SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

                  For the quarterly period ended March 31, 1998
                                                 --------------
                                       OR
              [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                 For the transition period from ______ to ______

                         Commission file number 0-27736

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

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

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


                             (415) 394-9467
                             --------------
            (Registrant's telephone number, including area code)


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes [X] No [ ]

At April 30, 1998, there were 3,253,324 shares of the registrant's  Common Stock
outstanding.


<PAGE>


                                       



                         POINT WEST CAPITAL CORPORATION


                                      INDEX

                                                                        Page #
                                                                        ------
Part I

Item 1.     Consolidated Financial Statements:

            Consolidated Balance Sheets
                 March 31, 1998 and December 31, 1997                     1

            Consolidated Statements of Operations
                 and Comprehensive Income for the                         2
                 Three Months Ended March 31, 1998 and 1997

            Consolidated Statements of Cash Flows for the
                 Three Months Ended March 31, 1998 and 1997               3

            Condensed Notes to Consolidated Financial Statements         4-9

Item 2.     Management's Discussion and Analysis of Financial
                 Condition and Results of Operations                    10-17

Item 3.     Quantitative and Qualitative Disclosures
                 About Market Risk                                        17


Part II

Item 1.     Legal Proceedings                                             18

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


Signatures                                                                19
----------


                                      (i)






<PAGE>


                                            POINT WEST CAPITAL CORPORATION
                                              CONSOLIDATED BALANCE SHEETS
                                         March 31, 1998 and December 31, 1997


<TABLE>

<CAPTION>
                                                                                  March 31,            December 31,
                                 ASSETS                                             1998                   1997
                                                                             ====================   ====================

<S>                                                                           <C>                     <C>   
Cash and cash equivalents                                                  $           4,841,069  $          10,039,560
Restricted cash                                                                        3,698,306              3,756,714
Investment securities (note 2)
           Held-to-maturity                                                            2,220,000              2,220,000
           Available-for-sale                                                          9,386,231              3,597,343
Matured policies receivable                                                              706,969                305,435
Loans receivable, net of unearned income of $89,334
           and $59,884, respectively (note 3)                                          6,637,093              4,015,716
Assets held for sale (note 4)                                                             81,170                129,334
Purchased life insurance policies (note 5)                                            35,124,848             36,586,788
Investment in convertible preferred shares at cost                                     1,658,478              1,658,478
Deferred financing and organizational costs, net of
           accumulated amortization of $684,540 and
           $621,884, respectively                                                        462,777                525,433
Furniture and equipment, net of accumulated depreciation of
           $759 and $341, respectively                                                     8,180                  6,862
Other assets                                                                             219,270                127,590
                                                                             --------------------   --------------------

           Total assets                                                    $          65,044,391  $          62,969,253
                                                                             ====================   ====================

                  LIABILITIES AND STOCKHOLDERS' EQUITY

Accrued expenses                                                           $             197,685  $             183,150
Accounts payable                                                                         161,830                216,851
Accrued compensation payable                                                              50,000                193,000
Reserve for equity interest in wholly owned financing
           subsidiary (note 5)                                                         1,499,361              2,300,037
Long term notes payable  (note 6)                                                     38,804,107             38,804,107
Deferred income taxes                                                                      6,000                  6,000
                                                                             --------------------   --------------------

           Total                                                                      40,718,983             41,703,145
           liabilities
                                                                             --------------------   --------------------

Stockholders' equity:
           Preferred stock, $0.01 par value; 2,000,000 authorized shares:
                Convertible Preferred Stock, 135,000 authorized shares,
                0 shares issued and outstanding                                               --                     --
           Common stock, $0.01 par value; 15,000,000 authorized shares,
                4,291,824 shares issued
                3,253,324 shares outstanding                                              42,918                 42,918
           Additional paid-in-capital                                                 29,496,720             29,496,720
           Comprehensive income-- net unrealized
                investment gains (note 2 and 7)                                        5,736,111              2,597,239
           Retained deficit                                                          (8,076,309)            (7,996,737)
           Treasury stock, 1,038,500 shares                                          (2,874,032)            (2,874,032)
                                                                             --------------------   --------------------

           Total stockholders' equity                                                 24,325,408             21,266,108
                                                                             --------------------   --------------------

           Total liabilities and stockholders' equity                      $          65,044,391  $          62,969,253
                                                                             ====================   ====================
<FN>

      See accompanying condensed notes to consolidated financial statements

</FN>
</TABLE>

                                        1



                                       
<PAGE>

                                 POINT WEST CAPITAL CORPORATION
                 CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
                       For the Three Months Ended March 31, 1998 and 1997

<TABLE>
<CAPTION>


                                                                        Three Months Ended
                                                                            March 31,
                                                                      1998             1997
                                                                 --------------   --------------

<S>                                                                <C>              <C>    

Income:
     Earned discounts on matured policies (note 8)              $       316,133  $       184,286
     Interest income                                                    351,307          207,636
     Gain on sale of convertible
           preferred shares                                                  --          699,665
     Gain on assets sold (note 4)                                       138,837          870,641
     Other                                                               63,485           31,194
                                                                  --------------   --------------
           Total income                                                 869,762        1,993,422

Expenses:
     Interest expense                                                   904,120          938,470
     Compensation and benefits                                          349,559          270,283
     Other general and administrative expenses                          433,257          565,736
     Amortization                                                        62,656           58,426
     Depreciation                                                           418               --
                                                                  --------------   --------------
           Total expenses                                             1,750,010        1,832,915
                                                                  --------------   --------------

           Income (loss) before net loss in wholly
              owned financing subsidiary charged
              to reserve for equity interest                          (880,248)          160,507

Net loss in wholly owned financing subsidiary charged
     to reserve for equity interest (note 5)                            800,676          934,693

                                                                  --------------   --------------
           Net income (loss)                                    $      (79,572)  $     1,095,200
                                                                  ==============   ==============

Comprehensive income-- net unrealized
     investment gains (note 7)                                        3,138,872               --
Total comprehensive income (note 7)                                   3,059,300               --

Basic earnings (loss) per share (note 9)                                 (0.02)             0.27
Diluted earnings (loss) per share (note 9)                               (0.02)             0.27

