MANAGEMENT AGREEMENT


           AGREEMENT  made as of the  ___ day of  September,  1996  among  SMITH
BARNEY FUTURES MANAGEMENT INC., a Delaware  corporation  ("SBFM"),  SMITH BARNEY
DIVERSIFIED   FUTURES   FUND  L.P.,  a  New  York   limited   partnership   (the
"Partnership")  and AIS FUTURES  MANAGEMENT,  INC., a Delaware  corporation (the
"Advisor").

                              W I T N E S S E T H :

           WHEREAS,  SBFM is the  general  partner of Smith  Barney  Diversified
Futures  Fund  L.P.,  a  limited  partnership   organized  for  the  purpose  of
speculative trading of commodity interests, including futures contracts, options
and forward  contracts  with the  objective  of  achieving  substantial  capital
appreciation; and

           WHEREAS,   the  Limited   Partnership   Agreement   establishing  the
Partnership (the "Limited  Partnership  Agreement")  permits SBFM to delegate to
one or  more  commodity  trading  advisors  SBFM's  authority  to  make  trading
decisions for the Partnership; and

           WHEREAS,  the Advisor is  registered as a commodity  trading  advisor
with the Commodity Futures Trading  Commission  ("CFTC") and is a member as such
of the National Futures Association ("NFA"); and

           WHEREAS, SBFM is registered as a commodity pool
operator with the CFTC and is a member as such of the NFA; and

           WHEREAS,  SBFM and the Advisor  wish to enter into this  Agreement in
order to set forth the terms and  conditions  upon which the Advisor will render
and  implement   advisory  services  in  connection  with  the  conduct  by  the
Partnership  of its  commodity  trading  activities  during  the  term  of  this
Agreement;

           NOW, THEREFORE, the parties agree as follows:

           1.  DUTIES OF THE  ADVISOR.  (a) For the  period and on the terms and
conditions  of this  Agreement,  the  Advisor  shall  have  sole  authority  and
responsibility,  as one of the Partnership's agents and  attorneys-in-fact,  for
directing  the  investment  and  reinvestment  of the  assets  and  funds of the
Partnership  allocated  to it by the  General  Partner in  commodity  interests,
including commodity futures contracts,  options and forward contracts.  All such
trading on behalf of the  Partnership  shall be in  accordance  with the trading
policies  set forth in the  Partnership's  Prospectus  dated as of February  17,
1994, as supplemented  (the  "Prospectus"),  and as such trading policies may be
changed from time to time upon receipt by the Advisor of prior written notice of
such change and pursuant to the trading strategy selected by SBFM to be utilized
by the Advisor in managing the Partnership's assets. SBFM has initially selected
the Advisor's MAAP Program traded at up to  approximately  six times leverage to
manage the  Partnership's  assets  allocated to it. Any open  positions or other
investments  at the time of receipt of such notice of a change in trading policy
shall not be deemed to violate the changed policy and shall be closed or sold in
the ordinary course of trading.  The Advisor may not change the trading policies
set forth in the Prospectus without the prior written consent of the Partnership
given by SBFM. The Advisor makes no  representation or warranty that the trading
to be directed by it for the  Partnership  will be  profitable or will not incur
losses.

            (b) SBFM acknowledges  receipt of the Advisor's  Disclosure Document
dated January 2, 1996 (the  "Disclosure  Document") as filed with the CFTC.  All
trades  made by the Advisor  for the  account of the  Partnership  shall be made
through such commodity  broker or brokers as SBFM shall direct,  and the Advisor
shall have no authority or responsibility  for selecting or supervising any such
broker  in  connection   with  the  execution,   clearance  or  confirmation  of
transactions  for the  Partnership  or for the  negotiation  of brokerage  rates
charged therefor.  However,  the Advisor,  with the prior written permission (by
either original or fax copy) of SBFM, may direct all trades in commodity futures
and options to a futures  commission  merchant or  independent  floor  broker it
chooses  for  execution  with  instructions  to give-up the trades to the broker
designated by SBFM, provided that the futures commission merchant or independent
floor broker and any give-up or floor  brokerage fees are approved in advance by
SBFM. All give-up or similar fees relating to the foregoing shall be paid by the
Partnership after all parties have executed the relevant give-up  agreements (by
either original or fax copy).

