SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   ----------

                                    FORM 10-Q

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

    For the quarterly period ended June 30, 1999

                         Commission File Number 0-19799


                           PILGRIM CAPITAL CORPORATION
             ------------------------------------------------------
             (Exact name of Registrant as specified in its charter)


           Delaware                                      86-0670679
-------------------------------             ------------------------------------
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
 incorporation or organization)


             40 North Central Avenue, Suite 1200, Phoenix, AZ 85004
             ------------------------------------------------------
               (Address of principal executive offices) (Zip Code)

                                 (602) 417-8100
               --------------------------------------------------
               Registrant's telephone number, including area code

     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  the  number of  shares  outstanding  of each of the  Registrant's
classes of common stock, as of the latest practicable date.

         5,088,077 Shares of Common Stock Outstanding on August 4, 1999
         --------------------------------------------------------------
<PAGE>
                                      INDEX


PART I. FINANCIAL INFORMATION                                              Page
                                                                           ----
     Item 1. Financial Statements


          (a) Condensed Consolidated Financial Statements.................   3


          (b) Notes to Condensed Consolidated Financial Statements........   7



     Item 2.  Management's Discussion and Analysis of Financial Condition
              and Results of Operations...................................   9

PART II.  OTHER INFORMATION

     Item 6. Exhibits and Reports on Form 8-K.............................  18

Signatures................................................................  19

                                       2
<PAGE>
ITEM 1. FINANCIAL STATEMENTS

                          PILGRIM CAPITAL CORPORATION
               CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
                  (dollars in thousands, except share amounts)

                                                         June 30,  September 30,
                                                           1999        1998
                                                         --------  -------------
ASSETS
  Cash and cash equivalents                              $  3,564    $    763
  Investments                                              20,422      18,808
  Accounts receivable                                       2,291       1,566
  Notes receivable                                          4,139       4,136
  Costs assigned to management contracts acquired, less
    accumulated amortization of $5,597 and $4,523          52,195      27,740
  Furniture, fixtures and equipment, less accumulated
    depreciation of $618 and $536                           1,307         879
  Deferred acquisition costs, less accumulated
    amortization of $172 and $3,442                         1,485      26,562
  Incentive management fees receivable                      2,290       1,103
  Other assets                                              1,736       1,938
                                                         --------    --------
TOTAL ASSETS                                             $ 89,429    $ 83,495
                                                         ========    ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
  Current income taxes payable                           $  1,332    $     --
  Deferred tax liability                                    1,148          --
  Term note payable                                        24,063          --
  Revolver note payable                                     6,980      30,375
  Accrued compensation                                      2,454       2,763
  Accounts payable and accrued expenses                     6,503       3,793
                                                         --------    --------
        Total liabilities                                  42,480      36,931
                                                         --------    --------
Stockholders' equity:
  Common stock, $.01 par value, 10,000,000 shares
    authorized, 8,090,222 and 8,081,722 shares issued,
    with 5,084,477 and 5,588,477 shares outstanding at
    June 30, 1999 and September 30, 1998                       81          81
  Less: Treasury stock of 3,005,745 and 2,493,245 at
    cost on June 30, 1999 and September 30, 1998          (22,215)    (12,530)
  Additional paid-in capital                               48,844      48,790
  Retained earnings                                        20,218      10,296
  Accumulated other comprehensive earnings
    Unrealized gain (loss) on investments, net of tax          21         (73)
                                                         --------    --------
        Total stockholders' equity                         46,949      46,564
                                                         --------    --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY               $ 89,429    $ 83,495
                                                         ========    ========

See accompanying notes to condensed consolidated financial statements.

                                      3
<PAGE>
                          PILGRIM CAPITAL CORPORATION
           CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
           (DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
                                                  Three months ended        Nine months ended
                                                        June 30,                 June 30,
                                                -----------------------   -----------------------
                                                   1999         1998         1999         1998
                                                ----------   ----------   ----------   ----------
<S>                                             <C>          <C>          <C>          <C>
Revenues:
  Management and administrative fees            $    7,588   $    6,128   $   21,125   $   16,410
  Distribution fees                                  2,231        2,243        4,717        4,923
  Structured finance products management fees        3,363        2,083        9,678        3,736
  Commissions                                           81        1,475          407        2,290
  Investments and other income                         562          781        2,756        2,213
                                                ----------   ----------   ----------   ----------
     Total revenues                                 13,825       12,710       38,683       29,572
                                                ----------   ----------   ----------   ----------
Expenses:
  General and administrative                         3,903        3,793       11,899        8,689
  Selling                                            3,258        2,761        7,878        6,590
  Interest expense                                     313          358          647          750
  Amortization and depreciation                        559        1,235        1,419        2,857
                                                ----------   ----------   ----------   ----------
     Total expense                                   8,033        8,147       21,843       18,886
                                                ----------   ----------   ----------   ----------

Earnings before income tax                           5,792        4,563       16,840       10,686
Income tax                                           2,375        1,884        6,918        4,425
                                                ----------   ----------   ----------   ----------
Net earnings                                    $    3,417   $    2,679   $    9,922   $    6,261
                                                ==========   ==========   ==========   ==========

Earnings per Common and Common Equivalent Share

Basic:
  Net earnings                                  $     0.66   $     0.47   $     1.88   $     1.09
                                                ==========   ==========   ==========   ==========

  Shares used in per share calculation           5,154,261    5,745,056    5,273,016    5,769,332
                                                ==========   ==========   ==========   ==========
Diluted:
  Net earnings                                  $     0.58   $     0.40   $     1.64   $     0.95
                                                ==========   ==========   ==========   ==========

  Shares used in per share calculation           5,921,307    6,689,529    6,056,602    6,579,967
                                                ==========   ==========   ==========   ==========
</TABLE>

See accompanying notes to condensed consolidated financial statements.

                                       4
<PAGE>
                          PILGRIM CAPITAL CORPORATION
               CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS
                                  (UNAUDITED)
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                               Three months ended    Nine months ended
                                                    June 30,              June 30,
                                               ------------------    ------------------
                                                 1999       1998       1999       1998
                                               -------    -------    --------   -------
<S>                                            <C>        <C>        <C>        <C>
Net earnings                                   $ 3,417    $ 2,679    $  9,922   $ 6,261

Other comprehensive earnings, net of tax:
  Unrealized holding gains (losses) arising
    during the period                               35       (100)         99      (162)
  Less: Reclassification adjustment for gains
    included in net earnings                        (5)        --          (5)     (425)
                                               -------    -------    --------   -------
Comprehensive earnings                         $ 3,447    $ 2,579    $ 10,016   $ 5,674
                                               =======    =======    ========   =======
</TABLE>

See accompanying notes to condensed consolidated financial statements.