Weighted average number of shares of common stock
     outstanding (note 9)                                             3,253,324        4,053,774
Weighted average number of shares of common stock
     and common stock equivalents outstanding (note 9)                3,253,324        4,122,160

<FN>


     See accompanying condensed notes to consolidated financial statements

</FN>
</TABLE>

                                       2

<PAGE>

                                        POINT WEST CAPITAL CORPORATION
                                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             For the Three Months Ended March 31, 1998 and 1997

<TABLE>
<CAPTION>

 

                                                                                            Three Months Ended
                                                                                                March 31,
                                                                                       1998                    1997
                                                                               ---------------------   ---------------------
<S>                                                                             <C>                     <C>    


Cash flows for operating activities:
    Net income (loss)                                                       $              (79,572) $             1,095,200
    Adjustments to reconcile net income (loss) to net cash
         (used in) provided by operating activities:
          Depreciation and amortization                                                      63,074                  58,426
          Gain on assets                                                                  (138,837)               (870,641)
          Gain on sale of convertible preferred shares                                           --               (699,665)
          Earned discounts on policies                                                    (316,133)               (184,286)
          Purchase of life insurance policies                                                    --               (666,217)
          Expense of premiums previously capitalized                                         57,738                      --
          Collections on matured life insurance policies                                  1,318,280               3,217,810
          Increase in other assets                                                         (91,696)               (108,723)
          Increase in accrued expenses                                                       14,535                   4,784
          Increase (decrease) in accounts payable                                          (55,021)                 357,481
          Decrease in accrued compensation payable                                        (143,000)               (121,419)
          Decrease in reserve for equity interest in wholly
                    owned financing subsidiary                                            (800,676)               (934,693)
                                                                               ---------------------   ---------------------
                    Net cash (used in) provided by operating activities                   (171,308)               1,148,057
                                                                               ---------------------   ---------------------

Cash flows from investing activities:
    Proceeds from sale of assets held for sale                                              187,522               9,073,644
    Purchase of furniture and equipment                                                     (1,736)                      --
    Decrease in restricted cash                                                              58,408                 290,486
    Increase in investment securities                                                   (2,650,000)             (2,275,583)
    Increase in loans receivable                                                        (2,645,550)                      --
    Principal payments on loans receivable                                                   24,173                      --
    Sale of investment in convertible preferred stock                                            --               1,835,537
                                                                               ---------------------   ---------------------
                    Net cash (used in) provided by  investing activities                (5,027,183)               8,924,084
                                                                               ---------------------   ---------------------

Cash flows from financing activities:
    Principal payments on long term notes payable                                                --             (2,134,194)
    Purchase of treasury stock                                                                   --               (337,313)
    Increase in financing costs                                                                  --                 (5,000)
                                                                                                       ---------------------
                                                                               ---------------------
                    Net cash used in financing activities                                        --             (2,476,507)
                                                                               ---------------------   ---------------------

                    Net (decrease) increase in cash and cash equivalents                (5,198,491)               7,595,634

Cash and cash equivalents, beginning of period                                           10,039,560               6,586,447
                                                                               ---------------------   ---------------------

Cash and cash equivalents, end of period                                    $             4,841,069 $            14,182,081
                                                                               =====================   =====================


Supplemental disclosures:
Supplemental disclosure of non-cash activities:
    Unrealized gain on securities available for sale                        $             5,736,111 $                    --
                                                                               =====================   =====================
Supplemental disclosure of cash flow information:
    State taxes paid                                                        $                 1,930 $                23,136
                                                                               =====================   =====================
    Cash paid for interest                                                  $               889,584 $               933,686
                                                                               =====================   =====================

<FN>

     See accompanying condensed notes to consolidated financial statements


</FN>
</TABLE>

                                       3

<PAGE>



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

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


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

         The unaudited  consolidated  financial statements of Point West Capital
Corporation  ("Point West") and its consolidated  entities (the "Company") as of
March 31,  1998 and for the three  month  periods  ended March 31, 1998 and 1997
have been prepared in accordance with generally accepted  accounting  principles
for interim financial  information,  in accordance with Rule 10-01 of Regulation
S-X.  Accordingly,  such  statements do not include all of the  information  and
notes thereto that are included in the annual consolidated financial statements.
In the opinion of management,  all adjustments  considered  necessary for a fair
presentation  have been included.  Operating  results for the three month period
ended March 31, 1998 are not  necessarily  indicative of the results that may be
expected for the year ending December 31, 1998. The balance sheet as of December
31, 1997 has been derived from the audited consolidated  financial statements of
the Company.  The statements  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, 1997 (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 ("Fourteen Hill Capital"),
Allegiance   Capital,   LLC   ("Allegiance")  and  Allegiance  Funding  Corp.  I
("Allegiance Funding").

         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
sought to become a broad-based  specialty  financial  services company.  To that
end,  the Company has  expanded  its  financial  services  business  through the
formation of Fourteen Hill Management and Fourteen Hill Capital, which invest in
small  businesses,  and Allegiance and Allegiance  Funding,  which loan funds to
funeral  home and  cemetery  owners.  The Company  continues to service the life
insurance  policies held by its wholly owned special purpose  subsidiary,  DPFC,
and to evaluate other strategic  business  opportunities.  Fourteen Hill Capital
and Allegiance are indicative of the types of business opportunities the Company
intends to pursue.  See  "Management's  Discussion  and  Analysis  of  Financial
Condition and Results of Operations  -- Fourteen  Hill  Management  and Fourteen
Hill Capital" and "-- Allegiance and Allegiance Funding."
         
         During 1997, the Financial  Accounting  Standards Board ("FASB") issued
Financial Accounting Standard No. 131 ("SFAS 131"), Disclosure About Segments of
An Enterprise and Related  Information.  SFAS 131 is effective with the year-end
1998  financial   statements.   The Company will  comply  with  the  disclosure
requirements.


