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, 2003

Commission File Number 0-22491



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


             New York                                    13-3769020
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  (State or other jurisdiction of                     (I.R.S. Employer
   incorporation or organization)                     Identification No.)

                        c/o Citigroup Managed Futures LLC
                             399 Park Ave - 7th Fl.
                            New York, New York 10022
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              (Address and Zip Code of principal executive offices)

                                 (212) 559-2011
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              (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: Redeemable 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 [X]

Indicated  by check mark  whether the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Act).

                                    Yes         No X
                                                  ----

Limited Partnership Redeemable Units with an aggregate value of $70,961,018 were
outstanding  and  held by  non-affiliates  as of the  last  business  day of the
registrants most recently completed second fiscal quarter.

As of February 29, 2004,  45,732.5014 Limited Partnership  Redeemable Units were
outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

                                      None



<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(File No.  033-79244)  relating to the
public offering became effective on August 21, 1995.  Beginning August 21, 1995,
100,000 redeemable units of Limited Partnership  Interest  ("Redeemable  Units")
were publicly offered at $1,000 per Redeemable 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,  8,529  Redeemable  Units were sold at $1,000 per
Redeemable  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.  An additional 100,000 Redeemable Units were registered on a
Registration  Statement on Form S-1 (File No. 333-03538)  effective May 29, 1996
and an additional  150,000  Redeemable  Units were  registered on a Registration
Statement on Form S-1 (File No. 333-25239) effective April 15, 1997.

     Citigroup  Managed  Futures LLC,  formerly Smith Barney Futures  Management
LLC,  acts as the general  partner (the "General  Partner") of the  Partnership.
Sales  of  additional   Redeemable   Units  and   additional   General   Partner
contributions  and  redemptions of Redeemable  Units for the year ended December
31, 2003 are reported in the  Statement  of Partners'  Capital on page F-9 under
"Item 8. 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 per Redeemable Unit falls below $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  commodity  broker  is  Citigroup  Global  Markets  Inc.
("CGM"),  formerly  Salomon Smith Barney Inc. CGM is an affiliate of the General
partner.  The  General  Partner  is wholly  owned by  Citigroup  Global  Markets
Holdings Inc.  ("CGMHI")  formerly  Salomon Smith Barney Holdings Inc., which is
the sole owner of CGM.  CGMHI is a wholly owned  subsidiary  of  Citigroup  Inc.
("Citigroup").



                                       2
<PAGE>

     The Partnership's  trading of futures,  forwards and options contracts,  if
applicable,  on  commodities  is done  primarily on United States of America and
foreign  commodity  exchanges.  It engages in such  trading  through a commodity
brokerage account maintained with CGM.

     As of December 31, 2003, all commodity  trading  decisions are made for the
Partnership by Graham Capital Management L.P.  ("Graham"),  Campbell and Company
Inc., Willowbridge  Associates Inc., and Capital Fund Management  (collectively,
the "Advisors").  None of the Advisors is affiliated with the General Partner or
CGM. The Advisors are not responsible  for the  organization or operation of the
Partnership.  Stonebrook Structured Products LLC was terminated as an Advisor to
the Partnership on January 31, 2003.

     Pursuant to the terms of the management  agreements  with each Advisor (the
"Management Agreements"), the Partnership pays each Advisor a monthly management
fee equal to 1/6 of 1% (2% per year) of  month-end  Net Assets  allocated to the
Advisor. Month-end Net Assets for the purpose of calculating management fees are
Net  Assets,  as  defined in the  Limited  Partnership  Agreement,  prior to the
reduction of redemptions  and incentive  fees. In addition,  the  Partnership is
obligated to pay each Advisor an incentive fee payable quarterly equal to 20% of
the New Trading Profits, as defined in the Management Agreements, earned by each
Advisor for the Partnership,  except Graham, which will receive an incentive fee
of 10% of New  Trading  Profits on the first  $5,000,000  and 20% of New Trading
Profits for all such profits in excess of $5,000,000.  For the period January 1,
2000 through June 30, 2000, the Partnership was obligated to pay John W. Henry &
Company,  Inc. a monthly  management fee of 1/3 of 1% (4% per year) of month-end
net assets,  and an incentive fee of 15% of the new Trading Profits,  as defined
in the Management Agreement.

     The  Partnership  has  entered  into a  customer  agreement  with  CGM (the
"Customer  Agreement"),  which provides that the Partnership  pays CGM a monthly
brokerage  fee  equal to 1/2 of 1% of  month-end  Net  Assets  allocated  to the
Advisors  (6% per year) in lieu of brokerage  commissions  on a per trade basis.
Month-end Net Assets for the purpose of calculating  brokerage  commissions  are
Net  Assets,  as  defined  in the  Limited  Partnership  Agreement  prior to the
reduction of expenses and  redemptions  payable.  CGM also pays a portion of its
brokerage fees to its financial  consultants who have sold Redeemable  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 CGM gives the Partnership the legal right
to net unrealized gains and losses.



                                       3
<PAGE>

     In addition,  CGM 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 CGM 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.

     (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 years ended December 31, 2003,  2002,  2001 2000, and 1999 is
set forth under "Item 6. Selected Financial Data." The Partnership's  capital as
of December 31, 2003, was $68,275,728.

     (c) Narrative description of business.

         See Paragraphs (a) and (b) above.

         (i) through (xii) - Not applicable.

         (xiii) - The Partnership has no employees.

     (d) Financial  information about geographic areas. The Partnership does not
engage in sales of goods or services or own any long lived assets, and therefore
this item is not applicable.

     (e)  Available  information.  The  Partnership  does not  have an  Internet
address.  The Partnership will provide paper copies of its annual report on Form
10-K,  quarterly  reports  on Form  10-Q,  current  reports  on Form 8-K and any
amendments to these reports free of charge upon request.

Item 2. Properties.

     The Partnership  does not own or lease any properties.  The General Partner
operates out of facilities provided by its affiliate, CGM.

Item 3. Legal Proceedings.

     This section  describes  the major pending  legal  proceedings,  other than
ordinary  routine  litigation  incidental  to the business,  to which  Citigroup
Global  Markets  Holdings Inc.  ("CGMHI") or its  subsidiaries  is a party or to
which any of their property is subject.  There are no material legal proceedings
pending against the Partnership or the General Partner.

     CGM is a New York  corporation  with its principal place of business at 388
Greenwich Street, New York, New York 10013. CGM is registered as a broker-dealer
and futures  commission  merchant  ("FCM"),  and provides futures  brokerage and
clearing  services  for  institutional  and retail  participants  in the futures
markets.  CGM and its  affiliates  also  provide  investment  banking  and other
financial services for clients worldwide.



                                       4
<PAGE>

     There have been no  administrative,  civil or criminal actions pending,  on
appeal or concluded  against CGM or any of its individual  principals within the
past five years that  management  believes  may have a material  impact on CGM's
ability to act as an FCM. In the ordinary course of its business, CGM is a party
to various claims and regulatory inquiries.

Settlement of Certain Legal and Regulatory Matters

     On April  28,  2003,  CGM  announced  final  agreements  with the SEC,  the
National Association of Securities Dealers ("NASD"), the New York Stock Exchange
("NYSE")  and the New York  Attorney  General to resolve on a civil basis all of
their  outstanding  investigations  into its  research  and IPO  allocation  and
distribution practices (the "Research  Settlement").  To effectuate the Research
Settlement,  the SEC filed a Complaint  and Final  Judgment in the United States
District Court for the Southern District of New York. On October 31, 2003, final
judgment was entered against CGM and nine other  investment  banks. The NASD has
accepted the Letter of Acceptance,  Waiver and Consent  entered into with CGM in
connection with the Research Settlement.  In May 2003, the NYSE advised CGM that
the Hearing Panel's Decision, in which it accepted the Research Settlement,  had
become  final.  As required by the  Research  Settlement,  CGM has entered  into
separate settlement  agreements with 48 states and various U.S.  territories and
is in settlement negotiations with the remaining 2 states.

Enron Corp.

     In April 2002, Citigroup was named as a defendant along with, among others,
commercial and/or  investment  banks,  certain current and former Enron officers
and directors,  lawyers and accountants in a putative  consolidated class action
complaint  that was filed in the United States  District  Court for the Southern
District of Texas seeking unspecified damages. The action,  brought on behalf of
individuals who purchased  Enron  securities  (NEWBY,  ET AL. V. ENRON CORP., ET
AL.), alleges violations of Sections 11 and 15 of the Securities Act of 1933, as
amended, and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as
amended.  Citigroup's  motion to dismiss  the  complaint  was denied in December
2002,  and Citigroup  filed an answer in January  2003. In May 2003,  plaintiffs
filed an amended  consolidated  class action  complaint,  and Citigroup  filed a
motion  to  dismiss  in  June  2003.   Plaintiffs   filed  a  motion  for  class
certification in May 2003.  Discovery is proceeding pending the Court's decision
on class certification.

     Additional  actions have been filed  against  Citigroup  and certain of its
affiliates,  including  CGM,  along with other  parties,  including  (i) actions
brought by a number of pension  and  benefit  plans,  investment  funds,  mutual
funds, and other individual and  institutional  investors in connection with the
purchase  of  Enron  and  Enron-related  equity  and debt  securities,  alleging
violations  of  various  state  and  federal   securities   laws,  state  unfair
competition statutes,  common law fraud,  misrepresentation,  unjust enrichment,
breach of fiduciary duty, conspiracy, and other violations of state law; (ii) an
action by banks that  participated  in two Enron  revolving  credit  facilities,
originally  alleging fraud, gross negligence,  breach of implied duties,  aiding
and abetting and civil conspiracy in connection with defendants'  administration
of a credit facility with Enron; the Court granted Citigroup's motion to dismiss
with respect to all claims except for certain  claims of aiding and abetting and
civil  conspiracy;  (iii) an action brought by several  funds in connection with


                                       5
<PAGE>

secondary market purchases of Enron debt securities,  alleging violations of the
federal  securities law,  including Section 11 of the Securities Act of 1933, as
amended, and claims for fraud and  misrepresentation;  (iv) a series of putative
class  actions  by  purchasers  of  NewPower  Holdings  common  stock,  alleging
violations of the federal securities law, including Section 11 of the Securities
Act of 1933,  as amended,  and Section 10(b) of the  Securities  Exchange Act of
1934,  as  amended;  (v) a putative  class  action  brought by clients of CGM in
connection with research reports concerning Enron,  alleging breach of contract;
(vi) an action  brought by a retirement  and health  benefits plan in connection
with the  purchase  of  certain  Enron  notes,  alleging  violation  of  federal
securities law,  including Section 11 of the Securities Act of 1933, as amended,
violations of state securities and unfair  competition law, and common law fraud
and breach of fiduciary duty; (vii) an action brought by the Attorney General of
Connecticut  in  connection  with  various  commercial  and  investment  banking
services  provided  to Enron;  (viii) an action  brought  by  purchasers  in the
secondary  market of Enron  bank  debt,  alleging  claims  for common law fraud,
conspiracy,  gross negligence,  negligence and breach of fiduciary duty; (ix) an
action  brought by an  investment  company,  alleging  that  Enron  fraudulently
induced  it to  enter  into a  commodity  sales  contract;  (x)  five  adversary
proceedings  filed by Enron in its chapter 11 bankruptcy  proceedings to recover
alleged  preferential  payments and fraudulent  transfers  involving  Citigroup,
certain of its affiliates and other entities,  and to disallow or to subordinate
claims  that  Citigroup  and other  entities  have  filed  against  Enron;  (xi)
third-party  actions  brought by former Enron officers and  directors,  alleging
violation of state  securities and other laws and a right to  contribution  from
Citigroup,  in  connection  with claims  under state  securities  and common law
brought  against the officers and  directors  and others;  and (xii) a purported
class action brought on behalf of Connecticut municipalities, alleging violation
of state statutes,  conspiracy to commit fraud,  aiding and abetting a breach of
fiduciary  duty  and  unjust  enrichment.  Several  of  these  cases  have  been
consolidated or coordinated with the NEWBY action and are now generally inactive
pending the Court's decision on the pending motion on class certification.

Dynegy Inc.

     On June 6, 2003,  the  complaint in a  pre-existing  putative  class action
pending in the United States  District Court for the Southern  District of Texas
(IN RE:  DYNEGY INC.  SECURITIES  LITIGATION)  brought by purchasers of publicly
traded debt and equity  securities of Dynegy Inc. was amended to add  Citigroup,
Citibank and CGMI as defendants.  The plaintiffs  allege  violations of Sections
10(b) and 20(a) of the Securities Exchange Act of 1934, as amended,  against the
Citigroup defendants.

WorldCom, Inc.

     Citigroup,  CGM and  certain  executive  officers  and  current  and former
employees have been named as defendants--along  with twenty-two other investment
banks,  certain  current  and  former  WorldCom  officers  and  directors,   and
WorldCom's former  auditors--in a consolidated class action brought on behalf of
individuals and entities who purchased or acquired publicly traded securities of
WorldCom  between  April  29,  1999  and June 25,  2002  (IN RE:  WORLDCOM  INC.
SECURITIES  LITIGATION).  The class action complaint  asserts claims against CGM
under (i) Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended, in
connection  with certain bond offerings in which it served as  underwriter,  and
(ii)  Sections  10(b)  and  20(a) of the  Securities  Exchange  Act of 1934,  as
amended,  and Rule 10b-5  promulgated  under  Section  10(b),  alleging  that it
participated  in  the  preparation   and/or  issuance  of  misleading   WorldCom
registration statements and disseminated misleading research reports concerning


                                       6
<PAGE>

WorldCom  stock.  On May 19, 2003,  the Court denied CGM's motion to dismiss the
consolidated class action complaint.  On October 24, 2003, the Court granted the
plaintiffs'  motion for class  certification.  On December 31, 2003,  the United
States Court of Appeals for the Second Circuit  granted CGM's  petition  seeking
leave for an interlocutory appeal of the class certification order. The District
Court has scheduled trial to begin in January 2005.