                                       5
<PAGE>
                          PILGRIM CAPITAL CORPORATION
          CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
                             (dollars in thousands)

<TABLE>
<CAPTION>
                                                                       For the Nine Months
                                                                          Ended June 30,
                                                                       --------------------
                                                                         1999        1998
                                                                       --------    --------
<S>                                                                    <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings                                                           $  9,922    $  6,261
Adjustments to reconcile net earnings to net cash
 provided by (used in) operating activities:
  Amortization and depreciation                                           1,422       2,839
  Gain on sale of investments                                                (8)       (720)
  Gain on sale of deferred acquisition costs                               (294)         --
  Increase in accounts receivable                                          (728)       (261)
  Increase in incentive management fee receivable                        (1,187)       (708)
  Increase in deferred acquisition costs due to sales of fund shares     (8,886)    (19,438)
  Decrease in deferred acquisition costs due to redemptions                  27         534
  Net change in deferred  tax asset/current tax liability                 3,194       4,402
  Decrease in operating liabilities                                       2,401       1,173
  Increase in other operating assets                                       (575)       (785)
                                                                       --------    --------
Net cash provided by (used in) operating activities                       5,288      (6,703)
                                                                       --------    --------

CASH FLOWS FROM INVESTING ACTIVITIES
  Investment in Pilgrim Funds                                                --        (709)
  Sale of Pilgrim Funds                                                     508       3,047
  Investments in structured finance products                             (4,045)     (9,500)
  Principal distributions from structured finance product investments     2,133          --
  Acquisition of Nicholas Applegate funds                               (25,529)         --
  Sales of furniture, fixtures and equipment                                 --           9
  Purchases of furniture, fixtures and equipment                           (648)       (514)
                                                                       --------    --------
Net cash used in investing activities                                   (27,581)     (7,667)
                                                                       --------    --------

CASH FLOWS FROM FINANCING ACTIVITIES
  Purchase of treasury stock                                             (9,685)       (753)
  Cash payment of shares for stock split                                     --          (2)
  Proceeds from exercise of stock options                                    54          15
  Proceeds from sale of deferred acquisition costs                       34,057          --
  Borrowings                                                                668      16,050
                                                                       --------    --------
Net cash provided by financing activities                                25,094      15,310
                                                                       --------    --------
  Net  increase  in cash and cash equivalents                             2,801         940
  Cash and cash equivalents, beginning of period                            763         219
                                                                       --------    --------
CASH AND CASH EQUIVALENTS, END OF PERIOD                               $  3,564    $  1,159
                                                                       ========    ========

SUPPLEMENTAL DISCLOSURES
  Interest paid                                                         $ 1,066    $    461
  Income taxes paid                                                       3,869          24
</TABLE>

See accompanying notes to condensed consolidated financial statements.

                                       6
<PAGE>
                           PILGRIM CAPITAL CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(1) BASIS OF FINANCIAL STATEMENT PRESENTATION

PRINCIPLES OF CONSOLIDATION.  The accompanying  condensed consolidated financial
statements of Pilgrim  Capital  Corporation,  formerly known as Pilgrim  America
Capital  Corporation  until June 21, 1999, and its subsidiaries  (the "Company")
were prepared in accordance with generally  accepted  accounting  principles for
interim  financial  information and with the  instructions to Form 10-Q and Rule
10-01 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting  principles for complete
financial statements.  In the opinion of management,  all adjustments considered
necessary for fair  presentation  have been included.  Operating results for the
three and nine months ended June 30, 1999 are not necessarily  indicative of the
results which may be expected for the fiscal year ending September 30, 1999. For
additional  information,  refer to the consolidated financial statements for the
fiscal year ended  September 30, 1998 which are included in the  Company's  Form
10-K/A for that year.

The condensed  consolidated  financial  statements  include the Company's wholly
owned   subsidiary,   Pilgrim  Group,   Inc.  ("PGI")  and  PGI's  wholly  owned
subsidiaries,   Pilgrim  Investments,  Inc.  ("PII"),  a  registered  investment
advisor,  and Pilgrim  Securities,  Inc.  ("PSI"),  a  registered  broker/dealer
(collectively  "Pilgrim").  The condensed consolidated financial statements also
include the  Company's  wholly  owned  mortgage  banking  subsidiaries,  Express
America TC, Inc., EAMC Liquidation Corp.  ("EAMC") which are in the winding down
stages.

The  activities  of  the  Company  consist  primarily  of  providing  investment
management and related  services to various  open-end and closed-end  investment
companies  (each a "Fund" and  collectively  the "Pilgrim Funds" or the "Funds")
and structured  finance  products which are loan and bond funds that the Company
manages for institutional  investors ("Structured Finance Products"),  operating
under the Pilgrim  name.  The results of  operations  reported in the  condensed
consolidated   financial   statements   reflect  these   investment   management
activities.

INVESTMENTS.  The Company has  investments  in  Structured  Finance  Products in
addition to other marketable securities.

In recording  income from its investments in Structured  Finance  Products,  the
Company  records its equity in the  earnings  and losses of  Structured  Finance
Products'  investments  and evaluates the investment for impairment by comparing
the net present  values of  projected  future  cash flows with the  investments'
carrying  values.  The  investments'  cash flows and  timings  are a function of
actual and forecasted loan and bond defaults and their related  losses,  trading
gains and losses,  projected  interest receipts and expenses,  and net cash flow
allocations  based on product  specific  indenture  requirements.  In projecting
defaults and losses,  the Company reviews specific problem credits and forecasts
the anticipated  losses.  The remaining credits in the portfolios are forecasted
using  default  assumptions  of 2%  annually  with  related  recovery  rates  of
approximately 70% of the defaults.  Projected interest receipts and expenses are
based on current portfolio and market interest rates.

COSTS ASSIGNED TO MANAGEMENT  CONTRACTS  ACQUIRED.  Costs assigned to management
contracts acquired represent the fair value of the investment  management rights
acquired through two acquisitions. These acquisitions consist of the acquisition
of the management  contracts for one closed-end and five open-end  Pilgrim Funds
("Pilgrim  Acquisition")  in  April  1995 and the May  1999  acquisition  of the
management  contracts for eleven open-end  retail funds from Nicholas  Applegate
Capital  Management  ("NACM  Acquisition").  The costs  assigned  to  management
contracts  acquired  represents  the excess of the purchase  price over the fair
value of net assets  acquired and resulting costs from the  acquisitions.  These
acquisition costs are being amortized on a straight-line  basis over a period of
20 years for the NACM Acquisition and 25 years for the Pilgrim Acquisition.

