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 June 30,2005

Commission File Number 0-26132

SMITH BARNEY DIVERSIFIED FUTURES FUNDL.P.

|  |
|--|
|  |  |
|  |

(Exact nameof registrant as specified in its charter)

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

c/o Citigroup ManagedFutures LLC 399 Park Avenue - 7th Fl. New York, New York10022

|  |
|--|
|  |  |
|  |

(Addressand Zip Code of principal executive offices)

(212)599-2011

|  |
|--|
|  |  |
|  |

(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   

----

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

|                                      |  |                                                                                                                             |  |                         |  |  |  |  |  |  |  |  |  |  |
|--------------------------------------|--|-----------------------------------------------------------------------------------------------------------------------------|--|-------------------------|--|--|--|--|--|--|--|--|--|--|
|                                 |  |                                                                                                                        |  | PageNumber              |  |
| PARTI – Financial Information: |  |
| Item 1.                              |  | FinancialStatements:                                                                                                        |  |
|                                 |  | Statementsof Financial Condition at June 30, 2005 and December 31, 2004(unaudited)                                          |  | 3                       |  |
|                                 |  | Condensed Schedules of Investments at June 30, 2005and December 31, 2004(unaudited)                                         |  | 4 – 5   |  |
|                                 |  | Statements of Income and Expenses and Partners'Capital for the three and six months ended June 30, 2005 and 2004(unaudited) |  | 6                       |  |
|                                 |  | Statements of CashFlows for the three and six months ended June  30,  2005and 2004 (unaudited)                              |  | 7                       |  |
|                                 |  | Notes toFinancial 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

----

PART I

Item 1.Financial Statements

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

|                                                                                                                                        |  |             |            |                 |  |        |            |        |  |  |  |  |  |  |
|----------------------------------------------------------------------------------------------------------------------------------------|--|-------------|------------|-----------------|--|--------|------------|--------|--|--|--|--|--|--|
|                                                                                                                                   |  | June30,2005 |            | December31,2004 |  |
| ASSETS:                                                                                                                                |  |        |       |            |  |   |       |   |  |
| Investmentin Partnerships, at fairvalue                                                                                                |  | $           | 32,569,013 |            |  | $      | 16,141,889 |   |  |
| Equityin commodity futures tradingaccount:                                                                                             |  |        |       |            |  |   |       |   |  |
| Cash (restricted$6,443,843 and $8,098,048 in 2005 and 2004,respectively)                                                               |  |        | 27,512,568 |            |  |   | 52,660,336 |   |  |
| Netunrealized appreciation on open futurespositions                                                                                    |  |        | 1,504,765  |            |  |   | 1,601,032  |   |  |
| Unrealizedappreciation on open forwardcontracts                                                                                        |  |        | 552,050    |            |  |   | 2,250,162  |   |  |
|                                                                                                                                   |  |        | 62,138,396 |            |  |   | 72,653,419 |   |  |
| Interestreceivable                                                                                                                     |  |        | 53,529     |            |  |   | 69,831     |   |  |
|                                                                                                                                   |  | $           | 62,191,925 |            |  | $      | 72,723,250 |   |  |
| LIABILITIESAND PARTNERS'CAPITAL:                                                                                                       |  |        |       |            |  |   |       |   |  |
| Liabilities:                                                                                                                           |  |        |       |            |  |   |       |   |  |
| Unrealizeddepreciation on open forwardcontracts                                                                                        |  | $           | 401,502    |            |  | $      | 1,925,334  |   |  |
| Accruedexpenses:                                                                                                                       |  |        |       |            |  |   |       |   |  |
| Commissions                                                                                                                            |  |        | 279,327    |            |  |   | 329,810    |   |  |
| Managementfees                                                                                                                         |  |        | 93,916     |            |  |   | 112,466    |   |  |
| Incentivefees                                                                                                                          |  |        | 142,694    |            |  |   | 78,926     |   |  |
| Other                                                                                                                                  |  |        | 74,224     |            |  |   | 60,798     |   |  |
| Redemptionspayable                                                                                                                     |  |        | 234,943    |            |  |   | 985,058    |   |  |
|                                                                                                                                   |  |        | 1,226,606  |            |  |   | 3,492,392  |   |  |
|                                                                                                                                   |  |        |       |            |  |   |       |   |  |
| Partners'Capital:                                                                                                                      |  |        |       |            |  |   |       |   |  |
| General Partner,1,276.7484 Unit equivalents outstanding in 2005 and2004                                                                |  |        | 2,048,619  |            |  |   | 2,229,662  |   |  |
| LimitedPartners, 36,718.2371 and 38,366.2074 Redeemable Units of LimitedPartnership Interest outstanding in 2005 and 2004,respectively |  |        | 58,916,700 |            |  |   | 67,001,196 |   |  |
|                                                                                                                                   |  |        | 60,965,319 |            |  |   | 69,230,858 |   |  |
|                                                                                                                                   |  | $           | 62,191,925 |            |  | $      | 72,723,250 |   |  |
|                                                                                                                                        |