            (c)  The  initial  allocation  of the  Partnership's  assets  to the
Advisor will be made to the Advisor's MAAP Program traded at up to approximately
six times  leverage.  In the event the Advisor wishes to use a trading system or
methodology  other than or in addition to such  program in  connection  with its
trading for the Partnership, either in whole or in part, it may not do so unless
the Advisor  gives SBFM prior  written  notice of its  intention to utilize such
different trading system or methodology and SBFM consents thereto in writing. In
addition,  the Advisor will provide five days' prior  written  notice to SBFM of
any  change  in the  trading  system  or  methodology  to be  utilized  for  the
Partnership  which the Advisor deems material.  If the Advisor deems such change
in system or methodology or in markets traded to be material, the changed system
or  methodology  or markets  traded  will not be  utilized  for the  Partnership
without the prior written consent of SBFM. Further, the Advisor will provide the
Partnership with a current list of all commodity interests intended to be traded
for the  Partnership's  account  and will not  trade  any  additional  commodity
interests  for  such  account  without  providing  notice  thereof  to SBFM  and
receiving SBFM's written approval. The Advisor also agrees to provide SBFM, on a
monthly  basis,  with  a  written  report  of the  assets  under  the  Advisor's
management  together with all other matters deemed by the Advisor to be material
changes to its business not previously reported to SBFM.

            (d) Upon reasonable  request the Advisor agrees to make all material
disclosures to the Partnership regarding itself and its principals as defined in
Part  4 of  the  CFTC's  regulations  ("principals"),  shareholders,  directors,
officers and employees,  their trading  performance and general trading methods,
its customer accounts (but not the identities of or identifying information with
respect to its  customers)  and  otherwise  as are  required  in the  reasonable
judgment of SBFM to be made in any  filings  required by Federal or state law or
NFA rule or order. Notwithstanding Sections 1(d) and 4(d) of this Agreement, the
Advisor is not required to disclose the actual  trading  results of  proprietary
accounts of the Advisor or its principals unless SBFM reasonably determines that
such disclosure is required in order to fulfill its fiduciary obligations to the
Partnership  or the  reporting,  filing or other  obligations  imposed  on it by
Federal or state law or NFA rule or order.  The Partnership and SBFM acknowledge
that the  trading  advice to be  provided  by the  Advisor is a  property  right
belonging  to the  Advisor,  agree to  treat  as  confidential  any  results  of
proprietary  accounts  and/or  proprietary  information  with respect to trading
systems  obtained  from the  Advisor  and  agree  that  they  will keep all such
information  confidential  and shall use it for no other purpose than monitoring
the Partnership's account.

            (e) The Advisor understands and agrees that SBFM may designate other
trading  advisors for the Partnership and apportion or reapportion to such other
trading  advisors  the  management  of an amount of Net  Assets  (as  defined in
Section 3(b)  hereof) as it shall  determine  in its  absolute  discretion.  The
designation of other trading advisors and the  apportionment or  reapportionment
of Net Assets to any such  trading  advisors  pursuant  to this  Section 1 shall
neither  terminate this Agreement nor modify in any regard the respective rights
and obligations of the parties hereunder.

            (f) SBFM may, from time to time, in its absolute discretion,  select
additional trading advisors and reapportion funds among the trading advisors for
the Partnership as it deems appropriate. SBFM shall use its best efforts to make
reapportionments,  if any, as of the first day of a month.  The  Advisor  agrees
that it may be called upon at any time promptly to liquidate positions in SBFM's
sole  discretion so that SBFM may  reallocate  the  Partnership's  assets,  meet
margin calls on the Partnership's  account,  fund redemptions,  or for any other
reason,  except that SBFM will not require the liquidation of specific positions
by the Advisor. The Advisor shall not be subject to liability for the results of
following such  instructions  from SBFM.  SBFM will use its best efforts to give
two days' prior notice to the Advisor of any reallocations or liquidations.

            (g) The  Advisor  will  not be  liable  for  trading  losses  in the
Partnership's account including losses caused by errors; provided, however, that
(i) the  Advisor  will be  liable  to the  Partnership  with  respect  to losses
incurred  due to errors  committed or caused by it or any of its  principals  or
employees in communicating improper trading instructions or orders to any broker
on  behalf  of the  Partnership  and  (ii) the  Advisor  will be  liable  to the
Partnership with respect to losses incurred due to errors committed or caused by
any executing  broker (other than any SBFM  affiliate)  selected by the Advisor,
but only to the extent of the fees which  have been paid by the  Partnership  to
the Advisor up until the point at which the error  occurred plus any future fees
which  may be  earned  by the  Advisor  under  this  Agreement  (it  also  being
understood that SBFM, with the assistance of the Advisor,  will first attempt to
recover such losses from the executing broker).