     Pursuant to an order entered May 28, 2003, the District Court  consolidated
approximately  seventy  individual  actions  with the class  action for pretrial
proceedings.  Certain  individual  plaintiffs have appealed the district court's
order denying their motions to remand.  The claims asserted in these  individual
actions are substantially  similar to the claims alleged in the class action and
assert state and federal  securities law claims based on CGM's research  reports
concerning WorldCom and/or CGM's role as an underwriter in WorldCom offerings.

     Numerous other actions  asserting claims against CGM in connection with its
research  reports about  WorldCom  and/or its role as an  investment  banker for
WorldCom are pending in other federal and state courts.  These actions have been
remanded to various state courts,  are pending in other federal courts,  or have
been  conditionally  transferred  to the United  States  District  Court for the
Southern  District  of New York to be  consolidated  with the class  action.  In
addition,  actions  asserting  claims  against  Citigroup  and  certain  of  its
affiliates  relating to its  WorldCom  research  reports are pending in numerous
arbitrations  around the country.  These arbitration  proceedings  assert claims
that are substantially similar to the claims asserted in the class action.

Global Crossing

     On or about January 28, 2003,  lead  plaintiff in a  consolidated  putative
class action in the United States  District  Court for the Southern  District of
New  York  (IN  RE:  GLOBAL  CROSSING,   LTD.  SECURITIES  LITIGATION)  filed  a
consolidated  complaint  on behalf of  purchasers  of the  securities  of Global
Crossing and Asia Global  Crossing,  which names as  defendants,  among  others,
Citigroup,  CGM,  CGMHI and certain  executive  officers  and current and former
employees.  The putative  class action  complaint  asserts  claims against these
Citigroup defendants under (i) Sections 11, 12(a)(2) and 15 of the Securities


                                       7
<PAGE>

Act of 1933,  as amended,  and Section 14(a) of the  Securities  Exchange Act of
1934, as amended and Rule 14A-9A  promulgated  thereunder,  in  connection  with
certain  offerings in which CGM served as  underwriter  and in  connection  with
certain  transactions  in which CGM issued fairness  opinions,  and (ii) Section
10(b) and 20(a) of the  Securities  Exchange Act of 1934,  as amended,  and Rule
10b-5  promulgated  thereunder,   alleging  that  they  disseminated  misleading
research  reports  concerning  Global  Crossing  and Asia Global  Crossing.  The
Citigroup-related defendants have moved to dismiss these claims.

     In addition,  actions asserting claims against Citigroup and certain of its
affiliates  relating  to its Global  Crossing  research  reports  are pending in
numerous arbitrations around the country.  These arbitration  proceedings assert
claims that are  substantially  similar to the claims  asserted in the  putative
class action.

Adelphia Communications Corporation

     On  July 6,  2003,  an  adversary  proceeding  was  filed  by the  Official
Committee   of  Unsecured   Creditors  on  behalf  of  Adelphia   Communications
Corporation  against  certain  lenders and  investment  banks,  including  CGMI,
Citibank,  N.A.,  Citicorp USA, Inc.,  and Citigroup  Financial  Products,  Inc.
(together,  the Citigroup  Parties).  The  complaint  alleges that the Citigroup
Parties and numerous  other  defendants  committed acts in violation of the Bank
Holding Company Act and the common law. The complaints seek equitable relief and
an unspecified amount of compensatory and punitive damages.  In November 2003, a
similar  adversary  proceeding  was filed by the  Equity  Holders  Committee  of
Adelphia.

     In addition,  CGM is among the underwriters named in numerous civil actions
brought to date by investors in Adelphia  debt  securities  in  connection  with
Adelphia securities  offerings between September 1997 and October 2001. Three of
the complaints also assert claims against Citigroup Inc. and Citibank,  N.A. All
of the complaints allege  violations of federal  securities laws, and certain of
the complaints  also allege  violations of state  securities laws and the common
law. The complaint seeks unspecified damages. In December 2003, a second amended
complaint was filed and consolidated  before the same judge of the United States
District Court for the Southern District of New York.



                                       8
<PAGE>

Mutual Funds

     In 2003,  several  issues in the mutual fund  industry  have come under the
scrutiny of federal and state regulators. The Company has received subpoenas and
other requests for  information  from various  government  regulators  regarding
market timing,  fees, sales practices and other mutual fund issues in connection
with various  investigations,  including an  investigation by the Securities and
Exchange  Commission and a United States  Attorney into the  arrangements  under
which we became the  transfer  agent for many of the  mutual  funds in the Smith
Barney fund complex. CGM is cooperating fully with all such reviews.

Research

     Since May 2002,  Citigroup,  CGM and certain executive officers and current
and former  employees  have been named as defendants in numerous  putative class
action complaints,  individual actions, and arbitration demands by purchasers of
various  securities,   alleging  that  they  violated  federal  securities  law,
including Sections 10 and 20 of the Securities Exchange Act of 1934, as amended,
and  certain  state  laws for  allegedly  issuing  research  reports  without  a
reasonable  basis in fact and for  allegedly  failing to disclose  conflicts  of
interest  with  companies in  connection  with  published  investment  research,
including AT&T Corp., Winstar Communications, Inc., Rhythm NetConnections, Inc.,
Level 3 Communications, Inc., Metromedia Fiber Network, Inc., XO Communications,
Inc., Williams Communications Group Inc., and Qwest Communications International
Inc. The putative  class  actions  relating to research of these  companies  are
pending  before a single  judge in the  United  States  District  Court  for the
Southern  District  of New York  for  coordinated  proceedings.  The  Court  has
consolidated  these  actions  into  separate  proceedings  corresponding  to the
companies  named  above.   On  January  30,  2004,   plaintiffs  in  the  Rhythm
NetConnections,   Inc.  action   voluntarily   dismissed  their  complaint  with
prejudice.

     In addition,  actions asserting claims against Citigroup and certain of its
affiliates  relating to its research  reports on these  companies are pending in
numerous arbitrations around the country.  These arbitration  proceedings assert
claims that are  substantially  similar to the claims  asserted in the class and
individual actions.

     Three  additional  putative  class  actions are  pending in federal  courts
against  Citigroup and certain of its affiliates,  including CGM, and certain of
their current and former  directors,  officers and  employees,  along with other
parties,  on behalf of persons who  maintained  accounts with CGM. These actions
assert, among other things, common law claims, claims under state statutes,  and
claims under the  Investment  Advisers  Act of 1940,  for  allegedly  failing to
provide objective and unbiased  investment  research and investment  management,
seeking,  among other things,  return of fees and  commissions.  In all three of
these  actions,  the  Citigroup-related  defendants  have moved to  dismiss  the
complaints.  In two of these putative class actions,  these motions were granted
and appeals are now pending.



                                       9
<PAGE>


     In May 2003,  the SEC,  NYSE and NASD issued a subpoena  and letters to CGM
requesting   documents  and  information   with  respect  to  their   continuing
investigation  of individuals in connection with the supervision of the research
and  investment  banking  departments  of CGM.  Other  parties  to the  Research
Settlement have received similar subpoena and letters.

     On June 23,  2003,  the West  Virginia  Attorney  General  filed an  action
against CGM and nine other firms that were parties to the  Research  Settlement.
The West  Virginia  Attorney  General  alleges that the firms  violated the West
Virginia  Consumer  Credit and Protection Act in connection  with their research
activities and seeks monetary penalties. CGM and the other defendants have moved
to dismiss the action.

Other

     In April 2002,  consolidated  amended complaints were filed against CGM and
other  investment  banks named in numerous  putative  class actions filed in the
United States  District  Court for the Southern  District of New York,  alleging
violations  of certain  federal  securities  laws  (including  Section 11 of the
Securities Act of 1933, as amended, and Section 10(b) of the Securities Exchange
Act of 1934,  as amended)  with respect to the  allocation of shares for certain
initial  public  offerings and related  aftermarket  transactions  and damage to
investors caused by allegedly  biased research analyst reports.  On February 19,
2003, the Court issued an opinion denying  defendants'  motion to dismiss.  Also
filed in the  Southern  District of New York  against  CGM and other  investment
banks were several putative class actions that were  consolidated  into a single
class action, alleging violations of certain federal and state antitrust laws in
connection with the allocation of shares in initial public offerings when acting
as underwriters.  On November 3, 2003, the Court granted CGM's motion to dismiss
the consolidated amended complaint in the antitrust case.

     Additional  lawsuits containing similar claims to those described above may
be filed in the future.

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.


                                       10
<PAGE>



                                     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 Redeemable Units of Limited  Partnership
               Interest.

          (b)  Holders.  The number of holders  of  Redeemable  Units of Limited
               Partnership Interest as of December 31, 2003 was 2,779.

          (c)  Distribution.  The  Partnership did not declare a distribution in
               2003 or 2002.

          (d)  Use of Proceeds.  There were no  additional  sales of  Redeemable
               Units in the years ended December 31, 2003, 2002 and 2001.




                                       11
<PAGE>


Item 6. Selected Financial Data.

Realized and unrealized  trading gains  (losses),  interest  income,  net income
(loss) and increase  (decrease) in Net Asset Value per  Redeemable  Unit for the
years ended  December 31, 2003,  2002,  2001,  2000 and 1999 and total assets at
December 31, 2003, 2002, 2001, 2000 and 1999 were as follows:

<TABLE>
<CAPTION>

                                         2003            2002             2001            2000             1999
                                         ----            ----             ----            ----             ----
<S>                                       <C>             <C>             <C>              <C>            <C>
Realized and unrealized trading
gains (losses) net of brokerage
commissions and clearing fees
of $4,867,218, $4,514,105,
$5,109,439, $5,846,384 and
$8,857,232, respectively           $  14,129,201   $  14,296,353    $  (5,744,771)   $   6,540,869    $ (21,027,791)

Interest income                          569,919         799,484        2,121,645        3,884,319        4,658,630
                                   -------------   -------------    -------------    -------------    -------------
                                   $  14,699,120   $  15,095,837    $  (3,623,126)   $  10,425,188    $ (16,369,161)
                                   =============   =============    =============    =============    =============
Net income (loss)                  $  10,452,183   $  10,902,122    $  (6,137,603)   $   7,572,583    $ (21,048,896)
                                   =============   =============    =============    =============    =============

Increase (decrease) in Net Asset
Value per Redeemable Unit
                                   $      199.53   $      205.86    $      (87.64)   $      107.10    $     (193.59)
                                   =============   =============    =============    =============    =============

Total assets                       $  71,276,280   $  68,703,203    $  68,118,842    $  87,318,686    $ 106,012,664
                                   =============   =============    =============    =============    =============

</TABLE>


                                       12
<PAGE>




Item 7. Management's  Discussion and Analysis of Financial Condition and Results
        of Operations.

Overview

     The Partnership aims to achieve  substantial capital  appreciation  through
speculative trading,  directly and indirectly, in U.S. and international markets
for currencies,  interest rates, stock indices, agricultural and energy products
and precious and base metals.  The Partnership  may employ  futures,  options on
futures, and forward contracts in those markets.

     The General  Partner manages all business of the  Partnership.  The General
Partner has delegated its responsibility for the investment of the Partnership's
assets to Campbell & Company,  Inc.  ("Campbell"),  Capital Fund  Management  SA
("CFM"), Graham Capital Management,  L.P. ("Graham"),  Willowbridge  Associates,
Inc.  ("Willowbridge") and Stonebrook  Structured Products,  LLC ("Stonebrook"),
(collectively,  the "Advisors").  Stonebrook was terminated as an Advisor to the
Partnership  on  January  31,  2003.  The  General  Partner  employs  a team  of
approximately  15  professionals  whose  primary  emphasis is on  attempting  to
maintain  quality  control  among the advisors to the  partnerships  operated or
managed by the General Partner. A full-time staff of due diligence professionals
use  state-of-the-art  technology  and  on-site  evaluations  to monitor new and
existing  futures money  managers.  The accounting and operations  staff provide
processing of trading  activity and reporting to limited partners and regulatory
authorities. In selecting the Advisors for the Partnership,  the General Partner
considered past performance, trading style, volatility of markets traded and fee
requirements.

Responsibilities of the General Partner include:

          o    due diligence examinations of the Advisors;

          o    selection, appointment and termination of the Advisors;

          o    negotiation of the management agreements; and

          o    monitoring the activity of the Advisors.

     In  addition,  the  General  Partner  prepares  the books and  records  and
provides the administrative and compliance  services that are required by law or
regulation  from time to time in connection  with operation of the  Partnership.
These services include the preparation of required books and records and reports
to limited  partners,  government  agencies and  regulators;  computation of net
asset value;  calculation  of fees;  effecting  subscriptions,  redemptions  and
limited partner communications;  and preparation of offering documents and sales
literature.



                                       13
<PAGE>

     The General  Partner  seeks the best prices and  services  available in its
commodity futures brokerage  transactions.  The General Partner reviews at least
annually,  the  brokerage  rates  charged  to  commodity  pools  similar  to the
Partnership'  to determine  whether the brokerage fee the  Partnership  pays is
competitive with other rates.

     The  programs  traded by each  Advisor  on behalf of the  Partnership  are:
Campbell - Financial, Metal & Energy Large Portfolio ("FME Large"), CFM - Discus
Program  ("Discus"),  Graham - Global  Diversified  Program  ("GDP")  and Graham
Selective  Trading Program  ("GST"),  and Willowbridge - Argo and Vulcan Trading
Systems.  Stonebrook  traded its Volatility Hedge Program until January 31, 2003
when Stonebrook was terminated as an Advisor to the Partnership.  As of December
31, 2003,  the  Partnership's  assets were  allocated  among the Advisors in the
following  approximate  percentages:  Campbell,  31%, CFM, 19%, Graham, 32%, and
Willowbridge, 18%.

Campbell & Company, Inc.

     Campbell  trades its FME Large  Portfolio for the  Partnership.  Campbell's
trading models are designed to detect and exploit medium-term to long-term price
changes,   while  also  applying  risk   management  and  portfolio   management
principles.

