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 March 31, 1999
                                                 --------------
                                       OR
              [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                 For the transition period from ______ to ______

                         Commission file number 0-27736

                         POINT WEST CAPITAL CORPORATION
                         -------------------------------
             (Exact name of registrant as specified in its charter)

                   Delaware                           94-3165263
                   --------                           ----------
              (State or other jurisdiction of       (I.R.S. Employer
              incorporation or organization)      Identification Number)

          1700 Montgomery Street, Suite 250
          ---------------------------------
            San Francisco, California                       94111
            -------------------------                     ---------
        (Address of principal executive offices)          (Zip Code)


                             (415) 394-9467
                             --------------
            (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 [ ]

At April 9, 1999  there were  3,326,624  shares of the  registrant's  Common
Stock outstanding.



<PAGE>



                         POINT WEST CAPITAL CORPORATION
                         ------------------------------

                                      INDEX
                                      -----

Part I                                                                   Page #
------                                                                   ------
Item 1.   Consolidated Financial Statements:

          Consolidated Balance Sheets
            March 31, 1999 and December 31, 1998                           1

          Consolidated Statements of Operations
            and Comprehensive Income for the
            Three Months Ended March 31, 1999 and 1998                     2

          Consolidated Statements of Cash Flows for the
            Three Months Ended March 31, 1999 and 1998                     3

          Condensed Notes to Consolidated Financial Statements            4-11

Item 2.   Management's Discussion and Analysis of Financial
            Condition and Results of Operations                          12-23

Item 3.   Quantitative and Qualitative Disclosures
            About Market Risk                                              23


Part II
-------

Item 1.   Legal Proceedings                                                24

Item 6.   Exhibits and Reports on Form 8-K                                 25

Signatures                                                                 26
----------

                                      (i)

<PAGE>
 

                        POINT WEST CAPITAL CORPORATION
                           CONSOLIDATED BALANCE SHEETS
                      March 31, 1999 and December 31, 1998


<TABLE>
<CAPTION>

                                                                                    March 31,            December 31,
                                 ASSETS                                               1999                  1998
                                                                             -------------------   --------------------
<S>                                                                                  <C>                      <C>    


Cash and cash equivalents                                                  $          7,243,627  $           6,668,126
Restricted cash                                                                       2,114,616              3,153,513
Investment securities - available-for-sale                                           34,158,218              2,113,034
Matured policies receivable                                                             300,349                 12,000
Loans receivable, net of unearned income of $261,524 and
           $117,709, respectively and net of an allowance for
           loan losses of $75,000 and $50,000, respectively                          15,935,030             10,187,590
Purchased life insurance policies                                                    33,124,945             33,893,017
Non-marketable securities                                                             3,153,617              5,396,607
Deferred financing costs, net of accumulated amortization
           of $1,031,531 and $907,848, respectively                                     693,322                810,545
Furniture and equipment, net of accumulated depreciation of
           $6,267 and $4,469, respectively                                               26,476                 25,365
Other assets                                                                            259,771                182,964
                                                                             -------------------   --------------------

           Total assets                                                    $         97,009,971   $         62,442,761
                                                                             ===================   ====================

                  LIABILITIES AND STOCKHOLDERS' EQUITY

Accrued interest expense                                                   $            227,623  $             263,805
Accounts payable                                                                        282,001                192,436
Accrued compensation payable                                                            140,956                222,000
Revolving certificates                                                               11,797,272              5,400,045
Long term notes payable                                                              38,528,914             38,528,914
Debentures                                                                            3,000,000              3,000,000
Deferred income taxes                                                                 6,598,514                  6,000
                                                                             -------------------   --------------------

           Total liabilities                                                         60,575,280             47,613,200
                                                                             -------------------   --------------------
                                                                            

Stockholders' equity:
           Common stock, $0.01 par value; 15,000,000 authorized shares,
                4,365,124 and 4,291,824 shares, respectively, issued
                3,326,624 and 3,253,324 shares, respectively, outstanding                43,651                 42,918
           Additional paid-in-capital                                                30,013,170             29,496,720
           Accumulated comprehensive income - net unrealized
                investment gains (losses)                                            21,399,005               (188,966)
           Retained deficit                                                         (12,147,103)           (11,647,079)
           Treasury stock, 1,038,500 shares                                          (2,874,032)            (2,874,032)
                                                                             -------------------   --------------------

           Total stockholders' equity                                                36,434,691             14,829,561
                                                                             -------------------   --------------------

           Total liabilities and stockholders' equity                      $         97,009,971  $          62,442,761
                                                                             ===================   ====================

<FN>

     See accompanying condensed notes to consolidated financial statements

</FN>
</TABLE>

                                       1

<PAGE>


                         POINT WEST CAPITAL CORPORATION
         CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
               For the Three Months Ended March 31, 1999 and 1998



<TABLE>
<CAPTION>



                                                                              Three Months Ended
                                                                                   March 31,
                                                                             1999                    1998
                                                                       -------------------       -------------------
<S>                                                                          <C>                    <C>    



Income:
     Earned discounts on matured policies                       $             60,734  $            316,133
     Interest income                                                         490,992               351,307
     Gain on assets sold                                                           -               138,837
     Gain on sale of securities                                              968,348                     -
     Other                                                                    82,021                63,485
                                                                  -------------------   -------------------
           Total income                                                    1,602,095               869,762

Expenses:
     Interest expense                                                      1,043,033               904,120
     Compensation and benefits                                               347,334               349,559
     Other general and administrative expenses                               586,271               433,257
     Amortization                                                            123,683                62,656
     Depreciation                                                              1,798                   418
                                                                  -------------------   -------------------
           Total expenses                                                  2,102,119             1,750,010
                                                                  -------------------   -------------------

           Loss before net loss in wholly owned
               financing subsidiary charged to
               reserve for equity interest                                  (500,024)             (880,248)

Net loss in wholly owned financing subsidiary charged
     to reserve for equity interest                                                -               800,676

                                                                  -------------------   -------------------
           Net loss                                                         (500,024)              (79,572)

Comprehensive income - net unrealized
     investment gains                                                     21,587,971               402,655
                                                                  -------------------   -------------------
Total comprehensive income                                      $         21,087,947  $            323,083
                                                                  ===================   ===================

Basic loss per share                                            $             (0.15)  $             (0.02)
Diluted loss per share                                                        (0.15)                (0.02)

Weighted average number of shares of common stock
     outstanding                                                           3,273,628             3,253,324
Weighted average number of shares of common stock
     and common stock equivalents outstanding                              3,273,628             3,253,324


<FN>

     See accompanying condensed notes to consolidated financial statements

</FN>
</TABLE>

                                       2

<PAGE>


                         POINT WEST CAPITAL CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
               For the Three Months Ended March 31, 1999 and 1998


<TABLE>
<CAPTION>


                                                                                             Three Months Ended
                                                                                                     March 31,
                                                                                        1999                  1998
                                                                                   -------------------   -------------------
<S>                                                                                       <C>                 <C>   


Cash flows from operating activities:
    Net loss                                                             $           (500,024) $            (79,572)
    Adjustments to reconcile net loss to net cash
         used in operating activities:
          Depreciation and amortization                                               125,481                63,074
          Gain on assets sold                                                                -             (138,837)
          Gain on sale of securities                                                 (968,348)                     -
          Earned discounts on policies                                                (60,734)              (316,133)
          Collections on matured life insurance policies                              540,458              1,318,280
          Increase in reserve for loans receivable                                     25,000                      -
          Increase in other assets                                                    (77,354)               (91,696)
          Decrease (increase) in accrued interest expense                             (36,182)                14,535
          Increase (decrease) in accounts payable                                      89,565                (55,021)
          Decrease in accrued compensation payable                                    (81,044)              (143,000)
          Decrease in reserve for equity interest in wholly
                   owned financing subsidiary                                                -              (742,938)
          Increase in non-marketable securities received                             (148,840)                     -
                                                                            -------------------   -------------------
                   Net cash used in operating activities                           (1,092,022)              (171,308)
                                                                            -------------------   -------------------

Cash flows from investing activities:
    Proceeds from sale of other assets                                                       -              187,522
    Purchase of furniture and equipment                                                (2,909)               (1,736)
    Decrease in restricted cash                                                     1,038,897                58,408
    Purchase of investments and non-marketable securities                          (1,500,000)           (2,650,000)
    Sale of investments and non-marketable securities                               1,307,148                     -
    Additions to loans receivable                                                  (6,071,387)           (2,645,550)
    Principal payments on loans receivable                                            298,947                24,173
                                                                            -------------------   -------------------
                   Net cash used in investing activities                           (4,929,304)           (5,027,183)
                                                                            -------------------   -------------------

Cash flows from financing activities:
    Proceeds from revolving certificates                                             6,460,000                     -
    Principal payments on revolving certificates                                       (62,773)                    -
    Increase in financing costs                                                         (6,460)                    -
    Proceeds from options exercised                                                    206,060                     -
                                                                            -------------------   -------------------
                   Net cash provided by financing activities                         6,596,827                     -
                                                                            -------------------   -------------------

                   Net increase (decrease) in cash and cash equivalents                575,501            (5,198,491)

Cash and cash equivalents, beginning of period                                       6,668,126            10,039,560
                                                                            -------------------   -------------------

Cash and cash equivalents, end of period                                 $           7,243,627 $           4,841,069
                                                                            ===================   ===================


Supplemental disclosures:
Supplemental disclosure of non-cash activities:
    Unrealized gain on securities available for sale                     $          21,587,971 $             402,655
                                                                            ===================   ===================
    Receipt of warrants                                                  $             148,840 $                   -
                                                                            ===================   ===================
Supplemental disclosure of cash flow information:                                    
    Taxes  paid                                                          $               6,966 $               1,930
                                                                            ===================   ===================
    Cash paid for interest                                               $           1,039,857 $             889,584
                                                                            ===================   ===================

<FN>
     See accompanying condensed notes to consolidated financial statements
</FN>
</TABLE>

                                       3

<PAGE>

                                                        
                         POINT WEST CAPITAL CORPORATION
                         -------------------------------

              CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              ----------------------------------------------------


1.        General Description
--        -------------------

         The unaudited  consolidated  financial statements of Point West Capital
Corporation  ("Point West") and its consolidated  entities (the "Company") as of
March 31,  1999 and for the three  month  periods  ended March 31, 1999 and 1998
have been prepared in accordance with generally accepted  accounting  principles
("GAAP") for interim  financial  information,  in accordance  with Rule 10-01 of
Regulation  S-X.  Accordingly,  such  statements  do  not  include  all  of  the
information  and notes  thereto  that are  included  in the annual  consolidated
financial statements.  In the opinion of management,  all adjustments considered
necessary for a fair presentation have been included.  Operating results for the
three month period ended March 31, 1999 are not  necessarily  indicative  of the
results that may be expected for the year ending  December 31, 1999. The balance
sheet as of December  31, 1998 has been  derived  from the audited  consolidated
financial  statements of the Company.  The statements and notes thereto included
herein should be read in  conjunction  with the audited  consolidated  financial
statements  and notes thereto  included in the  Company's  Annual Report on Form
10-K for the year ended December 31, 1998 (the "Form 10-K").

