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, 1999

Commission File Number 0-26132

                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 LLC
                           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:  Units
                                                             of Limited
                                                             Partnership
                                                             Interest
                                                             (Title of Class)

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

                                                        Yes   X    No

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

As of February  29,  2000  Limited  Partnership  Units with an  aggregate  value
of  $110,920,751  were  outstanding  and held by non-affiliates.

                       DOCUMENTS INCORPORATED BY REFERENCE

                                      None




<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
contributions  and redemptions of Units for the year ended December 31, 1999 are
reported  in the  Statement  of  Partners'  Capital  on page F-6 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 ALimited Partnership Agreement@).
         Smith Barney Futures  Management  LLC acts as the general  partner (the
"General  Partner") of the Partnership.  The General Partner changed its form of
organization  from a corporation  to a limited  liability  company on October 1,
1999. The  Partnership's  commodity broker is Salomon Smith Barney Inc. ("SSB").
SSB is an affiliate of the General Partner.  The General Partner is wholly owned
by Salomon Smith Barney Holdings Inc. ("SSBHI"), which is the sole owner of SSB.
SSBHI is a wholly owned subsidiary of Citigroup Inc.
         The  Partnership's  trading of futures contracts on commodities is done
on United  States and foreign  commodity  exchanges.  It engages in such trading
through a commodity brokerage account maintained with SSB.

                                   3
<PAGE>


     As of December 31, 1999, all commodity  trading  decisions are made for the
Partnership by Campbell & Company,  Inc., John W. Henry & Company, Inc. ("JWH"),
Rabar Market Research Inc.("Rabar"),  Willowbridge  Associates,  Inc., Trendview
Management,   Inc.  and  Stonebrook  Capital  Management,   Inc.  ("Stonebrook")
(collectively,  the  "Advisors").  None of the Advisors is  affiliated  with one
another,  the General  Partner or SSB. The Advisors are not  responsible for the
organization or operation of the Partnership. Stonebrook was added as an Advisor
to the Partnership effective April 9, 1999.
         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
Stonebrook will receive a monthly  management fee equal to 1/16 of 1% (0.75% per
year) of a fixed notional account size of $75,000,000) 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)  earned by
each Advisor for the Partnership. Stonebrook does not receive an incentive fee.
         The  Partnership  has entered into a Customer  Agreement  with SSB (the
"Customer Agreement") which provides that the Partnership will pay SSB a monthly
brokerage  fee equal to 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.
                                   4
<PAGE>

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.  SSB 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 SSB 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,  SSB pays the  Partnership  interest on 80% of the average
daily  equity  maintained  in cash in its account  during each month at a 30-day
U.S.  Treasury  bill  rate  determined  weekly  by  SSB  based  on  the  average
non-competitive  yield on 3-month U.S.  Treasury  bills maturing in 30 days from
the date on which such weekly rate is determined.
         (b) Financial  information about industry  segments.  The Partnership's
business  consists  of  only  one  segment,  speculative  trading  of  commodity
interests.  The Partnership  does not engage in sales of goods or services.  The
Partnership's net income (loss) from operations for the years ended December 31,
                                   5
<PAGE>

1999, 1998,  1997, 1996 and 1995 is set forth under "Item 6. Selected  Financial
Data". The Partnership capital as of December 31, 1999 was $117,508,532.
         (c)  Narrative  description  of business.
            See  Paragraphs  (a) and (b) above.
            (i) through (x) - Not applicable.
            (xi) through (xii) - Not applicable.
            (xiii) - The Partnership has no employees.
         (d) Financial  Information About Geographic Areas. The Partnership does
not  engage in sales of goods or  services,  or own any long lived  assets,  and
therefore this item is not applicable.
Item 2.  Properties.
         The  Partnership  does not own or lease  any  properties.  The  General
Partner operates out of facilities provided by its affiliate, SSB.
Item 3.  Legal Proceedings.
         There have been no material  administrative,  civil or criminal actions
within the past five years against SSB or any of its  individual  principals and
no such actions are currently pending, except as follows.
         In  September  1992,  Harris  Trust and  Savings  Bank (as  trustee for
Ameritech  Pension Trust),  Ameritech  Corporation,  and an officer of Ameritech
sued  Salomon  Brothers  Inc  ("SBI") and Salomon  Brothers  Realty  Corporation
("SBRC")  in the U.S.  District  Court for the  Northern  District  of  Illinois
(Harris  Trust  Savings  Bank,  not  individually  but solely as trustee for the
Ameritech Pension Trust,  Ameritech Corporation and John A. Edwardson v. Salomon
Brothers Inc and Salomon  Brothers  Realty  Corp.).  The complaint  alleged that
                                   6
<PAGE>

purchases by Ameritech  Pension Trust from the Salomon entities of approximately
$20.9  million in  participations  in a portfolio  of motels  owned by Motels of
America,  Inc.  and Best Inns,  Inc.  violated the  Employee  Retirement  Income
Security Act ("ERISA"),  the Racketeer  Influenced and Corrupt  Organization Act
("RICO") and state law. SBI had acquired the participations  issued by Motels of
America and Best Inns to finance  purchases of motel  portfolios and sold 95% of
three  such  issues  and 100% of one  such  issue to  Ameritech  Pension  Trust.
Ameritech Pension Trust's  complaint sought (1)  approximately  $20.9 million on
the ERISA  claim,  and (2) in excess  of $70  million  on the RICO and state law
claims as well as other relief.  In various  decisions  between  August 1993 and
July 1999, the courts hearing the case have dismissed all of the  allegations in
the complaint against the Salomon entities.  In October 1999, Ameritech appealed
to the U.S.  Supreme Court and in January 2000, the Supreme Court agreed to hear
the case and oral argument will be heard April 17, 2000. The appeal seeks review
of the  decision  of the U.S.  Court of Appeals  for the  Seventh  Circuit  that
dismissed the sole remaining ERISA claim against the Salomon entities.
         Both the Department of Labor and the Internal  Revenue  Service ("IRS")
have  advised  SBI that they were or are  reviewing  the  transactions  in which
Ameritech  Pension Trust acquired such  participations.  With respect to the IRS
review,  SSBHI,  SBI and  SBRC  have  consented  to  extensions  of time for the
assessment  of excise  taxes that may be  claimed to be due with  respect to the
transactions  for the years 1987,  1988 and 1989. As of the date of this report,
                                   7
<PAGE>

