FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                 (X) QUARTERLY REPORT UNDER SECTION 13 or 15(d)

                     OF THE SECURITIES EXCHANGE ACT OF 1934

               OR ( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d)

                     OF THE SECURITIES EXCHANGE ACT OF 1934


For the Quarter ended June 30, 1998

Commission File Number 0-22489


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


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

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

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



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


<PAGE>




               SMITH BARNEY PRINCIPAL PLUS FUTURES FUND L.P. II
                                  FORM 10-Q
                                    INDEX




                                                                      Page
                                                                     Number

PART I - Financial Information:

       Item 1.   Financial Statements:
                 Statement of Financial Condition at
                 June 30, 1998 and December 31, 1997.                   3

                 Statement of Income and Expenses
                 and Partners' Capital for the three
                 and six months ended June 30, 1998
                 and 1997.                                              4

                 Notes to Financial Statements                        5 - 8

       Item 2.   Management's Discussion and Analysis
                 of Financial Condition and Results of
                 Operations                                           9 - 10

       Item 3.   Quantitative and Qualitative Disclosures
                 of Market Risk                                         11

PART II - Other Information                                          12 - 13



                                      2

<PAGE>
                                     PART I

                          Item 1. Financial Statements


                 SMITH BARNEY PRINCIPAL PLUS FUTURES FUND L.P.II
                        STATEMENT OF FINANCIAL CONDITION



                                                         JUNE 30,   DECEMBER 31,
                                                           1998        1997
                                                       -----------   -----------
ASSETS:                                                (Unaudited)

Equity in commodity futures trading account:
  Cash and cash equivalents                            $ 6,967,062   $ 8,500,216
  Net unrealized appreciation
   on open futures contracts                                25,020       720,274
  Zero Coupons, $17,260,000 and $18,968,000
   principal  amount in 1998 and 1997,
   respectively,  due  November 15, 2003 at
   market value (amortized cost $12,289,420 and
   $13,081,092 in 1998 and 1997, respectively)          12,889,078    13,577,673
                                                       -----------   -----------

                                                        19,881,160    22,798,163
 Receivable from SB on sale of
   Zero Coupons                                            702,364       419,702
 Interest income                                            23,181             -

                                                       ===========   ===========
                                                       $20,606,705   $23,217,865
                                                       ===========   ===========


LIABILITIES AND PARTNERS' CAPITAL:


Liabilities:

 Accrued expenses:
  Commissions                                          $    61,821   $    74,685
  Management fees                                           28,316        34,365
  Incentive fees                                                 -         1,244
  Due to Smith Barney                                            -        77,269
  Other                                                     50,376        30,223
 Redemptions payable                                     1,061,311       693,875
                                                       -----------   -----------
                                                         1,201,824       911,661
Partners' Capital:

General Partner, 203 Unit
  equivalents outstanding  in 1998 and 1997                228,227       238,726
Limited Partners, 17,057 and 18,765
  Units of Limited Partnership Interest
  outstanding in 1998 and 1997, respectively            19,176,654    22,067,478
                                                       -----------   -----------

                                                        19,404,881    22,306,204
                                                       -----------   -----------

                                                       $20,606,705   $23,217,865
                                                       ===========   ===========
See Notes to Financial Statements 


                                        3
<PAGE>


       SMITH BARNEY PRINCIPAL PLUS FUTURES FUND L.P.II
   STATEMENT OF INCOME AND EXPENSES AND PARTNERS' CAPITAL
                         (UNAUDITED)
<TABLE>
<CAPTION>

                                                              THREE MONTHS ENDED              SIX MONTHS ENDED
                                                                   JUNE 30,                       JUNE 30,
                                                            1998            1997            1998            1997
                                                        ------------    ------------    ------------    ------------
<S>                                                           <C>            <C>            <C>              <C>   
Income:
  Net gains (losses) on trading of commodity futures:
  Realized (gains) losses on closed positions           $   (510,974)   $   (618,205)   $   (315,775)   $    422,180
  Change in unrealized gains/losses on open
   positions                                                (541,000)       (286,534)       (695,254)         76,200
                                                        ------------    ------------    ------------    ------------