                                       4
<PAGE>


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

         Statement  of  Financial  Accounting  Standards  No. 115 ("SFAS  115"),
Accounting  for  Certain  Instruments  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
held-to-maturity   are  reported  at  amortized   cost  and   available-for-sale
securities  are reported at fair market value with  unrealized  gains and losses
(net of applicable taxes) as a separate component of stockholders'  equity. Many
of the equity  securities  classified as  available-for-sale  are  securities or
convertible into 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
stock for the last three trading days of the reporting  period,  and adjusted to
reflect  management's  estimate  of  liquidity  constraints.  The Company had no
trading  securities at March 31, 1998 or December 31, 1997.  Any realized  gains
and losses,  declines in value of securities  judged to be  other-than-temporary
and accrued  interest and  dividends on all  securities  will be reported in the
income statement as recognized.

         The amortized  costs and estimated fair value of investment  securities
as of March 31, 1998 and December 31, 1997 are as follows:
<TABLE>

<CAPTION>

                                                        March 31, 1998
------------------------------------------------------------------------------------------------------------
                                                   Gross Unrealized    Gross Unrealized
                                 Amortized Cost          Gains               Loss
                                                                                             Fair Value
<S>                               <C>                <C>                 <C>                  <C>    


Held-to-maturity
     Corporate bonds           $    2,220,000      $       125,000    $         (2,500)   $    2,342,500
                               --------------      ---------------    -----------------   --------------
Total held-to-maturity         $    2,220,000      $       125,000    $         (2,500)   $    2,342,500

Available-for-sale
     Common stock              $    3,650,000      $    5,736,231     $              --   $    9,386,231
     Warrants                  $            0      $            0     $              --   $            0
                               ------------------  -----------------  ------------------  ------------------
 
Total available-for-sale       $    3,650,000      $    5,736,231     $              --   $    9,386,231
                                                                      
</TABLE>

<TABLE>
<CAPTION>



                                                       December 31, 1997
-------------------------------------------------------------------------------------------------------

                                                   Gross Unrealized    Gross Unrealized
                                 Amortized Cost          Gains               Loss
                                                                                            Fair Value

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



Held-to-maturity
     Corporate bonds           $    2,220,000      $         75,000   $         (5,000)   $    2,290,000
                               --------------      ----------------   -----------------   --------------
Total held-to-maturity         $    2,220,000      $         75,000   $         (5,000)   $    2,290,000

Available-for-sale
     Common stock              $      903,181     $       1,355,153     $            --   $    2,258,334
     Warrants                  $       96,819     $       1,242,190     $            --   $    1,339,009
                               --------------     -----------------     ---------------   --------------
   Total available-for-sale    $    1,000,000     $       2,597,343     $            --   $    3,597,343

</TABLE>

                                                                      

         The Company  classifies  debt  securities for which it has the positive
intent and ability to hold to maturity as  held-to-maturity.  All investments in
debt securities  classified as  held-to-maturity  at March 31, 1998 and December
31, 1997 have maturity dates ranging from one to six years.  Warrants classified
as available-for-sale  have expiration dates ranging from one to five years. The
value of the

                                       5

<PAGE>

warrants was determined using the Black-Scholes  Model. The warrants held by the
Company at March 31, 1998 had no cost or market value. One of the small business
entities in which  Fourteen  Hill  Capital had invested as of December 31, 1997,
issued a redemption notice to call a warrant. On January 26, 1998, Fourteen Hill
Capital exercised this warrant for $1 million.

         Unrealized  gains  on   available-for-sale   securities   (representing
differences  between  estimated  fair value and cost) of $5.7  million  and $2.6
million at March 31, 1998 and  December 31, 1997,  respectively,  were  credited
(net of applicable taxes) to a separate component of stockholders' equity called
"Comprehensive Income -- Net Unrealized Investment Gains."

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

         Loans  receivable  includes  loans made to  unaffiliated  third parties
through  Allegiance  and  Fourteen  Hill  Capital.  Such loans are  reported  at
amortized  cost, and interest is accrued as earned.  All loans at March 31, 1998
and December 31, 1997 were current, and no reserves were considered necessary as
of such dates.

         Allegiance  provides senior secured loans to funeral homes and cemetery
owners. Two loans were outstanding at March 31, 1998 in the aggregate  principal
amount of $5.9 million, one of which bears interest at a fixed interest rate per
annum of 9.4% and the other of which bears interest at a fixed interest rate per
annum  of  9.8%.  Such  loans  mature,  subject  to  permitted  prepayments,  in
approximately fifteen years with monthly principal payments.

         Fourteen Hill Capital provides  financing to small businesses.  The one
loan  outstanding at March 31, 1998 in the principal  amount of $795,000 bears a
fixed  interest  rate  per  annum  of 15%  and  matures,  subject  to  permitted
prepayments,  in  approximately  5 years.  The only loan made by  Fourteen  Hill
Capital in 1997 in the amount of $250,000 was paid in full on January 20, 1998.

4.       Assets Held for Sale and Related Sale Agreements
--       ------------------------------------------------        

         As a  result  of  the  Company's  decision  in  1996  to  sell  all  or
substantially  all of its assets,  it  reclassified  all assets owned as of such
date,  other  than  the  assets  of DPFC,  to a  "held-for-sale"  category.  See
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations  -- Overview."  Accordingly,  such assets are recorded on the balance
sheet as of March 31, 1998 and December 31, 1997 at the lower of carrying  value
or fair value less  estimated  cost to sell. In connection  with the decision to
sell  assets,  the Company  established  a reserve for loss on sale of assets in
1996 and reevaluates such reserve each quarter. Assets held for sale consist of:

<TABLE>
<CAPTION>

                                                                 March 31, 1998           December 31, 1997
                                                                 --------------           ----------------- 
<S>                                                              <C>                       <C>     
     Capitalized costs                                        $         290,262           $       525,697
     Earned discounts on life insurance policies                          1,704                     2,482
     Reserve for loss on sale                                          (210,796)                 (398,845)
                                                              ------------------          ----------------
     Assets held for sale                                     $          81,170           $       129,334
                                                              ------------------          ----------------
</TABLE>


         The calculation of reserve for loss on sale was calculated based on the
life  expectancy of the insured under each life insurance  policy in relation to
prices  obtained by the Company in  connection  with other  sales,  management's
estimate of the current saleability of such policy, the type of policy

                                       6
<PAGE>


(e.g.,  term or whole life), the age of the insured and premiums on such policy.
Any gain or loss due to the difference  between  actual  proceeds (less any back
end sourcing fees) and the carrying value after giving effect to the reserve for
loss on sale of assets is reported as a realized  gain or loss on assets sold at
the time any sale proceeds are received.

