 31, 2001 ....        $28,481                    $    60                    $ 2,441
                                          =======                    =======                    =======
</Table>

            We are exposed to foreign exchange rate risk primarily due to other
international operation's holding of approximately $512 million in U.S. dollar
denominated debt, and our holding of approximately $1.9 billion of indebtedness
indexed in other foreign currencies including the Euro and Pound Sterling as of
December 31, 2001. Our potential immediate loss that would result from a
hypothetical 10% change in foreign currency exchange rates based on this
position would be approximately $209 million. In addition, if that change were
to be sustained, our cost of financing would increase in proportion to the
change.

            We are also subject to risk from changes in foreign exchange rates
for our international operations which use a foreign currency as their
functional currency and are translated into U.S. dollars.

            We believe our market risk exposure with regard to our marketable
equity securities is limited to changes in quoted market prices for the
securities. Based upon the composition of our marketable equity securities at
December 31, 2001, we do not believe a hypothetical 10% adverse change in quoted
market prices would be material to our results of operations or financial
position.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

            Consolidated Financial Statements and notes thereto are included
elsewhere in this Annual Report on Form 10-K as follows:

<Table>
<Caption>
                                                                                                     PAGE
                                                                                                     ----
<S>                                                                                                  <C>
WORLDCOM, INC.
Report of independent public accountants .........................................................   F-2
Consolidated balance sheets as of December 31, 2000 and 2001 .....................................   F-3
Consolidated statements of operations for the three years ended December 31, 2001 ................   F-4
Consolidated statements of shareholders' investment for the three years ended December 31, 2001 ..   F-5
Consolidated statements of cash flows for the three years ended December 31, 2001 ................   F-6
Notes to consolidated financial statements .......................................................   F-7
Financial data schedule ..........................................................................   F-43

<Caption>
                                                                                                     PAGE
                                                                                                     ----
<S>                                                                                                  <C>
WORLDCOM GROUP (AN INTEGRATED BUSINESS OF WORLDCOM, INC.)
 Report of independent public accountants ........................................................   F-45
 Combined balance sheets as of December 31, 2000 and 2001 ........................................   F-46
 Combined statements of operations for the three years ended December 31, 2001 ...................   F-47
 Combined statements of allocated net worth for the three years ended December 31, 2001 ..........   F-48
 Combined statements of cash flows for the three years ended December 31, 2001 ...................   F-49
 Notes to combined financial statements ..........................................................   F-50
</Table>


                                       69
<Page>

<Table>
<Caption>
                                                                                             PAGE
                                                                                             ----
<S>                                                                                          <C>
MCI GROUP (AN INTEGRATED BUSINESS OF WORLDCOM, INC.)
 Report of independent public accountants ................................................   F-68
 Combined balance sheets as of December 31, 2000 and 2001 ................................   F-69
 Combined statements of operations for the three years ended December 31, 2001 ...........   F-70
 Combined statements of allocated net worth for the three years ended December 31, 2001 ..   F-71
 Combined statements of cash flows for the three years ended December 31, 2001 ...........   F-72
 Notes to combined financial statements ..................................................   F-73
</Table>

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

            None

                                    PART III

            The information required by this Part III will be provided in our
definitive proxy statement for our 2002 annual meeting of the shareholders
(involving the election of directors), which definitive proxy statement will be
filed pursuant to Regulation 14A not later than 120 days following our fiscal
year ended December 31, 2001, and is incorporated herein by this reference to
the following extent:

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

            The information under the captions "ELECTION OF DIRECTORS -
Information about Nominees and Executive Officers" and "EXECUTIVE COMPENSATION -
Section 16(a) Beneficial Ownership Reporting Compliance."

ITEM 11. EXECUTIVE COMPENSATION

            The information under the captions "INFORMATION CONCERNING BOARD OF
DIRECTORS - Compensation of Directors" and "EXECUTIVE COMPENSATION."

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

            The information under the captions "PRINCIPAL HOLDERS OF VOTING
SECURITIES" and "SECURITY OWNERSHIP OF MANAGEMENT."

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

            The information under the caption "EXECUTIVE COMPENSATION - Certain
Relationships and Related Transactions" and "INFORMATION CONCERNING BOARD OF
DIRECTORS - Compensation of Directors."

                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

            (a)   1 and 2


                                       70
<Page>

FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE

            See Index to Consolidated Financial Statements and Financial
Statement Schedule on page F-1. All other schedules for which provision is made
in the applicable accounting regulations of the SEC are not required under the
related instructions or are inapplicable and, therefore, have been omitted.

            (a)   3

EXHIBITS REQUIRED BY ITEM 601 OF REGULATION S-K

            See Exhibit Index for the exhibits filed as part of or incorporated
by reference into this Annual Report on Form 10-K. There are omitted from the
exhibits filed with or incorporated by reference into this Annual Report on Form
10-K certain promissory notes and other instruments and agreements with respect
to long-term debt of WorldCom, none of which authorizes securities in a total
amount that exceeds 10% of the total assets of WorldCom on a consolidated basis.
Pursuant to Item 601(b)(4)(iii) of Regulation S-K, we hereby agree to furnish to
the SEC copies of any such omitted promissory notes or other instruments or
agreements as the SEC requests.

            (b)   Reports on Form 8-K

                  None.


                                       71
<Page>

                                   SIGNATURES

            Pursuant to the requirements of Section 13 of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                        WorldCom, Inc.


                                        By: /s/  Scott D. Sullivan
                                            ------------------------------------
                                            Chief Financial Officer

Date: March 13, 2002

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

<Table>
<Caption>
Name                                          Title                             Date
----                                          -----                             ----

<S>                                          <C>                                <C>
/s/ James C. Allen                           Director                           March 13, 2002
--------------------------
James C. Allen


/s/ Judith Areen                             Director                           March 13, 2002
--------------------------
Judith Areen


/s/ Carl J. Aycock                           Director                           March 13, 2002
--------------------------
Carl J. Aycock


/s/ Max E. Bobbitt                           Director                           March 13, 2002
--------------------------
Max E. Bobbitt


/s/ Bernard J. Ebbers             Director, President and Chief
--------------------------   Executive Officer (Principal Executive             March 13, 2002
Bernard J. Ebbers                            Officer)


/s/ Francesco Galesi                         Director                           March 13, 2002
--------------------------
Francesco Galesi


/s/ Stiles A. Kellett, Jr.                   Director                           March 13, 2002
--------------------------
Stiles A. Kellett, Jr.


/s/ Gordon S. Macklin                        Director                           March 13, 2002
--------------------------
Gordon S. Macklin


/s/ Bert C. Roberts, Jr.              Chairman of the Board                     March 13, 2002
--------------------------
Bert C. Roberts, Jr.


/s/ John W. Sidgmore                         Director                           March 13, 2002
--------------------------
John W. Sidgmore


/s/ Scott D. Sullivan             Director and Chief Financial
--------------------------    Officer (Principal Financial Officer              March 13, 2002
Scott D. Sullivan               and Principal Accounting Officer)
</Table>


                                       72
<Page>

                          INDEX TO FINANCIAL STATEMENTS

<Table>
<Caption>
                                                                                                       PAGE
                                                                                                       ----
<S>                                                                                                    <C>
WORLDCOM, INC.
  Report of independent public accountants .........................................................    F-2
  Consolidated balance sheets as of December 31, 2000 and 2001 .....................................    F-3
  Consolidated statements of operations for the three years ended December 31, 2001 ................    F-4
  Consolidated statements of shareholders' investment for the three years ended December 31, 2001 ..    F-5
  Consolidated statements of cash flows for the three years ended December 31, 2001 ................    F-6
  Notes to consolidated financial statements .......................................................    F-7
  Financial data schedule ..........................................................................   F-43

<Caption>
                                                                                                       PAGE
                                                                                                       ----
<S>                                                                                                    <C>
 WORLDCOM GROUP (AN INTEGRATED BUSINESS OF WORLDCOM, INC.)
   Report of independent public accountants ........................................................   F-45
   Combined balance sheets as of December 31, 2000 and 2001 ........................................   F-46
   Combined statements of operations for the three years ended December 31, 2001 ...................   F-47
   Combined statements of allocated net worth for the three years ended December 31, 2001 ..........   F-48
   Combined statements of cash flows for the three years ended December 31, 2001 ...................   F-49
   Notes to combined financial statements ..........................................................   F-50

<Caption>
                                                                                                       PAGE
                                                                                                       ----
<S>                                                                                                    <C>
  MCI GROUP (AN INTEGRATED BUSINESS OF WORLDCOM, INC.)
    Report of independent public accountants .......................................................   F-68
    Combined balance sheets as of December 31, 2000 and 2001 .......................................   F-69
    Combined statements of operations for the three years ended December 31, 2001 ..................   F-70
    Combined statements of allocated net worth for the three years ended December 31, 2001 .........   F-71
    Combined statements of cash flows for the three years ended December 31, 2001 ..................   F-72
    Notes to combined financial statements .........................................................   F-73
</Table>


                                      F-1
<Page>

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders of WorldCom, Inc.:

      We have audited the accompanying consolidated balance sheets of WorldCom,
Inc. (a Georgia corporation) and subsidiaries as of December 31, 2000 and 2001,
and the related consolidated statements of operations, shareholders' investment
and cash flows for each of the years in the three-year period ended December 31,
2001. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

      We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

      In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of WorldCom, Inc. and
subsidiaries as of December 31, 2000 and 2001, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 2001, in conformity with accounting principles generally
accepted in the United States.

      As discussed in Note 1 to the consolidated financial statements, effective
January 1, 2000, the Company changed its method of accounting for certain
activations and installation fee revenues and expenses.


ARTHUR ANDERSEN LLP

Jackson, Mississippi
March 7, 2002


                                      F-2
<Page>

                         WORLDCOM, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                        (In Millions, Except Share Data)

<Table>
<Caption>
                                                                                                       December 31,  December 31,
                                                                                                          2000           2001
                                                                                                       ------------  ------------
<S>                                                                                                     <C>           <C>
ASSETS
Current assets:
  Cash and cash equivalents                                                                             $     761     $   1,416
  Accounts receivable, net of allowance for bad debts of $1,532 in 2000 and $1,086 in 2001                  6,815         5,308
  Deferred tax asset                                                                                          172           251
  Other current assets                                                                                      2,007         2,230
                                                                                                        ---------     ---------
         Total current assets                                                                               9,755         9,205
                                                                                                        ---------     ---------
Property and equipment:
  Transmission equipment                                                                                   20,288        23,814
  Communications equipment                                                                                  8,100         7,878
  Furniture, fixtures and other                                                                             9,342        11,263
  Construction in progress                                                                                  6,897         5,706
                                                                                                        ---------     ---------
                                                                                                           44,627        48,661
  Accumulated depreciation                                                                                 (7,204)       (9,852)
                                                                                                        ---------     ---------
                                                                                                           37,423        38,809
                                                                                                        ---------     ---------
Goodwill and other intangible assets                                                                       46,594        50,537
Other assets                                                                                                5,131         5,363
                                                                                                        ---------     ---------
                                                                                                        $  98,903     $ 103,914
                                                                                                        =========     =========
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current liabilities:
  Short-term debt and current maturities of long-term debt                                              $   7,200     $     172
  Accrued interest                                                                                            446           618
  Accounts payable and accrued line costs                                                                   6,022         4,844
  Other current liabilities                                                                                 4,005         3,576
                                                                                                        ---------     ---------
         Total current liabilities                                                                         17,673         9,210
                                                                                                        ---------     ---------
Long-term liabilities, less current portion:
  Long-term debt                                                                                           17,696        30,038
  Deferred tax liability                                                                                    3,611         4,066
  Other liabilities                                                                                         1,124           576
                                                                                                        ---------     ---------
         Total long-term liabilities                                                                       22,431        34,680
                                                                                                        ---------     ---------

Commitments and contingencies

Minority interests                                                                                          2,592           101

Company obligated mandatorily redeemable and other preferred securities                                       798         1,993

Shareholders' investment:
  Series B preferred stock, par value $.01 per share; authorized, issued and
    outstanding: 10,693,437 shares in 2000 and none in 2001 (liquidation
    preference of $1.00 per share plus unpaid dividends)                                                       --            --
  Preferred stock, par value $.01 per share; authorized: 31,155,008 shares
    in 2000 and 30,967,637 shares in 2001; none issued                                                         --            --
  Common stock:
  WorldCom, Inc. common stock, par value $.01 per share; authorized: 5,000,000,000 shares in
      2000 and none in 2001; issued and outstanding: 2,887,960,378 shares in 2000 and none in 2001             29            --
   WorldCom group common stock, par value $.01 per share; authorized: none in 2000 and 4,850,000,000
      shares in 2001; issued and outstanding : none in 2000 and 2,967,436,680 shares in 2001                   --            30
   MCI group common stock, par value $.01 per share; authorized: none in 2000
      and 150,000,000 shares in 2001; issued and outstanding:  none in 2000 and 118,595,711 in 2001            --             1
  Additional paid-in capital                                                                               52,877        54,297
  Retained earnings                                                                                         3,160         4,400
  Unrealized holding gain (loss) on marketable equity securities                                              345           (51)
  Cumulative foreign currency translation adjustment                                                         (817)         (562)
  Treasury stock, at cost, 6,765,316 shares of WorldCom, Inc. in 2000, 6,765,316 shares of
    WorldCom group stock and 270,613 shares of MCI group stock in 2001                                       (185)         (185)
                                                                                                        ---------     ---------
        Total shareholders' investment                                                                     55,409        57,930
                                                                                                        ---------     ---------
                                                                                                        $  98,903     $ 103,914
                                                                                                        =========     =========
</Table>

The accompanying notes are an integral part of these statements.


                                      F-3
<Page>

                         WORLDCOM, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      (In Millions, Except Per Share Data)

<Table>
<Caption>
                                                                                    For the Years Ended December 31,
                                                                                   ----------------------------------
                                                                                     1999         2000         2001
                                                                                   --------     --------     --------
<S>                                                                                <C>          <C>          <C>
Revenues                                                                           $ 35,908     $ 39,090     $ 35,179
                                                                                   --------     --------     --------
Operating expenses:
  Line costs                                                                         14,739       15,462       14,739
  Selling, general and administrative                                                 8,935       10,597       11,046
  Depreciation and amortization                                                       4,354        4,878        5,880
  Other charges                                                                          (8)          --           --
                                                                                   --------     --------     --------
        Total                                                                        28,020       30,937       31,665
                                                                                   --------     --------     --------
Operating income                                                                      7,888        8,153        3,514
Other income (expense):
  Interest expense                                                                     (966)        (970)      (1,533)
  Miscellaneous                                                                         242          385          412
                                                                                   --------     --------     --------
Income before income taxes, minority interests and cumulative effect
     of accounting change                                                             7,164        7,568        2,393
Provision for income taxes                                                            2,965        3,025          927
                                                                                   --------     --------     --------
Income before minority interests and cumulative effect of accounting change           4,199        4,543        1,466
Minority interests                                                                     (186)        (305)          35
                                                                                   --------     --------     --------
Income before cumulative effect of accounting change                                  4,013        4,238        1,501
Cumulative effect of accounting change (net of income tax of $50 in 2000)                --          (85)          --
                                                                                   --------     --------     --------
Net income                                                                            4,013        4,153        1,501
Distributions on mandatorily redeemable preferred securities and
      other preferred dividend requirements                                              72           65          117
                                                                                   --------     --------     --------
Net income applicable to common shareholders                                       $  3,941     $  4,088     $  1,384
                                                                                   ========     ========     ========

  Net income attributed to WorldCom group before cumulative effect
     of accounting change                                                          $  2,294     $  2,608     $  1,407
                                                                                   ========     ========     ========
  Cumulative effect of accounting change                                           $     --     $    (75)    $     --
                                                                                   ========     ========     ========
  Net income attributed to WorldCom group                                          $  2,294     $  2,533     $  1,407
                                                                                   ========     ========     ========

  Net income (loss) attributed to MCI group before cumulative effect
     of accounting change                                                          $  1,647     $  1,565     $    (23)
                                                                                   ========     ========     ========
  Cumulative effect of accounting change                                           $     --     $    (10)    $     --
                                                                                   ========     ========     ========
  Net income (loss) attributed to MCI group                                        $  1,647     $  1,555     $    (23)
                                                                                   ========     ========     ========

<Caption>
<S>                                                                                <C>          <C>          <C>
Earnings (loss) per common share:                                                              PRO FORMA
WorldCom group:                                                                    ----------------------------------
  Net income attributed to WorldCom group before cumulative effect
     of accounting change:
     Basic                                                                         $   0.81     $   0.91     $   0.48
                                                                                   ========     ========     ========
     Diluted                                                                       $   0.78     $   0.90     $   0.48
                                                                                   ========     ========     ========
Cumulative effect of accounting change                                             $     --     $  (0.03)    $     --
                                                                                   ========     ========     ========
Net income attributed to WorldCom group:
     Basic                                                                         $   0.81     $   0.88     $   0.48
                                                                                   ========     ========     ========
     Diluted                                                                       $   0.78     $   0.87     $   0.48
                                                                                   ========     ========     ========

MCI group:
Net income (loss) attributed to MCI group before cumulative effect
of accounting change:
     Basic                                                                         $  14.32     $  13.61     $  (0.20)
                                                                                   ========     ========     ========
     Diluted                                                                       $  14.32     $  13.61     $  (0.20)
                                                                                   ========     ========     ========
Cumulative effect of accounting change                                             $     --     $  (0.09)    $     --
                                                                                   ========     ========     ========
Net income (loss) attributed to MCI group:
     Basic                                                                         $  14.32     $  13.52     $  (0.20)
                                                                                   ========     ========     ========
     Diluted                                                                       $  14.32     $  13.52     $  (0.20)
                                                                                   ========     ========     ========
</Table>

The accompanying notes are an integral part of these statements.


                                      F-4
<Page>

                         WORLDCOM, INC. AND SUBSIDIARIES
               CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT
                   For the Three Years Ended December 31, 2001
                                  (In Millions)

<Table>
<Caption>

                                                                              WorldCom, Inc.  WorldCom group   MCI group
                                                                                  Common         Common          Common
                                                                                  Stock          Stock           Stock
                                                                                  -----          -----           -----
<S>                                                                              <C>            <C>             <C>
Balances, December 31, 1998                                                      $     28       $     --        $     --
Exercise of stock options (61 million shares)                                          --             --              --
Tax adjustment resulting from exercise of stock options                                --             --              --
Shares issued for acquisitions (4 millions shares)                                     --             --              --
Conversion of convertible subordinated debt into common stock                          --             --              --
Other comprehensive income (loss) (net of taxes and reclassifications):
Net income                                                                             --             --              --
Distributions on mandatorily redeemable preferred
   securities and other preferred dividend requirements                                --             --              --
Net change in unrealized holding gain on marketable equity securities                  --             --              --
Foreign currency adjustment                                                            --             --              --

     Total comprehensive income
                                                                              --------------------------------------------
Balances, December 31, 1999                                                            28             --              --
Exercise of stock options (38 million shares)                                           1             --              --
Tax adjustment resulting from exercise of stock options                                --             --              --
Shares issued for acquisitions (0.3 million shares)                                    --             --              --
Redemption of Series C preferred stock                                                 --             --              --
Other comprehensive income (loss) (net of taxes and reclassifications):
Net income                                                                             --             --              --
Distributions on mandatorily redeemable preferred
   securities and other preferred dividend requirements                                --             --              --
Net change in unrealized holding gain on marketable equity securities                  --             --              --
Foreign currency adjustment                                                            --             --              --

     Total comprehensive income
                                                                              --------------------------------------------
Balances, December 31, 2000                                                            29             --              --
Deconsolidation of Embratel                                                            --             --              --
Recapitalization of WorldCom, Inc. common shares                                      (29)            29               1
Exercise of stock options (10 million shares)                                          --             --              --
Tax adjustment from exercise of stock options                                          --             --              --
Shares issued for acquisition -
     (67 million WorldCom group common shares)                                         --              1              --
     (2.7 million MCI group common shares)                                             --             --              --
Dividends declared on MCI group common stock                                           --             --              --
Other comprehensive income (loss) (net of
     taxes and reclassifications):
Net income                                                                             --             --              --
Distributions on mandatorily redeemable preferred
   securities and other preferred dividend requirements                                --             --              --
Derivative financial instruments:
   Cumulative effect of adoption of SFAS 133
      as of January 1, 2001                                                            --             --              --
   Reclassification of derivative financial instruments
      to current earnings                                                              --             --              --
   Change in fair value of derivative financial instruments                            --             --              --
Net change in unrealized holding gain (loss) on marketable equity
      securities                                                                       --             --              --
Foreign currency adjustment                                                            --             --              --

          Total comprehensive income
                                                                              --------------------------------------------
Balances, December 31, 2001                                                      $     --       $     30        $      1
                                                                              ============================================

<Caption>
                                                                                                          Unrealized      Foreign
                                                                             Additional     Retained        Holding      Currency
                                                                              Paid-in       Earnings         Gain       Translation
                                                                              Capital       (Deficit)       (loss)       Adjustment
                                                                              -------       ---------       ------       ----------
<S>                                                                           <C>           <C>            <C>           <C>
Balances, December 31, 1998                                                   $ 50,173      $ (4,869)      $    122      $    (28)
Exercise of stock options (61 million shares)                                      886            --             --            --
Tax adjustment resulting from exercise of stock options                            820            --             --            --
Shares issued for acquisitions (4 millions shares)                                 228            --             --            --
Conversion of convertible subordinated debt into common stock                        1            --             --            --
Other comprehensive income (loss) (net of taxes and reclassifications):
Net income                                                                          --         4,013             --            --
Distributions on mandatorily redeemable preferred
   securities and other preferred dividend requirements                             --           (72)            --            --
Net change in unrealized holding gain on marketable equity securities               --            --            453            --
Foreign currency adjustment                                                         --            --             --          (332)

     Total comprehensive income
                                                                             ------------------------------------------------------
Balances, December 31, 1999                                                     52,108          (928)           575          (360)
Exercise of stock options (38 million shares)                                      584            --             --            --
Tax adjustment resulting from exercise of stock options                            348            --             --            --
Shares issued for acquisitions (0.3 million shares)                                 27            --             --            --
Redemption of Series C preferred stock                                            (190)           --             --            --
Other comprehensive income (loss) (net of taxes and reclassifications):
Net income                                                                          --         4,153             --            --
Distributions on mandatorily redeemable preferred
   securities and other preferred dividend requirements                             --           (65)            --            --
Net change in unrealized holding gain on marketable equity securities               --            --           (230)           --
Foreign currency adjustment                                                         --            --             --          (457)

     Total comprehensive income
                                                                             ------------------------------------------------------
Balances, December 31, 2000                                                     52,877         3,160            345          (817)
Deconsolidation of Embratel                                                         --            (2)            --           335
Recapitalization of WorldCom, Inc. common shares                                    (1)           --             --
Exercise of stock options (10 million shares)                                      124            --             --            --
Tax adjustment from exercise of stock options                                       32            --             --            --
Shares issued for acquisition -
     (67 million WorldCom group common shares)                                   1,265            --             --            --
     (2.7 million MCI group common shares)                                          --            --             --            --
Dividends declared on MCI group common stock                                        --          (142)            --            --
Other comprehensive income (loss) (net of
     taxes and reclassifications):                                                                               --            --
Net income                                                                          --         1,501             --            --
Distributions on mandatorily redeemable preferred
   securities and other preferred dividend requirements                             --          (117)            --            --
Derivative financial instruments:
   Cumulative effect of adoption of SFAS 133
      as of January 1, 2001                                                         --            --             28            --
   Reclassification of derivative financial instruments
      to current earnings                                                           --            --           (110)           --
   Change in fair value of derivative financial instruments                         --            --             82            --
Net change in unrealized holding gain (loss) on marketable equity
      securities                                                                    --            --           (396)           --
Foreign currency adjustment                                                         --            --             --           (80)

          Total comprehensive income
                                                                             ------------------------------------------------------
Balances, December 31, 2001                                                   $ 54,297      $  4,400       $    (51)     $   (562)
                                                                             ======================================================

<Caption>

                                                                                               Total
                                                                               Treasury    Shareholders'
                                                                                 Stock      Investment
                                                                                 -----      ----------
<S>                                                                            <C>           <C>
Balances, December 31, 1998                                                    $   (185)     $ 45,241
Exercise of stock options (61 million shares)                                        --           886
Tax adjustment resulting from exercise of stock options                              --           820
Shares issued for acquisitions (4 millions shares)                                   --           228
Conversion of convertible subordinated debt into common stock                        --             1
Other comprehensive income (loss) (net of taxes and reclassifications):
Net income                                                                           --         4,013
Distributions on mandatorily redeemable preferred
   securities and other preferred dividend requirements                              --           (72)
Net change in unrealized holding gain on marketable equity securities                --           453
Foreign currency adjustment                                                          --          (332)
                                                                                             ---------
     Total comprehensive income                                                                 4,062
                                                                            --------------------------
Balances, December 31, 1999                                                        (185)       51,238
Exercise of stock options (38 million shares)                                        --           585
Tax adjustment resulting from exercise of stock options                              --           348
Shares issued for acquisitions (0.3 million shares)                                  --            27
Redemption of Series C preferred stock                                               --          (190)
Other comprehensive income (loss) (net of taxes and reclassifications):
Net income                                                                           --         4,153
Distributions on mandatorily redeemable preferred
   securities and other preferred dividend requirements                              --           (65)
Net change in unrealized holding gain on marketable equity securities                --          (230)
Foreign currency adjustment                                                          --          (457)
                                                                                             ---------
     Total comprehensive income                                                                 3,401
                                                                            --------------------------
Balances, December 31, 2000                                                        (185)       55,409
Deconsolidation of Embratel                                                          --           333
Recapitalization of WorldCom, Inc. common shares                                     --            --
Exercise of stock options (10 million shares)                                        --           124
Tax adjustment from exercise of stock options                                        --            32
Shares issued for acquisition -                                                                    --
     (67 million WorldCom group common shares)                                       --         1,266
     (2.7 million MCI group common shares)                                           --            --
Dividends declared on MCI group common stock                                         --          (142)
Other comprehensive income (loss) (net of                                                          --
     taxes and reclassifications):                                                   --            --
Net income                                                                           --         1,501
Distributions on mandatorily redeemable preferred
   securities and other preferred dividend requirements                              --          (117)
Derivative financial instruments:
   Cumulative effect of adoption of SFAS 133
      as of January 1, 2001                                                          --            28
   Reclassification of derivative financial instruments
      to current earnings                                                            --          (110)
   Change in fair value of derivative financial instruments                          --            82
Net change in unrealized holding gain (loss) on marketable equity
      securities                                                                     --          (396)
Foreign currency adjustment                                                                       (80)
                                                                                             ---------
          Total comprehensive income                                                              908
                                                                            --------------------------
Balances, December 31, 2001                                                    $   (185)      $ 57,930
                                                                            ==========================
</Table>

The accompanying notes are an integral part of these statements.


                                      F-5
<Page>

                         WORLDCOM, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (In Millions)

<Table>
<Caption>
                                                                                    For the Years Ended December 31,
                                                                                  ------------------------------------
                                                                                    1999          2000          2001
                                                                                  --------      --------      --------
<S>                                                                               <C>           <C>           <C>
Cash flows from operating activities:
Net income                                                                        $  4,013      $  4,153      $  1,501
Adjustments to reconcile net income to net cash
  provided by operating activities:
    Cumulative effect of accounting change                                              --            85            --
    Minority interests                                                                 186           305           (35)
    Other charges                                                                       (8)           --            --
    Depreciation and amortization                                                    4,354         4,878         5,880
    Provision for deferred income taxes                                              2,903         1,649         1,104
    Change in assets and liabilities, net of effect of business combinations:
        Accounts receivable, net                                                      (875)       (1,126)          281
        Other current assets                                                           143          (797)          164
        Accounts payable and other current liabilities                                 692        (1,050)       (1,154)
    All other operating activities                                                    (403)         (431)          253
                                                                                  --------      --------      --------
Net cash provided by operating activities                                           11,005         7,666         7,994
                                                                                  --------      --------      --------
Cash flows from investing activities:
  Capital expenditures                                                              (8,716)      (11,484)       (7,886)
  Acquisitions and related costs                                                    (1,078)          (14)         (206)
  Increase in intangible assets                                                       (743)         (938)         (694)
  Decrease in other liabilities                                                       (650)         (839)         (480)
  All other investing activities                                                     1,632        (1,110)         (424)
                                                                                  --------      --------      --------
Net cash used in investing activities                                               (9,555)      (14,385)       (9,690)
                                                                                  --------      --------      --------
Cash flows from financing activities:
  Principal borrowings (repayments) on debt, net                                    (2,894)        6,377         3,031
  Common stock issuance                                                                886           585           124
  Distributions on mandatorily redeemable and other preferred securities
     and dividends paid on other equity securities                                     (72)          (65)         (154)
  Redemptions of preferred stock                                                        --          (190)         (200)
  All other financing activities                                                        --           (84)         (272)
                                                                                  --------      --------      --------
Net cash provided by (used in) financing activities                                 (2,080)        6,623         2,529
Effect of exchange rate changes on cash                                               (221)          (19)           38
                                                                                  --------      --------      --------
Net increase (decrease) in cash and cash equivalents                                  (851)         (115)          871
Cash and cash equivalents at beginning of period                                     1,727           876           761
Deconsolidation of Embratel                                                             --            --          (216)
                                                                                  --------      --------      --------
Cash and cash equivalents at end of period                                        $    876      $    761      $  1,416
                                                                                  ========      ========      ========
</Table>

The accompanying notes are an integral part of these statements.


                                      F-6
<Page>

                         WORLDCOM, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

(1) THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES -

DESCRIPTION OF BUSINESS AND ORGANIZATION:

            Organized in 1983, WorldCom, Inc., a Georgia corporation, provides a
broad range of communications services to both U.S. and non-U.S. based
businesses and consumers. We are a global communications company utilizing a
strategy based on being able to provide service through our own facilities
throughout the world instead of being restricted to a particular geographic
location. We call this our "on-net" strategy. The on-net approach allows our
customers to send data or voice communications across town, across the U.S., or
to any of our networks in Europe or Asia, often without ever leaving our
networks. The on-net approach provides our customers with superior reliability
and low operating costs. Our core business is communications services, which
includes voice, data, Internet and international services. We serve as a holding
company for our subsidiaries' operations. References herein to WorldCom, "we,"
"our," or "us" include WorldCom, Inc. and its subsidiaries, unless the context
otherwise requires.

RECAPITALIZATION:

            On June 7, 2001, our shareholders approved a recapitalization
involving the creation of two separately traded tracking stocks:

      o     WorldCom group stock, which is intended to reflect the performance
            of our data, Internet, international and commercial voice businesses
            and is quoted on The Nasdaq National Market under the trading symbol
            "WCOM", and

      o     MCI group stock, which is intended to reflect the performance of our
            consumer, small business, wholesale long distance voice and data,
            wireless messaging and dial-up Internet access businesses and is
            quoted on The Nasdaq National Market under the trading symbol
            "MCIT".

            In connection with the recapitalization, we amended our articles of
incorporation to replace our existing common stock with two new series of common
stock that are intended to reflect, or track, the performance of the businesses
attributed to the WorldCom group and the MCI group. Effective with the
recapitalization on June 7, 2001, each share of our existing common stock was
changed into one share of WorldCom group stock and 1/25 of a share of MCI group
stock.

            A tracking stock is a separate class of a company's common stock
intended to provide a return to investors based upon the financial performance
of a distinct business unit of the company, sometimes referred to as the
targeted business. These targeted businesses are collections of businesses that
we have grouped together in order for us to issue WorldCom group stock and MCI
group stock. The ownership of the targeted business does not change, and while
each of the classes of stock trade separately, all shareholders are common
shareholders of a single company, WorldCom, and are subject to all risks of an
investment in WorldCom as a whole.

            During the second quarter of 2001, we declared the initial quarterly
dividend for the MCI group stock. A cash dividend of $0.60 per share of MCI
group stock, or approximately $70 million in the aggregate, was paid on October
15, 2001 to shareholders of record as of the close of business on September 28,
2001. Dividends of $0.60 per share of MCI group stock were also declared in the
third and fourth quarters of 2001, which have been or will be paid in 2002.


                                      F-7
<Page>

                         WORLDCOM, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

(1) THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)

            The MCI group was initially allocated notional debt of $6 billion
and our remaining debt was allocated on a notional basis to the WorldCom group.
We intend, for so long as the WorldCom group stock and the MCI group stock
remains outstanding, to include in our filings under the Securities Exchange Act
of 1934, as amended, the combined financial statements of each of the WorldCom
group and the MCI group. These combined financial statements will be prepared in
accordance with accounting principles generally accepted in the United States,
and in the case of annual financial statements, will be audited. These combined
financial statements are not legally required under current law or SEC
regulations.

            Voting rights of the holders of the WorldCom group and the MCI group
stock are prorated based on the relative market values of WorldCom group stock
and MCI group stock. We will conduct shareholder meetings that encompass all
holders of voting stock. The WorldCom group and the MCI group shareholders will
vote together as a single class on all matters brought to a vote of
shareholders, including the election of our directors.

            Our board of directors may at any time convert each outstanding
share of MCI group stock into shares of WorldCom group stock at 110% of the
relative trading value of MCI group stock for the 20 days prior to the
announcement of the conversion. No premium will be paid on a conversion that
occurs after June 7, 2004.

            If all or substantially all of the WorldCom group or MCI group
assets are sold, either: (i) the relevant shareholders will receive a
distribution equal to the fair value of the net proceeds of the sale, either by
special dividend or by redemption of shares; or (ii) each outstanding share of
MCI group stock will be converted into shares of WorldCom group stock at 110% or
100% of the relative trading value of MCI group stock for a 10 trading day
period following the sale.

PRINCIPLES OF CONSOLIDATION:

            The consolidated financial statements include the accounts of
WorldCom and our subsidiaries. All significant intercompany transactions and
balances have been eliminated in consolidation. Investments in joint ventures
and other equity investments in which we own a 20% to 50% voting ownership
interest are accounted for by the equity method. Investments of less than 20%
ownership, where we do not exercise control or significant influence, are
accounted for under the cost method.

EMBRATEL DECONSOLIDATION:

            During the second quarter of 2001, we reached a long-term strategic
decision to restructure our investment in Embratel Participacoes S.A., or
Embratel. The restructuring included the resignation of certain Embratel board
of directors seats, the irrevocable obligation to vote a portion of our common
shares in a specified manner and the transfer of certain economic rights
associated with such shares to an unrelated third party. Based on these actions,
the accounting principles generally accepted in the United States prohibit the
continued consolidation of Embratel's results. Accordingly, we have
deconsolidated Embratel's results effective January 1, 2001.

