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, 2001

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 Smith Barney Futures Management LLC
                           388 Greenwich St. - 7th Fl.
                            New York, New York 10013
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              (Address and Zip Code of principal executive offices)

                             (212) 723-5424
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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:  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]

As of February 28, 2002,  Limited  Partnership  Units with an aggregate value of
$58,778,836 were outstanding and held by non-affiliates.


                       DOCUMENTS INCORPORTED 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 relating to the public offering became
effective  on August 21,  1995.  Beginning  August 21,  1995,  100,000  Units of
Limited Partnership  Interest ("Units") were publicly offered at $1,000 per Unit
for a period of ninety days,  subject to increase for up to an additional  sixty
days at the sole  discretion  of the general  partner.  Between  August 21, 1995
(commencement  of the offering  period) and January 16,  1996,  8,529 Units were
sold at $1,000 per Unit. Proceeds of the offering were held in an escrow account
and were transferred,  along with the General Partner's  contribution of $87,000
to the  Partnership's  trading  account on January 17, 1996 when the Partnership
commenced  trading.  Sales of additional  Units and additional  general  partner
contributions  and redemptions of Units for the year ended December 31, 2001 are
reported  in the  Statement  of  Partners'  Capital  on page F-6 under  "Item 8.




                                       2
<PAGE>


Financial  Statements and Supplementary Data." The general partner has agreed to
make  capital  contributions,  if  necessary,  so that its  general  partnership
interest  will be equal to the  greater  of (i) an amount to entitle it to 1% of
each material item of Partnership income, loss, deduction or credit and (ii) the
greater  of (a) 1% of the  partners'  contributions  to the  Partnership  or (b)
$25,000.  The Partnership  will be liquidated upon the first of the following to
occur:  December 31, 2014;  the net asset value of a Unit decreases to less than
$400 as of the close of any  business  day; or under  certain  circumstances  as
defined in the Limited  Partnership  Agreement of the Partnership  (the "Limited
Partnership Agreement").
     Smith  Barney  Futures  Management  LLC acts as the  general  partner  (the
"General  Partner") of the Partnership.  The  Partnership's  commodity broker is
Salomon Smith Barney Inc.  ("SSB").  SSB is an affiliate of the General Partner.
The  General  Partner is wholly  owned by Salomon  Smith  Barney  Holdings  Inc.
("SSBHI"), which is the sole owner of SSB. SSBHI is a wholly owned subsidiary of
Citigroup Inc.
     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 SSB.
     As of December 31, 2001, all commodity  trading  decisions are made for the
Partnership by Graham Capital Management L.P.  ("Graham"),  Campbell and Company


                                       3
<PAGE>

Inc.,   Willowbridge  Associates  Inc.,  Stonebrook  Structured  Products,  LLC.
("Stonebrook"),  Capital  Fund  Management  and  Beacon  Management  Corporation
(collectively,  the  "Advisors").  None of the Advisors is  affiliated  with the
General Partner or SSB. The Advisors are not responsible for the organization or
operation of the Partnership. Capital Fund Management was added as an Advisor to
the Partnership on August 26, 2001.
     Pursuant  to  the  terms  of the  Management  Agreements  (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,
except Stonebrook,  which will receive a monthly management fee equal to 1/20 of
1% (.60% per year) of the fixed  notional  account size  determined on a monthly
basis by the General Partner.  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.  Stonebrook  does not receive an incentive
fee. 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


                                       4
<PAGE>

Partnership  has  entered  into a  Customer  Agreement  with SSB (the  "Customer
Agreement") which provides that the Partnership will pay SSB 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.  SSB also pays a
portion of its brokerage fees to its financial  consultants  who have sold Units
and who are registered as associated  persons with the Commodity Futures Trading
Commission (the "CFTC").  The Partnership pays for National Futures  Association
("NFA")  fees,  exchange  and  clearing  fees,  give-up  and user fees and floor
brokerage  fees.  Brokerage  fees will be paid for the life of the  Partnership,
although  the rate at which  such  fees are paid may be  changed.  The  Customer
Agreement  between the Partnership and SSB gives the Partnership the legal right
to net unrealized gains and losses.
     In addition,  SSB 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 SSB 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


                                       5
<PAGE>

engage in sales of goods or services.  The  Partnership's net income (loss) from
operations for the years ended December 31, 2001,  2000,  1999, 1998 and 1997 is
set forth under "Item 6. Selected Financial Data." The Partnership capital as of
December 31, 2001, was $66,617,537.
(c)  Narrative description of business. -
     --------------------------------
     See Paragraphs (a) and (b) above.
     (i) through (x) - Not applicable.
     (xi) through (xii) - Not applicable.
     (xiii) - The Partnership has no employees.
(d)  Financial  Information  About  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.
Item 2.  Properties.
         ----------
     The Partnership  does not own or lease any properties.  The General Partner
operates out of facilities provided by its affiliate, SSB.
(c)  Distribution.  The  Partnership  did not declare a distribution  in 2001 or
     2000.
(d)  Use of Proceeds. There were no additional sales
     ----------------
Item 3. Legal Proceedings.
        -----------------
     This section  describes  the major pending  legal  proceedings,  other than
ordinary routine litigation  incidental to the business,  to which Salomon Smith
Barney Holdings Inc.  ("SSBH") 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.