                                                          (1,051,974)       (904,739)     (1,011,029)        498,380
Less, brokerage commissions and clearing fees
  ($6,318, $3,311, $11,269 and $6,819, respectively)        (206,704)       (238,410)       (441,426)       (480,670)
                                                        ------------    ------------    ------------    ------------

  Net realized and unrealized gains (losses)              (1,258,678)     (1,143,149)     (1,452,455)         17,710
  Gain (loss) on sale of Zero Coupons                         30,220          (1,142)         50,109          (3,417)
  Unrealized appreciation (depreciation)
  on Zero Coupons                                             96,819         308,180         103,077        (127,523)
  Interest income                                            277,977         299,610         578,060         597,218
                                                        ------------    ------------    ------------    ------------

                                                            (853,662)       (536,501)       (721,209)        483,988
                                                        ------------    ------------    ------------    ------------


Expenses:
  Management fees                                             86,369         100,516         184,799         204,385
  Other                                                       16,436          13,912          34,921          27,671
  Incentive fees                                                   -               -               -         190,380
                                                        ------------    ------------    ------------    ------------

                                                             102,805         114,428         219,720         422,436
                                                        ------------    ------------    ------------    ------------

  Net income (loss)                                         (956,467)       (650,929)       (940,929)         61,552
  Redemptions                                             (1,061,311)       (181,994)     (1,960,394)       (328,222)
                                                        ------------    ------------    ------------    ------------

  Net decrease in Partners' capital                       (2,017,778)       (832,923)     (2,901,323)       (266,670)

Partners' capital, beginning of period                    21,422,659      22,823,814      22,306,204      22,257,561
                                                        ------------    ------------    ------------    ------------

Partners' capital, end of period                        $ 19,404,881    $ 21,990,891    $ 19,404,881    $ 21,990,891
                                                        ------------    ------------    ------------    ------------

Net asset value per Unit
  (17,260 and 19,812 Units outstanding
  at June 30, 1998 and 1997, respectively)              $   1,124.27    $   1,109.98    $   1,124.27    $   1,109.98
                                                        ------------    ------------    ------------    ------------


Net loss per Unit of Limited Partnership
  Interest and General Partner Unit equivalent          $     (52.54)   $     (32.70)   $     (51.72)   $      (2.64)
                                                        ------------    ------------    ------------    ------------


Redemption Net Asset Value per Unit                     $   1,124.27    $   1,123.42    $   1,124.27    $   1,123.42
                                                        ------------    ------------    ------------    ------------

</TABLE>

See Notes To Financial Statements 


                                        4
<PAGE>



               SMITH BARNEY PRINCIPAL PLUS FUTURES FUND L.P. II
                        NOTES TO FINANCIAL STATEMENTS
                                June 30, 1998
                                 (UNAUDITED)

1.  General

       Smith Barney Principal Plus Futures Fund L.P. II (the  "Partnership") was
formed  under  the laws of the  State  of New York on  November  16,  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 maintains a portion of its
assets  in  interest  payments  stripped  from  U.S.  Treasury  Bonds  under the
Treasury's STRIPS program which payments are due approximately  seven years from
the date trading commenced ("Zero Coupons").

       Between  April 3, 1996  (commencement  of offering  period) and August 8,
1996, 19,896 Units of limited partnership interest were sold at $1,000 per unit.
The  proceeds of the  offering  were held in an escrow  account  until August 9,
1996, at which time they were turned over to the Partnership for trading.

       Smith Barney  Futures  Management  Inc. acts as the general  partner (the
"General Partner") of the Partnership. Smith Barney Inc. ("SB"), an affiliate of
the General Partner,  acts as commodity broker for the Partnership.  All trading
decisions  are  currently  being  made for the  Partnership  by John W.  Henry &
Company, Inc. and Willowbridge Associates Inc.  (collectively,  the "Advisors").
On November 28, 1997,  Smith Barney Holdings Inc. was merged with Salomon Inc to
form Salomon Smith Barney Holdings Inc.  ("SSBH"),  a wholly owned subsidiary of
Travelers Group. SB is a wholly owned subsidiary of SSBH.

