| Wisconsin                       | 39-0667110          |
|---------------------------------|---------------------|
| (State or other jurisdiction of | (I.R.S. Employer    |
| Incorporation or organization)  | Identification No.) |
|                            |                |

----

|                                                           |   | December 25, |    |   | June 30, |   |
|----------------------------------------------------------------|--------|--------------|---------|--------|----------|--------|
|                                                           |   | 2009         |    |   | 2009     |   |
| Assets                                                         |   |         |    |   |     |   |
| Current assets:                                                |   |         |    |   |     |   |
| Cash                                                           |   | $            | 16,762  |   |     | $      | 13,266 |   |
| Trade accounts receivable, net                                 |   |         | 39,806  |   |     |   | 53,367 |   |
| Inventories, net                                               |   |         | 89,384  |   |     |   | 92,331 |   |
| Deferred income taxes                                          |   |         | 5,336   |   |     |   | 6,280 |   |
| Other                                                          |   |         | 7,587   |   |     |   | 8,677 |   |
|                                                           |   |         |    |   |     |   |   |   |
| Total current assets                                           |   |         | 158,875 |   |     |   | 173,921 |   |
|                                                           |   |         |    |   |     |   |   |   |
| Property, plant and equipment, net                             |   |         | 64,321  |   |     |   | 65,799 |   |
| Goodwill, net                                                  |   |         | 18,013  |   |     |   | 17,509 |   |
| Deferred income taxes                                          |   |         | 13,348  |   |     |   | 14,386 |   |
| Intangible assets, net                                         |   |         | 7,841   |   |     |   | 7,855 |   |
| Other assets                                                   |   |         | 6,350   |   |     |   | 6,095 |   |
|                                                           |   |         |    |   |     |   |   |   |
| Total assets                                                   |   | $            | 268,748 |   |     | $      | 285,565 |   |
|                                                           |   |         |    |   |     |   |   |   |
| Liabilities and Equity                                         |   |         |    |   |     |   |   |   |
| Current liabilities:                                           |   |         |    |   |     |   |   |   |
| Short-term borrowings and current maturities of long-term debt |   | $            | 4,551   |   |     | $      | 4,421 |   |
| Accounts payable                                               |   |         | 21,874  |   |     |   | 24,864 |   |
| Accrued liabilities                                            |   |         | 33,706  |   |     |   | 40,967 |   |
|                                                           |   |         |    |   |     |   |   |   |
| Total current liabilities                                      |   |         | 60,131  |   |     |   | 70,252 |   |
|                                                           |   |         |    |   |     |   |   |   |
| Long-term debt                                                 |   |         | 37,060  |   |     |   | 46,348 |   |
| Accrued retirement benefits                                    |   |         | 60,720  |   |     |   | 60,241 |   |
| Other long-term                                                |   |         | 899     |   |     |   | 899 |   |
|                                                           |   |         |    |   |     |   |   |   |
| Total liabilities                                              |   |         | 158,810 |   |     |   | 177,740 |   |
|                                                           |   |         |    |   |     |   |   |   |
| Equity                                                         |   |         |    |   |     |   |   |   |
| Twin Disc shareholders’ equity:                          |   |         |    |   |     |   |   |   |
| Common shares authorized: 30,000,000;                          |   |         |    |   |     |   |   |   |
| issued: 13,099,468; no par value                               |   |         | 10,468  |   |     |   | 13,205 |   |
| Retained earnings                                              |   |         | 145,796 |   |     |   | 150,257 |   |
| Accumulated other comprehensive loss                           |   |         | (19,458 | )      |     |   | (26,218 | ) |
|                                                           |   |         | 136,806 |   |     |   | 137,244 |   |
| Less treasury stock, at cost                                   |   |         |    |   |     |   |   |   |
| (1,914,842 and 2,070,124 shares, respectively)                 |   |         | 27,690  |   |     |   | 30,256 |   |
|                                                           |   |         |    |   |     |   |   |   |
| Total Twin Disc shareholders' equity                           |   |         | 109,116 |   |     |   | 106,988 |   |
|                                                           |   |         |    |   |     |   |   |   |
| Noncontrolling interest                                        |   |         | 822     |   |     |   | 837 |   |
|                                                           |   |         |    |   |     |   |   |   |
| Total equity                                                   |   |         | 109,938 |   |     |   | 107,825 |   |
|                                                           |   |         |    |   |     |   |   |   |
| Total liabilities and equity                                   |   | $            | 268,748 |   |     | $      | 285,565 |   |

