UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-K

                  Annual Report Pursuant to Section 13 or 15(d)

                     of the Securities Exchange Act of 1934

                      For the year ended December 31, 1996

Commission File Number 33-80723

             SMITH BARNEY PRINCIPAL PLUS FUTURES FUND L.P. II
                  (Exact name of registrant as specified in its charter)

            New York                                 13-3862967
      (State or other jurisdiction of                (I.R.S. Employer
       incorporation or organization)                 Identification No.)

                    c/o Smith Barney Futures Management Inc.
                           390 Greenwich St. - 1st Fl.
                            New York, New York 10013
              (Address and Zip Code of principal executive offices)

                                 (212) 723-5424
              (Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:  None

Securities registered pursuant to Section 12(g) of the Act: 60,000 Units
                                                            of Limited
                                                            Partnership
                                                            Interest
                                                            (Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

                                   Yes   X    No

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
form 10-K [ ]


<PAGE>



                                     PART I

Item 1. Business.

      (a) General  development of business.  Smith Barney Principal Plus Futures
Fund L.P. II (the "Partnership") is a limited partnership  organized on November
16, 1995 under the  Partnership  Law of the State of New York.  The  Partnership
engages in speculative  trading of commodity  interests,  including contracts on
foreign currencies,  commodity options and commodity futures contracts including
futures  contracts on United States  Treasury and other  financial  instruments,
foreign currencies and stock indices. The Partnership maintains a portion of its
assets  in  interest  payments  stripped  from  U.S.  Treasury  Bonds  under the
Treasury's  STRIPS program ("Zero  Coupons") which payments will be due November
15, 2003. The  Partnership  uses the Zero Coupons and its other assets to margin
its commodities account.
      A total of 60,000 Units of Limited Partnership Interest in the Partnership
(the  "Units")  were offered to the public.  Between April 3, 1996 and August 8,
1996,  19,897 Units were sold to the public at $1,000 per Unit.  Proceeds of the
offering along with the General Partners'  contribution of $203,000 were held in
escrow  until  August 8, 1996 at which time an  aggregate  of  $20,100,000  were
turned over to the Partnership and the Partnership commenced trading operations.
      The  Partnership's  trading of futures contracts on commodities is done on
United  States and  foreign  commodity  exchanges.  It  engages in such  trading
through a commodity brokerage account

                                      2

<PAGE>



maintained with its commodity broker, Smith Barney Inc. ("SB").
      Smith Barney  Futures  Management  Inc.  acts as the general  partner (the
"General  Partner")  of the  Partnership.  SB is an  affiliate  of  the  General
Partner.
      Under the Limited  Partnership  Agreement of the Partnership (the "Limited
Partnership  Agreement"),  the General  Partner  administers  the  business  and
affairs of the  Partnership.  As of  December  31,  1996 all  commodity  trading
decisions are made for the Partnership by John W. Henry & Company,  Inc. ("JWH")
and   Willowbridge   Associates   Inc.   ("Willowbridge")   (collectively,   the
"Advisors").  None of the Advisors is affiliated with the General Partner or SB.
The  Advisors  are not  responsible  for the  organization  or  operation of the
Partnership.
      Pursuant  to  the  terms  of the  Management  Agreement  (the  "Management
Agreement"),  the  Partnership  is  obligated  to  pay  Willowbridge  a  monthly
management  fee  equal  to 1/6 of 1% (2%  per  year)  of  month-end  Net  Assets
allocated to it and pay JWH a monthly  management fee equal to 1/3 of 1% (4% per
year) of the month-end Net Assets allocated to it. The Partnership will also pay
Willowbridge  an  incentive  fee payable  quarterly  equal to 20% of New Trading
Profits earned by it for the  Partnership  and JWH will receive an incentive fee
of 15% of the New Trading Profits.
      The Customer Agreement provides that the Partnership will pay SB a monthly
brokerage  fee equal to 7/12 of 1% of  month-end  Net  Assets  allocated  to the
Advisors (7% per year) in lieu of brokerage commissions on a per trade basis. SB
will pay a portion of its

                                      3

<PAGE>



brokerage  fees to its  financial  consultants  who have sold  Units and who are
registered as associated  persons with the Commodity Futures Trading  Commission
(the "CFTC").  The Partnership will pay for National Futures Association ("NFA")
fees,  exchange and  clearing  fees,  give-up and user fees and floor  brokerage
fees. Brokerage fees will be paid for the life of the Partnership,  although the
rate at which such fees are paid may be changed.  The Customer Agreement between
the  Partnership  and SB gives the Partnership the legal right to net unrealized
gains and losses.
      In addition,  SB will pay the  Partnership  interest on 80% of the average
daily  equity  maintained  in cash in its account  during each month at a 30-day
U.S.   Treasury  bill  rate  determined  weekly  by  SB  based  on  the  average
non-competitive  yield on 3-month U.S.  Treasury  bills maturing in 30 days from
the date on which such weekly rate is determined.
      In the unlikely  event that the  Partnership  is required to meet a margin
call in  excess  of the cash  balance  in its  trading  accounts,  Smith  Barney
Holdings Inc. will contribute up to an amount equal to the maturity value of the
Zero Coupons held by the  Partnership at the time of such call to the capital of
the  Partnership  to permit it to meet its margin  obligations  in excess of its
cash balance.  The  guarantee  can only be invoked once.  After the guarantee is
invoked,  trading will cease and the General  Partner will either wait until the
end of the month in which the Zero Coupons come due (November 2003), (the "First
Payment  Date"),  or will  distribute  cash  and  Zero  Coupons  to the  limited
partners.