     Campbell  believes  that  utilizing  multiple  trading  models  provides an
important  level  of  diversification,  and is  most  beneficial  when  multiple
contracts  of each market are traded.  Every  trading  model may not trade every
market.  It is possible that one trading model may signal a long position  while
another  trading  model  signals  a short  position  in the same  market.  It is
Campbell's  intention to offset those signals to reduce unnecessary trading, but
if the signals are not  simultaneous,  both trades will be taken and since it is
unlikely that both positions would prove profitable, in retrospect,  one or both
trades will appear to have been  unnecessary.  It is Campbell's policy to follow
trades signaled by each trading model independently of the other models.

Capital Fund Management SA

     CFM will trade the Partnership's  assets allocated to it in accordance with
its Discus Program. All of the trading decisions result from proprietary trading
and risk management  programs  developed by CFM. Discus is 100%  statistical and
systematic in nature.  The only  information  fed into the system are historical
price  statistics.  The system does not use any form of qualitative  information
and, most  importantly,  the system is never  overridden by human  opinion.  The
program  continuously  applies  proprietary  filters to review  price data in an
attempt  to  select  the most  efficient  trading  strategy  with  respect  to a
particular time frame (short, medium or long term),  contracts traded,  contract
and market sector  concentration  and risk exposure.  Discus trades more than 50
futures contracts on exchanges around the world.



                                       14
<PAGE>

Graham Capital Management, L.P.

     Graham currently  trades both GDP and GST on behalf of the Partnership.  Of
the Partnership's  assets allocated to Graham, 45% is currently traded using GDP
and 55% is currently traded using GST, each of which is described below.

     Graham  trades  actively in both U.S.  and foreign  markets,  primarily  in
futures contracts,  forward contracts,  spot contracts and associated derivative
instruments  such as options and swaps.  Graham engages in exchange for physical
transactions,  which  involve  the  exchange  of  a  futures  position  for  the
underlying  physical  commodity  without making an open competitive  trade on an
exchange.  Graham at times  will  trade  certain  instruments,  such as  forward
foreign  currency  contracts,  as a substitute  for futures or options traded on
futures exchanges.

     Graham's   trading   systems  rely  primarily  on  technical   rather  than
fundamental  information  as the  basis for their  trading  decisions.  Graham's
systems  are  based on the  expectation  that  they can over  time  successfully
anticipate  market events using  quantitative  mathematical  models to determine
their trading  activities,  as opposed to attempting  properly to forecast price
trends using subjective analysis of supply and demand.

     GDP utilizes multiple  computerized  trading models designed to participate
in potential profit  opportunities  during sustained price trends.  This program
features broad diversification in both financial and non-financial  markets. The
strategies that are utilized are primarily  long-term in nature and are intended
to generate  significant returns over time with an acceptable degree of risk and
volatility.  The  computer  models on a daily  basis  analyze  the recent  price
action,  the relative strength and the risk  characteristics  of each market and
compare  statistically  the  quantitative  results  of  this  data to  years  of
historical data on each market. GDP trades in approximately 80 markets.



                                       15
<PAGE>


     GST uses a mathematical  model to identify certain price patterns that have
very specific characteristics indicating that there is a high probability that a
significant  directional  move will occur.  Although  the program does not trade
against the market trend, it is not a true trend-following system inasmuch as it
will  only  participate  in  specific  types  of  market  moves  that  meet  the
restrictive  criteria of the model.  In general,  this program will  participate
only in  significant  market  moves  that  are  characterized  by a  substantial
increase in volatility.  As a result,  it frequently  will not  participate in a
market  trend  in which  virtually  all  trend-following  systems  would  have a
position. GST trades in approximately 70 markets.

Willowbridge Associates, Inc.

     Willowbridge trades the Partnership's  assets allocated to it in accordance
with its Select Investment  Program,  whereby the General Partner determined the
initial   allocation  of  the   Partnership's   assets  among  one  or  more  of
Willowbridge's  strategies and may determine subsequent  reallocations (if any).
Of the  Partnership's  assets allocated to Willowbridge,  0% is currently traded
using the Vulcan  Trading  System and 100% is  currently  traded  using the Argo
Trading System, each of which is described below.

     For each of these  systems,  risk is managed on a market by market level as
well as on an overall  portfolio  level.  On the market  level,  risk is managed
primarily by utilizing proprietary volatility filters. When these filters detect
a certain excessive level of volatility in the markets traded,  they will signal
that the systems should no longer be trading in the markets in which the filters
have detected excessive volatility.  In this way, the systems do not participate
in markets in which there are extremes in market action. On the portfolio level,
risk is  managed  by  utilizing  a  proprietary  portfolio  cutback  rule.  When
cumulative  profits  have reached a certain  level,  this rule  determines  that
positions  should be halved  across the entire  portfolio.  In this way, risk is
reduced while  allowing the systems to continue to  participate  in the markets,
albeit at a reduced  level.  After the  portfolio  has been traded at half,  the
portfolio  cutback rule will then determine when to increase  positions to again
trade at the full level.

     The  Vulcan  Trading  System,   which  commenced  trading  in  1988,  is  a
computerized  technical trading system. It is not a trend-following  system, but
does ride a trend when the  opportunity  arises.  Vulcan  uses the  concepts  of
pattern recognition,  support/resistance  levels, and counter-trend liquidations
in making  trading  decisions.  In effect,  Vulcan is more akin to a  systematic
technical  charting system,  as opposed to most computer systems which are based
on pure trend-following calculations.



                                       16
<PAGE>

     The Vulcan  System is based on general  technical  trading  principles.  It
applies  these  principles  to  a  diversified   portfolio  of  commodities  and
currencies.  Given that the system is based on  general  principles,  the system
parameters  used  are  the  same  for all  items  in the  portfolio  and are not
optimized.   In  this  manner,  the  Vulcan  System  minimizes  the  problem  of
data-fitting.

     The  Argo  Trading  System  commenced  trading  in 1988.  Argo  essentially
incorporates Vulcan's concepts of pattern recognition, support/resistance levels
and counter-trend  liquidations to trade a portfolio similar to Vulcan. However,
Argo has a  relatively  slower time  horizon than Vulcan and attempts to capture
longer-term price moves.

     Pattern   recognition,    support/resistance   levels   and   counter-trend
liquidations are defined as follows:

     Pattern recognition is the ability to identify patterns that appear to have
acted as precursors of price advances or declines in the past.

     A support level is a previous  low--a price level under the current  market
price at which point buying  interest is expected to be  sufficiently  strong to
overcome selling pressure.

     A  resistance  level is a previous  high--a  price  level over the  current
market  price at which point  selling  pressure  is expected to overcome  buying
pressure and a price advance is expected to be turned back.

     A  counter-trend  liquidation  is the  closing  out of a  position  after a
significant  price  move  on  the  assumption  that  the  market  is  due  for a
correction.

     No assurance is given that an Advisor's  trading program will be profitable
or that it will not experience losses.

                                       17
<PAGE>

(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 equivalents,  net unrealized  appreciation  (depreciation) on open
futures  positions,  unrealized  appreciation  on  open  forward  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 loss in liquidity.

     To minimize  this risk  relating to low margin  deposits,  the  Partnership
follows certain trading policies, including:

     (i)  The Partnership invests its assets only in commodity interests that an
          Advisor  believes  are traded in  sufficient  volume to permit ease of
          taking and liquidating positions.  Sufficient volume, in this context,
          refers to a level of liquidity  that the Advisor  believes will permit
          it to enter and exit trades without noticeably moving the market.

     (ii) No  Advisor  will  initiate  additional  positions  in  any  commodity
          interest  if these  positions  would  result  in  aggregate  positions
          requiring  a  margin  of more  than 66 2/3% of the  Partnership's  net
          assets allocated to that Advisor.

     (iii)The  Partnership  may  accassionally  accept  delivery of a commodity.
          Unless such  delivery is  disposed  of  promptly  by  retendering  the
          warehouse   receipt   representing  the  delivery  to  the  appropiate
          clearinghouse, the physical commodity position is fully hedge.

     (iv)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  purchases or sale of additional
          positions in the same or related commodities.

     (v)  The  Partnership  will  not  utilize  borrowings,  commodities  except
          short-term  borrowings,  commodities if the Partnership takes delivery
          of any cash commodities.

     (vi) The Advisors may, from time to time, employ trading strategies such as
          spreads or straddles on behalf of the  Partnership.  The term "spread"
          or "straddle" describes a commodity 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.



                                       18
<PAGE>


     (vi) The Partnership will not permit the churning of its commodity  trading
          account.  The term  "churning"  refers to the practice of entering and
          exiting trades with a frequency  unwarranted by legitimate  efforts to
          profit  from the trades,  driven by the desire to generate  commission
          income.

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

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

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



                                       19
<PAGE>

     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.  (See also
"Item 8. Financial Statements and Supplementary Data" for further information on
financial instrument risk included in the Notes to Financial Statements.)

     Other than the risks inherent in commodity  trading,  the Partnership knows
of no trends, demands, commitments, events or uncertainties which will result in
or  which  are  reasonably  likely  to  result  in the  Partnership's  liquidity
increasing or decreasing in any material way. The Limited Partnership  Agreement
provides that the  Partnership  will cease trading  operations and liquidate all
open positions upon the first to occur of the following:  (i) December 31, 2014;
(ii) the vote to dissolve the  Partnership by limited  partners owning more than
50% of the Redeemable  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
Redeemable 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  trading  and by
expenses,  interest income, redemptions of Redeemable Units and distributions of
profits, if any. Gains or losses on trading cannot be predicted. Market moves in
commodities  are dependent  upon  fundamental  and  technical  factors which the
Advisors may or may not be able to identify,  such as changing supply and demand
relationships,  weather, government agricultural,  commercial and trade programs
and  policies,  national and  international  political  and economic  events and
changes in interest rates.  Partnership expenses consist of, among other things,
brokerage,  advisory and  administrative  fees.  The 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 CGM is dependent upon interest rates over which the  Partnership  has
no control.



                                      20
<PAGE>

     No forecast can be made as to the level of redemptions in any given period.
A limited partner may cause all of their  Redeemable 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 year ended December 31, 2003,  5,671.3005 Redeemable Units
were  redeemed  totaling  $8,154,406.  For the year  ended  December  31,  2002,
11,001.6830  Redeemable Units were redeemed totaling  $11,541,708.  For the year
ended December 31, 2001,  11,034.5654  Redeemable  Units were redeemed  totaling
11,947,627.

(c)  Results of Operations.

     For the year ended  December 31, 2003,  the Net Asset Value per  Redeemable
Unit increased  16.0% from  $1,250.92 to $1,450.45.  For the year ended December
31, 2002 the Net Asset Value per Redeemable  Unit increased 19.7% from $1,045.06
to  $1,250.92.  For the year ended  December  31,  2001 the Net Asset  Value per
Redeemable Unit decreased 7.7% from $1,132.70 to $1,045.06.

     The  Partnership  experienced  a net  trading  gain of  $18,996,419  before
commissions  and  expenses  for the year ended  December  31,  2003.  Gains were
primarily attributable to the trading of currencies,  grains, livestock,  metals
and indices and were partially  offset by the losses  incurred in the trading of
energy, U.S. and non-U.S. interest rates and softs.

     On a very broad basis, the year 2003 can be divided into three periods: the
time leading up to and shortly  after the Iraq War (January  through  May),  the
transition to greater world  economic  growth (June  through  October),  and the
renewed dollar decline (November and December).

     The Iraq war was the  focus for much of the  first  half of the year.  With
uncertainty  concerning when hostilities  would begin and the possible impact of
these events,  investors showed a desire to move to a defensive and conservative
stance.  Equity  markets  moved  lower,  as did the dollar  against  other major
currencies,  gold prices rose,  bond  markets  rallied,  and the energy  markets
exhibited a risk premium  concerning  potential supply  disruptions.  This was a
continuation of many of the trends carried over from 2002.  During the first two
months of the year, the Advisors had strong performance, up nearly 19%.



                                       21
<PAGE>

     Just prior to the  inception  of the  hostilities  in Iraq,  several of the
Advisors  reduced  leverage in expectation of higher  volatility in the markets.
Markets were more  volatile  with a reduction of liquidity in response to events
in March. During this period, bond prices declined, the dollar stabilized, crude
oil prices declined  significantly,  and the stock market started to rally. Even
with this  reduced  leverage  the markets  were  volatile  and prior trends were
disrupted leading to losses for the month of March. Positions returned to normal
leverage in late April and May saw a  substantial  recovery in the  Partnerships
performance  with profits coming from short dollar,  long interest rate and long
commodity positions.

     In a transition to economic recovery and growth, the major markets began to
reflect  changing  expectations  in the  middle of June.  Consistently  positive
macroeconomic  news led to the  unexpected  pronouncement  of no further  easing
actions  by the  European  Central  Bank  and the  U.S.  Federal  Reserve  Bank.
Consequently,  there was a trend change,  as interest rates moved up off 40 year
lows and the dollar rallied  reversing the decline from earlier in the
year.

     While  there were  gains in stock  index  futures  trading,  the  Advisors'
exposure in these markets has been  relatively  low; hence they were not able to
make a substantial  impact on  performance.  In addition to the negative  market
action in  interest  rates and  currencies,  there  were  further  increases  in
volatility in the energy sector and growing volatility within a relatively tight
range for many agricultural  markets.  The second quarter ended unprofitably and
this  carried  through  the summer  and into the early  fall as the  Partnership
alternated between profits and losses on a monthly basis.

     The final period of 2003 marked by another decline in the dollar  beginning
in late November.  The dollar began a new  significant  decline against both the
euro and yen. This led to  significant  fourth  quarter  profits,  which boosted
performance  for many of the  Advisors  and the  Partnership  ended  the year up
16.0%.

     In the General Partner's  opinion,  the Advisors continue to employ trading
methods and produce  results  consistent  with the objectives of the Partnership
and expectations for the Advisors'  programs.  The General Partner  continues to
monitor the Advisors'  performance on a daily, weekly,  monthly and annual basis
to assure these objectives are met.