----

|                                                                                          |   | Three Months Ended |   |   | Six Months Ended |   |
|-----------------------------------------------------------------------------------------------|--------|--------------------|--------|--------|------------------|--------|
|                                                                                          |   | Dec. 25,           |   |   | Dec. 26,         |   |   | Dec. 25, |   |   | Dec. 26, |   |
|                                                                                          |   | 2009               |   |   | 2008             |   |   | 2009 |   |   | 2008 |   |
|                                                                                          |   |               |   |   |             |   |   |   |   |   |   |   |
| Net sales                                                                                     |   | $                  | 55,186 |   |             | $      | 81,598 |   |   | $ | 102,243 |   |   | $ | 154,270 |   |
| Cost of goods sold                                                                            |   |               | 40,400 |   |             |   | 58,645 |   |   |   | 77,710 |   |   |   | 111,245 |   |
|                                                                                          |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Gross profit                                                                                  |   |               | 14,786 |   |             |   | 22,953 |   |   |   | 24,533 |   |   |   | 43,025 |   |
|                                                                                          |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Marketing, engineering and administrative expenses                                            |   |               | 14,895 |   |             |   | 17,008 |   |   |   | 27,673 |   |   |   | 33,326 |   |
|                                                                                          |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| (Loss) earnings from operations                                                               |   |               | (109   | )      |             |   | 5,945 |   |   |   | (3,140 | ) |   |   | 9,699 |   |
|                                                                                          |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Interest expense                                                                              |   |               | 563    |   |             |   | 714 |   |   |   | 1,182 |   |   |   | 1,311 |   |
| Other expense (income), net                                                                   |   |               | 137    |   |             |   | (192 | ) |   |   | 197 |   |   |   | (1,012 | ) |
|                                                                                          |   |               | 700    |   |             |   | 522 |   |   |   | 1,379 |   |   |   | 299 |   |
|                                                                                          |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| (Loss) earnings before income taxes and noncontrolling interest                               |   |               | (809   | )      |             |   | 5,423 |   |   |   | (4,519 | ) |   |   | 9,400 |   |
| Income taxes                                                                                  |   |               | (300   | )      |             |   | 1,924 |   |   |   | (1,698 | ) |   |   | 3,277 |   |
|                                                                                          |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Net (loss) earnings                                                                           |   |               | (509   | )      |             |   | 3,499 |   |   |   | (2,821 | ) |   |   | 6,123 |   |
|                                                                                          |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Less: Net loss (earnings) attributable to noncontrolling interest, net of tax                 |   |               | 19     |   |             |   | (66 | ) |   |   | (73 | ) |   |   | (225 | ) |
|                                                                                          |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Net (loss) earnings attributable to Twin Disc                                                 |   | $                  | (490   | )      |             | $      | 3,433 |   |   | $ | (2,894 | ) |   | $ | 5,898 |   |
|                                                                                          |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Dividends per share                                                                           |   | $                  | 0.0700 |   |             | $      | 0.0700 |   |   | $ | 0.1400 |   |   | $ | 0.1400 |   |
|                                                                                          |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| (Loss) earnings per share data:                                                               |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Basic (loss) earnings per share attributable to Twin Disc common shareholders                 |   | $                  | (0.04  | )      |             | $      | 0.31 |   |   | $ | (0.26 | ) |   | $ | 0.53 |   |
| Diluted (loss) earnings per share attributable to Twin Disc common shareholders               |   | $                  | (0.04  | )      |             | $      | 0.31 |   |   | $ | (0.26 | ) |   | $ | 0.52 |   |
|                                                                                          |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Weighted average shares outstanding data:                                                     |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Basic shares outstanding                                                                      |   |               | 11,185 |   |             |   | 11,151 |   |   |   | 11,158 |   |   |   | 11,214 |   |
| Dilutive stock awards                                                                         |   |               | -      |   |             |   | 47 |   |   |   | - |   |   |   | 70 |   |
| Diluted shares outstanding                                                                    |   |               | 11,185 |   |             |   | 11,198 |   |   |   | 11,158 |   |   |   | 11,284 |   |
|                                                                                          |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Comprehensive income (loss):                                                                  |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Net (loss) earnings                                                                           |   | $                  | (509   | )      |             | $      | 3,499 |   |   | $ | (2,821 | ) |   | $ | 6,123 |   |
| Adjustment for amortization of net actuarial loss and prior service cost, net of tax          |   |               | 470    |   |             |   | 472 |   |   |   | 917 |   |   |   | 942 |   |
|     Foreign currency translation adjustment                               |   |               | 2,987  |   |             |   | (11,074 | ) |   |   | 5,915 |   |   |   | (18,570 | ) |
| Comprehensive income (loss)                                                                   |   |               | 2,948  |   |             |   | (7,103 | ) |   |   | 4,011 |   |   |   | (11,505 | ) |
|     Comprehensive loss (earnings) attributable to noncontrolling interest |   |               | 19     |   |             |   | (66 | ) |   |   | (73 | ) |   |   | (225 | ) |
|                                                                                          |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Comprehensive income (loss) attributable to Twin Disc                                         |   | $                  | 2,967  |   |             | $      | (7,169 | ) |   | $ | 3,938 |   |   | $ | (11,730 | ) |

