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 March 31, 2000
 Commission File Number 0-26132

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

           New York                                13-3729162
 (State or other jurisdiction of                (I.R.S.Employer
  incorporation or organization)                 Identification No.)


                     c/o Smith Barney Futures Management LLC
                           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 DIVERSIFIED FUTURES FUND L.P.
                                                      FORM 10-Q
                                                        INDEX

                                                                        Page
                                                                        Number

PART I - Financial Information:

                Item 1.          Financial Statements:

                                 Statement of Financial Condition
                                 at March 31, 2000 and December 31,
                                 1999 (unaudited).                        3

                                 Statement of Income and Expenses
                                 and Partners' Capital for the three
                                 months ended March 31, 2000 and 1999
                                 (unaudited).                             4

                                 Notes to Financial Statements
                                 (unaudited)                            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 - 12

PART II - Other Information                                            13 - 15



                                   2

<PAGE>


                                  PART I
                       ITEM 1. FINANCIAL STATEMENTS


                SMITH BARNEY DIVERSIFIED FUTURES FUND L.P.
                     STATEMENT OF FINANCIAL CONDITION
                               (Unaudited)

<TABLE>
<CAPTION>



                                                        MARCH 31,   DECEMBER 31,
                                                           2000             1999

ASSETS:
<S>                                                          <C>             <C>

Equity in commodity futures trading account:
  Cash                                               $105,963,002   $114,347,833
  Net unrealized appreciation
   on open futures contracts                            3,570,296      5,310,783
  Commodity options owned at fair
   value (cost  $1,344,599 and $663,996 in
   2000 and 1999, respectively)                         2,615,415        501,192
                                                  ---------------   ------------
                                                      112,148,713    120,159,808
Interest receivable                                       395,195        403,616
                                                  ---------------   ------------
                                                     $112,543,908   $120,563,424
                                                  ===============   ============

LIABILITIES AND PARTNERS' CAPITAL:

Liabilities:
 Accrued expenses:
  Commissions                                            $498,567       $556,459
  Management fees                                         308,714        326,697
  Other                                                   141,218        128,566
 Redemptions payable                                    2,737,730      2,043,170
 Commodity options written at fair
   value (cost  $1,000,686 and $0 in
   2000 and 1999, respectively)                         2,574,168             -
                                                    ---------------   ----------
                                                        6,260,397      3,054,892
                                                    ---------------   ----------

Partners' Capital:

General Partner, 2,048.9308 Unit
   equivalents outstanding in 2000 and 1999            2,647,464       2,669,941
Limited Partners, 80,205.9795 and
  88,128.2111 Units of Limited Partnership
  Interest outstanding in 2000 and 1999,
  respectively                                       103,636,046     114,838,591
                                                   ---------------   -----------
                                                     106,283,510     117,508,532
                                                   ---------------   -----------
                                                    $112,543,907    $120,563,424
                                                  ===============   ============
</TABLE>

See Notes to Financial Statements.


                                              3
<PAGE>

                   SMITH BARNEY DIVERSIFIED FUTURES FUND L.P.
             STATEMENT OF INCOME AND EXPENSES AND PARTNERS' CAPITAL
                                   (UNAUDITED)


<TABLE>
<CAPTION>


                                                              THREE MONTHS ENDED
                                                                  MARCH 31,
                                                     --------------   --------------
                                                               2000             1999
                                                     --------------   --------------
<S>                                                             <C>          <C>
Income:
  Net gains (losses) on trading of commodity
   futures:
  Realized gains on closed positions                  $   2,606,295    $     808,558
  Change in unrealized losses on open
   positions                                             (1,880,349)      (3,842,489)
                                                      -------------    -------------
                                                            725,946       (3,033,931)
Less, brokerage commissions including clearing fees
  of $68,419 and $58,967, respectively                   (1,746,589)      (2,072,448)
                                                      -------------    -------------
  Net realized and unrealized losses                     (1,020,643)      (5,106,379)
  Interest income                                         1,178,352        1,186,464
                                                      -------------    -------------
                                                            157,709       (3,919,915)
                                                      -------------    -------------

