| x                                                      | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  |
|--------------------------------------------------------|------------------------------------------------------------------------------------------|
|                                                   |                                                                                     |
|                                                   | For the quarterly period ended                                                           | December 25, 2010 |
|                                                   |                                                                                     |
| OR                                                     |
|                                                   |                                                                                     |
| o                                                      | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|                                                   |                                                                                     |
|                                                   | For the transition period from                                                           |   | to |   |
|                                                   |                                                                                     |
|                                                   | Commission file number                                                                   | 1-367 |
|                                                   |
| THE L. S. STARRETT COMPANY                             |
| (Exact name of registrant as specified in its charter) |

| MASSACHUSETTS                                                  |   | 04-1866480                           |
|----------------------------------------------------------------|--------|--------------------------------------|
| (State or other jurisdiction of incorporation or organization) |   | (I.R.S. Employer Identification No.) |

| 121 CRESCENT STREET, ATHOL, MASSACHUSETTS                                                                                                                                                                                                                                                                                                                | 01331-1915   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------|
| (Address of principal executive offices)                                                                                                                                                                                                                                                                                                                 | (Zip Code)   |
|                                                                                                                                                                                                                                                                                                                                                     |
| Registrant's telephone number, including area code                                                                                                                                                                                                                                                                                                       | 978-249-3551 |
|                                                                                                                                                                                                                                                                                                                                                     |
|                                                                                                                                                                                                                                                                                                                                                     |
| Former name, address and fiscal year, if changed since last report                                                                                                                                                                                                                                                                                       |
|                                                                                                                                                                                                                                                                                                                                                     |
| 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 o                                                                                                                                                                                                                                                                                                                        |
|                                                                                                                                                                                                                                                                                                                                                     |
| Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “accelerated filer,” “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act, (Check One):          |
|                                                                                                                                                                                                                                                                                                                                                     |
| Large Accelerated Filer o    Accelerated Filer  x   Non-Accelerated Filer o    Smaller Reporting Company o                                                                                                                                                                              |
|                                                                                                                                                                                                                                                                                                                                                     |
| Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).                                                                                                                                                                                                                                         |
|                                                                                                                                                                                                                                                                                                                                                     |
| YES  o   NO x                                                                                                                                                                                                                                                                                                                   |
| Common Shares outstanding as of |   | January 31, 2011 |   |
|---------------------------------|--------|------------------|--------|
|                            |   |             |
| Class A Common Shares           |   | 5,896,317        |   |
|                            |   |             |
| Class B Common Shares           |   | 802,871          |   |

----

|                                                                                                                                                     | Page No. |
|----------------------------------------------------------------------------------------------------------------------------------------------------------|----------|
|                                                                                                                                                     |     |
| Part I.     Condensed Consolidated Unaudited Financial Statements:                                                              |     |
|                                                                                                                                                     |     |
| Item 1.    Financial Statements                                                                                                      |     |
|                                                                                                                                                     |     |
| Consolidated Balance Sheets-December 25, 2010 (unaudited) and June 26, 2010                                                                              | 3        |
|                                                                                                                                                     |     |
| Consolidated Statements of Operations-thirteen and twenty-six weeks ended December25, 2010 and December 26, 2009 (unaudited)                             | 4        |
|                                                                                                                                                     |     |
| Consolidated Statements of Cash Flows-twenty-six weeks ended December 25, 2010 and December 26, 2009 (unaudited)                                         | 5        |
|                                                                                                                                                     |     |
| Consolidated Statements of Stockholders' Equity -twenty-six weeks ended December 25, 2010 and December 26, 2009 (unaudited)                              | 6        |
|                                                                                                                                                     |     |
| Notes to unaudited Consolidated Financial Statements                                                                                                     | 7-10     |
|                                                                                                                                                     |     |
| Item 2.     Management's Discussion and Analysis of Financial Condition and Results of Operations                                    | 10-12    |
|                                                                                                                                                     |     |
| Item 3.     Quantitative and Qualitative Disclosures About Market Risk                                                          | 12       |
|                                                                                                                                                     |     |
| Item 4.     Controls and Procedures                                                                                             | 12-13    |
|                                                                                                                                                     |     |
| Part II.                     Other information: |     |
|                                                                                                                                                     |     |
| Item 1.     Legal Proceedings                                                                                                   | 13       |
|                                                                                                                                                     |     |
| Item 1A.  Risk Factors                                                                                                                         | 13       |
|                                                                                                                                                     |     |
| Item 6.      Exhibits                                                                                                      | 13       |
|                                                                                                                                                     |     |
| SIGNATURES                                                                                                                                               | 13       |

