FORM 10-Q

                      SECURITIES AND EXCHANGE COMMISSION

                            WASHINGTON, D.C. 20549

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

                    OF THE SECURITIES EXCHANGE ACT OF 1934

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

                    OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarter ended June 30, 1997

Commission File Number 33-75056

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

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


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


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


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.
                              Yes   X    No


<PAGE>



                  SMITH BARNEY DIVERSIFIED FUTURES FUND L.P.
                                   FORM 10-Q
                                     INDEX


                                                                        Page
                                                                       Number

PART I - Financial Information:

            Item 1.     Financial Statements:

                        Statement of Financial Condition at
                        June 30, 1997 and December 31, 1996.               3

                        Statement of Income and Expenses and
                        Partners' Capital for the three and
                        six months ended June 30, 1997 and
                        1996.                                              4


                        Notes to Financial Statements                    5 - 8

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

PART II - Other Information                                                11


                                      2

<PAGE>

                                     PART I
                          ITEM 1. FINANCIAL STATEMENTS


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



                                                       JUNE 30,     DECEMBER 31,
                                                         1997          1996
                                                     ------------   ------------
ASSETS:                                              (Unaudited)


Equity in commodity futures trading account:
  Cash and cash equivalents                          $153,983,471   $170,574,018

  Net unrealized appreciation on open 
   futures contracts                                    4,784,924      6,887,203
  Commodity options owned, at market
   value (cost $103,817 and $607,539, in
    1997 and 1996, respectively)                           70,217        442,696

                                                     ------------   ------------

                                                      158,838,612    177,903,917

Interest receivable                                       495,679        558,298

                                                     ------------   ------------

                                                     $159,334,291   $178,462,215

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

LIABILITIES AND PARTNERS' CAPITAL:

Liabilities:
 Accrued expenses:
  Commissions                                        $    720,278   $    831,169
  Management fees                                         356,401        412,599
  Other                                                    91,919        108,043
  Incentive fees                                                -      3,476,717
  Redemptions payable                                   1,106,091      2,005,213
  Commodity options written, at market value
    (premiums received $83,070 in 1996)                         -         41,213

                                                     ------------   ------------
                                                        2,274,689      6,874,954

                                                     ------------   ------------
Partners' Capital:

General Partner, 2,048.9308 Unit
   equivalents outstanding in 1997 and 1996             2,473,141      2,561,901
Limited Partners, 128,070.6492 and
  135,181.6379 Units of Limited Partnership
  Interest outstanding in 1997 and 1996,
  respectively                                        154,586,461    169,025,360

                                                     ------------   ------------

                                                      157,059,602    171,587,261

                                                     ------------   ------------

                                                     $159,334,291   $178,462,215

                                                     ============   ============
See Notes to Financial Statements 

                                      3

<PAGE>




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



<TABLE>
<CAPTION>



                                                                         THREE-MONTHS ENDED                SIX-MONTHS ENDED
                                                                               JUNE 30,                         JUNE 30,
                                                                   ------------------------------    ------------------------------
                                                                        1997             1996             1997            1996
                                                                   ------------------------------    ------------------------------

<S>                                                                      <C>               <C>             <C>              <C>    

Income:
  Net gains on trading of commodity futures:
    Realized gains (losses) on closed positions                    $  (7,058,923)   $  11,020,258    $   1,480,735    $  10,177,362
    Change in unrealized gains/losses  on open positions              (3,733,550)      (2,260,925)      (2,012,893)     (11,092,765)

                                                                   -------------    -------------    -------------    -------------

                                                                     (10,792,473)       8,759,333         (532,158)        (915,403)
Less, brokerage commissions and clearing fees
  ( $80,128,  $96,741, $163,508  and $219,643,
   respectively)                                                      (2,465,556)      (2,677,183)      (5,130,100)      (5,574,564)
                                                                   -------------    -------------    -------------    -------------


  Net realized and unrealized gains (losses)                         (13,258,029)       6,082,150       (5,662,258)      (6,489,967)

  Interest income                                                      1,608,072        1,710,394        3,318,089        3,463,780
                                                                   -------------    -------------    -------------    -------------

                                                                     (11,649,957)       7,792,544       (2,344,169)      (3,026,187)

                                                                   -------------    -------------    -------------    -------------

Expenses:
  Management fees                                                      1,107,294        1,158,733        2,310,723        2,376,044
  Incentive fees                                                               0          446,772          747,694          446,772
  Other  expense                                                          46,979           66,353           96,138          154,972
                                                                   -------------    -------------    -------------    -------------

                                                                       1,154,273        1,671,858        3,154,555        2,977,788

                                                                   -------------    -------------    -------------    -------------


  Net income (loss)                                                  (12,804,230)       6,120,686       (5,498,724)      (6,003,975)


Additions                                                                252,639                0          252,639        2,035,483
Redemptions                                                           (3,737,803)     (13,674,871)      (9,281,574)     (25,381,740)

                                                                   -------------    -------------    -------------    -------------

Net decrease in Partners' capital                                    (16,289,394)      (7,554,185)     (14,527,659)     (29,350,232)