Expenses:
  Management fees                                           936,724          969,506
  Other expenses                                             29,349           36,252
                                                      -------------    -------------
                                                            966,073        1,005,758
                                                      -------------    -------------
  Net loss                                                 (808,364)      (4,925,673)
  Additions                                                  24,393           29,432
  Redemptions                                           (10,441,050)      (4,341,012)
                                                      -------------    -------------
  Net decrease in Partners' capital                     (11,225,021)      (9,237,253)
Partners' capital, beginning of period                  117,508,532      143,904,261
                                                      -------------    -------------
Partners' capital, end of period                      $ 106,283,511    $ 134,667,008
                                                      -------------    -------------
Net asset value per Unit
  (82,254.9103 and 99,764.7834 Units outstanding
  at March 31, 2000 and 1999, respectively)           $    1,292.12    $    1,349.85
                                                      -------------    -------------
Net loss per Unit of Limited Partnership
  Interest and General Partner Unit equivalent        $      (10.97)   $      (47.90)
                                                      -------------    -------------

See Notes to Financial Statements


                                                        4

</TABLE>
<PAGE>

                   SMITH BARNEY DIVERSIFIED FUTURES FUND L.P.
                          NOTES TO FINANCIAL STATEMENTS
                                 March 31, 2000
                                   (Unaudited)

1.     General:

     Smith Barney Diversified Futures Fund L.P. (the "Partnership") is a limited
partnership  organized  under the laws of the State of New York,  on August  13,
1993  to  engage  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  commenced  trading
operations on January 12, 1994.
     Smith  Barney  Futures  Management  LLC acts as the  general  partner  (the
General  Partner") of the Partnership.  The  Partnership's  commodity broker is
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.
("SSBHI"), which is the sole owner of SSB. SSBHI is a wholly owned subsidiary of
Citigroup Inc. All trading  decisions are made for the Partnership by Campbell &
Company,  Inc.,  John W. Henry & Company,  Inc.,  Rabar  Market  Research  Inc.,
Willowbridge    Associates,    Inc.   and   Stonebrook    Capital    Management,
Inc.(collectively  the "Advisors").  Trendview Management Inc. was terminated as
an Advisor to the Partnership effective January 31, 2000.

     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 March  31,  2000 and  December  31,  1999 and the  results  of its
operations for the three months ended March 31, 2000 and 1999.  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  financial
statements  and notes included in the  Partnership's  annual report on Form 10-K
filed with the  Securities  and Exchange  Commission for the year ended December
31, 1999.

     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 DIVERSIFIED FUTURES FUND L.P.
                          NOTES TO FINANCIAL STATEMENTS
                                   (continued)


2.      Net Asset Value Per Unit:

     Changes in net asset  value per Unit for the three  months  ended March 31,
2000 and 1999, were as follows:
<TABLE>
<CAPTION>


                                                             THREE-MONTHS ENDED
                                                                  MARCH 31,
                                                              -----------------
                                                         2000                 1999
                                                        ---------       -----------
<S>                                                        <C>               <C>

Net realized and unrealized
 losses                                            $     (13.43)      $     (49.70)
Interest income                                           13.46              11.64
Expenses                                                 (11.00)             (9.84)
                                                       ---------          --------
Decrease for period                                      (10.97)            (47.90)

Net Asset Value per Unit,
  beginning of period                                  1,303.09           1,397.75
                                                        --------          ---------
Net Asset Value per Unit,
  end of period                                    $   1,292.12       $   1,349.85
                                                     ===========         ==========
</TABLE>

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.



                                   6

<PAGE>

All of the commodity  interests  owned by the  Partnership  are held for trading
purposes.  The average  fair value  during the periods  ended March 31, 2000 and
December  31,  1999,  based  on  a  monthly  calculation,   was  $7,243,386  and
$6,571,306, respectively. The fair value of these commodity interests, including
options  thereon,  if  applicable,  at March 31, 2000 and December 31, 1999, was
$3,611,543 and $5,811,975, respectively, as detailed below.