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

3

----

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

|                                 |  |                                                                                  |  |           |            |         |  |  |  |  |
|---------------------------------|--|----------------------------------------------------------------------------------|--|-----------|------------|---------|--|--|--|--|
| Sector                          |  | Contract                                                                         |  | FairValue |
| Currencies                      |  |                                                                             |  |      |       |    |
|                            |  | Futurescontracts sold1.91%                                                       |  | $         | 1,166,937  |    |
|                            |  | Futurescontracts purchased(0.29)%                                                |  |      | (177,412   | )  |
|                            |  | Totalfuture positions1.62%                                                       |  |      | 989,525    |    |
|                            |  | TotalUnrealized depreciation on forward     contracts(0.53)% |  |      | (322,358   | )  |
|                            |  | TotalUnrealized appreciation on forward     contracts0.83%   |  |      | 503,614    |    |
|                            |  | Totalforward contracts0.30%                                                      |  |      | 181,256    |    |
| TotalCurrencies1.92%            |  |                                                                             |  |      | 1,170,781  |    |
| Energy(0.53)%                   |  | Futures contracts purchased(0.53)%                                               |  |      | (321,957   | )  |
| Grains(0.46)%                   |  | Futures contracts purchased(0.46)%                                               |  |      | (279,087   | )  |
| U.S.Interest Rates 0.56%        |  | Futures contracts purchased0.56%                                                 |  |      | 340,240    |    |
| Livestock0.06%                  |  | Futures contracts sold0.06%                                                      |  |      | 35,987     |    |
| InterestRates Non - U.S. 1.40%  |  | Futures contracts purchased1.40%                                                 |  |      | 855,912    |    |
| Metals                          |  |                                                                             |  |      |       |    |
|                            |  | Futurescontracts purchased(0.25)%                                                |  |      | (155,680   | )  |
|                            |  | Unrealizeddepreciation on forward contracts(0.13)%                               |  |      | (79,144    | )  |
|                            |  | Unrealizedappreciation on forward contracts0.08%                                 |  |      | 48,436     |    |
|                            |  | Totalforward contracts(0.05)%                                                    |  |      | (30,708    | )  |
| TotalMetals(0.30)%              |  |                                                                             |  |      | (186,388   | )  |
| Softs                           |  |                                                                             |  |      |       |    |
|                            |  | Futurescontracts sold(0.02)%                                                     |  |      | (11,926    | )  |
|                            |  | Futurescontracts purchased(0.06)%                                                |  |      | (39,349    | )  |
| TotalSofts(0.08)%               |  |                                                                             |  |      | (51,275    | )  |
| Indices0.15%                    |  | Futures contracts purchased0.15%                                                 |  |      | 91,100     |    |
| Investmentin Partnerships       |  | CMF Winton Master Fund LLC28.38%                                                 |  |      | 17,301,725 |    |
|                            |  | CMFCampbell Master Fund LP25.04%                                                 |  |      | 15,267,288 |    |
| Investmentin Partnerships53.42% |  |                                                                             |  |      | 32,569,013 |    |
| TotalFair Value56.14%           |  |                                                                             |  | $         | 34,224,326 |    |
|                                 |

|                    |  |                           |            |                             |  |        |        |         |  |  |
|--------------------|--|---------------------------|------------|-----------------------------|--|--------|--------|---------|--|--|
| CountryComposition |  | Investments at Fair Value |            | % ofInvestments atFairValue |
| Australia          |  |                      | 1,869      |                        |  |   | 0.01   | %  |
| France             |  |                      | 11,187     |                        |  |   | 0.03   |    |
| Germany            |  |                      | 330,022    |                        |  |   | 0.96   |    |
| HongKong           |  |                      | 13         |                        |  |   | 0.00   | *  |
| Japan              |  |                      | 73,441     |                        |  |   | 0.22   |    |
| Spain              |  |                      | 42,157     |                        |  |   | 0.12   |    |
| UnitedKingdom      |  |                      | 494,472    |                        |  |   | 1.44   |    |
| UnitedStates       |  |                      | 33,271,165 |                        |  |   | 97.22  |    |
|               |  |                      | 34,224,326 |                        |  |   | 100.00 | %  |
|                    |

|  |                                                                       |
|--|-----------------------------------------------------------------------|
|  | Percentages are basedon Partners' capital unless otherwise indicated. |

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

SeeAccompanying Notes to Financial Statements.

