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, 2002

                         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]

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

                                Yes       No   X
                                    ----     -----

Limited   Partnership   Units  with  an  aggregate  value  of  $59,188,691  were
outstanding  and  held by  non-affiliates  as of the  last  business  day of the
registrants most recently completed second fiscal quarter.

As of February 28, 2003, 51,505.0539 Limited Partnership Units were outstanding.


                       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, 2002 are
reported  in the  Statement  of  Partners'  Capital  on page F-9 under  "Item 8.
Financial  Statements and Supplementary Data." The general partner has agreed to


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<PAGE>

make  capital  contributions,  if  necessary,  so that its  general  partnership
interest  will be equal to the  greater  of (i) an amount to entitle it to 1% of
each material item of Partnership income, loss, deduction or credit and (ii) the
greater  of (a) 1% of the  partners'  contributions  to the  Partnership  or (b)
$25,000.  The Partnership  will be liquidated upon the first of the following to
occur:  December 31,  2014;  the net asset value per Unit falls below $400 as of
the close of any business day; or under certain  circumstances as defined in the
Limited  Partnership  Agreement of the  Partnership  (the  "Limited  Partnership
Agreement").
     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, 2002, all commodity  trading  decisions are made for the
Partnership by Graham Capital Management L.P.  ("Graham"),  Campbell and Company
Inc.,   Willowbridge  Associates  Inc.,  Stonebrook  Structured  Products,  LLC.
("Stonebrook"),  Capital  Fund  Management  and  Beacon  Management  Corporation


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<PAGE>

(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. Beacon Management Corporation was terminated as an
Advisor to the Partnership on December 21, 2002.
     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  Partnership  has  entered  into a  Customer  Agreement  with  SSB (the
"Customer  Agreement")  which provides that the  Partnership  pays SSB a monthly


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<PAGE>

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
engage in sales of goods or services.  The  Partnership's net income (loss) from


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operations for the years ended December 31, 2002,  2001,  2000, 1999 and 1998 is
set forth under "Item 6. Selected Financial Data." The Partnership capital as of
December 31, 2002, was $65,977,951.
     (c) Narrative description of business.
              ---------------------------------
     See Paragraphs (a) and (b) above.
     (i) through (xii) - Not applicable.
     (xiii) - The Partnership has no employees.

     (d) Financial  Information About Geographic Areas. The Partnership does not
engage in sales of goods or services or own any long lived assets, and therefore
this item is not applicable.
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 2002 or
2001
     (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. ("SSBHI") 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.
     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


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<PAGE>

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 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 County. SSB and the remaining  brokerage firms settled with
Orange County in mid 1999. SSB paid $1,333,333 to settle this matter.
     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


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<PAGE>

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  Internal  Revenue
Service  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 its lawsuit.
     In November 1998, a class action  complaint was filed in the U.S.  District
Court for the Middle  District  of Florida  (Dwight  Brock as Clerk for  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.  In
November  1999,  SSB moved to dismiss the amended  complaint.  In May 2001,  the
parties reached and the court preliminarily approved a tentative settlement. SSB
paid  $1,063,457 to settle this matter and in September 2001, the court approved
the settlement.
     In  connection  with the  Louisiana  and Florida  matters,  the IRS and SEC
conducted an industry-wide investigation into the pricing of Treasury securities
in  advanced  refunding  transactions.  In April  2000,  SSB and  several  other


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<PAGE>

broker-dealers  entered into a settlement with the IRS and the SEC.  Thereafter,
the plaintiffs filed voluntary discontinuances.
     In December  1998,  SSB was one of 28 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  allegations,  agreed to an order which
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 SEC
Rules  15c1-2,  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.
     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.).  The complaint  included  allegations  that, while acting as
prime broker for the hedge fund,  SSB breached its  contracts  with  plaintiffs,
misused their monies and engaged in tortious  conduct,  including  breaching its
fiduciary  duties.  SSB asked the court to dismiss  the  complaint  in full.  In
October  1999,  the court  dismissed  the tort claims,  including  the breach of
fiduciary  duty claims.  The court 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 plaintiff's motion


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to strike out 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.  In August 2002, SSB
filed a motion for summary judgment.
     In April 2002,  numerous class action complaints were filed against Salomon
Smith  Barney  and other  investment  banks in the U.S.  District  Court for the
Southern District of New York alleging  violations of certain federal securities
laws  (including  Section 11 of the  Securities Act of 1933 and Section 10(b) of
the  Securities  Exchange Act of 1934) with respect to the  allocation of shares
for certain initial public  offerings and related  aftermarket  transactions and
damage to investors  caused by allegedly  biased research  analyst  reports.  On
February 19, 2003, the court issued an opinion denying the defendants' motion to
dismiss. Also pending in the Southern District of New York against SSB and other
investment banks are several alleged class actions which have been  consolidated
into a single  class action  alleging  violations  of certain  federal and state
antitrust  laws in connection  with the  allocation of shares in initial  public
offerings  underwritten  by such parties.  The  defendants in these actions have
moved to dismiss the  consolidated  amended  complaint but the court has not yet
rendered a decision on those motions.
     In April 2002,  Citigroup  and, in one case,  SSB were named as  defendants


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along with, among others,  commercial and/or  investment banks,  certain current
and former Enron officers and directors,  lawyers and accountants in two alleged
consolidated  class action complaints that were filed in the U.S. District Court
for the Southern  District of Texas  seeking  unspecified  damages.  One action,
brought on behalf of individuals who purchased Enron securities  (Newby,  et al.
v.  Enron  Corp.,  et al.),  alleges  violations  of  Sections  11 and 15 of the
Securities Act of 1933 and Sections  10(b) and 20(a) of the Securities  Exchange
Act of 1934 and the other action,  brought on behalf of current and former Enron
employees  (Tittle,  et al. v. Enron Corp., et al.), alleges violations of ERISA
and RICO, as well as negligence and civil conspiracy.  On May 8, 2002, Citigroup
and SSB filed  motions to dismiss the  complaints.  On December  19,  2002,  the
motions to dismiss the Newby  complaint  were denied.  The motion to dismiss the
complaint in Tittle remains pending.
     Since April 2002,  SSB and  several  other  broker  dealers  have  received
subpoenas  and/or  requests  for  information  from  various   governmental  and
self-regulatory agencies and Congressional  committees,  including the NASD Inc.
which has raised  issues about SSB's  internal  e-mail  retention  practices and
research  on Winstar  Communications,  Inc.  With  respect to  Winstar,  SSB has
entered into a settlement  agreement.  SSB agreed to pay a penalty in the amount
of $5 million and did not admit to any  wrongdoing.  With  respect to other such
matters,  on December 20, 2002,  Citigroup and a number of other  broker/dealers