         Point West is a specialty  financial  services  company.  The Company's
financial  statements  consolidate  the assets,  liabilities  and  operations of
Dignity  Partners  Funding  Corp.  I ("DPFC"),  Fourteen  Hill  Management,  LLC
("Fourteen  Hill  Management"),  Fourteen Hill  Capital,  L.P.  ("Fourteen  Hill
Capital"),  Allegiance Capital, LLC ("Allegiance  Capital"),  Allegiance Funding
Corp. I ("Allegiance  Funding"),  Allegiance  Capital Trust I ("Allegiance Trust
I") and Point West Securities,  LLC ("PWS").  References herein to Fourteen Hill
include Fourteen Hill Management and Fourteen Hill Capital. References herein to
Allegiance include Allegiance  Capital,  Allegiance Funding and Allegiance Trust
I.

         Until February  1997, the Company  provided  viatical  settlements  for
terminally ill persons.  See "Management's  Discussion and Analysis of Financial
Condition and Results of Operations -- Overview." Subsequently,  the Company has
become a more broadly-based  specialty financial services company.  During 1997,
the Company expanded its financial  services  business through the operations of
Fourteen Hill,  which invests in small  businesses and  Allegiance,  which lends
funds to funeral home and cemetery owners.  During 1998, the Company formed PWS,
a broker-dealer licensed by the National Association of Securities Dealers, Inc.
The Company continues to service the life insurance  policies held by its wholly
owned special purpose  subsidiary,  DPFC. The Company  continues to evaluate new
business opportunities.

         During 1998, the Financial  Accounting  Standards Board ("FASB") issued
Financial  Accounting  Standard No. 133 ("SFAS 133"),  Accounting for Derivative
Instruments  and  Hedging  Activities.  SFAS  133 is  effective  for all  fiscal
quarters of fiscal  years  beginning  after June 15, 1999.  Management  is still
reviewing the impact of this pronouncement.

2.        Investment Securities
--        ---------------------

          Statement  of Financial  Accounting  Standards  No. 115 ("SFAS  115"),
Accounting  for  Certain  Investments  in Debt and Equity  Securities,  requires
marketable debt and equity  securities to be classified  into  held-to-maturity,
available-for-sale   and   trading   categories.    Securities   classified   as
available-for-sale  are reported at fair market value with unrealized  gains and
losses as a separate  component of stockholders'  equity.  Several of the equity
securities classified by the Company as available-for-sale are

                                       4

<PAGE>




securities traded in the  over-the-counter  ("OTC") market. Fair market value is
estimated by the Company based on the average  closing bid of the securities for
the last three trading days of the  reporting  period and is adjusted to reflect
management's   estimate   of   liquidity   constraints.   The   Company  had  no
held-to-maturity  or trading  securities at March 31, 1999 or December 31, 1998.
Any realized  gains and losses,  accrued  interest and dividends and  unrealized
losses  on  securities  judged to be  other-than-temporary  are  reported  on an
appropriate line item above "Net Income (Loss)" on the  Consolidated  Statements
of Operations and Comprehensive Income.

         The costs and estimated fair value of investment securities (before any
minority interest) as of March 31, 1999 and December 31, 1998 are as follows:
<TABLE>
<CAPTION>



                                                 March 31, 1999
---------------------------------------------------------------------------------------------------------------------
                                                          Gross                Gross
                                            Cost     Unrealized Gains      Unrealized
                                                                               Losses          Fair Value
<S>                                  <C>                <C>                 <C>               <C>    


 Available-for-sale
           Corporate Bond            $       350,000   $            --     $    (250,000)     $    100,000
           Common Stock                    5,505,029        29,572,739        (1,019,550)       34,058,218
                                     ---------------   ---------------    ---------------    ---------------                       
      Total available-for-sale       $     5,855,029   $    29,572,739     $  (1,269,550)     $ 34,158,218  

</TABLE>
 

<TABLE>
<CAPTION>


                                                 December 31, 1998
---------------------------------------------------------------------------------------------------------------------
                                                          Gross            Gross
                                            Cost     Unrealized Gains    Unrealized
                                                                             Losses          Fair Value
<S>                                  <C>                <C>                 <C>               <C>    


 Available-for-sale
           Corporate Bond            $       350,000   $           --     $ (190,000)       $   160,000
           Common Stock                    1,952,000            8,092         (7,058)         1,953,034
                                     ---------------   ---------------    ---------------    ---------------                       
      Total available-for-sale       $     2,302,000   $        8,092     $ (197,058)        $2,113,034  

</TABLE>
 


         Cumulative unrealized gains (losses) on  available-for-sale  securities
(representing  differences  between  estimated  fair  value and cost) were $28.3
million and ($189,000) at March 31, 1999 and December 31, 1998, respectively.  A
separate  component of stockholders'  equity called  "Accumulated  Comprehensive
Income -- Net Unrealized  Investment  Gains  (Losses)"  reflects such cumulative
gains (losses),  net of applicable  taxes.  For the three months ended March 31,
1999 and 1998, the Company's  total  comprehensive  income  includes  unrealized
investment gains for the respective  periods,  net of applicable taxes. See Note
10.

3.        Loans Receivable
--        ----------------

         Loans  receivable  includes  loans made to  unaffiliated  third parties
through  Allegiance and Fourteen Hill. Such loans are reported at amortized cost
net of an allowance for loan losses for the  Allegiance  loans,  and interest is
accrued as earned.

          Allegiance  had  eight  loans  outstanding  at March  31,  1999 in the
aggregate principal amount of $15.4 million, which bear a weighted-average fixed
interest  rate per annum of 9.4%.  Principal  payments  are due  monthly on such
loans, and such loans mature, subject to permitted prepayments, in approximately
fifteen years from the initial loan date. Loan  origination fees and direct loan
origination

                                       5

<PAGE>


costs are  capitalized  and  recognized  over the life of the related loan as an
adjustment of yield (interest  income) in accordance with Statement of Financial
Accounting  Standards No. 91 ("SFAS 91"),  Accounting for Nonrefundable Fees and
Costs Associated with Originating or Acquiring Loans and Initial Direct Costs of
Leases.

         In August 1998,  Allegiance  put in place a structured  financing  (the
"Allegiance Financing") which provides short term financing and may provide long
term financing, subject to certain limitations, with respect to loans Allegiance
has made in the past and may make in the  future.  It is  anticipated  that this
transaction   will  provide  interim  floating  rate  financing  and  ultimately
permanent fixed and floating rate financing for loans  originated by Allegiance.
See Note 6. The availability of permanent financing is conditioned on Allegiance
originating at least $30 million of loans by August 31, 1999. At March 31, 1999,
Allegiance had $15.4 million of loans outstanding.  Allegiance  utilizes futures
contracts  to  hedge  certain   interest  rate  exposure  between  the  time  of
origination  of  the  loans  and  the  establishment  of  permanent  fixed  rate
financing. The futures contracts are to protect the margins earned on the loans.
Any realized gain or loss related to these hedges are deferred and recognized by
Allegiance  over the  life of the  related  loan as an  adjustment  of  interest
income.  Pursuant to Statement of Financial  Accounting  Standards No. 80 ("SFAS
80"), Accounting for Futures Contracts,  all such deferred amounts are reflected
on the balance  sheet as an increase (in the case of a hedging loss) or decrease
(in the case of a hedging gain), in the carrying value of loans  receivable.  As
of March 31, 1999,  Allegiance had net realized losses on its hedging activities
of $92,000  which  increased  loans  receivable  in a like amount.  In addition,
Allegiance had unrealized net gains from open hedging  positions of $3,000 as of
March 31, 1999.

         Fourteen  Hill  had two  loans  outstanding  at March  31,  1999 in the
aggregate  principal amount of $619,000,  one of which was originated in January
1998 and bears  interest at a fixed interest rate per annum of 15% and the other
of which was originated in September 1998 and bears interest at a fixed interest
rate per annum of 14%.  Such loans  mature,  subject to  permitted  prepayments,
approximately 5 years from the initial loan date.

4.        Purchased Life Insurance Policies
--        ---------------------------------

         Purchased life insurance  policies  consist only of those policies held
by DPFC.  The Company has  discussed  potential  sales of DPFC policies with the
Noteholders.  The sale of  policies  held by DPFC,  all of which are  pledged as
security for the Securitized  Notes (as defined in Note 7), requires the consent
of the Company and the Noteholders. However, the Company has not decided whether
it will sell such policies and cannot  determine  whether the  Noteholders  will
consent to a sale or whether such a sale of DPFC policies is feasible. A reserve
was recorded in 1996 in the amount of $6.9 million to reflect the estimated loss
of Point West's equity interest in DPFC. The reserve  provided for the write-off
of the unrealized  residual value  associated with DPFC. The losses of DPFC were
charged first against the reserve  which,  during the third quarter of 1998, was
fully  depleted.  Losses  associated  with DPFC after  depletion  of the reserve
during the third  quarter of 1998 have been,  and all future  losses  associated
with  DPFC  will  be,  reflected  in the  Company's  Consolidated  Statement  of
Operations and Comprehensive Income in the appropriate period. See Note 7.