                                       7
<PAGE>
                           PILGRIM CAPITAL CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The  Company  periodically  analyzes  costs  assigned  to  management  contracts
acquired to determine  whether any impairment in value has occurred.  Based upon
anticipated  undiscounted  future cash flows from operations,  in the opinion of
management there has been no impairment.

DEFERRED  ACQUISITION  COSTS.  The Company  pays  commissions  of up to 4.00% to
authorized  broker-dealers  at the time that certain  Fund shares are sold.  The
commissions are recovered via distribution fees received from the related shares
and  contingent   deferred  sales  charges   ("CDSC"s)   received  if  the  Fund
shareholders  redeem  shares during a specified  period (up to six years).  Such
commission  costs are  capitalized  as Deferred  Acquisition  Costs  ("DAC") and
amortized over the period that the CDSC is in effect.  On December 11, 1998, the
Company sold without recourse its existing  September 30, 1998 DAC asset related
to certain of the Funds' shares (the "B Shares") and has agreed to sell such DAC
("B Share DAC") assets  generated on future B Share sales through November 2000.
The  Company  funds the B Share DAC  daily  and  sells  the asset  monthly.  The
purchaser  of the B Share  DAC  asset  is  entitled  to  0.75%,  annualized,  in
distribution  fees paid from B Share  assets  and all  CDSCs  received  from any
redemptions of the related B Shares. Prior to the sale of the B Share DAC asset,
the Company amortized the B Share DAC asset over a six-year period, which is the
period during which the CDSC is in effect for such shares.

In  conjunction  with  the  acquisition  of  the  Nicholas   Applegate   Capital
Management's  ("NACM")  eleven  open-end  retai1  funds which  included  Class C
shares,  the Company  began  offering  Class C shares on several of its open-end
funds. The Class C shares pay commissions up to 1% to authorized  broker dealers
at the time that the Class C shares are sold. The  Commissions are recovered via
distribution  fees received from the related shares and CDSC's  received  should
the  shareholder  redeem  shares during the first year.  The C share  commission
costs are capitalized as DAC and are amortized over a one-year period.

INCENTIVE MANAGEMENT FEES RECEIVABLE.  The Company receives management fees from
the  Structured  Finance  Products as follows:  (i) between 0.15% and 0.35% base
management  fee  which  is  generally  senior  to  leveraged  borrowings  in the
Structured  Finance  Product  vehicle,  (ii)  between  0.0% and 0.35%  secondary
management fee which is subordinated to certain payments on leveraged borrowings
and  (iii) an  additional  management  fee on each  Structured  Finance  Product
ranging  from  0.15% to 0.625%  of annual  net  assets if  specified  investment
returns are met ("Incentive  Management  Fees").  Incentive  Management Fees are
typically anticipated to be received in future periods.

Incentive Management Fee revenues represent the increase in the present value of
the  Incentive  Management  Fee  Receivable  for the period for each  Structured
Finance Product.

In determining the present value of Incentive  Management Fees  Receivable,  the
Company  projects  the timing of  Incentive  Management  Fee  payments  based on
product  specific  projected  returns to the equity  investors in the Structured
Finance  Products.  Product  specific  equity  returns  and their  timings are a
function of forecasted loan and bond defaults and their related losses,  trading
gains and losses,  projected  interest receipts and expenses,  and net cash flow
allocations  based on product  specific  indenture  requirements.  In projecting
defaults and losses,  the Company reviews specific problem credits and forecasts
the anticipated  losses.  The remaining credits in the portfolios are forecasted
using  default  assumptions  of 2%  annually  with  related  recovery  rates  of
approximately 70% of the defaults.  Projected interest receipts and expenses are
based on current portfolio and market interest rates. If the projected  investor
returns are in excess of the  minimums  defined in the  indentures,  the Company
uses a 10% discount rate to calculate the present value of the related Incentive
Management  Fee. Should the  anticipated  performance of the Structured  Finance
Product result in a present value lower than Incentive  Management Fees accrued,
the Company  would be required to write down the  receivable  to its net present
value,  to reflect the  impairment  of the asset.  Additionally,  volatility  of
investment performance may result in lower income recognition in some periods.

                                       8
<PAGE>
                           PILGRIM CAPITAL CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Incentive Management Fees Receivable is reported separately on the Company's
condensed consolidated balance sheet.

INCOME TAX.  Deferred tax assets and  liabilities  are initially  recognized for
temporary  differences  between the consolidated  financial  statement  carrying
amount and the tax bases of assets and  liabilities  which will result in future
deductible amounts and operating loss and tax credit carryforwards.  The Company
accounts  for income taxes under the  provisions  of SFAS 109,  "Accounting  for
Income Taxes". Under SFAS 109 deferred tax liabilities and assets are determined
based on the difference between the financial  statement and tax bases of assets
and liabilities, using tax rates in effect for the year in which differences are
expected to reverse.

NET EARNINGS PER SHARE. Basic earnings per share ("EPS") is computed by dividing
income available to common stockholders by the weighted average number of common
shares  outstanding  for the period.  Diluted EPS is computed by dividing income
available  for common  shareholders  by the  weighted  average  number of common
shares outstanding adjusted for the effect of dilutive common stock equivalents,
including stock options, during the period.

The following is a reconciliation  of the basic and diluted EPS computations for
the three and nine months  ended June 30, 1998 and 1999  (amounts in  thousands,
except per share amounts):

<TABLE>
<CAPTION>
                                                     Three months ended     Nine months ended
                                                           June 30,              June 30,
                                                     ------------------     -----------------
                                                       1999       1998       1999       1998
                                                      ------     ------     ------     ------
<S>                                                   <C>        <C>        <C>        <C>
Net earnings for basic and diluted EPS                $3,417     $2,679     $9,922     $6,261
                                                      ======     ======     ======     ======

Shares of common stock and common stock equivalents:
  Average number of common
    shares used in basic computation                   5,154      5,745      5,273      5,769
  Effect of dilutive securities - options                767        945        784        811
                                                      ------     ------     ------     ------
  Average shares used in diluted computation           5,921      6,690      6,057      6,580
                                                      ======     ======     ======     ======

Net earnings per share:
  Basic                                               $ 0.66     $ 0.47     $ 1.88     $ 1.09
                                                      ======     ======     ======     ======
  Diluted                                             $ 0.58     $ 0.40     $ 1.64     $ 0.95
                                                      ======     ======     ======     ======
</TABLE>

COMPREHENSIVE  INCOME Comprehensive income is defined as the change in equity of
a business  enterprise  during a period from  transactions  and other events and
circumstances from non-owner sources. It includes all changes to equity during a
period except those  resulting from  investments by owners and  distribution  to
owners.  The SFAS  requires  that all items that are  required to be  recognized
under accounting  standards as components of comprehensive income be reported in
a  financial  statement  that is  displayed  with the same  prominence  as other
financial statements. The SFAS requires that an enterprise (1) classify items of
other  comprehensive  income by their  nature in a financial  statement  and (2)
display the accumulated  balance of other  comprehensive  income separately from
retained  earnings and  additional  paid in capital in the equity section of the
statement of financial condition. No earnings per share disclosure of the effect
of comprehensive income is required under the SFAS.

