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, 2000

Commission File Number 0-22491

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

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

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

                                 (212) 723-5424
              (Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:  None
Securities registered pursuant to Section 12(g) of the Act:  Units of
                                                             Limited
                                                             Partnership
                                                             Interest
                                                             (Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

                                    Yes X No

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

As of February 28, 2001,  Limited  Partnership  Units with an aggregate value of
$79,731,023 were outstanding and held by non-affiliates.


                       DOCUMENTS INCORPORTED BY REFERENCE

                                      None


<PAGE>


39

                                     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, 2000 are
reported  in the  Statement  of  Partners'  Capital  on page F-6 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 of a Unit decreases to less than
$400 as of the close of any  business  day; or under  certain  circumstances  as
defined in the Limited  Partnership  Agreement of the Partnership  (the "Limited
Partnership Agreement").

     Smith  Barney  Futures  Management  LLC acts as the  general  partner  (the
"General  Partner") of the Partnership.  The  Partnership's  commodity broker is
Salomon Smith Barney Inc.  ("SSB").  SSB is an affiliate of the General Partner.
The  General  Partner is wholly  owned by Salomon  Smith  Barney  Holdings  Inc.
("SSBHI"), which is the sole owner of SSB. SSBHI is a wholly owned subsidiary of
Citigroup Inc.
     The Partnership's  trading of futures,  forwards and options contracts,  if
applicable,  on  commodities  is done  primarily on United States of America and
foreign  commodity  exchanges.  It engages in such  trading  through a commodity
brokerage account maintained with SSB.
     As of December 31, 2000, 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,


                                       3
<PAGE>

LLC.  ("Stonebrook")  and  Beacon  Management  Corporation  (collectively,   the
"Advisors"). None of the Advisors is affiliated with the General Partner or SSB.
The  Advisors  are not  responsible  for the  organization  or  operation of the
Partnership.  Stonebrook was added as an Advisor on March 1, 2000. John W. Henry
& Company,  Inc. was terminated as an Advisor on July 1, 2000.  Graham was added
as an Advisor on that date.
          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


                                       4
<PAGE>

"Customer Agreement") which provides that the Partnership will pay SSB a monthly
brokerage  fee  equal to 1/2 of 1% of  month-end  Net  Assets  allocated  to the
Advisors  (6% per year) in lieu of brokerage  commissions  on a per trade basis.
SSB also pays a portion of its brokerage fees to its financial  consultants  who
have sold Units and who are registered as associated  persons with the Commodity
Futures  Trading  Commission  (the "CFTC").  The  Partnership  pays for National
Futures  Association  ("NFA") fees, exchange and clearing fees, give-up and user
fees and floor brokerage  fees.  Brokerage fees will be paid for the life of the
Partnership,  although the rate at which such fees are paid may be changed.  The
Customer  Agreement  between the  Partnership  and SSB gives the Partnership the
legal right to net unrealized gains and losses.
         In addition,  SSB pays the  Partnership  interest on 80% of the average
daily  equity  maintained  in cash in its account  during each month at a 30-day
U.S.  Treasury  bill  rate  determined  weekly  by  SSB  based  on  the  average
non-competitive  yield on 3-month U.S.  Treasury  bills maturing in 30 days from
the date on which such weekly rate is determined.
         (b) Financial  information about industry  segments.  The Partnership's
business  consists  of  only  one  segment,  speculative  trading  of  commodity
interests (including, but not limited to, futures contracts, options and forward
contracts  on  U.S.  Treasury  Bills,  other  financial   instruments,   foreign
currencies,  stock indices and physical  commodities).  The Partnership does not
engage in sales of goods or services.  The  Partnership's net income (loss) from

                                       5
<PAGE>

operations for the years ended December 31, 2000,  1999,  1998, 1997 and 1996 is
set forth under "Item 6. Selected Financial Data." The Partnership capital as of
December 31, 2000, was $84,702,767.
         (c)  Narrative  description  of business.
              See  Paragraphs  (a) and (b) above.
              (i) through (x) - Not applicable.
              (xi) through (xii) - Not applicable.
             (xiii) - The Partnership has no employees.
         (d) Financial  Information About Geographic Areas. The Partnership does
not  engage in sales of goods or  services  or own any long  lived  assets,  and
therefore this item is not applicable.
Item 2.Properties.
       The Partnership does not own or lease any properties. The General Partner
operates out of facilities provided by its affiliate, SSB.
Item 3.Legal Proceedings.
       Salomon  Smith  Barney  Inc,  ("SSB") is a New York  corporation with its
 principal place of business at 388 Greenwich St., New York, New York 10013. SSB
 is registered as a broker-dealer and futures commission  merchant ("FCM"),  and
 provides futures  brokerage and clearing  services for institutional and retail
 participants  in the  futures  markets.  SSB and its  affiliates  also  provide
 investment banking and other financial services for clients worldwide.
          There have been no administrative,  civil or criminal actions pending,
 on appeal or concluded  against SSB or any of its individual  principals within

                                       6
<PAGE>

 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 CFTC disclosure requirements are:
          In  September  1992,  Harris  Trust and  Savings  Bank (as trustee for
 Ameritech Pension Trust),  Ameritech  Corporation,  and an officer of Ameritech
 sued Salomon Brothers Inc and Salomon  Brothers Realty  Corporation in the U.S.
 District  Court for the Northern  District of Illinois  (Harris  Trust  Savings
 Bank, not individually  but solely as trustee for the Ameritech  Pension Trust,
 Ameritech Corporation and John A. Edwardson v. Salomon Brothers Inc and Salomon
 Brothers  Realty  Corp.).  The  complaint  alleged that  purchases by Ameritech
 Pension  Trust from the Salomon  entities  of  approximately  $20.9  million in
 participations  in a portfolio of motels  owned by Motels of America,  Inc. and
 Best Inns, Inc. violated the Employee Retirement Income Security Act ("ERISA"),
 the Racketeer  Influenced and Corrupt  Organization Act ('RICO") and state law.
 Salomon  Brothers  Inc had  acquired  the  participations  issued  by Motels of
 America and Best Inns to finance  purchases of motel portfolios and sold 95% of
 three  such  issues  and 100% of one such  issue to  Ameritech  Pension  Trust.
 Ameritech Pension Trust's  complaint sought (1) approximately  $20.9 million on
 the ERISA  claim,  and (2) in excess of $70  million  on the RICO and state law
 claims as well as other relief.  In various  decisions  between August 1993 and
 July 1999, the courts hearing the case have dismissed all of the allegations in



