FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(X) QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
OR ( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter ended June 30, 1998
Commission File Number 0-22491
SMITH BARNEY DIVERSIFIED FUTURES FUND L.P. II
(Exact name of registrant as specified in its charter)
New York 13-3769020
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
c/o Smith Barney Futures Management Inc.
390 Greenwich St. - 1st Fl.
New York, New York 10013
(Address and Zip Code of principal executive offices)
(212) 723-5424
(Registrant's telephone number, including area code)
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
<PAGE>
SMITH BARNEY DIVERSIFIED FUTURES FUND L.P. II
FORM 10-Q
INDEX
Page
\ Number
PART I - Financial Information:
Item 1. Financial Statements:
Statement of Financial Condition at
June 30, 1998 and December 31, 1997 3
Statement of Income and Expenses and
Partners' Capital for the three and
six months ended June 30, 1998 and
1997. 4
Notes to Financial Statements 5 - 8
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 9 - 10
Item 3. Quantitative and Qualitative Disclosures
of Market Risk 11
PART II - Other Information 12 - 14
<PAGE>
PART I
Item 1. Financial Statements
SMITH BARNEY DIVERSIFIED FUTURES FUND L.P. II
STATEMENT OF FINANCIAL CONDITION
June 30, December 31,
1998 1997
ASSETS:
------------ ------------
(Unaudited)
Equity in commodity futures trading account:
Cash and cash equivalents $129,119,876 $104,013,967
Net unrealized appreciation on open
futures contracts 728,239 8,931,038
Commodity options owned, at market value
(cost $353,422 and $144,827 in 1998
and 1997, respectively) 402,312 219,299
------------ ------------
130,250,427 113,164,304
Interest receivable 407,187 383,130
------------ ------------
$130,657,614 $113,547,434
============ ============
LIABILITIES AND PARTNERS' CAPITAL:
Liabilities:
Accrued expenses:
Commissions $ 644,338 $ 578,625
Management fees 282,197 263,105
Other 39,636 18,146
Incentive fees - 67,467
Redemptions Payable 924,716 1,040,399
------------ ------------
1,890,887 1,967,742
------------ ------------
Partners' Capital:
General Partner, 1,195.9161 and 1,003.8833
Unit equivalents outstanding
in 1998 and 1997, respectively 1,298,873 1,128,124
Limited Partners, 117,364.4269 and
98,287.8866 Units of Limited Partnership
Interest outstanding in 1998 and 1997,
respectively 127,467,854 110,451,568
------------ ------------
128,766,727 111,579,692
------------ ------------
$130,657,614 $113,547,434
============ ============
See Notes to Financial Statements
3
<PAGE>
SMITH BARNEY DIVERSIFIED FUTURES FUND L.P. II
STATEMENT OF INCOME AND EXPENSES AND PARTNERS' CAPITAL
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------------ ------------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Income:
Net gains (losses) on trading of commodity futures:
Realized gains (losses) on closed positions $ 3,066,464 $ (3,100,484) $ 7,659,333 $ (1,218,338)
Change in unrealized gains/losses on open
positions (3,657,953) (1,221,326) (8,228,381) 200,602
------------- ------------- ------------- -------------
(591,489) (4,321,810) (569,048) (1,017,736)
Less, brokerage commissions and clearing fees
($48,947, $48,050, $105,787 and $81,200, respectively) (2,000,113) (1,569,958) (3,937,288) (2,786,588)
------------- ------------- ------------- -------------
Net realized and unrealized losses (2,591,602) (5,891,768) (4,506,336) (3,804,324)
Interest income 1,171,628 913,360 2,345,176 1,617,533
------------- ------------- ------------- -------------
(1,419,974) (4,978,408) (2,161,160) (2,186,791)
------------- ------------- ------------- -------------
Expenses:
Management fees 814,048 626,016 1,592,055 1,124,713
Other 99,273 200,843 167,345 232,668
Incentive fees (57,104) - - 296,785
------------- ------------- ------------- -------------
856,217 826,859 1,759,400 1,654,166
------------- ------------- ------------- -------------
Net loss (2,276,191) (5,805,267) (3,920,560) (3,840,957)
Additions- Limited Partner 17,366,000 20,711,000 28,936,000 45,999,600
- General Partner 121,000 203,000 210,000 446,000
Redemptions (3,371,345) (1,178,102) (8,038,405) (2,375,819)
