SECURITIES AND EXCHANGE COMMISSION
                          Washington, D.C. 20549

                                FORM 10-K

                    FOR ANNUAL AND TRANSITION REPORTS
                 PURSUANT TO SECTIONS 13 OR 15(d) OF THE
                     SECURITIES EXCHANGE ACT OF 1934

  (Mark One)
 [x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

  For the fiscal year ended June 30, 1999
                                    OR
 [ ] 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 0-5214
                            PEERLESS MFG. CO.
          (Exact name of registrant as specified in its charter)

                   Texas                          75-0724417
      (State or Other Jurisdiction of           (IRS Employer
      Incorporation or Organization)         Identification No.)

   2819 Walnut Hill Lane, Dallas, Texas             75229
 (Address of Principal Executive Offices)         (Zip Code)

 Registrant's telephone number, including area code: (214) 357-6181

  Securities registered pursuant to Section 12(g) of the Act:
     Title of each class         Name of Each Exchange on Which Registered
 Common Stock, par value $1.00   The Nasdaq Stock Market's National Market

        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 [ ]

       Indicate  by  check  mark  if  disclosure  of  delinquent  filers
  pursuant to Item 405  of Regulation S-K is  not contained herein,  and
  will not  be contained,  to the  best  of registrant's  knowledge,  in
  definitive proxy or information  statements incorporated by  reference
  in Part III of this Form 10-K or any amendment to this Form 10-K. [x]

       At September 21, 1999, Peerless Mfg. Co. had 1,452,492 shares  of
  common stock, $1.00 par value outstanding.  The aggregate market value
  of the registrant's common stock on September 21, 1999 (based upon the
  closing price of these  shares on Nasdaq)  held by non-affiliates  was
  approximately $13,200,000.

                   DOCUMENTS INCORPORATED BY REFERENCE
  Portions of the  Registrant's Proxy  Statement for  Annual Meeting  of
  Shareholders to be held  on or about November 18,  1999 (to be  filed)
  are incorporated by reference into Part III of this Form 10-K.
<PAGE>

                            TABLE OF CONTENTS

  Item                                                          Page
  ----                                                          ----
  PART I

       1    Business..............................................1

       2    Properties............................................5

       3    Legal Proceedings.....................................5

       4    Submission of Matters to a Vote
              of Security Holders ................................5

  PART II

       5    Market for Registrant's Common Equity and
              Related Stockholder Matters ........................5

       6    Selected Financial Data...............................6

       7    Management's Discussion and Analysis of Financial
              Condition and Results of Operations ................6

       8    Financial Statements and Supplementary Data..........12

       9    Changes in and Disagreements with Accountants
              on Accounting and Financial Disclosure ............43

  PART III

       10   Directors and Executive Officers of
              the Registrant ....................................43

       11   Executive Compensation...............................43

       12   Security Ownership of Certain Beneficial
              Owners and Management .............................43

       13   Certain Relationships and Related
              Transactions ......................................43

  PART IV

       14   Exhibits, Financial Statement Schedule,
              and Reports on Form 8-K ...........................44

<PAGE>
                                  PART I


  ITEM 1.   BUSINESS.

       Peerless Mfg. Co. (the "Registrant", "Peerless" or "we," "us"  or
  "our") was organized in 1933 as a proprietorship and was  incorporated
  as a Texas corporation in 1946.  We have wholly-owned subsidiaries  in
  the Netherlands, the United Kingdom and Barbados.

  Products and Operations

       We  are  engaged  in  the  business  of  designing,  engineering,
  manufacturing and selling highly specialized products, referred to  as
  "separators" or "filters," which are used for a variety of purposes in
  cleaning gases and liquids as they  move through a piping system.   We
  package these products  on skids complete  with instruments,  controls
  and related valves and piping.   These products are used primarily  to
  remove solid and liquid contaminants from natural gas, and salt  water
  aerosols from the combustion intake air of ship board gas turbine  and
  diesel engines.

       We  also  design,  engineer,  manufacture  and  sell  specialized
  products known as "pulsation dampeners,"  which are used primarily  to
  reduce  or  eliminate  vibrations  caused  by  acoustical   pulsations
  commonly found  in  piping  connected  to  reciprocating  compressors.
  Pulsation  dampeners  reduce  noise  levels,  improve  efficiency  and
  prolong the life of piping systems.

       Our products are also used  as components in selective  catalytic
  reduction systems.  Selective catalytic reduction equipment is used to
  separate nitrogen oxide (NOx) emissions  from exhaust gases caused  by
  burning hydrocarbon  fuels  such as  gasoline,  natural gas  and  oil.
  Additionally,  we  sell   gas  odorization  equipment,   quick-opening
  closures, parts for  our products  and other  miscellaneous items  and
  render certain engineering services.

       Although we manufacture and  stock a limited  number of items  of
  equipment for immediate  delivery, the vast  majority of our  products
  are designed  and constructed  for specific  customer requirements  or
  specifications.  In  certain cases,  our products  and components  are
  designed by us but produced by subcontractors under our supervision.

       We  market   our   products  worldwide   through   manufacturers'
  representatives, who  sell on  a commission  basis under  the  general
  direction of an officer of Peerless.   We also sell products  directly
  to customers.
<PAGE>
  Customers and Export Sales

       Gas separators  and filters  are sold  to gas  producers and  gas
  gathering, transmission and  distribution companies,  and to  chemical
  manufacturers  and  oil   refineries,  either   directly  or   through
  contractors  engaged   to  build   plants   and  pipelines,   and   to
  manufacturers of compressors,  turbines and  nuclear and  conventional
  steam generating equipment.  Marine separation/filtration systems  are
  sold primarily to ship builders.  Pulsation dampeners are purchased by
  customers in  the  same industries  as  purchasers of  separators  and
  filters  (except  ship   builders  and   steam  generating   equipment
  manufacturers).  Selective  catalytic reduction equipment  is sold  to
  gas turbine  operators, refineries  and others  who desire  or may  be
  required to reduce nitrogen oxide (NOx) emissions.

       We are  not  dependent  upon any  single  customer  or  group  of
  customers.  The custom-designed nature of our business and the  nature
  of the products cause  year to year variance  in our major  customers.
  No customer accounted for  10% or more of  our revenues during  fiscal
  years 1999 and 1998.  During  fiscal 1997, one customer accounted  for
  12% of revenues.

       Sales to international customers have been a part of our business
  for more than forty years.  During fiscal 1999, foreign sales amounted
  to $18  million, or  44% of  total consolidated  revenue, compared  to
  sales of $27  million, or 63%  of total  consolidated revenue,  during
  fiscal 1998.  Sales  in Asia were approximately  $2 million, or 5%  of
  net sales in fiscal 1999, compared to approximately $7 million or  17%
  of net sales in fiscal 1998.  The custom-designed and project-specific
  nature of our products enables us to sell to any geographic region.

       Our  international  sales   involve  certain   risks.     Foreign
  purchasers  may  default  in  the  payment  of  amounts  due,  causing
  collection on an international account to be more difficult than for a
  domestic account.   Foreign  exchange  rates may  fluctuate  adversely
  affecting us  and  the  U.S. and/or  foreign  governments  may  impose
  regulatory burdens upon exports and imports of our products.  We  also
  incur greater  expenses  on foreign  sales  because of  added  selling
  expenses incurred in other countries.   To date, we have not  incurred
  substantial expenses related to these risks.

       We have  reduced  our  credit  and  collection  risks  because  a
  substantial part of foreign sales are made to large,  well-established
  international companies and/or to international operations of domestic
  companies.  When sales are made to smaller international  enterprises,
  we generally require progress payments or an appropriate guarantee  of
  payment, such as a  letter of credit from  a banking institution.   We
  attempt to minimize the risks  of fluctuating currency exchange  rates
  by requiring payment in U.S. dollars (or in the functional currency of
  our foreign subsidiaries) for most of  our foreign product sales.   We
  hedge against  substantial  exposures that  we  may have  to  currency
  fluctuations.
<PAGE>
  Backlog

       Our  backlog  of   incomplete  orders  at   June  30,  1999   was
  approximately $29  million compared  to approximately  $22 million  at
  June 30, 1998.  Backlog has been calculated under our normal  practice
  of including incomplete  orders for products  that are deliverable  in
  future periods but that may be changed or cancelled.

  Competition

       There are many competitors, both larger  and smaller than us,  in
  the manufacturing  and selling  of separators,  filters and  pulsation
  dampeners.   Management  believes that  performance,  reliability  and
  warranty service are the prime competitive factors in our markets.  We
  believe that we  strongly compete  in these  areas and  have become  a
  world  leader  in  sales  of  custom-built  separators,  filters   and
  pulsation dampeners.

  Patents, Licenses and Product Development

       We consider our company  to be a world  leader in the  technology
  required  to  design  and  apply  our  high  efficiency   vapor/liquid
  separation and filtration equipment.   We believe that  we are also  a
  leader in the design, manufacture  and application of high  efficiency
  pulsation  dampeners  for  reciprocating   compressors,  and  in   the
  production of selective catalytic reduction component equipment.   Our
  expenditures  for  new  product  development  and  improvements   were
  approximately $667,000 in fiscal 1999 and $580,000 in fiscal 1998.  We
  expect product development expenditures  to be approximately  $650,000
  in fiscal 2000.

       We have existing patents and patent applications pending on  some
  of our  products and  processes that  are important  to our  business.
  These  include   patents   on  vane   designs,   separator   profiles,
  marine/separator filtration systems and pressure testing capabilities.
  In addition,  most  of  our products  are  proprietary  and  are  sold
  utilizing our  proven technology  and knowledge  of the  applications.
  However, other companies are  marketing competitive products that  may
  not infringe upon our patents and there can be no assurance that other
  companies won't sell products similar to our proprietary products.

