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

August 13, 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 second 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 six months ended June 30, 2014, Partnership capital decreased 12.0% from $203,401,479 to $178,958,625. This decrease was attributable to redemptions of 30,236.2170 Redeemable Units of Class A totaling $34,928,933, redemptions of 5,033.7730 Redeemable Units of Class D totaling $5,311,637 and redemptions of 120.1460 Redeemable Units of Class Z totaling $123,980. This decrease was partially offset by a net gain of $7,152,379, coupled with subscriptions of 7,626.5800 Redeemable Units of Class A totaling $8,769,317.

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 six months ended June 30, 2014, the Master's capital decreased 9.9% from $700,949,432 to $631,344,123. This decrease was attributable to redemptions for 50,576.5025 units totaling $140,525,268 and distributions of interest income to feeder funds totaling $72,394. This decrease was partially offset by a net gain of $45,279,691 and subscriptions of 9,344.8826 units totaling $25,712,662. 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 second quarter of 2014, the net asset value per unit for Class A increased 6.1% from $1,138.46 to $1,207.59, as compared to a decrease of 3.2% in the second quarter of 2013. During the Partnership's second quarter of 2014, the net asset value per unit for Class D increased 6.4% from $1,047.11 to $1,114.18, as compared to a decrease of 2.5% in the second quarter of 2013. During the Partnership's second quarter of 2014, the net asset value per unit for Class Z increased 6.6% from $1,049.01 to $1,118.30, as compared to a decrease of 2.3% in the second quarter of 2013. The Partnership, through its investment in the Master, experienced a net trading gain before fees and expenses in the second quarter of 2014 of $13,649,700. Gains were primarily attributable to the Master's trading of commodity futures in currencies, energy, indices, U.S. and non-U.S. interest rates, and livestock, and were partially offset by losses in grains, metals, and softs. The Partnership, through its investment in the Master, experienced a net trading loss before fees and expenses in the second quarter of 2013 of $3,225,334. Losses were primarily attributable to the Master's trading of commodity futures in currencies, energy, and U.S. and non-U.S. interest rates, and were partially offset by gains in grains, livestock, metals, softs, and indices.

During the second quarter, the Partnership posted a gain in Net Asset Value per Unit as trading profits in global interest rates, global stock index, currencies and energies more than offset losses in the agricultural and metals markets. The most significant gains were achieved within the global interest rate sector, primarily during May, from long positions in European fixed income futures as prices advanced as German unemployment unexpectedly increased and euro-area lending contracted, boosting demand for the relative "safety" of government debt. Additional gains were recorded during May from long positions in U.S. Treasury bond and Treasury notes futures as prices increased amid easing investor concern that the U.S. Federal Reserve would raise borrowing costs. Within the global stock index markets, gains were recorded during May and June primarily from long positions in U.S. equity index futures as prices rallied after positive economic data fueled speculation that the U.S. economy was rebounding from its first quarter contraction. Within the currency sector, gains were recorded during June from long positions in the British pound versus the U.S. dollar as the relative value of the British pound advanced after a report from the U.K. Office for National Statistics showed that British business investment surged during the first quarter. Long positions in the Australian dollar versus the U.S. dollar also recorded gains during June. Within the energy markets, gains were achieved primarily from long positions in natural gas futures as prices moved higher after government data indicated that fuel inventories fell to an 11-year-low during April. A portion of the Partnership's gains for the quarter was offset by losses incurred within the agricultural markets during June from long positions in the soybean complex as prices declined after favorable weather throughout much of the U.S. Midwest boosted soybean plantings to near record levels. Additional losses were recorded during May from long positions in corn futures as prices declined as spring plantings in the U.S. accelerated due to mild weather throughout the Midwest. Within the metals markets, losses were recorded primarily during June from short positions in gold and silver futures as precious metals prices rallied as increased turmoil in the Ukraine and Iraq spurred investors to the relative safety of the precious metals.

