UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-K

                  Annual Report Pursuant to Section 13 or 15(d)

                     of the Securities Exchange Act of 1934

                      For the year ended December 31, 1996

Commission File Number 33-75056

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

            New York                               13-3729162
      (State or other jurisdiction of            (I.R.S. Employer
       incorporation or organization)            Identification No.)

                    c/o Smith Barney Futures Management Inc.
                           390 Greenwich St. - 1st Fl.
                            New York, New York 10013
              (Address and Zip Code of principal executive offices)

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

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

Securities registered pursuant to Section 12(g) of the Act:  300,000  Units
                                                             of Limited
                                                             Partnership
                                                             Interest
                                                             (Title of Class)

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

                                    Yes   X    No

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


<PAGE>



                                    PART I

Item 1. Business.

      (a) General development of business. Smith Barney Diversified Futures Fund
L.P.  ("Partnership") is a limited  partnership  organized under the laws of the
State of New York,  on August  13,  1993 to engage in  speculative  trading of a
diversified  portfolio  of commodity  interests,  including  futures  contracts,
options and forwards. The commodity interests that are traded by the Partnership
are volatile and involve a high degree of market risk. The Partnership commenced
trading  operations  on January 12,  1994.  A total of 150,000  Units of Limited
Partnership Interest in the Partnership  ("Units") were offered to the public. A
Registration  Statement  on Form S-1  relating  to the  public  offering  became
effective  on October 29, 1993.  Between  October 29, 1993 and January 11, 1994,
75,615  Units  were  sold to the  public 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 $781,000 to the Partnership's trading account
on January  12,  1994 when the  Partnership  commenced  trading.  An  additional
150,000 Units were registered on a Registration  Statement on Form S-1 effective
February 17, 1994.  Sales of additional Units and additional  General  Partner's
contributions  and redemptions of Units for the year ended December 31, 1996 are
reported  in the  Statement  of  Partners'  Capital  on page F-5 under  "Item 8.
Financial Statements and Supplementary Data."


                                      2

<PAGE>



      The  General  Partner  has  agreed  to  make  capital  contributions,   if
necessary, so that its general partnership interest will be equal to the greater
of (i) an  amount  to  entitle  it to 1% of each  material  item of  Partnership
income,  loss,  deduction  or  credit  and  (ii)  the  greater  of (a) 1% of the
partners'  contributions to the Partnership or (b) $25,000. The Partnership will
be liquidated  upon the first of the following to occur:  December 31, 2013; the
net  asset  value of a Unit  decreases  to less than $400 as of the close of any
business  day;  or  under  certain  circumstances  as  defined  in  the  Limited
Partnership Agreement of the Partnership (the "Limited Partnership Agreement").
      The  Partnership's  trading of futures contracts on commodities is done on
United  States and  foreign  commodity  exchanges.  It  engages in such  trading
through a commodity  brokerage  account  maintained  with its commodity  broker,
Smith Barney Inc. ("SB").
     Smith Barney Futures  Management  Inc.,  acts as the general partner of the
Partnership (the "General Partner").  SB is an affiliate of the General Partner.
Under the Limited  Partnership  Agreement,  the General Partner  administers the
business and affairs of the Partnership.  As of December 31, 1996, all commodity
trading decisions are made for the Partnership by Campbell & Company, Inc., John
W.  Henry & Company,  Inc.  ("JWH"),  Chesapeake  Capital  Corporation,  Abraham
Trading  Co.,  Rabar Market  Research,  Inc.  and AIS Futures  Management,  Inc.
(collectively,  the  "Advisors").  None of the Advisors is  affiliated  with one
another,  the General  Partner or SB. The Advisors are not  responsible  for the
organization or

                                      3

<PAGE>



operation of the Partnership.
      Pursuant  to the  terms  of the  Management  Agreements  (the  "Management
Agreement"),  the  Partnership  is obligated to pay each Advisor:  (i) a monthly
management  fee equal to 1/6 of 1% (2% per year) of month-end Net Assets (except
that JWH will receive a monthly management fee equal to 1/3 of 1% (4% per year))
of the  Partnership  allocated  to each  Advisor as of the end of each month and
(ii) an incentive fee payable quarterly, equal to 20% of the New Trading Profits
(except JWH, which will receive an incentive fee of 15% of New Trading  Profits)
of the Partnership.
      The  Partnership  has  entered  into a  Customer  Agreement  with  SB (the
"Customer  Agreement") which provides that the Partnership will pay SB a monthly
brokerage  fee equal to 11/24 of 1% of  month-end  Net Assets  allocated  to the
Advisors (5.5% per year) in lieu of brokerage  commissions on a per trade basis.
SB 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. The Customer  Agreement  between the Partnership
and SB gives the Partnership the legal right to net unrealized gains and losses.
Brokerage fees will be paid for the life of the  Partnership,  although the rate
at which such fees are paid may be changed.
      In addition,  SB pays the Partnership interest on 80% of the average daily
equity maintained in cash in its account during each

