NOTE 12 — PARTNERS’ CAPITAL

Units Outstanding

The table below details the units outstanding as of September 30, 2013 and December 31, 2012, and the changes in outstanding units for the nine months ended September 30, 2013. As of September 30, 2013, the Fund owned all preferred units and all affiliated common units.


	Class C Convertible Preferred Units	General Partner	Class B Units	Public Common	Affiliated Common
Balance - December 31, 2012	16,666,667	51,036	-	51,299,278	7,145,866
Vested units awarded under our Long-Term Incentive
Performance Plan	-	-	-	152,546	-
Reduction in units to cover individuals' tax withholdings	-	-	-	(23,662)	-
Management incentive fee conversion	-	-	6,133,558	-	-
Balance - September 30, 2013	16,666,667	51,036	6,133,558	51,428,162	7,145,866

Class B Units

On February 22, 2013, our general partner elected to convert 80% of its fourth quarter 2012 management incentive fee and, on March 4, 2013, received 6,133,558 Class B units which were issued and outstanding upon conversion. In exchange for the issuance of Class B units, management incentive fees payable in the future will, if earned, be reduced to the extent of this and any future conversions. As a result, in the first quarter 2013 our general partner received a reduced fourth quarter management incentive fee of $0.7 million and a distribution of $3.0 million on the Class B units related to the fourth quarter 2012.

The Class B units are immediately convertible into common units at the election of our general partner. Class B units have all the rights of common units except for the right to vote on matters requiring specific approval by common unitholders, and are allocated income in an amount that is equal to their distributions.

As of September 30, 2013, QRE GP owned a 0.1% general partner interest in us, represented by 51,036 general partner units, and a 7.5% limited partnership interest in us, represented by 6,133,558 Class B units. QRE GP has the right, but not the obligation, to contribute a proportionate amount of capital to us to maintain its current general partner interest. QRE GP’s 7.6% interest in these distributions will be reduced if we issue additional units in the future and QRE GP does not contribute a proportionate share of capital to us to maintain its general and limited partnership interest.

Allocation of Net Income (Loss)

Net income (loss) is reduced by noncontrolling interest and is then allocated to the preferred and Class B unitholders to the extent distributions are made or accrued to them during the period and to QRE GP to the extent of the management incentive fee. The remaining income is allocated between QRE GP and the common unitholders in proportion to their pro rata ownership during the period.

Cash Distributions

Our partnership agreement, as amended, requires that within 45 days after the end of each quarter, we distribute all of our available cash to preferred unitholders, in arrears, and common unitholders of record on the applicable record date, as determined by QRE GP.

The following sets forth the distributions that have been declared and paid or are payable:


											Limited Partners
													Affiliated
Payment Date	For the period ended		Distributions to Preferred Unitholders		Distributions per Preferred Unit		General Partner		Class B		Public Common		Common		Total Distributions to Other Unitholders		Distributions per other units
(In thousands, except per unit amounts)
February 15, 2013	December 31, 2012	$	3,500	$	0.21	$	25	$	-	$	25,275	$	3,484	$	28,784	$	0.4875
May 15, 2013	December 31, 2012		-		-		-		2,990		-		-		2,990		0.4875
May 15, 2013	March 31, 2013		3,500		0.21		25		2,990		25,480		3,484		31,979		0.4875
August 14, 2013	June 30, 2013		3,500		0.21		25		2,990		25,475		3,484		31,974		0.4875

On October 25, 2013, the board of directors of QRE GP declared a $0.4875 per unit cash distribution for the third quarter 2013 which is payable on November 14, 2013 to unitholders of record at the close of business on November 7, 2013.