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, 2000
                                                 ------------------
                                       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 July 31, 2000,  there were  3,352,624  shares of the  registrant's  Common
Stock outstanding.


<PAGE>


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


                                      INDEX
                                      -----


Part I   Financial Information                                           Page
------                                                                   ----

Item 1.  Consolidated Financial Statements (Unaudited):

         Consolidated Balance Sheets
           June 30, 2000 and December 31, 1999                             1

         Consolidated Statements of Operations for the
           Three and Six Months Ended June 30, 2000 and 1999               2

         Consolidated Statements of Cash Flows for the
           Six Months Ended June 30, 2000 and 1999                         3

         Condensed Notes to Consolidated Financial Statements             4-13

Item 2.  Management's Discussion and Analysis of Financial
           Condition and Results of Operations                           14-23

Item 3.  Quantitative and Qualitative Disclosures
           About Market Risk                                               24


Part II  Other Information
-------

Item 1.  Legal Proceedings                                                 25

Item 4.  Submission of Matters to a Vote of Security Holders               25

Item 5.  Other Information                                                 26

Item 6.  Exhibits and Reports on Form 8-K                                  27

Signatures                                                                 28


<PAGE>



                                              POINT WEST CAPITAL CORPORATION
                                                CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>



                                                                                  June 30,             December 31,
                                 ASSETS                                             2000                   1999
                                                                             -------------------    -------------------
                                                                                             (unaudited)

<S>                                                                                  <C>                      <C>


Cash and cash equivalents                                                  $          9,132,639   $         12,836,125
Restricted cash                                                                         642,358              3,074,057
Investment securities:
     Held-to-maturity                                                                        --              2,504,610
     Available-for-sale                                                               1,242,634              6,519,821
Matured policies receivable                                                             331,897                     --
Taxes receivable                                                                        381,645                     --
Loans receivable, net of unearned income of $555,563 and
     $540,867, respectively, and net of an allowance for
     loan losses of $827,422 and $155,000, respectively                              34,498,265             35,467,079
Purchased life insurance policies                                                    30,971,252             31,727,966
Non-marketable securities                                                            14,783,085              5,933,133
Deferred financing costs, net of accumulated amortization
     of $1,485,394 and $1,378,623, respectively                                         778,619                656,376
Furniture and equipment, net of accumulated depreciation of
     $20,676 and $12,976, respectively                                                   77,263                 34,917
Deferred tax asset                                                                    2,417,482                     --
Other assets                                                                            482,270              2,771,767
                                                                             -------------------    -------------------
           Total assets                                                    $         95,739,409   $         101,525,851
                                                                             ===================    ===================

                  LIABILITIES AND STOCKHOLDERS' EQUITY

Accrued interest expense                                                   $            202,490   $            346,483
Accounts payable                                                                        388,960                238,326
Accrued compensation payable                                                            326,129                543,400
Accrued litigation settlement                                                                --              2,205,000
Taxes payable                                                                                --                141,100
Revolving certificates                                                                4,945,159              4,200,000
Term certificates                                                                    24,218,644             24,498,815
Securitized notes payable                                                            36,206,863             38,528,914
Debenture payable                                                                     6,500,000              3,000,000
Deferred income taxes                                                                        --                281,020
                                                                             -------------------    -------------------
           Total                                                                     72,788,245             73,983,058
           liabilities                                                       -------------------    -------------------

Stockholders' equity:
    Common stock, $0.01 par value; 15,000,000 authorized shares,
       4,391,124 and 4,390,124 shares, respectively, issued
         3,352,624 and 3,351,624 shares, respectively, outstanding                       43,911                 43,901
     Additional paid-in-capital                                                      30,091,689             30,088,949
     Accumulated comprehensive (loss) income, net of tax                              (310,707)              2,098,960
     Accumulated deficit                                                            (3,999,697)            (1,814,985)
     Treasury stock, 1,038,500 shares                                               (2,874,032)            (2,874,032)
                                                                             -------------------    -------------------
           Total stockholders' equity                                                22,951,164             27,542,793
                                                                             -------------------    -------------------
            Total liabilities and stockholders' equity                      $        95,739,409   $        101,525,851
                                                                             ===================    ===================
 <FN>
     See accompanying condensed notes to consolidated financial statements.
</FN>
</TABLE>