                                      4

<PAGE>



month at a 30-day U.S.  Treasury bill rate determined  weekly by SB based on the
average non-competitive yield on 3-month U.S. Treasury bills maturing in 30 days
from the date on which such weekly rate is determined.
      (b) Financial  information  about  industry  segments.  The  Partnership's
business  consists  of  only  one  segment,  speculative  trading  of  commodity
interests.  The Partnership  does not engage in sales of goods or services.  The
Partnership's  net income (loss) from operations for the year ended December 31,
1996,  1995 and for the period from  January 12, 1994  (commencement  of trading
operations)  to December  31, 1994 is set forth under "Item 6. Select  Financial
Data". The Partnership capital as of December 31, 1996 was $171,587,261.
      (c)  Narrative description of business.
          See Paragraphs (a) and (b) above.
          (i) through (x) - Not applicable.
          (xi) through (xii) - Not applicable.
          (xiii) - The Partnership has no employees.
      (d) Financial Information About Foreign and Domestic Operations and Export
Sales.  The  Partnership  does not  engage  in sales of goods or  services,  and
therefore this item is not applicable.
Item 2.  Properties.
      The Partnership does not own or lease any properties.  The General Partner
operates out of facilities provided by its affiliate, SB.

                                      5

<PAGE>



Item 3.  Legal Proceedings.
      There are no pending legal proceedings to which the Partnership is a party
or to  which  any of its  assets  is  subject.  No  material  legal  proceedings
affecting  the  Partnership  were  terminated  during the fiscal  year.  
Item 4.  Submission of Matters to a Vote of Security Holders.
      There were no matters  submitted to the security holders for a vote during
the last fiscal year covered by this report.
                                    PART II
Item 5.   Market for Registrant's Common Equity and Related Security
          Holder Matters.
          (a)   Market Information.  The Partnership has issued no
                stock.  There is no established 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, 1996 was 7,706.
          (c)   Distribution.  The Partnership did not declare a
                distribution in 1996.


                                      6

<PAGE>



Item 6. Select Financial Data. The Partnership  commenced trading  operations on
January 12, 1994.  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, 1996,  1995 and for the period from January 12,
1994 (commencement of trading  operations) to December 31, 1994 and total assets
at December 31, 1996, 1995, 1994 and 1993 were as follows:
<TABLE>
<CAPTION>

                                           1996               1995                1994             1993
                                       -------------       -------------      ------------      -------
<S>                                         <C>                 <C>                <C>             <C> 

Realized and unrealized
 trading gains (losses) net
 of brokerage commissions
 and clearing fees of
 $10,754,060, $11,751,508 and
 $9,866,501, respectively                $ 23,283,977       $ 23,528,907         $  1,167,729

Interest Income                             6,631,110          8,077,695            5,227,466
                                          ------------      -------------        ------------

                                         $ 29,915,087       $ 31,606,602         $  6,395,195
                                         =============      =============        ============

Net Income (loss)                        $ 21,056,614       $ 22,177,218         $ (2,229,371)
                                         =============      =============        =============
Increase (decrease) in net
 asset value per unit                        $ 158.70            $124.60             $ (32.94)
                                             =========           ========            =========


Total assets                             $178,462,215       $201,319,665         $186,365,419         $2,000
                                         =============      =============        =============        ======
</TABLE>


                                           7

<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 and cash equivalents,  net unrealized  appreciation
(depreciation) on open futures contracts and interest receivable. Because of the
low margin deposits normally  required in commodity futures trading,  relatively
small price movements may result in substantial losses to the Partnership.  Such
substantial  losses could lead to a material decrease in liquidity.  To minimize
this risk, the Partnership will follow certain policies including:
      (1)  Partnership  funds are invested only in futures  contracts  which are
traded in sufficient volume to permit,  in the opinion of the Advisors,  ease of
taking and liquidating positions.
      (2) The Partnership diversifies its positions among various commodities.
      (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  may  occasionally  accept  delivery of a  commodity.
Unless such  delivery is disposed  of  promptly  by  retendering  the  warehouse
receipt  representing  the  delivery  to the  appropriate  clearing  house,  the
physical commodity position will be fully hedged.

