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, 1998

Commission File Number 0-28350


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

               New York                           13-3823300
     (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: 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 [X]

As of February  28,  1999  Limited  Partnership  Units with an  aggregate  value
of  $1,278.34  were  outstanding  and held by non-affiliates.

                       DOCUMENTS INCORPORATED BY REFERENCE
                                      NONE



<PAGE>


                                     PART I

Item 1. Business.

     (a) General  development of business.  Smith Barney  Principal Plus Futures
Fund L.P. (the "Partnership") is a limited partnership  organized on January 25,
1993under the  Partnership  Law of the State of New York and was  capitalized on
April 12,  1995.  No activity  occurred  between  January 25, 1993 and April 12,
1995. The  Partnership  engages in speculative  trading of commodity  interests,
including  forward  contracts  on  foreign  currencies,  commodity  options  and
commodity  futures  contracts  including  futures  contracts  on  United  States
Treasuries and certain other financial instruments, foreign currencies and stock
indices. The commodity interests that are traded by the Partnership are volatile
and involve a high degree of market risk. 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 February
15, 2003. The  Partnership  uses the Zero Coupons and its other assets to margin
its commodities account.
         A total  of  100,000  Units  of  Limited  Partnership  Interest  in the
Partnership (the "Units") were offered to the public.  Between July 12, 1995 and
November  16,  1995,  37,131  Units  were sold to the public at $1,000 per Unit.
Proceeds  of the  offering  along with the  General  Partner's  contribution  of
$376,000 were held in escrow until  November 17, 1995 at which time an aggregate
of $37,507,000 were turned over to the Partnership and the Partnership commenced
trading operations.

                               2

<PAGE>

     Smith  Barney  Futures  Management  Inc.  acts as the general  partner (the
"General  Partner") of the Partnership.  On September 1, 1998, the Partnership's
commodity  broker,  Smith  Barney  Inc.,  merged with  Salomon  Brothers Inc and
changed its name to Salomon  Smith Barney Inc.  ("SSB").  SSB is an affiliate of
the General Partner. The General Partner is wholly owned by Salomon Smith Barney
Holdings,  Inc.  ("SSBH"),  which is the sole owner of SSB.  On October 8, 1998,
Travelers Group Inc. merged with Citicorp Inc. and changed its name to Citigroup
Inc. SSBH is a wholly owned subsidiary of Citigroup Inc.
     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 maintained with SSB.
     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,  1998,  all  commodity  trading
decisions are made for the Partnership by John W. Henry & Company, Inc. ("JWH"),
Rabar  Market  Research,  Inc.  and  Abraham  Trading  Co.  (collectively,   the
"Advisors"). None of the Advisors is affiliated with the General Partner or SSB.
The  Advisors  are not  responsible  for the  organization  or  operation of the
Partnership.
         Pursuant to the terms of the  Management  Agreements  (the  "Management

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<PAGE>

Agreements"),  the  Partnership  is  obligated  to pay each  Advisor  a  monthly
management  fee equal to 1/6 of 1% (2% per year) of month-end Net Assets (except
JWH,  which  will  receive a monthly  management  fee equal to 1/3 of 1% (4% per
year)) of the Partnership  allocated to each Advisor.  The Partnership will also
pay Abraham  Trading Co. an incentive fee payable  quarterly equal to 20% of New
Trading Profits earned by it for the Partnership;  JWH will receive an incentive
fee  payable  quarterly  of 15% of the New  Trading  Profits  (as defined in the
Management  Agreements);  and Rabar Market  Research Inc. will receive an annual
incentive fee of 22.5% of New Trading Profits of the Partnership.
         The Customer  Agreement  provides that the  Partnership  will pay SSB 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. SSB will pay a portion of its 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 SSB gives the
Partnership the legal right to net unrealized gains and losses. Reference should
be made to "Item 8. Financial  Statements and  Supplementary  Data." for further
information  regarding  the brokerage  commissions  included in the notes to the
financial statements.


                                 4

<PAGE>

         In  addition,  SSB  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 SSB 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, SSBH 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  (February,  2003),  (the "First Payment  Date"),  or will
distribute  cash and Zero Coupons to the limited  partners.  The General Partner
will provide a copy of SSBH'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 (including, but not limited to, futures contracts, options and forward
contracts on U.S. Treasuries,  other financial instruments,  foreign currencies,
stock  indices and physical  commodities).  The  Partnership  does not engage in


                               5


<PAGE>

sales of goods or services. The Partnership's net income from operations for the
year ended  December 31, 1998,  1997,  1996 and for the period from November 17,
1995  (commencement  of trading  operations)  to December  31, 1995 is set forth
under "Item 6. Selected Financial Data." Partnership  capital as of December 31,
1998 was $34,274,406.
         (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.
         (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, SSB.
Item 3.  Legal Proceedings.
         Thereare no material legal proceedings  pending against the Partnership
or the General  Partner.
         This section describes the major legal proceedings, other than ordinary
routine litigation incidental to the business, to which SSBH, the parent company
of this General Partner or its  subsidiaries is a party or to which any of their
property is subject.


                            6


<PAGE>

              In September  1992,  Harris Trust and Savings Bank (as trustee for
Ameritech  Pension  Trust  ("APT"),  Ameritech  Corporation,  and an  officer of
Ameritech filed suit against Salomon  Brothers Inc. ("SBI") and Salomon Brothers
Realty Corporation ("SBRC") in the U.S. District Court for the Northern District
of Illinois  (Harris Trust Savings Bank, not  individually but solely as trustee
for the Ameritech Pension Trust,  Ameritech Corporation and John A. Edwardson v.
Salomon  Brothers Inc and Salomon  Brothers  Realty  Corp.).  The second amended
complaint  alleges that three purchases by APT from defendants of  participation
interests  in net cash flow or resale  proceeds  of three  portfolios  of motels
owned by Motels of America, Inc. ("MOA"), as well as a fourth purchase by APT of
a similar participation  interest with respect to a portfolio of motels owned by
Best Inns, Inc. ("Best"),  violated the Employee  Retirement Income Security Act
("ERISA"),  and that the purchase of the  participation  interests for the third
MOA portfolio and for the Best portfolio  violated the Racketeer  Influenced and
Corrupt   Organization  Act  ("RICO")  and  state  law.  SBI  had  acquired  the
participation  interests  in  transactions  in which it  purchased  as principal
mortgage notes issued by MOA and Best to finance  purchases of motel portfolios;
95% of three such  interests  and 100% of one such interest were sold to APT for
purchase prices  aggregating  approximately  $20.9 million.  Plaintiffs'  second
amended complaint seeks (a) judgment on the ERISA claims for the purchase prices
of  the  four  participation   interests   (approximately  $20.9  million),  for

                              7

<PAGE>

rescission and for  disgorgement  of profits,  as well as other relief,  and (b)
judgment on the claims  brought  under RICO and state law in the amount of $12.3
million,  with  damages  trebled to $37 million on the RICO claims and  punitive
damages  in excess of $37  million on certain of the state law claims as well as
other  relief.  The court  dismissed  the RICO,  breach of contract,  and unjust
enrichment  claims.  The court also found that  defendants did not qualify as an
ERISA  fiduciary and dismissed the claims based on that  allegation.  Defendants
moved for summary  judgment on the sole remaining  claim. The motion was denied,
and defendants  appealed to the U.S.  Court of Appeals for the Seventh  Circuit.
Defendants are awaiting a decision.
              Both the Department of Labor and the Internal Revenue Service have
advised  SBI that  they  were or are  reviewing  the  transactions  in which APT
acquired  such  participation  interests.  With respect to the Internal  Revenue
Service review,  SSBH, SBI and SBRC have consented to extensions of time for the
assessment  of excise  taxes that may be  claimed to be due with  respect to the
transactions  for the years 1987,  1988 and 1989.  In August 1996,  the IRS sent
SSBH,  SBI and SBRC what appeared to be draft  "30-day  letters" with respect to
the  transactions and SSBH, SBI and SBRC were given an opportunity to comment on
whether the IRS should issue 30-day letters,  which would actually  commence the
assessment  process.  In October 1996, SSBH, SBI and SBRC submitted a memorandum
setting forth  reasons why the IRS should not issue 30-day  letters with respect
to the transactions.