the IRS has not issued such 30-day letters to SSBHI, SBI or SBRC.
     In December  1996, a complaint  seeking  unspecified  monetary  damages was
filed by Orange County,  California against numerous brokerage firms,  including
SSB,  in the U.S.  Bankruptcy  Court for the  Central  District  of  California.
(County  of  Orange et al. v. Bear  Stearns  & Co.  Inc.  et al.) The  complaint
alleged,  among other things,  that the  brokerage  firms  recommended  and sold
unsuitable  securities to Orange County.  SSB and the remaining  brokerage firms
settled with Orange County in mid 1999.
     In June  1998,  complaints  were filed in the U.S.  District  Court for the
Eastern District of Louisiana in two actions (Board of  Liquidations,  City Debt
of the City of New  Orleans v. Smith  Barney  Inc.  et ano.  and The City of New
Orleans v. Smith Barney Inc. et ano.),  in which the City of New Orleans seeks a
determination that Smith Barney Inc. and another underwriter will be responsible
for any  damages  that the City may incur in the event the IRS denies tax exempt
status to the  City's  General  Obligation  Refunding  Bonds  Series  1991.  The
complaints  were  subsequently  amended.  SSB has asked the court to dismiss the
amended complaints.  In May 1999, the Court denied SSB's motion to dismiss,  but
stayed the  litigation  because the matter was not ripe. In March 2000, the city
filed a notice of discontinuance dismissing the complaint.
         In November  1998,  a class  action  complaint  was filed in the United
States  District Court for the Middle District of Florida (Dwight Brock as Clerk
for Collier  County v. Merrill  Lynch,  et al.).  The  complaint  alleged  that,
                                   8
<PAGE>

pursuant to a nationwide conspiracy, 17 broker-dealer defendants, including SSB,
charged excessive mark-ups in connection with advanced  refunding  transactions.
Among  other  relief,  plaintiffs  sought  compensatory  and  punitive  damages,
restitution  and/or  rescission of the  transactions and disgorgement of alleged
excessive  profits.  In  October  1999,  the  plaintiff  filed a second  amended
complaint. SSB has asked the court to dismiss the amended complaint.
         In connection with the Louisiana and Florida  matters,  the IRS and SEC
have been conducting an industry-wide investigation into the pricing of Treasury
securities in advanced refunding transactions.
         In December 1998, SSB was one of twenty-eight  market making firms that
reached a settlement  with the SEC in the matter titled In the Matter of Certain
Market Making  Activities on NASDAQ.  As part of the  settlement of that matter,
SSB, without  admitting or denying the factual  allegations,  agreed to an order
that  required  that it: (i) cease and desist  from  committing  or causing  any
violations of Sections  15(c)(1) and (2) of the Securities  Exchange Act of 1934
and Rules  15c1-2,  15c2-7 and 17a-3  thereunder,  (ii) pay  penalties  totaling
approximately  $760,000,  and (iii) submit certain policies and procedures to an
independent consultant for review.
         In March 1999, a complaint  seeking in excess of $250 million was filed
by a hedge fund and its investment  advisor  against SSB in the Supreme Court of
the  State of New  York,  County of New York  (MKP  Master  Fund,  LDC et al. v.
Salomon  Smith Barney Inc.).  The complaint  included  allegations  that,  while
                                   9
<PAGE>

acting as prime  broker for the hedge fund,  SSB  breached  its  contracts  with
plaintiffs,  misused their monies, and engaged in tortious  (wrongful)  conduct,
including  breaching  its fiduciary  duties.  SSB asked the court to dismiss the
complaint  in full.  In  October  1999,  the court  dismissed  the tort  claims,
including the breach of fiduciary  duty claims.  The court allowed the breach of
contract and misuse of money  claims to stand.  In December  1999,  SSB filed an
answer and asserted counterclaims against the investment advisor. In response to
plaintiff's motion to strike the counterclaims, in January 2000, SSB amended its
counterclaims  against  the  investment  advisor  to  seek  indemnification  and
contribution. Plaintiffs moved to strike SSB's amended counterclaims in February
2000. SSB will continue to contest this lawsuit vigorously.
         In the  course of its  business,  SSB,  as a major  futures  commission
merchant and  broker-dealer is a party to various claims and routine  regulatory
investigations  and proceedings  that the general partner believes do not have a
material  effect on the business of SSB.
 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.
                                   10
<PAGE>


                                                       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, 1999 was 5,316.
          (c) Distribution.  The Partnership  did  not declare a distribution in
           1999 or 1998.
          (d)  Use of Proceeds:  For the twelve months ended  December 31, 1999,
           there were  additional  sales of 88.1293 Units totaling $120,344  and
           90.7211   Units  totaling   $117,210 for  the  twelve   months  ended
           December 31, 1998 and 256.5390 Units  totaling   $328,301   for   the
           twelve months ended  December 31, 1997.
           Proceeds from the sale of additional Units are used in the trading of
           commodity interests including futures contracts,  options and forward
           contracts.

                                   11
<PAGE>


Item 6. Selected Financial Data. 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, 1999,  1998,  1997,  1996 and 1995 and
total assets at December 31, 1999, 1998, 1997, 1996 and 1995 were as follows:

<TABLE>
<CAPTION>
<S>                                          <C>             <C>              <C>             <C>            <C>
                                            1999             1998            1997            1996            1995
                                   -------------    -------------   -------------   -------------   -------------
Realized and unrealized trading
gains(losses) net of brokerage
commissions and  clearing  fees
of $7,950,768,  $8,540,127,
$9,893,999, $10,754,060   and
$11,751,508, respectively          $  (8,806,023)   $  11,635,004   $   5,083,043   $  23,283,977   $  23,528,907


Interest income                        4,687,547        5,203,988       6,331,875       6,631,110       8,077,695
                                   -------------    -------------   -------------   -------------   -------------


                                   $  (4,118,476)   $  16,838,992   $  11,414,918   $  29,915,087   $  31,606,602
                                   =============    =============   =============   =============   =============

Net income (loss)                  $  (9,063,470)   $   9,913,148   $   5,525,809   $  21,056,614   $  22,177,218
                                   =============    =============   =============   =============   =============


Increase (decrease) in net
 asset value per unit              $      (94.66)   $       99.32   $       48.07   $      158.70   $      124.60
                                   =============    =============   =============   =============   =============

Total assets                       $ 120,563,424    $ 146,464,780   $ 154,556,541   $ 178,462,215   $ 201,319,665
                                   =============    =============   =============   =============   =============

</TABLE>
                                   12
<PAGE>



Item 7.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations.
         (a)  Liquidity.  The  Partnership  does not engage in sales of goods or
services.  Its only  assets  are its  equity in its  commodity  futures  trading
account,  consisting of cash, net unrealized appreciation (depreciation) on open
futures  contracts and interest  receivable.  Because of the low margin deposits
normally required in commodity 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 follows 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.

                                   13
<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
may  include  forwards,  futures  and  options,  whose  value is  based  upon an
underlying  asset,  index,  or reference  rate, and generally  represent  future
commitments to exchange  currencies or cash flows,  or to purchase or sell other
financial  instruments  at specified  terms at specified  future dates.  Each of
these  instruments  is subject to various risks similar to those relating to the
underlying financial  instruments  including market and credit risk. The General
                                   14
<PAGE>

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.  (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 Partnership will 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.