            As of December 31, 2001, our carrying value for our 19.3% ownership
interest in Embratel was $992 million, which is included in other assets in the
accompanying consolidated financial statements. Our equity in Embratel's loss
for 2001 is included in miscellaneous income/(expense) in the accompanying
consolidated financial statements.


                                      F-8
<Page>

                         WORLDCOM, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

(1) THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)

FAIR VALUE OF FINANCIAL INSTRUMENTS:

            The fair value of long-term debt and company obligated mandatorily
redeemable and other preferred securities is determined based on quoted market
rates or the cash flows from such financial instruments discounted at our
estimated current interest rate to enter into similar financial instruments. The
carrying amounts and fair values of these financial instruments were $25.7
billion and $25.3 billion, respectively, at December 31, 2000 and $32.2 billion
and $32.9 billion, respectively, at December 31, 2001. The carrying values for
all our other financial instruments approximate their respective fair values.

CASH AND CASH EQUIVALENTS:

            We consider cash in banks and short-term investments with original
maturities of three months or less as cash and cash equivalents.

PROPERTY AND EQUIPMENT:

            Property and equipment are stated at cost. Depreciation is provided
for financial reporting purposes using the straight-line method over the
following estimated useful lives:

<Table>
<S>                                                                <C>
Transmission equipment (including conduit) ................        4 to 40 years
Communications equipment ..................................        5 to 10 years
Furniture, fixtures, buildings and other ..................        4 to 39 years
</Table>

            We evaluate the recoverability of property and equipment when events
and circumstances indicate that such assets might be impaired. We determine
impairment by comparing the undiscounted future cash flows estimated to be
generated by these assets to their respective carrying amounts. In the event an
impairment exists, a loss is recognized based on the amount by which the
carrying value exceeds the fair value of the asset. If quoted market prices for
an asset are not available, fair market value is determined primarily using the
anticipated cash flows discounted at a rate commensurate with the risk involved.
Losses on property and equipment to be disposed of are determined in a similar
manner, except that fair market values are reduced for the cost to dispose.

            Maintenance and repairs are expensed as incurred. Replacements and
betterments are capitalized. The cost and related reserves of assets sold or
retired are removed from the accounts, and any resulting gain or loss is
reflected in results of operations.

            We construct certain of our own transmission systems and related
facilities. Internal costs directly related to the construction of such
facilities, including interest and salaries of certain employees, are
capitalized. Such internal costs were $625 million ($339 million in interest),
$842 million ($495 million in interest) and $858 million ($498 million in
interest) in 1999, 2000 and 2001, respectively.

GOODWILL AND OTHER INTANGIBLE ASSETS:

            The major classes of intangible assets as of December 31, 2000 and
2001 are summarized below (in millions):


                                      F-9
<Page>

                         WORLDCOM, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

(1) THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)

<Table>
<Caption>
                                                           AMORTIZATION
                                                              PERIOD           2000        2001
                                                           -------------     -------     -------
<S>                                                        <C>               <C>         <C>
Goodwill.............................................      5 to 40 years     $44,870     $49,825
Tradenames...........................................           40 years       1,100       1,112
Developed technology.................................      5 to 10 years       2,100       2,100
Other intangibles....................................      5 to 10 years       3,778       4,857
                                                                             -------     -------
                                                                              51,848      57,894
Less: accumulated amortization.......................                         (5,254)     (7,357)
                                                                             -------     -------
Goodwill and other intangible assets, net............                        $46,594     $50,537
                                                                             =======     =======
</Table>

            Intangible assets are amortized using the straight-line method for
the periods noted above.

            Goodwill is recognized for the excess of the purchase price of the
various business combinations over the value of the identifiable net tangible
and intangible assets acquired. Realization of acquisition-related intangibles,
including goodwill, is periodically assessed by our management based on the
current and expected future profitability and cash flows of acquired companies
and their contribution to the overall operations of WorldCom.

            Also included in other intangibles are costs incurred to develop
software for internal use. Such costs were $710 million, $925 million and $689
million for the years ended December 31, 1999, 2000 and 2001, respectively.

INVESTMENTS IN MARKETABLE EQUITY SECURITIES:

            Investments in marketable equity securities are classified as
available-for-sale securities and reported at fair value. Unrealized holding
gains and losses, net of taxes, are reflected as a component of shareholders'
investment in the accompanying consolidated financial statements.

FOREIGN CURRENCY TRANSLATION:

            Assets and liabilities recorded in foreign currencies are translated
at the exchange rate as of the balance sheet date. Translation adjustments are
recorded as a separate component of shareholders' investment. All revenue and
expense accounts are translated at a weighted-average of exchange rates in
effect during the period. Transaction gains and losses that arise from exchange
rate fluctuations on transactions denominated in a currency other than the
functional currency are included in the results of operations as incurred. The
accompanying consolidated statements of operations include foreign currency
transaction losses, after elimination of minority interests, of $36 million and
$38 million for the years ended December 31, 1999 and 2000, respectively, and
foreign currency transaction gains of $9 million for the year ended December 31,
2001.

RECOGNITION OF REVENUES:

            We record revenues for telecommunications services at the time of
customer usage. Service activation and installation fees are amortized over the
average customer contract life.


                                      F-10
<Page>

                         WORLDCOM, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

(1) THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)

ACCOUNTING FOR INTERNATIONAL LONG DISTANCE TRAFFIC AND OTHER:

            We enter into operating agreements with telecommunications carriers
in foreign countries under which international long distance traffic is both
delivered and received. The terms of most switched voice operating agreements,
as well as established FCC policy, require that inbound switched voice traffic
from the foreign carrier to the United States be routed to United States
international carriers, like WorldCom, in proportion to the percentage of United
States outbound traffic routed by that United States international carrier to
the foreign carrier. Mutually exchanged traffic between us and foreign carriers
is settled in cash through a formal settlement policy that generally extends
over a six-month period at an agreed upon settlement rate. International
settlements are treated as an offset to line costs. This reflects the way in
which the business is operated because WorldCom actually settles in cash through
a formal net settlement process that is inherent in the operating agreements
with foreign carriers.

            Reciprocal compensation represents a reimbursement of costs for call
termination performed on behalf of other carriers' customers and is determined
contractually based on fixed rate per minute charges to those carriers. Small
business and consumer primary interexchange carrier charges, or PICC, are
flat-rate charges mandated by the FCC which apply to telecommunications
companies that connect to customers through a traditional phone company's
facilities. Effective July 1, 2000, as a result of the FCC's Coalition for
Affordable Local and Long Distance Services, or CALLs order, the PICC fee is
billed directly to the customer by the traditional phone company rather than to
WorldCom and rebilled to the customer. Central office based remote access
equipment sales represent the reimbursement of customer specific equipment costs
incurred by WorldCom on behalf of the customer as part of service provisioning.
As such, WorldCom determined that it is more appropriate to reflect all of these
reimbursements of our cost as an offset to line costs rather than reporting
these reimbursements on a gross basis as revenues. During the years ended
December 31, 1999, 2000 and 2001, such amounts totaled $1.2 billion, $1.2
billion and $614 million, respectively.

DERIVATIVE FINANCIAL INSTRUMENTS:

            Effective January 1, 2001, we adopted the Financial Accounting
Standards Board's, or FASB's, Statement of Financial Accounting Standard, or
SFAS, No. 133, "Accounting for Derivative Instruments and Hedging Activities,"
as amended. This statement establishes accounting and reporting standards
requiring that derivative instruments (including certain derivative instruments
embedded in other contracts) be recorded in the balance sheet as either an asset
or liability measured at fair value. As of January 1, 2001, our exposure to
derivative financial instruments primarily consisted of option collar
transactions designated as cash flow hedges of anticipated sales of an equity
investment, which we maintain to minimize the impact of adverse changes in the
market price of the related equity investment. The initial adoption of SFAS No.
133 provided a net transition gain from our designated cash flow hedges
resulting in an increase in other comprehensive income of approximately $28
million. During 2001, shares of the hedged equity investment were sold and we
reclassified respective hedging gains of $110 million from accumulated
comprehensive income to miscellaneous income. As of December 31, 2001, we
maintain no derivative financial instruments. No amounts were reclassified to
earnings resulting from any ineffective portion of the designated derivative
hedges or from the discontinuance of designation of any cash flow hedges.

CUMULATIVE EFFECT OF ACCOUNTING CHANGE:

            During the fourth quarter of 2000, we implemented Staff Accounting
Bulletin No. 101, "Revenue Recognition in Financial Statements", or SAB 101,
which requires certain activation and installation fee revenues to be amortized
over the average life of the related service rather than be recognized
immediately. Costs directly related to these


                                      F-11
<Page>

                         WORLDCOM, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

(1) THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)

revenues may also be deferred and amortized over the customer contract life. As
required by SAB 101, we retroactively adopted this accounting effective January
1, 2000, which resulted in a one-time expense of $85 million, net of income tax
benefit of $50 million. The pro forma effect of adopting SAB 101 on periods
prior to January 1, 2000 was not material to our consolidated financial position
or results of operations.

INCOME TAXES:

            We recognize current and deferred income tax assets and liabilities
based upon all events that have been recognized in the consolidated financial
statements as measured by the provisions of the enacted tax laws.

EARNINGS PER SHARE:

            Our consolidated financial statements present basic and diluted
earnings (loss) per share for WorldCom group stock and MCI group stock using the
two-class method. The two-class method is an earnings formula that determines
the attributed earnings (loss) per share for WorldCom group stock and MCI group
stock according to participation rights in undistributed earnings. The combined
financial statements of the WorldCom group and the MCI group do not separately
present earnings (loss) per share because WorldCom group stock and MCI group
stock are series of our common stock, and the WorldCom group and the MCI group
are not legal entities with a capital structure.

            For purposes of our consolidated financial statements, basic
earnings (loss) per share attributed to WorldCom group stock and MCI group stock
is computed by dividing the respective attributed net income (loss) for the
period by the respective number of weighted-average shares of WorldCom group
stock and MCI group stock then outstanding. Diluted earnings (loss) per share
attributed to WorldCom group stock and MCI group stock is computed by dividing
the respective attributed net income (loss) for the period by the respective
weighted-average number of shares of WorldCom group stock and MCI group stock
outstanding, including the respective dilutive effect of WorldCom group stock
and MCI group stock equivalents.

            The following is a reconciliation of the numerators and the
denominators of the basic and diluted earnings (loss) per share computations for
the WorldCom group and the MCI group for the years ended December 31, 1999, 2000
and 2001 (in millions, except per share data):

<Table>
<Caption>
                                                                        1999     2000       2001
                                                                      -------   -------   -------
                                                                               PRO FORMA
                                                                      ---------------------------
<S>                                                                   <C>       <C>       <C>
        WORLDCOM GROUP STOCK
BASIC
Income attributed to WorldCom group before cumulative
   effect of accounting change                                        $ 2,366   $ 2,673   $ 1,524
Distributions on mandatorily redeemable preferred securities
   and other preferred dividend requirements                               72        65       117
                                                                      -------   -------   -------
Net income attributed to WorldCom group
   before cumulative effect of accounting change                      $ 2,294   $ 2,608   $ 1,407
                                                                      =======   =======   =======
Weighted-average shares of WorldCom group stock outstanding             2,821     2,868     2,923
                                                                      =======   =======   =======
Basic earnings per share attributed to WorldCom group stock
   before cumulative effect of accounting change                      $  0.81   $  0.91   $  0.48
                                                                      =======   =======   =======
DILUTED
Net income attributed to WorldCom group
   before cumulative effect of accounting change                      $ 2,294   $ 2,608   $ 1,407
                                                                      =======   =======   =======
Weighted-average shares of WorldCom group stock outstanding             2,821     2,868     2,923
</Table>


                                      F-12
<Page>

                         WORLDCOM, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

<Table>
<Caption>
                                                                        1999     2000       2001
                                                                      -------   -------   -------
                                                                               PRO FORMA
                                                                      ---------------------------
<S>                                                                   <C>       <C>       <C>
WorldCom group stock equivalents                                          102        42         9
WorldCom group stock issuable upon conversion of
   preferred stock                                                          2         2         1
                                                                      -------   -------   -------
Diluted shares of WorldCom group stock outstanding                      2,925     2,912     2,933
                                                                      =======   =======   =======
Diluted earnings per share attributed to WorldCom group stock
   before cumulative effect of accounting change                      $  0.78   $  0.90   $  0.48
                                                                      =======   =======   =======

        MCI GROUP STOCK
BASIC AND DILUTED
Net income (loss) attributed to MCI group before cumulative
   effect of accounting change                                        $ 1,647   $ 1,565   $   (23)
                                                                      =======   =======   =======
Basic and diluted weighted-average MCI group shares outstanding           115       115       117
                                                                      =======   =======   =======
Basic and diluted earnings (loss) per share attributed to MCI group
   stock before cumulative effect of accounting change                $ 14.32   $ 13.61   $ (0.20)
                                                                      =======   =======   =======
</Table>

            As discussed above, the recapitalization of WorldCom was effective
June 7, 2001, and each share of WorldCom stock was changed into one share of
WorldCom group stock and 1/25 of a share of MCI group stock. The
weighted-average shares outstanding and attributed earnings (loss) per share
information above is pro forma and assumes the recapitalization occurred at the
beginning of 1999 and the WorldCom group stock and MCI group stock existed for
all periods presented.

STOCK SPLITS:

            On November 18, 1999, our board of directors authorized a
three-for-two stock split in the form of a 50% stock dividend which was
distributed on December 30, 1999 to shareholders of record on December 15, 1999.
All per share data and numbers of common shares have been retroactively restated
to reflect this stock split.

CONCENTRATION OF CREDIT RISK:

            A portion of our revenues is derived from services provided to
others in the telecommunications industry, mainly resellers of long distance
telecommunications service and Internet online services. As a result, we have
some concentration of credit risk among our customer base. We perform ongoing
credit evaluations of our larger customer's financial condition and, at times,
require collateral from our customers to support our receivables, usually in the
form of assignment of our customers' receivables to us in the event of
nonpayment.

RECENTLY ISSUED ACCOUNTING STANDARDS:

            In June 2001, the FASB issued SFAS No. 141 "Business Combinations"
and SFAS No. 142 "Goodwill and Other Intangible Assets." SFAS No. 141 requires
business combinations initiated after June 30, 2001, which includes the
Intermedia merger, to be accounted for using the purchase method of accounting
and broadens the criteria for recording intangible assets separate from
goodwill. Recorded goodwill and intangibles will be evaluated against this new
criteria and may result in certain intangibles being subsumed into goodwill, or
alternatively, amounts initially recorded as goodwill may be separately
identified and recognized apart from goodwill. Under the new rules, goodwill and
intangible assets deemed to have indefinite lives will no longer be amortized
but will be subject to annual impairment tests. The statement includes
provisions for the identification of reporting units for purposes of assessing
potential future impairments of goodwill. Upon adoption, we stopped amortizing
intangible assets with indefinite useful lives, including goodwill and
tradenames. Based on current levels of such assets, this will reduce
amortization expense by approximately $1.3 billion annually ($1.0 billion at the
WorldCom group and $0.3 billion


                                      F-13
<Page>

                         WORLDCOM, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

(1) THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)

at the MCI group). Additionally, we are conducting impairment reviews of all
intangibles assets with indefinite useful lives and we expect to complete this
assessment no later than the second quarter of 2002, in accordance with the
provisions of SFAS No. 142. Based on our preliminary analyses, we estimate that
as a result of the adoption of SFAS No. 142 we will reduce goodwill by $15 to
$20 billion, with approximately $1 billion of the reduction at the MCI group.

            In June 2001, the FASB issued SFAS No. 143 "Asset Retirement
Obligations," which establishes new accounting and reporting standards for legal
obligations associated with retiring assets. The fair value of a liability for
an asset retirement obligation must be recorded in the period in which it is
incurred, with the cost capitalized as part of the related long-lived assets and
depreciated over the asset's useful life. Changes in the liability resulting
from the passage of time will be recognized as operating expenses. SFAS No. 143
must be adopted by 2003. We have not yet quantified the impact of adopting SFAS
No. 143 on our consolidated results of operations or financial position.

            In August 2001, the FASB issued SFAS No. 144 "Accounting for the
Impairment or Disposal of Long Lived Assets," which supersedes both SFAS No. 121
"Accounting for the Impairment of Long-Lived Assets for Long-Lived Assets to be
Disposed Of," and the accounting and reporting provisions for the disposal of a
segment of a business contained in APB Opinion No. 30, "Reporting the Results of
Operations - Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions." SFAS
No. 144 establishes a single accounting model for long-lived assets to be
disposed of by sale and broadens the presentation of discontinued operations.
The provisions of SFAS No. 144 are effective beginning in 2002 and are not
expected to have a material impact on our consolidated results of operations or
financial position.

USE OF ESTIMATES:

            The preparation of financial statements in conformity with
accounting principles generally accepted in the United States, or GAAP, requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and revenues and expenses during the period
reported. Actual results could differ from those estimates. Estimates are used
when accounting for allowance for doubtful accounts, revenue reserves,
depreciation and amortization, taxes and contingencies.

(2) BUSINESS COMBINATIONS -

            We have acquired other telecommunications companies offering similar
or complementary services to those offered by us. These acquisitions have been
accomplished through the purchase of the outstanding stock or assets of the
acquired entity for cash, notes, shares of our common stock, or a combination
thereof. The cash portion of acquisition costs has generally been financed
through our bank credit facilities.

            On July 1, 2001, we acquired Intermedia Communications Inc. for
approximately $5.8 billion, including assumed long-term debt, pursuant to the
merger of a wholly owned subsidiary with and into Intermedia, with Intermedia
continuing as the surviving corporation and as a subsidiary of WorldCom. As a
result of the Intermedia merger, we acquired a controlling interest in Digex,
Incorporated, or Digex, a provider of managed Web and application hosting
services. In connection with the Intermedia merger, stockholders of Intermedia
received one share of WorldCom group stock (or 57.1 million WorldCom group
shares in the aggregate) and 1/25th of a share of MCI group stock (or 2.3
million MCI group shares in the aggregate) for each share of Intermedia common
stock they


                                      F-14
<PAGE>

                         WORLDCOM, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

(2) BUSINESS COMBINATIONS - (CONTINUED)

owned. Holders of Intermedia preferred stock, other than Intermedia's 13.5%
Series B Redeemable Exchangeable Preferred Stock due 2009, or Intermedia Series
B Preferred Stock, received one share of a class or series of our preferred
stock, with substantially identical terms, which were established upon
consummation of the Intermedia merger. As a result of the merger with
Intermedia, we own approximately 90% of the voting securities of Intermedia.

      Upon effectiveness of the merger with Intermedia, the then outstanding and
unexercised options for shares of Intermedia common stock were converted into
options exercisable for an aggregate of approximately 10 million shares of
WorldCom group stock having the same terms and conditions as the Intermedia
options, except that the exercise price and the number of shares issuable upon
exercise were divided and multiplied, respectively, by 1.0319. The merger with
Intermedia was accounted for as a purchase and was allocated to the WorldCom
group.

      The purchase price in the Intermedia merger was allocated based on
appraised fair values at the date of acquisition. This resulted in an excess
purchase price over net assets acquired of $5.1 billion of which $67 million was
allocated to customer lists, which will be amortized over approximately four
years on a straight line basis. The remaining excess of $5.0 billion has been
allocated to goodwill and tradename which are not subject to amortization and
the goodwill is not expected to be deductible for tax purposes.

      In connection with the Intermedia merger, the Antitrust Division of the
Department of Justice required us to dispose of Intermedia's Internet service
provider business, which provided integrated Internet connectivity solutions,
and effective December 1, 2001, we sold substantially all of the Internet
related assets for approximately $12 million. In addition to this required
divestiture, we also committed to a plan to sell Intermedia's Advanced Building
Network business, which provides centralized telecommunications services in
multi-tenant commercial office buildings, and the systems integration business
through which Intermedia sells, installs, operates and maintains business
telephony customer premise equipment for its customers. We included the
appraised fair values of these assets to be disposed of in our initial
allocation of the Intermedia purchase price and also included accrued
anticipated losses expected to be incurred through disposal date. Any difference
between the actual results of operations and the amounts accrued will result in
an adjustment of goodwill unless there is a difference resulting from a
post-merger event. For the year ended December 31, 2001, operating losses for
these assets to be disposed of were approximately $41 million, before corporate
allocations. We anticipate that we will complete the planned disposals of the
remaining identified businesses before the third quarter of 2002.

      On October 1, 1999, we acquired SkyTel Communications, Inc., pursuant to
the merger of SkyTel with and into a wholly owned subsidiary of WorldCom. Upon
consummation of the SkyTel merger, the wholly owned subsidiary was renamed
SkyTel Communications, Inc. SkyTel is a leading provider of nationwide messaging
services in the United States. SkyTel's principal operations include one-way
messaging services in the United States, advanced messaging services on the
narrow band personal communications services network in the United States and
international one-way messaging operations.

      As a result of the SkyTel merger, each outstanding share of SkyTel common
stock was converted into the right to receive 0.3849 shares of WorldCom common
stock, par value $.01 per share, or approximately 23 million WorldCom common
shares in the aggregate. Holders of SkyTel's $2.25 Cumulative Convertible
Exchangeable Preferred Stock, received one share of WorldCom Series C $2.25
Cumulative Convertible Exchangeable Preferred Stock for each share of SkyTel
preferred stock held. The SkyTel merger was accounted for as a
pooling-of-interests; and accordingly, our financial statements for periods
prior to the SkyTel merger have been restated to include the results of SkyTel.
SkyTel has been allocated to the MCI group.


                                      F-15
<Page>

                         WORLDCOM, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

(2) BUSINESS COMBINATIONS - (CONTINUED)

      During 1999, 2000 and 2001, we recorded other liabilities of $582 million,
$29 million and $254 million, respectively, related to estimated costs of
unfavorable commitments of acquired entities, and other non-recurring costs
arising from various acquisitions and mergers. At December 31, 1999, 2000 and
2001, other liabilities related to these and previously recorded accruals
totaled $1.8 billion, $938 million and $817 million, respectively.

(3) INVESTMENTS -

      As of December 31, 2000 and 2001, our investments in marketable equity
securities are included in other assets at their fair value of approximately
$970 million and $22 million, respectively. The unrealized holding gain or loss
on these marketable equity securities, net of taxes of $207 million and tax
benefits of $31 million as of December 31, 2000 and 2001, respectively, is
included as a component of shareholders' investment in the accompanying
consolidated financial statements. As of December 31, 2000 and 2001, the gross
unrealized holding gain on these securities was $716 million and $2 million,
respectively. The gross unrealized holding loss on these securities was $164
million and $83 million at December 31, 2000 and 2001, respectively. Proceeds
from the sale of marketable equity securities totaled $1.7 billion, $680 million
and $526 million for the years ended December 31, 1999, 2000 and 2001,
respectively. Gross realized gains on marketable equity securities, which
represent reclassification adjustments to other comprehensive income, were $374
million, $643 million and $380 million for the years ended December 31, 1999,
2000 and 2001, respectively. Gross realized losses were $25 million and $2
million for the years ended December 31, 2000 and 2001, respectively. There were
no gross realized losses for the year ended December 31, 1999.

      Other cost investments totaled $1.2 billion and $1.0 billion as of
December 31, 2000 and 2001, respectively. Dividend income recorded on cost
investments for the years ended December 31, 1999, 2000 and 2001 was $32
million, $22 million and $56 million, respectively.

      In the second quarter of 2001, we recorded a pre-tax charge of $865
million related to the write-off of investments in specific publicly traded and
privately held companies. The write-off represented an other than temporary
impairment in the carrying value of the identified investments resulting from
bankruptcies and other declines in the telecommunications industry.

(4) LONG-TERM DEBT -

      Outstanding debt as of December 31, 2000 and 2001 consists of the
following (in millions):

<Table>
<Caption>
                                                                                         2000          2001
                                                                                      --------       --------
<S>                                                                                   <C>            <C>
       Commercial paper and credit facilities ..............................          $  3,629       $     --
       Floating rate notes due 2001 and 2002 ...............................             1,560             60
       7.88% - 8.25% Notes Due 2003-2010 ...................................             3,500          3,500
       7.38% Notes Due 2006-2011 ...........................................             2,000          2,000
       6.13% - 6.95% Notes Due 2001-2028 ...................................             6,100          4,600
       7.13% - 7.75% Notes Due 2004-2027 ...................................             2,000          2,000
       8.88% Senior Notes Due 2006 .........................................               672             --
       7.13% - 8.25% Senior Debentures Due 2023-2027 .......................             1,436          1,434
       6.13% - 7.50% Senior Notes Due 2004-2012 ............................             1,934          1,925
       6.50% - 8.25% Notes Due 2004 - 2031 .................................                --         11,939
       Intermedia 11.25% - 12.25% Senior Discount Notes Due 2007 - 2009 ....                --            643
       Intermedia 8.50% - 9.50% Senior Notes Due 2007 - 2009 ...............                --            581
       Capital lease obligations (maturing through 2017) ...................               413            953
       Embratel debt .......................................................             1,134             --
       Other debt (maturing through 2008) ..................................               518            575
                                                                                      --------       --------
                                                                                        24,896         30,210
       Short-term debt and current maturities of long-term debt ............            (7,200)          (172)
                                                                                      --------       --------
                                                                                      $ 17,696       $ 30,038
                                                                                      ========       ========
</Table>


                                      F-16
<Page>

                         WORLDCOM, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

(4) LONG-TERM DEBT - (CONTINUED)

      On June 8, 2001, we replaced our existing $7 billion 364-Day Revolving
Credit and Term Loan Agreement with two new credit facilities consisting of a
$2.65 billion 364-Day Revolving Credit Agreement (the "364-Day Facility") and a
$1.6 billion Revolving Credit Agreement (the "Multi-Year Facility"). The 364-Day
Facility and the Multi-Year Facility, together with our existing $3.75 billion
Amended and Restated Facility A Revolving Credit Agreement (the "Existing
Facility"), provide us with aggregate credit facilities of $8 billion. These
credit facilities provide liquidity support for our commercial paper program and
for other general corporate purposes.

      The Existing Facility and the Multi-Year Facility mature on June 30, 2002
and June 8, 2006, respectively. The 364-Day Facility has a 364-day term, which
may be extended for successive 364-day terms to the extent of the committed
amounts from those lenders consenting thereto, with a requirement that lenders
holding 51% of the committed amounts consent and so long as the final maturity
date does not extend beyond June 8, 2006. Additionally, we may elect to convert
the principal debt outstanding under the 364-Day Facility to a term loan
maturing no later than one year after the conversion date, so long as the final
maturity date does not extend beyond June 8, 2006. The Existing Facility is
subject to annual commitment fees not to exceed 0.25% of any unborrowed portion
of the facilities and the current commitment fee is 0.11%. The 364-Day Facility
and the Multi-Year Facility are subject to annual facility fees not to exceed
0.20% or 0.25%, respectively, of the average daily commitment under each such
facility (whether used or unused). The current commitment fee on the 364-Day
Facility is 0.07% and the current commitment fee on the Multi-Year Facility is
0.09%.

      The credit facilities bear interest payable in varying periods, depending
on the interest period, not to exceed six months, or with respect to any
Eurodollar Rate borrowing, 12 months if available to all lenders, at rates
selected by us under the terms of the credit facilities, including a Base Rate
or Eurodollar Rate, plus the applicable margin. The applicable margin for the
Eurodollar Rate borrowing generally varies from 0.35% to 0.75%, and is currently
set at 0.35%, as to loans under the Existing Facility, from 0.29% to 0.80%, and
is currently set at 0.33%, as to loans under the 364-Day Facility and 0.27% to
0.75%, and is currently set at 0.31%, as to loans under the Multi-Year Facility,
in each case based upon our then current debt ratings.

The credit facilities are unsecured and require compliance with various
covenants including a financial covenant based on the ratio of total debt to
total book capitalization, which may not exceed 0.68 to 1.00, calculated on a
consolidated basis. The credit facilities also require compliance with various
operating covenants which, among other things, permit the following transactions
so long as we are not in default thereunder:

      o     distributions to shareholders;

      o     the incurrence of additional indebtedness, except that newly secured
            debt or the total debt of the covered subsidiaries, cannot exceed
            10% of the book value of the consolidated assets of WorldCom and the
            covered subsidiaries; and

      o     sales of assets in the ordinary course of business and additional
            sales if after such sales, the aggregate book value of all such
            assets sold during the term of the credit facilities does not
            exceed 20% of the book value of the consolidated assets of WorldCom
            and the covered subsidiaries.

As of the date of this filing, we were in compliance with these covenants.

      On May 9, 2001, we completed the pricing of a public debt offering of
approximately $11.9 billion principal amount of debt securities, based on
currency exchange rates on May 8, 2001. The net proceeds of $11.7 billion have
been or will be used for general corporate purposes, including the repayment of
commercial paper and other debt payments as outlined below. The public debt
offering consisted of the following series of notes:


                                      F-17
<Page>

                         WORLDCOM, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

(4) LONG-TERM DEBT - (CONTINUED)

<Table>
<Caption>
                                       Principal                        Interest            First
                                         Amount        Maturity         Payable         Interest Date
      -------------------------------------------------------------------------------------------------
<S>                            <C>                   <C>              <C>             <C>
      6.50% Notes due 2004           $1.5 billion    May 15, 2004     Semiannually    November 15, 2001
      7.50% Notes due 2011           $4.0 billion    May 15, 2011     Semiannually    November 15, 2001
      8.25% Notes due 2031           $4.6 billion    May 15, 2031     Semiannually    November 15, 2001
      6.75% Notes due 2008     (euro)1.25 billion    May 15, 2008       Annually        May 15, 2002
      7.25% Notes due 2008     (pound)500 million    May 15, 2008       Annually        May 15, 2002
</Table>

      All of the notes, except for the 6.50% Notes due 2004 are redeemable, as a
whole or in part, at our option, at any time or from time to time, at respective
redemption prices equal to the greater of 100% of the principal amount of the
notes to be redeemed or:

      o     In the case of the U.S. dollar notes, the sum of the present values
            of the Remaining Scheduled Payments, as defined therein, discounted,
            on a semiannual basis, assuming a 360-day year consisting of twelve
            30-day months, at the Treasury Rate, as defined therein, plus:

            o     30 basis points for the Notes due 2011, and

            o     35 basis points for the Notes due 2031;

      o     In the case of the euro notes, the sum of the present values of the
            Remaining Scheduled Payments, as defined therein, discounted, on an
            annual basis (based on the actual number of days elapsed divided by
            365 or 366, as the case may be), at the Reference Euro Dealer Rate,
            as defined therein, plus 25 basis points; and

      o     In the case of the sterling notes, the price expressed as a
            percentage (rounded to three decimal places, with .0005 being
            rounded up) at which the Gross Redemption Yield, as defined therein,
            on the outstanding principal amount of the notes on the Reference
            Date, as defined therein, is equal to the Gross Redemption Yield
            (determined by reference to the middle-market price) at 3:00 p.m.
            (London time) on that date on the Benchmark Gilt, as defined
            therein, plus 25 basis points;

plus, in the case of the U.S. dollar notes, the euro notes and the sterling
notes, accrued interest to the date of redemption which has not been paid.

      In connection with the Intermedia merger, we assumed Intermedia's
outstanding debt including $1.2 billion of senior discount notes with interest
rates ranging from 11.25% to 12.5%, $0.9 billion of senior notes with interest
rates ranging from 8.5% to 9.5%, credit facility borrowings of $258 million and
other long-term debt including capital leases of $0.6 billion. We repaid the
Intermedia credit facility borrowings of $258 million and subsequently
terminated Intermedia's credit facility during the third quarter of 2001.
Additionally, on September 28, 2001, we redeemed all of Intermedia's 12.5%
senior discount notes for $337 million. Cash balances were used to repay these
amounts.

      During the third and fourth quarters of 2001, $1.5 billion of 6.125%
senior notes matured, $917 million of floating rate notes matured, we redeemed
all of our outstanding 8.875% senior notes due 2006 for $694 million, we retired
$1.1 billion of our outstanding debt through open market debt repurchases
(including $546 million of outstanding debt assumed in the Intermedia merger)
and we redeemed all of our outstanding Series G preferred stock at par for $200
million. Cash balances were used to repay these amounts.


                                      F-18
<Page>

                         WORLDCOM, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

(4) LONG-TERM DEBT - (CONTINUED)

      The aggregate principal repayments and reductions required in each of the
years ending December 31, 2002 through December 31, 2006 and thereafter for our
long-term debt is as follows (in millions):

<Table>
<S>                                                   <C>
                     2002 .....................       $   172
                     2003 .....................         1,749
                     2004 .....................         2,622
                     2005 .....................         2,349
                     2006 .....................         2,643
                     Thereafter ...............        20,675
                                                      -------
                                                      $30,210
                                                      =======
</Table>

      Included in WorldCom long-term debt is a $700 million 6.125% senior note
due 2012, which is a remarketable instrument. On April 15, 2002, the underwriter
has an option to remarket the note and we have the option to accept the
remarketing, exchange the note for new 5, 7 or 10-year notes at prevailing
interest rates or redeem the note for cash. Since the note matures in 2012, it
is not included in our 2002 scheduled debt maturities of $172 million.

      Our senior debt is currently rated as follows:

<Table>
<Caption>
Rating Agency                         Rating      Outlook
--------------------------------------------------------------
<S>                                   <C>         <C>
Moody's Investors Service             A3          Under review
Standard & Poor's                     BBB+        Negative
Fitch Ratings                         BBB+        Stable
</Table>

Any downgrade in rating will not trigger any events on our outstanding bond
debt, although the cost of future bond offerings may increase. Our credit
facilities contain ratings triggers affecting interest rates and our annual
commitment fee, which are outlined above and are not liquidity triggers.
Additionally, if WorldCom merges or consolidates with another corporation, the
surviving corporation, after giving effect to the merger or consolidation, among
other things, must have a then effective debt rating equal to or higher than
Baa3 by Moody's and BBB- by Standard & Poor's. Further, our $2 billion
receivables purchase program contains rating triggers which reduce the
availability under the program, and if we are rated less than Baa3 by Moody's
and less than BBB- by Standard & Poor's, or if we are not rated by either
agency, then the receivables purchase program is terminated. Our management
frequently communicates with the rating agencies and currently believes that a
downgrade below Baa3 or BBB- is not likely.

