UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-K

                  Annual Report Pursuant to Section 13 or 15(d)

                     of the Securities Exchange Act of 1934

                      For the year ended December 31, 1996

Commission File Number 33-79244

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

            New York                               13-3769020
      (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)

Securities registered pursuant to Section 12(b) of the Act:  None

Securities registered pursuant to Section 12(g) of the Act:  100,000  Units
                                                             of Limited
                                                             Partnership
                                                             Interest
                                                             (Title of Class)

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

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
form 10-K [ ]


<PAGE>



                                    PART I

Item 1. Business.

      (a) General development of business. Smith Barney Diversified Futures Fund
L.P. II ("Partnership") is a limited partnership organized on May 10, 1994 under
the Partnership laws of the State of New York. The Partnership commenced trading
operations on January 17, 1996. The Partnership  engages in speculative  trading
of commodity  interests,  including  forward  contracts  on foreign  currencies,
commodity   options  and  commodity   futures   contracts  and  other  financial
instruments, foreign currencies and stock indices.
        A  Registration  Statement on Form S-1  relating to the public  offering
became effective on August 21, 1995. Beginning August 21, 1995, 100,000 Units of
Limited Partnership  Interest ("Units") were publicly offered at $1,000 per Unit
for a period of ninety days,  subject to increase for up to an additional  sixty
days at the sole  discretion  of the General  Partner.  Between  August 21, 1995
(commencement  of the  offering  period)  and January  16,  1996,  8529 Units of
limited  partnership  interest  were sold at $1,000  per Unit.  Proceeds  of the
offering  were held in an escrow  account and were  transferred,  along with the
General Partner's  contribution of $87,000 to the Partnership's  trading account
on January 17, 1996 when the Partnership commenced trading.  Sales of additional
Units and additional  General  Partner's  contributions and redemptions of Units
for the year ended  December 31, 1996 are reported in the Statement of Partners'
Capital on page F-5 under "Item 8.

                                      2


<PAGE>



Financial Statements and Supplementary Data."
       The  General  Partner  has  agreed  to  make  capital  contributions,  if
necessary, so that its general partnership interest will be equal to the greater
of (i) an  amount  to  entitle  it to 1% of each  material  item of  Partnership
income,  loss,  deduction  or  credit  and  (ii)  the  greater  of (a) 1% of the
partners'  contributions to the Partnership or (b) $25,000. The Partnership will
be liquidated  upon the first of the following to occur:  December 31, 2014; the
net  asset  value of a Unit  decreases  to less than $400 as of the close of any
business  day;  or  under  certain  circumstances  as  defined  in  the  Limited
Partnership Agreement of the Partnership (the "Limited Partnership Agreement").
      The  Partnership's  trading of futures  contracts on  commodities  is done
primarily on United States and foreign commodity  exchanges.  It engages in such
trading  through a commodity  brokerage  account  maintained  with its commodity
broker, Smith Barney Inc. ("SB").
      Smith Barney Futures  Management  Inc., acts as the general partner of the
Partnership (the "General Partner").  SB is an affiliate of the General Partner.
Under  the  Limited  Partnership  Agreement  of the  Partnership  (the  "Limited
Partnership  Agreement"),  the General  Partner  administers  the  business  and
affairs of the  Partnership.  As of December 31,  1996,  all  commodity  trading
decisions are made for the Partnership by John W. Henry & Company, Inc. ("JWH"),
Millburn   Ridgefield    Corporation   and   Chesapeake   Capital   Corporation,
(collectively,  the  "Advisors").  None of the Advisors is  affiliated  with the
General Partner or SB. The

                                      3

<PAGE>



Advisors  are  not  responsible  for  the   organization  or  operation  of  the
Partnership.
      Pursuant  to the  terms  of the  Management  Agreements  (the  "Management
Agreement"),  the  Partnership  is obligated to pay each Advisor:  (i) a monthly
management  fee equal to 1/6 of 1% (2% per year) of month-end Net Assets (except
that JWH will receive a monthly management fee equal to 1/3 of 1% (4% per year))
of the  Partnership  allocated  to each  Advisor as of the end of each month and
(ii) an incentive fee payable quarterly, equal to 20% of the New Trading Profits
(except JWH, which will receive an incentive fee of 15% of New Trading  Profits)
(as defined in the Management Agreements) of the Partnership.
      The  Partnership  has  entered  into a  Customer  Agreement  with  SB (the
"Customer  Agreement") which provides that the Partnership will pay SB a monthly
brokerage  fee  equal to 1/2 of 1% of  month-end  Net  Assets  allocated  to the
Advisors (6.0% per year) in lieu of brokerage  commissions on a per trade basis.
SB also pays a portion of its brokerage  fees to its financial  consultants  who
have sold Units and who are registered as associated  persons with the Commodity
Futures  Trading  Commission  (the "CFTC").  The  Partnership  pays for National
Futures  Association  ("NFA") fees, exchange and clearing fees, give-up and user
fees and floor brokerage  fees.  Brokerage fees will be paid for the life of the
Partnership,  although the rate at which such fees are paid may be changed.  The
Customer  Agreement  between the  Partnership  and SB gives the  Partnership the
legal right to net unrealized gains and losses.