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reached a  settlement-in-principle  with the SEC,  the NASD  Inc.,  the New York
Stock  Exchange (the "NYSE") and the Attorney  General of New York of all issues
raised   in  their   research,   initial   public   offerings   allocation   and
spinning-related  inquiries.  In addition,  with respect to issues raised by the
NASD,  the NYSE and the SEC  about  SSB's  and  other  firms'  e-mail  retention
practices,  SSB and several other  broker/dealers and the NASD, the NYSE and the
SEC entered into a settlement  agreement in December  2002.  SSB agreed to pay a
penalty in the amount of $1.65  million and did not admit to any  allegation  of
wrongdoing.
     Since May 2002, Citigroup,  SSB and certain principals,  executive officers
and current and former  employees  have been named as  defendants in a number of
alleged  class  action  complaints  filed in the  U.S.  District  Court  for the
Southern District of New York by purchasers of various securities  alleging they
violated federal  securities law, including Sections 10 and 20 of the Securities
Exchange Act of 1934 by issuing  research  reports without  reasonable basis and
failing  to  disclose   conflicts  of  interest  in  connection  with  published
investment research,  including Global Crossing,  WorldCom, Inc., AT&T, Winstar,
Rhythm Net Connections,  Level 3  Communications,  MetroMedia Fiber Network,  XO
Communications  and  Williams  Communications  Group  Inc.  Nearly  all of these
actions are pending  before a single  judge in the U.S.  District  Court for the
Southern  District  of New York  for  coordinated  proceedings.  The  court  has
consolidated  these actions into nine separate  categories  corresponding to the
companies named above.


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<PAGE>

     Additional  actions have been filed  against  Citigroup  and certain of its
affiliates,  including  SSB, and certain of their current and former  directors,
officers and employees, along with other parties,  including: (1) three putative
class actions filed in state courts and federal  courts on behalf of persons who
maintained accounts with SSB asserting,  among other things,  common law claims,
claims under state  statutes,  and claims under the  Investment  Advisers Act of
1940,  for  allegedly  failing  to provide  objective  and  unbiased  investment
research and investment management,  seeking, among other things, return of fees
and  commissions;  (2)  approximately  fifteen  actions filed in different state
courts by  individuals  asserting,  among  other  claims,  common law claims and
claims under state  securities  laws,  for allegedly  issuing  research  reports
without  a  reasonable  basis  in fact and for  allegedly  failing  to  disclose
conflicts of interest with  companies in connection  with  published  investment
research,  including Global Crossing and WorldCom,  Inc.; (3) approximately five
actions  filed in different  state  courts by pension and other funds  asserting
common law claims and  statutory  claims under,  among other  things,  state and
federal  securities  laws,  for allegedly  issuing  research  reports  without a
reasonable  basis in fact and for  allegedly  failing to disclose  conflicts  of
interest  with  companies in  connection  with  published  investment  research,
including WorldCom,  Inc. and Qwest  Communications  International Inc.; and (4)
more than two hundred  arbitrations  asserting  common law claims and  statutory
claims  under,  among other  things,  state and  federal  securities  laws,  for


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allegedly  issuing  research  reports without a reasonable basis in fact and for
allegedly failing to disclose conflicts of interest with companies in connection
with published investment research.
     In July 2002,  Citigroup,  SSB and various of its affiliates and certain of
their officers and other employees were named as defendants,  along with,  among
others,  commercial and/or  investment  banks,  certain current and former Enron
officers and directors, lawyers and accountants in an alleged class action filed
in the U.S.  District  Court for the Southern  District of New York on behalf of
purchasers  of the Yosemite  Notes and Enron  Credit-Linked  Notes,  among other
securities (Hudson Soft Co., Ltd v. Credit Suisse First Boston  Corporation,  et
al.). The complaint  alleges  violations of RICO and of Sections 10(b) and 20(a)
of the Securities Exchange Act of 1934 and seeks unspecified damages.
     Additional  actions have been filed  against  Citigroup  and certain of its
affiliates, including SSB, along with other parties, including (i) three actions
brought in state courts by state pension  plans for alleged  violations of state
securities  law and common law fraud and  unjust  enrichment;  (ii) an action by
banks that  participated  in two Enron  revolving  credit  facilities,  alleging
fraud,  gross  negligence  and  breach  of  implied  duties in  connection  with
defendants'  administration  of a credit  facility  with Enron;  (iii) an action
brought by several funds in connection with secondary  market purchases of Enron
Corp. debt securities  alleging  violations of federal securities law, including
Section  11  of  the   Securities   Act  of  1933,  and  claims  for  fraud  and


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misrepresentation;  (iv) a series of  alleged  class  actions by  purchasers  of
NewPower  Holdings common stock alleging  violations of federal  securities law,
including  Section 11 of the  Securities  Act of 1933 and  Section  10(b) of the
Securities  Exchange Act of 1934; (v) an action brought by two investment  funds
in connection with purchases of Enron-related  securities for alleged violations
of state securities and unfair competition  statutes;  (vi) an action brought by
several  investment  funds and fund owners in connection with purchases of notes
of the Osprey I and Osprey II Trusts for alleged  violation of state and federal
securities  laws  and  claims  for  common  law  fraud,   misrepresentation  and
conspiracy;  (vii) an action brought by several investment funds and fund owners
in connection  with  purchases of notes of the Osprey I and Osprey II Trusts for
alleged  violation  of  state  and  federal  securities  laws and  state  unfair
competition laws and claims for common law fraud and  misrepresentation;  (viii)
an action  brought by the Attorney  General of  Connecticut  in connection  with
various  commercial and investment  banking services  provided to Enron;  (ix) a
putative  class action  brought by clients of SSB in  connection  with  research
reports  concerning Enron,  alleging breach of contract;  (x) actions brought by
several  investment  funds in  connection  with  the  purchase  of notes  and/or
certificates of the Osprey Trusts, the Marlin Trust, and the Marlin Water trust,
as well as the  purchase of other Enron or  Enron-related  securities,  alleging


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violation of state and federal  securities laws, and common law civil conspiracy
and fraud;  (xi) an action brought by a retirement  and health  benefits plan in
connection  with the  purchase of certain  Enron  notes,  alleging  violation of
federal  securities law,  including Section 11 of the Securities Act of 1933, as
amended,  violations of state securities and unfair  competition law, and common
law fraud and  breach of  fiduciary  duty;  and (xii) an action  brought  by two
broker/dealers  in  connection  with the  purchase  of certain  notes,  alleging
violation of federal and state securities laws. Several of these cases have been
consolidated  with the Newby action and stayed  pending the Court's  decision on
the pending motions of certain defendants to dismiss Newby.
     Additionally,  Citigroup and certain of its affiliates, including SSB, have
provided   substantial   information  to,  and  have  entered  into  substantive
discussions  with, the Securities and Exchange  Commission  regarding certain of
their  transactions with Enron and a transaction with Dynegy Inc.  Citigroup and
certain of its  affiliates,  including  SSB,  also have  received  subpoenas and
requests for information from various other regulatory and governmental agencies
and Congressional  committees, as well as from the Special Examiner in the Enron
bankruptcy, regarding certain transactions and business relationships with Enron
and  its  affiliates.   Citigroup  and  such  affiliates,   including  SSB,  are
cooperating fully with all such requests.
     Citigroup  and SSB are involved in a number of lawsuits  arising out of the
underwriting  of debt  securities  of  WorldCom,  Inc.  These  lawsuits  include