                                       7
<PAGE>

 the complaint against the Salomon entities. In October 1999, Ameritech appealed
 to the U.S. Supreme Court and in January 2000, the Supreme Court agreed to hear
 the case.  An argument was heard on April 17, 2000.  The appeal seeks review of
 the  decision  of the U.S.  Court  of  Appeals  for the  Seventh  Circuit  that
 dismissed the sole remaining ERISA claim against the Salomon entities.  In June
 the Supreme Court reversed the Seventh Circuit and the matter has been remanded
 to the Trial Courts.

     Both the Department of Labor and the Internal  Revenue Service have advised
Salomon  Brothers Inc that they were or are reviewing the  transactions in which
Ameritech  Pension  Trust  acquired  such  participations.  With  respect to the
Internal Revenue Service review, Salomon Smith Barney Holdings, Salomon Brothers
Inc and Salomon  Brothers  Realty have  consented to  extensions of time for the
assessment  of excise  taxes that may be  claimed to be due with  respect to the
transactions for the years 1987, 1988 and 1989.

     In December  1996, a complaint  seeking  unspecified  monetary  damages was
filed by Orange County,  California against numerous brokerage firms,  including
Salomon Smith Barney,  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.  Salomon  Smith  Barney and the
remaining brokerage firms settled with Orange County in mid 1999.

       In June 1998,  complaints were filed in the U.S.  District Court for the





                                       8
<PAGE>

Eastern District of Louisiana in two actions (Board of  Liquidations,  City Debt
of the City of New  Orleans v. Smith  Barney  Inc,  et ano.  and The City of New
Orleans v. Smith Barney Inc. et ano.),  in which the City of New Orleans seeks a
determination that Smith Barney Inc. and another underwriter will be responsible
for any  damages  that the City may  incur in the  event  the  Internal  Revenue
Service  denies tax exempt  status to the City's  General  Obligation  Refunding
Bonds Series 1991.  The  complaints  were  subsequently  amended.  Salomon Smith
Barney has asked the court to dismiss the amended  complaints.  The Court denied
the motion but stayed the case. Subsequently, the city withdrew its lawsuit.
     It November  1998, a class action  complaint was filed in the United States
District  Court for the Middle  District of Florida  (Dwight  Brock as Clerk for
Collier County v. Merrill Lynch, et al.). The complaint  alleged that,  pursuant
to a nationwide conspiracy, 17 broker-dealer defendants, including Salomon Smith
Barney,  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.  Salomon  Smith  Barney  has asked the court to dismiss  the  amended
complaint.
     In connection  with  the Louisiana  and  Florida  matters, the IRS and  SEC
 have  been  conducting  an  industry-wide  investigation  into the  pricing  of

                                       9
<PAGE>

 Treasury securities in advanced refunding  transactions.  In April 2000 SSB and
 several  other  broker-dealers  entered into a settlement  with the IRS and the
 SEC.
          In December 1998, Salomon Smith Barney was one of twenty-eight  market
 making firms that reached a settlement with the SEC in the matter titled In the
 Matter of Certain Market Making Activities on NASDAQ. As part of the settlement
 of that matter,  Salomon Smith Barney, without admitting or denying the factual
 allegations,  agreed to an order  that  required  that it: (i) cease and desist
 from  committing or causing any violations of Sections  15(c)(1) and (2) of the
 Securities Exchange Act of 1934 and Rules l5cl -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 Salomon Smith Barney 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,  Salomon  Smith Barney
 breached its contracts with  plaintiffs,  misused their monies,  and engaged in
 tortious (wrongful) conduct,  including breaching its fiduciary duties. Salomon
 Smith Barney 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 misuse of money claims to
 stand, Salomon Smith Barney will continue to contest this lawsuit vigorously.



                                       10
<PAGE>

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, 2000 was 3,866.

               (c)  Distribution. The Partnership did not declare a distribution
                    in 2000 or 1999.

               (d)  Use of Proceeds.  There were no additional  sales during the
                    twelve  months  ended   December  31,  2000  and  1999.  The
                    Partnership  ceased to offer Units  effective March 1, 1998.
                    For the twelve  months ended  December 31, 1998,  there were
                    additional sales of 38,309.9229  Units totaling  $42,074,000
                    and  contributions  by  the  General  Partner   representing
                    283.5082 Unit equivalents  totaling $311,000.  Proceeds from
                    the sale of  additional  Units  are used in the  trading  of
                    commodity interests including futures contracts, options and
                    forward contracts.

                                       11
<PAGE>


Item 6. Selected Financial Data. The Partnership commenced trading operations on
     January 17, 1996. 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, 2000,  1999,  1998,  1997 and for the
     period from  January  17,  1996  (commencement  of trading  operations)  to
     December 31, 1996 and total assets at December 31, 2000,  1999,  1998, 1997
     and 1996 were as follows:

<TABLE>
<CAPTION>
<S>                                                <C>             <C>              <C>              <C>               <C>
                                                 2000              1999            1998             1997             1996
                                              ------------    -------------    -------------    --------------   -------------

Realized and unrealized trading gains
 (losses) net of brokerage  commissions and
 clearing fees of $5,846,384, $8,857,532,
 $8,891,659, $6,257,856 and
 $2,169,468, respectively                    $   6,540,869    $ (21,027,791)   $  14,064,160    $    (461,654)   $   8,869,618
Interest income                                  3,884,319        4,658,630        4,818,279        3,634,245        1,190,687
                                             -------------    -------------    -------------    -------------    -------------
                                             $  10,425,188    $ (16,369,161)   $  18,882,439    $   3,172,591    $  10,060,305
                                             =============    =============    =============    =============    =============
Net income (loss)                            $   7,572,583    $ (21,048,896)   $  12,979,536    $    (313,824)   $   7,582,653
                                             =============    =============    =============    =============    =============
Increase (decrease) in net
 asset value per unit                        $      107.10    $     (193.59)   $       95.43    $       (1.30)   $      185.99
                                             =============    =============    =============    =============    =============
Total assets                                 $  87,318,686    $ 106,012,664    $ 154,692,651    $ 113,547,434    $  56,960,922
                                             =============    =============    =============    =============    =============
</TABLE>




                                       12
<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.