                                      8

<PAGE>



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

                                      9

<PAGE>



credit and risk management  monitoring systems and, accordingly believes that it
has effective procedures for evaluating and limiting the credit and market risks
to which the Partnership is subject.  (See also Item 8. Financial  Statement and
Supplementary  Data.,  for further  information  on  financial  instrument  risk
included in the notes to financial statements.)
      Other  than  the  risks  inherent  in  commodity   futures  trading,   the
Partnership knows of no trends,  demands,  commitments,  events or uncertainties
which  will  result  in  or  which  are  reasonably  likely  to  result  in  the
Partnership's  liquidity  increasing  or  decreasing  in any  material  way. The
Limited  Partnership  Agreement  provides  that the General  Partner may, at its
discretion,  cause the Partnership to cease trading operations and liquidate all
open positions upon the first to occur of the following:  (i) December 31, 2013;
(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.


                                      10

<PAGE>



      (b)     Capital resources.  (i) The Partnership has made no
material commitments for capital expenditures.
         (ii) The Partnership's capital consists of the capital contributions of
the partners as increased or decreased by gains or losses on commodity  trading,
and by expenses,  interest  income,  redemptions of Units and  distributions  of
profits,  if any.  Gains or  losses  on  commodity  futures  trading  cannot  be
predicted.  Market moves in  commodities  are  dependent  upon  fundamental  and
technical  factors  which the  Partnership  may or may not be able to  identify.
Partnership   expenses  will  consist  of,  among  other  things,   commissions,
management  fees and incentive  fees.  The level of these  expenses is dependent
upon the level of trading and the ability of the  Advisors to identify  and take
advantage of price movements in the commodity markets,  in addition to the level
of net assets maintained.  In addition, the amount of interest income payable by
SB is dependent upon interest rates over which the Partnership has no control.
      No  forecast  can be made as to the  level  of  redemptions  in any  given
period.  Beginning on April 1, 1994 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,  1996
42,559.6065  units  were  redeemed  totaling  $45,695,264.  For the  year  ended
December 31, 1995 46,400.1653  Units were redeemed  totaling  $47,827,665  which
includes the General Partner's redemption representing 48.7530 Units equivalents
totaling $60,045. For the

                                      11

<PAGE>



period ended December 31, 1994 33,561.8122 Units were redeemed
totaling $32,289,431.
      The  Partnership  ceased to offer Units at the Net Asset Value per Unit as
of the end of each month  effective  April 1, 1996.  For the year ended December
31, 1996, there were additional  sales of 1,905.2800 Units totaling  $2,035,483.
For the year ended December 31, 1995, there were additional sales of 38,919.4389
Units totaling  $40,580,354.  For the period ended December 31, 1994, there were
additional sales of 141,214.7500  Units totaling  $136,109,323 and contributions
by  the  General  Partner  representing  1,316.6838  Unit  equivalents  totaling
$1,274,000.
      (c)    Results of Operations.
         For the year ended  December  31,  1996,  the net asset  value per Unit
increased  14.5% from  $1,091.66 to $1,250.36.  For the year ended  December 31,
1995,  the net asset value per Unit  increased  12.9% from $967.06 to $1,091.66.
For the period from January 12, 1994  (commencement  of trading  operations)  to
December 31, 1994, the net asset value per Unit decreased 3.3% from $1,000.00 to
$967.06.
         The  Partnership  experienced  net trading gains of $34,038,037  before
commissions and expenses in 1996.  These gains were recognized in the trading of
interest rates,  metals,  currencies and energy commodity  futures.  These gains
were  partially  offset by losses  recognized  in the  trading  of  indices  and
agricultural products.
         The  Partnership  experienced  net trading gains of $35,280,415  before
commissions  and expenses in 1995.  Realized  trading gains of $39,663,772  were
attributable to gains incurred in the trading of

