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, 1998
                         Commission File Number 0-19799


                       PILGRIM AMERICA 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)


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

         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.



          5,747,677 Shares of Common Stock outstanding on July 31, 1998
          -------------------------------------------------------------
<PAGE>
                                      INDEX



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

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

               (b) Notes to Condensed Consolidated Financial Statements.....  6

      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............................ 13

      Signatures............................................................ 14



                                        2
<PAGE>
        ITEM 1. FINANCIAL STATEMENTS


        PILGRIM AMERICA CAPITAL CORPORATION
        CONDENSED CONSOLIDATED BALANCE SHEETS
        (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)


                                                      June 30,     September 30,
                                                        1998           1997
--------------------------------------------------------------------------------
ASSETS
  Cash and cash equivalents                          $  1,159        $    219
  Investments                                          10,048           3,127
  Accounts receivable                                     625             458
  Notes receivable                                      4,070           3,976
  Costs assigned to management contracts acquired,
  less accumulated amortization of $4,201 and $3,233   28,062          29,030
  Furniture, fixtures and equipment, less
  accumulated depreciation of $517 and $370               884             532
  Deferred taxes                                        2,410           6,420
  Deferred acquisition costs, less accumulated
  amortization of $2,430 and $772                      23,059           5,891
 Other assets                                           2,487             994
                                                     --------        --------
TOTAL ASSETS                                         $ 72,804        $ 50,647
                                                     ========        ========
--------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
  Net liabilities of discontinued operations         $    510        $    230
  Notes payable                                        21,525           5,475
  Accrued compensation                                  2,044           1,285
  Accounts payable and accrued expenses                 2,038           1,904
                                                     --------        --------
Total liabilities                                      26,117           8,894
                                                     --------        --------
Stockholders' equity:
Common stock, $.01 par value, 10,000,000 shares
  authorized, 8,079,922 and 8,076,022 shares issued
  with 5,747,677 and 5,799,495 shares outstanding
  at June 30, 1998 and September 30, 1997                  81              54
Less: Treasury stock, 2,332,245 and 2,276,527 shares
  at June 30, 1998 and September 30, 1997              (9,376)         (8,623)
Additional paid-in capital                             48,781          48,795
Unrealized gain (loss) on investments, net of tax         (49)            538
Retained earnings                                       7,250             989
                                                     --------        --------
Total stockholders' equity                             46,687          41,753
                                                     --------        --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY           $ 72,804        $ 50,647
                                                     ========        ========
--------------------------------------------------------------------------------

     See accompanying notes to condensed consolidated financial statements.

                                       3
<PAGE>
PILGRIM AMERICA CAPITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT SHARES AND  PER SHARE AMOUNTS)

--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                            Three months ended         Nine months ended
                                                 June 30,                  June 30,
                                            1998         1997          1998         1997
                                         -----------------------    ----------------------
<S>                                      <C>          <C>          <C>          <C>
Revenue:
  Management and administrative fees     $    6,128   $    4,456   $   16,410   $    12,630
  Private account management fees             2,083           --        3,736            --
  Distribution fees                           2,243          656        4,923         1,675
  Commissions                                 1,475          125        2,290           389
  Investment and other income                   781          457        2,213           731
                                         ----------   ----------   ----------   -----------
         Total revenue                       12,710        5,694       29,572        15,425
                                         ----------   ----------   ----------   -----------
Expense:
  General and administrative                  3,793        1,915        8,689         5,438
  Selling                                     2,761        1,212        6,590         3,667
  Interest expense                              358          112          750           380
  Amortization and depreciation               1,235          571        2,857         1,668
                                         ----------   ----------   ----------   -----------
         Total expense                        8,147        3,810       18,886        11,153
                                         ----------   ----------   ----------   -----------
Earnings from continuing operations
before tax                                    4,563        1,884       10,686         4,272

Income tax (benefit)                          1,884          773        4,425        (5,815)
                                         ----------   ----------   ----------   -----------