                                       9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS.

GENERAL

The Company is a holding  company that,  through its wholly owned  subsidiaries,
provides investment management and related services for eighteen open-end Funds,
one closed-end Fund and six Structured Finance Products.

RESULTS OF OPERATIONS
The following table presents  comparative  quarterly data regarding assets under
management, Fund share sales and increases in Structured Finance Products assets
for the four quarters ended June 30, 1999:

                                  PILGRIM FUNDS
                         SELECTED FUND DATA (unaudited)
                                   ($000,000)

                               June 30,   March 31,  December 31,  September 30,
                                 1999       1999         1998          1998
                               --------   ---------  ------------  -------------
Open-End Funds:
 Beginning Assets               $1,827.1   $1,899.9    $ 1,614.3     $ 1,786.3
 Acquired Fund Assets            1,548.8        N/A          N/A           N/A
 Direct Sales                      154.8      105.1        178.7         210.0
 Direct Redemptions               (194.3)    (138.3)       (85.1)        (91.7)
 Exchanges In (Out)(1)               2.5       (8.4)         2.1          (8.5)
 Investment Activities (2)         149.2      (31.2)       189.9        (281.8)
                                --------   --------    ---------     ---------
 Ending Assets                   3,488.1    1,827.1      1,899.9       1,614.3
                                --------   --------    ---------     ---------

CLOSED-END FUNDS: (5)
 Beginning Assets                1,733.2    1,751.3      1,663.4       1,574.6
 Direct Sales (4)                   7.60       1.00         28.0          71.6
 Investment Activities (2)         (10.0)     (19.1)        59.9          17.2
                                --------   --------    ---------     ---------
 Ending Assets                   1,730.8    1,733.2      1,751.3       1,663.4
                                --------   --------    ---------     ---------

STRUCTURED FINANCE PRODUCTS: (6)
 Beginning Assets                2,166.7    2,068.3      1,896.0       1,378.5
 Increases (3)                     173.0       98.4        172.3         517.5
                                --------   --------    ---------     ---------
 Ending Assets                   2,339.7    2,166.7      2,068.3       1,896.0
                                --------   --------    ---------     ---------
 Ending Assets Under Management $7,558.7   $5,727.0    $ 5,719.5     $ 5,173.7
                                ========   ========    =========     =========
----------
(1)  Net exchanges from (to) the Company's sponsored money market fund.
(2)  Investment activities include net investment income,  realized gain/(loss),
     change  in  appreciation/(depreciation)   and  net  cash  distributions  to
     shareholders.  Investment  activities for  closed-end  funds include assets
     acquired using borrowed funds.
(3)  Includes assets accumulated in Structured Finance Product transactions that
     had not closed as of the related quarter end date. Such  transactions  were
     in the ramp up stages at those dates.
(4)  Registration statements covering securities to be issued pursuant to a Cash
     Purchase  Plan  and a  Shelf  Offering  for  Prime  Rate  Trust  (the  "PPR
     Programs")  were filed with the Securities and Exchange  Commission and are
     now effective.
(5)  The Company's  Closed-end Fund is allowed to borrow up to 33 1/3% of assets
     for investment purposes.
(6)  Structured   Finance  Products  are  capitalized   primarily  through  debt
     financing by a special purpose entity created for each product. The debt is
     typically  secured  by the  assets  of the  particular  Structured  Finance
     Product.

                                       10
<PAGE>
QUARTER ENDED JUNE 30, 1999 TO QUARTER ENDED JUNE 30, 1998

Net earnings for the June 30, 1999 quarter  amounted to $3.4 million or $.58 per
diluted share compared to net earnings of $2.7 million or $.40 per diluted share
for the quarter ended June 30, 1998.

REVENUES. Revenues for the June 30, 1999 quarter were $13.8 million, an increase
of $1.1 million or 9% over revenues for the June 30, 1998 quarter.

Management and administrative  fees, the Company's largest revenue source,  were
$7.6 million in the current quarter, an increase of $1.5 million or 25% compared
to the June 30, 1998  quarter.  These  revenues are derived  from the  Company's
open-end  and  closed-end  Funds,  which  averaged  $4.2 billion in assets under
management  during the current quarter,  an increase of $1.0 billion or 33% over
Fund assets under management in the quarter ended June 30, 1998; $680 million of
this increase was  attributable to the average net assets of NACM held since May
21, 1999.  Structured  Finance Product management fees increased $1.3 million or
62% over the  comparable  quarter  as a result  of the  increase  of  Structured
Finance  Product  month end average  assets under  management of $1.0 billion or
88%.

Distribution  fees of $2.2 million for the quarter  ended June 30, 1999 was flat
compared to the quarter ended June 30, 1998, even though Fund average net assets
which generate  distribution fee income increased $855 million or 51% during the
comparable quarters. The relatively flat distribution fee income for the periods
is  attributable to the fact that the Company sold its B Share DAC asset and the
related rights to receive 0.75% of the 1.00% annualized  distribution  fees paid
by the Funds' B Share assets  effective  September 30, 1998. The Company amended
its B Share sales  agreement  to include the B shares of the NACM Funds that the
Company acquired in May 1999. Accordingly,  no related B Share distribution fees
were recorded during the current quarter. This decrease in distribution revenues
due to the B Share  sale was  offset  in the June 30,  1999  quarter  end due to
distribution fees being received on the NACM Funds (excluding the B Shares sold)
for the period from May 21, 1999 to June 30, 1999.

