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 September 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
                 September 30, 1998 and December 31, 1997.              3

                 Statement of Income and Expenses and
                 Partners'  Capital for the
                 three and nine months ended September 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 - 11

       Item 3.   Quantitative and Qualitative Disclosures
                 of Market Risk                                         12

PART II - Other Information                                          13 - 14



                                      2

<PAGE>
                                     PART I

                          Item 1. Financial Statements


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



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

Equity in commodity futures trading account:
Cash and cash equivalents                              $ 7,330,819   $ 8,500,216
Net unrealized appreciation
on open futures contracts                                3,266,554       720,274
Zero Coupons, $17,057,000 and $18,968,000
principal amount in 1998 and 1997, repectively,
due November 15, 2003 at market value
(amortized cost $12,343,611 and $13,081,092
in 1998 and 1997, respectively)                         13,662,145    13,577,673
                                                       -----------   -----------

                                                        24,259,518    22,798,163
Receivable from SSB on sale of
Zero Coupons                                               162,270       419,702
Interest income                                             26,281             -

                                                       ===========   ===========
                                                       $24,448,069   $23,217,865
                                                       ===========   ===========


LIABILITIES AND PARTNERS' CAPITAL:


Liabilities:

Accrued expenses:
Commissions                                            $    82,870   $    74,685
Management fees                                             37,508        34,365
Incentive fees                                             167,031         1,244
Due to Smith Barney                                              -        77,269
Other                                                       43,549        30,223
Redemptions payable                                        283,648       693,875
                                                       -----------   -----------
                                                           614,606       911,661
Partners' Capital:

General Partner, 203 Unit
equivalents outstanding in 1998 and 1997                   283,648       238,726
Limited Partners, 16,854 and 18,765
Units of Limited Partnership Interest
outstanding in 1998 and 1997, respectively              23,549,815    22,067,478
                                                       -----------   -----------

                                                        23,833,463    22,306,204
                                                       -----------   -----------

                                                       $24,448,069   $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              NINE MONTHS ENDED
                                                              SEPTEMBER 30,                  SEPTEMBER 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           $    968,868    $   (382,602)   $    653,093    $     39,578
Change in unrealized gains/losses on open
positions                                                3,241,534         288,368       2,546,280         364,568
                                                      ____________    ____________    ____________    ____________

                                                         4,210,402         (94,234)      3,199,373         404,146
Less, brokerage commissions and clearing fees
($5,150, $4,847, $16,419 and $11,666, respectively)       (229,377)       (242,201)       (670,803)       (722,871)
                                                      ____________    ____________    ____________    ____________

Net realized and unrealized gains (losses)               3,981,025        (336,435)      2,528,570        (318,725)
Gain on sale of Zero Coupons                                15,365           3,431          65,474              14
Unrealized appreciation
on Zero Coupons                                            718,876         317,996         821,953         190,473
Interest income                                            274,572         301,060         852,632         898,278
                                                      ____________    ____________    ____________    ____________

                                                         4,989,838         286,052       4,268,629         770,040
                                                      ____________    ____________    ____________    ____________


Expenses:
Management fees                                             97,092          99,525         281,891         303,910
Incentive fees                                             167,031               -         167,031         190,380
Other                                                       13,485          13,600          48,406          41,271
                                                      ____________    ____________    ____________    ____________

                                                           277,608         113,125         497,328         535,561
                                                      ____________    ____________    ____________    ____________

Net income                                               4,712,230         172,927       3,771,301         234,479
Redemptions                                               (283,648)       (288,689)     (2,244,042)       (616,911)
                                                      ____________    ____________    ____________    ____________

Net increase (decrease) in Partners' capital             4,428,582        (115,762)      1,527,259        (382,432)

Partners' capital, beginning of period                  19,404,881      21,990,891      22,306,204      22,257,561
                                                      ____________    ____________    ____________    ____________

Partners' capital, end of period                      $ 23,833,463    $ 21,875,129    $ 23,833,463    $ 21,875,129
                                                      ------------    ------------    ------------    ------------