                                      4

<PAGE>



      In addition,  SB pays the Partnership interest on 80% of the average daily
equity  maintained  in cash in its  account  during  each month at a 30-day U.S.
Treasury bill rate determined weekly by SB based on the average  non-competitive
yield on 3-month U.S.  Treasury bills maturing in 30 days from the date on which
such  weekly  rate is  determined.  However,  SB began  paying  interest  to the
Partnership  only after the amount of interest  accrued equaled the total amount
of  offering  and  organizational  expenses  paid by SB in  connection  with the
Partnership's  offering  plus  interest  at the prime  rate  quoted by The Chase
Manhattan Bank.
      (b) Financial  information  about  industry  segments.  The  Partnership's
business  consists  of  only  one  segment,  speculative  trading  of  commodity
interests (including, but not limited to, futures contracts, options and forward
contracts  on  U.S.  Treasury  Bills,  other  financial   instruments,   foreign
currencies,  stock indices and physical  commodities).  The Partnership does not
engage in sales of goods or services.  The  Partnership's net income (loss) from
operations  for the  period  from  January  17,  1996  (commencement  of trading
operations)  to December  31, 1996 is set forth under "Item 6. Select  Financial
Data." The Partnership capital as of December 31, 1996 was $55,298,004.


                                      5

<PAGE>



      (c)  Narrative description of business.
          See Paragraphs (a) and (b) above.
          (i) through (x) - Not applicable.
          (xi) through (xii) - Not applicable.
          (xiii) - The Partnership has no employees.
      (d) Financial Information About Foreign and Domestic Operations and Export
Sales.  The  Partnership  does not  engage  in sales of goods or  services,  and
therefore this item is not applicable.
Item 2.  Properties.
      The Partnership does not own or lease any properties.  The General Partner
operates out of facilities provided by its affiliate, SB.
Item 3.  Legal Proceedings.
      There are no pending legal proceedings to which the Partnership is a party
or to  which  any of its  assets  is  subject.  No  material  legal  proceedings
affecting  the  Partnership  were  terminated  during the fiscal  year.  
Item 4.  Submission of Matters to a Vote of Security Holders.
      There were no matters  submitted to the security holders for a vote during
the last fiscal year covered by this report.
                                    PART II
Item 5.   Market for Registrant's Common Equity and Related Security
          Holder Matters.
          (a)   Market Information.  The Partnership has issued no
                stock.  There is no public market for the Units of

                                      6

<PAGE>



                Limited Partnership Interest.
          (b)   Holders. The number of holders of Units of Limited
                Partnership Interest as of December 31, 1996 was 2,633.
          (c)   Distribution.  The Partnership did not declare a
                distribution in 1996.
Item 6. Select Financial Data. The Partnership  commenced trading  operations on
January 17, 1996.  Realized and unrealized  trading gains,  interest income, net
income and  increase in net asset value per Unit for the period from January 17,
1996 (commencement of trading  operations) to December 31, 1996 and total assets
at December 31, 1996 were as follows:
                                                          1996

Realized and unrealized trading
 gains net of brokerage commissions
 and clearing fees of $2,169,468                        $ 8,869,618

Interest Income                                           1,190,687
                                                        -----------
                                                        $10,060,305
                                                        ===========
Net Income                                              $ 7,582,653
                                                        ===========

Increase in net asset
 value per unit                                             $185.99
                                                        ===========
Total assets                                            $56,960,922
                                                        ===========

Item 7.   Management's Discussion and Analysis of Financial
          Condition and Results of Operations.
        (a)  Liquidity.  The  Partnership  does not  engage in sales of goods or
services.  Its only  assets  are its  equity in its  commodity  futures  trading
account, consisting of cash and cash

                                      7

<PAGE>



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.  Such substantial losses could
lead to a material decrease in liquidity. To minimize this risk, the Partnership
will follow certain policies including:
        (1) Partnership  funds are invested only in futures  contracts which are
traded in sufficient volume to permit,  in the opinion of the Advisors,  ease of
taking and liquidating positions.
        (2) The  Partnership  will not  permit  the  churning  of its  commodity
trading accounts.
        (3) No Advisor initiates  additional  positions in any commodity if such
additional  positions  would result in aggregate  positions for all  commodities
requiring as margin more than 66-2/3% of the  Partnership's  assets allocated to
the Advisor.
        (4) The Partnership will not employ the trading technique commonly known
as  "pyramiding",  in which the speculator uses  unrealized  profits on existing
positions as margin for the purchase or sale of additional positions in the same
or related commodities.
        (5)  The  Partnership  will  not  utilize  borrowing  except  short-term
borrowing if the Partnership takes delivery of any cash commodities.
        (6) The Advisor may, from time to time,  employ trading  strategies such
as  spread or  straddles  on behalf of the  Partnership.  The term  "spread"  or
"straddle" describes a commodity