                                      4

<PAGE>



The General  Partner will provide a copy of Smith Barney  Holdings Inc.'s annual
report as filed with the SEC to any limited partner requesting it.
      (b) Financial  information  about  industry  segments.  The  Partnership's
business  consists  of  only  one  segment,  speculative  trading  of  commodity
interests.  The Partnership  does not engage in sales of goods or services.  The
Partnership's  net income  from  operations  for the period  from August 9, 1996
(commencement  of trading  operations)  to December  31, 1996 is set forth under
"Item 6. Select Financial Data." Partnership capital as of December 31, 1996 was
$22,257,561.
      (c)     Narrative description of business.
              See Paragraphs (a) and (b) above.
              (I) through (x) - Not applicable.
              (xi) through (xii) - Not applicable.
              (xiii) - The Partnership has no employees.


                                      5

<PAGE>



      (d)     Financial Information About Foreign and Domestic
              Operations and Export Sales.  The Partnership does not
engage in sales of goods or services, and therefore this item is
not applicable.
Item 2.  Properties.
      The Partnership does not own or lease any properties.  The General Partner
operates out of facilities provided by its affiliate, SB.
Item 3.  Legal Proceedings.
      There are no pending legal proceedings to which the Partnership is a party
or to  which  any of its  assets  is  subject.  No  material  legal  proceedings
affecting  the  Partnership  were  terminated  during the fiscal  year.  
Item 4.  Submission of Matters to a Vote of Security Holders.
      There were no matters  submitted to the security holders for a vote during
the last fiscal year covered by this report.
                                     PART II
Item 5. Market for Registrant's Common Equity and Related Security
          Holder Matters.
          (a)   Market Information.  The Partnership has issued no
                stock.  There is no public market for the Units of
                Limited Partnership Interest.
          (b)   Holders. The number of holders of Units of Limited
                Partnership Interest as of December 31, 1996 was 1,377.
          (c)   Distribution.  The Partnership did not declare a
                distribution in 1996.

                                      6

<PAGE>



Item 6. Select Financial Data. The Partnership  commenced trading  operations on
August 9, 1996.  Realized and unrealized trading gains,  realized and unrealized
gains on Zero  Coupons,  interest  income,  net income and increase in net asset
value per Unit for the  period  from  August 9, 1996  (commencement  of  trading
operations)  to December  31, 1996 and total assets at December 31, 1996 were as
follows:
                                                            1996
Realized and unrealized trading
 gains net of brokerage commissions
 and clearing fees of $346,364                         $ 2,812,357

Realized and unrealized gains on
 Zero Coupons                                               80,764

Interest income                                            434,374
                                                       -----------
                                                       $ 3,327,495

Net Income                                             $ 2,717,561
                                                       ===========

Increase in net asset value per unit                       $135.20
                                                           =======

Total assets                                           $23,276,499
                                                       ===========



                                      7

<PAGE>



Item 7.    Management's Discussion and Analysis of Financial
           Condition and Results of Operations.
      (a)  Liquidity.  The  Partnership  does  not  engage  in sales of goods or
services.  Its only  assets  are its  equity in its  commodity  futures  trading
account,  consisting of cash and cash equivalents,  Zero Coupons, net unrealized
appreciation  (depreciation) on open futures contracts and interest  receivable.
Because  of the low margin  deposits  normally  required  in  commodity  futures
trading,  relatively  small price movements may result in substantial  losses to
the Partnership.  Such substantial  losses could lead to a material  decrease in
liquidity.  To minimize this risk,  the  Partnership  follows  certain  policies
including:
      (1) Partnership  funds are invested only in commodity  contracts which are
traded in sufficient volume to permit,  in the opinion of the Advisors,  ease of
taking and liquidating positions.
      (2) No Advisor will initiate additional positions in any commodity if such
additional  positions  would result in aggregate  positions for all  commodities
requiring as margin more than 66-2/3% of the  Partnership's  assets allocated to
the Advisor.
      (3) The Partnership will not employ the trading  technique  commonly known
as  "pyramiding",  in which the speculator uses  unrealized  profits on existing
positions as margin for the purchase or sale of additional positions in the same
or related commodities.
      (4)  The  Partnership  will  not  utilize   borrowings  except  short-term
borrowings if the Partnership takes delivery of any cash commodities.

                                      8

<PAGE>



      (5) The Advisors may, from time to time, employ trading strategies such as
spreads  or  straddles  on  behalf  of the  Partnership.  The term  "spread"  or
"straddle"   describes  a  commodity  futures  trading  strategy  involving  the
simultaneous buying and selling of contracts on the same commodity but involving
different  delivery  dates or markets and in which the trader  expects to earn a
profit from a widening or narrowing of the difference  between the prices of the
two contracts.
      (6) The Partnership will not permit the churning of its commodity  trading
accounts.
      (7) The  Partnership  may cease trading and  liquidate all open  positions
prior to its dissolution if its Net Assets  (excluding assets maintained in Zero
Coupons) decrease to 10% of those assets on the day trading commenced  (adjusted
for redemptions).
      The Partnership is party to financial  instruments with off- balance sheet
risk,  including  derivative  financial  instruments  and  derivative  commodity
instruments,  in the normal course of its business.  These financial instruments
include forwards,  futures and options,  whose value is based upon an underlying
asset,  index, or reference rate, and generally  represent future commitments to
exchange  currencies  or cash  flows,  or to  purchase  or sell other  financial
instruments  at  specified  terms  at  specified  future  dates.  Each of  these
instruments  is subject  to  various  risks  similar  to those  relating  to the
underlying financial  instruments  including market and credit risk. The General
Partner monitors and controls the  Partnership's  risk exposure on a daily basis
through financial,

