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, 1997

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, 1997 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").

     Smith  Barney  Futures  Management  Inc.  acts as the general  partner (the
"General  Partner") of the Partnership and is a wholly owned subsidiary of Smith
Barney Inc. ("SB"). SB acts as commodity broker for the Partnership. On November
28, 1997, Smith Barney Holdings Inc. was merged with Salomon Inc to form Salomon
Smith Barney  Holdings  Inc.  ("SSBH"),  a wholly owned  subsidiary of Travelers
Group Inc. SB is a wholly owned subsidiary of SSBH.

         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 SB.

     As of December 31, 1997, 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

                                          3
<PAGE>


Inc.("Rabar"),   Telesis  Management  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 operation of the Partnership.  Telesis Management Inc. was added
as an Advisor to the Partnership effective August 1, 1997.
         Pursuant to the terms of the  Management  Agreements  (the  "Management
Agreements"),  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  (except  for Rabar who will be paid
annually), equal to 20% of the New Trading Profits (as defined in the Management
Agreements)(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.
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 pays a
portion of its brokerage fees to its

                                    4

<PAGE>



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 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,
1997,  1996 and 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,  1997  was
$151,381,261.

                                5
<PAGE>


              (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.
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

                                            6

<PAGE>



                        Partnership Interest as of December 31, 1997 was 6,817.
              (c)       Distribution.   The   Partnership   did  not  declare  a
                        distribution in 1997 or 1996.


                                              7

<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,  1997,  1996 and 1995 and for the period from
January 12, 1994  (commencement of trading  operations) to December 31, 1994 and
total assets at December 31, 1997, 1996, 1995, 1994 and 1993 were as follows:

<TABLE>
<CAPTION>

                                                   1997              1996               1995           1994               1993

                                               -------------    -------------     -------------   ------------         ---------
<S>                                                <C>                 <C>             <C>            <C>                 <C>
Realized and unrealized
 trading gains (losses) net
 of brokerage  commissions
 and clearing fees of
 $9,893,999, $10,754,060,
 $11,751,508 and $9,866,501,
 respectively                                 $   5,083,043     $  23,283,977     $  23,528,907     $   1,167,729

Interest Income                                   6,331,875         6,631,110         8,077,695         5,227,466
                                              -------------     -------------     -------------      -------------

                                              $  11,414,918     $  29,915,087     $  31,606,602      $   6,395,195
                                              =============     =============     =============      =============

Net Income (loss)                             $   5,525,809     $  21,056,614     $  22,177,218     $  (2,229,371)
                                              =============     =============     =============      =============
Increase (decrease) in net
 asset value per unit                         $       48.07     $      158.70     $      124.60      $      (32.94)
                                              =============     =============     =============      =============


Total assets                                  $ 154,556,541     $ 178,462,215     $ 201,319,665     $ 186,365,419      $      2,000
                                              =============     =============     =============     =============      =============
</TABLE>


                                            8

<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.

                                9

<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

                                   10

<PAGE>



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.  (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  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.


                                 11

<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,  1997,
20,899.0206  Units  were  redeemed  totaling  $26,060,110.  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

                               12

<PAGE>



Units were redeemed  totaling  $47,827,665  which includes the General Partner's
redemption representing 48.7530 Units equivalents
totaling $60,045.
         The  Partnership  ceased  to  offer  Units  effective  April  1,  1996.
Additional  sales of  256.5390  Units  totaling  $328,301  for the  year  ending
December 31, 1997 represent  additional Units offered as a reduced brokerage fee
to existing  limited partners  investing  $1,000,000 or more. 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.
         (c)      Results of Operations.
             For the year ended  December 31, 1997, the net asset value per Unit
increased  3.8% from  $1,250.36 to  $1,298.43.  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.
          The Partnership  experienced  net trading gains of $14,977,042  before
commissions  and  expenses  for the year ended  December  31,  1997.  Gains were
recognized in the trading of commodity futures in currencies,  indices,  metals,
softs and interest rates and were partially  offset by losses  recognized in the
trading of energy, grains and livestock.
             The Partnership    experienced   net   trading gains of $34,038,037
before   commissions    and    expenses    in   1996.    These    gains     were

                             13

<PAGE>



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 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.
             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.