                                      12

<PAGE>



interest rates, stock indices and foreign currencies commodity futures. However,
these  realized   trading  gains  were  partially   offset  by  realized  losses
experienced in the trading of energy and agricultural commodity futures.
       The  Partnership  experienced  net trading  gains of  $11,034,230  before
commissions  and  expenses for the period  ended  December  31,  1994.  Realized
trading  losses of  $12,300,678  were  attributable  to losses  incurred  in the
trading of  commodity  futures in stock  indices,  energy  and  interest  rates.
However,  these realized  trading losses were partially offset by realized gains
experienced  in the  trading  of metals,  foreign  currencies  and  agricultural
commodity futures.
         Commodity futures markets are highly volatile. Broad price fluctuations
and rapid inflation increase the risks involved in commodity  trading,  but also
increase the possibility of profit. The profitability of the Partnership depends
on the  existence  of major  price  trends and the  ability of the  Advisors  to
identify  those price trends  correctly.  Price trends are  influenced by, among
other things, changing supply and demand relationships,  weather,  governmental,
agricultural,   commercial  and  trade  programs  and  policies,   national  and
international  political and economic  events and changes in interest  rates. To
the extent that market trends exist and the Advisors are able to identify  them,
the Partnership expects to increase capital through operations.

                                      13

<PAGE>



Item 8.         Financial Statements and Supplementary Data.




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



                                                                   Page
                                                                  Number


                Report of Independent Accountants.                  F-2

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

                Statement of Income and  Expenses  
                for the years ended  December 31,  1996
                and 1995 and for the period January  12,
                1994 (commencement of trading operations)
                to December 31, 1994.                               F-4

                Statement of Partner's Capital for
                the years ended December 31, 1996, 1995
                and 1994.                                           F-5

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



                                      F-1



<PAGE>

                        Report of Independent Accountants

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

We have  audited the  accompanying  statement  of  financial  condition of SMITH
BARNEY  DIVERSIFIED  FUTURES  FUND L.P. (a New York Limited  Partnership)  as of
December 31, 1996 and 1995,  and the related  statements  of income and expenses
for the years ended  December  31, 1996 and 1995 and for the period from January
12, 1994  (commencement  of trading  operations)  to December 31,  1994,  and of
partners'  capital for the years ended December 31, 1996,  1995, and 1994. These
financial  statements  are the  responsibility  of the management of the General
Partner.  Our  responsibility  is to  express  an  opinion  on  these  financial
statements based on our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,  the  financial  position of SMITH  BARNEY  DIVERSIFIED
FUTURES  FUND L.P.  as of  December  31,  1996 and 1995,  and the results of its
operations for the years ended  December 31, 1996,  1995 and 1994, in conformity
with generally accepted accounting principles.



                                                      Coopers & Lybrand L.L.P.

New York, New York
February 28, 1997

                                      F-2
<PAGE>


                                  Smith Barney
                          Diversified Futures Fund L.P.
                        Statement of Financial Condition
                           December 31, 1996 and 1995


Assets:                                                 1996            1995
Equity in commodity futures
 trading account:
  Cash and cash equivalents (Note 3c)              $170,574,018     $181,687,559
  Net unrealized appreciation
   on open futures contracts                          6,887,203       18,951,551
  Commodity options owned, at
   market value (cost $607,539 and
   $5,360, in 1996 and 1995,
   respectively)                                        442,696            5,520
                                                   ------------     ------------
                                                    177,903,917      200,644,630
 Interest receivable                                    558,298          675,035
                                                   ------------     ------------
                                                   $178,462,215     $201,319,665
                                                   ============     ============
Liabilities and Partners' Capital:
Liabilities:
 Accrued expenses:
  Commissions                                      $    831,169     $    940,399
  Management fees                                       412,599          447,124
  Incentive fees                                      3,476,717
  Other                                                 108,043          107,357
 Redemptions payable (Note 5)                         2,005,213        5,631,797
 Commodity options written, at
  market value (premiums received
  $83,070 and $2,400, in 1996 and
  1995, respectively)                                    41,213            2,560
                                                   ------------     ------------
                                                      6,874,954        7,129,237
                                                   ------------     ------------
Partners' capital (Notes 1, 5, and 7):
 General Partner, 2,048.9308
  Unit equivalents outstanding
  in 1996 and 1995                                    2,561,901        2,236,736
 Limited Partners, 135,181.6379
  and 175,835.9644 Units of
  Limited Partnership Interest
  outstanding in
  1996 and 1995, respectively                       169,025,360      191,953,692
                                                   ------------     ------------
                                                    171,587,261      194,190,428
                                                   ------------     ------------
                                                   $178,462,215     $201,319,665
                                                   ============     ============


See notes to financial statements.

