Report of Financial Responsibilities

The consolidated financial statements of Smith International, Inc. included in this Annual Report were prepared by management, which is responsible for their integrity and objectivity. The financial statements have been prepared in conformity with generally accepted accounting principles and include amounts that are based on estimates and judgments made by management. These financial statements have been audited by the independent accounting firm, Arthur Andersen LLP, which was given unrestricted access to all financial records and related data.

Management maintains a system of internal control that is designed to provide reasonable assurance that assets are safeguarded, transactions are executed and recorded in accordance with management's authorization and financial statements are reliable. This system includes an organizational structure providing a division of responsibilities, the selection and training of qualified personnel and policies and procedures that require adherence to ethical business standards and compliance with all laws to which the Company is subject. The internal control system is continuously monitored by direct management review and an internal audit function under which periodic independent reviews are conducted. Management believes that, as of December 31, 1996, the Company's system of internal control was adequate to provide reasonable assurance as to the established objectives. It should be recognized, however, that there are inherent limitations in the effectiveness of any system of internal control, including the possibility of human error and the circumvention of controls. Accordingly, even an effective internal control system can provide only reasonable assurance with respect to the preparation of reliable financial statements and the safeguarding of assets.

The adequacy of Smith International's financial controls and the accounting principles employed in financial reporting are under the general oversight of the Audit Committee of Smith International's Board of Directors. No member of this committee is an officer or employee of Smith International. The independent public accountants have direct access to the Audit Committee, and they meet with the committee from time to time, with and without financial management present, to discuss accounting, auditing and financial reporting matters.

	MANAGEMENT REPORT OF FINANCIAL RESPONSIBILITIES
1996 ANNUAL REPORT