                                       6
<PAGE>

     Salomon  Smith  Barney  Inc.  ("SSB")  is a New York  corporation  with its
principal place of business at 388 Greenwich St., New York, New York 10013.  SSB
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.  SSB and  its  affiliates  also  provide
investment banking and other financial services for clients worldwide.
     There have been no  administrative,  civil or criminal actions pending,  on
appeal or concluded  against SSB or any of its individual  principals within the
past five years that  management  believes  may have a material  impact on SSB's
ability to act as an FCM. In the ordinary course of its business, SSB is a party
to various claims and regulatory  inquiries.  Proceedings  deemed to be material
for  purposes  of  Commodity  Futures  Trading  Commission  ("CFTC")  disclosure
requirements are:
     In September 1992,  Harris Trust and Savings Bank (as trustee for Ameritech
Pension Trust ("APT"), Ameritech Corporation,  and an officer of Ameritech filed
suit  against  Salomon   Brothers  Inc.  ("SBI")  and  Salomon  Brothers  Realty
Corporation  ("SBRC") in the U.S.  District  Court for the Northern  District of
Illinois  (Harris Trust Savings Bank, not individually but solely as trustee for
the Ameritech  Pension  Trust,  Ameritech  Corporation  and John A. Edwardson v.
Salomon  Brothers Inc and Salomon  Brothers  Realty  Corp.).  The second amended
complaint  alleges that three purchases by APT from defendants of  participation


                                       7
<PAGE>

interests  in net cash flow or resale  proceeds  of three  portfolios  of motels
owned by Motels of America, Inc. ("MOA"), as well as a fourth purchase by APT of
a similar  participation  interest in a portfolio  of motels owned by Best Inns,
Inc. ("Best"),  violated the Employee  Retirement Income Security Act ("ERISA"),
and  that  APT's  purchase  of the  participation  interests  in the  third  MOA
portfolio  and in the Best  portfolio  violated  the  Racketeer  Influenced  and
Corrupt  Organization Act ("RICO") and the Illinois Consumer Fraud and Deceptive
Practices  Act  ("Consumer  Fraud  Act"),  and  constituted   fraud,   negligent
misrepresentation,  breach of contract and unjust  enrichment.  SBI had acquired
the participation interests when it purchased principal mortgage notes issued by
MOA and Best to finance  purchases  of motel  portfolios;  95% of three of those
interests  and 100% of the fourth were sold to APT for a total of  approximately
$20.9 million.  Plaintiffs'  second amended  complaint seeks judgment (a) on the
ERISA claims for the approximately  $20.9 million purchase price, for rescission
and for  disgorgement of profits,  as well as other relief,  and (b) on the RICO
and state law claims in the amount of $12.3 million, with damages trebled to $37
million on the RICO  claims  and  punitive  damages in excess of $37  million on
certain of the state law claims as well as other  relief.  Following  motions by
defendants,  the court dismissed the RICO, Consumer Fraud Act, fraud,  negligent
misrepresentation,  breach of contract,  and unjust enrichment claims. The court
also found that defendants  were not ERISA  fiduciaries and dismissed two of the
three claims based on that allegation.  Defendants moved for summary judgment on
plaintiffs' only remaining claim,  which alleged an ERISA violation.  The motion
was denied, and defendants appealed to the U.S. Court of Appeals for the Seventh


                                       8
<PAGE>

Circuit.  In July  1999,  the U. S.  Court of Appeals  for the  Seventh  Circuit
reversed the denial of defendants' motion for summary judgment and dismissed the
sole remaining ERISA claim against the Company.  Plaintiffs filed a petition for
certiorari  with the U. S. Supreme Court  seeking  review of the decision of the
Court of  Appeals,  which was  granted  in  January  2000.  After  hearing  oral
argument,  on June 12, 2000,  the U.S.  Supreme Court reversed the U.S. Court of
Appeals for the Seventh Circuit's  judgment,  which had overturned the denial of
defendants'  motion for summary  judgment and dismissed the sole remaining ERISA
claim  against the Company,  and  remanded  the matter to the circuit  court for
further proceedings.  Subsequently, the circuit court remanded the matter to the
U.S.   District  Court  for  the  Northern  District  of  Illinois  for  further
proceedings.
     Both the Department of Labor and the Internal  Revenue Service ("IRS") have
advised SBI that they were or are reviewing the  underlying  transactions.  With
respect to the IRS,  SSBH, SBI and SBRC have consented to extensions of time for
the  assessment  of  excise  taxes  that  may be  claimed  with  respect  to the
transactions  for the years 1987,  1988 and 1989.  In August 1996,  the IRS sent
SSBH,  SBI and SBRC what appeared to be draft  "30-day  letters" with respect to
the  transactions and SSBH, SBI and SBRC were given an opportunity to comment on
whether the IRS should issue 30-day letters,  which would actually  commence the


                                       9
<PAGE>

assessment  process.  In October 1996, SSBH, SBI and SBRC submitted a memorandum
setting  forth reasons why the IRS should not issue such 30-day  letters.  Since
that time, the IRS has not issued such 30-day letters to SSBH, SBI or SBRC.
     In December  1996, a complaint  seeking  unspecified  monetary  damages was
filed by Orange County,  California against numerous brokerage firms,  including
SSB,  in the U.S.  Bankruptcy  Court for the  Central  District  of  California.
(County  of Orange  et al v.  Bear  Stearns  & Co.  Inc.  et al.) The  complaint
alleged,  among other things,  that the  brokerage  firms  recommended  and sold
unsuitable  securities to Orange Count.  SSB and the remaining  brokerage  firms
settled with Orange County in mid 1999.
     In June  1998,  complaints  were filed in the U.S.  district  Court for the
Eastern District of Louisiana in two actions (Board of  Liquidations,  City Debt
of the City of New  Orleans v. Smith  Barney  Inc,  et ano.  and The City of New
Orleans v. Smith Barney Inc. et ano.),  in which the City of New Orleans seeks a
determination that Smith Barney Inc. and another underwriter will be responsible
for any  damages  that the City may incur in the event the IRS denies tax exempt
status to the  City's  General  Obligation  Refunding  Bonds  Series  1991.  The
complaints  were  subsequently  amended.  SSB has asked the court to dismiss the
amended   complaints.   The  Court  denied  the  motion  but  stayed  the  case.
Subsequently, the city withdrew the lawsuit.
     In November  1998, a class action  complaint was filed in the United States
District  Court for the Middle  District of Florida  (Dwight  Brock as Clerk for


