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                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549
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                                 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, 2000

                                      OR

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

     For the transition period from ________ to ________

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                        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

  Securities registered pursuant to Section 12(b) of the Act:  None
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       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, 2000, Peerless Mfg. Co. had 1,467,992 shares of common
 stock, $1.00  par value  outstanding.   The aggregate  market value  of  the
 registrant's common  stock on  September 21,  2000 (based  upon the  closing
 price of these shares on Nasdaq) held by non-affiliates (excludes  officers,
 directors and shareholders holding 5% or greater of the registrant's  common
 stock) was approximately $22,700,000.


                     DOCUMENTS INCORPORATED BY REFERENCE
 Portions  of  the  Registrant's  Proxy  Statement  for  Annual  Meeting   of
 Shareholders to be  held on  or about November 16,  2000 (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 ............ 37
 PART III

      10   Directors and Executive Officers of
             the Registrant .................................... 37

      11   Executive Compensation............................... 37

      12   Security Ownership of Certain Beneficial
             Owners and Management ............................. 37

      13   Certain Relationships and Related
             Transactions ...................................... 37
 PART IV

      14   Exhibits, Financial Statement Schedule,
             and Reports on Form 8-K ........................... 38

<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   Texas,
 Netherlands, 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 "Selective  Catalytic
 Reduction Systems" (we  refer to these  products as "SCR  Systems") used  to
 separate nitrogen oxide (NOx) emissions from exhaust gases caused by burning
 hydrocarbon fuels such as coal, gasoline,  natural gas and oil.  We  combine
 these products with other components as totally integrated systems.  Many of
 the company's components  are packaged on  skids complete with  instruments,
 controls and related valves and piping.

      We also  design, engineer,  manufacture and  sell specialized  products
 known as "separators" or "filters" which are used for a variety of  purposes
 in cleaning gases and liquids as they  move through a piping system.   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.   Separators are also used in  nuclear
 power plants to remove water from saturated steam.

      We likewise design, engineer, manufacture and sell packaged boilers and
 other steam generating  equipment through our  subsidiary, ABCO  Industries,
 Inc.  This equipment is  used to produce steam  which is used in  processes,
 heating, drying, driving steam turbines and a variety of other applications.
 ABCO Industries, Inc.  is also used  to support the  manufacturing needs  of
 other Peerless products.

      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.
 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.  Our business
 activity and revenues are not seasonal.
<PAGE>

 Customers and Export Sales

      Environmental control products,  principally SCR Systems,  are sold  to
 independent power producers, heat recovery steam generator suppliers, boiler
 manufacturers, refineries, petrochemical plants and others who desire or may
 be required to reduce nitrogen oxide (NOx) emissions.

      Gas separators and filters are sold to gas producers and gas gathering,
 transmission and  distribution  companies, 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  shipbuilders.    Pulsation  dampeners  are
 purchased by customers in  the same industries  as purchasers of  separators
 and  filters   (except   shipbuilders   and   steam   generating   equipment
 manufacturers).

      Boilers as supplied by  ABCO Industries, Inc.  are sold to  industrial,
 process and utility customers.  These products are sold through a number  of
 sales channels  including  direct  to users  of  the  equipment,  consulting
 engineers and OEM's.

      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.   During Fiscal  year
 2000, one customer, Pacific Gas  & Electric Disbursed Generating,  accounted
 for 19% of revenues.  No customer accounted for 10% or more of our  revenues
 during Fiscal years 1999 and 1998.

      Sales to international customers have been  a part of our business  for
 more than forty years.  During our Fiscal year 2000, foreign sales  amounted
 to $13.6 million, or 23% of total consolidated revenue, compared to sales of
 $18 million, or 44%  of total consolidated revenue,  during our Fiscal  year
 1999.   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. Also, the U.S.
 and 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.
<PAGE>

 Backlog

      Our backlog of uncompleted  orders at June  30, 2000 was  approximately
 $29 million, which was unchanged from orders at June 30, 1999.  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. Of the $29 million backlog as of June 30, 2000 approximately  90%
 is scheduled to be complete by the end of the current Fiscal year.

 Competition

      There are many  competitors, both larger  and smaller than  us, in  the
 manufacturing and selling of SCR systems, 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 these custom-built products.

 Patents, Licenses and Product Development

      We believe  that we  are  a leader  in  the design,  manufacturing  and
 application of  efficient, dependable  SCR systems.   We  also consider  our
 ourselves to be  a world  leader in the  technology required  to design  and
 apply our high efficiency vapor/liquid separation and filtration  equipment.
 In addition, we believe that we are also a leader in the design, manufacture
 and application  of high  efficiency pulsation  dampeners for  reciprocating
 compressors.  Our expenditures for new product development and  improvements
 were approximately $848,000 in Fiscal 2000 and $667,000 in Fiscal 1999.   We
 expect product  development expenditures  to  be approximately  $792,000  in
 Fiscal 2001.

           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.

 Employees

      At June 30, 2000, Peerless and  its subsidiaries had approximately  265
 employees.

 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.
<PAGE>

 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  NOx
 emissions have in  the past  resulted in  increased sales  of our  component
 parts for SCR systems.

 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.

 Executive Officers

      Our executive officers on September 21, 2000 are listed below.

         Name and Age          Position
         ------------------    ------------------------------------
         Sherrill Stone, 63    Chairman of the Board, President and
                               Chief Executive Officer (1)

         Roy C. Cuny, 47       Executive Vice President and
                               Chief Operating Officer (2)

         Thomas J. Reeve, 44   Chief Financial Officer, Treasurer
                               and Secretary (3)

         G. D. Cornwell, 56    Sr. 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. Cuny is  responsible for marketing,  manufacturing and  engineering
      operations of the company.  Mr. Cuny joined the company on May 16, 2000
      after twenty years with Foster Wheeler Corporation.