Earnings from continuing operations           2,679        1,111        6,261        10,087
                                         ----------   ----------   ----------   -----------
Earnings from operations of
discontinued mortgage business,
net of tax                                       --          413           --           413
                                         ----------   ----------   ----------   -----------

Net earnings                             $    2,679   $    1,524   $    6,261   $    10,500
                                         ==========   ==========   ==========   ===========
Earnings per Common and
Common Equivalent Share

Basic:
  Earnings  from continuing operations   $     0.47   $     0.19   $     1.09   $      1.74
                                         ==========   ==========   ==========   ===========
  Net earnings                           $     0.47   $     0.26   $     1.09   $      1.81
                                         ==========   ==========   ==========   ===========
  Shares used in per share calculation    5,745,056    5,799,195    5,769,332     5,799,195
                                         ==========   ==========   ==========   ===========
Diluted:
  Earnings  from continuing operations   $     0.40   $     0.17   $     0.95   $      1.64
                                         ==========   ==========   ==========   ===========
  Net earnings                           $     0.40   $     0.24   $     0.95   $      1.71
                                         ==========   ==========   ==========   ===========
  Shares used in per share calculation    6,689,529    6,350,117    6,579,967     6,147,090
                                         ==========   ==========   ==========   ===========
</TABLE>
--------------------------------------------------------------------------------
See accompanying notes to condensed consolidated financial statements.

                                       4
<PAGE>
PILGRIM AMERICA CAPITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)

                                                            For the Nine Months
                                                               Ended June 30,
--------------------------------------------------------------------------------
                                                             1998         1997
--------------------------------------------------------------------------------

CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings                                               $  6,261    $ 10,500
Adjustments to reconcile net earnings to net cash
 used in operating activities:
  Amortization and depreciation                               2,839       1,668
  Gain on sale of investments                                  (720)         --
  Increase  in accounts receivable                             (261)       (466)
  Increase (decrease) in operating liabilities                  893      (3,088)
  Increase in deferred acquisition costs due to
   subscriptions                                            (19,438)     (3,456)
  Decrease in deferred acquisition costs due to
   redemptions                                                  534         169
  (Increase) decrease in deferred tax asset                   4,402      (5,831)
  Increase  in other operating assets                        (1,493)       (295)
                                                           --------    --------
Net cash used in operating activities                        (6,983)       (799)
                                                           --------    --------
--------------------------------------------------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES
  Investment in Pilgrim America Funds                          (709)        (88)
  Proceeds from sale of  Pilgrim America Funds                3,047          --
  Other investments purchased                                (9,500)         --
  Sales of furniture, fixtures and equipment                      9          12
  Purchases of furniture, fixtures and equipment               (514)        (35)
  Cash provided by (used in) discontinued operations            280      (2,103)
                                                           --------    --------
Net cash used in investing activities                        (7,387)     (2,214)
                                                           --------    --------
--------------------------------------------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES
  Repurchase of treasury stock                                 (753)         --
  Cash payment of partial shares for stock split                 (2)         --
  Proceeds from purchase of stock options                        15          35
  Term debt borrowing                                        16,050       2,975
                                                           --------    --------
  Net cash provided by  financing activities                 15,310       3,010
                                                           --------    --------
  Net increase (decrease)  in cash and cash equivalents         940          (3)
  Cash and cash equivalents, beginning of period                219         238
                                                           --------    --------
CASH AND CASH EQUIVALENTS, END OF PERIOD                   $  1,159    $    235
                                                           ========    ========
--------------------------------------------------------------------------------

SUPPLEMENTAL DISCLOSURES
  Interest paid                                            $    461    $    372
  Income taxes paid                                              24          95
  Disposal of fixed assets                                       --         583

--------------------------------------------------------------------------------

See accompanying notes to condensed consolidated financial statements.