       In 1992, we shifted our emphasis from licensing our foreign sales
  to a strategy  of focusing on  direct international marketing  through
  our Singapore sales branch and European subsidiaries, Peerless  Europe
  B.V. and  Peerless Europe  Ltd. We  also  derive royalty  income  from
  license arrangements in  France and  England and  engineering fees  on
  certain projects.   Royalty and  engineering fee  revenues, which  are
  included in net sales, were $1,828,000 in fiscal 1998.  No royalty  or
  engineering fees were received in fiscal 1999.

  Employees

       At June 30, 1999, Peerless and its subsidiaries had approximately
  190 employees.
<PAGE>
  Raw Materials

       We purchase raw  materials and component  parts essential to  our
  business from established sources and have not experienced any unusual
  problems in purchasing required materials and parts.  We believe  that
  raw materials  and component  parts will  be available  in  sufficient
  quantities to  meet anticipated  demand.   However,  there can  be  no
  assurance  that  we  will  continue  to  find  our  raw  materials  in
  quantities or at prices satisfactory to us.

  Environmental Regulation

       We do  not believe  that our  compliance with  federal, state  or
  local statutes  or  regulations  relating to  the  protection  of  the
  environment has  had any  material effect  upon capital  expenditures,
  earnings or our competitive  position. Our manufacturing processes  do
  not  emit  substantial  foreign   substances  into  the   environment.
  Regulations related to nitrogen oxide (NOx) emissions have in the past
  resulted in  increased  sales of  our  component parts  for  selective
  catalytic reduction equipment.

  Market Risk

       Although we  generally require  payment in  U.S. dollars  on  our
  international projects,  we  sometimes  conduct  business  in  foreign
  currencies and are subject to foreign  currency exchange rate risk  on
  cash flows related to such transactions.  We make very limited use  of
  currency exchange  contracts to  reduce the  risk of  adverse  foreign
  currency movements related to  certain foreign currency  transactions.
  Exposure from market rate fluctuations  related to these contracts  is
  not material.
<PAGE>
  Executive Officers

       Our executive officers  on September 16,  1999 are listed  below.
  Each of these officers has been employed by Peerless for at least five
  years in the same position or a similar capacity, except as noted:

            Name and Age          Position
            ------------          --------
          Sherrill Stone, 62    Chairman of the Board,
                                President and Chief
                                Executive Officer (1)

          G. D. Cornwell, 55    Sr. Vice President (2)


          Paul W. Willey, 61    Chief Financial Officer,
                                Treasurer and Secretary (3)

          Ray Muzyka,     61    Vice President (4)

  ____________________

  (1)  Mr. Stone  is responsible  for formulation  of corporate  policy,
       investment and new business opportunities.  Mr. Stone assumed the
       duties of Chairman of  the Board and  Chief Executive Officer  on
       March 31, 1993.

  (2)  Mr. Cornwell  is  responsible  for  purchasing,  estimating,  and
       quality control operations.

  (3)  Mr. Willey is  responsible for financial  administration and  has
       been employed by us  since March 25, 1998.   He was Treasurer  of
       Dresser Industries, Inc. from 1983 to 1997.

  (4)  Mr. Muzyka is responsible for  the pressure product vessel  sales
       effort in Canada and the United States.
<PAGE>
  ITEM 2.   PROPERTIES.

       We own our principal executive offices located in Dallas,  Texas,
  which  include   office,  warehouse   and  manufacturing   facilities.
  Approximately 4,000 square  feet of space  is used  for executive  and
  sales offices, 3,600 square feet used for research and development and
  35,000 square feet  of a 40,000  square foot building  located on  the
  same  site  is  used  for  administrative,  engineering  and  drafting
  offices.  The remaining portion of this building is leased to a  third
  party.    We  own  approximately  21,600  additional  square  feet  of
  manufacturing facilities in Denton, Texas, approximately 29,000 square
  feet  of   manufacturing   facilities  in   Carrollton,   Texas,   and
  approximately  80,000  square  feet  of  manufacturing  facilities  in
  Dallas,  Texas.    We  believe  that  our  office  and   manufacturing
  facilities are  adequate and  suitable for  our present  requirements.
  Future needs can be  met by building  manufacturing facilities at  the
  Denton, Texas location, where space is available for expansion.

  ITEM 3.   LEGAL PROCEEDINGS.

       We are  involved  in various  legal  proceedings arising  in  the
  ordinary course of  business that are  not material  to our  financial
  condition.

  ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

       None.
<PAGE>
                               PART II

  ITEM 5.   MARKET  FOR   REGISTRANT'S   COMMON   EQUITY   AND   RELATED
            STOCKHOLDER MATTERS.

       Our Common Stock is listed on the Nasdaq Stock Market's  National
  Market under the  symbol PMFG.   Our  Board of  Directors reviews  our
  financial position  periodically  to  determine  the  advisability  of
  paying dividends.   The following table  sets forth,  for the  periods
  indicated, the range of the daily high and low closing bid prices  for
  our Common Stock as reported by Nasdaq Stock Market's National  Market
  and cash dividends paid per share.

    Quarter Ended:            Closing Bid Prices   Cash Dividends
                                 High      Low        Per Share
                                ------    ------        -----
    Fiscal 1998
    September 30, 1997         $15-1/2   $12            $.125
    December 31, 1997           13-5/8     9-7/8         .125
    March 31, 1998              12-1/2    10-1/8         .125
    June 30, 1998               13-1/2    11-3/8         .125

    Fiscal 1999
    September 30, 1998         $15-3/8   $10            $.125
    December 31, 1998           13         9             .125
    March 31, 1999              11-1/4     9-5/16        .125
    June 30, 1999               11-1/8     8-3/4         .125

       There were 198 record holders of  our Common Stock on August  13,
  1999.  We estimate that approximately 700 additional shareholders  own
  shares in broker names.
<PAGE>
  ITEM 6.   SELECTED FINANCIAL DATA

       The  following  selected  financial   data  should  be  read   in
  conjunction with Consolidated Financial  Statements and related  Notes
  included in this report.

                                         Year ended June 30
                    1999         1998        1997          1996         1995
                 ----------   ----------  ----------    ----------   ----------

Net sales       $40,568,443  $43,455,136 $41,486,492   $33,643,998  $32,089,132

Gross profit     14,271,719   15,239,806  11,525,289    10,213,237   10,583,128

Earnings before
 income taxes     2,845,570    3,522,138     537,996     1,182,148    1,908,661

Net earnings    $ 1,849,570  $ 2,449,561 $   537,416   $   789,721  $ 1,226,246
                 ==========   ==========  ==========    ==========   ==========
Earnings per
 common share-
 basic and
 diluted              $1.27        $1.68        $.37          $.55         $.85
                       ====         ====         ===           ===          ===

Total assets    $23,478,772  $23,756,221 $19,046,720   $18,191,426  $17,156,055
                 ==========   ==========  ==========    ==========   ==========
Long-term
obligations             ---         ---          ---           ---          ---

Cash dividend
 per common
 share          $       .50  $       .50 $       .50   $       .50  $       .50
                 ==========   ==========  ==========    ==========   ==========


  ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL  CONDITION
            AND RESULTS OF OPERATIONS.

  Liquidity And Capital Resources

       We believe  that  we  maintain corporate  liquidity  adequate  to
  support existing operations  and planned growth,  as well as  continue
  operations  during  reasonable  periods  of  unanticipated  adversity.
  Management directs  additional  resources  to  strategic  new  product
  development, market expansion and  continuing improvement of  existing
  products to enhance  our position as  a market leader  and to  promote
  planned internal growth and profitability.
<PAGE>
       We have historically financed,  and continue to finance,  working
  capital requirements, expansion,  equipment purchases or  acquisitions
  primarily through the retention of earnings, which is reflected by the
  absence of  long-term debt  on our  consolidated  balance sheet.    In
  addition to retained  earnings, we have  used short  term bank  credit
  lines of $7,000,000 to  supplement working capital.   We believe  that
  these  sources  will  be  sufficient  to  satisfy  our  needs  in  the
  foreseeable future.    During fiscal  1999  and fiscal  1998,  it  was
  necessary for us to use our  short-term bank credit lines in order  to
  finance a temporary shortfall in working  capital.  At June 30,  1999,
  we had no debt  outstanding under our credit  lines. We pay an  annual
  commitment fee of 0.25% of the unused balance under the credit  lines.
  We have no  material commitments for  capital expenditures other  than
  replacing equipment and maintaining our existing plants and equipment.
  During fiscal  1999  we  purchased  fixed  assets  totaling  $233,000,
  consisting primarily of replacement manufacturing equipment,  computer
  hardware and  software, office  equipment and  building  improvements.
  This is compared to purchases of $262,000 during fiscal 1998.

       Working  capital  was  $11,500,000  at  June 30,  1999,  up  from
  $10,500,000 at June 30, 1998, an increase of 9.5%.  This increase  was
  due primarily to increased cost and earnings in excess of billings  in
  fiscal 1999 compared to fiscal 1998.

       The following  table sets  forth certain  information related  to
  working capital for our last three fiscal years:

                                       1999       1998      1997
                                       ----       ----      ----
       Average working capital as a
       percentage of net sales         25.9%      20.5%     20.8%

       Annual accounts receivable
         turnover(1)                    3.8        5.0       4.3

       Annual inventory turnover(2)     6.2        6.3       6.6


  (1)  Annual accounts  receivable  turnover  is  computed  by  dividing
       annual net sales by the average monthly accounts receivable.