<TABLE>
<CAPTION>

                                             Fair Value
                                      ------------------------
                                       March 31,        December 31,
                                          2000              1999
                                       ---------       -----------
<S>                                      <C>              <C>
Currency:
--  Exchange Traded Contracts      $   626,406      $   423,503
--  OTC Contracts                       (1,744)         196,398
Energy                                (156,909)       1,095,761
Grains                                 634,636           64,492
Interest Rates U.S.                  1,529,854        1,352,098
Interest Rates Non-U.S               1,154,945          220,653
Livestock                               66,401          (19,700)
Metals                                  96,011          941,009
Softs                                 (227,917)         493,230
Indices                               (110,140)       1,044,531
                                     ---------       -----------
Total                              $ 3,611,543      $ 5,811,975
                                  =============     ============
</TABLE>

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
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, through physical delivery 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




                                   7

<PAGE>

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.

     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.  The  majority of these  instruments  mature
within  one  year  of  March  31,  2000.  However,  due  to  the  nature  of the
Partnership's business, these instruments may not be held to maturity.



                                   8

<PAGE>

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, net  unrealized  appreciation  (depreciation)  on open futures and forward
contracts,  commodity options 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. While substantial
losses could lead to a decrease in liquidity, no such losses occurred during the
first quarter of 2000.

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

     For the three months ended March 31, 2000,  Partnership  capital  decreased
9.6% from  $117,508,532 to  $106,283,511.  This decrease was attributable to the
redemption of 7,940.7226 Units totaling  $10,441,050  coupled with net loss from
operations of $808,364 which was partially offset by additional sales of 18.4910
Units totaling  $24,393.  Additional Units offered represent a reduced brokerage
fee  to  existing  limited  partners   investing   $1,000,000  or  more.  Future
redemptions  can  impact  the  amount  of funds  available  for  investments  in
commodity contract positions in subsequent periods.

Results of Operations

     During the  Partnership's  first  quarter of 2000,  the net asset value per
unit  decreased  0.8% from  $1,303.09  to $1,292.12 as compared to a decrease of
3.4% in the first  quarter of 1999.  The  Partnership  experienced a net trading
gain before brokerage  commissions and related fees in the first quarter of 2000
of  $725,946.  Gains were  primarily  attributable  to the trading of  commodity
futures in energy and U. S. interest rates and were  partially  offset by losses
in livestock,  metals,  currencies,  non-U.S. interest rates, indices and softs.
The  Partnership  experienced a net trading loss before  commissions and related
fees  in the  first  quarter  of  1999  of  $3,033,931.  Losses  were  primarily
attributable to the trading of commodity futures in livestock,  indices,  softs,
metals  and  non-U.S  interest  rates  and  were  partially  offset  by gains in
currencies, U.S. interest rates, energy and grains.

     Commodity futures markets are highly volatile. Broad price fluctuations and




                                   9
<PAGE>

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 on the monthly  average  30-day U.S.  Treasury  bill rate  determined
weekly by SSB based on the  non-competitive  yield on three month U.S.  Treasury
bills maturing in 30 days from the date in which such weekly rate is determined.
Interest  income for the three months ended March 31, 2000  decreased by $8,112,
as compared to the corresponding period in 1999. The decrease in interest income
is  primarily  due to the  effect of  redemptions  on the  Partnership's  equity
maintained in cash.

     Brokerage  commissions are calculated on the  Partnership's net asset value
as of the last day of each  month  and,  therefore,  vary  according  to trading
performance and redemptions.  Accordingly,  they must be compared in relation to
the fluctuations in monthly net asset values. Commissions and fees for the three
months  ended  March  31,  2000  decreased  by  $325,859,  as  compared  to  the
corresponding period in 1999.

     Management  fees are  calculated  on the portion of the  Partnership's  net
asset value  allocated to each  Advisor at the end of the month and,  therefore,
are affected by trading  performance  and  redemptions.  Management fees for the
three  months  ended March 31,  2000  decreased  by $32,782,  as compared to the
corresponding period in 1999.