       The accompanying  financial  statements are unaudited but, in the opinion
of management,  include all  adjustments,  consisting  only of normal  recurring
adjustments,  necessary for a fair presentation of the  Partnership's  financial
condition at June 30, 1998 and the results of its  operations  for the three and
six months ended June 30, 1998 and 1997. These financial  statements present the
results  of an  interim  period  and do not  include  all  disclosures  normally
provided in annual  financial  statements.  It is suggested that these financial
statements be read in conjunction with the  Partnership's  annual report on Form
10-K  filed  with the  Securities  and  Exchange  Commission  for the year ended
December 31, 1997.

       Due to the nature of commodity trading, the results of operations for the
interim  periods  presented  should not be considered  indicative of the results
that may be expected for the entire year.



                                      5

<PAGE>



               SMITH BARNEY PRINCIPAL PLUS FUTURES FUND L.P. II
                        NOTES TO FINANCIAL STATEMENTS
                                 (continued)


2. Net Asset Value Per Unit:

     Changes in net asset value per Unit for the three and six months ended June
30, 1998 and 1997 were as follows:

                                 THREE-MONTHS ENDED         SIX-MONTHS ENDED
                                       JUNE  30,                JUNE 30,
                                  1998        1997         1998          1997
                               ---------    ---------    ---------    ---------

Net realized and unrealized
 gains (losses)                $  (69.14)   $  (57.23)   $  (79.36)   $    0.52
Realized and unrealized gains
 (losses) on Zero Coupons           6.98        15.37         8.36        (6.42)
Interest income                    15.27        15.00        31.09        29.83
Expenses                           (5.65)       (5.73)      (11.81)      (21.06)
Other                                  -        (0.11)           -        (0.23)
                               ---------    ---------    ---------    ---------

Decrease for period               (52.54)      (32.70)      (51.72)       (2.64)

Net Asset Value per Unit,
 beginning of period            1,176.81     1,142.68     1,175.99     1,107.34
                               ---------    ---------    ---------    ---------

Net Asset Value per Unit,
 end of period                 $1,124.27    $1,109.98    $1,124.27    $1,109.98
                               =========    =========    =========    =========

Redemption Net Asset
 Value per Unit *              $1,124.27    $1,123.42    $1,124.27    $1,123.42
                               =========    =========    =========    =========


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

3. 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.

        The  Customer  Agreement  between  the  Partnership  and  SB  gives  the
Partnership the legal right to net unrealized gains and losses.

        All of the commodity  interests  owned by the  Partnership  are held for
trading purposes. The fair value of these commodity interests, including options
thereon,  at June 30, 1998 and  December  31,  1997 was  $25,020  and  $720,274,
respectively,  and the average fair value during the six and twelve  months then
ended based on monthly calculation, was $509,161 and $814,445, respectively.

                                      6

<PAGE>



4. Financial Instrument Risk:

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

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

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

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

        The notional or contractual amounts of these instruments,

                                      7

<PAGE>



while not  recorded  in the  financial  statements,  reflect  the  extent of the
Partnership's  involvement in these instruments.  At June 30, 1998, the notional
or  contractual  amounts of the  Partnership's  commitment  to purchase and sell
these instruments was $101,825,777 and $104,731,071,  respectively,  as detailed
below.  All of these  instruments  mature  within  one  year of June  30,  1998.
However, due to the nature of the Partnership's business,  these instruments may
not be held to maturity.  At June 30, 1998, the fair value of the  Partnership's
derivatives, including options thereon, was $25,020, as detailed below.