                                       1
<PAGE>




                         POINT WEST CAPITAL CORPORATION
                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>



                                                              For the Three Months Ended              For the Six Months Ended
                                                                       June 30,                              June 30,
                                                                2000              1999                2000               1999
                                                           ----------------  ----------------    ----------------  -----------------
                                                                      (unaudited)                           (unaudited)
<S>                                                              <C>                  <C>              <C>                  <C>


Income:
     Interest income                                     $         955,089           579,479           3,170,273          1,070,471
     Net (loss) gain on securities                             (3,251,640)         4,256,871         (2,833,369)          5,225,219
     Other                                                          82,470           236,319             115,435            318,340
     Earned discounts on matured policies                               --            50,267                  --            111,001
                                                           ----------------  ----------------    ----------------  -----------------
           Total (loss) income                                 (2,214,081)         5,122,936             452,339          6,725,031
                                                           ----------------  ----------------    ----------------  -----------------
Expenses:
     Interest expense                                              695,741         1,164,114           1,943,851          2,207,147
     Compensation and benefits                                     671,510           436,446           1,290,967            783,780
     Other general and administrative expenses                   1,530,455         1,621,814           2,400,315          2,203,285
     Amortization                                                   44,543           128,288             106,771            251,971
     Depreciation                                                    4,611             1,878               7,700              3,676
                                                           ----------------  ----------------    ----------------  -----------------
           Total expenses                                        2,946,860         3,352,540           5,749,604          5,449,859
                                                           ----------------  ----------------    ----------------  -----------------

           (Loss) gain before income taxes
             and extraordinary gain                            (5,160,941)         1,770,396         (5,297,265)          1,275,172

Income tax benefit (expense)                                     1,817,901          (12,700)           1,870,550           (17,500)

                                                           ----------------  ----------------    ----------------  -----------------
           (Loss) gain before extraordinary gain               (3,343,040)         1,757,696         (3,426,715)          1,257,672
                                                           ----------------  ----------------    ----------------  -----------------

Extraordinary gain, net of income taxes of $822,154                    --                 --           1,242,003                 --

                                                           ----------------  ----------------    ----------------  -----------------
            Net (loss) income                            $     (3,343,040) $       1,757,696         (2,184,712)          1,257,672
                                                           ================  ================    ================  =================
(Loss) income per share before extraordinary gain:
     Basic                                               $          (1.00) $            0.53              (1.02)               0.38
                                                           ================  ================    ================  =================
     Diluted                                             $          (1.00) $            0.48              (1.02)               0.34
                                                           ================  ================    ================  =================

Net (loss) income per share:
     Basic                                               $          (1.00) $            0.53              (0.65)               0.38
                                                           ================  ================    ================  =================
     Diluted                                             $          (1.00) $            0.48              (0.65)               0.34
                                                           ================  ================    ================  =================

Weighted-average number of shares of common stock
     outstanding                                                 3,352,624         3,341,635           3,352,443          3,307,820
Weighted-average number of shares of common stock
     and common stock equivalents outstanding                    3,352,624         3,657,996           3,352,443          3,680,091

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

                                       2
<PAGE>

                         POINT WEST CAPITAL CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>


                                                                             For the Six Months Ended June 30,
                                                                                 2000                  1999
                                                                           ------------------  ------------------
                                                                                        (unaudited)
 <S>                                                                              <C>                  <C>