                                      8

<PAGE>



futures  trading  strategy  involving  the  simultaneous  buying and  selling of
futures contracts on the same commodity but involving  different  delivery dates
or markets  and in which the trader  expects to earn a profit from a widening or
narrowing of the difference between the prices of the two contracts.
        The  Partnership  is party to  financial  instruments  with off- balance
sheet risk, including derivative financial  instruments and derivative commodity
instruments,  in the normal course of its business.  These financial instruments
include forwards,  futures and options,  whose value is based upon an underlying
asset,  index, or reference rate, and generally  represent future commitments to
exchange  currencies  or cash  flows,  or to  purchase  or sell other  financial
instruments  at  specified  terms  at  specified  future  dates.  Each of  these
instruments  is subject  to  various  risks  similar  to those  relating  to the
underlying financial  instruments  including market and credit risk. 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.  (See
also  Item  8.  Financial   Statement  and  Supplementary   Data.,  for  further
information  on  financial  instrument  risk  included in the notes to financial
statements.)
        Other  than  the  risks  inherent  in  commodity  futures  trading,  the
Partnership  knows of no trends demands,  commitments,  events or  uncertainties
which will result in or which are reasonably likely

                                      9

<PAGE>



to  result  in the  Partnership's  liquidity  increasing  or  decreasing  in any
material  way.  The  Limited  Partnership  Agreement  provides  that the General
Partner  may,  at  its  discretion,  cause  the  Partnership  to  cease  trading
operations  and  liquidate  all open  positions  upon the  first to occur of the
following:  (i) December 31, 2014;  (ii) the vote  dissolve the  Partnership  by
limited  partners  owning more than 50% of the Units;  (iii)  assignment  by the
General  Partner  of all of its  interest  in  the  Partnership  or  withdrawal,
removal,  bankruptcy or any other event that causes the General Partner to cease
to be a general  partner  under the New York  Revised  Limited  Partnership  Act
unless the  Partnership  is continued  as  described in the Limited  Partnership
Agreement;  (iv) Net Asset  Value per Unit falls to less than $400 as of the end
of any  trading  day;  or (v) the  occurrence  of any event  which shall make it
unlawful for the existence of the Partnership to be continued.
        (b)  Capital  resources.  (i)  The  Partnership  has  made  no  material
commitments for capital expenditures.
          (ii) The Partnership's  capital consists of the capital  contributions
of the  partners  as  increased  or  decreased  by gains or losses on  commodity
trading,   and  by  expenses,   interest   income,   redemptions  of  Units  and
distributions of profits,  if any. Gains or losses on commodity  futures trading
cannot be predicted.  Market moves in commodities are dependent upon fundamental
and technical  factors which the Partnership may or may not be able to identify.
Partnership   expenses  will  consist  of,  among  other  things,   commissions,
management fees and incentive fees. The

                                      10

<PAGE>



level of these  expenses is dependent  upon the level of trading and the ability
of the  Advisors  to  identify  and take  advantage  of price  movements  in the
commodity  markets,  in  addition  to the  level of net  assets  maintained.  In
addition, the amount of interest income payable by SB is dependent upon interest
rates over which the Partnership has no control.
        No  forecast  can be made as to the  level of  redemptions  in any given
period.  Beginning June 30, 1996 a Limited Partner may cause all of his Units to
be redeemed by the Partnership at the Net Asset Value thereof as of the last day
of each month on ten days' written notice to the General Partner. No fee will be
charged for  redemptions.  For the period ended  December  31, 1996,  1,911.1385
Units were redeemed totaling $1,968,649.
        The Partnership continues to offer Units at the Net Asset Value per Unit
as of the end of each month.  For the period ended December 31, 1996, there were
additional sales of 42,034.2002 Units totaling  $41,190,000 and contributions by
the General Partner representing 411.0108 Unit equivalents totaling $402,000.
        (c) Results of Operations.
        For  the  period  from  January  17,  1996   (commencement   of  trading
operations) to December 31, 1996,  the net asset value per Unit increased  19.8%
from $939.07 to $1,125.06.  There were no  operations in 1995 and 1994.  The net
asset value of $939.07 at  commencement  of trading  operations is reflective of
charging offering and organizational expenses against the initial capital of the
Partnership for financial reporting purposes.