                                        JUNE 30, 1998
                                   NOTIONAL OR CONTRACTUAL
                                    AMOUNT OF COMMITMENTS
                                TO PURCHASE          TO SELL        FAIR VALUE

Currencies
- Exchange Traded Contracts     $  2,079,250      $  8,301,875    $  55,625
- OTC Contracts                    8,323,746        15,044,909     (291,589)
Energy                               455,500         2,470,710       90,155
Interest Rates U.S.               35,607,781               -         85,969
Interest Rates Non-U.S.           52,653,120        71,333,783      133,601
Grains                             1,775,175           653,582      (11,636)
Softs                                337,605         1,452,146       56,125
Metals                               593,600         4,097,975      (56,329)
Indices                                  -           1,376,091      (36,901)
                                -------------      ------------    ---------

Totals                          $101,825,777      $104,731,071     $ 25,020
                                =============     =============    ========

      At  December  31,  1997,  the  notional  or  contractual  amounts  of  the
Partnership's commitment to purchase and sell these instruments was $103,162,990
and  $65,919,874,  respectively,  and,  the  fair  value  of  the  Partnership's
derivatives, including options thereon, was $720,274, as detailed below.

                                 DECEMBER 31, 1997
                               NOTIONAL OR CONTRACTUAL
                                AMOUNT OF COMMITMENTS
                             TO PURCHASE      TO SELL           FAIR VALUE

Currencies
- Exchange Traded Contracts            -       $ 4,026,713         $ 62,013
- OTC Contracts                $ 7,813,559      14,869,435          (37,009)
Energy                                 -         2,381,490          165,550
Interest Rates U.S.             27,054,925             -            163,819
Interest Rates Non U.S.         58,496,762      38,054,369          189,136
Grains                           2,958,744         679,250         (102,587)
Softs                            3,987,204         842,675         (129,803)
Metals                           2,851,796       4,180,877          336,934
Indices                                -           885,065           72,221
                               ------------    ------------       ---------

Totals                        $103,162,990     $65,919,874        $ 720,274
                              =============    ============       =========


                                        8

<PAGE>



                                    PART I

Item 2.      Management's Discussion and Analysis of Financial
             Condition and Results of Operations.

Liquidity and Capital Resources

      The Partnership does not engage in the sale 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 and forward  contracts,  commodity  options and
interest  receivable.  Because of the low margin  deposit  normally  required in
commodity  futures  trading,  relatively  small  price  movements  may result in
substantial losses to the Partnership.  While substantial losses could lead to a
substantial  decrease in  liquidity  no such losses  occurred  during the second
quarter of 1998.

      The Partnership's capital consists of capital contributions,  as increased
or decreased by gains or losses on commodity  futures  trading and Zero Coupons,
expenses, interest income, redemptions of Units and distributions of profits, if
any.

      For the six months  ended June 30,  1998,  Partnership  capital  decreased
13.0% from  $22,306,204 to  $19,404,881.  This decrease was  attributable to the
redemption  of 1,708  Units  totaling  $1,960,394  coupled  with a net loss from
operations  of  $940,929  for  the  six  months  ended  June  30,  1998.  Future
redemptions  can  impact  the  amount  of funds  available  for  investments  in
commodity contract positions in subsequent periods.

Operational Risk

      The General Partner  administers  the business of the Partnership  through
various  systems and processes  maintained by SSBH. SSBH has analyzed the impact
of the year 2000 on its systems and processes and  modifications  for compliance
are  proceeding  according to plan.  All  modifications  necessary for year 2000
compliance  are expected to be completed by the first  quarter of 1999.  In July
1998, SB participated  in successful  industry-wide  testing  coordinated by the
Securities  Industry  Association  and plans to participate in such tests in the
future.  The  purpose of  industry-wide  testing is to confirm  that  exchanges,
clearing organizations,  and other securities industry participants are prepared
for the year 2000.  The failure of vendors,  clients,  or  regulators to resolve
their  own Year  2000  compliance  issues  in a timely  manner  could  result in
material financial risk to the Partnership.