                                       22
<PAGE>

     The  Partnership  experienced  net  trading  gains  of  $18,810,458  before
commissions  and  expenses in 2002.  Gains were  primarily  attributable  to the
trading in indices, U.S. and non-U.S.  interest rates, energy, grains, livestock
and currencies and were  partially  offset by losses  incurred in the trading of
metals and softs.

     The   Partnership   experienced  net  trading  losses  of  $635,332  before
commissions and expenses in 2001. Losses were primarily  attributable to trading
in currencies,  energy, grains, indices, metals and livestock and were partially
offset by gains incurred in U.S. and non-U.S. interest rates and softs.

     It should be noted that commodity 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.

(d)  Operational Risk.

     The Partnership is directly  exposed to market risk and credit risk,  which
arise in the normal course of its business activities. Slightly less direct, but
of critical  importance,  are risks  pertaining to  operational  and back office
support.  This is particularly  the case in a rapidly  changing and increasingly
global environment with increasing  transaction  volumes and an expansion in the
number and complexity of products in the marketplace.

Such risks include:

     Operational/Settlement  Risk - the risk of financial and  opportunity  loss
and legal  liability  attributable to operational  problems,  such as inaccurate
pricing of transactions,  untimely trade execution, clearance and/or settlement,
or the inability to process large volumes of  transactions.  The  Partnership is
subject to increased  risks with respect to its trading  activities  in emerging
market securities,  where clearance,  settlement,  and custodial risks are often
greater than in more established markets.



                                       23
<PAGE>

     Technological  Risk  - the  risk  of  loss  attributable  to  technological
limitations  or hardware  failure that  constrain the  Partnership's  ability to
gather, process, and communicate  information efficiently and securely,  without
interruption,  to customers, among Redeemable Units within the Partnership,  and
in the markets where the Partnership participates.

     Legal/Documentation Risk - the risk of loss attributable to deficiencies in
the  documentation of transactions  (such as trade  confirmations)  and customer
relationships  (such as master  netting  agreements)  or errors  that  result in
noncompliance with applicable legal and regulatory requirements.

     Financial  Control Risk - the risk of loss  attributable  to limitations in
financial  systems and controls.  Strong  financial  systems and controls ensure
that assets are safeguarded,  that  transactions are executed in accordance with
management's   authorization,   and  that  financial   information  utilized  by
management and communicated to external parties, including the Partnership's
Redeemable Unit holders, creditors, and regulators, is free of material errors.

(e)  Critical Accounting Policies.

     The  preparation  of financial  statements  in conformity  with  accounting
principles   generally  accepted  in  the  United  States  of  America  requires
management to make estimates and assumptions that affect the reported amounts of
assets and  liabilities,  revenues  and  expenses,  and related  disclosures  of
contingent  assets and liabilities in the financial  statements and accompanying
notes.

     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
statements of financial  condition at fair value on the last business day of the
period,  which represents  market value for those commodity  interests for which
market  quotations are readily  available or other measures of fair value deemed
appropriate by management of the General Partner for those  commodity  interests
and foreign  currencies for which market  quotations are not readily  available,
including dealer quotes for swaps and certain option  contracts.  Investments in
commodity  interests  denominated in foreign currencies are translated into U.S.
dollars at the exchange rates prevailing on the last business day of the period.
Realized gains (losses) and changes in unrealized values on commodity  interests
and foreign  currencies  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.



                                       24
<PAGE>

     Foreign currency contracts are those contracts where the Partnership agrees
to receive or deliver a fixed  quantity of foreign  currency for an  agreed-upon
price on an agreed future date. Foreign currency contracts are valued daily, and
the  Partnership's net equity therein,  representing  unrealized gain or loss on
the contracts as measured by the difference between the forward foreign exchange
rates at the dates of entry  into the  contracts  and the  forward  rates at the
reporting dates, is included in the statements of financial condition.  Realized
gains (losses) and changes in unrealized  values on foreign  currency  contracts
are  recognized  in the period in which the  contract  is closed or the  changes
occur and are included in the  statements  of income and expenses and  partners'
capital.

     The General Partner believes that the accounting policies that will be most
critical to the  Partnership's  financial  condition  and results of  operations
relate to the  valuation  of the  Partnership's  positions.  The majority of the
Partnership's positions will be exchange-traded futures contracts, which will be
valued daily at settlement  prices  published by the  exchanges.  Swap contracts
generally will be valued by reference to published settlement prices or dealers'
quotes in related markets or other measures of fair value deemed  appropriate by
the General Partner. The General Partner expects that under normal circumstances
substantially  all of the  Partnership's  assets  will be  valued  by  objective
measures and without difficulty.



                                       25
<PAGE>

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Introduction

     The  Partnership  is a speculative  commodity  pool.  The market  sensitive
instruments held by it are acquired for speculative trading purposes, and all or
substantially all of the Partnership's assets are subject to the risk of trading
loss. Unlike an operating company,  the risk of market sensitive  instruments is
integral, not incidental, to the Partnership's main line of business.

     The risk to the  limited  partners  that have  purchased  interests  in the
Partnership  is  limited  to the amount of their  capital  contributions  to the
Partnership and their share of the Partnership assets and undistributed profits.
This limited  liability is a consequence of the  organization of the Partnership
as a limited partnership under applicable law.

     Market movements result in frequent changes in the fair market value of the
Partnership's open positions and,  consequently,  in its earnings and cash flow.
The  Partnership's  market  risk is  influenced  by a wide  variety of  factors,
including the level and volatility of interest  rates,  exchange  rates,  equity
price  levels,  the market value of financial  instruments  and  contracts,  the
diversification effects among the Partnership's open positions and the liquidity
of the markets in which it trades.

     The  Partnership  rapidly  acquires  and  liquidates  both  long and  short
positions in a wide range of different markets. Consequently, it is not possible
to predict how a particular future market scenario will affect performance,  and
the Partnership's  past performance is not necessarily  indicative of its future
results.

     Value at Risk is a measure  of the  maximum  amount  which the  Partnership
could  reasonably  be expected to lose in a given market  sector.  However,  the
inherent uncertainty of the Partnership's speculative trading and the recurrence
in the markets  traded by the  Partnership  of market  movements  far  exceeding
expectations could result in actual trading or non-trading losses far beyond the
indicated Value at Risk or the Partnership's  experience to date (i.e., "risk of
ruin").  In  light  of the  foregoing  as well as the  risks  and  uncertainties
intrinsic to all future projections, the inclusion of the quantification in this
section should not be considered to constitute  any assurance or  representation
that the  Partnership's  losses in any market sector will be limited to Value at
Risk or by the Partnership's attempts to manage its market risk.



                                       26
<PAGE>


Quantifying the Partnership's Trading Value at Risk

     The following  quantitative  disclosures regarding the Partnership's market
risk exposures contain  "forward-looking  statements"  within the meaning of the
safe harbor from civil  liability  provided for such  statements  by the Private
Securities  Litigation  Reform  Act of 1995  (set  forth in  Section  27A of the
Securities Act of 1933 and Section 21E of the Securities  Exchange Act of 1934).
All  quantitative  disclosures in this section are deemed to be  forward-looking
statements  for purposes of the safe harbor except for  statements of historical
fact (such as the terms of  particular  contracts  and the number of market risk
sensitive instruments held during or at the end of the reporting period).

     The Partnership's risk exposure in the various market sectors traded by the
Advisors is quantified below in terms of Value at Risk. Due to the Partnership's
mark-to-market  accounting, any loss in the fair value of the Partnership's open
positions is directly  reflected in the  Partnership's  earnings  (realized  and
unrealized).  Exchange  maintenance  margin  requirements  have been used by the
Partnership as the measure of its Value at Risk. Maintenance margin requirements
are set by exchanges to equal or exceed the maximum losses  reasonably  expected
to be incurred in the fair value of any given contract in 95%-99% of any one-day
intervals.  The  maintenance  margin  levels  are  established  by  dealers  and
exchanges  using  historical  price  studies as well as an assessment of current
market  volatility  (including the implied  volatility of the options on a given
futures contract) and economic fundamentals to provide a probabilistic  estimate
of the maximum expected near-term one-day price fluctuation.  Maintenance margin
has been used rather than the more generally  available initial margin,  because
initial margin  includes a credit risk component  which is not relevant to Value
at Risk.

     In the case of market sensitive  instruments  which are not exchange traded
(almost  exclusively  currencies  in the case of the  Partnership),  the  margin
requirements  for the  equivalent  futures  positions have been used as Value at
Risk. In those rare cases in which a futures-equivalent margin is not available,
dealers' margins have been used.

     The fair value of the Partnership's  futures and forward positions does not
have any optionality component. However, certain of the Advisors trade commodity
options. The Value at Risk associated with options is reflected in the following
table as the margin requirement  attributable to the instrument  underlying each
option.  Where this instrument is a futures  contract,  the futures margin,  and
where  this  instrument  is  a  physical   commodity,   the   futures-equivalent


                                       27
<PAGE>

maintenance  margin has been used.  This  calculation is conservative in that it
assumes  that the fair value of an option will decline by the same amount as the
fair value of the underlying  instrument,  whereas,  in fact, the fair values of
the options traded by the  Partnership in almost all cases fluctuate to a lesser
extent than those of the underlying instruments.

     In quantifying the Partnership's  Value at Risk, 100% positive  correlation
in the different  positions  held in each market risk category has been assumed.
Consequently,  the margin  requirements  applicable to the open  contracts  have
simply been added to determine each trading category's  aggregate Value at Risk.
The  diversification  effects  resulting  from the fact  that the  Partnership's
positions  are  rarely,  if  ever,  100%  positively  correlated  have  not been
reflected.

                                       28
<PAGE>

The  Partnership's Trading Value at Risk in Different Market Sectors

     The following table indicates the trading Value at Risk associated with the
Partnership's  open positions by market category as of December 31, 2003 and the
highest and lowest value at any point during the year. All open position trading
risk exposures of the Partnership  have been included in calculating the figures
set forth below. As of December 31, 2003, the Partnership's total capitalization
was $68,275,728.

                                December 31, 2003

<TABLE>
<CAPTION>
                                                                                             Year to Date
                                                                          ---------------------------------------------
                                                            % of Total          High               Low
    Market Sector                     Value at Risk         Capitalization   Value at Risk    Value at Risk    Average*
    -------------                     -------------         -------------- -------------      -------------    --------
      <S>                                   <C>                  <C>             <C>              <C>             <C>
    Currencies
    -Exchange Traded Contracts            $1,455,853             2.13%       $1,896,311         $195,698      $1,129,827
    -OTC Contracts                         1,088,448             1.59%        1,939,876          799,040       1,162,301
    Energy                                 1,785,450             2.62%        2,285,200          116,500       1,087,954
    Grains                                   305,750             0.45%          443,050          132,100         311,429
    Interest rates U.S.                      668,100             0.98%        1,380,050           52,825         607,219
    Interest rates Non-U.S.                  843,405             1.24%        2,711,474          371,657       1,214,876
    Livestock                                 36,800             0.05%          168,800           25,200          59,760
    Metals
     - Exchange Traded Contracts             174,000             0.25%          309,500           40,500         197,750
     - OTC Contracts                         225,534             0.33%          485,830            4,600         287,273
    Softs                                    111,132             0.16%          415,533           40,886         192,922
    Indices                                2,734,855             4.01%        5,010,346           42,662       2,117,267
                                           ---------             -----
    Total                                 $9,429,327            13.81%
                                          ==========            ======
</TABLE>

* Monthly average based on month-end value at risk.

                                       29
<PAGE>


     As of  December  31,  2002,  the  Partnership's  total  capitalization  was
approximately $65,977,951.

                                December 31, 2002
<TABLE>
<CAPTION>
                                                                                               Year to Date
                                                                           ---------------------------------------------
                                                             % of Total         High                Low
    Market Sector                         Value at Risk     Capitalization   Value at Risk     Value at Risk     Average*
    -------------                         -------------     --------------  -------------      -------------     --------
      <S>                                      <C>                <C>             <C>                <C>           <C>
    Currencies
     - Exchange Traded Contracts             $846,920            1.28%         $3,063,120         $438,135      $1,594,477
     - OTC Contracts                          793,608            1.20%          1,195,876          793,608       1,173,995
    Energy                                  1,400,000            2.13%          2,363,000          143,050       1,441,275
    Grains                                    183,200            0.28%            889,500          183,200         489,713
    Interest rates U.S.                       547,150            0.83%          1,365,400          354,500         806,163
    Interest rates Non-U.S.                 1,179,771            1.79%          2,663,879          753,975       1,622,564
    Livestock                                  29,600            0.04%            406,750           29,600         189,795
    Metals
     - Exchange Traded Contracts              118,000            0.18%          1,303,600          118,000         609,725
     - OTC Contracts                           85,975            0.13%            426,700           17,700         257,800
    Softs                                      88,700            0.13%            971,444           88,700         634,944
    Indices                                    72,725            0.11%          2,967,881           72,725       1,396,996
                                               ------            -----
    Total                                  $5,345,649            8.10%
                                           ==========            =====
</TABLE>

* Quarterly average



                                       30
<PAGE>


Material Limitations on Value at Risk as an Assessment of Market Risk

     The face value of the market sector  instruments held by the Partnership is
typically  many times the  applicable  maintenance  margin  requirement  (margin
requirements  generally range between 2% and 15% of contract face value) as well
as many  times the  capitalization  of the  Partnership.  The  magnitude  of the
Partnership's  open  positions  creates a "risk of ruin" not typically  found in
most other investment  vehicles.  Because of the size of its positions,  certain
market  conditions -- unusual,  but historically  recurring from time to time --
could cause the  Partnership to incur severe losses over a short period of time.
The  foregoing  Value at Risk  table -- as well as the past  performance  of the
Partnership -- give no indication of this "risk of ruin."

Non-Trading Risk

     The Partnership  has  non-trading  market risk on its foreign cash balances
not needed for margin.  However, these balances (as well as any market risk they
represent) are immaterial.

     Materiality  as  used  in  this  section,   "Qualitative  and  Quantitative
Disclosures About Market Risk," is based on an assessment of reasonably possible
market movements and the potential losses caused by such movements,  taking into
account the leverage,  optionality and multiplier  features of the Partnership's
market sensitive instruments.