                                       13
<PAGE>


           (5) The  Partnership  will not utilize  borrowing  except  short-term
borrowing if the Partnership  takes delivery of any cash commodities.
           (6) The Advisor may,  from time to time,  employ  trading  strategies
such as spread or  straddles on behalf of the  Partnership.  The term  "spread"
or  "straddle"  describes a commodity  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




                                       14
<PAGE>

and  market  risks to which  the  Partnership  is  subject.  (See  also  Item 8.
Financial   Statements  and  Supplementary  Data.  for  further  information  on
financial instrument risk included in the notes to financial statements.)
           Other than the risks inherent in commodity  trading,  the Partnership
knows of no trends  demands,  commitments,  events or  uncertainties  which will
result  in or  which  are  reasonably  likely  to  result  in the  Partnership's
liquidity  increasing or decreasing in any material way. The Limited Partnership
Agreement  provides  that the  Partnership  will cease  trading  operations  and
liquidate  all open  positions  upon the  first to occur of the  following:  (i)
December 31, 2014;  (ii) the vote dissolve the  Partnership by limited  partners
owning more than 50% of the Units;  (iii)  assignment by the General  Partner of
all of its interest in the Partnership or withdrawal, removal, bankruptcy or any
other  event that causes the  General  Partner to cease to be a general  partner
under the New York Revised  Limited  Partnership  Act unless the  Partnership is
continued  as  described in the Limited  Partnership  Agreement;  (iv) net asset
value per Unit falls to less than $400 as of the end of any trading  day; or (v)
the  occurrence  of any event which shall make it unlawful for the  existence of
the Partnership to be continued.
           (b)  Capital  resources.  (i) The  Partnership  has made no  material
commitments for capital expenditures.
              (ii)  The   Partnership's   capital   consists   of  the   capital
contributions  of the  partners as  increased or decreased by gains or losses on
commodity trading,  and by expenses,  interest income,  redemptions of Units and

                                       15
<PAGE>

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.  In  addition,  the amount of
interest  income  payable by SSB is dependent upon interest rates over which the
Partnership has no control.
           No forecast can be made as to the level of  redemptions  in any given
period.  A limited  partner  may cause  all of his Units to be  redeemed  by the
Partnership  at the Net Asset Value  thereof as of the last day of each month on
ten days'  written  notice to the  General  Partner.  No fee will be charged for
redemptions.  For the year  ended  December  31,  2000,  25,136.0733  Units were
redeemed totaling $25,343,422. For the year ended December 31, 1999, 24,591.7470
Units were redeemed totaling $28,275,280.  For the year ended December 31, 1998,
13,377.6641 Units were redeemed totaling 15,146,446.
            The  Partnership  ceased to offer Units effective March 1, 1998. For
the year ended  December 31, 1998,  there were  additional  sales of 38,309.9229
Units totaling $42,074,000 and contributions by the General Partner representing
283.5082 Unit equivalents totaling $311,000.

                                       16
<PAGE>

           (c) Results of Operations.  For the year ended December 31, 2000, the
Net Asset per Unit  increased  10.4% from  $1,025.60 to $1,132.70.  For the year
ended  December  31,  1999 the net asset  value per unit  decreased  15.9%  from
$1,219.19 to $1,025.60. For the year ended December 31, 1998 the net asset value
per Unit increased 8.5% from $1,123.76 to $1,219.19
           The Partnership  experienced net trading gains of $12,387,253  before
commissions  and  expenses in 2000.  Gains were  primarily  attributable  to the
trading in currencies, energy, and U.S. interest rates and were partially offset
by losses recognized in the trading of grains, softs, livestock, non-U.S.
interest rates, metals and indices.
           The Partnership  experienced net trading losses of $12,170,259 before
commissions  and expenses in 1999.  Losses were  primarily  attributable  to the
trading in indices,  non-U.S.  interest rates, metals,  grains, softs, livestock
and currencies and were partially  offset by gains  recognized in the trading of
U.S. interest rates and energy.
           The Partnership  experienced net trading gains of $22,955,819  before
commissions and expenses in 1998.  Gains were primarily  attributable to trading
in currencies,  U.S. and non-U.S. interest rates products and livestock and were
partially offset by losses recognized in grains, metals, softs and indices.
           Commodity markets are highly volatile.  Broad price  fluctuations and
rapid  inflation  increase  the risks  involved in commodity  trading,  but also



                                       17
<PAGE>

increase the possibility of profit. The profitability of the Partnership depends
on the  existence  of major  price  trends and the  ability of the  Advisors  to
identify  those price trends  correctly.  Price trends are  influenced by, among
other things, changing supply and demand relationships,  weather,  governmental,
agricultural,   commercial  and  trade  programs  and  policies,   national  and
international  political and economic  events and changes in interest  rates. To
the extent that market trends exist and the Advisors are able to identify  them,
the Partnership expects to increase capital through operations.
                        (d)Operational Risk
                        The  Partnership is directly  exposed to market risk and
credit risk, which arise in the normal course of its business activities.
Slightly  less  direct,  but of critical  importance,  are risks  pertaining  to
operational and back office support.  This is particularly the case in a rapidly
changing and increasingly global environment with increasing transaction volumes
and an expansion in the number and  complexity  of products in the  marketplace.
Such risks  include:
Operational/Settlement  Risk - the risk of financial  and  opportunity  loss and
legal liability attributable to operational problems, such as inaccurate pricing
of transactions,  untimely trade execution,  clearance and/or settlement, or the
inability to process large volumes of  transactions.  The Partnership is subject
to increased  risks with respect to its trading  activities  in emerging  market
securities,  where clearance,  settlement, and custodial risks are often greater
than in more established markets.