----

|                                                                                                                       |   | Dec. 252010(unaudited) |    |   | June 262010(audited) |   |
|----------------------------------------------------------------------------------------------------------------------------|--------|------------------------|---------|--------|----------------------|--------|
|                                                                                                                       |   |                   |    |   |                 |   |
| ASSETS                                                                                                                     |   |                   |    |   |                 |   |
| Current assets:                                                                                                            |   |                   |    |   |                 |   |
| Cash                                                                                                                       |   | $                      | 21,625  |   |                 | $      | 20,478 |   |
| Investments                                                                                                                |   |                   | -       |   |                 |   | 1,250 |   |
| Accounts receivable (less allowance for doubtful accounts of $634 and $607)                                                |   |                   | 37,313  |   |                 |   | 33,707 |   |
|     Inventory                                                                                          |   |                   | 51,478  |   |                 |   | 46,156 |   |
|    Deferred income tax asset                                                                                |   |                   | 3,396   |   |                 |   | 3,300 |   |
|    Prepaid expenses, taxes and other current assets                                                         |   |                   | 8,226   |   |                 |   | 5,510 |   |
| Total current assets                                                                                                       |   |                   | 122,038 |   |                 |   | 110,401 |   |
|                                                                                                                       |   |                   |    |   |                 |   |   |   |
| Property, plant and equipment, at cost (less accumulated depreciation of $127,122 and $120,943)                            |   |                   | 55,333  |   |                 |   | 56,529 |   |
| Property held for sale                                                                                                     |   |                   | 2,699   |   |                 |   | 2,699 |   |
| Intangible assets (less accumulated amortization of $5,597 and $4,973)                                                |   |                   | 679     |   |                 |   | 1,303 |   |
| Other assets                                                                                                               |   |                   | 474     |   |                 |   | 280 |   |
| Long-term taxes receivable                                                                                                 |   |                   | 2,807   |   |                 |   | 2,807 |   |
| Long-term deferred income tax asset                                                                                        |   |                   | 26,048  |   |                 |   | 26,115 |   |
| Total assets                                                                                                               |   | $                      | 210,078 |   |                 | $      | 200,134 |   |
|                                                                                                                       |   |                   |    |   |                 |   |   |   |
| LIABILITIES AND STOCKHOLDERS’ EQUITY                                                                                 |   |                   |    |   |                 |   |   |   |
| Current liabilities:                                                                                                       |   |                   |    |   |                 |   |   |   |
| Notes payable and current maturities                                                                                       |   | $                      | 5,306   |   |                 | $      | 2,696 |   |
| Accounts payable and accrued expenses                                                                                      |   |                   | 17,502  |   |                 |   | 17,740 |   |
| Accrued salaries and wages                                                                                                 |   |                   | 4,404   |   |                 |   | 5,037 |   |
| Total current liabilities                                                                                                  |   |                   | 27,212  |   |                 |   | 25,473 |   |
|                                                                                                                       |   |                   |    |   |                 |   |   |   |
| Long-term taxes payable                                                                                                    |   |                   | 9,281   |   |                 |   | 9,132 |   |
| Deferred income taxes                                                                                                      |   |                   | 2,464   |   |                 |   | 2,436 |   |
| Long-term debt                                                                                                             |   |                   | 587     |   |                 |   | 706 |   |
| Postretirement benefit liability                                                                                           |   |                   | 31,723  |   |                 |   | 30,005 |   |
| Total liabilities                                                                                                          |   |                   | 71,267  |   |                 |   | 67,752 |   |
|                                                                                                                       |   |                   |    |   |                 |   |   |   |
| Stockholders' equity:                                                                                                      |   |                   |    |   |                 |   |   |   |
| Class A Common $1 par (20,000,000 shares authorized)5,890,309 outstanding on 12/25/10 and5,858,700 outstanding on 6/26/10  |   |                   | 5,890   |   |                 |   | 5,859 |   |
| Class B Common $1 par (10,000,000 shares authorized)803,913 outstanding on 12/25/10 and821,204 outstanding on 6/26/10 |   |                   | 804     |   |                 |   | 821 |   |
| Additional paid-in capital                                                                                                 |   |                   | 50,531  |   |                 |   | 50,373 |   |
| Retained earnings reinvested and employed in the business                                                                  |   |                   | 123,917 |   |                 |   | 122,724 |   |
| Accumulated other comprehensive loss                                                                                       |   |                   | (42,331 | )      |                 |   | (47,395 | ) |
| Total stockholders' equity                                                                                                 |   |                   | 138,811 |   |                 |   | 132,382 |   |
| Total liabilities and stockholders’ equity                                                                           |   | $                      | 210,078 |   |                 | $      | 200,134 |   |

