SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 Form 11-K (Mark One) [ X ] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For The Fiscal Year Ended December 31, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from to Commission file number 0-6547 A. Full title of the plan and the address of the plan, if different from that of the issuer named below: MCI Communications Corporation 401(k) Plan for Exempt Employees B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office: MCI Communications Corporation, 1801 Pennsylvania Avenue, NW, Washington, DC 20006 MCI COMMUNICATIONS CORPORATION 401(K) PLAN FOR EXEMPT EMPLOYEES (FORMERLY MCI COMMUNICATIONS CORPORATION RETIREMENT SAVINGS PLAN) EIN: 52-0886267 INDEX TO FINANCIAL STATEMENTS AND SCHEDULES Page(s) ------- Report of Independent Accountants 3 Statements of Net Assets Available for Benefits at December 31, 1996 and 1995 4 Statements of Changes in Net Assets Available for Benefits for the years ended December 31, 1996 and 1995 5,6 Notes to Financial Statements 7-37 Additional Information: Schedule I. Schedule of Assets Held for Investment Purposes at December 31, 1996 38 Schedule II.Schedule of Reportable Transactions for the year ended December 31, 1996 39 Signature 40 Exhibits: 23. Consent of Independent Accountants 41 99. Certification Regarding Certain Investment Arrangements 42 Page 2 REPORT OF INDEPENDENT ACCOUNTANTS To the Participants and Administrative Committee of the MCI Communications Corporation 401(k) Plan for Exempt Employees In our opinion, the accompanying statements of net assets available for benefits and the related statements of changes in net assets available for benefits present fairly, in all material respects, the net assets available for benefits of the MCI Communications Corporation 401(k) Plan for Exempt Employees (formerly MCI Communications Corporation Retirement Savings Plan)at December 31, 1996 and 1995, and the changes in net assets available for benefits for the years then ended, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the plan's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The additional information included in Schedules I and II is presented for purposes of additional analysis and is not a required part of the basic financial statements, but is additional information required by the Employee Retirement Income Security Act of 1974, as amended. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. PRICE WATERHOUSE LLP PRICE WATERHOUSE LLP Washington, D. C. June 11, 1997 Page 3 MCI COMMUNICATIONS CORPORATION 401(k) PLAN FOR EXEMPT EMPLOYEES (FORMERLY MCI COMMUNICATIONS CORPORATION RETIREMENT SAVINGS PLAN) EIN: 52-0886267 STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS DECEMBER 31 ----------- 1996 1995 ------------- ------------- Value of interest in master trust $ 713,959,033 $ 537,827,481 ------------- ------------- Net assets available for benefits $ 713,959,033 $ 537,827,481 ============= ============= See accompanying notes to the financial statements. Page 4 MCI COMMUNICATIONS CORPORATION 401(K) PLAN FOR EXEMPT EMPLOYEES (FORMERLY MCI COMMUNICATIONS CORPORATION RETIREMENT SAVINGS PLAN) EIN: 52-0886267 STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS FOR THE YEAR ENDED DECEMBER 31, 1996 ADDITIONS - --------- Contributions: Participants $ 73,656,406 Non-cash employer 35,319,523 Rollovers 7,083,311 Transfers from ESOP 940,335 -------------- Total contributions 116,999,575 -------------- Earnings on investments: Interest on participant loans 1,629,497 Interest on guaranteed investment contracts 6,255,490 Dividends on common stock 445,635 Net gain on sale of common stock 808,155 Unrealized appreciation 59,988,328 Net gain from registered investment companies 34,793,327 -------------- Total earnings on investments 103,920,432 -------------- Total additions 220,920,007 -------------- DEDUCTIONS - ---------- Participant benefit payments 34,505,315 Account maintenance fees 98,473 -------------- Net increase 186,316,219 Net interplan transfers (10,184,667) Net assets available for benefits, at beginning of year 537,827,481 -------------- Net assets available for benefits, at end of year $ 713,959,033 ============== See accompanying notes to the financial statements. Page 5 MCI COMMUNICATIONS CORPORATION 401(K) PLAN FOR EXEMPT EMPLOYEES (FORMERLY MCI COMMUNICATIONS CORPORATION RETIREMENT SAVINGS PLAN) EIN: 52-0886267 STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS FOR THE YEAR ENDED DECEMBER 31, 1995 ADDITIONS - --------- Contributions: Participants $ 59,322,084 Non-cash employer 32,177,951 Rollovers 6,383,842 Transfers from ESOP 722,038 -------------- Total contributions 98,605,915 -------------- Earnings on investments: Interest on participant loans 1,508,423 Interest on guaranteed investment contracts 6,443,825 Dividends on common stock 399,550 Net gain on sale of common stock 2,224,386 Unrealized appreciation 57,379,129 Net gain from registered investment companies 48,750,925 -------------- Total earnings on investments 116,706,238 -------------- Total additions 215,312,153 -------------- DEDUCTIONS - ---------- Participant benefit payments 27,557,702 Account maintenance fees 80,508 -------------- Net increase 187,673,943 Net interplan transfers 2,592,696 Net assets available for benefits, beginning of year 347,560,842 -------------- Net assets available for benefits, end of year $ 537,827,481 ============== See accompanying notes to the financial statements. Page 6 MCI COMMUNICATIONS CORPORATION 401(K) PLAN FOR EXEMPT EMPLOYEES (FORMERLY MCI COMMUNICATIONS CORPORATION RETIREMENT SAVINGS PLAN) EIN: 52-0886267 NOTES TO FINANCIAL STATEMENTS ON FORM 11-K December 31, 1996 and 1995 NOTE 1- DESCRIPTION OF THE PLAN The following brief description of the MCI Communications Corporation 401(k) Plan for Exempt Employees (the "Plan" or "401(k)") is provided for general information purposes only. Participants should refer to the Plan document for more complete information. The Plan is subject to the applicable provisions of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). Effective January 1, 1996, the MCI Communications Corporation Employee Stock Ownership Plan and 401(k) and the MCI Consumer Markets 401(k) and Employee Stock Ownership Plan ("CM Plan") were restructured and renamed the MCI Communications Corporation ESOP and 401(k) Plan for Exempt Employees ("Exempt Plan") and the MCI Communications Corporation ESOP and 401(k) Plan for Non-Exempt Employees ("Non-Exempt Plan"), respectively. The MCI Communications Corporation ESOP and 401(k) Plan for Exempt Employees is comprised of two parts: Part I is an employee stock ownership plan ("ESOP"), Part II is the 401(k) Plan. The accompanying financial statements are solely those of Part II and are not intended to present the net assets available for benefits or the changes in net assets available for benefits of the MCI Communications Corporation ESOP and 401(k) Plan for Exempt Employees taken as a whole. The Company separately prepares an annual report on the overall MCI Communications Corporation ESOP and 401(k) plan for Exempt Employees which is submitted to the Internal Revenue Service ("IRS") on Form 5500 and is made available to all employees upon request. The assets of the Exempt Plan are combined with those of the Non-Exempt Plan into the MCI Communications Corporation Defined Contribution Master Trust. This facilitates the administration of the Plans as described below. Under the terms of the master trust agreement, each plan has a specific interest in all assets and liabilities of the trust. Page 7 Contributions - ------------- The Plan is a defined contribution, deferred savings plan. Under the Plan, employees become eligible to participate upon completion of one year of service with 1,000 hours of service and attainment of age 21. As a result of the restructuring of the Plan, the Plan was amended to include all exempt participants from the CM Plan. (An exempt employee is an employee who is exempt from the maximum hours limitation under the Fair Labor Standards Act of 1938, as amended). All non-exempt participants in the Plan were transferred to the Non-Exempt Plan. No further modifications were made to the Plan's provisions. Eligible employees may elect to defer up to 15% of eligible compensation on a pre-tax basis, to be contributed to the Plan by the Company on behalf of such employees ("Elective Contributions"). The first 6% of each participant's Elective Contributions is eligible for a Company matching contribution in the form of MCI Communications Corporation Common Stock. The Company provides a matching contribution of $.67 for each eligible dollar of Elective Contributions made to the Plan. The Company's matching contribution is made biweekly and is determined by the closing price of MCI Communications Corporation Common Stock on the date posted to the participants' accounts. Participants' Elective Contributions are withheld from their biweekly paychecks and the Company transfers these contributions