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MANAGED FUTURES PREMIER ABINGDON L.P. - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations.

May 14, 2014

Liquidity and Capital Resources

The Partnership does not engage in sales of goods or services. Its only assets are its investment in the Master and cash. The Master does not engage in sales of goods or services. The Master's only assets are its equity in its trading accounts, consisting of cash, cash margin, net unrealized appreciation on open futures contracts and net unrealized appreciation on forward contracts. Because of the low margin deposits normally required in commodity trading, relatively small price movements may result in substantial losses to the Partnership, through its investment in the Master. While substantial losses could lead to a material decrease in liquidity, no such illiquidity occurred in the first quarter of 2014.

The Partnership's capital consists of capital contributions, as increased or decreased by income (loss) from its investment in the Master, expenses, interest income, subscriptions, redemptions of Redeemable Units and distributions of profits, if any. For the three months ended March 31, 2014, Partnership capital decreased 10.2% from $203,401,479 to $182,553,554. This decrease was attributable to a net loss of $3,691,264, coupled with redemptions of 15,954.3880 Redeemable Units of Class A totaling $18,051,906, redemptions of 5,033.7730 Redeemable Units of Class D totaling $5,311,637 and redemptions of 100.4780 Redeemable Units of Class Z totaling $102,719. This decrease was partially offset by subscriptions of 5,519.9550 Redeemable Units of Class A totaling $6,309,601.

The Master's capital consists of the capital contributions of the partners as increased or decreased by gains or losses on trading and by expenses, interest income, redemptions of units and distributions of profits, if any.

For the three months ended March 31, 2014, the Master's capital decreased 8.5% from $700,949,432 to $641,484,271. This decrease was attributable to redemptions for 28,838.9741 units totaling $78,706,308, distributions of interest income to feeder funds totaling $47,993, and a net loss of $1,605,885. This decrease was partially offset by subscriptions of 7,676.6490 units totaling $20,895,025. Future redemptions can impact the amount of funds available for investment in commodity contract positions in subsequent periods.

Critical Accounting Policies

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expense during the reporting period. Management believes that the estimates and assumptions utilized in preparing the financial statements are reasonable. Actual results could differ from those estimates. The Partnership's significant accounting policies are described in detail in Note 6 of the Financial Statements.

The Partnership records all investments at fair value in its financial statements, with changes in fair value reported as a component of net realized gains (losses) and change in net unrealized gains (losses) in the Statements of Income and Expenses.

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Results of Operations

During the Partnership's first quarter of 2014, the net asset value per unit for Class A decreased 1.8% from $1,159.61 to $1,138.46, as compared to an increase of 5.1% in the first quarter of 2013. During the Partnership's first quarter of 2014, the net asset value per unit for Class D decreased 1.2% from $1,059.55 to $1,047.11, as compared to an increase of 5.8% in the first quarter of 2013. During the Partnership's first quarter of 2014, the net asset value per unit for Class Z decreased 1.0% from $1,059.49 to $1,049.01, as compared to an increase of 6.0% in the first quarter of 2013. The Partnership, through its investment in the Master, experienced a net trading loss before fees and expenses in the first quarter of 2014 of $494,511. Losses were primarily attributable to the Master's trading of commodity futures in currencies, U.S. interest rates, metals, softs, and indices, and were partially offset by gains in grains, livestock, energy, and non-U.S. interest rates. The Partnership, through its investment in the Master, experienced a net trading gain before fees and expenses in the first quarter of 2013 of $14,135,277. Gains were primarily attributable to the Master's trading of commodity futures in currencies, grains, indices, livestock and softs, and were partially offset by losses in energy, U.S. and non-U.S. interest rates and metals.