                                       10
<PAGE>

Collier County v. Merrill Lynch, et al.). The Complaint  alleged that,  pursuant
to a nationwide conspiracy, 17 broker-dealer defendants,  including SSB, Charged
excessive  mark-ups in connection with advanced  refunding  transactions.  Among
other relief,  plaintiffs sought compensatory and punitive damages,  restitution
and/or  rescission of the  transactions  and  disgorgement of alleged  excessive
profits.  In October 1999, the plaintiff filed a second amended  complaint.  SSB
has asked the court to dismiss the amended  complaint.  In  November  1999,  SSB
moved to dismiss the amended  complaint.  In May 2001, the parties reached,  and
the court preliminarily approved, a tentative settlement. In September 2001, the
court approved the settlement.
     In connection with the Louisiana and Florida matters,  the IRS and SEC have
been  conducting and  industry-wide  investigation  into the pricing of Treasury
securities  in advanced  refunding  transactions,  In April 2000 SSB and several
other broker-dealers entered into a settlement with the IRS and the SEC.
     In December  1998,  SSB was one of  twenty-eight  market  making firms that
reached a settlement  with the SEC in the matter titled In the Matter of Certain
Market Making  Activities on NASDAQ.  As part of the  settlement of that matter,
SSB,  without  admitting or denying the factual  allegation,  agreed to an order
that  required  that it: (i) cease and desist  from  committing  or causing  any
violations of Sections  15(c)(1) and (2) of the Securities  Exchange Act of 1934
and Rules 15cl -2,  15c2-7 and 17a-3  thereunder,  (ii) pay  penalties  totaling
approximately  $760,000,  and (iii) submit certain policies and procedures to an
independent consultant for review.


                                       11
<PAGE>

     In March 1999, a complaint seeking in excess of $250 million was filed by a
hedge fund and its  investment  advisor  against SSB in the Supreme Court of the
State of New York,  County of New York (MKP Master  Fund,  LDC et al. v. Salomon
Smith Barney  Inc.).  Plaintiffs  allege that while acting as their prime broker
SSB breached its contracts with  plaintiffs,  converted  plaintiffs'  monies and
engaged in tortious  conduct,  including  breaching  its  fiduciary  duties.  In
October 1999, the court dismissed plaintiffs' tort claims,  including the breach
of  fiduciary  duty claims,  but allowed the breach of contract  and  conversion
claims  to  stand.   In  December   1999,  SSB  filed  an  answer  and  asserted
counterclaims  against the investment advisor. In response to plaintiffs' motion
to strike the  counterclaims,  in January  2000,  SSB amended its  counterclaims
against  the  investment  advisor  to  seek  indemnification  and  contribution.
Plaintiffs  moved to strike SSB's  amended  counterclaims  in February  2000. In
September   2000,  the  court  denied   plaintiffs'   motion  to  dismiss  SSB's
counterclaims based on indemnification and contribution. Discovery is ongoing.
     SSBH and various subsidiaries have also been named as defendants in various
matters  incident to and typical of the  businesses  in which they are  engaged.
These include numerous civil actions,  arbitration proceedings and other matters
in which  SSBH's  broker-dealer  subsidiaries  have been  named,  arising in the
normal  course  of  business  out  of  activities  as a  broker  and  dealer  in
securities,  as an  underwriter  of  securities,  as  an  investment  banker  or


                                       12
<PAGE>

otherwise.  In the  opinion  of  SSBH's  management,  none of these  actions  is
expected  to have a  material  adverse  effect  on the  results  of  operations,
consolidated financial condition or liquidity of SSBH and its subsidiaries.
Item 4.  Submission of Matters to a Vote of Security Holders.
     There were no matters  submitted to the security  holders for a vote during
the last fiscal year covered by this report.
                                     PART II

Item 5.  Market for  Registrant's  Common  Equity and  Related  Security  Holder
     Matters.
(a)  Market Information. The Partnership has issued no stock.
          There  is no  public  market  for the  Units  of  Limited  Partnership
     Interest.
(b)  Holders.  The number of holders of Units of Limited Partnership Interest as
     of December 31, 2001 was 3,478.
(c)  Distribution.  The  Partnership  did not declare a distribution  in 2001 or
     2000.

(d)  Use of Proceeds.  There were no  additional  sales during the twelve months
     ended  December 31, 2001 and 2000.  The  Partnership  ceased to offer Units
     effective  March 1, 1998.  For the twelve  months ended  December 31, 1998,
     there were additional sales of 38,309.9229  Units totaling  $42,074,000 and
     contributions by the General Partner representing 283.5082 Unit equivalents
     totaling  $311,000.  Proceeds from the sale of additional Units are used in
     the trading of commodity interests including futures contracts, options and
     forward contracts.

                                       13
<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 Unit for the years ended December 31, 2001,  2000, 1999, 1998 and
     1997 and total assets at December 31, 2001,  2000, 1999, 1998 and 1997 were
     as follows:
<TABLE>
<CAPTION>
                                                 2001             2000              1999            1998           1997
                                         ------------    -------------     -------------  --------------  --------------
<S>                                               <C>              <C>              <C>              <C>             <C>
Realized and unrealized trading gains
(losses) net of brokerage commissions
 and clearing fees of $5,109,439,
$5,846,384, $8,857,532, $8,891,659,
and $6,257,856, respectively            $  (5,744,771)       6,540,869    $ (21,027,791)   $  14,064,160   $    (461,654)


Interest income                             2,121,645        3,884,319        4,658,630        4,818,279       3,634,245
                                        -------------    -------------    -------------    -------------   -------------
                                        $   3,623,126)   $  10,425,188    $ (16,369,161)   $  18,882,439   $   3,172,591
                                        =============    =============    =============    =============   =============

Net income (loss)                       $  (6,137,603)   $   7,572,583    $ (21,048,896)   $  12,979,536   $    (313,824)
                                        =============    =============    =============    =============   =============

Increase (decrease) in Net
 Asset Value per unit                   $      (87.64)   $      107.10    $     (193.59)   $       95.43   $       (1.30)
                                        =============    =============    =============    =============   =============

Total assets                            $  68,118,842    $  87,318,686    $ 106,012,664    $ 154,692,651   $ 113,547,434
                                        =============    =============    =============    =============   =============
</TABLE>