Partners' capital, beginning of period                               173,348,996      172,394,381      171,587,261      194,190,428
                                                                   -------------    -------------    -------------    -------------

Partners' capital, end of period                                   $ 157,059,602    $ 164,840,196    $ 157,059,602    $ 164,840,196

                                                                   =============    =============    =============    =============
Net asset value per Unit
  ( 130,119.5800 and 155,566.8362  Units outstanding
   at June 30, 1997 and 1996, respectively)                        $    1,207.04    $    1,059.61    $    1,207.04    $    1,059.61

                                                                   =============    =============    =============    =============
Net income (loss) per Unit of Limited Partnership
   Interest and General Partnership Unit equivalent                $      (96.46)   $       36.37    $      (43.32)   $      (32.05)

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

</TABLE>





                                      4

<PAGE>



                  SMITH BARNEY DIVERSIFIED FUTURES FUND L.P.
                         NOTES TO FINANCIAL STATEMENTS
                                 June 30, 1997
                                  (Unaudited)

1. General:

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

        Smith Barney Futures  Management  Inc. acts as the general  partner (the
"General Partner") of the Partnership. Smith Barney Inc. ("SB"), an affiliate of
the General Partner,  acts as commodity broker for the Partnership.  All trading
decisions  are made for the  Partnership  by Campbell & Company,  Inc.,  John W.
Henry & Company, Inc., Chesapeake Capital Corporation,  Abraham Trading Company,
Rabar Market Research, Inc. and AIS Futures Management, Inc. (collectively,  the
"Advisors").

      The accompanying financial statements are unaudited but, in the opinion of
management,  include  all  adjustments  (consisting  only  of  normal  recurring
adjustments)  necessary for a fair presentation of the  Partnership's  financial
condition at June 30, 1997 and the results of its  operations  for the three and
six months ended June 30, 1997 and 1996. These financial  statements present the
results of interim periods and do not include all disclosures  normally provided
in annual financial statements.  It is suggested that these financial statements
be read in conjunction  with the financial  statements and notes included in the
Partnership's  annual  report on Form 10-K filed with  Securities  and  Exchange
Commission for the year ended December 31, 1996.

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



                                      5

<PAGE>



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


2.   Net Asset Value Per Unit:

      Changes  in net asset  value per Unit for the three and six  months  ended
June 30, 1997 and 1996, were as follows:

                                 THREE-MONTHS ENDED        SIX-MONTHS ENDED
                                     JUNE  30,                 JUNE 30,
                                 1997         1996         1997         1996

Net realized and unrealized
 gains (losses)              $   (99.89)   $    36.12   $   (44.70)  $   (34.85)
Interest income                   12.16         10.32        24.72        20.26
Expenses                          (8.73)       (10.07)      (23.34)      (17.46)
                             ----------    ----------   ----------   ----------

Increase (decrease) for
 period                          (96.46)        36.37       (43.32)      (32.05)

Net Asset Value per Unit,
  beginning of period          1,303.50      1,023.24     1,250.36     1,091.66
                             ----------    ----------   ----------   ----------

Net Asset Value per Unit,
  end of period              $ 1,207.04    $ 1,059.61   $ 1,207.04   $ 1,059.61
                             ==========    ==========   ==========   ==========


3.  Trading Activities:

      The  Partnership  was formed for the  purpose  of trading  contracts  in a
variety of commodity interests,  including derivative financial  instruments and
derivative  commodity  instruments.  The  results of the  Partnership's  trading
activity are shown in the statements of income and expenses.

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

      All of the  commodity  interests  owned  by the  Partnership  are held for
trading purposes. The fair value of these commodity interests, including options
thereon,  at June 30, 1997 was  $4,855,141 and the average fair value during the
six months then ended, based on monthly calculation, was $9,389,130.

4.   Financial Instrument Risk:

      The Partnership is party to financial  instruments with off- balance sheet
risk,  including  derivative  financial  instruments  and  derivative  commodity
instruments,  in the normal course of its business.  These financial instruments
include forwards, futures

                                      6

<PAGE>



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

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

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

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

      The  notional  or  contractual  amounts  of these  instruments,  while not
recorded in the financial  statements,  reflect the extent of the  Partnership's
involvement in these instruments.  At June 30, 1997, the notional or contractual
amounts of the Partnership's

                                      7

<PAGE>



commitment  to  purchase  and sell  these  instruments  was  $1,584,917,211  and
$571,741,956,  respectively,  as detailed below. All of these instruments mature
within  one  year  of  June  30,  1997.  However,  due  to  the  nature  of  the
Partnership's  business,  these instruments may not be held to maturity. At June
30, 1997, the fair value of the  Partnership's  derivatives,  including  options
thereon, was $4,855,141, as detailed below.