                                  8

<PAGE>

     In December  1996, a complaint  seeking  unspecified  monetary  damages was
filed by Orange County,  California against numerous brokerage firms,  including
Smith  Barney,  in the  U.S.  Bankruptcy  Court  for  the  Central  District  of
California  (County  of  Orange  et al. v.  Bear  Stearns  & Co.  Inc.  et al.).
Plaintiff alleges,  among other things, that defendants  recommended and sold to
plaintiff  unsuitable  securities  and that such  transactions  were outside the
scope of  plaintiff's  statutory and  constitutional  authority  (ultra  vires).
Defendants'  motion for summary  judgment  was granted with respect to the ultra
vires  claims in  February  1999.  The court  allowed  the  filing of an amended
complaint asserting claims based on alleged breaches of fiduciary duty.
     In June  1998,  complaints  were filed in the U.S.  District  Court for the
Eastern District of Louisiana in two actions (Board of  Liquidations,  City Debt
of the City of New  Orleans v. Smith  Barney  Inc.  et ano.  and The City of New
Orleans v. Smith Barney Inc. et ano.),  in which the City of New Orleans seeks a
declaratory  judgment  that  Smith  Barney  Inc.  and  another  underwriter  are
responsible  for any damages  that the City may incur in the event the  Internal
Revenue  Service  denies tax  exempt  status to the  City's  General  Obligation
Refunding  Bonds  Series  1991.  The  Company  filed a  motion  to  dismiss  the
complaints in September 1998, and the complaints were subsequently  amended. The
Company has filed a motion to dismiss the amended complaints.
     In November  1998,  a purported  class  action  complaint  was filed in the
United States District Court for the Middle District of Florida (Dwight Brock as
                                  9

<PAGE>

Clerk for Collier County v. Merrill Lynch, et al.). The complaint  alleges that,
pursuant to a nationwide conspiracy, 17 broker-dealer defendants, including SSB,
charged excessive mark-ups in connection with advanced  refunding  transactions.
The Company intends to contest this complaint vigorously.
Environmental Matters
         In July  1996,  the City and  County of Denver  ("Denver")  enacted  an
ordinance   imposing   a   substantial   fee  on  any   radioactive   waste   or
radium-contaminated  material  disposed  of in the City of  Denver.  Under  this
ordinance,  Denver assessed a subsidiary of Salomon,  the S.W. Shattuck Chemical
Company, Inc.  ("Shattuck"),  $9.35 million for certain disposal already carried
out. Shattuck sued to enjoin  imposition of the fee on  constitutional  grounds.
The  United  States  also  sued,  seeking  to  enjoin  imposition  of the fee on
constitutional  grounds.  Denver  counterclaimed  and  moved  to add  SSBH  as a
defendant  for past costs.  These cases have been  consolidated  before the U.S.
District Court in Colorado,  which granted  Shattuck's  motion for a preliminary
injunction  enjoining Denver from enforcing the ordinance during the pendency of
the litigation. The parties have reached a settlement.
         The Company and various subsidiaries have also been named as defendants
in various  matters  incident to and typical of the businesses in which they are
engaged. These include numerous civil actions, arbitration proceedings and other
matters  in which the  Company's  broker-dealer  subsidiaries  have been  named,
arising in the  normal  course of  business  out of  activities  as a broker and

                               10

<PAGE>

dealer in securities,  as an underwriter of securities,  as an investment banker
or otherwise. In the opinion of the Company's management,  none of these actions
is  expected to have a material  adverse  effect on the  consolidated  financial
condition of the Company and its subsidiaries. 
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, 1998  was 1,448.
              (c)      Distribution.    The   Partnership  did  not  declare  a 
                       distribution in 1998 or 1997.

                               11
<PAGE>


Item 6. Selected Financial Data. The Partnership commenced trading operations on
November  17,  1995.  Realized  and  unrealized  trading  gains,   realized  and
unrealized  gains  (losses) on Zero  Coupons,  interest  income,  net income and
increase  in net asset  value per Unit for the years ended  December  31,  1998,
1997,  1996 and for the period from November 17, 1995  (commencement  of trading
operations)  to December 31, 1995 and total  assets at December 31, 1998,  1997,
1996 and 1995 were as follows:

<TABLE>
<CAPTION>

                                       1998            1997           1996            1995
                                 -----------     -----------   ------------       --------
<S>                                <C>               <C>           <C>             <C> 
Realized and unrealized
 trading gains net of
 brokerage commissions and
 clearing fees of $1,357,927,
 $1,462,372, $1,459,014  and
 $167,420, respectively         $  1,234,224   $  2,025,344   $  2,053,372    $  1,908,271

Realized and unrealized gains
 (losses) on Zero Coupons            923,712        631,119     (1,226,193)        531,953

Interest income                    1,710,639      1,916,217      1,935,048         250,172
                                ------------   ------------   ------------    ------------

                                $  3,868,575   $  4,572,680   $  2,762,227    $  2,690,396
                                ============   ============   ============    ============

Net income                      $  2,968,642   $  3,546,888   $  2,043,139    $  2,227,441
                                ============   ============   ============    ============

Increase in net asset value
 per unit                       $     109.40   $     115.33   $      58.96    $      59.38
                                ============   ============   ============    ============

Total assets                    $ 35,208,540   $ 36,883,726   $ 40,218,283    $ 40,226,379
                                ============   ============   ============    ============
</TABLE>

                                         12
<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.

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<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

                               14
<PAGE>

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.  (See
also  "Item 8.  Financial  Statements  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  (February 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


                              15

<PAGE>

dissolution  is  therefore  in the  Partnership's  best  interest;  or (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's  Advisors  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  gains or losses 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

                               16

<PAGE>

SSB is dependent upon interest rates over which the Partnership has no control.
         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 (June 30, 1996), a Limited Partner may cause all of his Units
to be redeemed by the  Partnership  at the Redemption Net Asset Value thereof as
of the last day of a quarter 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.  The last date on which a  redemption  fee was
charged was June 30, 1997. During 1997 and 1996, SSB received redemption fees of
$33,328 and $59,478,  respectively.  For the year ended December 31, 1998, 3,400
Units were redeemed totaling  $4,290,639.  For the year ended December 31, 1997,
5,459 Units were redeemed totaling  $6,204,189.  For the year ended December 31,
1996, 2,847 Units were redeemed totaling $2,973,876.
         Offering  and  organization  expenses  relating  to  the  issuance  and
marketing of Units  offered  were  initially  paid by SSB.  Such  expenses  were
initially  estimated to be $550,000 and were charged against the initial capital
of  the  Partnership.   During  1996,  the  Partnership's   total  offering  and
organization expense were determined to be $612,847. The Partnership has charged
the excess of $62,847 to expense.  As of December 31, 1997, the  Partnership had
reimbursed  SSB for the offering and  organization  expense plus interest at the

