SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q
                                    ---------
              [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended June 30, 1999
                                                 --------------
                                       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 August 6, 1999, there were 3,350,624 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
            June 30, 1999 and December 31, 1998                          1

          Consolidated Statements of Operations and
            Comprehensive Income (Loss) for the Three and
            Six Months Ended June 30, 1999 and 1998                      2

          Consolidated Statements of Cash Flows for the
            Six Months Ended June 30, 1999 and 1998                      3

          Condensed Notes to Consolidated Financial Statements          4-14

Item 2.   Management's Discussion and Analysis of Financial
            Condition and Results of Operations                        15-28

Item 3.   Quantitative and Qualitative Disclosures
            About Market Risk                                            28


Part II
-------

Item 1.   Legal Proceedings                                              30

Item 4.   Submission of Matters to a Vote of Security Holders            31

Item 6.   Exhibits and Reports on Form 8-K                               31

Signatures                                                               32

                                 (i)
<PAGE>
                         POINT WEST CAPITAL CORPORATION
                           CONSOLIDATED BALANCE SHEETS
                       June 30, 1999 and December 31, 1998
<TABLE>
<CAPTION>




                                                                                  June 30,            December 31,
                                 ASSETS                                             1999                  1998
                                                                             -------------------   --------------------
<S>                                                                             <C>                       <C>



Cash and cash equivalents                                                  $         10,236,549  $           6,668,126
Restricted cash                                                                       2,264,707              3,153,513
Investment securities-- available-for-sale                                           25,335,422              2,113,034
Matured policies receivable                                                             279,915                 12,000
Loans receivable, net of unearned income of $321,646 and
           $117,709, respectively, and net of an allowance for
           loan losses of $95,000 and $50,000, respectively                          19,075,250             10,187,590
Purchased life insurance policies                                                    32,560,408             33,893,017
Non-marketable securities                                                             3,074,168              5,396,607
Deferred financing costs, net of accumulated amortization
           of $1,159,819 and $907,848, respectively                                     568,614                810,545
Furniture and equipment, net of accumulated depreciation of
           $8,145 and $4,469, respectively                                               24,597                 25,365
Other assets                                                                          2,482,665                182,964
                                                                             -------------------   --------------------

           Total assets                                                    $         95,902,295  $          62,442,761
                                                                             ===================   ====================

                  LIABILITIES AND STOCKHOLDERS' EQUITY

Accrued interest expense                                                   $            289,261  $             263,805
Accounts payable                                                                        352,655                192,436
Accrued compensation payable                                                            177,344                222,000
Accrued litigation settlement                                                         3,150,000                     --
Revolving certificates                                                               15,300,794              5,400,045
Long term notes payable                                                              38,528,914             38,528,914
Debentures                                                                            3,000,000              3,000,000
Deferred income taxes                                                                 3,263,992                  6,000
                                                                             -------------------   --------------------

           Total liabilities                                                         64,062,960             47,613,200
                                                                             -------------------   --------------------

Stockholders' equity:
           Common  stock,  $0.01  par  value;   15,000,000   authorized
                shares, 4,389,124 and 4,291,824 shares, respectively,
                issued, 3,350,624 and 3,253,324 shares, respectively,
                outstanding                                                              43,891                 42,918
           Additional paid-in-capital                                                30,086,709             29,496,720
           Accumulated comprehensive income-- net unrealized
                investment gains (losses)                                            14,972,174              (188,966)
           Retained deficit                                                        (10,389,407)           (11,647,079)
           Treasury stock, 1,038,500 shares                                         (2,874,032)            (2,874,032)
                                                                             -------------------   --------------------

          Total stockholders' equity                                                31,839,335             14,829,561
                                                                             -------------------   --------------------

           Total liabilities and stockholders' equity                      $         95,902,295  $          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 (LOSS)
            For the Three and Six Months Ended June 30, 1999 and 1998

<TABLE>
<CAPTION>




                                                                 Three Months Ended                       Six Months Ended
                                                                       June 30,                               June 30,
                                                               1999              1998                 1999               1998
                                                         -----------------  ----------------    -----------------  -----------------
<S>                                                                <C>            <C>                     <C>              <C>

Income:
     Earned discounts on matured policies              $           50,267 $          49,519   $          111,001 $          365,652
     Interest income                                              579,479           347,848            1,070,471            699,155
     Gain on assets sold                                            7,751            11,689                7,751            150,526
     Gain on sale of securities                                 4,791,871                --            5,760,219                 --
     Other                                                        228,568           105,403              310,589            168,888
                                                         -----------------  ----------------    -----------------  -----------------
          Total income                                          5,657,936           514,459            7,260,031          1,384,221

Expenses:
     Interest expense                                           1,164,114           867,922            2,207,147          1,772,042
     Compensation and benefits                                    436,446           345,779              783,780            695,338
     Other general and administrative expenses                  1,634,514           414,562            2,220,785            847,819
     Amortization                                                 128,288            62,656              251,971            125,312
     Depreciation                                                   1,878               785                3,676              1,203
     Loss on non-marketable securities                            535,000                --              535,000                 --
                                                         -----------------  ----------------    -----------------  -----------------
          Total expenses                                        3,900,240         1,691,704            6,002,359          3,441,714
                                                         -----------------  ----------------    -----------------  -----------------

          Gain (loss) before net loss in wholly owned
              financing subsidiary charged to
              reserve for equity interest                       1,757,696       (1,177,245)            1,257,672        (2,057,493)

Net loss in wholly owned financing subsidiary charged
     to reserve for equity interest                                    --         1,092,037                   --          1,892,713


                                                         -----------------  ----------------    -----------------  -----------------
          Net income (loss)                                     1,757,696          (85,208)            1,257,672          (164,780)


Comprehensive income -- net unrealized
     investment gains (losses)                                (6,426,831)         (483,307)           15,161,140           (80,652)
                                                        -----------------  ----------------    -----------------  -----------------
Total comprehensive income (loss)                      $      (4,669,135) $       (568,515)   $       16,418,812 $        (245,432)
                                                         =================  ================    =================  =================

Basic earnings (loss) per share                        $             0.53            (0.03)   $             0.38 $           (0.05)
Diluted earnings (loss) per share                                    0.48            (0.03)                 0.34             (0.05)

Weighted average number of shares of common stock
     outstanding                                                3,341,635         3,253,324            3,307,820          3,253,324
Weighted average number of shares of common stock
     and common stock equivalents outstanding                   3,657,996         3,253,324            3,680,091          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 Six Months Ended June 30, 1999 and 1998

<TABLE>
<CAPTION>



                                                                                   Six Months Ended
                                                                                       June 30,
                                                                             1999                 1998
                                                                       ------------------   ------------------
<S>                                                                           <C>                      <C>