5.        Non-Marketable Securities
--        -------------------------

         Non-marketable  securities include investments in non-marketable equity
securities  through Point West and Fourteen  Hill. At March 31, 1999 the Company
had 3 investments in convertible  preferred  shares carried at an aggregate cost
of $2.8 million and 3 investments  in warrants  carried at an aggregate  cost of
$360,000.  At December  31, 1998 the Company had 4  investments  in  convertible
preferred  shares  carried at an aggregate cost of $5.3 million and 1 investment
in  warrants  carried  at a cost of  $98,000.  The  Company  accounts  for  such
non-marketable securities using the cost method. See the Form 10-K.


                                       6

<PAGE>



         During 1998,  Fourteen Hill invested $900,000 in convertible  preferred
shares  (convertible  into marketable  common shares) of an  unaffiliated  small
business  entity.  During the first  quarter of 1999,  Fourteen  Hill  converted
approximately  33% of the  preferred  shares  into common  shares,  which to the
extent still held at March 31, 1999, are marketable  securities  included in the
March 31, 1999 table in Note 2. The remaining  convertible preferred shares held
at March 31, 1999 are  reflected  as  non-marketable  securities  with a cost of
$600,000.  If the remaining  convertible  preferred shares had been converted to
common  shares at March 31, 1999,  the Company would have  reflected  additional
"Accumulated   Comprehensive   Income--Net   Unrealized  Investment  Gains"  and
"Comprehensive  Income -- Net Unrealized  Investment Gains" of $1.6 million, net
of applicable taxes. For further information regarding  Comprehensive Income see
Note 10.

         The Company reviews on a quarterly basis all non-marketable  securities
and attempts to ascertain whether the value is impaired.

6.        Revolving Certificates
--        ----------------------

         Pursuant  to  the  Allegiance  Financing,  a  consortium  of  insurance
companies (the "Investors") will provide funding of approximately  $26.4 million
through August 31, 1999 on a non recourse revolving certificate basis to be used
for the  purchase  or funding of loans  originated  by  Allegiance  Capital  and
transferred to Allegiance  Funding.  Upon the earlier of the incurrence of $26.4
million of revolving  certificates or August 31, 1999, the outstanding revolving
certificates  will be repaid through the issuance of term  certificates  with an
approximate 15-year maturity.  In addition,  the Allegiance Financing provides a
commitment to provide up to an additional $30 million of funding  through August
31, 1999 through 15-year term loans. In the event that term certificates are not
issued by August 31, 1999,  Allegiance  will be required to refinance from other
sources any revolving certificates outstanding under the Allegiance Financing.

         The Allegiance  Financing  contemplates the issuance of various classes
of  revolving  and term  certificates  through  Allegiance  Trust  I.  Revolving
certificates receiving ratings were purchased by the Investors, while Allegiance
Funding retained an unrated certificate.  The revolving certificates were issued
in August 1998 in four classes,  consisting of Class A-R,  Class B-R,  Class C-R
and Class D-R. The Class D-R  certificate is unrated,  while the other revolving
certificates  received  ratings from Duff & Phelps  Credit  Rating Co.  ("Duff &
Phelps")   ranging  from  A  to  BB.  It  is  also  anticipated  that  the  term
certificates,  when and if issued,  will receive ratings from Duff & Phelps. The
Class  A-R  certificate,  rated A,  was  partially  drawn  in March  1999 in the
principal amount of $6.5 million.  Such certificate bears interest at a variable
rate  based  on the  one-month  LIBOR  plus a  spread  of 2.0%.  The  Class  B-R
certificate, rated BBB, was fully drawn in December 1998 in the principal amount
of $3.3  million.  The  Class C-R  certificate,  rated  BB,  was fully  drawn in
November 1998 in the principal  amount of $2.1 million.  The Class B-R and Class
C-R  certificates  bear  interest at a variable  rate based on the one-year U.S.
Treasury  Rate plus a  weighted-average  spread of 3.9%.  Any future  borrowings
under the  revolving  certificates  will be through  increases in the  principal
amount of the Class A-R certificate.  The weighted-average  interest rate of the
certificates  at March 31, 1999 was 8.16%.  Allegiance  initially  retained  the
unrated  Class D-R  revolving  certificate  with a maximum  aggregate  principal
amount of  $3,650,000.  This  certificate  represents  the right to receive  all
excess cash flow from Allegiance Trust I. Allegiance also anticipates  retaining
unrated term certificates  following  retirement of the revolving  certificates.
Because  of  Allegiance's  right to redeem  the  certificates  if 15% or less in
principal amount of certificates is outstanding,  the Allegiance  Financing does
not qualify for sale treatment under Statement of Financial Accounting Standards
No. 125 ("SFAS 125"), Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities.  Accordingly,  the Allegiance Financing will
not receive  gain on sale  treatment  under SFAS 125.  The loans and  borrowings
under the Allegiance Financing are reflected on the Consolidated Balance Sheet.

                                       7

<PAGE>


         In connection with the Allegiance Financing,  Allegiance Capital paid a
$175,000 commitment fee when funds were initially  borrowed.  Of such commitment
fee,  $58,000  will  be  amortized  over  the  expected  life  of the  revolving
certificates  (10 months) and $117,000 will be amortized  over the expected life
of the Allegiance Financing (15 years). This allocation was based on an estimate
of the portion of the commitment fee attributable to the revolving  certificates
and the term certificates.

         In  connection  with the  Allegiance  Financing,  Point West  agreed to
provide  additional  cash to Allegiance  Trust I in the event that monthly LIBOR
interest  rates exceed  6.16%.  The amount of cash will be a function of several
variables  including the monthly LIBOR interest rate and the amount of revolving
Class A-R certificate outstanding under Allegiance Trust I.

7.        Long Term Notes Payable
--        -----------------------

         The Senior Viatical  Settlement Notes,  Series 1995-A,  Stated Maturity
March 10, 2005 (the  "Securitized  Notes")  were issued by DPFC.  Principal  and
interest  payments on the Securitized  Notes are payable solely from collections
on pledged  policies and  deposited  funds.  The  Securitized  Notes,  which are
reported on the balance sheet as long term notes payable,  bear a fixed interest
rate of 9.17% per annum.

         The Securitized  Notes  represent the  obligations  solely of DPFC. The
Company's consolidated financial statements include the assets,  liabilities and
operations  of  DPFC;  however,  the  assets  of DPFC are not  available  to pay
creditors  of  Point  West.  The  assets  of DPFC are the  beneficial  ownership
interests in the life insurance  policies and funds which secure the Securitized
Notes.  From 1996 through the third quarter of 1998, losses associated with DPFC
were charged  against the reserve which was  originally  established in 1996 for
the estimated  loss of Point West's equity  interest in DPFC.  See Note 4. Since
the third quarter of 1998,  losses  associated  with DPFC after depletion of the
reserve  have  been  reflected  in  the  Company's   Consolidated  Statement  of
Operations  and  Comprehensive  Income  in  the  appropriate  period.  Upon  the
retirement of the  Securitized  Notes,  the Company will  recognize a gain in an
amount  approximately equal to any accumulated deficit reflected.  For the first
quarter of 1999, the loss associated with DPFC was  approximately  $1.1 million.
At March 31, 1999, DPFC's accumulated deficit was $2.8 million.

         Point West is the servicer of the policies  pledged under the Indenture
pursuant to which the Securitized Notes were issued (the "Indenture") and incurs
servicing expenses (which are reimbursed,  subject to certain priority payments)
in connection therewith.

8.        Debenture
--        ----------

         As of March 31, 1999, Fourteen Hill Capital had issued one debenture in
the principal amount of $3 million payable to the Small Business  Administration
("SBA") with semi-annual  interest only payments at a fixed rate of 5.9% (plus a
1% annual fee) and a scheduled  maturity date of September 1, 2008. In addition,
Fourteen  Hill  Capital  paid to the  SBA a  $105,000  fee  (3.5%  of the  total
borrowings)  to borrow  such money.  The  debenture  is subject to a  prepayment
penalty if paid prior to September 1, 2003.


                                       8
<PAGE>



9.        Stockholders' Equity
--        --------------------

         Changes in  stockholders'  equity during the first three months of 1999
reflected the following:

Stockholders' equity, beginning of period                          $14,829,561
   Common stock -- options exercised                                       733
   Additional paid-in-capital -- options exercised                     516,450
   Accumulated comprehensive incom -- net unrealized
          investment gains                                          21,587,971
   Net loss                                                           (500,024)
                                                                   ------------
Stockholders' equity, end of period                                $36,434,691


10.       Comprehensive Income -- Net Unrealized Investment Gains
--        -------------------------------------------------------

         Statement  of  Financial  Accounting  Standard  No. 130  ("SFAS  130"),
Reporting  Comprehensive Income, requires the reporting of comprehensive income.
At March 31,  1999,  the  Company's  total  comprehensive  income  includes  net
unrealized  investment  gains,  net of  applicable  taxes of $6.9 million  which
represents  the increase in the Company's  investment  securities  classified as
available-for-sale.

         The Company originally reported "Comprehensive Income -- Net Unrealized
Investment Gains" of $3.1 million for the first quarter of 1998 in its Form 10-Q
for the period ended March 31, 1998. Of the $3.1 million,  $2.7 million  related
to  unrealized  gains  on  certain   convertible   preferred  shares  originally
classified as  available-for-sale.  In this Form 10-Q,  the Company has reported
"Comprehensive Income -- Net Unrealized Investment Gains" for the same period of
$403,000.  The difference in numbers  reported is due to a  reclassification  of
those  convertible  preferred shares from  available-for-sale  to non-marketable
securities,  which are carried at cost. See Notes 2 and 5. In both periods, such
securities were  convertible into marketable  securities but nonetheless  should
have been reflected at March 31, 1998 as  non-marketable  securities  under GAAP
and  carried  at cost  with  corresponding  footnote  disclosure  regarding  any
significant  appreciation or decline in value. During the first quarter of 1999,
a portion of such  securities was converted into common shares and classified as
available-for-sale. See Note 5.