----

|                                                                      |   | 13 Weeks Ended |   |   |  26 Weeks Ended |   |
|---------------------------------------------------------------------------|--------|----------------|--------|--------|----------------------|--------|
|                                                                      |   | 12/25/2010     |   |   | 12/26/2009           |   |   | 12/25/2010 |   |   | 12/26/2009 |   |
|                                                                      |   |           |   |   |                 |   |   |   |   |   |   |   |
| Net sales                                                                 |   | $              | 57,290 |   |                 | $      | 50,535 |   |   | $ | 114,829 |   |   | $ | 91,108 |   |
| Cost of goods sold                                                        |   |           | 38,612 |   |                 |   | 34,634 |   |   |   | 77,479 |   |   |   | 65,175 |   |
|                                                                      |   |           |   |   |                 |   |   |   |   |   |   |   |   |   |   |   |
| Gross margin                                                              |   |           | 18,678 |   |                 |   | 15,901 |   |   |   | 37,350 |   |   |   | 25,933 |   |
|      % of Net Sales                              |   |           | 32.6   | %      |                 |   | 31.5 | % |   |   | 32.5 | % |   |   | 28.5 | % |
|                                                                      |   |           |   |   |                 |   |   |   |   |   |   |   |   |   |   |   |
| Selling and general expense                                               |   |           | 16,365 |   |                 |   | 14,359 |   |   |   | 33,752 |   |   |   | 28,712 |   |
|                                                                      |   |           |   |   |                 |   |   |   |   |   |   |   |   |   |   |   |
| Operating income (loss)                                                   |   |           | 2,313  |   |                 |   | 1,542 |   |   |   | 3,598 |   |   |   | (2,779 | ) |
|                                                                      |   |           |   |   |                 |   |   |   |   |   |   |   |   |   |   |   |
| Other income (expense)                                                    |   |           | 354    |   |                 |   | (254 | ) |   |   | 537 |   |   |   | (642 | ) |
|                                                                      |   |           |   |   |                 |   |   |   |   |   |   |   |   |   |   |   |
| Earnings (loss) before income taxes                                       |   |           | 2,667  |   |                 |   | 1,288 |   |   |   | 4,135 |   |   |   | (3,421 | ) |
|                                                                      |   |           |   |   |                 |   |   |   |   |   |   |   |   |   |   |   |
| Income tax expense                                                        |   |           | 1,361  |   |                 |   | 1,600 |   |   |   | 2,006 |   |   |   | 22 |   |
|                                                                      |   |           |   |   |                 |   |   |   |   |   |   |   |   |   |   |   |
| Net earnings  (loss)                                            |   | $              | 1,306  |   |                 | $      | (312 | ) |   | $ | 2,129 |   |   | $ | (3,443 | ) |
|                                                                      |   |           |   |   |                 |   |   |   |   |   |   |   |   |   |   |   |
|                                                                      |   |           |   |   |                 |   |   |   |   |   |   |   |   |   |   |   |
| Basic earnings (loss) per share                                           |   | $              | 0.20   |   |                 | $      | (0.05 | ) |   | $ | 0.32 |   |   | $ | (0.52 | ) |
|                                                                      |   |           |   |   |                 |   |   |   |   |   |   |   |   |   |   |   |
| Diluted earnings (loss) per share                                         |   | $              | 0.19   |   |                 | $      | (0.05 | ) |   | $ | 0.32 |   |   | $ | (0.52 | ) |
|                                                                      |   |           |   |   |                 |   |   |   |   |   |   |   |   |   |   |   |
| Average outstanding shares used in per share calculations (in thousands): |   |           |   |   |                 |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                                     |   |           | 6,691  |   |                 |   | 6,666 |   |   |   | 6,687 |   |   |   | 6,658 |   |
| Diluted                                                                   |   |           | 6,714  |   |                 |   | 6,666 |   |   |   | 6,706 |   |   |   | 6,658 |   |
|                                                                      |   |           |   |   |                 |   |   |   |   |   |   |   |   |   |   |   |
|                                                                      |   |           |   |   |                 |   |   |   |   |   |   |   |   |   |   |   |
| Dividends per share                                                       |   | $              | .08    |   |                 | $      | .06 |   |   | $ | .14 |   |   | $ | .18 |   |