                               14

<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, 1997 and 1996.                                      F-3

Statement of Income and Expenses
for the years ended December 31, 1997
1996 and 1995.                                                   F-4

Statement of Partners' Capital for
the years ended December 31, 1997,
1996 and 1995.                                                   F-5

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



                                     F-1

                                  Continued



<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, 1997 and 1996,  and the related  statements  of income and expenses
and  partners'  capital for the years ended  December 31,  1997,  1996 and 1995.
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,  1997 and 1996,  and the results of its
operations for the years ended  December 31, 1997,  1996 and 1995, in conformity
with generally accepted accounting principles.



                                                        Coopers & Lybrand L.L.P.

New York, New York
March 6, 1998
                              F-2


<PAGE>


                                  Smith Barney
                          Diversified Futures Fund L.P.
                        Statement of Financial Condition
                           December 31, 1997 and 1996


                                                        1997            1996
Assets:
Equity in commodity futures
  trading account:
   Cash and cash equivalents                       $142,852,854     $170,574,018
   (Note 3c)
   Net unrealized appreciation
    on open futures contracts                        11,184,770        6,887,203
   Commodity options owned,
    at market
    value (cost $607,539 in
    1996)                                                    --          442,696
                                                   ------------     ------------
                                                    154,037,624      177,903,917

  Interest receivable                                   518,917          558,298
                                                   ------------     ------------
                                                   $154,556,541     $178,462,215

                                                   ------------     ------------


Liabilities and Partners'
Capital:
Liabilities:
  Accrued expenses:
   Commissions                                     $    721,970     $    831,169
   Management fees                                      359,579          412,599
   Incentive fees                                       492,736        3,476,717
   Other                                                 79,457          108,043
  Redemptions payable (Note 5)                        1,521,538        2,005,213
  Commodity options written,
   at market value (premiums
   received $83,070 in 1996                                  --           41,213
                                                   ------------     ------------
                                                      3,175,280        6,874,954
Partners' capital (Notes 1, 5, and 6):
  General Partner, 2,048.9308
   Unit equivalents
   outstanding
   in 1997 and 1996                                   2,660,393        2,561,901
  Limited Partners,
   114,539.1563 and
   135,181.6379 Units of
   Limited Partnership
   Interest outstanding in
   1997 and 1996, respectively                      148,720,868      169,025,360
                                                   ------------     ------------
                                                    151,381,261      171,587,261
                                                   ------------     ------------
                                                   $154,556,541     $178,462,215
                                                   ------------     ------------




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, 1997, 1996 and 1995


                                        1997            1996           1995
Income:
  Net gains on trading of
   commodity interests:
   Realized gains on
    closed positions               $ 10,556,489    $ 46,225,371    $ 39,663,772
   Change in
    unrealized gains/
    losses on open
    positions                         4,420,553     (12,187,334)     (4,383,357)
                                   ------------    ------------    ------------
                                     14,977,042      34,038,037      35,280,415
  Less, Brokerage
   commissions and
   clearing fees
   ($316,227,
   $393,877 and
   $433,213,
   respectively)
   (Note 3c)                         (9,893,999)    (10,754,060)    (11,751,508)
                                   ------------    ------------    ------------
  Net realized and
   unrealized gains                   5,083,043      23,283,977      23,528,907
  Interest income                     6,331,875       6,631,110       8,077,695
                                   ------------    ------------    ------------

                                     11,414,918      29,915,087      31,606,602
                                   ------------    ------------    ------------

Expenses:

  Management fees
  (Note 3b)                           4,455,840       4,682,124       4,940,353
  Incentive fees
  (Note 3b)                           1,301,462       3,923,488       4,073,071
  Other                                 131,807         252,861         415,960
                                   ------------    ------------    ------------
                                      5,889,109       8,858,473       9,429,384
                                   ------------    ------------    ------------
Net income                         $  5,525,809    $ 21,056,614    $ 22,177,218
                                   ------------    ------------    ------------
Net income per Unit of
  Limited Partnership
  Interest
  and General Partner Unit
  equivalent (Notes 1 and 6)       $      48.07    $     158.70    $     124.60
                                   ------------    ------------    ------------




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, 1997, 1996 and 1995


                                   Limited            General
                                  Partners            Partner            Total
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              --          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              --           2,035,483
Redemption of
  42,559.6065 Units
  of Limited
  Partnership
  Interest                      (45,695,264)             --         (45,695,264)
                              -------------     -------------     -------------
Partners' capital at
  December 31, 1996             169,025,360         2,561,901       171,587,261
Net income                        5,427,317            98,492         5,525,809
Sale of 256.5390
  Units of Limited
  Partnership
  Interest                          328,301              --             328,301
Redemption of
  20,899.0206 Units
  of Limited
Partnership
  Interest                      (26,060,110)             --         (26,060,110)
                              -------------     -------------     -------------
Partners' capital at
  December 31, 1997           $ 148,720,868     $   2,660,393     $ 151,381,261
                              -------------     -------------     -------------






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. The
    Partnership was authorized to sell 300,000 Units during its offering period.

    Smith  Barney Futures  Management  Inc.  acts as the  general  partner  (the
    "General  Partner")  of the Partnership and is a wholly owned  subsidiary of
    Smith Barney Inc.   ("SB").  SB acts as commodity broker for the Partnership
    (see Note 3c).  On November 28, 1997,  Smith Barney Holdings Inc. was merged
    with Salomon Inc  to form Salomon  Smith Barney  Holdings Inc.  ("SSBH"),  a
    wholly  owned   subsidiary  of  Travelers  Group Inc.  SB is a wholly  owned
    subsidiary  of SSBH.

    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>


    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., Rabar
       Market Research Inc. ("Rabar") and Telesis Management 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 (Rabar will be paid annually)
       (except JWH,  which will  receive an incentive  fee of 15% of New Trading
       Profits).  Telesis  Management  Inc.  was  added  as an  Advisor  to  the
       Partnership effective August 1, 1997.

    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,

                                   F-7
<PAGE>



       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, 1997 and 1996,  the amount of cash held for margin  requirements  was
       $28,016,682  and  $17,906,764,  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 U.S. Treasury bill rate
       determined  weekly  by SB based on the  average  noncompetitive  yield on
       3-month U.S.  Treasury  bills  maturing in 30 days from the date on which
       such  weekly  rate is  determined.  The  Customer  Agreement  between the
       Partnership  and  SB  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  instruments.  The results of the Partnership's trading
    activities are shown in the statement of income and expenses.

    All of the commodity interests owned by the Partnership are held for trading
    purposes.  The fair value of these commodity  interests,  including  options
    thereon,  at December  31,  1997 and 1996 was  $11,184,770  and  $7,288,686,
    respectively,  and the average fair value during the years then ended, based
    on monthly calculation, was $10,552,252 and $14,427,778, 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.  A
    limited partner may require the Partnership to redeem his Units at their Net
    Asset  Value  as of the last day of each  month  on 10 days'  notice  to the
    General Partner. No fee will be charged for redemptions.

                              F-8

<PAGE>

6.  Net Asset Value Per Unit:

    Changes in the net asset  value per Unit for the years  ended  December  31,
    1997, 1996 and 1995 were as follows:





                                                1997         1996          1995
Net realized and
unrealized gains                            $   44.59    $  175.18    $  132.42
Interest income                                 49.04        41.97        44.48
Expenses                                       (45.56)      (58.45)      (52.30)
                                             ---------    ---------    ---------

Increase for year                               48.07       158.70       124.60
Net asset value per
Unit, beginning of
year                                         1,250.36     1,091.66       967.06
                                             ---------    ---------    ---------
Net asset value per
Unit, end of year                           $1,298.43    $1,250.36    $1,091.66
                                             ---------    ---------    ---------

7.  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.