                                      F-3
<PAGE>


                                  Smith Barney
                          Diversified Futures Fund L.P.
                        Statement of Income and Expenses
                  for the years ended December 31, 1996 and
                1995 and for the period from January 12, 1994
                   (commencement of trading operations) to
                              December 31, 1994


                                       1996            1995           1994
Income:
 Net gains (losses) on trading
  of commodity interests:
  Realized gains (losses) on                     
   closed positions                $ 46,225,371    $ 39,663,772    $(12,300,678)
  Change in unrealized
   gains/ losses on
   open positions                   (12,187,334)     (4,383,357)     23,334,908
                                   ------------    ------------    ------------
                                     34,038,037      35,280,415      11,034,230
 Less, Brokerage
  commissions and
  clearing fees
  ($393,877, $433,213
  and $273,864,
  respectively) (Note 3c)           (10,754,060)    (11,751,508)     (9,866,501)
                                   ------------    ------------    ------------
 Net realized and
  unrealized gains                   23,283,977      23,528,907       1,167,729
 Interest income                      6,631,110       8,077,695       5,227,466
                                   ------------    ------------    ------------
                                     29,915,087      31,606,602       6,395,195
                                   ------------    ------------    ------------
Expenses:
 Management fees (Note 3b)            4,682,124       4,940,353       4,285,947
 Incentive fees (Note 3b)             3,923,488       4,073,071       3,023,294
 Other                                  252,861         415,960         170,003
 Organization expense (Note 6)                                        1,145,322
                                   ------------    ------------    ------------
                                      8,858,473       9,429,384       8,624,566
                                   ------------    ------------    ------------
Net income (loss)                  $ 21,056,614    $ 22,177,218    $ (2,229,371)
                                   ============    ============    ============
Net income (loss) per
 Unit of Limited Partnership
 Interest and General Partner
 Unit equivalent (Notes 1 and 7)   $     158.70    $     124.60    $     (32.94)
                                   ============    ============    ============

See notes to financial statements.

                                      F-4
<PAGE>


                                  Smith Barney
                          Diversified Futures Fund L.P.
                         Statement of Partners' Capital
                     for the years ended December 31, 1996,
                                  1995 and 1994


                                     Limited         General
                                     Partners        Partner           Total
Partners' capital at
 December 31, 1993                $       1,000   $       1,000   $       2,000
Proceeds from offering of 75,614
 Units of Limited  Partnership
 Interest  and General Partner's
 contribution representing 780
 Unit equivalents (Note 1)           75,614,000         780,000      76,394,000
                                  -------------   -------------   -------------
Opening Partnership
 capital for operations              75,615,000         781,000      76,396,000
Net loss                             (2,202,957)        (26,414)     (2,229,371)
Sale of 141,214.7500 Units of
 Limited Partnership Interest
 and General Partner's
 contribution representing
 1,316.6838 Unit equivalents        136,109,323       1,274,000     137,383,323
Redemption of 33,561.8122 Units
 of Limited Partnership Interest    (32,289,431)              0     (32,289,431)
                                  -------------   -------------   -------------
Partners' capital at
 December 31, 1994                  177,231,935       2,028,586     179,260,521
Net income                           21,909,023         268,195      22,177,218
Sale of 38,919.4389 Units of
 Limited Partnership Interest        40,580,354               0      40,580,354
Redemption of 46,351.4123 Units
 of Limited Partnership Interest
 and General Partner's
 redemption representing 48.7530
 Unit equivalents                   (47,767,620)        (60,045)    (47,827,665)
                                  -------------   -------------   -------------
Partners' capital at
 December 31, 1995                  191,953,692       2,236,736     194,190,428
Net income                           20,731,449         325,165      21,056,614
Sale of 1,905.2800 Units of
 Limited Partnership Interest         2,035,483               0       2,035,483
Redemption of 42,559.6065 Units
 of Limited Partnership Interest    (45,695,264)              0     (45,695,264)
                                  -------------   -------------   -------------
Partners' capital at
 December 31, 1996                $ 169,025,360   $   2,561,901   $ 171,587,261
                                  =============   =============   =============


See notes to financial statements.