Cash flows from operating activities:
    Net income (loss)                                                $         1,257,672 $          (164,780)
    Adjustments to reconcile net income (loss) to net cash
       used in operating activities:
         Depreciation and amortization                                           255,647              126,515
         Gain on assets sold                                                     (7,751)            (150,526)
         Gain on sale of securities                                          (5,760,219)                   --
         Earned discounts on policies                                          (111,001)            (365,652)
         Collections on matured life insurance policies                        1,175,341            2,275,514
         Increase in reserve for loans receivable                                 45,000                   --
         Increase in other assets                                            (2,319,072)            (136,637)
         Increase (decrease) in accrued interest expense                          25,456              (4,711)
         Increase (decrease) in accounts payable                                 160,219             (37,771)
         Decrease in accrued compensation payable                               (44,656)             (93,000)
         Decrease in reserve for equity interest in wholly
                  owned financing subsidiary                                          --          (1,775,769)
         Increase in non-marketable securities received                        (242,164)                   --
         Loss on non-marketable securities                                       535,000                   --
         Loss on loan                                                            140,000                   --
         Increase in accrued litigation settlement                             3,150,000                   --
                                                                       ------------------   ------------------
                  Net cash used in operating activities                      (1,740,528)            (326,817)
                                                                       ------------------   ------------------

Cash flows from investing activities:
    Proceeds from sale of other assets                                            27,126              205,696
    Purchase of furniture and equipment                                          (2,909)             (11,883)
    Decrease in restricted cash                                                  888,806               56,566
    Purchase of investments and non-marketable securities                    (3,812,227)          (4,723,670)
    Sale of investments and non-marketable securities                          7,137,420                   --
    Additions to loans receivable                                            (9,450,703)          (2,617,234)
    Principal payments on loans receivable                                       378,043               57,042
                                                                       ------------------   ------------------
                  Net cash used in investing activities                      (4,834,444)          (7,033,483)
                                                                       ------------------   ------------------

Cash flows from financing activities:
    Principal payments on long term notes payable                                     --            (275,193)
    Proceeds from revolving certificates                                      10,040,000                   --
    Principal payments on revolving certificates                               (139,251)                   --
    Increase in financing costs                                                 (10,040)             (50,000)
    Proceeds from options exercised                                              252,686                   --
                                                                       ------------------   ------------------
                  Net cash provided by (used in) financing activities         10,143,395            (325,193)
                                                                       ------------------   ------------------

                  Net increase (decrease) in cash and cash                     3,568,423          (7,685,493)
                  equivalents

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

Cash and cash equivalents, end of period                             $        10,236,549 $          2,354,067
                                                                       ==================   ==================


Supplemental disclosures:
Supplemental disclosure of non-cash activities:
    Unrealized gain on securities available for sale                 $        15,161,140 $           (80,652)
                                                                       ==================   ==================
    Receipt of warrants                                              $           242,164 $                 --
                                                                       ==================   ==================
Supplemental disclosure of cash flow information:
    Taxes paid                                                       $            20,606    $            8,530
                                                                       ==================   ==================
    Cash paid for interest                                           $         2,181,691 $          1,776,753
                                                                       ==================   ==================
<FN>
     See accompanying condensed notes to consolidated financial statements.
</FN>
</TABLE>
                                      3



                         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
June 30,  1999 and for the three and six month  periods  ended June 30, 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 and six month periods ended June 30, 1999 are not  necessarily  indicative
of the results that may be expected for the year ending  December 31, 1999.  The
Consolidated  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 I,
LLC ("Allegiance  Funding"),  Allegiance Capital Trust I ("Allegiance Trust I"),
Allegiance Management Corp. ("Allegiance Management") 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, Allegiance Trust I and Allegiance Management.

         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.

         In June 1999, the Financial  Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard No. 137 ("SFAS 137"),  Accounting for
Derivative  Instruments and Hedging Activities -- Deferral of the Effective Date
of FASB  Statement  No. 133 -- an Amendment of FASB  Statement No. 133. SFAS 137
defers the effective date of Statement of Financial  Accounting Standard No. 133
("SFAS 133"), Accounting for Derivative Instruments and Hedging Activities. SFAS
133, as  amended,  is now  effective  for all fiscal  quarters  of fiscal  years
beginning after June 15, 2000.  Management is still reviewing the impact of this
pronouncement.

                                       4
<PAGE>




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

         Statement  of  Financial  Accounting  Standard  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  on the  Consolidated  Balance  Sheets at fair
market  value  with any  cumulative  unrealized  gains and  losses as a separate
component of  stockholders'  equity and any unrealized  gains and losses for the
respective  period as a separate  line item on the  Consolidated  Statements  of
Operations and  Comprehensive  Income (Loss).  Several of the equity  securities
classified by the Company as  available-for-sale  are  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 June 30, 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 the Consolidated  Statements of Operations
and  Comprehensive  Income (Loss) on an appropriate  line item above "Net Income
(Loss)".

         The costs and estimated fair value of investment securities (before any
minority interest)  reflected on the Consolidated  Balance Sheets as of June 30,
1999 and December 31, 1998 are as follows:

<TABLE>
<CAPTION>



                                                 June 30, 1999
---------------------------------------------------------------------------------------------------------------------
                                                          Gross                Gross
                                            Cost     Unrealized Gains      Unrealized
                                                                               Losses          Fair Value
<S>                                  <C>                <C>                 <C>               <C>


 Available-for-sale
           Corporate bond            $       350,000   $            --     $    (292,500)     $     57,500
           Common stock                    6,416,630        19,965,496        (1,104,204)       25,277,922
                                     ---------------   ---------------    ---------------    ---------------
      Total available-for-sale       $     6,766,630   $    19,965,496     $  (1,396,704)     $ 25,335,422

</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 $18.6
million and ($189,000) at June 30, 1999 and December 31, 1998,  respectively.  A
separate  balance sheet 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 and six months
ended June 30, 1999 and 1998, the Company's total comprehensive income (loss) in
its  Consolidated  Statements  of  Operations  and  Comprehensive  Income (Loss)
includes unrealized investment gains (losses), net of applicable taxes, only for
the respective period. See Note 10.

                                       5

<PAGE>


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  twelve  loans  outstanding  at  June  30,  1999 in the
aggregate principal amount of $18.9 million, which bear a weighted-average fixed
interest  rate per  annum of 9.5%.  Allegiance  had five  loans  outstanding  at
December 31, 1998 in the aggregate principal amount of $9.1 million,  which bear
a weighted-average fixed interest rate per annum of 9.3%. 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. At June
30, 1999, one loan was delinquent and 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 Statement of Financial  Accounting  Standard 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  fixed  and  floating  rate  financing  and
ultimately permanent fixed and floating rate financing for loans originated. See
Note 6.  Allegiance  uses  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
Standard No. 80 ("SFAS 80"), Accounting for Futures Contracts, all such deferred
amounts are reflected on the Consolidated  Balance Sheets 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 June 30, 1999,  Allegiance  had net
realized gains on its hedging  activities of $35,000 which reduced the amount of
loans  receivable in a like amount.  In addition,  Allegiance had net unrealized
gains from open hedging positions of $103,000 as of June 30, 1999.