                              F-9

<PAGE>

    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.

    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,  1997,  the notional or
    contractual  amounts of the  Partnership's  commitment  to purchase and sell
    these  instruments was $825,601,374 and $788,720,477,  respectively.  All of
    these instruments mature within one year of December 31, 1997. However,  due
    to the nature of the  Partnership's  business,  these instruments may not be
    held to maturity.
                              F-10


<PAGE>

At December  31,  1997,  the  fair  value  of   the  Partnership's  derivatives,
including options thereon, was $11,184,770, as detailed below.

                                December 31, 1997
                    -------------------------------------
                   Notional or Contractual
                    Amount of Commitment
                   To Purchase    To Sell    Fair Value
Currencies
  -Exchange
   Traded
   Contracts    $ 11,004,227   $ 85,052,231   $   710,480
  -OTC
   Contracts      91,780,207    172,891,448       430,261
Energy             2,293,498     51,019,266     2,859,466
Grains             1,900,330     34,874,210       884,824
Interest Rate
  Non-U.S        450,921,559    320,673,268     1,205,068
Interest Rate
  U.S            221,651,270             --     1,004,688
Livestock                 --      7,873,583       241,315
Metals            23,394,060     69,472,845     2,414,000
Softs             18,743,743     20,872,968       934,676
Indices            3,912,480     25,990,658       499,992
                ------------   ------------   -----------
Total           $825,601,374   $788,720,477   $11,184,770
                ------------   ------------   -----------

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,  and  the  fair  value  of  the  Partnership's
derivatives, including options thereon, was $7,288,686 as detailed below.

                             December 31, 1996
                   --------------------------------------
                    Notional or Contractual
                     Amount of Commitment
                   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             --     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
                ------------   ------------   -----------

8.  Subsequent Events:

     Effective  January 31, 1998,  Chesapeake  Capital  Corporation  and Abraham
     Trading Co. were  terminated as Advisors.  Trendview  Management,  Inc. was
     added as an Advisor on February 1, 1998.

                         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., AIS
Futures  Management,   Inc.  and  Telesis  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 $9,893,999
were paid for the year ended  December 31, 1997.  Management  fees and incentive
fees of $4,455,840  and  $1,301,462,  respectively,  were paid or payable to the
Advisors for the year ended December 31, 1997.


                                 15

<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 (1.8%) of Limited  Partnership  Interest as of
December 31, 1997.
                 (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, 1997 and 1996.
                 Statement  of Income and Expenses for the years ended December
                 31, 1997, 1996 and 1995.

                                      16

<PAGE>



                         Statement  of  Partners'  Capital   for the years ended
                         December 31, 1997, 1996, and 1995.
                 (2)     Financial Statement Schedules: Financial Data
                         Schedule for the year ended December 31, 1997.
                 (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
                         by reference).

                                             17

<PAGE>



              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).

                                              18
<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.   (previously
                         filed).
             10.15-      Letter dated  October 1, 1996 from the General  Partner
                         to Hyman  Beck &  Company  terminating  the  Management
                         Agreement (previously filed).
             10.16-      Management Agreement   among   the   Partnership,   the
                         General Partner and  Telesis   Management  Inc.  (filed
                         herein).
             10.17-      Letter    terminating   Management      Agreement  with
                         Chesapeake      Capital   Corporation   (filed herein).
             10.18-      Letter terminating Management Agreement  with   Abraham
                         Trading Co. (filed herein).
             10.19-      Management   Agreement   among   the   Partnership  the
                         General   Partner    and   Trendview   Management, Inc.
                         (filed herein).
             10.20-      Letters extending Management Agreements with Campbell &
                         Co., Chesapeake Capital Corp., John W. Henry & Company,
                         Inc., AIS Futures Managment, Inc, Abraham Trading  Co.,
                         and Rabar Market Research Inc. for 1996 and 1997 (filed
                         herein)


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

                                        19

<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


                                20

<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 1998.

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/ 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

                                                        21