           2. INDEPENDENCE OF THE ADVISOR.  For all purposes herein, the Advisor
shall be deemed to be an independent  contractor and, unless otherwise expressly
provided or  authorized,  shall have no authority  to act for or  represent  the
Partnership in any way and shall not be deemed an agent,  promoter or sponsor of
the  Partnership,  SBFM,  or  any  other  trading  advisor  and  shall  have  no
responsibility  or liability  therefor.  The Advisor shall not be responsible to
the  Partnership,  the  General  Partner,  any  trading  advisor or any  limited
partners  for any acts or omissions of any other  trading  advisor  acting as an
advisor to the Partnership.

           3. COMPENSATION.  (a) In consideration of and as compensation for all
of the  services to be rendered  by the  Advisor to the  Partnership  under this
Agreement,  the  Partnership  shall pay the Advisor (i) an incentive fee payable
quarterly  equal to 20% of New Trading  Profits (as such term is defined  below)
earned  by  the  Advisor  for  the  Partnership  and  (ii)  a  monthly  fee  for
professional  management  services  equal  to  1/6 of 1% (2%  per  year)  of the
month-end Net Assets of the Partnership allocated to the Advisor.

            (b) "Net  Assets"  shall  have the  meaning  set forth in  Paragraph
7(d)(1) of the  Limited  Partnership  Agreement  dated as of August 27, 1993 and
without  regard to further  amendments  thereto  (and as set forth in Appendix A
hereto),  provided that in determining  the Net Assets of the Partnership on any
date, no adjustment shall be made to reflect any  distributions,  redemptions or
incentive fees payable as of the date of such determination.

            (c) "New  Trading  Profits"  shall mean the  excess,  if any, of Net
Assets  managed by the  Advisor at the end of the fiscal  period over Net Assets
managed by the Advisor at the end of the highest  previous  fiscal period or Net
Assets  allocated  to the Advisor at the date  trading  commences,  whichever is
higher,  and as further adjusted to eliminate the effect on Net Assets resulting
from  new  capital   contributions,   redemptions,   reallocations   or  capital
distributions,  if any, made during the fiscal  period  decreased by interest or
other  income,  not  directly  related  to  trading  activity,   earned  on  the
Partnership's  assets  during the  fiscal  period,  whether  the assets are held
separately  or in margin  accounts.  Ongoing  expenses will be attributed to the
Advisor  based  on the  Advisor's  proportionate  share of Net  Assets.  Ongoing
expenses  above will not  include  expenses  of  litigation  not  involving  the
activities of the Advisor on behalf of the Partnership. Ongoing expenses include
offering and organizational expenses of the Partnership. Interest income earned,
if any, will not be taken into account in computing New Trading  Profits  earned
by the  Advisor.  If Net Assets  allocated  to the  Advisor  are  reduced due to
redemptions,  distributions or reallocations (net of additions), there will be a
corresponding  proportional  reduction in the related loss  carryforward  amount
that must be  recouped  before  the  Advisor  is  eligible  to  receive  another
incentive fee.

            (d) Quarterly  incentive fees and monthly  management  fees shall be
paid within twenty (20) business  days  following the end of the period,  as the
case may be, for which such fee is payable.  In the event of the  termination of
this  Agreement as of any date which shall not be the end of a fiscal quarter or
a calendar  month,  as the case may be,  the  quarterly  incentive  fee shall be
computed as if the effective date of  termination  were the last day of the then
current  quarter  and the  monthly  management  fee  shall  be  prorated  to the
effective date of termination.  If, during any month,  the Partnership  does not
conduct  business  operations  or the Advisor is unable to provide the  services
contemplated  herein for more than two  successive  business  days,  the monthly
management  fee shall be prorated by the ratio which the number of business days
during which SBFM conducted the  Partnership's  business  operations or utilized
the Advisor's  services  bears in the month to the total number of business days
in such month.

            (e) The provisions of this Paragraph 3 shall survive the termination
of this Agreement.