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putative class actions filed in July 2002 by alleged purchasers of WorldCom debt
securities in the United States District Court for the Southern  District of New
York (Above  Paradise  Investments  Ltd. V.  Worldcom,  Inc., et al.;  Municipal
Police Employees Retirement System Of Louisiana V. Worldcom,  Inc., et al.), and
in the United States  District  Court for the Southern  District of  Mississippi
(Longacre  Master Fund V. Worldcom,  Inc., et al.).  These putative class action
complaints assert violations of federal  securities law,  including  Sections 11
and 12 of the Securities Act of 1933, as amended,  and seek unspecified  damages
from the underwriters.
     On October 11, 2002,  the Above  Paradise and  Municipal  Police  Employees
lawsuits filed in the United States District Court for the Southern  District of
New York were  superseded by the filing of a consolidated  putative class action
complaint in the United States  District Court for the Southern  District of New
York  (In  Re  Worldcom,  Inc.  Securities  Litigation).   In  the  consolidated
complaint,  in addition to the claims of violations by the  underwriters  of the
federal  securities law,  including  Sections 11 and 12 of the Securities Act of
1933,  as amended,  the  plaintiffs  allege  violations  of Section 10(b) of the
Securities  Exchange  Act of  1934,  as  amended,  and  Rule  10b-5  promulgated
thereunder,  by SSB arising out of alleged conflicts of interest of SSB and Jack
Grubman.  The plaintiffs continue to seek unspecified  compensatory  damages. In
addition to the consolidated  class action  complaint,  the Southern District of
Mississippi  class  action  has  been  transferred  by  the  Judicial  Panel  on
MultiDistrict  Litigation to the Southern  District of New York for  centralized


                                       17
<PAGE>

pre-trial proceedings with other WorldCom-related actions.
     In addition to the several putative class actions that have been commenced,
certain  individual  actions have been filed in various federal and state courts
against  Citigroup and SSB, along with other parties,  concerning  WorldCom debt
securities  including individual state court actions brought by approximately 18
pension  funds  and  other  institutional   investors  in  connection  with  the
underwriting of debt securities of WorldCom alleging violations of Section 11 of
the Securities Act of 1933, as amended,  and, in one case, violations of various
state  securities  laws and common law fraud.  Most of these  actions  have been
removed to federal court and have been  transferred to the Southern  District of
New York for  centralized  pre-trial  proceedings  with  other  WorldCom-related
actions.
     A putative  class action on behalf of  participants  in  WorldCom's  401(k)
salary savings plan and those  WorldCom  benefit plans covered by ERISA alleging
violations of ERISA and common law fraud  (Emanuele V. Worldcom,  Inc., Et Al.),
which was  commenced  in the United  States  District  Court for the District of
Columbia,  also has been  transferred  by the  Judicial  Panel on  MultiDistrict
Litigation  to the  Southern  District  of New  York for  centralized  pre-trial
proceedings with other  WorldCom-related  actions.  In December 2002, the claims
against SSB and the other underwriters were dismissed without prejudice.
     On or about January 27, 2003,  lead  plaintiff in a  consolidated  putative


                                       18
<PAGE>

class action in the United States  District Court for the District of New Jersey
(In Re  AT&T  Corporation  Securities  Litgation)  sought  leave  to  amend  its
complaint on behalf of purchasers of AT&T common stock asserting claims against,
among others, AT&T Corporation,  to add as named defendants  Citigroup,  SSB and
certain executive  officers and current and former  employees,  asserting claims
under federal  securities laws for allegedly  issuing research reports without a
reasonable  basis in fact and for  allegedly  failing to disclose  conflicts  of
interest with AT&T in connection with published investment research.
     On or about January 28, 2003,  lead  plaintiff in a  consolidated  putative
class action in the United States  District  Court for the Southern  District of
New  York  (In  Re  Global  Crossing,   Ltd.  Securities   Litigation)  filed  a
consolidated  complaint  on behalf of  purchasers  of the  securities  of Global
Crossing  and  its  subsidiaries,  which  names  as  defendants,  among  others,
Citigroup,  SSB and certain executive officers and current and former employees,
asserting  claims under federal  securities laws for allegedly  issuing research
reports without a reasonable basis in fact and for allegedly failing to disclose
conflicts  of  interest  with  Global  Crossing  in  connection  with  published
investment research.
     SSBHI  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 SSBHI's broker-dealer  subsidiaries have been named, arising in


                                       19
<PAGE>

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
otherwise.  In the  opinion  of  SSBHI'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 SSBHI 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, 2002 was 3,052.

     (c)  Distribution.  The  Partnership did not declare a distribution in 2002
          or 2001.

     (d)  Use of  Proceeds.  There were no  additional  sales  during the twelve
          months ended  December 31, 2002 and 2001.  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


                                       20
<PAGE>

          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.



                                       21
<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, 2002,  2001,  2000,  1999 and 1998 and
total assets at December 31, 2002, 2001, 2000, 1999 and 1998 were as follows:
<TABLE>
<CAPTION>
                                         2002              2001             2000             1999            1998
<S>                                       <C>              <C>              <C>              <C>              <C>
Realized and unrealized trading
 gains (losses) net of brokerage
 commissions and clearing fees
 of $4,514,105, $5,109,439,
 $5,846,384, $8,857,232, and
 $8,891,659, respectively          $  14,296,353    $  (5,744,771)   $   6,540,869    $ (21,027,791)   $  14,064,160


Interest income                          799,484        2,121,645        3,884,319        4,658,630        4,818,279
                                   -------------    -------------    -------------    -------------    -------------
                                   $  15,095,837    $  (3,623,126)   $  10,425,188    $ (16,369,161)   $  18,882,439
                                   =============    =============    =============    =============    =============

Net income (loss)                  $  10,902,122    $  (6,137,603)   $   7,572,583    $ (21,048,896)   $  12,979,536
                                   =============    =============    =============    =============    =============
Increase(decrease) in Net
 Asset Value per Unit              $      205.86    $      (87.64)   $      107.10    $     (193.59)   $       95.43
                                   =============    =============    =============    =============    =============

Total assets                       $  66,795,634    $  68,118,842    $  87,318,686    $ 106,012,664    $ 154,692,651
                                   =============    =============    =============    =============    =============
</TABLE>


                                       22
<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.