                                   15
<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 SSB is  dependent  upon
interest rates over which the Partnership has no control.
         No  forecast  can be made as to the level of  redemptions  in any given
period. 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,  1999,
12,865.1295  Units  were  redeemed  totaling  $17,452,603.  For the  year  ended
December 31, 1998, 13,724.6661 Units were redeemed totaling $17,507,358. For the
                                   16
<PAGE>

year  ended  December  31,  1997,   20,899.0206  Units  were  redeemed  totaling
$26,060,110.
         The  Partnership  ceased  to  offer  Units  effective  April  1,  1996.
Additional sales of 88.1293 Units totaling $120,344 for the year ending December
31, 1999 and 90.7211 Units  totaling  $117,210 for the year ending  December 31,
1998 and 256.5390 Units totaling $328,301 for the year ending December 31, 1997,
represent  additional  Units  offered as the  differencial  between the ordinary
brokerage  fee  and the  reduced  brokerage  fee to  existing  limited  partners
investing $1,000,000 or more.
         (c) Results of Operations.
                  For the year ended  December 31, 1999, the net asset value per
Unit decreased 6.8% from $1,397.75 to $1,303.09. For the year ended December 31,
1998,  the net asset value per Unit  increased 7.6% from $1,298.43 to $1,397.75.
For the year ended  December  31, 1997,  the net asset value per Unit  increased
3.8% from $1,250.36 to $1,298.43.
             The  Partnership  experienced net trading losses of $855,255 before
commissions  and expenses in 1999.  Losses were  primarily  attributable  to the
trading of non-U.S. interest rates, metals, softs, livestock, indices and grains
and were  partially  offset by gains  recognized  in the trading of  currencies,
energy and U.S. interest rates.
             The Partnership experienced net trading gains of $20,175,131 before
commissions  and  expenses in 1998.  Gains were  primarily  attributable  to the
trading of  commodity  futures in U.S.  and non- U.S.  interest  rates,  energy,
livestock,  grains and currencies and were partially offset by losses recognized
                                   17
<PAGE>

in the trading of indices, softs and metals.
         The  Partnership  experienced  net trading gains of $14,977,042  before
commissions  and  expenses  for the year ended  December  31,  1997.  Gains were
primarily  attributable to the trading of commodity futures in U.S. and non-U.S.
interest rates  currencies,  indices,  metals and softs were partially offset by
losses recognized in the trading of energy, grains and livestock.
             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.
         (d)      Operational Risk
                  The Partnership is directly  exposed to market risk and credit
risk, which arise in the normal course of its business activities. Slightly less
direct, but of critical importance, are risks pertaining to operational and back
office  support.  This is  particularly  the  case  in a  rapidly  changing  and
                                   18
<PAGE>

increasingly  global  environment  with  increasing  transaction  volumes and an
expansion  in the number and  complexity  of products in the  marketplace.
Such risks  include:
Operational/Settlement  Risk  -  the  risk  of  financial  and opportunity loss
and legal liability attributable to operational  problems,  such  as  inaccurate
pricing  of   transactions,   untimely   trade  execution,   clearance    and/or
settlement,  or the inability to process large  volumes  of   transactions.  The
Partnership  is subject  to   increased  risks  with  respect  to  its   trading
activities in emerging  market  securities,  where  clearance,  settlement,  and
custodial   risks  are  often   greater  than  in  more   established   markets.
Technological Risk - the risk of loss attributable to technological  limitations
or hardware failure that constrain the Partnership's ability to gather, process,
and communicate information efficiently and securely,  without interruption,  to
customers,  among units  within the  Partnership,  and in the markets  where the
Partnership   participates.
Legal/Documentation   Risk  -  the  risk  of  loss attributable to  deficiencies
in the documentation of transactions (such as trade confirmations) and  customer
relationships (such as master netting agreements) or  errors   that   result  in
noncompliance  with  applicable  legal  and  regulatory requirements.
Financial  Control  Risk  - the  risk  of  loss  attributable  to limitations in
financial  systems and controls.  Strong  financial  systems and controls ensure
that assets are safeguarded,  that   transactions  are  executed  in  accordance

<PAGE>

with  management's  authorization,  and  that  financial   information  utilized
by    management   and   communicated   to  external   parties,   including  the
Partnership's  unitholders,  creditors,  and  regulators,  is free  of  material
errors.
Risk of Computer System Failure (Year 2000 Issue)
         SSBHI's computer systems and business  processes  successfully  handled
the date change from December 31, 1999 to January 1, 2000. SSBHI is not aware of
any  significant  year 2000  problems  encountered  internally or with the third
parties with which it interfaces,  including customers and  counterparties,  the
global financial market infrastructure,  and the utility infrastructure on which
all corporations rely.
         Based on operations  since  January 1, 2000,  SSBHI does not expect any
significant  impact to its ongoing  business as a result of the year 2000 issue.
However,  it is  possible  that the full impact of year 2000 issues has not been
fully recognized and no assurances can be given that year 2000 problems will not
emerge.
         The pretax costs  associated  with required  system  modifications  and
conversions totaled approximately $130 million.  These costs were funded through
operating cash flow and expensed in the period in which they were incurred.
                  The expenditures and the General Partner's resources dedicated
to the preparation for Year 2000 did not have a material impact on the operation
or results of the Partnership.
                  The most likely and most  significant  risk to the Partnership
associated  with the lack of Year  2000  readiness  is the  failure  of  outside
                                   20
<PAGE>

organizations,  including the commodities exchanges, clearing organizations,  or
regulators  with which the  Partnership  interacts  to  resolve  their Year 2000
issues in a timely  manner.  This risk could  involve the inability to determine
the value of the  Partnership  at some  point in time and would  make  effecting
purchases  or  redemptions  of Units in the  Partnership  infeasible  until such
valuation was determinable.
          (e)     New Accounting Pronouncements
     The Partnership adopted Statement on Financial Accounting Standards No. 133
("SFAS  133"),  Accounting  For  Derivative  Financial  Instruments  and Hedging
Activities,  on January 1, 1999. SFAS 133 requires that an entity  recognize all
derivative instruments in the statement of financial condition and measure those
financial instruments at fair value. SFAS 133 has no impact on Partners' Capital
and operating results as all derivative  instruments are recorded at fair value,
with changes therein reported in the statement of income and expenses.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Introduction
         The Partnership is a speculative  commodity pool. The market  sensitive
instruments held by it are acquired for speculative trading purposes, and all or
substantially all of the Partnership's assets are subject to the risk of trading
loss. Unlike an operating company,  the risk of market sensitive  instruments is
integral, not incidental, to the Partnership's main line of business.
                                   21
<PAGE>