                                      11

<PAGE>



        The  Partnership  experienced  net trading gains of  $11,039,086  before
commissions  and  expenses  in 1996.  These  gains  were  attributable  to gains
incurred  in  the  trading  of  interest  rates,  metals,   energy  and  foreign
currencies.  However,  these  trading  gains  were  partially  offset  by losses
experienced in the trading of stock indices and agricultural commodity futures.
        Commodity futures markets are highly volatile.  Broad price fluctuations
and rapid inflation increase the risks involved in commodity  trading,  but also
increase the possibility of profit. The profitability of the Partnership depends
on the  existence  of major  price  trends and the  ability of the  Advisors  to
identify  those price trends  correctly.  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.


                                      12

<PAGE>



Item 8.         Financial Statements and Supplementary Data.




                SMITH BARNEY  DIVERSIFIED FUTURES FUND L.P. II
                         INDEX TO FINANCIAL STATEMENTS



                                                                  Page 
                                                                  Number


                Report of Independent Accountants.                  F-2

                Financial Statements:
                Statement of Financial Condition at
                December 31, 1996 and 1995.                         F-3

                Statement of Income and Expenses for
                the period from January 17, 1996
                (commencement of trading operations)
                to December 31, 1996.                               F-4

                Statement of Partners'  Capital for 
                the years ended December 31,
                1996  and  1995  and for the  period   
                from  May 10,  1994  (date
                Partnership was organized) to
                December 31, 1994.                                  F-5

                Notes to Financial Statements.                    F-6 -  F-11







                                      F-1

                                   Continued


<PAGE>


                        Report of Independent Accountants

To the Partners of
  Smith Barney Diversified Futures Fund L.P. II:

We have  audited the  accompanying  statement  of  financial  condition of SMITH
BARNEY DIVERSIFIED  FUTURES FUND L.P. II (a New York Limited  Partnership) as of
December 31, 1996 and 1995,  and the related  statements  of income and expenses
for the period from January 17, 1996  (commencement  of trading  operations)  to
December 31, 1996,  and of  partners'  capital for the years ended  December 31,
1996  and 1995  and for the  period  from May 10,  1994  (date  Partnership  was
organized)  to  December  31,  1994.   These   financial   statements   are  the
responsibility of the management of the General Partner.  Our  responsibility is
to express an opinion on these financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the accounting  principles used and significant  estimates made by the
management of the General Partner,  as well as evaluating the overall  financial
statement  presentation.  We believe that our audits provide a reasonable  basis
for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,  the  financial  position of Smith  Barney  Diversified
Futures  Fund L.P. II as of December  31, 1996 and 1995,  and the results of its
operations for the period from May 10, 1994 (date  Partnership was organized) to
December 31, 1996, in conformity with generally accepted accounting principles.



                                                      Coopers & Lybrand L.L.P.

New York, New York
February 28, 1997

                                      F-2
<PAGE>
                  Smith Barney Diversified Futures Fund L.P. II
                        Statement of Financial Condition
                                December 31, 1996


Assets:                                                 1996            1995
Equity in commodity futures
 trading account:

  Cash and cash equivalents (Note 3c)               $54,370,448      $     2,000
  Net unrealized appreciation
  on open futures contracts                           1,981,313
  Commodity options owned, at
  market value (cost $420,667)                          430,497
                                                     ----------       ----------
                                                     56,782,258            2,000
Interest receivable                                     178,664
                                                     ----------       ----------
                                                    $56,960,922      $     2,000
                                                     ==========       ==========
Liabilities and Partners' Capital:
Liabilities:
 Accrued expenses:
  Commissions                                       $   288,503
  Management fees                                       133,127
  Incentive fees                                      1,036,077
  Other                                                  47,744
 Redemptions payable (Note 5)                           145,230
 Commodity options written, at market
 value (premiums received $28,124)                       12,237
                                                     ----------
                                                      1,662,918
                                                     ----------
Partners' capital (Notes 1 and 7):
 General Partner, 498.0108 and 1 Unit
  equivalents outstanding in 1996 and                   560,295      $     1,000
  1995, respectively
 Limited Partners, 48,653.0617 and 1
  Units of Limited Partnership
  Interest outstanding in 1996 and
  1995, respectively                                 54,737,709            1,000
                                                     ----------       ----------
                                                     55,298,004            2,000
                                                     ----------       ----------
                                                    $56,960,922      $     2,000
                                                     ==========       ==========


See notes to financial statements.