11.       Earnings per Share
--        ------------------

         Statement  of  Financial  Accounting  Standards  No.128  ("SFAS  128"),
Earnings per Share,  requires  earnings per share  ("EPS") to be reported as two
separate calculations:  Basic EPS, similar to the previous primary EPS excluding
stock equivalents;  and, Diluted EPS, similar to the previous fully diluted EPS.
Diluted  EPS for the three  months  ended March 31, 1999 and 1998 do not include
any common stock equivalents due to their anti-dilutive effect

12.       Litigation
--        ----------

          On  December  19,  1996,  a complaint  was filed in the United  States
District  Court,  Northern  District of  California  (the  "Court")  (Docket No.
C96-4558)  against Dignity Partners,  Inc. (now Point West Capital  Corporation)
and each of its  directors by three  individuals  purporting to act on behalf of
themselves  and an alleged class  consisting of all  purchasers of the Company's
common stock during the period February 14, 1996 to July 16, 1996. The complaint
alleged that the defendants  violated  Section 10(b) of the Securities  Exchange
Act of 1934 and Rule 10b-5  thereunder  and Section 11 of the  Securities Act of
1933 and seeks, among other things,  compensatory  damages,  interest,  fees and
costs. The allegations were based on alleged misrepresentations in and omissions
from the Company's registration

                                       9

<PAGE>


statement  and  prospectus  related to its initial  public  offering and certain
documents  filed by the Company under the Exchange  Act. On April 24, 1998,  the
Court  granted  the  Company's  and other  defendants'  motion to  dismiss as it
related to the Section 11 claims with prejudice but denied the motion to dismiss
the claims under  Section 10(b) and Rule 10b-5 as to all  defendants  other than
Mr. Bow, one of Point West's directors.  Plaintiffs have appealed this dismissal
to the United States Circuit Court for the Ninth Circuit.  On November 13, 1998,
the Court granted plaintiff's motion for class certification. On March 11, 1999,
defendants  filed a motion for summary  judgement which is scheduled to be heard
in May 1999.  The case is currently in discovery.  A trial date has been set for
October  1999.  The  Company  and each of the  remaining  defendants  intend  to
continue to defend the action vigorously.

         On February 13, 1997,  a complaint  was filed in the Superior  Court of
California, City and County of San Francisco (Docket No. 984643) against Dignity
Partners,  Inc.,  and each of its  executive  officers and New Echelon LLC by an
individual  purporting  to  act on  behalf  of  himself  and  an  alleged  class
consisting of all  purchasers  of the  Company's  common stock during the period
February 14, 1996 to July 16, 1996.  The complaint  alleges that the  defendants
violated  section 25400 of the  California  Corporate  Code and seeks to recover
damages. The allegations are based on alleged misstatements,  concealment and/or
misrepresentations and omissions of allegedly material information in connection
with the Company's initial public offering and subsequent disclosures.  The case
has been stayed since its inception by agreement of the parties. The Company and
each of the defendants intend to defend the action vigorously.

13.       Segment Reporting
--        -----------------

         Financial  Accounting Standard No. 131 ("SFAS 131"),  Disclosures about
Segments of an Enterprise  and Related  Information,  establishes  standards for
reporting  information about operating  segments in annual financial  statements
and requires selected  information about operating segments in interim financial
reports.  Operating  segments are defined as components  of an enterprise  about
which separate financial information is available that is evaluated regularly by
the chief operating decision maker, or decision making group, in deciding how to
allocate resources and in assessing  performance.  The Company's chief operating
decision  making group is comprised of the Chairman of the Board,  President and
Chief Financial Officer of Point West.

                                       10

<PAGE>

        The  Company's   reportable   operating   segments   include   Viatical
Settlements, Fourteen Hill and Allegiance. The Other Segment includes Point West
and PWS. The accounting policies of the operating segments are the same as those
described in the summary of  significant  accounting  policies in the Form 10-K.
The following table represents the Company's results from segments for March 31,
1999 and 1998.
<TABLE>
<CAPTION>
                                                        March 31, 1999
                     -----------------------------------------------------------------------------------------

                               Viatical          Fourteen
                           Settlements (1)         Hill            Allegiance          Other             Total
                           ---------------         -----           ----------          -----             -----

<S>                           <C>                    <C>                  <C>           <C>                 <C>   


Interest income......     $       27,603    $      187,400       $  221,422       $   54,567         $    490,992
Other revenue........             69,589           650,898               --          390,616            1,111,103
Interest expense......           883,275            51,337          108,421               --            1,043,033
Depreciation &
  Amortization.......             58,720             7,500           57,463            1,798              125,481
Contributed  income 
(loss) (2)..............       (997,127)           779,389         (103,632)        (178,654)            (500,024)
Comprehensive
  income...............              --         21,647,971               --          (60,000)          21,587,971
Segment assets......         39,968,455         37,225,397       17,571,849        6,244,270           97,009,971



</TABLE>
 <TABLE>
<CAPTION>
                                                        March 31, 1998
                     -----------------------------------------------------------------------------------------


                               Viatical          Fourteen
                           Settlements (1)         Hill            Allegiance          Other             Total
                           ---------------         -----           ----------          -----             -----

<S>                           <C>                    <C>                  <C>           <C>                 <C>   


Interest income......     $      52,389    $       43,892       $  140,430       $  114,596           $  351,307
Other revenue........           515,004                --            3,451               --              518,455
Interest expense......          904,120                --               --               --              904,120
Depreciation &          
  Amortization.......            58,720             2,508            1,428              418               63,074
Contributed  income
(loss) (2)..............        203,837            35,872          101,955         (421,236)             (79,572)
Comprehensive 
  income...............              --           402,655               --               --              402,655
Segment assets......         40,561,766        10,868,158        6,068,671        7,545,796           65,044,391

<FN>

--
(1) The  viatical   settlements   segment  includes  results  of  operations  in
    connection  with  viatical  settlements  for DPFC,  and Point West

(2) Corporate  overhead is not  generally  allocated  between  segments  and is
    included in the other segment.


</FN>
</TABLE>

         A reconciliation  of the totals reported for the operating  segments to
the  applicable  line  items  in the  consolidated  financial  statements  is as
follows:

                                    March 31, 1999            March 31, 1998
         Income
         ------
         Interest income            $     490,992             $     351,307
         Other revenue                  1,111,103                   518,455
                                    -------------             --------------
         Total income               $  1,602,095              $     869,762


                                       11

<PAGE>



                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                -------------------------------------------------
                       CONDITION AND RESULTS OF OPERATIONS
                       ------------------------------------

         The  following  is  a  discussion  and  analysis  of  the  consolidated
financial  condition of the Company as of March 31, 1999,  and of the results of
operations  for the Company for the three  months ended March 31, 1999 and 1998,
and of  certain  factors  that may affect the  Company's  prospective  financial
condition and results of operations. The following should be read in conjunction
with the unaudited consolidated financial statements and related notes appearing
elsewhere  herein.  For the reasons set forth below  (including the inception of
two new businesses in the second half of 1997 which generated substantially more
activity in the first quarter of 1999 compared to the first quarter of 1998) the
Company's  results of operations and cash flows for the three months ended March
31, 1999 are not comparable to those for the three months ended March 31, 1998.

Overview
--------

         The Company is a specialty  financial  services company.  The Company's
financial statements consolidate the assets, liabilities and operations of DPFC,
Fourteen  Hill,  Allegiance  and PWS. See the Form 10-K and  Condensed  Notes to
Consolidated  Financial  Statements  (contained herein) for further  information
regarding these entities.

         The principal  business  activity of the Company through  February 1997
was to provide  viatical  settlements  for terminally ill persons.  See the Form
10-K for further  information  regarding the Company's former principal business
activity.  Subsequently,  the Company has become a more broadly-based  specialty
financial  services  company.  During 1997,  the Company  expanded its financial
services  business  through the  operations of Fourteen  Hill,  which invests in
small businesses and Allegiance,  which lends funds to funeral home and cemetery
owners.  During 1998,  the Company formed PWS, a  broker-dealer  licensed by the
National  Association  of  Securities  Dealers,  Inc.  The Company  continues to
service the life  insurance  policies held by its wholly owned  special  purpose
subsidiary, DPFC.

         Information  regarding  the  revenues,  contributed  income  (loss) and
identifiable  assets for each of the Company's business segments is contained in
Note 13 of the Condensed Notes to Consolidated  Financial Statements  (contained
herein).

         The  Company  continues  to  evaluate  other  business   opportunities.
Fourteen  Hill,  Allegiance  and PWS,  whose  business  activities are described
below, may or may not be indicative of the types of business  opportunities  the
Company will continue to pursue. No assurance can be given that the Company will
be successful in becoming a broad-based  specialty financial services company or
that any such enterprise will be successful.  The Company is seeking advice from
financial  advisors to assist it in its strategy of  developing or acquiring new
operating  businesses.  See "Considerations  Under the Investment Company Act of
1940."

Results of Operations for the Company
-------------------------------------

  Three Months Ended March 31, 1999 Compared to Three Months Ended March 31,
  -------------------------------------------------------------------------- 
  1998
  ----

         Total Income. Total income increased 83.9% to $1.6 million in the first
quarter of 1999 from  $870,000  in the first  quarter of 1998 due to $651,000 of
gains on sales of securities  recognized by Fourteen Hill,  $317,000 of gains on
sales of  securities  recognized  by Point West in  connection  with its hedging
activities of internet related stocks and $140,000  increase in interest income.
See "Item 3 --  Quantitative  and  Qualitative  Disclosure  About Market  Risk."
Offsetting this increase was a $255,000 

                                       12

<PAGE>


decrease in earned discounts on matured policies.  The 1998 period also included
a $139,000 gain on assets sold.

         Total Expenses.  Total expenses  increased 16.7% to $2.1 million in the
first  quarter  of 1999  from $1.8  million  in the  first  quarter  of 1998 due
primarily to a $139,000  increase in interest  expense  related to borrowings by
Allegiance  and Fourteen  Hill in the second half of 1998.  In  addition,  total
expenses reflect a $110,000  increase from the prior period in other general and
administrative  expenses due primarily to legal expenses  incurred in connection
with the federal  class action and state  alleged  class action  lawsuits  filed
against Point West and its officers and directors. See "Results of Operations by
Segment -- Other -- Other General and Administrative Expenses."