4

----

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

----

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

|                                                                                                                                    |  |                           |            |                         |  |        |             |         |  |        |            |         |  |        |            |         |  |  |
|------------------------------------------------------------------------------------------------------------------------------------|--|---------------------------|------------|-------------------------|--|--------|-------------|---------|--|--------|------------|---------|--|--------|------------|---------|--|--|
|                                                                                                                               |  | ThreeMonths EndedJune 30, |            | Six Months EndedJune30, |
|                                                                                                                               |  | 2005                      |            | 2004                    |  | 2005   |             | 2004    |
| Income:                                                                                                                            |  |                      |       |                    |  |   |        |    |  |   |       |    |  |   |       |    |
| Net gains (losses) on trading of commodityinterests:                                                                               |  |                      |       |                    |  |   |        |    |  |   |       |    |  |   |       |    |
| Realizedgains (losses) on closedpositions                                                                                          |  | $                         | (4,461,378 | )                  |  | $      | (3,160,991  | )  |  | $      | (6,920,017 | )  |  | $      | 9,027,671  |    |
| Changein unrealized gains (losses) on open positions and investment inPartnerships                                                 |  |                      | 3,954,913  |                    |  |   | (6,803,613  | )  |  |   | 3,659,700  |    |  |   | (6,728,072 | )  |
|                                                                                                                               |  |                      | (506,465   | )                  |  |   | (9,964,604  | )  |  |   | (3,260,317 | )  |  |   | 2,299,599  |    |
| Interestincome                                                                                                                     |  |                      | 145,141    |                    |  |   | 133,034     |    |  |   | 284,290    |    |  |   | 266,322    |    |
|                                                                                                                               |  |                      | (361,324   | )                  |  |   | (9,831,570  | )  |  |   | (2,976,027 | )  |  |   | 2,565,921  |    |
| Expenses:                                                                                                                          |  |                      |       |                    |  |   |        |    |  |   |       |    |  |   |       |    |
| Brokeragecommissions including clearing fees of $15,289, $28,999, $27,013 and$60,800,respectively                                  |  |                      | 858,008    |                    |  |   | 1,016,094   |    |  |   | 1,757,212  |    |  |   | 2,159,132  |    |
| Managementfees                                                                                                                     |  |                      | 279,477    |                    |  |   | 329,924     |    |  |   | 577,859    |    |  |   | 704,906    |    |
| Incentivefees                                                                                                                      |  |                      | 142,694    |                    |  |   | —     |    |  |   | 296,368    |    |  |   | 1,880,089  |    |
| Otherexpenses                                                                                                                      |  |                      | 25,446     |                    |  |   | 21,781      |    |  |   | 45,748     |    |  |   | 44,237     |    |
|                                                                                                                               |  |                      | 1,305,625  |                    |  |   | 1,367,799   |    |  |   | 2,677,187  |    |  |   | 4,788,364  |    |
| Netloss                                                                                                                            |  |                      | (1,666,949 | )                  |  |   | (11,199,369 | )  |  |   | (5,653,214 | )  |  |   | (2,222,443 | )  |
| Additions—LimitedPartners                                                                                                    |  |                      | —    |                    |  |   | 194         |    |  |   | —    |    |  |   | 1,995      |    |
| Redemptions—LimitedPartners                                                                                                  |  |                      | (1,335,599 | )                  |  |   | (1,765,681  | )  |  |   | (2,612,325 | )  |  |   | (3,469,139 | )  |
| Netdecrease in Partners'capital                                                                                                    |  |                      | (3,002,548 | )                  |  |   | (12,964,856 | )  |  |   | (8,265,539 | )  |  |   | (5,689,587 | )  |
| Partners'capital, beginning ofperiod                                                                                               |  |                      | 63,967,867 |                    |  |   | 79,002,615  |    |  |   | 69,230,858 |    |  |   | 71,727,346 |    |
| Partners'capital, end ofperiod                                                                                                     |  | $                         | 60,965,319 |                    |  | $      | 66,037,759  |    |  | $      | 60,965,319 |    |  | $      | 66,037,759 |    |
| Netasset value per Redeemable Unit (37,994.9855 and 41,759.4725 RedeembleUnits outstanding at June 30, 2005 and 2004,respectively) |  | $                         | 1,604.56   |                    |  | $      | 1,581.38    |    |  | $      | 1,604.56   |    |  | $      | 1,581.38   |    |
| Netloss per Redeemable Unit of Limited Partnership Interest and GeneralPartner Unitequivalent                                      |  | $                         | (41.49     | )                  |  | $      | (262.34     | )  |  | $      | (141.80    | )  |  | $      | (55.26     | )  |
|                                                                                                                                    |

SeeAccompanying Notes to Financial Statements.