Commission  revenue for the quarter ended June 30, 1999 was $81,000,  a decrease
of $1.4 million or nearly 100% compared to the June 30, 1998 quarter. Commission
revenue consists of commissions from the sales of the Company's  open-end funds,
CDSC fees earned and commissions  from the sales of shares of Pilgrim Prime Rate
Trust.  The  commissions  from open-end  funds was $56,000 for the quarter ended
June 30,  1999,  a decrease of $588,000  compared to the quarter  ended June 30,
1998.  This decrease was  attributable  to the decrease in sales of the open-end
funds,  which were $154.8  million for the June 30, 1999 quarter,  a decrease of
$204.5  million or 57% over the June 30, 1998 quarter.  The  commission  revenue
from CDSC fees was $14,000 for the quarter  ended June 30,  1999,  a decrease of
$89,000 or 86% compared to the quarter ended June 30, 1998. The decrease in CDSC
fees is due to the sale of the B Share DAC asset which  resulted in no CDSC fees
being  collected on B Share assets in fiscal 1999. The  commission  revenue from
the sales of Pilgrim Prime Rate Trust under the PPR Programs was $11,000 for the
quarter ended June 30, 1999 a decrease of $717,000 or 99% from the June 30, 1998
quarter.  The decrease in  commissions  on sales of shares of Pilgrim Prime Rate
Trust is due to a reduced market premium over net asset value during the current
period.

Investment  and other  income for the June 30,  1999  quarter  was  $562,000,  a
decrease  of $219,000 or 28% over the June 30,  1998  quarter.  The  decrease is
attributable  primarily  to three  factors.  First,  income  from the  Company's
investments in Structured Finance Products decreased by $496,000 to $123,000 for
the  quarter.  This  decrease  was a result  of the  ongoing  evaluation  of the
expected future cash flows of the Structured Finance Products, and the resulting
adjustment to the carrying value of the Structured  Finance  Products (See Notes
to Condensed Consolidated Financial Statements "Investments"). This decrease was
offset  by a gain  of  $208,000  recognized  on  the  early  termination  of the
Company's lease and related  sublease in Century City, CA. Finally,  the Company
recognized  gains of $65,000 in the current  quarter on sales of its B Share DAC
asset which the Company began selling in the current fiscal year.

                                       11
<PAGE>
EXPENSES.  Total expenses,  excluding  amortization,  depreciation  and interest
expense,  for the current quarter were $7.2 million,  an increase of $600,000 or
9% compared  to the June 30, 1998  quarter.  This net  increase in expenses  was
primarily a result of a $110,000 increase in general and administrative expenses
due to an increase in  personnel  and  compensation  and a $497,000  increase in
selling expenses due to the Company's  acquisition of the NACM Funds.  Until May
21, 1999,  the Company was reimbursed its direct  expenses of  distributing  the
NACM Funds.  The Company had entered into an agreement in January 1999 with NACM
to acquire the right to manage the NACM Funds and completed this  transaction on
May 21, 1999.  Per an agreement  with NACM dated  February 1, 1999 the Company's
broker dealer subsidiary, PSI, began distributing shares of the NACM Funds. NACM
agreed to reimburse  the Company for the direct  costs of selling  shares of the
NACM Funds up to certain  limits  based on the  expenses  incurred.  The Company
reduced its selling expenses by $1.3 million for the quarter ended June 30, 1999
for the  reimbursed  costs of  distributing  the NACM  Funds  from April 1, 1999
through May 21, 1999.

Interest  expense was $313,000 in the quarter ended June 30, 1999, a decrease of
$45,000 or 13%  compared to the quarter  ended June 30,  1998.  The  decrease in
interest expense between  quarters is primarily  attributable to the sale of the
DAC asset in December  1998. The funds received in December from the sale of the
DAC asset  were used to pay down debt  outstanding  under the  Company's  Credit
Agreement.  This decrease was partially  offset in the June 30, 1999 quarter due
to the funds that were  borrowed on May 21, 1999 to purchase the NACM Funds (see
"Liquidity").

Amortization and depreciation  expenses decreased $676,000 primarily as a result
of the sale of the B Share DAC asset.  The DAC Asset  consisted  of  commissions
paid on the sale of certain Funds  shares.  Prior to the sale of the B Share DAC
asset these  commissions  were capitalized and amortized over a six-year period.
The Company began selling C shares in conjunction  with the NACM  Acquisition in
May 1999.  The Company pays a 1%  commission to the broker for C shares sold and
amortizes these costs over 1 year.

NINE MONTHS ENDED JUNE 30, 1999 TO NINE MONTHS ENDED JUNE 30, 1998

Net  earnings for the nine months ended June 30, 1999 were $9.9 million or $1.64
per diluted  share  compared to $6.3  million or $.95 per diluted  share for the
nine months ended June 30, 1998.

REVENUES.  Revenues for the nine months ended June 30, 1999 were $38.7  million,
an increase of $9.1 million or 31% over  revenues for the nine months ended June
30, 1998.

Management  and  administrative  fees were  $21.1  million in the  current  nine
months;  an increase of $4.7  million or 29%  compared to the nine months  ended
June 30,  1998.  These  revenues  are derived  from the  Company's  open-end and
closed-end Funds,  which averaged $3.8 billion in assets under management during
the first nine months of the current fiscal year, an increase of $967 million or
35% over Fund average net assets under  management in the nine months ended June
30, 1998:  $227 million of this  increase  was  attributable  to the average net
assets of NACM held since May 21, 1999.  Structured  Finance Product  management
fees increased $6.0 million or 162% over the comparable  nine months as a result
of the increase of $1.3 billion or 164% in Structured Finance Products month end
average assets under management.

Distribution  fees of $4.7  million,  for the nine  months  ended June 30,  1999
decreased  $206,000 or 4% compared to the nine months ended June 30, 1998,  even
though fund average net assets which generate  distribution fee income increased
$701  million  or 52%  during  the  comparable  nine  months.  The  decrease  in
distribution fee income is attributable to the Company's sale of its B Share DAC
asset on December 11, 1998 and the related  rights to receive 0.75% of the 1.00%
annualized  distribution  fees paid by the Funds' B Share  assets.  The  Company
amended its B Shares  sales  agreement to include the B Shares of the NACM Funds
that  the  Company  acquired  in May  1999.  Accordingly,  no  related  B  Share
distribution  fees were recorded for fiscal 1999.  This decrease in distribution
revenues due to the B Share sale was offset in fiscal 1999 by distribution  fees
being  received on the NACM Funds  (excluding  the B Shares sold) for the period
from May 21, 1999 to June 30, 1999.

