FORM10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C.20549 (X) QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THESECURITIES EXCHANGE ACT OF 1934 OR (    ) TRANSITIONREPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF1934

For the Quarter ended September 30,2005

Commission File Number 0-26132

SMITH BARNEY DIVERSIFIED FUTURES FUNDL.P.

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(Exact nameof registrant as specified in its charter)

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|--------------------------------------------------------------|--|-----------------------------------|--|--|--|--|
| NewYork                                                      |  | 13-3729162                        |
| (State or otherjurisdiction ofincorporation or organization) |  | (I.R.S.EmployerIdentificationNo.) |
|                                                              |

c/o Citigroup ManagedFutures LLC 731 Lexington Ave - 25th Fl New York, New York10022

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(Addressand Zip Code of principal executive offices)

(212)599-2011

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(Registrant'stelephone number, including area code)

Indicateby check mark whether the registrant (1) has filed all reports requiredto be filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period thatthe registrant was required to file such reports), and (2) has beensubject to such filing requirements for the past 90 days.

Yes    X                No          

Indicate by checkmark whether the registrant is an accelerated filer (as defined in rule12b-2 of the Exchange Act).

Yes                       No   X   

Indicate by check markwhether the registrant is a shell company (as defined in rule 12b-2 ofthe Exchange Act).

Yes                       No   X   

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SMITH BARNEY DIVERSIFIEDFUTURES FUND L.P.FORM 10-QINDEX

|                                      |  |                                                                                                                                   |  |                         |  |  |  |  |  |  |
|--------------------------------------|--|-----------------------------------------------------------------------------------------------------------------------------------|--|-------------------------|--|--|--|--|--|--|
|                                 |  |                                                                                                                              |  | PageNumber              |
| PARTI – Financial Information: |  |                                                                                                                              |
| Item 1.                              |  | FinancialStatements:                                                                                                              |  |                    |
|                                 |  | Statementsof Financial Condition at September 30, 2005 and December 31, 2004(unaudited)                                           |  | 3                       |
|                                 |  | Condensed Schedules of Investments at September 30,2005 and December 31, 2004(unaudited)                                          |  | 4 – 5   |
|                                 |  | Statements of Income and Expenses and Partners'Capital for the three and nine months ended September 30, 2005 and 2004(unaudited) |  | 6                       |
|                                 |  | Statements of CashFlows for the three and nine months ended September  30,2005 and 2004 (unaudited)                               |  | 7                       |
|                                 |  | Notesto Financial Statements (unaudited)                                                                                          |  | 8 – 12  |
| Item2.                               |  | Management's Discussion and Analysis of FinancialCondition and Results ofOperations                                               |  | 13 – 15 |
| Item3.                               |  | Quantitative and Qualitative Disclosures about MarketRisk                                                                         |  | 16 – 17 |
| Item4.                               |  | Controls and Procedures                                                                                                           |  | 18                      |
| PART II– OtherInformation      |  | 19                                                                                                                                |
|                                      |

2

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PART I

Item 1.Financial Statements

Smith Barney Diversified Futures FundL.P.Statements of FinancialCondition(Unaudited)

|                                                                                                                                        |  |                  |            |                 |  |        |            |        |  |  |
|----------------------------------------------------------------------------------------------------------------------------------------|--|------------------|------------|-----------------|--|--------|------------|--------|--|--|
|                                                                                                                                   |  | September30,2005 |            | December31,2004 |
| ASSETS:                                                                                                                                |  |             |       |            |  |   |       |   |
| Investmentin Partnerships, at fairvalue                                                                                                |  | $                | 43,843,614 |            |  | $      | 16,141,889 |   |
| Equityin commodity futures tradingaccount:                                                                                             |  |             |       |            |  |   |       |   |
| Cash (restricted$1,050,620 and $8,098,048 in 2005 and 2004,respectively)                                                               |  |             | 16,311,117 |            |  |   | 52,660,336 |   |
| Netunrealized appreciation on open futurespositions                                                                                    |  |             | 171,369    |            |  |   | 1,601,032  |   |
| Unrealizedappreciation on open forwardcontracts                                                                                        |  |             | 438,539    |            |  |   | 2,250,162  |   |
|                                                                                                                                   |  |             | 60,764,639 |            |  |   | 72,653,419 |   |
| Interestreceivable                                                                                                                     |  |             | 34,948     |            |  |   | 69,831     |   |
|                                                                                                                                   |  | $                | 60,799,587 |            |  | $      | 72,723,250 |   |
| LIABILITIESAND PARTNERS'CAPITAL:                                                                                                       |  |             |       |            |  |   |       |   |
| Liabilities:                                                                                                                           |  |             |       |            |  |   |       |   |
| Unrealizeddepreciation on open forwardcontracts                                                                                        |  | $                | 230,435    |            |  | $      | 1,925,334  |   |
| Accruedexpenses:                                                                                                                       |  |             |       |            |  |   |       |   |
| Commissions                                                                                                                            |  |             | 273,807    |            |  |   | 329,810    |   |
| Managementfees                                                                                                                         |  |             | 92,459     |            |  |   | 112,466    |   |
| Incentivefees                                                                                                                          |  |             | –    |            |  |   | 78,926     |   |
| Other                                                                                                                                  |  |             | 55,227     |            |  |   | 60,798     |   |
| Redemptionspayable                                                                                                                     |  |             | 292,631    |            |  |   | 985,058    |   |
|                                                                                                                                   |  |             | 944,559    |            |  |   | 3,492,392  |   |
|                                                                                                                                   |  |             |       |            |  |   |       |   |
| Partners'Capital:                                                                                                                      |  |             |       |            |  |   |       |   |
| General Partner,1,276.7484 Unit equivalents outstanding in 2005 and2004                                                                |  |             | 2,061,285  |            |  |   | 2,229,662  |   |
| LimitedPartners, 35,797.0534 and 38,366.2074 Redeemable Units of LimitedPartnership Interest outstanding in 2005 and 2004,respectively |  |             | 57,793,743 |            |  |   | 67,001,196 |   |
|                                                                                                                                   |  |             | 59,855,028 |            |  |   | 69,230,858 |   |
|                                                                                                                                   |  | $                | 60,799,587 |            |  | $      | 72,723,250 |   |
|                                                                                                                                        |

|  |                                                |
|--|------------------------------------------------|
|  | See Accompanying Notes toFinancial Statements. |

3

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Smith Barney Diversified Futures FundL.P. Condensed Schedule of Investments September 30,2005(Unaudited)

|                                       |  |                                                          |  |           |            |         |  |  |  |  |
|---------------------------------------|--|----------------------------------------------------------|--|-----------|------------|---------|--|--|--|--|
| Sector                                |  | Contract                                                 |  | FairValue |
| **Currencies**                        |  |                                                     |  |      |       |    |
|                                  |  | TotalUnrealized depreciation on forward contracts(0.12)% |  | $         | (73,679    | )  |
|                                  |  | TotalUnrealized appreciation on forward contracts0.31%   |  |      | 185,681    |    |
| TotalCurrencies 0.19%                 |  |                                                     |  |      | 112,002    |    |
|                                  |  |                                                     |  |      |       |    |
| Energy0.02%                           |  | Futures contracts purchased0.02%                         |  |      | 15,556     |    |
|                                  |  |                                                     |  |      |       |    |
| **Grains**                            |  |                                                     |  |      |       |    |
|                                  |  | Futures contracts sold0.00%*                             |  |      | 3,063      |    |
|                                  |  | Futurescontracts purchased 0.00%*                        |  |      | 575        |    |
| Total Grains0.00%*                    |  |                                                     |  |      | 3,638      |    |
|                                  |  |                                                     |  |      |       |    |
| **U.S. InterestRates**                |  |                                                     |  |      |       |    |
|                                  |  | Futurescontracts sold 0.02%                              |  |      | 9,390      |    |
|                                  |  | Futures contracts purchased(0.01)%                       |  |      | (4,234     | )  |
| TotalU.S. Interest Rates0.01%         |  |                                                     |  |      | 5,156      |    |
|                                  |  |                                                     |  |      |       |    |
| Interest Rates Non -U.S.              |  |                                                     |  |      |       |    |
|                                  |  | Futures contractssold 0.01%                              |  |      | 3,747      |    |
|                                  |  | Futurescontracts purchased(0.01)%                        |  |      | (2,737     | )  |
| TotalInterest Rates Non - U.S.0.00%*  |  |                                                     |  |      | 1,010      |    |
|                                  |  |                                                     |  |      |       |    |
| **Metals**                            |  |                                                     |  |      |       |    |
|                                  |  | Futurescontracts purchased 0.03%                         |  |      | 16,480     |    |
|                                  |  |                                                     |  |      |       |    |
|                                  |  | Unrealizeddepreciation on forward contracts(0.26)%       |  |      | (156,756   | )  |
|                                  |  | Unrealizedappreciation on forward contracts0.42%         |  |      | 252,858    |    |
|                                  |  | Total forward contracts0.16%                             |  |      | 96,102     |    |
| TotalMetals 0.19%                     |  |                                                     |  |      | 112,582    |    |
|                                  |  |                                                     |  |      |       |    |
| **Softs**                             |  |                                                     |  |      |       |    |
|                                  |  | Futures contracts sold(0.00)%*                           |  |      | (166       | )  |
|                                  |  | Futurescontracts purchased 0.07%                         |  |      | 39,155     |    |
| Total Softs0.07%                      |  |                                                     |  |      | 38,989     |    |
|                                  |  |                                                     |  |      |       |    |
| Indices0.15%                          |  | Futures contracts purchased0.15%                         |  |      | 90,540     |    |
|                                  |  |                                                     |  |      |       |    |
| **Investment inPartnerships**         |  | CMF Winton Master Fund LLC26.82%                         |  |      | 16,056,163 |    |
|                                  |  | CMFCampbell Master Fund LP 25.06%                        |  |      | 14,998,415 |    |
|                                  |  | CMF Willowbridge Master Fund LP 21.37%                   |  |      | 12,789,036 |    |
| Total Investment inPartnerships73.25% |  |                                                     |  |      | 43,843,614 |    |
|                                  |  |                                                     |  |      |       |    |
| Total Fair Value73.88%                |  |                                                     |  | $         | 44,223,087 |    |
|                                       |