                                      9

<PAGE>



credit and risk management  monitoring systems and, accordingly believes that it
has effective procedures for evaluating and limiting the credit and market risks
to which the Partnership is subject.  (See also "Item 8. Financial Statement and
Supplementary  Data.",  for further  information  on financial  instrument  risk
included in the notes to financial statements.)
         Other  than the  risks  inherent  in  commodity  futures  trading,  the
Partnership knows of no trends,  demands,  commitments,  events or uncertainties
which  will  result  in  or  which  are  reasonably  likely  to  result  in  the
Partnership's  liquidity  increasing  or  decreasing  in any  material  way. The
Limited  Partnership  Agreement  provides  that the General  Partner may, at its
discretion,  cause the Partnership to cease trading operations and liquidate all
open positions upon the first to occur of the following:  (i) December 31, 2015;
(ii)  at the end of the  month  in  which  the  Zero  Coupons  purchased  by the
Partnership  come due  (November 15, 2003),  unless the General  Partner  elects
otherwise; (iii) the vote to dissolve the Partnership by limited partners owning
more than 50% of the Units; (iv) assignment by the General Partner of all of its
interest in the  Partnership  or  withdrawal,  removal,  bankruptcy or any other
event that causes the General Partner to cease to be a general partner under the
Partnership  Act unless the Partnership is continued as described in the Limited
Partnership  Agreement;  (v) the  Partnership  is required to register under the
Investment  Company  Act  of  1940  and  the  General  Partner  determines  that
dissolution is therefore in the Partnership's best interest; or

                                      10

<PAGE>



(vi) the  occurrence of any event which shall make it unlawful for the existence
of the Partnership to be continued.
      (b)  Capital   resources.   (i)  The  Partnership  has  made  no  material
commitments for capital expenditures.
           (ii)  The   Partnership's   capital   will  consist  of  the  capital
contributions  of the  partners as  increased or decreased by gains or losses on
commodity futures trading and Zero Coupon  appreciation or depreciation,  and by
expenses, interest income, redemptions of Units and distributions of profits, if
any. Gains or losses on commodity  futures  trading cannot be predicted.  Market
moves in commodities are dependent upon fundamental and technical  factors which
the  Partnership may or may not be able to identify.  Partnership  expenses will
consist of, among other things, commissions, management fees and incentive fees.
The level of these  expenses  is  dependent  upon the level of  trading  and the
ability of the Advisors to identify and take advantage of price movements in the
commodity  markets,   in  addition  to  the  level  of  Net  Assets  maintained.
Furthermore,  the Partnership  will receive no payment on its Zero Coupons until
their due date.  However,  the  Partnership  will  accrue  interest  on the Zero
Coupons and Limited  Partners  will be required to report as interest  income on
their U.S. tax returns in each year their pro-rata share of the accrued interest
on the Zero  Coupons  even  though no  interest  will be paid prior to their due
date. In addition, the amount of interest income payable by SB is dependent upon
interest rates over which the Partnership has no control.

                                      11

<PAGE>



      No  forecast  can be made as to the  level  of  redemptions  in any  given
period.  Beginning  with the first full quarter ending at least six months after
trading commences (March 31, 1997), a Limited Partner may cause all of his Units
to be redeemed by the  Partnership at the Net Asset Value thereof as of the last
day of a quarter  (the  "Redemption  Date") on ten days'  written  notice to the
General  Partner.  Redemption fees equal to 2% of Redemption Net Asset Value per
Unit  redeemed  will be charged to any Limited  Partner who redeems his Units on
the first,  second or third possible  redemption  dates and 1% on the fourth and
fifth possible  redemption dates,  respectively.  Thereafter,  no redemption fee
will be  charged.  Redemption  Net Asset  Value  differs  from Net  Asset  Value
calculated for financial  reporting  purposes in that the accrued  liability for
reimbursement of offering and organization  expenses will not be included in the
calculation of Redemption Net Asset Value.
      Offering and  organization  expenses of $560,000  relating to the issuance
and marketing of Units offered were initially paid by SB. The accrued  liability
for  reimbursement  of offering and  organization  expenses  will not reduce Net
Asset Value per Unit for any purpose (other than financial reporting), including
calculation of advisory and brokerage  fees and the  redemption  value of Units.
Interest earned by the Partnership will be used to reimburse SB for the offering
and  organization  expenses of the  Partnership  plus interest at the prime rate
quoted by The Chase  Manhattan  Bank until such time as such  expenses are fully
reimbursed. As of December

                                      12

<PAGE>



31,  1996,  the  Partnership  has  reimbursed  SB for  $110,123 of offering  and
organization expenses and $15,696 of interest.
      For each Unit  redeemed  and not  offset by a  purchase,  the  Partnership
liquidates  $1,000  (principal  amount) of Zero  Coupons  and will  continue  to
liquidate  $1,000  (principal  amount) of Zero Coupons per Unit redeemed.  These
liquidations  will be at market value which will be less than the amount payable
on their due date.  Moreover,  it is possible  that the market value of the Zero
Coupon could be less than its purchase  price plus the original  issue  discount
amortized to date.
      (c)   Results  of   operations.   For  the  period  from  August  9,  1996
(commencement  of trading  operations) to December 31, 1996, the net asset value
per Unit  increased  13.9% from  $972.14 to  $1,107.34.  The net asset  value of
$972.14 at commencement of trading operations is reflective of charging offering
and  organizational  expenses against the initial capital of the Partnership for
financial reporting purposes. The redemption value per unit at December 31, 1996
is $1,129.72. There were no operations in 1995 and 1994.
      The  Partnership  experienced  net  trading  gains  of  $3,158,721  before
commissions  and  expenses for the period  ended  December 31, 1996.  Gains were
attributable  to the trading of  commodity  futures in interest  rates,  metals,
energy and  foreign  currencies.  These  gains were  partially  offset by losses
experienced in the trading of indices and agricultural products. The Partnership
experienced unrealized appreciation of $80,764 on Zero Coupons during 1996.