                                       5
<PAGE>
                       PILGRIM AMERICA 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 America  Capital  Corporation  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 nine months  ended June 30, 1998 are not  necessarily
indicative  of the  results  which may be  expected  for the fiscal  year ending
September  30,  1998.  For  additional  information,  refer to the  consolidated
financial  statements  for the fiscal  year ended  September  30, 1997 which are
included in the Company's Form 10-K.

The condensed  consolidated  financial  statements  include the Company's wholly
owned  subsidiary,  Pilgrim America Group,  Inc.  ("PAG") and PAG's wholly owned
subsidiaries, Pilgrim America Investments,  Inc.("PAI"), a registered investment
advisor,   and  Pilgrim   America   Securities,   Inc.,("PAS"),   a   registered
broker/dealer  (collectively  "Pilgrim  America").  The  condensed  consolidated
financial  statements also include the Company's  wholly-owned  mortgage banking
subsidiaries,  Express America TC, Inc., EAMC Liquidation  Corp.  ("EAMC"),  and
EAMC's  wholly-owned  subsidiaries,   Wesav  Investment  Corporation  and  Wesav
Investment Inc.-2.

The  activities  of  the  Company  consist  primarily  of  providing  investment
management and related  services to various  open-end and closed-end  investment
companies  operating  under the Pilgrim and Pilgrim America names (the "Funds").
The Company also is providing  management  services  for  institutional  private
accounts.  The  results of  operations  reported in the  condensed  consolidated
financial statements reflect these investment management activities.

Costs Assigned to Management  Contracts  Acquired.  Costs assigned to management
contracts acquired represent the fair value of the investment  management rights
acquired  through the acquisition in April 1995 of such  management  contracts (
the  "Acquisition")  and  also  represents  the  excess  of the  purchase  price
(including  liabilities  assumed) over the fair value of net assets acquired and
resulting  costs from the  Acquisition.  These amounts are being  amortized on a
straight-line basis over 25 years.

The  Company  periodically  analyzes  costs  assigned  to  management  contracts
acquired to determine  whether any impairment in value has occurred.  Based upon
anticipated  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 4.0% to
authorized  broker-dealers at the time that Fund shares with contingent deferred
sales charges are sold.  These  payments are  capitalized  and amortized  over a
six-year period,  which is the period during which the contingent deferred sales
charge is effective.

The Company periodically analyzes the recoverability of its Deferred Acquisition
Costs ("DAC Asset") by comparison of the carrying  amount of the net future cash
flows to be received. If necessary, a valuation allowance is recorded to reflect
the difference between the carrying amount and the estimated future cash flows.

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


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.  A valuation
allowance is then  established  to reduce the deferred tax asset to the level at
which it is "more likely than not" that the tax benefits  will be realized.  The
Company  recorded  an income tax benefit  during the nine months  ended June 30,
1997 as a result  of a  change  in the  valuation  allowance  for the  Company's
deferred  tax  asset.  The  change  in the  valuation  allowance  resulted  from
management's determination that it is more likely than not that the deferred tax
asset will be realized.

Net  Earnings  Per Common  Share.  Effective  December  31,  1997,  the  Company
implemented  Financial  Accounting  Standard No. 128 "Earnings per Share".  This
statement  provides  accounting  and reporting  standards for earnings per share
("EPS"),  simplifies the requirement for calculating EPS, and is compatible with
international accounting standards.  This statement replaces the presentation of
primary  EPS with a  presentation  of basic EPS.  The  statement  requires  dual
presentation  of  basic  and  diluted  EPS  by  entities  with  complex  capital
structures.  Basic EPS includes no dilution  and is computed by dividing  income
available to common stockholders by the weighted average number of common shares
outstanding  for the period.  Diluted EPS  reflects  the  potential  dilution of
securities  that could share in the  earnings  of any  entity,  similar to fully
diluted EPS.

EPS for prior  periods  have been  restated  to conform to the  requirements  of
Statement No. 128.

Additionally, the shares outstanding and the net EPS per share data reported for
the quarter  and nine months  ended June 30,  1997,  have been  restated to give
retroactive recognition to a 50% stock dividend accounted for as a 3 for 2 stock
split that occurred in the third quarter of Fiscal 1998.