                              17

<PAGE>

prime rate quoted by the Chase  Manhattan  Bank  totaling  $34,494 from interest
paid to the Partnership.
         For each Unit redeemed 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 year ended December 31, 1998 the net
asset value per Unit increased  9.0% from  $1,219.01 to $1,328.41.  For the year
ended  December  31,  1997 the net asset  value per Unit  increased  10.4%  from
$1,103.68 to  $1,219.01.  For the year ended  December  31, 1996,  the net asset
value per Unit increased 5.6% from $1,044.72 to $1,103.68.
         The  Partnership  experienced  net trading gains of  $2,592,151  before
commissions  and  expenses  for the year ended  December  31,  1998.  Gains were
primarily  attributable to the trading of commodity futures in U.S. and non-U.S.
interest  rates,  livestock  and energy  products and were  partially  offset by
losses recognized in grains, currencies, indices, metals and softs products. The
Partnership experienced a realized gain of $82,242 on Zero Coupons liquidated in
conjuction with the redemption of Units during 1998 and unrealized  appreciation
of $841,470 on Zero Coupons during 1998.
         The  Partnership  experienced  net trading gains of  $3,487,716  before
commissions  and  expenses  for the year ended  December  31,  1997.  Gains were

                                  18

<PAGE>

primarily attributable to the trading of commodity futures in currencies, softs,
grains,  indices,  metals and interest rates and were partially offset by losses
recognized  in livestock  and energy  products.  The  Partnership  experienced a
realized  loss of $93,506 on Zero Coupons  liquidated  in  conjunction  with the
redemption of Units during 1997 and unrealized  appreciation of $724,625 on Zero
Coupons during 1997.
         The  Partnership  experienced  net trading gains of  $3,512,386  before
commissions  and  expenses  for the year ended  December  31,  1996.  Gains were
primarily attributable to the trading of commodity futures in currencies, energy
products,  metals  and  interest  rates  and were  partially  offset  by  losses
recognized in indices and agricultural products.  The Partnership  experienced a
realized  loss of $75,906 on Zero Coupons  liquidated  in  conjunction  with the
redemption  of Units during 1996 and  unrealized  depreciation  of $1,150,287 on
Zero Coupons during 1996.
         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

                                19

<PAGE>

the extent that market trends exist and the Advisors are able to identify  them,
the Partnership expects to increase capital through operations.
 (d)   Operational Risk
       The Company is directly exposed to market  risk  and  credit  risk, which
arisein the normal course of its business activities. Slightly less direct,  but
of critical importance, are  risks  pertaining  to operational  and back  office
support.  This is particularly  the case in a rapidly  changing and increasingly
global environment with increasing  transaction  volumes and an expansion in the
number and complexity of products in the marketplace.
Such risks include:
Operational/Settlement  Risk - the risk of financial  and  opportunity  loss and
legal liability attributable to operational problems, such as inaccurate pricing
of transactions,  untimely trade execution,  clearance and/or settlement, or the
inability to process  large volumes of  transactions.  The Company is subject to
increased  risks with  respect to its  trading  activities  in  emerging  market
securities,  where clearance,  settlement, and custodial risks are often greater
than in more established markets.
Technological Risk - the risk of loss attributable to technological  limitations
or hardware failure that constrain the Company's ability to gather, process, and
communicate  information  efficiently and securely,  without interruption,  with
customers,  among units within the Company, and in the markets where the Company
participates. 
Legal/Documentation  Risk - the risk of loss attributable to deficiencies in the

                                 20

<PAGE>

documentation  of  transactions  (such  as  trade  confirmations)  and  customer
relationships  (such as master  netting  agreements)  or errors  that  result in
noncompliance  with  applicable  legal and  regulatory  requirements. 
Financial  Control  Risk - the  risk  of loss  attributable  to  limitations  in
financial  systems and controls.  Strong  financial  systems and controls ensure
that assets are safeguarded,  that  transactions are executed in accordance with
management's   authorization,   and  that  financial   information  utilized  by
management  and  communicated  to  external  parties,  including  the  Company's
stockholder, creditors, and regulators, is free of material errors.
Risk of Computer System Failure (Year 2000 Issue)
                  The Year 2000 issue is the  result of  existing  computers  in
many  businesses  using  only two digits to  identify a year in the date  field.
These  computers and programs,  often referred to as  "information  technology,"
were  designed  and  developed  without  considering  the impact of the upcoming
change in the century. If not corrected,  many computer  applications could fail
or create  erroneous  results at the Year 2000.  Such systems and  processes are
dependent on correctly identifying dates in the next century.
                  The  General   Partner   administers   the   business  of  the
Partnership through various systems and processes maintained by SSBH and SSB. In
addition, the operation of the Partnership is dependent on the capability of the
Partnership's  Advisors,  the brokers and  exchanges  through which the Advisors

                                   21

<PAGE>

trade, and other third parties to prepare adequately for the Year 2000 impact on
their  systems  and  processes.   The  Partnership  itself  has  no  systems  or
information technology applications relevant to its operations.
                  The General Partner,  SSB, SSBH and their parent  organization
Citigroup Inc. have  undertaken a  comprehensive,  firm-wide  evaluation of both
internal and external  systems  (systems  related to third parties) to determine
the  specific  modifications  needed to prepare for the year 2000.  The combined
Year 2000 program in SSB is expected to cost approximately $140 million over the
four years  from 1996  through  1999,  and  involve  over 450 people at the peak
staffing level. SSB expects to complete all compliance and certification work by
June 1999. At this time,  over 95% of SSBH systems have completed the correction
process  and are Year 2000  compliant.  Over 73% of the systems  have  completed
certification testing. The Year 2000 project at SSBH remains on schedule.
                  The systems and components  supporting  the General  Partner's
business that require  remediation have been identified and  modifications  have
been made to bring them into Year 2000 compliance.  Testing of these systems was
completed in the fourth  quarter of 1998.  Final testing and  certification  are
expected to be completed by the end of the first quarter of 1999.
                  This expenditure and the General Partner's resources dedicated
to  the  preparation  for  Year  2000 do not and will not have a material impact
on the operation or results of the Partnership.
                  The General Partner has requested and received statements from
the Advisors that each has undertaken its own evaluation and  remediation  plans

                               22

<PAGE>

to identify any of its  computer  systems  that are Year 2000  vulnerable.  Each
Advisor has confirmed it is taking immediate  actions to remedy those systems as
necessary. The General Partner will continue to inquire into and to confirm each
Advisor's readiness for Year 2000.
                  The most likely and most  significant  risk to the Partnership
associated  with the lack of Year  2000  readiness  is the  failure  of  outside
organizations,  including the commodities exchanges, clearing organizations,  or
regulators  with which the  Partnership  interacts  to  resolve  their Year 2000
issues in a timely  manner.  This risk could  involve the inability to determine
the value of the  Partnership  at some  point in time and would  make  effecting
purchases  or  redemptions  of Units in the  Partnership  infeasible  until such
valuation was determinable.
                  SSB has  successfully  participated in  industry-wide  testing
including:  The Streetwide  Beta Testing  organized by the  Securities  Industry
Association  (SIA),  a  government  securities  clearing  test with the  Federal
Reserve Bank of New York,  The  Depository  Trust  Company,  and The Bank of new
York,  and Futures  Industry  Association  participants  test.  The firm is also
participating in the streetwide testing which commenced in March 1999.
                  It is possible that problems may occur that would require some
time to repair.  Moreover,  it is possible that problems will occur outside SSBH
for which  SSBH could  experience  a  secondary  effect.  Consequently,  SSBH is
preparing   comprehensive,   written   contingency  plans  so  that  alternative