------------- ------------- ------------- -------------
Net Increase in Partners' capital 11,839,464 13,930,631 17,187,035 40,228,824
Partners' capital, beginning of period 116,927,263 81,596,197 111,579,692 55,298,004
------------- ------------- ------------- -------------
Partners' capital, end of period $ 128,766,727 $ 95,526,828 $ 128,766,727 $ 95,526,828
------------- ------------- ------------- -------------
Net asset value per Unit
(118,560.3430 and 87,587.6071 Units outstanding
at June 30, 1998 and 1997, respectively) $ 1,086.09 $ 1,090.64 $ 1,086.09 $ 1,090.64
------------- ------------- ------------- -------------
Net loss per Unit of Limited Partnership
Interest and General Partner Unit equivalent $ (21.85) $ (71.86) $ (37.67) $ (34.42)
------------- ------------- ------------- -------------
</TABLE>
See Notes to Financial Statements
4
<PAGE>
SMITH BARNEY DIVERSIFIED FUTURES FUND L.P. II
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
(Unaudited)
1. General
Smith Barney Diversified Futures Fund L.P. II (the "Partnership"), is a
limited partnership which was organized on May 10, 1994 under the partnership
laws of the State of New York to engage in the speculative trading of a
diversified portfolio of commodity interests including futures contracts,
options and forward contracts. The commodity interests that are traded by the
Partnership are volatile and involve a high degree of market risk.
Between August 21, 1995 (commencement of the offering period) and January
16, 1996, 8,529 Units of limited partnership interest were sold at $1,000 per
unit. The proceeds of the offering were held in an escrow account until January
17, 1996, at which time they were turned over to the Partnership for trading.
Smith Barney Futures Management Inc. acts as the general partner (the
"General Partner") of the Partnership. Smith Barney Inc. ("SB"), an affiliate of
the General Partner, acts as commodity broker for the Partnership. All trading
decisions are made for the Partnership by John W. Henry & Company, Inc.,
Millburn Ridgefield Corporation, Campbell & Co., Inc., Willowbridge Associates
Inc. and ARA Portfolio Management Company, L.L.C. (collectively, the
"Advisors"). On November 28, 1997, Smith Barney Holdings Inc. was merged with
Salomon Inc to form Salomon Smith Barney Holdings Inc. ("SSBH"), a wholly owned
subsidiary of Travelers Group. SB is a wholly owned subsidiary of SSBH.
The accompanying financial statements are unaudited but, in the opinion
of management, include all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of the Partnership's financial
condition at June 30, 1998 and the results of its operations for the three and
six months ended June 30, 1998 and 1997. These financial statements present the
results of interim periods and do not include all disclosures normally provided
in annual financial statements. It is suggested that these financial statements
be read in conjunction with the financial statements and notes included in the
Partnership's annual report on Form 10-K filed with the Securities and Exchange
Commission for the year ended December 31, 1997.
Due to the nature of commodity trading, the results of operations for the
interim periods presented should not be considered indicative of the results
that may be expected for the entire year.
5
<PAGE>
SMITH BARNEY DIVERSIFIED FUTURES FUND L.P. II
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
(Unaudited)
2. Net Asset Value Per Unit:
Changes in net asset value per Unit for the three and six months ended
June 30, 1998 and 1997, were as follows:
THREE-MONTHS ENDED SIX-MONTHS ENDED
JUNE 30, JUNE 30,
1998 1997 1998 1997
Net realized and unrealized
losses $ (24.65) $ (72.92) $ (43.07) $ (32.05)
Interest income 10.32 10.98 21.57 22.16
Expenses (7.52) (9.92) (16.17) (24.53)
--------- --------- --------- ---------
Decrease for period (21.85) (71.86) (37.67) (34.42)
Net Asset Value per Unit,
beginning of period 1,107.94 1,162.50 1,123.76 1,125.06
--------- --------- --------- ---------
Net Asset Value per Unit,
end of period $1,086.09 $1,090.64 $1,086.09 $1,090.64
========= ========= ========= =========
3. 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
activity are shown in the statement of income and expenses.