         Net Loss in Wholly Owned  Financing  Subsidiary  Charged to Reserve for
Equity Interest.  The DPFC net loss of $801,000 recorded in the first quarter of
1998  was  included  in the  Company's  loss  before  net loss in  wholly  owned
financing  subsidiary  charged to  reserve  for  equity  interest.  Prior to the
depletion of the reserve  during the third quarter of 1998,  losses were charged
against the reserve for equity  interest in wholly owned  financing  subsidiary.
After the reserve was fully  depleted  during the third quarter of 1998,  DPFC's
losses have been reflected in the Company's Consolidated Statement of Operations
and Comprehensive Income. All additional losses of DPFC will be reflected in the
Company's  Consolidated Statement of Operations and Comprehensive Income for the
periods  in  which  such  losses  occur.   See  the  Form  10-K  for  additional
information.

         Comprehensive Income -- Net Unrealized Investment Gains.  Comprehensive
income -- net unrealized  investment  gains reported  herein  increased to $21.6
million in the first quarter of 1999 from $403,000 in the first quarter of 1998,
primarily  as  a  result  of  one  of  Fourteen  Hill's  investments,   FlashNet
Communications,  Inc.  ("FlashNet"),  completing an initial public offering. The
Company originally reported  "Comprehensive  Income -- Net Unrealized Investment
Gains" of $3.1  million  for the first  quarter of 1998 in its Form 10-Q for the
period  ended March 31,  1998.  Of the $3.1  million,  $2.7  million  related to
unrealized gains on certain convertible  preferred shares originally  classified
as   available-for-sale.   In  this  Form  10-Q,   the  Company   has   reported
"Comprehensive Income -- Net Unrealized Investment Gains" for the same period of
$403,000.  The difference in numbers  reported is due to a  reclassification  of
those  convertible  preferred shares from  available-for-sale  to non-marketable
securities,  which are carried at cost. In both periods,  such  securities  were
convertible  into  marketable   securities  but  nonetheless  should  have  been
reflected at March 31, 1998 as non-marketable  securities under GAAP and carried
at  cost  with  corresponding  footnote  disclosure  regarding  any  significant
appreciation or decline in value. During the first quarter of 1999, a portion of
such   securities   was  converted   into  common   shares  and   classified  as
available-for-sale.  See "Results of Operations by Segment -- Fourteen Hill" and
Notes 5 and 10 of the Condensed Notes to Consolidated Financial Statements.

Results of Operations by Segment
--------------------------------

     Viatical Settlements
     --------------------

         The viatical  settlements  segment  includes  results of  operations in
connection with viatical settlements for DPFC and Point West.

         Method of Accounting for Viatical Settlements

         As a  result  of  the  Company's  decision  in  1996  to  sell  all  or
substantially all of its assets,  the Company  established a reserve for loss on
sale of assets during 1996. This reserve is reevaluated  quarterly.  The reserve
for loss on sale of assets was  $167,000 as of March 31, 1999 and  December  31,

                                       13

<PAGE>


1998. In 1996,  the Company also  established a reserve for loss of Point West's
equity  interest in DPFC.  By the end of the third  quarter of 1998,  the equity
reserve was fully  depleted.  See "Certain  Accounting  Implications  for DPFC."
During both 1998 and 1999,  the Company  recognized  income with  respect to its
viatical  settlement  business  upon  receipt of proceeds  on  policies  (either
pursuant  to sale of the  policy or the death of the  insured).  Such  income is
equal to the difference  between such proceeds (less any back-end sourcing fees)
and the carrying  value of such policies  after giving effect to any reserve for
loss on the sale of such policies.

         Certain Accounting Implications for DPFC

         Although  the  Securitized  Notes have a stated  maturity  of March 10,
2005, the Securitized Notes were originally  expected to be repaid by the fourth
quarter of 1997. However, at March 31, 1999, $38.5 million remained  outstanding
under the Securitized Notes. As a result of the substantially delayed collection
of DPFC policies, DPFC had a deficit of $2.8 million at March 31, 1999.

         If the  collection  experience  for the DPFC  policies  continues to be
substantially  delayed,  DPFC's  deficit  will  increase  for one or more of the
following  reasons.  First,  a decision to discontinue  paying  premiums on some
policies may be made because the present value of the expected  death benefit on
some  policies  may be less than  expected  future  premiums  to be paid on such
policies. Second, the face value of certain policies (especially group term) may
begin to  decrease  as the  people  whose  lives are  insured  thereunder  reach
specified age levels (often 65).  Finally,  policies for which the insurance was
continued under a disability  provision may be uneconomical to convert given the
insured's age and life expectancy if such insured person is no longer considered
disabled.  The Company cannot  determine at present the extent to which policies
held by DPFC will be so affected.

         In the first quarter of 1999,  the total loss realized by DPFC was $1.1
million,  which  was  reflected  in  the  Company's  Consolidated  Statement  of
Operations  and  Comprehensive  Income.  The loss for the first  quarter of 1999
decreased basic EPS by $0.34.  The average  historical  quarterly losses in DPFC
have been  approximately  $1.1 million per quarter over the past four  quarters.
Upon the retirement of the Securitized  Notes, the Company will recognize a gain
in an amount approximately equal to any accumulated deficit of DPFC.

         The Securitized  Notes represent the obligations  solely of DPFC. Point
West did not guarantee repayment of the Securitized Notes and is not required to
fund any principal or interest deficiencies thereunder.

         Three Months Ended March 31, 1999 Compared to Three Months Ended March 
31, 1998

         Earned  Discounts.  Earned discounts on matured polices decreased 80.7%
to $61,000 in the first  quarter of 1999 from  $316,000 in the first  quarter of
1998. The decrease is due primarily to fewer deaths of insureds and  secondarily
to a decrease in the size of the Company's portfolio of life insurance policies.
During the first  quarter of 1999,  earned  discounts on matured  policies  were
recognized on 12 policies with a face value of $834,000, compared to 24 policies
with a face value of $1.7 million in the first  quarter of 1998.  See "Method of
Accounting for Viatical Settlements." As of March 31, 1999, the Company held 494
policies with an aggregate carrying value of $33.2 million and an aggregate face
value of $38.8  million.  Virtually  all of the policies are pledged as security
for the Securitized Notes.

          Interest  Income.  Interest  income  declined  to $28,000 in the first
quarter of 1999 from $52,000 in the first  quarter of 1998, as a result of lower
cash  balances  attributable  to DPFC.  DPFC's cash balances are affected by the
amount  and  timing of any  policy  collections  and by the amount and timing of
expenses  

                                       14

<PAGE>


(such as interest,  trustee fees,  premium costs and servicing  fees) related to
its portfolio. The cash generated by DPFC is restricted under the Indenture.

         Gain on Assets  Sold.  The  Company  did not  collect  any  proceeds on
policies  sold during the first  quarter of 1999.  In the first quarter of 1998,
the Company  collected  the sale  proceeds on 4 policies  and recorded a gain on
assets  sold  of  $139,000.  The  realized  gain  was  calculated  based  on the
difference  between the sale proceeds and the carrying value after giving effect
to the provision for loss on sale of assets.

         Other  Income.  Components  of  other  income  include  collections  on
policies of dividends, interest and paid-up cash values, increases in face value
of matured  policies and refunds of premiums on matured  policies.  Other income
declined  to $9,000  in the first  quarter  of 1999  from  $60,000  in the first
quarter of 1998 due to the decrease in the number of matured policies.

         Interest  Expense.  Interest expense  decreased 2.3% to $883,000 in the
first  quarter of 1999 from $904,000 in the first quarter of 1998 as a result of
modest principal  repayments  under the Securitized  Notes.  Average  borrowings
under the  Securitized  Notes  were $38.5  million in the first  quarter of 1999
compared to $38.8 million in the first quarter of 1998.

         Other   General  and   Administrative   Expenses.   Other  general  and
administrative expenses decreased 24.4% to $152,000 in the first quarter of 1999
from $201,000 in the first quarter of 1998. This decrease was due primarily to a
$43,000  write-off of a life insurance  policy  recorded in the first quarter of
1998. In addition,  other  general and  administrative  expenses  decreased as a
result of a decrease in life insurance  policy premium costs.  Although  premium
costs decreased as a result of the decrease in size of the Company's  portfolio,
the Company  believes  that if the life  insurance  policies  continue to mature
slowly,  life insurance  premium costs are likely to increase in future periods.
See "Certain Accounting Implications for DPFC."

     Fourteen Hill
     -------------

         Method of Accounting for Loans and Debt and Equity Securities

         SFAS  115  requires   marketable  debt  and  equity  securities  to  be
classified into  held-to-maturity,  available-for-sale  and trading  categories.
Securities  classified as  available-for-sale  are reported at fair market value
with  unrealized  gains and  losses as a  separate  component  of  stockholders'
equity. The Company had no  held-to-maturity  or trading securities at March 31,
1999 or  December  31,  1998.  The  Company  uses the cost method to account for
non-marketable  securities.  The  Company  reviews  on  a  quarterly  basis  all
non-marketable  securities  and  attempts  to  ascertain  whether  the  value is
impaired. For further information regarding accounting for securities classified
as  available-for-sale,  see  "Results  of  Operations  for the Company -- Three
Months  Ended March 31, 1999  Compared to Three  Months  Ended March 31, 1998 --
Comprehensive  Income -- Net Unrealized  Investment Gains" and notes 2 and 10 to
the Condensed Notes to Consolidated Financial Statements. Any realized gains and
losses,  accrued  interest and  dividends  and  unrealized  losses  judged to be
other-than-temporary  are reported on an appropriate line item above "Net Income
(Loss)" on the Consolidated  Statements of Operations and Comprehensive  Income.
See Note 2 of the Condensed Notes to Consolidated Financial Statements.

         Beginning in 1999,  because of the  volatility of internet and internet
related stocks,  Point West shorted stocks of certain competitors of FlashNet so
as to partially hedge its holdings in FlashNet. However, under GAAP such hedging
activities  do not  constitute  hedges  under SFAS 80.  Therefore,  such hedging
activities are reflected in the Company's  Consolidated  Statement of Operations
and  Comprehensive  Income.  At March 31, 1999 no such hedges were in place. The
Company  recognized a 

                                       15

<PAGE>


$317,000 gain in connection  with such hedging  activities
during the first quarter of 1999. See "Item 3 --  Quantitative  and  Qualitative
Disclosures About Market Risk."