<PAGE>


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

     (a)  Liquidity.  The  Partnership  does  not  engage  in  sales of goods or
services.  Its only  assets  are its  equity in its  commodity  futures  trading
account,  consisting of cash, net unrealized appreciation (depreciation) on open
futures  contracts and interest  receivable.  Because of the low margin deposits
normally  required in commodity  trading,  relatively  small price movements may
result in substantial  losses to the Partnership.  Such substantial losses could
lead to a material decrease in liquidity. To minimize this risk, the Partnership
follows certain policies  including:
     (1)  Partnership  funds are invested only in commodity  interests which are
traded in sufficient volume to permit,  in the opinion of the Advisors,  ease of
taking and liquidating positions.
     (2) The Partnership  will not permit the churning of its commodity  trading
accounts.
     (3) No Advisor  initiates  additional  positions  in any  commodity if such
additional  positions  would result in aggregate  positions for all  commodities
requiring as margin more than 66-2/3% of the  Partnership's  assets allocated to
the Advisor.
     (4) The Partnership will not employ the trading technique commonly known as
"pyramiding",  in which the  speculator  uses  unrealized  profits  on  existing
positions as margin for the purchase or sale of additional positions in the same
or related commodities.


                                       14
<PAGE>



     (5) The Partnership will not utilize borrowing except short-term  borrowing
if the Partnership takes delivery of any cash commodities.
     (6) The Advisors may, from time to time, employ trading  strategies such as
spread  or  straddles  on  behalf  of the  Partnership.  The  term  "spread"  or
"straddle"   describes  a  commodity  futures  trading  strategy  involving  the
simultaneous  buying and selling of futures  contracts on the same commodity but
involving different delivery dates or markets and in which the trader expects to
earn a profit from a widening or narrowing of the difference  between the prices
of the two contracts.
     The Partnership is party to financial  instruments with  off-balance  sheet
risk,  including  derivative  financial  instruments  and  derivative  commodity
instruments,  in the normal course of its business.  These financial instruments
may  include  forwards,  futures  and  options,  whose  value is  based  upon an
underlying  asset,  index,  or reference  rate, and generally  represent  future
commitments to exchange  currencies or cash flows,  or to purchase or sell other
financial  instruments  at specified  terms at specified  future dates.  Each of
these  instruments  is subject to various risks similar to those relating to the
underlying financial  instruments  including market and credit risk. The General
Partner monitors and controls the  Partnership's  risk exposure on a daily basis
through financial, credit and risk management monitoring systems and accordingly
believes that it has effective procedures for evaluating and limiting the credit


                                       15
<PAGE>

and  market  risks to which  the  Partnership  is  subject.  (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 dissolve the Partnership by limited  partners owning more than 50%
of the Units;  (iii) assignment by the General Partner of all of its interest in
the  Partnership  or  withdrawal,  removal,  bankruptcy  or any other event that
causes the General  Partner to cease to be a general  partner under the New York
Revised Limited Partnership Act unless the Partnership is continued as described
in the  Limited  Partnership  Agreement;  (iv) net asset value per Unit falls to
less than $400 as of the end of any trading  day; or (v) the  occurrence  of any
event which shall make it unlawful for the  existence of the  Partnership  to be
continued.
(b)  Capital resources. (i) The Partnership has made no material commitments for
     capital expenditures.
     (ii) The Partnership's capital consists of the capital contributions of the
partners as increased or decreased by gains or losses on commodity trading,  and
by expenses, interest income, redemptions of Units and distributions of profits,


                                       16
<PAGE>

if any. Gains or losses on commodity  trading cannot be predicted.  Market moves
in commodities are dependent upon  fundamental  and technical  factors which the
Partnership  may or may not be  able  to  identify.  Partnership  expenses  will
consist of, among other things, commissions, management fees and incentive fees.
The level of these  expenses  is  dependent  upon the level of trading  gains or
losses 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 SSB is
dependent upon interest rates over which the Partnership has no control.
     No forecast can be made as to the level of redemptions in any given period.
A limited  partner may cause all of his Units to be redeemed by the  Partnership
at the Net Asset  Value  thereof  as of the last day of each  month on ten days'
written notice to the General  Partner.  No fee will be charged for redemptions.
For the year ended December 31, 2001,  11,034.5654  Units were redeemed totaling
11,947,627.  For the year  ended  December  31,  2000,  25,136.0733  Units  were
redeemed totaling $25,343,422. For the year ended December 31, 1999, 24,591.7470
Units were redeemed totaling $28,275,280.
     The Partnership ceased to offer Units effective March 1, 1998. For the year
ended  December 31,  1998,  there were  additional  sales of  38,309.9229  Units
totaling  $42,074,000  and  contributions  by the General  Partner  representing
283.5082 Unit equivalents totaling $311,000.


                                       17
<PAGE>

     (c) Results of  Operations.  For the year ended  December  31, 2001 the Net
Asset Value per Unit decreased  7.7% from  $1,132.70 to $1,045.06.  For the year
ended  December  31,  2000,  the Net Asset Value per Unit  increased  10.4% from
$1,025.60 to $1,132.70. For the year ended December 31, 1999 the Net Asset Value
per unit decreased 15.9% from $1,219.19 to $1,025.60.
     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 recognized in U.S. and non-U.S. interest rates and softs.
     The  Partnership  experienced  net  trading  gains  of  $12,387,253  before
commissions  and  expenses in 2000.  Gains were  primarily  attributable  to the
trading in currencies, energy, and U.S. interest rates and were partially offset
by losses  recognized  in the  trading of  grains,  softs,  livestock,  non-U.S.
interest rates, metals and indices.
     The  Partnership  experienced  net  trading  losses of  $12,170,259  before
commissions  and expenses in 1999.  Losses were  primarily  attributable  to the
trading in indices,  non-U.S.  interest rates, metals,  grains, softs, livestock
and currencies and were partially  offset by gains  recognized in the trading of
U.S. interest rates and energy.
           Commodity markets are highly volatile. Broad price fluctuations and
rapid inflation increase the risks involved in commodity trading, but also


                                       18
<PAGE>

     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.


                                       19
<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,  with customers,  among 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
unitholder, creditors, and regulators, is free of material errors.