                                       12
<PAGE>
Commission  revenue for the nine  months  ended June 30,  1999 was  $407,000,  a
decrease of $1.9 million or 82% compared to the nine months ended June 30, 1998.
Commission  revenue  consists  of  commissions  from the sales of the  Company's
open-end  funds,  CDSC fees  earned and  commissions  for the sales of shares of
Pilgrim Prime Rate Trust.  The commissions  from open-end funds was $322,000 for
the nine months ended June 30, 1999, a decrease of $1.1 million  compared to the
nine months ended June 30, 1998. This decrease was attributable to a decrease in
sales of the open-end  funds which were $438.6 million for the nine months ended
June 30, 1999,  $403.6  million or 48% lower than the nine months ended June 30,
1998.  The  commission  revenue  from CDSC fees was  $14,000 for the nine months
ended June 30,  1999,  a decrease of $176,000 or 93% compared to the nine months
ended June 30, 1998. The decrease in CDSC fees is due to the sale of the B Share
DAC asset which  resulted in no CDSC fees being  collected  on B Share assets in
fiscal 1999. The  commission  revenue from the sales of Pilgrim Prime Rate Trust
under the PPR  Programs  was $71,000  for the nine months  ended June 30, 1999 a
decrease  of  $657,000  or 90% from the nine  months  ended June 30,  1998.  The
decrease in commissions on sales of shares of Pilgrim Prime Rate Trust is due to
a reduced market premium over net asset value during the current fiscal year.

Investment  and other  income for the nine  months  ended June 30, 1999 was $2.8
million,  an increase  of  $543,000  or 25% over the nine months  ended June 30,
1998.  The primary  factors  contributing  to the increase  were as follows:  1)
income from the Company's  investments in Structured  Finance Products increased
by $940,000 to $1.8 million as a result of three additional  Structured  Finance
Product investments which closed after June 30, 1998. The Company had Structured
Finance  Product  investments  of $20.3 million as of June 30, 1999 versus $10.0
million at June 30, 1998; 2) an increase of $294,000  reflecting  gains on sales
of B Share DAC assets which began in the current  year; 3) a gain of $208,000 in
the current period recognized on the termination of the Century City lease; 4) a
decrease of $720,000 due to the gain the Company  recognized  on the sale of its
investments  in the Pilgrim  Funds made in prior  periods;  and 5) a decrease of
$211,000 in dividend income on the Company's investments in those Funds.

EXPENSES.  Total expenses,  excluding  amortization,  depreciation  and interest
expense,  for the nine months ended June 30, 1999 were $19.8 million an increase
of $4.5 million or 29%  compared to the nine months  ended June 30,  1998.  This
increase  was  primarily  a result of a $3.2  million  increase  in general  and
administrative expenses due to an increase in personnel and compensation, a $1.3
million  increase  in selling  expenses  primarily  related to a increase in the
Company's  sales and  marketing  costs in the nine  months  ended June 30,  1999
reduced by expense  reimbursements due to the Company for distributing shares of
the NACM Funds from February 1, 1999 until May 21, 1999 when the NACM Funds were
purchased by the Company.  The Company entered into an agreement  during January
1999 with NACM to acquire  the right to manage the NACM Funds and as of February
1, 1999 the Company's broker dealer subsidiary,  PSI, began distributing  shares
of the NACM Funds.  NACM agreed to reimburse the Company for the direct costs of
selling  shares of the NACM Funds up to  certain  limits  based on the  expenses
incurred.  The Company reduced its selling expenses by $2.3 million for the nine
months ended June 30, 1999 for the  reimbursed  costs of  distributing  the NACM
Funds from February 1, 1999 through May 21, 1999.

Interest expense was $647,000 for the nine months ended June 30, 1999 a decrease
of $103,000 or 14% compared to the nine months ended June 30, 1998. The decrease
in interest expense between the comparable periods is primarily  attributable to
the sale of the DAC asset in December  1998.  The Company was  reimbursed by the
purchaser  of the DAC asset for the interest  expense that the Company  incurred
related to  borrowings  between the  effective  date of the sale,  September 30,
1998, and the date the funds were received at the closing of the  transaction in
December  1998.  The funds  received in December  from the sale of the DAC asset
were used to pay down debt  outstanding  under the Company's  Credit  Agreement.
This  decrease was  partially  offset due to the funds that were borrowed on May
21, 1999 to purchase the NACM Funds (see "Liquidity").

Amortization and  depreciation  expenses  decreased $1.4 million  primarily as a
result  of the  sale of the B  Share  DAC  asset.  The DAC  asset  consisted  of
commissions paid on the sale of certain Funds' shares.  Prior to the sale of the
B share DAC asset  these  commissions  were  capitalized  and  amortized  over a
six-year period. The Company began selling C shares in conjunction with the NACM
Acquisition  in May 1999.  The Company pays a 1%  Commission to the broker for C
shares sold and amortizes these costs over 1 year.

                                       13
<PAGE>
LIQUIDITY

The Company's  principal  liquidity  needs arise in connection  with general and
administrative  expenses,  selling expenses,  including  commissions paid by the
Company in connection with the sale of Fund shares,  and investments made by the
Company in connection with the management of Structured  Finance  Products.  The
Company  also  purchases  shares of its common stock  pursuant to  authorization
given by its board of directors.  The Company's  principal  sources of liquidity
and capital resources include cash flow from operations and borrowings available
under a $75 million credit agreement ("the Credit Agreement").  During the first
nine months of fiscal 1999, the Company's  operations  provided net cash of $5.3
million  and the  Company  used  $27.6  million  of net  cash  in its  investing
activities,  including $25.5 million  invested on May 21, 1999 in the management
contracts of NACM, and $4.0 million used for the Company's equity  investment in
a new  Structured  Finance  Product  asset  which was  partially  offset by $2.1
million  in  principal   distributions   received  by  the  Company  from  these
investments.  The Company had a net increase in cash from financing activity due
to the $34.1 million  received from the ongoing sales of the DAC asset offset by
$9.7 million in purchases of the  Company's  stock and an increase in borrowings
of $668,000.

One of the Company's  principal  uses of cash is the payment of  commissions  in
connection  with the sale of B Shares.  Such costs are capitalized as DAC assets
and are recovered  through  distribution  fees and CDSC fees received from the B
Share assets.  On December 11, 1998, the Company sold its September 30, 1998 DAC
asset for $26.5  million and agreed to sell any DAC assets  generated  through B
Share sales through  November 1999, (B Share Sales  Agreement")  with a right of
first  refusal  on a  two-year  extension  thereafter.  In May 1999 the  Company
amended  the B Shares  Sales  Agreement  to  include  future  sales of the newly
acquired  NACM  Funds' B shares  to  increase  the B shares  sales  limit to $50
million,  and to extend the initial term to November  2000. The purchaser of the
DAC asset is entitled to 0.75%,  annualized,  in  distribution  fees paid from B
Share  assets  and all CDSCs  received  from any  redemptions  of the  related B
Shares.  If the  Company's B Shares Sales  Agreement  expires and the Company is
unable to sell its DAC assets or to borrow to fund  commissions,  the  Company's
ability  to  finance  the  continued  sale of  open-end  Fund B Shares  could be
adversely effected.