                                       23
<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


                                       24
<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 to 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 as of the end of the latest fiscal period.
     (ii) The Partnership's capital consists of the capital contributions of the
partners as  increased  or  decreased  by gains or losses on  commodity  futures


                                       25
<PAGE>

trading,   and  by  expenses,   interest   income,   redemptions  of  Units  and
distributions of profits, 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.  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, 2002,  11,001.6830  Units were redeemed totaling
$11,541,708.  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.
     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


                                       26
<PAGE>

totaling  $42,074,000  and  contributions  by the General  Partner  representing
283.5082 Unit equivalents totaling $311,000.
     (c) Results of  Operations.  For the year ended  December  31, 2002 the Net
Asset Value per unit increased  19.7% from $1,045.06 to $1,250.92.  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.
     The  Partnership  experienced  net  trading  gains  of  $18,810,458  before
commissions  and  expenses in 2002.  Gains were  primarily  attributable  to the
trading in indices, U.S. and non-U.S.  interest rates, energy, grains, livestock
and currencies and were partially offset by losses  recognized in the trading of
metals and softs.
     The   Partnership   experienced  net  trading  losses  of  $635,332  before
commissions and expenses in 2001. Losses were primarily  attributable to trading
in currencies,  energy, grains, indices, metals and livestock and were partially
offset by gains 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.
     Commodity markets are highly volatile.  Broad price  fluctuations and rapid
inflation  increase the risks involved in commodity  trading,  but also increase


                                       27
<PAGE>

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


                                       28
<PAGE>

than in more established markets.
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.
         (e)      Critical Accounting Policies
     The General Partner believes that the accounting policies that will be most
critical to the  Partnership's  financial  condition  and results of  operations
relate to the  valuation  of the  Partnership's  positions.  The majority of the
Partnership's positions will be exchange-traded futures contracts, which will be
valued daily at settlement prices published by the exchanges. If applicable, the


                                       29
<PAGE>

Partnership's spot and forward foreign currency contracts will also be valued at
published daily  settlement  prices or at dealers'  quotes.  The General Partner
expects that under normal  circumstances  substantially all of the Partnership's
assets will be valued by objective measures and without difficulty.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Introduction
     The  Partnership  is a speculative  commodity  pool.  The market  sensitive
instruments held by it are acquired for speculative trading purposes, and all or
substantially all of the Partnership's assets are subject to the risk of trading
loss. Unlike an operating company,  the risk of market sensitive  instruments is
integral, not incidental, to the Partnership's main line of business.
     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


                                       30
<PAGE>

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

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


                                       31
<PAGE>

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
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,


                                       32
<PAGE>

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
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.

                                       33
<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, 2002 and the
highest and lowest value at any point during the year. All open position trading
risk exposures of the Partnership  have been included in calculating the figures
set forth below. As of December 31, 2002, the Partnership's total capitalization
was $65,977,951.
                                December 31, 2002

<TABLE>
<CAPTION>
                                                                           Year to Date
                                                   % of Total           High            Low
Market Sector                   Value at Risk    Capitalization    Value at Risk  Value at Risk
-----------------------------------------------------------------------------------------------
<S>                                  <C>                  <C>             <C>          <C>
Currencies
- Exchange Traded Contracts      $  846,920             1.28%         $3,063,120   $  438,135
- OTC Contracts                     793,608             1.20%          1,195,876      793,608
Energy                            1,400,000             2.13%          2,363,000      143,050
Grains                              183,200             0.28%            889,500      183,200
Interest rates U.S.                 547,150             0.83%          1,365,400      354,500
Interest rates Non-U.S            1,179,771             1.79%          2,663,879      753,975
Livestock                            29,600             0.04%            406,750       29,600
Metals
- Exchange Traded Contracts         118,000             0.18%          1,303,600      118,000
- OTC Contracts                      85,975             0.13%            426,700       17,700
Softs                                88,700             0.13%            971,444       88,700
Indices                              72,725             0.11%          2,967,881       72,725
                                 ----------        ----------
Total                            $5,345,649             8.10%
                                 ==========        ==========


</TABLE>


                                       34
<PAGE>



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>


                                       35
<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


                                       36
<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, 2002, by market sector.
     Interest  Rates.  Interest rate movements  directly affect the price of the
futures  positions held by the Partnership and indirectly the value of its stock
index and currency positions.  Interest rate movements in one country as well as


                                       37
<PAGE>

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
limited to futures on broadly  based  indices.  As of  December  31,  2002,  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


                                       38
<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,
2002.
     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, 2002.


                                       39
<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
Advisors often follow  diversification  guidelines,  margin limits and stop loss
points to exit a  position.  The  Advisors'  research of risk  management  often


                                       40
<PAGE>

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.



                                       41
<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

                        Reports of Independent Accountants.            F-3 - F-4

                        Financial Statements:
                        Statements of Financial Condition at
                        December 31, 2002 and 2001.                       F-5

                        Condensed Schedules of Investments at
                        December 31, 2002 and 2001.                    F-6 - F-7

                        Statements of Income and Expenses for
                        the years ended December 31, 2002,
                        2001 and 2000.                                    F-8

                        Statements of Partners' Capital for
                        the years ended December 31, 2002, 2001
                        and 2000.                                         F-9

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

                        Select unaudited quarterly financial
                        data.                                             F-15



                                       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 Auditors

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

     We have audited the accompanying  statement of financial condition of Smith
     Barney Diversified  Futures Fund L.P. II (the  Partnership),  including the
     condensed schedule of investments, as of December 31, 2002, and the related
     statements of income and expenses,  and partners' capital for the year then
     ended.   These  financial   statements  are  the   responsibility   of  the
     Partnership's  management.  Our  responsibility is to express an opinion on
     these financial  statements based on our audit. The financial statements of
     the  Partnership  as of December 31, 2001 and for the years ended  December
     31,  2001 and 2000  were  audited  by other  auditors  whose  report  dated
     February 28, 2002 expressed an unqualified opinion on those statements.

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

     In our opinion,  the financial statements referred to above present fairly,
     in  all  material   respects,   the  financial  position  of  Smith  Barney
     Diversified  Futures Fund L.P. II as of December 31, 2002,  and the results
     of its  operations  and changes in its partners'  capital for the year then
     ended, in conformity with accounting  principles  generally accepted in the
     United States of America.