|                    |  |                           |            |                              |  |        |        |         |  |  |
|--------------------|--|---------------------------|------------|------------------------------|--|--------|--------|---------|--|--|
| CountryComposition |  | Investments at Fair Value |            | % ofInvestments at FairValue |
| France             |  |                      | 15,733     |                         |  |   | 0.04   | %  |
| Germany            |  |                      | 19,528     |                         |  |   | 0.04   |    |
| Hong Kong          |  |                      | 3,951      |                         |  |   | 0.01   |    |
| Japan              |  |                      | 17,690     |                         |  |   | 0.04   |    |
| Spain              |  |                      | 14,612     |                         |  |   | 0.03   |    |
| United Kingdom     |  |                      | 102,675    |                         |  |   | 0.23   |    |
| UnitedStates       |  |                      | 44,048,898 |                         |  |   | 99.61  |    |
|               |  |                      | 44,223,087 |                         |  |   | 100.00 | %  |
|                    |

|  |                                                                      |
|--|----------------------------------------------------------------------|
|  | Percentagesare based on Partners' capital unless otherwiseindicated. |

|  |                       |
|--|-----------------------|
|  | * Due torounding |

See Accompanying Notes to FinancialStatements.

4

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Smith Barney Diversified Futures FundL.P.Condensed Schedule of InvestmentsDecember 31,2004

|                                   |  |                                                    |  |           |            |         |  |  |  |  |
|-----------------------------------|--|----------------------------------------------------|--|-----------|------------|---------|--|--|--|--|
| Sector                            |  | Contract                                           |  | FairValue |
| Currencies                        |  |                                               |  |      |       |    |
|                              |  | Futurescontracts purchased0.61%                    |  | $         | 423,469    |    |
|                              |  | Unrealizedappreciation on forward contracts2.85%   |  |      | 1,969,858  |    |
|                              |  | Unrealizeddepreciation on forward contracts(2.38)% |  |      | (1,645,688 | )  |
|                              |  | Totalforward contracts0.47%                        |  |      | 324,170    |    |
| TotalCurrencies1.08%              |  |                                               |  |      | 747,639    |    |
| Energy                            |  |                                               |  |      |       |    |
|                              |  | Futurescontracts purchased(0.06)%                  |  |      | (43,173    | )  |
|                              |  | Futurescontracts sold0.42%                         |  |      | 293,267    |    |
| TotalEnergy0.36%                  |  |                                               |  |      | 250,094    |    |
| Grains                            |  |                                               |  |      |       |    |
|                              |  | Futurescontracts purchased(0.12)%                  |  |      | (80,231    | )  |
|                              |  | Futurescontracts sold(0.00)%*                      |  |      | (703       | )  |
| TotalGrains(0.12)%                |  |                                               |  |      | (80,934    | )  |
| InterestRates U.S.                |  |                                               |  |      |       |    |
|                              |  | Futures contracts purchased0.09%                   |  |      | 62,139     |    |
|                              |  | Futurescontracts sold0.10%                         |  |      | 69,596     |    |
| TotalInterest Rates U.S.0.19%     |  |                                               |  |      | 131,735    |    |
| InterestRates Non-U.S.            |  |                                               |  |      |       |    |
|                              |  | Futures contracts purchased0.43%                   |  |      | 294,324    |    |
|                              |  | Futurescontracts sold0.00%*                        |  |      | 325        |    |
| TotalInterest Rates Non-U.S.0.43% |  |                                               |  |      | 294,649    |    |
| Livestock0.02%                    |  | Futures contracts purchased0.02%                   |  |      | 16,491     |    |
| Metals                            |  |                                               |  |      |       |    |
|                              |  | Futurescontracts purchased(0.03)%                  |  |      | (22,450    | )  |
|                              |  | Unrealizedappreciation on forward contracts0.40%   |  |      | 280,304    |    |
|                              |  | Unrealizeddepreciation on forward contracts(0.40)% |  |      | (279,646   | )  |
|                              |  | Totalforward contracts0.00%*                       |  |      | 658        |    |
| TotalMetals(0.03)%                |  |                                               |  |      | (21,792    | )  |
| Softs                             |  |                                               |  |      |       |    |
|                              |  | Futurescontracts purchased0.14%                    |  |      | 93,622     |    |
|                              |  | Futurescontracts sold(0.02)%                       |  |      | (12,420    | )  |
| TotalSofts0.12%                   |  |                                               |  |      | 81,202     |    |
| Indices                           |  |                                               |  |      |       |    |
|                              |  | Futurescontracts purchased0.73%                    |  |      | 505,676    |    |
|                              |  | Futurescontracts sold0.00%*                        |  |      | 1,100      |    |
| TotalIndices0.73%                 |  |                                               |  |      | 506,776    |    |
| Investmentin Partnership 23.32%   |  | CMF Winton Master Fund L.P.23.32%                  |  |      | 16,141,889 |    |
| TotalFair Value26.10%             |  |                                               |  | $         | 18,067,749 |    |
|                                   |

|                    |  |                           |            |                              |  |        |        |         |  |  |
|--------------------|--|---------------------------|------------|------------------------------|--|--------|--------|---------|--|--|
| CountryComposition |  | Investments at Fair Value |            | % ofInvestments at FairValue |
| Australia          |  | $                         | 737        |                         |  |   | 0.00*  | %  |
| Canada             |  |                      | (725       | )                       |  |   | (0.00) | *  |
| France             |  |                      | (1,582     | )                       |  |   | (0.01  | )  |
| Germany            |  |                      | 176,133    |                         |  |   | 0.97   |    |
| HongKong           |  |                      | 257        |                         |  |   | 0.00   | *  |
| Japan              |  |                      | 72,974     |                         |  |   | 0.40   |    |
| Spain              |  |                      | 53,523     |                         |  |   | 0.30   |    |
| UnitedKingdom      |  |                      | 167,316    |                         |  |   | 0.93   |    |
| UnitedStates       |  |                      | 17,599,116 |                         |  |   | 97.41  |    |
|               |  | $                         | 18,067,749 |                         |  |   | 100.00 | %  |
|                    |

|  |                                                                     |
|--|---------------------------------------------------------------------|
|  | Percentagesare based on Partners' capital unless otherwiseindicated |

|  |                   |
|--|-------------------|
|  | * Due to rounding |

See accompanying notes to FinancialStatements.