                                      13

<PAGE>



The Partnership  included in interest income the  amortization of original issue
discount on Zero Coupons based on the interest method.
      Commodity  futures markets are highly volatile.  Broad price  fluctuations
and rapid inflation increase the risks involved in commodity  trading,  but also
increase the possibility of profit. The profitability of the Partnership depends
on the  existence  of major  price  trends and the  ability of the  Advisors  to
identify  those price trends  correctly.  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 Advisors are able to identify  them,
the Partnership expects to increase capital through operations.


                                      14

<PAGE>




Item 8.         Financial Statements and Supplementary Data.




               SMITH BARNEY PRINCIPAL PLUS FUTURES FUND L.P. II
                          INDEX TO FINANCIAL STATEMENTS



                                                                    Page
                                                                   Number


                Report of Independent Accountants.                  F-2

                Financial Statements:
                Statement of Financial Condition at
                December 31, 1996.                                  F-3

                Statement of Income and Expenses for
                the period from August 9, 1996
                (commencement of trading operations)
                to December 31, 1996.                               F-4

                Statement of Partners'  Capital for
                the year ended  December 31, 1996 and
                for the period from November 16, 1995
                (date Partnership was organized) to
                December 31, 1995.                                  F-5

                Notes to Financial Statements.                    F-6 -  F-12







                                       F-1

                                    Continued


<PAGE>


                        Report of Independent Accountants

To the Partners of
  Smith Barney Principal PLUS Futures Fund L.P. II:

We have  audited the  accompanying  statement  of  financial  condition of SMITH
BARNEY  PRINCIPAL PLUS FUTURES FUND L.P. II (a New York Limited  Partnership) as
of December 31, 1996 and 1995, and the related statements of income and expenses
for the period  from  August 9, 1996  (commencement  of trading  operations)  to
December 31, 1996, and of partners' capital for the year ended December 31, 1996
and for the period from November 16, 1995 (date  Partnership  was  organized) to
December 31, 1995.  These  financial  statements are the  responsibility  of the
management of the General Partner.  Our  responsibility is to express an opinion
on these financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards 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.  An audit also includes
assessing the accounting  principles used and significant  estimates made by the
management of the General Partner,  as well as evaluating the overall  financial
statement  presentation.  We believe that our audits provide a reasonable  basis
for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the financial  position of Smith Barney  Principal PLUS
Futures  Fund L.P. II as of December  31, 1996 and 1995,  and the results of its
operations  for  the  period  from  August  9,  1996  (commencement  of  trading
operations)  to December  31, 1996 and of  partners'  capital for the year ended
December 31, 1996 and for the period from  November  16, 1995 (date  Partnership
was  organized)  to December 31, 1995,  in conformity  with  generally  accepted
accounting principles.



                                                      Coopers & Lybrand L.L.P.

New York, New York
February 28, 1997

                                      F-2
<PAGE>


                           Smith Barney Principal PLUS
                              Futures Fund L.P. II
                        Statement of Financial Condition
                           December 31, 1996 and 1995


Assets:                                                    1996          1995
Equity in commodity futures
 trading account:
  Cash and cash equivalents (Note 3c)                  $ 9,941,903   $     2,000
  Net unrealized appreciation
   on open futures contracts                               241,456
   Zero Coupons, $20,100,000
   principal amount due November 15, 2003,
   at market value (amortized cost $13,012,376)
   (Notes 1 and 2)                                      13,093,140
                                                       -----------   -----------
                                                       $23,276,499   $     2,000
                                                       ===========   ===========
Liabilities and Partners' Capital:
Liabilities:
 Accrued expenses:
  Commissions                                          $    74,500
  Management fees                                           33,970
  Incentive fees                                           421,541
  Due to SB (Note 6)                                       449,877
  Other                                                     39,050
                                                       -----------
                                                         1,018,938
                                                       -----------
Partners' capital (Notes 1, 5, and 7):
 General Partner, 203 and 1 Unit
  equivalents outstanding in 1996
  and 1995, respectively                                   224,790   $     1,000
 Limited Partners, 19,897 and 1
  Units of Limited Partnership Interest                 
  outstanding in 1996 and 1995, respectively            22,032,771         1,000
                                                       -----------   -----------
                                                        22,257,561         2,000
                                                       -----------   -----------
                                                       $23,276,499   $     2,000
                                                       ===========   ===========


See notes to financial statements.

                                      F-3
<PAGE>


                           Smith Barney Principal PLUS
                              Futures Fund L.P. II
                        Statement of Income and Expenses
  for the period from August 9, 1996 (commencement of trading operations) to
                                December 31, 1996


                                      1996
Income:
 Net gains on trading of
   commodity interests:
   Realized gains on
   closed positions                 $2,917,265
  Change in unrealized gains
   on open positions                   241,456
                                    ----------
                                     3,158,721
 Less, Brokerage commissions
  and clearing fees ($6,910)
  (Note 3c)                            346,364
                                    ----------
 Net realized and unrealized
  gains                              2,812,357
 Unrealized appreciation
  on Zero Coupons                       80,764
 Interest income (Notes 2c,
  3c and 6)                            434,374
                                    ----------
                                     3,327,495
                                    ----------
Expenses:
 Management fees (Note 3b)             146,507
 Incentive fees (Note 3b)              421,541
 Other expenses                         41,886
                                    ----------
                                       609,934
                                    ----------
Net income                          $2,717,561
                                    ==========
Net income per Unit of Limited
 Partnership Interest and
 General Partner Unit
 equivalent (Notes 1 and 7)         $   135.20
                                    ==========


See notes to financial statements.