         Fourteen  Hill  had  two  loans  outstanding  at June  30,  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 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.  Although the Company and the Noteholders have not
determined  whether the policies will be sold or whether such a sale of policies
is feasible, the Company and the Noteholders are in discussions that contemplate
a  purchase  of  the  policies  and  cancellation  of  the  indebtedness  by the
Noteholders. The discussions also contemplate that the Company would continue to
act as  servicer  through  June 30,  2002.  No  assurance  can be given that any
agreement will be ultimately  reached with the Noteholders or, if reached,  will
contain such terms and conditions contemplated by current discussions. 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

                                       6

<PAGE>

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 (Loss) 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 June 30, 1999 (after giving
effect to the  write-off as described  below) the Company had one  investment in
preferred  shares,  one  investment  in  convertible  preferred  shares  and one
investment in common stock carried at an aggregate cost of $2.6 million and four
investments in warrants  carried at an aggregate  cost of $453,000.  At December
31,  1998 the Company  had four  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.

         The Company reviews on a quarterly basis all non-marketable  securities
and  attempts to ascertain  whether the value is  impaired.  As a result of such
review,  Fourteen Hill determined that $535,000 of non-marketable  securities of
one company was impaired at June 30, 1999.  Therefore,  Fourteen Hill  wrote-off
the entire $535,000 carrying value of such security.

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

         Pursuant  to  the  Allegiance  Financing,  a  consortium  of  insurance
companies  (the  "Investors")  will make available  funding up to  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.  In addition,  the  Allegiance
Financing provides a commitment,  subject to certain limitations,  to provide up
to an additional  $30 million of permanent  funding  through  September 15, 1999
through the issuance of term  certificates.  In the event that term certificates
are not issued by September 15, 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. The Investors
purchased rated revolving  certificates,  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 the first half of 1999 in the principal  amount
of $10.0 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 and
bears interest at a fixed rate of 7.1%. The Class C-R certificate, rated BB, was
fully drawn in November 1998 in the  principal  amount of $2.1 million and bears
interest  at a fixed rate of 9.8%.  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 June 30,
1999 was 7.4%.  Allegiance  initially retained the unrated Class D-R 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

                                       7
<PAGE>


outstanding,  the Allegiance Financing does not qualify for sale treatment under
Statement of Financial Accounting Standard 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 Sheets.

         The Company and  Investors  have  reached an  agreement in principle to
extend the Allegiance  Financing  through April 15, 2000.  Although no assurance
can be given  that  such  extension  will  ultimately  be put in  place,  if the
extension  is  consummated  Allegiance  would be  permitted  to borrow up to $30
million on a  revolving  basis  through  March 31,  2000 on terms  substantially
similar to those of the  current  revolving  certificates  under the  Allegiance
Financing.  In addition,  the Investors would agree to provide up to $60 million
of permanent  financing (less any permanent financing provided under the current
arrangement)  through  April 15,  2000,  on terms  substantially  similar to the
current term certificates under the Allegiance Financing,  but with an increased
weighted-average spread of approximately 0.5%. Upon completion of an initial $30
million term financing,  whether under the current arrangement or the extension,
subsequent term  financings  under the extension could be completed in a minimum
amount of $15 million.

         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).  In  connection  with the  extension,
Allegiance  would pay a $125,000  commitment fee. Of such fee,  $42,000 would be
amortized  over the expected life of the revolving  certificates  (8 months) and
$83,000 would be amortized  over the expected life of the  Allegiance  Financing
(15 years).  These  allocations  were 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 Consolidated  Balance Sheets 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 (Loss) 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 (less any tax
effect for debt

                                       8

<PAGE>


forgiveness).  For the first  half of 1999,  the loss  associated  with DPFC was
approximately  $2.1 million.  At June 30, 1999, DPFC's  accumulated  deficit was
$3.8 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.

         The  Company  is in  discussions  with the  Noteholders  regarding  the
possible   purchase  of  policies  and   cancellation  of  indebtedness  by  the
Noteholders. See Note 4.

8.        Debentures
--        ----------

         Fourteen Hill Capital has 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.

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

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

          Stockholders' equity, beginning of period                  $14,829,561
           Common stock -- options exercised                                 973
           Additional paid-in-capital -- options exercised               589,989
           Accumulated comprehensive income -- net unrealized
                investment gains                                      15,161,140
           Net income                                                  1,257,672
                                                                     -----------
          Stockholders' equity, end of period                        $31,839,335

10.       Comprehensive Income -- Net Unrealized Investment Gains (Losses)
--        ----------------------------------------------------------------

         Statement  of  Financial  Accounting  Standard  No. 130  ("SFAS  130"),
Reporting  Comprehensive Income, requires the reporting of comprehensive income.
For the six months ended June 30, 1999, the Company's total comprehensive income
includes  net  unrealized  investment  gains,  net of  applicable  taxes of $3.6
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  (Losses)"  of $2.5 million and $5.7 million for the three and
six months  ended June 30, 1998,  respectively,  in its Form 10-Q for the period
ended June 30, 1998. Of these unrealized gains, $3.0 million and $5.8 million in
the  three  and six  months  ended  June  30,  1998,  respectively,  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 (Losses)" for the same
periods of $(483,000) and $(81,000).  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 June 30,  1998 as
non-marketable  securities  under GAAP and  carried  at cost with  corresponding
footnote  disclosure   regarding  any  significant   appreciation

                                       9
<PAGE>

or permanent  impairment.  During the first half of 1999,  such  securities were
converted into common shares and sold.

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

         Statement  of  Financial   Accounting  Standard  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
common  stock  equivalents;  and,  Diluted EPS,  similar to the  previous  fully
diluted EPS. The weighted  average  number of common stock shares and additional
common stock equivalent shares used in computing EPS are set forth below for the
periods indicated.
<TABLE>
<CAPTION>

                                                            Three Months Ended             Six Months Ended
                                                                 June 30,                       June 30,
                                                             1999         1998             1999        1998

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

Weighted average number of shares of common
 stock outstanding.........................                 3,341,635  3,253,324          3,307,820    3,253,324
Additional common stock equivalents........                   316,361     --                372,271       --
Weighted average number of shares of common
 stock and common stock equivalents
 outstanding...............................                 3,657,996  3,253,324          3,680,091    3,253,324

</TABLE>


         Diluted  EPS for the three and six months  ended  June 30,  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
alleges 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  outside  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 was denied. The case is currently in discovery.  A trial
date has been set for January 20, 2000.  However,  the plaintiffs and defendants
have reached an agreement in principle  providing  for a settlement  pursuant to
which all claims  against  all  defendants  would be  dismissed.  The  agreement
provides for the payment of $3.15 million.  Under the terms of the Company's D&O
insurance  policy,  the  Company's  insurer  is  obligated  to  pay  70%  of the
settlement  amount.  Any  settlement  would be  subject  to court  approval.  No
assurance can be given that a definitive  settlement  agreement will be reached,
or, if reached,  will be approved by the Court. In the event a settlement is not
effected, the Company and each of the remaining defendants intend to continue to
defend the action vigorously.

                                       10

<PAGE>


         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.  However,  the
claims  in  this  case  will  also be  resolved  by the  settlement  arrangement
described  above if it  becomes  effective.  In the  event a  settlement  is not
effected,  the  Company and each of the  defendants  intend to defend the action
vigorously.