  (2)  Annual inventory turnover  is computed  by dividing  the cost  of
       goods sold by the average monthly inventory and contract costs.

       The  average  working  capital  as  a  percentage  of  net  sales
  increased as a function of increased working capital of  approximately
  $1,000,000 and a  decreased sales volume  of approximately  $2,900,000
  reported in fiscal  1999 over  fiscal 1998.   The  decrease in  annual
  accounts receivable  turnover was  caused primarily  by  international
  customers who slowed payments to us.  We are intensifying our  efforts
  to improve collection.  Average  inventory turnover has stabilized  at
  6.2 in  fiscal 1999.   Peerless  management continues  to monitor  and
  streamline  our   receivable  collection   and  inventory   purchasing
  procedures to maximize cash flow.
<PAGE>
  Results of Operations

       The following table  sets forth various  measures of  performance
  expressed as percentages of net sales for our last three fiscal years,
  as well as our effective income tax rate for the same periods:

                                   1999        1998        1997
                                   ----        ----        ----
  Gross profit margin              35.2%       35.1%       27.8%

  Operating expenses               27.8%       26.7%       26.8%

  Earnings before income taxes     7.0%        8.1%        1.3%

  Effective income tax rate        35.0%       30.5%       0.1%


       Inflation did not have a material impact on our operating results
  during the last three fiscal years.

  Comparison of Fiscal 1999 to Fiscal 1998

  Net Sales

       Our net sales decreased  approximately $2,887,000, or 6.6%,  from
  $43,455,000 to  $40,568.000.    Domestic sales  increased  39.6%  from
  $16,181,000 in fiscal  1998 to $22,593,000  in fiscal  1999.   Foreign
  sales decreased 34.1% from $27,274,000  in fiscal 1998 to  $17,975,000
  in  fiscal  1999.    The  decrease  in  international  sales  resulted
  primarily from reduced sales realized in Asia.

       Our backlog  of unfilled  orders  increased from  $22,000,000  at
  June 30, 1998 to $29,000,000 at June 30, 1999.

  Gross Profit Margin

       Our gross  profit margin  increased slightly  from 35.1%  of  net
  sales in fiscal 1998 to 35.2% of net sales in fiscal 1999.

  Operating Expenses

       Operating Expenses decreased 2.6% from $11,595,000 in fiscal 1998
  to $11,293,000 in fiscal 1999.  This decrease in operating expense was
  primarily due to decreased sales in  fiscal 1999.  However,  operating
  expenses as a percent of sales increased slightly from 26.7% in fiscal
  1998 compared to 27.8% in fiscal 1999.

  Income Tax

       Our effective tax rate was 35.0% in fiscal 1999 compared to 30.5%
  in fiscal 1998.  For a further discussion of our federal income taxes,
  see Note H to our Financial Statements.

  Comparison of Fiscal 1998 to Fiscal 1997
<PAGE>
  Net Sales

       Our net sales increased  approximately $1,969,000, or 4.7%,  from
  $41,486,000 in fiscal 1997  to $43,455,000 in  fiscal 1998.   Domestic
  sales increased 1.9% from $15,881,000 in fiscal 1997 to $16,181,000 in
  fiscal 1998.  Foreign sales increased 6.5% from $25,605,000 in  fiscal
  1997 to $27,274,000  in fiscal 1998.   The  increase in  international
  sales resulted primarily from additional sales realized in Canada  and
  South America.

       Our backlog  of unfilled  orders  increased from  $20,000,000  at
  June 30, 1997 to $22,000,000 at June 30, 1998.

  Gross Profit Margin

       Our gross  profit margin  increased from  27.8% of  net sales  in
  fiscal 1997  to 35.1%  of net  sales  in fiscal  1998.   The  increase
  resulted from a  relative increase in  engineering revenues in  fiscal
  1998 versus fiscal 1997.  Such revenues provide a higher gross  profit
  margin.   Revenues  from engineering  fees  with higher  gross  profit
  margins increased approximately 400% from  $359,000 in fiscal 1997  to
  $1,828,000 in fiscal 1998.

  Operating Expenses

       Operating expenses increased 4.3% from $11,118,000 in fiscal 1997
  to $11,595,000 in fiscal  1998.  This  increase in operating  expenses
  was primarily  due  to  increased sales  in  fiscal  1998.    However,
  operating expenses as a percent of  sales were comparable at 26.8%  in
  fiscal 1997 compared to 26.7% in fiscal 1998.

  Income Tax

       Our effective income tax rate was  30.5% in fiscal 1998  compared
  to 0.1% in fiscal 1997.   Foreign deferred tax benefits, which  offset
  domestic tax expenses, were not available to us in fiscal 1998 as they
  were in fiscal 1997.  For  a further discussion of our federal  income
  taxes, see Note H to our Consolidated Financial Statements.

  Year 2000 Compliance

       The  inability  of  computers,   software  and  other   equipment
  utilizing microprocessors  to  recognize  and  properly  process  data
  fields containing a  two-digit year is  commonly referred  to as  "the
  Year 2000  Compliance  issue".   As  the Year  2000  approaches,  such
  systems  may  be  unable  to  accurately  process  certain  date-based
  information.
<PAGE>
       As the case with  most other companies  using computers in  their
  operations, we  are  in  the  process  of  addressing  the  Year  2000
  Compliance issue.  We began converting our information systems in 1996
  through the purchase of a new information system that is already  Year
  2000 compliant.  We have incurred and expensed approximately  $150,000
  through June 30, 1999 for remediation  costs associated with our  Year
  2000 compliance  activities and  we expect  to  incur and  expense  an
  additional $20,000 in the future to remediate our information  systems
  and to write off unamortized costs for systems replaced.  In  addition
  to  these  remediation  costs  expensed,  we  have  also   capitalized
  approximately $340,000 of capital  expenditures through June 30,  1999
  for the replacement and upgrading  of purchased software and  hardware
  for our existing systems.  Our  new system was implemented during  the
  quarter ending  March 31, 1999,  and was  successfully tested.    Time
  sensitive schedules, purchase  orders and  invoices were  successfully
  generated.

       We purchase computer  hardware and software  products from  third
  parties for  incorporation into  our  products and  these  third-party
  products may be affected by  the Year 2000 problem.   There can be  no
  guarantee that these  products or the  systems of  other companies  on
  which our systems and operations rely will be timely converted or that
  the failure of these systems would  not have an adverse effect on  our
  systems.  We have advised our customers inquiring about this issue  to
  contact our vendors for Year 2000 information.  We are in the  process
  of consulting with such vendors in an effort to ascertain whether they
  have addressed  the risk  of  Year 2000  problems  in the  systems  we
  currently use.

       We believe  that  all  Year  2000  remediation  efforts  for  our
  businesses will  be completed  on time  and within  budget  estimates.
  Should any  critical  service  providers, suppliers  or  customers  be
  unable to achieve timely compliance, there may be an adverse impact on
  our operations.  Our  current assessment of risks,  based on the  most
  reasonable worst case scenario, is that  there will be no  significant
  adverse impact on our operations or financial performance.  We believe
  that if any disruption to operations  does occur, it will be  isolated
  and/or short-term in duration.

  Sales in Southeast Asia

       Demand for  our products  in Southeast  Asia  has declined  as  a
  result of the  recent financial  situation there.   However,  economic
  reports indicate business activity may be improving in Southeast Asia.
<PAGE>
  Outlooks and Uncertainties

       This Annual Report on Form 10-K contains certain  forward-looking
  statements within the meaning of Section 27A of the Securities Act  of
  1933, as amended, and  Section 21E of the  Securities Exchange Act  of
  1934, as amended. Such statements refer to events that could occur  in
  the future or may be identified by the use of words such as  "expect,"
  "intend," "plan," "believe," correlative words, and other  expressions
  indicating that future events are contemplated and may be included  in
  our business description or in Management's Discussion and Analysis of
  Results of  Operations and  Financial Condition,  among other  places.
  Such statements are subject to  inherent risks and uncertainties,  and
  actual results could  differ materially  from those  projected in  the
  forward-looking statements as a result of certain of the risk  factors
  set forth below and elsewhere in this Annual Report on Form 10-K.   In
  addition to the other information contained  in this Annual Report  on
  Form 10-K,  investors should  carefully  consider the  following  risk
  factors.    We  do  not   undertake  to  update  any   forward-looking
  statements.

       Competition.  We operate in highly competitive markets worldwide.
  We compete with manufacturers and  sellers of separators, filters  and
  pulsation dampeners, some of which are larger than us and have greater
  financial resources.  In addition, several smaller manufacturers  also
  produce  custom-designed  equipment  that  is  competitive  with   our
  specialized products and services.  There can be no assurance that  we
  will  be  able  to  compete   successfully  with  current  or   future
  competitors.

       International Operations.  We  derive a  significant  portion  of
  revenues from  international sales,  particularly in  Asia.   Economic
  conditions across international regions could materially and adversely
  affect us.   Our  operations and  earnings throughout  the world  have
  been, and may in the future be, affected from time to time in  varying
  degrees by political  developments and foreign  laws and  regulations,
  such as  forced divestiture  of  assets, restrictions  on  production,
  imports and  exports, price  controls,  tax cancellation  of  contract
  rights  and  environmental  regulations.    The  likelihood  of   such
  occurrences and their overall effect upon us vary greatly from country
  to country and are not predictable.