5

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Smith BarneyDiversified Futures Fund L.P. Statements of Income and Expensesand Partners'Captial(Unaudited)

|                                                                                                                                          |  |                                |            |                              |  |        |            |         |  |        |            |         |  |        |            |         |  |  |
|------------------------------------------------------------------------------------------------------------------------------------------|--|--------------------------------|------------|------------------------------|--|--------|------------|---------|--|--------|------------|---------|--|--------|------------|---------|--|--|
|                                                                                                                                     |  | ThreeMonths EndedSeptember 30, |            | Nine MonthsEndedSeptember30, |
|                                                                                                                                     |  | 2005                           |            | 2004                         |  | 2005   |            | 2004    |
| Income:                                                                                                                                  |  |                           |       |                         |  |   |       |    |  |   |       |    |  |   |       |    |
| Net gains (losses) on trading of commodityinterests:                                                                                     |  |                           |       |                         |  |   |       |    |  |   |       |    |  |   |       |    |
| Realizedgains (losses) on closed positions                                                                                               |  | $                              | 1,046,890  |                         |  | $      | (5,189,578 | )  |  | $      | (5,873,127 | )  |  | $      | 3,838,093  |    |
| Change in unrealized gains (losses) on open positionsand investment inPartnerships                                                       |  |                           | 385,838    |                         |  |   | 4,545,762  |    |  |   | 4,045,538  |    |  |   | (2,182,310 | )  |
|                                                                                                                                     |  |                           | 1,432,728  |                         |  |   | (643,816   | )  |  |   | (1,827,589 | )  |  |   | 1,655,783  |    |
| Interest income                                                                                                                          |  |                           | 105,552    |                         |  |   | 172,145    |    |  |   | 389,842    |    |  |   | 438,467    |    |
|                                                                                                                                     |  |                           | 1,538,280  |                         |  |   | (471,671   | )  |  |   | (1,437,747 | )  |  |   | 2,094,250  |    |
| Expenses:                                                                                                                                |  |                           |       |                         |  |   |       |    |  |   |       |    |  |   |       |    |
| Brokeragecommissions including clearing fees of $4,882, $26,601, $37,336 and$87,401 respectively                                         |  |                           | 854,677    |                         |  |   | 939,449    |    |  |   | 2,611,889  |    |  |   | 3,098,581  |    |
| Managementfees                                                                                                                           |  |                           | 284,934    |                         |  |   | 302,918    |    |  |   | 862,793    |    |  |   | 1,007,824  |    |
| Incentivefees                                                                                                                            |  |                           | —    |                         |  |   | —    |    |  |   | 296,368    |    |  |   | 1,880,089  |    |
| Otherexpenses                                                                                                                            |  |                           | 17,667     |                         |  |   | 20,442     |    |  |   | 63,415     |    |  |   | 64,679     |    |
|                                                                                                                                     |  |                           | 1,157,278  |                         |  |   | 1,262,809  |    |  |   | 3,834,465  |    |  |   | 6,051,173  |    |
| Net income (loss)                                                                                                                        |  |                           | 381,002    |                         |  |   | (1,734,480 | )  |  |   | (5,272,212 | )  |  |   | (3,956,923 | )  |
| Additions—LimitedPartners                                                                                                          |  |                           | —    |                         |  |   | —    |    |  |   | —    |    |  |   | 1,995      |    |
| Redemptions—LimitedPartners                                                                                                        |  |                           | (1,491,293 | )                       |  |   | (1,171,949 | )  |  |   | (4,103,618 | )  |  |   | (4,641,088 | )  |
| Net decrease inPartners'capital                                                                                                          |  |                           | (1,110,291 | )                       |  |   | (2,906,429 | )  |  |   | (9,375,830 | )  |  |   | (8,596,016 | )  |
| Partners' capital, beginningof period                                                                                                    |  |                           | 60,965,319 |                         |  |   | 66,037,759 |    |  |   | 69,230,858 |    |  |   | 71,727,346 |    |
| Partners' capital, end ofperiod                                                                                                          |  | $                              | 59,855,028 |                         |  | $      | 63,131,330 |    |  | $      | 59,855,028 |    |  | $      | 63,131,330 |    |
| Net asset value per Redeemable Unit (37,073.8018 and40,994.5419 Redeemble Units outstanding at September 30, 2005 and 2004,respectively) |  | $                              | 1,614.48   |                         |  | $      | 1,539.99   |    |  | $      | 1,614.48   |    |  | $      | 1,539.99   |    |
| Net income (loss) per Redeemable Unit of Limited PartnershipInterest and General Partner Unitequivalent                                  |  | $                              | 9.92       |                         |  | $      | (41.39     | )  |  | $      | (131.88    | )  |  | $      | (96.65     | )  |
|                                                                                                                                          |

See Accompanying Notes toFinancial Statements.

6

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Smith Barney Diversified Futures FundL.P. Statements of CashFlows(Unaudited)

|                                                                                                  |  |                                |             |                              |  |        |             |         |  |        |             |         |  |        |            |         |  |  |
|--------------------------------------------------------------------------------------------------|--|--------------------------------|-------------|------------------------------|--|--------|-------------|---------|--|--------|-------------|---------|--|--------|------------|---------|--|--|
|                                                                                             |  | ThreeMonths EndedSeptember 30, |             | Nine MonthsEndedSeptember30, |
|                                                                                             |  | 2005                           |             | 2004                         |  | 2005   |             | 2004    |
| Cashflows from operating activities:                                                             |  |                           |        |                         |  |   |        |    |  |   |        |    |  |   |       |    |
| Net gain(loss)                                                                                   |  | $                              | 381,002     |                         |  | $      | (1,734,480  | )  |  | $      | (5,272,212  | )  |  | $      | (3,956,923 | )  |
| Adjustmentsto reconcile net income (loss) to net cash provided by (used in)operating activities: |  |                           |        |                         |  |   |        |    |  |   |        |    |  |   |       |    |
| Changes inoperating assets and liabilities:                                                      |  |                           |        |                         |  |   |        |    |  |   |        |    |  |   |       |    |
| (Increase)decrease in restrictedcash                                                             |  |                           | 5,393,223   |                         |  |   | (2,584,548  | )  |  |   | 7,047,428   |    |  |   | 3,699,700  |    |
| (Increase)decrease in investment in Partnership at fairvalue                                     |  |                           | (11,274,601 | )                       |  |   | —     |    |  |   | (27,701,725 | )  |  |   | —    |    |
| (Increase)decrease in net unrealized appreciation on open futures positions                      |  |                           | 1,333,396   |                         |  |   | (3,122,358  | )  |  |   | 1,429,663   |    |  |   | 554,845    |    |
| (Increase)decrease in unrealized appreciation on open forward contracts                          |  |                           | 113,511     |                         |  |   | (812,292    | )  |  |   | 1,811,623   |    |  |   | 2,950,471  |    |
| (Increase)decrease in interest     receivable                                |  |                           | 18,581      |                         |  |   | (14,779     | )  |  |   | 34,883      |    |  |   | (21,133    | )  |
| Increase(decrease) in unrealized depreciation on open futurespositions                           |  |                           | —     |                         |  |   | (509,608    | )  |  |   | —     |    |  |   | —    |    |
| Increase(decrease) in unrealized depreciation on open forward contracts                          |  |                           | (171,067    | )                       |  |   | (101,504    | )  |  |   | (1,694,899  | )  |  |   | (1,323,006 | )  |
| Accruedexpenses:                                                                                 |  |                           |        |                         |  |   |        |    |  |   |        |    |  |   |       |    |
| Increase (decrease) in commissions                                                               |  |                           | (5,520      | )                       |  |   | (16,166     | )  |  |   | (56,003     | )  |  |   | (56,365    | )  |
| Increase(decrease) in management fees                                                            |  |                           | (1,457      | )                       |  |   | (6,285      | )  |  |   | (20,007     | )  |  |   | (21,718    | )  |
| Increase(decrease) in incentive fees                                                             |  |                           | (142,694    | )                       |  |   | —     |    |  |   | (78,926     | )  |  |   | (761,281   | )  |
| Increase(decrease) in other                                                                      |  |                           | (18,997     | )                       |  |   | 12,902      |    |  |   | (5,571      | )  |  |   | 35,563     |    |
| Netcash provided by (used in)     operating activities                       |  |                           | (4,374,623  | )                       |  |   | (8,889,118  | )  |  |   | (24,505,746 | )  |  |   | 1,100,153  |    |
| Cashflows from financing activities:                                                             |  |                           |        |                         |  |   |        |    |  |   |        |    |  |   |       |    |
| Proceedsfrom additions—Limited Partners                                                    |  |                           | —     |                         |  |   | —     |    |  |   | —     |    |  |   | 1,995      |    |
| Paymentsfor redemptions—Limted Partners                                                    |  |                           | (1,433,605  | )                       |  |   | (1,841,996  | )  |  |   | (4,796,045  | )  |  |   | (5,080,026 | )  |
| Netcash provided by (used in)     financing activities                       |  |                           | (1,433,605  | )                       |  |   | (1,841,996  | )  |  |   | (4,796,045  | )  |  |   | (5,078,031 | )  |
| Netchange in cash                                                                                |  |                           | (5,808,228  | )                       |  |   | (10,731,114 | )  |  |   | (29,301,791 | )  |  |   | (3,977,878 | )  |
| Unrestrictedcash, at beginning of period                                                         |  |                           | 21,068,725  |                         |  |   | 61,357,416  |    |  |   | 44,562,288  |    |  |   | 54,604,180 |    |
| Unrestrictedcash, at end of period                                                               |  | $                              | 15,260,497  |                         |  | $      | 50,626,302  |    |  | $      | 15,260,497  |    |  | $      | 50,626,302 |    |
|                                                                                                  |

See Accompanying Notes to FinancialStatements.

7

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SmithBarney Diversified Futures Fund L.P.Notes to FinancialStatementsSeptember 30, 2005(Unaudited)

1.    General:

Smith Barney Diversified Futures Fund L.P. (the"Partnership") is a limited partnershiporganized under the laws of the State of New York on August 13, 1993 toengage in the speculative trading of a diversified portfolio ofcommodity interests including futures contracts, options and forwardcontracts. The commodity interests that are traded by the Partnershipare volatile and involve a high degree of market risk. The Partnershipcommenced trading operations on January 12, 1994.