                                   23

<PAGE>

procedures  and a  framework  for  critical  decisions  are  defined  before any
potential crisis occurs.
                    The  goal  of Year  2000  contingency  planning  is a set of
alternate  procedures to be used in the event of a critical  system failure or a
failure by a supplier or  counterparty.  Planning work was completed in December
1998, and testing of alternative  procedures will be conducted in the first half
of 1999. 
European  Economic and Monetary Union  
European  Economic and  Monetary  Union  ("EMU") is an historic  event in Europe
involving the unification of currency in eleven major countries. The new unified
currency,  called the Euro,  is expected  to compete on a global  scale with the
U.S. Dollar and the Japanese Yen.  
         Introduction  of the Euro began on January 1, 1999,  when the  European
Central Bank assumed control of the monetary policy for  participating  nations.
Exchange  rates between the  participating  countries were fixed and the Euro is
available for  electronic  payments.  Also on January 1, 1999,  various  issuers
re-denominated  their  securities and  harmonized  bond payment  conventions.  A
three-year  transition  period began on January 1, 1999,  after which Euro notes
and coins will be issued by the European  Central  Bank and national  currencies
will be phased out.
         The  Company  completed  a  successful  conversion  to the Euro and has
commenced trading and settlement in the new currency with no major exceptions.
         As the preceding risks are largely  interrelated,  so are the Company's
actions to mitigate and manage them. The Company's Chief Administrative  Officer

                                  24

<PAGE>

is  responsible  for,  among other things,  oversight of global  operations  and
technology.  An  essential  element in  mitigating  the risks noted above is the
optimization  of information  technology and the ability to manage and implement
change.  To be an effective  competitor in an  information-driven  business of a
global nature  requires the  development  of global  systems and databases  that
ensure increased and more timely access to reliable data.
         (e)        New Accounting Pronouncements
         In June 1998, the Financial Accounting Standards Board issued SFAS 133,
Accounting for Derivative  Instruments and Hedging Activities ("SFAS 133"). SFAS
133  requires  that an entity  recognize  all  derivatives  in the  statement of
financial  condition and measure those  instruments  at fair value.  SFAS 133 is
effective for fiscal year beginning  after June 15, 1999 SFAS 133 is expected to
have no material  impact on the financial  statements of the  Partnership as all
commodity interests are recorded at fair value, with changes therein reported in
the statement of income and expenses.
Item 7A.       Quantitative  and Qualitative Disclosures About Market Risk
Introduction
                    The Partnership is a speculative  commodity pool. The market
sensitive  instruments held by it are acquired for speculative trading purposes,
and all or substantially all of the Partnership's assets are subject to the risk
of trading  loss.  Unlike an  operating  company,  the risk of market  sensitive

                                  25
<PAGE>

instruments  is integral,  not  incidental,  to the  Partnership's  main line of
business.
         Market movements result in frequent changes in the fair market value of
the  Partnership's  open positions and,  consequently,  in its earnings and cash
flow. The Partnership's  market risk is influenced by a wide variety of factors,
including the level and volatility of interest  rates,  exchange  rates,  equity
price  levels,  the market value of financial  instruments  and  contracts,  the
diversification effects among the Partnership's open positions and the liquidity
of the markets in which it trades.
         The  Partnership  rapidly  acquires and liquidates  both long and short
positions in a wide range of different markets. Consequently, it is not possible
to predict how a particular future market scenario will affect performance,  and
the Partnership's  past performance is not necessarily  indicative of its future
results.
         Value at Risk is a measure of the maximum amount which the  Partnership
could  reasonably  be expected to lose in a given market  sector.  However,  the
inherent uncertainty of the Partnership's speculative trading and the recurrence
in the markets  traded by the  Partnership  of market  movements  far  exceeding
expectations could result in actual trading or non-trading losses far beyond the
indicated Value at Risk or the Partnership's  experience to date (i.e., "risk of
ruin").  In  light  of the  foregoing  as well as the  risks  and  uncertainties
intrinsic  to all  future  projections,  the  inclusion  of  the  quantification

                              26

<PAGE>

included in this section should not be considered to constitute any assurance or
representation  that the  Partnership's  losses  in any  market  sector  will be
limited to Value at Risk or by the  Partnership's  attempts to manage its market
risk. 
Quantifying the Partnership's Trading Value at Risk
         The following  quantitative  disclosures  regarding  the  Partnership's
market risk exposures contain "forward-looking statements" within the meaning of
the safe harbor from civil liability provided for such statements by the Private
Securities  Litigation  Reform  Act of 1995  (set  forth in  Section  27A of the
Securities Act of 1933 and Section 21E of the Securities  Exchange Act of 1934).
All  quantitative  disclosures in this section are deemed to be  forward-looking
statements  for purposes of the safe harbor except for  statements of historical
fact (such as the terms of  particular  contracts  and the number of market risk
sensitive instruments held during or at the end of the reporting period).
         The Partnership's risk exposure in the various market sectors traded by
the  Advisors  is  quantified  below in  terms  of  Value  at  Risk.  Due to the
Partnership's  mark-to-market  accounting,  any  loss in the  fair  value of the
Partnership's open positions is directly reflected in the Partnership's earnings
(realized or unrealized).
         Exchange   maintenance  margin  requirements  have  been  used  by  the
Partnership as the measure of its Value at Risk. Maintenance margin requirements
are set by exchanges to equal or exceed the maximum losses  reasonably  expected
to be incurred in the fair value of any given contract in 95%-99% of any one-day
intervals.  The  maintenance  margin  levels  are  established  by  dealers  and

                                27

<PAGE>

exchanges  using  historical  price  studies as well as an assessment of current
market  volatility  (including the implied  volatility of the options on a given
futures contract) and economic fundamentals to provide a probabilistic  estimate
of the maximum expected near-term one-day price fluctuation.  Maintenance margin
has been used rather than the more generally  available initial margin,  because
initial margin  includes a credit risk component  which is not relevant to Value
at Risk.
         In the case of market  sensitive  instruments  which  are not  exchange
traded  (almost  exclusively  currencies  in the case of the  Partnership),  the
margin requirements for the equivalent futures positions have been used as Value
at  Risk.  In those  rare  cases in  which a  futures-equivalent  margin  is not
available, dealers' margins have been used.
         The fair value of the Partnership's  futures and forward positions does
not have any  optionality  component.  However,  certain of the  Advisors  trade
commodity options. The Value at Risk associated with options is reflected in the
following  table  as the  margin  requirement  attributable  to  the  instrument
underlying each option. Where this instrument is a futures contract, the futures
margin,   and   where   this   instrument   is   a   physical   commodity,   the
futures-equivalent  maintenance  margin  has  been  used.  This  calculation  is
conservative in that it assumes that the fair value of an option will decline by
the same  amount as the fair value of the  underlying  instrument,  whereas,  in

                            28

<PAGE>

fact,  the fair values of the options  traded by the  Partnership  in almost all
cases fluctuate to a lesser extent than those of the underlying instruments.
         In  quantifying  the   Partnership's   Value  at  Risk,  100%  positive
correlation  in the  different  positions  held in each market risk category has
been  assumed.  Consequently,  the margin  requirements  applicable  to the open
contracts have simply been added to determine each trading category's  aggregate
Value at Risk.  The  diversification  effects  resulting  from the fact that the
Partnership's positions are rarely, if ever, 100% positively correlated have not
been  reflected.  
The  Partnership's  Trading Value at Risk in Different  Market Sectors
         The following table indicates the trading Value at Risk associated with
the Partnership's open positions by market category as of December 31, 1998. All
open position  trading risk exposures of the  Partnership  have been included in
calculating  the  figures  set  forth  below.  As  of  December  31,  1998,  the
Partnership's total capitalization was $34,274,406.