6

----

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

|                                                                                                  |  |                           |            |                         |  |        |             |         |  |        |             |         |  |        |            |         |  |  |
|--------------------------------------------------------------------------------------------------|--|---------------------------|------------|-------------------------|--|--------|-------------|---------|--|--------|-------------|---------|--|--------|------------|---------|--|--|
|                                                                                             |  | ThreeMonths EndedJune 30, |            | Six Months EndedJune30, |
|                                                                                             |  | 2005                      |            | 2004                    |  | 2005   |             | 2004    |
| Cashflows from operating activities:                                                             |  |
| Net loss                                                                                         |  | $                         | (1,666,949 | )                  |  | $      | (11,199,369 | )  |  | $      | (5,653,214  | )  |  | $      | (2,222,443 | )  |
| Adjustmentsto reconcile net income (loss) to net cash provided by (used in)operating activities: |  |
| Changes inoperating assets and liabilities:                                                      |  |
| (Increase)decrease in restrictedcash                                                             |  |                      | (894,071   | )                  |  |   | 3,786,943   |    |  |   | 1,654,205   |    |  |   | 6,284,248  |    |
| (Increase)decrease in investment in Partnership at fairvalue                                     |  |                      | 2,566,955  |                    |  |   | —     |    |  |   | (16,427,124 | )  |  |   | —    |    |
| (Increase)decrease in net unrealized appreciation on open futures positions                      |  |                      | (449,974   | )                  |  |   | 5,831,346   |    |  |   | 96,267      |    |  |   | 4,186,811  |    |
| (Increase)decrease in unrealized appreciation on open forward contracts                          |  |                      | (162,389   | )                  |  |   | 1,342,464   |    |  |   | 1,698,112   |    |  |   | 3,762,763  |    |
| (Increase)decrease in interest     receivable                                |  |                      | 92         |                    |  |   | 4,276       |    |  |   | 16,302      |    |  |   | (6,354     | )  |
| Increase(decrease) in unrealized depreciation on open forward contracts                          |  |                      | (83,178    | )                  |  |   | (370,197    | )  |  |   | (1,523,832  | )  |  |   | (1,221,502 | )  |
| Accruedexpenses:                                                                                 |  |
| Increase (decrease) in commissions                                                               |  |                      | (25,484    | )                  |  |   | (77,279     | )  |  |   | (50,483     | )  |  |   | (40,199    | )  |
| Increase(decrease) in management fees                                                            |  |                      | (9,148     | )                  |  |   | (26,715     | )  |  |   | (18,550     | )  |  |   | (15,433    | )  |
| Increase(decrease) in incentive fees                                                             |  |                      | (10,980    | )                  |  |   | (1,880,089  | )  |  |   | 63,768      |    |  |   | (761,281   | )  |
| Increase (decrease) in other                                                                     |  |                      | (6,877     | )                  |  |   | 10,006      |    |  |   | 13,426      |    |  |   | 22,661     |    |
| Net cash provided by (used in)     operatingactivities                       |  |                      | (742,003   | )                  |  |   | (2,578,614  | )  |  |   | (20,131,123 | )  |  |   | 9,989,271  |    |
| Cashflows from financing activities:                                                             |  |
| Proceedsfrom additions—Limited Partners                                                    |  |                      | —    |                    |  |   | 194         |    |  |   | —     |    |  |   | 1,995      |    |
| Paymentsfor redemptions—Limted Partners                                                    |  |                      | (1,743,027 | )                  |  |   | (1,241,146  | )  |  |   | (3,362,440  | )  |  |   | (3,238,030 | )  |
| Netcash provided by (used in)     financing activities                       |  |                      | (1,743,027 | )                  |  |   | (1,240,952  | )  |  |   | (3,362,440  | )  |  |   | (3,236,035 | )  |
| Netchange in cash                                                                                |  |                      | (2,485,030 | )                  |  |   | (3,819,566  | )  |  |   | (23,493,563 | )  |  |   | 6,753,236  |    |
| Unrestrictedcash, at beginning of period                                                         |  |                      | 23,553,755 |                    |  |   | 65,176,982  |    |  |   | 44,562,288  |    |  |   | 54,604,180 |    |
| Unrestrictedcash, at end of period                                                               |  | $                         | 21,068,725 |                    |  | $      | 61,357,416  |    |  | $      | 21,068,725  |    |  | $      | 61,357,416 |    |
|                                                                                                  |

SeeAccompanying Notes to FinancialStatements.

7

----

SmithBarney Diversified Futures Fund L.P.Notes to FinancialStatementsJune 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 June 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 June 30, 2005 and December31, 2004 and the results of its operations and cash flows for the threeand six months ended June 30, 2005 and 2004. These financial statementspresent the results of interim periods and do not include alldisclosures normally provided in annual financial statements. Youshould read these financial statements together with the financialstatements and notes included in the Partnership's annual reporton Form 10-K filed with the Securities and Exchange Commission for theyear ended December 31, 2004.

Due to the nature of commoditytrading, the results of operations for the interim periods presentedshould not be considered indicative of the results that may be expectedfor the entire year.

2.    Financial Highlights:

Changes in Net Asset Value per Redeemable Unit of LimitedPartnership Interest for the three and six months ended June 30, 2005and 2004 were asfollows:

|                                                        |  |                           |          |                       |  |        |          |         |  |        |          |         |  |        |          |         |  |  |
|--------------------------------------------------------|--|---------------------------|----------|-----------------------|--|--------|----------|---------|--|--------|----------|---------|--|--------|----------|---------|--|--|
|                                                   |  | ThreeMonths EndedJune 30, |          | Six MonthsEndedJune30 |
|                                                   |  | 2005                      |          | 2004                  |  | 2005   |          | 2004    |
| Netrealized and unrealizedlosses*                      |  | $                         | (33.60   | )                |  | $      | (257.21  | )  |  | $      | (125.45  | )  |  | $      | (0.66    | )  |
| Interestincome                                         |  |                      | 3.77     |                  |  |   | 3.12     |    |  |   | 7.30     |    |  |   | 6.19     |    |
| Expenses**                                             |  |                      | (11.66   | )                |  |   | (8.25    | )  |  |   | (23.65   | )  |  |   | (60.79   | )  |
| Decreasefor the period                                 |  |                      | (41.49   | )                |  |   | (262.34  | )  |  |   | (141.80  | )  |  |   | (55.26   | )  |
| NetAsset Value per Redeemable Unit, beginning ofperiod |  |                      | 1,646.05 |                  |  |   | 1,843.72 |    |  |   | 1,746.36 |    |  |   | 1,636.64 |    |
| NetAsset Value per Redeemable Unit, end ofperiod       |  | $                         | 1,604.56 |                  |  | $      | 1,581.38 |    |  |   | 1,604.56 |    |  | $      | 1,581.38 |    |
|                                                        |