Results of Operations

      During the second  quarter  ending June 30, 1998,  the  Partnership's  net
asset value per Unit decreased 4.5% from $1,176.81 to $1,124.27,  as compared to
a decrease of 2.9% in the second quarter of 1997. The Partnership  experienced a
net trading loss before commissions and expenses in the second quarter of 1998

                                      9

<PAGE>



of  $1,051,974.  These  losses  were  primarily  attributable  to the trading of
commodity  futures in currencies,  energy  products,  grains,  U.S. and non U.S.
interest rates,  metals and indices and were partially offset by gains in softs.
The Partnership  experienced a net trading loss in the second quarter of 1997 of
$904,739.  These losses were  recognized  in the trading of  currencies,  energy
products,  grains,  U.S.  and non U.S.  interest  rates and  livestock  and were
partially offset by gains in metals, softs and indices.

      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  correctly  those price trends.  Price trends are  influenced by, among
other things, changing supply and demand relationships,  weather,  governmental,
agricultural,   commercial  and  trade  programs  and  policies,   national  and
international  political and economic  events and changes in interest  rates. To
the extent that market trends exist and the Advisors are able to identify  them,
the Partnership expects to increase capital through operations.

      Interest  Income on 80% of the  Partnership's  daily equity  maintained in
cash was earned at the 30-day U.S.  Treasury bill rate  determined  weekly by SB
based on the  average  non-competitive  yield on  3-month  U.S.  Treasury  bills
maturing  in  30  days.  Interest  income  decreased  by  $21,633  and  $19,158,
respectively,  for the three and six months  ended June 30,  1998 as compared to
the corresponding  periods in 1997. The decrease in interest income is primarily
due to the effect of net redemptions on the  Partnership's  equity maintained in
cash during 1998.

      Brokerage  commissions  are  calculated on the adjusted net asset value on
the  last  day of each  month  and  are  affected  by  trading  performance  and
redemptions.  Brokerage  commissions  and  clearing  fees for the  three and six
months ended June 30, 1998  decreased by $31,706 and $39,244,  respectively,  as
compared to the corresponding periods in 1997.

      Management  fees are calculated as a percentage of the  Partnership's  net
asset value as of the end of each month and are affected by trading  performance
and redemptions. Management fees decreased by $14,147 and $19,586, respectively,
as compared to the corresponding periods in 1997.

       Incentive  fees are based on the new trading  profits  generated  by each
Advisor as defined in the  advisory  agreements  between  the  Partnership,  the
General  Partner and each Advisor.  No incentive  fees were earned for the three
and six months ended June 30, 1998.  Trading  performance  for the three and six
months  ended June 30,  1997  resulted  in  incentive  fees of $0 and  $190,380,
respectively.

                                      10

<PAGE>



Item 3.      Quantitative and Qualitative Disclosures of Market Risk

      The  fund  is  subject  to  SEC  Financial   Reporting   Release  No.  48,
Quantitative and Qualitative Disclosures of Market Risk and will comply with the
disclosure and reporting requirements in its form 10K as of December 31, 1998.


                                      11

<PAGE>



                           PART II OTHER INFORMATION

Item 1.      Legal Proceedings

        Between May 1994 and the present,  Salomon Brothers Inc. ("SBI"), SB and
        The Robinson Humphrey Company, Inc. ("R- H"), all currently subsidiaries
        of Salomon Smith Barney Holdings Inc. ("SSBHI"),  along with a number of
        other  broker-dealers,  were named as  defendants  in  approximately  25
        federal  court  lawsuits  and  two  state  court  lawsuits,  principally
        alleging that companies that make markets in securities traded on NASDAQ
        violated the federal  antitrust laws by conspiring to maintain a minimum
        spread of $.25  between the bid and asked price for certain  securities.
        The  federal  lawsuits  and one state court case were  consolidated  for
        pre-trial  purposes in the Southern  District of New York in the fall of
        1994 under the caption In re NASDAQ Market-Makers  Antitrust Litigation,
        United  States  District  Court,  Southern  District  of  New  York  No.
        94-CIV-3996 (RWS); M.D.L. No. 1023. The other state court suit, Lawrence
        A. Abel v.  Merrill  Lynch & Co.,  Inc.  et al.;  Superior  Court of San
        Diego,  Case  No.  677313,  has  been  dismissed  without  prejudice  in
        conjunction with a tolling agreement.