           4. RIGHT TO ENGAGE IN OTHER ACTIVITIES.  (a) The services provided by
the Advisor hereunder are not to be deemed exclusive. SBFM on its own behalf and
on behalf of the  Partnership  acknowledges  that,  subject to the terms of this
Agreement,   the   Advisor   and  its   officers,   directors,   employees   and
shareholder(s), may render advisory, consulting and management services to other
clients and  accounts.  The Advisor and its officers,  directors,  employees and
shareholder(s) shall be free to trade for their own accounts and to advise other
investors and manage other commodity  accounts during the term of this Agreement
and to use the same  information,  computer  programs  and  trading  strategies,
programs or formulas which they obtain, produce or utilize in the performance of
services to SBFM for the Partnership.  However, the Advisor represents, warrants
and agrees that it believes  the  rendering  of such  consulting,  advisory  and
management services to other accounts and entities will not require any material
change  in the  Advisor's  basic  trading  strategies  and will not  affect  the
capacity  of the  Advisor  to  continue  to  render  services  to  SBFM  for the
Partnership as contemplated by this Agreement.

            (b) If, at any time during the term of this  Agreement,  the Advisor
is  required  to  aggregate  the  Partnership's  commodity  positions  with  the
positions of any other person for purposes of applying CFTC- or exchange-imposed
speculative  position  limits,  the Advisor agrees that it will promptly  notify
SBFM if the  Partnership's  positions are included in an aggregate  amount which
exceeds the applicable  speculative  position limit. The Advisor agrees that, if
its  trading  recommendations  are  altered  because of the  application  of any
speculative  position limits,  it will not modify the trading  instructions with
respect to the Partnership's account in such manner as to affect the Partnership
substantially  disproportionately as compared with the Advisor's other accounts.
The Advisor further represents,  warrants and agrees that under no circumstances
will it  knowingly or  deliberately  use trading  strategies  or methods for the
Partnership  that are inferior to strategies  or methods  employed for any other
client or  account  and that it will not  knowingly  or  deliberately  favor any
client or account  managed by it over any other client or account in any manner,
it being acknowledged,  however, that (i) SBFM has directed the Advisor to trade
its MAAP Program at six times leverage, and (ii) different trading strategies or
methods may be utilized for differing sizes of accounts, accounts with different
trading policies, accounts experiencing differing inflows or outflows of equity,
accounts  which  commence  trading  at  different  times,  accounts  which  have
different  portfolios or different fiscal years,  accounts  utilizing  different
executing brokers and accounts with other differences, and that such differences
may cause divergent trading results.

            (c)  It is  acknowledged  that  the  Advisor  and/or  its  officers,
employees,  directors and  shareholder(s)  presently  act, and it is agreed that
they may continue to act, as advisor for other accounts managed by them, and may
continue to receive  compensation  with respect to services for such accounts in
amounts  which  may  be  more  or  less  than  the  amounts  received  from  the
Partnership.

            (d) The Advisor agrees that it shall make such information available
to SBFM respecting the performance of the  Partnership's  account as compared to
the  performance of other  accounts  managed by the Advisor or its principals as
shall be  reasonably  requested  by SBFM,  subject  to the  preservation  of the
confidentiality of such information,  including but not limited to the Advisor's
trading  systems,  methods,  models,  strategies,  formulas  and the identity of
clients. The Advisor presently believes and represents that existing speculative
position limits will not materially  adversely  affect its ability to manage the
Partnership's  account given the potential size of the Partnership's account and
the Advisor's and its principals' current accounts and all proposed accounts for
which they have contracted to act as trading manager.

           5. TERM. (a) This  Agreement  shall continue in effect until June 30,
1997.  SBFM may, in its sole  discretion,  renew this  Agreement for  additional
one-year  periods  upon notice to the Advisor not less than 30 days prior to the
expiration  of the  previous  period.  At any  time  during  the  term  of  this
Agreement,  SBFM may terminate  this  Agreement at any  month-end  upon 30 days'
notice to the Advisor.  At any time during the term of this Agreement,  SBFM may
elect to  immediately  terminate  this  Agreement  upon 30 days'  notice  to the
Advisor  if (i) the Net Asset  Value per Unit  shall  decline as of the close of
business  on any day to $400 or  less;  (ii)  the Net  Assets  allocated  to the
Advisor (adjusted for redemptions, distributions,  withdrawals or reallocations,
if any)  decline  by 50% or more as of the end of a  trading  day from  such Net
Assets'  previous  highest value;  (iii) limited partners owning at least 50% of
the  outstanding  Units shall vote to require SBFM to terminate this  Agreement;
(iv) the Advisor fails to comply with the terms of this Agreement;  (v) SBFM, in
good faith,  reasonably  determines that the performance of the Advisor has been
such that SBFM's fiduciary  duties to the Partnership  require SBFM to terminate
this  Agreement;  or (vi)  SBFM  reasonably  believes  that the  application  of
speculative  position  limits will  substantially  affect the performance of the
Partnership.  At any time  during  the term of this  Agreement,  SBFM may  elect
immediately to terminate this Agreement if (i) the Advisor merges,  consolidates
with  another  entity,  sells a  substantial  portion of its assets,  or becomes
bankrupt or insolvent, except as provided in Section 10 hereof, (ii) John Hummel
dies, becomes incapacitated, leaves the employ of the Advisor, ceases to control
the Advisor or is otherwise not managing the trading  programs or systems of the
Advisor, or (iii) the Advisor's registration as a commodity trading advisor with
the CFTC or its  membership  in the NFA or any other  regulatory  authority,  is
terminated  or  suspended.   This  Agreement  will  immediately  terminate  upon
dissolution   of  the   Partnership  or  upon  cessation  of  trading  prior  to
dissolution.