                                      F-5
<PAGE>


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


1. Partnership Organization:

   Smith Barney Diversified  Futures Fund L.P. (the  "Partnership") is a limited
   partnership which was organized on August 13, 1993 under the partnership laws
   of  the  State  of  New  York  to  engage  in the  speculative  trading  of a
   diversified  portfolio of commodity  interests  including futures  contracts,
   options and forward contracts. The commodity interests that are traded by the
   Partnership are volatile and involve a high degree of market risk.

   Between  October  29,  1993 and January  11,  1994,  75,615  Units of Limited
   Partnership  Interest ("Units") were sold at $1,000.00 per Unit. The proceeds
   of the offering  were held in an escrow  account  until  January 12, 1994, at
   which  time  they  were  turned  over to the  Partnership  for  trading.  The
   Partnership was authorized to sell 300,000 Units during its offering period.

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

   The Partnership  will be liquidated upon the first of the following to occur:
   December 31, 2013;  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.

2. Accounting Policies:

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

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

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

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

3. Agreements:

   a.Limited Partnership Agreement:

   The Limited  Partnership  Agreement  provides that the General  Partner shall
   manage the business of the Partnership and may make all trading decisions for
   the Partnership.

   b.Management Agreements:

   The General  Partner has entered into  Management  Agreements with Campbell &
   Co., Inc.,  Chesapeake  Capital  Corporation,  John W. Henry & Company,  Inc.
   ("JWH"),  AIS Futures Management,  Inc., Abraham Trading Co. and Rabar Market
   Research Inc.  (collectively,  the "Advisors"),  registered commodity trading
   advisors.  The  Advisors  are not  affiliated  with one  another  and none is
   affiliated  with the General  Partner or SB and are not  responsible  for the
   organization or operation of the  Partnership.  The Partnership will pay each
   Advisor  a  monthly  management  fee  equal to 1/6 of 1% (2% per year) of Net
   Assets  allocated  to the  Advisor as of the end of each month  (except  JWH,
   which will receive a monthly  management fee equal to 1/3 of 1% (4% per year)
   of month-end Net Assets).  In addition,  the  Partnership is obligated to pay
   each  Advisor 20% of the New Trading  Profits  earned by each Advisor for the
   Partnership  in each  calendar  quarter  (except  JWH,  which will receive an
   incentive fee of 15% of New Trading Profits).  AIS Futures  Management,  Inc.
   was added as an  Advisor  to the  Partnership  effective  October 1, 1996 and
   Hyman Beck & Co., Inc., was terminated on the same date.

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

   c.Customer Agreement

   The Partnership has entered into a Customer Agreement which provides that the
   Partnership will pay SB a monthly brokerage fee equal up to 11/24 of 1% (5.5%
   per year) of month-end Net Assets in lieu of brokerage  commissions  on a per
   trade  basis.  Persons  investing  $1,000,000  or  more  will  pay a  reduced
   brokerage  fee of  7/24  of 1% of  month-end  Net  Assets  (3.5%  per  year),
   receiving the differential  between this reduced fee and 5.5% per year in the
   form of  additional  Units.  SB will pay a portion of  brokerage  fees to its
   financial  consultants  who have sold Units in this offering.  Brokerage fees
   will be paid for the life of the Partnership, although the rate at which such
   fees are paid may be changed.  The Partnership  will pay for National Futures
   Association  ("NFA")  fees,  exchange,  clearing,  user,  give-up  and  floor
   brokerage  fees.  All  of  the  Partnership's  assets  are  deposited  in the
   Partnership's  account at SB. The  Partnership's  cash is  deposited by SB in
   segregated bank accounts as required by Commodity Futures Trading  Commission
   regulations.  At  December  31,  1996 and 1995,  the  amount of cash held for
   margin  requirements  was $17,906,764 and $37,366,691,  respectively.  SB has
   agreed to pay the  Partnership  interest on 80% of the average  daily  equity
   maintained in cash in its account during each month at a 30-day Treasury bill
   rate determined  weekly by SB based on the average  non-competitive  yield on
   3-month U.S.  Treasury  bills maturing in 30 days from the date on which such
   weekly rate is determined. The Customer Agreement between the Partnership and
   SB gives the Partnership the legal right to net unrealized  gains and losses.
   The Customer Agreement may be terminated upon notice by either party.

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

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  instruments.  The results of the Partnership's  trading
   activities are shown in the statements of income and expenses.