(5)   COMPANY OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES OF
      SUBSIDIARIES AND OTHER REDEEMABLE PREFERRED SECURITIES -

      In connection with the Intermedia merger, we issued the following series
of preferred stock, which are mandatorily redeemable:

<Table>
<Caption>
                                                 NUMBER OF
                                                 PREFERRED                    ANNUAL               AGGREGATE # OF SHARES CONVERTIBLE
                                                   SHARES     LIQUIDATION   DIVIDEND                     AT THE OPTION OF HOLDER
                                                AUTHORIZED,   PREFERENCE       PER     ASSOCIATED  ---------------------------------
                                                 ISSUED AND  PER PREFERRED  PREFERRED  DEPOSITORY     WORLDCOM           MCI GROUP
                                                OUTSTANDING      SHARE        SHARE      SHARES     GROUP SHARES          SHARES
                                                ------------------------------------------------------------------------------------
<S>                                               <C>           <C>            <C>      <C>           <C>                 <C>
  Series D Junior Convertible preferred stock,
   par value $0.01 per share                       53,724       $2,500         $175     5,372,410     6,905,398           276,215
  Series E Junior Convertible preferred stock,
   par value $0.01 per share                       64,047       $2,500         $175     6,404,690     5,295,766           211,830
  Series F Junior Convertible preferred stock,
   par value $0.01 per share                       79,600       $2,500         $175     7,960,000     4,729,649           189,185
  Series G Junior Convertible Participating
   preferred stock, par value $0.01 per share     200,000       $1,000         $ 70           n/a     5,555,555           222,222
</Table>

      On August 20, 2001, the holder of our Series G preferred stock exercised
its right to require us to redeem all of the outstanding Series G preferred
stock at par plus accrued dividends, or approximately $200 million in the
aggregate.

      The Series D, E and F preferred stock are currently redeemable in whole or
in part, at our option for cash plus accrued and unpaid dividends at rates
commencing with 103%, declining to 100% in 2004 and thereafter for the Series D
and E preferred stock and commencing with 104%, declining to 100% in 2005 and
thereafter for the Series F preferred stock.

      Dividends on the Series D, E and F preferred stock are payable in cash or
shares of our common stock, at our election on each July 15, October 15, January
15 and April 15. To date, we have paid these dividends in cash and we expect to
continue to pay cash dividends on our Series D, E and F preferred stock.


                                      F-19
<Page>

                         WORLDCOM, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

(5)   COMPANY OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES OF
      SUBSIDIARIES AND OTHER REDEEMABLE PREFERRED SECURITIES - (CONTINUED)

      The Series D, E and F preferred shareholders are generally entitled to
one-tenth of a vote per share of Series D, E or F preferred stock on all matters
voting together with the WorldCom common shareholders as a single class.

      REDEEMABLE PREFERRED SECURITIES OF SUBSIDIARIES:

      At the time of the Intermedia merger, Intermedia had outstanding
Intermedia Series B Preferred Stock, and Digex had outstanding Series A
Convertible Preferred Stock, or Digex Series A Preferred Stock, that remain
outstanding subsequent to the Intermedia merger.

      As of December 31, 2001, there were 568,455 shares of Intermedia Series B
Preferred Stock outstanding. Dividends on the Intermedia Series B Preferred
Stock accumulate at a rate of 13.5% of the aggregate liquidation preference
thereof and are payable quarterly, in arrears. Dividends are payable in cash or,
at Intermedia's option, by the issuance of additional shares of Intermedia
Series B Preferred Stock having an aggregate liquidation preference equal to the
amount of such dividends. Historically, Intermedia has paid the Intermedia
Series B Preferred Stock dividend by the issuance of additional shares of
Intermedia Series B Preferred Stock. The Intermedia Series B Preferred Stock is
subject to mandatory redemption at its liquidation preference of $1,000 per
share, plus accumulated and unpaid dividends on March 31, 2009. The Intermedia
Series B Preferred Stock will be redeemable at the option of Intermedia at any
time after March 31, 2002 at rates commencing with 106.75%, declining to 100% on
March 31, 2007. Intermedia Series B Preferred Stock is generally entitled to
one-tenth of one vote per share on all matters voting together with the common
stock of Intermedia as a single class.

      The Digex Series A Preferred Stock has an aggregate liquidation preference
of $100 million, and is convertible into approximately 1,462,000 shares of Class
A Common Stock of Digex. The Digex Series A Preferred Stock does not pay
dividends and there are no voting rights.

      As of December 31, 2001, we also had $750 million aggregate principal
amount of 8% Cumulative Quarterly Income Preferred Securities, Series A,
representing 30 million shares outstanding due June 30, 2026 and 475 shares of
an authorized 500 shares of 6.375% cumulative preferred stock, Class A, or Class
A Preferred Stock. Each share of Class A Preferred Stock has a par value of
$0.01 per share and a liquidation preference of $100,000 per share. The Class A
Preferred Stock is mandatorily redeemable at the redemption price of $100,000
per share plus accumulated and unpaid dividends on January 1, 2019. Dividends on
the Class A Preferred Stock are payable quarterly at a rate per annum equal to
6.375% of the liquidation preference of $100,000 per share when, as and if
declared.

(6) PREFERRED STOCK -

      In October 2001, we exercised our option to redeem all of our outstanding
Series B Preferred Stock. Prior to the redemption date, substantially all of the
holders of our Series B Preferred Stock elected to convert the preferred stock
into 0.1460868 shares of WorldCom group stock and 0.005843472 shares of MCI
group stock for each share of Series B Preferred Stock held.

      In January 2000, each outstanding share of WorldCom Series C $2.25
Cumulative Convertible Exchangeable Preferred Stock was redeemed by us for
$50.75 in cash, or approximately $190 million in the aggregate.


                                      F-20
<Page>

                         WORLDCOM, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

(7) SHAREHOLDER RIGHTS PLAN -

      On September 6, 2001, our preferred share purchase rights previously
issued on August 25, 1996 expired. On March 7, 2002, our board of directors
declared a dividend of one preferred share purchase right, or WorldCom group
right, for each outstanding share of WorldCom group stock and one preferred
share purchase right, or MCI group right, for each outstanding share of MCI
group stock to shareholders of record on March 18, 2002. Each WorldCom group
right entitles the holder to purchase from us one one-thousandth of a share of
our Series 4 Junior Participating Preferred Stock, par value $.01 per share, or
Series 4 Preferred Stock, at an initial price of $60.00 per one one-thousandth
of a share of Series 4 Preferred Stock (the "Series 4 Purchase Price"), subject
to adjustment. Each MCI group right entitles the holder to purchase from us one
one-thousandth of a share of our Series 5 Junior Participating Preferred Stock,
par value $.01 per share, or Series 5 Preferred Stock, at an initial price of
$40.00 per one one-thousandth of a share of Series 5 Preferred Stock (the
"Series 5 Purchase Price"), subject to adjustment.

      The WorldCom group rights and MCI group rights generally will be
exercisable only after the close of business on the tenth business day following
the date of public announcement or the date on which we first have notice or
determine that a person or group of affiliated or associated persons, which we
refer to as an "Acquiring Person," other than WorldCom, any of our subsidiaries
or any employee benefit plan of WorldCom, has acquired, or has obtained the
right to acquire, 15% or more of the outstanding shares of voting stock of
WorldCom without the prior express written consent of a majority of our
independent directors, or after the close of business on the tenth business day
(or such later day as a majority of our independent directors shall determine,
but in no event later than the tenth business day after a person becomes an
Acquiring Person) after the commencement of a tender offer or exchange offer, by
a person which, upon consummation, would result in such party's control of 15%
or more of our voting stock. The WorldCom group rights and the MCI group rights
will expire, if not previously exercised, exchanged or redeemed, on March 18,
2012.

      If any person or group acquires 15% or more of our outstanding voting
stock without the prior written consent of a majority of our independent
directors, each WorldCom group right, except those held by such person or group,
would entitle that holder to acquire such number of shares of WorldCom group
stock as equals the result obtained by multiplying the then current Series 4
Purchase Price by the number of one one-thousandths of a share of Series 4
Preferred Stock for which a WorldCom group right is then exercisable and
dividing that product by 50% of the then current per-share market price of
WorldCom group stock. If any person or group acquires 15% or more of our
outstanding voting stock without the prior written consent of a majority of our
independent directors, each MCI group right, except those held by such person or
group, would entitle that holder to acquire such number of shares of MCI group
stock as equals the result obtained by multiplying the then current Series 5
Purchase Price by the number of one one-thousandths of a share of Series 5
Preferred Stock for which an MCI group right is then exercisable and dividing
that product by 50% of the then current per-share market price of MCI group
stock.

      If any person or group acquires 15% or more, but less than 50%, of our
outstanding voting stock without the prior written consent of a majority of our
independent directors, each WorldCom group right and MCI group right, except
those held by such person or group, may be exchanged for one share of WorldCom
group stock or MCI group stock, as applicable, if so determined by a majority of
our independent directors.

      If we were acquired in a merger or other business combination transaction
where we are not the surviving corporation or where we are the surviving
corporation, but WorldCom group stock or MCI group stock is exchanged or changed
for stock or other securities of any other person or for cash or other property,
or where 50% or more of our assets or earnings power is sold in one or more
transactions without the prior written consent of a majority of our independent
directors, each WorldCom group right and MCI group right would entitle the
holders thereof (except for the Acquiring Person) to receive such number of
shares of the acquiring company's common


                                      F-21
<Page>

                         WORLDCOM, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

(7) SHAREHOLDER RIGHTS PLAN - (CONTINUED)

stock as equals the result obtained by multiplying the then current Series 4
Purchase Price or Series 5 Purchase Price, as applicable, by the number of one
one-thousandths of a share of Series 4 Preferred Stock or Series 5 Preferred
Stock for which a WorldCom group right or MCI group right, as applicable, is
then exercisable and dividing that product by 50% of the then current market
price per share of the common stock of the acquiring company on the date of such
merger, sale or other business combination transaction.

      At any time prior to the time an Acquiring Person becomes such, a majority
of our independent directors may redeem the WorldCom group rights and MCI group
rights in whole, but not in part, at a price of $.01 per right, or the
"Redemption Price". The redemption of the WorldCom group rights and MCI group
rights may be made effective at such time, on such basis and with such
conditions as a majority of our independent directors in their sole discretion
may establish. Immediately upon any redemption of the WorldCom group rights and
MCI group rights, the right to exercise them will terminate and the only right
of the holders will be to receive the Redemption Price.

      The terms of the WorldCom group rights and MCI group rights may be amended
by us without the consent of the holders of such rights, including an amendment
to lower certain thresholds described above to not less than the greater of (i)
any percentage greater than the largest percentage of the voting power of all
securities of WorldCom then known to us to be beneficially owned by any person
or group of affiliated or associated persons (other than WorldCom, our
subsidiaries or any of our employee benefit plans) and (ii) 10%, except that
from and after such time as any person or group of affiliated or associated
persons becomes an Acquiring Person no such amendment may adversely affect the
interests of the holders of the WorldCom group rights or MCI group rights.

(8) LEASES AND OTHER COMMITMENTS -

      We lease office facilities and equipment under non-cancelable operating
leases having initial or remaining terms of more than one year. Rental expense
under these operating leases was $323 million, $392 million and $517 million in
1999, 2000 and 2001, respectively. Rental expense in 2001 increased as a result
of our movement of technical facilities closer to our customers which should
result in lower access costs in the future, international expansion and to a
lesser degree, the inclusion of Intermedia and annual rent escalation. We are
also obligated under rights-of-way and franchise agreements with various
entities for the use of their rights-of-way for the installation of our
telecommunications systems.

      At December 31, 2001, minimum lease payments under non-cancelable
operating leases and commitments, other contractual commitments and capital
leases were as follows (in millions):

<Table>
<Caption>
                              OFFICE FACILITIES
                                AND EQUIPMENT
                                  AND OTHER
                                 CONTRACTUAL      TELECOMMUNICATIONS                                      CAPITAL
YEAR                             COMMITMENTS          FACILITIES         RIGHTS-OF-WAY       TOTAL         LEASES
-------------------------------------------------------------------------------------------------------------------
<S>                                <C>                <C>                    <C>             <C>             <C>
2002.......................        $   556            $    778               $     45        $ 1,379       $   140
2003.......................            479                 676                     33          1,188           110
2004.......................            481                 491                     32          1,004           113
2005.......................            418                 222                     26            666           103
2006.......................            350                 218                     23            591           108
Thereafter.................          3,211                 330                    284          3,825         1,003
                                   -------            --------               --------        -------       -------
Total......................        $ 5,495            $  2,715               $    443        $ 8,653         1,577
                                   =======            ========               ========        =======
Less: imputed interest.....                                                                                   (953)
                                                                                                           -------
                                                                                                           $   624
                                                                                                           =======
</Table>


                                      F-22
<Page>

                         WORLDCOM, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

(8) LEASES AND OTHER COMMITMENTS - (CONTINUED)

      We have various facility leases that include renewal options, and most
leases include provisions for rent escalation to reflect increased operating
costs and/or require us to pay certain maintenance and utility costs. We also
purchase special access circuits from traditional local phone companies under
optional payment plans which are term and volume discounts off traditional local
phone company standard pricing. At December 31, 2001, the remaining obligations
associated with these discount plans are $1.8 billion.

      In October 1999, WorldCom and Electronic Data Systems Corporation, or EDS,
finalized dual outsourcing agreements. Under these agreements, we outsource
portions of our information technology, or IT, operations to EDS. EDS has
assumed responsibility for our IT system operations at more than a dozen of our
processing centers worldwide. The IT outsourcing agreement is represented by a
10-year contractual commitment with contractually specified minimums over the
term of the contract. As of December 31, 2001, the contractual obligation
associated with this contract is $2.4 billion in the aggregate and has been
included with Office Facilities and Equipment and Other Contractual Commitments
in the table above.

      Also included with Office Facilities and Equipment and Other Contractual
Commitments in the table above are contractual commitments with traditional
local phone companies who provide ports to us in co-located facilities, which we
use for dial-up Internet access. As of December 31, 2001, the contractual
commitment associated with these contracts was $1.9 billion in the aggregate.
During 2001, we were successful in the renegotiation of many of these contracts,
at no cost, and as a result, the contractual commitment has been lowered by more
than $1.1 billion versus the comparable obligation in 2000.

      As of December 31, 2001, our receivables purchase program consisted of a
$3.7 billion pool of receivables in which the purchaser owned an undivided
interest, which includes the $2.0 billion sold.

(9) CONTINGENCIES -

      We are involved in legal and regulatory proceedings that are incidental to
our business and have included loss contingencies in other current liabilities
and other liabilities for these matters in our financial statements. In some
instances, rulings by federal, state and international regulatory authorities
may result in increased operating costs to us. The results of these various
legal and regulatory matters are uncertain and could have a material adverse
effect on our consolidated results of operations or financial position.

      REGULATION

      We are subject to varying degrees of federal, state, local and
international regulation. In the United States, our subsidiaries are most
heavily regulated by the states, especially for the provision of local exchange
services. Our subsidiaries must be certified separately in each state to offer
local exchange and intrastate long distance services. No state, however,
subjects us to rate of return regulation, nor are we currently required to
obtain FCC authorization for installation or operation of our network facilities
used for domestic services, other than licenses for specific multichannel
multipoint distribution services, wireless communications service and
terrestrial microwave and satellite earth station facilities that utilize radio
frequency spectrum. FCC approval is required, however, for the installation and
operation of our international facilities and services. We are subject to
varying degrees of regulation in the foreign jurisdictions in which we conduct
business, including authorization for the installation and operation of network
facilities. Although the trend in federal, state and international regulation
appears to favor increased competition, no assurance can be given that changes
in current or future regulations adopted by the FCC, state or foreign regulators
or legislative initiatives in the United States or abroad would not have a
material adverse effect on us.


                                      F-23
<Page>

                         WORLDCOM, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

(9) CONTINGENCIES - (CONTINUED)

      In August 1996, the FCC established nationwide rules pursuant to the
Telecommunications Act of 1996, or the Telecom Act, designed to encourage new
entrants to compete in local service markets through interconnection with the
traditional local phone companies, resale of traditional local phone companies'
retail services, and use of individual and combinations of unbundled network
elements, owned by the traditional local phone companies. Unbundled network
elements are defined in the Telecom Act as any "facility or equipment used in
the provision of a telecommunication service," as well as "features, function,
and capabilities that are provided by means of such facility or equipment." In
January 1999, the Supreme Court of the United States confirmed the FCC's
authority to issue the rules, including a pricing methodology for unbundled
network elements. On remand, the FCC clarified the requirement that traditional
local phone companies make specific unbundled network elements available to new
entrants. The traditional local phone companies have sought reconsideration of
the FCC's order and have petitioned for review of the order in the United States
Court of Appeals for the D.C. Circuit. That case is pending.

      In its January 1999 decision, the Supreme Court remanded to the United
States Court of Appeals for the Eighth Circuit various substantive questions
concerning the FCC's rules for pricing unbundled network elements. In July 2000,
the Eighth Circuit upheld the use of a forward-looking methodology but struck
down the portion of the rule that calculates costs based on efficient technology
and design choices. At the request of various parties, including us, the Supreme
Court is reviewing the Eighth Circuit's decision. The Supreme Court heard oral
argument in October 2001, and a ruling is expected in the first half of 2002.

      In December 1999, the FCC concluded that in providing high-speed digital
subscriber line services, the incumbent local phone companies should be required
to share primary telephone lines with competitive local exchange carriers, and
the FCC identified the high frequency portion of the loop as a network element.
In January 2001, the FCC clarified that the requirement to share lines applies
to the entire loop, even where the traditional incumbent local phone company has
deployed fiber in the loop. Under the order, the incumbent local phone companies
must permit competing carriers to self-provision or partner with a data carrier
in order to furnish voice and data service on the same line. The incumbent local
phone companies have appealed these two rulings and we have intervened in
support of the FCC.

      In December 2001 and February 2002, the FCC issued a series of Notices of
Proposed Rulemaking, seeking to streamline and simplify the requirements imposed
on traditional local phone companies with respect to unbundled network elements,
broadband Internet access, and advanced services. Comments are due during the
spring of 2002, and decisions are expected before the end of 2002. WorldCom
cannot predict the outcome of these proceedings. However, if regulations are
streamlined or removed, there are elements and combinations of elements upon
which WorldCom relies to provide local services, broadband and advanced services
that might no longer be required as a matter of federal regulation.

      The Telecom Act requires traditional local phone companies to petition the
FCC for permission to offer long distance services for each state within their
region. Under section 271 of the Telecom Act, for these applications to be
granted, the FCC must find, among other things, that the traditional phone
company has demonstrated that it has satisfied a 14-point competitive checklist
to open its local network to competition and that granting the petition is in
the public interest. To date, the FCC has rejected five traditional local phone
company applications and it has granted ten: Verizon's for New York,
Massachusetts, Connecticut, Pennsylvania and Rhode Island and SBC's for Texas,
Kansas, Oklahoma, Missouri and Arkansas. WorldCom and other competitive carriers
appealed to the D.C. Circuit the approvals for Kansas, Oklahoma and
Massachusetts. On December 28, 2001, the D.C. Circuit decided that the FCC had
not adequately addressed whether the prices charged for leasing network elements
by SBC in Kansas and Oklahoma create a price squeeze which violated the
standards for SBC to gain long distance approval. Without vacating the approval,
the D.C. Circuit remanded the case to the FCC for it to address the price
squeeze issue. A briefing schedule has not been established for the
Massachusetts appeal. BellSouth has filed applications to offer long


                                      F-24
<Page>

                         WORLDCOM, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

(9) CONTINGENCIES - (CONTINUED)

distance service for Georgia and Louisiana, and Verizon has filed applications
for Vermont and New Jersey. Other applications may be filed at any time. We have
challenged, and will continue to challenge, any application that does not
satisfy the requirements of section 271 or the FCC's local competition rules. To
date, these challenges have focused on the pricing of unbundled network elements
and on the adequacy of the traditional local phone companies' operations support
systems. In addition, legislation has been introduced in Congress that would
have the effect of allowing traditional local phone companies to offer in-region
long distance data services without satisfying section 271 of the Telecom Act
and/or of making it more difficult for competitors to resell incumbent local
phone company high-speed Internet access services or to lease the unbundled
network elements used to provide these services. To date, WorldCom and others
have successfully opposed these legislative initiatives.

      In February 1999, the FCC issued a Declaratory Ruling and Notice of
Proposed Rulemaking regarding the regulatory treatment of calls to Internet
service providers. Prior to the FCC's order, over thirty state public utility
commissions issued orders finding that carriers, including us, are entitled to
collect reciprocal compensation for completing calls to Internet service
providers under the terms of their interconnection agreements with traditional
local phone companies. Many of these public utility commission decisions were
appealed by the traditional local phone companies and, since the FCC's order,
many traditional local phone companies have filed new cases at the public
utility commissions or in court. We petitioned for review of the FCC's order in
the D.C. Circuit, which vacated the order and remanded the case to the FCC for
further proceedings. In April 2001, the FCC issued an Order on Remand and Report
and Order asserting jurisdiction over calls to Internet service providers and
establishing a three-year transitional scheme of decreasing reciprocal
compensation rates. We filed a petition for review of the FCC's order with the
D.C. Circuit, and the Court heard oral arguments on February 12, 2002.

      It is possible that spectrum rights held may be disrupted by FCC decisions
to re-allocate some or all of that spectrum to other services. If this
re-allocation were to occur, we cannot predict whether current deployment plans
for our multi-channel multipoint distribution service services will be
sustainable.

      LITIGATION

      In November 2000, class action complaints were filed in the United States
District Courts for the Southern District of Mississippi, the Southern District
of New York, and the District of Columbia against WorldCom and some of our
executive officers. All of these actions were consolidated in the Southern
District of Mississippi on March 27, 2001, along with another purported class
action lawsuit filed on behalf of individuals who purchased stock in Intermedia
between September 5 and November 1, 2000, which action asserts substantially
similar claims and alleges that after the announcement of the
WorldCom-Intermedia merger, the price of Intermedia stock was tied to the price
of WorldCom stock. On June 1, 2001, the plaintiffs filed a consolidated amended
complaint. Among other things, the consolidated amended complaint alleged that
statements regarding WorldCom's revenues, the integration of MCI, the success of
UUNET Technologies, and the expansion of WorldCom's network were false;
WorldCom's financial disclosures were false; and WorldCom's announcement of its
"generation d" initiative was misleading. Based on these allegations, the
consolidated amended complaint asserts claims for violation of Section 10(b) of
the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder and
Section 20(a) of the Securities Exchange Act of 1934. The consolidated amended
complaint seeks to certify a class of persons who purchased WorldCom shares
between February 10, 2000 and November 1, 2000, inclusive; it does not assert
separate claims on behalf of purchasers of Intermedia shares. On August 7, 2001,
WorldCom and the individual defendants filed a motion to dismiss the
consolidated amended complaint in its entirety. We believe that the factual
allegations and legal claims asserted in the consolidated amended complaint are
without merit and intend to defend them vigorously.


                                      F-25
<Page>

                         WORLDCOM, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

(9) CONTINGENCIES - (CONTINUED)

      In August 1997, three complaints were filed in the United States District
Court for the District of Columbia, as class actions on behalf of purchasers of
MCI shares. The three cases were consolidated on April 1, 1998. On or about May
8, 1998, the plaintiffs in all three cases filed a consolidated amended
complaint alleging, on behalf of purchasers of MCI's shares between July 11,
1997 and August 21, 1997, inclusive, that MCI and some of its officers and
directors failed to disclose material information about MCI, including that MCI
was renegotiating the terms of the MCI BT merger agreement. The consolidated
amended complaint seeks damages and other relief. WorldCom and the other
defendants have moved to dismiss the consolidated amended complaint.

(10) EMPLOYEE BENEFIT PLANS -

STOCK OPTION PLANS:

      Effective with our recapitalization, each outstanding stock option under
our existing stock option plans was converted into a stock option to acquire
shares of WorldCom group stock having the same terms and conditions, except that
the exercise price and the number of shares issuable upon exercise were divided
and multiplied, respectively, by 1.0319. The following information reflects this
conversion ratio. We do not maintain a plan for the issuance of MCI group stock
options. We have several stock option plans under which options to acquire up to
919 million shares of WorldCom group stock may be granted to directors, officers
and employees of WorldCom including the stock option plans acquired through
various acquisitions. As of December 31, 1999, 2000 and 2001, outstanding
options and warrants to acquire 101 million, 137 million and 202 million shares,
respectively, were exercisable. We account for these plans under APB Opinion No.
25, under which no compensation cost is recognized. Terms and conditions of our
options, including exercise price and the period in which options are
exercisable, generally are at the discretion of the Compensation and Stock
Option Committee of our board of directors; however, no options are exercisable
for more than 10 years after date of grant. As of December 31, 2001, 586 million
options had been granted under these plans.

      Additionally, there are outstanding warrants to acquire 2.4 million shares
of WorldCom group stock at prices ranging from $20.75 to $45.00 per share which
were granted by acquired entities prior to their merger with WorldCom.

      Additional information regarding options and warrants granted and
outstanding is summarized below (in millions, except per share data):

<Table>
<Caption>
                                                                NUMBER OF           WEIGHTED-
                                                               OPTIONS AND           AVERAGE
                                                                WARRANTS         EXERCISE PRICE
                                                                --------         --------------
<S>                                                                <C>            <C>
      Balance, December 31, 1998.....................              254            $    16.40
      Granted to employees/directors.................              157                 45.17
      Exercised......................................              (63)                14.84
      Expired or canceled............................              (19)                29.92
                                                                   ---            ----------
      Balance, December 31, 1999.....................              329                 29.63
      Granted to employees/directors.................              112                 42.73
      Exercised......................................              (38)                15.14
      Expired or canceled............................              (47)                40.27
                                                                   ---            ----------
      Balance, December 31, 2000.....................              356                 33.95
      Assumed in connection with acquisitions........               10                 24.59
      Granted to employees/directors.................               91                 15.63
      Exercised......................................              (10)                10.74
      Expired or canceled............................              (44)                37.79
                                                                   ---            ----------
      Balance, December 31, 2001.....................              403            $    29.83
                                                                   ===            ==========
</Table>


                                      F-26
<Page>

                         WORLDCOM, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

(10) EMPLOYEE BENEFIT PLANS - (CONTINUED)

      Options and warrants to purchase 1 million, 323 million and 370 million
shares of WorldCom group stock, were outstanding as of December 31, 1999, 2000
and 2001, respectively, with an exercise price in excess of the respective year
end closing market price for WorldCom group stock.

      The following table summarizes information about the WorldCom group
options and warrants outstanding at December 31, 2001:

<Table>
<Caption>
                                   OPTIONS AND WARRANTS OUTSTANDING             OPTIONS AND WARRANTS EXERCISABLE
                          --------------------------------------------------   ---------------------------------
         RANGE OF             NUMBER          REMAINING         WEIGHTED-         NUMBER             WEIGHTED-
         EXERCISE          OUTSTANDING       CONTRACTUAL         AVERAGE        OUTSTANDING           AVERAGE
          PRICES          (IN MILLIONS)      LIFE (YEARS)     EXERCISE PRICE   (IN MILLIONS)      EXERCISE PRICE
         --------         -------------      ------------     --------------   -------------      --------------
<S>                             <C>              <C>             <C>                 <C>              <C>
     $  0.01 - 16.81            149              6.9             $ 14.45             60               $ 12.84
       16.82 - 33.61             60              5.7               22.11             55                 23.89
       33.62 - 50.42            193              6.9               43.96             86                 44.26
       50.43 - 84.03              1              5.3               56.60              1                 56.34
                                ---                                                 ---
                                403                                                 202
                                ===                                                 ===
</Table>

      SFAS No. 123, "Accounting for Stock-Based Compensation", requires
disclosure of the compensation cost for stock-based incentives granted after
January 1, 1995 based on the fair value at grant date for awards. Applying SFAS
No. 123 to the WorldCom group would result in net income and earnings per share,
or EPS, amounts as follows (in millions, except per share data):

<Table>
<Caption>
                                                                                              1999     2000      2001
                                                                                              ----     ----      ----
<S>                                                                                           <C>      <C>      <C>
     Net income attributed to WorldCom group before cumulative                As reported     $2,294   $2,608   $1,407
       effect of accounting change..........................................    With 123       1,795    1,844      600
                                                                              As reported       0.81     0.91     0.48
     Basic EPS..............................................................    With 123        0.64     0.64     0.21
                                                                              As reported       0.78     0.90     0.48
     Diluted EPS............................................................    With 123        0.61     0.63     0.20
</Table>

      The fair value of each option is estimated on the date of grant using an
option-pricing model with the following weighted-average assumptions used for
grant:

<Table>
<Caption>
                                                             WEIGHTED-
                               EXPECTED      RISK-FREE     AVERAGE GRANT-
               DATE GRANTED   VOLATILITY   INTEREST RATE  DATE FAIR VALUE
               ------------   ----------   -------------  ---------------
<S>                              <C>            <C>          <C>
                   1999          26.8%          5.2%         $  14.91
                   2000          30.2%          6.3%         $  16.79
                   2001          39.7%          4.7%         $   6.53
</Table>

      Additionally, for all options, a 15% forfeiture rate was assumed with an
expected life of 5 years and no dividend yield.

401(k) PLANS:

      WorldCom and its subsidiaries offer our qualified employees the
opportunity to participate in one of our defined contribution retirement plans
qualifying under the provisions of Section 401(k) of the Internal Revenue Code,
or the Code. Each employee may contribute on a tax deferred basis a portion of
annual earnings not to exceed $10,500. We match individual employee
contributions in selected plans, up to a maximum level which in no case


                                      F-27
<Page>

                         WORLDCOM, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

(10) EMPLOYEE BENEFIT PLANS - (CONTINUED)

exceeds 6% of the employee's compensation. Expenses recorded by us relating to
our 401(k) plans were $108 million, $112 million and $103 million for the years
ended December 31, 1999, 2000 and 2001, respectively.

EMPLOYEE STOCK PURCHASE PLAN:

      Effective July 1, 2001, we established the MCI group 2001 Employee Stock
Purchase Plan under Section 423 of the Code which allows eligible MCI group
employees to purchase shares of MCI group stock through payroll deductions not
to exceed 15% of the employee's compensation. The purchase price is 85% of the
lower of the fair market value of MCI group stock on the participant's
enrollment date or the exercise date. A maximum of 10 million shares of MCI
group stock are authorized for issuance. During 2001 shares totaling 346,000
were issued at an average price of $13.10 per share.

(11) PENSION AND OTHER POST-RETIREMENT BENEFIT PLANS -

      We maintain a noncontributory defined benefit pension plan, or MCI Plan,
and a supplemental pension plan, or the Supplemental Plan, and WorldCom
International Data Services, Inc., a subsidiary of MCI, has a defined benefit
pension plan. Collectively, these plans cover substantially all MCI employees
who became WorldCom employees as a result of the merger with MCI and who work
1,000 hours or more in a year. Effective January 1, 1999, no future compensation
credits are earned by participants of the MCI Plan.

      Annual service cost is determined using the Projected Unit Credit
actuarial method, and prior service cost is amortized on a straight-line basis
over the average remaining service period of employees. As of December 31, 2000,
the fair value of MCI Plan assets exceeded the MCI Plan accumulated benefit
obligation by $42 million. As of December 31, 2001, the accumulated benefit
obligation exceeded the fair value of the plan assets by $21 million. There is
no additional minimum pension liability required to be recognized.

      Additionally, Embratel sponsors a contributory defined benefit pension
plan and a post-retirement benefit plan. Annual service cost is determined using
the projected unit credit actuarial method. Approximately 95% of Embratel's
full-time employees are covered by these plans. The defined benefit pension plan
had a fair value of assets in excess of accumulated benefit obligation of $3
million at December 31, 2000. There is no additional minimum pension liability
to be recognized.

      In April 1999, we completed the sale of MCI Systemhouse Corp. and SHL
Systemhouse Co. to EDS for $1.6 billion resulting in a settlement gain of $24
million and benefit payments of $80 million.

      The following table sets forth information for the MCI pension plans and,
for the year ended December 31, 2000, the Embratel defined benefit pension and
post-retirement plans' assets and obligations (in millions):

<Table>
<Caption>
                                                                                                EMBRATEL PLANS
                                                                                 MCI         ---------------------
                                                                               PENSION       PENSION        OTHER
                                                                                PLANS        BENEFITS     BENEFITS
                                                                                -----        --------     --------
<S>                                                                             <C>            <C>          <C>
           CHANGE IN BENEFIT OBLIGATION
      Benefit obligation at January 1, 2000 ......................              $ 476          $ 349        $ 109
      Service cost ...............................................                 --              1           --
      Interest cost ..............................................                 35             37           12
      Actuarial loss .............................................                  8             29            8
      Benefits paid ..............................................                (59)           (30)          (4)
      Foreign currency exchange ..................................                 --            (32)         (10)
      Plan amendments ............................................                  4             --           --
      Assumption change ..........................................                  3             --           --
                                                                                -----          -----        -----
</Table>


                                      F-28
<Page>

                         WORLDCOM, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

<Table>
<Caption>
                                                                                                EMBRATEL PLANS
                                                                                 MCI         ---------------------
                                                                               PENSION       PENSION        OTHER
                                                                                PLANS        BENEFITS     BENEFITS
                                                                                -----        --------     --------
<S>                                                                             <C>            <C>          <C>
      Benefit obligation at December 31, 2000 ....................                467            354          115
      Interest cost ..............................................                 32              *            *
      Actuarial gain .............................................                 (1)             *            *
      Benefits paid ..............................................                (45)             *            *
      Assumption change ..........................................                  2              *            *
                                                                                -----          -----        -----
      Benefit obligation at December 31, 2001 ....................              $ 455              *            *
                                                                                =====          =====        =====
           CHANGE IN PLAN ASSETS
      Fair value of assets at January 1, 2000 ....................              $ 565          $ 361        $  29
      Actual return on plan assets ...............................                 36             57            5
      Foreign currency exchange ..................................                 --            (31)          (2)
      Benefits paid ..............................................                (59)           (30)          (4)
                                                                                -----          -----        -----
      Fair value of assets at December 31, 2000 ..................                542            357           28
      Actual return on plan assets ...............................                 (8)             *            *
      Benefits paid ..............................................                (45)             *            *
      Effect of settlement/transfers .............................                (27)             *            *
                                                                                -----          -----        -----
      Fair value of assets at December 31, 2001 ..................              $ 462              *            *
                                                                                =====          =====        =====
           AS OF DECEMBER 31, 2001:
      Funded status ..............................................              $   7              *            *
      Unrecognized net actuarial gain ............................                (17)             *            *
      Unamortized prior service cost .............................                  6              *            *
                                                                                -----          -----        -----
      Accrued benefit cost .......................................              $  (4)             *            *
                                                                                =====          =====        =====
      Weighted-average actuarial assumptions:
      Discount rate ..............................................               7.25%             *            *
      Expected return on plan assets .............................               9.00%             *            *
      Rate of compensation increase ..............................                N/A              *            *
           AS OF DECEMBER 31, 2000:
      Funded status ..............................................              $  75          $   3        $ (87)
      Unrecognized net actuarial (gain) loss .....................               (102)           (60)          44
      Unamortized prior service cost .............................                  7             --           --
      Unrecognized transition liability ..........................                 --              2           --
                                                                                -----          -----        -----
      Accrued benefit cost .......................................              $ (20)         $ (55)       $ (43)
                                                                                =====          =====        =====
      Weighted-average actuarial assumptions:
      Discount rate ..............................................               7.50%          6.00%        6.00%
      Expected return on plan assets .............................               9.00%          9.00%        9.00%
      Rate of compensation increase ..............................                N/A            N/A          N/A
</Table>

*     Information is not provided as a result of the Embratel deconsolidation
      effective January 1, 2001.