----

|                                                                                                              |   | 26 Weeks Ended |   |
|-------------------------------------------------------------------------------------------------------------------|--------|----------------|--------|
|                                                                                                              |   | 12/25/2010     |   |   | 12/26/2009 |   |
|                                                                                                              |   |           |   |   |   |   |
| Cash flows from operating activities:                                                                             |   |           |   |   |   |   |
| Net earnings (loss)                                                                                               |   | $              | 2,129  |   |   | $ | (3,443 | ) |
| Non-cash items included:                                                                                          |   |           |   |   |   |   |   |   |
| Depreciation                                                                                                      |   |           | 4,659  |   |   |   | 4,532 |   |
| Amortization                                                                                                      |   |           | 624    |   |   |   | 590 |   |
| Fixed asset impairment                                                                                            |   |           | -      |   |   |   | 72 |   |
| Net long-term tax payable                                                                                         |   |           | 104    |   |   |   | (454 | ) |
| Deferred taxes                                                                                                    |   |           | 201    |   |   |   | (1,448 | ) |
| Unrealized transaction (gains) losses                                                                             |   |           | (113   | ) |   |   | (303 | ) |
| Retirement benefits                                                                                               |   |           | 1,727  |   |   |   | 1,451 |   |
|        Equity loss on investment in private software development company       |   |           | 418    |   |   |   | — |   |
| Working capital changes                                                                                           |   |           |   |   |   |   |   |   |
| Receivables                                                                                                       |   |           | (1,617 | ) |   |   | (2,727 | ) |
| Inventories                                                                                                       |   |           | (3,489 | ) |   |   | 10,900 |   |
| Other current assets                                                                                              |   |           | (2,763 | ) |   |   | 1,270 |   |
| Other current liabilities                                                                                         |   |           | (1,851 | ) |   |   | 1,556 |   |
| Prepaid pension cost and other                                                                                    |   |           | 230    |   |   |   | (329 | ) |
|                                                                                                              |   |           |   |   |   |   |   |   |
| Net cash provided by operating activities                                                                         |   |           | 259    |   |   |   | 11,667 |   |
|                                                                                                              |   |           |   |   |   |   |   |   |
| Cash flows from investing activities:                                                                             |   |           |   |   |   |   |   |   |
| Additions to plant and equipment                                                                                  |   |           | (2,433 | ) |   |   | (4,132 | ) |
|     Decrease in investments                                                                   |   |           | 1,250  |   |   |   | 618 |   |
|     Earn out paid for Kinemetric Engineering                                                  |   |           | -      |   |   |   | (110 | ) |
|     Investment in private software development company                                        |   |           | (600   | ) |   |   | - |   |
|                                                                                                              |   |           |   |   |   |   |   |   |
|           Net cash (used in)  by investing activities |   |           | (1,783 | ) |   |   | (3,624 | ) |
|                                                                                                              |   |           |   |   |   |   |   |   |
| Cash flows from financing activities:                                                                             |   |           |   |   |   |   |   |   |
| Proceeds from short-term borrowings                                                                               |   |           | 3,385  |   |   |   | 14,049 |   |
| Short-term debt repayments                                                                                        |   |           | (788   | ) |   |   | (18,127 | ) |
| Proceeds from long-term borrowings                                                                                |   |           | -      |   |   |   | 129 |   |
| Long-term debt repayments                                                                                         |   |           | (130   | ) |   |   | (361 | ) |
| Proceeds from common stock issued                                                                                 |   |           | 139    |   |   |   | 260 |   |
| Dividends paid                                                                                                    |   |           | (936   | ) |   |   | (1,199 | ) |
| Net cash provided by (used in) financing activities                                                               |   |           | 1,670  |   |   |   | (5,249 | ) |
|                                                                                                              |   |           |   |   |   |   |   |   |
| Effect of exchange rate changes on cash                                                                           |   |           | 1,001  |   |   |   | 295 |   |
|                                                                                                              |   |           |   |   |   |   |   |   |
| Net increase in cash                                                                                              |   |           | 1,147  |   |   |   | 3,089 |   |
| Cash, beginning of period                                                                                         |   |           | 20,478 |   |   |   | 10,248 |   |
| Cash, end of period                                                                                               |   | $              | 21,625 |   |   | $ | 13,337 |   |