KPMG LLP
New York, New York
March 7, 2003


                                      F-3
<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  the  results  of its
     operations for each of the two 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-4
<PAGE>


                            Smith Barney Diversified
                              Futures Fund L.P. II
                        Statements of Financial Condition
                           December 31, 2002 and 2001

<TABLE>
<CAPTION>

                                                                 2002            2001
<S>                                                               <C>            <C>
Assets:
Equity in commodity futures trading account:
   Cash (restricted $6,861,874 and $10,365,008 in 2002 and
   2001, respectively) (Note 3c)                              $62,798,601   $63,266,503
   Net unrealized appreciation on open positions *              3,945,135     3,633,560
   Commodity options owned, at fair value (cost
   $0 and $2,368,450  in 2002 and 2001, respectively)                  -      1,141,550
                                                              -----------   -----------
                                                               66,743,736    68,041,613
Interest receivable                                                51,898        77,229
                                                              -----------   -----------
                                                              $66,795,634   $68,118,842
                                                              -----------   -----------
Liabilities and Partners' Capital:
Liabilities:
  Accrued expenses:
   Commissions (Note 3c)                                      $   359,772   $   361,453
   Management fees (Note 3b)                                      151,201       153,976
   Incentive fees (Note 3b)                                             -        52,446
   Professional fees                                               55,026        58,544
   Other                                                           14,029        14,825
  Redemptions payable (Note 5)                                    237,655       860,061
                                                              -----------   -----------
                                                                  817,683     1,501,305
                                                              -----------   -----------
Partners' capital (Notes 1 and 5):
  General Partner, 862.6415 and 1,287.3915 Unit equivalents
   outstanding in 2002 and 2001, respectively                   1,079,096     1,345,402
  Limited Partners, 51,880.8267 and 62,457.7597 Units
   of Limited Partnership Interest outstanding in
   2002 and 2001, respectively                                 64,898,855    65,272,135
                                                              -----------   -----------
                                                               65,977,951    66,617,537
                                                              -----------   -----------
                                                              $66,795,634   $68,118,842
                                                              -----------   -----------


</TABLE>

*  Forward  contracts  included  in this  balance  are  presented  gross  in the
accompanying Condensed Schedule of Investments.
See accompanying notes to financial statements.

                                      F-5
<PAGE>
                            Smith Barney Diversified
                              Futures Fund L.P. II
                        Condensed Schedule of Investments
                                December 31, 2002
<TABLE>
<CAPTION>
Sector                                         Contract                                                     Fair Value
<S>                                             <C>                                                            <C>
Currencies                                     Unrealized depreciation on forward contracts (2.18)%        $(1,439,765)
                                               Unrealized appreciation on forward contracts 2.69%            1,773,212
                                                                                                           -----------
                                                   Total forward contracts 0.51%                               333,447

                                               Futures contracts sold (0.06)%                                  (42,212)
                                                                                                           -----------
                                               Futures contracts purchased 2.39%                             1,579,903
                                                                                                           -----------
                                                   Total futures contracts 2.33%                             1,537,691
                                                                                                           -----------
   Total Currencies - 2.84%                                                                                  1,871,138
                                                                                                           -----------

Energy - 0.57%                                 Futures contracts purchased 0.57%                               374,747
                                                                                                           -----------

Grains                                         Futures contracts sold 0.14%                                     94,600
                                               Futures contracts purchased (0.01)%                              (9,108)
                                                                                                           -----------
    Total Grains - 0.13%                                                                                        85,492
                                                                                                           -----------

Interest Rates U.S.                            Futures contracts sold (0.01)%                                   (9,275)
                                               Futures contracts purchased 0.72%                               479,889
                                                                                                           -----------
    Total Interest Rates U.S. - 0.71%                                                                          470,614
                                                                                                           -----------

Interest Rates Non-U.S.                        Futures contracts sold (0.04)%                                  (28,984)
                                               Futures contracts purchased 1.62%                             1,072,951
                                                                                                           -----------
    Total Interest Rates Non-U.S. - 1.58%                                                                    1,043,967
                                                                                                           -----------

Total Livestock - 0.04%                        Futures contracts purchased 0.04%                                30,300
                                                                                                           -----------

Metals                                         Futures contracts purchased 0.31%                               205,285

                                               Unrealized depreciation on forward contracts (0.71)%           (467,804)
                                               Unrealized appreciation on forward contracts 0.08%               49,880
                                                                                                           -----------
                                                   Total forward contracts (0.63)%                            (417,924)
                                                                                                           -----------
    Total Metals - (0.32)%                                                                                    (212,639)
                                                                                                           -----------
Softs                                          Futures contracts sold 0.00% *                                   (2,700)
                                               Futures contracts purchased 0.12%                                78,972
                                                                                                           -----------
    Total Softs - 0.12%                                                                                         76,272
                                                                                                           -----------

Indices                                        Futures contracts sold 0.33%                                    218,656
                                               Futures contracts purchased (0.02)%                             (13,412)
                                                                                                           -----------
    Total Indices - 0.31%                                                                                      205,244
                                                                                                           -----------

Total Fair Value - 5.98%                                                                                    $3,945,135
                                                                                                           ===========
</TABLE>
                                   Investments at  % of Investments at
Country Composition                  Fair Value         Fair Value
----------------------     --------------------       -----------
Australia                                 $8,692           0.22%
Canada                                    15,101           0.38
France                                     2,268           0.06
Germany                                  510,574          12.94
Hong Kong                                 45,977           1.17
Japan                                    183,163           4.64
Spain                                     (7,733)         (0.19)
United Kingdom                            54,111           1.37
United States                          3,132,982          79.41
                                 ---------------      ----------
                                     $ 3,945,135         100.00%
                                 ===============     ===========

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

                                      F-6
<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 sold 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
                                                                                                           ============
</TABLE>
                                   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%
                                 ===============       ==========

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

                                      F-7
<PAGE>


                            Smith Barney Diversified
                              Futures Fund L.P. II
                        Statements of Income and Expenses
                               for the years ended
                        December 31, 2002, 2001, and 2000

<TABLE>
<CAPTION>

                                                                  2002            2001             2000
<S>                                                                <C>             <C>              <C>
Income:
  Net gains (losses) on trading of commodity interests:
   Realized gains on closed positions and
    foreign currencies                                       $ 17,271,983    $  6,814,630    $  6,556,736
   Change in unrealized gains (losses) on open positions        1,538,475      (7,449,962)      5,830,517
                                                             ------------    ------------    ------------
                                                               18,810,458        (635,332)     12,387,253
  Interest income (Note 3c)                                       799,484       2,121,645       3,884,319
                                                             ------------    ------------    ------------
                                                               19,609,942       1,486,313      16,271,572
Expenses:
  Brokerage commissions including clearing fees of
   $197,990, $199,455 and $218,335, respectively (Note 3c)
                                                                4,514,105       5,109,439       5,846,384
  Management fees (Note 3b)                                     1,732,210       1,997,773       2,465,726
  Incentive fees (Note 3b)                                      2,374,309         408,145         285,755
  Professional fees                                                67,763          69,515          65,629
  Other expenses                                                   19,433          39,044          35,495
                                                             ------------    ------------    ------------
                                                                8,707,820       7,623,916       8,698,989
                                                             ------------    ------------    ------------
Net income (loss)                                            $ 10,902,122    $ (6,137,603)   $  7,572,583
                                                             ------------    ------------    ------------

Net income (loss) per Unit of Limited Partnership
  Interest and General Partner Unit equivalent (Notes 1
   and 6)                                                    $     205.86    $     (87.64)   $     107.10
                                                                ----------    ------------    ------------



</TABLE>

See accompanying notes to financial statements.


