QCII and two of its subsidiaries, Qwest Capital Funding, Inc ("QCF") and QSC, guarantee the payment of certain of each other's registered debt securities. As of the successor date of June 30, 2012, each series of QCII's outstanding notes totaling approximately $1.4 billion in aggregate principal amount is guaranteed on a senior unsecured basis by QCF and QSC (the "QCII Guaranteed Notes"). These notes are guaranteed through their respective maturity dates, the latest of which is in April 2018. In addition, each series of QCF's outstanding notes totaling approximately $1 billion in aggregate principal amount is guaranteed on a senior unsecured basis by QCII (the "QCF Guaranteed Notes"). These notes are guaranteed through their respective maturity dates, the latest of which is in February 2031. The guarantees described above are full and unconditional and joint and several. A significant amount of QCII's and QSC's income and cash flow are generated by their subsidiaries. As a result, the funds necessary to meet their debt service or guarantee obligations are provided in large part by distributions or advances from their subsidiaries.

The following information sets forth our condensed consolidating statements of operations, balance sheets and statements of cash flows for the periods indicated. The information for QCII is presented on a stand-alone basis, information for QSC and QCF is presented on a combined basis and information for all of our other non-guarantor subsidiaries is presented on a combined basis. Each entity's investments in its subsidiaries, if any, are presented under the equity method. The consolidating statements of operations and balance sheets include the effects of consolidating adjustments to our subsidiaries' tax provisions and the related income tax assets and liabilities in the QSC and QCII results. Both QSC and QCF are 100% owned by QCII, and QCF is a finance subsidiary of QCII. Other than as already described in this note, the accounting principles used to determine the amounts reported in this note are the same as those used in our consolidated financial statements.

CenturyLink periodically restructures the internal capital structure of its subsidiaries, including QCII and its subsidiaries, based on the needs of its business.

We allocate the costs of shared services among our affiliates. These services include marketing and advertising, information technology, product and technical services as well as general support services. The allocation of these costs is based on estimated market values or fully distributed cost ("FDC"). Most of our affiliate services are priced by applying an FDC methodology. FDC rates are determined using salary rates, which include payroll taxes, employee benefits, facilities and overhead costs. Whenever possible, costs are directly assigned to the affiliate that uses the service. If costs cannot be directly assigned, they are allocated among all affiliates based on cost usage measures; or if no cost usage measure is available, these costs are allocated based on a general allocator. From time to time, we adjust the basis for allocating the costs of a shared service among our affiliates. Such changes in allocation methodologies are generally billed prospectively.

Under our tax allocation policy, we treat our subsidiaries as if they were separate taxpayers. The policy requires that each subsidiary pay its tax liabilities in cash based on that subsidiary's separate return taxable income. To the extent a subsidiary has taxable losses, the subsidiary does not pay any amount and therefore retains the benefit of the losses. Subsidiaries are also included in the combined state tax returns we file and the same payment and allocation policy applies.

Eligible employees of our subsidiaries participate in the QCII pension and non-qualified pension plan and may become eligible to participate in the post-retirement health care and life insurance, and other post-employment benefit plans sponsored by CenturyLink. The amounts contributed by our subsidiaries are not segregated or restricted to pay amounts due to their employees and may be used to provide benefits to our other employees or employees of other subsidiaries. We allocate the cost of pension, non-qualified pension, post-retirement health care and life insurance benefits and the associated obligations and assets to our subsidiaries and determine the subsidiaries' required contributions. The allocation is based upon demographics of each subsidiary's employees compared to all participants. In determining the allocated amounts, we make numerous assumptions. Changes in any of our assumptions could have a material impact on the expense allocated to our subsidiaries.

During the first quarter of 2012, in connection with post-acquisition systems integration activities, CenturyLink changed certain cash management processes applicable to us. Therefore, we now present the balances related to these cash management transactions on a net basis with our other affiliate transactions.