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

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

8

----

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

Financial Highlights(continued):

|                                              |  |                           |      |                       |  |        |         |          |  |        |      |          |  |        |      |          |  |  |
|----------------------------------------------|--|---------------------------|------|-----------------------|--|--------|---------|----------|--|--------|------|----------|--|--------|------|----------|--|--|
|                                         |  | ThreeMonths EndedJune 30, |      | SixMonthsEndedJune30, |
|                                         |  | 2005                      |      | 2004                  |  | 2005   |         | 2004     |
| Ratioto average net assets: ***              |  |
| Netinvestment loss before incentive fees**** |  |                      | (6.7 | )%               |  |   | (6.9    | )%  |  |   | (6.7 | )%  |  |   | (7.3 | )%  |
| Operatingexpenses                            |  |                      | 7.7  | %                |  |   | 7.7     | %   |  |   | 7.6  | %   |  |   | 8.0  | %   |
| Incentivefees                                |  |                      | 0.2  | %                |  |   | — | %   |  |   | 0.5  | %   |  |   | 2.6  | %   |
| Totalexpenses                                |  |                      | 7.9  | %                |  |   | 7.7     | %   |  |   | 8.1  | %   |  |   | 10.6 | %   |
| Totalreturn:                                 |  |
| Total return before incentivefees            |  |                      | (2.3 | )%               |  |   | 14.2    | %   |  |   | (7.7 | )%  |  |   | (0.6 | )%  |
| Incentivefees                                |  |                      | (0.2 | )%               |  |   | — | %   |  |   | (0.4 | )%  |  |   | (2.8 | )%  |
| Totalreturn after incentivefees              |  |                      | (2.5 | )%               |  |   | 14.2    | %   |  |   | (8.1 | )%  |  |   | (3.4 | )%  |
|                                              |

|     |                                       |
|-----|---------------------------------------|
| *** | 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 was formed forthe purpose of trading contracts in a variety of commodity interests,including derivative financial instruments and derivative commodityinstruments. The results of the Partnership's trading activitiesare shown in the Statements of Income and Expenses and Partners'Capital and are discussed in Item 2, Management's Discussion andAnalysis of Financial Condition and Results of Operations.

TheCustomer Agreement between the Partnership and CGM gives thePartnership the legal right to net unrealized gains and losses on openfutures positions.

All of the commodity interests owned by thePartnership are held for trading purposes. The average fair values ofthese interests during the six and twelve months ended June 30, 2005and December 31, 2004, based on a monthly calculation, were $716,804and $2,973,373, respectively. The fair values of these commodityinterests, including options thereon, if applicable, at June 30, 2005and December 31, 2004, were $1,655,313 and $1,925,860, respectively.Fair values for exchange traded commodity futures and options are basedon quoted market prices for those futures and options. Fair values forall other financial instruments for which market quotations are notreadily available are based on calculations approved by the GeneralPartner.

4.    Investment in Partnerships:

EffectiveNovember 1, 2004, the Partnership allocated capital for trading to theCMF Winton Master Fund L.P., a limited partnership organized under thepartnership laws of New York State (the "WintonMaster"). The partnership purchased 15,054.1946 Units ofthe Winton Master with cash equal to $14,251,586, and a contribution ofopen commodity futures and forward positions with a fair value of$802,609. The Winton Master was formed in order to permit commoditypools managed now or in the 

9

----

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

future by Winton, to invest together in onetrading vehicle. The General Partner is the Managing Member of theWinton Master. Individual and pooled accounts currently managed byWinton, including the 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.

Effective January1, 2005, the assets allocated to Campbell for trading were invested inthe 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 Program, to investtogether in one trading vehicle. The General Partner is the ManagingMember of Campbell Master. Individual and pooled accounts currentlymanaged by Campbell, including the Partnership (collectively, the"Feeder Funds") are permitted to be anon-managing member of Campbell Master. The General Partner andCampbell believe that trading through this structure should promoteefficiency and economy in the trading process. Expenses to investors asa result of the investment in Campbell Master are approximately thesame and redemption rights are not affected.

The WintonMaster's and Campbell Master's trading of futures, forwardsand options contracts, if applicable, on commodities is done primarilyon United States of America commodity exchanges and foreign commodityexchanges. The Masters all engage in such trading through commoditybrokerage accounts maintained with CGM.

A non-managingmember/limited partner may withdraw all or part of their capitalcontribution and undistributed profits, if any, from the Winton Masterand Campbell Master in multiples of the net asset value per unit oflimited partnership interest as of the last day of a month after arequest for redemption has been made to the managing Member/GeneralPartner at least 3 days in advance of month-end.

Management andincentive fees are not directly charged to the investments presentedbelow. These fees are charged at the Partnership level.

Allexchange, clearing, user, give-up, floor brokerage and National FuturesAssociation fees are borne by the Winton Master and Campbell Master.All other fees including CGM's direct brokerage commission arecharged at the Partnership level.

At June 30, 2005 and December31, 2004 the Partnership owned 10.4% and 14.0%,respectively of the Winton Master. At June 30, 2005, the Partnershipowned 5.1% of Campbell Master. It is Winton's andCampbell's intention to continue to invest the assets allocatedto each by the Partnership in the Winton Master and Campbell Master,respectively. The performance of the partnership is directly affectedby the performance of the Winton Master and Campbell Master.