 (3)  Mr. Reeve  is responsible  for financial  administration and  has  been
      employed by us  since January  3, 2000.   He was  formerly employed  by
      Trinity Industries from 1996 to 1999 as Chief Financial Officer for the
      Transportation Products Division.

 (4)  Mr. Cornwell is responsible for manufacturing, purchasing,  estimating,
      and quality control operations.
<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 is used for research and development and a 40,000 square foot  building
 located on  the  same  site is  used  for  administrative,  engineering  and
 drafting offices.    We  own four  manufacturing  facilities  consisting  of
 approximately 21,600  square feet  in  Denton, Texas,  approximately  29,000
 square feet  in  Carrollton,  Texas, approximately  80,000  square  feet  in
 Dallas, Texas and approximately 77,700 square feet in Abilene, Texas.   Only
 approximately 35,000 square feet of the manufacturing facility in Dallas  is
 currently usable  for  manufacturing.    We  believe  that  our  office  and
 manufacturing  facilities  are  adequate   and  suitable  for  its   present
 requirements.  Future needs can be met by building, modernizing or expanding
 manufacturing facilities at  the Denton,  Texas, Dallas,  Texas or  Abilene,
 Texas locations, where space is available for expansion.

      The manufacturing facility in Abilene,  Texas is pledged as  collateral
 for a bank loan used to purchase the property.


 ITEM 3.   LEGAL PROCEEDINGS.

      We are involved in various legal proceedings and claims arising in  the
 ordinary course  of  business.    On  the  basis  of  information  presently
 available, it is the opinion of  management that such legal proceedings  and
 claims are not material to our financial condition.

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

      None.


                              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 and cash dividends paid per share.

       Quarter Ended:             Closing Bid Prices   Cash Dividends
       --------------             ------------------   --------------
                                    High       Low       Per Share
                                   ------    -------        ----
       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

       Fiscal 2000
       September 30, 1999         $14-1/8   $10-1/2        $.125
       December 31, 1999           13         9-7/8         .125
       March 31, 2000              15-13/16  12             .125
       June 30, 2000               17-7/8    12             .125
<PAGE>
      There were 178  record holders  of our  Common Stock  on September  19,
 2000.  We estimate that approximately 700 additional shareholders own shares
 in broker names.

      We intend to pay cash dividends on our common stock as our Board  deems
 appropriate,  after  consideration  of  our  operating  results,   financial
 condition, cash  requirements, compliance  with financial  covenants in  our
 credit facilities and such other factors as the Board deems appropriate.


 ITEM 6.   SELECTED FINANCIAL DATA

<TABLE>
      The following selected  financial data  should be  read in  conjunction
 with, and  is qualified  in its  entirety  by, "Managements  Discussion  and
 Analysis  of  Financial  Condition  and  results  of  Operations"  and   the
 Consolidated Financial Statements and related Notes included in this report.


                                            Year ended June 30
                        -------------------------------------------------------------
                           2000         1999         1998         1997        1996
                        ----------   ----------   ----------   ----------  ----------
 <S>                   <C>          <C>          <C>          <C>         <C>
 Net sales             $58,561,396  $40,568,443  $43,455,136  $41,486,492 $33,643,998

 Gross profit           15,657,989   14,271,719   15,239,806   11,525,289  10,213,237

 Earnings before         1,578,363    2,845,570    3,522,138      537,996   1,182,148
 income taxes

 Net earnings             $930,777   $1,849,570   $2,449,561     $537,416    $789,721
                        ==========   ==========  ===========   ==========  ==========
 Earnings per
 common share - basic         $.64        $1.27        $1.68         $.37        $.55
                        ==========   ==========  ===========   ==========  ==========
 Earnings per
 common share - diluted       $.63        $1.27        $1.68         $.37        $.55
                        ==========   ==========  ===========   ==========  ==========

 Total assets          $32,120,953  $23,478,772  $23,756,221  $19,046,720 $18,191,426
                        ==========   ==========  ===========   ==========  ==========

 Long-term obligations   1,406,144          ---          ---          ---         ---

 Cash dividend per
 common share          $       .50  $       .50  $       .50   $      .50 $       .50
                        ==========   ==========  ===========   ==========  ==========
</TABLE>
<PAGE>

 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.

      We have historically financed, and continue to finance, working capital
 requirements, expansion,  and  equipment  purchases  primarily  through  the
 retention of earnings and the use of a short-term bank credit line.   During
 Fiscal 2000 we increased our short-term  line of credit to $11,000,000.   It
 was necessary for us  to use our  short-term bank credit  lines in order  to
 finance a  temporary shortfall  in working  capital during  Fiscal 2000  and
 Fiscal 1999.   On June  30, 2000  we had  $5,821,000 outstanding  and as  of
 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.
 The ABCO acquisition was made on February 25, 2000 and was financed with a 5
 year fully amortized  term note  that will  be repaid  with equal  quarterly
 principle installments  plus  accrued  interest.  The  assets  of  the  ABCO
 acquisition secure the term note.  The balance on the  term note as of  June
 30, 2000  was  $1,806,000.  We have  no  material  commitments  for  capital
 expenditures other  than replacing  equipment and  maintaining our  existing
 plants and equipment.  During Fiscal 2000 we purchased fixed assets totaling
 $327,000,  consisting  primarily  of  replacement  manufacturing  equipment,
 computer hardware and software, office equipment and building  improvements.
 This is compared to purchases of $233,000 during Fiscal 1999.

      Working capital was $11,900,000 at June 30,  2000, an increase of  less
 than 4% from $11,500,000 at June 30, 1999.