Cash flows from operating activities:
    Net (loss) income                                                    $       (2,184,712) $         1,257,672
    Adjustments to reconcile net (loss) income to net cash
         used in operating activities:
         Depreciation and amortization                                               114,471             255,647
         Loss on loan receivable                                                          --             140,000
         Provision for loan losses                                                   579,964              45,000
         Net loss (gain) on securities                                             2,833,369         (5,225,219)
         Interest income received as warrants                                    (1,101,532)           (242,164)
         Earned discounts on matured policies                                             --           (111,001)
         Deferred tax asset                                                      (1,922,784)                  --
         Extraordinary gain                                                      (1,242,003)                  --
         Changes in operating assets and liabilities:
           Collections on matured life insurance policies                            441,286           1,175,341
           Other assets                                                               68,099           (121,823)
           Taxes receivable                                                        (522,745)                  --
           Accrued interest expense                                                (143,993)              25,456
           Accounts payable                                                          150,634             160,219
           Accrued compensation payable                                            (217,271)            (44,656)
           Accrued litigation settlement                                                  --             945,000
                                                                           ------------------  ------------------
                  Net cash used in operating activities                          (3,147,217)         (1,740,528)
                                                                           ------------------  ------------------

Cash flows from investing activities:
    Proceeds from sale of other assets                                                    --              27,126
    Purchase of furniture and equipment                                             (50,047)             (2,909)
    Decrease in restricted cash                                                    2,431,699             888,806
    Proceeds from maturity of held-to-maturity securities                          2,504,610                  --
    Purchase of investment and non-marketable securities                        (11,932,428)         (3,812,227)
    Proceeds from sale of investment and non-marketable securities                 2,620,215           7,137,420
    Additions to loans receivable                                                (2,665,360)         (9,450,703)
    Principal payments on loans receivable                                         3,054,210             378,043
                                                                           ------------------  ------------------
                  Net cash used in investing activities                          (4,037,101)         (4,834,444)
                                                                           ------------------  ------------------

Cash flows from financing activities:
    Principal payments on securitized notes payable                                (257,894)                  --
    Proceeds from SBA debenture                                                    3,500,000                  --
    Proceeds from revolving certificates                                             820,000          10,040,000
    Principal payments on revolving certificates                                    (74,841)           (139,251)
    Principal payments on term certificates                                        (280,171)                  --
    Increase in deferred financing costs                                           (229,012)            (10,040)
    Proceeds from options exercised                                                    2,750             252,686
                                                                           ------------------  ------------------
                  Net cash provided by financing activities                        3,480,832          10,143,395
                                                                           ------------------  ------------------

                  Net (decrease) increase in cash and cash equivalents           (3,703,486)           3,568,423

Cash and cash equivalents, beginning of period                                    12,836,125           6,668,126
                                                                           ------------------  ------------------

Cash and cash equivalents, end of period                                 $         9,132,639 $        10,236,549
                                                                           ==================  ==================

Supplemental disclosures:
Supplemental disclosure of non-cash activities:
    Unrealized(loss)gain on securities available for sale, net of tax    $       (2,409,667) $        15,161,140
    Receipt of warrants                                                  $         1,101,532 $           242,164
    Reduction in securitized notes payable in
         connection with extraordinary gain                              $         2,064,157 $                --
    Accrued litigation settlement offset against other assets            $         2,205,000 $                --
Supplemental disclosure of cash flow information:
    Taxes paid                                                           $           587,099 $            20,606
    Cash paid for interest                                               $         2,368,232 $         2,181,691

<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 Capital") and its consolidated entities (the "Company")
as of June 30, 2000 and for the three and six month  periods ended June 30, 2000
and 1999 have been prepared in accordance with accounting  principles  generally
accepted in the United States  ("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, 2000 are
not  necessarily  indicative  of the results  that may be expected  for the year
ending December 31, 2000. The consolidated balance sheet as of December 31, 1999
has been  derived  from the audited  consolidated  financial  statements  of the
Company.  These  statements and notes thereto 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, 1999 (the
"Form 10-K").