QWEST COMMUNICATIONS INTERNATIONAL INC.
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 2012
SUCCESSOR
(UNAUDITED)

	QCII(1)

	(Dollars in millions)
OPERATING REVENUES:
Operating revenues	$	—		—		2,736		—		2,736
Operating revenues—affiliates		—		1		100		(1	)	100

Total operating revenues		—		1		2,836		(1	)	2,836

OPERATING EXPENSES:
Cost of services and products (exclusive of depreciation and amortization)		—		—		1,213		—		1,213
Selling, general and administrative		1		1		442		—		444
Operating expenses—affiliates		—		—		151		(1	)	150
Depreciation and amortization		16		—		722		—		738

Total operating expenses		17		1		2,528		(1	)	2,545

OPERATING (LOSS) INCOME		(17	)	—		308		—		291
OTHER INCOME (EXPENSE)
Interest expense		(25	)	(16	)	(113	)	—		(154	)
Interest expense—affiliates		(21	)	(28	)	(8	)	27		(30	)
Interest income—affiliates		—		27		—		(27	)	—
Income from equity investments in subsidiaries		91		15		—		(106	)	—
Net loss on early retirement of debt		—		—		(45	)	—		(45	)
Other income (expense)		5		—		(3	)	—		2

Total other income (expense)		50		(2	)	(169	)	(106	)	(227	)

INCOME (LOSS) BEFORE INCOME TAX (BENEFIT) EXPENSE		33		(2	)	139		(106	)	64
Income tax (benefit) expense		(4	)	(93	)	124		—		27

NET INCOME	$	37		91		15		(106	)	37

COMPREHENSIVE INCOME	$	37		91		15		(106	)	37

QWEST COMMUNICATIONS INTERNATIONAL INC.
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2012
SUCCESSOR
(UNAUDITED)

	QCII(1)

	(Dollars in millions)
OPERATING REVENUES:
Operating revenues	$	—		—		5,461		—		5,461
Operating revenues—affiliates		—		3		214		(3	)	214

Total operating revenues		—		3		5,675		(3	)	5,675

OPERATING EXPENSES:
Cost of services and products (exclusive of depreciation and amortization)		—		—		2,388		—		2,388
Selling, general and administrative		3		3		922		—		928
Operating expenses—affiliates		—		—		302		(3	)	299
Depreciation and amortization		34		—		1,445		—		1,479

Total operating expenses		37		3		5,057		(3	)	5,094

OPERATING (LOSS) INCOME		(37	)	—		618		—		581
OTHER INCOME (EXPENSE)
Interest expense		(64	)	(34	)	(226	)	—		(324	)
Interest expense—affiliates		(22	)	(54	)	(11	)	53		(34	)
Interest income—affiliates		—		53		—		(53	)	—
Income from equity investments in subsidiaries		217		60		—		(277	)	—
Net loss on early retirement of debt		—		—		(37	)	—		(37	)
Other income (expense)		13		—		(10	)	—		3

Total other income (expense)		144		25		(284	)	(277	)	(392	)

INCOME BEFORE INCOME TAX (BENEFIT) EXPENSE		107		25		334		(277	)	189
Income tax (benefit) expense		(7	)	(192	)	274		—		75

NET INCOME	$	114		217		60		(277	)	114

COMPREHENSIVE INCOME	$	114		217		60		(277	)	114

QWEST COMMUNICATIONS INTERNATIONAL INC.
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 2011
SUCCESSOR
(UNAUDITED)

	QCII(1)

	(Dollars in millions)
OPERATING REVENUES:
Operating revenues	$	—		—		2,763		—		2,763
Operating revenues—affiliates		—		3		15		(12	)	6

Total operating revenues		—		3		2,778		(12	)	2,769

OPERATING EXPENSES:
Cost of services and products (exclusive of depreciation and amortization)		—		—		1,141		—		1,141
Selling, general and administrative		5		3		648		—		656
Operating expenses—affiliates		—		—		44		(12	)	32
Depreciation and amortization		22		—		780		—		802