CitigroupManaged Futures LLC acts as the general partner (the"General Partner") of the Partnership. ThePartnership's commodity broker is Citigroup Global Markets Inc.("CGM"). CGM is an affiliate of the GeneralPartner. The General Partner is wholly owned by Citigroup GlobalMarkets Holdings Inc. ("CGMHI"), which is thesole owner of CGM. CGMHI is a wholly owned subsidiary of Citigroup Inc.("Citigroup"). As of September 30, 2005, alltrading decisions are made for the Partnership by Campbell &Company, Inc. ("Campbell"), WillowbridgeAssociates, Inc. ("Willowbridge"), WintonCapital Management Limited ("Winton") andGraham Capital Management L.P. ("Graham")(each an "Advisor" and collectively, the"Advisors").

The accompanyingfinancial statements are unaudited but, in the opinion of management,include all adjustments, consisting only of normal recurringadjustments, necessary for a fair presentation of thePartnership's financial condition at September 30, 2005 andDecember 31, 2004 and the results of its operations and cash flows forthe three and nine months ended September 30, 2005 and 2004. Thesefinancial statements present the results of interim periods and do notinclude all disclosures normally provided in annual financialstatements. You should read these financial statements together withthe financial statements and notes included in the Partnership'sannual report on Form 10-K filed with the Securities and ExchangeCommission for the year ended December 31, 2004.

Due to thenature of commodity trading, the results of operations for the interimperiods presented should not be considered indicative of the resultsthat may be expected for the entire year.

2.    FinancialHighlights:

Changes in Net Asset Value per Redeemable Unit ofLimited Partnership Interest for the three and nine months endedSeptember 30, 2005 and 2004 were asfollows:

|                                                        |  |                                |          |                             |  |        |          |         |  |        |          |         |  |        |          |         |  |  |
|--------------------------------------------------------|--|--------------------------------|----------|-----------------------------|--|--------|----------|---------|--|--------|----------|---------|--|--------|----------|---------|--|--|
|                                                   |  | ThreeMonths EndedSeptember 30, |          | Nine MonthsEndedSeptember30 |
|                                                   |  | 2005                           |          | 2004                        |  | 2005   |          | 2004    |
| Netrealized and unrealized gains(losses)*              |  | $                              | 15.10    |                        |  | $      | (37.75   | )  |  | $      | (110.35  | )  |  | $      | (38.41   | )  |
| Interestincome                                         |  |                           | 2.80     |                        |  |   | 4.15     |    |  |   | 10.10    |    |  |   | 10.34    |    |
| Expenses**                                             |  |                           | (7.98    | )                      |  |   | (7.79    | )  |  |   | (31.63   | )  |  |   | (68.58   | )  |
| Increase(decrease) for the period                      |  |                           | 9.92     |                        |  |   | (41.39   | )  |  |   | (131.88  | )  |  |   | (96.65   | )  |
| NetAsset Value per Redeemable Unit, beginning ofperiod |  |                           | 1,604.56 |                        |  |   | 1,581.38 |    |  |   | 1,746.36 |    |  |   | 1,636.64 |    |
| NetAsset Value per Redeemable Unit, end ofperiod       |  | $                              | 1,614.48 |                        |  | $      | 1,539.99 |    |  | $      | 1,614.48 |    |  | $      | 1,539.99 |    |
|                                                        |

|   |                                |
|---|--------------------------------|
| * | Includesbrokerage commissions. |

|    |                                |
|----|--------------------------------|
| ** | Excludes brokeragecommissions. |

8

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SmithBarney Diversified Futures Fund L.P.Notes to FinancialStatementsSeptember 30, 2005(Unaudited)

Financial Highlights(continued):

|                                              |  |                                |         |                             |  |        |         |          |  |        |        |          |  |        |        |          |  |  |
|----------------------------------------------|--|--------------------------------|---------|-----------------------------|--|--------|---------|----------|--|--------|--------|----------|--|--------|--------|----------|--|--|
|                                         |  | ThreeMonths EndedSeptember 30, |         | NineMonthsEndedSeptember30, |
|                                         |  | 2005                           |         | 2004                        |  | 2005   |         | 2004     |
| Ratioto average net assets: ***              |  |                           |    |                        |  |   |    |     |  |   |   |     |  |   |   |     |
| Netinvestment loss before incentive fees**** |  |                           | (6.9    | )%                     |  |   | (6.8    | )%  |  |   | (6.8   | )%  |  |   | (7.1   | )%  |
| Operatingexpenses                            |  |                           | 7.6     | %                      |  |   | 7.9     | %   |  |   | 7.6    | %   |  |   | 8.0    | %   |
| Incentivefees                                |  |                           | — | %                      |  |   | — | %   |  |   | 0.5    | %   |  |   | 2.7    | %   |
| Totalexpenses                                |  |                           | 7.6     | %                      |  |   | 7.9     | %   |  |   | 8.1    | %   |  |   | 10.7   | %   |
| Totalreturn:                                 |  |                           |    |                        |  |   |    |     |  |   |   |     |  |   |   |     |
| Total return before incentivefees            |  |                           | 0.6     | %                      |  |   | (2.6    | )%  |  |   | (7.1   | )%  |  |   | (3.1   | )%  |
| Incentivefees                                |  |                           | — | %                      |  |   | — | %   |  |   | (0.5   | )%  |  |   | (2.8   | )%  |
| Totalreturn after incentivefees              |  |                           | 0.6     | %                      |  |   | (2.6    | )%  |  |   | (7.6   | )%  |  |   | (5.9   | )%  |
|                                              |

|     |                                        |
|-----|----------------------------------------|
| *** | Annualized(other than incentive fees). |

|      |                                                                   |
|------|-------------------------------------------------------------------|
| **** | Interest income less total expenses(exclusive of incentive fees). |

The above ratios mayvary for individual investors based on the timing of capitaltransactions during the period. Additionally, these ratios arecalculated for the Limited Partner class using the LimitedPartners' share of income, expenses and average net assets.

3.    Trading Activities:

The Partnership wasformed for the purpose of trading contracts in a variety of commodityinterests, including derivative financial instruments and derivativecommodity instruments. The results of the Partnership's tradingactivities are shown in the Statements of Income and Expenses andPartners' Capital and are discussed in Item 2, Management'sDiscussion and Analysis of Financial Condition and Results ofOperations.

The Customer Agreement between the Partnership andCGM gives the Partnership the legal right to net unrealized gains andlosses on open futures positions.

All of the commodity interestsowned by the Partnership are held for trading purposes. The averagefair values of these interests during the nine and twelve months endedSeptember 30, 2005 and December 31, 2004, based on a monthlycalculation, were $588,927 and $2,973,373, respectively. The fairvalues of these commodity interests, including options thereon, ifapplicable, at September 30, 2005 and December 31, 2004, were $379,473and $1,925,860, respectively. Fair values for exchange traded commodityfutures and options are based on quoted market prices for those futuresand options. Fair values for all other financial instruments for whichmarket quotations are not readily available are based on calculationsapproved by the General Partner.

4.    Investment inPartnerships:

Effective November 1, 2004, the Partnershipallocated capital for trading to the CMF Winton Master Fund L.P., alimited partnership organized under the partnership laws of New YorkState (the "Winton Master"). The partnershippurchased 15,054.1946 Units of the Winton Master with cash equal to$14,251,586, and a contribution of open commodity futures and forwardpositions with a fair value of $802,609. The Winton Master was formedin order to permit commodity pools managed now or in the future byWinton, to invest together in one trading vehicle. The General Partneris the Managing Member of the Winton Master. Individual and pooledaccounts currently managed by Winton, including the 

9

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SmithBarney Diversified Futures Fund L.P.Notes to FinancialStatementsSeptember 30, 2005(Unaudited)

Partnership (collectively, the"Feeder Funds"), are permitted to be anon-managing member of the Winton Master. The General Partner andWinton believe that trading through this structure should promoteefficiency and economy in the trading process. Expenses to investors asa result of the investment in the Winton Master are approximately thesame and redemption rights are not affected.

EffectiveJanuary 1, 2005, the assets allocated to Campbell for trading wereinvested in the CMF Campbell Master Fund L.P. ("CampbellMaster"), a limited liability partnership organized underthe partnership laws of the State of New York. The Partnershippurchased 19,621.1422 Units of Campbell Master with cash equal to$19,428,630, and a contribution of open commodity futures and forwardpositions with a fair value of $192,512. Campbell Master was formed inorder to permit commodity pools managed now or in the future usingCampbell's Financials Metals and Energy("FME") Portfolio, to invest together in onetrading vehicle. The General Partner is the Managing Member of CampbellMaster. Individual and pooled accounts currently managed by Campbell,including the Partnership (collectively, the "FeederFunds"), are permitted to be a non-managing member ofCampbell Master. The General Partner and Campbell believe that tradingthrough this structure should promote efficiency and economy in thetrading process. Expenses to investors as a result of the investment inCampbell Master are approximately the same and redemption rights arenot affected.