       Further, foreign purchasers may default in the payment of amounts
  due, causing  collection  on  an  international  account  to  be  more
  difficult than for  a domestic account.   Foreign  exchange rates  may
  fluctuate  adversely  affecting  us   and  the  U.S.  and/or   foreign
  governments may impose regulatory burdens upon exports and imports  of
  our products. We also incur greater expenses on foreign sales  because
  of added selling expense incurred in other countries.  The  occurrence
  of any  one  or more  of  the  foregoing could  adversely  affect  our
  operations.
<PAGE>
     Concentrations of Credit Risk.  We continue to closely monitor  the
  creditworthiness of our customers and have not experienced significant
  credit losses to  date.   A significant portion  of our  sales are  to
  customers whose activities are  related to the  oil and gas  industry,
  including some  who are  located in  other  countries.   We  generally
  extend credit to  these customers.   Our  exposure to  credit risk  is
  affected by conditions within the oil and gas industry. When sales are
  made  to  smaller  international  enterprises,  we  generally  require
  progress payments or an  appropriate guarantee of  payment, such as  a
  letter of credit from a banking institution.

       Backlog.  Our backlog represents incomplete customer orders.   We
  have historically completed and shipped virtually all of the  backlog.
  However, customers  may  cancel  outstanding  orders  prior  to  their
  completion.   In  such cases,  we  would not  recognize  revenues  for
  canceled orders.  We have contractual  protection to recover from  our
  customers our costs related to canceled orders.
<PAGE>

  ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

                    Index to Financial Statements

                                                               Page

  REPORT OF INDEPENDENT CERTIFIED PUBLIC
       ACCOUNTANTS ...........................................  17

  CONSOLIDATED BALANCE SHEETS AT JUNE 30, 1999 AND 1998.......  18

  CONSOLIDATED STATEMENTS OF EARNINGS FOR THE YEARS
       ENDED JUNE 30, 1999, 1998 AND 1997.....................  20

  CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS'
       EQUITY FOR THE YEARS ENDED JUNE 30, 1999,
       1998 AND 1997..........................................  21

  CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS
       ENDED JUNE 30, 1999, 1998 AND 1997.....................  23

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE
       YEARS ENDED JUNE 30, 1999, 1998 AND 1997...............  25

  REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
       ON SCHEDULE............................................  36

  SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS.............  37

<PAGE>

            Report of Independent Certified Public Accountants




  Board of Directors
  Peerless Mfg. Co.


  We have  audited  the  accompanying  consolidated  balance  sheets  of
  Peerless Mfg. Co. and Subsidiaries as  of June 30, 1999 and 1998,  and
  the  related   consolidated  statements   of  earnings,   changes   in
  stockholders' equity, and cash  flows for each of  the three years  in
  the period ended June  30, 1999.  These  financial statements are  the
  responsibility of the Company's management.  Our responsibility is  to
  express an opinion on these financial statements based on our audits.

  We conducted our audits in accordance with generally accepted auditing
  standards.  Those standards require that we plan and perform the audit
  to obtain reasonable assurance about whether the financial  statements
  are free of material misstatement.  An audit includes examining, on  a
  test basis, evidence  supporting the  amounts and  disclosures in  the
  financial statements.  An audit also includes assessing the accounting
  principles used and significant estimates made by management, as  well
  as evaluating  the  overall  financial  statement  presentation.    We
  believe our audits provide a reasonable basis for our opinion.

  In our opinion,  the financial statements  referred to above,  present
  fairly, in all material respects, the consolidated financial  position
  of Peerless Mfg. Co.  and Subsidiaries as of  June 30, 1999 and  1998,
  and  the   consolidated  results   of  their   operations  and   their
  consolidated cash flows  for each  of the  three years  in the  period
  ended June 30, 1999, in conformity with generally accepted  accounting
  principles.


  GRANT THORNTON LLP

  Dallas, Texas
  September 10, 1999

<PAGE>
<TABLE>
                 Peerless Mfg. Co. and Subsidiaries
                     CONSOLIDATED BALANCE SHEETS
                               June 30,




                      ASSETS                       1999         1998
                                               ----------   ----------
  <S>                                         <C>          <C>
  CURRENT ASSETS
   Cash and cash equivalents                  $   210,866  $   428,482
   Short-term investments                         273,343      268,065
   Accounts receivable - principally trade,
    net of allowance for uncollectible
    accounts of $685,330 and $806,200 in
    1999 and 1998, respectively                12,195,037   14,241,036
   Inventories                                  3,730,970    2,419,845
   Costs and earnings in excess of billings
    on uncompleted contracts                    3,268,181    1,838,641
   Deferred income taxes                              -        433,596
   Other                                          777,635      165,631
                                               ----------   ----------
                Total current assets           20,456,032   19,795,296

  PROPERTY, PLANT AND EQUIPMENT - AT COST,
      less accumulated depreciation             2,102,546    2,268,405

  DEFERRED INCOME TAXES                            59,613          -

  OTHER ASSETS                                    860,581      692,520
                                               ----------   ----------
                                              $23,478,772  $22,756,221
                                               ==========   ==========

</TABLE>
<PAGE>
<TABLE>
                 Peerless Mfg. Co. and Subsidiaries
               CONSOLIDATED BALANCE SHEETS - CONTINUED
                              June 30,




     LIABILITIES AND STOCKHOLDERS' EQUITY          1999         1998
                                               ----------   ----------
  <S>                                         <C>          <C>
  CURRENT LIABILITIES
      Accounts payable - trade                $ 5,626,058  $ 5,566,068
      Notes payable                                   -        200,000
      Billings in excess of costs and
       earnings on uncompleted contracts          572,970       49,977
      Commissions payable                       1,204,584    1,205,391
      Accrued expenses
          Compensation                          1,188,165    1,499,443
          Warranty reserve                        313,773      434,588
          Deferred income taxes                    42,736          -
          Other                                    38,669      366,408
                                               ----------   ----------
                Total current liabilities       8,986,955    9,321,875

  DEFERRED INCOME TAXES                               -         38,543

  COMMITMENTS                                         -            -

  STOCKHOLDERS' EQUITY
   Common stock - authorized, 10,000,000
    shares of $1 par value; issued and
    outstanding, 1,452,492 and 1,457,492
    shares in 1999 and 1998, respectively       1,452,492    1,457,492
      Additional paid-in capital                2,539,951    2,583,701
      Unamortized value of restricted
       stock grants                                (4,719)     (51,385)
      Accumulated other comprehensive
       income (loss)                             (103,824)     (79,849)
      Retained earnings                        10,607,917    9,485,844
                                               ----------   ----------
                                               14,491,817   13,395,803
                                               ----------   ----------
                                              $23,478,772  $22,756,221
                                               ==========   ==========


     The accompanying notes are an integral part of these statements.

</TABLE>
<PAGE>
<TABLE>

                 Peerless Mfg. Co. and Subsidiaries
                 CONSOLIDATED STATEMENTS OF EARNINGS
                         Year ended June 30,



                                         1999         1998         1997
                                     ----------   ----------   ----------
  <S>                               <C>          <C>          <C>
  Net sales                         $40,568,443  $43,455,136  $41,486,492

  Cost of goods sold                 26,296,724   28,215,330   29,961,203
                                     ----------   ----------   ----------
            Gross profit             14,271,719   15,239,806   11,525,289

  Operating expenses
   Marketing and engineering          8,630,962    8,932,180    9,129,347
   General and administrative         2,662,289    2,662,725    1,988,618
                                     ----------   ----------   ----------
                                     11,293,251   11,594,905   11,117,965
                                     ----------   ----------   ----------
            Operating profit          2,978,468    3,644,901      407,324

  Other income (expense)
   Interest income                       58,987       34,055       24,687
   Interest expense                     (23,696)     (27,430)     (55,475)
   Foreign exchange gains (losses)     (118,866)     (90,050)     103,583
   Other, net                           (49,323)     (39,338)      57,877
                                     ----------   ----------   ----------
                                       (132,898)    (122,763)     130,672
                                     ----------   ----------   ----------
       Earnings before income taxes   2,845,570    3,522,138      537,996

  Income tax expense (benefit)
   Current                              617,824    1,262,998       65,766
   Deferred                             378,176     (190,421)     (65,186)
                                     ----------   ----------   ----------
                                        996,000    1,072,577          580
                                     ----------   ----------   ----------
            NET EARNINGS            $ 1,849,570  $ 2,449,561  $   537,416
                                     ==========   ==========   ==========
  Earnings per common share - basic
   and diluted                            $1.27        $1.68         $.37
                                           ====         ====          ===


     The accompanying notes are an integral part of these statements.