During the Partnership's six months ended June 30, 2014, the Partnership's net asset value per Class A Redeemable Unit increased 4.1% from $1,159.61 to $1,207.59, as compared to an increase of 1.8% in the six months ended June 30, 2013. During the Partnership's six months ended June 30, 2014, the Partnership's net asset value per Class D Redeemable Unit increased 5.2% from $1,059.55 to $1,114.18, as compared to an increase of 3.1% in the six months ended June 30, 2013. During the Partnership's six months ended June 30, 2014, the Partnership's net asset value per Class Z Redeemable Unit increased 5.6% from $1,059.49 to $1,118.30, as compared to an increase of 3.5% in the six months ended June 30, 2013. The Partnership, through its investment in the Master, experienced a net trading gain before fees and expenses in the six months ended June 30, 2014 of $13,155,189. Gains were primarily attributable to the Master's trading of commodity futures in currencies, energy, indices, U.S. and non-U.S. interest rates, and livestock, and were partially offset by losses in grains, metals, and softs. The Partnership, through its investment in the Master, experienced a net trading gain before fees and expenses in the six months ended June 30, 2013 of $10,909,943. Gains were primarily attributable to the Master's trading of commodity futures in currencies, grains, livestock, metals, softs and indices, and were partially offset by losses in energy and non-U.S. and U.S. interest rates.

During the first six months of the year, the Partnership posted a gain in Net Asset Value per Unit as trading profits in the global interest rate, global stock index, currency, and energy markets offset losses in the metals and agricultural markets. The most significant gains were achieved within the global interest rate sector, primarily during May, from long positions in European fixed income futures as prices advanced as German unemployment unexpectedly increased and euro-area lending contracted, boosting demand for the relative "safety" of government debt. During May gains were also recorded from long positions in U.S. Treasury bond and Treasury note futures as prices increased amid easing investor concern that the U.S. Federal Reserve would raise borrowing costs. Additional gains in the fixed income sector were recorded during January from long positions in European fixed income futures. Within the global stock index sector, gains were experienced during February from long positions in U.S. and European equity index futures as prices advanced amid improving U.S. and European consumer confidence. During May gains were achieved from long positions in U.S. and European equity index futures as prices climbed higher on positive economic indicators in the U.S. and Europe spurring investor sentiment. Gains were achieved within the currency markets during February from long positions in the British pound versus the U.S. dollar as the relative value of the pound increased after Bank of England policy makers expressed little concern that the strength of the currency would harm the British economy. Additional gains in the currency sector were experienced during June from long positions in the British pound versus the U.S. dollar as the relative value of the pound advanced. Within the energy markets, 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. The Partnership's gains for the first six months of the year were partially offset by losses incurred within the metals sector during June from short positions in gold and silver futures as precious metals prices rallied as increased turmoil in the Ukraine and Iraq caused investors to seek the relative safety of the precious metals. Additional losses were incurred during February from short positions in silver and gold futures as prices moved higher as increased geo-political tensions and discouraging U.S. economic data spurred investor demand. Within the agricultural sector, losses were experienced during June from long positions in the soybean complex as prices declined after favorable weather throughout much of the U.S. Midwest boosted soybean plantings to near record levels. Additional losses were incurred during February from short positions in coffee and sugar futures as prices advanced as adverse weather in Brazil negatively affected crops.

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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, as applicable. Interest income allocated from the Master for the three and six months ended June 30, 2014 decreased by $4,269 and $17,772, respectively, as compared to the corresponding periods in 2013. The decrease in interest income is primarily due to lower U.S. Treasury bill rates during the three and six months ended June 30, 2014, as compared to the corresponding periods 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 and six months ended June 30, 2014 decreased by $1,211,398 and $1,454,072, respectively, as compared to the corresponding periods in 2013. The decrease in ongoing selling agent/brokerage fees is due to lower ongoing selling agent/brokerage fee rates, as well as lower net assets per class during the three and six months ended June 30, 2014, as compared to the corresponding periods 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 and six months ended June 30, 2014 decreased by $113,306 and $190,707, respectively, as compared to the corresponding periods in 2013. The decrease in management fees is due to lower net assets per class during the three and six months ended June 30, 2014, as compared to the corresponding periods 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 and six months ended June 30, 2014 decreased by $37,769 and $63,568, respectively, as compared to the corresponding periods in 2013. The decrease in administrative fees is due to lower net assets per class during the three and six months ended June 30, 2014, as compared to the corresponding periods 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. Incentive fees for the three and six months ended June 30, 2014 was $657,744. There were no incentive fees for the three and six months ended June 30, 2013. 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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