                                    NOTIONAL OR CONTRACTUAL
                                     AMOUNT OF COMMITMENTS
                                TO PURCHASE       TO SELL           FAIR VALUE

Currencies:
- Exchange Traded Contracts    $   56,217,194   $   87,536,459   $       50,820
- OTC Contracts                   151,990,765      113,182,957         (478,530)
Energy                                598,580       45,225,589       (1,378,922)
Interest Rates U.S.               359,634,615                0        1,096,912
Interest Rates Non U.S.           840,496,113      183,632,090        1,238,355
Grains                              5,898,845       54,949,909        2,464,714
Metals                             49,323,803       82,856,899        1,111,146
Indices                            79,957,470                0           25,295
Softs                              37,602,093        4,155,333          659,168
Livestock                           3,197,733          202,720           66,183
                               --------------   --------------   --------------

Totals                         $1,584,917,211   $  571,741,956   $    4,855,141
                               ==============   ==============   ==============


5.   Subsequent Event:

        Telesis Management Inc. was added as an advisor to the
Partnership effective August 1, 1997.

                                      8

<PAGE>





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


Liquidity and Capital Resources

      The Partnership does not engage in the sale of goods or services. Its only
assets are its equity in its commodity  futures trading  account,  consisting of
cash and cash equivalents,  net unrealized  appreciation  (depreciation) on open
futures  contracts and interest  receivable.  Because of the low margin deposits
normally required in commodity futures trading, relatively small price movements
may result in substantial  losses to the Partnership.  While substantial  losses
could lead to a decrease in liquidity, no such losses occurred during the second
quarter of 1997.

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

      For the six months ended June 30, 1997, Partnership capital decreased 8.5%
from $171,587,261 to $157,059,602.  This decrease was attributable to a net loss
from  operations  of $5,498,724  coupled with  redemptions  of 7,306.1774  units
totaling $9,281,574 which was partially offset by the addition of 195.1887 Units
totaling $252,639 for the six months ended June 30, 1997. Future redemptions can
impact the amount of funds  available  for  investments  in  commodity  contract
positions in subsequent periods.

Results of Operations

      During the  Partnership's  second quarter of 1997, the net asset value per
Unit decreased  7.4% from $1,303.50 to $1,207,04,  as compared to an increase of
3.6% in the second  quarter of 1996. The  Partnership  experienced a net trading
loss  before  commissions  and  expenses  in  the  second  quarter  of  1997  of
$10,792,473.  Losses  were  recognized  in the trading of  commodity  futures in
currencies,  energy products, U.S. and non U.S. interest rates and livestock and
were  partially  offset by gains in  grains,  indices,  metals  and  softs.  The
Partnership  experienced a net trading gain before  commissions  and expenses in
the second quarter of 1996 of $8,759,333.  Gains were  recognized in currencies,
metals,  energy and agricultural products and were partially offset by losses in
indices and interest rates.

      Commodity  futures markets are highly volatile.  Broad price  fluctuations
and rapid inflation increase the risks involved in commodity  trading,  but also
increase the possibility of profit.

                                      9

<PAGE>



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

      Interest  income on 80% of the  Partnership's  daily equity  maintained in
cash was earned on the  monthly  average  30-day  Treasury  bill rate.  Interest
income for the three and six months  ended June 30, 1997  decreased  by $102,322
and $145,691,  respectively,  as compared to the corresponding  periods in 1996.
The  decrease  in  interest  income is  primarily  due to the effect of negative
trading  performance and redemptions on the  Partnership's  equity maintained in
cash.

      Brokerage  commissions are calculated on the Partnership's net asset value
as of the last day of each  month  and,  therefore,  vary  according  to trading
performance and redemptions. Commissions for the three and six months ended June
30, 1997  decreased by $211,627 and $444,464,  respectively,  as compared to the
corresponding periods in 1996.

      Management  fees are  calculated on the portion of the  Partnership's  net
asset value  allocated to each  Advisor at the end of the month and,  therefore,
are affected by trading  performance  and  redemptions.  Management fees for the
three and six months  ended June 30,  1997  decreased  by $51,439  and  $65,321,
respectively, as compared to the corresponding periods in 1996.

      Incentive  fees are based on the new  trading  profits  generated  by each
Advisor at the end of the quarter, as defined in the advisory agreements between
the  Partnership,  the General  Partner and each  Advisor.  Trading  performance
resulted in  incentive  fees for the three and six months ended June 30, 1997 of
$0 and $747,694,  respectively.  Trading  performance for the three months ended
June 30, 1996  resulted in incentive  fees of $446,772.  There were no incentive
fees earned in the first quarter of 1996.

                                      10

<PAGE>




                           PART II OTHER INFORMATION

Item 1.     Legal Proceedings - None

Item 2.     Changes in Securities - None

Item 3.     Defaults Upon Senior Securities - None

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

Item 5.     Other Information - None

Item 6.     (a) Exhibits
             10.8   Letter dated June 24, 1997 from the General Partner to Rabar
             Market Research revising the terms of incentive fee payment.


            (b) Reports on Form 8-K - None




                                      11


<PAGE>


                                   SIGNATURES

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

SMITH  BARNEY DIVERSIFIED FUTURES FUND L.P.


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


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


Date:    8/13/97


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

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


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


Date:    8/13/97

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

Date:    8/13/97


                                       12

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