                                       18
<PAGE>

Technological Risk - the risk of loss attributable to technological  limitations
or hardware failure that constrain the Partnership's ability to gather, process,
and communicate information efficiently and securely, without interruption, with
customers,  among units  within the  Partnership,  and in the markets  where the
Partnership   participates.
Legal/Documentation  Risk - the risk of loss attributable to deficiencies in the
documentation  of  transactions  (such  as  trade  confirmations)  and  customer
relationships  (such as master  netting  agreements)  or errors  that  result in
noncompliance  with  applicable  legal and  regulatory  requirements.
Financial  Control  Risk - the  risk  of loss  attributable  to  limitations  in
financial  systems and controls.  Strong  financial  systems and controls ensure
that assets are safeguarded,  that  transactions are executed in accordance with
management's   authorization,   and  that  financial   information  utilized  by
management and  communicated to external  parties,  including the  Partnership's
unitholder, creditors, and regulators, is free of material errors.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Introduction
         The Partnership is a speculative  commodity pool. The market  sensitive
instruments held by it are acquired for speculative trading purposes, and all or
substantially all of the Partnership's assets are subject to the risk of trading



                                       19
<PAGE>

loss. Unlike an operating company,  the risk of market sensitive  instruments is
integral, not incidental, to the Partnership's main line of business.
         Market movements result in frequent changes in the fair market value of
the  Partnership's  open positions and,  consequently,  in its earnings and cash
flow. The Partnership's  market risk is influenced by a wide variety of factors,
including the level and volatility of interest  rates,  exchange  rates,  equity
price  levels,  the market value of financial  instruments  and  contracts,  the
diversification results among the Partnership's open positions and the liquidity
of the markets in which it trades.
         The  Partnership  rapidly  acquires and liquidates  both long and short
positions in a wide range of different markets. Consequently, it is not possible
to predict how a particular future market scenario will affect performance,  and
the Partnership's  past performance is not necessarily  indicative of its future
results.
         Value at Risk is a measure of the maximum amount which the  Partnership
could  reasonably  be expected to lose in a given market  sector.  However,  the
inherent uncertainty of the Partnership's speculative trading and the recurrence
in the markets  traded by the  Partnership  of market  movements  far  exceeding
expectations could result in actual trading or non-trading losses far beyond the
indicated Value at Risk or the Partnership's  experience to date (i.e., "risk of
ruin").  In  light  of the  foregoing  as well as the  risks  and  uncertainties


                                       20
<PAGE>

intrinsic  to all  future  projections,  the  inclusion  of  the  quantification
included in this section should not be considered to constitute any assurance or
representation  that the  Partnership's  losses  in any  market  sector  will be
limited to Value at Risk or by the  Partnership's  attempts to manage its market
risk.
Quantifying the Partnership's Trading Value at Risk
     The following  quantitative  disclosures regarding the Partnership's market
risk exposures contain  "forward-looking  statements"  within the meaning of the
safe harbor from civil  liability  provided for such  statements  by the Private
Securities  Litigation  Reform  Act of 1995  (set  forth in  Section  27A of the
Securities Act of 1933 and Section 21E of the Securities  Exchange Act of 1934).
All  quantitative  disclosures in this section are deemed to be  forward-looking
statements  for purposes of the safe harbor except for  statements of historical
fact (such as the terms of  particular  contracts  and the number of market risk
sensitive instruments held during or at the end of the reporting period).
     The Partnership's risk exposure in the various market sectors traded by
the  Advisors  is  quantified  below in  terms  of  Value  at  Risk.  Due to the
Partnership's  mark-to-market  accounting,  any  loss in the  fair  value of the
Partnership's open positions is directly reflected in the Partnership's earnings
(realized or unrealized).
     Exchange  maintenance margin requirements have been used by the Partnership
as the measure of its Value at Risk.  Maintenance margin requirements are set by
exchanges  to equal or exceed  the  maximum  losses  reasonably  expected  to be


                                       21
<PAGE>

incurred  in the fair value of any given  contract  in  95%-99%  of any  one-day
intervals.  The  maintenance  margin  levels  are  established  by  dealers  and
exchanges  using  historical  price  studies as well as an assessment of current
market  volatility  (including the implied  volatility of the options on a given
futures contract) and economic fundamentals to provide a probabilistic  estimate
of the maximum expected near-term one-day price fluctuation.  Maintenance margin
has been used rather than the more generally  available initial margin,  because
initial margin  includes a credit risk component  which is not relevant to Value
at Risk.
         In the case of market  sensitive  instruments  which  are not  exchange
traded  (almost  exclusively  currencies  in the case of the  Partnership),  the
margin requirements for the equivalent futures positions have been used as Value
at  Risk.  In those  rare  cases in  which a  futures-equivalent  margin  is not
available, dealers' margins have been used.
         The fair value of the Partnership's  futures and forward positions does
not have any  optionality  component.  However,  certain of the  Advisors  trade
commodity options. The Value at Risk associated with options is reflected in the
following  table  as the  margin  requirement  attributable  to  the  instrument
underlying each option. Where this instrument is a futures contract, the futures
margin,   and   where   this   instrument   is   a   physical   commodity,   the
futures-equivalent  maintenance  margin  has  been  used.  This  calculation  is


                                       22
<PAGE>

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.

                                       23
<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, 2000. All
open position  trading risk exposures of the  Partnership  have been included in
calculating  the  figures  set  forth  below.  As  of  December  31,  2000,  the
Partnership's total capitalization was $84,702,767.



<TABLE>
<CAPTION>
<S>                                               <C>              <C>        <C>             <C>
                                      December 31, 2000
                                                                             Year to Date
                                                            % of Total         High          Low
Market Sector                              Value at Risk   Capitalization    Value at Risk  Value at Risk
-------------------------------------------------------------------------------------------------

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



                                       24
<PAGE>




     As of  December  31,  1999,  the  Partnership's  total  capitalization  was
$102,473,606.