Qualitative Disclosures Regarding Primary Trading Risk Exposures

     The following  qualitative  disclosures  regarding the Partnership's market
risk  exposures  - except  for (i)  those  disclosures  that are  statements  of
historical fact and (ii) the  descriptions  of how the  Partnership  manages its
primary market risk exposures - constitute forward-looking statements within the
meaning of Section 27A of the  Securities  Act and Section 21E of the Securities
Exchange Act. The  Partnership's  primary  market risk  exposures as well as the
strategies  used and to be used by the  General  Partner  and the  Advisors  for
managing such exposures are subject to numerous uncertainties, contingencies and
risks, any one of which could cause the actual results of the Partnership's risk
controls to differ materially from the objectives of such strategies. Government
interventions,  defaults and expropriations,  illiquid markets, the emergence of
dominant fundamental factors,  political upheavals,  changes in historical price
relationships,  an influx of new market  participants,  increased regulation and
many  other  factors  could  result in  material  losses as well as in  material
changes to the risk exposures and the management  strategies of the Partnership.
There can be no assurance that the Partnership's  current market exposure and/or
risk  management  strategies  will  not  change  materially  or  that  any  such
strategies will be effective in either the short- or long- term.  Investors must
be  prepared  to  lose  all or  substantially  all of  their  investment  in the
Partnership.



                                       31
<PAGE>


     The following were the primary trading risk exposures of the Partnership as
of December 31, 2003, by market sector.

     Interest  Rates.  Interest rate movements  directly affect the price of the
futures  positions held by the Partnership and indirectly the value of its stock
index and currency positions.  Interest rate movements in one country as well as
relative  interest  rate  movements  between  countries  materially  impact  the
Partnership's profitability. The Partnership's primary interest rate exposure is
to interest rate  fluctuations in the United States and the other G-8 countries.
However,  the Partnership also takes futures positions on the government debt of
smaller nations -- e.g., Australia.

     Currencies.  The  Partnership's  currency  exposure  is  to  exchange  rate
fluctuations,  primarily  fluctuations  which  disrupt  the  historical  pricing
relationships   between   different   currencies  and  currency   pairs.   These
fluctuations  are  influenced  by interest rate changes as well as political and
general  economic  conditions.  The General Partner does not anticipate that the
risk profile of the Partnership's  currency sector will change  significantly in
the future.  The currency  trading Value at Risk figure includes  foreign margin
amounts  converted into U.S.  dollars with an incremental  adjustment to reflect
the  exchange  rate  risk  inherent  to the  U.S.  dollar-based  Partnership  in
expressing Value at Risk in a functional currency other than U.S. dollars.

     Stock Indices. The Partnership's primary equity exposure is to equity price
risk in the G-8 countries. The stock index futures traded by the Partnership are
limited to futures on broadly  based  indices.  As of  December  31,  2003,  the
Partnership's  primary exposures were in the S&P 500, Financial Times (England),
Nikkei (Japan) and EUREX (Germany)  stock indices.  The Partnership is primarily
exposed to the risk of adverse price trends or static markets in the major U.S.,
European  and Japanese  indices.  (Static  markets  would not cause major market
changes  but  would  make  it  difficult  for the  Partnership  to  avoid  being
"whipsawed" into numerous small losses.)

     Metals. The Partnership's  primary metal market exposure is to fluctuations
in the price of gold,  silver and copper.  Although certain of the Advisors will
from time to time trade base metals such as nickel and  aluminum,  the principal
market  exposures  of the  Partnership  have  consistently  been in the precious
metals,  gold and silver.  The General Partner  anticipates that gold and silver
will remain the primary metals market exposure for the Partnership.

     Softs. The Partnership's  primary  commodities  exposure is to agricultural
price  movements  which  are often  directly  affected  by severe or  unexpected
weather conditions.  Coffee, cocoa, cotton, orange juice and sugar accounted for
the substantial bulk of the Partnership's  commodity exposure as of December 31,
2003.

     Energy. The Partnership's  primary energy market exposure is to gas and oil
price movements, often resulting from political developments in the Middle East.
Oil prices can be volatile and substantial  profits and losses have been and are
expected to continue to be experienced in this market.



                                       32
<PAGE>


Qualitative Disclosures Regarding Non-Trading Risk Exposure

     The following were the only  non-trading  risk exposures of the Partnership
as of December 31, 2003.

     Foreign  Currency  Balances.  The  Partnership's  primary foreign  currency
balances are in Japanese yen, Euro dollar,  British pounds and Swiss francs. The
Advisor regularly converts foreign currency balances to dollars in an attempt to
control the Partnership's non-trading risk.

Qualitative Disclosures Regarding Means of Managing Risk Exposure.

     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.

     The  General  Partner  monitors  the  Partnership's   performance  and  the
concentration of its open positions,  and consults with the Advisors  concerning
the Partnership's overall risk profile. If the General Partner felt it necessary
to do so, the General Partner could require certain of the Advisors to close out
individual   positions  as  well  as  enter  into  programs  on  behalf  of  the
Partnership. However, any such intervention would be a highly unusual event. The
General  Partner  primarily  relies on the Advisors'  own risk control  policies
while maintaining a general  supervisory  overview of the  Partnership's  market
risk exposures.

     Each Advisor applies its own risk management  policies to its trading.  The
Advisors often follow  diversification  guidelines,  margin limits and stop loss
points to exit a  position.  The  Advisors'  research of risk  management  often
suggests ongoing modifications to their trading programs.

     As part of the General  Partner's  risk  management,  the  General  Partner
periodically  meets with the Advisors to discuss  their risk  management  and to
look for any material  changes to the  Advisors'  portfolio  balance and trading
techniques.  The  Advisors  are  required to notify the  General  Partner of any
material changes to their programs.



                                       33
<PAGE>



Item 8.   Financial Statements and Supplementary Data.



                  SMITH BARNEY DIVERSIFIED FUTURES FUND L.P. II

                          INDEX TO FINANCIAL STATEMENTS


                                                                 Page Number

Oath or Affirmation                                                  F-2

Independent Auditors' Report.                                     F-3 - F-4

Financial Statements:

Statements of Financial Condition at
December 31, 2003 and 2002.                                          F-5

Condensed Schedules of Investments at
December 31, 2003 and 2002.                                       F-6 - F-7

Statements of Income and Expenses for
the years ended December 31, 2003,
2002 and 2001.                                                       F-8

Statements of Partners' Capital for
the years ended December 31, 2003, 2002
and 2001.                                                            F-9

Notes to Financial Statements.                                   F-10 - F-14

Select Unaudited Quarterly Financial Data.                           F-15



<PAGE>






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

To the best of the  knowledge  and belief of the  undersigned,  the  information
contained herein is accurate and complete.





     /s/ Daniel R. McAuliffe, Jr
     ---------------------------
By:  Daniel R. McAuliffe, Jr.
     Chief Financial Officer and Director
     Citigroup Managed Futures LLC
     General Partner, Smith Barney Diversified
     Futures Fund L.P. II

Citigroup Managed Futures LLC
399 Park Avenue
7th Floor
New York, N.Y. 10022
212-559-2011





                                        F-2
<PAGE>


                          Independent Auditors' Report

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

     We have audited the accompanying statements of financial condition of Smith
     Barney Diversified  Futures Fund L.P. II (the  Partnership),  including the
     condensed  schedules of investments,  as of December 31, 2003 and 2002, and
     the related  statements of income and expenses,  and partners'  capital for
     the years then ended. These financial  statements are the responsibility of
     the Partnership's  management.  Our responsibility is to express an opinion
     on these financial statements based on our audits. The statements of income
     and expenses and partners'  capital of the  Partnership  for the year ended
     December  31,  2001 were  audited  by other  auditors  whose  report  dated
     February 28, 2002 expressed an unqualified opinion on those statements.

     We conducted our audits in accordance  with  auditing  standards  generally
     accepted in the United States of America.  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 management, 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, 2003 and 2002, and the
     results of its  operations  and its  partners'  capital  for the years then
     ended, in conformity with accounting  principles  generally accepted in the
     United States of America.

      /s/KPMG LLP
      KPMG LLP
      New York, New York
      February 27, 2004

                                        F-3
<PAGE>


                         Report of Independent Auditors

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

     In our  opinion,  the  accompanying  statements  of income and expenses and
     partners' capital present fairly, in all material respects,  the results of
     Smith Barney  Diversified  Futures Fund L.P. II's  operations  for the year
     ended December 31, 2001, in conformity with accounting principles generally
     accepted in the United States of America.  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 audit.  We  conducted  our audit of these  financial  statements  in
     accordance with auditing standards  generally accepted in the United States
     of  America,  which  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,  assessing  the  accounting  principles  used  and  significant
     estimates made by the management of the General Partner, and evaluating the
     overall  financial  statement  presentation.  We  believe  that  our  audit
     provides a reasonable basis for our opinion.


     /s/ PricewaterhouseCoopers LLP
     PricewaterhouseCoopers LLP
     New York, New York
     February 28, 2002



                                        F-4

<PAGE>


                            Smith Barney Diversified
                              Futures Fund L.P. II
                        Statements of Financial Condition
                           December 31, 2003 and 2002

<TABLE>
<CAPTION>

                                                                       2003                 2002
                                                                  -------------       -------------
<S>                                                                     <C>                 <C>
Assets:
Equity in commodity futures trading account:
   Cash (restricted $12,384,177 and $6,861,874 in 2003
     and 2002, respectively) (Note 3c)                              $65,423,348          $62,798,601
   Net unrealized appreciation on open futures positions              2,834,001            4,029,612
   Unrealized appreciation on open forward contracts                  2,980,419            1,823,092
                                                                  -------------        -------------
                                                                     71,237,768           68,651,305
Interest receivable (Note 3c)                                            38,512               51,898
                                                                  -------------        -------------
                                                                    $71,276,280          $68,703,203
                                                                  -------------        -------------

Liabilities and Partners' Capital:
Liabilities:
  Unrealized depreciation on open forward contracts                  $1,766,851           $1,907,569
  Accrued expenses:
   Commissions (Note 3c)                                                354,212              359,772
   Management fees (Note 3b)                                            117,366              151,201
   Incentive fees (Note 3b)                                             347,867                   --
   Professional fees                                                     47,907               55,026
   Other                                                                 13,037               14,029
  Redemptions payable (Note 5)                                          353,312              237,655
                                                                  -------------        -------------
                                                                      3,000,552            2,725,252
                                                                  -------------        -------------
Partners' capital (Notes 1 and 5)
  General Partner, 862.6415 Unit equivalents outstanding
   in 2003 and 2002                                                   1,251,218            1,079,096
  Limited Partners, 46,209.5262 and 51,880.8267
   Redeemable Units of Limited Partnership Interest
   outstanding in 2003 and 2002, respectively                        67,024,510           64,898,855
                                                                  -------------        -------------
                                                                     68,275,728           65,977,951
                                                                  -------------        -------------
                                                                    $71,276,280          $68,703,203
                                                                  -------------        -------------
</TABLE>


See accompanying notes to financial statements.
                                        F-5
<PAGE>


                            Smith Barney Diversified
                              Futures Fund L.P. II
                        Condensed Schedule of Investments
                                December 31, 2003

<TABLE>
<CAPTION>

Sector                                         Contract                                                     Fair Value
 --------------------------                    ---------------------------------------                      ----------
<S>                                               <C>                                                          <C>
Currencies                                     Unrealized appreciation on forward contracts 2.54%           $1,738,596
                                               Unrealized depreciation on forward contracts (1.48)%         (1,010,885)
                                                                                                            ----------
                                                   Total forward contracts 1.06%                               727,711

                                               Futures contracts sold (0.12)%                                  (82,710)
                                               Futures contracts purchased 2.23%                             1,520,460
                                                                                                            ----------
                                                   Total futures contracts 2.11%                             1,437,750
                                                                                                            ----------
    Total Currencies - 3.17%                                                                                 2,165,461
                                                                                                            ----------
Energy - (0.15)%                               Futures contracts purchased (0.15)%                             (99,330)
                                                                                                            ----------
Grains                                         Futures contracts sold 0.98%                                    667,231
                                               Futures contracts purchased (0.09)%                             (60,625)
                                                                                                            ----------
    Total Grains - 0.89%                                                                                       606,606
                                                                                                            ----------
Interest Rates U.S. - (0.22)%                  Futures contracts purchased (0.22)%                            (147,378)
                                                                                                            ----------
Interest Rates Non-U.S.                        Futures contracts sold (0.04)%                                  (29,333)
                                               Futures contracts purchased (0.04)%                             (28,952)
                                                                                                            ----------
    Total Interest Rates Non-U.S. - (0.08)%                                                                    (58,285)
                                                                                                            ----------
Total Livestock - 0.02%                        Futures contracts sold 0.02%                                     10,951
                                                                                                            ----------
Metals                                         Futures contracts purchased 0.37%                               250,200

                                               Unrealized appreciation on forward contracts 1.82%            1,241,823
                                               Unrealized depreciation on forward contracts (1.11)%           (755,966)
                                                                                                            ----------
                                                   Total forward contracts 0.71%                               485,857
                                                                                                            ----------
    Total Metals - 1.08%                                                                                       736,057
                                                                                                            ----------
Softs                                          Futures contracts sold 0.01%                                      7,338
                                               Futures contracts purchased (0.14)%                             (96,920)
                                                                                                            ----------
    Total Softs - (0.13)%                                                                                      (89,582)
                                                                                                            ----------
Indices                                        Futures contracts sold 0.05%                                     36,230
                                               Futures contracts purchased 1.30%                               886,839
                                                                                                            ----------
    Total Indices - 1.35%                                                                                      923,069
                                                                                                            ----------

Total Fair Value - 5.93%                                                                                    $4,047,569
                                                                                                            ==========