         The  Company  accounts  for loans by accruing  interest on  outstanding
balances. At March 31, 1999 and December 31, 1998, the Company evaluated each of
Fourteen  Hill's  outstanding  loans and  determined  that an allowance for loan
losses was not  necessary.  As  Fourteen  Hill's  loan  portfolio  grows or upon
subsequent  evaluation,  allowances  for loan losses will be added to the extent
considered  necessary.  See  Note  3 of  the  Condensed  Notes  to  Consolidated
Financial Statements.

         Three Months Ended March 31, 1999 Compared to Three Months Ended March 
31, 1998

         Interest Income.  Interest income increased $143,000 to $187,000 in the
first quarter of 1999 from $44,000 in the first  quarter of 1998.  This increase
was due to  $149,000  of  interest  income  recognized  as a result of a warrant
(valued using the  Black-Scholes  option-pricing  model)  received in connection
with one of Fourteen Hill's loans.

          Gain on Sales of  Securities.  Fourteen Hill  recognized a net gain of
$651,000 in the first quarter of 1999 in  connection  with the sale a portion of
two of its  investments.  See  Note 5 to the  Condensed  Notes  to  Consolidated
Financial Statements.

         Interest Expense.  Interest expense was $51,000 in the first quarter of
1999 due to the  interest on funds  borrowed  in July 1998.  The  interest  rate
(including a 1% annual fee) is 6.9%.  Prior to July 1998,  Fourteen  Hill had no
debt.

         Amortization.  Amortization  costs  increased  $5,000  to $8,000 in the
first  quarter of 1999 from $3,000 in the first  quarter of 1998  because of the
financing costs associated with the borrowed funds.

     Allegiance
     ----------

         Method of Accounting for Loans and Debt and Equity Securities

         The  Company  accounts  for loans  advanced by  Allegiance  by accruing
interest on  outstanding  balances.  At March 31, 1999 and December 31, 1998 the
allowance for loan losses was $75,000 and $50,000,  respectively.  The allowance
for loan losses is  estimated by  management  based on a review of the loans and
factors  which in  management's  judgement  deserve  recognition  under  current
economic  conditions.  Management believes that the allowance for loan losses is
adequate.  Although management uses available information to recognize losses on
loans,  future  additions to the allowance may be necessary  based on changes in
economic  conditions.  At March 31, 1999, no loans were  delinquent and no loans
were placed on non-accrual status.

         Loan origination fees and direct loan origination costs are capitalized
and  recognized  over the life of the  related  loan as an  adjustment  of yield
(interest income) in accordance with SFAS 91.

         The  Allegiance  Financing  provides for short term  floating rate debt
that is expected to become long term fixed rate debt. The interest rate at which
Allegiance  anticipates issuing long term certificates will be set in the future
provided that  approximately $30 million of loans have been originated.  Because
of a provision allowing  Allegiance to redeem outstanding  certificates when 15%
of the original principal balance remains outstanding,  the Allegiance Financing
does not qualify for sale treatment under SFAS 125. Accordingly,  the Allegiance
Financing will not receive gain on sale treatment  under SFAS 125. The loans and
borrowings  under the  Allegiance  Financing are  reflected on the  Consolidated
Balance Sheet.  Allegiance  utilizes futures contracts to hedge certain interest
rate  exposure  between the time of  

                                       16

<PAGE>


origination  of the loans and the expected  issuance of term  certificates.  The
futures  contracts are to protect the margins earned on the loans.  Any realized
gain or loss related to these hedges are deferred and  recognized  by Allegiance
over the life of the related loan as an adjustment of interest income.  Pursuant
to SFAS 80 all such  deferred  amounts are  reflected on the balance sheet as an
increase  (in the case of a hedging  loss) or decrease (in the case of a hedging
gain),  in the  carrying  value  of loans  receivable.  As of  March  31,  1999,
Allegiance  had net realized  losses on its hedging  activities of $92,000 which
increased  loans  receivable  in a like  amount.  In  addition,  Allegiance  had
unrealized net gains from open hedging positions of $3,000 as of March 31, 1999.
See "Item 3 -- Quantitative and Qualitative Disclosures About Market Risk."

         Three Months Ended March 31, 1999 Compared to Three Months Ended March
31, 1998

         Interest  Income.  Interest  income  increased 57.9% to $221,000 in the
first quarter of 1999 from $140,000 in the first quarter of 1998.  This increase
was due to  increased  loans  made by  Allegiance.  Allegiance  had eight  loans
outstanding  in the  aggregate  amount of $15.4  million  at March  31,  1999 as
compared  to two loans  outstanding  in the amount of $5.9  million at March 31,
1998. The  weighted-average  interest rate on the loans  outstanding  during the
first  quarter of 1999 was 9.3%  compared  to 9.5%  during the first  quarter of
1998.

         Interest  Expense.  Interest expense for Allegiance was $108,000 in the
first  quarter of 1999 as a result of the  interest  paid  under the  Allegiance
Financing.  During the first quarter of 1999, the weighted-average interest rate
under the Allegiance Financing was 8.16%. Prior to November 1998, Allegiance had
no debt.

         Compensation  and  Benefits.  Compensation  and  benefits  increased to
$55,000 in the first  quarter of 1999 from $37,000 in the first quarter of 1998.
This increase resulted from the hiring of one new employee in March 1999 and two
part-time employees in January 1999 to support Allegiance's lending activities.

         Other   General  and   Administrative   Expenses.   Other  general  and
administrative  expenses  increased to $99,000 in the first quarter of 1999 from
$50,000 in the first  quarter of 1998 due  primarily  to a $25,000  increase  in
allowance  for loan losses  recorded in the first  quarter of 1999. In addition,
the increase was due to an increase in Allegiance's activities.

         Amortization.  Amortization  costs increased  $56,000 to $57,000 in the
first  quarter  of 1999 from  $1,000  in the  first  quarter  1998.  Such  costs
increased due to the financing costs associated with the Allegiance Financing.

     Other
     -----

         The other segment  includes  operating  results for Point West and PWS.
Except for compensation and benefit expenses clearly attributable to Allegiance,
corporate  overhead is included in the other segment and has not been allocated.
Activities for PWS were immaterial in the first quarter of 1998.

         Three Months Ended March 31, 1999 Compared to Three Months Ended March
31, 1998

          Interest  Income.  Interest  income  declined  to $55,000 in the first
quarter of 1999 from $115,000 in the first quarter of 1998. This decrease is due
to lower cash balances.


                                       17


<PAGE>



          Gain on Sales of Securities.  Point West recognized a $317,000 gain in
the first quarter of 1999 in connection with shorting  internet  related stocks.
See "Item 3 -- Quantitative and Qualitative Disclosures About Market Risk."

         Other  Income.  Other income was $73,000 in the first  quarter of 1999.
Such amount included a $66,000  placement fee received by PWS in connection with
an investment  made by  co-investors of Fourteen Hill Capital in an unaffiliated
small business entity and $7,000 in trading commissions generated by PWS.

         Compensation and Benefits.  Compensation and benefits decreased 6.7% to
$292,000  in the first  quarter of 1999 from  $313,000  in the first  quarter of
1998.  This  decrease  resulted  primarily  from a reduction in staff related to
activities other than Allegiance.

          Other  General  and   Administrative   Expenses.   Other  general  and
administrative expenses increased 48.0% to $330,000 in the first quarter of 1999
from $223,000 in the first  quarter of 1998.  This increase was due primarily to
an  increase  in legal  expenses  in the first  quarter of 1999 in the amount of
$110,000  incurred in connection with the federal and state alleged class action
lawsuits filed against Point West and its officers and directors. See Note 12 of
the Condensed  Notes to  Consolidated  Financial  Statements. Point West expects
legal expenses to increase substantially in 1999 relative to 1998 since the case
is currently in discovery and the trial date is set for October 1999.

         The Company's  current lease expires in May 1999. The Company is in the
process  of  negotiating  a  renewal  of the  lease on its  current  space.  The
Company's  monthly  rent  is  likely  to  increase  from  $5,240  per  month  to
approximately $16,000 per month.

Liquidity and Capital Resources
-------------------------------

     Point West and PWS

         At present,  neither Point West nor PWS has an external  funding source
from which to fund its working capital and general  corporate needs.  During the
first quarter of 1999,  the Company  supported the operations of Point West, PWS
and Fourteen Hill primarily from cash  balances.  In prior periods,  the Company
generated cash  primarily  from sales  proceeds of life  insurance  policies and
investment  securities.  The  Company  invested  the cash in the  growth  of its
businesses. At March 31, 1999, the Company's cash and cash equivalents were $7.2
million.  The Company  continues  to analyze  its  current and future  needs for
financing,  which will be dependent on its ability to develop the  businesses of
Fourteen  Hill,  Allegiance  and PWS and any other  business  opportunities  the
Company pursues. See "Considerations  Under the Investment Company Act of 1940."
There can be no assurance that Point West or PWS will be successful in obtaining
external  financing  on  satisfactory  terms  assuming  the  Company  determines
additional funds are needed. Point West at present anticipates having sufficient
liquidity to meet its working capital and operational  needs through 1999, using
current cash and cash equivalents.

     DPFC

         DPFC  does  not  have  operations.  Point  West,  as  servicer,  incurs
administrative  costs  associated  with the  Securitized  Notes.  Point  West is
reimbursed  for these costs  subject to  priority  provisions  contained  in the
Indenture.  As of March  31,  1999,  the  outstanding  principal  amount  of the
Securitized  Notes was $38.5 million.  As of the same date,  DPFC had restricted
cash of $1.9  million,  which  cannot  be  accessed  by Point  West  except  for
reimbursement  of costs  incurred in connection  with its activities as servicer
under the Indenture.  Principal and interest  payments on the Securitized  Notes
are payable solely 

                                       18

<PAGE>


from  collections on policies  pledged to secure the payment  thereof and do not
require Point West to expend cash or obtain  financing to satisfy such principal
and interest obligations.