----

|                                                               |   | Common Stock Outstanding($1 Par) |   |   | Addi-tionalPaid-inCapital |   |   | RetainedEarnings |   |   | AccumulatedOther Com-prehensiveLoss |   |   | Total  |    |
|--------------------------------------------------------------------|--------|---------------------------------------|--------|--------|---------------------------|--------|--------|------------------|--------|--------|-------------------------------------|--------|--------|--------|---------|
|                                                               |   | Class A                               |   |   | Class B                   |   |   |             |   |   |                                |   |   |   |    |   |   |   |
| Balance June 27, 2009                                              |   | $                                     | 5,770  |   |                      | $      | 869    |             |   | $      | 49,984                              |   |   | $      | 127,707 |   |   | $ | (41,452 | ) |   | $ | 142,878 |   |
| Comprehensive income:                                              |   |                                  |   |   |                      |   |   |             |   |   |                                |   |   |   |    |   |   |   |   |   |   |   |   |   |
| Net loss                                                           |   |                                  |   |   |                      |   |   |             |   |   |                                |   |   |   | (3,443  | ) |   |   |   |   |   |   | (3,443 | ) |
| Unrealized net gain on investments                                 |   |                                  |   |   |                      |   |   |             |   |   |                                |   |   |   |    |   |   |   | 6 |   |   |   | 6 |   |
| Translation gain, net                                              |   |                                  |   |   |                      |   |   |             |   |   |                                |   |   |   |    |   |   |   | 5,894 |   |   |   | 5,894 |   |
| Total comprehensive income                                         |   |                                  |   |   |                      |   |   |             |   |   |                                |   |   |   |    |   |   |   |   |   |   |   | 2,457 |   |
| Dividends ($.18 per share)                                         |   |                                  |   |   |                      |   |   |             |   |   |                                |   |   |   | (1,199  | ) |   |   |   |   |   |   | (1,199 | ) |
| Treasury shares:                                                   |   |                                  |   |   |                      |   |   |             |   |   |                                |   |   |   |    |   |   |   |   |   |   |   |   |   |
| Issued                                                             |   |                                  | 29     |   |                      |   |   |             |   |   | 222                                 |   |   |   |    |   |   |   |   |   |   |   | 251 |   |
| Issuance of stock under ESPP                                       |   |                                  |   |   |                      |   | 1      |             |   |   | 40                                  |   |   |   |    |   |   |   |   |   |   |   | 41 |   |
| Conversion                                                         |   |                                  | 13     |   |                      |   | (13    | )                |   |   |                                |   |   |   |    |   |   |   |   |   |   |   | 0 |   |
|                                                               |   |                                  |   |   |                      |   |   |             |   |   |                                |   |   |   |    |   |   |   |   |   |   |   |   |   |
| Balance December 26, 2009                                          |   | $                                     | 5,812  |   |                      | $      | 857    |             |   | $      | 50,246                              |   |   | $      | 123,065 |   |   | $ | (35,552 | ) |   | $ | 144,428 |   |
|                                                               |   |                                  |   |   |                      |   |   |             |   |   |                                |   |   |   |    |   |   |   |   |   |   |   |   |   |