Net asset value per Unit
(17,057 and 19,566 Units outstanding
at September 30, 1998 and 1997, respectively)         $   1,397.28    $   1,118.59    $   1,397.28    $   1,118.59
                                                      ------------    ------------    ------------    ------------


Net income per Unit of Limited Partnership
Interest and General Partner Unit equivalent          $     273.01    $       8.61    $     221.29    $      11.25
                                                      ------------    ------------    ------------    ------------

Redemption Net Asset Value Per Unit                   $   1,397.28    $   1,127.69    $   1,397.28    $   1,127.69
                                                      ------------    ------------    ------------    ------------

</TABLE>


See Notes to Financial Statements                                4


<PAGE>



               SMITH BARNEY PRINCIPAL PLUS FUTURES FUND L.P. II
                        NOTES TO FINANCIAL STATEMENTS
                              September 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.  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. SSBH is a wholly owned
subsidiary  of  Travelers  Group Inc.  All  trading  decisions  are made for the
Partnership by John W. Henry & Company,  Inc. and  Willowbridge  Associates Inc.
(collectively, the "Advisors"). (see Note 5)

       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 September 30, 1998 and the results of its  operations for the three
and nine months ended September 30, 1998 and 1997.  These  financial  statements
present  the  results of interim  periods  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 nine  months  ended
September 30, 1998 and 1997 were as follows:

                                  THREE-MONTHS ENDE        NINE-MONTHS ENDED
                                     SEPTEMBER 30,            SEPTEMBER 30,
                                   1998        1997         1998        1997

Net realized and unrealized
gains (losses)                 $  230.66    $  (16.98)   $ 151.30     $  (16.46)
Realized and unrealized
gains on Zero Coupons              42.54        16.22        50.90         9.81
Interest income                    15.90        15.20        46.99        45.00
Expenses                          (16.09)       (5.71)      (27.90)      (26.76)
Other                                  -        (0.12)           -        (0.34)
                               ---------    ---------    ---------    ---------

Increase for period               273.01         8.61       221.29        11.25

Net Asset Value per Unit,
beginning of period             1,124.27     1,109.98     1,175.99     1,107.34
                               ---------    ---------    ---------    ---------

Net Asset Value per Unit,
end of period                  $1,397.28    $1,118.59    $1,397.28    $1,118.59
                               =========    =========    =========    =========

Redemption Net Asset
Value per Unit *               $1,397.28    $1,127.69    $1,397.28    $1,127.69
                               =========    =========    =========    =========


    *   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 SSB  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  September  30,  1998 and  December  31,  1997 was  $3,266,554  and
$720,274,  respectively,  and the average  fair value during the nine and twelve
months then ended based on monthly calculation, was $981,234 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 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.


                                      7

<PAGE>



        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  September  30,  1998,  the  notional or
contractual  amounts of the Partnership's  commitment to purchase and sell these
instruments was  $209,541,200 and $7,172,936,  respectively,  as detailed below.
All of these instruments mature within one year of September 30, 1998.  However,
due to the nature of the  Partnership's  business,  these instruments may not be
held to maturity.  At September  30, 1998,  the fair value of the  Partnership's
derivatives, including options thereon, was $3,266,554, as detailed below.

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

Currencies
- Exchange Traded Contracts     $ 14,221,938      $        -       $  246,039
- OTC Contracts                   13,638,850         2,990,901        310,741
Energy                             2,177,940               -           23,281
Interest Rates U.S.               47,773,609               -          915,891
Interest Rates Non U.S.          130,218,194           181,828      1,491,563
Grains                                   -             646,435         98,593
Softs                                    -           1,132,410         37,264
Metals                             1,510,669           514,230         24,161
Indices                                  -           1,707,132        119,021
                                -------------      ------------      --------

Totals                          $209,541,200        $7,172,936     $3,266,554
                                =============       ===========    ==========

      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
                               =============    ============       =========

5.    Subsequent Event:

      On October 8, 1998, Travelers Group Inc. merged with Citicorp
Inc. and changed its name to Citigroup Inc.