      The components of the net post-retirement benefit and pension costs for
the years ended December 31, 1999, 2000 and 2001 are as follows (in millions):

<Table>
<Caption>
                                                                        1999                         2000                 2001
                                                          ---------------------------------------------------------------------
                                                                          EMBRATEL                        EMBRATEL
                                                            MCI      -------------------    MCI     -------------------   MCI
                                                          PENSION    PENSION     OTHER    PENSION   PENSION    PENSION   OTHER
                                                           PLANS     BENEFITS   BENEFITS   PLANS    BENEFITS   BENEFITS  PLANS
                                                          ---------------------------------------------------------------------
<S>                                                       <C>         <C>        <C>       <C>       <C>        <C>      <C>
      Service cost ..................................     $    1      $    1     $   --    $   --    $   --     $  --    $   --
      Interest cost on accumulated post-retirement
          benefit obligation ........................         36          17          5        35        35        11        32
      Expected return on plan assets ................        (50)        (25)        (2)      (49)      (46)       (4)      (44)
      Amortization of transition obligation .........         --          (2)        --        --        --        --         1
      Amortization of net loss (gain) ...............         (4)         --          1       (10)       (2)        2        (5)
                                                          ---------------------------------------------------------------------
      Net periodic post-retirement benefit cost .....     $  (17)     $   (9)    $    4    $  (24)   $  (13)    $   9    $  (16)
                                                          =====================================================================
</Table>


                                      F-29
<Page>

                         WORLDCOM, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

(12) INCOME TAXES -

      The provision for income taxes is composed of the following (in millions):

<Table>
<Caption>
                                                          1999       2000        2001
                                                          ----       ----        ----
<S>                                                      <C>        <C>         <C>
      Current ........................................   $   62     $1,376      $  (177)
      Deferred .......................................    2,903      1,649        1,104
                                                         ------     ------      -------
      Total provision for income taxes ...............   $2,965     $3,025      $   927
                                                         ======     ======      =======
</Table>

      The following is a reconciliation of the provision for income taxes to the
expected amounts using the statutory rate:

<Table>
<Caption>
                                                                                       1999      2000     2001
                                                                                       ----      ----     ----
<S>                                                                                    <C>       <C>      <C>
      Expected statutory amount .................................................      35.0%     35.0%    35.0%
      Nondeductible amortization of excess of cost over net tangible assets
         acquired ...............................................................       5.2       5.0     13.7
      State income taxes ........................................................       2.5       2.6     (5.0)
      Valuation allowance .......................................................      (1.5)       --       --
      Tax credits ...............................................................      (0.2)     (0.4)    (2.9)
      Other .....................................................................       0.4      (2.2)    (2.1)
                                                                                       ----      ----     ----
      Actual tax provision ......................................................      41.4%     40.0%    38.7%
                                                                                       ====      ====     ====
</Table>

      The following is a summary of the significant components of our deferred
tax assets and liabilities as of December 31, 2000 and 2001 (in millions):

<Table>
<Caption>
                                                           2000                     2001
                                                  ---------------------     ---------------------
                                                  ASSETS    LIABILITIES     ASSETS    LIABILITIES
                                                  ------    -----------     ------    -----------
<S>                                              <C>          <C>          <C>          <C>
      Fixed assets ...........................   $    --      $(4,779)     $    --      $(5,580)
      Goodwill and other intangibles .........        --         (122)          --          (11)
      Investments ............................       363           --          392           --
      Other assets ...........................        --         (264)          --         (423)
      Accrued liabilities ....................       643           --          394           --
      NOL carryforwards ......................       517           --        1,315           --
      Tax credits ............................       760           --          686           --
      Other ..................................        --         (366)          --         (123)
                                                 -------      -------      -------      -------
                                                   2,283       (5,531)       2,787       (6,137)
      Valuation allowance ....................      (191)          --         (465)          --
                                                 -------      -------      -------      -------
                                                 $ 2,092      $(5,531)     $ 2,322      $(6,137)
                                                 =======      =======      =======      =======
</Table>

      Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and amounts used for income tax purposes and the impact of available
net operating loss, or NOL, carryforwards.

      At December 31, 2001, we had unused NOL carryforwards for federal income
tax purposes of approximately $3.4 billion which expire in various amounts
during the years 2011 through 2021. These NOL carryforwards result in a deferred
tax asset of approximately $1.3 billion at December 31, 2001.


                                      F-30
<Page>

                         WORLDCOM, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

(12) INCOME TAXES - (CONTINUED)

      Approximately $1.7 billion of NOL carryforwards for federal income tax
purposes relate to preacquisition NOL carryforwards attributable to entities
acquired in transactions accounted for as purchases. These carryforwards and
other deferred tax assets result in deferred tax assets for which a valuation
allowance of $433 million has been established. If subsequent events or
conditions dictate an increase in the need for a valuation allowance
attributable to such deferred tax assets, the income tax expense for that period
will be increased accordingly.

      In addition, at December 31, 2001 we have unused NOL carryforwards of $85
million outside the United States which generally do not expire. These
carryforwards result in a $32 million deferred tax asset for which a valuation
allowance has been established.

(13) SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION -

      Interest paid by us during the years ended December 31, 1999, 2000 and
2001 amounted to $1.3 billion, $1.1 billion and $1.4 billion, respectively.
Income taxes paid, net of refunds, during the years ended December 31, 1999,
2000 and 2001 were $106 million, $452 million and $148 million, respectively.

      In conjunction with business combinations during the years ended December
31, 1999, 2000 and 2001, assets acquired, liabilities assumed and common stock
issued were as follows (in millions):

<Table>
<Caption>
                                                            1999        2000        2001
                                                          -------     -------      -------
<S>                                                       <C>         <C>          <C>
      Fair value of assets acquired ................      $    62     $    --      $ 1,932
      Goodwill and other intangible assets .........        2,231          43        5,102
      Liabilities assumed ..........................         (987)        (29)      (4,201)
      Preferred stock issued or assumed ............           --          --       (1,361)
      Common stock issued ..........................         (228)         --       (1,266)
                                                          -------     -------      -------
      Net cash paid ................................      $ 1,078     $    14      $   206
                                                          =======     =======      =======
</Table>

(14) SEGMENT AND GEOGRAPHIC INFORMATION -

      Based on our organizational structure, we operate in six reportable
segments: Commercial voice, data and Internet; International operations;
Consumer; Wholesale; Alternative channels and small business; and Dial-up
Internet. Our reportable segments represent business units that primarily offer
similar products and services; however, the business units are managed
separately due to the type and class of customer as well as the geographic
dispersion of their operations. The Commercial voice, data and Internet segment
includes voice, data and other types of domestic communications services for
commercial customers, and Internet services including dedicated access and web
and application hosting services. International operations provide voice, data,
Internet and other similar types of communications services to customers
primarily in Europe and the Asia Pacific region. Consumer includes domestic
voice communications services for consumer customers. Wholesale includes voice
and data domestic communications services for wholesale customers. Alternative
channels and small business includes domestic long distance voice and data,
agents, prepaid calling cards and paging services provided to alternative
wholesale and small business customers. Dial-up Internet includes dial-up
Internet access services.

      Our chief operating decision-maker utilizes revenue information in
assessing performance and making overall operating decisions and resource
allocations. Communications services are generally provided utilizing our fiber
optic networks, which do not make a distinction between the types of services
provided. Profit and loss information for WorldCom, the WorldCom group and the
MCI group is reported only on a consolidated basis to the chief operating
decision-maker and our board of directors.


                                      F-31
<Page>

                         WORLDCOM, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

(14) SEGMENT AND GEOGRAPHIC INFORMATION - (CONTINUED)

      The accounting policies of the segments are the same as those described in
the summary of significant accounting policies. Information about our segments
is as follows (in millions):

<Table>
<Caption>
                                                    REVENUES FROM              SELLING, GENERAL AND
                                                 EXTERNAL CUSTOMERS              ADMINISTRATIVE             CAPITAL EXPENDITURES
                                            ----------------------------  ----------------------------  ----------------------------
                                              1999      2000      2001      1999      2000     2001       1999      2000      2001
                                            --------  --------  --------  --------  --------  --------  --------  --------  --------
<S>                                         <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>
   Voice, data and Internet ..............  $ 14,817  $ 16,880  $ 18,371  $  2,655  $  3,209  $  3,895  $  5,532  $  8,376  $  6,505
   International operations ..............     1,624     2,367     2,977       774     1,094     1,409     1,494     1,754     1,114
   Consumer ..............................     7,590     7,778     7,227     3,275     2,823     2,968       235       146        89
   Wholesale .............................     3,943     3,388     2,641       620       538       617       192        94        32
   Alternative channels and small business     3,142     3,541     2,427       808     1,030     1,092       182        75       109
   Dial-up Internet ......................     1,497     1,628     1,536       368       426       537       178       185        37
   Corporate - other charges .............        --        --        --        --       778       888        --        --        --
   Other .................................       523        --        --       170        --        --        10        --        --
   Elimination of intergroup expenses ....        --        --        --      (331)     (254)     (360)       --        --        --
                                            --------  --------  --------  --------  --------  --------  --------  --------  --------
        Total before Embratel ............    33,136    35,582    35,179     8,339     9,644    11,046     7,823    10,630     7,886
   Embratel ..............................     2,854     3,662        --       610       980        --       893       854        --
   Elimination of intersegment
      revenue/expenses ...................       (82)     (154)       --       (14)      (27)       --        --        --        --
                                            --------  --------  --------  --------  --------  --------  --------  --------  --------
        Total ............................  $ 35,908  $ 39,090  $ 35,179  $  8,935  $ 10,597  $ 11,046  $  8,716  $ 11,484  $  7,886
                                            ========  ========  ========  ========  ========  ========  ========  ========  ========
</Table>

      As discussed in Note 1, we deconsolidated our investment in Embratel as of
January 1, 2001. Embratel, which provides communications services in Brazil, was
designated as a separate reportable segment for periods prior to January 1,
2001. Accordingly, we have included Embratel in our segment information
presented for 1999 and 2000. Additionally, Other includes the operations of MCI
Systemhouse Corp. and SHL Systemhouse Co., which was sold to EDS in April 1999.

      See Note 17 for a reconciliation of the WorldCom group's and the MCI
group's operating results to our consolidated results of operations.

      Information about our operations by geographic areas are as follows (in
millions):

<Table>
<Caption>
                                                       1999                     2000                   2001
                                              ----------------------   ---------------------   ---------------------
                                                          LONG-LIVED              LONG-LIVED              LONG-LIVED
                                              REVENUES      ASSETS     REVENUES     ASSETS     REVENUES     ASSETS
                                              --------    ----------   --------   ----------   --------   ----------
<S>                                            <C>          <C>         <C>         <C>         <C>         <C>
   United States ......................        $30,721      $21,965     $32,177     $29,816     $31,428     $34,799
   Brazil .............................          2,772        4,017       3,508       4,008          --          --
   All other international ............          2,415        2,636       3,405       3,599       3,751       4,010
                                               -------      -------     -------     -------     -------     -------
   Total ..............................        $35,908      $28,618     $39,090     $37,423     $35,179     $38,809
                                               =======      =======     =======     =======     =======     =======
</Table>

(15) UNAUDITED QUARTERLY FINANCIAL DATA -

<Table>
<Caption>
                                                                                         QUARTER ENDED
                                                          ------------------------------------------------------------------------
                                                              MARCH 31,          JUNE 30,       SEPTEMBER 30,       DECEMBER 31,
                                                          ------------------------------------------------------------------------
                                                            2000     2001     2000      2001    2000     2001      2000      2001
                                                          ------------------------------------------------------------------------
                                                                             (in millions, except per share data)
<S>                                                       <C>      <C>       <C>      <C>      <C>      <C>       <C>      <C>
Revenues .............................................    $ 9,612  $ 8,825   $ 9,807  $ 8,910  $10,037  $ 8,966   $ 9,634  $ 8,478
Operating income .....................................      2,424    1,197     2,387      384    1,852    1,180     1,490      753
Income before cumulative effect of accounting change .      1,288      610     1,273       97      951      536       726      258
Net income ...........................................      1,203      610     1,273       97      951      536       726      258
Distributions on mandatorily redeemable preferred
  securities and other preferred dividend requirements         17       16        16       16       16       43        16       42
Income (loss) before cumulative effect of accounting
  change attributed to:
    WorldCom group ...................................        741      548       732      126      599      503       601      347
    MCI group ........................................        547       62       541      (29)     352       33       125      (89)
</Table>


                                      F-32
<Page>

                         WORLDCOM, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

<Table>
<Caption>
                                                                                         QUARTER ENDED
                                                          ------------------------------------------------------------------------
                                                              MARCH 31,          JUNE 30,       SEPTEMBER 30,       DECEMBER 31,
                                                          ------------------------------------------------------------------------
                                                            2000     2001     2000      2001    2000     2001      2000      2001
                                                          ------------------------------------------------------------------------
                                                                             (in millions, except per share data)
<S>                                                          <C>      <C>       <C>     <C>       <C>      <C>       <C>     <C>
Income (loss) per share before cumulative effect of
  accounting change:
    WorldCom group -
    Basic ............................................       0.25     0.18      0.25     0.04     0.20     0.16      0.20     0.10
    Diluted ..........................................       0.25     0.18      0.25     0.04     0.20     0.16      0.20     0.10
    MCI group -
    Basic ............................................       4.80     0.54      4.75    (0.25)    3.06     0.28      1.09    (0.75)
    Diluted ..........................................       4.80     0.54      4.75    (0.25)    3.06     0.28      1.09    (0.75)
</Table>

(16) RELATED PARTY TRANSACTIONS -

      We have entered into certain loan and guaranty arrangements involving
Bernard J. Ebbers, WorldCom's President and Chief Executive Officer, principally
relating to certain obligations to financial institutions secured by Mr. Ebbers'
stock in WorldCom. Following recent declines in the closing price of the
WorldCom group stock, the outstanding debt covered by the WorldCom guaranty in
favor of Bank of America, N.A., or Bank of America, has been repaid and we have
deposited with Bank of America approximately $35 million to collateralize a
letter of credit used to support financing for which Mr. Ebbers is obligated.
The underlying letter of credit is scheduled to expire on February 15, 2003,
subject to renewal, extension or substitution.

      WorldCom made aggregate payments of approximately $198.7 million to Bank
of America pursuant to the guaranty, in addition to the deposit collateralizing
the letter of credit. That amount, together with any amounts paid or costs
incurred by us in connection with the letter of credit, plus accrued interest at
a floating rate equal to that under one of our credit facilities, is payable by
Mr. Ebbers to us on demand. The amount of such interest accrued through February
28, 2002, is approximately $875,000 and the interest rate as of that date was
2.15% per annum.

      In addition to the guaranty arrangements, we have also agreed to loan up
to $165 million in principal amount to Mr. Ebbers. These loans are payable on
demand and bear interest at floating rates equal to that under certain of our
credit facilities. As of February 28, 2002, the aggregate principal amount of
indebtedness owed by Mr. Ebbers to us under these loans was approximately $144.3
million. Accrued interest on these loans is approximately $5.5 million through
February 28, 2002, at interest rates ranging from 2.14% to 2.16% per annum as of
that date.

      We have been advised that Mr. Ebbers has used, or plans to use, the
proceeds of the loans from WorldCom principally to repay certain indebtedness
under loans secured by shares of our stock owned by him and that the proceeds of
such secured loans were used for private business purposes. The loans and
guaranty by WorldCom were made following a determination that they were in the
best interests of WorldCom and our shareholders in order to avoid additional
forced sales of Mr. Ebbers' stock in WorldCom. The determination was made by our
Compensation and Stock Option Committee as a result of the pressure on our stock
price, margin calls faced by Mr. Ebbers and other considerations. Such actions
were ratified and approved by our board of directors.

      In connection with the transactions described above, and subject to
certain limitations, and effective upon termination of restrictions under
existing lending agreements, Mr. Ebbers pledged to WorldCom the shares of our
stock owned by him with respect to his obligations under the loans and guaranty
from WorldCom. The pledge of certain of those shares is subordinated to the
prior rights of other lenders and is not currently perfected. Mr. Ebbers also
agreed to indemnify WorldCom for any amounts expended or losses, damages, costs,
claims or expenses incurred under the guaranty or the loans from WorldCom and
has provided information demonstrating that his assets are sufficient to cover
his outstanding obligations to us.


                                      F-33
<Page>

                         WORLDCOM, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

(17) CONSOLIDATING INFORMATION -

      Below is the consolidating financial information of the WorldCom group and
the MCI group. The financial information reflects the businesses attributed to
the WorldCom group and the MCI group including the allocation of revenues and
expenses between the WorldCom group and the MCI group in accordance with our
allocation policies.

      The attribution of the assets, liabilities, equity, revenues and expenses
for each group, as reflected in our consolidated financial statements, which are
consolidated in accordance with accounting principles generally accepted in the
United States, is primarily based on specific identification of the businesses
included in each group. Where specific identification was impractical, other
methods and criteria were used that our management believes are equitable and
provide a reasonable estimate of the assets, liabilities, equity, revenues and
expenses attributable to each group. Our shared corporate services and related
balance sheet amounts (such as executive management, human resources, legal,
regulatory, accounting, tax, treasury, strategic planning and information
systems support) have been attributed to the WorldCom group or the MCI group
based upon identification of such services specifically benefiting each group.
Where determinations based on specific usage alone are impractical, other
methods and criteria were used that our management believes are equitable and
provide a reasonable estimate of the cost attributable to each group.

      Our board of directors or any special committee appointed by the board of
directors may, without shareholder approval, change the polices set forth in our
tracking stock policy statement. Our board of directors or any special committee
appointed by the board of directors also may, without shareholder approval,
adopt additional policies or make exceptions with respect to the application of
the policies described in our tracking stock policy statement in connection with
particular facts and circumstances, all as they may determine to be in our best
interests as a whole.


                                      F-34
<Page>

                         WORLDCOM, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                                DECEMBER 31, 2001

(17) CONSOLIDATING INFORMATION - (CONTINUED)

                          CONSOLIDATING STATEMENT OF OPERATIONS
                                  (IN MILLIONS)

<Table>
<Caption>
                                                                             YEAR ENDED DECEMBER 31, 1999
                                                                 --------------------------------------------------
                                                                 WORLDCOM        MCI
                                                                   GROUP        GROUP      ELIMINATIONS    WORLDCOM
                                                                 --------      --------    ------------    --------
<S>                                                              <C>           <C>           <C>           <C>
Revenues                                                         $ 19,736      $ 16,172      $     --      $ 35,908
                                                                 --------      --------      --------      --------
Operating expenses:
      Line costs:
          Attributed costs (1)                                      7,841         6,898            --        14,739
          Intergroup allocated expenses (2)                            64           189          (253)           --
      Selling, general and administrative:
          Attributed costs (1)                                      2,594         3,113         3,228         8,935
          Shared corporate services (3)                             1,601         1,627        (3,228)           --
          Other intergroup allocated expenses (4)                      --           331          (331)           --
      Depreciation and amortization:
          Attributed costs (1)                                      3,533           821            --         4,354
          Intergroup allocated expenses (5)                          (520)          (64)          584            --
      Other charges                                                    (8)           --            --            (8)
                                                                 --------      --------      --------      --------
Total                                                              15,105        12,915            --        28,020
                                                                 --------      --------      --------      --------
Operating income                                                    4,631         3,257            --         7,888
Interest expense                                                     (460)         (506)           --          (966)
Miscellaneous income                                                  237             5            --           242
                                                                 --------      --------      --------      --------
Income before income taxes and minority interests                   4,408         2,756            --         7,164
Provision for income taxes                                          1,856         1,109            --         2,965
                                                                 --------      --------      --------      --------
Income before minority interests                                    2,552         1,647            --         4,199
Minority interests                                                   (186)           --            --          (186)
                                                                 --------      --------      --------      --------
Net income before distributions on mandatorily
      redeemable preferred securities                               2,366         1,647            --         4,013
Distributions on mandatorily redeemable preferred securities
      and other preferred dividend requirements                        72            --            --            72
                                                                 --------      --------      --------      --------
Net income                                                       $  2,294      $  1,647      $     --      $  3,941
                                                                 ========      ========      ========      ========
</Table>

(1)   Attributed costs represent costs directly incurred by or attributed to the
      WorldCom group and the MCI group and do not include any intergroup
      allocations.
(2)   The WorldCom group was allocated $64 million for its usage of our business
      voice switches, which have been attributed to the MCI group, and the MCI
      group was allocated $189 million for its usage of our fiber optic systems,
      which have been attributed to the WorldCom group.
(3)   Our shared corporate services (such as executive management, human
      resources, legal, regulatory, accounting and tax, treasury, strategic
      planning and information systems support) have been allocated to the
      WorldCom group and the MCI group in the amounts of $1.6 billion and $1.6
      billion, respectively.
(4)   The MCI group was allocated $303 million of costs related to its use of
      buildings, furniture and fixtures and $28 million for use of the MCI
      tradenames, which assets have been attributed to the WorldCom group.
(5)   A credit of $492 million and $64 million to depreciation expense has been
      recorded by the WorldCom group and the MCI group, respectively, to reflect
      the allocation of a portion of the applicable costs for the use by the
      WorldCom group of the business voice switches attributed to the MCI group,
      and the proportionate use by the MCI group of the fiber optic systems and
      buildings, furniture and fixtures attributed to the WorldCom group.
      Additionally, a credit of $28 million to amortization expense has been
      recorded by the WorldCom group to reflect the charge to the MCI group for
      use of the MCI tradenames.


                                      F-35
<Page>

                         WORLDCOM, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                DECEMBER 31, 2001

(17) CONSOLIDATING INFORMATION - (CONTINUED)

                      CONSOLIDATING STATEMENT OF CASH FLOWS
                                  (IN MILLIONS)

<Table>
<Caption>
                                                                          YEAR ENDED DECEMBER 31, 1999
                                                             -----------------------------------------------------
                                                              WORLDCOM         MCI
                                                               GROUP          GROUP      ELIMINATIONS     WORLDCOM
                                                             ---------      ---------    ------------    ---------
<S>                                                          <C>            <C>            <C>           <C>
Cash flows from operating activities:
Net income                                                   $   2,366      $   1,647      $      --     $   4,013
Adjustments to reconcile net income to net cash provided
   by operating activities:                                      4,986          2,006             --         6,992
                                                             ---------      ---------      ---------     ---------
   Net cash provided by operating activities                     7,352          3,653             --        11,005
                                                             ---------      ---------      ---------     ---------

Cash flows from investing activities:
Capital expenditures                                            (7,929)          (787)            --        (8,716)
Acquisitions and related costs                                    (786)          (292)            --        (1,078)
All other investing activities, net                                670           (431)            --           239
                                                             ---------      ---------      ---------     ---------
   Net cash used in investing activities                        (8,045)        (1,510)            --        (9,555)
                                                             ---------      ---------      ---------     ---------

Cash flows from financing activities:
Principal repayments on debt, net                               (2,894)            --             --        (2,894)
Attributed stock activity of WorldCom, Inc.                        886             --             --           886
Intergroup advances, net                                         2,097         (2,097)            --            --
All other financing activities, net                                (72)            --             --           (72)
                                                             ---------      ---------      ---------     ---------
   Net cash provided by (used in) financing activities              17         (2,097)            --        (2,080)
Effect of exchange rate changes on cash                           (221)            --             --          (221)
                                                             ---------      ---------      ---------     ---------
Net increase (decrease) in cash and cash equivalents              (897)            46             --          (851)
Cash and cash equivalents beginning of period                    1,703             24             --         1,727
                                                             ---------      ---------      ---------     ---------
Cash and cash equivalents end of period                      $     806      $      70      $      --     $     876
                                                             =========      =========      =========     =========
</Table>


                                      F-36
<Page>

                         WORLDCOM, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                DECEMBER 31, 2001

         (17)   CONSOLIDATING INFORMATION - (CONTINUED)

                               CONSOLIDATING BALANCE SHEET
                                      (IN MILLIONS)

<Table>
<Caption>
                                                                        AT DECEMBER 31, 2000
                                                        ----------------------------------------------------
                                                         WORLDCOM        MCI
                                                          GROUP         GROUP    ELIMINATIONS(1)   WORLDCOM
                                                        ---------     ---------  ---------------   ---------
<S>                                                     <C>           <C>           <C>            <C>
Current assets                                          $   8,092     $   2,312     $    (649)     $   9,755
Property and equipment, net                                35,177         2,246            --         37,423
Goodwill and other intangibles                             36,685         9,909            --         46,594
Other assets                                                5,939           168          (976)         5,131
                                                        ---------     ---------     ---------      ---------
     Total assets                                       $  85,893     $  14,635     $  (1,625)     $  98,903
                                                        =========     =========     =========      =========

Current liabilities                                     $  14,213     $   4,109     $    (649)     $  17,673
Long-term debt                                             11,696         6,000            --         17,696
Noncurrent liabilities                                      3,648         2,063          (976)         4,735
Minority interests                                          2,592            --            --          2,592
Company obligated mandatorily redeemable
     preferred securities                                     798            --            --            798
Shareholders' investment                                   52,946         2,463            --         55,409
                                                        ---------     ---------     ---------      ---------
     Total liabilities and shareholders' investment     $  85,893     $  14,635     $  (1,625)     $  98,903
                                                        =========     =========     =========      =========
</Table>

(1)   Represents the elimination of intergroup receivables and payables
      associated with other intergroup allocations between the WorldCom group
      and the MCI group. The WorldCom group had a net receivable from the MCI
      group (and the MCI group had a corresponding net payable to the WorldCom
      group) of $1.6 billion, of which $649 million was classified as current
      with the remainder classified as long-term.


                                      F-37
<Page>

                        WORLDCOM, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                               DECEMBER 31, 2001

(17) CONSOLIDATING INFORMATION - (CONTINUED)

                      CONSOLIDATING STATEMENT OF OPERATIONS
                                  (IN MILLIONS)

<Table>
<Caption>

                                                                             YEAR ENDED DECEMBER 31, 2000
                                                                 --------------------------------------------------
                                                                 WORLDCOM        MCI
                                                                   GROUP        GROUP      ELIMINATIONS    WORLDCOM
                                                                 --------      --------    ------------    --------
<S>                                                              <C>           <C>           <C>           <C>
Revenues                                                         $ 22,755      $ 16,335      $     --      $ 39,090
                                                                 --------      --------      --------      --------
Operating expenses:
     Line costs:
         Attributed costs (1)                                       8,658         6,804            --        15,462
         Intergroup allocated expenses (2)                             87           373          (460)           --
     Selling, general and administrative:
         Attributed costs (1)                                       3,682         2,981         3,934        10,597
         Shared corporate services (3)                              2,007         1,927        (3,934)           --
         Other intergroup allocated expenses (4)                       --           254          (254)           --
     Depreciation and amortization:
         Attributed costs (1)                                       3,907           971            --         4,878
         Intergroup allocated expenses (5)                           (627)          (87)          714            --
                                                                 --------      --------      --------      --------
Total                                                              17,714        13,223            --        30,937
                                                                 --------      --------      --------      --------
Operating income                                                    5,041         3,112            --         8,153
Interest expense                                                     (458)         (512)           --          (970)
Miscellaneous income                                                  385            --            --           385
                                                                 --------      --------      --------      --------
Income before income taxes, minority interests and
     cumulative effect of accounting change                         4,968         2,600            --         7,568
Provision for income taxes                                          1,990         1,035            --         3,025
                                                                 --------      --------      --------      --------
Income before minority interests and cumulative
     effect of accounting change                                    2,978         1,565            --         4,543
Minority interests                                                   (305)           --            --          (305)
                                                                 --------      --------      --------      --------
Income before cumulative effect of accounting change                2,673         1,565                       4,238
Cumulative effect of accounting change                                (75)          (10)                        (85)
                                                                 --------      --------      --------      --------
Net income before distributions on mandatorily
     redeemable preferred securities                                2,598         1,555            --         4,153
Distributions on mandatorily redeemable preferred securities
     and other preferred dividend requirements                         65            --            --            65
                                                                 --------      --------      --------      --------
Net income                                                       $  2,533      $  1,555      $     --      $  4,088
                                                                 ========      ========      ========      ========
</Table>

(1)   Attributed costs represent costs directly incurred by or attributed to the
      WorldCom group and the MCI group and do not include any intergroup
      allocations.
(2)   The WorldCom group was allocated $87 million for its usage of our business
      voice switches, which have been attributed to the MCI group, and the MCI
      group was allocated $373 million for its usage of our fiber optic systems,
      which have been attributed to the WorldCom group.
(3)   Our shared corporate services (such as executive management, human
      resources, legal, regulatory, accounting and tax, treasury, strategic
      planning and information systems support) have been allocated to the
      WorldCom group and the MCI group in the amounts of $2.0 billion and $1.9
      billion, respectively.
(4)   The MCI group was allocated $226 million of costs related to its use of
      buildings, furniture and fixtures and $28 million for use of the MCI
      tradenames, which assets have been attributed to the WorldCom group.
(5)   A credit of $599 million and $87 million to depreciation expense has been
      recorded by the WorldCom group and the MCI group, respectively, to reflect
      the allocation of a portion of the applicable costs for the use by the
      WorldCom group of the business voice switches attributed to the MCI group,
      and the proportionate use by the MCI group of the fiber optic systems and
      buildings, furniture and fixtures attributed to the WorldCom group.
      Additionally, a credit of $28 million to amortization expense has been
      recorded by the WorldCom group to reflect the charge to the MCI group for
      use of the MCI tradenames.


                                      F-38
<Page>

                        WORLDCOM, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                               DECEMBER 31, 2001

(17) CONSOLIDATING INFORMATION - (CONTINUED)

                      CONSOLIDATING STATEMENT OF CASH FLOWS
                                  (IN MILLIONS)

<Table>
<Caption>
                                                                           YEAR ENDED DECEMBER 31, 2000
                                                             ------------------------------------------------------
                                                              WORLDCOM         MCI
                                                                GROUP         GROUP       ELIMINATIONS     WORLDCOM
                                                             ---------      ---------     ------------    ---------
<S>                                                          <C>            <C>            <C>            <C>
Cash flows from operating activities:
Net income                                                   $   2,598      $   1,555      $       --     $   4,153
Adjustments to reconcile net income to net cash provided
   by operating activities:                                      2,732            781              --         3,513
                                                             ---------      ---------      ----------     ---------
   Net cash provided by operating activities                     5,330          2,336              --         7,666
                                                             ---------      ---------      ----------     ---------

Cash flows from investing activities:
Capital expenditures                                           (10,984)          (500)             --       (11,484)
Acquisitions and related costs                                     (14)            --              --           (14)
All other investing activities, net                             (2,614)          (273)             --        (2,887)
                                                             ---------      ---------      ----------     ---------
   Net cash used in investing activities                       (13,612)          (773)             --       (14,385)
                                                             ---------      ---------      ----------     ---------

Cash flows from financing activities:
Principal borrowings on debt, net                                6,377             --              --         6,377
Attributed stock activity of WorldCom, Inc.                        585             --              --           585
Intergroup advances, net                                         1,592         (1,592)             --            --
All other financing activities, net                               (339)            --              --          (339)
                                                             ---------      ---------      ----------     ---------
   Net cash provided by (used in) financing activities           8,215         (1,592)             --         6,623
Effect of exchange rate changes on cash                            (19)            --              --           (19)
                                                             ---------      ---------      ----------     ---------
Net decrease in cash and cash equivalents                          (86)           (29)             --          (115)
Cash and cash equivalents beginning of period                      806             70              --           876
                                                             ---------      ---------      ----------     ---------
Cash and cash equivalents end of period                      $     720      $      41      $       --     $     761
                                                             =========      =========      ==========     =========
</Table>


                                      F-39
<Page>

                         WORLDCOM, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                DECEMBER 31, 2001

(17) CONSOLIDATING INFORMATION - (CONTINUED)

                           CONSOLIDATING BALANCE SHEET
                                  (IN MILLIONS)

<Table>
<Caption>
                                                                        AT DECEMBER 31, 2001
                                                         --------------------------------------------------
                                                         WORLDCOM        MCI
                                                           GROUP        GROUP    ELIMINATIONS(1)   WORLDCOM
                                                         --------     --------   ---------------   --------
<S>                                                      <C>          <C>           <C>            <C>
Current assets                                           $  8,179     $  1,926      $   (900)      $  9,205
Property and equipment, net                                36,792        2,017            --         38,809
Goodwill and other intangibles                             40,818        9,719            --         50,537
Other assets                                                6,112          227          (976)         5,363
                                                         --------     --------      --------       --------
      Total assets                                       $ 91,901     $ 13,889      $ (1,876)      $103,914
                                                         ========     ========      ========       ========

Current liabilities                                      $  5,915     $  4,195      $   (900)      $  9,210
Long-term debt                                             24,533        5,505            --         30,038
Noncurrent liabilities                                      3,742        1,876          (976)         4,642
Minority interests                                            101           --            --            101
Company obligated mandatorily redeemable
      and other preferred securities                        1,993           --            --          1,993
Shareholders' investment                                   55,617        2,313            --         57,930
                                                         --------     --------      --------       --------
      Total liabilities and shareholders' investment     $ 91,901     $ 13,889      $ (1,876)      $103,914
                                                         ========     ========      ========       ========
</Table>

(1)   Represents the elimination of intergroup receivables and payables
      associated with other intergroup allocations between the WorldCom group
      and the MCI group. The WorldCom group had a net receivable from the MCI
      group (and the MCI group had a corresponding net payable to the WorldCom
      group) of $1.9 billion, of which $900 million was classified as current
      with the remainder classified as long-term.