| Balance June 26, 2010                                              |   | $                                     | 5,859  |   |                      | $      | 821    |             |   | $      | 50,373                              |   |   | $      | 122,724 |   |   | $ | (47,395 | ) |   | $ | 132,382 |   |
| Comprehensive income:                                              |   |                                  |   |   |                      |   |   |             |   |   |                                |   |   |   |    |   |   |   |   |   |   |   |   |   |
| Net earnings                                                       |   |                                  |   |   |                      |   |   |             |   |   |                                |   |   |   | 2,129   |   |   |   |   |   |   |   | 2,129 |   |
|     Minimum pension liability                  |   |                                  |   |   |                      |   |   |             |   |   |                                |   |   |   |    |   |   |   | 78 |   |   |   | 78 |   |
| Translation gain, net                                              |   |                                  |   |   |                      |   |   |             |   |   |                                |   |   |   |    |   |   |   | 4,986 |   |   |   | 4,986 |   |
| Total comprehensive income                                         |   |                                  |   |   |                      |   |   |             |   |   |                                |   |   |   |    |   |   |   |   |   |   |   | 7,193 |   |
| Dividends ($.14 per share)                                         |   |                                  |   |   |                      |   |   |             |   |   |                                |   |   |   | (936    | ) |   |   |   |   |   |   | (936 | ) |
| Treasury shares:                                                   |   |                                  |   |   |                      |   |   |             |   |   |                                |   |   |   |    |   |   |   |   |   |   |   |   |   |
|       Issued                         |   |                                  | 12     |   |                      |   |   |             |   |   | 104                                 |   |   |   |    |   |   |   |   |   |   |   | 116 |   |
| Issuance of stock under ESPP                                       |   |                                  |   |   |                      |   | 2      |             |   |   | 54                                  |   |   |   |    |   |   |   |   |   |   |   | 56 |   |
| Conversion                                                         |   |                                  | 19     |   |                      |   | (19    | )                |   |   |                                |   |   |   |    |   |   |   |   |   |   |   |   |   |
|                                                               |   |                                  |   |   |                      |   |   |             |   |   |                                |   |   |   |    |   |   |   |   |   |   |   |   |   |
| Balance December 25, 2010                                          |   | $                                     | 5,890  |   |                      | $      | 804    |             |   | $      | 50,531                              |   |   | $      | 123,917 |   |   | $ | (42,331 | ) |   | $ | 138,811 |   |
|                                                               |   |                                  |   |   |                      |   |   |             |   |   |                                |   |   |   |    |   |   |   |   |   |   |   |   |   |
| Cumulative Balance:                                                |   |                                  |   |   |                      |   |   |             |   |   |                                |   |   |   |    |   |   |   |   |   |   |   |   |   |
| Translation loss                                                   |   |                                  |   |   |                      |   |   |             |   |   |                                |   |   |   |    |   |   |   | (6,585 | ) |   |   |   |   |
| Amounts not recognized as a component of net periodic benefit cost |   |                                  |   |   |                      |   |   |             |   |   |                                |   |   |   |    |   |   |   | (35,746 | ) |   |   |   |   |
|                                                               |   |                                  |   |   |                      |   |   |             |   |   |                                |   |   |   |    |   |   | $ | (42,331 | ) |   |   |   |   |