         Market movements result in frequent changes in the fair market value of
the  Partnership's  open positions and,  consequently,  in its earnings and cash
flow. The Partnership's  market risk is influenced by a wide variety of factors,
including the level and volatility of interest  rates,  exchange  rates,  equity
price  levels,  the market value of financial  instruments  and  contracts,  the
diversification results among the Partnership's open positions and the liquidity
of the markets in which it trades.
         The  Partnership  rapidly  acquires and liquidates  both long and short
positions  in a wide  range of  different  markets.  Conse-  quently,  it is not
possible  to  predict  how a  particular  future  market  scenario  will  affect
performance,   and  the  Partnership's   past  performance  is  not  necessarily
indicative of its future results.
         Value at Risk is a measure of the maximum amount which the  Partnership
could  reasonably  be expected to lose in a given market  sector.  However,  the
inherent uncertainty of the Partnership's speculative trading and the recurrence
in the markets  traded by the  Partnership  of market  movements  far  exceeding
expectations could result in actual trading or non-trading losses far beyond the
indicated Value at Risk or the Partnership's  experience to date (i.e., "risk of
ruin").  In  light  of the  foregoing  as well as the  risks  and  uncertainties
intrinsic  to all  future  projections,  the  inclusion  of  the  quantification
included in this section should not be considered to constitute any assurance or
representation  that the  Partnership's  losses  in any  market  sector  will be
                                   22
<PAGE>

limited to Value at Risk or by the  Partnership's  attempts to manage its market
risk.
 Quantifying the Partnership's Trading Value at Risk
                  The   following   quantitative   disclosures   regarding   the
Partnership's market risk exposures contain "forward-looking  statements" within
the meaning of the safe harbor from civil liability provided for such statements
by the Private  Securities  Litigation  Reform Act of 1995 (set forth in Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of  1934).  All  quantitative  disclosures  in this  section  are  deemed  to be
forward-looking statements for purposes of the safe harbor except for statements
of historical fact (such as the terms of particular  contracts and the number of
market risk  sensitive  instruments  held during or at the end of the  reporting
period).
         The Partnership's risk exposure in the various market sectors traded by
the  Advisors  is  quantified  below in  terms  of  Value  at  Risk.  Due to the
Partnership's  mark-to-market  accounting,  any  loss in the  fair  value of the
Partnership's open positions is directly reflected in the Partnership's earnings
(realized or unrealized).
         Exchange   maintenance  margin  requirements  have  been  used  by  the
Partnership as the measure of its Value at Risk. Maintenance margin requirements
are set by exchanges to equal or exceed the maximum losses  reasonably  expected
to be incurred in the fair value of any given contract in 95%-99% of any one-day
intervals.  The  maintenance  margin  levels  are  established  by  dealers  and
exchanges  using  historical  price  studies as well as an assessment of current
                                   23
<PAGE>

market  volatility  (including the implied  volatility of the options on a given
futures contract) and economic fundamentals to provide a probabilistic  estimate
of the maximum expected near-term one-day price fluctuation.  Maintenance margin
has been used rather than the more generally  available initial margin,  because
initial margin  includes a credit risk component  which is not relevant to Value
at Risk.
         In the case of market  sensitive  instruments  which  are not  exchange
traded  (almost  exclusively  currencies  in the case of the  Partnership),  the
margin requirements for the equivalent futures positions have been used as Value
at  Risk.  In those  rare  cases in  which a  futures-equivalent  margin  is not
available, dealers' margins have been used.
         The fair value of the Partnership's  futures and forward positions does
not have any  optionality  component.  However,  certain of the  Advisors  trade
commodity options. The Value at Risk associated with options is reflected in the
following  table  as the  margin  requirement  attributable  to  the  instrument
underlying each option. Where this instrument is a futures contract, the futures
margin,   and   where   this   instrument   is   a   physical   commodity,   the
futures-equivalent  maintenance  margin  has  been  used.  This  calculation  is
conservative in that it assumes that the fair value of an option will decline by
the same  amount as the fair value of the  underlying  instrument,  whereas,  in
fact,  the fair values of the options  traded by the  Partnership  in almost all
cases fluctuate to a lesser extent than those of the underlying instruments.
                                   24
<PAGE>

         In  quantifying  the   Partnership's   Value  at  Risk,  100%  positive
correlation  in the  different  positions  held in each market risk category has
been  assumed.  Consequently,  the margin  requirements  applicable  to the open
contracts have simply been added to determine each trading category's  aggregate
Value at Risk.  The  diversification  effects  resulting  from the fact that the
Partnership's positions are rarely, if ever, 100% positively correlated have not
been reflected.

                                   25
<PAGE>


The Partnership's Trading Value at Risk in Different Market Sectors
         The following table indicates the trading Value at Risk associated with
the Partnership's open positions by market category as of December 31, 1999. All
open position  trading risk exposures of the  Partnership  have been included in
calculating  the  figures  set  forth  below.  As  of  December  31,  1999,  the
Partnership's total capitalization was approximately $117,508,532.

<TABLE>
<CAPTION>
<S>                                <C>        <C>            <C>          <C>
                             December 31, 1999
                                                              Year to  Date
                                         % of Total        High           Low
Market Sector        Value at Risk   Capitalization   Value at Risk    Value at Risk
--------------------------------------------------------------------------------
Currencies
-OTC Contracts               $ 2,522,728       2.15%    $ 4,861,168    $ 2,444,372
-Exchange Traded Contracts       856,142       0.73%      1,118,598        466,987
Energy                         2,287,500       1.95%      2,876,700      2,099,900
Grains                           483,740       0.41%      1,348,250        372,050
Interest rates U.S.            1,758,561       1.50%      2,272,250      1,086,450
Interest rates Non-U.S         3,094,296       2.63%      6,249,718      3,643,895
Livestock                         65,500       0.05%        131,750         30,400
Metals                         1,703,375       1.45%      2,498,700      1,197,900
Softs                          1,308,505       1.11%      1,373,896        839,305
Indices                        2,043,921       1.74%      3,609,182      1,277,732
                            -----------   -----------

Total                        $16,124,268      13.72%
                            ===========   ===========


</TABLE>
                                   26
<PAGE>


As of December 31,1998, the Partnership's total capitalization was approximately
$143,904,261.


                                   December 31, 1998
                                                                    % of Total
Market Sector                       Value at Risk                 Capitalization


Currencies
-OTC Contracts                         $ 2,036,442                     1.41%
-Exchange Traded Contracts                 210,542                     0.15%
Energy                                   1,400,100                     0.97%
Grains                                     538,800                     0.37%
Interest rates U.S.                        961,640                     0.67%
Interest rates Non-U.S.                  5,454,576                     3.79%
Livestock                                   21,674                     0.02%
Metals                                   1,393,950                     0.97%
Softs                                      933,802                     0.65%
Indices                                  1,220,543                     0.85%
                                       -----------                     -----

Total                                  $14,172,069                     9.85%
                                       ===========                     =====

Material Limitations on Value at Risk as an Assessment of Market Risk
         The face value of the market sector instruments held by the Partnership
is typically many times the applicable  maintenance margin  requirement  (margin
requirements  generally range between 2% and 15% of contract face value) as well
as, many times,  the  capitalization  of the  Partnership.  The magnitude of the
Partnership's  open  positions  creates a "risk of ruin" not typically  found in
most other investment  vehicles.  Because of the size of its positions,  certain
market  conditions -- unusual,  but historically  recurring from time to time --
could cause the  Partnership to incur severe losses over a short period of time.
The  foregoing  Value at Risk  table -- as well as the past  performance  of the
Partnership -- give no indication of this "risk of ruin."
                                   27
<PAGE>

 Non-Trading Risk
         The  Partnership  has  non-trading  market  risk  on its  foreign  cash
balances not needed for margin.  However,  these balances (as well as any market
risk they represent) are immaterial.
         Materiality  as used in this  section,  "Qualitative  and  Quantitative
Disclosures About Market Risk," is based on an assessment of reasonably possible
market movements and the potential losses caused by such movements,  taking into
account the leverage,  optionality and multiplier  features of the Partnership's
market sensitive instruments.