to the Plan each pay period. Participants vest in the Company's matching contributions at a rate of 20% per year of service and are always 100% vested in their Elective Contributions. Participants receive a year of service for vesting purposes for each Plan year during which they complete at least 1,000 hours of service. Effective July 1, 1995, the Plan decreased the number of investment options from sixteen to seven funds. Participants with balances in the funds that were eliminated were allowed to reallocate their fund balances into the seven remaining funds. Elective Contributions are invested in any of the seven investment funds in accordance with participants' instructions. The available investment funds as of July 1, 1995 are: - MCI Common Stock Fund A fund investing in MCI Communications Corporation Common Stock. These shares of stock are qualified employer securities as defined by ERISA. Page 8 - EuroPacific Growth Fund A long term growth fund invested primarily in securities of issuers domiciled in Europe and the Pacific Basin. The fund is a member of the American Funds Group and is managed by Capital Research and Management Company. - Dreyfus S&P 500 Stock Index Portfolio An equity index mutual fund invested in common stock which is comparable to the Standard & Poor's 500 Composite Index. All investment decisions are made by Dreyfus Corporation, an affiliate of the Plan trustee. The trustee oversees the fund in accordance with the trust agreement. - Putnam Voyager Fund A long term growth fund invested in a diversified portfolio of two types of common stocks: emerging growth stocks and opportunity stocks. The fund is managed by Putnam Investment Management, Inc. - Putnam New Opportunities Fund A growth fund invested primarily in common stock of companies in economic sectors with above-average prospects for growth. Putnam Investment Management, Inc. makes the investment decisions for the fund and is subject to the policies established by the fund's trustee. - Putnam Balanced Retirement Fund A growth and income fund invested in a diversified portfolio of equity and debt securities.Putnam Investment Management, Inc. makes the investment decisions for the fund and is subject to the policies established by the fund's trustee. - Stable Asset Fund The fund consists primarily of guaranteed investment contracts (GICs)issued by insurance companies and contracts with other financial institutions that offer fixed interest rates on investments. This fund was formerly known as the Long-Term Fixed Income Fund. The fund seeks to maintain a constant book value of $1.00 per share. The guaranteed rates of interest range from 5.6% to 8.08% at December 31, 1996. Page 9 The following guaranteed investment contracts were held individually by the Master Trust as of December 31: Contract Value -------------- Contract 1996 1995 Rate ---- ---- ---- Aetna Life Insurance $ 20,306,182 $ 19,041,899 6.63% Allstate Life Insurance 6,474,248 6,113,549 5.90% Allstate Life Insurance 4,000,628 0 5.90% John Hancock Mutual Life Insurance 14,261,226 13,198,728 8.05% Metropolitan Life Insurance 0 13,623,754 8.96% New York Life Insurance 8,847,294 8,281,679 6.82% New York Life Insurance 5,803,475 5,369,604 8.08% Pacific Mutual Life Insurance 4,642,586 0 7.30% Pacific Mutual Life Insurance 1,287,816 0 7.36% Peoples Security Insurance Company 7,000,905 7,400,229 5.72% Peoples Security Insurance Company 5,220,011 5,219,396 5.86% Principal Mutual Life Insurance 3,409,732 0 6.60% Principal Mutual Life Insurance 0 14,445,534 9.10% Prudential Life Insurance 6,028,870 5,634,458 7.00% TransAmerica Life Insurance 3,423,163 3,426,163 5.60% TransAmerica Life Insurance 4,071,194 2,543,520 7.25% This fund also includes investment in the Mellon Bank Temporary Investment Fund (TIF) to satisfy any liquidity needs and also serves as a temporary account to hold funds from maturing interests. Page 10 Participant Accounts - -------------------- Each individual's investment in the funds is recorded in their participant account on a unit value basis with the exception of MCI Common Stock Fund which is recorded on a per share basis. The Plan is processed on a daily valuation basis. Participants may transfer all or part of the balance in their Elective Contributions and related earnings from one fund to another once each calendar month. Participants may reallocate their matching contributions balance that is 100% vested as of the prior year end once per plan year. Participants may change the allocation of their future contributions among the funds with unlimited frequency. Participants' allocations are affected by the last change placed prior to payroll processing. Certain participants have the right to diversify a portion of their account in the ESOP, Part I of the Exempt Plan, and transfer that portion of their account to the 401(k). Participants in the ESOP, who have attained at least 55 years of age and have been a participant in the ESOP for at least 10 years, are eligible to diversify under these provisions. During 1996 and 1995, 36,696 and 32,820 shares of MCI Communications Corporation Common Stock at a fair market value on the diversification date of $940,335 and $722,038, respectively, were transferred from the ESOP to the 401(k) pursuant to these provisions. Participants who are 100% vested are permitted to diversify amounts in their Employer Matching Contribution accounts once per calendar year. During 1996 and 1995, 284,842 and 238,173 shares of MCI Communications Corporation Common Stock at a fair market value on the diversification date of $7,950,763 and $5,656,455, respectively, were transferred from the Employer Matching Contributions accounts to the Elective Contributions accounts pursuant to these provisions. Participant Loans - ----------------- The Plan allows participants to borrow up to one-half of the vested account balance (or $50,000, whichever is less). The minimum loan amount is $1,000 and the minimum term of a loan is one year. The maximum term of a loan is five years for a general purpose loan and fifteen years for a primary residence loan. Only one loan of each type, general purpose and primary Page 11 residence, may be outstanding at any time. Effective January 1, 1995, the Plan charges a $30 origination fee for loans. Loan proceeds are disbursed pro rata from each of the participants' investment funds, and are repaid through biweekly payroll deductions. Loan repayments of principal and interest are invested based on the participants' current investment elections. Interest rates for new loans are determined monthly based on the prime rate as published on the first business day of each month in THE WALL STREET JOURNAL, plus one percentage point. The interest rate is fixed for the term of the loan. Loans can be repaid in full by a cashier's or certified check. During Plan years ended December 31, 1996 and 1995, $13,001,099 and $11,419,704 in loans were disbursed and principal repayments of $7,284,330 and $6,720,130, respectively, were made. Participant Benefit Payments - ---------------------------- Distribution of the benefits in a participant's Plan account is normally made only after the participant ceases to be an employee of the Company. However, the account of a participant's Elective Contributions may be withdrawn prior to termination of employment if the participant is under age 59 1/2 and can demonstrate an economic hardship (as defined in the Plan). A participant who has attained age 59 1/2 may withdraw all or any portion of his Elective Contributions account in accordance with the terms of the Plan. Upon termination of employment, a participant receives all vested assets in accounts established on his behalf under the Plan. Non-vested portions of a terminated participant's accounts are forfeited and used to offset future Company matching contributions. Effective January 1, 1995, participants who terminate employment and elect to keep their funds in the Plan are charged a $20 annual account maintenance fee. The Plan was amended effective January 24, 1995, to provide for the distribution in a lump sum of terminated participant accounts with a vested balance of less than $3,500. This distribution generally occurs no sooner than six months after the participant's termination of employment date. As of December 31, 1996 and 1995, forfeitures included in the Plan were $120,854 and $695,734, respectively, which included 3,211 and 26,163 forfeited shares of MCI Communications Corporation Common Stock, at year-end fair market values of $104,974 and $683,508, respectively. Page 12 Plan Administration - ------------------- The Plan is not a defined benefit plan and accordingly, Plan benefits are not guaranteed by the Pension Benefit Guaranty Corporation. The Company is the plan administrator and has appointed an Administrative Committee to administer the Plan. The Administrative Committee is responsible for carrying out the provisions of the Plan and may employ such experts as deemed necessary. Plan assets are held