         Through December 31, 1997, the Company entered into several  agreements
to sell portions of its portfolio of policies. None of the purchasers thereunder
is  affiliated  with the Company or any of its  directors or officers.  The sale
agreements   provided  for  the  sale,  upon  the  issuing  insurance  company's
acknowledgment of transfer of ownership,  of an aggregate of 373 policies having
an aggregate  face value of $29.2  million.  Through March 31, 1998, the sale of
352 policies with an aggregate face value of $28.8 million had been consummated.
Eleven  policies  covered  by the sales  agreements  were not sold  because  the
insured died prior to the issuing insurance company's acknowledgment of transfer
of ownership of the policy and the Company  collected the death benefit  instead
of selling these policies. The remaining 10 policies (representing approximately
$534,000 in face amount) were carried on the balance  sheet at March 31, 1998 at
$81,000 after giving effect to the reserve for loss on assets held for sale.

         The  policies  representing  "assets  held  for  sale"  consist  of the
policies under the  aforementioned  sales  agreements.  The Company  experienced
delays or  difficulties  in  transferring  the  ownership  of the  remaining  10
policies described above and, due to contractual provisions in the related sales
agreements, the sales of these policies have not been consummated.  However, the
Company is pursuing other alternatives for the sale of these policies.

5.       Purchased Life Insurance Policies
--       ---------------------------------

         Effective July 1996,  purchased life insurance  policies consisted 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 6), will
require  the  consent  of the  Company  and the  Noteholders.  The  Company  has
discussed  potential sales of DPFC policies with the Noteholders;  however,  the
Company  has not  determined  whether it will decide to sell such  policies  and
cannot determine  whether the Noteholders will consent to such a sale or whether
such a sale is  feasible.  A reserve was  recorded in 1996 in the amount of $6.9
million to reflect the estimated  loss of Point West's equity  interest in DPFC.
As of March 31, 1998 and  December  31,  1997,  the reserve was $1.5 million and
$2.3  million,  respectively.  The reserve  provides  for the  write-off  of the
unrealized residual value associated with DPFC.

6.       Long Term Notes Payable
--       -----------------------

         The Senior Viatical  Settlement Notes,  Series 1995-A,  Stated Maturity
March 10, 2005 (the "Securitized  Notes") issued by DPFC previously provided for
a  maximum  lending  commitment  of  $50  million.  As  a  result  of  an  early
amortization  event in June 1996, the maximum lending  commitment was reduced to
the then outstanding principal amount ($45.5 million), and principal payments on
the Securitized Notes began in July 1996. Principal and interest payments on the
Securitized  Notes are payable solely from  collections on pledged  policies and
deposited funds. The Securitized Notes are reported on the balance sheet as long
term notes payable.  The  Securitized  Notes bear a fixed interest rate of 9.17%
per annum.

                                       7

<PAGE>

         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.  However,  to the  extent  that the  losses  of DPFC  exceed  its  equity
(creating  a deficit),  the deficit  would be recorded by the Company as a loss.
Upon the  retirement  of the  Securitized  Notes at less  than book  value,  the
Company  would  recognize  a gain  for the  difference,  which  is  expected  to
approximate  the deficit of DPFC. At March 31, 1998, the equity of DPFC was $1.5
million.

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

7.       Stockholders' Equity
--       --------------------

         Changes in  stockholders' equity during the first three months of 1998
reflected the following:

             Stockholders' equity, beginning of period           $  21,266,108
                  Comprehensive income -- net unrealized 
                  investment gains                                   3,138,872
                                                                 -------------
                  Net loss                                             (79,572)
                                                                 -------------
             Stockholders' equity, end of period                 $  24,325,408



         During 1997, FASB issued Financial  Accounting  Standard No. 130 ("SFAS
130"),  Reporting  Comprehensive  Income.  SFAS 130 is effective for interim and
annual  periods  beginning  after  December  15, 1997.  At March 31,  1998,  the
Company's total  comprehensive  income includes net unrealized  investment gains
which represents the increase in the Company's  investment  securities in common
stock classified as available-for-sale, net of applicable taxes.

8.       Earned Discounts
--       ----------------

         With the  decision to sell all or  substantially  all of the  Company's
assets,  any income on matured policies since the third quarter of 1996 has been
recorded  as  earned  discounts  on  matured  policies  and  recorded  upon  the
notification  of death of the  insured.  Such income is equal to the  difference
between the  proceeds the Company  received on the  policies  (less any back end
sourcing  fees) and the carrying  value of such policies  after giving effect to
any reserve for loss on sale of such policies.

9.       Earnings per Share
--       ------------------

         Statement  of  Financial  Accounting  Standards  No. 128 ("SFAS  128"),
Earnings  per Share,  was issued in  February  1997 and is  effective  for years
ending after  December 15, 1997.  Under SFAS 128,  earnings per share ("EPS") is
reported  as two  separate  calculations:  Basic EPS,  similar  to the  previous
primary EPS  excluding  stock  equivalents;  and,  Diluted  EPS,  similar to the
previous fully diluted EPS.

                                       8

<PAGE>

         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>

                                                                      March 31, 1998          March 31, 1997
                                                                      ==============         ===============

<S>                                                                   <C>                      <C>    
Weighted  average  number of shares of common stock  
outstanding.......................................                        3,253,324                4,053,774
Additional common stock equivalents ..............                               --                   68,386
                                                                    ---------------          ---------------   
Weighted  average  number of shares of common  stock 
and  common stock equivalents outstanding ........                        3,253,324                4,122,160

</TABLE>


         Diluted  EPS for the three  months  ended March 31, 1998 do not include
common  stock  equivalents  due to  their  anti-dilutive  effect.  Common  Stock
equivalents  for the three  months ended March 31, 1997  include,  to the extent
they do not have an anti-dilutive effect,  employee stock options,  non-employee
director  stock options and warrants  issued to Jefferies & Company,  Inc.,  the
investment  banking firm which advised the Company in connection  with strategic
options.