Qualitative Disclosures Regarding Primary Trading Risk Exposures
         The  following  qualitative  disclosures  regarding  the  Partnership's
market risk exposures - except for (i) those  disclosures that are statements of
historical fact and (ii) the  descriptions  of how the  Partnership  manages its
primary market risk exposures - constitute forward-looking statements within the
meaning of Section 27A of the  Securities  Act and Section 21E of the Securities
Exchange Act. The  Partnership's  primary  market risk  exposures as well as the
strategies  used and to be used by the  General  Partner  and the  Advisors  for
managing such exposures are subject to numerous uncertainties, contingencies and
risks, any one of which could cause the actual results of the Partnership's risk
controls to differ materially from the objectives of such strategies. Government
interventions,  defaults and expropriations,  illiquid markets, the emergence of
dominant fundamental factors,  political upheavals,  changes in historical price
                                   28
<PAGE>

relationships,  an influx of new market  participants,  increased regulation and
many  other  factors  could  result in  material  losses as well as in  material
changes to the risk exposures and the management  strategies of the Partnership.
There can be no assurance that the Partnership's  current market exposure and/or
risk  management  strategies  will  not  change  materially  or  that  any  such
strategies  will be effective in either the short- or long-term.  Investors must
be  prepared  to  lose  all or  substantially  all of  their  investment  in the
Partnership
        The following were the primary trading risk exposures of the Partnership
as of December 31, 1999, by market sector.
        Interest  Rates.  Interest rate risk is the  principal  market  exposure
of the  Partnership.  Interest  rate  movements directly affect the price of the
futures  positions held by the Partnership and indirectly the value of its stock
index and currency  positions. Interest rate movements in one country as well as
relative  interest  rate  movements  between   countries  materially impact  the
Partnership's  profitability.  The Partnership's primary  interest rate exposure
is  to  interest  rate  fluctuations  in  the  United  States  and the other G-7
countries.  However,  the  Partnership  also  takes  futures  positions  on  the
government  debt of smaller  nations -- e.g.,  Australia.  The  General  Partner
anticipates  that G-7  interest  rates will remain the primary  market  exposure
of the Partnership  for the foreseeable  future.  The changes in interest  rates
which have  the most  effect on the  Partnership  are  changes in  long-term, as

<PAGE>

opposed to short-term, rates. Consequently, even a material change in short-term
rates would have little effect on the Partnership were the medium-  to long-term
rates to remain steady.
         Currencies.  The  Partnership's  currency  exposure is to exchange rate
fluctuations,  primarily  fluctuations  which  disrupt  the  historical  pricing
relationships   between   different   currencies  and  currency   pairs.   These
fluctuations  are  influenced  by interest rate changes as well as political and
general  economic  conditions.  The General Partner does not anticipate that the
risk profile of the Partnership's  currency sector will change  significantly in
the future.  The currency  trading Value at Risk figure includes  foreign margin
amounts  converted into U.S.  dollars with an incremental  adjustment to reflect
the exchange rate risk inherent to the  dollar-based  Partnership  in expressing
Value at Risk in a functional currency other than dollars.
         Stock Indices.  The Partnership's  primary equity exposure is to equity
price  risk  in the  G-7  countries.  The  stock  index  futures  traded  by the
Partnership  are by law  limited  to futures on  broadly  based  indices.  As of
December 31, 1999,  the  Partnership's  primary  exposures  were in the S&P 500,
Financial  Times  (England),  Nikkei  (Japan)  and Hang Seng (Hong  Kong)  stock
indices.  The General Partner  anticipates  little,  if any,  trading in non-G-7
stock indices. The Partnership is primarily exposed to the risk of adverse price
trends or static  markets in the major  U.S.,  European  and  Japanese  indices.
(Static markets would not cause major market changes but would make it difficult
for the Partnership to avoid being "whipsawed" into numerous small losses.)
                                   30
<PAGE>

         Metals.   The  Partnership's   primary  metal  market  exposure  is  to
fluctuations in the price of gold and silver.  Although  certain of the Advisors
will from time to time  trade base  metals  such as  aluminum  and  copper,  the
principal  market  exposures of the Partnership  have  consistently  been in the
precious  metals,   gold  and  silver.  The  Advisors'  gold  trading  has  been
increasingly  limited due to the long-lasting and mainly non-volatile decline in
the  price of gold  over the last  10-15  years.  However,  silver  prices  have
remained  volatile  over this period,  and the  Advisors  have from time to time
taken  substantial  positions as they have  perceived  market  opportunities  to
develop.  The General Partner  anticipates  that gold and silver will remain the
primary metals market exposure for the Partnership.
         Softs.   The   Partnership's   primary   commodities   exposure  is  to
agricultural  price  movements  which are often  directly  affected by severe or
unexpected weather conditions. Coffee, cocoa, cotton and sugar accounted for the
substantial  bulk of the  Partnership's  commodity  exposure as of December  31,
1999.
         Energy. The  Partnership's  primary  energy  market  exposure is to gas
and oil price  movements,  often  resulting  from political developments  in the
Middle  East.  Oil prices can be  volatile  and  substantial  profits and losses
have been and are expected to continue to be experienced in this market.

Qualitative Disclosures Regarding Non-Trading Risk Exposure
         The  following  were  the  only   non-trading  risk  exposures  of  the
Partnership as of December 31, 1999.
                                   31
<PAGE>

         Foreign Currency Balances.  The Partnership's  primary foreign currency
balances are in Japanese yen,  German marks,  British  pounds and French francs.
The  Advisor  regularly  converts  foreign  currency  balances  to dollars in an
attempt to control the Partnership's non-trading risk.
         Qualitative Disclosures Regarding Means of Managing Risk Exposure.
         The General  Partner  monitors  and  controls  the  Partnership's  risk
exposure  on a  daily  basis  through  financial,  credit  and  risk  management
monitoring systems and accordingly believes that it has effective procedures for
evaluating and limiting the credit and market risks to which the  Partnership is
subject.
         The General  Partner  monitors the  Partnership's  performance  and the
concentration of its open positions,  and consults with the Advisors  concerning
the Partnership's overall risk profile. If the General Partner felt it necessary
to do so, the General Partner could require certain of the Advisors to close out
individual  positions as well as enter certain positions traded on behalf of the
Partnership. However, any such intervention would be a highly unusual event. The
General  Partner  primarily  relies on the Advisors'  own risk control  policies
while maintaining a general  supervisory  overview of the  Partnership's  market
risk exposures.
         Each Advisor applies its own risk  management  policies to its trading.
The Advisors  often follow  diversification  guidelines,  margin limits and stop
loss points to exit a position.  The Advisors' research of risk management often
                                   32
<PAGE>

suggests ongoing modifications to their trading programs.
         As part of the General  Partner's risk management,  the General Partner
periodically  meets with the Advisors to discuss  their risk  management  and to
look for any material  changes to the  Advisors'  portfolio  balance and trading
techniques.  The  Advisors  are  required to notify the  General  Partner of any
material changes to their programs.