                                      F-4
<PAGE>


                           Smith Barney Principal PLUS
                              Futures Fund L.P. II
 Statement of Partners' Capital for the year ended December 31, 1996 and for the
  period from November 16, 1995 (date the Partnership was organized) to
                                December 31, 1995


                                      Limited         General
                                      Partners        Partner         Total
Initial capital contributions      $      1,000    $      1,000    $      2,000
                                   ------------    ------------    ------------
Partners' capital at
  December 31, 1995                       1,000           1,000           2,000
Proceeds from offering of
  19,896 Units of Limited
  Partnership Interest
  and General Partner's
  contribution representing
  202 Unit equivalents (Note 1)      19,896,000         202,000      20,098,000
Offering and organization
  costs (Note 6)                       (554,400)         (5,600)       (560,000)
                                   ------------    ------------    ------------
Opening Partnership capital
  for operations                     19,342,600         197,400      19,540,000
Net Income                            2,690,171          27,390       2,717,561
                                   ------------    ------------    ------------
Partners' capital at
  December 31, 1996                $ 22,032,771    $    224,790    $ 22,257,561
                                   ============    ============    ============


See notes to financial statements.

                                      F-5
<PAGE>


                           Smith Barney Principal PLUS
                              Futures Fund L.P. II
                           Notes to Financial Statements

1. Partnership Organization:

   Smith Barney  Principal  PLUS Futures Fund L.P. II (the  "Partnership")  is a
   limited  partnership  which was  organized  on  November  16,  1995 under the
   partnership  laws of the State of New York.  The  Partnership  engages in the
   speculative  trading  of a  diversified  portfolio  of  commodity  interests,
   including futures  contracts,  options and forward  contracts.  The commodity
   interests that are traded by the  Partnership are volatile and involve a high
   degree of market risk. The Partnership  will maintain a portion of its assets
   in interest  payments  stripped from U.S. Treasury Bonds under the Treasury's
   STRIPS program which payments are due approximately seven years from the date
   trading commenced ("Zero Coupons").

   Between April 3, 1996  (commencement  of offering period) and August 8, 1996,
   19,896 Units of Limited  Partnership  Interest  ("Units") were sold at $1,000
   per Unit.  The proceeds of the offering were held in an escrow  account until
   August 9, 1996,  at which time they were turned over to the  Partnership  for
   trading.  The  Partnership  was  authorized  to sell 60,000  Units during the
   offering period of the Partnership.

   Smith Barney  Futures  Management  Inc. is the general  partner (the "General
   Partner") of the Partnership.  Smith Barney Inc. ("SB"),  an affiliate of the
   General Partner,  acts as commodity broker for the Partnership (see Note 3c).
   The General  Partner and each limited partner share in the profits and losses
   of the Partnership in proportion to the amount of partnership  interest owned
   by each except that no limited partner shall be liable for obligations of the
   Partnership in excess of his initial  capital  contribution  and profits,  if
   any, net of distributions.

   The Partnership  will be liquidated upon the first to occur of the following:
   December  31,  2015;  at the end of the  month  in  which  the  Zero  Coupons
   purchased  come due  (November,  2003)  ("First  Payment  Date"),  unless the
   General Partner elects  otherwise,  or under certain other  circumstances  as
   defined in the Limited  Partnership  Agreement.  The General Partner,  in its
   sole  discretion,  may elect not to terminate the Partnership as of the First
   Payment  Date. In the event that the General  Partner  elects to continue the
   Partnership, each limited partner shall have the opportunity to redeem all or
   some of his Units.

                                      F-6
<PAGE>
                           Smith Barney Principal PLUS
                              Futures Fund L.P. II
                           Notes to Financial Statements


2. Accounting Policies:

   a.All commodity interests  (including  derivative  financial  instruments and
     derivative  commodity  instruments)  are used  for  trading  purposes.  The
     commodity  interests  are  recorded  on trade date and open  contracts  are
     recorded in the statement of financial  condition at market value for those
     commodity interests for which market quotations are readily available or at
     fair value on the last business day of the year.  Investments  in commodity
     interests  denominated in foreign currency are translated into U.S. dollars
     at the  exchange  rates  prevailing  on the last  business day of the year.
     Realized  gain  (loss)  and  changes  in  unrealized  values  on  commodity
     interests  are  recognized in the period in which the contract is closed or
     the  changes  occur and are  included  in net gains  (losses) on trading of
     commodity interests.

   b.Income taxes have not been provided as each partner is individually  liable
     for the  taxes,  if any,  on his  share  of the  Partnership's  income  and
     expenses.

   c.The original  issue  discount on the Zero Coupons is being  amortized  over
     their life using the interest method and is included in interest income.

   d.Zero Coupons are recorded in the statement of financial condition at market
     value.  Realized  gain (loss) on the sale of Zero Coupons is  determined on
     the amortized cost basis of the Zero Coupons at the time of sale.

   e.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 at
     the date of the financial  statements and the reported  amounts of revenues
     and expenses during the reporting period.  Actual results could differ from
     these estimates.

3. Agreements:

   a.Limited Partnership Agreement:

     The General Partner administers the business and affairs of the Partnership
     including  selecting one or more advisors to make trading decisions for the
     Partnership.