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


                                       20
<PAGE>

loss. Unlike an operating company,  the risk of market sensitive  instruments is
integral, not incidental, to the Partnership's main line of business.
     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 results 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


                                       21
<PAGE>

intrinsic  to all  future  projections,  the  inclusion  of  the  quantification
included 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.
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 or 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


                                       22
<PAGE>

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
maintenance  margin has been used.  This  calculation is conservative in that it


                                       23
<PAGE>

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.



                                       24
<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, 2001.  All
open position  trading risk exposures of the  Partnership  have been included in
calculating  the  figures  set  forth  below.  As  of  December  31,  2001,  the
Partnership's total capitalization was $66,617,537.

                                December 31, 2001
<TABLE>
<CAPTION>
                                                                            Year to Date
                                                   % of Total         High               Low
Market Sector                  Value at Risk    Capitalization    Value at Risk  Value at Risk
-----------------------------------------------------------------------------------------------
<S>                                     <C>              <C>                <C>          <C>
Currencies
- Exchange Traded Contracts      $1,966,109             2.95%        $2,687,849   $  880,468
- OTC Contracts                   1,361,075             2.04%         1,527,257      917,768
Energy                            1,612,500             2.42%         2,320,000      634,000
Grains                              550,800             0.83%           934,666      164,910
Interest rates U.S.                 355,000             0.53%         2,725,192      302,535
Interest rates Non-U.S              785,151             1.18%         3,147,150      619,466
Livestock                           159,600             0.24%           473,866       72,642
Metals
- Exchange Traded Contracts         344,000             0.52%         1,419,200      344,000
- OTC Contracts                     134,450             0.20%           581,225       22,800
Softs                               501,310             0.75%         1,022,290      471,949
Indices                           1,443,518             2.17%         3,330,731      968,173
                                 ----------        ----------
Total                            $9,213,513            13.83%
                                 ==========        ==========

</TABLE>


                                       25
<PAGE>





     As of  December  31,  2000,  the  Partnership's  total  capitalization  was
$84,702,767.

<TABLE>
<CAPTION>

                                December 31, 2000
                                                                          Year to Date
                                                % of Total         High               Low
Market Sector                  Value at Risk    Capitalization    Value at Risk  Value at Risk
-----------------------------------------------------------------------------------------------
<S>                                      <C>              <C>                <C>          <C>
Currencies
- Exchange Traded Contracts      $ 1,295,861             1.53%       $ 2,848,182   $   480,391
- OTC Contracts                      746,446             0.88%         2,855,526       746,446
Energy                             1,474,000             1.74%         3,867,500     1,268,800
Grains                               550,150             0.65%         1,362,550       320,150
Interest rates U.S.                1,449,100             1.71%         2,045,100       330,300
Interest rates Non-U.S             2,007,106             2.37%         5,017,546       698,877
Livestock                            350,660             0.42%           389,240        45,194
Metals (Exchange Traded and
 OTC Contracts)                      968,500             1.14%         1,847,100       677,250
Softs                                678,700             0.80%         1,615,154       454,300
Stock Indices                      2,456,153             2.90%         2,659,715     1,240,264
                                 -----------       -----------
Total                            $11,976,676            14.14%
                                 ===========       ===========
</TABLE>


                                       26
<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


                                       27
<PAGE>

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.
     The following were the primary trading risk exposures of the Partnership as
of December 31, 2001, 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


                                       28
<PAGE>

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-7 countries.
However,  the Partnership also takes futures positions on the government debt of
smaller nations -- e.g.,  Australia.  The General Partner  anticipates  that G-7
interest rates will remain the primary market  exposure of the  Partnership  for
the foreseeable future.
     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  dollar-based  Partnership  in expressing
Value at Risk in a functional currency other than dollars.
     Stock Indices. The Partnership's primary equity exposure is to equity price
risk in the G-7 countries. The stock index futures traded by the Partnership are
by law limited to futures on broadly based indices. As of December 31, 2001, 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


                                       29
<PAGE>

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,
2001.
     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.

Qualitative Disclosures Regarding Non-Trading Risk Exposure
     The following were the only  non-trading  risk exposures of the Partnership
as of December 31, 2001.


                                       30
<PAGE>


     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  programs  traded  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


                                       31
<PAGE>

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.


<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

                        Report of Independent Accountants.              F-3

                        Financial Statements:
                        Statement of Financial Condition at
                        December 31, 2001 and 2000.                     F-4

                        Condensed Schedule of Investments at
                        December 31, 2001                               F-5

                        Statement of Income and Expenses for
                        the years ended December 31, 2001,
                        2000 and 1999.                                  F-6

                        Statement of Partners' Capital for
                        the years ended December 31, 2001, 2000
                        and 1999.                                       F-7

                        Notes to Financial Statements.               F-8 - F-12


                                       F-1



<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.






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

Smith Barney Futures Management LLC
388 Greenwich Street
7th Floor
New York, N.Y. 10013
212-723-5424




                                        F-2

<PAGE>


                        Report of Independent Accountants

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

     In  our  opinion,  the  accompanying   statement  of  financial  condition,
including the condensed  schedule of investments,  and the related statements of
income and expenses and of partners'  capital  present  fairly,  in all material
respects,  the financial position of Smith Barney Diversified  Futures Fund L.P.
II at December 31, 2001 and 2000,  and the results of its operations for each of
the three years in the period  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  audits.  We  conducted  our audits 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 audits  provide a  reasonable  basis for our
opinion.