10

----

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

Summarized information reflecting thePartnership's investment in, and the operations of the WintonMaster and Campbell's Master are as shown in the followingtable.

|                        |  |                              |       |                                         |  |              |            |                     |  |        |           |                  |  |                     |        |                       |  |        |       |        |  |        |           |        |  |                                 |  |        |         |        |  |  |  |  |
|------------------------|--|------------------------------|-------|-----------------------------------------|--|--------------|------------|---------------------|--|--------|-----------|------------------|--|---------------------|--------|-----------------------|--|--------|-------|--------|--|--------|-----------|--------|--|---------------------------------|--|--------|---------|--------|--|--|--|--|
|                   |  | June30, 2005                 |       | For the three months ended June 30,2005 |  |         |            |                |
| Investment             |  | %of Partnership's Net Assets |       | FairValue                               |  | Income(loss) |            | ExpensesCommissions |  | Other  |           | NetIncome (Loss) |  | InvestmentObjective |        | Redemptions Permitted |
| CMFCampbell Master LLC |  |                         | 25.04 | %                                  |  | $            | 15,267,288 |                |  | $      | 2,165,516 |             |  | $                   | 6,394  |                  |  | $      | 812   |   |  | $      | 2,158,310 |   |  | Financials& MetalsPortfolio |  |   | Monthly |   |
| CMF Winton MasterLLC   |  |                         | 28.38 | %                                  |  |         | 17,301,725 |                |  |   | 1,127,196 |             |  |                | 24,287 |                  |  |   | 1,848 |   |  |   | 1,101,061 |   |  | CommodityPortfolio              |  |   | Monthly |   |
|                   |  |                         | 53.42 | %                                  |  | $            | 32,569,013 |                |  | $      | 3,292,712 |             |  | $                   | 30,681 |                  |  | $      | 2,660 |   |  | $      | 3,259,371 |   |  |
|                        |

|                       |  |                                  |       |                                       |  |              |            |                     |  |        |           |                  |  |                     |         |                       |  |        |         |        |  |        |           |        |  |        |                                |        |  |        |         |        |  |  |
|-----------------------|--|----------------------------------|-------|---------------------------------------|--|--------------|------------|---------------------|--|--------|-----------|------------------|--|---------------------|---------|-----------------------|--|--------|---------|--------|--|--------|-----------|--------|--|--------|--------------------------------|--------|--|--------|---------|--------|--|--|
|                  |  | June30, 2005                     |       | For the six months ended June 30,2005 |  |         |            |                |
| Investment            |  | %of Partnership's Net Assets     |       | FairValue                             |  | Income(loss) |            | ExpensesCommissions |  | Other  |           | NetIncome (Loss) |  | InvestmentObjective |         | Redemptions Permitted |
| CMFCampbellMaster LLC |  |                             | 25.04 | %                                |  | $            | 15,267,288 |                |  | $      | 1,535,843 |             |  | $                   | 14,941  |                  |  | $      | 1,709   |   |  | $      | 1,519,193 |   |  |   | Financials&MetalsPortfolio |   |  |   | Monthly |   |
| CMFWintonMaster LLC   |  |                             | 28.38 | %                                |  |         | 17,301,725 |                |  |   | 2,273,378 |             |  |                | 50,968  |                  |  |   | 3,868   |   |  |   | 2,218,542 |   |  |   | CommodityPortfolio             |   |  |   | Monthly |   |
|                  |  |                             | 53.42 | %                                |  | $            | 32,569,013 |                |  | $      | 3,809,221 |             |  | $                   | 65,909  |                  |  | $      | 5,577   |   |  | $      | 3,737,735 |   |  |
|                  |  | **Forthe year December 31,2004** |       |                                  |  |         |            |
| CMFWinton MasterLLC   |  |                             | 23.32 | %                                |  |         | 16,141,889 |                |  | $      | —   |             |  | $                   | — |                  |  | $      | — |   |  | $      | —   |   |  |   | CommodityPortfolio             |   |  |   | Monthly |   |
|                       |

5.    FinancialInstrument Risks:

In the normal course of its business, thePartnership is party to financial instruments with off-balance sheetrisk, including derivative financial instruments and derivativecommodity instruments. These financial instruments may includeforwards, futures and options, whose values are based upon anunderlying asset, index, or reference rate, and generally representfuture commitments to exchange currencies or cash flows, to purchase orsell other financial instruments at specific terms at specified futuredates, or, in the case of derivative commodity instruments, to have areasonable possibility to be settled in cash, through physical deliveryor with another financial instrument. These instruments may be tradedon an exchange or over-the-counter ("OTC").Exchange-traded instruments are standardized and include futures andcertain option contracts. OTC contracts are negotiated betweencontracting parties and include forwards and certain options. Each ofthese instruments is subject to various risks similar to those relatedto the underlying financial instruments including market and creditrisk. In general, the risks associated with OTC contracts are greaterthan those associated with exchange-traded instruments because of thegreater risk of default by the counterparty to an OTC contract.

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

Credit risk is the possibilitythat a loss may occur due to the failure of a counterparty to performaccording to the terms of a contract. Credit risk with respect toexchange traded instruments is reduced to the extent that an exchangeor clearing organization acts as a counterparty to the transactions.The 

11

----

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

Partnership's risk of loss in the eventof counterparty default is typically limited to the amounts recognizedas unrealized appreciation in the statements of financial condition andnot represented by the contract or notional amounts of the instruments.The Partnership has credit risk and concentration risk because the solecounterparty or broker with respect to the Partnership's assetsis CGM.

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

The majority of these instruments mature within oneyear of June 30, 2005. However, due to the nature of thePartnership's business, these instruments may not be held tomaturity.