During the first quarter, the Partnership recorded a loss in Net Asset Value per Unit as trading losses in global stock index and metals futures offset trading gains in the global interest rate, agricultural and energy sectors. Trading results in currencies were relatively flat for the quarter and had no material impact on the Fund's performance. The most significant losses were recorded within the global stock index sector during January primarily from long positions in U.S. and Asian equity index futures as prices declined amid growing concern that the global economic recovery is faltering. Additional losses were incurred from long positions in European equity index futures during January after reports showed that German industrial confidence during the previous quarter was lower than forecasts predicted. Losses in this sector were also incurred during March from long positions in European equity index futures as prices declined over concern that the situation in Ukraine would escalate hostilities between the U.S. and Russia. Within the metals complex, losses were experienced during January and February from short positions in silver and gold futures as priced moved higher as increased geo-political tensions and discouraging U.S. economic data spurred investor demand for the precious metals. A majority of the Partnership's losses for the quarter were offset by gains achieved within the global interest rate sector during January from long positions in European fixed income futures as prices advanced amid concerns for stability in many emerging market economies, thus increasing demand for the relative 'safety' of government debt. Additional gains in the sector were recorded during February and March from long positions in European fixed income futures as prices advanced as slowing euro-area inflation boosted speculation that the European Central Bank will take more measures to stimulate the economy. Gains within the agricultural sector were recorded during February from long positions in soybean and soybean meal futures as prices advanced after adverse weather conditions in the U.S. and Brazil lowered crop estimates. Smaller gains were recorded from long positions in livestock futures during February and March as prices trended higher. Within the energy sector, gains were achieved primarily during January from long positions in natural gas futures as prices advanced after a U.S. government report showed a record drop in U.S. inventories after cold weather throughout much of the U.S. boosted heating demand.

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Commodity futures markets are highly volatile. The potential for broad and rapid price fluctuations increases the risks involved in commodity trading, but also increases the possibility of profit. The profitability of the Partnership (and the Master) depends on the existence of major price trends and the ability of the Advisor to correctly identify those price trends. Price trends are influenced by, among other things, changing supply and demand relationships, weather, governmental, agricultural, commercial and trade programs and policies, national and international political and economic events and changes in interest rates. To the extent that market trends exist and the Advisor is able to identify them, the Partnership (and the Master) expects to increase capital through operations.

Interest income on 80% of the Partnership's average daily equity allocated to it by the Master during each month was earned at a 30-day U.S. Treasury bill rate determined weekly by CGM based on the average noncompetitive yield on 3-month Treasury bills maturing in 30 days or at the monthly average of the 4-week U.S. Treasury bill discount rate. Interest income allocated from the Master for the three months ended March 31, 2014 decreased by $13,503, as compared to the corresponding period in 2013. The decrease in interest income is primarily due to lower U.S. Treasury bill rates during the three months ended March 31, 2014, as compared to the corresponding period in 2013. Interest earned by the Partnership will increase the net asset value of the Partnership. The amount of interest income earned by the Partnership depends on the average daily equity in the Partnership's (or the Partnership's allocable portion of the Master's) account and upon interest rates over which the Partnership, the Master and MS&Co. have no control.

Ongoing selling agent/brokerage fees are calculated as a percentage of the adjusted net asset value per class as of the end of each month and are affected by trading performance, subscriptions and redemptions. Accordingly, they must be analyzed in relation to the fluctuations in the monthly net asset values. Ongoing selling agent/brokerage fees for the three months ended March 31, 2014 decreased by $242,674, as compared to the corresponding period in 2013. The decrease in ongoing selling agent/brokerage fees is due to lower net assets per class during the three months ended March 31, 2014, as compared to the corresponding period in 2013.

Management fees are calculated as a percentage of the net asset value per class as of the end of each month and are affected by trading performance, subscriptions and redemptions. Accordingly, they must be analyzed in relation to the fluctuations in the monthly net asset values. Management fees for the three months ended March 31, 2014 decreased by $77,401, as compared to the corresponding period in 2013. The decrease in management fees is due to lower net assets per class during the three months ended March 31, 2014, as compared to the corresponding period in 2013.

Administrative fees are paid to the General Partner for administering the business and affairs of the Partnership. These fees are calculated as a percentage of the net asset value per class as of the end of each month and are affected by trading performance, subscriptions and redemptions. Accordingly, they must be analyzed in relation to the fluctuations in the monthly net asset values. Administrative fees for the three months ended March 31, 2014 decreased by $25,799, as compared to the corresponding period in 2013. The decrease in administrative fees is due to lower net assets per class during the three months ended March 31, 2014, as compared to the corresponding period in 2013.

Incentive fees paid by the Partnership are based on the new trading profits generated by the Advisor at the end of the quarter, as defined in the management agreements among the Partnership, the General Partner and the Advisor. There were no incentive fees for the three months ended March 31, 2014 and 2013, respectively. The Advisor will not be paid incentive fees until the Advisor recovers the net loss incurred and earns additional new trading profits for the Partnership.

In allocating substantially all of the assets of the Partnership to the Master, the General Partner considers the Advisor's past performance, trading style, volatility of markets traded and fee requirements. The General Partner may modify or terminate the allocation of assets to the Advisor at any time.

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Source: Edgar Glimpses


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