         As a result of having reached a settlement agreement in principle,  the
Company  recorded an  accrued litigation settlement liability  of $3.15  million
and an accounts  receivable from the insurance company of $2.2 million,  and the
remaining  amount of $945,000 was  expensed in the second quarter of 1999 in the
Consolidated  Statements  of Operations and Comprehensive Income (Loss).

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,  the President
and the Chief Financial Officer of Point West.

                                       11

<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 tables represent the Company's results from segments for the three
months ended June 30, 1999 and 1998.

<TABLE>
<CAPTION>
                                   Three Months Ended June 30, 1999
                     -----------------------------------------------------------------------------------------

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

<S>                           <C>                    <C>                  <C>           <C>                 <C>
Interest income......         $    18,087       $    132,183      $    370,942      $    58,267    $       579,479
Gain on sale of
   securities.........                 --          4,791,871                --               --          4,791,871
Other revenue........              93,937             46,458                --          146,191            286,586
Interest expense......            871,205             51,907            241,002              --          1,164,114
Depreciation &
   Amortization......              58,720              7,500             62,068           1,878            130,166
Contributed income
   (loss) (2)............        (884,676)         4,369,931           (86,634)      (1,640,925)         1,757,696
Comprehensive
  Income (loss)......                  --        (6,384,331)                --          (42,500)        (6,426,831)
Segment assets......           34,955,555         32,012,940        19,529,868        9,403,932         95,902,295


</TABLE>

<TABLE>
<CAPTION>

                                   Three Months Ended June 30, 1998
                     -----------------------------------------------------------------------------------------

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

<S>                           <C>                    <C>                  <C>           <C>                 <C>
Interest income......        $     54,825      $      74,786      $    143,804     $     74,433     $      347,848
Gain on sale of
  securities.........                  --                 --                --               --                 --
Other revenue........              96,986                 --                --           69,625            166,611
Interest expense......            867,922                 --                --               --            867,922
Depreciation &
  Amortization.......              58,720              2,508             1,428              785             63,441
Contributed income
(loss) (2)...........             119,789             46,579           108,919         (360,495)           (85,208)
Comprehensive
  Income (loss)......                  --           (483,307)               --               --           (483,307)
Segment assets......           39,165,137         15,598,039         6,252,402        5,864,532         66,880,110
--

<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:
                                                Three Months Ended
                                                ------------------
                                          June 30, 1999      June 30, 1998
          Income
          ------
          Interest income                 $      579,479     $      347,848
          Gain on sale of securities           4,791,871                 --
          Other revenue                          286,586            166,611
                                          ---------------    ---------------
           Total income                   $    5,657,936     $      514,459


                                       12

<PAGE>



         The following tables represent the Company's  results from segments for
the six months ended June 30, 1999 and 1998.

<TABLE>
<CAPTION>
                                                            Six Months Ended June 30, 1999
                     -----------------------------------------------------------------------------------------

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

<S>                           <C>                    <C>                  <C>           <C>                 <C>
Interest income.......    $        45,690       $    319,583    $     592,364  $       112,834   $      1,070,471
Gain on sale of
   securities.........                 --          5,442,769               --          317,450          5,760,219
Other revenue.........            163,526             46,458               --          219,357            429,341
Interest expense......          1,754,480            103,244          349,423               --          2,207,147
Depreciation &
  Amortization........            117,440             15,000          119,531            3,676            255,647
Contributed income
   (loss) (2).........        (1,881,803)          5,149,320        (190,266)      (1,819,579)          1,257,672
Comprehensive
  Income (loss).......                --          15,263,640               --        (102,500)         15,161,140
Segment assets........        34,955,555          32,012,940       19,529,868        9,403,932         95,902,295

</TABLE>
<TABLE>
<CAPTION>


                                                            Six Months Ended June 30, 1998
                           ------------------ ------------------ ---------------- ---------------- ------------------
                               Viatical           Fourteen
                            Settlements (1)         Hill           Allegiance          Other             Total
                            ---------------         -----          ----------          -----             -----

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

Interest income.......        $  107,214      $     118,678      $    284,234    $     189,029    $       699,155
Gain on sale of
   securities.........                --                 --                --               --                 --
Other revenue.........           611,990                 --            3,451           69,625             685,066
Interest expense......         1,772,042                 --               --               --           1,772,042
Depreciation &
  Amortization........           117,440              5,016            2,856            1,203             126,515
Contributed income
(loss) (2)............           323,626             82,451          210,874         (781,731)          (164,780)
Comprehensive
 Income (loss)........                --           (80,652)               --               --            (80,652)
Segment assets........        39,165,137         15,598,039        6,252,402        5,864,532          66,880,110

<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:
                                                Six Months Ended
                                                ------------------
                                          June 30, 1999      June 30, 1998
          Income
          ------
          Interest income                 $    1,070,471     $      699,155
          Gain on sale of securities           5,760,219                 --
          Other revenue                          429,341            685,066
                                          ---------------    ---------------
           Total income                   $    5,657,936     $    1,384,221

                                       13

<PAGE>

14.       Events Subsequent to the Balance Sheet Date
--        --------------------------------------------

         On July 16, 1999 Fourteen Hill invested $200,000 in convertible debt of
a small  business  entity.  On July 22, 1999 Fourteen Hill invested  $750,000 in
preferred stock of a small business  entity.  On July 27, 1999,  Point West sold
for $3.1 million 43% of its investment in American  Information  Company,  Inc.,
commonly known as Car Club, a privately held company which,  among other things,
provides information  services to individuals owning or purchasing  automobiles.
That  portion  of Point  West's  investment  that was  sold was  carried  on the
Consolidated  Balance  Sheets at $719,000 as of June 30, 1999 and  December  31,
1998.  The  remaining  preferred  shares  that  Point West held of Car Club were
converted  into common  shares.  On August 4, 1999  Fourteen  Hill invested $1.0
million in convertible debt of a small business entity.

                                       14

<PAGE>
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                -------------------------------------------------
                       CONDITION AND RESULTS OF OPERATION
                       -----------------------------------

         The  following  is  a  discussion  and  analysis  of  the  consolidated
financial  condition of the Company as of June 30,  1999,  and of the results of
operations  for the Company for the three and six months ended June 30, 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  half of 1999  compared  to the  first  half of 1998) the
Company's  results  of  operations  and cash  flows for the three and six months
ended  June 30,  1999 are not  comparable  to those for the three and six months
ended June 30, 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. See Note 4 of the Condensed Notes to  Consolidated  Financial
Statements (contained herein).