by the trustee, Mellon Bank, N.A. of Pittsburgh, Pennsylvania. The recordkeeper for the Plan is Putnam Investments, Inc. The Company reserves its rights under the Plan to discontinue its contributions and to terminate the Plan at any time. Upon such termination, all amounts funded shall become nonforfeitable and shall be provided for and paid from the Plan's trust in accordance with the order of priority set forth in Section 4044 of ERISA. The Company has not expressed any intent to discontinue its contributions nor to terminate the Plan. The Plan's holdings of MCI Communications Corporation Common Stock, various Putnam Investments, Inc. mutual funds, and a Mellon Bank mutual fund and collective trust account are party-in-interest investments. NOTE 2 - DESCRIPTION OF ACCOUNTING PRINCIPLES AND PRACTICES The preparation of financial statements in conformity with generally accepted accounting principles 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 the reported amounts of changes in net assets available for benefits during the reporting period, such as those regarding fair value. Actual results could differ from those estimates. The financial statements for the Plan are prepared on the accrual basis of accounting. The Plan's distribution of the Company's Common Stock to participants is at the fair market value as of the distribution date. The difference between the fair market value on the date of distribution and the carrying value of the distributed shares is recorded as a net gain or loss on disposition of assets. Purchase and sales of securities are recorded on the trade date. Page 13 The Plan's interest in registered investment companies and employer securities are stated at fair value, measured by the quoted current market price. Units in collective trusts are valued at the net asset value as reported by such trusts at the end of each period. Funds invested in guaranteed investment contracts are stated at contract value, measured as cost plus earned interest income. During 1996, the Plan adopted American Institute of Certified Public Accountants Statement of Position 94-4, "Reporting of Investment Contracts Held by Health and Welfare Benefit Plans and Defined Contribution Pension Plans." Defined contribution plans should report fully-benefit responsive investment contracts at contract value, which may or may not be equal to fair value, and all other investment contracts at fair value. All guaranteed investment contracts held by the Plan at December 31, 1996 and 1995 were fully-benefit responsive, and therefore are valued at contract value. Participant loans are valued at cost which approximates fair value. Administrative expenses of the Plan are paid by the Company. NOTE 3 - MASTER TRUST MCI Communications Corporation established the MCI Communications Corporation Defined Contribution Master Trust (the "Master Trust") for the purpose of facilitating administration of the Plan. The Master Trust is intended to be a tax-exempt trust within the meaning of Section 501(a) of the Internal Revenue Code. The administration of the Master Trust is the responsibility of the trustee. All Plan investments are included in the Master Trust. Effective November 20, 1996, the assets of the Darome Teleconferencing, Inc. 401(k) Plan were transferred into the MCI Communications Corporation Defined Contribution Master Trust. The Darome Teleconferencing, Inc. 401(k) Plan had a specific interest in the Master Trust of $658,541 representing approximately .08% of the net assets of the Master Trust as of December 31, 1996. The Master Trust consists of a pool of individual investments in which the Plan, the Non-Exempt Plan, and the Darome Teleconferencing, Inc. 401(k) Plan have shared participation through Master Trust units. Net assets and net investment gains Page 14 and losses are allocated to each participating plan based on units of participation held by the respective plans. Each unit represents a proportionate, specific interest in the Master Trust. The Plan had a specific interest in the Master Trust of $713,959,033 and $537,827,481 representing approximately 87% and 89% of the net assets of the Master Trust as of December 31, 1996 and 1995, respectively. The fund information below presents the percentage interest of each plan in the Master Trust using specific identification: Percentage Interest Master Trust ------------------- Plan Name Investment Account 12/31/96 12/31/95 - --------------------- ---------------------------------- -------- -------- MCI Communications EuroPacific Growth Fund 88.39% 87.35% Corporation Dreyfus S&P 500 Stock Index 88.44% 88.43% 401(k) Plan Putnam Voyager Fund 90.92% 92.20% For Exempt Putnam Balanced Retirement Fund 86.21% 87.94% Employees Stable Asset Fund 86.40% 90.52% EIN: 52-0886267 Putnam New Opportunities 88.34% 88.39% MCI Common Stock 85.88% 88.40% Participant Loans 80.73% 87.88% MCI Communications EuroPacific Growth Fund 11.33% 12.65% Corporation Dreyfus S&P 500 Stock Index 11.41% 11.57% 401(k) Plan Putnam Voyager Fund 09.08% 07.80% For Non-Exempt Putnam Balanced Retirement Fund 13.25% 12.06% Employees Stable Asset Fund 13.35% 09.48% EIN: 52-0886267 Putnam New Opportunities 11.60% 11.61% MCI Common Stock 14.12% 11.60% Participant Loans 19.18% 12.12% Darome EuroPacific Growth Fund 00.28% 00.00% Teleconferencing, Dreyfus S&P 500 Stock Index 00.15% 00.00% Inc. 401(k) Plan Putnam Voyager Fund 00.00% 00.00% EIN: 13-2745892 Putnam Balanced Retirement Fund 00.53% 00.00% Stable Asset Fund 00.25% 00.00% Putnam New Opportunities 00.06% 00.00% MCI Common Stock 00.00% 00.00% Participant Loans 00.09% 00.00% The following pages present the net assets available for benefits and changes in net assets available for benefits for the Master Trust in which the Plan, the Non-Exempt Plan, and Darome Teleconferencing, Inc. 401(k) Plan participate. Page 15 MCI COMMUNICATIONS CORPORATION DEFINED CONTRIBUTION MASTER TRUST STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION DECEMBER 31, 1996 EuroPacific Dreyfus Putnam Stable Growth S&P 500 Voyager Asset Fund Stock Index Fund Fund ASSETS ------------- ------------- ------------- ------------- ------ Contributions receivable: Employee $ 727 $ 427 $ 838 $ 182 Employer 0 0 0 0 ----------- ----------- ------------ ------------ Total contributions receivable 727 427 838 182 Non-interest bearing cash 0 0 16 628,668 Other receivables 938 24,358 34,113 7,882,658 Investments, at fair value: Common stock 0 0 0 0 Common/collective trusts 227 27,198 4,705 2,136,200 Registered investment companies 25,677,109 77,615,093* 133,656,939* 0 Participant loans 0 0 0 0 Investments, at contract value: Value of guaranteed investment contracts 0 0 0 94,780,330* ----------- ----------- ------------ ------------ Total assets 25,679,001 77,667,076 133,696,611 105,428,038 ----------- ----------- ------------ ------------ LIABILITIES ------------ Operating payables 21,541 24,835 34,943 158,253 ----------- ----------- ------------ ------------ Net assets available for benefits $25,657,460 $77,642,241 $133,661,668 $105,269,785 =========== =========== ============ ============ Participating Plan Interests - ---------------------------- MCI 401(k) Plan for Exempt Employees $22,678,619 $68,670,124 $121,528,239 $ 90,950,784 MCI 401(k) Plan for Non-Exempt Employees 2,907,841 8,857,738 12,133,429 14,054,922 Darome Teleconferencing, Inc. 401(k) Plan 71,000 114,379 0 264,079 ----------- ----------- ------------ ------------ Total $25,657,460 $77,642,241 $133,661,668 $105,269,785 =========== =========== ============ ============ <FN> * Investment represents 5% or more of the Trust's net assets. </FN> Page 16 MCI COMMUNICATIONS CORPORATION DEFINED CONTRIBUTION MASTER TRUST STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION DECEMBER 31, 1996 Putnam Putnam MCI New Balanced Common Participant Opportunities Retirement Stock Loans Total ASSETS ------------- ------------- ------------- ------------ ------------- ------ Contributions receivable: Employee $ 1,348 $ 288 $ 1,135 $ 0 $ 4,945 Employer 0 0 2,199 0 2,199 ------------- ------------- ------------- ------------ ------------- Total contributions receivable 1,348 288 3,334 0 7,144 Non-interest bearing cash 0 0 0 0 628,684 Other receivables 74,230 4,712 109,760 0 8,130,769 Investments, at fair value: Common stock 0 0 369,352,337* 0 369,352,337 Common/collective trusts 43,655 4,536 8,844 0 2,225,365 Registered investment companies 52,455,498* 29,329,101 0 0 318,733,740 Participant loans 0 0 0 26,210,945 26,210,945 Investments, at contract value: Value of guaranteed investment contracts 0 0 0 0 94,780,330 ------------- ------------- ------------- ------------ ------------- Total assets 52,574,731 29,338,637 369,474,275 26,210,945 820,069,314 ------------- ------------- ------------- ------------ ------------- LIABILITIES ----------- Operating payables 75,514 4,993 67 0 320,146 ------------- ------------- ------------- ------------ ------------- Net assets available for benefits $ 52,499,217 $ 29,333,644 $369,474,208 $26,210,945 $819,749,168 ============= ============= ============= ============ ============= Participating Plan Interests - ---------------------------- MCI 401(k) Plan for Exempt Employees $ 46,378,741 $ 25,289,835 $317,302,646 $ 21,160,045 $713,959,033 MCI 401(k) Plan for Non-Exempt Employees 6,090,028 3,887,960 52,171,562 5,028,114 105,131,594 Darome Teleconferencing, Inc. 401(k) Plan 30,448 155,849 0 22,786 658,541 ------------- ------------- ------------- ------------- ------------ Total $ 52,499,217 $ 29,333,644 $369,474,208 $ 26,210,945 $819,749,168 ============= ============= ============= ============= ============ <FN> * Investment represents 5% or more of the Trust's net assets. </FN> Page 17 MCI COMMUNICATIONS CORPORATION DEFINED CONTRIBUTION MASTER TRUST STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION DECEMBER 31, 1995 EuroPacific Dreyfus Putnam Stable Growth S&P 500 Voyager Asset Fund Stock Index Fund Fund ASSETS ------------- ------------- ------------- ------------- ------ Contributions receivable: Employee $ 14,237 $ 22,898 $ 46,507 $ 40,196 Employer 0 0 0 0 ----------- ----------- ------------ ------------ Total contributions receivable 14,237 22,898 46,507 40,196 Non-interest bearing cash 1,652 72,460 88,919 144,577 Other receivables 258,009 334,968 60,967 1,478 Investments, at fair value: Common stock 0 0 0 0 Common/collective trusts 14 12,491 1,703 1,584,427 Registered investment companies 14,850,336 58,410,869* 107,447,827* 0 Participant loans 0 0 0 0 Investments, at contract value: Value of guaranteed investment contracts 0 0 0 104,298,513* ----------- ----------- ------------ ------------ Total assets 15,124,248 58,853,686 107,645,923 106,069,191 ----------- ----------- ------------ ------------ LIABILITIES ------------ Operating payables 258,009 334,957 88,909 25,089 ----------- ----------- ------------ ------------ Net assets available for benefits $14,866,239 $58,518,729 $107,557,014 $106,044,102 =========== =========== ============ ============ Participating Plan Interests - ---------------------------- MCI Communications Retirement Savings Plan $12,985,468 $51,748,402 $ 99,167,158 $ 95,991,937 MCI Consumer Markets 401(k) Plan 1,880,771 6,770,327 8,389,856 10,052,165 ----------- ----------- ------------ ------------ Total $14,866,239 $58,518,729 $107,557,014 $106,044,102 =========== =========== ============ ============ <FN> * Investment represents 5% or more of the Trust's net assets. </FN> Page 18 MCI COMMUNICATIONS CORPORATION DEFINED CONTRIBUTION MASTER TRUST STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION DECEMBER 31, 1995 Putnam Putnam MCI New Balanced Common Participant Opportunities Retirement Stock Loans Total ASSETS ------------- ------------- ------------- ------------ ------------- ------ Contributions receivable: Employee $ 26,865 $ 19,313 $ 51,919 $ 0 $ 221,935 Employer 0 0 126,693 0 126,693 ----------- ----------- ------------ ----------- ------------ Total contributions receivable 26,865 19,313 178,612 0 348,628 Non-interest bearing cash 0 0 0 0 307,608 Other receivables 17,119 177,650 0 0 850,191 Investments, at fair value: Common stock 0 0 246,431,822* 0 246,431,822 Common/collective trusts 1,395 1,213 22,393 0 1,623,636 Registered investment companies 28,406,193 19,099,867 0 0 228,215,092 Participant loans 0 0 0 20,447,333 20,447,333 Investments, at contract value: Value of guaranteed investment contracts 0 0 0 0 104,298,513 ----------- ----------- ------------ ----------- ------------ Total assets 28,451,572 19,298,043 246,632,827 20,447,333 602,522,823 ----------- ----------- ------------ ----------- ------------ LIABILITIES ------------ Operating payables 0 193,585 0 0 900,549 ----------- ----------- ------------ ----------- ------------ Net assets available for benefits $28,451,572 $19,104,458 $246,632,827 $20,447,333 $601,622,274 =========== =========== ============ =========== ============ Participating Plan Interests - ---------------------------- MCI Communications Retirement Savings Plan $25,147,778 $16,800,069 $218,017,594 $17,969,075 $537,827,481 MCI Consumer Markets 401(k) Plan 3,303,794 2,304,389 28,615,233 2,478,258 63,794,793 ----------- ----------- ------------ ----------- ------------ Total $28,451,572 $19,104,458 $246,632,827 $20,447,333 $601,622,274 =========== =========== ============ =========== ============ <FN> * Investment represents 5% or more of the Trust's net assets. </FN> Page 19 MCI COMMUNICATIONS CORPORATION DEFINED CONTRIBUTION MASTER TRUST STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION FOR THE YEAR ENDED DECEMBER 31, 1996 EuroPacific Dreyfus Putnam Stable Putnam Putnam Growth S&P 500 Voyager Asset New Balanced Fund Stock Index Fund Fund Opportunities Retirement ------------ ------------ ----------- ----------- -------------- ------------ ADDITIONS - --------- Contributions: Participants $ 7,252,491 $ 11,138,992 $ 21,643,332 $ 10,657,509 $ 14,051,271 $ 7,166,398 Non-cash employer 0 0 0 0 0 0 Rollovers 738,656 722,245 1,607,984 906,949 1,969,435 684,448 Transfers from ESOP 84,030 86,897 334,056 92,767 343,735 123,300 ------------ ------------ ------------- ------------- ------------ ------------ Total contributions 8,075,177 11,948,134 23,585,372 11,657,225 16,364,441 7,974,146 ------------ ------------ ------------- ------------- ------------ ------------ Earnings on investments: Interest on participant loans 0 0 0 0 0 0 Interest on guaranteed investment contracts 0 0 0 7,188,820 0 0 Dividends on common stock 0 0 0 0 0 0 Net gain on sale of common stock 0 0 0 0 0 0 Unrealized appreciation of assets 0 0 0 0 0 0 Net gain from registered investment companies 3,598,035 14,154,926 14,497,797 0 3,295,115 3,239,957 ------------ ------------ ------------- ------------- ------------ ------------ Total earnings on investments 3,598,035 14,154,926 14,497,797 7,188,820 3,295,115 3,239,957 ------------ ------------ ------------- ------------- ------------ ------------ Total additions 11,673,212 26,103,060 38,083,169 18,846,045 19,659,556 11,214,103 DEDUCTIONS - ---------- Participant benefit payments 984,231 3,597,461 6,993,973 8,873,275 2,135,703 1,520,211 Account maintenance fees 6,163 14,225 27,072 27,308 11,396 7,390 ------------ ------------ ------------- ------------- ------------ ------------ Net increase 10,682,818 22,491,374 31,062,124 9,945,462 17,512,457 9,686,502 Transfers from (to): Other master trust investment accounts 137,996 (2,725,774) (3,558,778) (9,805,983) 6,817,424 575,236 Net loans (96,843) (788,574) (1,439,817) (1,215,837) (313,333) (182,289) Western Union International Collectively Bargained Plan 215 38,526 41,125 42,069 88 29 Darome Teleconferencing, Inc. 401(k) Plan 67,035 107,960 0 259,972 31,009 149,708 Net assets available for benefits, at beginning of year 14,866,239 58,518,729 107,557,014 106,044,102 28,451,572 19,104,458 ------------ ------------ ------------- ------------- ------------ ------------ Net assets available for benefits, at end of year $ 25,657,460 $ 77,642,241 $ 133,661,668 $ 105,269,785 $ 52,499,217 $ 29,333,644 ============ ============ ============= ============= ============ ============ Page 20 MCI COMMUNICATIONS CORPORATION DEFINED CONTRIBUTION MASTER TRUST STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION FOR THE YEAR ENDED DECEMBER 31, 1996 MCI Common Participant Stock Loans Total ADDITIONS -------------- -------------- ------------ - --------- Contributions: Participants $ 16,670,642 $ 0 $ 88,580,635 Non-cash employer 42,788,843 0 42,788,843 Rollovers 977,692 0 7,607,409 Transfers from ESOP 53,920 0 1,118,705 ------------- ----------- ------------ Total contributions 60,491,097 0 140,095,592 ------------- ----------- ------------ Earnings on investments: Interest on participant loans 0 1,978,777 1,978,777 Interest on guaranteed investment contracts 0 0 7,188,820 Dividends on common stock 525,391 0 525,391 Net gain on sale of common stock 1,003,548 0 1,003,548 Unrealized appreciation of assets 69,875,942 0 69,875,942 Net gain from registered investment companies 0 0 38,785,830 ------------- ----------- ------------ Total earnings on investments 71,404,881 1,978,777 119,358,308 ------------- ----------- ------------ Total additions 131,895,978 1,978,777 259,453,900 DEDUCTIONS - ------------ Participant benefit payments 16,137,642 1,801,966 42,044,462 Account maintenance fees 47,232 0 140,786 ------------- ----------- ------------ Net increase 115,711,104 176,811 217,268,652 Transfers from (to): Other master trust investment accounts 8,559,879 0 0 Net loans (1,514,441) 5,551,134 0 Western Union International Collectively Bargained Plan 84,839 10,786 217,677 Darome Teleconferencing, Inc. 401(k) Plan 0 24,881 640,565 Net assets available for benefits, at beginning of year 246,632,827 20,447,333 601,622,274 ------------- ----------- ------------ Net assets available for benefits, at end of year $ 369,474,208 $26,210,945 $819,749,168 ============= =========== ============ Page 21 MCI COMMUNICATIONS CORPORATION DEFINED CONTRIBUTION MASTER