12

----

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 second 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 six months ended June 30, 2005, Partnership capital decreased11.9% from $69,230,858 to $60,965,319. This decrease wasattributable to a net loss from operations of $5,653,214 coupled withthe redemption of 1,647.9703 Redeemable Units totaling $2,612,325.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 second quarter of2005 the net asset value per unit decreased 2.5% from $1,646.05to $1,604.56 as compared to a decrease of 14.2% in the secondquarter of 2004. The Partnership experienced a net trading loss beforebrokerage commissions and related fees in the second quarter of 2005 of$506,465. Losses were primarily attributable to the trading ofcommodity futures in energy, U.S. 

13

----

interest rates, gains, metals, indices andsofts and were partially offset by gains in currencies, non-U.Sinterest rates, livestock and lumber. The Partnership experienced a nettrading loss before brokerage commissions and related fees in thesecond quarter of 2004 of $9,964,604. Losses were primarilyattributable to the trading of commodity futures in currencies, grains,U.S. and non U.S. interest rates, metals, softs and indices and werepartially offset by gains in energy, livestock and lumber.

Trading in the second quarter of 2005, began with a continuation ofthe volatile and directionless markets that had characterized the firstquarter. Through most of April, neither the financial nor commoditymarkets provided profitable trading opportunities for thePartnership's Advisors. May was a transition period asmacro-economic trends emerged and continued into June providingimproved trading conditions for the trend-following strategies of theAdvisors.

Lower interest rates in Europe and Asia were theprimary drivers of profitability for the quarter and had a concomitantimpact on strengthening the U.S. dollar to recent highs versus theEuro, British pound and Swiss franc. Lower interest rates werefavorable for Advisors' positions as lower inflation reports,weak European markets, and improved productivity caused markets toshrug off another increase in short-term rates by the U.S. FederalReserve Bank. Trading in foreign currencies was likewise profitablewhile trading in stock indices was unprofitable.

Offsetting aportion of these gains were losses in the commodity markets. Acombination of lower inflation expectations and increased suppliesdisrupted price trends across several markets leading to losses inenergy, primarily crude oil, base and precious metals, andgrains.

During the Partnership's six months ended June 30,2005, the net asset value per Redeemable unit decreased 8.1%from $1,746.36 to $1,604.56 as compared to an decrease of 3.4%for the six months ended June 30, 2004. The Partnership experienced anet trading loss before commissions and related fees for the six monthsended June 30, 2005 of $3,260,317. Losses were primarily attributableto the trading of commodity futures in currencies, energy, grains,livestock, metals, softs and indices and were partially offset by gainsin U.S. and non-U.S. interest rates and lumber. The Partnershipexperienced a net trading gain before brokerage commissions and relatedfees for the six months ended June 30, 2004, of $2,299,599. Gains wereprimarily attributable to the trading of commodity futures in energy,grains, non-U.S. interest rates, livestock, metals and lumber and werepartially offset by losses in currencies, U.S. interest rates, softsand indices.

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 six monthsended June 30, 2005 increased by $12,107 and $17,968, respectively, ascompared to the corresponding periods in 2004. The increase in interestincome is primarily due to an increase in interest rates during thethree and six months ended June 30, 2005 as compared to thecorresponding periods in 2004.

Brokerage commissions arecalculated on the Partnership's net asset value as of the lastday of each month and are affected by trading performance andredemptions. Accordingly, they must be compared in relation to thefluctuations in monthly net asset values. Commissions and fees for thethree and six months ended June 30, 2005 decreased by $158,086 and$401,920, respectively, as compared to the corresponding 

14

----

periods in 2004. The decrease in brokeragecommissions is due to lower average net assets during the three and sixmonths ended June 30, 2005 as compared to the corresponding periods in2004.

Management fees are calculated on the portion of thePartnership's net asset value allocated to each Advisor at theend of the month and, therefore, are affected by trading performanceand redemptions. Management fees for the three and six months endedJune 30, 2005 decreased by $50,447 and $127,047, respectively ascompared to the corresponding periods in 2004. The decrease inmanagement fees is due to lower average net assets during the three andsix months ended June 30, 2005 as compared to the corresponding periodsin 2004.

Incentive fees are based on the new trading profitsgenerated by each Advisor at the end of the quarter as defined in theadvisory agreements between the Partnership, the General Partner andeach Advisor. Trading performance for the three and six months endedJune 30, 2005 resulted in incentive fees of $142,694 and $296,368,respectively. Trading performance for the three and six months endedJune 30, 2004 resulted in incentive fees of $0 and $1,880,089,respectively.

15

----

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.

16

----

The following table indicates the tradingValue at Risk associated with the Partnership's open positions bymarket category as of June 30, 2005 and the highest, lowest and averagevalue during the three months ended June 30, 2005. All open positiontrading risk exposures of the Partnership have been included incalculating the figures set forth below. As of June 30, 2005, thePartnership's total capitalization was $60,965,319. There hasbeen no material change in the trading Value at Risk informationpreviously disclosed in the Partnership's Annual Report on Form10-K for the year ended December 31, 2004.