The Customer Agreement between the Partnership and SB gives the
Partnership the legal right to net unrealized gains and losses.
All of the commodity interests owned by the Partnership are held for
trading purposes. The fair value of these commodity interests, including options
thereon, at June 30, 1998 and December 31, 1997 was $1,130,551 and $9,150,337,
respectively, and the average fair value during the six and twelve months then
ended, based on monthly calculation, was $4,826,122 and $5,938,920,
respectively.
4. Financial Instrument Risk:
The Partnership is party to financial instruments with off- balance sheet
risk, including derivative financial instruments and
6
<PAGE>
derivative commodity instruments, in the normal course of its business. These
financial instruments include forwards, futures and options, whose value is
based upon an underlying asset, index, or reference rate, and generally
represent future commitments to exchange currencies or cash flows, to purchase
or sell other financial instruments at specific terms at specified future dates,
or, in the case of derivative commodity instruments, to have a reasonable
possibility to be settled in cash or with another financial instrument. These
instruments may be traded on an exchange or over-the-counter ("OTC"). Exchange
traded instruments are standardized and include futures and certain option
contracts. OTC contracts are negotiated between contracting parties and include
forwards and certain options. Each of these instruments is subject to various
risks similar to those related to the underlying financial instruments including
market and credit risk. In general, the risks associated with OTC contracts are
greater than those associated with exchange traded instruments because of the
greater risk of default by the counterparty to an OTC contract.
Market risk is the potential for changes in the value of the financial
instruments traded by the Partnership due to market changes, including interest
and foreign exchange rate movements and fluctuations in commodity or security
prices. Market risk is directly impacted by the volatility and liquidity in the
markets in which the related underlying assets are traded.
Credit risk is the possibility that a loss may occur due to the failure of
a counterpaty to perform according to the terms of a contract. Credit risk with
respect to exchange traded instruments is reduced to the extent that an exchange
or clearing organization acts as a counterparty to the transactions. The
Partnership's risk of loss in the event of counterparty default is typically
limited to the amounts recognized in the statement of financial condition and
not represented by the contract or notional amounts of the instruments. The
Partnership has concentration risk because the sole counterparty or broker with
respect to the Partnership's assets is SB.
The General Partner monitors and controls the Partnership's risk exposure
on a daily basis through financial, credit and risk management monitoring
systems and, accordingly believes that it has effective procedures for
evaluating and limiting the credit and market risks to which the Partnership is
subject. These monitoring systems allow the General Partner to statistically
analyze actual trading results with risk adjusted performance indicators and
correlation statistics. In addition, on-line monitoring systems provide account
analysis of futures, forwards and options positions by sector, margin
requirements, gain and loss transactions and collateral positions.
The notional or contractual amounts of these instruments,
7
<PAGE>
while not recorded in the financial statements, reflect the extent of the
Partnership's involvements in these instruments. At June 30, 1998, the notional
or contractual amounts of the Partnership's commitment to purchase and sell
these instruments was $985,631,670 and $962,423,315, respectively, as detailed
below. All of these instruments mature within one year of June 30, 1998.
However, due to the nature of the Partnership's business, these instruments may
not be held to maturity. At June 30, 1998, the fair value of the Partnership's
derivatives, including options thereon, was $1,130,551, as detailed below.