Effective July  1, 2005, the assetsallocated to Willowbridge for trading were invested in the CMFWillowbridge Master Fund L.P. ("WillowbridgeMaster"), a limited liability partnership organized underthe partnership laws of the State of New York. The partnershippurchased 12,259.3490 Units of Willowbridge Master with cash equal to$11,118,119, and a contribution of open commodity futures and forwardpositions with a fair value of $1,141,230. Willowbridge Master wasformed in order to permit commodity pools managed now or in the futureby using Willowbridge's Argo Trading Program, to invest togetherin one trading vehicle. The General Partner is the Managing member ofWillowbridge Master. Individual and pooled accounts currently managedby Willowbridge, including the Partnership (collectively, the"Feeder Funds"), are permitted to be anon-managing member of Willowbridge Master. The General Partner andWillowbridge believe that trading through this master/feeder structureshould promote efficiency and economy in the trading process. Expensesto investors as a result of the investment in Willowbridge Master areapproximately the same and redemption rights are notaffected.

The Winton Master's, CampbellMaster's and Willowbridge Master's trading of futures,forwards and options contracts, if applicable, on commodities is doneprimarily on United States of America commodity exchanges and foreigncommodity exchanges. The Masters all engage in such trading throughcommodity brokerage accounts maintained with CGM.

Anon-managing member/limited partner may withdraw all or part of itscapital contribution and undistributed profits, if any, from the WintonMaster, Campbell Master and Willowbridge Master (the"Master Funds") in multiples of the net assetvalue per unit of limited partnership interest as of the last day of amonth after a request for redemption has been made to the managingMember/General Partner at least 3 days in advance of month-end.

Management and incentive fees are not directly charged tothe investments presented below. These fees are charged at thePartnership level. All exchange, clearing, user, give-up, floorbrokerage and National Futures Association fees are borne by the MasterFunds. All other fees, including CGM's direct brokeragecommission, are charged at the Partnership level.

As ofSeptember 30, 2005 and December 31, 2004 the Partnership owned9.0% and 14.0%, respectively of the Winton Master. AtSeptember 30, 2005, the Partnership owned 4.9% of CampbellMaster. At September 30, 2005, the Partnership owned 7.6% ofWillowbridge Master. It is Winton's, Campbell's andWillowbridge's intention to continue to invest the assetsallocated to each by the Partnership in the Winton Master, CampbellMaster and Willowbridge Master. The performance of the partnership isdirectly affected by the performance of the Master Funds.

10

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SmithBarney Diversified Futures Fund L.P.Notes to FinancialStatementsSeptember 30, 2005(Unaudited)

Summarized information reflecting thetotal assets, liabilities and capital for the Master Funds are shown inthe followingtables.

|                    |  |                          |             |                                |  |                            |            |                     |  |                       |             |        |  |                    |  |        |         |        |  |  |  |  |
|--------------------|--|--------------------------|-------------|--------------------------------|--|----------------------------|------------|---------------------|--|-----------------------|-------------|--------|--|--------------------|--|--------|---------|--------|--|--|--|--|
|               |  | September30, 2005        |             |                           |  |                       |
|               |  | Investments' TotalAssets |             | Investments' Total Liabilities |  | Investments' Total Capital |            | InvestmentObjective |  | Redemptions Permitted |
| Campbell Master    |  | $                        | 327,642,354 |                           |  | $                          | 20,278,272 |                |  | $                     | 307,364,082 |   |  | FMEPortfolio       |  |   | Monthly |   |
| WintonMaster       |  |                     | 178,028,295 |                           |  |                       | 473,861    |                |  |                  | 177,554,434 |   |  | CommodityPortfolio |  |   | Monthly |   |
| WillowbridgeMaster |  |                     | 167,925,751 |                           |  |                       | 367,651    |                |  |                  | 167,558,100 |   |  | CommodityPortfolio |  |   | Monthly |   |
| Total              |  | $                        | 673,596,400 |                           |  | $                          | 21,119,784 |                |  | $                     | 652,476,616 |   |  |               |  |   |    |   |
|                    |

|               |  |                          |             |                                |  |                            |           |                     |  |                       |             |        |  |                    |  |        |         |        |  |  |  |  |
|---------------|--|--------------------------|-------------|--------------------------------|--|----------------------------|-----------|---------------------|--|-----------------------|-------------|--------|--|--------------------|--|--------|---------|--------|--|--|--|--|
|          |  | December31, 2004         |             |                           |  |                       |
|          |  | Investments' TotalAssets |             | Investments' Total Liabilities |  | Investments' Total Capital |           | InvestmentObjective |  | Redemptions Permitted |
| Winton Master |  | $                        | 116,230,069 |                           |  | $                          | 1,104,740 |                |  | $                     | 115,125,329 |   |  | CommodityPortfolio |  |   | Monthly |   |
|               |

Summarizedinformation reflecting the Partnership's investment in, and theoperations of the Master Funds are as shown in the followingtables.

|                    |  |                              |       |                                              |  |              |            |                     |  |        |          |                  |  |                     |        |                       |  |        |       |        |  |        |          |         |  |                    |  |        |         |        |  |  |  |  |
|--------------------|--|------------------------------|-------|----------------------------------------------|--|--------------|------------|---------------------|--|--------|----------|------------------|--|---------------------|--------|-----------------------|--|--------|-------|--------|--|--------|----------|---------|--|--------------------|--|--------|---------|--------|--|--|--|--|
|               |  | September30, 2005            |       | For the three months ended September 30,2005 |  |         |            |                |
| Investment         |  | %of Partnership's Net Assets |       | FairValue                                    |  | Income(loss) |            | ExpensesCommissions |  | Other  |          | NetIncome (Loss) |  | InvestmentObjective |        | Redemptions Permitted |
| CampbellMaster     |  |                         | 25.06 | %                                       |  | $            | 14,998,415 |                |  | $      | 27,321   |             |  | $                   | 5,680  |                  |  | $      | 686   |   |  | $      | 20,955   |    |  | FMEPortfolio       |  |   | Monthly |   |
| WintonMaster       |  |                         | 26.82 | %                                       |  |         | 16,056,163 |                |  |   | (154,146 | )           |  |                | 34,418 |                  |  |   | 1,613 |   |  |   | (190,177 | )  |  | CommodityPortfolio |  |   | Monthly |   |
| WillowbridgeMaster |  |                         | 21.37 | %                                       |  |         | 12,789,036 |                |  |   | 706,653  |             |  |                | 15,831 |                  |  |   | 1,153 |   |  |   | 689,669  |    |  | CommodityPortfoilo |  |   | Monthly |   |
| Total              |  |                         | 73.25 | %                                       |  | $            | 43,843,614 |                |  | $      | 579,828  |             |  | $                   | 55,929 |                  |  | $      | 3,452 |   |  | $      | 520,447  |    |  |               |  |   |    |   |
|                    |

|                    |        |                                  |       |                                             |  |              |            |                     |  |                     |           |                      |  |                     |         |                       |  |        |        |        |  |        |           |        |  |                    |  |        |         |        |  |  |  |  |
|--------------------|--------|----------------------------------|-------|---------------------------------------------|--|--------------|------------|---------------------|--|---------------------|-----------|----------------------|--|---------------------|---------|-----------------------|--|--------|--------|--------|--|--------|-----------|--------|--|--------------------|--|--------|---------|--------|--|--|--|--|
|               |        | September30, 2005                |       | For the nine months ended September 30,2005 |  |         |            |                |
| Investment         |        | %of Partnership's Net Assets     |       | FairValue                                   |  | Income(loss) |            | ExpensesCommissions |  | Other               |           | NetIncome (Loss)     |  | InvestmentObjective |         | Redemptions Permitted |
| CampbellMaster     |        |                             | 25.06 | %                                      |  | $            | 14,998,415 |                |  | $                   | 1,563,164 |                 |  | $                   | 20,621  |                  |  | $      | 2,395  |   |  | $      | 1,540,148 |   |  | FMEPortfolio       |  |   | Monthly |   |
| WintonMaster       |        |                             | 26.82 | %                                      |  |         | 16,056,163 |                |  |                | 2,119,232 |                 |  |                | 85,386  |                  |  |   | 5,481  |   |  |   | 2,028,365 |   |  | CommodityPortfolio |  |   | Monthly |   |
| WillowbridgeMaster |        |                             | 21.37 | %                                      |  |         | 12,789,036 |                |  |                | 706,653   |                 |  |                | 15,831  |                  |  |   | 1,153  |   |  |   | 689,669   |   |  | CommodityPortfoilo |  |   | Monthly |   |
| Total              |        |                             | 73.25 | %                                      |  | $            | 43,843,614 |                |  | $                   | 4,389,049 |                 |  | $                   | 121,838 |                  |  | $      | 9,029  |   |  | $      | 4,258,182 |   |  |               |  |   |    |   |
|               |        | **Forthe year December 31,2004** |       |                                        |  |         |            |                |  | InvestmentObjective |           | RedemptionsPermitted |
|               |   |                             |       | %of Partnership'sNetAssets                  |  | FairValue    |            |                |  |                |           |                 |  |                |         |
| WintonMaster       |        |                             | 23.32 | %                                      |  | $            | 16,141,889 |                |  | $                   | —   |                 |  |                |    |                  |  |   |   |   |  |   |      |   |  | CommodityPortfolio |  |   | Monthly |   |
|                    |