                                                      December 31, 1999
<TABLE>
<CAPTION>
<S>                                                   <C>          <C>         <C>             <C>
                                                                                   Year to Date
                                                               % of Total        High           Low
Market Sector                                 Value at Risk   Capitalization Value at Risk  Value at Risk
----------------------------------------------------------------------------------------------------------
Currencies
- Exchange Traded Contracts                     $ 1,049,175         1.03%  $ 2,724,264     $   812,342
- OTC Contracts                                   1,720,429         1.68%    3,072,042       1,332,074
Energy                                            2,328,200         2.27%    3,097,700       1,635,400
Grains                                              382,900         0.37%    1,066,275         378,375
Interest rates U.S.                               1,902,900         1.86%    3,125,500         529,250
Interest rates Non-U.S                            2,606,214         2.54%    6,364,023       1,456,762
Livestock                                           133,625         0.13%      496,796          91,500
Metals (Exchange Traded and  OTC Contracts)       1,510,250         1.47%    3,103,800         606,500
Softs                                             1,494,803         1.46%    2,485,987       1,125,200
Stock Indices                                     1,324,983         1.29%    5,983,258       1,202,078
                                                -----------       -------
Total                                           $14,453,479        14.10%
                                                ===========       =======
</TABLE>

                                       25
<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


                                       26
<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, 2000, by market sector.
         Interest Rates.  Interest rate risk is the principal market exposure of
the  Partnership.  Interest  rate  movements  directly  affect  the price of the
futures  positions held by the Partnership and indirectly the value of its stock

                                       27
<PAGE>

index and currency positions.  Interest rate movements in one country as well as
relative  interest  rate  movements  between  countries  materially  impact  the
Partnership's profitability. The Partnership's primary interest rate exposure is
to interest rate  fluctuations in the United States and the other G-7 countries.
However,  the Partnership also takes futures positions on the government debt of
smaller nations -- e.g.,  Australia.  The General Partner  anticipates  that G-7
interest rates will remain the primary market  exposure of the  Partnership  for
the foreseeable future.
         Currencies.  The  Partnership's  currency  exposure is to exchange rate
fluctuations,  primarily  fluctuations  which  disrupt  the  historical  pricing
relationships   between   different   currencies  and  currency   pairs.   These
fluctuations  are  influenced  by interest rate changes as well as political and
general  economic  conditions.  The General Partner does not anticipate that the
risk profile of the Partnership's  currency sector will change  significantly in
the future.  The currency  trading Value at Risk figure includes  foreign margin
amounts  converted into U.S.  dollars with an incremental  adjustment to reflect
the exchange rate risk inherent to the  dollar-based  Partnership  in expressing
Value at Risk in a functional currency other than dollars.
         Stock Indices.  The Partnership's  primary equity exposure is to equity
price  risk  in the  G-7  countries.  The  stock  index  futures  traded  by the
Partnership  are by law  limited  to futures on  broadly  based  indices.  As of
December 31, 2000,  the  Partnership's  primary  exposures  were in the S&P 500,
Financial  Times  (England),  Nikkei  (Japan)  and Hang Seng (Hong  Kong)  stock



                                       28
<PAGE>

indices.  The  Partnership  is  primarily  exposed to the risk of adverse  price
trends or static  markets in the major  U.S.,  European  and  Japanese  indices.
(Static markets would not cause major market changes but would make it difficult
for the Partnership to avoid being "whipsawed" into numerous small losses.)
         Metals.   The  Partnership's   primary  metal  market  exposure  is  to
fluctuations in the price of gold and silver.  Although  certain of the Advisors
will from time to time trade base metals such as platinum,  nickel, aluminum and
copper, 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, 2000.
         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, 2000.


                                       29
<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
suggests ongoing modifications to their trading programs.


                                       30
<PAGE>

         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.

                                       31
<PAGE>



Item 8.  Financial Statements and Supplementary Data.


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


                                            Page
                                           Number

Oath or Affirmation                         F-2

Report of Independent Accountants           F-3

Financial Statements:
Statement of Financial Condition at
December 31, 2000 and 1999                  F-4

Statement of Income and Expenses for
the years ended December 31, 2000,
1999 and 1998                               F-5

Statement of Partners' Capital for
the years ended December 31, 2000, 1999
and 1998                                    F-6

Notes to Financial Statements            F-7 - F-10








                                       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 A. Dantuono, Chief Financial Officer
     Smith Barney Futures Management LLC
     General Partner, Smith Barney Diversified
      Futures Fund L.P. II

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




                                   F-2

<PAGE>


                          Report of Independent Accountants

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

In our  opinion,  the  accompanying  statement of  financial  condition  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, 2000 and 1999, and the results
of its  operations  for each of the three years in the period ended December 31,
2000, 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
March 9, 2001

                              F-3
<PAGE>


                 Smith Barney Diversified
                   Futures Fund L.P. II
             Statement of Financial Condition
                December 31, 2000 and 1999


                                                  2000                 1999
Assets:
Equity in commodity futures trading account:
   Cash (Note 3c)                             $77,138,225         $101,629,135
   Net unrealized appreciation on open
    positions                                   9,856,622            4,026,105
                                            -------------        -------------
                                               86,994,847          105,655,240
Interest receivable                               323,839              357,424
                                            -------------        -------------
                                              $87,318,686         $106,012,664
                                            -------------        -------------

Liabilities and Partners' Capital:
Liabilities:
  Accrued expenses:
   Commissions                                   $447,854             $540,229
   Management fees                                187,871              238,436
   Incentive fees                                 285,755                   --
   Professional fees                               57,091               80,860
   Other                                            6,089               13,116
  Redemptions payable (Note 5)                  1,631,259            2,666,417
                                            -------------        -------------
                                                2,615,919            3,539,058
                                            -------------        -------------
Partners' capital (Notes 1, 5 and 6):
  General Partner, 1,287.3915 Unit
   equivalents outstanding in
   2000 and 1999                                1,458,228            1,320,349
  Limited Partners, 73,492.3251 and
   98,628.3984 Units of Limited
   Partnership Interest outstanding in
   2000 and 1999, respectively                 83,244,539          101,153,257
                                            -------------        -------------
                                               84,702,767          102,473,606
                                            -------------        -------------
                                              $87,318,686         $106,012,664
                                            -------------        -------------



See notes to financial statements.