PricewaterhouseCoopers LLP
New York, New York
February 28, 2002

                                        F-3
<PAGE>


                            Smith Barney Diversified
                              Futures Fund L.P. II
                        Statement of Financial Condition
                           December 31, 2001 and 2000


<TABLE>
<CAPTION>
                                                               2001         2000
                                                        -----------   -----------
<S>                                                            <C>           <C>
Equity in commodity futures trading account:
   Cash (Note 3c)                                       $63,266,503   $77,138,225
   Net unrealized appreciation on open positions          3,633,560     9,856,622
   Commodity options owned, at fair value (cost
   $2,368,450 and $0 in 2001 and 2000, respectively)      1,141,550          --
                                                        -----------   -----------
                                                         68,041,613    86,994,847
Interest receivable                                          77,229       323,839
                                                        -----------   -----------
                                                        $68,118,842   $87,318,686
                                                        -----------   -----------

Liabilities and Partners' Capital:
Liabilities:
  Accrued expenses:
   Commissions                                          $   361,453   $   447,854
   Management fees                                          153,976       187,871
   Incentive fees                                            52,446       285,755
   Professional fees                                         58,544        57,091
   Other                                                     14,825         6,089
  Redemptions payable (Note 5)                              860,061     1,631,259
                                                        -----------   -----------
                                                          1,501,305     2,615,919
                                                        -----------   -----------
Partners' capital (Notes 1, 5 and 6):
  General Partner, 1, 287.3915 Unit equivalents
   outstanding in 2001 and 2000                           1,345,402     1,458,228
  Limited Partners, 62,457.7597 and 73,492.3251 Units
   of Limited Partnership Interest outstanding in
   2001 and 2000, respectively                           65,272,135    83,244,539
                                                        -----------   -----------
                                                         66,617,537    84,702,767
                                                        -----------   -----------
                                                        $68,118,842   $87,318,686
                                                        -----------   -----------
</TABLE>

See notes to financial statements.


                                        F-4
<PAGE>
                           Smith Barney Diversified
                              Futures Fund L.P. II
                        Condensed Schedule of Investments
                                December 31, 2001
<TABLE>
<CAPTION>
Sector                                         Contract                                        Fair Value
--------                                       ---------                                        ---------
<S>                                            <C>                                                    <C>
Currencies                                     Over the counter  contracts sold - 1.47%       $   979,504
                                               Over the counter contracts purchased - 0.41%       269,940
                                                                                               ----------
                                                   Total Over the counter - 1.88%               1,249,444

                                               Exchange contracts sold - 2.58%                  1,721,800
                                               Exchange contracts purchased - 0.24%               157,770
                                                                                               ----------
                                                   Total Exchange traded - 2.82%                1,879,570

                                                                                               ----------
    Total Currencies - 4.70%                                                                    3,129,014
                                                                                               ----------

Energy                                         Futures contracts sold - 0.12%                      81,683
                                               Futures contracts purchased - (0.08)%              (50,650)
                                                                                               ----------
    Total Energy - 0.04%                                                                           31,033
                                                                                               ----------

Grains                                         Futures contracts sold - 0.62%                     416,332
                                               Futures contracts purchased - 0.0%           *      (5,000)
                                                                                               ----------
    Total Grains - 0.62%                                                                          411,332
                                                                                               ----------

Total Interest Rates U.S.                      Futures contracts sold  (0.01)%                     (7,322)
                                               Futures contracts purchased - 0.15%                101,600
                                                                                               ----------
    Total Interest Rates U.S. - 0.14%                                                              94,278
                                                                                               ----------

Interest Rates Non-U.S                         Futures contracts sold - 0.24%                     157,588
                                               Futures contracts purchased - (0.22)%             (147,690)
                                                                                                ---------
    Total Interest Rates Non-U.S. - 0.02%                                                           9,898
                                                                                                ---------

Livestock                                      Futures contracts sold - (0.15)%                   (97,500)
                                               Futures contracts purchased - 0.04%                 25,960
                                                                                                 --------
    Total Livestock - (0.11)%                                                                     (71,540)
                                                                                                 --------

Metals                                         Futures contracts sold - (0.69)%                  (460,649)
                                               Futures contracts purchased - 0.20%                131,456
                                                                                                ---------
    Total Metals - (0.49)%                                                                       (329,193)
                                                                                                ---------

Softs                                          Futures contracts sold   - 0.18%                   122,603
                                               Futures contracts purchased - 0.24%                159,445
                                                                                                ---------
    Total Softs - 0.42%                                                                           282,048
                                                                                                ---------

Indices                                        Futures contracts -  0.04%                          22,395
                                               Futures contracts purchased - 0.08%                 54,295
                                                                                                ---------
    Total Indices - 0.12%                                                                          76,690
                                                                                                ---------

Total Fair Value on Futures and Forwards - 5.46%                                                3,633,560

Total Currencies - 1.71%                       Commodity options owned  - 1.71%                 1,141,550
                                                                                                ---------
Total Investments - 7.17%                                                                     $ 4,775,110
                                                                                                =========
                                   Investments at     % of Investments at
Country Composition                  Fair Value            Fair Value
--------------------         --------------------       -----------------

Australia                               $ 27,934             0.58%
Canada                                    10,883             0.23%
Germany                                  134,572             2.82%
Hong Kong                                     70             0.00%
Japan                                   (136,759)           (2.86)%
France                                    18,389             0.38%
United Kingdom                          (327,219)           (6.85)%
United States                          5,047,240           105.70%
                                 ---------------     --------------
                                      $4,775,110           100.00%
                                 ===============     ==============
</TABLE>
Percentages are based on Partners' capital unless otherwise indicated
 * Due to rounding

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



                            Smith Barney Diversified
                              Futures Fund L.P. II
                        Statement of Income and Expenses
                               for the years ended
                        December 31, 2001, 2000, and 1999


<TABLE>
<CAPTION>
                                                                       2001               2000               1999
                                                               ------------       ------------       -------------
<S>                                                                    <C>                 <C>                <C>
Income:
  Net gains (losses) on trading of commodity interests:
   Realized gains (losses) on closed positions                   $6,814,630         $6,556,736         $(8,265,193)
   Change in unrealized gains (losses) on open positions         (7,449,962)         5,830,517          (3,905,066)
                                                               ------------       ------------        ------------
                                                                   (635,332)        12,387,253         (12,170,259)
  Less, Brokerage commissions including clearing fees
   of $199,455, $218,335 and $321,934, respectively
   (Note 3c)                                                     (5,109,439)        (5,846,384)         (8,857,532)
                                                               ------------       ------------        ------------
  Net realized and unrealized gains (losses)                     (5,744,771)         6,540,869         (21,027,791)
  Interest income (Note 3c)                                       2,121,645          3,884,319           4,658,630
                                                               ------------       ------------        ------------
                                                                 (3,623,126)        10,425,188         (16,369,161)
                                                               ------------       ------------        ------------
Expenses:
  Management fees (Note 3b)                                       1,997,773          2,465,726           3,463,948
  Incentive fees (Note 3b)                                          408,145            285,755           1,024,143
  Professional fees                                                  69,515             65,629             157,460
  Other expenses                                                     39,044             35,495              34,184
                                                               ------------       ------------        ------------
                                                                  2,514,477          2,852,605           4,679,735
                                                               ------------       ------------        ------------
Net income (loss)                                               $(6,137,603)        $7,572,583        $(21,048,896)
                                                               ------------       ------------       -------------