            (b) The Advisor may terminate this Agreement by giving not less than
30 days'  notice  to SBFM (i) in the  event  that the  trading  policies  of the
Partnership  as set forth in the  Prospectus are changed in such manner that the
Advisor reasonably believes will adversely affect the performance of its trading
strategies;  (ii) after June 30,  1997;  or (iii) in the event that the  General
Partner or  Partnership  fails to comply with the terms of this  Agreement.  The
Advisor may  immediately  terminate this Agreement if SBFM's  registration  as a
commodity pool operator or its membership in the NFA is terminated or suspended.

            (c) Except as otherwise provided in this Agreement,  any termination
of this Agreement in accordance with this Paragraph 5 or Paragraph 1(e) shall be
without  penalty  or  liability  to any  party,  except  for any fees due to the
Advisor pursuant to Section 3 hereof.

           6.  INDEMNIFICATION.  (a)(i) In any threatened,  pending or completed
action,  suit,  or  proceeding  to  which  the  Advisor  was or is a party or is
threatened  to be  made a  party  arising  out  of or in  connection  with  this
Agreement or the  management of the  Partnership's  assets by the Advisor or the
offering  and  sale  of  units  in  the  Partnership,  SBFM  shall,  subject  to
subparagraph  (a)(iii) of this  Paragraph  6,  indemnify  and hold  harmless the
Advisor against any loss, liability,  damage, cost, expense (including,  without
limitation,  attorneys' and  accountants'  fees),  judgments and amounts paid in
settlement  actually  and  reasonably  incurred  by it in  connection  with such
action,  suit,  or proceeding if the Advisor acted in good faith and in a manner
reasonably  believed  to be in or not  opposed  to  the  best  interests  of the
Partnership,  and  provided  that its  conduct  did not  constitute  negligence,
intentional misconduct, or a breach of this agreement and to the extent that the
court or  administrative  forum in which such action or suit was  brought  shall
determine upon  application  that,  despite the adjudication of liability but in
view of all  circumstances  of the case,  the  Advisor is fairly and  reasonably
entitled to indemnity for such expenses which such court or administrative forum
shall  deem  proper;  and  further  provided  that no  indemnification  shall be
available from the Partnership if such  indemnification is prohibited by Section
16 of the  Partnership  Agreement.  The  termination  of  any  action,  suit  or
proceeding  by  judgment,  order or  settlement  shall not, of itself,  create a
presumption  that  the  Advisor  did  not  act in  good  faith  and in a  manner
reasonably  believed  to be in or not  opposed  to  the  best  interests  of the
Partnership.

            (ii) Without  limiting  sub-paragraph  (i) above, to the extent that
the Advisor has been  successful  on the merits or  otherwise  in defense of any
action,  suit or proceeding referred to in subparagraph (i) above, or in defense
of any claim,  issue or matter  therein,  SBFM shall  indemnify  it against  the
expenses  (including,  without  limitation,  attorneys' and  accountants'  fees)
actually and reasonably incurred by it in connection therewith.