----

|   | o | Level 1 – Financial assets whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market which the company has the ability to access at the measurement date (examples include active exchange-traded equity securities and most U.S. Government and agency securities). |
|--------|---|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | o | Level 2 - Financial assets whose values are based on quoted market prices in markets where trading occurs infrequently or whose values are based upon quoted prices of instruments with similar attributes in active markets. |
|--------|---|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | o | Level 3 – Financial assets whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement.  These inputs reflect management’s own view about the assumptions a market participant would use in pricing the asset. |
|--------|---|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                |   | Level 1    |   |
|-----------------------------------------------------|--------|------------|--------|
|                                                |   | 12/25/2010 |   |   | 6/26/2010 |   |
| International Bonds (Puerto Rican Debt Obligations) |   |       | -      |   |   | $ | 1,250 |   |
|                                                |   |       | -      |   |   | $ | 1,250 |   |

----

|                                |   | Dec 25 2010 |    |   | June 26 2010 |   |
|-------------------------------------|--------|------------------|---------|--------|-------------------|--------|
| Raw Material & Supplies         |   | $                | 32,011  |   |              | $      | 27,251 |   |
| Goods in Process and Finished Parts |   |             | 21,216  |   |              |   | 19,136 |   |
| Finished Goods                      |   |             | 22,943  |   |              |   | 24,960 |   |
|                                |   |             | 76,170  |   |              |   | 71,347 |   |
| LIFO Reserve              |   |             | (24,692 | )      |              |   | (25,191 | ) |
| Net Inventory             |   | $                | 51,478  |   |              | $      | 46,156 |   |

|                               |   | Thirteen WeeksEnded December |   |   | Twenty-six WeeksEnded December |   |
|------------------------------------|--------|------------------------------|--------|--------|--------------------------------|--------|
|                               |   | 2010                         |   |   | 2009                           |   |   | 2010 |   |   | 2009 |   |
|                               |   |                         |   |   |                           |   |   |   |   |   |   |   |
| Service cost                       |   | $                            | 575    |   |                           | $      | 486 |   |   | $ | 1,149 |   |   | $ | 973 |   |
| Interest cost                      |   |                         | 1,618  |   |                           |   | 1,574 |   |   |   | 3,229 |   |   |   | 3,154 |   |
| Expected return on plan assets     |   |                         | (1,866 | )      |                           |   | (1,783 | ) |   |   | (3,727 | ) |   |   | (3,571 | ) |
| Amortization of prior service cost |   |                         | 157    |   |                           |   | 96 |   |   |   | 314 |   |   |   | 192 |   |
| Amortization of unrecognized loss  |   |                         | 680    |   |                           |   | 701 |   |   |   | 1,360 |   |   |   | 1,403 |   |
|                               |   | $                            | 1,164  |   |                           | $      | 1,074 |   |   | $ | 2,325 |   |   | $ | 2,151 |   |

|                                  |   | Thirteen WeeksEnded December |   |   | Twenty-six WeeksEnded December |   |
|---------------------------------------|--------|------------------------------|--------|--------|--------------------------------|--------|
|                                  |   | 2010                         |   |   | 2009                           |   |   | 2010 |   |   | 2009 |   |
|                                  |   |                         |   |   |                           |   |   |   |   |   |   |   |
| Service cost                          |   | $                            | 92     |   |                           | $      | 85 |   |   | $ | 184 |   |   | $ | 169 |   |
| Interest cost                         |   |                         | 151    |   |                           |   | 169 |   |   |   | 302 |   |   |   | 339 |   |
| Amortization of prior service benefit |   |                         | (226   | )      |                           |   | (226 | ) |   |   | (453 | ) |   |   | (453 | ) |
| Amortization of unrecognized loss     |   |                         | 7      |   |                           |   | - |   |   |   | 14 |   |   |   | - |   |
|                                  |   | $                            | 24     |   |                           | $      | 28 |   |   | $ | 47 |   |   | $ | 55 |   |