| The notes to condensed consolidated financial statements are an integral part of these statements. |
|----------------------------------------------------------------------------------------------------|

----

|                                            |   | Six Months Ended |    |
|-------------------------------------------------|--------|------------------|---------|
|                                            |   | December 25,     |    |   | December 26, |   |
|                                            |   | 2009             |    |   | 2008 |   |
|                                            |   |             |    |   |   |   |
| Cash flows from operating activities:           |   |             |    |   |   |   |
| Net (loss) earnings                             |   | $                | (2,821  | ) |   | $ | 6,123 |   |
| Adjustments to reconcile net (loss) earnings to |   |             |    |   |   |   |   |   |
| net cash provided by operating activities:      |   |             |    |   |   |   |   |   |
| Depreciation and amortization                   |   |             | 4,872   |   |   |   | 4,754 |   |
| Other non-cash changes, net                     |   |             | 237     |   |   |   | 295 |   |
| Net change in working capital, excluding cash   |   |             | 13,773  |   |   |   | (8,046 | ) |
|                                            |   |             |    |   |   |   |   |   |
| Net cash provided by operating activities       |   |             | 16,061  |   |   |   | 3,126 |   |
|                                            |   |             |    |   |   |   |   |   |
| Cash flows from investing activities:           |   |             |    |   |   |   |   |   |
| Acquisitions of fixed assets                    |   |             | (1,664  | ) |   |   | (4,651 | ) |
| Other, net                                      |   |             | (263    | ) |   |   | 1,126 |   |
|                                            |   |             |    |   |   |   |   |   |
| Net cash used by investing activities           |   |             | (1,927  | ) |   |   | (3,525 | ) |
|                                            |   |             |    |   |   |   |   |   |
| Cash flows from financing activities:           |   |             |    |   |   |   |   |   |
| Increase (decrease) in notes payable, net       |   |             | 73      |   |   |   | (951 | ) |
| (Payments of) proceeds from long-term debt      |   |             | (9,232  | ) |   |   | 3,584 |   |
| Proceeds from exercise of stock options         |   |             | 80      |   |   |   | 110 |   |
| Purchase of treasury stock                      |   |             | -       |   |   |   | (1,813 | ) |
| Dividends paid to shareholders                  |   |             | (1,567  | ) |   |   | (1,578 | ) |
| Dividends paid to noncontrolling interest       |   |             | (160    | ) |   |   | (143 | ) |
| Other                                           |   |             | (468    | ) |   |   | (252 | ) |
|                                            |   |             |    |   |   |   |   |   |
| Net cash used by financing activities           |   |             | (11,274 | ) |   |   | (1,043 | ) |
|                                            |   |             |    |   |   |   |   |   |
| Effect of exchange rate changes on cash         |   |             | 636     |   |   |   | (1,854 | ) |
|                                            |   |             |    |   |   |   |   |   |
| Net change in cash                              |   |             | 3,496   |   |   |   | (3,296 | ) |
|                                            |   |             |    |   |   |   |   |   |
| Cash:                                           |   |             |    |   |   |   |   |   |
| Beginning of period                             |   |             | 13,266  |   |   |   | 14,447 |   |
|                                            |   |             |    |   |   |   |   |   |
| End of period                                   |   | $                | 16,762  |   |   | $ | 11,151 |   |