                                      F-8
<PAGE>


                            Smith Barney Diversified
                              Futures Fund L.P. II
                         Statements of Partners' Capital
                               for the years ended
                        December 31, 2002, 2001 and 2000

<TABLE>
<CAPTION>

                                                  Limited            General
                                                 Partners            Partner            Total
<S>                                                 <C>              <C>                <C>
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
Net income                                        10,665,826          236,296       10,902,122
Redemption of 10,576.9330 Units of Limited
  Partnership Interest and 424.7500 Units of
  General Partnership Interest                   (11,039,106)        (502,602)     (11,541,708)
                                                -------------     -----------    -------------
Partners' capital at December 31, 2002         $  64,898,855    $   1,079,096    $  65,977,951
                                               -------------    -------------    -------------
</TABLE>
See accompanying notes to financial statements.


                                      F-9
<PAGE>

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

1.  Partnership Organization:

     Smith  Barney  Diversified  Futures Fund L.P. II (the  "Partnership")  is a
     limited   partnership  which  was  organized  on  May 10,  1994  under  the
     partnership  laws of the  State of New York to  engage  in the  speculative
     trading of a diversified portfolio of commodity interests including futures
     contracts,  options and forward contracts. The commodity interests that are
     traded by the  Partnership are volatile and involve a high degree of market
     risk.  The  Partnership  was  authorized  to sell 100,000  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  their  initial  capital
     contribution and profits, if any, net of distributions.

     The  Partnership  will  be  liquidated  upon  the  first  to  occur  of the
     following:  December 31,  2014;  the net asset value of a 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 gains (losses)
     on open  positions  are  recognized  in the period in which the contract is
     closed or the  changes  occur and are  included  in net gains  (losses)  on
     trading of commodity interests.

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

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

                                      F-10
<PAGE>

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

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

3.  Agreements:

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

b.   Management  Agreements:  The General Partner, on behalf of the Partnership,
     has entered into Management  Agreements with Graham Capital Management L.P.
     ("Graham"),  Capital  Fund  Management  SA  ("CFM"),  Campbell & Co.,  Inc.
     ("Campbell"),  Willowbridge  Associates Inc.  ("Willowbridge"),  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 total Net Assets of the Partnership determined on a monthly basis by
     the General Partner.  Month-end Net Assets,  for the purpose of calculating
     management  fees are Net  Assets,  as  defined in the  Limited  Partnership
     Agreement, prior to the reduction of redemptions and incentive fees.

     In addition,  the Partnership is obligated to pay each Advisor an incentive
     fee payable  quarterly equal to 20% of the New Trading Profits,  as defined
     in the Management  Agreements,  earned by each Advisor for the Partnership,
     except  Graham,  which will receive an incentive  fee of 10% of New Trading
     Profits on the first $5,000,000 and 20% of New Trading Profits for all such
     profits in excess of $5,000,000.  Stonebrook  does not receive an incentive
     fee.  Effective  December  31,  2002  Beacon  Management   Corporation  was
     terminated as an advisor to the Partnership.

c.   Customer Agreement:

     The Partnership  has entered into a Customer  Agreement which provides that
     the Partnership will pay 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.  Month-end Net Assets,
     for the purpose of calculating  commissions  are Net Assets,  as defined in
     the  Limited  Partnership   Agreement,   prior  to  the  reduction  of  all
     liabilities of the 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 fees as
     well as exchange,  clearing, user, give-up and floor brokerage fees. All of
     the Partnership's assets are deposited in the Partnership's account at SSB.


                                      F-11
<PAGE>

     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, 2002 and 2001, the amount of cash held for margin requirements
     was  $6,861,874  and  10,365,008,  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.

4.  Trading Activities:

     The  Partnership  was formed for the  purpose  of  trading  contracts  in a
     variety of commodity interests,  including derivative financial instruments
     and  derivative  commodity  interests.  The  results  of the  Partnership's
     trading activities are shown in the 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,  2002 and 2001,  based on a monthly  calculation,  was  $5,286,046  and
     $5,739,090, respectively.

5.   Distributions and Redemptions:
     Distributions  of profits,  if any, will be made at the sole  discretion of
     the General  Partner;  however,  beginning  with the quarter ended June 30,
     1996, a limited  partner may require the  Partnership to redeem their 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-12
<PAGE>

6.   Financial Highlights:
     Changes in the net asset  value per Unit of  Partnership  interest  for the
     years ended December 31, 2002, 2001 and 2000 were as follows:

<TABLE>
<CAPTION>

                                                      2002         2001         2000
<S>                                                   <C>           <C>         <C>
Net realized and unrealized gains (losses) *   $     266.34 $     (81.80)$      95.31
Interest income                                       13.87        30.06        44.87
Expenses **                                          (74.35)      (35.90)      (33.08)
                                                -----------    ---------    ---------
Increase (decrease) for period                       205.86       (87.64)      107.10
                                                -----------    ---------    ---------
Net asset value per Unit, beginning of year        1,045.06     1,132.70     1,025.60
                                                 ----------    ---------     --------
Net asset value per Unit, end of year          $   1,250.92 $   1,045.06 $   1,132.70
                                                  ---------    ---------    ---------
</TABLE>


     *  Includes brokerage commission
     ** Excludes brokerage commission
<TABLE>
<CAPTION>
<S>                                                    <C>       <C>

Ratios to average net assets:
 Net investment loss before incentive fees ***       (8.8)%   (6.7)%
 Incentive fees                                      (3.8)%   (0.5)%
                                                     ----     ----
 Net investment loss after incentive fees           (12.6)%   (7.2)%
                                                     ----     ----

 Net gain (loss) loss before incentive fees ****     21.1%    (7.6)%
 Incentive fees ****                                 (3.8)%   (0.5)%
                                                     ----     ----
 Net gain (loss) after incentive fees ****           17.3%    (8.1)%
                                                     ----     ----

 Operating expenses                                  10.1%     9.6%
 Incentive fees                                       3.8%     0.5%
                                                     ----     ----
 Total expenses                                      13.9%    10.1%
                                                     ----     ----


Total return:
 Total return before incentive fees                  24.0%    (7.2)%
 Incentive fees                                      (4.3)%   (0.5)%
                                                    -----     -----
 Total return after incentive fees                   19.7%    (7.7)%
                                                     ----     ----

</TABLE>

      *** Interest income less total expenses (exclusive of incentive fees)
     **** Supplemental information not required

     The above ratios may vary for individual  investors  based on the timing of
     capital transactions during the year.