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

                                          2000      1999      1998
                                          ----      ----      ----
          Average working capital as
          a percentage of net sales       18.5%     25.9%     20.5%

          Annual accounts receivable
             turnover(1)                   5.3       3.8       5.0

          Annual inventory turnover(2)     9.4       6.2       6.3


 (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.
<PAGE>

      The average working capital as a percentage of net sales declined  from
 25.9% in Fiscal 1999 to 18.5% in Fiscal  2000.  The decrease in Fiscal  2000
 was the result of average working  capital increasing $300,000 or 3%  offset
 by an increase  in sales  volume of  44% or  approximately $17,993,000  over
 Fiscal 1999.  The increase in  annual accounts receivable turnover  from 3.8
 in Fiscal 1999 to 5.3 in Fiscal 2000 was caused by improved collections. The
 average account  receivable balance  increased approximately  $468,000  from
 Fiscal 1999 to Fiscal 2000, while  sales increased $17,993,000 for the  same
 time period. Average inventory turnover has improved from 6.2 in Fiscal 1999
 to 9.4 in Fiscal 2000.  The average inventory level increased $316,000, from
 $4,254,000 in Fiscal 1999 to $4,570,000  in Fiscal 2000. This combined  with
 an approximately  $16,600,000  increase  in  cost  of  sales  increased  the
 inventory turnover.  The  higher  inventory  turnover  is  primarily  due to
 increased sub-contracting and SCR specialty components purchased and shipped
 direct to the customer.

 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:

                                     2000        1999        1998
                                     ----        ----        ----
 Gross profit margin                 26.7%       35.2%       35.1%

 Operating expenses                  23.5%       27.8%       26.7%

 Earnings before income taxes         2.7%        7.0%        8.1%

 Effective income tax rate           41.0%       35.0%       30.5%


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


 Comparison of Fiscal 2000 to Fiscal 1999

 Net Sales

      Our  net  sales  increased  approximately  $17,993,000,  or  44%,  from
 $40,568,000 to $58,561,000.  Domestic  sales increased 99% from  $22,593,000
 in Fiscal 1999  to $44,978,000 in  Fiscal 2000.   Domestic sales growth  was
 caused primarily by  a significant increase  in the  sales of  environmental
 products (SCR  systems) from  $6,132,000 in  Fiscal 1999  to $28,533,000  in
 Fiscal 2000.  Foreign sales decreased 24.4% from $17,975,000 in Fiscal  1999
 to $13,583,000 in Fiscal 2000.

      Our backlog of unfilled orders remained unchanged at $29,000,000 as  of
 June 30, 1999 and June 30, 2000.
<PAGE>

 Gross Profit Margin

      Our gross profit increased $1,386,000  from $14,272,000 in Fiscal  1999
 to $15,658,000 in  Fiscal 2000. However  the gross  profit margin  decreased
 from 35.2% of net sales in Fiscal 1999 to 26.7% of net sales in Fiscal 2000.
 The lower  gross  profit margin  is  primarily due  to  cost overruns  on  a
 significant order  and  lower  margins inherent  with  specialty  components
 purchased and  shipped direct  to  customers associated  with  environmental
 products.

 Operating Expenses

      Operating expenses increased 22.1% from  $11,293,000 in Fiscal 1999  to
 $13,791,000 in  Fiscal  2000.    This  increase  in  operating  expenses  is
 primarily due  to increased  implementation cost  for an  ERP system,  costs
 associated with integration of ABCO Industries and the addition of personnel
 to support  the higher  sales  volume.   However,  operating expenses  as  a
 percent of sales  decreased from  27.8% in Fiscal  1999 to  23.5% in  Fiscal
 2000.

 Income Tax

      Our effective tax rate  was 41.0% in Fiscal  2000 compared to 35.0%  in
 Fiscal 1999.  For a further discussion of our federal income taxes, see Note
 J to our Financial Statements.


 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.

      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
 J to our Financial Statements.
<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.

      Quantitative and  Qualitative  Disclosures  about  Market  Risk.    The
 company is exposed   to market  risk from changes  in  interest  rates.  The
 company's cash equivalents  and short-term investments  and its  outstanding
 debt bear variable  interest rates.   The  company has  not used  derivative
 instruments to offset the exposure to changes in interest rates.  Changes in
 interest rates are not expected to  have a material impact on the  company's
 results of operations.

      Competition.  We  operate in highly  competitive markets worldwide.  We
 compete with  manufacturers and  sellers  of selective  catalytic  reduction
 systems, 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.  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.   Fluctuations  in foreign  exchange rates  may have  an
 adverse affect.  Also,  U.S. and 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.

      Potential Cost Overruns.    From time to  time we enter into  contracts
 for custom designed,  engineered and  manufactured products  that contain  a
 fixed price.  In the event of a cost  over run, the additional cost may  not
 be recoverable from the customer.
<PAGE>

  ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

                    Index to Financial Statements

                                                                Page
                                                                ----
  REPORT OF INDEPENDENT CERTIFIED PUBLIC
       ACCOUNTANTS ...........................................   14

  CONSOLIDATED BALANCE SHEETS AT JUNE 30, 2000 AND 1999.......   15

  CONSOLIDATED STATEMENTS OF EARNINGS FOR THE YEARS
       ENDED JUNE 30, 2000, 1999 AND 1998.....................   17

  CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS'
       EQUITY FOR THE YEARS ENDED JUNE 30, 2000,
       1999 AND 1998..........................................   18

  CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS
       ENDED JUNE 30, 2000, 1999 AND 1998.....................   19

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE
       YEARS ENDED JUNE 30, 2000, 1999 AND 1998...............   21

  REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
       ON SCHEDULE............................................   34

  SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS.............   35

<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, 2000  and 1999,  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,  2000.
 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 auditing  standards  generally
 accepted in the United States of  America.  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, 2000 and 1999, and the consolidated
 results of their operations  and their consolidated cash  flows for each  of
 the three  years in  the  period ended  June 30,  2000, in  conformity  with
 accounting principles generally accepted in the United States of America.