JUNE 30, 1998
NOTIONAL OR CONTRACTUAL
AMOUNT OF COMMITMENTS
TO PURCHASE TO SELL FAIR VALUE
Currencies:
- - Exchange Traded Contracts $ 13,832,920 $ 36,294,500 $ 569,413
- - OTC Contracts 275,646,431 374,678,953 (2,650,753)
Energy 5,746,970 27,518,804 993,371
Grains 8,481,363 8,859,431 (140,247)
Interest Rates U.S. 334,816,470 - 941,318
Interest Rates Non U.S. 322,982,383 437,575,261 261,216
Livestock - 3,039,630 74,990
Metals 3,995,713 33,733,733 337,809
Softs 9,528,250 18,091,463 925,690
Indices 10,601,170 22,631,540 (182,256)
------------ ------------ ------------
Totals $985,631,670 $962,423,315 $ 1,130,551
============ ============ ============
At December 31, 1997, the notional or contractual amounts of the
Partnership's commitment to purchase and sell these instruments was $529,827,193
and $562,544,334, respectively, and the fair value of the Partnership's
derivatives, including options thereon, was $9,150,337, as detailed below.
DECEMBER 31, 1997
NOTIONAL OR CONTRACTUAL
AMOUNT OF COMMITMENTS
TO PURCHASE TO SELL FAIR VALUE
Currencies:
- - Exchange Traded Contracts $ 16,384,721 $107,228,370 $ 480,324
- - OTC Contracts 51,178,514 103,210,400 451,488
Energy - 35,726,058 1,910,464
Grains 7,962,725 10,551,808 79,029
Interest Rates U.S. 140,875,215 11,765,610 717,418
Interest Rates Non U.S. 262,803,653 198,052,010 1,149,142
Livestock - 7,732,038 262,598
Metals 21,841,650 52,955,116 2,665,247
Softs 26,105,281 19,193,510 888,328
Indices 2,675,434 16,129,414 546,299
------------ ------------ ------------
Totals $529,827,193 $562,544,334 $ 9,150,337
============ ============ ============
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Liquidity and Capital Resources
The Partnership does not engage in the sale of goods or services. Its only
assets are its equity in its commodity futures trading account, consisting of
cash and cash equivalents, net unrealized appreciation (depreciation) on open
futures and forward 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. While substantial
losses could lead to a decrease in liquidity, no such losses occurred during the
second quarter of 1998.
The Partnership's capital consists of the capital contributions of the
partners as increased or decreased by gains or losses on commodity futures
trading, expenses, interest income, additions and redemptions of Units and
distributions of profits if any.
For the six months ended June 30, 1998, Partnership capital increased
15.4% from $111,579,692 to $128,766,727. This increase was attributable to the
addition of 26,615.4640 Units totaling $29,146,000 partially offset by net loss
from operations of $3,920,560 and the redemption of 7,346.8909 Units resulting
in an outflow of $8,038,405 for the six months ended June 30, 1998.
Operational Risk
The General Partner administers the business of the Partnership through
various systems and processes maintained by SSBH. SSBH has analyzed the impact
of the year 2000 on its systems and processes and modifications for compliance
are proceeding according to plan. All modifications necessary for year 2000
compliance are expected to be completed by the first quarter of 1999. In July
1998, SB participated in successful industry-wide testing coordinated by the
Securities Industry Association and plans to participate in such tests in the
future. The purpose of industry-wide testing is to confirm that exchanges,
clearing organizations, and other securities industry participants are prepared
for the year 2000. The failure of vendors, clients, or regulators to resolve
their own Year 2000 compliance issues in a timely manner could result in
material financial risk to the Partnership.
Results of Operations
During the Partnership's second quarter of 1998, the net asset value per
Unit decreased 2.0% from $1,107.94 to $1,086.09, as compared to the second
quarter of 1997 in which the net asset value per Unit decreased 6.2%. The
Partnership experienced a net trading loss before commissions and expenses in
the second quarter of 1998
9
<PAGE>
of $591,489. Losses were recognized in the trading of commodity futures in
currencies, grains, U.S. and non U.S. interest rates, and metals and were
partially offset by gains recognized in the trading of energy, indices and
softs. The Partnership experienced a net trading loss before commissions and
expenses in the second quarter of 1997 of $4,321,810. Losses were recognized in
the trading of commodity futures in currencies, energy products, U.S. and non
U.S. interest rates, livestock and metals and were partially offset by gains in
grains, indices and softs.