                                      F-13
<PAGE>


7.   Financial Instrument Risks:

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

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

     Credit risk is the possibility  that a loss may occur due to the failure of
     a counterparty to perform according to the terms of a contract. Credit risk
     with respect to exchange  traded  instruments is reduced to the extent that
     an  exchange  or  clearing  organization  acts  as a  counterparty  to  the
     transactions.  The Partnership's  risk of loss in the event of counterparty
     default is typically limited to the amounts  recognized in the 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 majority of these  instruments  mature  within one year of December 31,
     2002.  However,  due to the  nature of the  Partnership's  business,  these
     instruments may not be held to maturity.

8.  Subsequent Event:
     Effective  January  31,  2003,  Stonebrook  Structured  Products,  LLC  was
     terminated as an advisor to the Partnership.


                                      F-14
<PAGE>

Selected  unaudited  quarterly  financial  data for the years ended December 31,
2002 and December 31, 2001 is summarized below:

<TABLE>
<CAPTION>
                                     For the period      For the period       For the period    For the period
                                  from October 1, 2002  from July 1, 2002     April 1, 2002 to  January 1, 2002
                                  to December 31, 2002  to September 30, 2002  June 30, 2002   to March 31, 2002
<S>                                       <C>                   <C>                <C>               <C>
   Net realized and unrealized
  trading gains (losses) net of
    brokerage commissions and
 clearing fees including interest      $(3,534,468)        $16,400,044         $ 7,523,682        $(5,293,421)
              income

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

 Increase (decrease) in Net Asset      $(    72.95)        $    248.97         $    120.21        $(    90.37)
          Value per Unit

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

   Net realized and unrealized
  trading gains (losses) net of
    brokerage commissions and
 clearing fees including interest     $ (3,530,333)        $ 2,100,488         $(4,285,473)       $ 2,092,192
              income

        Net Income (loss)             $ (4,095,066)        $ 1,582,720         $(4,813,731)       $ 1,188,474

 Increase (decrease) in Net Asset     $ (    62.71)        $     25.00         $(    66.70)       $     16.77
          Value per Unit

</TABLE>



                                      F-15






<PAGE>


Item 9.  Changes  in  and  Disagreements  with  Accountants  on  Accounting  and
     Financial Disclosure.
     PricewaterhouseCoopers  LLP was previously the principal accountant for the
Partnership.  On July 9, 2002,  that firm was dismissed as principal  accountant
and KPMG LLP was  engaged  as  principal  accountant.  The  decision  to  change
accountants was approved by the general partner of the Partnership.
     In  connection  with the audits of the two fiscal years ended  December 31,
2001,   and   through   July  9,  2002,   there  were  no   disagreements   with
PricewaterhouseCoopers  LLP on any matter of accounting principles or practices,
financial  statement  disclosure,   or  auditing  scope  or  procedures,   which
disagreements  if not resolved to their  satisfaction  would have caused them to
make  reference  thereto in their reports on the financial  statements  for such
years.
     The audit reports of PricewaterhouseCoopers LLP on the financial statements
of the  Partnership as of and for the years ended December 31, 2001 and 2000 did
not  contain  any  adverse  opinion  or  disclaimer  of  opinion,  nor were they
qualified or modified as to uncertainty, audit scope, or accounting principle.
                                    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,
2002,  investment  decisions were being made by Graham Capital  Management L.P.,


                                       42
<PAGE>

Campbell and Company Inc.,  Willowbridge  Associates Inc., Stonebrook Structured
Products,  LLC  ("Stonebrook")  and Capital Fund Management  (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 $4,514,105 were earned for the year
ended  December 31, 2002.  Management  fees and incentive fees of $1,732,210 and
$2,374,309,  respectively,  were  earned  by the  Advisors  for the  year  ended
December 31, 2002.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
     (a). Security  ownership of certain beneficial owners. As of March 1, 2003,
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  862.6415  Units  (1.6%) of Limited  Partnership  Interest  as of
December 31, 2002.
     (c). Changes in control. None.


                                       43
<PAGE>


Item 13. Certain Relationships 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."
Item 14. Control and Procedures
     Based on their  evaluation  of the  Partnership's  disclosure  controls and
procedures  as of a date within 90 days of the filing of this report,  the Chief
Executive  Officer and Chief Financial Officer have concluded that such controls
and procedures are effective.
     There were no significant changes in the Partnership's internal controls or
in other factors that could significantly affect such controls subsequent to the
date of their evaluation.
                                     PART IV
Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
         (a) (1)Financial Statements:
               Statements of Financial  Condition at December 31, 2002 and 2001.
               Statements  of Income and Expenses  for the years ended  December
               31, 2002, 2001 and 2000.
               Statements of Partners'  Capital for the years ended December 31,
               2002, 2001 and 2000.


                                       44
<PAGE>

               (2) Financial  Statement  Schedules:  Financial Data Schedule for
               the year ended December 31, 2002.
               (3) Exhibits:
               3.1 - Limited Partnership  Agreement (filed as Exhibit 3.1 to the
               Registration  Statement  on  Form  S-1  (File  No.  33-79244  and
               incorporated herein by reference).
               3.2 - Certificate of Limited  Partnership  of the  Partnership as
               filed in the office of the County Clerk of New York County (filed
               as Exhibit 3.2 to the  Registration  Statement  on Form S-1 (File
               No. 33-79244) and incorporated herein by reference).
               10.1- Customer Agreement between the Partnership and Smith Barney
               (filed as Exhibit 10.1 to the Registration  Statement on Form S-1
               (File No. 33-79244) and incorporated herein by reference).
               10.2-  Subscription  Agreement  (filed  as  Exhibit  10.2  to the
               Registration  Statement  on Form  S-1  (File  No.  33-29144)  and
               incorporated herein by reference).
               10.3-  Escrow  Instructions  relating  to escrow of  subscription
               funds  (filed as Exhibit  10.3 to the  Registration  Statement on
               Form  S-1  (File  No.  33-79244)  and   incorporated   herein  by
               reference).
               10.4-  Management  Agreement among the  Partnership,  the General
               Partner and Chesapeake Capital Corporation (filed as Exhibit 10.5
               to the Registration Statement on Form S-1 (File No. 33-79244) and


                                       45
<PAGE>

               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).
               10.10-  Management  Agreement among the Partnership,  the General
               Partner and Campbell & Co.,  Inc.  (filed as Exhibit 10.10 to the