</TABLE>
<PAGE>
<TABLE>
                            Peerless Mfg. Co. and Subsidiaries
                 CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

                                                          Unamortized   Accumulated
                                              Additional    value of      other
                                     Common    paid-in     restricted  comprehensive     Retained
                                      stock    capital    stock grants income (loss)     earnings      Total
                                    ---------  ---------     -------     ---------     -----------   ----------
  <S>                               <C>       <C>           <C>         <C>           <C>           <C>
  Balances as of July 1, 1996       1,446,742 $2,489,879    $(33,750)   $   23,842    $  7,953,143  $11,879,856

  Comprehensive income
   Net earnings                           -          -           -             -           537,416      537,416
   Foreign currency translation
    adjustment                            -          -           -        (117,786)            -       (117,786)

       Total comprehensive income                                                          419,630

  Issuance of 8,000 shares of
   common stock                         8,000     72,250     (80,250)          -               -            -
  Forfeiture of 4,000 shares of
   common stock                        (4,000)   (38,750)     42,750           -               -            -
  Stock options exercised               1,250     10,312         -             -               -         11,562
  Cash dividends paid
   ($.50 per share)                       -          -           -             -          (727,149)    (727,149)
  Cash dividends declared
   ($.125 per share)                      -          -           -             -          (182,624)    (182,624)
  Amortization of restricted
   stock grants                           -          -        26,625           -              -          26,625
  Income tax benefit related to
   restricted stock plans                 -        1,530        -              -              -           1,530
                                    ---------  ---------     -------     ---------     -----------   ----------
  Balances as of June 30, 1997      1,451,992  2,535,221     (44,625)      (93,944)      7,580,786   11,429,430

  Comprehensive income
   Net earnings                           -          -           -             -         2,449,561    2,449,561
   Foreign currency translation
    adjustment                            -          -           -          14,095             -         14,095
                                                                                                     ----------
     Total comprehensive income                                                                       2,463,656

  Issuance of 3,000 shares of
   common stock                         3,000     28,875     (31,875)          -               -            -
  Stock options exercised               2,500     20,625         -             -               -         23,125
  Cash dividends ($.375 per share)        -          -           -             -          (544,503)    (544,503)
  Amortization of restricted
   stock grants                           -          -        25,115           -               -         25,115
  Income tax expense related to
   restricted stock plans                 -       (1,020)        -             -               -         (1,020)
                                    ---------  ---------     -------     ---------     -----------   ----------
  Balances as of June 30, 1998      1,457,492  2,583,701     (51,385)      (79,849)      9,485,844   13,395,803


</TABLE>
<PAGE>
<TABLE>

                             Peerless Mfg. Co. and Subsidiaries
              CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY - CONTINUED


                                                          Unamortized   Accumulated
                                              Additional    value of      other
                                     Common    paid-in     restricted  comprehensive     Retained
                                      stock    capital    stock grants income (loss)     earnings      Total
                                    ---------  ---------     -------     ---------     -----------   ----------
  <S>                               <C>       <C>           <C>         <C>           <C>           <C>
  Comprehensive income
   Net earnings                           -   $     -       $    -      $      -      $  1,849,570  $ 1,849,570
   Foreign currency translation
    adjustment                            -         -            -         (23,975)                     (23,975)
                                                                                                     ----------
        Total comprehensive income                                                                    1,825,595

  Cash dividends paid
   ($.50 per share)                       -         -            -             -          (727,497)    (727,497)
  Forfeiture of restricted
   stock grant                         (5,000)  (43,750)      29,250           -               -        (19,500)
  Amortization of restricted
   stock grants                           -         -         17,416           -               -         17,416
                                    ---------  ---------     -------     ---------     -----------   ----------
  Balance at June 30, 1999          1,452,492 $2,539,951    $ (4,719)   $ (103,824)   $ 10,607,917  $14,491,817
                                    =========  =========     =======     =========     ===========   ==========



             The accompanying notes are an integral part of this statement.

</TABLE>
<PAGE>
<TABLE>

                 Peerless Mfg. Co. and Subsidiaries
                CONSOLIDATED STATEMENTS OF CASH FLOWS
                         Year ended June 30,


                                             1999         1998         1997
                                         ----------   ----------   ----------
  <S>                                   <C>          <C>          <C>
  Cash flows from operating activities
   Net earnings                         $ 1,849,570  $ 2,449,561  $   537,416
   Adjustments to reconcile net
    earnings to net cash provided by
    (used in) operating activities
       Depreciation and amortization        413,026      379,752      370,526
       Deferred income taxes                378,176     (190,421)     (65,186)
       Foreign exchange loss (gain)         118,886       90,050     (103,583)
       Other                                (34,160)      (1,020)       1,530
       Changes in operating assets
        and liabilities
         Accounts receivable              1,949,880   (4,703,504)  (1,586,991)
         Inventories                     (1,301,720)     544,993      (11,463)
         Cost and earnings in excess
          of billings on uncompleted
          contracts                      (1,429,540)      33,176     (468,618)
         Other current assets              (612,004)     132,974      (59,501)
         Other assets                      (186,421)    (231,004)     (40,466)
         Accounts payable                    59,008      837,205      791,364
         Billings in excess of costs
          and earnings on uncompleted
          contracts                         522,993     (353,174)     363,257
        Commissions payable                    (807)     425,917      212,708
        Accrued expenses                   (788,479)     985,395       22,497
                                         ----------   ----------   ----------
                                           (911,162)  (2,049,661)    (573,926)
                                         ----------   ----------   ----------
  Net cash provided by (used in)
   operating activities                     938,408      399,900      (36,510)

  Cash flows from investing activities
   Net purchases of short-term
    investments                              (5,278)      (9,058)     (12,348)
   Proceeds from sale of property
    and equipment                            30,850          -            -
   Purchase of property and equipment      (233,323)    (262,362)    (596,395)
                                         ----------   ----------   ----------
  Net cash used in investing activities    (207,751)    (271,420)    (608,743)

</TABLE>
<PAGE>
<TABLE>

                 Peerless Mfg. Co. and Subsidiaries
          CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
                         Year ended June 30,


                                             1999         1998         1997
                                         ----------   ----------   ----------
  <S>                                   <C>          <C>          <C>
  Cash flows from financing activities
   Sale of common stock                 $       -    $    23,125  $    11,562
   Advances on short-term borrowings            -        200,000          -
   Net payments on short-term borrowings   (200,000)         -            -
   Dividends paid                          (727,497)    (727,127)    (727,149)
                                         ----------   ----------   ----------
  Net cash used in financing activities    (927,497)    (504,002)    (715,587)

  Effect of exchange rate changes on
   cash and cash equivalents                (20,776)      31,451       51,064
                                         ----------   ----------   ----------
  Net decrease in cash and cash
   equivalents                             (217,616)    (344,071)  (1,309,776)

  Cash and cash equivalents at
   beginning of year                        428,482      772,553    2,082,329
                                         ----------   ----------   ----------
  Cash and cash equivalents at
   end of year                          $   210,866  $   428,482  $   772,553
                                         ==========   ==========   ==========

  Supplemental information on cash flows:

  Interest paid                         $   21,170   $    29,956  $    55,475
  Income taxes paid                     $  900,814   $   957,860  $   379,347



     The accompanying notes are an integral part of these statements.

</TABLE>
<PAGE>
                 Peerless Mfg. Co. and Subsidiaries
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    June 30, 1999, 1998 and 1997



  NOTE A - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
           POLICIES

   Nature of Operations
   --------------------
   Peerless  Mfg. Co. designs,  engineers, and manufactures  specialized
   products for the  removal of contaminants from gases and liquids  and
   for   air  pollution   abatement.     The  Company's   products   are
   manufactured principally at  plants located in Dallas, Texas and  are
   sold  worldwide with  the  principal markets  located in  the  United
   States  and Europe.  Primary  customers are equipment  manufacturers,
   engineering contractors and operators of power plants.

   A  summary  of  the  significant  accounting  policies   consistently
   applied   in  the  preparation   of  the  accompanying   consolidated
   financial statements follows.

   Consolidation
   -------------
   The   Company  consolidates   the   accounts  of   its   wholly-owned
   subsidiaries,   all   of   which  are   foreign.    All   significant
   intercompany  accounts  and  transactions  have  been  eliminated  in
   consolidation.

   Cash Equivalents
   ----------------
   For purposes  of the statement of  cash flows, the Company  considers
   all highly liquid investments purchased with an original maturity  of
   three months or less to be cash equivalents.

   Inventories
   -----------
   Inventories are stated at the lower of cost (first-in, first-out)  or
   market.

   Depreciable Assets
   ------------------
   Depreciation  is provided  for in  amounts sufficient  to relate  the
   cost  of  depreciable  assets  to  operations  over  their  estimated
   service lives, principally by the straight-line method.

   Revenue Recognition
   -------------------
   The Company generally recognizes sales of custom-contracted  products
   at the completion  of the manufacturing process.  The  percentage-of-
   completion  method  is  used  for  significant  long-term  contracts.
   Percentage-of-completion   is   generally   determined   based   upon
   engineering  work performed,  materials purchased  and  manufacturing
   labor hours incurred.

<PAGE>

  NOTE A - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
            POLICIES - Continued

   Stock-Based Compensation
   ------------------------
   Statement  of  Financial Accounting  Standards  No. 123  (SFAS  123),
   Accounting  for Stock-Based  Compensation, encourages,  but does  not
   require,  companies  to  record  compensation  cost  for  stock-based
   employee compensation  plans at fair value.   The Company has  chosen
   to  account for stock-based  compensation using  the intrinsic  value
   method prescribed in Accounting Principles Board Opinion No. 25  (APB
   25),   Accounting  for  Stock  Issued   to  Employees,  and   related
   interpretations.

   Earnings Per Common Share
   -------------------------
   Basic earnings per common share is computed by dividing net  earnings
   by  the weighted average number  of common shares outstanding  during
   each year presented.   Diluted earnings per common share give  effect
   to  the assumed  issuance  of shares  pursuant to  outstanding  stock
   option plans, when dilutive.

   Foreign Currency
   ----------------
   All balance sheet accounts of foreign operations are translated  into
   U.S.  dollars at  the year-end  rate of  exchange and  statements  of
   earnings items are translated at the weighted average exchange  rates
   for  the  year.   The  resulting  translation  adjustments  are  made
   directly to a separate component of stockholders' equity.  Gains  and
   losses  from foreign currency transactions,  such as those  resulting
   from the settlement of foreign receivables or payables, are  included
   in the consolidated statements of earnings.

   From  time  to  time,  the  Company  enters  into  forward   exchange
   contracts  in anticipation  of future  movements in  certain  foreign
   exchange  rates and to hedge  against foreign currency  fluctuations.
   Realized  and unrealized  gains  and losses  on these  contracts  are
   included in net income, except that gains and losses on contracts  to
   hedge  specific   foreign  currency  commitments  are  deferred   and
   accounted for as part of the underlying transaction.