         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 and Six Months Ended June 30, 1999 Compared to the Three and Six
     ----------------------------------------------------------------------
     Months Ended June 30, 1998
     --------------------------

         Total Income.  Total income  increased  $5.2 million to $5.7 million in
the second  quarter of 1999 from  $514,000 in the second  quarter of 1998.  This
increase  was due  primarily to $4.8  million of gain on sale of  securities  by
Fourteen  Hill during the second  quarter of 1999.  The increase was also due to
(i) a $232,000  increase in interest income primarily  related to the Allegiance
loans and (ii) a $123,000 increase

                                       15
<PAGE>

in other  income as a result of a fee  received  by PWS for  investment  banking
services.  Total income increased $5.9 million to $7.3 million in the first half
of 1999 from $1.4  million  in the first  half of 1998.  This  increase  was due
primarily to $5.4 million of gain on sale of  securities by Fourteen Hill during
the first half of 1999.  Also  contributing  to the  increase was (i) a $371,000
increase in interest  income  primarily  related to the Allegiance  loans,  (ii)
$317,000 of gains on sales of securities  recognized by Point West in connection
with its  hedging  activities  of internet  related  stocks and (iii) a $142,000
increase  in other  income as a result of fees  received  by PWS for  investment
banking services.  See "Item 3 -- Quantitative and Qualitative  Disclosure About
Market Risk."  Offsetting the increase in the first half of 1999 compared to the
first  half of 1998 was a  $255,000  decrease  in earned  discounts  on  matured
policies and a $143,000 decrease in gain on assets sold.

         Total Expenses.  Total expenses increased 129.4% to $3.9 million in the
second  quarter of 1999 from $1.7  million in the second  quarter of 1998.  This
increase was primarily due to $945,000 of estimated  litigation expense recorded
in the second quarter of 1999  reflecting the amount of the proposed  settlement
arrangement  of the pending  federal class action and state alleged class action
lawsuits  not covered by  insurance.  The  proposed  settlement  is subject to a
number  of  contingencies  described  in  Note  12 of  the  Condensed  Notes  to
Consolidated  Financial Statements  (contained herein). Also contributing to the
increase  were (i) a $535,000 loss  recognized  on  securities  held by Fourteen
Hill,  (ii) a $296,000  increase in interest  expense  related to  borrowings by
Allegiance and Fourteen Hill, (iii) a $140,000 write-off of a loan recognized by
Point West and (iv) a $95,000 increase in legal expenses  incurred in connection
with the federal  class action and state  alleged  class action  lawsuits  filed
against Point West and its  directors.  Total expenses  increased  76.5% to $6.0
million in the first  half of 1999 from $3.4  million in the first half of 1998.
This  increase was primarily due to the $945,000  estimated  litigation  expense
described above. Also contributing to the increase were (i) the $535,000 loss on
securities described above, (ii) a $435,000 increase in interest expense related
to borrowings by Allegiance and Fourteen Hill, (iii) the $140,000 loan write-off
described  above and (iv) a $205,000  increase  in legal  expenses  incurred  in
connection with the federal class action and state alleged class action lawsuits
filed  against  Point West and its  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 $1.1 million and $1.9 million recorded in
the three and six months ended June 30, 1998, respectively,  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 net income (loss). All additional losses of DPFC will be reflected
in the  Company's  net income (loss) for the periods in which such losses occur.
See the Form 10-K for additional information.

         Comprehensive  Income  -- Net  Unrealized  Investment  Gains  (Losses).
Comprehensive income -- net unrealized  investment gains (losses) for any period
reflects unrealized gains or losses on marketable securities during that period.
The line item  changes as a result of (i)  fluctuations  in the market  value of
marketable  securities from period to period, (ii) acquisitions and dispositions
of marketable securities from period to period and (iii) the recharacterizations
of investments from non-marketable  securities (which are reflected at the lower
of cost or market value) to marketable  securities  (which are reflected at fair
market  value).  During  the  first  quarter  of 1999,  one of  Fourteen  Hill's
investments,  FlashNet  Communications Inc.  ("FlashNet"),  completed an initial
public offering.  As a result of the offering,  the FlashNet  securities held by
Fourteen Hill were recharacterized from non-marketable  securities to marketable
securities.  Primarily  as a result  of this  recharacterization,  comprehensive
income -- net unrealized investment gains (losses) for the six months ended June
30, 1999 was $15.2  million  versus

                                       16
<PAGE>


($81,000) for the comparable 1998 period. Comprehensive income -- net unrealized
investment  losses for the second  quarter of 1999 was $6.4  million,  primarily
reflecting the decrease in the market value of the FlashNet  securities  between
March 31, 1999 and June 30, 1999.

         The Company originally reported "Comprehensive Income -- Net Unrealized
Investment  Gains  (Losses)"  of $2.5 million and $5.7 million for the three and
six months  ended June 30, 1998,  respectively,  in its Form 10-Q for the period
ended June 30, 1998. Of these gains,  $3.0 million and $5.8 million in the three
and six months ended June 30, 1998, respectively, 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  (Losses)"  for the same periods of
$(483,000)  and  $(81,000).  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 June 30, 1998 as non-marketable securities under GAAP and
carried at cost with corresponding footnote disclosure regarding any significant
appreciation  or  permanent  impairment.  During  the first  half of 1999,  such
securities  were  converted  into  common  shares  and  sold.  See  "Results  of
Operations by Segment -- Fourteen  Hill" and Note 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  $132,000 as of June 30, 1999 and  $167,000 as of
December 31, 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 June 30, 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 $3.8 million at June 30, 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

                                       17
<PAGE>

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  half of 1999,  the total loss  realized  by DPFC was $2.1
million, which was reflected in the Company's net income. The loss for the first
half of 1999  decreased  basic EPS by $0.64.  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 (less any tax effect for debt forgiveness).

         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 and Six Months Ended June 30, 1999 Compared to the Three and Six
         Months Ended June 30, 1998

         Earned Discounts on Matured Policies.  DPFC recognized earned discounts
on  matured  polices of  $50,000  for both the second  quarter of 1999 and 1998.
Earned  discounts on matured  policies  decreased 69.7% to $111,000 in the first
half of 1999  from  $366,000  in the first  half 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 second quarter
of 1999,  earned  discounts on matured  policies were  recognized on 12 policies
with a face value of  $622,000,  compared  to 14  policies  with a face value of
$590,000 in the second  quarter of 1998.  During the first half of 1999,  earned
discounts on matured  policies were  recognized on 24 policies with a face value
of $1.5  million,  compared to 38 policies  with a face value of $2.3 million in
the first half of 1998. See "Method of Accounting for Viatical  Settlements." As
of June 30, 1999, the Company held 480 policies with an aggregate carrying value
of $32.9 million  (comprised of "matured policies  receivable,"  "purchased life
insurance policies" and a portion of "other assets") and an aggregate face value
of $38.1 million.  All of the "purchased  life insurance  policies" and "matured
policies receivable" are pledged as security for the Securitized Notes.