----

| A. | Basis of Presentation |
|----|-----------------------|

| a)   | How investment allocation decisions are made; |
|----------------|-----------------------------------------------|

| b)   | The major categories of plan assets; |
|----------------|--------------------------------------|

| c)   | The inputs and valuation techniques used to measure the fair value of plan assets; |
|----------------|------------------------------------------------------------------------------------|

| d)   | The effect of fair value measurements using significant unobservable inputs on changes in plan assets for the period; and |
|----------------|---------------------------------------------------------------------------------------------------------------------------|

| e)   | Significant concentrations of risk within plan assets. |
|----------------|--------------------------------------------------------|

| B. | Inventory |
|----|-----------|

|            |   | December 25, |   |   | June 30, |   |
|-----------------|--------|--------------|--------|--------|----------|--------|
|            |   | 2009         |   |   | 2009     |   |
| Inventories:    |   |         |   |   |     |   |
| Finished parts  |   | $            | 57,447 |   |     | $      | 62,498 |   |
| Work in process |   |         | 9,541  |   |     |   | 8,726 |   |
| Raw materials   |   |         | 22,396 |   |     |   | 21,107 |   |
|            |   |         |   |   |     |   |   |   |
|            |   | $            | 89,384 |   |     | $      | 92,331 |   |

| C. | Warranty |
|----|----------|

|                                 |   | Three Months Ended |   |   | Six Months Ended |   |
|--------------------------------------|--------|--------------------|--------|--------|------------------|--------|
|                                 |   | Dec. 25,           |   |   | Dec. 26,         |   |   | Dec. 25, |   |   | Dec. 26, |   |
|                                 |   | 2009               |   |   | 2008             |   |   | 2009 |   |   | 2008 |   |
|                                 |   |               |   |   |             |   |   |   |   |   |   |   |
| Reserve balance, beginning of period |   | $                  | 7,667  |   |             | $      | 7,838 |   |   | $ | 8,028 |   |   | $ | 8,125 |   |
| Current period expense               |   |               | 1,222  |   |             |   | 1,314 |   |   |   | 2,419 |   |   |   | 2,107 |   |
| Payments or credits to customers     |   |               | (1,755 | )      |             |   | (764 | ) |   |   | (3,441 | ) |   |   | (1,556 | ) |
| Translation                          |   |               | (19    | )      |             |   | (157 | ) |   |   | 109 |   |   |   | (445 | ) |
|                                 |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Reserve balance, end of period       |   | $                  | 7,115  |   |             | $      | 8,231 |   |   | $ | 7,115 |   |   | $ | 8,231 |   |

| D. | Contingencies |
|----|---------------|

| E. | Business Segments |
|----|-------------------|

|                                            |   | Three Months Ended |     |   | Six Months Ended |   |
|-------------------------------------------------|--------|--------------------|----------|--------|------------------|--------|
|                                            |   | Dec. 25,           |     |   | Dec. 26,         |   |   | Dec. 25, |   |   | Dec. 26, |   |
|                                            |   | 2009               |     |   | 2008             |   |   | 2009 |   |   | 2008 |   |
|                                            |   |               |     |   |             |   |   |   |   |   |   |   |
| Manufacturing segment sales                     |   | $                  | 46,921   |   |             | $      | 74,946 |   |   | $ | 79,659 |   |   | $ | 135,377 |   |
| Distribution segment sales                      |   |               | 23,484   |   |             |   | 27,151 |   |   |   | 51,436 |   |   |   | 57,970 |   |
| Inter/Intra segment elimination - manufacturing |   |               | (11,072  | )      |             |   | (15,933 | ) |   |   | (17,480 | ) |   |   | (29,235 | ) |
| Inter/Intra segment elimination - distribution  |   |               | (4,147   | )      |             |   | (4,566 | ) |   |   | (11,372 | ) |   |   | (9,842 | ) |
|                                            |   |               |     |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Net sales                                       |   | $                  | 55,186   |   |             | $      | 81,598 |   |   | $ | 102,243 |   |   | $ | 154,270 |   |
|                                            |   |               |     |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Manufacturing segment (loss) earnings           |   | $                  | (222     | )      |             | $      | 5,323 |   |   | $ | (4,396 | ) |   | $ | 8,443 |   |
| Distribution segment earnings                   |   |               | 1,474    |   |             |   | 2,315 |   |   |   | 3,741 |   |   |   | 5,495 |   |
| Corporate and eliminations                      |   |               | (2,061   | )      |             |   | (2,215 | ) |   |   | (3,864 | ) |   |   | (4,538 | ) |
|                                            |   |               |     |   |             |   |   |   |   |   |   |   |   |   |   |   |
| (Loss) earnings before income taxes             |   |               |     |   |             |   |   |   |   |   |   |   |   |   |   |   |
| and noncontrolling interest                     |   | $                  | (809     | )      |             | $      | 5,423 |   |   | $ | (4,519 | ) |   | $ | 9,400 |   |
|                                            |   |               |     |   |             |   |   |   |   |   |   |   |   |   |   |   |
|                                            |   | Dec. 25,           |     |   | June 30,         |   |   |   |   |   |   |   |   |   |
| Assets                                          |   |               | 2009     |   |             |   | 2009 |   |   |   |   |   |   |   |   |   |
|                                            |   |               |     |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Manufacturing segment assets                    |   | $                  | 349,831  |   |             | $      | 355,672 |   |   |   |   |   |   |   |   |   |
| Distribution segment assets                     |   |               | 61,619   |   |             |   | 67,856 |   |   |   |   |   |   |   |   |   |
| Corporate assets and elimination                |   |               |     |   |             |   |   |   |   |   |   |   |   |   |   |   |
| of inter-company assets                         |   |               | (142,702 | )      |             |   | (137,963 | ) |   |   |   |   |   |   |   |   |
|                                            |   |               |     |   |             |   |   |   |   |   |   |   |   |   |   |   |
|                                            |   | $                  | 268,748  |   |             | $      | 285,565 |   |   |   |   |   |   |   |   |   |