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

         During 1997,  the Company  expanded  its  financial  services  business
through the  operations  of Ventures,  which makes loans to and invests in small
businesses that are generally  focused in the areas of e-commerce,  Internet and
telecommunications;  and  Allegiance,  which lends to funeral  home and cemetery
owners.  During 1998,  the Company formed PWS, a  broker-dealer  licensed by the
National  Association of Securities Dealers,  Inc ("NASD").  On May 8, 2000, the
Company  formed  SocietyPool,  a  company  that  plans  to  offer a new  type of
financial  product.  In addition,  in  connection  with the  principal  business
activity of the Company  through  February  1997 (which was to provide  viatical
settlements  for  terminally  ill persons),  Point West continues to service the
life insurance  policies held by its  wholly-owned  special purpose  subsidiary,
DPFC.  The  Company  continually  evaluates  new  business  opportunities.   See
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations -- Overview."

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

         Investment securities consist of marketable debt and equity securities.
Statement of Financial  Accounting  Standards  No. 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 in
the  consolidated  balance sheets at fair value with any  cumulative  unrealized
gains and losses,  net of any tax effect,  included in comprehensive  income and
reported as a separate component of stockholders'  equity.  Management

                                       4

<PAGE>


estimates  fair value,  considering  factors such as the bid and offer prices of
securities and volume.  Securities classified as held-to-maturity  included U.S.
Treasury  bills  reported at cost with  original  maturities  greater than three
months, but less than one year. Cash and cash equivalents included U.S. Treasury
bills with maturities less than three months of $7.0 million and $8.3 million at
June 30, 2000 and  December  31,  1999,  respectively.  Any  realized  gains and
losses,  interest and dividends and unrealized losses on securities judged to be
other-than-temporary are reported in the consolidated statements of operations.

         The cost and estimated fair value of investment securities reflected in
the consolidated balance sheets as of June 30, 2000 and December 31, 1999 are as
follows:

<TABLE>
<CAPTION>


                                 June 30, 2000
----------------------------------------------------------------------------------------------------------------------

                                                                     Gross               Gross
                                                                   Unrealized          Unrealized            Fair
                                                 Cost               Gains               Losses               Value
                                                 ----               -----               ------               -----
<S>                                          <C>                 <C>                    <C>               <C>

Available-for-sale:
     Corporate bonds.................    $         350,000   $             ---  $         (292,500)   $          57,500
      Common stock...................            1,409,057                 ---            (223,923)           1,185,134
                                         ------------------  ------------------  ------------------   ------------------
        Total available-for-sale         $       1,759,057  $              ---  $         (516,423)   $       1,242,634
                                         =================   =================    =================   =================

</TABLE>

<TABLE>
<CAPTION>


                                December 31, 1999
----------------------------------------------------------------------------------------------------------------------

                                                                     Gross               Gross
                                                                   Unrealized          Unrealized             Fair
                                                  Cost               Gains               Losses               Value
                                                  ----               -----               ------               -----
<S>                                          <C>                 <C>                    <C>               <C>

Held-to-maturity:
     U.S. Treasury bills ..............  $       2,504,610   $             ---  $              ---   $       2,504,610
                                         -----------------   -----------------  ------------------   -----------------
          Total held-to-maturity         $       2,504,610   $             ---  $              ---   $       2,504,610
                                         =================   =================  ==================   =================



Available-for-sale:
     Corporate bonds.................    $         350,000   $             ---  $        (297,500)   $          52,500
      Common stock...................            2,678,633           4,201,560           (412,872)            6,467,321
                                         ------------------  ------------------  ------------------   ------------------
        Total available-for-sale         $       3,028,633   $       4,201,560  $        (710,372)   $        6,519,821
                                         =================   =================    =================   =================

</TABLE>

         Cumulative   net  unrealized   gains  (losses)  on   available-for-sale
securities (representing differences between estimated fair value and cost) were
($516,000)   and  $3.5   million  at  June  30,  2000  and  December  31,  1999,
respectively.  These cumulative net unrealized gains (losses), net of applicable
taxes,  are included in  accumulated  comprehensive  (loss)  income,  a separate
balance sheet component of stockholders' equity. See Note 8.