     Fourteen Hill

         Fourteen  Hill's  activities  have  generally been supported by capital
investments by Point West.  During 1997,  Point West contributed $2.5 million to
Fourteen Hill. During 1998, Point West contributed an additional $2.5 million to
Fourteen Hill.  During the first quarter of 1999,  Point West has contributed an
additional $800,000 to Fourteen Hill.

         Fourteen Hill Capital has an SBA debenture license and, therefore,  may
be permitted to borrow up to $7.5  million  from the SBA.  Any  borrowings  bear
interest at the rate for ten year debentures issued by SBIC's and funded through
public sales of  certificates  bearing the SBA's guarantee  ("Debenture  Rate").
Interest is payable  semi-annually.  In addition,  there is a leverage fee of 3%
and a fee of 1% per  annum  on the  outstanding  amount  of  debt.  Among  other
requirements,  an SBIC  with an SBIC  debenture  license  must  maintain  proper
diversification of its portfolio. This requirement generally means that in order
to borrow funds from the SBA, no single  investment may exceed 20% of the SBIC's
regulatory capital plus its net unrealized  investment gains. The net unrealized
investment  gains may be used in this  calculation only if the SBIC has positive
retained earnings.  Additionally,  the portfolio must consist of a proper mix of
debt and equity  investments.  In July 1998,  Fourteen Hill Capital  borrowed $3
million from the SBA.

         Fourteen Hill may not have sufficient liquidity,  at least in the short
term, to grow its business. In addition,  because of substantial appreciation in
investments,  the Company may be required to restrict  Fourteen Hill's growth in
order to avoid  registration  under the  Investment  Company Act of 1940 at some
time in the future.  See  "Considerations  Under the  Investment  Company Act of
1940."

     Allegiance

         As of March 31, 1999, Point West has made the only capital contribution
to Allegiance Capital in the aggregate amount of $5.7 million.

         On August 19, 1998,  Allegiance put in place the  Allegiance  Financing
which may provide up to $56.4 million  solely to support any lending  activities
of Allegiance. The Allegiance Financing provides interim floating rate financing
through August 31, 1999. The Company  anticipates that the Allegiance  Financing
will  ultimately  provide 15 year fixed and floating  rate  financing  for loans
originated by Allegiance.  However, if Allegiance does not originate $30 million
in loans by August 31, 1999, permanent financing will not be available under the
Allegiance  Financing  and  Allegiance  would  be  responsible  for  finding  an
alternative  financing  source to repay the interim  financing.  As of March 31,
1999, Allegiance had borrowed $11.8 million under the Allegiance Financing.  The
Company expects Allegiance to originate $30 million in loans by August 1999.

         The  Company  expects  that  the  Allegiance   Financing  will  provide
sufficient funds to support Allegiance's lending activities through August 1999.

Considerations Under the Investment Company Act of 1940
-------------------------------------------------------

         The  Investment  Company  Act  of  1940  (the  "1940  Act")  creates  a
comprehensive  regulatory framework applicable generally to investment companies
(i.e., companies engaged primarily in the business of investing,  reinvesting or
trading in securities  within the meaning of the 1940 Act,  whether or not those
companies  intend to be engaged  primarily in such business).  There are various
percentage  of

                                       19


<PAGE>


assets and income  tests under the 1940 Act (the  "Percentage  Tests")  that are
relevant in considering whether a company is deemed to be an investment company.
Companies  that  are  subject  to the 1940  Act  must  register  with the SEC as
investment   companies  and  upon  registration   become  subject  to  extensive
regulation.

         Although  the Company  believes  that it did not exceed the  Percentage
Tests at March 31, 1999, it is possible that it may exceed the Percentage  Tests
in the near future as a result of the following:

            *     Allegiance  has not grown its commercial  lending  business as
                  quickly as the Company had expected;

            *     The  Company  has been  unable to  commence  or acquire  other
                  complementary  financial services  businesses as rapidly as it
                  had hoped;

            *     The  success  of  Fourteen  Hill,  which  holds  a  number  of
                  investment securities, has exceeded expectations; and

            *     The  success of other  investments  by the  Company  exceeding
                  expectations.

         The  bulk of  investment  securities  held  by the  Company  have  been
acquired  since  January  1998.  The aggregate  value of these  investments  has
increased  substantially since the purchase dates. In particular,  Fourteen Hill
holds  1,120,266  shares of  FlashNet  common  stock  that was  acquired  for $2
million. FlashNet consummated an initial public offering in March 1999. FlashNet
priced at $17 per share, but has traded between $30 and $51.

         In any event,  the Company does not believe that it should be deemed to
be an investment  company because it is not engaged primarily in the business of
investing,  reinvesting or trading in securities  within the meaning of the 1940
Act and the rules of the SEC promulgated thereunder and does not hold itself out
as an investment company.

         The Company intends to pursue an aggressive  strategy to ensure that it
is not deemed to be an  investment  company.  Some  elements  of this  strategy,
however,  may at  least  in the  short  term  materially  adversely  affect  the
Company's financial condition or results of operations, or both. The elements of
this strategy, which are subject to the risks described below involve:

            *     pursuing   the  growth  of  new   operating   businesses,   by
                  acquisition or internal development;

            *     continuing   to  develop   Allegiance's   commercial   lending
                  business; and

            *     disposing of  investment  securities  and/or  restricting  the
                  growth of Fourteen Hill's business.

Growth of New Operating Businesses

         The Company is seeking advice from  financial  advisors to assist it in
its strategy of developing or acquiring  new  operating  businesses  that do not
involve investment securities. Although the Company intends to pursue businesses
which are  complementary to the Company's current  businesses,  these businesses
may  not  necessarily  involve  financial  services.  These  businesses  will be
operating  entities  which do not own, trade or hold any  significant  amount of
investment  securities.  The Company  may not find any  suitable  businesses  to
acquire or develop on terms acceptable to the Company. In addition,  the 

                                       20

<PAGE>


Company may not be able to  successfully  integrate  the  operations  of any new
businesses.  Finally,  any new businesses  may not contribute  positively to the
Company's financial condition or results of operations.

Continuing the Growth of Allegiance

         The  Company  will use all  reasonable  efforts to grow the  commercial
lending business of Allegiance.  However,  the growth of Allegiance is dependent
on the market's  acceptance of the product offerings and services of Allegiance,
Allegiance's   continued   ability  to  raise   financing  for  its  activities,
Allegiance's  ability to find suitable  creditworthy  borrowers and  competitive
pressures in the lending industry. As previously discussed,  Allegiance does not
have an external funding source beyond August 31, 1999. In addition,  Allegiance
may need to find  financing  to repay  its  existing  external  interim  funding
source.

Disposing of Investment Securities/Limiting Growth of Fourteen Hill

         The Company may determine that it must dispose of investment securities
to avoid being deemed to be an investment company. The dispositions may occur at
times and on terms that would not  maximize the value of these  investments.  In
addition,  the dispositions may result in disadvantageous tax consequences.  The
Company  intends to use any  proceeds of any sale to reduce debt and support its
working capital. Pending final use, proceeds of any sale will be invested in U.S
government securities.

         The  Company  may also  determine  that it needs to limit the growth of
Fourteen  Hill's  business to avoid being an  investment  company under the 1940
Act.  Limiting  Fourteen  Hill's  growth  may  materially  adversely  affect the
Company's future financial condition and results of operations.

Year 2000 Readiness Disclosure
------------------------------

         The "Year 2000 issue"  refers to a wide variety of  potential  computer
program processing and functionality issues that may arise from the inability of
computer programs to properly process date-sensitive information relating to the
Year 2000,  years  thereafter  and to a lesser degree the Year 1999.  Any of the
Company's computers,  computer programs and administration equipment or products
that have  date-sensitive  software may  recognize a date using "00" as the year
1900 rather than the year 2000.  If any of the  Company's  systems or  equipment
that have  date-sensitive  software  use only two  digits,  system  failures  or
miscalculations may result causing disruptions of operations,  including,  among
other things, a temporary inability to process  transactions or send and receive
electronic  data  with  third  parties  or  engage in  similar  normal  business
activities.   The  following  discussion   constitutes  a  Year  2000  Readiness
Disclosure.

         The Company  expects to spend  approximately  $25,000 to $50,000 in the
aggregate to modify its computer  information systems enabling proper processing
of  transactions  relating to the year 2000 and beyond ("Year 2000  Compliant").
During 1998,  the Company made an assessment of Year 2000  Compliant  issues and
determined  that it needed to modify or replace  certain  third  party  computer
hardware and software. As the Company has implemented solutions to the Year 2000
Compliant  issues,  in  some  circumstances  it has  determined  that  replacing
existing systems,  hardware, or equipment may be more efficient and also provide
additional  functionality.  The  Company  has  completed  the  majority  of such
modifications and replacements. Through March 31, 1999, the Company had incurred
Year 2000 Compliant costs of  approximately  $26,000,  of which $19,000 has been
capitalized.  The Company  does not believe the amounts  expected to be expensed
over the next year will have a  material  effect on its  financial  position  or
results of operations.  However, there can be no assurance that actual costs (i)
will not  materially  exceed  expected  costs and (ii) will not have a  material
adverse  effect on the Company's  

                                       21

<PAGE>


financial condition and results of operation. The Company is currently assessing
its electronic office equipment such as the phone system, copiers, fax machines,
printers, and the like to determine if such equipment is date sensitive and will
require   upgrades.   The  Company  is  also  assessing  the  readiness  of  its
business-critical  spreadsheets  and  customized  databases  and  plans  to make
modifications  of those systems as necessary.  During the remainder of 1999, the
Company will test and make any system refinements that may be needed.

         The Company has begun  assessing  the  readiness of external  entities,
such  as  vendors,  suppliers,  investments  and  financial  institutions  which
interface  with the Company and plans to have this  assessment  complete by June
30, 1999. The Company plans to determine  whether those parties have appropriate
plans to  remediate  Year 2000 issues  where their  systems  interface  with the
Company's  systems or  otherwise  impact its  operations.  The Company  plans to
assess  the  extent  to  which  its  operations  are  vulnerable   should  those
organizations fail to properly  remediate their computer systems.  The Company's
Year 2000 team is made up of three  internal  staff  members.  While the Company
believes  its planning  efforts are adequate to address its Year 2000  concerns,
there can be no  guarantee  that the  systems  of other  companies  on which the
Company's  systems and  operations  rely will be Year 2000 Compliant on a timely
basis.  Although the Company believes it is unlikely,  there can be no assurance
that the failure of the Company or a third party on which it is  dependent to be
Year 2000  Compliant  will not have a material  adverse  effect on the Company's
operations, prospects, financial condition or results of operations.