     Incentive  fees are  based on the new  trading  profits  generated  by each
Advisor at the end of the quarter, as defined in the advisory agreements between
the Partnership,  the General Partner and each Advisor.  There were no incentive
fees earned for the three months ending March 31, 2000 or 1999.



                                   10

<PAGE>

Item 3.       Quantitative and Qualitative Disclosures of Market Risk

     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  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
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.

     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.  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.


                                   11

<PAGE>

     The following table indicates the trading Value at Risk associated with the
Partnership's  open positions by market  category as of March 31, 2000. All open
position  trading  risk  exposures  of the  Partnership  have been  included  in
calculating the figures set forth below. As of March 31, 2000, the Partnership's
total capitalization was approximately $106,283,511.  There has been no material
change in the trading Value at Risk information previously disclosed in the Form
10-K for the year ended December 31, 1999.
 <TABLE>
<CAPTION>

                                 March 31, 2000
                                   (Unaudited)
                                                                        Year to Date
                                                                      ------------------
                               % of Total                          High             Low
Market Sector                Value at Risk   Capitalization        Value at Risk    Value at Risk
---------------------------------------------------------------------------------------------------
<S>                                    <C>          <C>                      <C>         <C>
Currencies:
 - Exchange Traded Contracts    $   805,012       0.76%$               1,158,359   $   862,289
 - OTC Contracts                  2,300,060       2.16%                3,574,254     1,860,662
Energy                            1,419,200       1.34%                5,401,200     1,419,200
Grains                              726,300       0.68%                  791,300       314,250
Interest Rates U.S.               1,524,318       1.44%                2,104,984       622,467
Interest Rates Non-U.S            3,297,745       3.10%                6,211,403     2,789,401
Livestock                            67,325       0.06%                  115,375        29,075
Metals                            1,670,325       1.57%                1,916,625       970,575
Softs                               828,953       0.78%                1,489,882       828,953
Indices                           2,128,081       2.00%                2,578,509     1,301,148
                               -------------  ----------
Total                           $14,767,319      13.89%
                               ============= ===========
</TABLE>





                                   12

<PAGE>

                            PART II OTHER INFORMATION

Item 1.  Legal Proceedings-

     For  information  concerning a suit filed by Harris Trust  Savings Bank (as
trustee for the Ameritech  Pension  Trust) and others against  Salomon  Brothers
Inc., and Salomon Brothers Realty Corp., see the description that appears in the
second and third paragraphs under the caption "Legal  Proceedings"  beginning on
page 11 of the  Annual  Report on Form 10-K of the  Company  for the year  ended
December 31, 1999 (File No.  1-4346),  which  description is included as Exhibit
99.1 to this Form 10-Q and incorporated by reference  herein. In April 2000, the
U.S.  Supreme Court heard oral argument on  plaintiffs'  petition to reverse the
decision of the U.S. Court of Appeals for the Seventh Circuit.  The U.S. Supreme
Court reserved its decision, and has not yet released its opinion.

     For information  concerning the complaints filed in the U.S. District Court
for the Eastern District of Louisiana  (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.),  a  purported  class  action in Florida  against
numerous broker-dealers including the Company (Dwight Brock as Clerk for Collier
County  v.  Merrill  Lynch,   et  al.),  and  the  IRS  and  SEC   industry-wide
investigation  into the pricing of  Treasury  securities  in advanced  refunding
transactions,  see the description  that appears in the fourth,  fifth and sixth
paragraphs  under the caption " Legal  Proceedings"  beginning on page 11 of the
Annual  Report on Form 10-K of SSBHI for the year ended  December 31, 1999 (File
No. 1-4346), which description is included as Exhibit 99.2 to this form 10-Q and
incorporated by reference  herein.  In April 2000,  seventeen  investment banks,
including the Company,  entered into an agreement with the federal government to
settle  charges  related  to the  pricing of  Treasury  securities  in  advanced
refunding transactions.  Thereafter,  plaintiffs filed voluntary discontinuances
in the two Louisiana federal actions.