   Financial Instruments
   ---------------------
   The  carrying amounts  of cash  and cash  equivalents and  short-term
   investments approximate  fair value because of the short-term  nature
   of these items.

   Use of Estimates
   ----------------
   The preparation of financial statements in conformity with  generally
   accepted accounting principles requires management to make  estimates
   and  assumptions  that affect  the  reported amounts  of  assets  and
   liabilities  and disclosure of contingent  assets and liabilities  at
   the  date of  the financial statements  and the  reported amounts  of
   revenues  and expenses during the  reporting period.  Actual  results
   could differ from those estimates.

<PAGE>

  NOTE A - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
            POLICIES - Continued

   Reclassification
   ----------------
   Certain  reclassifications of prior  year amounts have  been made  to
   conform to the current year presentation.


  NOTE B - CONCENTRATIONS OF CREDIT RISK

   A significant portion  of the Company's sales are to customers  whose
   activities are  related to the oil  and gas industry, including  some
   who are located in foreign countries.  The Company generally  extends
   credit to these  customers.  Its exposure to credit risk is  affected
   by conditions  within the oil and gas  industry.  Also, with  respect
   to foreign sales, collection may be more difficult in the event of  a
   default.

   However,  the Company closely monitors  extensions of credit and  has
   never  experienced  significant  credit losses.    Substantially  all
   foreign  sales are made  to large, well-established  companies.   The
   Company generally requires collateral or guarantees on foreign  sales
   to smaller companies.

   No  single customer accounted for  more than 10%  of revenues in  the
   years ended June  30, 1999 or 1998.  Sales to one customer  accounted
   for  approximately 12.3%  of  revenues for  the year  ended  June 30,
   1997.


  NOTE C - INVENTORIES

   Principal components of inventories are as follows:

                                                      June 30,
                                                1999          1998
                                            ----------    ----------
     Raw materials                         $   961,450   $   973,906
     Work in process                         2,522,182     1,114,524
     Finished goods                            247,338       331,415
                                            ----------    ----------
                                           $ 3,730,970   $ 2,419,845
                                            ==========    ==========

    At June  30, 1999  and 1998,  progress  payments of  $1,237,771  and
    $100,472, respectively,  have been  offset against  inventories  and
    costs of uncompleted contracts.

<PAGE>

  NOTE D - PROPERTY, PLANT AND EQUIPMENT

    Property, plant and equipment is summarized as follows:

                                                    June 30,
                                                1999          1998
                                            ----------    ----------

     Buildings                             $ 3,096,993   $ 3,029,175
     Equipment                               2,670,878     2,842,401
     Furniture and fixtures                  1,815,592     1,587,383
                                            ----------    ----------
                                             7,583,463     7,458,959
       Less accumulated depreciation        (6,201,643)   (5,911,280)
                                            ----------    ----------
                                             1,381,820     1,547,679
     Land                                      720,726       720,726
                                            ----------    ----------
                                           $ 2,102,546   $ 2,268,405
                                            ==========    ==========

  NOTE E - CREDIT ARRANGEMENT

    The Company has banking agreements for unsecured revolving lines  of
    credit in the combined  amount of $7,000,000  due upon demand,  with
    interest at the banks' prime lending rate (7.75% at June 30,  1999),
    payable monthly.  The banks charge  usage fees at an annual rate  of
    .25% of the average  daily unused portion of  the line.  No  amounts
    were borrowed  under  these  arrangements at  June  30,  1999.    At
    June 30, 1998, $200,000 was outstanding  under the lines of  credit.
    The  Company  had  letters  of  credit  outstanding  under  separate
    arrangements of $3,246,567 and $3,027,911 at June 30, 1999 and 1998,
    respectively.  Other  assets with a  cost of approximately  $635,000
    and $526,000 were pledged against the letters of credit  outstanding
    at June 30, 1999 and 1998, respectively.


  NOTE F - STOCKHOLDERS' EQUITY

    The Company has a 1985 restricted  stock plan (the 1985 Plan)  under
    which 75,000  shares of  common stock  were reserved  for awards  to
    employees.   Restricted  stock  grants  made  under  the  1985  Plan
    generally vest  ratably  over  a three-year  period.    The  Company
    awarded 8,000 shares  (fair value at  date of grant  of $80,250)  in
    fiscal 1997,  of  which 5,000  and  3,000 shares  were  subsequently
    forfeited, in fiscal 1999 and 1997, respectively, and awarded  3,000
    shares (fair value  at date  of grant  of $31,875)  in fiscal  1998.
    Compensation expense for  stock grants is  charged to earnings  over
    the restriction period and amounted to $17,416, $25,115, and $26,625
    in fiscal 1999,  1998, and 1997,  respectively.  The  tax effect  of
    differences between compensation expense for financial statement and
    income tax purposes  is charged  or credited  to additional  paid-in
    capital.

<PAGE>

  NOTE F - STOCKHOLDERS' EQUITY - Continued

    In December 1995, the Company adopted a stock option and  restricted
    stock plan (the 1995 Plan), which provides for a maximum of  100,000
    shares of common stock to be  issued.  Stock options are granted  at
    market value, generally vest ratably over four years, and expire ten
    years from date of grant.

    At June 30, 1999, 36,250 shares  of common stock were available  for
    issuance under the 1995 Plan, and 1,750 shares were available  under
    the 1985 Plan.

    The Company has adopted the disclosure  provisions of SFAS 123.   It
    applies APB 25 and related  interpretations in accounting for  stock
    options issued  and,  therefore,  does  not  recognize  compensation
    expense for stock options granted at  or greater than market  value.
    If the Company had elected  to recognize compensation expense  based
    upon the fair  value at the  grant date for  awards under this  plan
    consistent with the methodology prescribed  by SFAS 123, the  effect
    on net earnings and earnings per share would have been as follows:

                                             Year ended June 30,
                                         1999        1998      1997
                                      ---------   ---------   -------
     Net earnings - as reported      $1,849,570  $2,449,561  $537,416
     Net earnings - pro forma         1,813,141   2,440,327   527,012

     Basic earnings per share
     As reported                           1.27        1.68       .37
     Pro forma                             1.25        1.68       .36

     Diluted earnings per share
     As reported                           1.27        1.68       .37
     Pro forma                             1.24        1.67       .36

    The fair value of these options  was estimated at the date of  grant
    using the  Black-Scholes option  pricing  model with  the  following
    weighted-average assumptions:  expected volatility of 43% for fiscal
    1999, 41%  for  fiscal  1998 and  45%  for  fiscal  1997;  risk-free
    interest rates ranging from  4.6% to 5.6%;  dividend yield of  3.7%,
    5.6%, and  3.8% in  fiscal 1999,  1998 and  1997, respectively;  and
    expected lives of five to seven years.

<PAGE>


  NOTE F - STOCKHOLDERS' EQUITY - Continued

    Additional information with respect to options outstanding under the
    plan is as follows:

                                                Number of    Weighted
                                                 shares      average
                                               underlying    exercise
          Stock options                          options      price
                                                  ------      ------
     Outstanding at July 1, 1996                  34,000     $  9.25
     Granted                                       2,500       13.33
     Exercised                                    (1,250)       9.25
     Canceled/forfeited                           (3,750)       9.25
                                                  ------
     Outstanding at June 30, 1997                 31,500        9.57
     Granted                                      24,000       10.73
     Exercised                                    (2,500)       9.25
                                                  ------
     Outstanding at June 30, 1998                 53,000       10.11
     Granted                                       7,000       13.64
                                                  ------
     Outstanding at June 30, 1999                 60,000       10.52
                                                  ======

   Options exercisable at June 30, 1997            9,250       10.14
                                                  ======
   Options exercisable at June 30, 1998           16,125       10.12
                                                  ======
   Options exercisable at June 30, 1999           31,000       10.15
                                                  ======
   Weighted average fair value of options granted:

       Year ended  June 30, 1997                   $3.22
       Year ended June 30, 1998                    $3.24
       Year ended June 30, 1999                    $4.72



<PAGE>


  NOTE F - STOCKHOLDERS' EQUITY - Continued

   The  following table summarizes  information about  the Plan's  stock
   options at June 30, 1999:

                                      Options outstanding
                         ---------------------------------------------------
                                        Weighted average
        Range of           Number    remaining contractual  Weighted average
     Exercise Prices     outstanding    life (in years)      exercise price
     ---------------     -----------    ---------------      --------------
     $9.25                   26,500          6.6               $    9.25
     $10.625-$11.875         24,000          8.6                   10.73
     $12.125-$14.25           9,500          8.7                   13.56
                             ------
                             60,000
                             ======
                                               Options exercisable
                                        -----------------------------------
          Range of                         Number          Weighted average
     Exercise Prices                     exercisable        exercise price
     ---------------                    ---------------     ---------------
     $9.25                                  19,250              $    9.25
     $10.625-$11.875                         7,500                  10.96
     $12.125-$14.25                          4,250                  12.77
                                            ------
                                            31,000
                                            ======

   On May  21, 1997, the Board of Directors  declared a dividend of  one
   common  share purchase  right for  each outstanding  share of  common
   stock to shareholders  of record at the close of business on June  2,
   1997.   Each Right  entitles the registered  holder to purchase  from
   the  Company  one common  share  at a  price  of $30.00,  subject  to
   adjustment, as more  fully set forth in a Rights Agreement dated  May
   22, 1997.