                                   33
<PAGE>



Item 8.    Financial Statements and Supplementary Data.




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


                                                                  Page
                                                                 Number
                        Oath of Affirmation                       F-2

                        Report of Independent Accountants.        F-3

                        Financial Statements:
                        Statement of Financial Condition at
                        December 31, 1999 and 1998.               F-4

                        Statement of Income and Expenses
                        for the years ended December 31, 1999
                        1998 and 1997.                            F-5

                        Statement of Partners' Capital for
                        the years ended December 31, 1999,
                        1998 and 1997.                            F-6

                        Notes to Financial Statements.         F-7 - F-11

                                   F-1

<PAGE>

                         To The Limited Partners of
                                  Smith Barney
                          Diversified Futures Fund L.P.

To the best of the  knowledge  and belief of the  undersigned,  the  information
contained herein is accurate and complete.





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

     Smith Barney Futures Management LLC
     390 Greenwich Street
     1st Floor
     New York, N.Y.  10013
     212-723-5424



                                   F-2

<PAGE>


                           Report of Independent Accountants

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

In our  opinion,  the  accompanying  statement of  financial  condition  and the
related  statements  of income and  expenses and of  partners'  capital  present
fairly,  in all  material  respects,  the  financial  position  of Smith  Barney
Diversified  Futures Fund L.P. at December 31, 1999 and 1998, and the results of
its  operations  for each of the three years in the period  ended  December  31,
1999, in conformity with accounting  principles generally accepted in the United
States.  These financial  statements are the responsibility of the management of
the  General  Partner;  our  responsibility  is to  express  an opinion on these
financial  statements  based on our  audits.  We  conducted  our audits of these
financial statements in accordance with auditing standards generally accepted in
the United  States,  which  require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the  amounts  and  disclosures  in  the  financial  statements,   assessing  the
accounting  principles used and significant  estimates made by the management of
the  General   Partner,   and   evaluating  the  overall   financial   statement
presentation.  We believe  that our audits  provide a  reasonable  basis for the
opinion expressed above.


                                                      PricewaterhouseCoopers LLP

New York, New York
February 25, 2000

                                   F-3
<PAGE>


                                     Smith Barney
                             Diversified Futures Fund L.P.
                           Statement of Financial Condition
                              December 31, 1999 and 1998

<TABLE>
<CAPTION>
<S>                                                                <C>             <C>
                                                                    1999            1998
Assets:
Equity in commodity futures trading account:
   Cash  (Note 3c)                                           $114,347,833   $136,910,140
   Net unrealized appreciation on open
   futures contracts                                            5,310,783      9,155,609
   Commodity options owned, at market value
   (cost $663,996)                                                501,192           --
                                                             ------------   ------------
                                                              120,159,808    146,065,749
  Interest receivable                                             403,616        399,031
                                                             ------------   ------------
                                                             $120,563,424   $146,464,780
                                                             ------------   ------------

Liabilities and Partners' Capital:
Liabilities:
  Accrued expenses:
   Commissions                                               $    556,459   $    684,171
   Management fees                                                326,697        360,801
   Incentive fees                                                    --          721,179
   Professional fees                                              120,995         64,697
   Other                                                            7,571         24,488
  Redemptions payable (Note 5)                                  2,043,170        705,183
                                                             ------------   ------------
                                                                3,054,892      2,560,519
                                                             ------------   ------------
Partners' capital:
  General Partner, 2,048.9308 Unit equivalents outstanding      2,669,941      2,863,893
   in 1999 and 1998
  Limited Partners, 88,128.2111 and 100,905.2113 Units of
   Limited Partnership Interest outstanding in 1999 and
   1998, respectively                                         114,838,591    141,040,368
                                                             ------------   ------------
                                                              117,508,532    143,904,261
                                                             ------------   ------------
                                                             $120,563,424   $146,464,780
                                                             ------------   ------------

</TABLE>

See notes to financial statements.

                                              F-4
<PAGE>


                                     Smith Barney
                             Diversified Futures Fund L.P.
                           Statement of Income and Expenses
                                  for the years ended
                           December 31, 1999, 1998 and 1997

<TABLE>
<CAPTION>
<S>                                                             <C>            <C>            <C>
                                                                1999            1998            1997
Income:
  Net gains (losses) on trading of commodity interests:
   Realized gains on closed positions                   $  3,152,375    $ 22,204,292    $ 10,556,489
   Change in unrealized gains (losses) on open
    positions                                             (4,007,630)     (2,029,161)      4,420,553
                                                        ------------    ------------    ------------
                                                            (855,255)     20,175,131      14,977,042
  Less, Brokerage commissions including clearing fees
   of $237,946, $251,241 and $316,227, respectively
   (Note 3c)                                              (7,950,768)     (8,540,127)     (9,893,999)
                                                        ------------    ------------    ------------
  Net realized and unrealized gains (losses)              (8,806,023)     11,635,004       5,083,043
  Interest income                                          4,687,547       5,203,988       6,331,875
                                                        ------------    ------------    ------------
                                                          (4,118,476)     16,838,992      11,414,918
                                                        ------------    ------------    ------------

Expenses:
  Management fees (Note 3b)                                4,128,925       4,049,675       4,455,840
  Incentive fees (Note 3b)                                   668,443       2,741,328       1,301,462
  Professional fees                                          123,075          83,791          76,038
  Other                                                       24,551          51,050          55,769
                                                        ------------    ------------    ------------
                                                           4,944,994       6,925,844       5,889,109
                                                        ------------    ------------    ------------
Net income (loss)                                       $ (9,063,470)   $  9,913,148    $  5,525,809
                                                        ------------    ------------    ------------
Net income (loss) per Unit of Limited
  Partnership Interest and General Partner Unit
  equivalent (Notes 1 and 6)                            $     (94.66)   $      99.32    $      48.07
                                                        ------------    ------------    ------------
</TABLE>
See notes to financial statements.