| F. | Stock-Based Compensation |
|----|--------------------------|

| G. | Pension and Other Postretirement Benefit Plans |
|----|------------------------------------------------|

|                                  |   | Three Months Ended |   |   | Six Months Ended |   |
|---------------------------------------|--------|--------------------|--------|--------|------------------|--------|
|                                  |   | Dec. 25,           |   |   | Dec. 26,         |   |   | Dec. 25, |   |   | Dec. 26, |   |
|                                  |   | 2009               |   |   | 2008             |   |   | 2009 |   |   | 2008 |   |
|                                  |   |               |   |   |             |   |   |   |   |   |   |   |
| Pension Benefits:                     |   |               |   |   |             |   |   |   |   |   |   |   |
| Service cost                          |   | $                  | 73     |   |             | $      | 298 |   |   | $ | 135 |   |   | $ | 587 |   |
| Interest cost                         |   |               | 1,832  |   |             |   | 1,771 |   |   |   | 3,647 |   |   |   | 3,527 |   |
| Expected return on plan assets        |   |               | (1,526 | )      |             |   | (2,238 | ) |   |   | (3,033 | ) |   |   | (4,461 | ) |
| Amortization of prior service cost    |   |               | 4      |   |             |   | (179 | ) |   |   | 6 |   |   |   | (359 | ) |
| Amortization of transition obligation |   |               | 20     |   |             |   | 18 |   |   |   | 33 |   |   |   | 31 |   |
| Amortization of net loss              |   |               | 657    |   |             |   | 800 |   |   |   | 1,313 |   |   |   | 1,601 |   |
| Net periodic benefit cost             |   | $                  | 1,060  |   |             | $      | 470 |   |   | $ | 2,101 |   |   | $ | 926 |   |
|                                  |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Postretirement Benefits:              |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Service cost                          |   | $                  | 7      |   |             | $      | 9 |   |   | $ | 14 |   |   | $ | 19 |   |
| Interest cost                         |   |               | 336    |   |             |   | 324 |   |   |   | 673 |   |   |   | 648 |   |
| Amortization of net actuarial loss    |   |               | 46     |   |             |   | 138 |   |   |   | 91 |   |   |   | 275 |   |
| Net periodic benefit cost             |   | $                  | 389    |   |             | $      | 471 |   |   | $ | 778 |   |   | $ | 942 |   |

| H. | Income Taxes |
|----|--------------|

| I. | Goodwill and Other Intangibles |
|----|--------------------------------|

| Balance at June 30, 2009     |   | $      | 17,509 |   |
|------------------------------|--------|--------|--------|--------|
| Translation adjustment       |   |   | 504    |   |
|                         |   |   |   |   |
| Balance at December 25, 2009 |   | $      | 18,013 |   |