                                   F-4
<PAGE>


                            Smith Barney Diversified
                              Futures Fund L.P. II
                        Statement of Income and Expenses
                               for the years ended
                        December 31, 2000, 1999 and 1998

<TABLE>
<CAPTION>
<S>                                    <C>                 <C>                 <C>
                                       2000                1999                1998
Income
  Net gains (losses) on
   trading of commodity
   interests:
   Realized gains (losses)
    on closed positions             $6,556,736         $(8,265,193)        $24,030,158
   Change in unrealized
    gains (losses) on open
    positions                        5,830,517          (3,905,066)         (1,074,339)
                                   ------------        ------------        ------------
                                    12,387,253         (12,170,259)         22,955,819
  Less, Brokerage
   commissions including
   clearing fees
   of $218,335, $321,934 and
   $201,707, respectively
   (Note 3c)                        (5,846,384)         (8,857,532)         (8,891,659)
                                  ------------        ------------        ------------
  Net realized and                   6,540,869         (21,027,791)         14,064,160
   unrealized gains (losses)
  Interest income (Note 3c)          3,884,319           4,658,630           4,818,279
                                  ------------        ------------        ------------
                                    10,425,188         (16,369,161)         18,882,439
                                  ------------        ------------        ------------
Expenses:
  Management fees (Note 3b)          2,465,726           3,463,948           3,553,437
  Incentive fees (Note 3b)             285,755           1,024,143           1,998,362
  Professional fees                     65,629             157,460             318,739
  Other expenses                        35,495              34,184              32,365
                                  ------------        ------------        ------------
                                     2,852,605           4,679,735           5,902,903
                                  ------------        ------------        ------------
Net income (loss)                   $7,572,583        $(21,048,896)        $12,979,536
                                  ------------        ------------        ------------
Net income (loss) per Unit
  of Limited Partnership
  Interest and General
  Partner Unit equivalent
  (Notes 1 and 6)                      $107.10            $(193.59)             $95.43
                                  ------------        ------------        ------------
</TABLE>


See notes to financial statements.

                                   F-5
<PAGE>


                            Smith Barney Diversified
                              Futures Fund L.P. II
                         Statement of Partners' Capital
                               for the years ended
                        December 31, 2000, 1999 and 1998


                             Limited            General
                             Partners           Partner            Total

Partners' capital at
   December 31, 1997      $ 110,451,568    $   1,128,124    $ 111,579,692
Net income                   12,849,085          130,451       12,979,536
Sale of 38,309.9229
  Units of Limited
  Partnership Interest
  and General Partner's
  contribution
  representing 283.5082
  Unit equivalents           42,074,000          311,000       42,385,000
Redemption of
  13,377.6641 Units of
  Limited Partnership
  Interest                  (15,146,446)            --        (15,146,446)
                          -------------    -------------    -------------
Partners' capital at
   December 31, 1998        150,228,207        1,569,575      151,797,782
Net loss                    (20,799,670)        (249,226)     (21,048,896)
Redemption of
  24,591.7470 Units of
  Limited Partnership
  Interest                  (28,275,280)            --        (28,275,280)
                          -------------    -------------    -------------
Partners' capital at
   December 31, 1999        101,153,257        1,320,349      102,473,606
Net income                    7,434,704          137,879        7,572,583
Redemption of
  25,136.0733 Units of
  Limited Partnership
  Interest                  (25,343,422)            --        (25,343,422)
                          -------------    -------------    -------------
Partners' capital at
   December 31, 2000      $  83,244,539    $   1,458,228    $  84,702,767
                          -------------    -------------    -------------


See notes to financial statements.



                                   F-6
<PAGE>


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

1.  Partnership Organization:

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

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

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

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

2.  Accounting Policies:

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

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

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


                                   F-7
<PAGE>



3.  Agreements:

    a. Limited Partnership Agreement:

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

    b. Management Agreements:

       The General  Partner,  on behalf of the  Partnership,  has  entered  into
       Management  Agreements with Graham Capital  Management  L.P.  ("Graham"),
       Campbell & Co., Inc., Willowbridge Associates Inc., Stonebrook Structured
       Products,   LLC.   ("Stonebrook")   and  Beacon  Management   Corporation
       (collectively,  the "Advisors"),  registered  commodity trading advisors.
       The Advisors are not affiliated with one another, are not affiliated with
       the General Partner or SSB and are not  responsible for the  organization
       or operation of the Partnership.  The Partnership will pay each Advisor a
       monthly  management fee equal to 1/6 of 1% (2% per year) of month-end Net
       Assets allocated to the Advisor, except Stonebrook,  which will receive a
       monthly  management  fee equal to 1/20 of 1% (.60% per year) of the fixed
       notional  account  size  determined  on a  monthly  basis by the  General
       Partner. In addition, the Partnership is obligated to pay each Advisor an
       incentive fee payable  quarterly equal to 20% of the New Trading Profits,
       as defined in the Management  Agreements,  earned by each Advisor for the
       Partnership, except Graham, which will receive an incentive fee of 10% of
       New  Trading  Profits  on the  first  $5,000,000  and 20% of New  Trading
       Profits for all such profits in excess of $5,000,000. Stonebrook does not
       receive an incentive fee. 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.  Stonebrook was added as an Advisor
       on March 1, 2000.  John W. Henry & Company,  Inc.  was  terminated  as an
       Advisor on July 1, 2000.  Graham Capital  Management L.P. was added as an
       Advisor on that date.

    c. Customer Agreement:

       The Partnership has entered into a Customer Agreement which provides that
       the Partnership  will pay SSB a monthly  brokerage fee equal to 1/2 of 1%
       (6% per year) of month-end Net Assets,  in lieu of brokerage  commissions
       on a per trade  basis.  SSB will pay a portion of  brokerage  fees to its
       financial consultants who have sold Units in this Partnership.  Brokerage
       fees will be paid for the life of the  Partnership,  although the rate at
       which such fees are paid may be  changed.  The  Partnership  will pay for
       National Futures  Association  ("NFA") fees,  exchange,  clearing,  user,
       give-up and floor  brokerage  fees. All of the  Partnership's  assets are
       deposited in the Partnership's  account at SSB. The Partnership's cash is
       deposited by SSB in segregated  bank  accounts to the extent  required by
       Commodity Futures Trading  Commission  regulations.  At December 31, 2000
       and 1999, the amount of cash held for margin requirements was $14,659,778
       and  $17,283,509,  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.