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

         Loans  receivable  includes  loans made to  unaffiliated  third parties
through Allegiance and Ventures. Such loans are reported at the principal amount
outstanding,  net of unearned income, hedging gains and losses and the allowance
for loan losses.  Loan origination  fees and direct loan  origination  costs are
netted and  capitalized  and recognized  over the life of the related loan as an
adjustment of yield (interest  income) in accordance with Statement of Financial
Accounting  Standards  No.  91,  Accounting  for  Nonrefundable  Fees and  Costs
Associated  with  Originating  or  Acquiring  Loans and Initial  Direct Costs of
Leases.

                                       5

<PAGE>



         Allegiance  had 24 loans  outstanding  at June 30, 2000 in an aggregate
principal amount of $36.0 million,  which bore a weighted-average fixed interest
rate per annum of 9.8%. Allegiance had 21 loans outstanding at December 31, 1999
in an aggregate principal amount of $33.8 million, which bore a weighted-average
fixed interest rate per annum of 9.8%.  Principal and interest  payments are due
monthly on such loans, and such loans mature,  subject to permitted prepayments,
approximately  fifteen  years from the initial  loan date.  At June 30, 2000 and
December 31, 1999, one loan was in default and on non-accrual  status.  Based on
recent bids received for businesses and other collateral  securing the defaulted
loan,  management  believes that Allegiance will incur a loss in connection with
such loan.  Management  believes such loss will be  approximately  $650,000 and,
therefore, has recorded a reserve in connection therewith in such amount.

         From time to time,  Allegiance uses futures  contracts to hedge certain
interest rate  exposure  between the time of loan  origination  and the expected
issuance of term certificates. See Note 5. The futures contracts are intended to
protect a  portion  of the net  interest  margins  expected  to be earned on the
loans.  Any  realized  gain or loss  related  to these  hedges is  deferred  and
recognized by  Allegiance  over the life of the related loan as an adjustment of
interest income. Pursuant to Statement of Financial Accounting Standards No. 80,
Accounting for Futures Contracts, all such deferred amounts are reflected in 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, 2000, Allegiance had cumulative net realized gains on
its hedging  activities of $197,000,  which  reduced loans  receivable in a like
amount. As of December 31, 1999, Allegiance had cumulative net realized gains on
its hedging  activities of $215,000,  which  reduced loans  receivable in a like
amount.  In  addition,  Allegiance  had net  unrealized  gains from open hedging
positions of $3,000 as of June 30, 2000. As of December 31, 1999, Allegiance had
no open hedges.

         Ventures had no loans  outstanding  at June 30, 2000.  Ventures had two
loans outstanding at December 31, 1999 in an aggregate  principal amount of $2.6
million,  one of which was  originated  in January  1998 and bore  interest at a
fixed  interest  rate per annum of 15% and the other of which was  originated in
November  1999 and bore interest at a variable rate based on the prime rate plus
4% (at  December  31,  1999 the prime rate was  8.5%).  The loan  originated  in
January 1998 was repaid in January  2000.  The other loan matured and was repaid
on April 30, 2000.