   All of the commodity  interests owned by the Partnership are held for trading
   purposes.  The fair value of these  commodity  interests,  including  options
   thereon,  at  December  31,  1996 and 1995 was  $7,288,686  and  $18,954,511,
   respectively and the average fair value during the years then ended, based on
   monthly calculation, was $14,427,778 and $12,694,190, respectively.

5. Distributions and Redemptions:

   Distributions of profits,  if any, will be made at the sole discretion of the
   General  Partner  and at  such  times  as the  General  Partner  may  decide.
   Beginning on April 1, 1994, a limited  partner may require the Partnership to
   redeem his Units at their Net Asset Value as of the last day of each month 10
   days' notice to the General Partner. No fee will be charged for redemptions.

6. Organization and Offering Costs:

   Offering and organization expenses of $1,145,322 relating to the issuance and
   marketing of units offered were  initially  paid by SB. The  Partnership  has
   reimbursed SB for all such expenses from interest paid to the Partnership and
   has recorded such reimbursement amounts as organization expense in 1994.

7. Net Asset Value Per Unit:

   Changes  in the net asset  value per Unit for the years  ended  December  31,
   1996, 1995 and 1994 were as follows:


                              1996           1995          1994
   Net realized and
   unrealized
   gains/losses           $  175.18      $  132.42        $  (11.88)
   Interest income            41.97          44.48            29.36
   Expenses                  (58.45)        (52.30)          (50.42)
                          ---------      ---------        ---------
   Increase(decrease)
   for period                158.70         124.60           (32.94)
   Net asset value per
   Unit, beginning of
   period                  1,091.66         967.06         1,000.00
                          ---------      ---------        ---------
   Net asset value per
   Unit, end of period    $1,250.36      $1,091.66        $  967.06
                          =========      =========        =========

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

8. Financial Instrument Risk:

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

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

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

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

   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 not recorded
   in  the  financial  statements,  reflect  the  extent  of  the  Partnership's
   involvement  in these  instruments.  At December  31,  1996,  the notional or
   contractual  amounts of the  Partnership's  commitment  to purchase  and sell
   these  instruments was $852,011,994 and  $465,891,579,  respectively.  All of
   these instruments mature within one year of December 31, 1996.  However,  due
   to the nature of the  Partnership's  business,  these  instruments may not be
   held to maturity.  At December 31, 1996, the fair value of the  Partnership's
   derivatives, including options thereon, was $7,288,686, as detailed below.


                                   Notional or Contractual
                                    Amount of Commitments
                                  To Purchase       To Sell        Fair Value
Currencies
 -Exchange Traded
  Contracts                      $  45,531,748   $  99,346,984    $   2,104,939
 -OTC Contracts                     81,321,969      94,859,240          893,020
Energy                              39,406,151               0        2,582,805
Interest Rate U.S.                 128,723,410      20,658,535          (57,409)
Interest Rate
 Non-U.S.                          494,435,015     117,300,683         (389,818)
Grains                               3,521,825      31,295,014          694,742
Metals                              22,575,658      72,077,301        1,126,558
Indices                             24,509,712      15,044,568          453,162
Softs                                5,868,966      15,302,854         (141,817)
Livestock                            6,117,540           6,400           22,504
                                 -------------   -------------    -------------
Total                            $ 852,011,994   $ 465,891,579    $   7,288,686
                                 =============   =============    =============

                                      F-11



<PAGE>



Item 9. Changes in and Disagreements with Accountants on Accounting
        and Financial Disclosure.
        During the last two fiscal years and any subsequent  interim period,  no
independent  accountant who was engaged as the principal accountant to audit the
Partnership's financial statements has resigned or was dismissed.
                                   PART III
Item 10.Directors and Executive Officers of the Registrant.       
        The Partnership has no officers or directors and its affairs are managed
by  its  General  Partner,  Smith  Barney  Futures  Management  Inc.  Investment
decisions  will  be  made  by  Campbell  &  Company,  Inc.,  Chesapeake  Capital
Corporation,  John W. Henry & Company,  Inc.,  Abraham Trading Co., Rabar Market
Research, Inc. and AIS Futures Management, Inc. (collectively the "Advisors").
Item 11.Executive Compensation.
        The Partnership has no directors or officers. Its affairs are managed by
Smith Barney  Futures  Management  Inc.,  its General  Partner,  which  receives
compensation  for its services,  as set forth under "Item 1.  Business."  SB, an
affiliate of the General  Partner,  is the commodity  broker for the Partnership
and receives brokerage  commissions for such services,  as described under "Item
1. Business."  Brokerage  commissions and clearing fees of $10,754,060 were paid
for the year ended  December 31, 1996.  Management  fees and  incentive  fees of
$4,682,124 and  $3,923,488,  respectively,  were paid or payable to the Advisors
for the year ended December 31, 1996.