          Interest  Income.  Interest  income  decreased 67.3% to $18,000 in the
second  quarter of 1999 from $55,000 in the second  quarter of 1998 and 57.0% to
$46,000 in the first half of 1999 from $107,000 in the first half of 1998.  This
decrease was a result of lower cash balances  attributable  to DPFC and to lower
yields on such cash  balances.  DPFC's cash  balances are affected by the amount
and timing of any policy  collections  and by the amount and timing of  expenses
(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 gain on assets sold decreased to $8,000 in the
second  quarter of 1999 from $12,000 in the second quarter of 1998 and to $8,000
in the first half of 1999 from  $151,000 in the first half of 1998.  The Company
collected the sale  proceeds on one policy in the second  quarter and first half
of 1999, compared to two policies in the second quarter of 1998 and six policies
in the  first  half of  1998.  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.  The  Company  collected  a large
portion of the sale proceeds  from life  insurance  policies in 1997,  therefore
there  will be minimal  (if any)  gains or losses on any  assets  sold in future
periods.

         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

                                       18
<PAGE>


policies.  Other income was $36,000 in both the second  quarter of 1999 and 1998
and  decreased  53.1% to $45,000  in the first half of 1999 from  $96,000 in the
first half of 1998.  This  decrease  was due to the  decrease  in the number and
amount of matured policies.

         Interest  Expense.  Interest expense was $871,000 in the second quarter
of 1999, which was consistent with the second quarter of 1998.  Interest expense
decreased  1.0% to $1,754,000 in the second half of 1999 from  $1,772,000 in the
first  half 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 half of 1999 compared to $38.7 million in the first half of
1998.

         Other   General  and   Administrative   Expenses.   Other  general  and
administrative expenses decreased 66.2% to $67,000 in the second quarter of 1999
from $198,000 in the second quarter of 1998.  This decrease was primarily due to
the timing of various  expenses  that were paid in the first quarter in 1999 and
the second  quarter in 1998.  In addition this decrease was due to a decrease in
life insurance policy premium costs. Other general and  administrative  expenses
decreased 45.1% to $219,000 in the first half of 1999 from $399,000 in the first
half of 1998.  This decrease was due  primarily to a decrease in life  insurance
policy premium costs.  Although  premium costs decreased in both periods of 1999
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 on the  Consolidated
Balance  Sheets at fair market value with any  cumulative  unrealized  gains and
losses as a separate component of stockholders'  equity and any unrealized gains
and losses for the respective period as a separate line item on the Consolidated
Statements of Operations and  Comprehensive  Income  (Loss).  The Company had no
held-to-maturity  or trading  securities  at June 30, 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 and Six Months Ended June 30, 1999 Compared
to the Three and Six Months Ended June 30, 1998 --  Comprehensive  Income -- Net
Unrealized  Investment Gains (Losses)" 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  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
(Loss). 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 Fourteen Hill's 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 (Loss). At June 30, 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.  See "Item 3 --  Quantitative  and
Qualitative Disclosures About Market Risk."

                                       19
<PAGE>


         The  Company  accounts  for loans by accruing  interest on  outstanding
balances.  At June 30, 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 and Six Months Ended June 30, 1999 Compared to the Three and Six
         Months Ended June 30, 1998

         Interest  Income.  Interest  income  increased 76.0% to $132,000 in the
second  quarter of 1999 from $75,000 in the second quarter of 1998 and 168.9% to
$320,000 in the first half of 1999 from $119,000 in the first half of 1998. This
increase was due to $93,000 and $242,000 of interest  income  recognized  in the
three and six months ended June 30, 1999, respectively, as a result of a warrant
(valued using the  Black-Scholes  option-pricing  model)  received in connection
with one of Fourteen  Hill's loans.  Offsetting  this increase was a decrease in
interest income as a result of lower yields.

         Gain on Sale of Securities. Fourteen Hill recognized a net gain of $4.8
million  and $5.4  million  in the three and six  months  ended  June 30,  1999,
respectively,  primarily in connection with the sale of one of its  investments.
For tax purposes, the gain on sale of securities was offset by the Company's net
operating loss carryforward.

         Other Income.  Fourteen Hill recognized  other income of $46,000 in the
second  quarter of 1999 in  connection  with the  liquidation  of a $1.0 million
investment that was written-off in 1998.

         Interest  Expense.  Interest  expense was  $52,000 and  $103,000 in the
three and six months ended June 30, 1999,  respectively,  due to the interest on
funds  borrowed  from the SBA 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
second  quarter of 1999 from $3,000 in the second quarter of 1998 and $10,000 to
$15,000  in the first half of 1999 from  $5,000 in the first  half of 1998.  The
1999 periods  reflect the financing costs  associated  with borrowed funds.  The
1998 periods  reflect  organizational  costs which are currently  required to be
expensed as incurred and were written-off at the end of 1998.

         Loss on Non-Marketable Securities. Fourteen Hill reviews on a quarterly
basis all non-marketable  securities and attempts to ascertain whether the value
is impaired. As a result of such review,  Fourteen Hill determined that $535,000
of  non-marketable  equity  securities  of one company was  impaired at June 30,
1999.  Therefore,  Fourteen Hill wrote-off the entire $535,000 carrying value of
such security.

     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 June 30, 1999 and  December 31, 1998 the
allowance for loan losses was $95,000 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  June  30,  1999,  one  loan  was  delinquent  and  on
non-accrual status.

                                       20

<PAGE>


         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 fixed and floating
rate debt that is  expected  to become  long term fixed  rate,  and  potentially
floating 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 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 June
30, 1999, Allegiance had net realized gains on its hedging activities of $35,000
which decreased loans receivable in a like amount.  In addition,  Allegiance had
net unrealized   gains from open  hedging  positions  of  $103,000 as of June 30
1999.  See "Item 3 --  Quantitative  and  Qualitative  Disclosures  About Market
Risk."

         Three and Six Months Ended June 30, 1999 Compared to the Three and Six
         Months Ended June 30, 1998

         Interest Income.  Interest income increased $227,000 to $371,000 in the
second  quarter of 1999 from $144,000 in the second quarter of 1998 and $308,000
to $592,000  in the first half of 1999 from  $284,000 in the first half of 1998.
This  increase was due to increased  lending  activity by  Allegiance.  However,
offsetting  this  increase was $34,000 of interest for the 1999 periods that was
not paid on one delinquent loan.  Allegiance had twelve loans outstanding in the
aggregate  amount of $18.9  million at June 30,  1999 as  compared  to two loans
outstanding in the amount of $5.9 million at June 30, 1998. The weighted-average
interest  rate on the loans  outstanding  during the second  quarter of 1999 was
8.6%  compared  to 9.5%  during the second  quarter of 1998 and 8.9%  during the
first  half  of 1999  compared  to 9.5%  during  the  first  half of  1998.  The
weighted-average  interest rates for the 1999 periods decreased because one loan
in the  amount  of  $2.1  million  was  delinquent  and on  non-accrual  status.
Allegiance  cannot  predict at this time  whether or not the loan will remain on
non-accrual  status.  However,  to the  extent  that the  loan  does  remain  on
non-accrual  status,  Allegiance does not anticipate  receiving  interest income
(approximately  $16,000 per month) from such loan. Allegiance may be required to
foreclose on real property and other assets securing the loan and liquidate this
loan in a future  period.  If it does so,  Allegiance  does not  believe it will
incur any loss in connection with such loan.