10.      Litigation
--       ----------

         On  December  19,  1996,  a  complaint  was filed in the United  States
District  Court,  Northern  District of  California  (the  "Court")  (Docket No.
C96-4558)  against Dignity Partners,  Inc. (now Point West Capital  Corporation)
and each of its  directors by three  individuals  purporting to act on behalf of
themselves  and an alleged class  consisting of all  purchasers of the Company's
common stock during the period February 14, 1996 to July 16, 1996. The complaint
alleged that the defendants  violated  Section 10(b) of the Securities  Exchange
Act of 1934 and Rule 10b-5  thereunder  and Section 11 of the  Securities Act of
1933 and seeks, among other things,  compensatory  damages,  interest,  fees and
costs. The allegations were based on alleged misrepresentations in and omissions
from the Company's  registration statement and prospectus related to its initial
public  offering and certain  documents  filed by the Company under the Exchange
Act. On April 24, 1998,  the Court granted the  Company's and other  defendants'
motion to  dismiss as it related to the  Section 11 claims  with  prejudice  but
denied the motion to dismiss the claims under Section 10(b) and Rule 10b-5 as to
all defendants  other than Mr. Bow, one of Point West's  directors.  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
Company and each of the defendants intend to defend the action vigorously.

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

       On  May  7,  1998,   Fourteen  Hill  Capital  invested  $1,000,000  in
convertible preferred stock of a small business entity.

                                       9

<PAGE>


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

         The  following  is  a  discussion  and  analysis  of  the  consolidated
financial  condition of the Company as of March 31, 1998,  and of the results of
operations  for the Company for the three  months ended March 31, 1998 and 1997,
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
reclassification  into  "assets held for sale" of a  substantial  portion of the
Company's assets in 1996 and related  accounting  consequences and the inception
of two  businesses  in the  second  half  of  1997)  the  Company's  results  of
operations  and cash flows for the three  months  ended  March 31,  1998 are not
comparable to those for the three months ended March 31, 1997.

Overview

         The Company is a specialty  financial  services company.  The Company's
financial statements consolidate the assets, liabilities and operations of DPFC,
Fourteen  Hill  Management,  Fourteen Hill Capital,  Allegiance  and  Allegiance
Funding.  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.  A viatical
settlement  is the payment of cash in return for an  ownership  interest in, and
right to receive the death benefit (face value) of, a life insurance  policy. In
February 1997,  Point West's Board of Directors  (the "Board")  decided to cease
the Company's viatical settlement  business.  The Board's decision resulted from
(i) accounts of research results reported at the  International  AIDS Conference
held in Vancouver,  British Columbia in July 1996 (the "AIDS Conference"),  (ii)
the Board's belief regarding  increased risks of purchasing and holding policies
insuring the lives of individuals  diagnosed with HIV or AIDS, (iii) accounts of
subsequent  research results which appeared to confirm the reports from the AIDS
Conference, and (iv) a determination by the Board that it was not viable for the
Company  to  continue  to  operate a  viatical  settlement  business  solely for
non-AIDS policies. Also as a result of the accounts of research results reported
at the AIDS Conference, the Company decided in the third quarter of 1996 to sell
all or substantially  all of its assets.  Through December 31, 1997, the Company
had entered into agreements to sell 373 policies with an aggregate face value of
$29.2  million  and had  consummated  the  sale  of all but 10 of such  policies
(having an aggregate  face value of $534,000) at March 31, 1998. See "Results of
Operations  -- Three Months Ended March 31, 1998  Compared to Three Months Ended
March 31,  1997 -- Gain on Assets  Sold"  and Note 4 of the  Condensed  Notes to
Consolidated  Financial  Statements  (contained herein) for further  information
regarding assets held for sale.

         Subsequent  to  February  1997,  the  Company  has  sought  to become a
broad-based  specialty  financial services company. To that end, the Company has
expanded its financial  services business through the formation of Fourteen Hill
Management  and Fourteen Hill  Capital,  which invest in small  businesses,  and
Allegiance and Allegiance Funding, which loan funds to funeral home and cemetery
owners. The Company continues to service the life insurance policies held by its
wholly owned special purpose  subsidiary,  DPFC, and to evaluate other strategic
business opportunities. Fourteen Hill


                                       10

<PAGE>


Capital and  Allegiance,  whose  business  activities are described  below,  are
indicative of the types of business opportunities the Company intends to pursue.

Fourteen Hill Management and Fourteen Hill Capital
--------------------------------------------------

         On June 3, 1997,  the  Company  formed  Fourteen  Hill  Management  and
Fourteen  Hill  Capital.  Fourteen  Hill  Management  is a wholly owned  limited
liability  company of Point West formed solely for the purpose of serving as the
general  partner of one or more small business  investment  companies  ("SBIC").
Fourteen Hill Capital is a limited  partnership formed solely for the purpose of
operating as an SBIC.  Fourteen Hill Capital  received its SBIC license from the
Small Business  Administration  ("SBA") effective  September 26, 1997.  Fourteen
Hill Management is the sole general  partner of Fourteen Hill Capital,  and owns
99.976%  of the  partnership  interests.  Point  West is one of the two  limited
partners of Fourteen Hill Capital and owns 0.022% of the partnership  interests.
The remaining  0.002% of the partnership  interest is owned by one  unaffiliated
limited  partner.  Point West  capitalized  Fourteen Hill  Management  with $5.0
million.  To the extent that Fourteen  Hill  Management  contributes  additional
capital to Fourteen Hill Capital,  Fourteen Hill  Management's  equity  interest
will increase.

         Fourteen Hill Capital provides loans,  debt and equity capital to small
companies (i.e.,  generally companies with a net worth less than $18 million and
average net income less than $6 million for the last two years).  Fourteen  Hill
Capital  commenced  operations in August 1997. At March 31, 1998,  Fourteen Hill
Capital had one loan and three equity  investments  outstanding for which it had
originally  provided funds in the aggregate amount of $4.4 million. At March 31,
1998,  such loans and  investments  were  carried on the balance  sheet at $10.1
million.  The  difference  between such  carrying  value and the original  funds
provided is reflected as  "Comprehensive  Income --  Net  Unrealized  Investment
Gains" in  stockholders' equity.  Many of the equity  securities  classified  as
available-for-sale are securities traded in the Over-the-Counter ("OTC") Market.
Fair  market  value is  estimated  by the  Company  and is based on the  average
closing bid of the stock for the last three trading days of the reporting period
and decreased to reflect management's estimate of liquidity constraints.