         The Company's contingency plans, if year 2000 modifications do not work
or are not ready by year 2000,  relies  significantly  on manual  procedures and
record keeping. All files are expected to be adequately backed up as of December
31, 1999 and to be available to facilitate manual record keeping.  Adequate hard
copy reports of balances and  transactions  as of December 31, 1999 will also be
available  to provide a  complete  manual  system of  accounting  and  inventory
control,  if required.  Subsequent to year 2000, manual systems will continue to
be in  place to  mitigate  the risk of lost  information  due to any  unforeseen
interruptions  that may  occur as a result  of year 2000  issues  arising  after
January 1,  2000.  Nonetheless,  there can be no  assurance  that the  Company's
contingency plan will  effectively  mitigate any Year 2000 failures or that such
contingency  plan would not itself  materially  adversely  effect the  Company's
financial condition or results of operations.

Forward Looking Statements
--------------------------

         This report includes forward looking  statements  within the meaning of
the Private Securities Litigation Reform Act of 1995. All statements made herein
which are not based on historical  facts are forward  looking and,  accordingly,
involve  risks and  uncertainties  that  could  cause  actual  results to differ
materially from those discussed.  Such forward looking  statements include those
under  "Management's  Discussion and Analysis of Financial Condition and Results
of Operations"  relating to (i) the ability of Allegiance to avail itself of the
benefits of the Allegiance Financing beyond August 1999, (ii) sufficiency of the
Company's   liquidity  and  capital   resources  (See   "Liquidity  and  Capital
Resources"),  (iii) the  Company's  ability  to  continue  not being  subject to
registration  and regulation under the 1940 Act (See  "Considerations  Under the
Investment Company Act of 1940"),  (iv) expected expenses in connection with the
federal and state  alleged class action  lawsuits  filed against the Company and
its officers and directors,  (v) expected  future life insurance  policy premium
costs and (vi) expected expenses to make the Company's computer  operations Year
2000  Compliant  and  expectations  regarding  the Year 2000  Compliance  of the
Company,  third-parties  on which the Company is  dependent  and the efficacy of
contingency  plans related  thereto.  Such  statements are based on management's
belief,  judgment and analysis as well as  assumptions  made by and  information
available to management at the date hereof.  In addition to any  assumptions and
cautionary  factors  referred to  specifically in this report in connection with
such forward  looking  statements,  factors  that could cause actual  results to
differ  materially from 

                                       22
<PAGE>


those  contemplated by the forward looking  statements  include (i) Allegiance's
ability to originate a sufficient  number and amount of loans,  (ii) the results
of the Company's  consideration  of strategic  options and any costs  associated
with a chosen option,  (iii) availability and cost of capital,  (iv) the factors
described under "Management's Discussion and Analysis of Financial Condition and
Results of  Operations --  Considerations  Under the  Investment  Company Act of
1940," (v) the outcome of the federal and state  alleged  class action  lawsuits
filed against the Company and its officers and directors, (vi) the maturity rate
of DPFC's  portfolio  of life  insurance  policies  and (vii) the ability of the
Company's suppliers and vendors to become Year 2000 Compliant.

ITEM 3--QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
------------------------------------------------------------------

         Market  risk  refers  to the risk  that a change in the level of one or
more market prices,  interest rates, or other market factors, such as liquidity,
will  result in losses for a  specified  position or  portfolio.  The  Company's
exposure to market risk arises primarily from Fourteen Hill's investments in the
stock of public and  private  companies,  fixed rate loans and debt  investments
made by Allegiance  and Fourteen Hill and  Allegiance's  variable rate debt. The
Company's   management  believes  the  Company's  risk  management  and  hedging
practices result in carefully managed market exposure.

         The Company has investment  holdings in various  companies.  Due to the
varying nature of these investments, it is difficult to correlate the effects of
the market to a particular  market index. The effects of the market are reviewed
by management on an individual investment-by-investment basis.

         Beginning in 1999,  because of the  volatility of internet and internet
related stocks,  Point West shorted stocks of certain competitors of FlashNet so
as to partially hedge its holdings in FlashNet. At March 31, 1999 no such hedges
were in place.  The Company  recognized a $317,000 gain in connection  with such
hedging activities during the first quarter of 1999.

         Allegiance's  variable rate debt consist of trust certificates totaling
$6.5 million which bear interest  based on the one-month  LIBOR plus a spread of
2.0% and $5.3 million  which bear interest  based on the one-year U.S.  Treasury
Rate plus a weighted  average spread of 3.9%. See Note 6 of the Condensed  Notes
to Consolidated Financial Statements.

         The table below  represents  principal cash flows and weighted  average
interest rates for the Allegiance loans outstanding at March 31, 1999:
<TABLE>
<CAPTION>


                                 1999          2000           2001           2002          2003        Thereafter
                                 ----          ----           ----           ----          ----        ----------

<S>                              <C>            <C>             <C>           <C>            <C>         <C>


Fixed rate loans (1)         $  247,356    $   394,203    $  432,784     $  475,148    $  521,666    $13,368,363
Average interest rates          9.4%           9.4%          9.4%           9.4%          9.4%           9.4%

--
<FN>


(1)  The Company hedges its interest rate exposure  related to the loans made by
     Allegiance  because  the  interest  rate at  which  Allegiance  anticipates
     issuing  term  certificates  will be set in the future at some point before
     August 31, 1999, provided that approximately $30 million of loans have been
     originated. Allegiance utilizes futures contracts to hedge certain interest
     rate exposure between the time of origination of the loans and the issuance
     of term certificates. The Company sold 10-year Treasury Notes to hedge such
     interest rate risk.

</FN>
</TABLE>

          In  connection  with the  Allegiance  Financing,  Point West agreed to
provide  additional  cash to Allegiance  Trust I in the event that monthly LIBOR
interest  rates exceed  6.16%.  The amount of cash will be a function of several
variables  including the monthly LIBOR interest rate and the amount of revolving
Class A-R  certificate  outstanding  under  Allegiance  Trust I.

                                       23

<PAGE>



PART II.  OTHER INFORMATION
--------  -----------------

Item 1. Legal Proceedings
-------------------------

         On  December  19,  1996,  a  complaint  was filed in the United  States
         District Court,  Northern  District of California (the "Court") (Docket
         No. C96-4558)  against Dignity  Partners,  Inc. (now Point West Capital
         Corporation) and each of its directors by three individuals  purporting
         to act on behalf of themselves  and an alleged class  consisting of all
         purchasers of the Company's common stock during the period February 14,
         1996 to July 16,  1996.  The  complaint  alleged  that  the  defendants
         violated Section 10(b) of the Securities  Exchange Act of 1934 and Rule
         10b-5  thereunder  and  Section  11 of the  Securities  Act of 1933 and
         seeks, among other things,  compensatory  damages,  interest,  fees and
         costs. The allegations were based on alleged  misrepresentations in and
         omissions  from the Company's  registration  statement  and  prospectus
         related to its initial public  offering and certain  documents filed by
         the  Company  under the  Exchange  Act.  On April 24,  1998,  the Court
         granted the  Company's  and other  defendants'  motion to dismiss as it
         related to the Section 11 claims with  prejudice  but denied the motion
         to dismiss  the  claims  under  Section  10(b) and Rule 10b-5 as to all
         defendants  other  than  Mr.  Bow,  one  of  Point  West's   directors.
         Plaintiffs  have appealed this  dismissal to the United States  Circuit
         Court for the Ninth  Circuit.  On November 13, 1998,  the Court granted
         plaintiff's  motion  for  class  certification.   On  March  11,  1999,
         defendants  filed a motion for summary  judgement which is scheduled to
         be heard in May 1999. The case is currently in discovery.  A trial date
         has been set for October  1999.  The Company and each of the  remaining
         defendants intend to continue to defend the action vigorously.

         On February 13, 1997,  a complaint  was filed in the Superior  Court of
         California,  City and  County  of San  Francisco  (Docket  No.  984643)
         against Dignity Partners,  Inc., and each of its executive officers and
         New Echelon LLC by an individual purporting to act on behalf of himself
         and an alleged  class  consisting  of all  purchasers  of the Company's
         common stock during the period  February 14, 1996 to July 16, 1996. The
         complaint  alleges that the  defendants  violated  section 25400 of the
         California Corporate Code and seeks to recover damages. The allegations
         are    based   on    alleged    misstatements,    concealment    and/or
         misrepresentations  and omissions of allegedly material  information in
         connection  with the Company's  initial public  offering and subsequent
         disclosures.  The case has been stayed since its inception by agreement
         of the parties. The Company and each of the defendants intend to defend
         the action vigorously.

                                       24

<PAGE>


Item 6. Exhibits and Reports on Form 8-K

         (a)      Exhibits.
                  Number           Description
                  ----------       ------------ 

                  27            Financial Data Schedule

                  99.1      Press Release for Fourteen Hill Capital, L.P.

         (b) Reports on Form 8-K filed during the quarter ended March 31, 1999:

                  Date               Item Reported    Matter Reported

                  January 11, 1999        5           The Company issued a press
                                                      release regarding the 
                                                      formation  of  Point  West
                                                      Securities.

                  March 5, 1999           5           The Company issued a press
                                                      release regarding its  
                                                      results of  operations for
                                                      1998.
                                                                         


                                       25


<PAGE>




                                   SIGNATURES

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



                                              POINT WEST CAPITAL CORPORATION



DATED:  April 13, 1999                        /s/ ALAN B. PERPER              
                                              -------------------------------- 
                                              ALAN B. PERPER 
                                              President
                                              (Duly Authorized Officer)




DATED:  April 13, 1999                        /s/ JOHN WARD ROTTER         
                                              -------------------------------- 
                                              JOHN WARD ROTTER
                                              Executive Vice President and
                                              Chief Financial Officer
                                              (Principal Financial and
                                              Accounting Officer)


                                       26