Total operating expenses		27		3		2,613		(12	)	2,631

OPERATING (LOSS) INCOME		(27	)	—		165		—		138
OTHER INCOME (EXPENSE)
Interest expense		(44	)	(18	)	(88	)	—		(150	)
Interest expense—affiliates		(4	)	(23	)	1		26		—
Interest income—affiliates		—		26		—		(26	)	—
Income from equity investments in subsidiaries		67		(52	)	—		(15	)	—
Net loss on early retirement of debt		—		—		(1	)	—		(1	)

Total other income (expense)		19		(67	)	(88	)	(15	)	(151	)

(LOSS) INCOME BEFORE INCOME TAX (BENEFIT) EXPENSE		(8	)	(67	)	77		(15	)	(13	)
Income tax (benefit) expense		5		(131	)	126		—		—

NET (LOSS) INCOME	$	(13	)	64		(49	)	(15	)	(13	)

COMPREHENSIVE (LOSS) INCOME	$	(13	)	64		(49	)	(15	)	(13	)

QWEST COMMUNICATIONS INTERNATIONAL INC.
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2011
PREDECESSOR
(UNAUDITED)

	QCII(1)

	(Dollars in millions)
OPERATING REVENUES:
Operating revenues	$	—		—		2,846		—		2,846
Operating revenues—affiliates		—		2		9		(11	)	—

Total operating revenues		—		2		2,855		(11	)	2,846

OPERATING EXPENSES:
Cost of services and products (exclusive of depreciation and amortization)		—		—		1,178		—		1,178
Selling, general and administrative		3		2		551		—		556
Operating expenses—affiliates		—		—		11		(11	)	—
Depreciation and amortization		—		—		533		—		533

Total operating expenses		3		2		2,273		(11	)	2,267

OPERATING (LOSS) INCOME		(3	)	—		582		—		579
OTHER INCOME (EXPENSE)
Interest expense		(56	)	(19	)	(152	)	—		(227	)
Interest expense—affiliates		(1	)	(26	)	(1	)	28		—
Interest income—affiliates		—		28		—		(28	)	—
Income from equity investments in subsidiaries		272		226		—		(498	)	—
Other income (expense)		—		(1	)	6		—		5

Total other income (expense)		215		208		(147	)	(498	)	(222	)

INCOME BEFORE INCOME TAX EXPENSE (BENEFIT)		212		208		435		(498	)	357
Income tax expense (benefit)		1		(64	)	209		—		146

NET INCOME	$	211		272		226		(498	)	211

COMPREHENSIVE INCOME	$	218		272		226		(498	)	218

QWEST COMMUNICATIONS INTERNATIONAL INC.
CONSOLIDATING BALANCE SHEETS
JUNE 30, 2012
SUCCESSOR
(UNAUDITED)

	QCII(1)

	(Dollars in millions)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	—	27	14	—		41
Accounts receivable, less allowance		43	—	1,177	—		1,220
Accounts receivable—affiliates, net		—	1,109	1,208	(2,244	)	73
Notes receivable—affiliates		—	1,413	—	(1,413	)	—
Deferred income taxes, net		—	430	123	—		553
Other		23	—	283	—		306

Total current assets		66	2,979	2,805	(3,657	)	2,193
Net property, plant and equipment		—	—	9,147	—		9,147
Goodwill		—	—	10,123	—		10,123
Customer relationships, net		—	—	6,300	—		6,300
Other intangible assets, net		92	—	1,330	—		1,422
Investments in subsidiaries		14,284	13,788	—	(28,072	)	—
Deferred income taxes, net		1,102	1,029	—	(2,131	)	—
Prepaid pension, post-retirement and other post-employment benefits—affiliate		2,777	76	957	(3,810	)	—
Other		40	7	316	—		363