The  Company  uses a  significant  portion  of its cash to invest in  Structured
Finance  Products  that it  manages.  The  Company  may be required to invest an
agreed upon  percentage in each new Structured  Finance  Product on the date the
transaction  closes. If the Company was unable to generate funds from operations
or to borrow  funds needed to invest in new  Structured  Finance  Products  this
could have an adverse  effect on the Company's  ability to continue to close and
manage  additional  Structured  Finance Product assets.  As of June 30, 1999 the
Company had $20.3 million invested in Structured Finance Products.

The Company  intends to continue  funding its investment  management  operations
with cash provided by operations and with  borrowings  obtained under the Credit
Agreement.  The Company's  Credit  Agreement was amended and restated on May 21,
1999, and allows the Company or the Company's  wholly owned  subsidiary  Pilgrim
Group,  Inc.  ("PGI") to borrow up to $25 million in term debt ("Term Debt") and
$50  million in  revolving  loans  ("Revolver").  The Term Debt was used for the
purchase of the NACM Funds and has a four-year repayment schedule.  The Revolver
can be used  for  various  purposes  including  (i)  general  corporate  working
capital; (ii) acquisition of investment management contracts; (iii) financing of
commissions  paid by the Company in connection with sales of Fund shares subject
to a contingent deferred sales charge, (iv) financing Structured Finance Product
investments  and  (v)  repurchasing   Company  stock.  The  agreement   contains
restrictive  covenants  which  require PGI and the  Company to maintain  certain
financial ratios and prohibits certain "restricted payments" including dividends
by the Company to its  shareholders.  Borrowings  under the Credit Agreement are
collateralized  by a pledge by the  Company of the stock of PGI,  by a pledge of
PGI of the stock of its wholly owned subsidiaries, by a security interest in the
assets  of the  Company,  PGI  and  PGI's  wholly  owned  subsidiaries,  Pilgrim
Investments,  Inc. ("PII") and Pilgrim  Securities,  Inc., and by a guarantee by
PGI's wholly owned subsidiary, PII.

                                       14
<PAGE>
At June 30, 1999 the Company had  approximately  $24.1  million in Term Debt and
$7.0 million in Revolver  debt  outstanding  under the Credit  Agreement and had
approximately $43.0 million additional borrowings available.

On August 5, 1997, the Company's  Board of Directors  approved  purchasing up to
750,000   shares  of  its  common  stock  from  time  to  time  in  open  market
transactions.  The Company may use cash generated from  operations or borrowings
obtained under the Credit Agreement to purchase the shares. As of June 30, 1999,
the Company had purchased  729,150  shares  pursuant to this  authorization.  In
August 1998, the Company's Board of Directors approved the purchase from time to
time of an additional 500,000 shares of common stock.

SUBSEQUENT EVENT

On July 22, 1999 the Company  entered  into a merger  agreement  with  ReliaStar
Financial Corp. and its wholly owned subsidiary,  Northstar Holdings,  providing
for the merger of the Company with and into Northstar.

Under the terms of the merger  agreement,  upon  consummation of the merger each
outstanding Pilgrim Share will be converted into the right to receive .50 shares
of  ReliaStar  common  stock plus  $12.50 in cash  subject  to certain  possible
adjustments. The merger agreement contemplates that the merger will be accounted
for  under  the  purchase  method  of  accounting  and  will be tax  free to the
Company's  stockholders  as to the shares of  ReliaStar  common  stock that they
receive.  Consummation  of  the  merger  is  subject  to  customary  conditions,
including approval by the Company's stockholders.

YEAR 2000

Many  existing  computer  programs only use two digits to identify a year in the
date field. The change from 1999 to 2000 may cause many computer applications to
fail or create erroneous results. The endeavor to correct this year 2000 problem
has commonly become known as Y2K and affects virtually all companies.

The  Company  is  working  to ensure  that its  information  technology  systems
("systems")  will, along with those of its third party service providers ("third
parties" or "third  party"),  continue to function  properly upon the arrival of
the year 2000. The Company has developed and is implementing a comprehensive Y2K
plan (the "plan") to complete all internal system upgrades or conversions by the
fourth quarter of fiscal 1999. A significant part of the plan involves upgrading
hardware  and  software to newer  versions  that have been  certified  to be Y2K
compliant.  To date, most of the Company's current hardware and software systems
have  been  certified,  by the  manufacturers,  as Y2K  compliant.  Based on the
Company's  plan, it is estimated that  incremental  expenses for the Y2K project
will not  have a  material  impact  on the  Company's  operations  or  financial
results. To date, the Company has spent approximately  $817,000 on upgrading its
hardware and software systems to those that are Y2K compliant and to accommodate
the Company's growth.  The Company estimates that the remaining cost to complete
the implementation of the plan will be between $50,000 and $200,000. The Company
will use its own cash or to the extent  available borrow from its line of credit
for any Y2K expenditure.  It is the Company's policy to capitalize all costs for
hardware  and  software  that have a useful life of over  one-year.  The cost of
these assets will be depreciated  based on the estimated  useful life. Costs for
remediation and testing are expensed as incurred.

The Company is  measuring  its progress by  following  the three  action  phases
outlined in its plan:  Assessment,  Remediation/Implementation  and Testing. The
Assessment  phase included  completing an inventory of all-internal and external
systems,  office  equipment,  third  party  dependencies,  physical  facilities,
business issues and creating a budget and strategy to address the Y2K issue. The
Remediation/Implementation  phase includes  upgrading or replacing  hardware and
software systems,  issuance of Company  statements of Y2K readiness,  compliance
with regulatory disclosure  requirements,  development of a Y2K contingency plan
and contacting and monitoring third parties.  The Testing phase includes several
levels  of  testing  some  of which rely upon  third  parties.  The Company must

                                       15
<PAGE>
test internal  systems on a stand-alone  basis and also complete  point-to-point
testing  with some third  parties.  Additionally,  the  Company  will obtain the
results of certain  third party  testing that will be conducted on behalf of the
Company and its affiliates on an industry wide basis. The table below summarizes
the status of the Company's Y2K readiness.

                             STATUS OF Y2K READINESS

                                    % Completed
    Y2k Plan Phase               As of July 1, 1999       Completion Target Date
    --------------               ------------------       ----------------------
   Assessment                           100%                     01/31/99
   Remediation/Implementation            99%                     09/30/99
   Testing                               95%                     10/31/99

The Company's core business  activities are highly  dependent upon certain third
parties that are classified as Y2K "mission  critical".  A failure of any single
mission  critical  third party or  combination  of parties  could  likely have a
material  negative  impact to the Company'  ability to conduct its business.  As
part of its plan,  the  Company  has been  monitoring  the Y2K  progress of such
mission critical third parties. To date based upon written disclosures  provided
by such third parties,  the Company has not received any significant  indication
that a mission critical third party will likely experience a Y2K failure.