                                      F-3
<PAGE>


                  Smith Barney Diversified Futures Fund L.P. II
                        Statement of Income and Expenses
              for the period from January 17, 1996 (commencement of
                    trading operations) to December 31, 1996


                                                     1996
Income:
 Net gains (losses) on trading of
 commodity interests:
  Realized gains on closed
  positions                                      $ 9,032,056
  Change in unrealized
  gains on open positions
                                                   2,007,030
                                                  ----------
                                                  11,039,086
 Less, Brokerage commissions
  and clearing fees ($67,406)
  (Note 3c)                                        2,169,468
                                                  ----------
 Net realized and unrealized
  gains                                            8,869,618
 Interest income (Notes 3c
  and 6)                                           1,190,687
                                                  ----------
                                                  10,060,305
                                                  ----------
Expenses:
 Management fees (Note 3b)                           866,887
 Organization expense (Note 6)                       291,264
 Incentive fees (Note 3b)                          1,199,948
 Other expenses                                      119,553
                                                  ----------
                                                   2,477,652
                                                  ----------
Net income                                       $ 7,582,653
                                                  ==========
Net income per Unit of Limited
 Partnership Interest and
 General Partner Unit
 equivalent (Notes 1 and 7)                      $    185.99
                                                  ==========



See notes to financial statements.

                                      F-4
<PAGE>


                            Smith Barney Diversified
                              Futures Fund L.P. II
                         Statement of Partners' Capital
               for the years ended December 31, 1996 and 1995 and
             for the period from May 10, 1994 (date Partnership was
                         organized) to December 31, 1994


                                        Limited         General
                                       Partners         Partner          Total
Initial capital contributions        $     1,000    $      1,000    $     2,000
                                      ----------     -----------     ----------
Partners' capital at
  December 31, 1994                        1,000           1,000          2,000
                                      ----------     -----------     ----------
Partners' capital at
  December 31, 1995                        1,000           1,000          2,000
Proceeds from offering of 8,529
  Units of Limited Partnership
  Interest and General Partner's
  contribution representing
  86 Unit equivalents (Note 1)         8,529,000          86,000      8,615,000
Offering and organization costs
  (Note 6)                              (519,700)         (5,300)      (525,000)
                                      ----------     -----------     ----------
Opening Partnership capital
  for operations                       8,010,300          81,700      8,092,000
Net Income                             7,506,058          76,595      7,582,653
Sale of 42,034.2002 Units of Limited
 Partnership Interest and General
 Partner's contribution representing
 411.0108 Unit equivalents            41,190,000         402,000     41,592,000
Redemption of 1,911.1385 Units of
 Limited Partnership Interest         (1,968,649)             --     (1,968,649)
                                      ----------     -----------     ----------
Partners' capital at
  December 31, 1996                  $54,737,709    $    560,295    $55,298,004
                                      ==========     ===========     ==========
See notes to financial statements


                                      F-5

<PAGE>



                            Smith Barney Diversified
                              Futures Funds L.P. II
                          Notes to Financial Statements

1. Partnership Organization:

   Smith  Barney  Diversified  Futures  Fund L.P.  II (the  "Partnership")  is a
   limited partnership which was organized on May 10, 1994 under the partnership
   laws of the  State of New York 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.

   Between August 21, 1995 (commencement of the offering period) and January 16,
   1996,  8,529 Units of Limited  Partnership  Interest  ("Units")  were sold at
   $1,000 per Unit. The proceeds of the initial  offering were held in an escrow
   account  until  January 17, 1996,  at which time they were turned over to the
   Partnership for trading. The Partnership  continues to offer Units during the
   continuous  offering  period.  The  Partnership is authorized to sell 100,000
   Units during the public offering period of the Partnership.

   Smith Barney  Futures  Management  Inc. is 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 (see Note 3c).
   The General  Partner and each limited partner share in the profits and losses
   of the Partnership in proportion to the amount of partnership  interest owned
   by each except that no limited partner shall be liable for obligations of the
   Partnership in excess of his initial  capital  contribution  and profits,  if
   any, net of distributions.

   The Partnership  will be liquidated upon the first to occur of the following:
   December 31, 2014;  the net asset value of a Unit decreases to less than $400
   as of a close of any business day; or under certain  other  circumstances  as
   defined in the Limited Partnership Agreement.

2. Accounting Policies:

   a.All commodity interests  (including  derivative  financial  instruments and
     derivative  commodity  instruments)  are used  for  trading  purposes.  The
     commodity  interests  are  recorded  on trade date and open  contracts  are
     recorded in the statement of financial  condition at market value for those
     commodity interests for which market quotations are readily available or at
     fair value on the last business day of the year.  Investments  in commodity
     interests  denominated in foreign currency are translated into U.S. dollars
     at the  exchange  rates  prevailing  on the last  business day of the year.
     Realized  gain  (loss)  and  changes  in  unrealized  values  on  commodity
     interests  are  recognized in the period in which the contract is closed or
     the  changes  occur and are  included  in net gains  (losses) on trading of
     commodity interests.