   The Rights will become exercisable only in the event that any  person
   or  group of  affiliated persons acquires,  or obtains  the right  to
   acquire,  beneficial ownership  of  20% or  more of  the  outstanding
   common  shares  or   commences  a  tender  or  exchange  offer,   the
   consummation of which  would result in the beneficial ownership by  a
   person  or group of 20%  or more of  such outstanding common  shares.
   The  rights are redeemable under  certain circumstances at $.01  each
   and expire in May 2007.

<PAGE>


  NOTE G - EMPLOYEE BENEFIT PLANS

    The Company has a 401(k) Plan  to provide eligible employees with  a
    retirement savings plan.  All employees are eligible to  participate
    in  the  plan  upon  completing  90   days  of  service.     Company
    contributions are voluntary and  at the discretion  of the Board  of
    Directors of the  Company.  The  Company's contribution expense  for
    the years  ended June  30, 1999,  1998  and 1997  was  approximately
    $157,000, $128,000, and $119,500, respectively.


  NOTE H - INCOME TAXES

    Deferred taxes are  provided for the  temporary differences  between
    the financial reporting  bases and the  tax bases  of the  Company's
    assets and liabilities.  The temporary differences that give rise to
    the deferred tax assets or liabilities are as follows:

                                                      June 30,
                                                   1999       1998
                                                 --------   --------
     Deferred tax assets
       Restricted stock grants                  $   6,083  $  10,760
       Inventories                                 80,597     22,349
       Foreign subsidiaries' net
        operating loss carryforwards              232,122    115,473
       Accrued expenses                           164,317    253,012
       Accounts receivable                        108,285    148,983
       Other                                       29,461        -
                                                 --------   --------
                                                  620,865    550,577

     Deferred tax liabilities
       Property, plant and equipment             (100,088)  (111,762)
       Uncompleted contracts                     (500,396)   (40,258)
       Other                                       (3,504)    (3,504)
                                                 --------   --------
                                                 (603,988)  (155,524)
                                                 --------   --------
             Net deferred tax asset             $  16,877  $ 395,053
                                                 ========   ========

    Deferred tax assets  and liabilities included  in the balance  sheet
    are as follows:

                                                       June 30,
                                                   1999      1998
                                                 --------   --------
    Current deferred tax asset (liability)      $ (42,736) $ 433,596
    Noncurrent deferred tax asset (liability)      59,613    (38,543)
                                                 --------   --------
                                                 $ 16,877  $ 395,053
                                                 ========   ========

<PAGE>

  NOTE H - INCOME TAXES - Continued

    The provision for income taxes consisted of the following:

                                            Years  ended June 30,
                                       1999         1998         1997
                                      -------    ---------     --------
     Federal
       Current                       $552,824   $1,157,345    $  41,765
       Deferred                       378,176     (190,421)     (65,185)
     State                             65,000      105,653       24,000
                                      -------    ---------     --------
                                     $996,000   $1,072,577    $     580
                                      =======    =========     ========

   The  Company had  provided a  valuation allowance  at June  30,  1997
   related  to  deferred tax  assets  of foreign  subsidiaries.    These
   assets  are recoverable  only from  future income  of the  respective
   foreign   subsidiaries.    Because  of   a  recapitalization  and   a
   reorganization of European operations, the Company concluded at  June
   30,  1997 that  it  was more  likely than  not  that certain  of  the
   deferred  tax assets are  recoverable.  The  valuation allowance  was
   reduced in 1997  and eliminated in 1998.  Utilization of foreign  net
   operating carryforwards  reduced income tax expense by  approximately
   $12,000 and $130,000 for 1998 and 1997, respectively.

    The effective income tax rate varies from the statutory rate due  to
    the following:

                                                   As a percentage
                                                  of pretax earnings
                                                 1999   1998   1997
                                                 -----  -----  -----
     Income tax expense at statutory rate        34.0%  34.0%  34.0%
     Increase (decrease) in income taxes
      resulting from
       State tax, net of federal benefits         1.5    2.0    2.9
       Foreign sales corporation exclusions       (2.9) (6.7) (10.2)
       Change in valuation allowance               -    (0.8) (24.3)
       Other                                      2.4    2.0   (2.3)
                                                 -----  -----  -----
     Income tax expense at effective rate        35.0%  30.5%   0.1%
                                                 =====  =====  =====
<PAGE>


  NOTE I - EARNINGS PER SHARE

<TABLE>

    Summarized basic and diluted earnings per  common share for each  of
    the three years ended June 30, 1999 is as follows:

                                1999                           1998                           1997
                  ----------------------------    ---------------------------    -------------------------
                                          Per                            Per                          Per
                    Net                  share      Net                 share     Net                share
                  earnings     Shares    amount   earnings    Shares    amount  earnings    Shares   amount
                  ---------   ---------   ----    ---------  ---------   ----    -------  ---------    ---
 <S>             <C>          <C>        <C>     <C>         <C>        <C>     <C>       <C>         <C>
 Basic earnings
  per share      $1,849,570   1,455,396  $1.27   $2,449,561  1,454,277  $1.68   $537,416  1,454,045   $.37
 Effect of
  dilutive
  options               -         4,751    -            -        2,698    -          -        1,034    -
                  ---------   ---------   ----    ---------  ---------   ----    -------  ---------    ---
 Diluted earnings
  per share      $1,849,570   1,460,147  $1.27   $2,449,561  1,456,975  $1.68   $537,416  1,455,079   $.37
                  =========   =========   ====    =========  =========   ====    =======  =========    ===
</TABLE>

  For fiscal 1999, 1998 and 1997, stock options covering 11,500,  2,500,
  and 2,500 shares,  respectively were excluded  in the computations  of
  diluted earnings per share because their effect was antidilutive.


  NOTE J - INDUSTRY SEGMENT AND GEOGRAPHIC INFORMATION

   The  Company  identifies  reportable  segments  based  on  management
   responsibility within the  corporate structure.  The Company has  two
   reportable  industry segments:   gas/liquid filtration and  catalytic
   reduction  systems.    The  gas/liquid  filtration  segment  produces
   various  types of separators  and filters used  for removing  liquids
   and  solids  from   gases  and  air.    The  segment  also   provides
   engineering  design and  services, pulsation  dampeners, natural  gas
   odorizers,  quick-opening closures and parts  for its products.   The
   catalytic  reduction  systems segment  produces  selective  catalytic
   reduction  systems  used  for  air  pollution  abatement  to   reduce
   nitrogen oxide emissions.


<PAGE>

  NOTE J - INDUSTRY SEGMENT AND GEOGRAPHIC INFORMATION - Continued

   Segment profit and loss is based on revenue less direct costs of  the
   segment  before allocation of  general, administrative, research  and
   development  costs.    There  were  no  sales  or  transfers  between
   segments.   Segment  information and  a reconciliation  to  operating
   profit  for  the  years  ended  June 30,  1999,  1998  and  1997  are
   presented  below.   Note  that the Company  does not allocate assets,
   expenditures  for assets or  depreciation  expense on a segment basis
   for internal management reporting, and  therefore such information is
   not presented.
<TABLE>
                                       Catalytic     Unallocated
                          Gas/liquid   reduction      corporate
                          Filtration    Systems       overhead   Consolidated
                           ----------   ----------   ----------    ----------
 <S>                      <C>          <C>          <C>           <C>
 1999

 Revenues from customers  $34,849,000  $ 5,719,000  $       -     $40,568,000
 Segment profit (loss)      4,891,000    1,538,000   (3,451,000)    2,978,000

 1998

 Revenues from customers   39,234,000    4,221,000          -      43,455,000
 Segment profit (loss)      6,708,000       84,000   (3,147,000)    3,645,000

 1997

 Revenues from customers   31,854,000    9,632,000          -      41,486,000
 Segment profit (loss)      4,207,000   (1,038,000)  (2,762,000)      407,000

   The   Company  attributes   revenues  from   external  customers   to
   individual geographic  areas based on the  country where the sale  is
   originated.  Information about the Company's operations in  different
   geographic areas  as of and for the  years ended June 30, 1999,  1998
   and 1997 is as follows:

                             United
                             States       Europe    Eliminations  Consolidated
                           ----------    ---------   ----------    ----------
 1999
 Net sales to unaffiliated
   customers              $34,707,000   $5,861,000  $       -     $40,568,000
 Transfers between
   geographic areas           726,000          -       (726,000)          -
                           ----------    ---------   ----------    ----------
 Total                    $35,433,000   $5,861,000  $  (726,000)  $40,568,000
                           ==========    =========   ==========    ==========
 Identifiable assets      $21,723,000   $4,285,000  $(2,529,000)  $23,479,000
                           ==========    =========   ==========    ==========
</TABLE>
<PAGE>


  NOTE J - INDUSTRY SEGMENT AND GEOGRAPHIC INFORMATION - Continued

<TABLE>

                             United
                             States       Europe    Eliminations  Consolidated
                           ----------    ---------   ----------    ----------
 <S>                      <C>           <C>          <C>          <C>
 1998
 Net sales to unaffiliated
   customers              $37,357,000   $6,098,000   $     -      $43,455,000
 Transfers between
   geographic areas         1,847,000        1,000   (1,848,000)         -
                           ----------    ---------   ----------    ----------
     Total                $39,204,000   $6,099,000  $(1,848,000)  $43,455,000
                           ==========    =========   ==========    ==========
 Identifiable assets      $20,736,000   $4,521,000  $(2,501,000)  $22,756,000
                           ==========    =========   ==========    ==========

                             United
                             States       Europe    Eliminations  Consolidated
                           ----------    ---------   ----------    ----------
 1997
 Net sales to unaffiliated
   customers              $35,553,000   $5,933,000  $       -     $41,486,000
 Transfers between
   geographic areas           889,000        4,000     (893,000)          -
                           ----------    ---------   ----------    ----------
 Total                    $36,442,000   $5,937,000  $  (893,000)  $41,486,000
                           ==========    =========   ==========    ==========
 Identifiable assets      $17,374,000   $3,817,000  $(2,144,000)  $19,047,000
                           ==========    =========   ==========    ==========

</TABLE>

   Transfers   between   the  geographic   areas   primarily   represent
   intercompany export sales and are accounted for based on  established
   sales prices between the related companies.