|                                 |   | December 25, |   |   | June 30, |   |
|--------------------------------------|--------|--------------|--------|--------|----------|--------|
|                                 |   | 2009         |   |   | 2009     |   |
| Intangible assets with finite lives: |   |         |   |   |     |   |
| Licensing agreements                 |   | $            | 3,015  |   |     | $      | 3,015 |   |
| Non-compete agreements               |   |         | 2,050  |   |     |   | 2,050 |   |
| Other                                |   |         | 5,991  |   |     |   | 5,991 |   |
|                                 |   |         |   |   |     |   |   |   |
|                                 |   |         | 11,056 |   |     |   | 11,056 |   |
| Accumulated amortization             |   |         | (6,593 | )      |     |   | (6,184 | ) |
| Translation adjustment               |   |         | 973    |   |     |   | 711 |   |
|                                 |   |         |   |   |     |   |   |   |
| Total                                |   | $            | 5,436  |   |     | $      | 5,583 |   |

| Fiscal Year |   |
|-------------|--------|
| 2010        | $      | 422 |
| 2011        |   | 845 |
| 2012        |   | 845 |
| 2013        |   | 795 |
| 2014        |   | 795 |
| 2015        |   | 474 |

| J.   | Long-term Debt |
|----------------|----------------|

|                                               |   | December 25, |   |   | June 30, |   |
|----------------------------------------------------|--------|--------------|--------|--------|----------|--------|
|                                               |   | 2009         |   |   | 2009     |   |
|                                               |   |         |   |   |     |   |
| Revolving loan                                     |   | $            | 13,850 |   |     | $      | 22,450 |   |
| 10-year unsecured senior notes                     |   |         | 25,000 |   |     |   | 25,000 |   |
| Other                                              |   |         | 2,761  |   |     |   | 3,319 |   |
| Subtotal                                           |   |         | 41,611 |   |     |   | 50,769 |   |
| Less: current maturities and short-term borrowings |   |         | (4,551 | )      |     |   | (4,421 | ) |
| Total long-term debt                               |   | $            | 37,060 |   |     | $      | 46,348 |   |

| K.   | Shareholders’ Equity |
|----------------|----------------------------|

| The following is a reconciliation of the Company’s equity balances for the first fiscal half of 2009 and 2010 (in thousands): |   |
|-------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                |   | Twin Disc, Inc. Shareholders’ Equity |   |   |   |   |   |   |   |
|                                                                                                                                |   |   |   |   |   |   |   | Accumulated |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                |   |   |   |   |   |   |   | Other |   |   |   |   |   | Non- |   |   |   |   |
|                                                                                                                                |   | Common |   |   | Retained |   |   | Comprehensive |   |   | Treasury |   |   | Controlling |   |   | Total |   |
|                                                                                                                                |   | Stock |   |   | Earnings |   |   | Income (Loss) |   |   | Stock |   |   | Interest |   |   | Equity |   |
| Balance –June 30, 2008                                                                                                        |   | $ | 14,693 |   |   | $ | 142,361 |   |   | $ | 2,446 |   |   | $ | (29,854 | ) |   | $ | 679 |   |   | $ | 130,325 |   |
| Net income                                                                                                                          |   |   |   |   |   |   | 5,898 |   |   |   |   |   |   |   |   |   |   |   | 225 |   |   |   | 6,123 |   |
| Translation adjustments                                                                                                             |   |   |   |   |   |   |   |   |   |   | (18,524 | ) |   |   |   |   |   |   | (46 | ) |   |   | (18,570 | ) |
| Benefit plan adjustments, net of tax                                                                                                |   |   |   |   |   |   |   |   |   |   | 942 |   |   |   |   |   |   |   |   |   |   |   | 942 |   |
| Cash dividends                                                                                                                      |   |   |   |   |   |   | (1,578 | ) |   |   |   |   |   |   |   |   |   |   | (143 | ) |   |   | (1,721 | ) |
| Compensation expense and windfall                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     tax benefits                                                                                                |   |   | 1,497 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 1,497 |   |
| Shares (acquired) issued, net                                                                                                       |   |   | (2,328 | ) |   |   |   |   |   |   |   |   |   |   | (402 | ) |   |   |   |   |   |   | (2,730 | ) |
| Balance-December 26, 2008                                                                                                           |   | $ | 13,862 |   |   | $ | 146,681 |   |   | $ | (15,136 | ) |   | $ | (30,256 | ) |   | $ | 715 |   |   | $ | 115,866 |   |
|                                                                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                |   | Twin Disc, Inc. Shareholders’ Equity |   |   |   |   |   |   |   |   |   |
|                                                                                                                                |   |   |   |   |   |   |   |   |   | Accumulated |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                |   |   |   |   |   |   |   |   |   | Other |   |   |   |   |   |   | Non- |   |   |   |   |   |
|                                                                                                                                |   | Common |   |   | Retained |   |   | Comprehensive |   |   | Treasury |   |   | Controlling |   |   | Total |   |
|                                                                                                                                |   | Stock |   |   | Earnings |   |   | Income (Loss) |   |   | Stock |   |   | Interest |   |   | Equity |   |
| Balance-June 30, 2009                                                                                                               |   | $ | 13,205 |   |   | $ | 150,257 |   |   | $ | (26,218 | ) |   | $ | (30,256 | ) |   | $ | 837 |   |   | $ | 107,825 |   |
| Net (loss) income                                                                                                                   |   |   |   |   |   |   | (2,894 | ) |   |   |   |   |   |   |   |   |   |   | 73 |   |   |   | (2,821 | ) |
| Translation adjustments                                                                                                             |   |   |   |   |   |   |   |   |   |   | 5,843 |   |   |   |   |   |   |   | 72 |   |   |   | 5,915 |   |
| Benefit plan adjustments, net of tax                                                                                                |   |   |   |   |   |   |   |   |   |   | 917 |   |   |   |   |   |   |   |   |   |   |   | 917 |   |
| Cash dividends                                                                                                                      |   |   |   |   |   |   | (1,567 | ) |   |   |   |   |   |   |   |   |   |   | (160 | ) |   |   | (1,727 | ) |
| Compensation expense and windfall                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| tax benefits                                                                                                                        |   |   | 66 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 66 |   |
| Shares (acquired) issued, net                                                                                                       |   |   | (2,803 | ) |   |   |   |   |   |   |   |   |   |   | 2,566 |   |   |   |   |   |   |   | (237 | ) |
| Balance-December 25, 2009                                                                                                           |   | $ | 10,468 |   |   | $ | 145,796 |   |   | $ | (19,458 | ) |   | $ | (27,690 | ) |   | $ | 822 |   |   | $ | 109,938 |   |