11

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SmithBarney Diversified Futures Fund L.P.Notes to FinancialStatementsSeptember 30, 2005(Unaudited)

5.    Financial Instrument Risks:

In the normal course of its business, the Partnership is party tofinancial instruments with off-balance sheet risk, including derivativefinancial instruments and derivative commodity instruments. Thesefinancial instruments may include forwards, futures and options, whosevalues are based upon an underlying asset, index, or reference rate,and generally represent future commitments to exchange currencies orcash flows, to purchase or sell other financial instruments at specificterms at specified future dates, or, in the case of derivativecommodity instruments, to have a reasonable possibility to be settledin cash, through physical delivery or with another financialinstrument. These instruments may be traded on an exchange orover-the-counter ("OTC"). Exchange-tradedinstruments are standardized and include futures and certain optioncontracts. OTC contracts are negotiated between contracting parties andinclude forwards and certain options. Each of these instruments issubject to various risks similar to those related to the underlyingfinancial instruments including market and credit risk. In general, therisks associated with OTC contracts are greater than those associatedwith exchange-traded instruments because of the greater risk of defaultby the counterparty to an OTC contract.

Market risk is thepotential for changes in the value of the financial instruments tradedby the Partnership due to market changes, including interest andforeign exchange rate movements and fluctuations in commodity orsecurity prices. Market risk is directly impacted by the volatility andliquidity in the markets in which the related underlying assets aretraded.

Credit risk is the possibility that a loss may occur dueto the failure of a counterparty to perform according to the terms of acontract. Credit risk with respect to exchange traded instruments isreduced to the extent that an exchange or clearing organization acts asa counterparty to the transactions. The Partnership's risk ofloss in the event of counterparty default is typically limited to theamounts recognized as unrealized appreciation in the statements offinancial condition and not represented by the contract or notionalamounts of the instruments. The Partnership has credit risk andconcentration risk because the sole counterparty or broker with respectto the Partnership's assets is CGM.

The General Partnermonitors and controls the Partnership's risk exposure on a dailybasis through financial, credit and risk management monitoring systems,and accordingly believes that it has effective procedures forevaluating and limiting the credit and market risks to which thePartnership is subject. These monitoring systems allow the GeneralPartner to statistically analyze actual trading results withrisk-adjusted performance indicators and correlation statistics. Inaddition, on-line monitoring systems provide account analysis offutures, forwards and options positions by sector, margin requirements,gain and loss transactions and collateral positions.

Themajority of these instruments mature within one year of September 30,2005. However, due to the nature of the Partnership's business,these instruments may not be held to maturity.

12

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Item2.    Management's Discussion and Analysis of FinancialCondition and Results of Operations.

Liquidity and CapitalResources

The Partnership does not engage in the sale ofgoods or services. Its only assets are its equity in its commodityfutures trading account, consisting of cash, net unrealizedappreciation on open futures and forward contracts and interestreceivable. Because of the low margin deposits normally required incommodity futures trading, relatively small price movements may resultin substantial losses to the Partnership. While substantial lossescould lead to a decrease in liquidity, no such losses occurred duringthe third quarter of 2005.

The Partnership's capitalconsists of the capital contributions of the partners as increased ordecreased by realized and/or unrealized gains or losses on commodityfutures trading, expenses, interest income, additions and redemptionsof Redeemable Units and distributions of profits, if any.

Forthe nine months ended September 30, 2005, Partnership capital decreased13.5% from $69,230,858 to $59,855,028. This decrease wasattributable to a net loss from operations of $5,272,212 coupled withthe redemption of 2,569.1540 Redeemable Units totaling $4,103,618.Persons investing $1,000,000 or more will pay a reduced brokerage fee,receiving the differential in the form of additional Redeemable Units.Future redemptions can impact the amount of funds available forinvestment in commodity contract positions in subsequent periods.

Critical Accounting Policies

The preparationof financial statements in conformity with accounting principlesgenerally accepted in the United States of America requires managementto make estimates and assumptions that affect the reported amounts ofassets and liabilities, disclosures of contingent assets andliabilities at the date of the financial statements and reportedamounts of revenues and expenses during the reporting period. Actualresults could differ from these estimates.

All commodityinterests (including derivative financial instruments and derivativecommodity instruments) are used for trading purposes. The commodityinterests are recorded on trade date and open contracts are recorded inthe statements of financial condition at fair value on the lastbusiness day of the period, which represents market value for thosecommodity interests for which market quotations are readily availableor other measures of fair value deemed appropriate by management of theGeneral Partner for those commodity interests and foreign currenciesfor which market quotations are not readily available. Investments incommodity interests denominated in foreign currencies are translatedinto U.S. dollars at the exchange rates prevailing on the last businessday of the period. Realized gains (losses) and changes in unrealizedvalues on open positions are recognized in the period in which thecontract is closed or the changes occur and are included in net gains(losses) on trading of commodity interests. The investment in otherPartnerships are recorded at fair value, based upon thePartnership's proportionate interest held.

Foreigncurrency contracts are those contracts where the Partnership agrees toreceive or deliver a fixed quantity of foreign currency for anagreed-upon price on an agreed future date. Foreign currency contractsare valued daily, and the Partnership's net equity therein,representing unrealized gain or loss on the contracts as measured bythe difference between the forward foreign exchange rates at the dateof entry into the contracts and the forward rates at the reportingdates, is included in the statement of financial condition. Realizedgains (losses) and changes in unrealized values on foreign currencycontracts are recognized in the period in which the contract is closedor the changes occur and are included in the statements of income andexpenses and partners' capital.

Results ofOperations

During the Partnership's third quarter of2005 the net asset value per Redeemable Unit increased 0.6% from$1,604.56 to $1,614.48 as compared to a decrease of 2.6% in thethird quarter of 2004. The Partnership experienced a net trading gainbefore brokerage commissions and related fees in the third quarter of2005 of $1,432,728. Gains were primarily attributable to the trading ofcommodity futures in 

13

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energy, grains, metals and indices and werepartially offset by losses in currencies, U.S. interest rates andnon-U.S interest rates, livestock, softs and lumber. The Partnershipexperienced a net trading loss before brokerage commissions and relatedfees in the third quarter of 2004 of $643,816. Losses were primarilyattributable to the trading of commodity futures in currencies, U.S.interest rates, livestock, metals, softs and indices and were partiallyoffset by gains in energy, grains, non-U.S. interest rates andlumber.

Third Quarter results reflect strong trends andprofitable trading in the energy and stock index markets withdirectionless and volatile prices in interest rates and currenciesproducing losses. Periodic trading opportunities in metals and softsgenerated small gains. The overall net result was positive for thequarter.

The quarter started with reversing trends in U.S. andEuropean fixed income instruments as yields began to rise prompted byU.S. central bank rate increases. This volatility continued through theremainder of the quarter and led to the greatest sector loss for thePartnership. The most profitable trends for the quarter, however, werein the energy markets as crude oil and natural gas prices rose tohistoric levels. Substantial profits were made in trading these marketswhich saw recent trends exacerbated by the impact of the two Gulf Coasthurricanes.

Prospects of improving economic conditions in Japanled to strong profits in Nikkei stock index trading and combined withsolid second quarter corporate profits led to profits in U.S. stockindex trading as well. Offsetting profitable stock index trading werelosses in foreign currency trading. The most notable event in thismarkets was the Chinese government decision to unpeg the yuan from theU.S. dollar and the yuan's subsequent upward revaluation. Thisled to near continuous adjustments in the relation of the majorcurrencies throughout the quarter and range-bound trading in the U.S.dollar. While other commodity markets produced lackluster price trends,precious metals, particularly gold rose to over $400 an ounce, itshighest level in 15 years and produced additional profits for thePartnership's Advisors.

During the Partnership's ninemonths ended September 30, 2005, the net asset value per RedeemableUnit decreased 7.6% from $1,746.36 to $1,614.48 as compared to adecrease of 5.9% for the nine months ended September 30, 2004.The Partnership experienced a net trading loss before commissions andrelated fees for the nine months ended September 30, 2005 of$1,827,589. Losses were primarily attributable to the trading ofcommodity futures in currencies, grains, U.S interest rates, livestock,metals and softs and were partially offset by gains in energy, non-U.S.interest rates, indices and lumber. The Partnership experienced a nettrading gain before brokerage commissions and related fees for the ninemonths ended September 30, 2004 of $1,655,783. Gains were primarilyattributable to the trading of commodity futures in energy, grains,non-U.S. interest rates, livestock and lumber and were partially offsetby losses in currencies, U.S. interest rates, metals, softs andindices.