 GRANT THORNTON LLP

 Dallas, Texas
 September 15, 2000


<PAGE>
<TABLE>
                     Peerless Mfg. Co. and Subsidiaries

                         CONSOLIDATED BALANCE SHEETS

                                  June 30,


                  ASSETS                            2000         1999
                                                 ----------   ----------
 <S>                                            <C>          <C>
 CURRENT ASSETS
  Cash and cash equivalents                     $   561,017  $   210,866
  Short-term investments                            273,343      273,343
  Accounts receivable - principally trade,
    net of allowance for uncollectible
    accounts of $777,546 and $685,330
    in 2000 and 1999, respectively               12,319,171   12,195,037
  Inventories                                     3,287,957    3,730,970
  Costs and earnings in excess of billings
    on uncompleted contracts                      9,911,587    3,268,181
  Deferred income taxes                             470,884         -
  Other                                             704,118      777,635
                                                 ----------   ----------
           Total current assets                  27,528,077   20,456,032

 PROPERTY, PLANT AND EQUIPMENT - AT COST,
   less accumulated depreciation                  3,509,846    2,102,546

 DEFERRED INCOME TAXES                                 -          59,613

 OTHER ASSETS                                     1,083,030      860,581
                                                 ----------   ----------
                                                $32,120,953  $23,478,772
                                                 ==========   ==========


</TABLE>
<PAGE>
<TABLE>
                     Peerless Mfg. Co. and Subsidiaries

                   CONSOLIDATED BALANCE SHEETS - CONTINUED

                                  June 30,


    LIABILITIES AND STOCKHOLDERS' EQUITY            2000          1999
                                                 ----------   ----------
 <S>                                            <C>          <C>
 CURRENT LIABILITIES
  Accounts payable - trade                      $ 6,471,280  $ 5,626,058
  Lines of credit                                 5,800,000         -
  Current maturities of long-term debt              421,212         -
  Billings in excess of costs and earnings
    on uncompleted contracts                        363,577      572,970
  Commissions payable                               984,784    1,204,584
  Accrued expenses
    Compensation                                    745,911    1,188,165
    Warranty reserve                                354,534      313,773
    Deferred income taxes                              -          42,736
    Other                                           448,194       38,669
                                                 ----------   ----------
           Total current liabilities             15,589,492    8,986,955

 LONG-TERM DEBT, net of current maturities        1,406,000         -

 DEFERRED INCOME TAXES                              376,061         -

 COMMITMENTS                                           -            -

 STOCKHOLDERS' EQUITY
  Common stock - authorized, 10,000,000
    shares of $1 par value; issued and
    outstanding, 1,467,992 and 1,452,492
    shares in 2000 and 1999, respectively         1,467,992    1,452,492
  Additional paid-in capital                      2,692,099    2,539,951
  Unamortized value of restricted stock grants      (71,096)      (4,719)
  Accumulated other comprehensive income (loss)    (148,954)    (103,824)
  Retained earnings                              10,809,359   10,607,917
                                                 ----------   ----------
                                                 14,749,400   14,491,817
                                                 ----------   ----------
                                                $32,120,953  $23,478,772
                                                 ==========   ==========


       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,


                                       2000         1999         1998
                                    ----------   ----------   ----------
 <S>                               <C>          <C>          <C>

 Net sales                         $58,561,396  $40,568,443  $43,455,136

 Cost of goods sold                 42,903,407   26,296,724   28,215,330
                                    ----------   ----------   ----------
           Gross profit             15,657,989   14,271,719   15,239,806

 Operating expenses
  Marketing and engineering         10,035,579    8,630,962    8,932,180
  General and administrative         3,755,087    2,662,289    2,662,725
                                    ----------   ----------   ----------
                                    13,790,666   11,293,251   11,594,905
                                    ----------   ----------   ----------
           Operating profit          1,867,323    2,978,468    3,644,901

 Other income (expense)
  Interest income                       38,413       58,987       34,055
  Interest expense                    (180,128)     (23,696)     (27,430)
  Foreign exchange gains (losses)       (6,710)    (118,866)     (90,050)
  Other, net                          (140,535)     (49,323)     (39,338)
                                    ----------   ----------   ----------
                                      (288,960)    (132,898)    (122,763)
                                    ----------   ----------   ----------
      Earnings before income taxes   1,578,363    2,845,570    3,522,138

 Income tax expense (benefit)
  Current                              725,532      617,824    1,262,998
  Deferred                             (77,946)     378,176     (190,421)
                                    ----------   ----------   ----------
                                       647,586      996,000    1,072,577
                                    ----------   ----------   ----------
      NET EARNINGS                 $   930,777  $ 1,849,570  $ 2,449,561
                                    ==========   ==========   ==========

 Earnings per common share - basic       $ .64        $1.27        $1.68
                                          ====         ====         ====
 Earnings per common share - diluted     $ .63        $1.27        $1.68
                                          ====         ====         ====



       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 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

  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

 Comprehensive income
  Net earnings                            -          -           -             -           930,777      930,777
  Foreign currency translation
   adjustment                             -          -           -         (45,130)            -        (45,130)
                                                                                                     ----------
      Total comprehensive income                                                                        885,647