                                29
<PAGE>



                             December 31, 1998
                                           % of Total
Market Sector             Value at Risk   Capitalization

Currencies
-OTC Contracts               $  133,688      0.39%
-Exchange Traded Contracts      169,675      0.50%
Energy                          127,800      0.37%
Grains                           92,458      0.27%
Interest rates U.S.             154,200      0.45%
Interest rates Non-U.S          918,655      2.68%
Livestock                        35,975      0.10%
Metals                          250,000      0.73%
Softs                            71,362      0.21%
Indices                          31,284      0.09%
                             ----------   --------

Total                        $1,985,097      5.79%
                             ==========   ========

Material Limitations on Value at Risk as an Assessment of Market Risk
         The face value of the market sector instruments held by the Partnership
is typically many times the applicable margin requirement  (margin  requirements
generally  range  between  2% and 15% of  contract  face  value)  as well as the
capitalization  of the  Partnership.  The  magnitude of the  Partnership's  open
positions  creates a "risk of ruin" not typically found in most other investment
vehicles.  Because of the size of its positions,  certain  market  conditions --
unusual,  but  historically  recurring  from  time to time --  could  cause  the
Partnership  to incur severe  losses over a short period of time.  The foregoing
Value at Risk table -- as well as the past  performance  of the  Partnership  --
give no indication of this "risk of ruin."

                                 30

<PAGE>

Non-Trading Risk
         The  Partnership  has  non-trading  market  risk  on its  foreign  cash
balances not needed for margin.  However,  these balances (as well as any market
risk they represent) are immaterial.
         Materiality  as used in this  section,  "Qualitative  and  Quantitative
Disclosures About Market Risk," is based on an assessment of reasonably possible
market movements and the potential losses caused by such movements,  taking into
account the leverage,  optionality and multiplier  features of the Partnership's
market sensitive instruments.  
Qualitative Disclosures Regarding Primary Trading Risk Exposures
         The  following  qualitative  disclosures  regarding  the  Partnership's
market risk exposures - except for (i) those  disclosures that are statements of
historical fact and (ii) the  descriptions  of how the  Partnership  manages its
primary market risk exposures - constitute forward-looking statements within the
meaning of Section 27A of the  Securities  Act and Section 21E of the Securities
Exchange Act. The  Partnership's  primary  market risk  exposures as well as the
strategies  used and to be used by the  General  Partner  and the  Advisors  for
managing such exposures are subject to numerous uncertainties, contingencies and
risks, any one of which could cause the actual results of the Partnership's risk
controls to differ materially from the objectives of such strategies. Government
interventions,  defaults and expropriations,  illiquid markets, the emergence of
dominant fundamental factors,  political upheavals,  changes in historical price
relationships,  an influx of new market  participants,  increased regulation and

                             31

<PAGE>

many  other  factors  could  result in  material  losses as well as in  material
changes to the risk exposures and the management  strategies of the Partnership.
There can be no assurance that the Partnership's  current market exposure and/or
risk  management  strategies  will  not  change  materially  or  that  any  such
strategies will be effective in either the short- or long- term. Investors  must
be  prepared  to  lose  all or  substantially  all of  their  investment  in the
Partnership.
                    The following were the primary trading risk exposures of the
Partnership as of December 31, 1998, by market sector.
                    Interest Rates.  Interest rate risk is the principal  market
exposure of the Partnership.  Interest rate movements  directly affect the price
of the futures positions held by the Partnership and indirectly the value of its
stock index and currency  positions.  Interest rate  movements in one country as
well as relative interest rate movements between countries materially impact the
Partnership's profitability. The Partnership's primary interest rate exposure is
to interest rate  fluctuations in the United States and the other G-7 countries.
However,  the Partnership also takes futures positions on the government debt of
smaller nations -- e.g.,  Australia.  The General Partner  anticipates  that G-7
interest rates will remain the primary market  exposure of the  Partnership  for
the foreseeable future. The changes in interest rates which have the most effect
on the  Partnership are changes in long-term,  as opposed to short-term,  rates.
Consequently,  even a material  change in  short-term  rates  would have  little

                               32

<PAGE>

effect on the Partnership were the medium- to long-term rates to remain steady.
         Currencies.  The  Partnership's  currency  exposure is to exchange rate
fluctuations,  primarily  fluctuations  which  disrupt  the  historical  pricing
relationships   between   different   currencies  and  currency   pairs.   These
fluctuations  are  influenced  by interest rate changes as well as political and
general  economic  conditions.  The General Partner does not anticipate that the
risk profile of the Partnership's  currency sector will change  significantly in
the future,  although it is difficult at this point to predict the effect of the
introduction  of the Euro on the  Advisors'  currency  trading  strategies.  The
currency trading Value at Risk figure includes foreign margin amounts  converted
into U.S.  dollars with an  incremental  adjustment to reflect the exchange rate
risk inherent to the  dollar-based  Partnership in expressing Value at Risk in a
functional currency other than dollars.
         Stock Indices.  The Partnership's  primary equity exposure is to equity
price  risk  in the  G-7  countries.  The  stock  index  futures  traded  by the
Partnership  are by law  limited  to futures on  broadly  based  indices.  As of
December 31, 1998,  the  Partnership's  primary  exposures  were in the S&P 500,
Financial  Times  (England),  Nikkei  (Japan)  and Hang Seng (Hong  Kong)  stock
indices.  The General Partner  anticipates  little,  if any,  trading in non-G-7
stock indices. The Partnership is primarily exposed to the risk of adverse price

                                 33

<PAGE>

trends or static  markets in the major  U.S.,  European  and  Japanese  indices.
(Static markets would not cause major market changes but would make it difficult
for the Partnership to avoid being "whipsawed" into numerous small losses.)
                    Metals.  The Partnership's  primary metal market exposure is
to  fluctuations  in the  price  of gold and  silver.  Although  certain  of the
Advisors  will from time to time trade base metals such as aluminum  and copper,
the principal market exposures of the Partnership have  consistently been in the
precious  metals,   gold  and  silver.  The  Advisors'  gold  trading  has  been
increasingly  limited due to the long-lasting and mainly non-volatile decline in
the  price of gold  over the last  10-15  years.  However,  silver  prices  have
remained  volatile  over this period,  and the  Advisors  have from time to time
taken  substantial  positions as they have  perceived  market  opportunities  to
develop.  The General Partner  anticipates  that gold and silver will remain the
primary metals market exposure for the Partnership.
                    Commodities.  The Partnership's primary commodities exposure
is to agricultural  price movements which are often directly  affected by severe
or unexpected weather conditions.  Coffee, cocoa, cotton and sugar accounted for
the substantial bulk of the Partnership's  commodity exposure as of December 31,
1998.
                    Energy.  The Partnership's primary energy market exposure is
to  gas and  oil  price movements,  often resulting from political  developments
in the Middle East. Oil prices are currently depressed, but they can be volatile