         In consolidated  action, the plaintiffs purport to represent a class of
         persons  who bought one or more of what they  currently  estimate to be
         approximately  1,650  securities on NASDAQ  between May 1, 1989 and May
         27,  1994.  They seek  unspecified  monetary  damages,  which  would be
         trebled under the antitrust  laws. The plaintiffs  also seek injunctive
         relief,  as well as attorney's  fees and the costs of the action.  (The
         state cases seek similar relief.) Plaintiffs in the consolidated action
         filed an amended  consolidated  complaint that  defendants  answered in
         December  1995.  On  November  26,  1996,  the Court  certified a class
         composed  of  retail  purchasers.  A motion  to  include  institutional
         investors in the class and to add class representatives was granted. In
         December 1997, SBI, SB and R-H, along with several other  broker-dealer
         defendants,  executed a settlement agreement with the plaintiffs.  This
         agreement has been  preliminarily  approved by the U.S.  District Court
         for the Southern District of New York but is subject to final approval.

         On July 17, 1996,  the Antitrust  Division of the Department of Justice
         filed a complaint  against a number of firms that act as market  makers
         in  NASDAQ  stocks.  The  complaint  basically  alleged  that a  common
         understanding  arose among  NASDAQ  market  makers which worked to keep
         quote spreads in NASDAQ stocks artificially wide.  Contemporaneous with
         the

                                      12

<PAGE>



         filing of the complaint,  SBI, SB and other  defendants  entered into a
         stipulated settlement agreement, pursuant to which the defendants would
         agree not to engage in certain  practices  relating  to the  quoting of
         NASDAQ  securities  and would  further  agree to implement a program to
         ensure compliance with federal antitrust laws and with the terms of the
         settlement. In entering into the stipulated settlement,  SBI and SB did
         not  admit any  liability.  There  are no  fines,  penalties,  or other
         payments of monies in connection  with the  settlement.  In April 1997,
         the U.S.  District Court for the Southern District of New York approved
         the  settlement.  In May 1997,  plaintiffs  in the related civil action
         (who were  permitted to intervene  for limited  purposes)  appealed the
         district court's  approval of the settlement.  The appeal was argued in
         March 1998 and was affirmed in August 1998.

         The Securities  and Exchange  Commission  ("SEC") is also  conducting a
         review  of the  NASDAQ  marketplace,  during  which  it has  subpoenaed
         documents and taken the testimony of various individuals  including SBI
         and SB personnel.  In July 1996, the SEC reached a settlement  with the
         National   Association  of  Securities  Dealers  and  issued  a  report
         detailing  certain  conclusions with respect to the NASD and the NASDAQ
         market.

        In December 1996, a complaint seeking  unspecified  monetary damages was
        filed by Orange County,  California  against  numerous  brokerage firms,
        including SB, in the U.S.  Bankruptcy  Court for the Central District of
        California.  Plaintiff alleged,  among other things, that the defendants
        recommended  and  sold to  plaintiff  unsuitable  securities.  The  case
        (County  of Orange et al. v. Bear  Stearns & Co.  Inc.  et al.) had been
        subject to a stay by  agreement  of the  parties  which  will  expire on
        August 21, 1998.

Item 2.      Changes in Securities and Use of Proceeds - None

Item 3.      Defaults Upon Senior Securities - None

Item 4.      Submission of Matters to a Vote of Security Holders -
             None

Item 5.      Other Information - None

Item 6.      (a) Exhibits - None

             (b) Reports on Form 8-K - None



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<PAGE>



                                  SIGNATURES

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

SMITH BARNEY PRINCIPAL PLUS FUTURES FUND L.P. II


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


By:     /s/ David J. Vogel, President
        David J. Vogel, President

Date:    8/14/98

       Pursuant to the requirements of the Securities Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
registrant and in the capacities and on the dates indicated.

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


By:     /s/ David J. Vogel, President
        David J. Vogel, President


Date:    8/14/98


By      /s/ Daniel A. Dantuono
        Daniel A. Dantuono
        Chief Financial Officer and
        Director

Date:    8/14/98



                                      14