 Cash dividends paid
  ($.50 per share)                        -          -           -             -          (729,335)    (729,335)
 Stock options exercised                9,000     74,937         -             -               -         83,937
 Issuance of stock grants               6,500     73,711     (80,211)          -               -            -
 Amortization of restricted
  stock grants                            -          -        13,834           -               -         13,834
 Income tax expense related to
  restricted stock plans                  -        3,500         -             -               -          3,500
                                    ---------  ---------     -------     ---------     -----------   ----------
 Balance at June 30, 2000           1,467,992 $2,692,099    $(71,096)   $ (148,954)   $ 10,809,359  $14,749,400
                                    =========  =========     =======     =========     ===========   ==========


        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,




                                            2000         1999         1998
                                         ----------   ----------   ----------
 <S>                                    <C>          <C>          <C>

 Cash flows from operating activities
  Net earnings                          $   930,777  $ 1,849,570  $ 2,449,561
  Adjustments to reconcile net earnings
    to net cash provided by (used in)
    operating activities
      Depreciation and amortization         489,739      413,026      379,752
      Deferred income taxes                 (77,946)     378,176     (190,421)
      Foreign exchange loss                   6,710      118,886       90,050
      Other                                    (671)     (34,160)      (1,020)
      Changes in operating assets and
        liabilities, net of effect
        of acquisitions
         Accounts receivable               (124,134)   1,949,880   (4,703,504)
         Inventories                        443,013   (1,301,720)     544,993
         Cost and earnings in excess
           of billings on uncompleted
           contracts                     (6,643,406)  (1,429,540)      33,176
         Other current assets                73,517     (612,004)     132,974
         Other assets                      (222,449)    (186,421)    (231,004)
         Accounts payable                   845,222       59,008      837,205
         Billings in excess of costs
           and earnings on uncompleted
           contracts                       (209,393)     522,993     (353,174)
         Commissions payable               (219,800)        (807)     425,917
         Accrued expenses                     8,032     (788,479)     985,395
                                         ----------   ----------   ----------
                                         (5,631,566)    (911,162)  (2,049,661)
                                         ----------   ----------   ----------
 Net cash provided by (used in)
   operating activities                  (4,700,789)     938,408      399,900

 Cash flows from investing activities
  Net purchases of short-term investments       -         (5,278)      (9,058)
  Proceeds from sale of property
    and equipment                            88,000       30,850          -
  Purchase of property and equipment     (1,967,034)    (233,323)    (262,362)
                                         ----------   ----------   ----------
 Net cash used in investing activities   (1,879,034)    (207,751)    (271,420)

</TABLE>
<PAGE>
<TABLE>

                      Peerless Mfg. Co. and Subsidiaries

              CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

                             Year ended June 30,




                                            2000         1999         1998
                                         ----------   ----------   ----------
 <S>                                    <C>          <C>          <C>

 Cash flows from financing activities
  Sale of common stock                  $    83,937  $       -    $    23,125
  Net changes in lines of credit          5,800,000          -            -
  Advances on short-term borrowings       2,827,212          -        200,000
  Payments on short-term borrowings      (1,000,000)    (200,000)         -
  Dividends paid                           (729,335)    (727,497)    (727,127)
                                         ----------   ----------   ----------
         Net cash provided by (used in)
             financing activities         6,981,814     (927,497)    (504,002)

 Effect of exchange rate changes on
  cash and cash equivalents                 (51,840)     (20,776)      31,451
                                         ----------   ----------   ----------
 Net decrease in cash and cash
   equivalents                              350,151     (217,616)    (344,071)

 Cash and cash equivalents at
   beginning of year                        210,866      428,482      772,553
                                         ----------   ----------   ----------
 Cash and cash equivalents at
   end of year                          $   561,017  $   210,866  $   428,482
                                         ==========   ==========   ==========

 Supplemental information on cash flows:

 Interest paid                          $   150,183  $    21,170  $    29,956
 Income taxes paid                      $   780,945  $   900,814  $   957,860



       The accompanying notes are an integral part of these statements.

</TABLE>
<PAGE>

                      Peerless Mfg. Co. and Subsidiaries

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                         June 30, 2000, 1999 and 1998


 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 subsidiaries, all of which are
  whole-owned.   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
  ------------------------
  The  Company  accounts 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.  The carrying amount of debt  approximates  fair value because
  all debt has interest rates tied to market.

  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 - BUSINESS COMBINATION

  On  February 25,  2000,  the Company  purchased  substantially all  of  the
  assets of  ABCO Industries, Inc. (ABCO)  for approximately $1,700,000.   No
  goodwill  resulted  from the  acquisition.   ABCO  is  in the  business  of
  designing  and manufacturing industrial  boilers.   Following is  unaudited
  pro forma data  assuming that the acquisition of ABCO had occurred on  July
  1, 1998:

                                                 Year ended June 30,
                                              -------------------------
                                                 2000           1999
                                              ----------     ----------
    Sales                                    $69,316,000    $55,569,000
    Net loss before extraordinary credit         (13,000)      (327,000)
    Net earnings (loss)                        2,109,000       (327,000)
    Per share - basic
      Net loss before extraordinary credit          (.01)          (.22)
      Net earnings (loss)                           1.44           (.22)
    Per share - diluted
      Net loss before extraordinary credit          (.01)          (.22)
      Net earnings (loss)                           1.43           (.22)


 NOTE C - 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.

  For  the year  ended  June 30,  2000, sales  to  one customer  amounted  to
  approximately  19% of  revenues.  For  the years  ended June  30, 1999  and
  1998, no single customer accounted for more than 10% of revenues.
<PAGE>

 NOTE D - INVENTORIES

  Principal components of inventories are as follows:

                                                      June 30,
                                               -----------------------
                                                 2000          1999
                                               ---------     ---------
    Raw materials                             $1,252,111    $  961,450
    Work in process                            1,669,348     2,522,182
    Finished goods                               366,498       247,338
                                               ---------     ---------
                                              $3,287,957    $3,730,970
                                               =========     =========

   At June 30, 2000 and 1999,  progress payments of $261,374 and  $1,237,771,
   respectively,  have  been   offset  against  inventories   and  costs   of
   uncompleted contracts.