                                      F-6
<PAGE>
                            Smith Barney Diversified
                              Futures Funds L.P. II
                          Notes to Financial Statements


   b.Income taxes have not been provided as each partner is individually  liable
     for the  taxes,  if any,  on his  share  of the  Partnership's  income  and
     expenses.

   c.The  preparation  of financial  statements  in  conformity  with  generally
     accepted  accounting  principles  requires management to make estimates and
     assumptions  that affect the reported  amounts of assets and liabilities at
     the date of the financial  statements and the reported  amounts of revenues
     and expenses during the reporting period.  Actual results could differ from
     these estimates.

3. Agreements:

   a.Limited Partnership Agreement:

     The General Partner administers the business and affairs of the Partnership
     including  selecting one or more advisors to make trading decisions for the
     Partnership.

   b.Management Agreements:

     The  General  Partner,  on  behalf of the  Partnership,  has  entered  into
     Management Agreements with John W. Henry & Company, Inc. ("JWH"),  Millburn
     Ridgefield  Corporation and Chesapeake Capital Corporation,  (collectively,
     the "Advisors"),  registered  commodity trading advisors.  The Advisors are
     not  affiliated  with one another and none is  affiliated  with the General
     Partner or SB and are not responsible for the  organization or operation of
     the Partnership. The Partnership will pay each Advisor a monthly management
     fee equal to 1/6 of 1% (2% per year) of month-end Net Assets  allocated  to
     the Advisor (except JWH, which will receive a monthly  management fee equal
     to 1/3 of 1% (4% per  year) of  month-end Net  Assets).  In  addition,  the
     Partnership  is  obligated  to pay each  Advisor an  incentive  fee payable
     quarterly  equal to 20% of the New Trading  Profits  earned by each Advisor
     for the Partnership (except JWH, which will receive an incentive fee of 15%
     of New Trading Profits).

                                      F-7
<PAGE>
                            Smith Barney Diversified
                              Futures Funds L.P. II
                          Notes to Financial Statements


   c.Customer Agreement:

     The Partnership  has entered into a Customer  Agreement which provides that
     the Partnership will pay SB a monthly  brokerage fee equal to 1/2 of 1% (6%
     per  year)  of  month-end  Net  Assets,  as  defined,  in lieu of brokerage
     commissions  on a per trade basis.  SB will pay a portion of brokerage fees
     to its  financial  consultants  who have  sold  Units in this  Partnership.
     Brokerage fees will be paid for the life of the  Partnership,  although the
     rate at which such fees are paid may be changed.  The Partnership  will pay
     for National Futures Association ("NFA") fees,  exchange,  clearing,  user,
     give-up  and floor  brokerage  fees.  All of the  Partnership's  assets are
     deposited in the  Partnership's  account at SB. The  Partnership's  cash is
     deposited  by SB in  segregated  bank  accounts as  required  by  Commodity
     Futures Trading Commission regulations. At December 31, 1996, the amount of
     cash held for margin requirements was $6,904,509.  SB has agreed to pay the
     Partnership  interest on 80% of the average daily equity maintained in cash
     in its account during each month at a 30-day U.S. Treasury bill rate deter-
     mined weekly by  SB  based  on the average non-competitive yield on 3-month
     U.S.  Treasury bills maturing in 30 days from the date on which such weekly
     rate is determined.  The Customer  Agreement between the Partnership and SB
     gives the Partnership  the legal right to net unrealized  gains and losses.
     The Customer Agreement may be terminated upon notice by either party.

4. 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  interests.  The results of the  Partnership's  trading
   activity are shown in the statement of income and expense.

   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 December  31, 1996 was,  $2,399,573  and the average fair
   value  during  the  year  then  ended,  based  on  monthly   calculation  was
   $2,965,883.

5. Distributions and Redemptions:

   Distributions of profits,  if any, will be made at the sole discretion of the
   General Partner;  however,  beginning with the quarter ended June 30, 1996, a
   limited  partner may require the Partnership to redeem his Units at their Net
   Asset Value as of the last day of any month on 10 days' notice to the General
   Partner provided that no redemption may result in the limited partner holding
   fewer than 3 Units after  redemption is effected.  There is no fee charged to
   limited partners in connection with redemptions.

                                      F-8
<PAGE>
                            Smith Barney Diversified
                              Futures Funds L.P. II
                          Notes to Financial Statements


6. Organization and Offering Costs:

   Offering and organization expenses of approximately  $525,000 relating to the
   issuance  and  marketing  of Units  during the initial  offering  period were
   initially  paid by SB and were  charged  against the  initial  capital of the
   Partnership.  In  addition,  expenses of $291,264  related to the  continuous
   offering  of  Units  have  been  incurred.  As  of  December  31,  1996,  the
   Partnership  had  reimbursed  SB for all such  expenses  incurred  during the
   initial  offering and continuous  offering period (in addition to interest at
   the prime rate  quoted by The Chase  Manhattan  Bank  totaling  approximately
   $20,929) from interest earned on funds held in its account.