                                       7
<PAGE>

The following is a reconciliation  of the basic and diluted EPS computations for
the three months ended June 30, 1998 and June 30, 1997:
<TABLE>
<CAPTION>
                                                                 June 30,       June 30,
                                                                  1998           1997
                                                                  ----           ----
                                                                (amounts in thousands,
                                                               except per share amounts)

<S>                                                             <C>             <C>   
Earnings for basic and diluted EPS from continuing operations    $2,679          $1,111
                                                                 ======          ======
Net earnings for basic and diluted EPS                           $2,679          $1,524
                                                                 ======          ======
Shares of common stock and common stock equivalents:
   Average number of common shares used in basic computation      5,745           5,799
   Effect of dilutive securities - options                          945             551
                                                                 ------          ------ 
   Average shares used in diluted                                 6,690           6,350
                                                                 ======          ======
Earnings per share from continuing operations:
   Basic                                                         $ 0.47          $ 0.19
   Diluted                                                       $ 0.40          $ 0.17

Net earnings per share:
   Basic                                                         $ 0.47          $ 0.26
   Diluted                                                       $ 0.40          $ 0.24

The following is a reconciliation  of the basic and diluted EPS computations for
the nine months ended June 30, 1998 and June 30, 1997:

                                                                 June 30,       June 30,
                                                                  1998           1997
                                                                  ----           ----
                                                                (amounts in thousands,
                                                               except per share amounts)

Earnings for basic and diluted EPS from continuing operations    $6,261         $10,087
                                                                 ======         =======
Net earnings for basic and diluted EPS                           $6,621         $10,500
                                                                 ======         =======
Shares of common stock and common stock equivalents:
   Average number of common shares used in basic computation      5,769           5,799
   Effect of dilutive securities - options                          811             348
                                                                 ------         ------- 
   Average shares used in diluted                                 6,580           6,147
                                                                 ======         =======
Earnings per share from continuing operations:
   Basic                                                         $ 1.09         $  1.74
   Diluted                                                       $ 0.95         $  1.64

Net earnings per share:
   Basic                                                         $ 1.09         $  1.81
   Diluted                                                       $ 0.95         $  1.71
</TABLE>

Private   Accounts   Management  Fees  As  of  June  30,  1998  Company  managed
approximately  $1.4 billion of assets in structured  finance products  ("Private
Accounts")  including  assets under  management  during the ramp up period.  The
Company earns a management fee on these assets,  and the Company may be entitled
to an additional  performance fee. As part of the transactions,  the Company has
acquired a $10 million equity investment in these Private Accounts.

                                       8
<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 seven open-end and one
closed-end fund (each a "Fund" and  collectively  the "Pilgrim America Funds" or
the "Funds").  The Company also manages assets in Private Accounts.  The Company
closed its third Private Account  transaction on July 8, 1998 with approximately
$312  million  in  assets.  The  Company  acquired  $5 million in equity in this
Private Account.

RESULTS OF OPERATIONS

The following table presents  comparative  quarterly data regarding assets under
management and Fund sales for the four quarters ended June 30, 1998:
<TABLE>
<CAPTION>
                                                        PILGRIM AMERICA FUNDS
                                                          SELECTED FUND DATA
                                                               ($000,000)
                                ---------------------------------------------------------------------------
                                JUNE 30, 1998    MARCH 31, 1998   DECEMBER 31, 1997 (1)  SEPTEMBER 30, 1997
                                -------------    --------------   ---------------------  ------------------
<S>                              <C>                <C>                <C>                  <C>     
OPEN-END FUNDS:
  Beginning Assets               $1,508.1           $1,153.3           $  676.0             $  600.0
  Direct Sales                      359.3              307.8              175.1                 66.3
  Direct Redemptions                (51.9)             (48.9)             (62.9)               (22.0)
  Exchanges In (Out)(2)               4.1               (4.1)             353.2                  5.9
  Investment Activities (3)         (33.3)             100.0               11.9                 25.8
                                 --------           --------           --------             --------
  Ending Assets                   1,786.3            1,508.1            1,153.3                676.0