                                                                F-5

<PAGE>


                                     Smith Barney
                             Diversified Futures Fund L.P.
                            Statement of Partners' Capital
                                  for the years ended
                           December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>


                                                   Limited          General
                                                  Partners          Partner            Total
<S>                                                   <C>               <C>             <C>
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
Net income                                       9,709,648          203,500        9,913,148
Sale of 90.7211 Units of Limited
  Partnership Interest                             117,210             --            117,210
Redemption of 13,724.6661 Units of
  Limited Partnership Interest                 (17,507,358)            --        (17,507,358)
                                             -------------    -------------    -------------
Partners' capital at December 31, 1998         141,040,368        2,863,893      143,904,261
Net loss                                        (8,869,518)        (193,952)      (9,063,470)
Sale of 88.1293 Units of Limited
  Partnership Interest                             120,344             --            120,344
Redemption of 12,865.1295 Units of
  Limited Partnership Interest                 (17,452,603)            --        (17,452,603)
                                             -------------    -------------    -------------
Partners' capital at December 31, 1999       $ 114,838,591    $   2,669,941    $ 117,508,532
                                             -------------    -------------    -------------

</TABLE>

See notes to financial statements.

                                                            F-6
<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  LLC  acts as the  general  partner  (the
    "General Partner") of the Partnership.  The General Partner changed its form
    of organization from a corporation to a limited liability company on October
    1, 1999.  The  Partnership's  commodity  broker is Salomon Smith Barney Inc.
    ("SSB").  SSB is an affiliate of the General Partner. The General Partner is
    wholly owned by Salomon Smith Barney Holdings Inc.  ("SSBHI"),  which is the
    sole owner of SSB. SSBHI is a wholly owned subsidiary of Citigroup Inc.

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

    The Partnership will be liquidated upon the first 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 fair value on the
       last business day of the year,  which  represents  market value for those
       commodity  interests for which market  quotations are readily  available.
       Investments in commodity interests  denominated in foreign currencies are
       translated into U.S. dollars at the exchange rates prevailing on the last
       business  day of  the  year.  Realized  gains  (losses)  and  changes  in
       unrealized values on commodity  interests are recognized in the period in
       which the contract is closed or the changes occur and are included in net
       gains (losses) on trading of commodity interests.

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

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



                                     F-7
<PAGE>

    d. 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., John W. Henry & Company, Inc. ("JWH"),  Trendview Management
       Inc., Rabar Market Research Inc. ("Rabar"), Willowbridge Associates, Inc.
       and Stonebrook Capital Management,  Inc.  ("Stonebrook"),  (collectively,
       the "Advisors"),  registered commodity trading advisors. The Advisors are
       not affiliated  with one another and none is affiliated  with the General
       Partner or SSB and are not responsible for the  organization or operation
       of the  Partnership.  The  Partnership  will pay each  Advisor  a monthly
       management  fee equal to 1/6 of 1% (2% per year) of 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),  and
       Stonebrook,  which will receive a monthly management fee equal to 1/16 of
       1% (0.75% per year) of a fixed notional  account size of $75,000,000.  In
       addition, the Partnership is obligated to pay each Advisor 20% of the New
       Trading Profits, as defined in the Management Agreements,  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.  Stonebrook does not receive an incentive fee.  Telesis
       Management  Inc.  was  terminated  as an  Advisor on  January  31,  1999.
       Stonebrook was added as an Advisor on April 9, 1999.

    c. Customer Agreement

       The Partnership has entered into a Customer Agreement which provides that
       the Partnership will pay SSB a monthly brokerage fee equal to 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. SSB 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 SSB. The Partnership's cash is
       deposited by SSB in segregated  bank  accounts to the extent  required by
       Commodity Futures Trading  Commission  regulations.  At December 31, 1999
       and 1998, the amount of cash held for margin requirements was $18,616,389

                                   F-8
<PAGE>

       and  $15,565,181,  respectively.  SSB has  agreed to pay the  Partnership
       interest on 80% of the average  daily  equity  maintained  in cash in its
       account during each month at a 30-day U.S.  Treasury bill rate determined
       weekly by SSB based on the average  noncompetitive  yield on 3-month U.S.
       Treasury  bills  maturing  in 30 days from the date on which such  weekly
       rate is determined.  The Customer  Agreement  between the Partnership and
       SSB gives the  Partnership  the legal right to net  unrealized  gains and
       losses.  The Customer  Agreement may be terminated  upon notice by either
       party.

4.  Trading Activities:

    The Partnership was formed for the purpose of trading contracts in a variety
    of commodity  interests,  including  derivative  financial  instruments  and
    derivative commodity  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 average fair value  during the years ended  December 31, 1999
    and 1998,  based on a monthly  calculation,  was $6,571,306 and  $8,814,289,
    respectively. The fair value of these commodity interests, including options
    thereon,  if  applicable,  at December 31, 1999 and 1998 was  $5,811,975 and
    $9,155,609, respectively, as detailed below.

                                           Fair Market Value
                                     December 31,   December 31,
                                          1999           1998
    Currencies:
     -Exchange Traded Contracts      $   423,503    $    57,514
        -OTC Contracts                   196,398         56,390
    Energy                             1,095,761        433,210
    Grains                                64,492        415,008
    Interest Rates U.S.                1,352,098       (740,429)
    Interest Rates Non-U.S               220,653      7,987,464
    Livestock                            (19,700)        20,120
    Metals                               941,009        468,466
    Softs                                493,230        383,544
    Indices                            1,044,531         74,322
                                     -----------    -----------
    Total                            $ 5,811,975    $ 9,155,609
                                     -----------    -----------

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-9
<PAGE>

6.  Net Asset Value Per Unit:

    Changes  in the net asset  value per Unit of  Partnership  interest  for the
    years ended December 31, 1999, 1998 and 1997 were as follows:

<TABLE>
<CAPTION>

                                                       1999        1998         1997
<S>                                                    <C>          <C>         <C>
Net realized and unrealized gains (losses)    $     (92.07)$     115.88 $      44.59
Interest income                                      48.30        47.60        49.04
Expenses                                            (50.89)      (64.16)      (45.56)
                                                  --------    ---------    ---------
Increase (decrease) for year                        (94.66)       99.32        48.07
Net asset value per Unit, beginning of year       1,397.75     1,298.43     1,250.36
                                                 ---------    ---------    ---------
Net asset value per Unit, end of year         $   1,303.09 $   1,397.75 $   1,298.43
                                                 ---------    ---------    ---------

</TABLE>


7.  Financial Instrument Risks:

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

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

    Credit risk is the possibility that a loss may occur due to the failure of a
    counterparty  to perform  according to the terms of a contract.  Credit risk
    with respect to exchange traded instruments is reduced to the extent that an
    exchange or clearing organization acts as a counterparty to the transactions
    (see  table  in Note  4).  The  Partnership's  risk of loss in the  event of
    counterparty  default is typically limited to the amounts  recognized in the
    statement  of financial  condition  and not  represented  by the contract or
    notional amounts of the instruments.  The Partnership has concentration risk
    because the sole  counterparty  or broker with respect to the  Partnership's
    assets is SSB.