TRUST STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION FOR THE YEAR ENDED DECEMBER 31, 1995 EuroPacific Putnam Scudder Dreyfus Putnam Putnam Putnam Growth Balanced Income S&P 500 Growth & Investors Vista Fund Fund Fund Stock Index Income Fund Fund ADDITIONS ------------ ------------ ----------- ------------ ----------- ---------- ----------- - --------- Contributions: Participants $ 5,251,972 $ 1,248,922 $ 577,090 $ 8,827,241 $ 565,945 $ 123,673 $ 243,681 Non-cash employer 0 0 0 0 0 0 0 Rollovers 791,446 241,301 119,561 745,493 227,021 37,701 90,302 Transfers from ESOP 66,721 0 0 54,377 0 0 0 ------------ ------------ ----------- ------------ ----------- ---------- ----------- Total contributions 6,110,139 1,490,223 696,651 9,627,111 792,966 161,374 333,983 ------------ ------------ ----------- ------------ ----------- ---------- ----------- Earnings on investments: Interest on participant loans 0 0 0 0 0 0 0 Interest on guaranteed investment contracts 0 0 0 0 0 0 0 Dividends on common stock 0 0 0 0 0 0 0 Net gain on sale of common stock 0 0 0 0 0 0 0 Unrealized appreciation of assets 0 0 0 0 0 0 0 Net gain from registered investment companies 1,280,651 710,463 247,679 14,536,948 432,773 109,244 208,851 ------------ ------------ ----------- ------------ ----------- ---------- ---------- Total earnings on investments 1,280,651 710,463 247,679 14,536,948 432,773 109,244 208,851 ------------ ------------ ----------- ------------ ----------- ---------- ---------- Total additions 7,390,790 2,200,686 944,330 24,164,059 1,225,739 270,618 542,834 DEDUCTIONS - ---------- Participant benefit payments 530,494 195,674 79,766 2,450,337 61,244 10,369 24,012 Account maintenance fees 3,587 920 440 11,812 340 130 168 ------------ ------------ ----------- ------------ ----------- ---------- ---------- Net increase 6,856,709 2,004,092 864,124 21,701,910 1,164,155 260,119 518,654 Transfers from (to): Other master trust investment accounts 1,567,927 (5,496,998) (2,728,202) 1,451,525 (3,060,910) (678,260) (1,514,509) Net loans (5,685) (31,753) (7,405) (710,327) (15,566) (12,686) 7,781 Western Union International Collectively Bargained Plan 0 0 0 7,922 0 0 0 Net assets available for benefits, beginning of year 6,447,288 3,524,659 1,871,483 36,067,699 1,912,321 430,827 988,074 ------------ ------------ ----------- ------------ ----------- ---------- ----------- Net assets available for benefits, end of year $14,866,239 $ 0 $ 0 $58,518,729 $ 0 $ 0 $ 0 ============ ============ =========== ============ =========== ========== =========== Page 22 MCI COMMUNICATIONS CORPORATION DEFINED CONTRIBUTION MASTER TRUST STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION FOR THE YEAR ENDED DECEMBER 31, 1995 Putnam Putnam Putnam Putnam Putnam Putnam Voyager Convertible High Yield Global Gov't OTC Emerging Diversified Fund Income-Growth Advantage Income Growth Income ADDITIONS ------------- ------------- ---------- ------------ ------------ ----------- - --------- Contributions: Participants $ 16,872,907 $ 198,879 $ 130,518 $ 60,923 $ 1,036,061 $ 81,012 Non-cash employer 0 0 0 0 0 0 Rollovers 1,286,559 59,077 25,654 7,986 189,639 26,713 Transfers from ESOP 81,661 0 0 0 0 0 ------------- ----------- --------- --------- ----------- --------- Total contributions 18,241,127 257,956 156,172 68,909 1,225,700 107,725 ------------- ----------- --------- --------- ----------- --------- Earnings on investments: Interest on participant loans 0 0 0 0 0 0 Interest on guaranteed investment contracts 0 0 0 0 0 0 Dividends on common stock 0 0 0 0 0 0 Net gain on sale of common stock 0 0 0 0 0 0 Unrealized appreciation of assets 0 0 0 0 0 0 Net gain from registered investment companies 28,079,036 107,684 57,739 16,807 663,984 40,082 ------------- ----------- --------- --------- ----------- --------- Total earnings on investments 28,079,036 107,684 57,739 16,807 663,984 40,082 ------------- ----------- --------- --------- ----------- --------- Total additions 46,320,163 365,640 213,911 85,716 1,889,684 147,807 DEDUCTIONS - ---------- Participant benefit payments 5,020,074 12,105 17,737 4,797 109,631 19,295 Account maintenance fees 21,203 239 136 42 646 58 ------------- ----------- --------- --------- ----------- --------- Net increase 41,278,886 353,296 196,038 80,877 1,779,407 128,454 Transfers from (to): Other master trust investment accounts 4,780,658 (1,045,665) (611,710) (296,290) (4,812,448) (485,856) Net loans (1,268,072) (21,765) (442) 1,853 (10,051) (5,941) Western Union International Collectively Bargained Plan 31,562 0 0 0 0 0 Net assets available for benefits, at beginning of year 62,733,980 714,134 416,114 213,560 3,043,092 363,343 ------------- ----------- --------- --------- ----------- --------- Net assets available for benefits, at end of year $ 107,557,014 $ 0 $ 0 $ 0 $ 0 $ 0 ============= =========== ========= ========= =========== ========= Page 23 MCI COMMUNICATIONS CORPORATION DEFINED CONTRIBUTION MASTER TRUST STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION FOR THE YEAR ENDED DECEMBER 31, 1995 Stable Putnam Putnam MCI Asset New Balanced Common Participant Fund Opportunities Retirement Stock Loans Total ADDITIONS ------------- ------------- ------------- ------------- ------------- ------------ - --------- Contributions: Participants $ 11,915,844 $ 5,436,882 $ 3,080,954 $ 15,451,668 $ 0 $ 71,104,172 Non-cash employer 0 0 0 38,743,079 0 38,743,079 Rollovers 1,214,460 1,006,870 396,986 752,466 0 7,219,235 Transfers from ESOP 334,063 55,454 53,836 75,926 0 722,038 ------------- ------------- ------------- ------------- ------------- ------------- Total contributions 13,464,367 6,499,206 3,531,776 55,023,139 0 117,788,524 ------------- ------------- ------------- ------------- ------------- ------------- Earnings on investments: Interest on participant loans 0 0 0 0 1,668,598 1,668,598 Interest on guaranteed investment contracts 7,160,055 0 0 0 0 7,160,055 Dividends on common stock 0 0 0 456,852 0 456,852 Net gain on sale of common stock 0 0 0 2,798,630 0 2,798,630 Unrealized appreciation of assets 0 0 0 66,162,577 0 66,162,577 Net gain from registered investment companies 0 5,545,511 1,701,843 0 0 53,739,295 ------------- ------------- ------------- ------------- ------------- ------------- Total earnings on investments 7,160,055 5,545,511 1,701,843 69,418,059 1,668,598 131,986,007 ------------- ------------- ------------- ------------- ------------- ------------- Total additions 20,624,422 12,044,717 5,233,619 124,441,198 1,668,598 249,774,531 DEDUCTIONS - ---------- Participant benefit payments 8,079,761 722,038 558,121 14,459,032 1,480,795 33,835,282 Account maintenance fees 28,684 3,424 2,619 34,554 0 109,002 ------------- ------------- ------------- ------------- ------------- ------------- Net increase 12,515,977 11,319,255 4,672,879 109,947,612 187,803 215,830,247 Transfers from (to): Other master trust investment accounts (5,022,366) 12,473,352 14,416,962 (8,937,210) 0 0 Net loans (1,493,070) 40,952 14,617 (791,294) 4,308,854 0 Western Union International Collectively Bargained Plan 40,298 0 0 39,706 9,350 128,838 Net assets available for benefits, beginning of year 100,003,263 4,618,013 0 146,374,013 15,941,326 385,663,189 ------------- ------------- ------------- ------------- ------------- ------------- Net assets available for benefits, end of year $106,044,102 $ 28,451,572 $ 19,104,458 $246,632,827 $ 20,447,333 $601,622,274 ============= ============= ============= ============= ============= ============= Page 24 MCI COMMUNICATIONS CORPORATION 401(K) PLAN FOR EXEMPT EMPLOYEES (FORMERLY MCI COMMUNICATIONS CORPORATION RETIREMENT SAVINGS PLAN) EIN: 52-0886267 SCHEDULE OF MASTER TRUST PARTICIPATION Current Value of Interest Year Ended December 31, 1996 ----------------------------- ------------------------------------------------------------------------- Participant Investment Account December 31, December 31, Benefit Net Interest: 1996 1995 Contributions Payments Net Loans Net Transfers Appreciation -------------- -------------- -------------- --------------- ------------- ------------ ------------- EuroPacific Growth Fund $ 22,678,619 $ 12,985,468 $ 6,941,688 $ (828,594) $ (47,687) $ 434,823 $ 3,192,921 Dreyfus S&P 500 Stock Index 68,670,124 51,748,402 10,304,900 (3,141,941) (633,926) (2,166,772) 12,559,461 Putnam Voyager Fund 121,528,239 99,167,158 20,354,441 (6,062,941) (1,081,454) (4,080,261) 13,231,296 Putnam Balanced Retirement Fund 25,289,835 16,800,069 6,516,742 (1,239,791) (135,546) 536,459 2,811,902 Stable Asset Fund 90,950,784 95,991,937 9,255,398 (7,325,393) (837,997) (12,388,651) 6,255,490 Putnam New Opportunities 46,378,741 25,147,778 13,918,520 (1,809,320) (235,690) 6,359,706 2,997,747 MCI Common Stock 317,302,646 218,017,594 49,707,886 (12,743,123) (1,114,972) 2,193,143 61,242,118 Participant Loans (interest rates range 7% - 11%) 21,160,045 17,969,075 0 (1,452,685) 4,087,272 (1,073,114) 1,629,497 -------------- -------------- -------------- --------------- ------------- ------------- -------------- Total $ 713,959,033 $ 537,827,481 $ 116,999,575 $ (34,603,788) $ 0 $(10,184,667) $ 103,920,432 ============== ============== ============== =============== ============= ============= ============== Page 25 NOTE 4 - NET ASSETS AVAILABLE FOR BENEFITS AND CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS BY FUND The net assets available for benefits and the changes in net assets among the Plan's investment funds for the years ended December 31, 1996 and 1995 are presented on the following pages. Page 26 MCI COMMUNICATIONS CORPORATION 401(K) PLAN FOR EXEMPT EMPLOYEES (FORMERLY MCI COMMUNICATIONS CORPORATION RETIREMENT SAVINGS PLAN) EIN: 52-0886267 STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION DECEMBER 31, 1996 EuroPacific Dreyfus Putnam Stable Growth S&P 500 Voyager Asset Fund Stock Index Fund Fund ------------- ------------- ------------- ------------- ASSETS ------ Contributions receivable: Employee $ 638 $ 401 $ 720 $ 65 Employer 0 0 0 0 Other receivables 437 22,434 40,643 6,901,871 ----------- ----------- ----------- ------------ Total receivables 1,075 22,835 41,364 6,901,936 Non-interest bearing cash 0 0 15 543,155 Investments, at fair value: Common stock 0 0 0 0 Common/collective trusts 200 24,055 4,278 1,845,630 Registered investment companies 22,695,987 68,646,113* 121,523,940* 0 Participant loans 0 0 0 0 Investments, at contract value: Value of guaranteed investment contracts 0 0 0 81,784,837* ------------- ------------ ------------ ------------ Total assets 22,697,262 68,693,003 121,569,597 91,075,558 ------------- ------------ ------------ ------------ LIABILITIES ----------- Operating payables 18,643 22,879 41,358 124,774 ------------- ------------- ------------- ------------ Net assets available for benefits $22,678,619 $ 68,670,124 $ 121,528,239 $ 90,950,784 ============= ============= ============= ============= <FN> * Investment represents 5% or more of the Plan's net assets. </FN> Page 27 MCI COMMUNICATIONS CORPORATION 401(K) PLAN FOR EXEMPT EMPLOYEES (FORMERLY MCI COMMUNICATIONS CORPORATION RETIREMENT SAVINGS PLAN) EIN: 52-0886267 STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION DECEMBER 31, 1996 Putnam Putnam MCI New Balanced Common Participant Opportunities Retirement Stock Loans Total ------------- ------------- ----------- ------------ ----------- ASSETS ------ Contributions receivable: Employee $ 1,149 $ 174 $ 989 $ 0 $ 4,136 Employer 0 0 1,691 0 1,691 Other receivables 74,714 4,657 84,104 0 7,128,861 ----------- ------------ ------------ ------------ ----------- Total receivables 75,863 4,831 86,784 0 7,134,688 Non-interest bearing cash 0 0 0 0 543,170 Investments, at fair value: Common stock 0 0 317,208,325* 0 317,208,325 Common/collective trusts 38,566 3,911 7,595 0 1,924,235 Registered investment companies 46,340,117* 25,285,749 0 0 284,491,906 Participant loans 0 0 0 21,160,045 21,160,045 Investments, at contract value: Value of guaranteed investment contracts 0 0 0 0 81,784,837 ------------ ------------ ------------ ------------ ----------- Total assets 46,454,546 25,294,491 317,302,704 21,160,045 714,247,206 ------------ ------------ ------------ ------------ ----------- LIABILITIES ----------- Operating payables 75,805 4,656 58 0 288,173 ------------ ------------ ------------ ------------ ------------ Net assets available for benefits $ 46,378,741 $ 25,289,835 $317,302,646 $21,160,045 $713,959,033 ============= =========== ============ ============ ============ <FN> * Investment represents 5% or more of the Plan's net assets. </FN> Page 28 MCI COMMUNICATIONS CORPORATION 401(K) PLAN FOR EXEMPT EMPLOYEES (FORMERLY MCI COMMUNICATIONS CORPORATION RETIREMENT SAVINGS PLAN) EIN: 52-0886267 STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION DECEMBER 31, 1995 EuroPacific Dreyfus Putnam Stable Growth S&P 500 Voyager Asset Fund Stock Index Fund Fund ------------ ------------- ------------- ------------- ASSETS ------ Non-interest bearing cash $ 1,443 $ 64,077 $ 81,983 $ 130,872 Other receivables 225,584 295,590 66,146 1,338 Investments, at fair value: Common stock 0 0 0 0 Common/collective trusts 12 11,046 1,571 1,434,180 Registered investment companies 12,984,013 51,637,924* 99,032,315* 0 Participant loans 0 0 0 0 Investments, at contract value: Value of guaranteed investment contracts 0 0 0 94,448,258* ------------ ------------- ------------- ------------- Total assets 13,211,052 52,008,637 99,182,015 96,014,648 ------------ ------------- ------------- ------------- LIABILITIES ----------- Operating payables 225,584 260,235 14,857 22,711 ------------ ------------- ------------- ------------- Net assets available for benefits $ 12,985,468 $ 51,748,402 $ 99,167,158 $ 95,991,937 ============ ============= ============= ============= <FN> * Investment represents 5% or more of the Plan's net assets. </FN> Page 29 MCI COMMUNICATIONS CORPORATION 401(K) PLAN FOR EXEMPT EMPLOYEES (FORMERLY MCI COMMUNICATIONS CORPORATION RETIREMENT SAVINGS PLAN) EIN: 52-0886267 STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION DECEMBER 31, 1995 Putnam Putnam MCI New Balanced Common Participant Opportunities Retirement Stock Loans Total ------------- ------------- ------------- ------------- ------------- ASSETS ------ Non-interest bearing cash $ 0 $ 0 $ 0 $ 0 $ 278,375 Other receivables 21,387 161,058 51 0 771,154 Investments, at fair value: Common stock 0 0 217,997,790* 0 217,997,790 Common/collective trusts 1,233 1,067 19,753 0 1,468,862 Registered investment companies 25,125,158 16,808,405 0 0 205,587,815 Participant loans 0 0 0 17,969,075 17,969,075 Investments, at contract value: Value of guaranteed investment contracts 0 0 0 0 94,448,258 ------------ ------------- ------------- ------------- ------------- Total assets 25,147,778 16,970,530 218,017,594 17,969,075 538,521,329 ------------ ------------- ------------- ------------- ------------- LIABILITIES ----------- Operating payables 0 170,461 0 0 693,848 ------------ ------------- ------------- ------------- ------------- Net assets available for benefits $ 25,147,778 $ 16,800,069 $218,017,594 $ 17,969,075 $537,827,481 ============ ============= ============= ============= ============= <FN> * Investment represents 5% or more of the Plan's net assets. </FN> Page 30 MCI COMMUNICATIONS CORPORATION 401(K) PLAN FOR EXEMPT EMPLOYEES (FORMERLY MCI COMMUNICATIONS CORPORATION RETIREMENT SAVINGS PLAN) EIN: 52-0886267 STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION DECEMBER 31, 1996 EuroPacific Dreyfus Putnam Stable Putnam Putnam Growth S&P 500 Voyager Asset New Balanced Fund Stock Index Fund Fund Opportunities Retirement ADDITIONS ------------ ------------ ----------- ----------- -------------- ------------ - --------- Contributions: Participants $ 6,157,553 $ 9,538,036 $ 18,553,560 $ 8,382,022 $11,735,103 $ 5,855,906 Non-cash employer 0 0 0 0 0 0 Rollovers 702,527 684,102 1,491,567 829,537 1,892,158 555,336 Transfers from ESOP 81,608 82,762 309,314 43,839 291,259 105,500 ----------- ----------- ---------- ---------- ----------- ---------- Total contributions 6,941,688 10,304,900 20,354,441 9,255,398 13,918,520 6,516,742 ----------- ----------- ---------- ---------- ----------- ---------- Earnings on investments: Interest on participant loans 0 0 0 0 0 0 Interest on guaranteed investment contracts 0 0 0 6,255,490 0 0 Dividends on common stock 0 0 0 0 0 0 Net gain on sale of common stock 0 0 0 0 0 0 Unrealized appreciation of assets 0 0 0 0 0 0 Net gain from registered investment companies 3,192,921 12,559,461 13,231,296 0 2,997,747 2,811,902 ----------- ------------ ------------ ----------- ------------ ------------ Total earnings on investments 3,192,921 12,559,461 13,231,296 6,255,490 2,997,747 2,811,902 ----------- ------------ ------------ ----------- ------------ ------------ Total additions 10,134,609 22,864,361 33,585,737 15,510,888 16,916,267 9,328,644 DEDUCTIONS - ---------- Participant benefit payments 824,288 3,131,545 6,043,256 7,307,455 1,801,178 1,234,830 Account maintenance fees 4,306 10,396 19,685 17,938 8,142 4,961 ----------- ------------ ------------ ----------- ------------ ------------ Net increase 9,306,015 19,722,420 27,522,796 8,185,495 15,106,947 8,088,853 Transfers from (to): Other master trust investment accounts 200,129 (2,490,292) (3,365,427) (9,219,889) 5,968,885 526,814 Net loans (47,687) (633,926) (1,081,454) (837,997) (235,690) (135,546) Western Union International Collectively Bargained Plan 164 36,136 38,925 41,454 0 0 MCI 401(k) Plan for Non-Exempt Employees 234,530 287,384 (753,759) (3,210,216) 390,821 9,645 Net assets available for benefits, beginning of year 12,985,468 51,748,402 99,167,158 95,991,937 25,147,778 16,800,069 ----------- ------------ ----------- ----------- ----------- ----------- Net assets available for benefits, end of year $22,678,619 $68,670,124 $121,528,239 $90,950,784 $46,378,741 $ 25,289,835 =========== ============ =========== =========== =========== ============ Page 31 MCI COMMUNICATIONS CORPORATION 401(K) PLAN