 NOTE E - PROPERTY, PLANT AND EQUIPMENT

   Property, plant and equipment is summarized as follows:

                                                      June 30,
                                              -------------------------
                                                 2000          1999
                                              ----------     ----------
    Buildings                                $ 3,783,724    $ 3,096,993
    Equipment                                  3,449,821      2,670,878
    Furniture and fixtures                     2,044,660      1,815,592
    Land improvements                              5,169              -
                                              ----------     ----------
                                               9,283,374      7,583,463
      Less accumulated depreciation           (6,609,254)    (6,201,643)
                                              ----------     ----------
                                               2,674,120      1,381,820
    Land                                         835,726        720,726
                                              ----------     ----------
                                             $ 3,509,846    $ 2,102,546
                                              ==========     ==========

 NOTE F - LINES OF CREDIT

   The Company has unsecured revolving lines of credit in the amount of $11.0
   million due in December  2000, with interest at  the banks' prime  lending
   rate (9.5% at  June 30, 2000),  payable monthly.   The bank charges  usage
   fees at an annual rate of .25% of the average daily unused portion of  the
   line.  At June 30, 2000, $5.8  million was outstanding under the lines  of
   credit.   The  Company  had letters  of  credit  outstanding  under  these
   arrangements of  $4,094,479 and  $3,246,567 at  June  30, 2000  and  1999,
   respectively.   Other assets  with a  cost of  approximately $649,000  and
   $635,000 were pledged against  the letters of  credit outstanding at  June
   30, 2000 and 1999, respectively.
<PAGE>

 NOTE G - LONG-TERM DEBT

                                                   2000           1999
                                                 ---------     ---------
   Note payable, due June 30, 2005, principal
     due in 19 quarterly installments of
     $100,000 beginning June 30, 2000,
     interest at the bank's prime rate
     (9.5% at June 30, 2000)                    $1,827,212    $        -
      Less current maturities                     (421,212)            -
                                                 ---------     ---------
                                                $1,406,000    $        -
                                                 =========     =========

   The aggregate annual maturities of long-term debt at June 30, 2000 are  as
   follows:

    Year ended
     June 30,
     --------
      2001                                    $  421,212
      2002                                       400,000
      2003                                       400,000
      2004                                       400,000
      2005                                       206,000
                                               ---------
                                              $1,827,212
                                               =========

 NOTE H - 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 to five-year period.  The Company awarded 3,000 shares  (fair
   value at date of grant of $31,875)  in fiscal 1998 and 6,500 shares  (fair
   value at date of grant of  $80,211) in fiscal 2000.  Compensation  expense
   for stock grants is  charged to earnings over  the restriction period  and
   amounted to $13,835, $17,416, and $25,115  in fiscal 2000, 1999 and  1998,
   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.

   In December 1995, the Company adopted a stock option and restricted  stock
   plan (the 1995 Plan),  which provides for a  maximum of 120,000 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,  2000, 27,450  shares  of  common stock  were  available  for
   issuance under the 1995 Plan, and 250 shares were available under the 1985
   Plan.
<PAGE>

 NOTE H - STOCKHOLDERS' EQUITY - Continued

   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,
                                     2000          1999          1998
                                    -------      ---------     ---------
    Net earnings - as reported     $930,777     $1,849,570    $2,449,561
    Net earnings - pro forma        836,372      1,813,141     2,440,327

    Basic earnings per share
    As reported                         .64           1.27          1.68
    Pro forma                           .57           1.25          1.68

    Diluted earnings per share
    As reported                         .63           1.27          1.68
    Pro forma                           .57           1.24          1.67

   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 41%  to 44% for fiscal 2000, 43%  for
   fiscal 1999 and 41% for fiscal 1998; risk-free interest rates ranging from
   4.6% to 6%; dividend yield of 4.2%,   3.7%, and 5.6% in fiscal 2000,  1999
   and 1998, respectively; and expected lives of five to seven years.
<PAGE>

 NOTE H - 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, 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

    Granted                                      42,800       12.00
    Exercised                                    (9,000)       9.33
    Canceled                                    (14,000)      12.12
                                                 ------
    Outstanding at June 30, 2000                 79,800       11.17
                                                 ======       =====

    Options exercisable at June 30, 1998         16,125       10.12
                                                 ======       =====
    Options exercisable at June 30, 1999         31,000       10.15
                                                 ======       =====
    Options exercisable at June 30, 2000         63,175       11.14
                                                 ======       =====

    Weighted average fair value per share of options granted:

      Year ended June 30, 1998          $3.24
      Year ended June 30, 1999          $4.72
      Year ended June 30, 2000          $3.94
<PAGE>


 NOTE H - STOCKHOLDERS' EQUITY - Continued

  The following table  summarizes information about the Plan's stock  options
  at June 30, 2000:

                                       Options outstanding
                           --------------------------------------------------
                                         Weighted average
        Range of              Number  remaining contractual  Weighted average
    Exercise Prices        outstanding    life (in years)     exercise price
    ---------------        -----------    --------------      --------------
    $9.25                     16,000           5.6               $  9.25
    $10.625-$11.875           22,500           7.8                 10.79
    $12.00-$13.375            41,300           9.0                 12.12
                              ------
                              79,800
                              ======

                                       Options exercisable
        Range of                    Number     Weighted average
    Exercise Prices              exercisable    exercise price
    ---------------              -----------    --------------
    $9.25                           16,000        $    9.25
    $10.625-$11.875                 12,000            10.83
    $12.00-$13.375                  35,175            12.10
                                    ------
                                    63,175
                                    ======


  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.