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

         Purchased life insurance  policies  consist only of those policies held
by DPFC.  The policies held by DPFC are pledged as security for the  Securitized
Notes (as defined in Note 6). As a result of the imminent  default of DPFC under
the terms of the  Securitized  Notes,  Point West Capital and the holders of the
Securitized  Notes (the  "Noteholders")  entered  into an  agreement  (the "DPFC
Agreement") that amends certain of the terms of the Securitized Notes.  Pursuant
to the DPFC Agreement, which is effective from March 2000 through June 2002, the
Noteholders will provide funds to pay servicing fees, premiums and certain other
costs of DPFC in the event policy  collections are insufficient.  Under the DPFC
Agreement,  Point West  Capital  will  continue to act as servicer  for a fee of
$18,000  per month  for the  period  March  2000  through  June  2002.  The DPFC
Agreement  also provides the  Noteholders  with an option to purchase from Point
West Capital the DPFC  outstanding  stock for a nominal amount on June 30, 2002.
If the Noteholders do not exercise such option, Point West Capital may liquidate
DPFC. See Note 6.

5.       Revolving and Term Certificates
--       -------------------------------

         Allegiance  finances its loans receivable under a structured  financing
arrangement established in August 1998 (the "Allegiance  Financing").  Under the
Allegiance  Financing,  various  classes of revolving

                                       6

<PAGE>


and term  certificates of Allegiance Trust I have been issued. At June 30, 2000,
revolving  certificates  held by third parties were outstanding in the aggregate
principal  amount of $4.9  million.  At June 30, 2000,  such  certificates  bore
interest at fixed and variable  rates based on the one-year U.S.  Treasury yield
plus a weighted-average  spread of 4.3%. The  weighted-average  interest rate of
the  revolving  certificates  held by third  parties at June 30, 2000 was 10.1%.
Allegiance funded and retained an unrated revolving certificate in the principal
amount of $2.2 million. The unrated certificate  represents the right to receive
all  excess  cash  flow  from  Allegiance  Trust  I  related  to  the  revolving
certificates.  The revolving certificates held by third parties received ratings
from Duff & Phelps Credit Rating Co.  ranging from A to B. At June 30, 2000, the
term  certificates  held by third  parties  were  outstanding  in the  aggregate
principal amount of $24.2 million. The  weighted-average  fixed interest rate of
the term  certificates  held by third  parties was 8.1%.  Allegiance  funded and
retained an unrated  term  certificate  that  represents  the right to receive a
17.5% coupon subject to other priority payments on the senior  certificates.  At
June 30, 2000, the outstanding principal balance of the unrated term certificate
was $2.6 million.  Allegiance  retained an additional  unrated term  certificate
that represents the right to receive 90% of the excess cash flow from Allegiance
Trust I related to the term certificates.  This term certificate does not have a
principal balance.  The term certificates held by third parties received ratings
from Duff & Phelps Credit Rating Co. ranging from AA to B.

         In April 2000, the Company and a consortium of insurance companies (the
"Investors")  executed amendments that extended the Allegiance Financing through
December 15, 2000. The Investors  agreed to continue to provide  revolving debt,
subject to certain  limitations,  through December 15, 2000, on terms similar to
those  under  the  original  Allegiance  Financing  revolving  certificates.  In
addition,  the Investors agreed to provide up to approximately  $20.0 million of
additional term financing, subject to certain limitations,  through December 15,
2000, on terms  similar to those under the original  Allegiance  Financing  term
certificates.  The fixed interest on the additional  term  certificates  will be
based on the ten-year U.S.  Treasury  yield plus a spread  ranging from 2.05% to
8.5%.

         The  Allegiance  Financing  does not qualify for sale  treatment  under
Statement of Financial  Accounting  Standards No. 125,  Accounting for Transfers
and Servicing of Financial Assets and  Extinguishments  of Liabilities,  because
its terms entitle  Allegiance  Funding to repurchase loans prior to the point at
which the cost of servicing  them  becomes  burdensome.  As such,  the loans and
borrowings  under the  Allegiance  Financing are  reflected in the  consolidated
balance sheets.