                                       46
<PAGE>

               Form 10-K for the year ended December 31, 1997).
               10.11- Letters extending Management Agreements with John W. Henry
               & Company  Inc.,  Chesapeake  Capital  Corporation  and  Millburn
               Ridgefield  Corporation for 1996 and 1997 (filed as Exhibit 10.11
               to the Form 10-K for the year ended December 31, 1997).
               10.12- Letters from the General  Partner  terminating  Management
               Agreement  with  Millburn  Ridgefield   Corporation   (previously
               filed).
               10.13-  Letter from the General  Partner  terminating  Management
               Agreement with ARA Portfolio Management (previously filed).
               10.14-  Management  Agreement among the Partnership,  the General
               Partner and Beacon Management Corporation (previously filed).
               10.15-  Management  Agreement among the Partnership,  the General
               Partner and Roy G. Neiderhoffer Co., Inc. (previously filed).
               10.16- Letters extending Management Agreements with John W. Henry
               & Company  Inc.,  Campbell & and Company,  Inc. and  Willowbridge
               Associates Inc. for 1998 (previously filed).
               10.17- Letters  extending the Management  Agreements with John W.
               Henry & Company  Inc.,  Campbell  & Company,  Inc.,  Willowbridge
               Associates  Inc.  and  Beacon  Management  Corporation  for  1999
               (previously filed).


                                       47
<PAGE>

               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 (previously filed).
               10.24-  Management  Agreement among the Partnership,  the General
               Partner and Capital Fund Management (previously filed).
               10.25- Letters extending the Management  Agreements with Campbell


                                       48
<PAGE>

               & Company Inc.,  Willowbridge  Associates Inc., Beacon Management
               Corporation,  Stonebrook  Structured  Products and Graham Capital
               Management L.P. for 2002 (filed herein).
               99.1 Certificate of Chief Executive Officer.
               99.2 Certificate of Chief Financial Officer.
               (b) Report on Form 8-K: None Filed.



                                       49
<PAGE>

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


Annual  Report to Limited  Partners

No proxy  material  has been sent to Limited Partners.


                                       50
<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 27th day of March 2003.


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



                                       51
<PAGE>


                                  CERTIFICATION


I, David J. Vogel, certify that:
1.   I have reviewed this annual report on Form 10-K of Smith Barney Diversified
     Futures Fund L.P. II;

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

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

4.   The  registrant's  other  certifying  officer  and  I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a.   designed  such  disclosure  controls  and  procedures  to ensure  that
          material  information  relating  to  the  registrant,   including  its
          consolidated subsidiaries,  is made known to us by others within those
          entities,  particularly  during the period in which this annual report
          is being prepared;

     b.   evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures as of a date within 90 days prior to the filing date of
          this annual report (the "Evaluation Date"); and
     c.   presented   in  this   annual   report  our   conclusions   about  the
          effectiveness  of the disclosure  controls and procedures based on our
          evaluation as of the Evaluation Date;

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



                                       52
<PAGE>

     a.   all  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  registrant's  ability to
          record,  process,   summarize  and  report  financial  data  and  have
          identified for the  registrant's  auditors any material  weaknesses in
          internal controls; and
     b.   any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          controls; and

6.   The  registrant's  other  certifying  officer and I have  indicated in this
     annual  report  whether or not there were  significant  changes in internal
     controls  or in other  factors  that could  significantly  affect  internal
     controls  subsequent to the date of our most recent  evaluation,  including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.
Date: March 27, 2003                                         /s/David J. Vogel
                                                             -------------------
                                                                  David J. Vogel
                                                         Chief Executive Officer



                                       53
<PAGE>


                                  CERTIFICATION


I, Daniel R. McAuliffe, Jr., certify that:
1.   I have reviewed this annual report on form 10-K of Smith Barney Diversified
     Futures Fund L.P. II;

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

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

4.   The  registrant's  other  certifying  officer  and  I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a.   designed  such  disclosure  controls  and  procedures  to ensure  that
          material  information  relating  to  the  registrant,   including  its
          consolidated subsidiaries,  is made known to us by others within those
          entities,  particularly  during the period in which this annual report
          is being prepared;

     b.   evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures as of a date within 90 days prior to the filing date of
          this annual report (the "Evaluation Date"); and

     c.   presented   in  this   annual   report  our   conclusions   about  the
          effectiveness  of the disclosure  controls and procedures based on our
          evaluation as of the Evaluation Date;
5.   The registrant's  other certifying  officer and I have disclosed,  based on
     our most recent  evaluation,  to the  registrant's  auditors  and the audit
     committee of  registrant's  board of directors (or persons  performing  the
     equivalent function):



                                       54
<PAGE>

     a.   all  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  registrant's  ability to
          record,  process,   summarize  and  report  financial  data  and  have
          identified for the  registrant's  auditors any material  weaknesses in
          internal controls; and

     b.   any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          controls; and

6.   The  registrant's  other  certifying  officer and I have  indicated in this
     annual  report  whether or not there were  significant  changes in internal
     controls  or in other  factors  that could  significantly  affect  internal
     controls  subsequent to the date of our most recent  evaluation,  including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.
Date: March 27, 2003
       /s/Daniel R. McAuliffe, Jr.
         -----------------------
         Daniel R. McAuliffe, Jr.
         Chief Financial Officer


                                       55
<PAGE>


CIK>                                               0000923660
NAME>                              Smith Barney Diversified Futures Fund L.P. II
PERIOD-TYPE>                                       12-MONTHS
FISCAL-YEAR-END>                                   DEC-31-2002
PERIOD-START>                                      JAN-01-2002
PERIOD-END>                                        DEC-31-2002
CASH>                                                      62,798,601
SECURITIES>                                                 3,945,135
RECEIVABLES>                                                   51,898
ALLOWANCES>                                                         0
INVENTORY>                                                          0
CURRENT-ASSETS>                                            66,795,634
PP&E>                                                               0
DEPRECIATION>                                                       0
TOTAL-ASSETS>                                              66,795,634
CURRENT-LIABILITIES>                                          817,683
BONDS>                                                              0
PREFERRED-MANDATORY>                                                0
PREFERRED>                                                          0
COMMON>                                                             0
OTHER-SE>                                                  65,977,951
TOTAL-LIABILITY-AND-EQUITY>                                66,795,634
SALES>                                                              0
TOTAL-REVENUES>                                            19,609,942
CGS>                                                                0
TOTAL-COSTS>                                                        0
OTHER-EXPENSES>                                             8,707,820
LOSS-PROVISION>                                                     0
INTEREST-EXPENSE>                                                   0
INCOME-PRETAX>                                             10,902,122
INCOME-TAX>                                                         0
INCOME-CONTINUING>                                                  0
DISCONTINUED>                                                       0
EXTRAORDINARY>                                                      0
CHANGES>                                                            0
NET-INCOME>                                                10,902,122
EPS-PRIMARY>                                                   205.86
EPS-DILUTED>                                                        0