Company Background WorldCom began in 1983 as a small company named Long Distance Discount Services, Inc. in Jackson, Mississippi. Within 15 years, it had become a global telecommunications giant and one of the largest companies in the world. Few companies in the annals of American business have grown so large and so fast in such an intensely competitive marketplace. The Company's SEC filings reflect that WorldCom's growth evolved from its commitment to the following principles: - competition and capital requirements in the telecommunications industry would result in consolidation of competitors to a few dominant companies; - to survive, WorldCom needed to grow its services, customer base and facilities rapidly and continually; - the most effective means to grow was the acquisition of existing telecommunications companies with desirable shares of geographic or service markets; and - investment in new technologies was critical to reducing marginal costs, attracting customers and meeting their demand for new and better services. From 1985 to 2001, WorldCom acquired other telecommunications companies at an unrelenting pace - over 60 acquisitions in just over 15 years. Regulatory filings reflect that some of these transactions constituted the largest mergers of their time in the telecommunications industry. Public statements by WorldCom executives suggest that these acquisitions were intended to achieve strategically broader geographic coverage of the Company's services, more and better transmission facilities, new services (such as data transmission, Internet, web hosting and wireless services), and new markets. Hindsight has shown, however, that some areas projected to offer high profit margin and growth - such as Internet and wireless service - failed to sustain high growth rates and produce adequate returns, and profit margins declined due to the extensive, industry-wide overcapacity in transmissions facilities. The Company's focus on acquisitions presented significant challenges. Given its modest early capital base and to minimize reliance on cash outlays for acquisitions, the Company often relied significantly on its stock to pay for many acquisitions. The need to maintain the value and attractiveness of that "currency" placed considerable pressure on WorldCom to achieve consistently impressive share price performance and high stock prices. Another challenge for WorldCom involved its integration of acquired assets, operations and related customer services. Rapid acquisitions can frustrate or stall integration efforts. Public reports, and our discussions with WorldCom employees, raise significant questions regarding the extent to which WorldCom effectively integrated acquired businesses and operations. A companion set of issues relates to the extent to which the Company integrated or expanded its systems and internal controls to accommodate new and changing businesses, cultures and reporting structures. Finally, the Company's unprecedented and unceasing growth may have obscured the ability of investors to focus upon and evaluate objectively the actual strength and financial performance of the Company at particular junctures. With the Company so constantly changing form through expansion, reliable benchmarks of historical performance against which investors could measure current performance may have been difficult to find.