            (iii) Any  indemnification  under  subparagraph  (i)  above,  unless
ordered  by a court  or  administrative  forum,  shall  be made by SBFM  only as
authorized in the specific  case and only upon a  determination  by  independent
legal counsel in a written  opinion that such  indemnification  is proper in the
circumstances because the Advisor has met the applicable standard of conduct set
forth in  subparagraph  (i)  above.  Such  independent  legal  counsel  shall be
selected by SBFM in a timely manner,  subject to the Advisor's  approval,  which
approval shall not be unreasonably  withheld. The Advisor will be deemed to have
approved SBFM's selection unless the Advisor notifies SBFM in writing,  received
by SBFM within five days of SBFM's  telecopying  to the Advisor of the notice of
SBFM's selection, that the Advisor does not approve the selection.

            (iv) In the event the Advisor is made a party to any claim,  dispute
or  litigation  or  otherwise  incurs  any loss or expense as a result of, or in
connection with, the  Partnership's or SBFM's  activities or claimed  activities
unrelated to the Advisor,  SBFM shall  indemnify,  defend and hold  harmless the
Advisor against any loss, liability, damage, cost or expense (including, without
limitation, attorneys' and accountants' fees) incurred in connection therewith.

            (v) As  used in this  Paragraph  6(a),  the  terms  "Advisor"  shall
include the Advisor,  its  principals,  officers,  directors,  stockholders  and
employees and the term "SBFM" shall include the Partnership.

           (b)(i) The  Advisor  agrees to  indemnify,  defend and hold  harmless
SBFM, the Partnership and their affiliates against any loss, liability,  damage,
cost or expense  (including,  without  limitation,  attorneys' and  accountants'
fees), judgments and amounts paid in settlement actually and reasonably incurred
by them (A) as a result of the material  breach of any material  representations
and warranties made by the Advisor in this Agreement,  or (B) as a result of any
act or omission of the Advisor  relating to the  Partnership if there has been a
final judicial or regulatory  determination  or, in the event of a settlement of
any  action or  proceeding  with the prior  written  consent of the  Advisor,  a
written opinion of an arbitrator  pursuant to Paragraph 14 hereof, to the effect
that such acts or omissions violated the terms of this Agreement in any material
respect  or  involved  negligence,   bad  faith,   recklessness  or  intentional
misconduct on the part of the Advisor  (except as otherwise  provided in Section
1(g)).

            (ii) In the event SBFM, the  Partnership or any of their  affiliates
is made a party to any claim, dispute or litigation or otherwise incurs any loss
or expense as a result of, or in  connection  with,  the  activities  or claimed
activities of the Advisor or its principals, officers, directors, shareholder(s)
or employees  unrelated  to SBFM's or the  Partnership's  business,  the Advisor
shall indemnify,  defend and hold harmless SBFM, the Partnership or any of their
affiliates  against any loss,  liability,  damage,  cost or expense  (including,
without  limitation,  attorneys' and  accountants'  fees) incurred in connection
therewith.

            (iii) John Hummel shall have no liability to the Partnership or SBFM
or  any  of  their  respective  officers,  directors,   employees,  partners  or
affiliates   under  this  Agreement  or  in  connection  with  the  transactions
contemplated by this Agreement except in the case of fraud or willful misconduct
by John Hummel.

            (c) In the event that a person  entitled  to  indemnification  under
this Paragraph 6 is made a party to an action,  suit or proceeding alleging both
matters for which  indemnification  can be made  hereunder and matters for which
indemnification may not be made hereunder, such person shall be indemnified only
for that portion of the loss,  liability,  damage,  cost or expense  incurred in
such  action,  suit  or  proceeding  which  relates  to the  matters  for  which
indemnification can be made.

            (d) None of the indemnifications contained in this Paragraph 6 shall
be  applicable  with respect to default  judgments,  confessions  of judgment or
settlements entered into by the party claiming indemnification without the prior
written  consent,  which  shall  not be  unreasonably  withheld,  of  the  party
obligated to indemnify such party.

            (e) The provisions of this Paragraph 6 shall survive the termination
of this Agreement.

           7.  REPRESENTATIONS, WARRANTIES AND AGREEMENTS.

            (a) The Advisor represents and warrants that:

            (i)  All  references  to  the  Advisor  and  its  principals  in the
Advisor's  Disclosure  Document are accurate in all material  respects and as to
them the Disclosure Document does not contain any untrue statement of a material
fact or omit to state a material fact which is necessary to make the  statements
therein not misleading.

            (ii) The performance information in the Disclosure Document is based
on all  of  the  customer  accounts  managed  on a  discretionary  basis  by the
Advisor's principals and/or the Advisor during the period covered by such tables
and required to be disclosed therein.