         Interest  Expense.  Interest  expense for  Allegiance  was $241,000 and
$349,000 in the three and six months  ended June 30,  1999,  respectively,  as a
result of the interest paid under the Allegiance Financing. During the three and
six months ended June 30, 1999,  the  weighted-average  interest  rate under the
Allegiance  Financing was 7.5% and 7.7%,  respectively.  Prior to November 1998,
Allegiance had no debt.

         Compensation and Benefits. Compensation and benefits increased 64.9% to
$61,000 in the second quarter of 1999 from $37,000 in the second quarter of 1998
and 55.4% to $115,000  in the first half of 1999 from  $74,000 in the first half
of 1998. This increase resulted from the hiring of additional  employees in 1999
to support Allegiance's lending activities.

                                       21

<PAGE>

         Other   General  and   Administrative   Expenses.   Other  general  and
administrative  expenses  increased  $80,000 to $94,000 in the second quarter of
1999 from $14,000 in the second quarter of 1998. This increase was due primarily
to a $31,000  increase in general legal  expense,  a $20,000  provision for loan
losses  and  a  $15,000  increase  in  marketing  expense.   Other  general  and
administrative expenses increased $134,000 to $198,000 in the first half of 1999
from $64,000 in the first half of 1998.  This  increase  was due  primarily to a
$50,000  increase in general legal expense,  a $45,000 increase in allowance for
loan losses and a $18,000  increase  in  marketing  expense.  In  addition,  the
increase was due to an increase in Allegiance's activities.

         Amortization.  Amortization  costs increased  $61,000 to $62,000 in the
second  quarter of 1999 from $1,000 in the second  quarter  1998 and $117,000 to
$120,000  in the first half of 1999 from  $3,000 in the first half of 1998.  The
1999 periods reflect  financing costs associated with the Allegiance  Financing.
The 1998 periods reflect organizational costs which are currently required to be
expensed as incurred and were written-off at the end of 1998.

     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 half of 1998.

         Three and Six Months Ended June 30, 1999 Compared to the Three and Six
         Months Ended June 30, 1998

         Interest  Income.  Interest  income  declined  21.6% to  $58,000 in the
second  quarter of 1999 from $74,000 in the second  quarter of 1998 and 40.2% to
$113,000 in the first half of 1999 from $189,000 in the first half of 1998. This
decrease  is due to lower  cash  balances  outstanding  during the three and six
months  ended June 30, 1999  compared to the three and six months ended June 30,
1998. In addition, interest income has declined because a larger portion of cash
balances have been invested in lower  yielding  instruments  in 1999 compared to
1998.

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

         Other Income.  Other income increased to $146,000 in the second quarter
of 1999 from $70,000 in the second quarter of 1998.  This increase was due to an
increase of $55,000 in fees received by PWS for investment  banking services and
$21,000 in trading  commissions  generated by PWS in the second quarter of 1999.
Other income increased to $219,000 in the first half of 1999 from $70,000 in the
first half of 1998.  This  increase  was due to an  increase of $121,000 in fees
received  by  PWS  for  investment  banking  services  and  $28,000  in  trading
commissions  generated  by PWS in the first half of 1999.  The increase in other
income was primarily due to transaction based investment  banking services.  The
amount and timing of these services  cannot be predicted  because of the limited
operating history of PWS.

         Compensation and Benefits. Compensation and benefits increased 21.7% to
$376,000 in the second  quarter of 1999 from  $309,000 in the second  quarter of
1998 and 7.6% to $668,000  in the first half of 1999 from  $621,000 in the first
half of 1998.  This increase  resulted in the hiring of two new employees in the
third quarter of 1998 to support PWS' activities and an increase in compensation
and benefits for other employees for 1998.

                                       22

<PAGE>

         Other   General  and   Administrative   Expenses.   Other  general  and
administrative  expenses  increased  $1.3  million to $1.5 million in the second
quarter of 1999 from $195,000 in the second  quarter of 1998.  This increase was
primarily due to $945,000 of estimated litigation expense recorded in the second
quarter of 1999 reflecting the amount of the proposed settlement  arrangement of
the pending  federal class action and state  alleged  class action  lawsuits not
covered  by  insurance.  The  proposed  settlement  is  subject  to a number  of
contingencies  described  in  Note 12 of the  Condensed  Notes  to  Consolidated
Financial Statements  (contained herein). Also contributing to the increase were
a $140,000 loan  write-off and $95,000  increase in legal  expenses  incurred in
connection  with the federal and state  alleged  class  action  lawsuits.  Other
general and  administrative  expenses  increased $1.4 million to $1.8 million in
the first half of 1999 from  $418,000 in the first half of 1998.  This  increase
was  primarily  due to the $945,000 of estimated  litigation  expense  described
above.  Also  contributing  to the  increase  were a $205,000  increase in legal
expenses  incurred in connection with the federal and state alleged class action
lawsuits and the $140,000 loan  write-off.  Unless a settlement of these actions
is effected,  Point West expects legal expenses to increase substantially during
the remainder of 1999 relative to 1998 since one of the lawsuits is currently in
discovery and the trial date is set for January 2000.

         During the second quarter of 1999, the Company renewed the lease on its
current  space.  The Company's  monthly rent  increased from $5,240 per month to
approximately $14,967 per month.

Liquidity and Capital Resource
------------------------------

     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 half 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 June 30, 1999, the Company's cash and cash equivalents were $10.2
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 the working  capital and  operational  needs of Point West and
PWS 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  June  30,  1999,  the  outstanding  principal  amount  of the
Securitized  Notes was $38.5 million.  As of the same date,  DPFC had restricted
cash of $2.0  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 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.

                                       23
<PAGE>

     Fourteen Hill

         Fourteen  Hill's  activities  have  generally been supported by capital
investments by Point West, by the sale of certain  investments and the repayment
by  obligors of loans.  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  contributed  an
additional  $800,000 to Fourteen Hill.  During the first half of 1999,  Fourteen
Hill generated $6.8 million from the sale of securities.

         Fourteen Hill Capital has an SBA debenture license and, therefore,  may
be permitted to borrow up to $12.5  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 $3.0
million from the SBA. Fourteen Hill Capital is permitted to borrow an additional
$9.5 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 June 30, 1999, Point West has made the only capital  contribution
to Allegiance Capital in the aggregate amount of $4.2 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 fixed and 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  September  15,  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,  unless
the Allegiance  Financing is extended as discussed  below.  As of June 30, 1999,
Allegiance had borrowed $15.3 million under the Allegiance Financing.

         The Company and  Investors  have  reached an  agreement in principle to
extend the Allegiance  Financing  through April 15, 2000.  Although no assurance
can be given  that  such  extension  will  ultimately  be put in  place,  if the
extension  is  consummated  Allegiance  would be  permitted  to borrow up to $30
million on a  revolving  basis  through  March 31,  2000 on terms  substantially
similar to those of the  current  revolving  certificates  under the  Allegiance
Financing.  In addition,  the Investors would agree to provide up to $60 million
of permanent  financing (less any permanent financing provided under the current
arrangement)  through  April 15,  2000,  on terms  substantially  similar to the
current term certificates under the Allegiance Financing,  but with an increased
weighted-average spread of approximately 0.5%. Upon completion of an initial $30
million term financing,  whether under the current arrangement or the

                                       24
<PAGE>

extension,  subsequent term financings under the extension could be completed in
a minimum amount of $15 million.