                                      F-7
<PAGE>
                           Smith Barney Principal PLUS
                              Futures Fund L.P. II
                           Notes to Financial Statements


   b.Management Agreements:

     The  General  Partner,  on  behalf of the  Partnership,  has  entered  into
     Management  Agreements  with John W.  Henry &  Company,  Inc.  ("JWH")  and
     Willowbridge   Associates   Inc.   ("Willowbridge")   (collectively,    the
     "Advisors"),  which  provide  that the  Advisors  have sole  discretion  in
     determining  the investment of the assets of the  Partnership  allocated to
     each Advisor by the General  Partner.  As  compensation  for services,  the
     Partnership is obligated to pay  Willowbridge  a monthly  management fee of
     1/6 of 1% (2% per year) of month-end Net Assets allocated to it and pay JWH
     a monthly management fee of 1/3 of 1% (4% per year) of month-end Net Assets
     allocated to it. The  Partnership  will also pay  Willowbridge an incentive
     fee payable  quarterly equal to 20% of New Trading Profits earned by it for
     the  Partnership  and JWH will receive an  incentive  fee of 15% of the New
     Trading Profits.

   c.Customer Agreement:

     The Partnership  has entered into a Customer  Agreement which provides that
     the Partnership will pay SB a monthly  brokerage fee equal to 7/12 of 1% of
     month-end  Net Assets  allocated  to the  Advisors (7% per year) in lieu of
     brokerage  commissions  on a per trade basis. A portion of this fee is paid
     to  employees of SB who have sold Units of the  Partnership.  This fee does
     not include exchange, clearing, user, give-up, floor brokerage and NFA fees
     which will be borne by the Partnership. All of the Partnership's assets are
     deposited in the Partnership's  account at SB. The Partnership  maintains a
     portion  of these  assets  in Zero  Coupons  and a  portion  in  cash.  The
     Partnership's  cash is  deposited by SB in  segregated  bank  accounts,  as
     required by Commodity Futures Trading Commission  regulations.  At December
     31, 1996, the amount of cash held for margin  requirements  was $1,487,207.
     SB will pay the  Partnership  interest on 80% of the average  daily  equity
     maintained  in cash in its account  during each month at a 30-day  Treasury
     bill  rate  determined  weekly by SB based on the  average  non-competitive
     yield on 3-month U.S.  Treasury  bills maturing in 30 days from the date on
     which such weekly rate is determined.  The Customer  Agreement  between the
     Partnership  and SB gives the Partnership the legal right to net unrealized
     gains and losses. The Customer Agreement may be terminated by either party.

                                      F-8
<PAGE>
                           Smith Barney Principal PLUS
                              Futures Fund L.P. II
                           Notes to Financial Statements

4. Trading Activities:

   The Partnership was formed for the purpose of trading  contracts in a variety
   of  commodity  interests,  including  derivative  financial  instruments  and
   derivative commodity  instruments.  The results of the Partnership's  trading
   activity are shown in the statement of income and expenses.

   All of the commodity  interests owned by the Partnership are held for trading
   purposes.  The fair value of these  commodity  interests,  including  options
   thereon,  at December  31,1996 was $241,456 and the average fair value during
   the period then ended, based on monthly calculation, was $1,507,237.

5. Distributions and Redemptions:

   Distributions of profits,  if any, will be made at the sole discretion of the
   General  Partner.  Beginning with the end of the first full quarter ending at
   least six months after trading commences (March 31,1997),  on 10 days' notice
   to the General  Partner,  a limited  partner may require the  Partnership  to
   redeem his Units at their  Redemption Net Asset Value as of the last day of a
   quarter.  Redemption  fees equal to 2% of Redemption Net Asset Value per Unit
   redeemed will be charged to any limited  partner who redeems his Units on the
   first,  second or third  possible  redemption  date, and 1% on the fourth and
   fifth  possible  redemption  dates.  Thereafter,  no  redemption  fee will be
   charged.  Redemption Net Asset Value differs from Net Asset Value  calculated
   for  financial   reporting   purposes  in  that  the  accrued  liability  for
   reimbursement of offering and  organization  expenses will not be included in
   the calculation of Redemption Net Asset Value.

6. Offering and Organization Costs:

   Offering and organization  expenses of $560,000  relating to the issuance and
   marketing of Units offered were initially  paid by SB. The accrued  liability
   for  reimbursement of offering and organization  expenses will not reduce Net
   Asset  Value  per Unit for any  purpose  (other  than  financial  reporting),
   including calculation of advisory and brokerage fees and the redemption value
   of Units. Interest earned by the Partnership will be used to reimburse SB for
   the offering and  organization  expenses of the Partnership  plus interest at
   the prime  rate  quoted by The Chase  Manhattan  Bank until such time as such
   expenses are fully reimbursed.

   As of December 31, 1996,  the  Partnership  has reimbursed SB for $110,123 of
   offering and organization expenses and $15,696 of interest.

                                      F-9
<PAGE>

7. Net Asset Value Per Unit:

   Changes in the net asset  value per Unit for the period  from  August 9, 1996
   (commencement of trading operations) to December 31,1996 were as follows:

                                     1996
   Net realized and
   unrealized gains             $  139.92
   Interest income                  21.60
   Realized and unrealized
   gains on Zero Coupons             4.03
   Expenses                        (30.35)
                                ---------
   Increase for period             135.20
   Net asset value per
   Unit, beginning of
   period                          972.14
                                ---------
   Net asset value per
   Unit, end of period          $1,107.34
                                ---------
   Redemption value per
   Unit, end of period*         $1,129.72
                                =========

   *For the purpose of a redemption,  any accrued liability for reimbursement of
   offering and organization expenses will not reduce redemption net asset value
   per Unit.