                                   Investments at     % of Investments at
Country Composition                  Fair Value            Fair Value
-------------------------------- -------------------- ----------------------
Australia                                $(6,239)         (0.15)%
Canada                                     3,093           0.08
France                                    16,957           0.42
Germany                                  194,296           4.80
Hong Kong                                  2,228           0.05
Italy                                     (2,956)         (0.07)
Japan                                      8,023           0.20
Spain                                     84,091           2.07
United Kingdom                           541,601          13.38
United States                          3,206,475          79.22
                                 -------------------- ----------------------
                                      $4,047,569         100.00%
                                 ==================== ======================

Percentages are based on Partners' capital unless otherwise indicated
See accompanying notes to financial statements.
</TABLE>

                                        F-6
<PAGE>


                            Smith Barney Diversified
                              Futures Fund L.P. II
                        Condensed Schedule of Investments
                                December 31, 2002
<TABLE>
<CAPTION>
Sector                                         Contract                                                     Fair Value
 --------------------------                    ---------------------------------------                    ------------
<S>                                              <C>                                                          <C>
Currencies                                     Unrealized depreciation on forward contracts (2.18)%        $(1,439,765)
                                               Unrealized appreciation on forward contracts 2.69%            1,773,212
                                                                                                            ----------
                                                   Total forward contracts 0.51%                               333,447

                                               Futures contracts sold (0.06)%                                  (42,212)
                                               Futures contracts purchased 2.39%                             1,579,903
                                                                                                            ----------
                                                   Total futures contracts 2.33%                             1,537,691
                                                                                                            ----------
    Total Currencies - 2.84%                                                                                 1,871,138
                                                                                                            ----------
Energy - 0.57%                                 Futures contracts purchased 0.57%                               374,747
                                                                                                            ----------
Grains                                         Futures contracts sold 0.14%                                     94,600
                                               Futures contracts purchased (0.01)%                              (9,108)
                                                                                                            ----------
    Total Grains - 0.13%                                                                                        85,492
                                                                                                            ----------
Interest Rates U.S.                            Futures contracts sold (0.01)%                                   (9,275)
                                               Futures contracts purchased 0.72%                               479,889
                                                                                                            ----------
    Total Interest Rates U.S. - 0.71%                                                                          470,614
                                                                                                            ----------
Interest Rates Non-U.S.                        Futures contracts sold (0.04)%                                  (28,984)
                                               Futures contracts purchased 1.62%                             1,072,951
                                                                                                            ----------
    Total Interest Rates Non-U.S. - 1.58%                                                                    1,043,967
                                                                                                            ----------
Total Livestock - 0.04%                        Futures contracts purchased 0.04%                                30,300
                                                                                                            ----------
Metals                                         Futures contracts purchased 0.31%                               205,285
                                               Unrealized depreciation on forward contracts (0.71)%           (467,804)
                                               Unrealized appreciation on forward contracts 0.08%               49,880
                                                                                                            ----------
                                                   Total forward contracts (0.63)%                            (417,924)
                                                                                                            ----------
    Total Metals - (0.32)%                                                                                    (212,639)
                                                                                                            ----------
Softs                                          Futures contracts sold 0.00% *                                   (2,700)
                                               Futures contracts purchased 0.12%                                78,972
                                                                                                            ----------
    Total Softs - 0.12%                                                                                         76,272
                                                                                                            ----------
Indices                                        Futures contracts sold 0.33%                                    218,656
                                               Futures contracts purchased (0.02)%                             (13,412)
                                                                                                            -----------
    Total Indices - 0.31%                                                                                      205,244
                                                                                                            ----------

Total Fair Value - 5.98%                                                                                    $3,945,135
                                                                                                            ==========

                                   Investments at     % of Investments at
Country Composition                  Fair Value            Fair Value
-------------------------------- -------------------- ----------------------
Australia                             $    8,692            0.22%
Canada                                    15,101            0.38
France                                     2,268            0.06
Germany                                  510,574            12.94
Hong Kong                                 45,977            1.17
Japan                                    183,163            4.64
Spain                                     (7,733)          (0.19)
United Kingdom                            54,111            1.37
United States                          3,132,982           79.41
                                 -------------------- ----------------------
                                      $3,945,135          100.00%
                                 ==================== ======================

</TABLE>

Percentages are based on Partners' capital unless otherwise indicated
* Due to rounding
See accompanying notes to financial statements.

                                        F-7
<PAGE>



                            Smith Barney Diversified
                              Futures Fund L.P. II
                        Statements of Income and Expenses
                               for the years ended
                        December 31, 2003, 2002, and 2001

<TABLE>
<CAPTION>

                                                                   2003               2002                 2001
                                                               -----------         ----------         ------------
<S>                                                                 <C>                <C>                 <C>
Income:
  Net gains (losses) on trading of commodity interests:
   Realized gains on closed positions and
    foreign currencies                                          $18,893,985        $17,271,983          $6,814,630
   Change in unrealized gains (losses) on open positions            102,434          1,538,475          (7,449,962)
                                                               ------------       ------------        ------------
                                                                 18,996,419         18,810,458            (635,332)
  Interest income (Note 3c)                                         569,919            799,484           2,121,645
                                                               ------------       ------------        ------------
                                                                 19,566,338         19,609,942           1,486,313
                                                               ------------       ------------        ------------
Expenses:
  Brokerage commissions including clearing fees of
   $276,506, $197,990 and $199,455, respectively (Note 3c)
                                                                  4,867,218          4,514,105           5,109,439
  Management fees (Note 3b)                                       1,492,670          1,732,210           1,997,773
  Incentive fees (Note 3b)                                        2,663,950          2,374,309             408,145
  Professional fees                                                  67,078             67,763              69,515
  Other expenses                                                     23,239             19,433              39,044
                                                               ------------       ------------        ------------
                                                                  9,114,155          8,707,820           7,623,916
                                                               ------------       ------------        ------------
Net income (loss)                                               $10,452,183        $10,902,122         $(6,137,603)
                                                               ------------        ------------       -------------

Net income (loss) per Redeemable Unit of Limited
  Partnership Interest and General Partner Unit
  equivalent (Notes 1 and 6)                                        $199.53            $205.86             $(87.64)
                                                               ------------        ------------       -------------

</TABLE>


See accompanying notes to financial statements.

                                        F-8
<PAGE>


                            Smith Barney Diversified
                              Futures Fund L.P. II
                         Statements of Partners' Capital
                               for the years ended
                        December 31, 2003, 2002 and 2001

<TABLE>
<CAPTION>

                                                         Limited           General
                                                         Partners          Partner              Total
                                                      -------------      -----------       -------------
<S>                                                          <C>               <C>                <C>
Partners' capital at December 31, 2000                  $83,244,539       $1,458,228         $84,702,767
Net loss                                                 (6,024,777)        (112,826)         (6,137,603)
Redemption of 11,034.5654 Redeemable Units
  of Limited Partnership Interest                       (11,947,627)              --         (11,947,627)
                                                      -------------      -----------       -------------
Partners' capital at December 31, 2001                   65,272,135        1,345,402          66,617,537
Net income                                               10,665,826          236,296          10,902,122
Redemption of 10,576.9330 Redeemable Units of
  Limited Partnership Interest and 424.7500 Units
  of General Partnership Interest                       (11,039,106)        (502,602)        (11,541,708)
                                                      -------------      -----------       -------------

Partners' capital at December 31, 2002                   64,898,855        1,079,096          65,977,951
Net income                                               10,280,061          172,122          10,452,183
Redemption of 5,671.3005 Redeemable Units of
  Limited Partnership Interest                           (8,154,406)             --           (8,154,406)
                                                      -------------      -----------       -------------
Partners' capital at December 31, 2003                  $67,024,510       $1,251,218         $68,275,728
                                                      -------------      -----------      --------------

</TABLE>

See accompanying notes to financial statements.

                                        F-9
<PAGE>


                            Smith Barney Diversified
                              Futures Fund 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. The  Partnership was authorized to sell 100,000  redeemable  units of
     Limited  Partnership  Interest  ("Redeemable  Units")  during  its  initial
     offering period.

     Citigroup  Managed  Futures LLC,  formerly Smith Barney Futures  Management
     LLC,  acts  as  the  general   partner  (the  "General   Partner")  of  the
     Partnership. The Partnership's commodity broker is Citigroup Global Markets
     Inc. ("CGM"), formerly Salomon Smith Barney Inc. CGM is an affiliate of the
     General  Partner.  The General Partner is wholly owned by Citigroup  Global
     Markets Holdings Inc. ("CGMHI"), formerly Smith Barney Holdings Inc., which
     is the sole owner of CGM.  CGMHI is a wholly owned  subsidiary of Citigroup
     Inc. ("Citigroup").

     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  their  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  Redeemable  Unit
     decreases  to less  than  $400  per  Redeemable  Unit 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 statements of financial condition at fair value on
          the last business day of the year, which  represents  market value for
          those  commodity  interests  for which market  quotations  are readily
          available.  Investments in commodity interests  denominated in foreign
          currencies  are  translated  into U.S.  dollars at the exchange  rates
          prevailing  on the  last  business  day of the  year.  Realized  gains
          (losses) and changes in unrealized  gains  (losses) on open  positions
          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.

     b.   The Partnership may purchase and write (sell) options.  An option is a
          contract allowing, but not requiring, its holder to buy (call) or sell
          (put) a specific or standard  commodity or financial  instrument  at a
          specified price during a specified time period.  The option premium is
          the total price paid or  received  for the option  contract.  When the
          Partnership  writes an option,  the premium  received is recorded as a
          liability  in the  statements  of  financial  condition  and marked to
          market daily.  When the Partnership  purchases an option,  the premium
          paid is recorded as an asset in the statements of financial  condition
          and marked to market daily.

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

                                        F-10

<PAGE>



     d.   The preparation of financial  statements in conformity with accounting
          principles generally accepted in the United States of America requires
          management to make estimates and assumptions  that affect the reported
          amounts of assets and liabilities, disclosure of contingent 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.

     e.   Certain  prior  period  amounts have been  reclassified  to conform to
          current year presentation.

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 Graham Capital Management L.P. ("Graham"),
          Capital Fund Management SA ("CFM"), Campbell & Co., Inc. ("Campbell"),
          Willowbridge   Associates   Inc.   ("Willowbridge")   and   Stonebrook
          Structured   Products,   LLC.   ("Stonebrook")   (collectively,    the
          "Advisors"),  registered commodity trading advisors.  The Advisors are
          not affiliated  with one another,  are not affiliated with the General
          Partner  or CGM 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.  Month-end  Net Assets,  for the
          purpose of calculating  management fees are Net Assets,  as defined in
          the  Limited  Partnership   Agreement,   prior  to  the  reduction  of
          redemptions and incentive fees.

          In  addition,  the  Partnership  is  obligated  to pay each Advisor an
          incentive  fee,  payable  quarterly,  equal to 20% of the New  Trading
          Profits,  as  defined  in the  Management  Agreements,  earned by each
          Advisor for the  Partnership,  except  Graham,  which will  receive an
          incentive  fee of 10% of New Trading  Profits on the first  $5,000,000
          and 20% of New  Trading  Profits  for all such  profits  in  excess of
          $5,000,000.  Effective January 31, 2003,  Stonebrook was terminated as
          an advisor to the Partnership.

     c.   Customer Agreement:

          The Partnership  has entered into a Customer  Agreement which provides
          that the Partnership will pay CGM a monthly brokerage fee equal to 1/2
          of 1% (6% per year) of  month-end  Net  Assets,  in lieu of  brokerage
          commissions on a per trade basis.  CGM will pay a portion of brokerage
          fees to its financial  consultants who have sold  Redeemable  Units in
          this Partnership. Month-end Net Assets, for the purpose of calculating
          commissions  are Net  Assets,  as defined in the  Limited  Partnership
          Agreement,  prior to the reduction of accrued expenses and redemptions
          payable.  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 fees as well as
          exchange, clearing, user, give-up and floor brokerage fees. All of the

                                        F-11
<PAGE>

          Partnership's  assets are  deposited in the  Partnership's  account at
          CGM. The  Partnership's  cash is deposited by CGM in  segregated  bank
          accounts  to  the  extent   required  by  Commodity   Futures  Trading
          Commission  regulations.  At December 31, 2003 and 2002, the amount of
          cash held for margin  requirements  was  $12,384,177  and  $6,861,874,
          respectively. CGM 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  determined  weekly by CGM
          based on the average  noncompetitive  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 CGM
          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 activities are shown in the statements of income and expenses.

     All of the  commodity  interests  owned  by the  Partnership  are  held for
     trading  purposes.  The average fair value during the years ended  December
     31,  2003 and 2002,  based on a monthly  calculation,  was  $4,134,488  and
     $5,286,046, respectively.

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  their
     Redeemable  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 Redeemable  Units after
     the redemption is effected.  There is no fee charged to limited partners in
     connection with redemptions.

                                        F-12
<PAGE>

6.   Financial Highlights:

     Changes in the Net Asset Value per Redeemable  Unit of Limited  Partnership
     Interest  for the years  ended  December  31,  2003,  2002 and 2001 were as
     follows:

<TABLE>
<CAPTION>
                                                                   2003         2002          2001
                                                               ---------     ---------     ---------
<S>                                                                 <C>          <C>           <C>
   Net realized and unrealized gains (losses) *             $     271.30  $     266.34  $     (81.80)
   Interest income                                                 11.32         13.87         30.06
   Expenses **                                                    (83.09)       (74.35)       (35.90)
                                                               ---------     ---------     ---------
   Increase (decrease) for the year                               199.53        205.86        (87.64)
   Net asset value per Redeemable Unit, beginning of year       1,250.92      1,045.06      1,132.70
                                                               ---------     ---------     ---------
   Net asset value per Redeemable Unit, end of year         $   1,450.45  $   1,250.92  $   1,045.06
                                                               ---------     ---------     ---------

    *  Includes brokerage commissions
    ** Excludes brokerage commissions


   Ratios to average net assets:
    Net investment loss before incentive fees ***                  (8.3)%        (8.8)%        (6.7)%
                                                              ---------     ---------     ---------

    Operating expenses                                              9.1%         10.1%          9.6%
    Incentive fees                                                  3.8%          3.8%          0.5%
                                                              ---------     ---------     ---------
    Total expenses                                                 12.9%         13.9%         10.1%
                                                              ---------     ---------     ---------
   Total return:
    Total return before incentive fees                             20.5%         24.0%         (7.2)%
    Incentive fees                                                 (4.5)%        (4.3)%        (0.5)%
                                                              ---------     ---------     ---------
    Total return after incentive fees                              16.0%         19.7%         (7.7)%
                                                              ---------     ---------     ---------


</TABLE>

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

     The above ratios may vary for individual  investors  based on the timing of
     capital  transactions  during  the year.  Additionally,  these  ratios  are
     calculated for the Limited Partner class using the Limited  Partners' share
     of income, expenses and average net assets.