 NOTE I - 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, 2000, 1999
   and 1998 was approximately $151,000, $157,000, and $128,000, respectively.
<PAGE>

 NOTE J - 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,
                                                 2000          1999
                                               ---------     ---------
    Deferred tax assets
      Restricted stock grants                 $    7,264    $    6,083
      Inventories                                126,175        80,597
      Foreign subsidiaries' net operating
        loss carryforwards                       115,421       232,122
      Accrued expenses                           229,712       164,317
      Accounts receivable                         91,684       108,285
      Other                                       25,727        29,461
                                               ---------     ---------
                                                 595,983       620,865

    Deferred tax liabilities
      Property, plant and equipment             (122,359)     (100,088)
      Uncompleted contracts                     (375,297)     (500,396)
      Other                                       (3,504)       (3,504)
                                               ---------     ---------
                                                (501,160)     (603,988)
                                               ---------     ---------
            Net deferred tax asset            $   94,823    $   16,877
                                               =========     =========

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

                                                       June 30,
                                                   2000      1999
                                               ---------     ---------
    Current deferred tax asset (liability)    $  470,884    $  (42,736)
    Noncurrent deferred tax asset (liability)   (376,061)       59,613
                                               ---------     ---------
                                              $   94,823    $   16,877
                                               =========     =========
<PAGE>

 NOTE J - INCOME TAXES - Continued

   The provision for income taxes consisted of the following:

                                          Years ended June 30,
                                     ---------------------------------
                                      2000        1999         1998
                                     -------     -------     ---------
    Federal
      Current                       $599,431    $552,824    $1,157,345
      Deferred                       (77,946)    378,176      (190,421)
    State                            126,101      65,000       105,653
                                     -------     -------     ---------
                                    $647,586    $996,000    $1,072,577
                                     =======     =======     =========


  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 for 1998.

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

                                                    As a percentage
                                                  of pretax earnings
                                                 --------------------
                                                 2000    1999    1998
                                                 ----    ----    ----
    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         3.8     1.5     2.0
       Foreign sales corporation exclusions      (2.5)   (2.9)   (6.7)
       Change in valuation allowance                -       -    (0.8)
       Adjustment to prior year taxes             5.4       -       -
       Effect of lower foreign tax rate          (1.4)      -       -
       Other                                      1.7    2.4     2.0
                                                 ----    ----    ----
    Income tax expense at effective rate         41.0%   35.0%   30.5%
                                                 ====    ====    ====
<PAGE>

 NOTE K - EARNINGS PER SHARE
<TABLE>
   Summarized basic and  diluted earnings per  common share for  each of  the
   three years ended June 30, 2000 is as follows:

                                2000                          1999                           1998
                  ----------------------------    ---------------------------    ---------------------------
                                          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       $  930,777   1,459,590  $ .64   $1,849,570  1,455,396  $1.27   $2,449,561  1,454,277  $1.68
   Effect of
   dilutive
   options              -        10,753     -             -      4,751     -             -      2,698      -
                  ---------   ---------   ----    ---------  ---------   ----    ---------  ---------   ----
 Diluted earnings
 per share       $  930,777   1,470,343  $ .63   $1,849,570  1,460,147  $1.27   $2,449,561  1,456,975  $1.68
                  =========   =========   ====    =========  =========   ====    =========  =========   ====
</TABLE>

 For fiscal 2000, 1999, and 1998,  stock options covering 2,500, 11,500,  and
 2,500 shares,  respectively were  excluded in  the computations  of  diluted
 earnings per share because their effect was antidilutive.
<PAGE>

 NOTE L - 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  (SCR)" used  to separate  nitrogen oxide  (NOx)
 emissions from exhaust  gases caused by  burning hydrocarbon  fuels such  as
 coal, gasoline, natural gas and oil.   We combine these products with  other
 components as totally integrated systems.  Many of the Company's  components
 are packaged on skids complete with instruments, controls and related valves
 and piping.


 NOTE L - 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, 2000, 1999,  and 1998  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>
 2000
 ----
 Revenues from customers  $30,028,000  $28,533,000  $         -   $58,561,000
 Segment profit (loss)      2,634,000    3,793,000   (4,560,000)    1,867,000


 1999
 ----
 Revenues from customers  $34,436,000  $ 6,132,000  $         -   $40,568,000
 Segment profit (loss)      5,580,000      849,000   (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
</TABLE>
<PAGE>

  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:

<TABLE>
                             United
                             States       Europe    Eliminations  Consolidated
                           ----------    ---------   ----------    ----------
 <S>                      <C>           <C>         <C>           <C>
 2000
 ----
 Net sales to unaffiliated
   customers              $51,917,000   $6,644,000  $         -   $58,561,000
 Transfers between
   geographic areas         1,750,000            -   (1,750,000)            -
                           ----------    ---------   ----------    ----------
 Total                    $53,667,000   $6,644,000  $(1,750,000)  $58,561,000
                           ==========    =========   ==========    ==========
 Identifiable assets      $31,744,000   $3,094,000  $(2,717,000)  $32,121,000
                           ==========    =========   ==========    ==========


                             United
                             States       Europe    Eliminations  Consolidated
                           ----------    ---------   ----------    ----------
 <S>                      <C>           <C>         <C>           <C>
 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
                           ==========    =========   ==========    ==========

 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
                           ==========    =========   ==========    ==========
</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
 15, 2000, 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,  2000.
 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 15, 2000