         At present,  Fourteen Hill Capital does not have any  outstanding  debt
from the SBA,  and the  Company  believes  that,  until  Fourteen  Hill  Capital
liquidates  a portion of one of its  investments  or  increases  its  regulatory
capital,  Fourteen Hill Capital may not be able to access all such debt from the
SBA.  See  the  Form  10-K  and  Notes  2, 3 and 11 of the  Condensed  Notes  to
Consolidated  Financial  Statements  (contained herein) for further  information
regarding Fourteen Hill Management and Fourteen Hill Capital.

Allegiance and Allegiance Funding
---------------------------------

         Allegiance is a limited  liability  company formed on September 5, 1997
as a specialty  finance company to provide senior secured loans to funeral homes
and cemetery owners.  Through March 31, 1998, Allegiance had funded two loans in
the aggregate principal amount of $5.9 million.  Point West provided the capital
to  Allegiance  for such  loans.  Point West has a 54% equity  interest  and 95%
voting  control in Allegiance  and serves as the managing  member of Allegiance.
Allegiance's  president and its vice  president of  marketing,  each of whom was
hired in September  1997,  have the balance of such  interests.  Allegiance owns
100% of Allegiance  Funding,  which is a special  purpose  subsidiary  formed to
facilitate the potential securitization of loans consummated by Allegiance.  Net
profits of Allegiance  for each  calendar year will be allocated  first to Point
West in an amount equal to a return of 10% per 

                                       11

<PAGE>



annum, compounded monthly, on the amount of its capital contribution, but not in
excess of such net profits.  Any shortfall will be carried forward  indefinitely
to the next calendar  year or years in which net profits are  sufficient to make
such  allocation.  An  additional  5%  return  for each  calendar  year  will be
allocated first to Point West to the extent that in each year sufficient profits
are available  with no carry forward  provided.  See the Form 10-K and Note 3 of
the Notes to Consolidated  Financial  Statements  (contained herein) for further
information regarding Allegiance and Allegiance Funding.

Method of Accounting
--------------------

         As a result of the Company's  decision to sell all or substantially all
of its  assets,  the  Company  established  a reserve for loss on sale of assets
during 1996 and reevaluates this reserve quarterly. The Company also established
a reserve for loss of Point West's  equity  interest in DPFC during 1996 because
of the  uncertainties  created by the data presented at the AIDS  Conference and
subsequent  reports of the efficacy of new treatments for AIDS/HIV.  The reserve
for loss on sale of assets was  $211,000  and  $399,000 as of March 31, 1998 and
December 31,  1997,  respectively.  The reserve for loss of Point West's  equity
interest  in DPFC was $1.5  million  and $2.3  million as of March 31,  1998 and
December 31, 1997,  respectively.  In addition,  beginning in 1996,  the Company
began  generally  recognizing  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.  See the  Form  10-K  and  Notes  4 and 5 of the  Condensed  Notes  to
Consolidated  Financial  Statements  (contained herein) for further  information
regarding  the  reserve  for loss on sale of assets and the  reserve for loss of
Point West's equity interest in DPFC.

         SFAS 115  requires  marketable  debt and equity  securities  (including
those held by Fourteen  Hill Capital) to be  classified  into  held-to-maturity,
available-for-sale   and   trading   categories.    Securities   classified   as
held-to-maturity   are  reported  at  amortized   cost  and   available-for-sale
securities  are reported at fair market value with  unrealized  gains and losses
(net of applicable taxes) as a separate  component of stockholders'  equity. The
Company had no trading  securities  at March 31, 1998 or December 31, 1997.  Any
realized  gains  and  losses,  declines  in value  of  securities  judged  to be
other-than-temporary  and accrued  interest and dividends on all securities will
be reported in the income  statement as recognized.  See Note 2 of the Condensed
Notes to Consolidated Financial Statements (contained herein).

         The Company  accounts for loans  advanced by Fourteen  Hill Capital and
Allegiance by accruing interest on outstanding balances.  Since only three loans
were outstanding at March 31, 1998 and December 31, 1997, the Company  evaluated
the loans and determined that a specific reserve was not necessary.  As the loan
portfolio  grows,  general  reserves  will be  added  to the  extent  considered
necessary.  See  Note  3  of  the  Condensed  Notes  to  Consolidated  Financial
Statements (contained herein).

Certain Accounting Implications for DPFC
-----------------------------------------

         Although  the  Securitized  Notes had an expected  life of 2.1 years in
September  1995, the Securitized  Notes were not retired through  collections by
October  1997.  At March 31,  1998,  $38.8  million  was  outstanding  under the
Securitized Notes. In the event that the collection experience for DPFC policies
is substantially  delayed, the equity of DPFC may become negative.  Based on the
recent

                                       12

<PAGE>


collection  experience,  the  Company  believes  the equity of DPFC will  become
negative in the third quarter of 1998.

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

         In light of the foregoing, to the extent that the losses of DPFC exceed
its equity (creating a deficit), the deficit would be recorded by the Company as
a loss.  Upon the retirement of the  Securitized  Notes at less than book value,
the  Company  would  recognize a gain for the  difference,  which is expected to
approximate  the deficit of DPFC. At March 31, 1998, the equity of DPFC was $1.5
million.  The Securitized  Notes  represent the obligations  solely of DPFC. The
Company did not guarantee repayment of the Securitized Notes and is not required
to fund any principal or interest deficiencies thereunder.


Results of Operations
---------------------

Three Months Ended March 31, 1998 Compared to the Three Months Ended 
--------------------------------------------------------------------
March 31, 1997
--------------

         Earned  Discounts.  Earned discounts on matured polices increased 71.5%
in the first quarter of 1998  compared to the first quarter of 1997.  During the
first  quarter of 1998,  the Company had earned  discounts on 24 policies with a
face value of $1.7  million,  compared to 37 policies  with a face value of $2.2
million during the first quarter of 1997.  This increase is due primarily to the
collection in the first quarter of 1998 of two above-average  size policies with
relatively low carrying values. See "Method of Accounting."