CLOSED-END FUNDS:
  Beginning Assets                1,473.2            1,453.8            1,702.0              1,688.9
  Direct Sales (5)                   71.5               --                 --                   --
  Exchanges In (Out)(2)              --                 --               (354.2)                --
  Investment Activities (3)          29.9               19.4              106.0                 13.1
                                 --------           --------           --------             --------
  Ending Assets                   1,574.6            1,473.2            1,453.8              1,702.0

PRIVATE ACCOUNTS:
  Beginning Assets                  870.0              587.3              230.5                 --
  Sales (4)                         508.5              282.7              356.8                230.5
  Investment Activities (3)          --                 --                 --                   --
                                 --------           --------           --------             --------
  Ending Assets                   1,378.5              870.0              587.3                230.5
                                 --------           --------           --------             --------
Ending Assets Under Management   $4,739.4           $3,851.3           $3,194.4             $2,608.5
                                 ========           ========           ========             ========
</TABLE>
(1)  The   shareholders  of  Pilgrim  America  Bank  and  Thrift  Fund  approved
     converting the Fund from a closed-end Fund to an open-end Fund at a meeting
     on October 31, 1997.
(2)  Net exchanges from (to) the Company's  sponsored  money market fund and the
     conversion  of Pilgrim  America Bank and Thrift Fund to an open-end Fund in
     October 1997.
(3)  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.
(4)  The Private Account activity  includes assets under  management  during the
     period assets were being accumulated.
(5)  Registration statements covering securities to be issued pursuant to a Cash
     Purchase  Plan  and a  Shelf  Offering  for  Prime  Rate  Trust  (the  "New
     Programs") have been filed with the Securities and Exchange  Commission and
     became effective in May 1998.
                                       9
<PAGE>

Quarter Ended June 30, 1998 compared to the Quarter Ended June 30, 1997

Net earnings for the June 30, 1998 quarter amounted to $2.7 million or $0.40 per
diluted share compared to net earnings of $1.5 million or $.24 per diluted share
for the quarter ended June 30, 1997.  Net earnings for the June 30, 1997 quarter
consisted  of  earnings  from the  Company's  continuing  investment  management
business of $1.1  million,  or $.17 per diluted  share,  and  earnings  from the
operations of the discontinued mortgage business of $413,000 or $.07 per diluted
share.

REVENUE.  Revenue for the June 30, 1998  quarter  increased by $7.0 million over
revenue for the June 30, 1997 quarter.

Net management and  administrative  fees, the Company's  largest revenue source,
increased  $1.7  million in the  current  quarter  compared to the June 30, 1997
quarter.  Private Account  management fees increased $2.1 million in the current
quarter  compared to the June 30, 1997 quarter  during which the Company had not
yet begun to engage in Private Account management. Management and administrative
fees and Private Account  management  fees are based on assets under  management
which averaged $4.2 billion during the current  quarter and $ 2.2 billion during
the June 30, 1997 quarter.

The  conversion of the Pilgrim  America Bank and Thrift Fund to an open-end Fund
in October  1997,  along with higher sales of open-end  Funds during the current
quarter as  compared  to the June 30,  1997  quarter  resulted in an increase in
distribution fees of $1.6 million.  Distribution fees are realized from the sale
of certain Fund shares.

During the  quarter  ended June 30,  1998 the Company  began  selling  shares of
Pilgrim  America Prime Rate Trust under the New Programs.  The sales  commission
received  from the sale of  these  shares  along  with  the  increased  sales of
open-ended  Fund shares  during the current  quarter as compared to the June 30,
1997 quarter resulted in an increase in commission revenue of $1.4 million.