                                      F-40
<Page>

                         WORLDCOM, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                DECEMBER 31, 2001

(17) CONSOLIDATING INFORMATION - (CONTINUED)

                      CONSOLIDATING STATEMENT OF OPERATIONS
                                  (IN MILLIONS)

<Table>
<Caption>
                                                                           YEAR ENDED DECEMBER 31, 2001
                                                                 --------------------------------------------------
                                                                 WORLDCOM         MCI
                                                                   GROUP         GROUP    ELIMINATIONS     WORLDCOM
                                                                 --------      --------   ------------     --------
<S>                                                              <C>           <C>           <C>           <C>
Revenues                                                         $ 21,348      $ 13,831      $     --      $ 35,179
                                                                 --------      --------      --------      --------
Operating expenses:
     Line costs:
         Attributed costs (1)                                       8,019         6,720            --        14,739
         Intergroup allocated expenses (2)                            101           360          (461)           --
     Selling, general and administrative:
         Attributed costs (1)                                       4,052         3,438         3,556        11,046
         Shared corporate services (3)                              2,006         1,550        (3,556)           --
         Other intergroup allocated expenses (4)                       --           360          (360)           --
     Depreciation and amortization:
         Attributed costs (1)                                       4,841         1,039            --         5,880
         Intergroup allocated expenses (5)                           (720)         (101)          821            --
                                                                 --------      --------      --------      --------
Total                                                              18,299        13,366            --        31,665
                                                                 --------      --------      --------      --------
Operating income                                                    3,049           465            --         3,514
Interest expense                                                   (1,029)         (504)           --        (1,533)
Miscellaneous income                                                  412            --            --           412
                                                                 --------      --------      --------      --------
Income (loss) before income taxes and minority interests            2,432           (39)           --         2,393
Income tax expense (benefit)                                          943           (16)           --           927
                                                                 --------      --------      --------      --------
Income (loss) before minority interests                             1,489           (23)           --         1,466
Minority interests                                                     35            --            --            35
                                                                 --------      --------      --------      --------
Net income (loss) before distributions on mandatorily
     redeemable preferred securities                                1,524           (23)           --         1,501
Distributions on mandatorily redeemable preferred securities
     and other preferred dividend requirements                        117            --            --           117
                                                                 --------      --------      --------      --------
Net income  (loss)                                               $  1,407      $    (23)     $     --      $  1,384
                                                                 ========      ========      ========      ========
</Table>

(1)   Attributed costs represent costs directly incurred by or attributed to the
      WorldCom group and the MCI group and do not include any intergroup
      allocations.
(2)   The WorldCom group was allocated $101 million for its usage of our
      business voice switches, which have been attributed to the MCI group, and
      the MCI group was allocated $360 million for its usage of our fiber optic
      systems, which have been attributed to the WorldCom group.
(3)   Our shared corporate services (such as executive management, human
      resources, legal, regulatory, accounting and tax, treasury, strategic
      planning and information systems support) have been allocated to the
      WorldCom group and the MCI group in the amounts of $2.0 billion and $1.6
      billion, respectively.
(4)   The MCI group was allocated $332 million of costs related to its use of
      buildings, furniture and fixtures and $28 million for use of the MCI
      tradenames, which assets have been attributed to the WorldCom group.
(5)   A credit of $692 million and $101 million to depreciation expense has been
      recorded by the WorldCom group and the MCI group, respectively, to reflect
      the allocation of a portion of the applicable costs for the use by the
      WorldCom group of the business voice switches attributed to the MCI group,
      and the proportionate use by the MCI group of the fiber optic systems and
      buildings, furniture and fixtures attributed to the WorldCom group.
      Additionally, a credit of $28 million to amortization expense has been
      recorded by the WorldCom group to reflect the charge to the MCI group for
      use of the MCI tradenames.


                                      F-41
<Page>

                         WORLDCOM, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                DECEMBER 31, 2001

(17) CONSOLIDATING INFORMATION - (CONTINUED)

                      CONSOLIDATING STATEMENT OF CASH FLOWS
                                  (IN MILLIONS)

<Table>
<Caption>
                                                                         YEAR ENDED DECEMBER 31, 2001
                                                           ------------------------------------------------------
                                                            WORLDCOM         MCI
                                                              GROUP         GROUP       ELIMINATIONS     WORLDCOM
                                                           ---------      ---------     ------------     --------
<S>                                                        <C>            <C>            <C>             <C>
Cash flows from operating activities:
Net income (loss)                                          $   1,524      $     (23)     $        --     $  1,501
Adjustments to reconcile net income (loss) to net cash
   provided by operating activities:                           5,081          1,412               --        6,493
                                                           ---------      ---------      -----------     --------
   Net cash provided by operating activities                   6,605          1,389               --        7,994
                                                           ---------      ---------      -----------     --------

Cash flows from investing activities:
Capital expenditures                                          (7,619)          (267)              --       (7,886)
Acquisitions and related costs                                  (206)            --               --         (206)
All other investing activities, net                             (993)          (605)              --       (1,598)
                                                           ---------      ---------      -----------     --------
   Net cash used in investing activities                      (8,818)          (872)              --       (9,690)
                                                           ---------      ---------      -----------     --------

Cash flows from financing activities:
Principal borrowings (repayments) on debt, net                 3,526           (495)              --        3,031
Attributed stock activity of WorldCom, Inc.                      124             --               --          124
Intergroup advances, net                                         (15)            15               --           --
All other financing activities, net                             (555)           (71)              --         (626)
                                                           ---------      ---------      -----------     --------
   Net cash provided by (used in) financing activities         3,080           (551)              --        2,529
Effect of exchange rate changes on cash                           38             --               --           38
                                                           ---------      ---------      -----------     --------
Net increase (decrease) in cash and cash equivalents             905            (34)              --          871
Cash and cash equivalents beginning of period                    720             41               --          761
Deconsolidation of Embratel                                     (216)            --                          (216)
                                                           ---------      ---------      -----------     --------
Cash and cash equivalents end of period                    $   1,409      $       7      $        --     $  1,416
                                                           =========      =========      ===========     ========
</Table>


                                      F-42
<Page>

                                 WORLDCOM, INC.

                                   SCHEDULE II
                        VALUATION AND QUALIFYING ACCOUNTS

<Table>
<Caption>
                                   BALANCE AT                      CHARGED TO    ADDITIONS       DEDUCTIONS
                                   BEGINNING     DECONSOLIDATION    COSTS AND   FROM PURCHASE   AND ACCOUNTS    BALANCE AT
DESCRIPTIONS                       OF PERIOD      OF EMBRATEL       EXPENSES    TRANSACTIONS     WRITTEN OFF   END OF PERIOD
------------                       ---------      -----------       --------    ------------     -----------   -------------
<S>                                 <C>             <C>             <C>           <C>             <C>             <C>
Allowance for doubtful accounts
   (in millions):
Accounts receivable
   2001 .........................   $  1,532        $    282        $  1,313      $    194        $  1,671        $  1,086
   2000 .........................      1,122              --           1,865            --           1,455           1,532
   1999 .........................        920              --             951            19             768           1,122
</Table>


                                      F-43
<Page>

                          INDEX TO FINANCIAL STATEMENTS

<Table>
<Caption>
                                                                                                 PAGE
                                                                                                 ----
<S>                                                                                              <C>
WORLDCOM GROUP (AN INTEGRATED BUSINESS OF WORLDCOM, INC.)
   Report of independent public accountants................................................      F-45
   Combined balance sheets as of December 31, 2000 and 2001................................      F-46
   Combined statements of operations for the three years ended December 31, 2001...........      F-47
   Combined statements of allocated net worth for the three years ended December 31, 2001..      F-48
   Combined statements of cash flows for the three years ended December 31, 2001...........      F-49
   Notes to combined financial statements..................................................      F-50
</Table>

                                   -----------

      You should understand the following when reading the combined financial
statements of the WorldCom group, which is an integrated business of WorldCom,
Inc.:

      o     WorldCom has presented the combined financial statements of the
            WorldCom group at substantially the same level of detail as the
            consolidated financial statements of WorldCom. WorldCom believes
            that investors require detailed financial information for the
            WorldCom group to properly evaluate the market potential of WorldCom
            group stock;

      o     the WorldCom group is a collection of WorldCom's data, Internet,
            international and commercial voice businesses and is not a separate
            legal entity;

      o     the holders of the WorldCom group stock are shareholders of WorldCom
            and do not have an ownership interest in the WorldCom group or any
            company in the WorldCom group or a claim on any of the assets
            attributed to the WorldCom group;

      o     the attribution of a portion of WorldCom's assets and liabilities to
            the WorldCom group does not affect WorldCom's ownership of these
            assets or responsibility for these liabilities and does not affect
            the rights of any creditor of WorldCom; and

      o     the assets attributed to the WorldCom group could be subject to the
            liabilities attributed to the MCI group.


                                      F-44
<Page>

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

      To the Shareholders of WorldCom, Inc.:

      We have audited the accompanying combined balance sheets of the WorldCom
group (an integrated business of WorldCom, Inc.) (as described in Note 1) as of
December 31, 2000 and 2001, and the related combined statements of operations,
allocated net worth and cash flows for each of the years in the three-year
period ended December 31, 2001. These financial statements are the
responsibility of WorldCom, Inc.'s management. Our responsibility is to express
an opinion on these financial statements based on our audits.

      We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

      In our opinion, the WorldCom group combined financial statements referred
to above present fairly, in all material respects, the combined financial
position of the WorldCom group as of December 31, 2000 and 2001, and the results
of its operations and its cash flows for each of the years in the three-year
period ended December 31, 2001, in conformity with accounting principles
generally accepted in the United States.

      As discussed in Note 1 to the combined financial statements, effective
January 1, 2000, the WorldCom group changed its method of accounting for certain
activation and installation fee revenues and expenses.

      The WorldCom group is a fully integrated business of WorldCom, Inc.
Accordingly, as described in Note 1, the WorldCom group's combined financial
statements have been derived from the consolidated financial statements and
accounting records of WorldCom, Inc. and, therefore, reflect certain assumptions
and allocations. As more fully discussed in Note 1, the combined financial
statements of the WorldCom group should be read in conjunction with the audited
consolidated statements of WorldCom, Inc.


ARTHUR ANDERSEN LLP

Jackson, Mississippi
March 7, 2002


                                      F-45
<Page>

            WORLDCOM GROUP (AN INTEGRATED BUSINESS OF WORLDCOM, INC.)
                             COMBINED BALANCE SHEETS
                                  (IN MILLIONS)

<Table>
<Caption>
                                                                                           DECEMBER 31,   DECEMBER 31,
                                                                                               2000           2001
                                                                                           ------------   ------------
<S>                                                                                          <C>           <C>
ASSETS
Current assets:
  Cash and cash equivalents                                                                  $    720      $  1,409
  Accounts receivable, net of allowance for bad debts of $1,018 in 2000 and $693 in 2001        4,980         3,734
  Deferred tax asset                                                                              131           241
  Other current assets                                                                          1,612         1,895
  Receivable from MCI group, net                                                                  649           900
                                                                                             --------      --------
         Total current assets                                                                   8,092         8,179
                                                                                             --------      --------
Property and equipment:
  Transmission equipment                                                                       19,883        23,369
  Communications equipment                                                                      5,873         5,434
  Furniture, fixtures and other                                                                 8,666        10,583
  Construction in progress                                                                      6,727         5,576
                                                                                             --------      --------
                                                                                               41,149        44,962
  Accumulated depreciation                                                                     (5,972)       (8,170)
                                                                                             --------      --------
                                                                                               35,177        36,792
                                                                                             --------      --------
Goodwill and other intangible assets                                                           36,685        40,818
Long-term receivable from MCI group, net                                                          976           976
Other assets                                                                                    4,963         5,136
                                                                                             --------      --------
                                                                                             $ 85,893      $ 91,901
                                                                                             ========      ========
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current liabilities:
  Short-term debt and current maturities of long-term debt                                   $  7,200      $    172
  Accrued interest                                                                                338           507
  Accounts payable and accrued line costs                                                       3,584         2,751
  Other current liabilities                                                                     3,091         2,485
                                                                                             --------      --------
         Total current liabilities                                                             14,213         5,915
                                                                                             --------      --------
Long-term liabilities, less current portion:
  Long-term debt                                                                               11,696        24,533
  Deferred tax liability                                                                        2,683         3,196
  Other liabilities                                                                               965           546
                                                                                             --------      --------
         Total long-term liabilities                                                           15,344        28,275
                                                                                             --------      --------

Commitments and contingencies

Minority interests                                                                              2,592           101

Company obligated mandatorily redeemable and other preferred securities                           798         1,993

Allocated net worth                                                                            52,946        55,617
                                                                                             --------      --------
                                                                                             $ 85,893      $ 91,901
                                                                                             ========      ========
</Table>

The accompanying notes are an integral part of these combined statements.


                                      F-46
<Page>

            WORLDCOM GROUP (AN INTEGRATED BUSINESS OF WORLDCOM, INC.)
                        COMBINED STATEMENTS OF OPERATIONS
                                  (IN MILLIONS)

<Table>
<Caption>
                                                                                     FOR THE YEARS ENDED DECEMBER 31,
                                                                                   ------------------------------------
                                                                                     1999          2000          2001
                                                                                   --------      --------      --------
<S>                                                                                <C>           <C>           <C>
Revenues                                                                           $ 19,736      $ 22,755      $ 21,348
                                                                                   --------      --------      --------
Operating expenses:
  Line costs                                                                          7,905         8,745         8,120
  Selling, general and administrative                                                 4,195         5,689         6,058
  Depreciation and amortization                                                       3,013         3,280         4,121
  Other charges                                                                          (8)           --            --
                                                                                   --------      --------      --------
        Total                                                                        15,105        17,714        18,299
                                                                                   --------      --------      --------
Operating income                                                                      4,631         5,041         3,049
Other income (expense):
  Interest expense                                                                     (460)         (458)       (1,029)
  Miscellaneous                                                                         237           385           412
                                                                                   --------      --------      --------
Income before income taxes, minority interests and cumulative effect
     of accounting change                                                             4,408         4,968         2,432
Provision for income taxes                                                            1,856         1,990           943
                                                                                   --------      --------      --------
Income before minority interests and cumulative effect of accounting change           2,552         2,978         1,489
Minority interests                                                                     (186)         (305)           35
                                                                                   --------      --------      --------
Income before cumulative effect of accounting change                                  2,366         2,673         1,524
Cumulative effect of accounting change (net of income tax of $43 in 2000)                --           (75)           --
                                                                                   --------      --------      --------
Net income before distributions on mandatorily redeemable preferred securities        2,366         2,598         1,524
Distributions on mandatorily redeemable preferred securities and other
    preferred dividend requirements                                                      72            65           117
                                                                                   --------      --------      --------
Net income                                                                         $  2,294      $  2,533      $  1,407
                                                                                   ========      ========      ========
</Table>

The accompanying notes are an integral part of these combined statements.


                                      F-47
<Page>

            WORLDCOM GROUP (AN INTEGRATED BUSINESS OF WORLDCOM, INC.)
                   COMBINED STATEMENTS OF ALLOCATED NET WORTH
                  FOR THE THREE YEARS ENDED DECEMBER 31, 2001
                                  (IN MILLIONS)

<Table>
<Caption>
                                                                                            FOREIGN
                                                                            UNREALIZED      CURRENCY      ALLOCATED
                                                               ATTRIBUTED     HOLDING     TRANSLATION        NET
                                                                 CAPITAL    GAIN (LOSS)    ADJUSTMENT       WORTH
                                                                 -------    -----------    ----------       -----
<S>                                                             <C>           <C>           <C>           <C>
Balances, December 31, 1998                                     $ 42,197      $    122      $    (28)     $ 42,291
Funds attributed from WorldCom, Inc.                               1,935            --            --         1,935
Advances from MCI group, net                                       2,097            --            --         2,097
Other comprehensive income (net of taxes
     and reclassifications):
Net income before distributions on mandatorily
     redeemable preferred securities                               2,366            --            --         2,366
Distributions on mandatorily redeemable preferred
   securities and other preferred dividend requirements              (72)           --            --           (72)
Net change in unrealized holding gain on
     marketable equity securities                                     --           453            --           453
Foreign currency adjustment                                           --            --          (332)         (332)
                                                                                                          --------
           Total comprehensive income                                                                        2,415
                                                                --------------------------------------------------
Balances, December 31, 1999                                       48,523           575          (360)       48,738
Funds attributed from WorldCom, Inc.                                 770            --            --           770
Advances from MCI group, net                                       1,592            --            --         1,592
Other comprehensive income (net of taxes
     and reclassifications):
Net income before distributions on mandatorily
     redeemable preferred securities                               2,598            --            --         2,598
Distributions on mandatorily redeemable preferred
   securities and other preferred dividend requirements              (65)           --            --           (65)
Net change in unrealized holding gain on
     marketable equity securities                                     --          (230)           --          (230)
Foreign currency adjustment                                           --            --          (457)         (457)
                                                                                                          --------
           Total comprehensive income                                                                        1,846
                                                                --------------------------------------------------
Balances, December 31, 2000                                       53,418           345          (817)       52,946
Deconsolidation of Embratel                                           (2)           --           335           333
Funds attributed from WorldCom, Inc.                               1,422            --            --         1,422
Advances to MCI group, net                                           (15)           --            --           (15)
Other comprehensive income (net of taxes
     and reclassifications):
Net income before distributions on mandatorily
     redeemable preferred securities                               1,524            --            --         1,524
Distributions on mandatorily redeemable preferred
   securities and other preferred dividend requirements             (117)           --            --          (117)
Derivative financial instruments:
   Cumulative effect of adoption of SFAS 133
      as of January 1, 2001                                           --            28            --            28
   Reclassification of derivative financial instruments
      to current earnings                                             --          (110)           --          (110)
   Change in fair value of derivative financial instruments           --            82            --            82
Net change in unrealized holding gain (loss) on
       marketable equity securities                                   --          (396)           --          (396)
Foreign currency adjustment                                           --            --           (80)          (80)
                                                                                                          --------
           Total comprehensive income                                                                          931
                                                                --------------------------------------------------
Balances, December 31, 2001                                     $ 56,230      $    (51)     $   (562)     $ 55,617
                                                                ==================================================
</Table>

The accompanying notes are an integral part of these combined statements.


                                      F-48
<Page>

            WORLDCOM GROUP (AN INTEGRATED BUSINESS OF WORLDCOM, INC.)
                        COMBINED STATEMENTS OF CASH FLOWS
                                  (IN MILLIONS)

<Table>
<Caption>
                                                                                       FOR THE YEARS ENDED DECEMBER 31,
                                                                                    ------------------------------------
                                                                                      1999          2000          2001
                                                                                    --------      --------      --------
<S>                                                                                 <C>           <C>           <C>
Cash flows from operating activities:
Net income before distributions on mandatorily redeemable preferred securities      $  2,366      $  2,598      $  1,524
Adjustments to reconcile net income before distributions on mandatorily
  redeemable preferred securities to net cash provided by operating activities:
    Cumulative effect of accounting change                                                --            75            --
    Minority interests                                                                   186           305           (35)
    In-process research and development and other charges                                 (8)           --            --
    Depreciation and amortization                                                      3,013         3,280         4,121
    Provision for deferred income taxes                                                2,510         1,410         1,131
    Change in assets and liabilities, net of effect of business combinations:
        Accounts receivable, net                                                        (611)       (1,300)          104
        Receivable from MCI group, net                                                  (555)         (649)         (251)
        Accounts payable and other current liabilities                                   746           624          (200)
        Other current assets                                                             119          (582)          104
    All other operating activities                                                      (414)         (431)          107
                                                                                    --------      --------      --------
Net cash provided by operating activities                                              7,352         5,330         6,605
                                                                                    --------      --------      --------
Cash flows from investing activities:
  Capital expenditures                                                                (7,929)      (10,984)       (7,619)
  Acquisitions and related costs                                                        (786)          (14)         (206)
  Increase in intangible assets                                                         (389)         (771)         (367)
  Decrease in other liabilities                                                         (565)         (823)         (351)
  All other investing activities                                                       1,624        (1,020)         (275)
                                                                                    --------      --------      --------
Net cash used in investing activities                                                 (8,045)      (13,612)       (8,818)
                                                                                    --------      --------      --------
Cash flows from financing activities:
  Principal borrowings (repayments) on debt, net                                      (2,894)        6,377         3,526
  Attributed stock activity of WorldCom, Inc.                                            886           585           124
  Distributions on mandatorily redeemable and other preferred securities
     and dividends paid on other equity securities                                       (72)          (65)          (83)
  Redemptions of preferred stock                                                          --          (190)         (200)
  Advances (to) from MCI group, net                                                    2,097         1,592           (15)
  All other financing activities                                                          --           (84)         (272)
                                                                                    --------      --------      --------
Net cash provided by financing activities                                                 17         8,215         3,080
Effect of exchange rate changes on cash                                                 (221)          (19)           38
                                                                                    --------      --------      --------
Net increase (decrease) in cash and cash equivalents                                    (897)          (86)          905
Cash and cash equivalents at beginning of period                                       1,703           806           720
Deconsolidation of Embratel                                                               --            --          (216)
                                                                                    --------      --------      --------
Cash and cash equivalents at end of period                                          $    806      $    720      $  1,409
                                                                                    ========      ========      ========
</Table>

The accompanying notes are an integral part of these combined statements.


                                      F-49
<Page>

            WORLDCOM GROUP (AN INTEGRATED BUSINESS OF WORLDCOM, INC.)
                     NOTES TO COMBINED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

(1) THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES -

DESCRIPTION OF BUSINESS AND ORGANIZATION:

      Organized in 1983, WorldCom, Inc., a Georgia corporation, provides a broad
range of communications services to both U.S. and non-U.S. based businesses and
consumers. We are a global communications company utilizing a strategy based on
being able to provide service through our own facilities throughout the world
instead of being restricted to a particular geographic location. We call this
our "on-net" strategy. The on-net approach allows our customers to send data or
voice communications across town, across the U.S., or to any of our networks in
Europe or Asia, often without ever leaving our networks. The on-net approach
provides our customers with superior reliability and low operating costs. Our
core business is communications services, which includes voice, data, Internet
and international services. We serve as a holding company for our subsidiaries'
operations. References herein to WorldCom, "we," "our," or "us" include
WorldCom, Inc. and its subsidiaries, unless the context otherwise requires.

BASIS OF COMBINATION AND PRESENTATION:

      On June 7, 2001, our shareholders approved a recapitalization involving
the creation of two separately traded tracking stocks:

      o     WorldCom group stock, which is intended to reflect the performance
            of our data, Internet, international and commercial voice businesses
            and is quoted on The Nasdaq National Market under the trading symbol
            "WCOM", and

      o     MCI group stock, which is intended to reflect the performance of our
            consumer, small business, wholesale long distance voice and data,
            wireless messaging and dial-up Internet access businesses and is
            quoted on The Nasdaq National Market under the trading symbol
            "MCIT".

      In connection with the recapitalization, we amended our articles of
incorporation to replace our existing common stock with two new series of common
stock that are intended to reflect, or track, the performance of the businesses
attributed to the WorldCom group and the MCI group. Effective with the
recapitalization on June 7, 2001, each share of our existing common stock was
changed into one share of WorldCom group stock and 1/25 of a share of MCI group
stock.

      A tracking stock is a separate class of a company's common stock intended
to provide a return to investors based upon the financial performance of a
distinct business unit of the company, sometimes referred to as the targeted
business. These targeted businesses are collections of businesses that we have
grouped together in order for us to issue WorldCom group stock and MCI group
stock. The ownership of the targeted business does not change, and while each of
the classes of stock trade separately, all shareholders are common shareholders
of a single company, WorldCom, and are subject to all risks of an investment in
WorldCom as a whole.

      During the second quarter of 2001, we declared the initial quarterly
dividend for the MCI group stock. A cash dividend of $0.60 per share of MCI
group stock, or approximately $70 million in the aggregate, was paid on October
15, 2001 to shareholders of record as of the close of business on September 28,
2001. Dividends of $0.60 per share of MCI group stock were also declared in the
third and fourth quarters of 2001, which have been or will be paid in 2002.


                                      F-50
<Page>

            WORLDCOM GROUP (AN INTEGRATED BUSINESS OF WORLDCOM, INC.)
                     NOTES TO COMBINED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

(1) THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)

      The MCI group was initially allocated notional debt of $6 billion and our
remaining debt was allocated on a notional basis to the WorldCom group. We
intend, for so long as the WorldCom group stock and the MCI group stock remains
outstanding, to include in our filings under the Securities Exchange Act of
1934, as amended, the combined financial statements of each of the WorldCom
group and the MCI group. These combined financial statements will be prepared in
accordance with accounting principles generally accepted in the United States,
and in the case of annual financial statements, will be audited. These combined
financial statements are not legally required under current law or SEC
regulations.

      Voting rights of the holders of the WorldCom group stock and the MCI group
stock are prorated based on the relative market values of WorldCom group stock
and MCI group stock. We will conduct shareholder meetings that encompass all
holders of voting stock. The WorldCom group and the MCI group shareholders will
vote together as a single class on all matters brought to a vote of
shareholders, including the election of our directors.

      Our board of directors may at any time convert each outstanding share of
MCI group stock into shares of WorldCom group stock at 110% of the relative
trading value of MCI group stock for the 20 days prior to the announcement of
the conversion. No premium will be paid on a conversion that occurs after June
7, 2004.

      If all or substantially all of the WorldCom group or MCI group assets are
sold, either: (i) the relevant shareholders will receive a distribution equal to
the fair value of the net proceeds of the sale, either by special dividend or by
redemption of shares; or (ii) each outstanding share of MCI group stock will be
converted into shares of WorldCom group stock at 110% or 100% of the relative
trading value of MCI group stock for a 10 trading day period following the sale.

INTERGROUP ALLOCATION POLICIES:

TRACKING STOCK POLICY STATEMENT

      Our board of directors has fiduciary duties to all shareholders of
WorldCom, and no independent fiduciary duties to the holders of WorldCom group
stock and MCI group stock. Our board of directors has adopted a policy statement
regarding the WorldCom group and the MCI group matters. Our board of directors
or any special committee appointed by our board of directors, may, without
shareholder approval, change the policies set forth in our policy statement. Our
board of directors or any special committee appointed by our board of directors
also may, without shareholder approval, adopt additional policies or make
exceptions with respect to the application of the policies described in our
policy statement in connection with particular facts and circumstances, all as
they may determine to be in the best interests of WorldCom. The material
provisions of the policy statement are as follows:

      GENERAL POLICY. The policy statement provides that all material matters as
to which the holders of WorldCom group stock and MCI group stock may have
potentially divergent interests will be resolved in a manner that our board of
directors or any special committee appointed by our board of directors
determines to be in the best interests of WorldCom as a whole, after giving due
consideration to the potentially divergent interests and all other interests of
the holders of the separate series of common stock of WorldCom that our board of
directors or any special committee, as the case may be, deems relevant. The
policy statement provides that we will manage the businesses in the WorldCom
group and the MCI group in a manner intended to maximize the operations, assets
and values of both groups, and with complementary deployment of personnel,
capital and facilities, consistent with their respective business objectives.


                                      F-51
<Page>

            WORLDCOM GROUP (AN INTEGRATED BUSINESS OF WORLDCOM, INC.)
                     NOTES TO COMBINED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

(1) THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)

      Under this policy statement, all material transactions which are
determined by our board of directors to be in the ordinary course of business
between the WorldCom group and the MCI group, except for those described in the
paragraphs below, are intended to be on terms consistent with terms that would
be applicable to arm's-length dealings with unrelated third parties.

      CASH MANAGEMENT. Decisions regarding the investment of surplus cash, the
issuance and retirement of debt, and the issuance and repurchase of common and
preferred stock will continue to be made by WorldCom management on behalf of the
groups. Under this centralized cash management system, the MCI group will
generally not be allocated any cash balances.

CORPORATE ALLOCATIONS

      Corporate allocations have been attributed and/or allocated to the
WorldCom group or the MCI group based upon identification of such services
specifically benefiting each group. Such corporate allocations may change at our
discretion and do not require shareholder approval. Management believes that the
allocation methodologies applied are reasonable and these methods have been
consistently applied for all periods presented. However, it is not practical to
determine whether the allocated amounts represent amounts that would have been
incurred on a stand alone basis. Explanations of the composition and the method
of allocation for such items are described below.

      SHARED CORPORATE SERVICES. We have directly charged specifically
identifiable costs to the WorldCom group and the MCI group. Where determinations
based on specific usage alone were impracticable, we used other allocation
methods that we believe are fair, including methods based on factors such as the
number of employees and total line costs or revenues generated by each group.
For the years ended December 31, 1999, 2000 and 2001, the WorldCom group was
allocated $1.6 billion, $2.0 billion and $2.0 billion of these costs,
respectively.

      COMMERCIAL INTER-GROUP TRANSACTIONS. The MCI group is allocated a
proportion, based on usage, of our fiber optic system costs for use of the fiber
optic systems, which are attributed to the WorldCom group and the WorldCom group
is allocated a corresponding decrease to depreciation expense which totaled $189
million, $373 million and $360 million for the years ended December 31, 1999,
2000 and 2001, respectively. In addition, the WorldCom group is allocated a
proportion, based on usage, of our switching costs for use of the business voice
switched services, which are attributed to the MCI group. For the years ended
December 31, 1999, 2000 and 2001, switching costs allocated to the WorldCom
group were $64 million, $87 million and $101 million, respectively.
Additionally, the MCI group is allocated a proportionate share of costs
associated with buildings, furniture and fixtures attributed to the WorldCom
group, and is also allocated costs for use of the MCI tradenames as discussed
below. The WorldCom group is allocated a corresponding decrease to depreciation
and amortization expense. For the years ended December 31, 1999, 2000 and 2001,
these allocated costs totaled $331 million, $254 million and $360 million,
respectively.

      All other material commercial transactions in the ordinary course of
business between the groups are intended, to the extent practicable, to be on
terms consistent with terms that would be applicable to arm's-length dealings
with unrelated third parties and will be subject to the review and approval of
our board of directors or any special committee. Neither group is under any
obligation to use services provided by the other group, and each group may use
services provided by a competitor of the other group if our board of directors
or any special committee determines it is in the best interests of WorldCom as a
whole.


                                      F-52
<Page>

            WORLDCOM GROUP (AN INTEGRATED BUSINESS OF WORLDCOM, INC.)
                     NOTES TO COMBINED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

(1) THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)

      ALLOCATION OF INTANGIBLE ASSETS. Intangible assets consist of the excess
consideration paid over the fair value of net tangible assets acquired by us in
business combinations accounted for under the purchase method and include
goodwill, channel rights, developed technology and tradenames. These assets have
been attributed to the respective groups based on specific identification and
where acquired companies have been divided between the WorldCom group and the
MCI group, the intangible assets have been attributed based on the respective
fair values at the date of purchase of the related operations attributed to each
group. Management believes that this method of allocation is equitable and
provides a reasonable estimate of the intangible assets attributable to the
WorldCom group and the MCI group.

      All tradenames, including the MCI tradename and the other related MCI
tradenames, have been attributed to the WorldCom group. The MCI group will be
allocated an expense and the WorldCom group will be allocated a corresponding
decrease in depreciation and amortization expense for the use of the MCI
tradenames for the next four years based on the following fee schedule:

<Table>
<S>                                                <C>
                 2002:..................           $30.0 million
                 2003:..................           $35.0 million
                 2004:..................           $40.0 million
                 2005:..................           $45.0 million
</Table>

      Any renewal or termination of use of the MCI tradename by the MCI group
will be subject to the general policy that our board of directors will act in
the best interests of WorldCom. For each of the years ended December 31, 1999,
2000 and 2001, depreciation and amortization expense associated with the MCI
tradenames allocated to the WorldCom group was decreased by $27.5 million per
annum for use of the MCI tradenames by the MCI group.

      FINANCING ARRANGEMENTS. As of January 1, 1999, $6.0 billion of our
outstanding debt was notionally allocated to the MCI group and the remainder of
our debt was notionally allocated to the WorldCom group. Our debt was allocated
between the WorldCom group and the MCI group based upon a number of factors
including estimated future cash flows and the ability to pay debt service and
dividends of each of the groups. In addition, management considered certain
measures of creditworthiness, such as coverage ratios and various tests of
liquidity, in the allocation process. Our management believes that the initial
allocation was equitable and supportable by both the WorldCom group and the MCI
group. The debt allocated to the MCI group bears interest at a rate indicative
of the rate at which the MCI group would borrow from third parties if it was a
wholly owned subsidiary of WorldCom but did not have the benefit of any
guarantee by WorldCom. Interest rates are calculated on a quarterly basis. Debt
allocated to the MCI group bears an interest rate equal to the weighted-average
interest rate, excluding capitalized interest, of WorldCom debt plus 1 1/4
percent. Interest allocated to the WorldCom group reflects the difference
between our actual interest expense and the interest expense charged to the MCI
group. Subsequent to the recapitalization, each group's allocated debt increases
or decreases by the amount of any net cash generated by, or required to fund,
the group's operating activities, investing activities, dividend payments, share
repurchases and other financing activities.

      As of December 31, 2001, our receivables purchase program consisted of a
$3.7 billion pool of receivables in which the purchaser owned an undivided
interest, including the $2.0 billion sold, of which $2.8 billion and $1.7
billion relate to the WorldCom group, respectively. The receivables sold were
assigned based on specific identification where practical, or allocated based on
total revenues. Our management believes that this method of allocation is
equitable and provides a reasonable estimate of the receivables attributable to
the groups.


                                      F-53
<Page>

            WORLDCOM GROUP (AN INTEGRATED BUSINESS OF WORLDCOM, INC.)
                     NOTES TO COMBINED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

(1) THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)

EMBRATEL DECONSOLIDATION:

      During the second quarter of 2001, we reached a long-term strategic
decision to restructure our investment in Embratel Participacoes S.A., or
Embratel. The restructuring included the resignation of certain Embratel board
of directors seats, the irrevocable obligation to vote a portion of our common
shares in a specified manner and the transfer of certain economic rights
associated with such shares to an unrelated third party. Based on these actions,
the accounting principles generally accepted in the United States prohibit the
continued consolidation of Embratel's results. Accordingly, we have
deconsolidated Embratel's results effective January 1, 2001.

      As of December 31, 2001, our carrying value for our 19.3% ownership
interest in Embratel was $992 million which is included in the other assets in
the accompanying combined financial statements. Our equity in Embratel's loss
for 2001 is included in miscellaneous income/(expense) in the accompanying
combined financial statements. Our investment in Embratel has been allocated to
the WorldCom group.

FAIR VALUE OF FINANCIAL INSTRUMENTS:

      See Note 1 to our consolidated financial statements for additional fair
value descriptions.

CASH AND CASH EQUIVALENTS:

      We consider cash in banks and short-term investments with original
maturities of three months or less as cash and cash equivalents.

PROPERTY AND EQUIPMENT:

      Property and equipment are stated at cost. Depreciation is provided for
financial reporting purposes using the straight-line method over the following
estimated useful lives:

<Table>
<S>                                                              <C>
           Transmission equipment (including conduit).......     4 to 40 years
           Communications equipment.........................     5 to 10 years
           Furniture, fixtures, buildings and other.........     4 to 39 years
</Table>

      We evaluate the recoverability of property and equipment when events and
circumstances indicate that such assets might be impaired. We determine
impairment by comparing the undiscounted future cash flows estimated to be
generated by these assets to their respective carrying amounts. In the event an
impairment exists on property and equipment attributed to the WorldCom group, a
loss will be recognized by the WorldCom group based on the amount by which the
carrying value exceeds the fair value of the asset. If quoted market prices for
an asset are not available, fair market value is determined primarily using the
anticipated cash flows discounted at a rate commensurate with the risk involved.
Losses on property and equipment to be disposed of are determined in a similar
manner, except that fair market values are reduced for the cost to dispose.