         Interest  Income.  Interest income increased 69.2% in the first quarter
of 1998 compared to the first quarter of 1997. This increase is due primarily to
the interest earned on loans made by Fourteen Hill Capital and Allegiance.

         Gain on Sale of Convertible  Preferred  Shares. In the first quarter of
1997 the Company  recognized  a $700,000  gain on the sale of a portion of Point
West's   investment   in   American   Information   Company,   Inc.   ("American
Information").  Point West converted 8.2 million shares of convertible preferred
stock into 8.2 million shares of common stock of American  Information  and sold
such shares  (approximately  38% of Point West's  equity  investment in American
Information) to an unaffiliated third party for $1.8 million. The carrying value
of such shares was $1.1 million.  The Company accounts for this investment using
the cost method.

         Gain on Assets  Sold.  The gain on assets sold  decreased  84.0% in the
first  quarter of 1998  compared  to the first  quarter of 1997  because a large
portion of the sale proceeds from life insurance  policies was collected  during
the first quarter of 1997. The Company collected the sale proceeds on 4 policies
resulting in a realized gain of $139,000 in the first quarter of 1998,  compared
to 188 policies


                                       13

<PAGE>

resulting  in a realized  gain of  $871,000  in the first  quarter of 1997.  The
realized gain was calculated  based on the difference  between the sale proceeds
and the carrying  value of such policies  after giving effect to the reserve for
loss on sale of  assets.  See  Note 4 of the  Condensed  Notes  to  Consolidated
Financial Statements (contained herein).

         Other  Income.  Components  of  other  income  include  collections  on
policies of dividends, interest, paid-up cash values, increases in face value of
matured  policies,  refunds of premiums on matured policies and realized capital
gains on investments securities.  Other income increased 103.5% during the first
quarter of 1998  compared to the first  quarter of 1997,  due to an aggregate of
$43,000 in paid-up cash values on two policies  offset by a decrease  associated
with a smaller number of matured policies.

         Interest Expense.  Interest expense decreased 3.7% in the first quarter
of 1998  compared to the first  quarter of 1997.  Average  borrowings  under the
Securitized  Notes were $38.8  million in the first  quarter of 1998 compared to
$40.7 million in the first quarter of 1997. The interest rate on the Securitized
Notes was 9.17% in both periods.

         Compensation and Benefits. Compensation and benefits increased 29.3% in
the first quarter of 1998  compared to the first quarter of 1997.  This increase
was due to two new  employees  hired in September  1997 to support  Allegiance's
lending activities and an increase in compensation and benefits for employees in
1998.

         Other   General  and   Administrative   Expenses.   Other  general  and
administrative expenses decreased 23.4% in the first quarter of 1998 compared to
the first quarter of 1997.  This decrease is primarily the result of $250,000 in
legal expenses  recorded in the first quarter of 1997 in connection with federal
and state  alleged  class  action  lawsuits  filed  against  the Company and its
officers and  directors.  Partially  offsetting  the decrease was an increase in
life insurance policy premium costs of $150,000 (including approximately $58,000
of premiums that were previously  capitalized)  recorded in the first quarter of
1998.  Notwithstanding  the increase in premium  costs,  such premium costs were
reflected in the reduction of the reserve for loss on investment in wholly owned
financing  subsidiary.  As a result, such increased premium costs did not impact
net income.

         Net Loss in Wholly Owned  Financing  Subsidiary  Charged to Reserve for
Equity Interest.  At March 31, 1998 and December 31, 1997 the reserve to reflect
the  estimated  loss of Point  West's  entire  equity  interest in DPFC was $1.5
million  and $2.3  million,  respectively.  The DPFC  net loss of  $801,000  and
$935,000  recorded  in the first  quarter  of 1998 and 1997,  respectively,  was
included in the  Company's  net loss before net loss in wholly  owned  financing
subsidiary charged to reserve for equity interest. This loss was charged against
the reserve for equity interest in wholly owned financing subsidiary.


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

         Other than any debt  borrowings  that may be available to Fourteen Hill
Capital through the SBA, the Company does not currently have an external funding
source.  Although  Fourteen Hill Capital's  SBIC license  permits it, subject to
certain conditions,  to obtain debt from the federal government,  because one of
Fourteen Hill Capital's investments represents an amount greater than 20% of its
regulatory  capital  (at  May  20,  1998  this  investment  constituted  40%  of
regulatory  capital),  Fourteen Hill Capital may not be able to access such debt
until it liquidates a portion of such  

                                       14

<PAGE>


investment or increases its regulatory  capital.  The  Securitized  Notes do not
provide  funds with which to fund  operations.  Allegiance  is in the process of
negotiating an external funding facility to support its loan activity. There can
be no assurance that Allegiance will be able to obtain external  funding or that
any such funding will be on terms acceptable to the Company.

         At March 31, 1998,  cash and cash  equivalents  was $4.8  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
Capital and Allegiance and any other business opportunities the Company pursues.
There can be no  assurance  that the Company  will be  successful  in  obtaining
external  financing  on  satisfactory  terms  assuming  it  determines  it needs
additional funds. Point West at present anticipates having sufficient  liquidity
to meet its capital  commitments  and  working  capital  and  operational  needs
through 1998, using current cash and cash equivalents. However, the Company does
not have sufficient liquidity to fund the growth of the businesses of Allegiance
or Fourteen Hill Capital.

         As  of  March  31,  1998,  the  outstanding  principal  amount  of  the
Securitized  Notes was $38.8 million.  Principal  repayments on the  Securitized
Notes began in July 1996.  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  the  Company  to  expend  cash or  obtain
financing to satisfy such principal and interest obligations.  See Note 6 of the
Condensed Notes to Consolidated Financial Statements (contained herein).

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,
holding 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  Securities  and Exchange  Commission  (the  "Commission")  as
investment   companies  and  upon  registration   become  subject  to  extensive
regulation.