                                   F-8
<PAGE>



     Treasury  bills  maturingin 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 activity are shown in the statement of income and expenses.

     All of the  commodity  interests,  owned by the  Partnership,  are held for
     trading  purposes.  The average fair value during the years ended  December
     31,  2000 and 1999,  based on a monthly  calculation,  was  $4,748,750  and
     $7,397,780,  respectively.  The fair  value of these  commodity  interests,
     including options thereon, if applicable, at December 31, 2000 and 1999 was
     $9,856,622 and $4,026,105, respectively, as detailed below.

                                                     Fair Value

                                              December 31,    December 31,
                                                  2000           1999
Currencies:
   -Exchange Traded Contracts                $ 3,394,005    $   320,385
    -OTC                                         133,429        305,278
Energy                                           668,357        880,171
Grains                                           221,765         93,138
Interest Rates U.S.                            4,125,853      1,254,924
Interest Rates Non-U.S                           858,321       (106,494)
Livestock                                        591,100        (71,300)
Metals (Exchange Traded and OTC Contracts)       (46,413)       318,282
Softs                                            353,333        548,382
Indices                                         (443,128)       483,339
                                             -----------    -----------
Total                                        $ 9,856,622    $ 4,026,105
                                             -----------    -----------


5.  Distributions and Redemptions:

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

                                   F-9

<PAGE>



6.  Net Asset Value Per Unit:

    Changes  in the net asset  value per Unit of  Partnership  interest  for the
    years ended December 31, 2000, 1999 and 1998 were as follows:




<TABLE>
<CAPTION>
<S>                                                    <C>         <C>         <C>
                                                     2000          1999        1998

Net realized and unrealized gains (losses)       $   95.31   $  (193.82)  $   103.15
Interest income                                      44.87        40.81        41.25
Expenses                                            (33.08)      (40.58)      (48.97)
                                                  ---------    ---------    ---------
Increase (decrease) for period                      107.10      (193.59)       95.43
Net asset value per Unit, beginning of year       1,025.60     1,219.19     1,123.76
                                                 ---------    ---------    ---------
Net asset value per Unit, end of year           $ 1,132.70  $  1,025.60   $ 1,219.19
                                                 ---------    ---------    ---------
</TABLE>



7.  Financial Instrument Risks:

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

     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 (see table in Note 4). 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.

                                   F-10
<PAGE>


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

     The  notional  or   contractual   amounts  of  these   instruments,   while
     appropriately not recorded in the financial statements,  reflect the extent
     of the  Partnership's  involvement  in these  instruments.  The majority of
     these instruments mature within one year of December 31, 2000. However, due
     to the nature of the Partnership's  business,  these instruments may not be
     held to maturity.

8.  Subsequent Event:

    On January 31, 2001 there were  additional  redemptions of 1,074.4296  Units
    totaling $1,189,555.



                                   F-11
<PAGE>



Item 9. Changes in and Disagreements with Accountants on Accounting and
        Financial Disclosure.
              During  the last  two  fiscal  years  and any  subsequent  interim
period, no independent accountant who was engaged as the principal accountant to
audit the Partnership's financial statements has resigned or was dismissed.
                                    PART III
Item 10.  Directors and Executive Officers of the Registrant.
              The  Partnership  has no officers or directors and its affairs are
managed by its General  Partner,  Smith  Barney  Futures  Management  LLC. As of
December  31,  2000,  investment  decisions  were being  made by Graham  Capital
Management  L.P.,  Campbell  and Company  Inc.,  Willowbridge  Associates  Inc.,
Stonebrook  Structured  Products,   LLC  ("Stonebrook")  and  Beacon  Management
Corporation (collectively, the "Advisors").
Item 11.         Executive Compensation.
                 The Partnership  has no directors or officers.  Its affairs are
managed by Smith Barney Futures  Management  LLC, its General  Partner.  SSB, an
affiliate of the General  Partner,  is the commodity  broker for the Partnership
and receives brokerage  commissions for such services,  as described under "Item
1. Business." Brokerage  commissions and clearing fees of $5,846,384 were earned
for the year ended  December 31, 2000.  Management  fees and  incentive  fees of
$2,465,726 and $285,755,  respectively, were earned by the Advisors for the year
ended December 31, 2000.



                                       32
<PAGE>


Item 12.  Security Ownership of Certain Beneficial Owners and Management.
                 (a).  Security  ownership of certain  beneficial  owners.  As
of March 1, 2001, the Partnership  knows of no person who beneficially owns more
than 5% of the Units outstanding.
                 (b). Security  ownership of management.  Under the terms of the
Limited  Partnership  Agreement,  the  Partnership's  affairs are managed by the
General Partner.  The General Partner owns Units of general partnership interest
equivalent  to  1,287.3915  Units (1.7%) of Limited  Partnership  Interest as of
December 31, 2000.
                 (c).  Changes in control.   None.
Item 13.   Certain Relationship and Related Transactions.
           Salomon  Smith  Barney Inc. and Smith Barney Futures  Management LLC
would be considered  promoters  for purposes of item 404 (d) of Regulation  S-K.
The nature and the amounts of  compensation  each promoter will receive from the
Partnership  are  set  forth  under  "Item  1.  Business",  "Item  8.  Financial
Statements and Supplementary Data." and "Item 11. Executive Compensation."

                                     PART IV
Item 14.   Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
         (a) (1)  Financial Statements:
                  Statement of Financial  Condition at December 31, 2000
                  and 1999.
                  Statement  of Income and  Expenses for the years ended
                  December  31,  2000,  1999  and  1998.