            (iii) The Advisor will be acting as a commodity trading advisor with
respect to the  Partnership  and not as a securities  investment  adviser and is
duly registered  with the CFTC as a commodity  trading  advisor,  is a member as
such of the NFA, and is in compliance with such other registration and licensing
requirements  as shall be  necessary  to enable it to  perform  its  obligations
hereunder,  and agrees to maintain  and renew such  registrations  and  licenses
during the term of this Agreement.

            (iv) The Advisor is a corporation  duly organized,  validly existing
and in good standing  under the laws of the State of Delaware and has full power
and authority to enter into this Agreement and to provide the services  required
of it hereunder.

            (v) The Advisor will not, by acting as a commodity  trading  advisor
to the Partnership,  breach or cause to be breached any undertaking,  agreement,
contract,  statute,  rule or regulation to which it is a party or by which it is
bound.

            (vi) This Agreement has been duly and validly  authorized,  executed
and delivered by the Advisor and is a valid and binding agreement enforceable in
accordance with its terms.

            (vii)  At  any  time  during  the  term  of  this  Agreement  that a
prospectus  relating to the Units is required to be delivered in connection with
the offer and sale  thereof,  the  Advisor  agrees  upon the  request of SBFM to
provide the Partnership  with such information as shall be necessary so that, as
to the  Advisor  and  its  principals,  such  prospectus  is  accurate,  and any
reference or information  regarding the Advisor therein shall be approved by the
Advisor in writing prior to its use.

            (b) SBFM represents and warrants for itself and the
Partnership that:

            (i) The  Prospectus  (as from time to time amended or  supplemented,
which  amendment or supplement is approved by the Advisor as to  descriptions of
itself and its actual  performance)  does not contain any untrue  statement of a
material  fact or omit to state a material  fact which is  necessary to make the
statements therein not misleading, except that the foregoing representation does
not apply to any statements  concerning the Advisor in the  Prospectus,  if any,
specifically approved by the Advisor for such use prior to its use.

            (ii) It is a corporation  duly  organized,  validly  existing and in
good  standing  under the laws of the State of Delaware  and has full  corporate
power and authority to perform its obligations under this Agreement.

            (iii) SBFM and the  Partnership  have the capacity and  authority to
enter into this Agreement on behalf of the Partnership.

            (iv) This Agreement has been duly and validly  authorized,  executed
and delivered on SBFM's and the Partnership's  behalf and is a valid and binding
agreement of SBFM and the Partnership enforceable in accordance with its terms.

            (v) SBFM will not, by acting as General  Partner to the  Partnership
and the Partnership  will not,  breach or cause to be breached any  undertaking,
agreement,  contract,  statute,  rule or regulation to which it is a party or by
which it is bound.

            (vi) It is registered  as a commodity  pool operator and is a member
of the NFA, and it will  maintain  and renew such  registration  and  membership
during the term of this Agreement.

            (vii) The  Partnership is a limited  partnership  duly organized and
validly  existing under the laws of the State of New York and has full power and
authority to enter into this Agreement and to perform its obligations under this
Agreement.

           8.  COVENANTS OF THE ADVISOR, SBFM AND THE
PARTNERSHIP(a)  The Advisor agrees as follows:

            (i) In connection with its activities on behalf of the  Partnership,
the Advisor will comply with all  applicable  rules and  regulations of the CFTC
and/or the commodity exchange on which any particular transaction is executed.

            (ii) The Advisor will promptly  notify SBFM of the  commencement  of
any material  suit,  action or proceeding  involving it, whether or not any such
suit, action or proceeding also involves SBFM.

            (iii) In the placement of orders for the  Partnership's  account and
for the accounts of any other client, the Advisor will utilize a pre-determined,
systematic,  fair and reasonable order entry system,  which shall, on an overall
basis, be no less favorable to the Partnership than to any other account managed
by  the  Advisor.   The  Advisor  acknowledges  its  obligation  to  review  the
Partnership's positions, prices and equity in the account managed by the Advisor
daily and within two business  days to notify,  in writing,  the broker and SBFM
and the  Partnership's  brokers of (i) any error committed by the Advisor or its
principals  or  employees;  (ii) any trade  which the Advisor  believes  was not
executed in accordance with its  instructions;  and (iii) any discrepancy with a
value of $10,000 or more (due to differences in the positions,  prices or equity
in the  account)  between  its  records  and  the  information  reported  on the
account's daily and monthly broker statements.

            (iv) The Advisor will maintain a net worth of not less than $250,000
during the term of this Agreement.