                              34

<PAGE>

and  substantial  profits  and  losses have been and are expected to continue to
be experienced in this market.
Qualitative Disclosures Regarding Non-Trading Risk Exposure
                    The following  were the only  non-trading  risk exposures of
the Partnership as of December 31, 1998.
                    Foreign Currency Balances. The Partnership's primary foreign
currency  balances are in Japanese yen, German marks,  British pounds and French
francs.  The Advisor regularly  converts foreign currency balances to dollars in
an attempt to control the Partnership's non-trading risk.
                    Securities Positions. The Partnership's only market exposure
in instruments held other than for trading is in its securitites portfolio.  The
Partnership maintains a portion of its assets in principal amounts stripped from
U.S. Treasury Bonds under the Treasury's STRIPS program. Violent fluctuations in
prevailing  interest rates could cause immaterial  mark-to-market  losses on the
Partnership's securities.
Qualitative Disclosures Regarding Means of Managing Risk Exposure
         The General  Partner  monitors the  Partnership's  performance  and the
concentration of its open positions,  and consults with the Advisors  concerning
the Partnership's overall risk profile. If the General Partner felt it necessary
to do so, the General Partner could require certain of the Advisors to close out
individual  positions  as  well  as  enter  programs  traded  on  behalf  of the
Partnership. However, any such intervention would be a highly unusual event. The
General  Partner  primarily  relies on the Advisors'  own risk control  policies


                                 35

<PAGE>

while maintaining a general  supervisory  overview of the  Partnership's  market
risk exposures.
         Each Advisor applies its own risk  management  policies to its trading.
The Advisors  often follow  diversification  guidelines,  margin limits and stop
loss points to exit a position.  The Advisors' research of risk management often
suggests ongoing modifications to their trading programs.
         As part of the General  Partner's risk management,  the General Partner
periodically  meets with the Advisors to discuss  their risk  management  and to
look for any material  changes to the  Advisors'  portfolio  balance and trading
techniques.  The  Advisors  are  required to notify the  General  Partner of any
material changes to their programs.
         In the unlikely event that the Partnership is required to meet a margin
call in excess of the cash balance in its trading accounts, SSBH 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.



                              36
<PAGE>





Item 8.    Financial Statements and Supplementary Data.




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

                                                                   Page
                                                                  Number

     Oath or Affirmation                                           F-2

     Report of Independent Accountants.                            F-3

     Financial Statements:
     Statement of Financial Condition at
     December 31, 1998 and 1997.                                   F-4

     Statement of Income and Expenses for
     the years ended December 31, 1998, 1997
     and 1996.                                                      F-5

     Statement of Partners' Capital for the
     years ended December 31, 1998, 1997 and
     1996.                                                          F-6

     Notes to Financial Statements.                              F-7 - F-11
















                                       F-1

                                    Continued


<PAGE>

                          To The Limited Partners of
                           Smith Barney Principal PLUS
                                Futures Fund L.P.

To the best of the  knowledge  and belief of the  undersigned,  the  information
contained herein is accurate and complete.







By:  Daniel A. Dantuono, Chief Financial Officer
     Smith Barney Futures Management Inc.
     General Partner, Smith Barney Principal PLUS
        Futures Fund L.P.

Smith Barney Futures Management Inc.
390 Greenwich Street
1st Floor
New York, N.Y.  10013
212-723-5424


                                    F-2



<PAGE>





                                      

                        Report of Independent Accountants

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

In our  opinion,  the  accompanying  statement of  financial  condition  and the
related  statements  of income and  expenses and of  partners'  capital  present
fairly,  in all  material  respects,  the  financial  position  of Smith  Barney
Principal  PLUS Futures Fund L.P. at December 31, 1998 and 1997, and the results
of its  operations  for each of the three years in the period ended December 31,
1998,  in  conformity  with  generally  accepted  accounting  principles.  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 of these  financial
statements  in accordance  with  generally  accepted  auditing  standards  which
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,  assessing the  accounting  principles
used and  significant  estimates made by the management of the General  Partner,
and evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.



                                                    PricewaterhouseCoopers LLP

New York, New York
February 26, 1999

                                            F-3

<PAGE>


                           Smith Barney Principal PLUS
                                Futures Fund L.P.
                        Statement of Financial Condition
                           December 31, 1998 and 1997

<TABLE>
<CAPTION>

                                                    1998           1997
<S>                                               <C>              <C> 
Assets:
Equity in commodity futures
   trading account:
   Cash (Note 3c)                               $12,186,981   $13,346,392
   Net unrealized appreciation
   on open futures contracts                      1,350,548     1,079,612
   Zero Coupons, $25,801,000 and
   $29,201,000 principal amount in
   1998 and 1997, respectively, due
   February 15, 2003 at fair value
   (amortized cost $20,356,124 and
   $21,727,880 in 1998 and 1997,
   respectively) (Notes 1 and 2)                 21,303,885    21,834,171
                                                -----------   -----------
                                                 34,841,414    36,260,175
  Receivable from SSB on sale of Zero Coupons       330,440       575,066
  Interest receivable                                36,686        48,485
                                                -----------   -----------
                                                $35,208,540   $36,883,726
                                                ===========   ===========

Liabilities and Partners' Capital:
Liabilities:
  Accrued expenses:
   Management fees                              $    47,621   $    50,926
   Commissions                                      109,341       114,693
   Incentive fees                                   203,874       154,823
   Other                                             40,606        27,024
  Redemptions payable                               532,692       939,857
                                                -----------   -----------
                                                    934,134     1,287,323
                                                -----------   -----------
Partners' Capital (Notes 1, 5, and 7):
  General Partner, 376 Unit
   equivalents outstanding in
   1998 and 1997                                    499,482       458,348 
  Limited Partners, 25,425 and
   28,825 Units of Limited Partnership 
   Interest outstanding in
   1998 and 1997, respectively                   33,774,924    35,138,055
                                                -----------   -----------
                                                 34,274,406    35,596,403
                                                -----------   -----------
                                                $35,208,540   $36,883,726
                                                ===========   ===========
</TABLE>

See notes to financial statements.

                                            F-4

<PAGE>


                           Smith Barney Principal PLUS
                                Futures Fund L.P.
                        Statement of Income and Expenses
                     for the Years Ended December 31, 1998,
                                  1997 and 1996

<TABLE>
<CAPTION>
                                                1998            1997          1996
<S>                                           <C>                <C>          <C>  
Income:
  Net gains on trading of
    commodity interests:
   Realized gains on closed positions      $ 2,321,215    $ 2,851,564    $ 4,345,757
   Change in unrealized gains/ losses
    on open positions                          270,936        636,152       (833,371)
                                           -----------    -----------    -----------
                                             2,592,151      3,487,716      3,512,386
  Less, Brokerage commissions including
   clearing fees of $39,374, $37,258 and
   $42,740, respectively (Note 3c)          (1,357,927)    (1,462,372)    (1,459,014)
                                           -----------    -----------    -----------
  Net realized and unrealized gains          1,234,224      2,025,344      2,053,372
  Gain (Loss) on sale of Zero Coupons           82,242        (93,506)       (75,906)
  Unrealized appreciation (depreciation)
  on Zero Coupons                              841,470        724,625     (1,150,287)
  Interest income (Notes 3c)                 1,710,639      1,916,217      1,935,048
                                           -----------    -----------    -----------
                                             3,868,575      4,572,680      2,762,227
                                           -----------    -----------    -----------
Expenses:
  Management fees (Note 3b)                    535,282        586,615        560,948
  Incentive fees (Note 3b)                     300,523        319,273         67,801
  Other expenses                                64,128        119,904         90,339
                                           -----------    -----------    -----------
                                               899,933      1,025,792        719,088
                                           -----------    -----------    -----------
Net income                                 $ 2,968,642    $ 3,546,888    $ 2,043,139
                                           ===========    ===========    ===========
Net income per Unit of Limited
Partnership Interest and General Partner
   Unit equivalent (Notes 1 and 6)         $    109.40    $    115.33    $     58.96
                                           ===========    ===========    ===========
</TABLE>
 See notes to financial statements.
                                               F-5