                                      14

<PAGE>



Item 12.    Security Ownership of Certain Beneficial Owners and
            Management.
            (a).  Security ownership of certain beneficial owners.
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  2,048.9308  Units (1.5%) of Limited  Partnership  Interest as of
December 31, 1996.
            (c).  Changes in control.   None.
Item 13.   Certain Relationship and Related Transactions.
           Smith Barney Inc. and Smith Barney Futures  Management  Inc. would be
considered  promoters for purposes of item 404 (d) of Regulation S-K. The nature
and the amounts of compensation  each promoter will receive from the Partnership
are set forth under "Item 1. Business" and "Item 11. Executive Compensation."

                                    PART IV
Item 14.    Exhibits, Financial Statement Schedules, and Reports on
            Form 8-K.
      (a) (1)  Financial Statements:
                  Statement  of  Financial  Condition  at December  31, 1996 and
                  1995.  Statement  of Income and  Expenses  for the years ended
                  December  31,  1996,  1995 and for the period from January 12,
                  1994 (commencement of trading

                                      15

<PAGE>



                  operations)  to December  31,  1994.  Statement  of  Partner's
                  Capital for the years ended December 31, 1996, 1995, and 1994.
              (2) Financial Statement Schedules:  None.
              (3)  Exhibits:
          3.1 -  Limited Partnership Agreement (filed as Exhibit 3.1
                 to the Registration Statement on Form S-1 (File No.
                 33-75056 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 on October 13, 1993 (filed
                 as Exhibit 3.2 to the Registration Statement on Form
                 S-1 (File No. 33-75056) 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. 33-75056) 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-
                 75056) and incorporated herein by reference).
          10.5-  Management Agreement among the Partnership, the
                 General Partner and Campbell & Company, Inc. (filed
                 as Exhibit 10.5 to the Registration Statement on
                 Form S-1 (File No. 33-75056) and incorporated herein

                                      16

<PAGE>



                 by reference).
          10.6-  Management Agreement among the Partnership, the
                 General Partner and Colorado Commodity Management
                 Corp. (filed as Exhibit 10.6 to the Registration
                 Statement on Form S-1 (File No. 33-75056) and
                 incorporated herein by reference).
          10.7-  Management Agreement among the Partnership, the
                 General Partner and John W. Henry & Company, Inc.
                 (filed as Exhibit 10.7 to the Registration Statement
                 on Form S-1 (File No. 33-75056) and incorporated
                 herein by reference).
          10.8-  Management Agreement among the Partnership, the
                 General Partner and Hyman Beck & Company (filed as
                 Exhibit 10.8 to the Registration Statement on Form
                 S-1 (File No. 33-75056) and incorporated herein by
                 reference).
          10.9-  Letter dated May 19, 1994 from the General Partner
                 to Colorado Commodities Management Corp. terminating
                 the Management Agreement (previously filed).
         10.10-  Management Agreement among the Partnership, the
                 General Partner and Chesapeake Capital Corp.
                 (previously filed).
         10.11-  Letters extending Management Agreements with John W.
                 Henry & Company, Inc., Hyman Beck & Company,
                 Campbell & Co., Inc. and Chesapeake Capital Corp.
                 (previously filed).

                                      17

<PAGE>



         10.12-  Management Agreement among the Partnership, the
                 General Partner and Abraham Trading Co. (previously
                 filed).
         10.13-  Management Agreement among the Partnership, the
                 General Partner and Rabar Market Research Inc.
                 (previously filed).
         10.14-  Management Agreement among the Partnership, the
                 General Partner and AIS Futures Management, Inc.
                 (filed herein).
         10.15-  Letter dated October 1, 1996 from the General  Partner to Hyman
                 Beck & Company  terminating  the  Management  Agreement  (filed
                 herein).
         (b)  Reports on 8-K:   None Filed.

                                      18

<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


                                      19


<PAGE>


                                  SIGNATURES

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

SMITH BARNEY DIVERSIFIED FUTURES FUND L.P.


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



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


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



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



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



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




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



                                      20

<PAGE>