Commodity futures markets are highly volatile. Thepotential for broad and rapid price fluctuations increases the risksinvolved in commodity trading, but also increases the possibility ofprofit. The profitability of the Partnership depends on the existenceof major price trends and the ability of the Advisors to correctlyidentify those price trends. Price trends are influenced by, amongother things, changing supply and demand relationships, weather,governmental, agricultural, commercial and trade programs and policies,national and international political and economic events and changes ininterest rates. To the extent that market trends exist and the Advisorsare able to identify them, the Partnership expects to increase capitalthrough operations.

Interest income on 80% of thePartnership's daily equity maintained in cash was earned at themonthly average 30-day U.S. Treasury bill rate determined weekly by CGMbased on the non-competitive yield on three month U.S. Treasury billsmaturing 30 days from the date in which such weekly rate is determined.CGM may continue to maintain the Partnership's assets in cashand/or place all of the Partnership's assets in 90-day Treasurybills and pay the Partnership 80% of the interest earned on theTreasury bills purchased. CGM will retain 20% of any interestearned on Treasury bills. Interest income for the three and nine monthsended September 30, 2005 decreased by $66,593 and $48,625,respectively, as compared to the corresponding periods in 2004. Thedecrease in interest income is primarily due to lower average netassets during the three and nine months ended September 30, 2005 ascompared to the corresponding periods in 2004.

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Brokerage commissions are calculated onthe Partnership's net asset value as of the last day of eachmonth and are affected by trading performance and redemptions.Accordingly, they must be compared in relation to the fluctuations inmonthly net asset values. Commissions and fees for the three and ninemonths ended September 30, 2005 decreased by $84,772 and $486,692,respectively, as compared to the corresponding periods in 2004. Thedecrease in brokerage commissions is due to lower average net assetsduring the three and nine months ended September 30, 2005 as comparedto the corresponding periods in 2004.

Management fees arecalculated on the portion of the Partnership's net asset valueallocated to each Advisor at the end of the month and, therefore, areaffected by trading performance and redemptions. Management fees forthe three and nine months ended September 30, 2005 decreased by $17,984and $145,031, respectively as compared to the corresponding periods in2004. The decrease in management fees is due to lower average netassets during the three and nine months ended September 30, 2005 ascompared to the corresponding periods in 2004.

Incentive feesare based on the new trading profits generated by each Advisor at theend of the quarter as defined in the advisory agreements between thePartnership, the General Partner and each Advisor. Trading performancefor the three and nine months ended September 30, 2005 resulted inincentive fees of $0 and $296,368, respectively. Trading performancefor the three and nine months ended September 30, 2004 resulted inincentive fees of $0 and $1,880,089, respectively.

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Item 3.    Quantitative and QualitativeDisclosures about Market Risk

The Partnership is a speculativecommodity pool. The market sensitive instruments held by it areacquired for speculative trading purposes, and all or substantially allof the Partnership's assets are subject to the risk of tradingloss. Unlike an operating company, the risk of market sensitiveinstruments is integral, not incidental, to the Partnership'smain line of business.

Market movements result in frequentchanges in the fair value of the Partnership's open positionsand, consequently, in its earnings and cash flow. ThePartnership's market risk is influenced by a wide variety offactors, including the level and volatility of interest rates, exchangerates, equity price levels, the value of financial instruments andcontracts, the diversification effects among the Partnership'sopen positions and the liquidity of the markets in which it trades.

The Partnership rapidly acquires and liquidates both long and shortpositions in a wide range of different markets. Consequently, it is notpossible to predict how a particular future market scenario will affectperformance, and the Partnership's past performance is notnecessarily indicative of its future results.

Value at Risk is ameasure of the maximum amount which the Partnership could reasonably beexpected to lose in a given market sector. However, the inherentuncertainty of the Partnership's speculative trading and therecurrence in the markets traded by the Partnership of market movementsfar exceeding expectations could result in actual trading ornon-trading losses far beyond the indicated Value at Risk or thePartnership's experience to date (i.e., "risk ofruin"). In light of the foregoing as well as the risks anduncertainties intrinsic to all future projections, the inclusion of thequantification in this section should not be considered to constituteany assurance or representation that the Partnership's losses inany market sector will be limited to Value at Risk or by thePartnership's attempts to manage its market risk. 

Exchangemaintenance margin requirements have been used by the Partnership asthe measure of its Value at Risk. Maintenance margin requirements areset by exchanges to equal or exceed the maximum losses reasonablyexpected to be incurred in the fair value of any given contract in95%-99% of any one-day interval. Maintenance margin hasbeen used rather than the more generally available initial margin,because initial margin includes a credit risk component, which is notrelevant to Value at Risk.

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The following table indicates the tradingValue at Risk associated with the Partnership's open positions bymarket category as of September 30, 2005 and the highest, lowest andaverage value during the three months ended September 30, 2005. Allopen position trading risk exposures of the Partnership have beenincluded in calculating the figures set forth below. As of September30, 2005, the Partnership's total capitalization was $59,855,028.There has been no material change in the trading Value at Riskinformation previously disclosed in the Partnership's AnnualReport on Form 10-K for the year ended December 31, 2004.

September 30, 2005(Unaudited)

|                                                 |  |               |         |                         |  |                                     |        |                  |  |                      |           |        |  |        |         |        |  |        |         |        |  |  |
|-------------------------------------------------|--|---------------|---------|-------------------------|--|-------------------------------------|--------|------------------|--|----------------------|-----------|--------|--|--------|---------|--------|--|--------|---------|--------|--|--|
|                                            |  |          |         |                    |  | ThreeMonths Ended September 30,2005 |
| MarketSector                                    |  | Value at Risk |         | % ofTotalCapitalization |  | HighValue atRisk                    |        | LowValue at Risk |  | AverageValue atRisk* |
| Currencies:                                     |  |          |    |                    |  |                                |   |             |  |                 |      |   |  |   |    |   |  |   |    |   |
|     OTC                     |  | $             | 256,063 |                    |  |                                | 0.43   | %           |  | $                    | 828,490   |   |  | $      | 61,678  |   |  | $      | 385,443 |   |
| Energy                                          |  |          | 86,500  |                    |  |                                | 0.14   | %           |  |                 | 366,000   |   |  |   | 49,000  |   |  |   | 124,833 |   |
| Grains                                          |  |          | 6,250   |                    |  |                                | 0.01   | %           |  |                 | 43,300    |   |  |   | 6,250   |   |  |   | 15,823  |   |
| InterestRatesU.S.                               |  |          | 10,224  |                    |  |                                | 0.02   | %           |  |                 | 226,950   |   |  |   | 1,535   |   |  |   | 14,604  |   |
| InterestRates Non-U.S.                          |  |          | 20,220  |                    |  |                                | 0.03   | %           |  |                 | 315,275   |   |  |   | 17,060  |   |  |   | 48,943  |   |
| Metals                                          |  |          |    |                    |  |                                |   |             |  |                 |      |   |  |   |    |   |  |   |    |   |
|     ExchangeTradedContracts |  |          | 16,000  |                    |  |                                | 0.03   | %           |  |                 | 16,000    |   |  |   | — |   |  |   | 5,333   |   |
|     OTC                     |  |          | 63,320  |                    |  |                                | 0.11   | %           |  |                 | 95,160    |   |  |   | 10,686  |   |  |   | 79,087  |   |
| Softs                                           |  |          | 46,297  |                    |  |                                | 0.08   | %           |  |                 | 61,240    |   |  |   | 9,784   |   |  |   | 41,592  |   |
| Indices                                         |  |          | 432,784 |                    |  |                                | 0.72   | %           |  |                 | 1,153,800 |   |  |   | 288,758 |   |  |   | 746,007 |   |
| Total                                           |  | $             | 937,658 |                    |  |                                | 1.57   | %           |  |                 |      |   |  |   |    |   |  |   |    |   |
|                                                 |

|   |                                     |
|---|-------------------------------------|
| * | Averageof month-end Values at Risk. |

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Item 4.    Controls and Procedures

The General Partner of the Partnership, with the participation ofthe General Partner's Chief Executive Officer and the ChiefFinancial Officer, has evaluated the effectiveness of the design andoperation of its disclosure controls and procedures (as defined inRules 13a-15(e) and 15d-15(e) of the Exchange Act) with respect to thePartnership as of the end of the period covered by the report, and,based on this evaluation, has concluded that these disclosure controlsand procedures are effective. Additionally, there were no significantchanges in the Partnership's internal controls or in otherfactors that could significantly affect these controls during theregistrant's last fiscal quarter, including any correctiveactions with regard to significant deficiencies and materialweaknesses.