FOR EXEMPT EMPLOYEES (FORMERLY MCI COMMUNICATIONS CORPORATION RETIREMENT SAVINGS PLAN) EIN: 52-0886267 STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION DECEMBER 31, 1996 MCI Common Participant Stock Loans Total ADDITIONS -------------- --------------- ------------ - --------- Contributions: Participants $ 13,434,226 $ 0 $ 73,656,406 Non-cash employer 35,319,523 0 35,319,523 Rollovers 928,084 0 7,083,311 Transfers from ESOP 26,053 0 940,335 ------------- ------------- ------------ Total contributions 49,707,886 0 116,999,575 -------------- ------------- ------------ Earnings on investments: Interest on participant loans 0 1,629,497 1,629,497 Interest on guaranteed investment contracts 0 0 6,255,490 Dividends on common stock 445,635 0 445,635 Net gain on sale of common stock 808,155 0 808,155 Unrealized appreciation of assets 59,988,328 0 59,988,328 Net gain from registered investment companies 0 0 34,793,327 ------------- ------------ ------------ Total earnings on investments 61,242,118 1,629,497 103,920,432 ------------- ------------ ------------ Total additions 110,950,004 1,629,497 220,920,007 DEDUCTIONS - ---------- Participant benefit payments 12,710,078 1,452,685 34,505,315 Account maintenance fees 33,045 0 98,473 ------------- ------------ ------------ Net increase 98,206,881 176,812 186,316,219 Transfers from (to): Other master trust investment accounts 8,379,780 0 0 Net loans (1,114,972) 4,087,272 0 Western Union International Collectively Bargained Plan 82,468 10,786 209,933 MCI Plan for Non-Exempt Employees (6,269,105) (1,083,900) (10,394,600) Net assets available for benefits, beginning of year 218,017,594 17,969,075 537,827,481 -------------- ------------- ------------ Net assets available for benefits, end of year $317,302,646 $ 21,160,045 $713,959,033 ============= ============ ============ Page 32 MCI COMMUNICATIONS CORPORATION 401(K) PLAN FOR EXEMPT EMPLOYEES (FORMERLY MCI COMMUNICATIONS CORPORATION RETIREMENT SAVINGS PLAN) EIN: 52-0886267 STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION DECEMBER 31, 1995 EuroPacific Putnam Scudder Dreyfus Putnam Putnam Putnam Growth Balanced Income S&P 500 Growth & Investors Vista Fund Fund Fund Stock Index Income Fund Fund ADDITIONS ------------- ----------- ----------- ------------- ----------- --------- ----------- - --------- Contributions: Participants $ 4,390,561 $1,036,121 $ 483,658 $ 7,433,945 $ 445,674 $102,315 $ 211,700 Non-cash employer 0 0 0 0 0 0 0 Rollovers 726,922 221,987 110,740 633,595 169,421 16,863 78,024 Transfers from ESOP 66,721 0 0 54,377 0 0 0 ------------- ----------- ----------- ------------- ----------- --------- ----------- Total contributions 5,184,204 1,258,108 594,398 8,121,917 615,095 119,178 289,724 ------------- ----------- ----------- ------------- ----------- --------- ----------- Earnings on investments: Interest on participant loans 0 0 0 0 0 0 0 Interest on guaranteed investment contract 0 0 0 0 0 0 0 Dividends on common stock 0 0 0 0 0 0 0 Net gain on sale of common stock 0 0 0 0 0 0 0 Unrealized appreciation of assets 0 0 0 0 0 0 0 Net gain from registered investment companies 1,129,858 627,036 223,175 12,843,841 383,901 99,870 185,802 ------------- ----------- ----------- ------------- ----------- --------- ----------- Total earnings on investments 1,129,858 627,036 223,175 12,843,841 383,901 99,870 185,802 ------------- ----------- ----------- ------------- ----------- --------- ----------- Total additions 6,314,062 1,885,144 817,573 20,965,758 998,996 219,048 475,526 DEDUCTIONS - ---------- Participant benefit payments 453,332 182,456 67,840 2,074,793 49,062 9,451 19,622 Account maintenance fees 2,791 726 366 8,476 277 95 143 ------------- ----------- ----------- ------------- ----------- --------- ----------- Net increase 5,857,939 1,701,962 749,367 18,882,489 949,657 209,502 455,761 Transfers from (to): Other master trust investment accounts 1,299,583 (4,828,727) (2,422,280) 1,273,832 (2,638,716) (598,543) (1,330,877) Net loans (2,097) (31,170) (7,580) (550,185) (16,903) (9,081) 14,264 MCI Consumer Markets 401(k) Plan 83,937 20,346 183 364,557 5,121 (906) (44,438) Western Union International Collectively Bargained Plan 0 0 0 7,922 0 0 0 Net assets available for benefits, beginning of year 5,746,106 3,137,589 1,680,310 31,769,787 1,700,841 399,028 905,290 ------------- ----------- ----------- ------------- ----------- --------- ----------- Net assets available for benefits, end of year $ 12,985,468 $ 0 $ 0 $ 51,748,402 $ 0 $ 0 $ 0 ============= =========== =========== ============= =========== ========= =========== Page 33 MCI COMMUNICATIONS CORPORATION 401(K) PLAN FOR EXEMPT EMPLOYEES (FORMERLY MCI COMMUNICATIONS CORPORATION RETIREMENT SAVINGS PLAN) EIN: 52-0886267 STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION DECEMBER 31, 1995 Putnam Putnam Putnam Putnam Putnam Putnam Voyager Convertible High Yield Global Gov't OTC Emerging Diversified Fund Income-Growth Advantage Income Growth Income ADDITIONS ------------- ------------- ---------- ------------ ------------ ----------- - --------- Contributions: Participants $ 14,346,390 $ 166,684 $ 111,042 $ 49,139 $ 894,852 $ 64,948 Non-cash employer 0 0 0 0 0 0 Rollovers 1,132,926 46,148 25,654 7,986 154,784 26,713 Transfers from ESOP 81,661 0 0 0 0 0 ------------- ------------- ---------- ------------ ------------ ----------- Total contributions 15,560,977 212,832 136,696 57,125 1,049,636 91,661 ------------- ------------- ---------- ------------ ------------ ----------- Earnings on investments: Interest on participant loans 0 0 0 0 0 0 Interest on guaranteed investment contracts 0 0 0 0 0 0 Dividends on common stock 0 0 0 0 0 0 Net gain on sale of common stock 0 0 0 0 0 0 Unrealized appreciation of assets 0 0 0 0 0 0 Net gain from registered investment companies 26,000,640 97,125 52,849 15,071 604,501 34,453 ------------ ------------- ---------- ------------ ------------ ----------- Total earnings on investments 26,000,640 97,125 52,849 15,071 604,501 34,453 ------------ ------------- ---------- ------------ ------------ ----------- Total additions 41,561,617 309,957 189,545 72,196 1,654,137 126,114 DEDUCTIONS - ---------- Participant benefit payments 4,465,024 10,919 16,008 4,572 99,188 18,151 Account maintenance fees 16,535 214 108 35 520 47 ------------ ------------- ---------- ------------ ------------ ----------- Net increase 37,080,058 298,824 173,429 67,589 1,554,429 107,916 Transfers from (to): Other master trust investment accounts 4,523,355 (950,771) (549,601) (265,628) (4,353,550) (416,410) Net loans (1,107,613) (15,069) (554) 1,639 7,856 (7,565) MCI Consumer Markets 401(k) Plan 428,679 1,120 (591) 446 (11,115) 498 Western Union International Collectively Bargained Plan 31,562 0 0 0 0 0 Net assets available for benefits, beginning of year 58,211,117 665,896 377,317 195,954 2,802,380 315,561 ------------- ------------- ---------- ------------ ------------ ----------- Net assets available for benefits, end of year $ 99,167,158 $ 0 $ 0 $ 0 $ 0 $ 0 ============= ============= ========== ============ ============ =========== Page 34 MCI COMMUNICATIONS CORPORATION 401(K) PLAN FOR EXEMPT EMPLOYEES (FORMERLY MCI COMMUNICATIONS CORPORATION RETIREMENT SAVINGS PLAN) EIN: 52-0886267 STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION DECEMBER 31, 1995 Stable Putnam Putnam MCI Asset New Balanced Common Participant Fund Opportunities Retirement Stock Loans Total ADDITIONS ------------- ------------- ------------- ------------- ------------- ------------- - --------- Contributions: Participants $ 9,767,877 $ 4,464,435 $ 2,491,906 $ 12,860,837 $ 0 $ 59,322,084 Non-cash employer 0 0 0 32,177,951 0 32,177,951 Rollovers 1,128,971 844,648 363,898 694,562 0 6,383,842 Transfers from ESOP 334,063 55,454 53,836 75,926 0 722,038 ------------- ------------- ------------- ------------- ------------- ------------- Total contributions 11,230,911 5,364,537 2,909,640 45,809,276 0 98,605,915 ------------- ------------- ------------- ------------- ------------- ------------- Earnings on investments: Interest on participant loans 0 0 0 0 1,508,423 1,508,423 Interest on guaranteed investment contracts 6,443,825 0 0 0 0 6,443,825 Dividends on common stock 0 0 0 399,550 0 399,550 Net gain on sale of common stock 0 0 0 2,224,386 0 2,224,386 Unrealized appreciation of assets 0 0 0 57,379,129 0 57,379,129 Net gain from registered investment companies 0 4,951,744 1,501,059 0 0 48,750,925 ------------- ------------- ------------- ------------- ------------- ------------- Total earnings on investments 6,443,825 4,951,744 1,501,059 60,003,065 1,508,423 116,706,238 ------------- ------------- ------------- ------------- ------------- ------------- Total additions 17,674,736 10,316,281 4,410,699 105,812,341 1,508,423 215,312,153 DEDUCTIONS - ---------- Participant benefit payments 6,409,570 644,545 480,864 11,398,405 1,153,900 27,557,702 Account maintenance fees 20,572 2,623 1,928 25,052 0 80,508 ------------- ------------- ------------- ------------- ------------- ------------- Net