<PAGE>


                           Smith Barney Principal PLUS
                                Futures Fund L.P.
                         Statement of Partners' Capital
                     for the Years Ended December 31, 1998,
                                  1997 and 1996
<TABLE>
<CAPTION>
                                             Limited          General
                                            Partners          Partner          Total
<S>                                         <C>                 <C>             <C>

Partners' capital at December 31, 1995   $ 38,791,626    $    392,815   $ 39,184,441
Net income                                  2,020,970          22,169      2,043,139
Redemption of 2,847 Units of Limited
   Partnership Interest                    (2,973,876)           --       (2,973,876)
                                         ------------    ------------   ------------
Partners' capital at December 31, 1996     37,838,720         414,984     38,253,704
Net income                                  3,503,524          43,364      3,546,888
Redemption of 5,459 Units of Limited
   Partnership Interest                    (6,204,189)           --       (6,204,189)
                                         ------------    ------------   ------------
Partners' capital at December 31, 1997     35,138,055         458,348     35,596,403
Net income                                  2,927,508          41,134      2,968,642
Redemption of 3,400 Units of Limited
   Partnership Interest                    (4,290,639)           --       (4,290,639)
                                         ------------    ------------   ------------
Partners' capital at December 31, 1998   $ 33,774,924    $    499,482   $ 34,274,406
                                         ============    ============   ============
</TABLE>
                                                        

See notes to financial statements.

                                   F-6
<PAGE>


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

1.  Partnership Organization:
    Smith  Barney  Principal  PLUS Futures Fund L.P.  (the  "Partnership")  is a
    limited  partnership which was initially organized on January 25, 1993 under
    the  partnership  laws of the State of New York and was capitalized on April
    12, 1995. No activity  occurred between January 25, 1993 and April 12, 1995.
    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  principal  amounts
    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 July 12, 1995 and November 16, 1995, 37,131 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  November 17,
    1995,  at which time they were turned over to the  Partnership  for trading.
    The  Partnership  was  authorized  to sell 100,000 Units during the offering
    period of the Partnership.  Smith Barney Futures Management Inc. acts as the
    general partner (the "General Partner") of the Partnership.  On September 1,
    1998, the  Partnership's  commodity  broker,  Smith Barney Inc., merged with
    Salomon  Brothers  Inc and  changed  its name to Salomon  Smith  Barney Inc.
    ("SSB").  SSB is an affiliate of the General Partner. The General Partner is
    wholly owned by Salomon Smith Barney Holdings,  Inc. ("SSBH"),  which is the
    sole owner of SSB.  On October 8, 1998,  Travelers  Group Inc.  merged  with
    Citicorp Inc. and changed its name to Citigroup  Inc. SSBH is a wholly owned
    subsidiary of Citigroup  Inc. 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  (February,  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.
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 fair value on the
       last business day of the year,  which  represents  market value for those
       commodity  interests for which market  quotations are readily  available.
       Investments in commodity interests  denominated in foreign currencies are
       translated into U.S. dollars at the exchange rates prevailing on the last
       business  day of  the  year.  Realized  gains  (losses)  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 fair
       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
                                 F-7
<PAGE>

       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.
    b. Management Agreements:
       The General  Partner,  on behalf of the  Partnership,  has  entered  into
       Management Agreements with John W. Henry & Company, Inc., Abraham Trading
       Co. and Rabar Market Research Inc. (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 a monthly  management  fee of 1/6 of 1% (2% per year) to
       Abraham  Trading Co. and Rabar Market  Research  Inc., and 1/3 of 1 % (4%
       per year) to John W.  Henry &  Company,  Inc.,  of  month-end  Net Assets
       allocated to each advisor.  The Partnership will also pay Abraham Trading
       Co.  an  incentive  fee  payable  quarterly  equal to 20% of New  Trading
       Profits,  as defined,  earned by it for the Partnership;  John W. Henry &
       Company,  Inc.  will  receive  a  quarterly  incentive  fee of 15% of New
       Trading  Profits;  and Rabar Market  Research Inc. will receive an annual
       incentive fee of 22.5% of New Trading Profits of the Partnership.
    c. Customer Agreement:
       The  Partnership  has entered into a Customer  Agreement with SSB whereby
       SSB provides services which include, among other things, the execution of
       transactions  for the  Partnership's  account in  accordance  with orders
       placed by the  Advisors.  The  Partnership  is obligated to pay a monthly
       brokerage fee to SSB equal to 7/12 of 1 % of month-end Net Assets (7% per
       year) in lieu of brokerage commissions on a per trade basis. A portion of
       this  fee is  paid  to  employees  of SSB  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
       SSB. The Partnership  maintains a portion of these assets in Zero Coupons
       and a portion in cash.  The  Partnership's  cash is  deposited  by SSB in
       segregated  bank accounts,  to the extent  required by Commodity  Futures
       Trading Commission regulations. At December 31, 1998 and 1997, the amount
       of cash held for  margin  requirements  was  $2,250,973  and  $2,930,178,
       respectively. SSB 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 SSB based on the
       average  noncompetitive  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 SSB gives the Partnership
       the  legal  right  to net  unrealized  gains  and  losses.  The  Customer
       Agreement may be terminated by either party.
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, if
    applicable,  at December 31, 1998 and 1997 was  $1,350,548  and  $1,079,612,
    respectively  and the average fair value during the years then ended,  based
    on a monthly calculation, was $1,147,510 and $1,182,103, respectively.
5.  Distributions and Redemptions:
    Distributions of profits, if any, will be made at the sole discretion of the
    General  Partner.  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%

                                F-8
<PAGE>

    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.  During 1997 and 1996,  SSB
    received  redemption fees of $33,328 and $59,478,  respectively.  Redemption
    Net Asset  Value  differs  from Net Asset  Value  calculated  for  financial
    reporting  purposes  in that any  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 relating to the issuance and marketing of
    Units during the offering  period were  initially paid by SSB. Such expenses
    were initially estimated to be $550,000 and were charged against the initial
    capital of the Partnership.  During 1996, the  Partnership's  total offering
    and  organization  expenses were determined to be $612,847.  The Partnership
    has charged the excess of $62,847 to  expense.  As of December  31, 1997 the
    Partnership had reimbursed SB for the offering and organization expense plus
    interest  at the prime  rate  quoted by the Chase  Manhattan  Bank  totaling
    $34,494 from interest paid to the Partnership.
7.   Net Asset Value Per Unit:
    Changes  in the net asset  value per Unit of  Partnership  interest  for the
    years ended December 31, 1998, 1997 and 1996 were as follows:

<TABLE>
<CAPTION>

                                                  1998         1997         1996
<S>                                              <C>            <C>        <C> 
   
   Net realized and unrealized gains       $      47.41    $   66.66    $   58.66
   Realized and unrealized gains
    (losses) on Zero Coupons                      32.87        21.33       (32.04)
   Interest income                                61.61        58.85        52.41
   Expenses                                      (32.49)      (31.51)      (20.07)
                                               ---------    ---------    ---------
   Increase for year                             109.40       115.33        58.96
   Net asset value per Unit,
    beginning of year                          1,219.01     1,103.68     1,044.72
                                              ---------    ---------    ---------
   Net asset value per Unit, end of year     $ 1,328.41   $ 1,219.01    $ 1,103.68
                                              =========    =========    =========
</TABLE>

                                                                       
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,  SSBH 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.
9.  Financial Instrument Risks:
    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 may 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

                                   F-9
<PAGE>

    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 SSB. 
    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.
    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, 1998,  the  Partnership's  commitment  to purchase and sell
    these  instruments was $101,948,437 and  $95,047,009,  respectively.  All of
    these instruments mature within one year of December 31, 1998. However,  due
    to the nature of the  Partnership's  business,  these instruments may not be
    held to maturity.  At December 31, 1998, the fair value of the Partnership's
    derivatives,  including options thereon, if applicable,  was $1,350,548,  as
    detailed below.