      Maintenance and repairs are expensed as incurred. Replacements and
betterments are capitalized. The cost and related reserves of assets sold or
retired are removed from the accounts, and any resulting gain or loss is
reflected in results of operations.


                                      F-54
<Page>

            WORLDCOM GROUP (AN INTEGRATED BUSINESS OF WORLDCOM, INC.)
                     NOTES TO COMBINED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

(1) THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)

      We construct certain of our own transmission systems and related
facilities. Internal costs directly related to the construction of such
facilities, including interest and salaries of certain employees, are
capitalized. Such internal costs were $625 million ($339 million in interest),
$842 million ($495 million in interest) and $858 million ($498 million in
interest) in 1999, 2000 and 2001, respectively, and have been allocated to the
WorldCom group.

GOODWILL AND OTHER INTANGIBLE ASSETS:

      The major classes of intangible assets attributed to the WorldCom group as
of December 31, 2000 and 2001 are summarized below (in millions):

<Table>
<Caption>
                                                                   AMORTIZATION PERIOD         2000           2001
                                                                   -------------------         ----           ----
<S>                                                                   <C>                    <C>           <C>
         Goodwill ..........................................          5 to 40 years          $ 35,596      $ 40,551
         Tradenames ........................................               40 years             1,100         1,112
         Developed technology ..............................          5 to 10 years             1,590         1,590
         Other intangibles .................................          5 to 10 years             2,665         3,414
                                                                                             --------      --------
                                                                                               40,951        46,667
         Less: accumulated amortization ....................                                   (4,266)       (5,849)
                                                                                             --------      --------
         Goodwill and other intangible assets, net .........                                 $ 36,685      $ 40,818
                                                                                             ========      ========
</Table>

      Intangible assets are amortized using the straight-line method for the
periods noted above.

      Goodwill is recognized for the excess of the purchase price of the various
business combinations over the value of the identifiable net tangible and
intangible assets acquired. Realization of acquisition-related intangibles,
including goodwill, is periodically assessed by our management based on the
current and expected future profitability and cash flows of acquired companies
and their contribution to the overall operations of the WorldCom group.

      Also included in other intangibles are costs incurred to develop software
for internal use. Such costs were $354 million, $765 million and $364 million
for the years ended December 31, 1999, 2000 and 2001, respectively.

INVESTMENTS IN MARKETABLE EQUITY SECURITIES:

      Investments in marketable equity securities are classified as
available-for-sale securities and reported at fair value. Unrealized holding
gains and losses, net of taxes, are reflected as a component of allocated net
worth in the accompanying combined financial statements. See Note 3 to our
consolidated financial statements for additional investment disclosures.

FOREIGN CURRENCY TRANSLATION:

      Assets and liabilities recorded in foreign currencies are translated at
the exchange rate as of the balance sheet date. Translation adjustments are
recorded as a separate component of allocated net worth. All revenue and expense
accounts are translated at a weighted-average of exchange rates in effect during
the period. Transaction gains and losses that arise from exchange rate
fluctuations on transactions denominated in a currency other than the functional
currency are included in the results of operations as incurred. The accompanying
combined statements of operations include foreign currency transaction losses,
after elimination of minority interests, of $36 million and $38 million for the
years ended December 31, 1999 and 2000, respectively, and foreign currency
transaction gains of $9 million for the year ended December 31, 2001.


                                      F-55
<Page>

            WORLDCOM GROUP (AN INTEGRATED BUSINESS OF WORLDCOM, INC.)
                     NOTES TO COMBINED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

(1) THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)

RECOGNITION OF REVENUES:

      The WorldCom group records revenues for telecommunications services at the
time of customer usage. Service activation and installation fees are amortized
over the average customer contract life.

ACCOUNTING FOR INTERNATIONAL LONG DISTANCE TRAFFIC AND OTHER:

      The WorldCom group enters into operating agreements with
telecommunications carriers in foreign countries under which international long
distance traffic is both delivered and received. The terms of most switched
voice operating agreements, as well as established FCC policy, require that
inbound switched voice traffic from the foreign carrier to the United States be
routed to United States international carriers, like the WorldCom group, in
proportion to the percentage of United States outbound traffic routed by that
United States international carrier to the foreign carrier. Mutually exchanged
traffic between the WorldCom group and foreign carriers is settled in cash
through a formal settlement policy that generally extends over a six-month
period at an agreed upon settlement rate. International settlements are treated
as an offset to line costs. This reflects the way in which the business is
operated because the WorldCom group actually settles in cash through a formal
net settlement process that is inherent in the operating agreements with foreign
carriers.

      Reciprocal compensation represents a reimbursement of costs for call
termination performed on behalf of other carriers' customers and is determined
contractually based on fixed rate per minute charges to those carriers. As such,
we have determined that it is more appropriate to reflect this reimbursement of
our cost as an offset to cost of sales rather than reporting this reimbursement
on a gross basis as revenues. During the years ended December 31, 1999, 2000 and
2001, reciprocal compensation recorded by the WorldCom group was $395 million,
$400 million and $248 million, respectively.

DERIVATIVE FINANCIAL INSTRUMENTS:

      Effective January 1, 2001, we adopted SFAS No. 133. This statement
establishes accounting and reporting standards requiring that derivative
instruments (including certain derivative instruments embedded in other
contracts) be recorded in the balance sheet as either an asset or liability
measured at fair value. As of January 1, 2001, our exposure to derivative
financial instruments primarily consisted of option collar transactions
designated as cash flow hedges of anticipated sales of an equity investment,
which we maintain to minimize the impact of adverse changes in the market price
of the related equity investment. The initial adoption of SFAS No. 133 provided
a net transition gain from our designated cash flow hedges resulting in an
increase in other comprehensive income of approximately $28 million. During
2001, shares of the hedged equity investment were sold and we reclassified
respective hedging gains of $110 million from accumulated comprehensive income
to miscellaneous income. As of December 31, 2001, we maintain no derivative
financial instruments. No amounts were reclassified to earnings resulting from
any ineffective portion of the designated derivative hedges or from the
discontinuance of designation of any cash flow hedges. All of our derivative
instrument activity was attributed to the WorldCom group.


                                      F-56
<Page>

            WORLDCOM GROUP (AN INTEGRATED BUSINESS OF WORLDCOM, INC.)
                     NOTES TO COMBINED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

(1) THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)

CUMULATIVE EFFECT OF ACCOUNTING CHANGE:

      During the fourth quarter of 2000, the WorldCom group implemented SAB 101,
which requires certain activation and installation fee revenues to be amortized
over the average life of the related service rather than be recognized
immediately. Costs directly related to these revenues may also be deferred and
amortized over the customer contract life. As required by SAB 101, the WorldCom
group retroactively adopted this accounting effective January 1, 2000, which
resulted in a one-time expense of $75 million, net of income tax benefit of $43
million. The pro forma effect of adopting SAB 101 on periods prior to January 1,
2000 was not material to the WorldCom group's financial position or results of
operations.

INCOME TAXES:

      The federal and state income tax liabilities incurred by WorldCom and
which are determined on a consolidated, combined, or unitary basis are allocated
between the WorldCom group and the MCI group in accordance with our policy
statement. The income tax expense or benefit for each group and the balance
sheet allocation of the expense is based on a comparison of our tax expense with
the hypothetical tax expense or benefit of the MCI group. The tax expense or
benefit allocable to the MCI group is the amount that the MCI group would have
incurred if it had filed tax returns as a separate taxpayer and the tax expense
allocable to the WorldCom group is the excess, if any, of our tax expense over
the tax expense or benefit allocable to the MCI group. Tax benefits that cannot
be used by a group generating those benefits but can be used on a consolidated
basis are credited to the group that generated those benefits. Had the WorldCom
group and the MCI group filed separate tax returns, the provision for income
taxes and net income for each group would not have significantly differed from
the amounts reported on the group's combined statements of operations for the
years ended December 31, 1999, 2000 and 2001. However, the amounts of current
and deferred taxes and taxes payable or refundable attributed to each group on
the historical financial statements may differ from those that would have been
allocated had the WorldCom group or the MCI group filed separate income tax
returns.

      Deferred tax assets and liabilities are based on temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and their respective tax bases, and the impact of available net
operating loss, or NOL, carryforwards. Valuation allowances have been recorded
to reduce the deferred tax asset to the amount more likely than not to be
realized.

EARNINGS PER SHARE:

      Our consolidated financial statements present basic and diluted earnings
(loss) per share for WorldCom group stock and MCI group stock using the
two-class method. The two-class method is an earnings formula that determines
the attributed earnings (loss) per share for WorldCom group stock and MCI group
stock according to participation rights in undistributed earnings. The combined
financial statements of the WorldCom group do not present earnings per share
because WorldCom group stock is a series of our common stock, and the WorldCom
group is not a legal entity with a capital structure.

      For purposes of our consolidated financial statements, basic earnings per
share attributed to WorldCom group stock is computed by dividing attributed net
income for the period by the number of weighted-average shares of WorldCom group
stock then outstanding. Diluted earnings per share attributed to WorldCom group
stock is computed by dividing attributed net income for the period by the
weighted-average number of shares of WorldCom group stock outstanding, including
the dilutive effect of WorldCom group stock equivalents.


                                      F-57
<Page>

            WORLDCOM GROUP (AN INTEGRATED BUSINESS OF WORLDCOM, INC.)
                     NOTES TO COMBINED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

(1) THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)

CONCENTRATION OF CREDIT RISK:

      A portion of the WorldCom group's revenues is derived from services
provided to other telecommunications service providers. As a result, the
WorldCom group has some concentration of credit risk among its customer base.
The WorldCom group performs ongoing credit evaluations of its larger customers'
financial condition and, at times, requires collateral from its customers to
support its receivables, usually in the form of assignment of its customers'
receivables to the WorldCom group in the event of nonpayment.

RECENTLY ISSUED ACCOUNTING STANDARDS:

      In June 2001, the FASB issued SFAS No. 141 "Business Combinations" and
SFAS No. 142 "Goodwill and Other Intangible Assets." SFAS No. 141 requires
business combinations initiated after June 30, 2001, which includes the
Intermedia merger, to be accounted for using the purchase method of accounting
and broadens the criteria for recording intangible assets separate from
goodwill. Recorded goodwill and intangibles will be evaluated against this new
criteria and may result in certain intangibles being subsumed into goodwill, or
alternatively, amounts initially recorded as goodwill may be separately
identified and recognized apart from goodwill. Under the new rules, goodwill and
intangible assets deemed to have indefinite lives will no longer be amortized
but will be subject to annual impairment tests. The statement includes
provisions for the identification of reporting units for purposes of assessing
potential future impairments of goodwill. Upon adoption, we stopped amortizing
intangible assets with indefinite useful lives, including goodwill and
tradenames. Based on current levels of such assets, this will reduce
amortization expense by approximately $1.0 billion annually at the WorldCom
group. Additionally, we are conducting impairment reviews of all intangible
assets with indefinite useful lives and we expect to complete this assessment no
later than the second quarter of 2002, in accordance with the provisions of SFAS
No. 142. Based on our preliminary analyses, we estimate that as a result of the
adoption of SFAS No. 142 we will reduce goodwill by approximately $14 to $19
billion at the WorldCom group.

      In June 2001, the FASB issued SFAS No. 143 "Asset Retirement Obligations,"
which establishes new accounting and reporting standards for legal obligations
associated with retiring assets. The fair value of a liability for an asset
retirement obligation must be recorded in the period in which it is incurred,
with the cost capitalized as part of the related long-lived assets and
depreciated over the asset's useful life. Changes in the liability resulting
from the passage of time will be recognized as operating expenses. SFAS No. 143
must be adopted by 2003. We have not yet quantified the impact of adopting SFAS
No. 143 on our consolidated results of operations or financial position.

      In August 2001, the FASB issued SFAS No. 144 "Accounting for the
Impairment or Disposal of Long-Lived Assets," which supercedes both SFAS No. 121
"Accounting for the Impairment of Long-Lived Assets for Long-Lived Assets to be
Disposed Of," and the accounting and reporting provisions for the disposal of a
segment of a business contained in APB Opinion No. 30, "Reporting the Results of
Operations - Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions." SFAS
No. 144 establishes a single accounting model for long-lived assets to be
disposed of by sale and broadens the presentation of discontinued operations.
The provisions of SFAS No. 144 are effective beginning in 2002 and are not
expected to have a material impact on our consolidated results of operations or
financial position.


                                      F-58
<Page>

            WORLDCOM GROUP (AN INTEGRATED BUSINESS OF WORLDCOM, INC.)
                     NOTES TO COMBINED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

(1) THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)

USE OF ESTIMATES:

      The preparation of financial statements in conformity with accounting
principles generally accepted in the United States, or GAAP, requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and revenues and expenses during the period reported.
Actual results could differ from those estimates. Estimates are used when
accounting for allowance for doubtful accounts, revenue reserves, depreciation
and amortization, taxes and contingencies.

(2) BUSINESS COMBINATIONS -

      We have acquired other telecommunications companies offering similar or
complementary services to those offered by us. These acquisitions have been
accomplished through the purchase of the outstanding stock or assets of the
acquired entity for cash, notes, shares of our common stock, or a combination
thereof. The cash portion of acquisition costs has generally been financed
through our bank credit facilities.

      On July 1, 2001, we acquired Intermedia Communications Inc. for
approximately $5.8 billion, including assumed long-term debt, pursuant to the
merger of a wholly owned subsidiary with and into Intermedia, with Intermedia
continuing as the surviving corporation and as a subsidiary of WorldCom. As a
result of the Intermedia merger, we acquired a controlling interest in Digex,
Incorporated, or Digex, a provider of managed Web and application hosting
services. In connection with the Intermedia merger, stockholders of Intermedia
received one share of WorldCom group stock (or 57.1 million WorldCom group
shares in the aggregate) and 1/25th of a share of MCI group stock (or 2.3
million MCI group shares in the aggregate) for each share of Intermedia common
stock they owned. Holders of Intermedia preferred stock, other than Intermedia's
13.5% Series B Redeemable Exchangeable Preferred Stock due 2009, or Intermedia
Series B Preferred Stock, received one share of a class or series of our
preferred stock, with substantially identical terms, which were established upon
consummation of the Intermedia merger. As a result of the merger with
Intermedia, we own approximately 90% of the voting securities of Intermedia.

      Upon effectiveness of the merger with Intermedia, the then outstanding and
unexercised options for shares of Intermedia common stock were converted into
options exercisable for an aggregate of approximately 10 million shares of
WorldCom group stock having the same terms and conditions as the Intermedia
options, except that the exercise price and the number of shares issuable upon
exercise were divided and multiplied, respectively, by 1.0319. The merger with
Intermedia was accounted for as a purchase and was allocated to the WorldCom
group.

      The purchase price in the Intermedia merger was allocated based on
appraised fair values at the date of acquisition. This resulted in an excess
purchase price over net assets acquired of $5.1 billion of which $67 million was
allocated to customer lists, which will be amortized over approximately four
years on a straight-line basis. The remaining excess of $5.0 billion has been
allocated to goodwill and tradename which are not subject to amortization and
the goodwill is not expected to be deductible for tax purposes.

      In connection with the Intermedia merger, the Antitrust Division of the
Department of Justice required us to dispose of Intermedia's Internet service
provider business, which provided integrated Internet connectivity solutions,
and effective December 1, 2001, we sold substantially all of the Internet
related assets for approximately $12 million. In addition to this required
divestiture, we also committed to a plan to sell Intermedia's Advanced Building
Network business, which provides centralized telecommunications services in
multi-tenant commercial


                                      F-59
<Page>

            WORLDCOM GROUP (AN INTEGRATED BUSINESS OF WORLDCOM, INC.)
                     NOTES TO COMBINED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

(2) BUSINESS COMBINATIONS - (CONTINUED)

office buildings, and the systems integration business through which Intermedia
sells, installs, operates and maintains business telephony customer premise
equipment for its customers. We included the appraised fair values of these
assets to be disposed of in our initial allocation of the Intermedia purchase
price and also included accrued anticipated losses expected to be incurred
through disposal date. Any difference between the actual results of operations
and the amounts accrued will result in an adjustment of goodwill unless there is
a difference resulting from a post-merger event. For the year ended December 31,
2001, operating losses for these assets to be disposed of were approximately $41
million, before corporate allocations. We anticipate that we will complete the
planned disposals of the remaining identified businesses before the third
quarter of 2002.

      During 1999, 2000 and 2001, we recorded other liabilities of $582 million,
$29 million and $254 million, respectively, related to estimated costs of
unfavorable commitments of acquired entities, and other non-recurring costs
arising from various acquisitions and mergers. At December 31, 1999, 2000 and
2001, other liabilities attributed to the WorldCom group related to these and
previously recorded accruals totaled $1.6 billion, $832 million and $764
million, respectively.

(3) LONG-TERM DEBT-

      Our outstanding debt as of December 31, 2000 and 2001 consists of the
following (in millions):

<Table>
<Caption>
                                                                                                      2000          2001
                                                                                                    --------      --------
<S>                                                                                                 <C>           <C>
         Commercial paper and credit facilities ...............................................     $  3,629      $     --
         Floating rate notes due 2001 through 2002 ............................................        1,560            60
         7.88% - 8.25% Notes Due 2003-2010 ....................................................        3,500         3,500
         7.38% Notes Due 2006-2011 ............................................................        2,000         2,000
         6.13% - 6.95% Notes Due 2001-2028 ....................................................        6,100         4,600
         7.13% - 7.75% Notes Due 2004-2027 ....................................................        2,000         2,000
         8.88% Senior Notes Due 2006 ..........................................................          672            --
         7.13% - 8.25% Senior Debentures Due 2023-2027 ........................................        1,436         1,434
         6.13% - 7.50% Senior Notes Due 2004-2012 .............................................        1,934         1,925
         6.50% - 8.25% Notes Due 2004-2031 ....................................................           --        11,939
         Intermedia 11.25%-12.25% Senior Discount Notes Due 2007-2009 .........................           --           643
         Intermedia 8.50%-9.50% Senior Notes Due 2007-2009 ....................................           --           581
         Capital lease obligations (maturing through 2017) ....................................          413           953
         Embratel debt ........................................................................        1,134            --
         Other debt (maturing through 2008) ...................................................          518           575
                                                                                                    --------      --------
                                                                                                      24,896        30,210
         Notional debt allocated to the MCI group .............................................       (6,000)       (5,505)
                                                                                                    --------      --------
         Notional debt allocated to the WorldCom group ........................................       18,896        24,705
         Short-term debt and current maturities of allocated WorldCom group long-term debt ....       (7,200)         (172)
                                                                                                    --------      --------
                                                                                                    $ 11,696      $ 24,533
                                                                                                    ========      ========
</Table>

      See Note 1 for a more detailed description of how we allocate debt to the
groups and Note 4 of our consolidated financial statements for additional debt
descriptions.

(4)   COMPANY OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES OF
      SUBSIDIARIES AND OTHER REDEEMABLE PREFERRED SECURITIES -

      In connection with the Intermedia merger, we issued the following series
of preferred stock, which are mandatorily redeemable:


                                      F-60
<Page>

            WORLDCOM GROUP (AN INTEGRATED BUSINESS OF WORLDCOM, INC.)
                     NOTES TO COMBINED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

(4)   COMPANY OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES OF
      SUBSIDIARIES AND OTHER REDEEMABLE PREFERRED SECURITIES - (CONTINUED)

<Table>
<Caption>
                                                  NUMBER OF
                                                  PREFERRED                   ANNUAL               AGGREGATE # OF SHARES CONVERTIBLE
                                                    SHARES     LIQUIDATION   DIVIDEND                    AT THE OPTION OF HOLDER
                                                 AUTHORIZED,   PREFERENCE       PER     ASSOCIATED ---------------------------------
                                                  ISSUED AND  PER PREFERRED  PREFERRED  DEPOSITORY      WORLDCOM        MCI GROUP
                                                 OUTSTANDING      SHARE        SHARE      SHARES      GROUP SHARES        SHARES
                                                 -----------------------------------------------------------------------------------
<S>                                                <C>            <C>          <C>       <C>           <C>               <C>
  Series D Junior Convertible preferred stock,
     par value $0.01 per share                      53,724        $2,500       $175      5,372,410     6,905,398         276,215
  Series E Junior Convertible preferred stock,
     par value $0.01 per share                      64,047        $2,500       $175      6,404,690     5,295,766         211,830
  Series F Junior Convertible preferred stock,
     par value $0.01 per share                      79,600        $2,500       $175      7,960,000     4,729,649         189,185
  Series G Junior Convertible Participating
     preferred stock, par value $0.01 per share    200,000        $1,000       $ 70            n/a     5,555,555         222,222
</Table>

      On August 20, 2001, the holder of our Series G preferred stock exercised
its right to require us to redeem all of the outstanding Series G preferred
stock at par plus accrued dividends, or approximately $200 million in the
aggregate.

      The Series D, E and F preferred stock are currently redeemable in whole or
in part, at our option for cash plus accrued and unpaid dividends at rates
commencing with 103%, declining to 100% in 2004 and thereafter for the Series D
and E preferred stock and commencing with 104%, declining to 100% in 2005 and
thereafter for the Series F preferred stock.

      Dividends on the Series D, E and F preferred stock are payable in cash or
shares of our common stock, at our election on each July 15, October 15, January
15 and April 15. To date, we have paid these dividends in cash and we expect to
continue to pay cash dividends on our Series D, E and F preferred stock.

      The Series D, E and F preferred shareholders are generally entitled to
one-tenth of a vote per share of Series D, E or F preferred stock on all matters
voting together with WorldCom common shareholders as a single class.

      REDEEMABLE PREFERRED SECURITIES OF SUBSIDIARIES:

      At the time of the Intermedia merger, Intermedia had outstanding
Intermedia Series B Preferred Stock, and Digex had outstanding Series A
Convertible Preferred Stock, or Digex Series A Preferred Stock, that remain
outstanding subsequent to the Intermedia merger.

      As of December 31, 2001, there were 568,455 shares of Intermedia Series B
Preferred Stock outstanding. Dividends on the Intermedia Series B Preferred
Stock accumulate at a rate of 13.5% of the aggregate liquidation preference
thereof and are payable quarterly, in arrears. Dividends are payable in cash or,
at Intermedia's option, by the issuance of additional shares of Intermedia
Series B Preferred Stock having an aggregate liquidation preference equal to the
amount of such dividends. Historically, Intermedia has paid the Intermedia
Series B Preferred Stock dividend by the issuance of additional shares of
Intermedia Series B Preferred Stock. The Intermedia Series B Preferred Stock is
subject to mandatory redemption at its liquidation preference of $1,000 per
share, plus accumulated and unpaid dividends on March 31, 2009. The Intermedia
Series B Preferred Stock will be redeemable at the option of Intermedia at any
time after March 31, 2002 at rates commencing with 106.75%, declining to 100% on
March 31, 2007. Intermedia Series B Preferred Stock is generally entitled to
one-tenth of one vote per share on all matters voting together with the common
stock of Intermedia as a single class.


                                      F-61
<Page>

            WORLDCOM GROUP (AN INTEGRATED BUSINESS OF WORLDCOM, INC.)
                     NOTES TO COMBINED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

(4)   COMPANY OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES OF
      SUBSIDIARIES AND OTHER REDEEMABLE PREFERRED SECURITIES - (CONTINUED)

      The Digex Series A Preferred Stock has an aggregate liquidation preference
of $100 million, and is convertible into approximately 1,462,000 shares of Class
A Common Stock of Digex. The Digex Series A Preferred Stock does not pay
dividends and there are no voting rights.

      As of December 31, 2001, we also had $750 million aggregate principal
amount of 8% Cumulative Quarterly Income Preferred Securities, Series A,
representing 30 million shares outstanding due June 30, 2026 and 475 shares of
an authorized 500 shares of 6.375% cumulative preferred stock, Class A, or Class
A Preferred Stock. Each share of Class A Preferred Stock has a par value of
$0.01 per share and a liquidation preference of $100,000 per share. The Class A
Preferred Stock is mandatorily redeemable at the redemption price of $100,000
per share plus accumulated and unpaid dividends on January 1, 2019. Dividends on
the Class A Preferred Stock are payable quarterly at a rate per annum equal to
6.375% of the liquidation preference of $100,000 per share when, as and if
declared.

(5) PREFERRED STOCK -

      In October 2001, we exercised our option to redeem all of our outstanding
Series B Preferred Stock. Prior to the redemption date, substantially all of the
holders of our Series B Preferred Stock elected to convert the preferred stock
into 0.1460868 shares of WorldCom group stock and 0.005843472 shares of MCI
group stock for each share of Series B Preferred Stock held.

      In January 2000, each outstanding share of Series C $2.25 Cumulative
Convertible Exchangeable Preferred Stock was redeemed by us for $50.75 in cash,
or approximately $190 million in the aggregate.

(6) SHAREHOLDER RIGHTS PLAN -

      See Note 7 to our consolidated financial statements for a detailed
description of our shareholder rights plan.

(7) LEASES AND OTHER COMMITMENTS -

      WorldCom leases office facilities and equipment under non-cancelable
operating and capital leases and is also obligated under various right-of-way
agreements having initial or remaining terms of more than one year and allocates
rent expense on these leases attributable to the WorldCom group and the MCI
group in accordance with our allocation policies. Rental expense allocated to
the WorldCom group under these operating leases was $160 million, $203 million
and $304 million in 1999, 2000 and 2001, respectively. The WorldCom group's
rental expense in 2001 increased as a result of our movement of technical
facilities closer to our customers which should result in lower access costs in
the future, international expansion and to a lesser degree, the inclusion of
Intermedia and annual rent escalation.

      The WorldCom group is an integrated business of WorldCom and is therefore
subject to all our liabilities and obligations, including leases and other
commitments. See Note 8 to WorldCom's consolidated financial statements for a
description of our leases and other commitments.

(8) CONTINGENCIES -

      The WorldCom group shareholders are subject to all of the risks related to
an investment in WorldCom and the WorldCom group, including the effects of any
legal proceedings and claims against the MCI group. See Note 9 to our
consolidated financial statements for information related to our contingencies.


                                      F-62
<Page>

            WORLDCOM GROUP (AN INTEGRATED BUSINESS OF WORLDCOM, INC.)
                     NOTES TO COMBINED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

(9) EMPLOYEE BENEFIT PLANS -

STOCK OPTION PLANS:

      WorldCom has several stock option plans under which options to acquire
shares of WorldCom group stock may be granted to directors, officers and
employees of the WorldCom group and the MCI group. WorldCom accounts for these
plans under APB Opinion No. 25, under which no compensation cost is recognized.
Terms and conditions of WorldCom's options, including exercise price and the
period in which options are exercisable, generally are at the discretion of the
Compensation and Stock Option Committee of our board of directors; however, no
options are exercisable for more than 10 years after date of grant.

401(k) PLANS:

      WorldCom offers our qualified employees the opportunity to participate in
one of our defined contribution retirement plans qualifying under the provisions
of Section 401(k) of the Internal Revenue Code. Each employee may contribute on
a tax deferred basis a portion of annual earnings not to exceed $10,500.
WorldCom matches individual employee contributions in selected plans, up to a
maximum level which in no case exceeds 6% of the employee's compensation.
Expenses allocated to the WorldCom group relating to our 401(k) plans were $45
million, $44 million and $47 million for the years ended December 31, 1999, 2000
and 2001, respectively.

PENSION AND OTHER POST-RETIREMENT BENEFIT PLANS:

      We maintain various defined benefit plans and other post-retirement
benefit plans that cover selected eligible employees of the WorldCom group and
the MCI group. Annual service cost is determined using the Projected Unit Credit
actuarial method, and prior service cost is amortized on a straight-line basis
over the average remaining service period of employees.

      See Notes 10 and 11 to our consolidated financial statements for
additional disclosures related to employee benefit plans.

(10) INCOME TAXES -

      The WorldCom group combined balance sheets reflect the anticipated tax
impact of future taxable income or deductions implicit in the combined balance
sheets in the form of temporary differences. These temporary differences reflect
the difference between the basis in the assets and liabilities for financial
reporting purposes and amounts used for income tax purposes and the impact of
available NOL carryforwards as measured in the WorldCom group's combined
financial statements and as measured by tax laws using enacted tax rates.

      The provision for income taxes is composed of the following (in millions):

<Table>
<Caption>
                                                                             1999      2000     2001
                                                                           -------   -------   -------
<S>                                                                        <C>       <C>       <C>
            Current ............................................           $  (654)  $   580   $  (188)
            Deferred ...........................................             2,510     1,410     1,131
                                                                           -------   -------   -------
            Total provision for income taxes ...................           $ 1,856   $ 1,990   $   943
                                                                           =======   =======   =======
</Table>

      The following is a reconciliation of the provision for income taxes to the
expected amounts using the statutory rate:


                                      F-63
<Page>

            WORLDCOM GROUP (AN INTEGRATED BUSINESS OF WORLDCOM, INC.)
                     NOTES TO COMBINED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

(10) INCOME TAXES - (CONTINUED)

<Table>
<Caption>
                                                                                    1999       2000       2001
                                                                                    ----       ----       ----
<S>                                                                                 <C>        <C>        <C>
            Expected statutory amount .....................................         35.0%      35.0%      35.0%
            Nondeductible amortization of excess of cost over
            net tangible assets acquired ..................................          6.7        6.0       10.4
            State income taxes ............................................          2.5        2.6       (5.0)
            Valuation allowance ...........................................         (2.5)        --         --
            Tax credits ...................................................         (0.2)      (0.4)      (1.9)
            Other .........................................................          0.6       (3.1)       0.3
                                                                                    ----       ----       ----
            Actual tax provision ..........................................         42.1%      40.1%      38.8%
                                                                                    ====       ====       ====
</Table>

      The following is a summary of the significant components of the WorldCom
group's attributed deferred tax assets and liabilities as of December 31, 2000
and 2001 (in millions):

<Table>
<Caption>
                                                                       2000                      2001
                                                             ----------------------     ----------------------
                                                              ASSETS    LIABILITIES     ASSETS     LIABILITIES
                                                             -------    -----------     -------   ------------
<S>                                                          <C>          <C>           <C>          <C>
            Fixed assets ...........................         $    --      $(3,957)      $    --      $(4,488)
            Goodwill and other intangibles .........              --         (167)           --          (52)
            Investments ............................             363           --           392           --
            Other assets ...........................              --         (264)           --         (423)
            Accrued liabilities ....................             745           --           348           --
            NOL carryforwards ......................             517           --         1,186           --
            Tax credits ............................             692           --           676           --
            Other ..................................              --         (290)           --         (129)
                                                             -------      -------       -------      -------
                                                               2,317       (4,678)        2,602       (5,092)
            Valuation allowance ....................            (191)          --          (465)          --
                                                             -------      -------       -------      -------
                                                             $ 2,126      $(4,678)      $ 2,137      $(5,092)
                                                             =======      =======       =======      =======
</Table>

      At December 31, 2001, the WorldCom group was attributed unused NOL
carryforwards for federal income tax purposes of approximately $3.1 billion
which expire in various amounts during the years 2011 through 2021. These NOL
carryforwards result in a deferred tax asset of approximately $1.2 billion at
December 31, 2001.

      Approximately $1.7 billion of NOL carryforwards for federal income tax
purposes relate to preacquisition NOL carryforwards attributable to entities
acquired in transactions accounted for as purchases. These carryforwards and
other deferred tax assets result in deferred tax assets for which a valuation
allowance of $433 million has been established. If subsequent events or
conditions dictate an increase in the need for a valuation allowance
attributable to such deferred tax assets, the income tax expense for that period
will be increased accordingly.

      In addition, at December 31, 2001 the WorldCom group was attributed unused
NOL carryforwards of $85 million outside the United States which generally do
not expire. These carryforwards result in a $32 million deferred tax asset for
which a valuation allowance has been established.

(11) SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION -

      Interest paid by the WorldCom group during the years ended December 31,
1999, 2000 and 2001 amounted to $816 million, $488 million and $886 million,
respectively. Income taxes paid by the WorldCom group, net of refunds, during
the years ended December 31, 1999, 2000 and 2001 were $35 million, $28 million
and $148 million, respectively.


                                      F-64
<Page>

            WORLDCOM GROUP (AN INTEGRATED BUSINESS OF WORLDCOM, INC.)
                     NOTES TO COMBINED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

(11) SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION - (CONTINUED)

      In conjunction with business combinations attributed to the WorldCom
group, assets acquired and liabilities assumed, including revisions to
previously recorded acquisitions, and WorldCom common stock issued were as
follows (in millions):

<Table>
<Caption>
                                                                               1999       2000        2001
                                                                             -------    -------     -------
<S>                                                                          <C>        <C>         <C>
         Fair value of assets acquired ...........................           $   (92)   $    --     $ 1,932
         Goodwill and other intangible assets ....................             2,041         43       5,102
         Liabilities assumed .....................................              (935)       (29)     (4,201)
         Preferred stock issued or assumed .......................                --         --      (1,361)
         WorldCom common stock issued ............................              (228)        --      (1,266)
                                                                             -------    -------     -------
         Net cash paid ...........................................           $   786    $    14     $   206
                                                                             =======    =======     =======
</Table>

(12) SEGMENT AND GEOGRAPHIC INFORMATION -

      Based on our organizational structure, the WorldCom group operates in two
reportable segments: Commercial voice, data and Internet and International
operations. The WorldCom group's reportable segments represent business units
that primarily offer similar products and services; however, the business units
are managed separately due to the type and class of customer as well as the
geographic dispersion of their operations. The Commercial voice, data and
Internet segment includes voice, data and other types of domestic communications
services for commercial customers, and Internet services including dedicated
access and web and application hosting services. International operations
provide voice, data, Internet and other similar types of communications services
to customers primarily in Europe and the Asia Pacific region.

      Our chief operating decision-maker utilizes revenue information in
assessing performance and making overall operating decisions and resource
allocations. Communications services are generally provided utilizing WorldCom's
fiber optic networks, which do not make a distinction between the types of
services provided. Profit and loss information is reported only on a combined
basis to the chief operating decision-maker and our board of directors.