8. Guarantee:

   In the unlikely event that the  Partnership is required to meet a margin call
   in excess of the cash balance in its trading accounts,  Smith Barney Holdings
   Inc. will  contribute up to an amount equal to the maturity value of the Zero
   Coupons  held by the  Partnership  at the time of such call to the capital of
   the Partnership to permit it to meet its margin  obligations in excess of its
   cash balance.  The guarantee can only be invoked once. After the guarantee is
   invoked,  trading  will cease and the General  Partner will either wait until
   the  First  Payment  Date or will  distribute  cash and Zero  Coupons  to the
   limited partners.

                                      F-10
<PAGE>
                           Smith Barney Principal PLUS
                              Futures Fund L.P. II
                           Notes to Financial Statements


9. Financial Instrument Risk:

   The  Partnership is party to financial  instruments  with  off-balance  sheet
   risk,  including  derivative  financial  instruments and derivative commodity
   instruments,   in  the  normal  course  of  its  business.   These  financial
   instruments include forwards,  futures and options, whose value is based upon
   an underlying asset, index, or reference rate, and generally represent future
   commitments to exchange  currencies or cash flows,  to purchase or sell other
   financial instruments at specific terms at specified future dates, or, in the
   case of derivative commodity instruments, to have a reasonable possibility to
   be settled in cash or with another  financial  instrument.  These instruments
   may be traded on an exchange or  over-the-counter  ("OTC").  Exchange  traded
   instruments  are   standardized   and  include  futures  and  certain  option
   contracts.  OTC  contracts are  negotiated  between  contracting  parties and
   include forwards and certain options. Each of these instruments is subject to
   various  risks  similar  to  those  related  to  the   underlying   financial
   instruments   including  market  and  credit  risk.  In  general,  the  risks
   associated with OTC contracts are greater than those associated with exchange
   traded instruments because of the greater risk of default by the counterparty
   to an OTC contract.

   Market  risk is the  potential  for  changes  in the  value of the  financial
   instruments  traded  by the  Partnership  due to  market  changes,  including
   interest and foreign exchange rate movements and fluctuations in commodity or
   security  prices.  Market risk is directly  impacted  by the  volatility  and
   liquidity in the markets in which the related underlying assets are traded.

   Credit risk is the possibility  that a loss may occur due to the failure of a
   counterparty  to perform  according  to the terms of a contract.  Credit risk
   with respect to exchange traded  instruments is reduced to the extent that an
   exchange or clearing organization acts as a counterparty to the transactions.
   The  Partnership's  risk of loss in the  event  of  counterparty  default  is
   typically  limited to the amounts  recognized  in the  statement of financial
   condition  and not  represented  by the  contract or notional  amounts of the
   instruments.   The  Partnership  has  concentration  risk  because  the  sole
   counterparty or broker with respect to the Partnership's assets is SB.

   The General Partner monitors and controls the Partnership's  risk exposure on
   a daily  basis  through  financial,  credit  and risk  management  monitoring
   systems,  and  accordingly  believes  that it has  effective  procedures  for
   evaluating and limiting the credit and market risks to which the  Partnership
   is  subject.   These   monitoring   systems  allow  the  General  Partner  to
   statistically  analyze actual trading results with risk adjusted  performance
   indicators  and  correlation  statistics.  In  addition,  on-line  monitoring
   systems provide account analysis of futures,  forwards and options  positions
   by sector,  margin  requirements,  gain and loss  transactions and collateral
   positions.

                                      F-11
<PAGE>
                           Smith Barney Principal PLUS
                              Futures Fund L.P. II
                           Notes to Financial Statements


   The notional or contractual amounts of these instruments,  while not recorded
   in  the  financial  statements,  reflect  the  extent  of  the  Partnership's
   involvement in these  instruments.  At December 31, 1996,  the  Partnership's
   commitment  to  purchase  and sell  these  instruments  was  $62,598,929  and
   $26,015,417, respectively, as detailed below. All of these instruments mature
   within  one year of  December  31,  1996.  However,  due to the nature of the
   Partnership's  business,  these  instruments may not be held to maturity.  At
   December 31, 1996, the fair value of the Partnership's derivatives, including
   options thereon, was $241,455, as detailed below.


                                     Notional or Contractual
                                      Amount of Commitments
                                     To Purchase     To Sell        Fair Value
Currencies
 -Exchange Traded
  Contracts                         $  1,334,520   $  5,148,813    $     12,153
 -OTC Contracts                        7,465,989      7,184,196          56,747
Energy                                 2,918,918             --         118,296
Interest Rates U.S.                   11,395,169             --         (83,819)
Interest Rates
 Non-U.S                              37,500,497      7,525,109         (14,353)
Grains                                   356,850        614,676            (274)
Livestock                                412,460             --          15,310
Softs                                    532,888        966,751         (13,390)
Metals                                   681,638      3,643,675         115,283
Indices                                       --        932,197          35,502
                                    ------------   ------------    ------------
Total                               $ 62,598,929   $ 26,015,417    $    241,455
                                    ============   ============    ============


                                      F-12

<PAGE>



Item 9.     Changes in and Disagreements with Accountants on
            Accounting and  Financial Disclosure.
            During the last two fiscal years and any subsequent  interim period,
no independent  accountant who was engaged as the principal  accountant to audit
the Partnership's financial statements has resigned or was dismissed.