| (In thousands)             |   |               |   |   |             |   |   |         |   |   |         |   |   |   |   |   |    |   |   |   |   |   |   |    |
|----------------------------|--------|--------------------|--------|--------|------------------|--------|--------|--------------|--------|--------|--------------|--------|--------|--------|--------|--------|---------|--------|--------|--------|--------|--------|--------|---------|
|                       |   | Three Months Ended |   |   | Six Months Ended |   |
|                       |   | December 25,       |   |   | December 26,     |   |   | December 25, |   |   | December 26, |   |
|                       |   | 2009               |   |   | %                |   |   | 2008         |   |   | %            |   |   | 2009   |   |   | %       |   |   | 2008   |   |   | %      |    |
|                       |   |               |   |   |             |   |   |         |   |   |         |   |   |   |   |   |    |   |   |   |   |   |   |    |
| Net sales                  |   | $                  | 55,186 |   |             |   |   |         | $      | 81,598 |         |   |   |   |   | $      | 102,243 |   |   |   |   |   | $      | 154,270 |   |   |   |   |
| Cost of goods sold         |   |               | 40,400 |   |             |   |   |         |   | 58,645 |         |   |   |   |   |   | 77,710  |   |   |   |   |   |   | 111,245 |   |   |   |   |
|                       |   |               |   |   |             |   |   |         |   |   |         |   |   |   |   |   |    |   |   |   |   |   |   |    |   |   |   |   |
| Gross profit               |   |               | 14,786 |   |             |   | 26.8   | %            |   |   | 22,953       |   |   |   | 28.1   | %      |    |   | 24,533 |   |   |   | 24.0   | %       |   |   | 43,025 |   |   |   | 27.9 | % |
|                       |   |               |   |   |             |   |   |         |   |   |         |   |   |   |   |   |    |   |   |   |   |   |   |    |   |   |   |   |   |   |   |   |
| Marketing, engineering and |   |               |   |   |             |   |   |         |   |   |         |   |   |   |   |   |    |   |   |   |   |   |   |    |   |   |   |   |   |   |   |   |
| administrative expenses    |   |               | 14,895 |   |             |   | 27.0   |         |   |   | 17,008       |   |   |   | 20.8   |   |    |   | 27,673 |   |   |   | 27.1   |    |   |   | 33,326 |   |   |   | 21.6 |   |
|                       |   |               |   |   |             |   |   |         |   |   |         |   |   |   |   |   |    |   |   |   |   |   |   |    |   |   |   |   |   |   |   |   |
| Earnings from operations   |   | $                  | (109   | )      |             |   | (0.2   | )            |   | $      | 5,945        |   |   |   | 7.3    |   |    | $      | (3,140 | )      |   |   | (3.1   | )       |   | $ | 9,699 |   |   |   | 6.3 |   |