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PART II.    OTHERINFORMATION

Item 1.    Legal Proceedings

Thefollowing information supplements and amends our discussion set forthunder Item, 3 "Legal Proceedings" in thePartnership's Annual Report on Form 10-K for the year endedDecember 31, 2004 and under Part II, Item 1, "LegalProceedings" in the Partnership's Quarterly Reporton Form 10-Q for the quarters ended March 31, 2005 and June 30,2005.

Enron Corp.

On August 4, 2005, a breach ofcontract action was filed in the United States District Court for theSouthern District of New York, WESTPAC BANKING CORPORATION v. CITIBANK,N.A. The complaint alleges that Citibank breached a representation andwarranty in a Credit Default Swap agreement entered into in December2000 concerning Enron.

On August 26, 2005, a group of 15plaintiffs filed an action in the United States District Court for theSouthern District of Texas, AVENUE CAPITAL MANAGEMENT II, L.P., ET AL.v. J.P. MORGAN-CHASE & CO., ET AL. The complaint names asdefendants Citigroup Inc., Citibank, N.A., Citigroup Global MarketsInc., and several J.P. Morgan entities and alleges fraud, breach offiduciary duty and breach of contract arising out of Enron bank debtincurred under two syndicated revolving credit facilities and asyndicated letter of credit facility.

WorldCom, Inc.

InSTURM, ET AL. v. CITIGROUP, ET AL., an NASD arbitration seeking verysignificant compensatory and punitive damages, Claimants' commonlaw claims, including fraud, arising out of alleged research analystconflicts of interest related to SSB research coverage of WorldCom,were heard this quarter.

Citigroup, along with other financialinstitution defendants, entered into a settlement in NEW YORK CITYEMPLOYEES' RETIREMENT SYSTEM v. EBBERS, ET AL., resolving allclaims against the Citigroup-related defendants in thisWorldCom-related action, which was brought by a plaintiff that optedout of the settlement of the WorldCom class action. The settlementamount is covered by existing litigation reserves.

Citigroupalong with other financial institutions and other defendants, enteredinto a settlement resolving all claims against the Citigroup-relateddefendants in 32 individual actions filed by a single law firm onbehalf of 70 institutional plaintiffs that have opted out of theWorldCom class action settlement. Plaintiffs in these actions assertedvarious claims under federal and state law, including, among otherthings, federal and state securities claims, fraud, negligentmisrepresentation and breach of fiduciary duty, in connection with theCitigroup-related defendants' research coverage, and underwritingof WorldCom securities. The settlement amount is covered by existinglitigation reserves.

Global Crossing

On September 12,2005, Citigroup entered into a settlement with the Global CrossingEstate Representative, resolving all claims pending in United StatesBankruptcy Court for the Southern District of New York against theCitigroup-related defendants. The settlement amount is covered byexisting litigation reserves.

Research

On September 27,2005, Citigroup entered into a memorandum of agreement settling allclaims against the Citigroup-related defendants in IN RE SALOMONANALYST AT&T LITIGATION, a putative class action alleging researchanalyst conflicts of interest. The settlement amount is covered byexisting litigation reserves. The settlement is subject to judicialapproval.

On September 22, 2005, Citigroup reached anagreement-in-principle to settle all claims against theCitigroup-related defendants in NORMAN v. SALOMON SMITH BARNEY, ET AL.,a putative class 

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action asserting violations of the InvestmentAdvisers Act of 1940 and various common law claims in connection withcertain investors who maintained guided portfolio management accountsat Smith Barney. The settlement amount is covered by existinglitigation reserves. The settlement is subject to judicialapproval.

On August 17, 2005, in DISHER v. CITIGROUP GLOBALMARKETS INC., the United States Court of Appeals for the SeventhCircuit reversed the district court's grant of plaintiffs'motion to remand the case to state court, and directed the districtcourt to dismiss the case as preempted under the Securities LitigationUniform Standards Act ("SLUSA"). The UnitedStates Supreme Court has granted review in another case involving SLUSAthat may affect the Seventh Circuit's dismissal of the Dishermatter.

Adelphia

In May and July of 2005, the UnitedStates District Court for the Southern District of New York grantedmotions to dismiss several claims, based on the running of applicablestatute of limitations, asserted in the putative class and individualactions being coordinated under IN RE ADELPHIA COMMUNICATIONSCORPORATION SECURITIES AND DERIVATIVE LITIGATION. With the exception ofone individual action that was dismissed with prejudice, the courtgranted the putative class and individual plaintiffs leave to re-pleadcertain of those claims the court found to be time-barred. Additionalmotions to dismiss the class complaint and the remaining individualcomplaints on other grounds remain pending.

IPO SecuritiesLitigation

On June 30, 2005, the United States Court of Appealsfor the Second Circuit entered an order in IN RE INITIAL PUBLICOFFERING SECURITIES LITIGATION agreeing to review the districtcourt's order granting plaintiffs' motion for classcertification.

IPO Antitrust Litigation

On September28, 2005 the United States Court of Appeals for the Second Circuit inIN RE INITIAL PUBLIC OFFERING ANTITRUST LITIGATION vacated the districtcourt's order dismissing these actions and remanded for furtherproceedings.

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Item 2.    Unregistered Sales of EquitySecurities and Use of Proceeds

Additional Redeemable Unitsoffered represent a reduced brokerage fee to existing limited partnerswho invested $1,000,000 or more.

The following chart sets forththe purchases of Redeemable Units by the Partnership.

|                                             |
|---------------------------------------------|
|                                             |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Period                                      |  | (a)TotalNumber of Shares(or Units) Purchased* |  | (b)Average PricePaid per Share(or Unit)** |  | (c) TotalNumber ofShares (or Units)Purchased as Partof PubliclyAnnouncedPlans or Programs |  | (d) Maximum Number(orApproximateDollar Value) ofShares (or Units)that May YetBePurchased Under thePlans orPrograms |
| July 1, 2005 – July 31, 2005          |  |   | 240.2938 |   |  | $ | 1,552.59 |   |  |   | N/A |   |  |   | N/A |   |
| August1, 2005 – August 31, 2005       |  |   | 499.6361 |   |  | $ | 1,652.37 |   |  |   | N/A |   |  |   | N/A |   |
| September1, 2005 – September 30, 2005 |  |   | 181.2538 |   |  | $ | 1,614.48 |   |  |   | N/A |   |  |   | N/A |   |
| Total                                       |  |   | 921.1837 |   |  | $ | 1,606.48 |   |  |   | N/A |   |  |   | N/A |   |
|                                             |

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|---|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| * | Generally,Limited Partners are permitted to redeem their Redeemable Units as ofthe end of each month on 10 days' notice to the General Partner.Under certain circumstances, the General Partner can compel redemptionbut, to date, the General Partner has not exercised this right.Purchases of Redeemable Units by the Partnership reflected in the chartabove were made in the ordinary course of the Partnership'sbusiness in connection with effecting redemptions for LimitedPartners. |

|    |                                                                                                                                        |
|----|----------------------------------------------------------------------------------------------------------------------------------------|
| ** | Redemptions ofRedeemable Units are effected as of the last day of each month at theNet Asset Value per Redeemable Unit as of that day. |

Item3.    Defaults Upon Senior Securities — None

Item4.    Submission of Matters to a Vote of Security Holders —None

Item 5.    Other Information — None

Item6.    Exhibits

The exhibits required to be filedby Item 601 of Regulation S-K are incorporated herein by reference tothe exhibit index of the Partnership's Annual Report on Form 10-Kfor the year ended December 31, 2004.

Exhibit- 31.1 — Rule 13a-14(a)/15d-14(a) Certification (Certification ofPresident and Director).

Exhibit - 31.2 —Rule 13a-14(a)/15d-14(a) Certification (Certification of ChiefFinancial Officer and Director).

Exhibit - 32.1— Section 1350 Certification (Certification of President andDirector).

Exhibit - 32.2 — Section 1350Certification (Certification of Chief Financial Officer andDirector).

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934,the registrant has duly caused this report to be signed on its behalfby the undersigned thereunto duly authorized.

|                                           |  |                                                             |  |        |  |  |  |  |  |  |
|-------------------------------------------|--|-------------------------------------------------------------|--|--------|--|--|--|--|--|--|
| SMITHBARNEY DIVERSIFIED FUTURES FUND L.P. |  |                                                        |
| By:                                       |  | CitigroupManaged FuturesLLC                                 |  |   |
|                                      |  | (GeneralPartner)                                            |  |   |
| By:                                       |  | /s/ David J.Vogel                                           |  |   |
|                                      |  | David J.VogelPresident and Director                         |  |   |
| Date:                                     |  | November 14,2005                                            |  |   |
| By:                                       |  | /s/Daniel R. McAuliffe, Jr.                                 |  |   |
|                                      |  | Daniel R. McAuliffe,Jr.Chief Financial Officer and Director |  |   |
| Date:                                     |  | November 14,2005                                            |  |   |
|                                           |

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