Net income (loss) per Unit of Limited Partnership
  Interest and General Partner Unit equivalent (Notes 1
   and 6)                                                          $(87.64)           $107.10            $(193.59)
                                                               ------------       ------------       -------------
</TABLE>


See notes to financial statements.


                                        F-6

<PAGE>


                            Smith Barney Diversified
                              Futures Fund L.P. II
                         Statement of Partners' Capital
                               for the years ended
                        December 31, 2001, 2000 and 1999

<TABLE>
<CAPTION>

                                                            Limited           General
                                                           Partners           Partner            Total
                                                       ------------       ------------     -------------
<S>                                                            <C>              <C>                  <C>
Partners' capital at December 31, 1998                 $150,228,207        $1,569,575       $151,797,782
Net loss                                                (20,799,670)         (249,226)       (21,048,896)
Redemption of 24,591.7470 Units of Limited
  Partnership Interest                                  (28,275,280)              --         (28,275,280)
                                                      -------------        -----------     -------------
Partners' capital at December 31, 1999                  101,153,257         1,320,349        102,473,606
Net income                                                7,434,704           137,879          7,572,583
Redemption of 25,136.0733 Units of Limited
  Partnership Interest                                  (25,343,422)              --         (25,343,422)
                                                      -------------        -----------     -------------
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 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
                                                      -------------        -----------     --------------

</TABLE>


See notes to financial statements.

                                        F-7

<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  Units during its initial  offering
period.

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

     The  General  Partner  and each  limited  partner  share in the profits and
losses of the  Partnership in proportion to the amount of  partnership  interest
owned by each except that no limited  partner shall be liable for obligations of
the Partnership in excess of his initial capital  contribution  and profits,  if
any, net of distributions.

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

2.  Accounting Policies:
     a. All commodity interests (including  derivative financial instruments and
derivative commodity  instruments) are used for trading purposes.  The commodity
interests  are  recorded on trade date and open  contracts  are  recorded in the
statement of financial  condition at 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  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.

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

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


                                        F-8
<PAGE>



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"),   Stonebrook   Structured  Products,   LLC.
("Stonebrook") and Beacon Management Corporation ("Beacon")  (collectively,  the
"Advisors"),  registered  commodity  trading  advisors.  The  Advisors  are  not
affiliated with one another,  are not affiliated with the General Partner or SSB
and are not  responsible for the  organization or operation of the  Partnership.
The Partnership  will pay each Advisor a monthly  management fee equal to 1/6 of
1% (2% per year) of  month-end  Net  Assets  allocated  to the  Advisor,  except
Stonebrook,  which  will  receive a monthly  management  fee equal to 1/20 of 1%
(.60% per year) of the fixed notional account size determined on a monthly basis
by the General  Partner.  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.  Stonebrook  does not receive an incentive
fee.  Capital Fund  Management SA was added as an Advisor to the  Partnership on
July 6, 2001.

    c. Customer Agreement:

     The Partnership  has entered into a Customer  Agreement which provides that
the Partnership will pay SSB 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. SSB will pay a portion of brokerage fees to its financial consultants who
have sold Units in this Partnership. Brokerage fees will be paid for the life of
the  Partnership,  although the rate at which such fees are paid may be changed.
The  Partnership  will  pay  for  National  Futures  Association  ("NFA")  fees,
exchange,  clearing,  user,  give-up  and  floor  brokerage  fees.  All  of  the
Partnership's  assets are  deposited  in the  Partnership's  account at SSB. The
Partnership's cash is deposited by SSB in segregated bank accounts to the extent
required by Commodity Futures Trading  Commission  regulations.  At December 31,
2001 and 2000, the amount of cash held for margin  requirements  was $10,365,008
and $14,659,778, respectively. SSB 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 SSB 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 SSB gives the  Partnership  the legal right to net
unrealized  gains and losses.  The Customer  Agreement  may be  terminated  upon
notice by either party.

                                        F-9

<PAGE>



4.  Trading Activities:

     The  Partnership  was formed for the  purpose  of  trading  contracts  in a
variety of commodity interests,  including derivative financial  instruments and
derivative  commodity  interests.  The  results  of  the  Partnership's  trading
activity are shown in the statement of income and 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,
2001 and 2000,  based on a monthly  calculation,  was $5,739,090 and $4,748,750,
respectively.  The fair value of these commodity  interests,  including  options
thereon,  if  applicable,  at  December  31,  2001 and 2000 was  $4,775,110  and
$9,856,622, respectively.

                                                       Fair Value
                                                       December 31,
                                                            2000
                                                       ------------
 Currencies:
        -Exchange Traded Contracts                      $3,394,005
        -OTC Contracts                                     133,429
    Energy                                                 668,357
    Grains                                                 221,765
    Interest Rates U.S.                                  4,125,853
    Interest Rates Non-U.S.                                858,321
    Livestock                                              591,100
    Metals:
        -Exchange Traded Contracts                         244,253
        -OTC Contracts                                    (290,666)
    Softs                                                  353,333
    Indices                                               (443,128)
                                                       ------------
    Total                                               $9,856,622
                                                       ------------


5.       Distributions and Redemptions:

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

                                        F-10
<PAGE>



6.      Financial Highlights:

     Changes in the net asset  value per Unit of  Partnership  interest  for the
years ended December 31, 2001, 2000 and 1999 were as follows:

<TABLE>
<CAPTION>
                                                      2001         2000         1999
                                                  ---------    ---------    ---------
<S>                                                   <C>          <C>          <C>
Net realized and unrealized gains (losses)    $     (81.80)$      95.31 $    (193.82)
Interest income                                      30.06        44.87        40.81
Expenses                                            (35.90)      (33.08)      (40.58)
                                                  ---------    ---------    ---------
Increase (decrease) for period                      (87.64)      107.10      (193.59)
Net asset value per Unit, beginning of year       1,132.70     1,025.60     1,219.19
                                                  ---------    ---------    ---------
Net asset value per Unit, end of year         $   1,045.06 $   1,132.70 $   1,025.60
                                                  ---------    ---------    ---------

</TABLE>


    Ratios to average net assets:
    Net loss before incentive fee                    (7.6)%
    Incentive fee                                    (0.5)%
                                                 ----------
    Net loss after incentive fee                     (8.1)%
                                                 ----------


    Operating  expenses                               9.6%
    Incentive fee                                     0.5%
                                                ----------
    Total expenses and incentive fee                 10.1%
                                                ----------

    Total return:
    Total return before incentive fee                (7.2)%
    Incentive fee                                    (0.5)%
                                                 ----------
    Total return after incentive fee                 (7.7)%
                                                 ----------



7.  Financial Instrument Risks:


     The Partnership is party to financial  instruments with  off-balance  sheet
risk,  including  derivative  financial  instruments  and  derivative  commodity
instruments,  in the normal course of its business.  These financial instruments
may  include  forwards,  futures  and  options,  whose  value is  based  upon an
underlying  asset,  index,  or reference  rate, and generally  represent  future
commitments to exchange  currencies or cash flows,  or to purchase or sell other
financial  instruments at specific terms at specified  future dates,  or, in the
case of derivative commodity instruments, to have a reasonable possibility to be
settled in cash, 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.

                                        F-11
<PAGE>


     Market  risk is the  potential  for  changes in the value of the  financial
instruments traded by the Partnership due to market changes,  including interest
and foreign  exchange rate movements and  fluctuations  in commodity or security
prices.  Market risk is directly impacted by the volatility and liquidity in the
markets in which the related  underlying  assets are traded.  Credit risk is the
possibility  that a loss may  occur  due to the  failure  of a  counterparty  to
perform according to the terms of a contract.

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

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

     The  notional  or   contractual   amounts  of  these   instruments,   while
appropriately  not recorded in the financial  statements,  reflect the extent of
the  Partnership's  involvement  in these  instruments.  The  majority  of these
instruments  mature  within one year of December 31, 2001.  However,  due to the
nature  of the  Partnership's  business,  these  instruments  may not be held to
maturity.

8.  Subsequent Event:

     On January 31, 2002,  there were  additional  redemptions of 478.2754 Units
totaling $481,317.


                                        F-12
<PAGE>

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

     During the last two fiscal  years and any  subsequent  interim  period,  no
independent  accountant who was engaged as the principal accountant to audit the
Partnership's financial statements has resigned or was dismissed.

                                    PART III

Item 10.  Directors and Executive Officers of the Registrant.
          --------------------------------------------------
     The Partnership has no officers or directors and its affairs are managed by
its General  Partner,  Smith Barney Futures  Management  LLC. As of December 31,
2001,  investment  decisions were being made by Graham Capital  Management L.P.,
Campbell and Company Inc.,  Willowbridge  Associates Inc., Stonebrook Structured
Products,  LLC  ("Stonebrook"),  Capital Fund  Management and Beacon  Management
Corporation (collectively, the "Advisors").
Item 11. Executive Compensation.
         ---------------------
     The  Partnership  has no directors or officers.  Its affairs are managed by
Smith Barney Futures  Management LLC, its General Partner.  SSB, 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 $5,109,439 were earned for the year
ended  December 31, 2001.  Management  fees and incentive fees of $1,997,773 and
$408,145,  respectively, were earned by the Advisors for the year ended December
31, 2001.


                                       32
<PAGE>

Item 12. Security Ownership of Certain Beneficial Owners and Management.
 (a). Security  ownership of certain beneficial owners. As of March 1, 2001,
the  Partnership  knows of no person who  beneficially  owns more than 5% of the
Units outstanding.
     (b).  Security  ownership  of  management.  Under the terms of the  Limited
Partnership  Agreement,  the  Partnership's  affairs  are managed by the General
Partner.  The  General  Partner  owns  Units  of  general  partnership  interest
equivalent  to  1,287.3915  Units (2.0%) of Limited  Partnership  Interest as of
December 31, 2001.
(c). Changes in control. None.

Item 13. Certain Relationship and Related Transactions.

     Salomon Smith Barney Inc. and Smith Barney Futures  Management 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."

                                     PART IV
Item 14.  Exhibits,  Financial  Statement  Schedules,  and  Reports on Form 8-K.

     (a) (1) Financial Statements:
     Statement of Financial Condition at December 31, 2001 and 2000.
     Statement  of Income and  Expenses  for the years ended  December 31, 2001,
     2000 and 1999.
     Statement of Partners'  Capital for the years ended December 31, 2001, 2000
     and 1999.


                                       33
<PAGE>

     (2) Financial  Statement  Schedules:  Financial  Data Schedule for the year
ended December 31, 2001.
(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  Exhibit3.2  to the
Registration  Statement on Form S-1 (Filed No. 33-79244) and incorporated herein
by reference).
     10.1- Customer Agreement between the Partnership and Smith Barney (filed as
Exhibit 10.1 to the  Registration  Statement on Form S-1 (File No. 33-79244) and
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).


                                       34
<PAGE>

     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).
     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).

                                       35
<PAGE>



     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).


                                       36
<PAGE>



     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).
     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 (filed herein).


                                       37
<PAGE>



     10.24- Management Agreement among the Partnership,  the General Partner and
Capital Fund Management (filed herein).
(b)  Reports on 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



                                       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 2002.


SMITH BARNEY DIVERSIFIED FUTURES FUND L.P. II


By:       Smith Barney Futures Management 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                                                  Director
Director, Principal Executive
Officer and President



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



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



                                       40