7. Net Asset Value Per Unit:

   Changes in the net asset value per Unit for the period from  January 17, 1996
   (commencement of trading operations) to December 31, 1996 were as follows:


                                        1996
Net realized and
unrealized gains                   $     177.40
Interest income                           36.09
Expenses                                 (67.51)
Other                                     40.01
                                   ------------
Increase for period                      185.99
Net asset value
per Unit, 
beginning of period                      939.07
                                   ------------
Net asset value
per Unit,                          
end of period                      $   1,125.06
                                   ============

8. Financial Instrument Risk:

   The Partnership is party to  financial  instruments  with  off-balance  sheet
   risk, including  derivative  financial  instruments and derivative  commodity
   instruments,   in  the  normal  course  of  its  business.   These  financial
   instruments include forwards,  futures and options, whose value is based upon
   an underlying asset, index, or reference rate, and generally represent future
   commitments  to exchange  currencies  or cash  flows,  or 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.

                                      F-9
<PAGE>
                            Smith Barney Diversified
                              Futures Funds L.P. II
                          Notes to Financial Statements


   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.

                                      F-10
<PAGE>
                            Smith Barney Diversified
                              Futures Funds L.P. II
                          Notes to Financial Statements

   The notional or contractual amounts of these instruments, while appropriately
   not  recorded  in  the  financial  statements,  reflect  the  extent  of  the
   Partnership's  involvement  in these  instruments.  At December 31, 1996, the
   Partnership's   commitment  to  purchase  and  sell  these   instruments  was
   $287,865,518 and $181,348,343,  respectively, as detailed below. All of these
   instruments mature within one year of December 31, 1996. However,  due to the
   nature of the  Partnership's  business,  these instruments may not be held to
   maturity.  At  December  31,  1996,  the  fair  value  of  the  Partnership's
   derivatives, including options thereon, was $2,399,573, as detailed below.


                                      Notional or Contractual
                                       Amount of Commitments
                                      To Purchase      To Sell         Fair
                                                                       Value
Currencies:
 -Exchange Traded Contracts          $ 12,752,114   $ 15,672,967   $    596,711
 -OTC Contracts                        48,300,653     72,590,507        393,543
Energy                                 12,060,803             --        328,180
Grains                                    175,750      4,560,014        148,525
Interest Rate U.S.                     54,062,085      4,098,651        (55,803)
Interest Rate
 Non-U.S.                             137,083,934     42,405,484        (44,169)
Livestock                                 385,930             --            840
Metals                                  7,349,851     23,421,538        416,746
Softs                                   7,984,383      8,534,913         28,892
Indices                                 7,710,015     10,064,269        586,108
                                     ------------   ------------   ------------
Total                                $287,865,518   $181,348,343   $  2,399,573
                                     ============   ============   ============


                                      F-11


<PAGE>



Item 9. Changes in and Disagreements with Accountants on Accounting
        and Financial Disclosure.
        During the last two fiscal years and any subsequent  interim period,  no
independent  accountant who was engaged as the principal accountant to audit the
Partnership's financial statements has resigned or was dismissed.
                                   PART III
Item 10.  Directors and Executive Officers of the Registrant.
        The Partnership has no officers or directors and its affairs are managed
by  its  General  Partner,  Smith  Barney  Futures  Management  Inc.  Investment
decisions  will be made by John W. Henry &  Company,  Inc.,  Chesapeake  Capital
Corporation and Millburn Ridgefield Corporation (collectively, the "Advisors").
Item 11.    Executive Compensation.
            The  Partnership  has no  directors  or  officers.  Its  affairs are
managed by Smith Barney  Futures  Management  Inc., its General  Partner,  which
receives  compensation for its services,  as set forth under "Item 1. Business."
SB, an  affiliate  of the  General  Partner,  is the  commodity  broker  for the
Partnership and receives brokerage  commissions for such services,  as described
under "Item 1. Business." Brokerage  commissions and clearing fees of $2,169,468
were paid for the period ended December 31, 1996.  Management fees and incentive
fees of $866,887 and $1,199,948, respectively, were paid to the Advisors for the
period ended December 31, 1996.


                                      13

<PAGE>



Item 12.    Security Ownership of Certain Beneficial Owners and
            Management.
            (a). Security ownership of certain beneficial owners. As of March 1,
1997, the Partnership  knows of no person who beneficially  owns more than 5% of
the Units outstanding.
            (b).  Security  ownership  of  management.  Under  the  terms of the
Limited  Partnership  Agreement,  the  Partnership's  affairs are managed by the
General Partner.  The General Partner owns Units of general partnership interest
equivalent  to  498.0108  Units  (1.0%) of Limited  Partnership  Interest  as of
December 31, 1996.
            (c).  Changes in control.   None.
Item 13.   Certain Relationship and Related Transactions.
            Smith Barney Inc. and Smith Barney Futures  Management Inc. would be
considered  promoters for purposes of item 404 (d) of Regulation S-K. The nature
and the amounts of compensation  each promoter will receive from the Partnership
are set forth under "Item 1. Business" and "Item 11. Executive Compensation."