     For information  concerning the matter entitled MKP Master Fund, LDC et al.
v. Salomon Smith Barney Inc.,  see the  description  that appears in the seventh
paragraph  under the caption "Legal  Proceedings"  beginning  on page 11 of the
Annual  Report on Form 10-K of SSBHI for the year ended  December 31, 1999 (File
No. 1-4346), which description is included as Exhibit 99.3 to this Form 10-Q and
incorporated by reference herein. In March 2000,  plaintiffs'  motion to dismiss
the  Company's  amended  counterclaims  was  argued,  and no  decision  has been
rendered.





                                   13

<PAGE>


Exhibit 99.1


     Second and third paragraphs under the caption "Legal Proceedings" beginning
on page 11 of the  Annual  Report  on Form  10-K of  SSBHI  for the  year  ended
December 31, 1999 (File No. 1-4346).

     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 in a portfolio  of motels owned by Best Inns,
Inc. ("Best"),  violated the Employee  Retirement Income Security Act ("ERISA"),
and  that  APT's  purchase  of the  participation  interests  in the  third  MOA
portfolio  and in the Best  portfolio  violated  the  Racketeer  Influenced  and
Corrupt  Organization Act ("RICO") and the Illinois Consumer Fraud and Deceptive
Practices  Act  ("Consumer  Fraud  Act"),  and  constituted   fraud,   negligent
misrepresentation,  breach of contract and unjust  enrichment.  SBI had acquired
the participation interests when it purchased principal mortgage notes issued by
MOA and Best to finance  purchases  of motel  portfolios;  95% of three of those
interests  and 100% of the fourth were sold to APT for a total of  approximately
$20.9 million.  Plaintiffs'  second amended  complaint seeks judgment (a) on the
ERISA claims for the approximately  $20.9 million purchase price, for rescission
and for  disgorgement of profits,  as well as other relief,  and (b) on the RICO
and state law claims 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.  Following  motions by
defendants,  the court dismissed the RICO, Consumer Fraud Act, fraud,  negligent
misrepresentation,  breach of contract,  and unjust enrichment claims. The court
also found that defendants  were not ERISA  fiduciaries and dismissed two of the
three claims based on that allegation.  Defendants moved for summary judgment on
plaintiffs' only remaining claim,  which alleged an ERISA violation.  The motion
was denied, and defendants appealed to the U.S. Court of Appeals for the Seventh
Circuit.  In July  1999,  the U. S.  Court of Appeals  for the  Seventh  Circuit
reversed the denial of defendants' motion for summary judgment and dismissed the
sole remaining ERISA claim against the Company.  Plaintiffs filed a petition for
certiorari  with the U. S. Supreme Court  seeking  review of the decision of the
Court of Appeals. The petition was granted in January 2000.




                                   14
<PAGE>

     Both the Department of Labor and the Internal  Revenue Service have advised
SBI that they were or are reviewing the underlying transactions. With respect to
the Internal Revenue  Service,  SSBHI, SBI and SBRC have consented to extensions
of time for the  assessment  of excise taxes that may be claimed with respect to
the transactions for the years 1987, 1988 and 1989. In August 1996, the IRS sent
SSBHI,  SBI and SBRC what appeared to be draft "30-day  letters" with respect to
the transactions and SSBHI, 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, SSBHI, SBI and SBRC submitted a memorandum
setting  forth reasons why the IRS should not issue such 30-day  letters.  Since
that time, the IRS has not issued such 30-day letters to SSBHI, SBI or SBRC.

Item 2.   Changes in Securities and Use of Proceeds -

          Additional Units offered represent a reduced brokerage fee to existing
     limited partners in existing $1,000,000 or more. For the three months ended
     March 31,  2000,  there were  additional  sales of 18.4910  Units  totaling
     $24,393 and 21.5170 Units totaling $29,432 for the three months ended March
     31, 1999.

          Proceeds from the sale of additional  Units are used in the trading of
     commodity  interest  including  futures  contracts,   options  and  forward
     contracts.

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





                                   15

<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 DIVERSIFIED FUTURES FUND L.P.


By:        Smith Barney Futures Management LLC
           (General Partner)


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

Date:      5/12/00


          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 LLC
           (General Partner)


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


Date:      5/12/00


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

Date: 5/12/00
                                   16