                                        F-13

<PAGE>



7.   Financial Instrument Risks:

     In the normal course of its business, the Partnership is party to financial
     instruments with off-balance  sheet risk,  including  derivative  financial
     instruments   and  derivative   commodity   instruments.   These  financial
     instruments  may include  forwards,  futures and options,  whose values are
     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,  through physical delivery
     or with another financial instrument. These instruments may be traded on an
     exchange or  over-the-counter  ("OTC").  Exchange  traded  instruments  are
     standardized  and  include  futures  and  certain  option  contracts.   OTC
     contracts are negotiated between  contracting  parties and include forwards
     and certain options.  Each of these instruments is subject to various risks
     similar to those related to the underlying financial  instruments including
     market and credit risk. In general, the risks associated with OTC contracts
     are greater than those associated with exchange traded instruments  because
     of the greater risk of default by the counterparty to an OTC contract.

     Market  risk is the  potential  for  changes in the value of the  financial
     instruments  traded by the  Partnership  due to market  changes,  including
     interest and foreign  exchange rate movements and fluctuations in commodity
     or security 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 statements of
     financial condition and not represented by the contract or notional amounts
     of the instruments.  The Partnership has credit risk and concentration risk
     because the sole  counterparty or broker with respect to the  Partnership's
     assets is CGM.

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

     The majority of these  instruments  mature  within one year of December 31,
     2003.  However,  due to the  nature of the  Partnership's  business,  these
     instruments may not be held to maturity.


                                        F-14
<PAGE>
     Selected  unaudited  quarterly  financial data for the years ended December
31, 2003 and 2002 are summarized below:

<TABLE>
<CAPTION>
<S>                                       <C>                  <C>                   <C>                  <C>
                                   For the period from  For the period from   For the period from  For the period from
                                    October 1, 2003 to    July 1, 2003 to       April 1, 2003 to    January 1, 2003 to
                                    December 31, 2003   September 30, 2003       June 30, 2003        March 31, 2003

Net realized and unrealized trading
 gains (losses) net of brokerage
 commissions and clearing fees
 including interest income              $ 4,218,043          $ (4,261,243)        $ 4,836,316       $ 9,906,004

Net Income (loss)                       $ 3,508,014          $ (4,631,123)        $ 3,522,448       $ 8,052,844

Increase (decrease) in Net Asset
 Value per Redeemable Unit                  $ 73.80              $ (94.77)            $ 67.95          $ 152.55

                                   For the period from  For the period from   For the period from  For the period from
                                    October 1, 2002 to    July 1, 2002 to       April 1, 2002 to    January 1, 2002 to
                                    December 31, 2002   September 30, 2002        June 30, 2002       March 31, 2002

Net realized and unrealized trading
 gains(losses) net of brokerage
 commissions and clearing fees
 including interest income             $ (3,534,468)         $ 16,400,044         $ 7,523,682      $ (5,293,421)

Net Income (loss)                      $ (3,998,506)         $ 13,830,202         $ 6,803,256      $ (5,732,830)

Increase (decrease) in Net Asset
 Value per Redeemable Unit                 $ (72.95)             $ 248.97            $ 120.21          $ (90.37)
</TABLE>


                                      F-15
<PAGE>


Item 9.  Changes  in  and  Disagreements  with  Accountants  on  Accounting  and
     Financial Disclosure.


     PricewaterhouseCoopers  LLP was previously the principal accountant for the
Partnership.  On July 9, 2002,  that firm was dismissed as principal  accountant
and KPMG LLP was  engaged  as  principal  accountant.  The  decision  to  change
accountants was approved by the General Partner of the Partnership.

     In  connection  with the audit of the fiscal year ended  December 31, 2001,
and   through    July   9,   2002,    there   were   no    disagreements    with
PricewaterhouseCoopers  LLP on any matter of accounting principles or practices,
financial  statement  disclosure,   or  auditing  scope  or  procedures,   which
disagreements  if not resolved to their  satisfaction  would have caused them to
make reference thereto in their report on the financial statements for the year.

     The audit report of PricewaterhouseCoopers  LLP on the financial statements
of the  Partnership  as of and for the  year  ended  December  31,  2001 did not
contain any adverse  opinion or disclaimer  of opinion,  nor was it qualified or
modified as to uncertainty, audit scope, or accounting principle.

Item 9A. Controls and Procedures.

     Based on their  evaluation  of the  Partnership's  disclosure  controls and
procedures  as of year end the  Chief  Executive  Officer  and  Chief  Financial
Officer of the General  Partner have concluded that such controls and procedures
are effective.

     There were no significant changes in the Partnership's internal controls or
in other factors that could significantly affect such controls during the fourth
quarter of 2003.


                                        34

<PAGE>


                                    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,  Citigroup  Managed  Futures LLC. As of December 31, 2003,
investment decisions were being made by Graham Capital Management L.P., Campbell
and Company Inc., Willowbridge Associates Inc., and Capital Fund Management .

     The  Partnership  has not adopted a code of ethics that applies to officers
because it has no officers.

Item 11. Executive Compensation.

     The  Partnership  has no directors or officers.  Its affairs are managed by
the General Partner.  CGM, 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  $4,867,218  were  earned  by CGM for  the  year  ended  December  31,  2003.
Management fees and incentive fees of $1,492,670 and  $2,663,950,  respectively,
were earned by the Advisors for the year ended December 31, 2003.

Item 12. Security Ownership of Certain Beneficial Owners and Management.

     (a)  Security ownership of certain beneficial owners. As of March 1, 2004,
          the Partnership  knows of no person who beneficially owns more than 5%
          of the Redeemable 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 862.6415 (1.8%) Unit equivalents as of December
          31, 2003.

     (c)  Changes in control. None.

Item 13. Certain Relationships and Related Transactions.

     Citigroup  Global Markets Inc. and Citigroup  Managed  Futures LLC 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",  "Item 8.  Financial  Statements  and
Supplementary Data" and "Item 11. Executive Compensation."

Item 14. Principal Accountant Fees and Services.

     (1) Audit Fees.  The aggregate  fees billed for each of the last two fiscal
years  for  professional  services  rendered  by KPMG  LLP for the  audit of the
Partnership's  annual  financial  statements,  review  of  financial  statements
included in the Partnership's Forms 10-Q and other services normally provided in
connection with regulatory filings or engagements are as follows:

        2003     $32,236
        2002     $35,154

     (2) Audit-Related Fees. None.

     (3) Tax Fees.  The  aggregate  fees  billed for each of the last two fiscal
years for professional  services rendered by KPMG LLP for tax compliance and tax
advice  given  in  the  preparation  of  the  Partnership's  Schedule  K1s,  the
preparation  of the  Partnership's  Form 1065 and  preparation  of all State Tax
Returns are as follows:

        2003     $4,809
        2002     $4,809

     (4) All Other Fees. None.

     (5) Not Applicable.

     (6) Not Applicable.


                                       35
<PAGE>


                                     PART IV

Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

(a)  (1) Financial Statements:

          Statements of Financial Condition at December 31, 2003 and 2002.

          Condensed Schedules of Investments at December 31, 2003 and 2002.

          Statements of Income and Expenses for the years ended December 31,
          2003, 2002 and 2001.

          Statements of Partners' Capital for the years ended December 31, 2003,
          2002 and 2001.

          Notes to Financial Statements

     (2)  Financial Statement Schedules:  Financial  Data  Schedule for the year
          ended December 31, 2003.

     (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 (File 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 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).

     10.7-Management  Agreement among the  Partnership,  the General Partner and
          Willowbridge  Associates  Inc. (filed as Exhibit 10.7 to the Form 10-K
          for the year ended December 31, 1997).



                                       36
<PAGE>

     10.8-Management  Agreement among the  Partnership,  the General Partner and
          ARA Portfolio Management Company, L.L.C. (filed as Exhibit 10.8 to the
          Form 10-K for the year ended December 31, 1997).

     10.9-Letter from General  Partner  terminating  Management  Agreement  with
          Chesapeake Capital Corporation (filed as Exhibit 10.9 to the Form 10-K
          for the year ended December 31, 1997).

     10.10- Management Agreement among the Partnership,  the General Partner and
          Campbell & Co., Inc.  (filed as Exhibit 10.10 to the Form 10-K for the
          year ended December 31, 1997).

     10.11- Letters extending Management Agreements with John W. Henry & Company
          Inc.,   Chesapeake   Capital   Corporation  and  Millburn   Ridgefield
          Corporation for 1996 and 1997 (filed as Exhibit 10.11 to the Form 10-K
          for the year ended December 31, 1997).

     10.12- Letters from the General Partner  terminating  Management  Agreement
          with Millburn Ridgefield Corporation (previously filed).

     10.13- Letter from the General  Partner  terminating  Management  Agreement
          with ARA Portfolio Management (previously filed).

     10.14- Management Agreement among the Partnership,  the General Partner and
          Beacon Management Corporation (previously filed).

     10.15- Management Agreement among the Partnership,  the General Partner and
          Roy G. Neiderhoffer Co., Inc. (previously filed).

     10.16- Letters extending Management Agreements with John W. Henry & Company
          Inc.,  Campbell & and Company,  Inc. and Willowbridge  Associates Inc.
          for 1998 (previously filed).

     10.17- Letters  extending the  Management  Agreements  with John W. Henry &
          Company Inc., Campbell & Company, Inc.,  Willowbridge  Associates Inc.
          and Beacon Management Corporation for 1999 (previously filed).

     10.18- Letter from the General  Partner  terminating  Management  Agreement
          with Roy G. Neiderhoffer Co., Inc. (previously filed).

     10.19- Letter from the General  Partner  terminating  Management  Agreement
          with John W. Henry & Company Inc. (previously filed).

     10.20- Management Agreement among the Partnership,  the General Partner and
          Stonebrook Structured Products, LLC (previously filed).

     10.21- Management Agreement among the Partnership,  the General Partner and
          Graham Capital Management L.P. (previously filed).



                                       37
<PAGE>

     10.22- Letters extending the Management Agreements with Campbell & Company,
          Inc.,  Willowbridge  Associates Inc. and Beacon Management Corporation
          for 2000 (previously filed).

     10.23- Letters extending the Management Agreements with Campbell & Company,
          Inc.,  Willowbridge  Associates Inc., Beacon  Management  Corporation,
          Stonebrook  Structured Products and Graham Capital Management L.P. for
          2001 (previously filed).

     10.24- Management Agreement among the Partnership,  the General Partner and
          Capital Fund Management (previously filed).

     10.25- Letters extending the Management  Agreements with Campbell & Company
          Inc.,  Willowbridge  Associates Inc., Beacon  Management  Corporation,
          Stonebrook  Structured Products and Graham Capital Management L.P. for
          2002 (previously filed).

     10.26- Letter from the General  Partner  Terminating  Management  Agreement
          with Beacon Capital Management (previously filed).

     10.27- Letters extending the management  Agreements with Campbell & Company
          Inc.,  Willowbridge Associates Inc. Capital Fund Management and Graham
          Capital Management L.P. for 2003 (filed herein).

     10.28- Letter from the General  Partner  Terminating  Management  Agreement
          with Stonebrook Structured Products LLC filed herein).

     16.1 - Letter from PricewaterhouseCoopers LLP (filed herein).

           The exhibits required to be filed by Item 601 of regulation S-K are
           incorporated herein by reference

     31.1 - Rule 13a-14(a)/15d-14(a)  Certification  (Certification of President
          and Director).

     31.2 -  Rule  13a-14(a)/15d-14(a)  Certification  (Certification  of  Chief
          Financial Officer and Director).

     32.1 -  Section  1350   Certification   (Certification   of  President  and
          Director).

     32.2 - Section 1350 Certification (Certification of Chief Financial Officer
          and Director)



(b)  Reports on Form 8-K: None Filed.




                                       38
<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

No proxy material has been sent to Limited Partners.


                                       39
<PAGE>


                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934,  the Registrant has duly caused this annual report on Form
10-K 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 29th day of March 2004.

SMITH BARNEY DIVERSIFIED FUTURES FUND L.P. II


By:      Citigroup Managed Futures LLC
         (General Partner)



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


     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
annual report on Form 10-K has been signed below by the following persons in the
capacities and on the date indicated.


/s/ David J. Vogel                                  /s/ Shelley Ullman
--------------------                                --------------------
David J. Vogel                                      Shelley Ullman
President and Director                              Director



/s/ Maureen O'Toole                                 /s/ Steve J. Keltz
--------------------                                ------------------
Maureen O'Toole                                     Steve J. Keltz
Director                                            Secretary and Director



/s/ Daniel R. McAuliffe, Jr.
----------------------------
Daniel R. McAuliffe, Jr.
Chief Financial Officer and
Director



                                       40
<PAGE>



                                                                    Exhibit 31.1

                                  CERTIFICATION

I, David J. Vogel, certify that:

1.   I have reviewed this Annual Report on Form 10-K of Smith Barney Diversified
     Futures Fund L.P. II (the "registrant");

2.   Based on my knowledge, this report does not contain any untrue statement of
     a material  fact or omit to state a  material  fact  necessary  to make the
     statements made, in light of the circumstances  under which such statements
     were made,  not  misleading  with  respect  to the  period  covered by this
     report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information  included  in  this  report,  fairly  present  in all  material
     respects  the  financial   condition  and  results  of  operations  of  the
     registrant as of, and for, the periods presented in this report;

4.   The  registrant's  other  certifying  officer  and  I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

     a)   designed  such  disclosure  controls  and  procedures,  or caused such
          disclosure   controls  and   procedures  to  be  designed   under  our
          supervision,  to ensure  that  material  information  relating  to the
          registrant,  is made  known to us by  others  within  those  entities,
          particularly during the period in which this report is being prepared;

     b)   evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures and presented in this report our conclusions  about the
          effectiveness of the disclosure controls and procedures, as of the end
          of the period covered by this report based on such evaluation; and

     c)   disclosed  in this  report  any  change in the  registrant's  internal
          control over financial reporting that occurred during the registrant's
          most recent fiscal quarter (the registrant's  fourth fiscal quarter in
          the case of an annual  report)  that has  materially  affected,  or is
          reasonably  likely to materially  affect,  the  registrant's  internal
          control over financial reporting; and

5.   The registrant's  other certifying  officer and I have disclosed,  based on
     our most recent evaluation of internal control over financial reporting, to
     the registrant's auditors and the audit committee of the registrant's board
     of directors (or persons performing the equivalent functions):

     a)   all significant  deficiencies and material weaknesses in the design or
          operation  of internal  control  over  financial  reporting  which are
          reasonably  likely to  adversely  affect the  registrant's  ability to
          record, process, summarize and report financial information; and

     b)   any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          control over financial reporting.