                                    PART III
Item 10.    Directors and Executive Officers of the Registrant.
            The  Partnership  has no officers or  directors  and its affairs are
managed by its General Partner,  Smith Barney Futures Management Inc. Investment
decisions are made by the Advisors.
Item 11.    Executive Compensation.
            The  Partnership  has no  directors  or  officers.  Its  affairs are
managed by Smith Barney  Futures  Management  Inc., its General  Partner,  which
receives  compensation for its services,  as set forth under "Item 1. Business."
SB, an  affiliate  of the  General  Partner,  is the  commodity  broker  for the
Partnership and receives brokerage  commissions for such services,  as described
under "Item 1.  Business."  Brokerage  commissions and clearing fees of $346,364
were paid for the period ended  December 31, 1996.  Management  fees of $146,507
were paid or payable to the Advisors for the period ended  December 31, 1996. In
addition,  incentive fees of $421,541 were payable for the period ended December
31, 1996.


                                      15

<PAGE>



Item 12. Security Ownership of Certain Beneficial Owners and
         Management.
            (a). Security ownership of certain beneficial owners.
The  Partnership  knows of no person who  beneficially  owns more than 5% of the
Units outstanding.
            (b).  Security  ownership  of  management.  Under  the  terms of the
Limited  Partnership  Agreement,  the  Partnership's  affairs are managed by the
General  Partner.  The  General  Partner  owns  Units  of  partnership  interest
equivalent to 203 (1.0%) Units of Limited Partnership Interest.
            (c). Changes in control.  None.
Item 13.  Certain Relationships and Related Transactions.
            Smith Barney Inc. and Smith Barney Futures  Management Inc. would be
considered  promoters for purposes of Item 404(d) of Regulation  S-K. The nature
and the amounts of compensation  each promoter will receive from the Partnership
are set forth under "Item 1. Business." and "Item 11. Executive Compensation."
                                     PART IV
Item 14.    Exhibits, Financial Statement Schedules, and Reports on
            Form 8-K.
      (a)  (1)    Financial Statements:
                  Statement  of  Financial   Condition  at  December  31,  1996.
                  Statement  of Income and  Expenses  for period  from August 9,
                  1996  (commencement  of trading  operations)  to December  31,
                  1996.  Statement  of  Partners'  Capital  for the  year  ended
                  December  31, 1996 and for the period  November 16, 1995 (date
                  Partnership was organized) to December 31, 1996.
          (2)     Financial Statement Schedules:  None.
          (3)     Exhibits:
          3.1 -    Limited Partnership Agreement (dated November
                   16, 1995, (filed as Exhibit 3.1 to the
                   Registration Statement on Form S-1 (File No.
                   33-80723) and incorporated herein by
                   reference).
          3.2 -    Certificate of Limited Partnership of the
                   Partnership as filed in the office of the
                   Secretary of State of the State of New York
                   (filed as Exhibit 3.2 to the Registration
                   Statement on Form S-1 (File No. 33-80723) and
                   incorporated herein by reference).
          10.1 -   Customer Agreement between the Partnership and
                   Smith Barney Shearson Inc. (filed as Exhibit
                   10.1 to the Registration Statement on Form S-1
                   (File No. 33-80723) and incorporated herein by
                   reference).
          10.3 -   Escrow Instructions relating to escrow of
                   subscription funds (filed as Exhibit 10.3 to

                                     16

<PAGE>



                   the Registration Statement on Form S-1 (File
                   No. 33-80723) and incorporated herein by
                   reference).
          10.5 -   Management Agreement among the Partnership, the
                   General Partner and John W. Henry & Company,
                   Inc. (JWH) (filed as Exhibit 10.5 to the
                   Registration Statement on Form S-1 (File No.
                   33-80723) and incorporated herein by
                   reference).
          10.6 -   Management Agreement among the Partnership, the
                   General Partner and Willowbridge Associates Inc.
                   (filed as Exhibit 10.6 to the Registration
                   Statement on Form S-1 (File No. 33-80723) and
                   incorporated herein by reference).
             (b)   Reports on 8-K:  None Filed.

                                      17

<PAGE>



      Supplemental  Information  To Be Furnished  With Reports Filed Pursuant To
Section 15(d) Of The Act by  Registrants  Which Have Not  Registered  Securities
Pursuant To Section 12 Of the Act.




Annual Report to Limited Partners


                                      18

<PAGE>



                                   SIGNATURES

       Pursuant to the  requirements  of Section 13 or 15 (d) of the  Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

SMITH BARNEY PRINCIPAL PLUS FUTURES FUND L.P. II


By:    Smith Barney Futures Management Inc.
       (General Partner)



By     /s/        David J. Vogel
       David J. Vogel, President & Director


       Pursuant  to  the  requirements  of the  Securities  Act  of  1933,  this
Registration  Statement  has been signed below by the  following  persons in the
capacities and on the date indicated.



/s/     David J. Vogel                    /s/     Jack H. Lehman III
David J. Vogel,                           Jack H. Lehman III
Director, Principal Executive             Chairman and Director
Officer and President



/s/      Michael Schaefer                 /s/    Daniel A. Dantuono
Michael Schaefer                          Daniel A. Dantuono
Director                                  Treasurer, Chief Financial
                                          Officer and Director



/s/  Philip M. Waterman, Jr.              /s/ Daniel R. McAuliffe, Jr.
Philip M. Waterman, Jr.                   Daniel R. McAuliffe, Jr.
Director and Vice-Chairman                Director




/s/ Steve J. Keltz                        /s/   Shelley Ullman
Steve J. Keltz                            Shelley Ullman
Secretary and Director                    Director


                                      20

<PAGE>