----

|                               |   | December 25,2010 |   |   | June 26,2010 |   |
|------------------------------------|--------|------------------|--------|--------|--------------|--------|
|                               |   |             |   |   |         |   |
| Loan and Security Agreement        |   | $                | 5,000  |   |         | $      | 1,700 |   |
| Short-term foreign credit facility |   |             | 47     |   |         |   | 730 |   |
| Other                              |   |             | 259    |   |         |   | 266 |   |
|                               |   | $                | 5,306  |   |         | $      | 2,696 |   |

| o | Cash and short term instruments |
|---|---------------------------------|

|   | The carrying amount approximates fair value because of the short maturity of those investments |
|--------|------------------------------------------------------------------------------------------------|

| o | Long term investments |
|---|-----------------------|

|   | The fair value of some investments are estimated on quoted market prices for those or similar investments. |
|--------|------------------------------------------------------------------------------------------------------------|

| o | Short and long term debt |
|---|--------------------------|

|   | The fair value of the Company’s short and long term debt is estimated on quoted market prices for the same or similar issues or on the current rates offered to the Company for debt of the same remaining maturities. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|            |   | December 25, 2010 |   |   | June 26, 2010 |   |
|-----------------|--------|-------------------|--------|--------|---------------|--------|
|            |   | Carrying Amount   |   |   | Fair Value    |   |   | Carrying Amount |   |   | Fair Value |   |
|            |   |              |   |   |          |   |   |   |   |   |   |   |
| Cash            |   | $                 | 21,625 |   |          | $      | 21,625 |   |   | $ | 20,478 |   |   | $ | 20,478 |   |
| Short term debt |   |              | 5,306  |   |          |   | 5,306 |   |   |   | 2,696 |   |   |   | 2,696 |   |
| Investments     |   |              | -      |   |          |   | - |   |   |   | 1,250 |   |   |   | 1,250 |   |
| Long term debt  |   |              | 587    |   |          |   | 587 |   |   |   | 706 |   |   |   | 706 |   |

----

----

| Cash flows (in thousands)                         |   | 26 Weeks Ended |   |
|---------------------------------------------------|--------|----------------|--------|
|                                              |   | 12/25/10       |   |   | 12/26/09 |   |
|                                              |   |           |   |   |   |   |
| Cash provided by operations                       |   | $              | 259    |   |   | $ | 11,667 |   |
| Cash (used in) from investing activities          |   |           | (1,783 | ) |   |   | (3,624 | ) |
| Cash provided (used in) from financing activities |   |           | 1,670  |   |   |   | (5,249 | ) |
| Effect of exchange rates changes on cash          |   |           | 1,001  |   |   |   | 295 |   |
|                                              |   |           |   |   |   |   |   |   |
| Net increase in cash                              |   | $              | 1,147  |   |   | $ | 3,089 |   |

----

|   | o | The Company completed the development of an improved financial reporting framework which will facilitate a uniform approach to consolidated and subsidiary financial reporting and analysis.  This project was completed in the second quarter of fiscal 2011. |
|--------|---|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | o | The company has added experienced financial resources to its staff and will continue to evaluate further requirements. The plan to correct the major financial reporting and control problems began in October of 2010 and is expected to be completed by the fourth quarter fiscal 2011. |
|--------|---|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 31a | Certification of Chief Executive Officer Pursuant to Rules 13a-15(e)/15(d)-15(e) and 13a-15(f)/15(d)-15(f), filed herewith. |
|-----|-----------------------------------------------------------------------------------------------------------------------------|

| 31b | Certification of Principal Accounting Officer Pursuant to Rules 13a-15(e)/15(d)-15(e) and 13a-15(f)/15(d)-15(f), filed herewith. |
|-----|----------------------------------------------------------------------------------------------------------------------------------|

| 32 | Certification of Chief Executive Officer and Principal Accounting Officer Pursuant to Rule 13a-14(b) and Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), filed herewith. |
|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |             |   | THE L. S. STARRETT COMPANY(Registrant)       |
|--------|------------------|--------|----------------------------------------------|
|   |             |   |                                         |
|   |             |   |                                         |
| Date   | February 3, 2011 |   | S/R. Douglas A. Starrett                     |
|   |             |   | Douglas A. Starrett - President and CEO      |
|   |             |   |                                         |
| Date   | February 3, 2011 |   | S/R. Francis J. O’Brien                |
|   |             |   | Francis J. O’Brien - Treasurer and CFO |