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 correctly those prices trends. 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.
Interest income on 80% of the Partnership's daily equity maintained in
cash was earned at the 30-day U.S. Treasury bill rate determined weekly by SB
based on the average non-competitive yield on 3-month U.S. Treasury bills
maturing in 30 days. Interest income increased by $258,268 and $727,643,
respectively, for the three and six months ended June 30, 1998 as compared to
the corresponding periods in 1997. The increase in interest income is primarily
due to an increase in Partnership capital as a result of net additions through
the second quarter of 1998.
Brokerage commissions are calculated on the Partnership's net asset value
as of the last day of each month and therefore, are affected by trading
performance, additions and redemptions. Brokerage commissions and clearing fees
for the three and six months ended June 30, 1998 increased by $430,155 and
$1,150,700, respectively, as compared to the corresponding periods in 1997.
Management fees are calculated on the portion of the Partnership's net
asset value allocated to each Advisor at the end of the month and, therefore,
are affected by trading performance, additions and redemptions. Management fees
increased by $188,032 and $467,342 for the three and six months ended June 30,
1998, respectively, as compared to the corresponding periods in 1997.
Incentive fees are based on the new trading profits generated by each
Advisor as defined in the advisory agreements between the Partnership, the
General Partner and each Advisor. No incentive fees were earned during the three
months ended June 30, 1998 and 1997 and for the six months ended June 30, 1998.
Trading performance resulted in incentive fees of $296,785 for the six months
ended June 30, 1997.
10
<PAGE>
Item 3. Quantitative and Qualitative Disclosures of Market Risk
The fund is subject to SEC Financial Reporting Release No. 48,
Quantitative and Qualitative Disclosures of Market Risk and will comply with the
disclosure and reporting requirements in its form 10K as of December 31, 1998.
11
<PAGE>
PART II OTHER INFORMATION
Item 1. Legal Proceedings -
Between May 1994 and the present, Salomon Brothers Inc. ("SBI"), SB
and The Robinson Humphrey Company, Inc. ("R- H"), all currently
subsidiaries of Salomon Smith Barney Holdings Inc. ("SSBHI"), along
with a number of other broker-dealers, were named as defendants in
approximately 25 federal court lawsuits and two state court
lawsuits, principally alleging that companies that make markets in
securities traded on NASDAQ violated the federal antitrust laws by
conspiring to maintain a minimum spread of $.25 between the bid and
asked price for certain securities. The federal lawsuits and one
state court case were consolidated for pre-trial purposes in the
Southern District of New York in the fall of 1994 under the caption
In re NASDAQ Market- Makers Antitrust Litigation, United States
District Court, Southern District of New York No. 94-CIV-3996 (RWS);
M.D.L. No. 1023. The other state court suit, Lawrence A. Abel v.
Merrill Lynch & Co., Inc. et al.; Superior Court of San Diego, Case
No. 677313, has been dismissed without prejudice in conjunction with
a tolling agreement.
In consolidated action, the plaintiffs purport to represent a class
of persons who bought one or more of what they currently estimate to
be approximately 1,650 securities on NASDAQ between May 1, 1989 and
May 27, 1994. They seek unspecified monetary damages, which would be
trebled under the antitrust laws. The plaintiffs also seek
injunctive relief, as well as attorney's fees and the costs of the
action. (The state cases seek similar relief.) Plaintiffs in the
consolidated action filed an amended consolidated complaint that
defendants answered in December 1995. On November 26, 1996, the
Court certified a class composed of retail purchasers. A motion to
include institutional investors in the class and to add class
representatives was granted. In December 1997, SBI, SB and R-H,
along with several other broker-dealer defendants, executed a
settlement agreement with the plaintiffs. This agreement has been
preliminarily approved by the U.S. District Court for the Southern
District of New York but is subject to final approval.