            (v) The  Advisor  will  keep  confidential  all of the terms of this
Agreement. In particular, the Advisor will not, directly or indirectly, disclose
to any  other  party  the  terms  of this  Agreement  related  to the  Advisor's
liability  for  give-up  transactions  or any other  which  differs  from SBFM's
Standard Form Management Agreement.

            (b) SBFM agrees for itself and the Partnership that:

            (i) SBFM and the Partnership  will comply with all applicable  rules
and  regulations  of the  CFTC  and/or  the  commodity  exchange  on  which  any
particular transaction is executed.

            (ii) SBFM will promptly  notify the Advisor of the  commencement  of
any material suit, action or proceeding involving it or the Partnership, whether
or not such suit, action or proceeding also involves the Advisor.

           (iii) SBFM will keep confidential all of the terms of this Agreement.
In  particular,  SBFM will not,  directly or  indirectly,  disclose to any other
party the  terms of this  Agreement  which  differ  from  SBFM's  Standard  Form
Management
Agreement.

           9.  COMPLETE AGREEMENT.  This Agreement constitutes the
entire agreement between the parties pertaining to the subject
matter hereof.

           10.  ASSIGNMENT.  This  Agreement  may not be  assigned  by any party
without  the  express  written  consent of the other  parties,  except  that the
Advisor may  incorporate  or transfer  all of its  assets,  trading  programs or
goodwill to, or merge or consolidate with, any corporation,  partnership or sole
proprietorship controlled by John Hummel and/or the Advisor, and may assign this
Agreement to any such corporation, partnership or sole proprietorship; provided,
that said corporation, partnership or sole proprietorship assumes all rights and
obligations of the Advisor under this Agreement and is entitled to and agrees to
use the  trading  method  and  systems  of the  Advisor  for the  benefit of the
Partnership.

           11.  AMENDMENT.  This Agreement may not be amended
except by the written consent of the parties.

           12. NOTICES. All notices,  demands or requests required to be made or
delivered under this Agreement  shall be in writing and delivered  personally or
by registered or certified mail or expedited courier,  return receipt requested,
postage  prepaid,  to the addresses  below or to such other  addresses as may be
designated by the party entitled to receive the same by notice similarly given:

           If to SBFM:

                Smith Barney Futures Management Inc.
                390 Greenwich Street
                1st Floor
                New York, New York  10013
                Attention:  David J. Vogel
                Facsimile:  212-723-8985

           If to the Advisor:

                AIS Futures Management, Inc.
                375 Park Avenue
                New York, New York  10152
                Attention:  John R. Hummel
                Facsimile:  212-339-9736

           13.  GOVERNING LAW.  This Agreement shall be governed
by and construed in accordance with the laws of the State of New
York.

           14.  ARBITRATION.  The parties agree that any dispute or  controversy
arising out of or  relating to this  Agreement  or the  interpretation  thereof,
shall be settled by arbitration in accordance with the rules, then in effect, of
the National Futures  Association or, if the National Futures  Association shall
refuse  jurisdiction,  then in accordance with the rules, then in effect, of the
American  Arbitration  Association;  provided,  however,  that the  power of the
arbitrator  shall be limited to  interpreting  this Agreement as written and the
arbitrator  shall state in writing his reasons for his award.  Judgment upon any
award  made  by  the  arbitrator  may  be  entered  in any  court  of  competent
jurisdiction.

           15.  NO THIRD PARTY BENEFICIARIES.  There are no third
party beneficiaries to this Agreement.


           IN WITNESS  WHEREOF,  this  Agreement  has been  executed  for and on
behalf of the undersigned as of the day and year first above written.

                        SMITH BARNEY FUTURES MANAGEMENT INC.


                        By________________________
                                 David J. Vogel
                          President and Director


                        SMITH BARNEY DIVERSIFIED FUTURES FUND L.P.

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


                        By________________________
                                 David J. Vogel
                          President and Director


                        AIS FUTURES MANAGEMENT, INC.



                        By________________________
                        Name:
                        Title:


<PAGE>



                                   Appendix A


           Net Assets. NET ASSETS of the Partnership shall mean the total assets
of the Partnership  including all cash,  plus Treasury Bills at market,  accrued
interest, and the market value of all open commodity positions maintained by the
Partnership,  less brokerage  charges accrued and less all other  liabilities of
the  Partnership,  determined in accordance with generally  accepted  accounting
principles under the accrual basis of accounting.