<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      Deductions       end of period
     -----------                      -------     --------   --------------       ----------      -------------
  <S>                                <C>          <C>            <C>               <C>              <C>
  2000
  ----
  Allowance for uncollectible
    accounts                         $685,330     $162,727       $   -             $ 70,511 (1)     $777,546
                                      =======      =======        =======           =======          =======
  1999
  ----
  Allowance for uncollectible
    accounts                         $806,200     $184,471       $   -             $305,341 (1)     $685,330
                                      =======      =======        =======           =======          =======
  1998
  ----
  Allowance for uncollectible
    accounts                         $312,450     $621,560       $   -             $127,810 (1)     $806,200
                                      =======      =======        =======           =======          =======

  Deferred tax valuation allowance   $ 29,710     $      -       $   -             $ 29,710 (2)     $   -
                                      =======      =======        =======            =======          =======


 (1) Write offs.

 (2) 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  16,
 2000 (we refer to  it as the "2000  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 2000
 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 2000 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
 2000 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 Accounts - Years Ended June 30,
                     2000, 1999 and 1998

           *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, 2000.

      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, 2000                        /s/ Sherrill Stone
                                           ----------------------------------
                                           Sherrill Stone, Chairman of the
                                           Board, President, Director and
                                           Chief Executive Officer

 September 28, 2000                        /s/ Thomas J. Reeve
                                           ----------------------------------
                                           Thomas J. Reeve,
                                           Principal Financial Officer,

 September 28, 2000                        /s/ Donald A. Sillers
                                           ----------------------------------
                                           Donald A. Sillers, Jr., Director

 September 28, 2000                        /s/ J. V. Mariner, Jr.
                                           ----------------------------------
                                           J. V. Mariner, Jr. Director

 September 28, 2000                        /s/ Bernard S. Lee
                                           ----------------------------------
                                           Bernard S. Lee, Director

 September 28, 2000                        /s/ D. D. Battershell
                                           ----------------------------------
                                           D. D. Battershell, Director

<PAGE>

                         INDEX TO EXHIBITS



     3(a)  Articles of Incorporation, as amended to date (filed as
           Exhibit 3(a) the registrant's Quarterly Report on Form
           10-Q for the quarter ended December 31, 1997, and
           incorporated herein by reference)

     3(b)  Bylaws, as amended to date (filed as Exhibit 3(b) to the
           registrant's Annual Report on Form 10-K for the year
           ended June 30, 1997, and incorporated herein by
           reference)

     4(a)  Specimen of common stock certificate (filed as Exhibit
           __ to the registrant's Form 8-A registration statement
           (File No. 0-05214), dated October 29, 1970 and
           incorporated herein by reference)

     4(b)  Rights Agreement between Peerless Mfg. Co. and
           ChaseMellon Shareholder Services, L.L.C., adopted by the
           Board of Directors on May 21, 1997 (filed as Exhibit 1
           to the registrant's Registration Statement on Form 8-A
           (File No. 0-05214), dated May 22, 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
           the registrant's Annual Report on Form 10-K for the year
           ended 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
           the registrant's Annual Report on Form 10-K for the year
           ended 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 on May 24, 1991, and approved by shareholders
           on November 20, 1991 (filed as Exhibit 10(e) to the
           registrant's Annual Report on Form 10-K for the year
           ended June 30, 1991 and incorporated herein by
           reference)

     10(d) Employment Agreement, dated as of April 29, 1994, by and
           between Peerless Mfg. Co. and Sherrill Stone (filed as
           Exhibit 10(d) to the registrant's Annual Report on Form
           10-K for the year ended June 30, 1994 and incorporated
           herein by reference)

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

     10(f) Eighth Amended and Restated Loan Agreement, dated as of
           December 12, 1999, between Bank of America, N.A. and
           Peerless Mfg. Co. (filed as Exhibit 10(f) to the
           registrant's Quarterly Report on Form 10-Q for the
           quarter ended December 31, 1999 and incorporated herein
           by reference)

     10(g) Second Amended and Restated Loan Agreement, dated as of
           December 12, 1999, and Waiver and First Amendment to
           Second Amended and Restated Loan Agreement, dated as of
           December 12, 1999, by and between Chase Bank of Texas
           and Peerless Mfg. Co. (filed as Exhibit 10(g) to the
           registrant's Quarterly Report on Form 10-Q for the
           quarter ended December 31, 1999 and incorporated herein
           by reference)

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

     10(i) Asset Purchase Agreement, dated February 25, 2000, by
           and between PMC Acquisition, Inc. and ABCO Industries,
           Inc. (filed as Exhibit 2.1 to the registrant's Current
           Report on Form 8-K dated February 25, 2000 and
           incorporated herein by reference)

     10(j) Employment Agreement, dated as of July 23, 1999, by and
           between Peerless Mfg. Co. and G.D. Cornwell (filed as
           exhibit 10(j) to the registrant's Quarterly Report on
           Form 10-Q for the quarter ended September 30, 1999 and
           incorporated herein by reference)

     10(k) Agreement dated as of July 23, 1999 by and between
           Peerless Mfg. Co. and G.D. Cornwell (filed as exhibit
           10(k) to the registrant's Quarterly Report Form 10-Q,
           for the quarter ended September 30, 1999 and
           incorporated herein by reference)

     10(l) Employment Agreement, dated as of May 16, 2000, by and
           between Peerless Mfg. Co. and Roy C. Cuny*

     10(m) The Term Note with Bank of America date May 30th of 2000
           by and between Bank of America, N.A. and Peerless Mfg. Co.*

     21    Subsidiaries of Peerless*

     23    Consent of Grant Thorton LLP*

     27    Financial Data Schedule*

 ______________
 * Filed herewith