<TABLE>
<CAPTION>

                                December 31, 1998
                             Notional or Contractual
                              Amount of Commitments
                                 To Purchase        To Sell      Fair Value
<S>                                   <C>             <C>           <C>    
 Currencies
   -Exchange Traded Contracts   $  3,636,075   $  1,874,375   $     54,358
   -OTC Contracts                  5,170,563      1,578,002         53,374
 Energy                                 --        1,298,588        (47,454)
 Grains                              191,782      2,987,925         58,398
 Interest Rate U.S.                9,430,094     12,005,819        (82,237)
 Interest Rate Non-U.S            80,293,487     66,487,227      1,290,455
 Livestock                              --          865,450         25,120
 Metals                            2,636,819      6,289,250        (97,212)
 Softs                               297,225      1,540,440         93,013
 Indices                             292,392        119,933          2,733
                                ------------   ------------   ------------
Total                           $101,948,437   $ 95,047,009   $  1,350,548
                                ============   ============   ============
</TABLE>


                                        F-10

<PAGE>



At December 31, 1997,  the  Partnership's  commitment to purchase and sell these
instruments was $103,740,103 and $104,099,896,  respectively, and the fair value
of the Partnership's derivatives,  including options thereon, if applicable, was
$1,079,612, as detailed below.

<TABLE>
<CAPTION>

                                        December 31, 1997
                                   Notional or Contractual
                                   Amount of Commitments
                                 To Purchase        To Sell      Fair Value
<S>                                  <C>              <C>            <C>  
 Currencies
  -Exchange Traded Contracts    $  1,852,635   $ 13,543,743   $    130,111
  -OTC Contracts                  11,577,189     22,737,095        (43,636)
 Energy                                 --        2,330,053         81,274
 Grains                                 --        3,197,466         76,852
 Interest Rate U.S.               16,567,737           --           99,253
 Interest Rate Non-U.S            68,669,047     47,748,762        101,593
 Livestock                              --        1,949,300         55,800
 Metals                            3,314,600      9,844,978        485,359
 Softs                             1,709,720      1,695,191         11,764
 Indices                              49,175      1,053,308         81,242
                                ------------   ------------   ------------
 Total                          $103,740,103   $104,099,896   $  1,079,612
                                ============   ============   ============
</TABLE>
          


10.    Subsequent Events:
   Abraham  Trading Co.  was  terminated  as  an Advisor to the  Partnership  on
   January 31,  1999. Fort Orange Capital  Management was added as an Advisor on
   February 1, 1999.
11.    New Accounting Pronouncements:
   In June 1998,  the  Financial  Accounting  Standards  Board  issued SFAS 133,
   Accounting for Derivative  Instruments and Hedging  Activities  ("SFAS 133").
   SFAS 133 requires that an entity  recognize all  derivatives in the statement
   of financial  condition and measure those instruments at fair value. SFAS 133
   is effective  for fiscal  years  beginning  after June 15, 1999.  SFAS 133 is
   expected  to have no  material  impact  on the  financial  statements  of the
   Partnership  as all  commodity  interests  are  recorded at fair value,  with
   changes therein reported in the statement of income and expenses.

                                        F-11
<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.  SSB, 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 $1,357,927 were paid
for the year ended  December 31, 1998.  Management  fees and  incentive  fees of
$535,282  and  $300,523,  respectively,  were paid to the  Advisors for the year
ended December 31, 1998.

                                    37
<PAGE>



Item 12. Security Ownership of Certain Beneficial Owners and Management.
                   (a). Security  ownership of certain  beneficial owners. As of
March  1,  1999, two beneficial owners who are neither a director nor executive
officer own  more than five percent  (5%) of the outstanding Units issued by the
Registrant as follows:
Title             Name and Address of          Amount and Nature of   Percent of
of Class          Beneficial Owner             Beneficial Ownership      Class
Units of          CITIC Industrial Bank        5,000 Units               19.4%
Limited           No. 6 Xinyuan Nan Lu
Partnership       Chaoyang District Beijing
Interest

Units of          Naomi R. Wilden              1,500 Units                5.8%
Limited           11727 Pendelton
Partnership       Ycaipa, CA 92399
Interest
                  (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 376 (1.5%) Units of Limited Partnership Interest.
                  (c). Changes in control.  None.
Item 13.  Certain Relationships and Related Transactions.
                  Salomon 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

                                38
<PAGE>


Item 14.    Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
     (a)          (1)      Financial Statements:
                           Statement of Financial Condition at December 31, 1998
                           and 1997.
                           Statement  of Income and Expenses for the years ended
                           December  31,  1998,  1997  and  1996.  Statement  of
                           Partners'  Capital for the years ended  December  31,
                           1998, 1997 and 1996.
                  (2)      Financial Statement Schedules:Financial data schedule
                           for the year ended December 31, 1998.
                  (3)      Exhibits:
              3.1 -        Limited  Partnership  Agreement (dated  April 3, 1995
                           and amended as of June 22,  1995), (filed  as Exhibit
                           3.1 to the  Registration  Statement on Form S-1 (File
                           No. 33-01742) 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 New York  (filed as  Exhibit  3.2 to the
                           Registration    Statement   on  Form  S-1  (File  No.
                           33-91742) and incorporated herein by reference).

                              39
<PAGE>


                 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. 33-91742)
                         and incorporated herein by reference).
                 10.3 -  Escrow   Instructions   relating    to    escrow     of
                         subscription  funds  (filed  as  Exhibit  10.3  to  the
                         Registration  Statement on Form S-1 (File No. 33-91742)
                         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.  33-91742)  and  incorporated  herein by
                         reference)
                 10.6 -  Management  Agreement    among  the   Partnership,  the
                         General Partner and Rabar Market Research,  Inc. (filed
                         as Exhibit 10.6 to the  Registration  Statement on Form
                         S-1  (File No.  33-91742)  and  incorporated  herein by
                         reference). 
                 10.7 -  Management   Agreement  among    the  Partnership,  the
                         General  Partner  and  Abraham  Trading  Co.  (filed as
                         Exhibit 10.7 to the Registration  Statement on Form S-1
                         (File  No.   33-91742)  and   incorporated   herein  by
                         reference).



                                        40
<PAGE>



                 10.8 -  Letters   extending   Management  Agreements with Rabar
                         Market Research,  Inc., Abraham Trading Co. and John W.
                         Henry &  Company,  Inc.  for 1997 and 1996  (previously
                         filed). 

                 10.9 -  Letters extending Management  Agreements
                         with Rabar  Market  Research,  Inc. and John W. Henry &
                         Company, Inc.for 1998 (filed herein).

                 10.10-  Letter from   General  Partner  terminating  Management
                         Agreement  with  Abraham  Trading Co.  (filed  herein).

                 10.11-  Management   Agreement    among  the  Partnership,  the
                         General  Partner  and Fort  Orange  Capital  Management
                         (filed herein).
          (b) Reports on 8-K: None Filed.

                                         41
<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

                                      42
<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 Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of New York and State of New York on the 24th day of March 1999.

SMITH BARNEY PRINCIPAL PLUS FUTURES FUND L.P.


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


By

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



/s/ Daniel R. McAuliffe, Jr.                      /s/ Steve J. Keltz           
Daniel R. McAuliffe, Jr                                Steve J. Keltz
Director                                               Secretary and Director




/s/   Shelley Ullman          
Shelley Ullman
Director

By

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