On July 17, 1996, the Antitrust Division of the Department of
Justice filed a complaint against a number of firms that act as
market makers in NASDAQ stocks. The complaint basically alleged that
a common understanding arose among NASDAQ market makers which worked
to keep quote spreads in NASDAQ stocks artificially wide.
Contemporaneous with the filing of
12
<PAGE>
the complaint, SBI, SB and other defendants entered into a
stipulated settlement agreement, pursuant to which the defendants
would agree not to engage in certain practices relating to the
quoting of NASDAQ securities and would further agree to implement a
program to ensure compliance with federal antitrust laws and with
the terms of the settlement. In entering into the stipulated
settlement, SBI and SB did not admit any liability. There are no
fines, penalties, or other payments of monies in connection with the
settlement. In April 1997, the U.S. District Court for the Southern
District of New York approved the settlement. In May 1997,
plaintiffs in the related civil action (who were permitted to
intervene for limited purposes) appealed the district court's
approval of the settlement. The appeal was argued in March 1998 and
was affirmed in August 1998.
The Securities and Exchange Commission ("SEC") is also conducting a
review of the NASDAQ marketplace, during which it has subpoenaed
documents and taken the testimony of various individuals including
SBI and SB personnel. In July 1996, the SEC reached a settlement
with the National Association of Securities Dealers and issued a
report detailing certain conclusions with respect to the NASD and
the NASDAQ market.
In December 1996, a complaint seeking unspecified monetary damages
was filed by Orange County, California against numerous brokerage
firms, including SB, in the U.S. Bankruptcy Court for the Central
District of California. Plaintiff alleged, among other things, that
the defendants recommended and sold to plaintiff unsuitable
securities. The case (County of Orange et al. v. Bear Stearns & Co.
Inc. et al.) had been subject to a stay by agreement of the parties
which will expire on August 21, 1998.
Item 2. Changes in Securities and Use of Proceeds -
The Partnership continues to offer Units at the net asset value per
Unit as of the end of each month. For the three months ended June
30, 1998, there were additional sales of 16,056.6746 Units totaling
$17,366,000 and contributions by the General Partner representing
112.2445 Unit equivalents totaling $121,000. For the six months
ended June 30, 1998, there were additional sales of 26,423.4312
Units totaling $28,936,000 and contributions by the General Partner
representing 192.0328 Unit equivalents totaling $210,000.
Proceeds from the sale of additional Units are used in the trading
of commodity interests including futures contracts, options and
forward contracts.
13
<PAGE>
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders -
None
Item 5. Other Information - None
Item 6. (a) Exhibits - None
(b) Reports on Form 8-K - None
14
<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 report to be signed on
its behalf by the undersigned, thereunto duly authorized.
SMITH BARNEY DIVERSIFIED FUTURES FUND L.P. II
By: Smith Barney Futures Management Inc.
(General Partner)
By: /s/ David J. Vogel, President
David J. Vogel, President
Date: 8/14/98
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By: Smith Barney Futures Management Inc.
(General Partner)
By: /s/ David J. Vogel, President
David J. Vogel, President
Date: 8/14/98
By /s/ Daniel A. Dantuono
Daniel A. Dantuono
Chief Financial Officer and
Director
Date: 8/14/98
15
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000923660
<NAME> Smith Barney Diversified futures fund L.P.II
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 129,119,876
<SECURITIES> 1,130,551
<RECEIVABLES> 407,187
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 130,657,614
<PP&E> 0
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<TOTAL-ASSETS> 130,657,614
<CURRENT-LIABILITIES> 1,890,887
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 128,766,727
<TOTAL-LIABILITY-AND-EQUITY> 130,657,614
<SALES> 0
<TOTAL-REVENUES> (2,161,160)
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,759,400
<LOSS-PROVISION> 0
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<INCOME-PRETAX> (3,920,560)
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<NET-INCOME> (3,920,560)
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