Below is a  summary  table  that  sets  forth  the most  current  Y2K  status as
disclosed by certain of the Company's mission critical third parties:

                    MISSION CRITICAL THIRD PARTY - Y2K STATUS

Third Party                      Current Status                      Last Update
-----------                      --------------                      -----------

Fund Transfer Agent    The five major systems of the Transfer Agent      6/99
                       system are Y2K ready. Testing of contingency
                       plan will continue through 1999.

Fund Custodian         The information technology (IT) applications:     6/99
                          Correction                   99% complete
                          Testing & Implementation     99% complete

                       Ninety three percent (93%) of the sub-custodian   6/99
                       net work has been assessed to have a "high
                       degree" of Y2K readiness.

Fund Accounting Agent  Achieved goal of Y2K readiness production         6/99
                       environment by 12/98. Testing will continue
                       throughout 1999.

Communication Vendors  Both vendors have remediation and renovation      7/99
                       well under way.

Electrical Vendor      All IT and non IT systems have been inventoried.  6/99
                       All renovations are scheduled for completion by
                       mid 1999.

Corporate Banker       Systems are compliant. Testing continues          4/99
                       through mid-1999

The Company is  developing a  contingency  plan with the  objective of providing
reasonable  alternatives  to  systems,  third  party  vendors,   facilities  and
procedures  enabling  the Company to conduct  its core  business  operations  if
confronted  with a Y2K  failure.  The  scope of the  contingency  plan  includes
mission critical systems,  physical  facilities and the Company's  communication
systems. The contingency plan will provide the Company guidance should it or any
of the  Company's  primary third party  providers  fail to meet its goals and be
Year 2000  compliant  and includes an alternate  vendor list for its third party
mission critical providers. The Company has determined that even though it has a
list of alternative  vendors  selected,  it cannot ensure that these  alternates
will be Y2K ready or have the  wherewithal to accept the Company  business.  The

                                       16
<PAGE>
Company has also  determined  that there are some third party  mission  critical
vendors that do not have an alternate source.  The Company relies heavily on its
third  party  mission  critical  systems  to  conduct  its  day to day  business
operations  and to the extent that its  contingency  plan fails,  the  Company's
financial condition may be adversely effected.

The Company's ability to manage the Y2K issue is subject to uncertainties beyond
its  control  and actual  results  could  differ  materially  from what has been
discussed  above.  There are several factors that could effect the Y2K issue for
the Company,  including;  the success of the Company in identifying  systems and
programs  that are affected by Y2K; the amount and nature of testing on internal
and external  systems  that is  required:  the  installation,  programming,  and
systems work related to  upgrading or replacing  each of the affected  programs;
the cost,  magnitude and  availability  of labor and  consulting to complete the
required  Y2K  projects and the success of the  Company's  external  third party
providers and other industry or  governmental  entities in addressing  their Y2K
issues and assessing their risks.

The failure of the Company, the Company's mission critical third party providers
or other  industry or  governmental  entities to resolve Y2K issues could have a
material  adverse affect on the Company's  business,  financial  condition,  and
results of  operations.  The Company  could  become the subject of legal  claims
regarding its inability to operate its business due to Y2K failures by it or any
of its mission  critical third party  vendors.  The Company is also regulated by
several governmental  agencies that may decide to impose fines or sanctions that
could  adversely  effect the  Company's  ability to do business or in some cases
require the Company to cease  operations.  The Company  could also  experience a
decline in assets under  management  if investors in its Funds become  concerned
about the Y2K problem and withdraw their investments.  A decline in assets under
management would have an adverse effect upon the Company's  business,  financial
condition and results of operations.

FORWARD LOOKING STATEMENT

When  used in this  Form  10-Q and in future  filings  by the  Company  with the
Securities  and  Commission,  in  the  Company's  press  releases  and  in  oral
statements made with the approval of an authorized  executive officer, the words
or phrases,  "will likely  result",  "are expected  to",  "will  continue",  "is
anticipated",  "estimate",  "project",  or similar  expressions  are intended to
identify  "forward  looking"  statements,  within  the  meaning  of the  Private
Securities  Litigation  Reform  Act of  1995.  All  assumptions,  anticipations,
expectations and forecasts  contained herein are forward looking statements that
involve risks and  uncertainties.  Discussions  in  Management's  Discussion and
Analysis  about the  Company's  estimated  completion  dates  for  phases of the
Company's  Year 2000 plan,  related cost  estimates,  statements  about possible
effects of the year 2000 problem and related contingency plans are also "forward
looking"   statements.   Such  statements  are  subject  to  certain  risks  and
uncertainties  that  could  cause  actual  results  to  differ  materially  from
historical  earnings and those presently  anticipated or projected.  The Company
cautions  readers  not to  place  undue  reliance  on any  such  forward-looking
statements,  which  speak  only as of the  date,  made,  and  should  be read in
conjunction with the risk disclosures. The Company wishes to advise readers that
the  factors  in the Year  2000  discussed  above  could  affect  the  Company's
financial  performance  and could cause the Company's  actual results for future
periods to differ  materially  from any opinions or  statements  expressed  with
respect to future periods in any current statements.

The Company will not  undertake  and  specifically  declines any  obligation  to
release  publicly  the  result  of  any  revisions  which  may  be  made  to any
forward-looking  statements to reflect events or circumstances after the date of
such  statements or to reflect the occurrence of  anticipated  or  unanticipated
events.

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<PAGE>
                                 PART II - OTHER
                                   INFORMATION


ITEMS 1 THROUGH 5 ARE NOT APPLICABLE AND HAVE BEEN OMITTED.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

     (a)  Exhibits

          10.1  The Fourth Amended and Restated Credit Agreement by and between
                the Company and US Bank National Association dated as of May 21,
                1999

          27.0  Financial Data

     (b)  Reports on Form 8-K.

          The Company  filed one report on Form 8-K on July 28,  1999  reporting
          the execution of a plan and agreement of merger reached with ReliaStar
          Financial Corp. to acquire the Company.


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<PAGE>
                                   SIGNATURES

     Pursuant to the  requirements of Section 13 of the Securities  Exchange Act
of 1934,  the  Company has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.


                                       PILGRIM CAPITAL CORPORATION


Date: August 13, 1999                  /s/ James R. Reis
                                       -----------------------------------------
                                       James R. Reis
                                       Vice-Chairman and Chief Financial Officer
                                       (Principal Accounting Officer)


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