Investment and other income for the June 30, 1998 quarter increased by $324,000,
primarily  from  interest  income  earned on the new equity  investments  in the
Private Accounts.

EXPENSE.  Total  expense,  excluding  amortization,  depreciation  and  interest
expense,  for the current quarter increased by $3.4 million compared to the June
30,  1997  quarter.  This  increase  in  expenses  was  primarily a result of an
increase  in general  and  administrative  expenses  of $1.9  million  due to an
increase in personnel and  compensation  and a $1.5 million  increase in selling
expenses primarily due to increased Fund share sales.

Interest  expense  increased  $246,000 for the current  quarter  compared to the
quarter  ended June 30, 1997  primarily  due to increase in  borrowings of $15.0
million. (See Liquidity).

Amortization  and  depreciation  expenses  increased by $664,000  primarily as a
result  of an  increase  in the  amortization  of  deferred  acquisition  costs.
Deferred  acquisition  costs are  commissions  paid on the sale of certain  Fund
shares. These commissions are capitalized and amortized over a six-year period.

EARNINGS FROM  DISCONTINUED  OPERATIONS,  NET OF TAX. Earnings from discontinued
operations,  net of tax,  had no  activity  affecting  earnings  for the current
quarter  compared to  contribution to earnings of $413,000 for the quarter ended
June 30, 1997,  which was the result of the reduction of certain loss allowances
related to that business.

Nine Months Ended June 30, 1998 compared to the Nine Months Ended June 30, 1997

Net earnings for the nine months ended June 30, 1998 were $6.3 million, or $0.95
per diluted share compared to net earnings of $10.5 million or $1.71 per diluted
share for the nine months  ended June 30,  1997.  Net  earnings for the June 30,
1997  reporting  period  consisted of earnings  before taxes form the  Company's
continuing investment management business of $4.3 million, a tax benefit of $5.8
million, and earnings from the operations of the discontinued  mortgage business
of $413,000.

REVENUE.  Revenue for the nine months  ended June 30,  1998  increased  by $14.1
million over revenue for the nine months ended June 30, 1997.

                                       10
<PAGE>
Net management and  administrative  fees, the Company's  largest revenue source,
increased  $3.8 million in the nine months  ended June 30, 1998  compared to the
nine months ended June 30, 1997.  Private Account management fees increased $3.7
million  for the nine months  ending  June 30, 1998  compared to the nine months
ending  June 30,  1997  during  which the Company had not yet begun to engage in
Private  Account  management.  Management  and  administrative  fees and Private
Account management fees are based on assets under management which averaged $3.5
billion  during the nine months ended June 30, 1998 and $ 2.0 billion during the
nine months ended June 30, 1997.

The  conversion of the Pilgrim  America Bank and Thrift Fund to an open-end Fund
in October  1997,  along with  higher  sales of open-end  Funds  during the nine
months  ended June 30, 1998  compared  to the nine  months  ending June 30, 1997
resulted in an increase in distribution fees of $3.2 million.  Distribution fees
are realized from the sale of certain Fund shares.

During the nine months ended June 30, 1998 the Company began  selling  shares of
Pilgrim America Prime Rate Trust in accordance with the New Programs.  The sales
commission  received  from the sale of these  shares  along with the increase of
open-ended Funds sales during the current fiscal year as compared to fiscal 1997
resulted in an increase in commission revenue of $1.9 million.

Investment and other income for the nine months ended June 30, 1998 increased by
$1.5 million  compared to the nine months ended June 30,  1997,  primarily  from
interest income earned on the new equity investments in the Private Accounts and
one time gains from the sale of investments in the Funds.

EXPENSE.  Total  expense,  excluding  amortization,  depreciation  and  interest
expense,  for the nine months  ended June 30,  1998  increased  by $6.2  million
compared to the nine months ended June 30, 1997.  This  increase in expenses was
primarily a result of an increase in general and administrative expenses of $3.3
million due to an increase in  personnel  and  compensation  and a $2.9  million
increase in selling expenses primarily due to increased Fund share sales.