         The Company does not believe it is engaged primarily in the business of
investing,  reinvesting,  holding or trading in securities within the meaning of
the 1940 Act and the rules of the Commission promulgated thereunder and does not
believe  that  it  should  be  deemed  to be an  investment  company  under  the
Percentage  Tests.  It is  possible,  however,  that the Company  could,  in the
future,  be deemed to be an  investment  company under the  Percentage  Tests or
otherwise  and,  thus,  be required to register and be regulated  under the 1940
Act, which could  significantly and adversely affect the Company's  business and
the market price of its Common Stock.

         In  particular,   through  Fourteen  Hill  Capital  the  Company  holds
investments  in securities.  These  investments  have been made primarily  since
January 1998. The value of these and certain of the Company's other  investments
have increased  rapidly in the past two months,  increasing the likelihood  that
the Company will,  in the future,  exceed one or more of the  Percentage  Tests,
unless  the  Company's  other   businesses  grow  more  rapidly  than  currently
anticipated.

         Although,  the  Company  intends to conduct  its  business so as to not
become  subject  to  regulation  under the 1940 Act,  the  Company's  ability to
continue not being subject to  registration  and  

                                       15

<PAGE>


regulation under the 1940 Act will be subject to many factors, some of which may
be outside the  Company's  control.  Such factors  include,  among  others,  the
successful  and  timely  implementation  of the  Company's  business  plan,  the
relative  values of the  various  assets  which are held by the  Company and the
sources of the Company's income which, in turn, will be  significantly  affected
by increases  or  decreases in the market value of assets held by Fourteen  Hill
Capital.  In view of the  foregoing,  no assurance can be given that the Company
may not, in the future,  be required to register as an investment  company under
the 1940 Act or take steps to avoid being  required to register.  Such steps may
include (i)  disposing  of certain  assets at a time or in a manner which would
not maximize  potential  returns,  (ii)  restricting  additional  investments by
Fourteen  Hill  Capital (or  otherwise)  even if the capital to make  additional
investments is available,  and (iii)  initiating  other  businesses which may be
different from the Company's other business activities.

Other
-----
         Based  on  a   preliminary   study,   the  Company   expects  to  spend
approximately  $50,000  to  $100,000  from 1998 to 1999 to modify  its  computer
information  systems enabling proper processing of transactions  relating to the
year 2000 and beyond ("Year 2000 Compliant").  The Company continues to evaluate
appropriate  courses of  corrective  action,  including  replacement  of certain
systems whose associated costs would be recorded as assets and depreciated.  The
Company  does not expect the amounts  required to be expensed  over the next two
years  to have a  material  effect  on its  financial  position  or  results  of
operations.  The Company is also in the process of reviewing  whether or not its
suppliers and vendors are Year 2000 Compliant.

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)  expectations  regarding when the equity of DPFC
will become  negative (See "Certain  Accounting  Implications  for DPFC"),  (ii)
sufficiency of the Company's liquidity and capital resources (See "Liquidity and
Capital  Resources"),  (iii) the Company's ability to continue not being subject
to registration and regulation under the 1940 Act (See "Considerations Under the
Investment  Company  Act of  1940"),  and  (iv)  expected  expenses  to make the
Company's computer operations Year 2000 Compliant.  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) the  amount and  timing of actual  collections  of DPFC
policies  following the death of the insured,  (ii) the results of the Company's
consideration  of  strategic  options  and any  costs  associated  with a chosen
option, (iii) availability and cost of capital, (iv) the factors described under
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations -- Considerations  Under the Investment Company Act of 1940," and (v)
the  ability  of the  Company's  suppliers  and  vendors  to  become  Year  2000
compliant. 



                                       16

<PAGE>



Item 3. Quantitative and Qualitative Disclosures About Market Risk.
--------------------------------------------------------------------

         Not required.

                                       17


<PAGE>


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

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

         On  December  19,  1996,  a  complaint  was filed in the United  States
         District Court,  Northern  District of California (the "Court") (Docket
         No. C96-4558)  against Dignity  Partners,  Inc. (now Point West Capital
         Corporation) and each of its directors by three individuals  purporting
         to act on behalf of themselves  and an alleged class  consisting of all
         purchasers of the Company's common stock during the period February 14,
         1996 to July 16,  1996.  The  complaint  alleged  that  the  defendants
         violated Section 10(b) of the Securities  Exchange Act of 1934 and Rule
         10b-5  thereunder  and  Section  11 of the  Securities  Act of 1933 and
         seeks, among other things,  compensatory  damages,  interest,  fees and
         costs. The allegations were based on alleged  misrepresentations in and
         omissions  from the Company's  registration  statement  and  prospectus
         related to its initial public  offering and certain  documents filed by
         the  Company  under the  Exchange  Act.  On April 24,  1998,  the Court
         granted the  Company's  and other  defendants'  motion to dismiss as it
         related to the Section 11 claims with  prejudice  but denied the motion
         to dismiss  the  claims  under  Section  10(b) and Rule 10b-5 as to all
         defendants  other than Mr.  Bow,  one of Point  West's  directors.  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 Company and each of the  defendants  intend to defend
         the action vigorously.

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

         (a)     Exhibits.

                    Number            Description
                    ------            -----------

                     27                Financial Data Schedule

                     99                Press Release For Fourteen Hill Capital,
                                       L.P.
                                        

         (b)     Reports on Form 8-K.
            

                  Date             Item Reported     Matter Reported
                  ----             -------------     ---------------
  
                March 26, 1998       5            The Company issued a press
                                                  release regarding its results
                                                  of operations for  1997.
                                                   

                                      18

<PAGE>


                                   SIGNATURES
                                   ==========


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



                                          


                                              POINT WEST CAPITAL CORPORATION



DATED:  May 20 1998                           /S/ ALAN B. PERPER               
                                              -------------------------------- 
                                              ALAN B. PERPER 
                                              President
                                              (Duly Authorized Officer)




DATED:  May 20 1998                           /S/ JOHN WARD ROTTER         
                                              -------------------------------- 
                                              JOHN WARD ROTTER
                                              Executive Vice President and
                                              Chief Financial Officer
                                             (Principal Financial and
                                              Accounting Officer)

                                       19