      The accounting policies of the segments are the same as those described in
the summary of significant accounting policies. Information about the WorldCom
group's segments is as follows (in millions):

<Table>
<Caption>
                                                                REVENUES FROM                         SELLING, GENERAL AND
                                                              EXTERNAL CUSTOMERS                          ADMINISTRATIVE
                                                      ------------------------------------     ------------------------------------
                                                         1999          2000         2001         1999           2000          2001
                                                      --------      --------      --------     --------      --------      --------
<S>                                                   <C>           <C>           <C>          <C>           <C>           <C>
     Voice, data and Internet ...................     $ 14,817      $ 16,880      $ 18,371     $  2,655      $  3,209      $  3,895
     International operations ...................        1,624         2,367         2,977          774         1,094         1,409
     Corporate - other charges ..................           --            --            --           --           433           754
     Other ......................................          523            --            --          170            --            --
                                                      --------      --------      --------     --------      --------      --------
          Total before Embratel .................       16,964        19,247        21,348        3,599         4,736         6,058
     Embratel ...................................        2,854         3,662            --          610           980            --
     Elimination of intersegment revenue/expenses          (82)         (154)           --          (14)          (27)           --
                                                      --------      --------      --------     --------      --------      --------
          Total .................................     $ 19,736      $ 22,755      $ 21,348     $  4,195      $  5,689      $  6,058
                                                      ========      ========      ========     ========      ========      ========

<Caption>


                                                                 CAPITAL EXPENDITURES
                                                          ----------------------------------
                                                            1999         2000          2001
                                                          --------     --------     --------
<S>                                                       <C>          <C>          <C>
     Voice, data and Internet ...................         $  5,532     $  8,376     $  6,505
     International operations ...................            1,494        1,754        1,114
     Corporate - other charges ..................               --           --           --
     Other ......................................               10           --           --
                                                          --------     --------     --------
          Total before Embratel .................            7,036       10,130        7,619
     Embratel ...................................              893          854           --
     Elimination of intersegment revenue/expenses               --           --           --
                                                          --------     --------     --------
          Total .................................         $  7,929     $ 10,984     $  7,619
                                                          ========     ========     ========
</Table>


                                      F-65
<Page>

            WORLDCOM GROUP (AN INTEGRATED BUSINESS OF WORLDCOM, INC.)
                     NOTES TO COMBINED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

(12) SEGMENT AND GEOGRAPHIC INFORMATION - (CONTINUED)

      As discussed in Note 1, we deconsolidated our investment in Embratel as of
January 1, 2001. Embratel, which provides communications services in Brazil, was
designated as a separate reportable segment of the WorldCom group for periods
prior to January 1, 2001. Accordingly, we have included Embratel in our WorldCom
group segment information presented for 1999 and 2000.

      Additionally, Other includes the operations of MCI Systemhouse Corp and
SHL Systemhouse Co. which was sold to Electronic Data Systems Corporation in
April 1999.

      The following is a reconciliation of the segment information to income
before income taxes, minority interests and cumulative effect of accounting
change (in millions):

<Table>
<Caption>
                                                                          1999          2000          2001
                                                                        --------      --------      --------
<S>                                                                     <C>           <C>           <C>
      Revenues ....................................................     $ 19,736      $ 22,755      $ 21,348
      Operating expenses ..........................................       15,105        17,714        18,299
                                                                        --------      --------      --------
      Operating income ............................................        4,631         5,041         3,049
      Other income (expense):
         Interest expense .........................................         (460)         (458)       (1,029)
         Miscellaneous ............................................          237           385           412
                                                                        --------      --------      --------
      Income before income taxes, minority interests and cumulative
         effect of  accounting change .............................     $  4,408      $  4,968      $  2,432
                                                                        ========      ========      ========
</Table>

      Information about the WorldCom group's operations by geographic areas are
as follows (in millions):

<Table>
<Caption>
                                                     1999                          2000                         2001
                                           -------------------------     -------------------------     -------------------------
                                                          LONG-LIVED                    LONG-LIVED                    LONG-LIVED
                                            REVENUES        ASSETS        REVENUES        ASSETS        REVENUES        ASSETS
                                           ----------     ----------     ----------     ----------     ----------     ----------
<S>                                        <C>            <C>            <C>            <C>            <C>            <C>
      United States ...................    $   14,760     $   19,635     $   16,111     $   27,643     $   17,778     $   32,832
      Brazil ..........................         2,772          4,017          3,508          4,008             --             --
      All other international .........         2,204          2,575          3,136          3,526          3,570          3,960
                                           ----------     ----------     ----------     ----------     ----------     ----------
      Total ...........................    $   19,736     $   26,227     $   22,755     $   35,177     $   21,348     $   36,792
                                           ==========     ==========     ==========     ==========     ==========     ==========
</Table>

(13) RELATED PARTY TRANSACTIONS -

      See Note 16 to our consolidated financial statements for information
pertaining to our related party transactions.

(14) UNAUDITED QUARTERLY FINANCIAL DATA -

<Table>
<Caption>
                                                                                       QUARTER ENDED
                                                       ----------------------------------------------------------------------------
                                                           MARCH 31,           JUNE 30,         SEPTEMBER 30,        DECEMBER 31,
                                                       ----------------------------------------------------------------------------
                                                        2000      2001      2000      2001      2000      2001      2000      2001
                                                       ----------------------------------------------------------------------------
                                                                                       (in millions)
<S>                                                    <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>
      Revenues ....................................    $5,429    $5,203    $5,621    $5,362    $5,844    $5,482    $5,861    $5,301
      Operating income ............................     1,390       966     1,364       310     1,139       999     1,148       774
      Income before cumulative effect of accounting
          change ..................................       741       548       732       126       599       503       601       347
      Net income ..................................       649       532       716       110       583       460       585       305
</Table>


                                      F-66
<Page>

                          INDEX TO FINANCIAL STATEMENTS

<Table>
<Caption>
                                                                                                   PAGE
                                                                                                   ----
<S>                                                                                                <C>
MCI GROUP (AN INTEGRATED BUSINESS OF WORLDCOM, INC.)
   Report of independent public accountants.....................................................   F-68
   Combined balance sheets as of December 31, 2000 and 2001.....................................   F-69
   Combined statements of operations for the three years ended December 31, 2001................   F-70
   Combined statements of allocated net worth for the three years ended December 31, 2001.......   F-71
   Combined statements of cash flows for the three years ended December 31, 2001................   F-72
   Notes to combined financial statements.......................................................   F-73
</Table>

                                   -----------

      You should understand the following when reading the combined financial
statements of the MCI group, which is an integrated business of WorldCom, Inc.:

      o     WorldCom has presented the combined financial statements of the MCI
            group at substantially the same level of detail as the consolidated
            financial statements of WorldCom. WorldCom believes that investors
            require detailed financial information for the MCI group to properly
            evaluate the market potential of MCI group stock;

      o     the MCI group is a collection of WorldCom's MCI businesses and is
            not a separate legal entity;

      o     the holders of the MCI group stock are shareholders of WorldCom and
            do not have an ownership interest in the MCI group or any company in
            the MCI group or a claim on any of the assets attributed to the MCI
            group;

      o     the attribution of a portion of WorldCom's assets and liabilities to
            the MCI group does not affect WorldCom's ownership of these assets
            or responsibility for these liabilities and does not affect the
            rights of any creditor of WorldCom; and

      o     the assets attributed to the MCI group could be subject to the
            liabilities attributed to the WorldCom group.


                                      F-67
<Page>

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders of WorldCom, Inc.:

      We have audited the accompanying combined balance sheets of the MCI group
(an integrated business of WorldCom, Inc.) (as described in Note 1) as of
December 31, 2000 and 2001, and the related combined statements of operations,
allocated net worth and cash flows for each of the years in the three-year
period ended December 31, 2001. These financial statements are the
responsibility of WorldCom, Inc.'s management. Our responsibility is to express
an opinion on these financial statements based on our audits.

      We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

      In our opinion, the MCI group combined financial statements referred to
above present fairly, in all material respects, the combined financial position
of the MCI group as of December 31, 2000 and 2001, and the combined results of
its operations and its cash flows for each of the years in the three-year period
ended December 31, 2001, in conformity with accounting principles generally
accepted in the United States.

      As discussed in Note 1 to the combined financial statements, effective
January 1, 2000, the MCI group changed its method of accounting for certain
activation and installation fee revenues and expenses.

      The MCI group is a fully integrated business of WorldCom, Inc.
Accordingly, as described in Note 1, the MCI group's combined financial
statements have been derived from the consolidated financial statements and
accounting records of WorldCom, Inc. and, therefore, reflect certain assumptions
and allocations. As more fully discussed in Note 1, the combined financial
statements of the MCI group should be read in conjunction with the audited
consolidated statements of WorldCom, Inc.


ARTHUR ANDERSEN LLP

Jackson, Mississippi
March 7, 2002


                                      F-68
<Page>

              MCI GROUP (an integrated business of WorldCom, Inc.)
                             COMBINED BALANCE SHEETS
                                  (In Millions)

<Table>
<Caption>
                                                                                        December 31,  December 31,
                                                                                            2000          2001
                                                                                        ------------  ------------
<S>                                                                                       <C>           <C>
ASSETS
Current assets:
  Cash and cash equivalents                                                               $     41      $      7
  Accounts receivable, net of allowance for bad debts of $514 in 2000 and $393 in 2001       1,835         1,574
  Deferred tax asset                                                                            41            10
  Other current assets                                                                         395           335
                                                                                          --------      --------
         Total current assets                                                                2,312         1,926
                                                                                          --------      --------
Property and equipment:
  Transmission equipment                                                                       405           445
  Communications equipment                                                                   2,227         2,444
  Furniture, fixtures and other                                                                676           680
  Construction in progress                                                                     170           130
                                                                                          --------      --------
                                                                                             3,478         3,699
  Accumulated depreciation                                                                  (1,232)       (1,682)
                                                                                          --------      --------
                                                                                             2,246         2,017
                                                                                          --------      --------
Goodwill and other intangible assets                                                         9,909         9,719
Other assets                                                                                   168           227
                                                                                          --------      --------
                                                                                          $ 14,635      $ 13,889
                                                                                          ========      ========
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current liabilities:
  Payable to WorldCom group, net                                                          $    649      $    900
  Accrued interest                                                                             108           111
  Accounts payable and accrued line costs                                                    2,438         2,093
  Other current liabilities                                                                    914         1,091
                                                                                          --------      --------
         Total current liabilities                                                           4,109         4,195
                                                                                          --------      --------
Long-term liabilities, less current portion:
  Long-term debt                                                                             6,000         5,505
  Long-term payable to WorldCom group, net                                                     976           976
  Deferred tax liability                                                                       928           870
  Other liabilities                                                                            159            30
                                                                                          --------      --------
         Total long-term liabilities                                                         8,063         7,381
                                                                                          --------      --------

Commitments and contingencies

Allocated net worth                                                                          2,463         2,313
                                                                                          --------      --------
                                                                                          $ 14,635      $ 13,889
                                                                                          ========      ========
</Table>

The accompanying notes are an integral part of these combined statements.


                                      F-69
<Page>

              MCI GROUP (an integrated business of WorldCom, Inc.)
                        COMBINED STATEMENTS OF OPERATIONS
                                  (In Millions)

<Table>
<Caption>
                                                                                 For the Years Ended December 31,
                                                                                ----------------------------------
                                                                                  1999         2000         2001
                                                                                --------     --------     --------
<S>                                                                             <C>          <C>          <C>
Revenues                                                                        $ 16,172     $ 16,335     $ 13,831
                                                                                --------     --------     --------

Operating expenses:
  Line costs                                                                       7,087        7,177        7,080
  Selling, general and administrative                                              5,071        5,162        5,348
  Depreciation and amortization                                                      757          884          938
                                                                                --------     --------     --------
        Total                                                                     12,915       13,223       13,366
                                                                                --------     --------     --------
Operating income                                                                   3,257        3,112          465
Other income (expense):
  Interest expense                                                                  (506)        (512)        (504)
  Miscellaneous                                                                        5           --           --
                                                                                --------     --------     --------
Income (loss) before income taxes and cumulative effect of accounting change       2,756        2,600          (39)
Income tax expense (benefit)                                                       1,109        1,035          (16)
                                                                                --------     --------     --------
Income (loss) before cumulative effect of accounting change                        1,647        1,565          (23)
Cumulative effect of accounting change (net of income tax of $7 in 2000)              --          (10)          --
                                                                                --------     --------     --------
Net income (loss)                                                               $  1,647     $  1,555     $    (23)
                                                                                ========     ========     ========
</Table>

The accompanying notes are an integral part of these combined statements.


                                      F-70
<Page>

              MCI GROUP (AN INTEGRATED BUSINESS OF WORLDCOM, INC.)
                   COMBINED STATEMENTS OF ALLOCATED NET WORTH
                   FOR THE THREE YEARS ENDED DECEMBER 31, 2001
                                  (IN MILLIONS)

<Table>
<S>                                                                     <C>
Allocated net worth at December 31, 1998                                $ 2,950
Net income                                                                1,647
Advances to WorldCom group, net                                          (2,097)
                                                                        -------
Allocated net worth at December 31, 1999                                  2,500
Net income                                                                1,555
Advances to WorldCom group, net                                          (1,592)
                                                                        -------
Allocated net worth at December 31, 2000                                  2,463
Net loss                                                                    (23)
Advances from WorldCom group, net                                            15
Dividends declared on MCI group common stock                               (142)
                                                                        -------
Allocated net worth at December 31, 2001                                $ 2,313
                                                                        =======
</Table>

    The accompanying notes are an integral part of these combined statements.


                                      F-71
<Page>

              MCI GROUP (AN INTEGRATED BUSINESS OF WORLDCOM, INC.)
                        COMBINED STATEMENTS OF CASH FLOWS
                                  (IN MILLIONS)

<Table>
<Caption>
                                                                                  For the Years Ended December 31,
                                                                                 ----------------------------------
                                                                                   1999         2000         2001
                                                                                 --------     --------     --------
<S>                                                                              <C>          <C>          <C>
Cash flows from operating activities:
Net income (loss)                                                                $  1,647     $  1,555     $    (23)
Adjustments to reconcile net income (loss) to net cash
  provided by operating activities:
    Cumulative effect of accounting change                                             --           10           --
    Depreciation and amortization                                                     757          884          938
    Provision for deferred income taxes (benefit)                                     393          239          (27)
    Change in assets and liabilities, net of effect of business combinations:
        Accounts receivable, net                                                     (264)         174          177
        Other current assets                                                           24         (215)          60
        Accounts payable and other current liabilities                                530         (960)        (133)
       Payable to WorldCom group, net                                                 555          649          251
    All other operating activities                                                     11           --          146
                                                                                 --------     --------     --------
Net cash provided by operating activities                                           3,653        2,336        1,389
                                                                                 --------     --------     --------
Cash flows from investing activities:
  Capital expenditures                                                               (787)        (500)        (267)
  Acquisitions and related costs                                                     (292)          --           --
  Increase in intangible assets                                                      (354)        (167)        (327)
  Decrease in other liabilities                                                       (85)         (16)        (129)
  All other investing activities                                                        8          (90)        (149)
                                                                                 --------     --------     --------
Net cash used in investing activities                                              (1,510)        (773)        (872)
                                                                                 --------     --------     --------
Cash flows from financing activities:
  Principal repayments on debt, net                                                    --           --         (495)
  Dividends paid on MCI group common stock                                             --           --          (71)
  Advances (to) from WorldCom group, net                                           (2,097)     ( 1,592)          15
                                                                                 --------     --------     --------
Net cash used in financing activities                                              (2,097)     ( 1,592)        (551)
                                                                                 --------     --------     --------

Net increase (decrease) in cash and cash equivalents                                   46          (29)         (34)
Cash and cash equivalents at beginning of period                                       24           70           41
                                                                                 --------     --------     --------
Cash and cash equivalents at end of period                                       $     70     $     41     $      7
                                                                                 ========     ========     ========
</Table>

   The accompanying notes are an integral part of these combined statements.


                                      F-72
<Page>

              MCI GROUP (AN INTEGRATED BUSINESS OF WORLDCOM, INC.)
                     NOTES TO COMBINED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

(1) THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES -

DESCRIPTION OF BUSINESS AND ORGANIZATION:

      Organized in 1983, WorldCom, Inc., a Georgia corporation, provides a broad
range of communications services to both U.S. and non-U.S. based businesses and
consumers. We are a global communications company utilizing a strategy based on
being able to provide service through our own facilities throughout the world
instead of being restricted to a particular geographic location. We call this
our "on-net" strategy. The on-net approach allows our customers to send data or
voice communications across town, across the U.S., or to any of our networks in
Europe or Asia, often without ever leaving our networks. The on-net approach
provides our customers with superior reliability and low operating costs. Our
core business is communications services, which includes voice, data, Internet
and international services. We serve as a holding company for our subsidiaries'
operations. References herein to WorldCom, "we," "our," or "us" include
WorldCom, Inc. and its subsidiaries, unless the context otherwise requires.

BASIS OF COMBINATION AND PRESENTATION:

      On June 7, 2001, our shareholders approved a recapitalization involving
the creation of two separately traded tracking stocks:

      o     WorldCom group stock, which is intended to reflect the performance
            of our data, Internet, international and commercial voice businesses
            and is quoted on The Nasdaq National Market under the trading symbol
            "WCOM", and

      o     MCI group stock, which is intended to reflect the performance of our
            consumer, small business, wholesale long distance voice and data,
            wireless messaging and dial-up Internet access businesses and is
            quoted on The Nasdaq National Market under the trading symbol
            "MCIT".

      In connection with the recapitalization, we amended our articles of
incorporation to replace our existing common stock with two new series of common
stock that are intended to reflect, or track, the performance of the businesses
attributed to the WorldCom group and the MCI group. Effective with the
recapitalization on June 7, 2001, each share of our existing common stock was
changed into one share of WorldCom group stock and 1/25 of a share of MCI group
stock.

      A tracking stock is a separate class of a company's common stock intended
to provide a return to investors based upon the financial performance of a
distinct business unit of the company, sometimes referred to as the targeted
business. These targeted businesses are collections of businesses that we have
grouped together in order for us to issue WorldCom group stock and MCI group
stock. The ownership of the targeted business does not change, and while each of
the classes of stock trade separately, all shareholders are common shareholders
of a single company, WorldCom, and are subject to all risks of an investment in
WorldCom as a whole.

      During the second quarter of 2001, we declared the initial quarterly
dividend for the MCI group stock. A cash dividend of $0.60 per share of MCI
group stock, or approximately $70 million in the aggregate, was paid on October
15, 2001 to shareholders of record as of the close of business on September 28,
2001. Dividends of $0.60 per share of MCI group stock were also declared in the
third and fourth quarters of 2001, which have been or will be paid in 2002.


                                      F-73
<Page>

              MCI GROUP (AN INTEGRATED BUSINESS OF WORLDCOM, INC.)
                     NOTES TO COMBINED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

(1) THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)

      The MCI group was initially allocated notional debt of $6 billion and our
remaining debt was allocated on a notional basis to the WorldCom group. We
intend, for so long as the WorldCom group stock and the MCI group stock remains
outstanding, to include in our filings under the Securities Exchange Act of
1934, as amended, the combined financial statements of each of the WorldCom
group and the MCI group. These combined financial statements will be prepared in
accordance with accounting principles generally accepted in the United States,
and in the case of annual financial statements, will be audited. These combined
financial statements are not legally required under current law or SEC
regulations.

      Voting rights of the holders of the WorldCom group and the MCI group stock
are prorated based on the relative market values of WorldCom group stock and MCI
group stock. We will conduct shareholder meetings that encompass all holders of
voting stock. The WorldCom group and the MCI group shareholders will vote
together as a single class on all matters brought to a vote of shareholders,
including the election of our directors.

      Our board of directors may at any time convert each outstanding share of
MCI group stock into shares of WorldCom group stock at 110% of the relative
trading value of MCI group stock for the 20 days prior to the announcement of
the conversion. No premium will be paid on a conversion that occurs after June
7, 2004.

      If all or substantially all of the WorldCom group or MCI group assets are
sold, either: (i) the relevant shareholders will receive a distribution equal to
the fair value of the net proceeds of the sale, either by special dividend or by
redemption of shares; or (ii) each outstanding share of MCI group stock will be
converted into shares of WorldCom group stock at 110% or 100% of the relative
trading value of MCI group stock for a 10 trading day period following the sale.

INTERGROUP ALLOCATION POLICIES:

TRACKING STOCK POLICY STATEMENT

      Our board of directors has fiduciary duties to all shareholders of
WorldCom, and no independent fiduciary duties to the holders of WorldCom group
stock and MCI group stock. Our board of directors has adopted a policy statement
regarding the WorldCom group and the MCI group matters. Our board of directors
or any special committee appointed by our board of directors, may, without
shareholder approval, change the policies set forth in our policy statement. Our
board of directors or any special committee appointed by our board of directors
also may, without shareholder approval, adopt additional policies or make
exceptions with respect to the application of the policies described in our
policy statement in connection with particular facts and circumstances, all as
they may determine to be in the best interests of WorldCom. The material
provisions of the policy statement are as follows:

      GENERAL POLICY. The policy statement provides that all material matters as
to which the holders of WorldCom group stock and MCI group stock may have
potentially divergent interests will be resolved in a manner that our board of
directors or any special committee appointed by our board of directors
determines to be in the best interests of WorldCom as a whole, after giving due
consideration to the potentially divergent interests and all other interests of
the holders of the separate series of common stock of WorldCom that our board of
directors or any special committee, as the case may be, deems relevant. The
policy statement provides that we will manage the businesses in the WorldCom
group and the MCI group in a manner intended to maximize the operations, assets
and values of both groups, and with complementary deployment of personnel,
capital and facilities, consistent with their respective business objectives.


                                      F-74
<Page>

              MCI GROUP (AN INTEGRATED BUSINESS OF WORLDCOM, INC.)
                     NOTES TO COMBINED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

(1) THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)

      Under this policy statement, all material transactions which are
determined by our board of directors to be in the ordinary course of business
between the WorldCom group and the MCI group, except for those described in the
paragraphs below, are intended to be on terms consistent with terms that would
be applicable to arm's-length dealings with unrelated third parties.

      CASH MANAGEMENT. Decisions regarding the investment of surplus cash, the
issuance and retirement of debt, and the issuance and repurchase of common and
preferred stock will continue to be made by WorldCom management on behalf of the
groups. Under this centralized cash management system, the MCI group will
generally not be allocated any cash balances.

      CORPORATE ALLOCATIONS

      Corporate allocations have been attributed and/or allocated to the
WorldCom group or the MCI group based upon identification of the services
specifically benefiting each group. Such corporate allocations may change at our
discretion and do not require shareholder approval. Management believes that the
allocation methodologies applied are reasonable and these methods have been
consistently applied for all periods presented. However, it is not practical to
determine whether the allocated amounts represent amounts that would have been
incurred on a stand alone basis. Explanations of the composition and the method
of allocation for such items are described below.

      SHARED CORPORATE SERVICES. We have directly charged specifically
identifiable costs to the WorldCom group and the MCI group. Where determinations
based on specific usage alone were impracticable, we used other allocation
methods that we believe are fair, including methods based on factors such as the
number of employees and total line costs or revenues generated by each group.
For the years ended December 31, 1999, 2000, and 2001, the MCI group was
allocated $1.6 billion, $1.9 billion and $1.6 billion of these costs,
respectively.

      COMMERCIAL INTER-GROUP TRANSACTIONS. The MCI group is allocated a
proportion, based on usage, of our fiber optic system costs for use of the fiber
optic systems, which are attributed to the WorldCom group. For the years ended
December 31, 1999, 2000 and 2001, fiber optic system costs allocated to the MCI
group were $189 million, $373 million and $360 million, respectively. In
addition, the WorldCom group is allocated a proportion, based on usage, of our
switching costs for use of the business voice switched services, which are
attributed to the MCI group and the MCI group is allocated a corresponding
decrease to depreciation expense which, for the years ended December 31, 1999,
2000 and 2001, totaled $64 million, $87 million and $101 million, respectively.
Selling, general and administrative expenses for the MCI group include allocated
costs for the MCI group's proportionate share of costs associated with
buildings, furniture and fixtures attributed to the WorldCom group, and the cost
allocated to the MCI group for use of the MCI tradenames as discussed below. For
the years ended December 31, 1999, 2000 and 2001, these allocated costs totaled
$331 million, $254 million and $360 million, respectively.

      All other material commercial transactions in the ordinary course of
business between the groups are intended, to the extent practicable, to be on
terms consistent with terms that would be applicable to arm's-length dealings
with unrelated third parties and will be subject to the review and approval of
our board of directors or any special committee. Neither group is under any
obligation to use services provided by the other group, and each group may use
services provided by a competitor of the other group if our board of directors
or any special committee determines it is in the best interests of WorldCom as a
whole.


                                      F-75
<Page>

              MCI GROUP (AN INTEGRATED BUSINESS OF WORLDCOM, INC.)
                     NOTES TO COMBINED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

(1)  THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)

      ALLOCATION OF INTANGIBLE ASSETS. Intangible assets consist of the excess
consideration paid over the fair value of net tangible assets acquired by us in
business combinations accounted for under the purchase method and include
goodwill, channel rights, developed technology and tradenames. These assets have
been attributed to the respective groups based on specific identification and
where acquired companies have been divided between the WorldCom group and the
MCI group, the intangible assets have been attributed based on the respective
fair values at date of purchase of the related operations attributed to each
group. Management believes that this method of allocation is equitable and
provides a reasonable estimate of the intangible assets attributable to the
WorldCom group and the MCI group.

      All tradenames, including the MCI tradename and the other related MCI
tradenames, have been attributed to the WorldCom group. The MCI group will be
allocated an expense, and the WorldCom group will be allocated a corresponding
decrease in depreciation and amortization expense for the use of the MCI
tradenames for the next four years based on the following fee schedule:

<Table>
<S>                                          <C>
                2002...................      $30.0 million
                2003...................      $35.0 million
                2004...................      $40.0 million
                2005...................      $45.0 million
</Table>

      Any renewal or termination of use of the MCI tradenames by the MCI group
will be subject to the general policy that our board of directors will act in
the best interests of WorldCom. For each of the years ended December 31, 1999,
2000 and 2001, an expense of $27.5 million per annum was allocated to the MCI
group for use of the MCI tradenames.

      FINANCING ARRANGEMENTS. As of January 1, 1999, $6.0 billion of our
outstanding debt was notionally allocated to the MCI group and the remainder of
our debt was notionally allocated to the WorldCom group. Our debt was allocated
between the WorldCom group and the MCI group based upon a number of factors
including estimated future cash flows and the ability to pay debt service and
dividends of each of the groups. In addition, management considered certain
measures of creditworthiness, such as coverage ratios and various tests of
liquidity, in the allocation process. Our management believes that the initial
allocation was equitable and supportable by both the WorldCom group and the MCI
group. The debt allocated to the MCI group bears interest at a rate indicative
of the rate at which the MCI group would borrow from third parties if it was a
wholly owned subsidiary of WorldCom but did not have the benefit of any
guarantee by WorldCom. Interest rates are calculated on a quarterly basis. Debt
allocated to the MCI group bears an interest rate equal to the weighted-average
interest rate, excluding capitalized interest, of WorldCom debt plus 1 1/4
percent. Interest allocated to the WorldCom group reflects the difference
between our actual interest expense and the interest expense charged to the MCI
group. Subsequent to the recapitalization, each group's allocated debt increases
or decreases by the amount of any net cash generated by, or required to fund,
the group's operating activities, investing activities, dividend payments, share
repurchases and other financing activities.

      As of December 31, 2001, our receivables purchase program consisted of a
$3.7 billion pool of receivables in which the purchaser owned an undivided
interest, including the $2.0 billion sold, of which $920 million and $273
million relate to the MCI group, respectively. The receivables sold were
assigned based on specific identification where practical, or allocated based on
total revenues. Our management believes that this method of allocation is
equitable and provides a reasonable estimate of the receivables attributable to
the groups.


                                      F-76
<Page>

              MCI GROUP (AN INTEGRATED BUSINESS OF WORLDCOM, INC.)
                     NOTES TO COMBINED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

(1) THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)

FAIR VALUE OF FINANCIAL INSTRUMENTS:

      See Note 1 to our consolidated financial statements for additional fair
value descriptions.

CASH AND CASH EQUIVALENTS:

      We consider cash in banks and short-term investments with original
maturities of three months or less as cash and cash equivalents.

PROPERTY AND EQUIPMENT:

      Property and equipment are stated at cost. Depreciation is provided for
financial reporting purposes using the straight-line method over the following
estimated useful lives:

<Table>
<S>                                                           <C>
              Transmission equipment.....................     4 to 10 years
              Communications equipment...................     5 to 10 years
              Furniture, fixtures, buildings and other...     4 to 39 years
</Table>

      We evaluate the recoverability of property and equipment when events and
circumstances indicate that such assets might be impaired. We determine
impairment by comparing the undiscounted future cash flows estimated to be
generated by these assets to their respective carrying amounts. In the event an
impairment exists on property and equipment attributed to the MCI group, a loss
will be recognized by the MCI group based on the amount by which the carrying
value exceeds the fair value of the asset. If quoted market prices for an asset
are not available, fair market value is determined primarily using the
anticipated cash flows discounted at a rate commensurate with the risk involved.
Losses on property and equipment to be disposed of are determined in a similar
manner, except that fair market values are reduced for the cost to dispose.

      Maintenance and repairs are expensed as incurred. Replacements and
betterments are capitalized. The cost and related reserves of assets sold or
retired are removed from the accounts, and any resulting gain or loss is
reflected in results of operations.

GOODWILL AND OTHER INTANGIBLE ASSETS:

      The major classes of intangible assets attributed to the MCI group as of
December 31, 2000 and 2001 are summarized below (in millions):

<Table>
<Caption>
                                                                   AMORTIZATION PERIOD       2000          2001
                                                                   -------------------       ----          ----
<S>                                                                   <C>                  <C>           <C>
            Goodwill ........................................         10 to 40 years       $  9,274      $  9,274
            Developed technology ............................         5 to 10 years             510           510
            Other intangibles ...............................         5 to 10 years           1,113         1,443
                                                                                           --------      --------
                                                                                             10,897        11,227
            Less: accumulated amortization ..................                                  (988)       (1,508)
                                                                                           --------      --------
            Goodwill and other intangible assets, net .......                              $  9,909      $  9,719
                                                                                           ========      ========
</Table>

      Intangible assets are amortized using the straight-line method for the
periods noted above.


                                      F-77
<Page>

              MCI GROUP (AN INTEGRATED BUSINESS OF WORLDCOM, INC.)
                     NOTES TO COMBINED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

(1) THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)

      Goodwill is recognized for the excess of the purchase price of the various
business combinations over the value of the identifiable net tangible and
intangible assets acquired. Realization of acquisition-related intangibles,
including goodwill, is periodically assessed by our management based on the
current and expected future profitability and cash flows of acquired companies
and their contribution to the overall operations of the MCI group.

      Also included in other intangibles are costs incurred to develop software
for internal use. Such costs were $356 million, $160 million and $325 million
for the years ended December 31, 1999, 2000 and 2001, respectively.

RECOGNITION OF REVENUES:

      The MCI group records revenues for telecommunications services at the time
of customer usage. Service activation and installation fees are amortized over
the average customer contract life.

ACCOUNTING FOR RECIPROCAL COMPENSATION AND OTHER:

      Reciprocal compensation represents a reimbursement of costs for call
termination performed on behalf of other carriers' customers and is determined
contractually based on fixed rate per minute charges to those carriers. Small
business and consumer primary interexchange carrier charges, or PICC, are
flat-rate charges mandated by the FCC which apply to telecommunications
companies that connect to customers through a traditional phone company's
facilities. Effective July 1, 2000, as a result of the FCC's Coalition for
Affordable Local and Long Distance Services, or CALLs order, the PICC fee is
billed directly to the customer by the traditional phone company rather than to
MCI group and rebilled to the customer. Central office based remote access
equipment sales represent the reimbursement of customer specific equipment costs
incurred by MCI group on behalf of the customer as part of service provisioning.
As such, we have determined that it is more appropriate to reflect these
reimbursements of our cost as an offset to cost of sales rather than reporting
these reimbursements on a gross basis as revenues. During the years ended
December 31, 1999, 2000 and 2001, such cost reimbursement amounts recorded by
the MCI group totaled $817 million, $802 million and $366 million, respectively.

CUMULATIVE EFFECT OF ACCOUNTING CHANGE:

      During the fourth quarter of 2000, the MCI group implemented SAB 101,
which requires certain activation and installation fee revenues to be amortized
over the average life of the related service rather than be recognized
immediately. Costs directly related to these revenues may also be deferred and
amortized over the customer contract life. As required by SAB 101, the MCI group
retroactively adopted this accounting effective January 1, 2000, which resulted
in a one-time expense of $10 million, net of income tax benefit of $7 million.
The pro forma effect of adopting SAB 101 on periods prior to January 1, 2000 was
not material to the MCI group's financial position or results of operations.

INCOME TAXES:

      The federal and state income tax liabilities incurred by WorldCom and
which are determined on a consolidated, combined, or unitary basis are allocated
between the WorldCom group and the MCI group in accordance with our policy
statement. The income tax expense or benefit for each group and the balance
sheet allocation of the expense is based on a comparison of our tax expense with
the hypothetical tax expense or benefit of the MCI group. The tax expense or
benefit allocable to the MCI group is the amount that the MCI group would have
incurred if it had filed tax returns as a separate taxpayer and the tax expense
allocable to the WorldCom group is the excess, if any, of our tax expense over
the tax expense or benefit allocable to the MCI group. Tax benefits that cannot
be used by a group generating those benefits but can be used on a consolidated
basis are credited to the group that


                                      F-78
<Page>

              MCI GROUP (AN INTEGRATED BUSINESS OF WORLDCOM, INC.)
                     NOTES TO COMBINED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

(1) THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)

generated those benefits. Had the WorldCom group and the MCI group filed
separate tax returns, the provision for income taxes and net income for each
group would not have significantly differed from the amounts reported on the
group's combined statements of operations for the years ended December 31, 1999,
2000 and 2001. However, the amounts of current and deferred taxes and taxes
payable or refundable attributed to each group on the historical financial
statements may differ from those that would have been allocated had the WorldCom
group or the MCI group filed separate income tax returns.

      Deferred tax assets and liabilities are based on temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and their respective tax bases, and the impact of available net
operating loss, or NOL, carryforwards.

EARNINGS PER SHARE:

      Our consolidated financial statements present basic and diluted earnings
(loss) per share for WorldCom group stock and MCI group stock using the
two-class method. The two-class method is an earnings formula that determines
the attributed earnings (loss) per share for WorldCom group stock and MCI group
stock according to participation rights in undistributed earnings. The combined
financial statements of the MCI group do not present earnings (loss) per share
because MCI group stock is a series of our common stock, and the MCI group is
not a legal entity with a capital structure.

      For purposes of our consolidated financial statements, basic earnings
(loss) per share attributed to MCI group stock is computed by dividing
attributed net income (loss) for the period by the number of weighted-average
shares of MCI group stock then outstanding. Diluted earnings (loss) per share
attributed to MCI group stock is computed by dividing attributed net income
(loss) for the period by the weighted-average number of shares of MCI group
stock outstanding, including the dilutive effect of MCI group stock equivalents.