                                      14

<PAGE>



                                    PART IV
Item 14.    Exhibits, Financial Statement Schedules, and Reports on
            Form 8-K.
      (a) (1)  Financial Statements:
                  Statement  of  Financial  Condition  at December  31, 1996 and
                  1995.  
                  Statement  of Income and  Expenses  for the period from
                  January  17,  1996  (commencement  of trading  operations)  to
                  December  31, 1996.  
                  Statement  of  Partners'  Capital for the
                  years ended December 31, 1996 and 1995 and for the period from
                  May 10, 1994 (date  Partnership was organized) to December 31,
                  1994.
          (2)    Financial Statement Schedules:  None.
          (3)    Exhibits:
          3.1 -  Limited Partnership Agreement (filed as Exhibit 3.1
                 to the Registration Statement on Form S-1 (File No.
                 33-79244 and incorporated herein by reference).
          3.2 -  Certificate of Limited Partnership of the
                 Partnership as filed in the office of the County
                 Clerk of New York County (filed as Exhibit 3.2 to
                 the Registration Statement on Form S-1 (Filed No.
                 33-79244) and incorporated herein by reference).
          10.1-  Customer Agreement between the Partnership and Smith
                 Barney  (filed as Exhibit 10.1 to the Registration
                 Statement on Form S-1 (File No. 33-79244) and

                                      15

<PAGE>



                 incorporated herein by reference).
          10.2-  Subscription Agreement (filed as Exhibit 10.2 to the
                 Registration Statement on Form S-1 (File No. 33-
                 29144) and incorporated herein by reference).
          10.3-  Escrow Instructions relating to escrow of
                 subscription funds (filed as Exhibit 10.3 to the
                 Registration Statement on Form S-1 (File No. 33-
                 79244) and incorporated herein by reference).
          10.4-  Management Agreement among the Partnership, the
                 General Partner and Chesapeake Capital Corporation
                 (filed as Exhibit 10.5 to the Registration Statement
                 on Form S-1 (File No. 33-79244) and incorporated
                 herein by reference).
          10.5-  Management Agreement among the Partnership, the
                 General Partner and John W. Henry & Co. Inc. (filed
                 as Exhibit 10.6 to the Registration Statement on
                 Form S-1 (File No. 33-79244) and incorporated herein
                 by reference).
          10.6-  Management Agreement among the Partnership, the
                 General Partner and Millburn Ridgefield Corporation
                 (filed as Exhibit 10.7 to the Registration Statement
                 on Form S-1 (File No. 33-79244) and incorporated
                 herein by reference).
      (b)     Reports on 8-K:   None Filed.

                                      16

<PAGE>



      Supplemental  Information  To Be Furnished  With Reports Filed Pursuant To
Section 15(d) Of The Act by  Registrants  Which Have Not  Registered  Securities
Pursuant To Section 12 Of the Act.




Annual Report to Limited Partners


                                      17

<PAGE>



                                  SIGNATURES

       Pursuant  to  the  requirements  of  the  Securities  Act  of  1933,  the
Registrant  has duly  caused  this  Registration  Statement  to be signed on its
behalf by the undersigned,  thereunto duly  authorized,  in the City of New York
and State of New York on the 24th day of March 1997.

SMITH BARNEY DIVERSIFIED FUTURES FUND L.P. II


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



By     /s/        David J. Vogel
       David J. Vogel, President & Director


       Pursuant  to  the  requirements  of the  Securities  Act  of  1933,  this
Registration  Statement  has been signed below by the  following  persons in the
capacities and on the date indicated.



/s/     David J. Vogel                    /s/     Jack H. Lehman III
David J. Vogel,                           Jack H. Lehman III
Director, Principal Executive             Chairman and Director
Officer and President



/s/      Michael Schaefer                 /s/    Daniel A. Dantuono
Michael Schaefer                          Daniel A. Dantuono
Director                                  Treasurer, Chief Financial
                                          Officer and Director



/s/  Philip M. Waterman, Jr.              /s/ Daniel R. McAuliffe, Jr.
Philip M. Waterman, Jr.                   Daniel R. McAuliffe, Jr.
Director and Vice-Chairman                Director




/s/ Steve J. Keltz                        /s/   Shelley Ullman
Steve J. Keltz                            Shelley Ullman
Secretary and Director                    Director



                                      18

<PAGE>