TOTAL ASSETS	$	18,361	17,879	30,978	(37,670	)	29,548

LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt	$	—	—	1,342	—		1,342
Accounts payable		—	1	735	—		736
Accounts payable—affiliates, net		794	—	—	(794	)	—
Notes payable—affiliates		—	1,413	583	(1,413	)	583
Dividends payable—affiliates		750	750	700	(1,450	)	750
Accrued expenses and other liabilities		246	40	679	—		965
Advance billings and customers deposits		—	—	411	—		411

Total current liabilities		1,790	2,204	4,450	(3,657	)	4,787

LONG-TERM DEBT		1,444	1,008	6,984	—		9,436

DEFERRED CREDITS AND OTHER LIABILITIES
Benefit plan obligations, net		3,124	—	—	—		3,124
Pension, post-retirement and other post-employment benefits obligations and other—affiliates		1,033	351	2,426	(3,810	)	—
Deferred income taxes, net		—	—	2,832	(2,131	)	701
Other		168	32	498	—		698

Total deferred credits and other liabilities		4,325	383	5,756	(5,941	)	4,523
STOCKHOLDER'S EQUITY		10,802	14,284	13,788	(28,072	)	10,802

TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY	$	18,361	17,879	30,978	(37,670	)	29,548

QWEST COMMUNICATIONS INTERNATIONAL INC.
CONSOLIDATING BALANCE SHEETS
DECEMBER 31, 2011
SUCCESSOR
(UNAUDITED)

	QCII(1)

	(Dollars in millions)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	—	40	8	—		48
Accounts receivable, less allowance		15	2	1,184	—		1,201
Accounts receivable—affiliates, net		211	336	36	(583	)	—
Advances to affiliates		184	1,694	400	(1,536	)	742
Deferred income taxes, net		—	438	121	—		559
Other		—	19	259	(13	)	265

Total current assets		410	2,529	2,008	(2,132	)	2,815
Net property, plant and equipment		—	—	9,461	—		9,461
Goodwill		—	—	10,123	—		10,123
Customer relationships, net		—	—	6,788	—		6,788
Other intangible assets, net		126	—	1,461	—		1,587
Investments in subsidiaries		14,856	13,999	—	(28,855	)	—
Deferred income taxes, net		1,102	1,390	117	(2,609	)	—
Prepaid pension, post-retirement and other post-employment benefits—affiliate		2,851	76	955	(3,882	)	—
Other		36	7	338	—		381

TOTAL ASSETS	$	19,381	18,001	31,251	(37,478	)	31,155

LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt	$	—	—	117	—		117
Current debt—affiliates		122	1,413	—	(1,535	)	—
Accounts payable		4	19	950	—		973
Accounts payable—affiliates, net		360	42	23	(31	)	394
Dividends payable—affiliates		200	—	310	(310	)	200
Accrued expenses and other liabilities		272	40	700	(1	)	1,011
Accrued expenses and other—affiliates		1	62	192	(255	)	—
Advance billings and customers deposits		—	—	400	—		400

Total current liabilities		959	1,576	2,692	(2,132	)	3,095

LONG-TERM DEBT		2,767	1,009	8,403	—		12,179

DEFERRED CREDITS AND OTHER LIABILITIES
Benefit plan obligations, net		3,198	—	—	—		3,198
Pension, post-retirement and other post-employment benefits obligations and other—affiliates		1,031	344	2,507	(3,882	)	—
Deferred income taxes, net		—	223	3,016	(2,609	)	630
Other		150	31	596	—		777

Total deferred credits and other liabilities		4,379	598	6,119	(6,491	)	4,605
STOCKHOLDER'S EQUITY		11,276	14,818	14,037	(28,855	)	11,276

TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY	$	19,381	18,001	31,251	(37,478	)	31,155

QWEST COMMUNICATIONS INTERNATIONAL INC.
CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2012
SUCCESSOR
(UNAUDITED)

	QCII(1)

	(Dollars in millions)
Net cash (used in) provided by operating activities	$	(415	)	(141	)	1,647		(13	)	1,078
INVESTING ACTIVITIES
Payments for property, plant and equipment and capitalized software		—		—		(752	)	—		(752	)
Changes in advances to affiliates		184		128		(1,422	)	1,779		669
Proceeds from sale of property		—		—		133		—		133