CONCENTRATION OF CREDIT RISK:

      A portion of the MCI group's revenues is derived from services provided to
others in the telecommunications industry, mainly resellers of long distance
telecommunications service and Internet online services. As a result, the MCI
group has some concentration of credit risk among its customer base. The MCI
group performs ongoing credit evaluations of its larger customers' financial
condition and, at times, requires collateral from its customers to support its
receivables, usually in the form of assignment of its customers' receivables to
the MCI group in the event of nonpayment.

RECENTLY ISSUED ACCOUNTING STANDARDS:

      In June 2001, the FASB issued SFAS No. 141 "Business Combinations" and
SFAS No. 142 "Goodwill and Other Intangible Assets." SFAS No. 141 requires
business combinations initiated after June 30, 2001, to be accounted for using
the purchase method of accounting and broadens the criteria for recording
intangible assets separate from goodwill. Recorded goodwill and intangibles will
be evaluated against this new criteria and may result in certain intangibles
being subsumed into goodwill, or alternatively, amounts initially recorded as
goodwill may be separately identified and recognized apart from goodwill. Under
the new rules, goodwill and intangible assets deemed to have indefinite lives
will no longer be amortized but will be subject to annual impairment tests. The
statement includes provisions for the identification of reporting units for
purposes of assessing potential future impairments of goodwill. Upon adoption,
we stopped amortizing intangible assets with indefinite useful lives, including
goodwill and tradenames. Based on current levels of such assets, this will
reduce amortization expense by approximately $0.3


                                      F-79
<Page>

              MCI GROUP (AN INTEGRATED BUSINESS OF WORLDCOM, INC.)
                     NOTES TO COMBINED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

(1) THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)

billion annually at the MCI group. Additionally, we are conducting impairment
reviews of all intangible assets with indefinite useful lives and we expect to
complete this assessment no later than the second quarter of 2002, in accordance
with the provisions of SFAS No. 142. Based on our preliminary analyses, we
estimate that as a result of the adoption of SFAS No. 142 we will reduce
goodwill by approximately $1 billion at the MCI group.

      In June 2001, the FASB issued SFAS No. 143 "Asset Retirement Obligations,"
which establishes new accounting and reporting standards for legal obligations
associated with retiring assets. The fair value of a liability for an asset
retirement obligation must be recorded in the period in which it is incurred,
with the cost capitalized as part of the related long-lived assets and
depreciated over the asset's useful life. Changes in the liability resulting
from the passage of time will be recognized as operating expenses. SFAS No. 143
must be adopted by 2003. We have not yet quantified the impact of adopting SFAS
No. 143 on our consolidated results of operations or financial position.

      In August 2001, the FASB issued SFAS No. 144 "Accounting for the
Impairment or Disposal of Long-Lived Assets," which supersedes both SFAS No. 121
"Accounting for the Impairment of Long-Lived Assets for Long-Lived Assets to be
Disposed Of," and the accounting and reporting provisions for the disposal of a
segment of a business contained in APB Opinion No. 30, "Reporting the Results of
Operations - Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions." SFAS
No. 144 establishes a single accounting model for long-lived assets to be
disposed of by sale and broadens the presentation of discontinued operations.
The provisions of SFAS No. 144 are effective beginning in 2002 and are not
expected to have a material impact on our consolidated results of operations or
financial position.

USE OF ESTIMATES:

      The preparation of financial statements in conformity with accounting
principles generally accepted in the United States, or GAAP, requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and revenues and expenses during the period reported.
Actual results could differ from those estimates. Estimates are used when
accounting for allowance for doubtful accounts, revenue reserves, depreciation
and amortization, taxes and contingencies.

(2) BUSINESS COMBINATIONS -

      We have acquired other telecommunications companies offering similar or
complementary services to those offered by us. These acquisitions have been
accomplished through the purchase of the outstanding stock or assets of the
acquired entity for cash, notes, shares of our common stock, or a combination
thereof. The cash portion of acquisition costs has generally been financed
through our bank credit facilities.

      On October 1, 1999, we acquired SkyTel Communications, Inc., pursuant to
the merger of SkyTel with and into a wholly owned subsidiary of WorldCom. Upon
consummation of the SkyTel merger, the wholly owned subsidiary was renamed
SkyTel Communications, Inc. SkyTel is a leading provider of nationwide messaging
services in the United States. SkyTel principal operations include one-way
messaging services in the United States, advanced messaging services on the
narrow band personal communications services network in the United States and
international one-way messaging operations.


                                      F-80
<Page>

              MCI GROUP (AN INTEGRATED BUSINESS OF WORLDCOM, INC.)
                     NOTES TO COMBINED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

(2) BUSINESS COMBINATIONS - (CONTINUED)

      As a result of the SkyTel merger, each outstanding share of SkyTel common
stock was converted into the right to receive 0.3849 shares of WorldCom common
stock, par value $.01 per share, or approximately 23 million WorldCom common
shares in the aggregate. Holders of SkyTel's $2.25 Cumulative Convertible
Exchangeable Preferred Stock received one share of WorldCom Series C $2.25
Cumulative Convertible Exchangeable Preferred Stock for each share of SkyTel
preferred stock held. The SkyTel merger was accounted for as a
pooling-of-interests; and accordingly, our financial statements for periods
prior to the SkyTel merger have been restated to include the results of SkyTel.
SkyTel has been allocated to the MCI group.

      During 1999, 2000 and 2001, we recorded other liabilities of $582 million,
$29 million and $254 million, respectively, related to estimated costs of
unfavorable commitments of acquired entities, and other non-recurring costs
arising from various acquisitions and mergers. At December 31, 1999, 2000 and
2001, other liabilities attributed to the MCI group related to these and
previously recorded accruals totaled $160 million, $106 million and $53 million,
respectively.

(3) LONG-TERM DEBT -

      Our outstanding debt as of December 31, 2000 and 2001 consists of the
following (in millions):

<Table>
<Caption>
                                                                                              2000               2001
                                                                                            --------           --------
<S>                                                                                         <C>                <C>
            Commercial paper and credit facilities ...............................          $  3,629           $     --
            Floating rate notes due 2001 through 2002 ............................             1,560                 60
            7.88% - 8.25% Notes Due 2003-2010 ....................................             3,500              3,500
            7.38% Notes Due 2006-2011 ............................................             2,000              2,000
            6.13% - 6.95% Notes Due 2001-2028 ....................................             6,100              4,600
            7.13% - 7.75% Notes Due 2004-2027 ....................................             2,000              2,000
            8.88% Senior Notes Due 2006 ..........................................               672                 --
            7.13% - 8.25% Senior Debentures Due 2023-2027 ........................             1,436              1,434
            6.13% - 7.50% Senior Notes Due 2004-2012 .............................             1,934              1,925
            6.50% - 8.25% Notes Due 2004-2031 ....................................                --             11,939
            Intermedia 11.25%-12.25% Senior Discount Notes Due 2007-2009 .........                --                643
            Intermedia 8.50%-9.50% Senior Notes Due 2007-2009 ....................                --                581
            Capital lease obligations (maturing through 2017) ....................               413                953
            Embratel debt ........................................................             1,134                 --
            Other debt (maturing through 2008) ...................................               518                575
                                                                                            --------           --------
                                                                                              24,896             30,210
            Notional debt allocated to the WorldCom group ........................           (18,896)           (24,705)
                                                                                            --------           --------
            Notional debt allocated to the MCI group .............................          $  6,000           $  5,505
                                                                                            ========           ========
</Table>

      See Note 1 for a more detailed description of how we allocate debt to the
groups and Note 4 of our consolidated financial statements for additional debt
descriptions.

(4) SHAREHOLDER RIGHTS PLAN -

      See Note 7 to our consolidated financial statements for a detailed
description of our shareholder rights plan.

(5) LEASES AND OTHER COMMITMENTS -

      WorldCom leases office facilities and equipment under non-cancelable
operating and capital leases and is also obligated under various rights-of-way
agreements having initial or remaining terms of more than one year and allocates
rent expense on these leases attributable to the WorldCom group and the MCI
group in accordance with our allocation policies. Rental expense allocated to
the MCI group under these operating leases was $163 million, $189 million and
$213 million in 1999, 2000 and 2001, respectively. The MCI group's rental
expense in 2001 increased as a result of our movement of technical facilities
closer to our customers which should result in lower access costs in the future
and annual rent escalation.


                                      F-81
<Page>

              MCI GROUP (AN INTEGRATED BUSINESS OF WORLDCOM, INC.)
                     NOTES TO COMBINED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

(5) LEASES AND OTHER COMMITMENTS - (CONTINUED)

      The MCI group is an integrated business of WorldCom and is therefore
subject to all our liabilities and obligations, including leases and other
commitments. See Note 8 to our consolidated financial statements for a
description of our leases and other commitments.

(6) CONTINGENCIES -

      The MCI group shareholders are subject to all of the risks related to an
investment in WorldCom and the MCI group, including the effects of any legal
proceedings and claims against the WorldCom group. See Note 9 to our
consolidated financial statements for information related to our contingencies.

(7) EMPLOYEE BENEFIT PLANS -

STOCK OPTION PLANS:

      WorldCom has several stock option plans under which options to acquire
shares of WorldCom group stock may be granted to directors, officers and
employees of the WorldCom group and the MCI group. We do not maintain a plan for
the issuance of MCI group stock options. WorldCom accounts for these plans under
APB Opinion No. 25, under which no compensation cost is recognized. Terms and
conditions of WorldCom's options, including exercise price and the period in
which options are exercisable, generally are at the discretion of the
Compensation and Stock Option Committee of our board of directors; however, no
options are exercisable for more than 10 years after date of grant.

401(k) PLANS:

      WorldCom offers our qualified employees the opportunity to participate in
one of our defined contribution retirement plans qualifying under the provisions
of Section 401(k) of the Internal Revenue Code. Each employee may contribute on
a tax deferred basis a portion of annual earnings not to exceed $10,500.
WorldCom matches individual employee contributions in selected plans, up to a
maximum level which in no case exceeds 6% of the employee's compensation.
Expenses allocated to the MCI group relating to our 401(k) plans were $63
million, $68 million and $56 million for the years ended December 31, 1999, 2000
and 2001, respectively.

PENSION AND OTHER POST-RETIREMENT BENEFIT PLANS:

      We maintain various defined benefit plans and other post-retirement
benefit plans that cover selected eligible employees of the WorldCom group and
the MCI group. Annual service cost is determined using the Projected Unit Credit
actuarial method, and prior service cost is amortized on a straight-line basis
over the average remaining service period of employees.

EMPLOYEE STOCK PURCHASE PLAN:

      Effective July 1, 2001, we established the MCI group 2001 Employee Stock
Purchase Plan under Section 423 of the Code which allows eligible MCI group
employees to purchase shares of the MCI group stock through payroll deductions
not to exceed 15% of the employee's compensation. The purchase price is 85% of
the lower of the fair market value of the MCI group stock on the participant's
enrollment date or the exercise date. A maximum of 10 million shares of MCI
group stock are authorized for issuance. During 2001 shares totaling 346,000
were issued at an average price of $13.10 per share.


                                      F-82
<Page>

              MCI GROUP (AN INTEGRATED BUSINESS OF WORLDCOM, INC.)
                     NOTES TO COMBINED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

(7) EMPLOYEE BENEFIT PLANS - (CONTINUED)

      See Notes 10 and 11 to our consolidated financial statements for
additional disclosures related to employee benefit plans.

(8) INCOME TAXES -

      The MCI group combined balance sheets reflects the anticipated tax impact
of future taxable income or deductions implicit in the combined balance sheets
in the form of temporary differences. These temporary differences reflect the
difference between the basis in the assets and liabilities for financial
reporting purposes and amounts used for income tax purposes and the impact of
available NOL carryforwards as measured in the MCI group's combined financial
statements and as measured by tax laws using enacted tax rates.

      Income tax expense (benefit) is composed of the following (in millions):

<Table>
<Caption>
                                                                            1999       2000        2001
                                                                           ------     ------      ------
<S>                                                                        <C>        <C>         <C>
              Current .........................................            $  716     $  796      $   11
              Deferred ........................................               393        239         (27)
                                                                           ------     ------      ------
              Total income tax expense (benefit) ..............            $1,109     $1,035      $  (16)
                                                                           ======     ======      ======
</Table>

      The following is a reconciliation of income tax provision to the expected
amounts using the statutory rate:

<Table>
<Caption>
                                                                                    1999      2000     2001
                                                                                   -----      -----    -----
<S>                                                                                 <C>        <C>      <C>
            Expected statutory amount ....................................          35.0%      35.0%   (35.0)%
            Nondeductible amortization of excess of cost over net
                 tangible assets acquired ................................           3.0        3.1    193.9
            State income taxes ...........................................           2.5        2.6      5.0
            Tax credits ..................................................          (0.2)      (0.4)   (59.4)
            Other ........................................................          (0.3)      (0.9)  (145.5)
                                                                                   -----      -----   ------
            Actual tax provision .........................................          40.2%      39.8%   (41.0)%
                                                                                   =====      =====   ======
</Table>

      The following is a summary of the significant components of the MCI
group's attributed deferred tax assets and liabilities as of December 31, 2000
and 2001 (in millions):

<Table>
<Caption>
                                                                       2000                      2001
                                                              ----------------------    ----------------------
                                                              ASSETS     LIABILITIES    ASSETS     LIABILITIES
                                                              -------    -----------    -------    -----------
<S>                                                           <C>          <C>          <C>          <C>
              Fixed assets ...........................        $    --      $  (822)     $    --      $(1,092)
              Goodwill and other intangibles .........             45           --           41           --
              Accrued liabilities ....................             --         (102)          46           --
              NOL carryforwards ......................             --           --          129           --
              Tax credits ............................             68           --           10           --
              Other ..................................             --          (76)           6           --
                                                              -------      -------      -------      -------
                                                              $   113      $(1,000)     $   232      $(1,092)
                                                              =======      =======      =======      =======
</Table>

      At December 31, 2001, the MCI group was attributed unused NOL
carryforwards for federal income tax purposes of approximately $340 million
which expire in various amounts during the year 2021. These NOL carryforwards
result in a deferred tax asset of approximately $129 million at December 31,
2001.


                                      F-83
<Page>

              MCI GROUP (AN INTEGRATED BUSINESS OF WORLDCOM, INC.)
                     NOTES TO COMBINED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

(9) SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION -

      Interest paid by the MCI group during the years ended December 31, 1999,
2000 and 2001 amounted to $490 million, $564 million and $501 million,
respectively. Income taxes paid, net of refunds, during the years ended December
31, 1999 and 2000 were $71 million and $424 million, respectively. No income
taxes were paid during the year ended December 31, 2001.

      In conjunction with business combinations attributed to the MCI group,
assets acquired and liabilities assumed, including revisions to previously
recorded acquisitions, were as follows (in millions):

<Table>
<Caption>
                                                                        1999        2000       2001
                                                                       ------     --------    -------
<S>                                                                    <C>        <C>         <C>
           Fair value of assets acquired ....................          $  154     $     --    $    --
           Goodwill and other intangible assets .............             190           --         --
           Liabilities assumed ..............................             (52)          --         --
           WorldCom common stock issued .....................              --           --         --
                                                                       ------     --------    -------
           Net cash paid ....................................          $  292     $     --    $    --
                                                                       ======     ========    =======
</Table>

(10) SEGMENT AND GEOGRAPHIC INFORMATION -

      Based on our organizational structure, the MCI group operates in four
reportable segments: Consumer; Wholesale; Alternative channels and small
business; and Dial-up Internet. The MCI group's reportable segments represent
business units that primarily offer similar products and services; however, the
business units are managed separately due to the type and class of customer as
well as the geographic dispersion of their operations. Consumer includes
domestic voice communications services for consumer customers. Wholesale
includes domestic long distance voice and data communications services for
wholesale customers. Alternative channels and small business includes domestic
long distance voice and data, agents, prepaid calling cards and paging services
provided to alternative wholesale and small business customers. Dial-up Internet
includes dial-up Internet access services.

      Our chief operating decision-maker utilizes revenue information in
assessing performance and making overall operating decisions and resource
allocations. Communications services are generally provided utilizing WorldCom's
fiber optic networks, which do not make a distinction between the types of
services provided. Profit and loss information is reported only on a combined
basis to our chief operating decision-maker and our board of directors.

      The accounting policies of the segments are the same as those described in
the summary of significant accounting policies. Information about the MCI
group's segments is as follows (in millions):

(10) SEGMENT AND GEOGRAPHIC INFORMATION -

<Table>
<Caption>
                                                           REVENUES FROM           SELLING, GENERAL AND
                                                        EXTERNAL CUSTOMERS            ADMINISTRATIVE         CAPITAL EXPENDITURES
                                                   ---------------------------  -------------------------  -------------------------
                                                     1999      2000      2001     1999     2000     2001     1999     2000    2001
                                                   -------   -------   -------  -------  -------  -------  -------  -------  -------
<S>                                                <C>       <C>       <C>      <C>      <C>      <C>      <C>      <C>      <C>
      Consumer .................................   $ 7,590   $ 7,778   $ 7,227  $ 3,275  $ 2,823  $ 2,968  $   235  $   146  $    89
      Wholesale ................................     3,943     3,388     2,641      620      538      617      192       94       32
      Alternative channels and small business ..     3,142     3,541     2,427      808    1,030    1,092      182       75      109
      Dial-up Internet .........................     1,497     1,628     1,536      368      426      537      178      185       37
      Corporate - other charges ................        --        --        --       --      345      134       --       --       --
                                                   -------   -------   -------  -------  -------  -------  -------  -------  -------
      Total ....................................   $16,172   $16,335   $13,831  $ 5,071  $ 5,162  $ 5,348  $   787  $   500  $   267
                                                   =======   =======   =======  =======  =======  =======  =======  =======  =======
</Table>


                                      F-84
<Page>

              MCI GROUP (AN INTEGRATED BUSINESS OF WORLDCOM, INC.)
                     NOTES TO COMBINED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

(10) SEGMENT AND GEOGRAPHIC INFORMATION - (CONTINUED)

      The following is a reconciliation of the segment information to income
(loss) before income taxes and cumulative effect of accounting change (in
millions):

<Table>
<Caption>
                                                                                   1999        2000        2001
                                                                                 --------    --------    --------
<S>                                                                              <C>         <C>         <C>
      Revenues .........................................................         $ 16,172    $ 16,335    $ 13,831
      Operating expenses ...............................................           12,915      13,223      13,366
                                                                                 --------    --------    --------
      Operating income .................................................            3,257       3,112         465
      Other income (expense): ..........................................
         Interest expense ..............................................             (506)       (512)       (504)
         Miscellaneous .................................................                5          --          --
                                                                                 --------    --------    --------
      Income (loss) before income taxes and cumulative effect
         of accounting change ..........................................         $  2,756    $  2,600    $    (39)
                                                                                 ========    ========    ========
</Table>

      Information about the MCI group's operations by geographic areas are as
follows (in millions):

<Table>
<Caption>
                                                 1999                       2000                      2001
                                       -----------------------    -----------------------    ---------------------
                                                    LONG-LIVED                 LONG-LIVED               LONG-LIVED
                                       REVENUES        ASSETS     REVENUES       ASSETS      REVENUES     ASSETS
                                       --------     ----------    --------     ----------    --------   ----------
<S>                                    <C>          <C>           <C>          <C>           <C>        <C>
      United States ..........         $ 15,961     $    2,330    $ 16,066     $    2,173    $ 13,650   $    1,967
      International ..........              211             61         269             73         181           50
                                       --------     ----------    --------     ----------    --------   ----------
      Total ..................         $ 16,172     $    2,391    $ 16,335     $    2,246    $ 13,831   $    2,017
                                       ========     ==========    ========     ==========    ========   ==========
</Table>

(11) RELATED PARTY TRANSACTIONS -

      See Note 16 to our consolidated financial statements for information
pertaining to our related party transactions.

(12) UNAUDITED QUARTERLY FINANCIAL DATA -

<Table>
<Caption>
                                                                                   QUARTER ENDED
                                                  ------------------------------------------------------------------------------
                                                       MARCH 31,           JUNE 30,          SEPTEMBER 30,        DECEMBER 31,
                                                  ------------------------------------------------------------------------------
                                                    2000      2001      2000      2001       2000      2001      2000      2001
                                                  ------------------------------------------------------------------------------
                                                                                    (in millions)
<S>                                               <C>       <C>       <C>       <C>        <C>       <C>       <C>       <C>
Revenues ......................................   $ 4,183   $ 3,622   $ 4,186   $ 3,548    $ 4,193   $ 3,484   $ 3,773   $ 3,177
Operating income (loss) .......................     1,034       231     1,023        74        713       181       342       (21)
Income (loss) before cumulative effect of
  accounting change ...........................       547        62       541       (29)       352        33       125       (89)
Net income (loss) .............................       537        62       541       (29)       352        33       125       (89)
</Table>


                                      F-85
<Page>

                                  EXHIBIT INDEX

2.1*   Agreement and Plan of Merger between WorldCom, Wildcat Acquisition Corp.
       and Intermedia Communications Inc. dated as amended May 14, 2001 (filed
       as Annex A to WorldCom's Registration Statement on Form S-4, Registration
       No. 333-60482 and incorporated herein by reference)

3.1    Articles of Amendment to the Second Amended and Restated Articles of
       Incorporation of WorldCom (amending former Article Seven by inserting
       Articles Seven D, E, F, and G) (incorporated herein by reference to
       Exhibit 3.1 to WorldCom's registration statement on Form S-8 dated August
       22, 2001 (Registration No. 333-68204))

3.2    Articles of Amendment to the Second Amended and Restated Articles of
       Incorporation of WorldCom (amending former Article Four by deleting the
       text thereof and substituting new Article Four) (incorporated herein by
       reference to Exhibit 3.2 to WorldCom's registration statement on Form S-8
       dated August 22, 2001 (Registration No. 333-68204))

3.3    Articles of Amendment to the Second Amended and Restated Articles of
       Incorporation of WorldCom (amending former Article Eleven by deleting the
       text thereof and substituting new Article Eleven) (incorporated herein by
       reference to Exhibit 3.3 to WorldCom's registration statement on Form S-8
       dated August 22, 2001 (Registration No. 333-68204))

3.4    Second Amended and Restated Articles of Incorporation of WorldCom
       (including preferred stock designations), as amended as of May 1, 2000
       (incorporated herein by reference to Exhibit 3.4 to WorldCom's
       registration statement on Form S-8 dated August 22, 2001 (Registration
       No. 333-68204))

3.5    Restated ByLaws of WorldCom, Inc. (incorporated by reference to Exhibit
       3.5 to WorldCom's registration statement on Form S-8 dated August 22,
       2001 (Registration No. 333-68204))

4.1    Rights Agreement between WorldCom, Inc. and The Bank of New York, as
       Rights Agent, dated as of March 7, 2002 (incorporated herein by reference
       to Exhibit 1 to WorldCom's Form 8-A dated March 13, 2002 (File No.
       0-11258))

 **
10.1*  364-Day Revolving Credit Agreement among WorldCom and Bank of America,
       N.A. and The Chase Manhattan Bank, Co-Administrative Agents; Banc of
       America Securities LLC and J.P. Morgan Securities Inc., Joint Lead
       Arrangers and Joint Book Managers; Banc of America Securities LLC, J.P.
       Morgan Securities Inc., Salomon Smith Barney Inc., ABN Amro Bank N.V. and
       Deutsche Banc Alex. Brown Inc., Co-Arrangers; Citibank, N.A., Syndication
       Agent; ABN Amro Bank N.V. and Deutsche Bank AG New York Branch,
       Co-Documentation Agents; and the lenders named therein dated as of June
       8, 2001 (incorporated herein by reference to Exhibit 10.1 to WorldCom's
       Current Report on Form 8-K dated June 8, 2001 (filed June 12, 2001) (File
       No. 0-11258))

10.2*  Revolving Credit Agreement among WorldCom and Bank of America, N.A. and
       The Chase Manhattan Bank, Co-Administrative Agents; Banc of America
       Securities LLC and J.P. Morgan Securities Inc., Joint Lead Arrangers and
       Joint Book Managers; Banc of America Securities LLC, J.P. Morgan
       Securities Inc., Salomon Smith Barney Inc., ABN Amro Bank N.V. and
       Deutsche Banc Alex. Brown Inc., Co-Arrangers; Citibank N.A., Syndication
       Agent; ABN Amro Bank N.V. and Deutsche Bank AG New York Branch,
       Co-Documentation Agents; and the lenders named therein dated as of June
       8, 2001 (incorporated herein by reference to Exhibit 10.2 to WorldCom's
       Current Report on Form 8-K dated June 8, 2001 (filed June 12, 2001) (File
       No. 0-11258))


                                      E-1
<Page>

10.3*  Amended and Restated Facility A Revolving Credit Agreement among
       WorldCom, NationsBank, N.A., NationsBanc Montgomery Securities LLC, Bank
       of America NT & SA, Barclays Bank PLC, The Chase Manhattan Bank,
       Citibank, N.A., Morgan Guaranty Trust Company of New York, and Royal Bank
       of Canada and the lenders named therein dated as of August 6, 1998
       (incorporated herein by reference to Exhibit 10.1 to WorldCom's Current
       Report on Form 8-K dated August 6, 1998 (filed August 7, 1998) (File No.
       0-11258)) (incorporated herein by reference to Exhibit 10.3 to
       WorldCom's Current Report on Form 8-K dated June 8, 2001 (filed June 12,
       2001) (File No. 0-11258))

10.4   WorldCom 1999 Stock Option Plan (incorporated herein by reference to
       Exhibit A to WorldCom's Proxy Statement dated April 23, 1999 (File No.
       0-11258)) (compensatory plan)

10.5   WorldCom, Inc. Third Amended and Restated 1990 Stock Option Plan
       (incorporated herein by reference to Exhibit A to WorldCom's Proxy
       Statement dated April 22, 1996 (File No. 0-11258)) (compensatory plan)

10.6   WorldCom, Inc. Performance Bonus Plan (incorporated herein by reference
       to Exhibit A to WorldCom's Proxy Statement dated April 21, 1997 (File No.
       0- 11258)) (compensatory plan)

10.7   WorldCom/MFS/UUNET 1995 Performance Option Plan (incorporated herein by
       reference to Exhibit 10.17 to WorldCom's Annual Report on Form 10-K for
       the period ended December 31, 1996 (File No. 0-11258)) (compensatory
       plan)

10.8   WorldCom/MFS/UUNET Equity Incentive Plan (incorporated herein by
       reference to Exhibit 10.18 to WorldCom's Annual Report on Form 10-K for
       the period ended December 31, 1996 (File No. 0-11258)) (compensatory
       plan)

10.9   MCI 1979 Stock Option Plan as amended and restated (incorporated by
       reference to Exhibit 10(a) to MCI's Annual Report on Form 10-K for the
       fiscal year ended December 31, 1988 (File No. 0-6457)) (compensatory
       plan)

10.10  Supplemental Retirement Plan for Employees of MCI Communications
       Corporation and Subsidiaries, as amended (incorporated by reference to
       Exhibit 10(b) to MCI's Annual Report on Form 10-K for the fiscal year
       ended December 31, 1993 (File No. 0-6457)) (compensatory plan)

10.11  Description of Executive Life Insurance Plan for MCI Communications
       Corporation and Subsidiaries (incorporated by reference to "Remuneration
       of Executive Officers" in MCI's Proxy Statement for its 1992 Annual
       Meeting of Stockholders (File No. 0-6457)) (compensatory plan)

10.12  MCI Communications Corporation Executive Incentive Compensation Plan
       (incorporated by reference to Exhibit 10(e) to MCI's Annual Report on
       Form 10-K for the fiscal year ended December 31, 1995 (File No. 0-6457))
       (compensatory plan)

10.13  Amendment No. 1 to MCI Communications Corporation Executive Incentive
       Compensation Plan (incorporated by reference to Exhibit 10(e) to MCI's
       Annual Report on Form 10-K for the fiscal year ended December 31, 1996
       (File No. 0-6457)) (compensatory plan)

10.14  1988 Directors' Stock Option Plan of MCI (incorporated by reference to
       Exhibit D to MCI's Proxy Statement for its 1989 Annual Meeting of
       Stockholders (File No. 0-6457)) (compensatory plan)

10.15  Amendment No. 1 to the 1988 Directors' Stock Option Plan of MCI
       (incorporated by reference to Appendix D to MCI's Proxy Statement for its
       1996 Annual Meeting of Stockholders (File No. 0-6457)) (compensatory
       plan)


                                      E-2
<Page>

10.16  Amendment No. 2 to 1988 Directors' Stock Option Plan of MCI (incorporated
       by reference to Exhibit 10(i) to MCI's Annual Report on Form 10-K for the
       fiscal year ended December 31, 1996) (File No. 0- 6457)) (compensatory
       plan)

10.17  Amendment No. 3 to 1988 Directors' Stock Option Plan of MCI (incorporated
       by reference to Exhibit 10(j) to MCI's Annual Report on Form 10-K for the
       fiscal year ended December 31, 1996 (File No. 0-6457)) (compensatory
       plan)

10.18  Stock Option Plan of MCI (incorporated by reference to Exhibit C to MCI's
       Proxy Statement for its 1989 Annual Meeting of Stockholders (File No. 0-
       6457)) (compensatory plan)

10.19  Amendment No. 1 to the Stock Option Plan of MCI (incorporated by
       reference to Exhibit 10(l) to MCI's Annual Report on Form 10-K for the
       fiscal year ended December 31, 1996 (File No. 0-6457)) (compensatory
       plan)

10.20  Amendment No. 2 to the Stock Option Plan of MCI (incorporated by
       reference to Appendix B to MCI's Proxy Statement for its 1996 Annual
       Meeting of Stockholders (File No. 0-6457)) (compensatory plan)

10.21  Amendment No. 3 to the Stock Option Plan of MCI (incorporated by
       reference to Exhibit 10(n) to MCI's Annual Report on Form 10-K for the
       fiscal year ended December 31, 1996 (File No. 0-6457)) (compensatory
       plan)

10.22  Amendment No. 4 to the Stock Option Plan of MCI (incorporated by
       reference to Exhibit 10(o) to MCI's Annual Report on Form 10-K for the
       fiscal year ended December 31, 1996 (File No. 0-6457)) (compensatory
       plan)

10.23  Amendment No. 5 to the Stock Option Plan of MCI (incorporated by
       reference to Exhibit 10(p) to MCI's Annual Report on Form 10-K for the
       fiscal year ended December 31, 1996 (File No. 0-6457)) (compensatory
       plan)

10.24  Board of Directors Deferred Compensation Plan of MCI (incorporated by
       reference to Exhibit 10(i) to MCI's Annual Report on Form 10-K for the
       fiscal year ended December 31, 1994 (File No. 0-6457)) (compensatory
       plan)

10.25  The Senior Executive Incentive Compensation Plan of MCI (incorporated by
       reference to Appendix A to MCI's Proxy Statement for its 1996 Annual
       Meeting of Stockholders (File No. 0-6457)) (compensatory plan)

10.26  Amendment No. 1 to the Senior Executive Incentive Compensation Plan of
       MCI (incorporated by reference to Exhibit 10(s) to MCI's Annual Report on
       Form 10-K for the fiscal year ended December 31, 1996 (File No. 0-6457))
       (compensatory plan)

10.27  Executive Severance Policy (incorporated by reference to Exhibit 10(a) to
       MCI's Quarterly Report on Form 10-Q for the quarter ended September 30,
       1996 (File No. 0-6457)) (compensatory plan)

10.28  Form of employment agreement, effective as of November 2, 1996, between
       MCI and Bert C. Roberts (incorporated by reference to Exhibit 10(u) to
       MCI's Annual Report on Form 10-K for the fiscal year ended December 31,
       1996 (File No. 0-6457)) (compensatory plan)

10.29  Employment Agreement between UUNET and John W. Sidgmore dated May 13,
       1994 (incorporated herein by reference to UUNET's Registration on Form
       S-1 (Registration No. 33-91028)) (compensatory plan)

10.30  Change of Control Severance Agreement effective April 8, 1997 between
       Brooks Fiber Properties, Inc. ("BFP") and James C. Allen (incorporated
       herein by reference from Exhibit 10.1 to BFP's Quarterly Report on Form
       10-Q for the quarterly period ended June 30, 1997 (File No. 0-28036))
       (compensatory plan)


                                      E-3
<Page>

10.31  Promissory Note dated September 8, 2000 between Bernard J. Ebbers (the
       "Borrower") and WorldCom (incorporated herein by reference from Exhibit
       10.4 to the WorldCom's Quarterly Report on Form 10-Q for the quarter
       ended September 30, 2000) (File No. 0-11258)

10.32  Promissory Note dated November 1, 2000 between the Borrower and WorldCom
       (incorporated herein by reference from Exhibit 10.5 to WorldCom's
       Quarterly Report on Form 10-Q for the quarter ended September 30, 2000)
       (File No. 0-11258)

10.33  Letter Agreement dated November 1, 2000 between the Borrower and WorldCom
       (incorporated herein by reference from Exhibit 10.6 to WorldCom's
       Quarterly Report on Form 10-Q for the quarter ended September 30, 2000)
       (File No. 0-11258)

10.34  Limited Guaranty made as of November 14, 2000 by WorldCom in favor of
       Bank of America, N.A. (incorporated herein by reference from Exhibit
       10.7 to WorldCom's Quarterly Report on Form 10-Q for the quarter ended
       September 30, 2000) (File No. 0-11258)

10.35  Limited Guaranty made as of February 12, 2001 by WorldCom in favor of
       Bank of America, N.A. (incorporated herein by reference from Exhibit
       10.35 to WorldCom's Annual Report on Form 10-K for the year ended
       December 31, 2000) (File No. 0-11258)

10.36  Promissory Note dated December 29, 2000 between the Borrower and WorldCom
       (incorporated herein by reference from Exhibit 10.36 to WorldCom's Annual
       Report on Form 10-K for the year ended December 31, 2000) (File No.
       01-11258)

10.37  Promissory note dated September 10, 2001 payable by Borrower to the order
       of WorldCom (incorporated herein by reference to Exhibit 10.1 to
       WorldCom's Quarterly Report on Form 10-Q for the quarter ended September
       30, 2001) (File No. 0-11258)

10.38  First Modification and Reaffirmation of Limited Guaranty dated as of
       January 25, 2002, by and between WorldCom and Bank of America, N.A.

10.39  Promissory Note dated January 30, 2002 payable by Borrower to the order
       of WorldCom

21.1   Subsidiaries of WorldCom

23.1   Consent of Arthur Andersen LLP

-----------

*      The registrant hereby agrees to furnish supplementally a copy of any
       omitted schedules to this Agreement to the SEC upon request.

**     No other long-term debt instruments are filed since the total amount of
       securities authorized under any such instrument does not exceed ten
       percent of the total assets of WorldCom and its subsidiaries on a
       consolidated basis. WorldCom agrees to furnish a copy of such instruments
       to the SEC upon request.


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