Interest  expense  increased  $370,000  for the nine months  ended June 30, 1998
compared to the nine months ended June 30, 1997  primarily due to an increase in
borrowings of $15.0 million. (See Liquidity).

Amortization and depreciation  expenses increased by $1.2 million primarily as a
result  of an  increase  in the  amortization  of  deferred  acquisition  costs.
Deferred  acquisition  costs are  commissions  paid on the sale of certain  Fund
shares. These commissions are capitalized and amortized over a six-year period.

EARNINGS FROM  DISCONTINUED  OPERATIONS,  NET OF TAX. Earnings from discontinued
operations,  net of tax,  had no  activity  effecting  earnings  for the current
fiscal year  compared to $413,000 for fiscal  1997,  which was the result of the
reduction of certain loss allowance related to that business.

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 equity investments made
by the  Company in  connection  with the  management  of Private  Accounts.  The
Company's  principal  liquidity  and capital  resources  include  cash flow from
operations and borrowings  available at June 30, 1998 under a $35 million credit
agreement ("the Credit Agreement"). During the first nine months of fiscal 1998,
the  Company  used  $6.3  million  in its  operations  and $8.1  million  in its
investing activities and $753,000 to repurchase the Company's stock. The Company
funded these uses of cash through its financing  activities which included $16.0
million from borrowings.

One of the Company's  principal  uses of cash is the payment of  commissions  in
connection with the sale of the open-end Funds B shares.  The Company's  payment
of these commissions is funded primarily with the Company's borrowings available
under the Credit  Agreement.  The Company also can fund B share sales by selling
its DAC  Asset  which  had a  balance  at June 30,  1998 of $23.1  million.  The

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<PAGE>
Company's  inability to borrow funds or sell its DAC Asset could have an adverse
affect on the Company's ability to finance the continued sale of open-end Fund B
shares.  For the nine months ended June 30, 1998,  the Company had cash outflows
of $19.4 million for the payment of B share commissions.

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 July 31,
1998 and allows the Company or the  Company's  wholly owned  subsidiary  Pilgrim
America  Group,  Inc  ("PAG") to borrow up to $55 million to 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  Private  Account  equity  investments  and  (v)
repurchasing Company stock. The agreement contains  restrictive  covenants which
require PAG 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 its wholly  owned  subsidiary  PAG,  by a
pledge of PAG of the  stock of its  wholly  owned  subsidiaries,  by a  security
interest in the assets of the Company,  PAG and PAG's wholly owned subsidiaries,
and by a guarantee by PAG's wholly owned subsidiary, PAI.

At July 31, 1998 the Company  had  borrowings  of  approximately  $26.1  million
outstanding  under  the  Credit  Agreement  and   approximately   $28.9  million
additional borrowings available.

The Company,  through its wholly owned discontinued mortgage subsidiaries,  owns
mortgage loans and foreclosed  real estate.  The Company's  investments in these
loans and  foreclosed  real  estate are  funded  with the  Company's  borrowings
available under the Credit  Agreement.  Any increase in repurchase loan activity
due to the  Company's  discontinued  operations,  beyond that  forecasted by the
Company, may have an adverse effect on the Company's liquidity.

On August 5, 1997, the Company's Board of Directors approved  repurchasing up to
750,000   shares  of  its  common  stock  from  time  to  time  in  open  market
transactions.  The Company will use cash generated from operations or borrowings
obtained  under the Credit  Agreement to repurchase  the shares.  As of June 30,
1998, the Company had repurchased 55,650 shares pursuant to this authorization.



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                           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 Third Amended and Restated Credit Agreement

      27.0 Financial Data Schedules

(b)   Reports on Form 8-K.

      None


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                                   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 AMERICA CAPITAL CORPORATION



Date:  August 7, 1998               /s/ James R. Reis
                                    ----------------------------------
                                    James R. Reis
                                    Vice-Chairman and Chief Financial Officer
                                    (Principal Accounting Officer)




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