   Identifiable assets of  geographic areas are those assets related  to
   the Company's operations in each area.  United States assets  consist
   of all other operating assets of the Company.

<PAGE>



   Report of Independent Certified Public Accountants on Schedules



  Board of Directors
  Peerless Mfg. Co.

  In connection with our audit of the consolidated financial  statements
  of Peerless Mfg. Co. and Subsidiaries referred to in our report  dated
  September 10, 1999, which is included in Part II of this form, we have
  also audited Schedule  II for each  of the three  years in the  period
  ended June 30, 1999.  In  our opinion, this schedule presents  fairly,
  in all material  respects, the information  required to  be set  forth
  therein.




  GRANT THORNTON LLP

  Dallas, Texas
  September 10, 1999

<PAGE>
<TABLE>

                              Peerless Mfg. Co. and Subsidiaries
                       SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
                                           June 30,


                                    Balance at          Additions
                                   beginning of  Charged to    Charged to                          Balance at
     Description                      period      expenses   other accounts (1)   Deductions (2)  end of period
     -----------                      -------     --------   --------------       ----------      -------------
  <S>                                <C>          <C>            <C>               <C>              <C>
  1999

  Allowance for uncollectible
    accounts                         $806,200     $184,471       $   -             $305,341         $685,330
                                      =======      =======        =====             =======          =======
  1998

  Allowance for uncollectible
    accounts                         $312,450     $621,560       $   -             $127,810 (2)     $806,200
                                      =======      =======        =====             =======          =======
  Deferred tax valuation allowance   $ 29,710     $    -         $   -             $ 29,710 (3)     $    -
                                      =======      =======        =====             =======          =======
  1997

  Allowance for uncollectible
    accounts                         $100,000     $249,612       $   -             $ 37,162 (2)     $312,450
                                      =======      =======        =====             =======          =======
  Deferred tax valuation allowance   $160,405     $    -         $   -             $130,695 (3)     $ 29,710
                                      =======      =======        =====             =======          =======


  (1) Collections on accounts previously written off.

  (2) Write offs.

  (3) Utilization and/or revaluation of deferred tax assets.

</TABLE>
<PAGE>


  ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
            AND FINANCIAL DISCLOSURE.

            None.


                              PART III


  ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

       For  information  concerning  our  Directors,  we  refer  to  the
  information set forth  under the caption  "Election of Directors"  and
  "Common Stock Ownership of  Management and Certain Beneficial  Owners"
  in our Proxy Statement  for the Annual Meeting  of Shareholders to  be
  held November 18, 1999 (the  "Proxy Statement"), which information  is
  incorporated herein by reference.

       For information concerning  our Executive Officers,  see Item  1,
  "Business - Executive Officers."


  ITEM 11.  EXECUTIVE COMPENSATION.

       For information concerning our  executive compensation, we  refer
  to  the   information  set   forth   under  the   caption   "Executive
  Compensation"  in   the   Proxy  Statement,   which   information   is
  incorporated herein by reference.

  ITEM 12.  SECURITY  OWNERSHIP   OF  CERTAIN   BENEFICIAL  OWNERS   AND
            MANAGEMENT.

       For information  concerning  the security  ownership  of  certain
  beneficial owners and management, reference is made to the information
  set forth under the caption "Election of Directors" and "Common  Stock
  Ownership of Management  and Certain Beneficial  Owners" in the  Proxy
  Statement, which information is incorporated herein by reference.


  ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

       For information  concerning  certain  relationships  and  related
  transactions, reference is made to the information set forth under the
  caption "Compensation Committee Interlocks and Insider  Participation"
  in the Proxy  Statement, which information  is incorporated herein  by
  reference.

<PAGE>

                                   PART IV

  ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULE  AND REPORTS ON  FORM
            8-K.

  (a)  1.   All Financial Statements:  see Item 8 "Financial  Statements
            and Supplementary Data" in Part II of this Report.

       2.   Financial Statement Schedule and  Exhibits filed in Part  IV
            of this report are as follows:

            SCHEDULES*:

            II   -    Valuation and  Qualifying  Account -  Years  Ended
                      June 30, 1999, 1998 and 1997

            * All other  schedules  are  omitted  because  the  required
            information is inapplicable or the information is  presented
            in the financial statements and the related notes.

  (b)  Reports on Form 8-K: None

  (c)  Exhibits: see Index to Exhibits, pages 41-42.

<PAGE>

                               SIGNATURES

       Pursuant to  the  requirements of  Section  13 or  15(d)  of  the
  Securities Exchange Act of 1934, the  registrant has duly caused  this
  report to be signed on its  behalf by the undersigned, thereunto  duly
  authorized.

                                     PEERLESS MFG. CO.
                                     (Registrant)

                                     By: /s/ Sherrill Stone
                                         Sherrill Stone, Chairman,
                                         President, and Chief
                                         Executive Officer

  Date: September 28, 1999.

       Pursuant to the  requirements of the  Securities Exchange Act  of
  1934, this report has  been signed below by  the following persons  on
  behalf of  the registrant  and  in the  capacities  and on  the  dates
  indicated.

  Date:

  September 28, 1999                     /s/ Sherrill Stone
                                         Sherrill Stone, Chairman of the
                                         Board, President, Director and
                                         Chief Executive Officer

  September 28, 1999                     /s/ Paul W. Willey
                                         Paul W. Willey,
                                         Principal Financial Officer,

  September 28, 1999                     /s/ Kent J. Van Houten
                                         Kent J. Van Houten,
                                         Principal Accounting Officer


                                         Donald A. Sillers, Jr., Director

  September 28, 1999                     /s/ J. V. Mariner, Jr.
                                         J. V. Mariner, Jr. Director

  September 28, 1999                     /s/ Bernard S. Lee
                                         Bernard S. Lee, Director

  September 28, 1999                     /s/ D. D. Battershell
                                         D. D. Battershell, Director
<PAGE>

                          INDEX TO EXHIBITS

  REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

  FINANCIAL STATEMENT SCHEDULES:

       II    Valuation and Qualifying Accounts - Years
             Ended June 30, 1999, 1998 and 1997
             (included in Item 8)

  EXHIBITS:

       3(a)  Our Articles of Incorporation, as
             amended to date (filed as Exhibit 3(a)
             our Quarterly Report on Form 10-Q,
             dated December 31, 1997, and
             incorporated herein by reference).

       3(b)  Our Bylaws, as amended to date (filed
             as Exhibit 3(b) to our Annual Report on
             Form 10-K, dated June 30, 1997, and
             incorporated herein by reference.)

       10(a) Incentive Compensation Plan effective
             January 1, 1981, as amended January 23,
             1991 (filed as Exhibit 10(b) to our
             Annual Report on Form 10-K, dated June
             30, 1991, and incorporated herein by
             reference).

       10(b) 1985 Restricted Stock Plan for Peerless
             Mfg. Co., effective December 13, 1985
             (filed as Exhibit 10(b) to our Annual
             Report on Form 10-K, dated June 30,
             1993, and incorporated herein by
             reference).

       10(c) 1991 Restricted Stock Plan for Non-
             Employee Directors of Peerless Mfg.
             Co., adopted subject to shareholder
             approval May 24, 1991, and approved by
             shareholders November 20, 1991 (filed
             as Exhibit 10(e) to our Annual Report
             on Form 10-K dated June 30, 1991, and
             incorporated herein by reference).

       10(d) Employment Agreement, dated as  of April
             29, 1994, by and between Peerless and
             Sherrill Stone (filed as Exhibit 10(d)
             to our Annual Report on Form 10-K for
             the Fiscal year ended June 30, 1994,
             and incorporated herein by reference).
<PAGE>
       10(e) Agreement, dated as of April 29, 1994
             by and between Peerless and Sherrill
             Stone (filed as Exhibit 10(e) to our
             Annual Report on Form 10-K dated June
             30, 1994 and incorporated herein by
             reference).

       10(f) Seventh Amended and Restated Loan
             Agreement, dated as of December 12,
             1998, between NationsBank, N.A. and
             Peerless (filed as Exhibit 10(f) to our
             Quarterly Report on Form 10-Q for the
             quarter ended December 31, 1998 and
             incorporated herein by reference).

       10(g) Amended and Restated Loan Agreement,
             dated as of December 12, 1998, by and
             between Chase Bank of Texas and us
             (filed as Exhibit 10(g) to our
             Quarterly Report on Form 10-Q for the
             quarter ended December 31, 1998 and
             incorporated herein by reference).

       10(h) Peerless Mfg. Co. 1995 Stock Option and
             Restricted Stock Plan, adopted by the
             Board of Directors December 31, 1995
             and approved by the Shareholders of
             Peerless November 21, 1996 (filed as
             Exhibit 10(h) to our Annual Report on
             Form 10-K for the year ended June 30,
             1997 and incorporated herein by reference).

       10(i) Rights Agreement between Peerless
             Mfg. Co. and ChaseMellon Shareholder
             Services, L.L.C., adopted by the Board
             of Directors May 21, 1997 (filed as
             Exhibit 1 to our Registration Statement
             on Form 8-A (File No. 0- 05214) and
             incorporated herein by reference).

       21    Subsidiaries of Peerless*

       27    Financial Data Schedule.*

  ______________
  * Filed herewith