                                        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 third
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  nine  months  ended  September  30,  1998,  Partnership  capital
increased 6.8% from  $22,306,204 to $23,833,463.  This increase was attributable
to net income from  operations of $3,771,301  which was partially  offset by the
redemption  of  1,911  Units  totalling  $2,244,042  for the nine  months  ended
September 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, SSB 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 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

                                      9

<PAGE>



purchases or redemptions of Units in the Partnership infeasible
until such valuation was determinable.

      In  addition,   the  General  Partner  is  addressing  the   technological
implications that will result from regulatory and market changes due to Europe's
Economic and Monetary Union ("EMU").

      Risks to the  Partnership  exist in the lack of  experience  with this new
currency and the potential impact it can have on the Advisors' trading programs.
Risks  also  exist  in  the  failure  of  external  information  technology  and
accounting  systems to  adequately  prepare  for the  conversion.  This issue is
particularly   acute  in  the  area  of  the  exchanges,   clearing  houses  and
over-the-counter  foreign  exchange  markets  where the  futures  interests  are
traded. If the necessary changes are not properly  implemented,  the Partnership
could suffer failed trade settlements,  inability to reconcile trading positions
and funding  disruptions.  Such events could result in erroneous  entries in the
Partnership's  accounts,  mispriced  transactions,  and a delay or  inability to
provide  timely  pricing of Units for the  purpose of  effecting  purchases  and
redemptions.

      SSB has evaluated its internal  systems and made the necessary  changes to
accommodate EMU transactions on behalf of the  Partnership.  The General Partner
will  continue  to  monitor  and  communicate  with  the  Advisors  and  related
third-party  entities to assure  preparation for the EMU conversion and advanced
notification of impending issues or problems.


Results of Operations

      During the third quarter ending September 30, 1998, the  Partnership's net
asset value per Unit increased 24.3% from $1,124.27 to $1,397.28, as compared to
an increase of 0.8% in the third quarter of 1997. The Partnership  experienced a
net trading  gain before  brokerage  commissions  and related  fees in the third
quarter of 1998 of $4,210,402.  These gains were primarily  attributable  to the
trading of commodity  futures in currencies,  energy products,  softs,  U.S. and
non-U.S.  interest rates and were partially  offset by losses in grains,  metals
and indices. The Partnership experienced a net trading loss in the third quarter
of 1997 of $94,234.  These losses were  recognized in the trading of currencies,
energy  products,  grains,  U.S.  interest  rates,  softs and livestock and were
partially offset by gains in metals, non-U.S.
interest rates 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

                                      10

<PAGE>



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 SSB
based on the  average  non-competitive  yield on  3-month  U.S.  Treasury  bills
maturing  in  30  days.   Interest  income  decreased  by  $26,488  and  $45,646
respectively, for the three and nine months ended September 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.  Accordingly, they must be compared in relation to the fluctuations
in the monthly net asset value. Brokerage commissions and fees for the three and
nine  months  ended  September  30,  1998  decreased  by  $12,824  and  $52,068,
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 $2,433 and $22,019, 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.  Trading  performance  for the three and nine
months ended September 30, 1998 resulted in incentive fees of $167,031.  Trading
performance  for the three and nine months ended  September 30, 1997 resulted in
incentive fees of $0 and $190,380, respectively.

                                      11

<PAGE>



Item 3.      Quantitative and Qualitative Disclosures of Market Risk

      The  Partnership  is subject to SEC  Financial  Reporting  Release No. 48,
regarding  quantitative  and  qualitative  disclosures  of market  risk and will
comply with the  disclosure  and reporting  requirements  in its Form 10-K as of
December 31, 1998.


                                      12

<PAGE>



                           PART II OTHER INFORMATION

Item 1.      Legal Proceedings

        Between May 1994 and the present,  Salomon Brothers Inc. ("SBI"),  Smith
        Barney Inc. ("SB") and The Robinson Humphrey Company,  Inc. ("R-H"), all
        currently  subsidiaries of Salomon Smith Barney Holdings Inc.  ("SSBH"),
        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 filing of the complaint, SBI, SB and other defendants

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<PAGE>



        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.) has been
        stayed by agreement of the parties.

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:    11/12/98

       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:    11/12/98


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

Date:    11/12/98



                                      15

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