increase 11,244,594 9,669,113 3,927,907 94,388,884 354,523 187,673,943 Transfers from (to): Other master trust investment accounts (4,161,296) 11,111,612 12,790,110 (8,482,093) 0 0 Net loans (1,179,222) 58,223 37,843 (606,989) 3,414,203 0 MCI Consumer Markets 401(k) Plan 407,343 68,883 44,209 1,021,414 74,172 2,463,858 Western Union International Collectively Bargained Plan 40,298 0 0 39,706 9,350 128,838 Net assets available for benefits beginning of year 89,640,220 4,239,947 0 131,656,672 14,116,827 347,560,842 ------------- ------------- ------------- ------------- ------------- ------------- Net assets available for benefits end of year $ 95,991,937 $ 25,147,778 $ 16,800,069 $218,017,594 $ 17,969,075 $537,827,481 ============= ============= ============= ============= ============= ============= Page 35 NOTE 5 - PARTICIPANTS' ACCOUNTS As of December 31, 1996 and 1995, the Plan held 9,703,805 and 8,343,760 shares, respectively, of MCI Communications Corporation Common Stock at fair market values of $317,193,126 and $217,980,730, respectively. Of these shares, 1,282,338 and 1,446,123 were contributed by the Company during the Plan years ended December 31, 1996 and 1995, respectively, as the Company's matching contributions. As of December 31, 1996 and 1995, the Plan's benefit claims payable was $106,395,205 and $67,482,454, which includes 1,289,814 and 956,517 shares of MCI Communications Corporation Common Stock at fair market values of $42,160,817 and $24,989,007, respectively. Net assets include account balances of participants who have terminated from the Company and have not received a distribution as of year end. NOTE 6 - TRANSFER OF ASSETS TO (FROM) THE PLAN During the years ended December 31, 1996 and 1995, certain participants transferred between the Plan and the Non-Exempt Plan. During the plan year ended December 31, 1996, assets valued at $10,394,600 were transferred from the Plan, including 235,152 shares of MCI Communications Corporation Common Stock at a fair value of $6,269,575. During the plan year ended December 31, 1995, assets valued at $2,463,858 were transferred to the Plan, including 47,040 shares of MCI Communications Corporation Common Stock at a fair value of $1,021,414. During the years ended December 31, 1996 and 1995, certain participants transferred between the Plan and the Western Union International 401(k) Plan for Collectively Bargained Employees. During the years ended December 31, 1996 and 1995, assets valued at $209,933 and $128,838, respectively, including 3,013 and 2,101 shares of MCI Communications Corporation Common Stock at a fair value of $82,468 and $39,706, respectively, were transferred to the Plan. NOTE 7 - FEDERAL INCOME TAX STATUS As described in Note 1, the Plan is Part II of the MCI Communications Corporation ESOP and 401(k) for Exempt Employees, which, as amended through January 24, 1995, has been determined by letter dated January 31, 1996, by the IRS to be qualified under Section 401 of the Internal Revenue Code. Page 36 NOTE 8- MERGER AGREEMENT Effective November 3, 1996, MCI Communications Corporation ("MCI") and British Telecommunications, plc ("BT") entered into an Agreement and Plan of Merger ("the Merger"). As a result of the proposed merger, the stockholders of MCI and BT will become the owners of a combined company, renamed Concert plc (Concert). Under the terms of the Merger, each outstanding share of the MCI's common stock (other than treasury shares and shares owned by BT including the shares of Class A common stock) will be converted into the right to receive (i) .54 American Depository Share (ADS) of Concert, each ADS representing ten ordinary shares of 25 pence each of Concert (with cash being paid in lieu of fractional ADSs), and (ii) $6.00 in cash. The shareholders of the respective companies approved the Merger at meetings held on April 2, 1997 and April 15, 1997, respectively. Completion of the Merger is subject to certain conditions, including the receipt of required regulatory approvals. MCI expects to complete the Merger in the fall of 1997. NOTE 9- SUBSEQUENT EVENTS Effective January 1, 1997, the eligibility requirements under the Plan were amended to permit an employee to become a participant and eligible for elective contributions on the entry date coincident with or next following the close of the three consecutive, full, calendar months period from his or her date of hire. The participant shall be eligible to receive matching contributions after completing a 12-consecutive-month period starting on his or her date of hire in which the participant has completed 1,000 hours of service. Page 37 SCHEDULE I MCI COMMUNICATIONS CORPORATION DEFINED CONTRIBUTION MASTER TRUST ITEM 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES DECEMBER 31, 1996 CURRENT NUMBER VALUE AT DESCRIPTION/ISSUER OF SHARES COST 12/31/96 - ------------------ --------- ------------ ------------ *LOANS TO PARTICIPANTS Participant loan accounts (rates range 7% - 11%) $ 0 $ 26,210,945 (maturities range 1997-2011) ------------ INTEREST IN COLLECTIVE INVESTMENT FUNDS OF TRUSTEE * Mellon Bank Temporary Investment Fund 2,225,365 2,225,365 ------------ INTEREST IN REGISTERED INVESTMENT COMPANIES EuroPacific Growth Fund 986,064 22,903,818 25,677,109 * Dreyfus S&P 500 Stock Index 4,878,384 55,973,987 77,615,093 * Putnam Voyager Fund 8,291,373 102,466,644 133,656,939 * Putnam New Opportunities 1,291,053 44,871,300 52,455,498 * Putnam Balanced Retirement 2,836,470 27,895,654 29,329,101 ------------ Total investment in registered investment companies 318,733,740 ------------ GUARANTEED INVESTMENT CONTRACTS ** Stable Asset Fund Aetna Life Insurance (6.63% Matures 6/30/00) 20,306,182 20,306,182 Allstate Life Insurance Company (5.90% Matures 7/1/98) 6,474,248 6,474,248 John Hancock Mutual Life Insurance (8.05% Matures 6/30/99) 4,000,628 4,000,628 Metropolitan Life Insurance (8.96% Matures 6/30/96) 14,261,226 14,261,226 New York Life Insurance (6.82% Matures 3/31/98) 8,847,294 8,847,294 New York Life Insurance (8.08% Matures 12/31/99) 5,803,475 5,803,475 Pacific Mutual Life Insurance (7.30% Matures 12/31/01) 4,642,586 4,642,586 Pacific Mutual Life Insurance(7.36% Matures 12/31/01) 1,287,816 1,287,816 Peoples Security Insurance Company (5.72% Matures 6/30/94) 7,000,905 7,000,905 Peoples Security Insurance Company (5.86% Matures 3/31/98) 5,220,011 5,220,011 Principal Mutual Life Insurance (6.60% Matures 4/02/01) 3,409,732 3,409,732 Prudential Life Insurance (7.00% Matures 9/30/98) 6,028,870 6,028,870 TransAmerica Life Insurance (5.60% Matures 6/30/95) 3,426,163 3,426,163 TransAmerica Life Insurance (7.25% Matures 12/31/98) 4,071,194 4,071,194 ------------ Total guaranteed investment contracts 94,780,330 ------------ COMMON STOCK * MCI Communications Corporation 11,299,325 248,485,916 369,352,337 ------------ TOTAL INVESTMENTS $811,302,717 ============ <FN> * Denotes a party-in-interest ** Current value is considered to be contract value. </FN> Page 38 SCHEDULE II MCI COMMUNICATIONS CORPORATION DEFINED CONTRIBUTION MASTER TRUST ITEM 27d - SCHEDULE OF REPORTABLE TRANSACTIONS FOR THE YEAR ENDED DECEMBER 31, 1996 Transactions or series of transactions exceeding 5% of the beginning fair values of master trust assets for the plan year January 1, 1996 to December 31, 1996 are considered reportable transactions. Fair value at January 1, 1996 is $602,522,823. Five percent (5%) of fair value is $30,126,141. Identity Expense Current of incurred value of asset party Purchase Selling Lease with Cost of on transaction Net gain involved Description of asset price price rental transaction asset date or (loss) - -------- ----------------------- -------------- ------------- ------ ----------- -------------- -------------- --------- * Putnam Voyager Fund $ 26,805,559 $ 26,805,559 $ 26,805,559 $ 0 (129 purchases) * Putnam Voyager Fund $ 15,121,764 $ 10,559,468 $ 15,121,764 $4,562,296 (126 sales) * MCI Communications $ 10,197,229 $ 10,197,229 $ 10,197,229 $ 0 Corporation Common Stock (202 deliveries) * MCI Communications $ 38,361,503 $ 38,361,503 $ 38,361,503 $ 0 Corporation Common Stock (209 receipts) Stable Asset Fund $ 35,230,443 $ 35,230,443 $ 35,230,443 $ 0 (207 purchases) Stable Asset Fund $ 34,678,608 $ 34,678,608 $ 34,678,608 $ 0 (179 sales) * Mellon Bank Temporary $ 37,705,175 $ 37,705,175 $ 37,705,175 $ 0 Investment Fund (100 purchases) * Mellon Bank Temporary $ 37,558,568 $ 37,558,568 $ 37,558,568 $ 0 Investment Fund (62 sales) <FN> * Denotes a party-in-interest </FN> Page 39 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Plan sponsor of the MCI Communications Corporation ESOP and 401(k) Plan for Exempt Employees has duly caused this annual report to be signed on its behalf by the undersigned, thereunto duly authorized. MCI COMMUNICATIONS CORPORATION ESOP AND 401(K) FOR EXEMPT EMPLOYEES Date: June 27, 1997 By:David M. Case ------------------------------ David M. Case Vice President and Controller MCI Communications Corporation Page 40