Date: March 29, 2004                               /s/ David J. Vogel
      --------------                               -----------------------
                                                   David J. Vogel
                                                   Citigroup Managed Futures LLC
                                                   President and Director



                                       41
<PAGE>





                                                                    Exhibit 31.2

                                  CERTIFICATION

I,   Daniel R. McAuliffe, Jr., certify that:

1.   I have reviewed this Annual Report on form 10-K of Smith Barney Diversified
     Futures Fund L.P. II (the "registrant");

2.   Based on my knowledge, this report does not contain any untrue statement of
     a material  fact or omit to state a  material  fact  necessary  to make the
     statements made, in light of the circumstances  under which such statements
     were made,  not  misleading  with  respect  to the  period  covered by this
     report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this report, fairly present in all material
     respects the financial condition and results of operations of the
     registrant as of, and for, the periods presented in this report;

4.   The registrant's other certifying officer and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

     a)   designed  such  disclosure  controls  and  procedures,  or caused such
          disclosure   controls  and   procedures  to  be  designed   under  our
          supervision,  to ensure  that  material  information  relating  to the
          registrant,  is made  known to us by  others  within  those  entities,
          particularly during the period in which this report is being prepared;

     b)   evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures and presented in this report our conclusions  about the
          effectiveness of the disclosure controls and procedures, as of the end
          of the period covered by this report based on such evaluation; and

     c)   disclosed  in this  report  any  change in the  registrant's  internal
          control over financial reporting that occurred during the registrant's
          most recent fiscal quarter (the registrant's  fourth fiscal quarter in
          the case of an annual  report)  that has  materially  affected,  or is
          reasonably  likely to materially  affect,  the  registrant's  internal
          control over financial reporting; and

5.   The registrant's other certifying officer and I have disclosed, based on
     our most recent evaluation of internal control over financial reporting, to
     the registrant's auditors and the audit committee of the registrant's board
     of directors (or persons performing the equivalent functions):

     a)   all significant  deficiencies and material weaknesses in the design or
          operation  of internal  control  over  financial  reporting  which are
          reasonably  likely to  adversely  affect the  registrant's  ability to
          record, process, summarize and report financial information; and

     b)   any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          control over financial reporting.

Date: March 29, 2004                        /s/ Daniel R. McAuliffe, Jr.
      --------------                        -----------------------
                                            Daniel R. McAuliffe, Jr.
                                            Citigroup Managed Futures LLC
                                            Chief Financial Officer and Director



                                       42
<PAGE>



                                                                    Exhibit 32.1





                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002





     In connection  with the Annual Report of Smith Barney  Diversified  Futures
Fund L.P. II (the  "Partnership")  on Form 10-K for the year ending December 31,
2003 as filed with the  Securities  and Exchange  Commission  on the date hereof
(the "Report"),  I, David J. Vogel,  President and Director of Citigroup Managed
Futures LLC, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss.
906 of the Sarbanes-Oxley Act of 2002, that:

     (1)  The Report fully  complies with the  requirements  of section 13(a) or
          15(d) of the Securities Exchange Act of 1934; and

     (2)  The  information  contained  in the  Report  fairly  presents,  in all
          material respects,  the financial  condition and results of operations
          of the Partnership.



/s/ David J. Vogel
--------------------------
David J. Vogel
Citigroup Managed Futures LLC
President and Director

March 29, 2004
--------------
Date



                                       43
<PAGE>



                                                                    Exhibit 32.2





                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002





     In connection  with the Annual Report of Smith Barney  Diversified  Futures
Fund L.P. II (the  "Partnership")  on Form 10-K for the year ending December 31,
2003 as filed with the  Securities  and Exchange  Commission  on the date hereof
(the  "Report"),  I,  Daniel R.  McAuliffe,  Jr.,  Chief  Financial  Officer and
Director of Citigroup  Managed Futures LLC,  certify,  pursuant to 18 U.S.C. ss.
1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:

     (1)  The Report fully  complies with the  requirements  of section 13(a) or
          15(d) of the Securities Exchange Act of 1934; and

     (2)  The  information  contained  in the  Report  fairly  presents,  in all
          material respects,  the financial  condition and results of operations
          of the Partnership.




/s/ Daniel R. McAuliffe, Jr.
--------------------------
Daniel R. McAuliffe, Jr.
Citigroup Managed Futures LLC
Chief Financial Officer and Director

March 29, 2004
--------------
Date



                                       44
<PAGE>

                       Smith Barney Futures Management LLC
                         388 Greenwich Street, 7th Floor
                          New York, New York 10013-2396

June 11, 2002


Graham Capital Management, L.P.
Stamford Harbour Park
333 Ludlow Street
Stamford, Ct. 06902

Attention:  Mr. Kenneth G.  Tropin

         Re:      Management Agreement Renewal

Dear Mr. Tropin:

We are  writing  with  respect  to your  management  agreements  concerning  the
commodity pools to which reference is made below (the "Management  Agreements").
We are extending the term of the Management Agreements through June 30, 2003 and
all other provisions of the Management Agreements will remain unchanged.

o        Smith Barney Global Markets Futures Fund
o        Smith Barney Diversified Futures Fund L.P. II
o        Smith Barney Diversified Futures Fund L.P.
o        Salomon Smith Barney Diversified 2000 Futures Fund L.P.
o        AURORA 2001

Please  acknowledge  receipt of this  modification  by signing  one copy of this
letter and returning it to the attention of Mr. Daniel  McAuliffe at the address
above or fax to  212-723-8985.  If you have any  questions  I can be  reached at
212-723-5435.

Very truly yours,

SMITH BARNEY FUTURES MANAGEMENT LLC


By:      /s/ Daniel R. McAuliffe, Jr.
          -------------------------
         Daniel R. McAuliffe, Jr.
         Chief Financial Officer & Director

         Graham Capital Management L.P.

By:      /s/ Kenneth Tropin
         -------------------------
Print Name:  Kenneth Tropin

<PAGE>
                       Smith Barney Futures Management LLC
                         388 Greenwich Street, 7th Floor
                          New York, New York 10013-2396

June 11, 2002



Capital Fund Management
109-11 Rue V. Hugo
92532 Levallois
France

Attention:  Jean-Pierre Aguilar, CFO

Re:  Management Agreement Renewals

Dear Mr. Aguilar:

We are  writing  with  respect  to  your  management  agreement  concerning  the
commodity pool to which reference is made below (the "Management Agreement"). We
are extending the term of the Management Agreement through June 30, 2003 and all
other provisions of the Management Agreement will remain unchanged.

o        Smith Barney Diversified Futures Fund L.P. II

Please  acknowledge  receipt of this  modification  by signing  one copy of this
letter and returning it to the attention of Mr. Daniel  McAuliffe at the address
above or fax to  212-723-8985.  If you have any  questions  I can be  reached at
212-723-5435.

Very truly yours,

SMITH BARNEY FUTURES MANAGEMENT LLC


By:      /s/ Daniel R. McAuliffe, Jr.
         -------------------------
          Daniel R. McAuliffe, Jr.
         Chief Financial Officer & Director

         CAPITAL FUND MANAGEMENT
By:      /s/ Jean-Pierre Aguilar
        -------------------------
Print Name:  Jean-Pierre Agular


<PAGE>
                       Smith Barney Futures Management LLC
                         388 Greenwich Street, 7th Floor
                          New York, New York 10013-2396






June 11, 2002



Campbell & Company, Inc.
Court Tower Building, Towson
210 West Pennsylvania Avenue
Suite 770
Baltimore, MD 212104


Attn: Mrs. Theresa D. Becks

         Re:      Management Agreement Renewals

Dear Mrs. Becks:

We are  writing  with  respect  to your  management  agreements  concerning  the
commodity pools to which reference is made below (the "Management  Agreements").
We are extending the term of the Management Agreements through June 30, 2003 and
all other provisions of the Management Agreements will remain unchanged.

o        Smith Barney Potomac Futures  Fund L.P.
o        Smith Barney Diversified Futures Fund L.P.
o        Smith Barney Diversified Futures Fund L.P. II
o        Smith Barney Global Markets Futures Fund
o        Smith Barney Global Diversified Futures Fund L.P.
o        Smith Barney Diversified 2000 Futures Fund L.P.
o        Smith Barney Campbell F.M. and Energy Fund plc
o        AURORA 2001

Please  acknowledge  receipt of this  modification  by signing  one copy of this
letter and returning it to the attention of Mr. Daniel  McAuliffe at the address
above or fax to  212-723-8985.  If you have any  questions  I can be  reached at
212-723-5435.

Very truly yours,

SMITH BARNEY FUTURES MANAGEMENT LLC


By:      /s/ Daniel R. McAuliffe, Jr.
          -------------------------
         Daniel R. McAuliffe, Jr.
         Chief Financial Officer & Director


CAMPBELL & COMPANY, INC.


By:    /s/ Theresa Becks
        -------------------------
Print Name:  Theresa Becks




<PAGE>
                       Smith Barney Futures Management LLC
                         388 Greenwich Street, 7th Floor
                          New York, New York 10013-2396

June 11, 2002



Willowbridge Associates Inc.
101 Morgan Lane - Suite 180
Plainsboro, N.J. 08536

Attention:  Ms. Bonnie Huff / Ms. Janet Boyer

         Re:      Management Agreement Renewals

Dear Ms. Huff and Ms. Boyer:

We are  writing  with  respect  to your  management  agreements  concerning  the
commodity pools to which reference is made below (the "Management  Agreements").
We are extending the term of the Management Agreements through June 30, 2003 and
all other provisions of the Management Agreements will remain unchanged.

o        Salomon Smith Barney Orion Futures Fund L.P.
o        Smith Barney Principal Plus Futures Fund L.P. II
o        Smith Barney Diversified Futures Fund L.P.
o        Smith Barney Diversified Futures Fund L.P. II
o

Please  acknowledge  receipt of this  modification  by signing  one copy of this
letter and returning it to the attention of Mr. Daniel  McAuliffe at the address
above or fax to  212-723-8985.  If you have any  questions  I can be  reached at
212-723-5435.

Very truly yours,

SMITH BARNEY FUTURES MANAGEMENT LLC


By:      /s/ Daniel R. McAuliffe, Jr.
          -------------------------
         Daniel R. McAuliffe, Jr.
         Chief Financial Officer & Director

        WILLOWBRIDGE ASSOCIATES INC

By:      /s/ Bonnie Huff
       -------------------------
Print Name:  Bonnie Huff

<PAGE>
                      Smith Barney Futures Management LLC
                         388 Greenwich Street, 7th Floor
                          New York, New York 10013-2396

June 11, 2002



Stonebrook Structured Products LLC
17 State Street  38th Floor
New York, N.Y. 10004

Attention:  Mr. Jerome Abernathy

         Re:      Management Agreement Renewals

Dear Mr. Abernathy:

We are  writing  with  respect  to your  management  agreements  concerning  the
commodity pools to which reference is made below (the "Management  Agreements").
We are extending the term of the Management Agreements through June 30, 2003 and
all other provisions of the Management Agreements will remain unchanged.

o        Smith Barney Diversified Futures Fund L.P.
o        Salomon Smith Barney Equity Plus Futures Fund L.P.
o        Smith Barney Diversified Futueres Fund L.P. II
o        Smith Barney Stonebrook FX Fund plc.

Please  acknowledge  receipt of this  modification  by signing  one copy of this
letter and returning it to the attention of Mr. Daniel  McAuliffe at the address
above or fax to  212-723-8985.  If you have any  questions  I can be  reached at
212-723-5435.

Very truly yours,

SMITH BARNEY FUTURES MANAGEMENT LLC


By:      /s/ Daniel R. McAuliffe, Jr.
          -------------------------
         Daniel R. McAuliffe, Jr.
         Chief Financial Officer & Director

         STONEBROOK STRUCTURED PRODUCTS LLC

By:      /s/ Jerome Abernathy
         -------------------------
Print Name:  Jerome Abernathy

<PAGE>
                       Smith Barney Futures Management LLC
                         388 Greenwich Street, 7th Floor
                          New York, New York 10013-2396



January 31, 2003



Stonebrook Structured Procucts LLC
17 State Street
New York, New York 10004

Attn: Mr. Jerome Abernathy

Re:      SB Diversified Futures Fund (Acct. #258-43075)
         SB Diversified Futures Fund II (Acct. #258-58075)

Dear Mr. Abernathy:

     Please liquidate all of your positions in the above  referenced  account in
an orderly fashion beginning  immediately.  This will effectively terminate your
management  agreement  with this entity.  Thank you for your service and we look
forward to the possibility of working together in the future.

     If you  have  any  questions,  please  call  myself  or  Jennifer  Magro at
(212)723-5413.

Very truly yours,


/s/ Daniel R. McAuliffe, Jr.
Daniel R. McAuliffe, Jr.
Chief Financial Officer


DRMcA/sr