         The  Company  expects  that  the  Allegiance   Financing  will  provide
sufficient funds to support Allegiance's lending activities through August 1999.
See Note 6 of the Condensed Notes to Consolidated Financial Statements.


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 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 June 30, 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  has exceeded
                 expectations.

         The  majority 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 $15.63 and $51.50.  At June 30,
1999, the price of FlashNet common stock was $29.44.

         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.

                                       25

<PAGE>

         During  the  second  quarter  of 1999,  Fourteen  Hill sold some of its
investments  in part to address these  issues.  The proceeds of these sales have
been  invested  in U.S. government  securities  pending  final use.  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

                 continuing   to  dispose  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 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 although Allegiance
and the  Investors  are  discussing  an extension of the  Allegiance  Financing,
Allegiance does not have an external  funding source beyond  September 15, 1999.
In addition, unless extended,  Allegiance may need to arrange 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 additional 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 additional sale to
reduce debt and support its working capital.  Pending final use, proceeds of any
additional 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.

                                       26

<PAGE>

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  $30,000 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 June 30, 1999, the Company had incurred
Year 2000 Compliant costs of  approximately  $27,000,  of which $19,000 has been
capitalized.  The Company  does not believe the amounts  expected to be expensed
over the remainder of 1999 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  financial  condition and results of operation.
The Company has  assessed  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 performed the required upgrades. The Company has
assessed the  readiness of its  business-critical  spreadsheets  and  customized
databases and is making 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 assessed the  readiness of external  entities,  such as
vendors, suppliers,  investments and financial institutions which interface with
the  Company.  Based on the  results  of this  assessment  the risk of  business
failure caused by an external  party's Year 2000 malfunction is not significant.
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

                                       27
<PAGE>


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  September  1999 or to extend the
Allegiance Financing, (ii) the collection of interest, no incurrence of any loss
and  potential  foreclosure  and  liquidation  of  one  of  the  loans  made  by
Allegiance,  (iii) sufficiency of the Company's  liquidity and capital resources
(See "Liquidity and Capital Resources"),  (iv) 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"),  (v) the Company's
ability to enter into a settlement  agreement in connection with the federal and
state alleged class action  lawsuits  filed against the Company and its officers
and directors, (vi) expected expenses (including amounts paid in any settlement)
in connection  with the lawsuits  described  above,  (vii) expected  future life
insurance  policy premium costs,  (viii) the potential  purchase of policies and
cancellation of indebtedness by the Noteholders,  and (ix) 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 those  contemplated by the
forward  looking  statements  include (i)  Allegiance's  ability to  originate a
sufficient  number  and  amount  of loans  and to reach  an  agreement  with the
Investors to extend the Allegiance  Financing,  (ii) the  borrower's  ability to
make future payments on the defaulted  Allegiance loan and Allegiance's  ability
to  liquidate  the  collateral  at a price at least  equal to the amount of debt
(including foreclosure fees and expenses) of such loan, (iii) the results of the
Company's  consideration  of strategic  options and any costs  associated with a
chosen option, (iv) availability and cost of capital,  (v) the factors described
under  "Considerations  Under the  Investment  Company  Act of  1940,"  (vi) the
outcome of the federal and state alleged class action lawsuits filed against the
Company  and its  officers  and  directors,  (vii) the  maturity  rate of DPFC's
portfolio of life  insurance  policies,  (viii) Point West's ability to reach an
agreement with the Noteholders  and (ix) 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.

                                       28
<PAGE>


         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 Fourteen Hill's holdings in FlashNet.  At June 30, 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 the Class A-R  certificate
totaling $10.0 million which bear interest  based on the one-month  LIBOR plus a
spread of 2.0%.  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 June 30, 1999:
<TABLE>
<CAPTION>


                                  1999           2000           2001          2002          2003        Thereafter
                                  ----           ----           ----          ----          ----        ----------
<S>                             <C>               <C>           <C>           <C>            <C>          <C>


Fixed rate loans (1)(2)       $  158,922    $   426,734     $  468,938    $  515,326    $  566,315    $14,749,224
Average interest
     rates (1)                    9.5%           9.5%           9.5%          9.5%          9.5%           9.5%
--
<FN>

(1) The principal cash flows for fixed rate loans and average  interest rates do
    not include  one  delinquent  loan.
(2) 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.
    Allegiance  utilizes  futures  contracts  to  hedge  certain  interest  rate
    exposure  between  the time of  origination  of the loans  and the  expected
    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.

                                       29
<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  alleges  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 outside  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 was denied.  The
         case is currently in  discovery.  A trial date has been set for January
         20,  2000.  However,  the  plaintiffs  and  defendants  have reached an
         agreement in principle providing for a settlement pursuant to which all
         claims  against  all  defendants  would  be  dismissed.  The  agreement
         provides  for the  payment  of $3.15  million.  Under  the terms of the
         Company's D&O insurance  policy,  the Company's insurer is obligated to
         pay 70% of the settlement  amount.  Any settlement  would be subject to
         court approval.  No assurance can be given that a definitive settlement
         agreement  will be  reached,  or, if  reached,  will be approved by the
         Court. In the event a settlement is not effected,  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.  However, the claims in this case will also be resolved
         by the settlement  arrangement described above if it becomes effective.
         In the event a settlement is not effected,  the Company and each of the
         defendants intend to defend the action vigorously.

         As a result of having reached a settlement agreement in principle,  the
         Company  recorded an accrued  litigation  settlement  liability  of
         $3.15 million and an accounts  receivable from the insurance company of
         $2.2 million,  and the remaining amount of $945,000 was expensed in the
         second quarter of 1999 in the Consolidated Statements of Operations
         and Comprehensive Income (Loss).

                                       30

<PAGE>

Item 4. Submission of Matters to a Vote of Security Holders
-----------------------------------------------------------

         On  May  10,  1999,   the  Company  held  an  Annual   Meeting  of  its
         stockholders.  The election of two  directors as set forth in the proxy
         statement  were  presented.  Bradley N.  Rotter and Stephen T. Bow were
         re-elected to the Board of Directors  for a term expiring in 2002.  The
         voting tallies were:

                    Director               Votes For             Votes Withheld
                    --------               ---------             --------------

                Bradley N. Rotter          3,136,852                 23,829

                 Stephen T. Bow            3,136,852                 23,829

         The other  directors  whose term of office  continued after the meeting
         are: Alan B. Perper (term expiring in 2000),  Paul A. Volberding  (term
         expiring in 2000) and John Ward Rotter (term expiring in 2001).

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 June 30,
                  1999:

                    Date            Item Reported   Matter Reported
                    ----            -------------   ---------------

                    April 13, 1999     5            The   Company   issued   a
                                                    press release regarding  its
                                                    results of  operations  for
                                                    the first quarter of 1999.


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<PAGE>

                                   SIGNATURE
                                   ---------

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




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


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