|   Contractual Obligations |   |  Total |   |   | Less than1 year |   |   | 1-3Years |   |   | 3-5Years |   |   | After 5Years |   |
|-------------------------------------|--------|-------------|--------|--------|-----------------|--------|--------|----------|--------|--------|----------|--------|--------|--------------|--------|
| Revolver borrowing                  |   | $           | 13,850 |   |            |   |   |     | $      | 13,850 |     |   |   |         |   |   |   |
| Long-term debt                      |   | $           | 27,761 |   |            | $      | 4,551  |     |   | $      | 7,965    |   |   | $            | 8,070  |   |   | $ | 7,175 |   |
| Operating leases                    |   | $           | 9,847  |   |            | $      | 3,501  |     |   | $      | 4,314    |   |   | $            | 1,822  |   |   | $ | 210 |   |
| Total obligations                   |   | $           | 51,458 |   |            | $      | 8,052  |     |   | $      | 26,129   |   |   | $            | 9,892  |   |   | $ | 7,385 |   |

| a)   | How investment allocation decisions are made; |
|----------------|-----------------------------------------------|

| b)   | The major categories of plan assets; |
|----------------|--------------------------------------|

| c)   | The inputs and valuation techniques used to measure the fair value of plan assets; |
|----------------|------------------------------------------------------------------------------------|

| d)   | The effect of fair value measurements using significant unobservable inputs on changes in plan assets for the period; and |
|----------------|---------------------------------------------------------------------------------------------------------------------------|

| e)   | Significant concentrations of risk within plan assets. |
|----------------|--------------------------------------------------------|

| Þ   | currency exchange rate fluctuations |
|--------------------|-------------------------------------|

| Þ   | export and import duties, changes to import and export regulations, and restrictions on the transfer of funds |
|--------------------|---------------------------------------------------------------------------------------------------------------|

| Þ   | problems with the transportation or delivery of our products |
|--------------------|--------------------------------------------------------------|

| Þ   | issues arising from cultural or language differences and labor unrest |
|--------------------|-----------------------------------------------------------------------|

| Þ   | longer payment cycles and greater difficulty in collecting accounts receivables |
|--------------------|---------------------------------------------------------------------------------|

| Þ   | compliance with trade and other laws in a variety of jurisdictions |
|--------------------|--------------------------------------------------------------------|

| Period                               | (a) Total Number of Shares Purchased | (b) Average Price Paid per Share | (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | (d) Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs |
|--------------------------------------|--------------------------------------|----------------------------------|--------------------------------------------------------------------------------------|------------------------------------------------------------------------------------|
|                                 |                                 |                             |                                                                                 |                                                                               |
| Sept. 26, 2009 – Oct. 30, 2009 | 0                                    | NA                               | 0                                                                                    | 250,000                                                                            |
|                                 |                                 |                             |                                                                                 |                                                                               |
| Oct. 31, 2009 – Nov. 27, 2009  | 0                                    | NA                               | 0                                                                                    | 250,000                                                                            |
|                                 |                                 |                             |                                                                                 |                                                                               |
| Nov. 28, 2009 – Dec. 25, 2009  | 0                                    | NA                               | 0                                                                                    | 250,000                                                                            |
|                                 |                                 |                             |                                                                                 |                                                                               |
| Total                                | 0                                    |                             | 0                                                                                    |                                                                               |

| Malcolm F. Moore | For: | 9,665,083 | Authority withheld: | 772,528 |
|------------------|------|-----------|---------------------|---------|
| David B. Rayburn | For: | 9,536,640 | Authority withheld: | 551,390 |

| 31a | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|-----|-----------------------------------------------------------------------------------------------------|

| 31b | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|-----|-----------------------------------------------------------------------------------------------------|

| 32a | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|-----|-----------------------------------------------------------------------------------------------------|

| 32b | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|-----|-----------------------------------------------------------------------------------------------------|

----

|                              | TWIN DISC, INCORPORATED  |
|-----------------------------------|--------------------------|
|                              | (Registrant)             |
|                              |                     |
|                              |                     |
| Date:  February 3, 2010 | /s/ JEFFREY S. KNUTSON   |
|                              | Jeffrey S. Knutson       |
|                              | Corporate Controller     |
|                              | Chief Accounting Officer |

----