June 30, 2005(Unaudited)

|                         |  |               |           |                         |  |                                |        |                  |  |                      |           |        |  |        |         |        |  |        |         |        |  |  |
|-------------------------|--|---------------|-----------|-------------------------|--|--------------------------------|--------|------------------|--|----------------------|-----------|--------|--|--------|---------|--------|--|--------|---------|--------|--|--|
|                    |  |          |           |                    |  | ThreeMonths Ended June 30,2005 |
| MarketSector            |  | Value at Risk |           | % ofTotalCapitalization |  | HighValue atRisk               |        | LowValue at Risk |  | AverageValue atRisk* |
| Currencies:             |  |          |      |                    |  |                           |   |             |  |                 |      |   |  |   |    |   |  |   |    |   |
| Exchange                |  |          | 715,682   |                    |  |                           | 1.17   | %           |  |                 | 715,682   |   |  |   | — |   |  |   | 492,961 |   |
| OTC                     |  |          | 799,065   |                    |  |                           | 1.31   | %           |  |                 | 799,065   |   |  |   | 251,991 |   |  |   | 389,143 |   |
| Energy                  |  |          | 462,250   |                    |  |                           | 0.76   | %           |  |                 | 1,483,500 |   |  |   | 59,800  |   |  |   | 527,967 |   |
| Grains                  |  |          | 315,525   |                    |  |                           | 0.52   | %           |  |                 | 399,450   |   |  |   | 14,700  |   |  |   | 247,108 |   |
| InterestRatesU.S.       |  |          | 504,850   |                    |  |                           | 0.83   | %           |  |                 | 626,050   |   |  |   | 1,879   |   |  |   | 276,993 |   |
| InterestRates Non-U.S.  |  |          | 1,038,216 |                    |  |                           | 1.70   | %           |  |                 | 1,132,647 |   |  |   | 76,015  |   |  |   | 751,269 |   |
| Livestock               |  |          | 31,200    |                    |  |                           | 0.05   | %           |  |                 | 31,200    |   |  |   | 8,800   |   |  |   | 18,667  |   |
| Metals                  |  |          |      |                    |  |                           |   |             |  |                 |      |   |  |   |    |   |  |   |    |   |
| ExchangeTradedContracts |  |          | 456,000   |                    |  |                           | 0.75   | %           |  |                 | 542,000   |   |  |   | 30,000  |   |  |   | 226,333 |   |
| OTC                     |  |          | 24,136    |                    |  |                           | 0.04   | %           |  |                 | 356,080   |   |  |   | 10,686  |   |  |   | 54,968  |   |
| Softs                   |  |          | 111,874   |                    |  |                           | 0.18   | %           |  |                 | 339,300   |   |  |   | 83,456  |   |  |   | 179,826 |   |
| Indices                 |  |          | 1,003,433 |                    |  |                           | 1.65   | %           |  |                 | 1,003,433 |   |  |   | 38,655  |   |  |   | 470,501 |   |
| Total                   |  | $             | 5,462,231 |                    |  |                           | 8.96   | %           |  |
|                         |

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

17

----

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 within 90 days of the filing date of this quarterly report,and, based on this evaluation, has concluded that these disclosurecontrols and procedures are effective. Additionally, there were nosignificant changes in the Partnership's internal controls or inother factors that could significantly affect these controls subsequentto the date of this evaluation, including any corrective actions withregard to significant deficiencies and materialweaknesses.

18

----

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 quarter ended March 31, 2005.

Enron-Related Civil Actions

On June 13, 2005, Citigroupannounced a settlement of the Enron class action litigation (Newby, etal. v. Enron Corp., et al.) currently pending in the United StatesDistrict Court for the Southern District of Texas, Houston Division.This settlement resolves all claims against Citigroup brought on behalfof the class of purchasers of publicly traded equity and debtsecurities issued by Enron and Enron-related entities between September9, 1997 and December 2, 2001. The settlement, which involves a pre-taxpayment of $2.0 billion to the settlement class, is fully covered byCitigroup's existing litigation reserves. It is subject toapproval by the Board of Regents of the University of California (thelead plaintiff), the Citigroup Board and the District Court inTexas.

Mutual Funds

On May 31, 2005, Citigroupannounced that Smith Barney Fund Management LLC and Citigroup GlobalMarkets completed a settlement with the SEC resolving an investigationby the SEC into matters relating to arrangements between certain SmithBarney mutual funds, an affiliated transfer agent and an unaffiliatedsub-transfer agent. Under the terms of the settlement, Citigroup agreedto pay fines totaling $208.1 million. The settlement, in whichCitigroup neither admitted nor denied any wrongdoing or liability,includes allegations of willful misconduct by Smith Barney FundManagement LLC and Citigroup Global Markets in failing to discloseaspects of the transfer agent arrangements to certain mutual fundinvestors.

19

----

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 |
| April 1, 2005 – April 30, 2005 |  |   | 511.6971 |   |  | $ | 1,512.73 |   |  |   | N/A |   |  |   | N/A |   |
| May1, 2005 – May 31, 2005      |  |   | 208.3801 |   |  | $ | 1,567.31 |   |  |   | N/A |   |  |   | N/A |   |
| June1, 2005 – June 30, 2005    |  |   | 146.4223 |   |  | $ | 1,604.56 |   |  |   | N/A |   |  |   | N/A |   |
| Total                                |  |   | 866.4995 |   |  | $ | 1,561.53 |   |  |   | 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).

20

----

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:                                     |  | August 15,2005                                              |  |
| By:                                       |  | /s/ Daniel R.McAuliffe, Jr.                                 |  |
|                                      |  | Daniel R. McAuliffe,Jr.Chief Financial Officer and Director |  |
| Date:                                     |  | August 15,2005                                              |  |
|                                           |

21

----