                                       33
<PAGE>

                         Statement  of  Partners'  Capital  for the years  ended
                          December 31, 2000, 1999 and 1998.
                    (2)  Financial Statement Schedules:  Financial Data Schedule
                         for the year ended December 31, 2000.
                    (3)  Exhibits:
                    3.1  - Limited  Partnership  Agreement (filed as Exhibit 3.1
                         to the  Registration  Statement  on Form S-1  (File No.
                         33-79244 and incorporated herein by reference)
                    3.2  - Certificate of Limited Partnership of the Partnership
                         as filed in the office of the County  Clerk of New York
                         County  (filed  as  Exhibit  3.2  to  the  Registration
                         Statement  on  Form  S-1  (Filed  No.   33-79244)   and
                         incorporated herein by reference)
                    10.1-Customer  Agreement  between the  Partnership and Smith
                         Barney  (filed  as  Exhibit  10.1  to the  Registration
                         Statement   on  Form  S-1  (File  No.   33-79244)   and
                         incorporated herein by reference).
                    10.2-Subscription  Agreement  (filed as Exhibit  10.2 to the
                         Registration  Statement on Form S-1 (File No. 33-29144)
                         and incorporated herein by reference).
                    10.3-Escrow Instructions  relating to escrow of subscription
                         funds  (filed  as  Exhibit  10.3  to  the  Registration
                         Statement   on  Form  S-1  (File  No.   33-79244)   and
                         incorporated herein by reference).
                    10.4-Management   Agreement  among  the   Partnership,   the
                         General  Partner  and  Chesapeake  Capital  Corporation
                         (filed as Exhibit 10.5 to the Registration Statement on
                         Form S-1 (File No. 33-79244) and incorporated herein by
                         reference).


                                       34
<PAGE>

                    10.5-Management Agreement among the Partnership, the General
                         Partner and John W. Henry & Co. Inc.  (filed as Exhibit
                         10.6 to the  Registration  Statement  on Form S-1 (File
                         No. 33-79244) and incorporated herein by reference).
                    10.6-Management Agreement among the Partnership, the General
                         Partner and Millburn  Ridgefield  Corporation (filed as
                         Exhibit 10.7 to the Registration  Statement on Form S-1
                         (File  No.   33-79244)  and   incorporated   herein  by
                         reference).
                    10.7-Management Agreement among the Partnership, the General
                         Partner  and  Willowbridge  Associates  Inc.  (filed as
                         Exhibit  10.7  to the  Form  10-K  for the  year  ended
                         December 31, 1997)
                    10.8-Management   Agreement  among  the   Partnership,   the
                         General Partner and ARA Portfolio  Management  Company,
                         L.L.C.  (filed as Exhibit 10.8 to the Form 10-K for the
                         year ended December 31, 1997).
                    10.9-Letter  from  General  Partner  terminating  Management
                         Agreement with Chesapeake Capital Corporation (filed as
                         Exhibit  10.9  to the  Form  10-K  for the  year  ended
                         December 31, 1997).


                                       35
<PAGE>


                    10.10-  Management  Agreement  among  the  Partnership,  the
                         General  Partner  and  Campbell & Co.,  Inc.  (filed as
                         Exhibit  10.10  to the Form  10-K  for the  year  ended
                         December 31, 1997).
                    10.11- Letters extending Management  Agreements with John W.
                         Henry & Company Inc.,  Chesapeake  Capital  Corporation
                         and Millburn  Ridgefield  Corporation for 1996 and 1997
                         (filed as  Exhibit  10.11 to the Form 10-K for the year
                         ended December 31, 1997).
                    10.12-  Letters   from  the  General   Partner   terminating
                         Management    Agreement   with   Millburn    Ridgefield
                         Corporation  (previously filed). 10.13- Letter from the
                         General Partner terminating  Management  Agreement with
                         ARA Portfolio Management (previously filed)
                    10.14-  Management  Agreement  among  the  Partnership,  the
                         General  Partner  and  Beacon  Management   Corporation
                         (previously filed).  10.15- Management  Agreement among
                         the  Partnership,   the  General  Partner  and  Roy  G.
                         Neiderhoffer Co., Inc. (previously filed).
                    10.16- Letters extending Management  Agreements with John W.
                         Henry & Company Inc., Campbell & and Company,  Inc. and
                         Willowbridge   Associates  Inc.  for  1998  (previously
                         filed).


                                       36
<PAGE>


                    10.17- Letters extending the Management Agreements with John
                         W. Henry & Company  Inc.,  Campbell  &  Company,  Inc.,
                         Willowbridge  Associates  Inc.  and  Beacon  Management
                         Corporation for 1999 (previously filed).
                    10.18-  Letter   from  the   General   Partner   terminating
                         Management Agreement with Roy G. Neiderhoffer Co., Inc.
                         (previously filed)
                    10.19-  Letter   from  the   General   Partner   terminating
                         Management  Agreement with John W. Henry & Company Inc.
                         (filed herein)
                    10.20-  Management  Agreement  among  the  Partnership,  the
                         General Partner and Stonebrook Structured Products, LLC
                         (filed as  Exhibit  10.20 to the Form 10-K for the year
                         ended December 31, 2000)
                    10.21-  Management  Agreement  among  the  Partnership,  the
                         General  Partner  and Graham  Capital  Management  L.P.
                         (filed as  Exhibit  10.21 to the Form 10-K for the year
                         ended December 31, 2000).
                    10.22- Letters  extending  the  Management  Agreements  with
                         Graham  Capital  Management  L.P.,  Campbell & Company,
                         Inc.,    Willowbridge   Associates   Inc.,   Stonebrook
                         Structured   Products,   LLC  and   Beacon   Management
                         Corporation for 2000 (filed herein).
                   (b) Reports on 8-K:  None Filed.

                                       37
<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

                                       38
<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 30th day of March 2001.


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



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



/s/ Daniel R. McAuliffe, Jr.                        /s/ Steve J. Keltz
Daniel R. McAuliffe, Jr.                            Steve J. Keltz
Director                                            Secretary and Director




/s/   Shelley Ullman
Shelley Ullman
Director

                                       39