    The General Partner monitors and controls the Partnership's risk exposure on
    a daily  basis  through  financial,  credit and risk  management  monitoring
    systems,  and  accordingly  believes  that it has effective  procedures  for

                                   F-10
<PAGE>

    evaluating and limiting the credit and market risks to which the Partnership
    is  subject.   These  monitoring   systems  allow  the  General  Partner  to
    statistically analyze actual trading results with risk-adjusted  performance
    indicators  and  correlation  statistics.  In addition,  on-line  monitoring
    systems provide account analysis of futures,  forwards and options positions
    by sector,  margin  requirements,  gain and loss transactions and collateral
    positions.

    The   notional  or   contractual   amounts  of  these   instruments,   while
    appropriately not recorded in the financial  statements,  reflect the extent
    of the Partnership's involvement in these instruments. The majority of these
    instruments mature within one year of December 31, 1999. However, due to the
    nature of the Partnership's  business,  these instruments may not be held to
    maturity.

8.  Subsequent Events:

    On January 1, 2000 there were additional sales representing  7.5079 Units of
    Limited  Partnership  Interest  totaling  $9,783  and on  January  31,  2000
    additional redemptions  representing 2,172.9431 Units of Limited Partnership
    Interest totaling $2,906,029.  Trendview Management,  Inc. was terminated as
    an Advisor to the Partnership on January 31, 2000.

9.  New Accounting Pronouncements:

    The Partnership adopted Statement on Financial  Accounting Standards No. 133
    ("SFAS 133"),  Accounting for Derivative  Financial  Instruments and Hedging
    Activities,  on January 1, 1999. SFAS 133 requires that an entity  recognize
    all  derivative  instruments  in the  statement of financial  condition  and
    measure those financial instruments at fair value. SFAS 133 has no impact on
    Partners'  Capital and operating  results as all derivative  instruments are
    recorded at fair value,  with changes  therein  reported in the statement of
    income and expenses.

                                   F-11

<PAGE>


Item 9.Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure.
              During  the last  two  fiscal  years  and any  subsequent  interim
period, no independent accountant who was engaged as the principal accountant to
audit the Partnership's financial statements has resigned or was dismissed.
                                                      PART III
Item 10.  Directors and Executive Officers of the Registrant.
     The Partnership has no officers or directors and its affairs are managed by
its General Partner,  Smith Barney Futures Management LLC. Investment  decisions
will be made by Campbell & Company,  Inc., John W. Henry & Company,  Inc., Rabar
Market Research,  Inc., Trendview Management,  Inc.,  Willowbridge  Associatees,
Inc. and Stonebrook Capital 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  LLC, its General  Partner.  SSB, an
affiliate of the General  Partner,  is the commodity  broker for the Partnership
and receives brokerage  commissions for such services,  as described under "Item
1.  Business."  Brokerage  commissions and clearing fees of $7,950,768 were paid
for the year ended  December 31, 1999.  Management  fees and  incentive  fees of
$4,128,925 and $668,443,  respectively, were paid or payable to the Advisors for
the year ended December 31, 1999.

                                   34
<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 (2.3%) of Limited  Partnership  Interest as of
December 31, 1999.
                 (c).  Changes in control.   None.
Item 13.   Certain Relationship and Related Transactions.
     Salomon Smith Barney Inc. and Smith Barney Futures  Management LLC would be
considered  promoters for purposes of item 404 (d) of Regulation S-K. The nature
and the amounts of compensation  each promoter will receive from the Partnership
are set forth under "Item 1. Business",  "Item 11. Executive  Compensation," and
"Item 8. Financial Statements and Supplementary Data."

                                        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, 1999
                 and 1998.
                                   35
<PAGE>

                 Statement  of Income and  Expenses for the years ended December
                 31,  1999,  1998  and  1997.   Statement  of Partners'  Capital
                 for the years ended  December  31, 1999, 1998 and 1997.
             (2) Financial Statement Schedules: Financial Data Schedule for  the
                 year ended December 31, 1999.
             (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
                                   36
<PAGE>

                 the Registration Statement on Form S-1 (File No. 33-75056)  and
                 incorporated herein 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).
                                   37
<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 as Exhibit  10.16  to
                the Form 10-K for the year ended December 31, 1997).
           10.17 - Letter   terminating  Management  Agreement  with  Chesapeake
                Capital Corporation (filed   as   Exhibit   10.17  to  the  Form
                10-K for the year ended December 31, 1997).
           10.18 - Letter   terminating   Management  Agreement  with    Abraham
                Trading Co.(filed as Exhibit 10.18 to the Form 10-K for the year
                ended December 31, 1997).
                                   38
<PAGE>

           10.19 - Management   Agreement  among  the  Partnership  the  General
                Partner and Trendview  Management,  Inc. (filed as Exhibit 10.19
                to the Form 10-K for the year ended December 31, 1997).
           10.20-  Letters extending Management  Agreements with Campbell & Co.,
                Chesapeake   Capital Corp.,  John W.  Henry &  Company Inc., AIS
                Futures Management L.L.C., Abraham Trading Co. and  Rabar Market
                Research Inc.(filed as Exhibit 10.20 to the Form 10-K  for   the
                year ended December 31, 1997).
           10.21-  Letter terminating AIS Futures  Management,  Inc. (previously
                filed).
           10.22-  Letter terminating Telesis Management Inc.(previously filed).
           10.23-  Letters extending  Management Agreements with Campbell & Co.,
                John W. Henry &  Company Inc.,  Rabar Market Research Inc.   and
                Trendview Management Inc. (previously filed).
           10.24-  Management  Agreement  among  the  Partnership  the   General
                Partner and Willowbridge  Associates,  Inc. (filed as Exhibit 10
               .24 to the Form 10-K for the year ended December 31, 1999).
                                   39
<PAGE>

           10.25-  Management  Agreement  among  the  Partnership  the   General
                Partner  and  Stonebrook  Capital  Management,   Inc. (filed  as
                Exhibit 10.25 to the Form 10-K for the year  ended December 31,
                1999).
           10.26-  Letters  extending  Management  Agreements  with  Campbell  &
                Co.,  John W. Henry & Company  Inc.,  Rabar Market Research Inc.
                and Trendview Management Inc. (filed herein).
         (b) Reports on 8-K:   None Filed.

                                   40
<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

                                   41

<PAGE>


                                   SIGNATURES

          Pursuant to the  requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934,  the Registrant has duly caused this annual report on Form
10-K to be signed on its behalf by the  undersigned,  thereunto duly authorized,
in the City of New York and State of New York on the 30th day of March 2000.


SMITH BARNEY DIVERSIFIED FUTURES FUND L.P.


By:       Smith Barney Futures Management LLC
          (General Partner)



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


          Pursuant to the  requirements of the Securities  Exchange Act of 1934,
this annual report on Form 10-K has been signed below by the  following  persons
in the capacities and on the date indicated.


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



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



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




/s/ Shelley Ullman
Shelley Ullman
Director
                                   42
<PAGE>