Net cash provided by (used in) investing activities		184		128		(2,041	)	1,779		50

FINANCING ACTIVITIES
Net proceeds from issuance of long-term debt		—		—		897		—		897
Payments of long-term debt		(1,299	)	—		(952	)	—		(2,251	)
Early retirement of debt costs		(49	)	—		(128	)	—		(177	)
Notes payable—affiliates		—		—		583		—		583
Accounts Payable—affiliates		1,579		—		—		(1,766	)	(187	)

Net cash used in financing activities		231		—		400		(1,766	)	(1,135	)

Net (decrease) increase in cash and cash equivalents		—		(13	)	6		—		(7	)
Cash and cash equivalents at beginning of period		—		40		8		—		48

Cash and cash equivalents at end of the period	$	—		27		14		—		41

QWEST COMMUNICATIONS INTERNATIONAL INC.
CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JUNE 30, 2011
SUCCESSOR
(UNAUDITED)

	QCII(1)

	(Dollars in millions)
Net cash provided by (used in) operating activities	$	(76	)	213		563		—		700
INVESTING ACTIVITIES
Payments for property, plant and equipment and capitalized software		—		—		(347	)	—		(347	)
Cash infusion to subsidiaries		—		(168	)	—		168		—
Changes in advances to affiliates		—		(243	)	(272	)	4		(511	)
Dividends received from subsidiaries		—		120		—		(120	)	—
Other, net		—		—		2		—		2

Net cash provided by (used in) investing activities		—		(291	)	(617	)	52		(856	)

FINANCING ACTIVITIES
Payments of long-term debt		—		—		(851	)	—		(851	)
Net proceeds from (repayments of) short-term affiliate debt		76		(72	)	—		(4	)	—
Net proceeds from issuance of long-term debt		—		—		643		—		643
Cash infusion from parent		—		—		168		(168	)	—
Dividends paid to parent		—		—		(120	)	120		—
Early retirement of debt costs		—		—		(13	)	—		(13	)

Net cash used in financing activities		76		(72	)	(173	)	(52	)	(221	)

Net increase in cash and cash equivalents		—		(150	)	(227	)	—		(377	)
Cash and cash equivalents at beginning of period		—		183		241		—		424

Cash and cash equivalents at end of the period	$	—		33		14		—		47

QWEST COMMUNICATIONS INTERNATIONAL INC.
CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2011
PREDECESSOR
(UNAUDITED)

	QCII(1)

	(Dollars in millions)
Net cash provided by (used in) operating activities	$	7		(62	)	828		4		777
INVESTING ACTIVITIES
Payments for property, plant and equipment and capitalized software		—		—		(410	)	—		(410	)
Changes in interest in investments managed by QSC		—		(3	)	3		—		—
Cash infusion to subsidiaries		—		(191	)	—		191		—
Changes in advances to affiliates		—		180		1		(181	)	—
Dividends received from subsidiaries		—		590		—		(590	)	—
Other, net		—		—		2		—		2

Net cash provided by (used in) investing activities		—		576		(404	)	(580	)	(408	)

FINANCING ACTIVITIES
Payments of long-term debt		—		(179	)	(24	)	—		(203	)
Net proceeds from (repayments of) short-term affiliate debt		119		(300	)	—		181		—
Dividends paid		(141	)	—		—		—		(141	)
Cash infusion from parent		—		—		191		(191	)	—
Dividends paid to parent		—		—		(590	)	590		—
Other, net		15		—		16		(4	)	27

Net cash used in financing activities		(7	)	(479	)	(407	)	576		(317	)

Net increase in cash and cash equivalents		—		35		17		—		52
Cash and cash equivalents at beginning of period		—		148		224		—		372

Cash and cash equivalents at end of the period	$	—		183		241		—		424