         In  connection  with  the  Allegiance   Financing  and  the  extensions
thereunder,  Allegiance Capital paid an aggregate of $375,000 in commitment fees
when funds were  initially  borrowed.  Of such  commitment  fees,  $100,000  was
amortized over the expected life of the initial revolving certificates,  $25,000
is  being  amortized  over  the  expected  life  of the  revolving  certificates
currently  outstanding  (8 months)  and  $250,000  is being  amortized  over the
expected life of the term certificates (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  extension  of  the  Allegiance   Financing,
Allegiance  agreed  to pay a  non-usage  fee  ranging  from  zero  to  $100,000,
depending  upon the  amount  of term debt  issued  between  March  31,  2000 and
December 15, 2000.

6.       Securitized Notes Payable
--       -------------------------

         In 1995,  DPFC  issued its Senior  Viatical  Settlement  Notes,  Series
1995-A  with a stated  maturity  of March 10,  2005 (the  "Securitized  Notes").
Principal and interest  payments on and other costs of the Securitized Notes are
payable solely from collections on pledged  policies,  deposited funds and funds
provided by the Noteholders. The Securitized Notes bear a fixed interest rate of
9.17% per annum.  Point

                                       7

<PAGE>


West  Capital  is the  servicer  of the  policies  pledged  under the  Indenture
pursuant  to which the  Securitized  Notes  were  issued  and  incurs  servicing
expenses  and  receives  servicing  income.  See Note 4 for further  information
regarding the servicing of DPFC.

         The  DPFC  Agreement  discussed  in Note 4, was  negotiated  due to the
imminent  default  of  DPFC  under  the  terms  of the  Securitized  Notes  and,
accordingly,  has been accounted for as a troubled debt restructuring.  As such,
during the first quarter of 2000, an extraordinary gain of $1.2 million,  net of
taxes of $822,000,  was recorded and the stated amount of the Securitized  Notes
of $38.5 million was reduced to $36.4  million,  reflecting  the maximum  future
cash payments the Noteholders could receive under the DPFC Agreement.  The $36.4
million is equal to the face value of the life insurance policies and restricted
cash held by DPFC as of March 31, 2000.

         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 Capital. The assets of DPFC are the beneficial ownership
interests in the life insurance  policies and funds which secure the Securitized
Notes.

7.       Debenture Payable
-        -----------------

         Point West Ventures has issued two debentures payable to the SBA in the
principal  amount of $6.5 million.  One debenture was issued in July 1998 in the
principal  amount of $3.0 million 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.  The  debenture is subject to a prepayment  penalty if repaid
prior to September 1, 2003.  The other  debenture  was issued on May 24, 2000 in
the principal amount of $3.5 million with semi-annual  interest only payments at
an interim rate of 7.4% (plus a 1% annual fee) and a scheduled  maturity date of
September 27, 2010.  On September  27, 2000,  the SBA will set the fixed rate on
the $3.5 million debenture.  The debenture is subject to a prepayment penalty if
repaid prior to September 27, 2005. In addition,  Point West Ventures paid a fee
of $227,500 (3.5% of the total borrowings) to the SBA to borrow such money.

8.       Stockholders' Equity
--       --------------------
<TABLE>
<CAPTION>


         Changes in  stockholders'  equity during the first six months of 2000
reflected the following:

               <S>                                                                   <C>


         Stockholders'  equity,  beginning  of  period   ..................     $27,542,793
          Comprehensive income:
           Net loss........................................................     (2,184,712)
           Other comprehensive loss:.......................................
             Net unrealized investment losses, net of tax benefit
              of $1.6 million .............................................     (2,409,667)
                                                                                -----------
               Comprehensive loss..........................................     (4,594,379)
          Common stock -- options exercised ...............................              10
          Additional paid-in-capital -- options exercised .................           2,740
                                                                                -----------
         Stockholders' equity, end of period...............................     $22,951,164
                                                                                ===========

</TABLE>

                                       8

<PAGE>


<TABLE>
<CAPTION>


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

             <S>                                                                   <C>

         Stockholders'  equity,  beginning  of  period   ..................     $14,829,561
          Comprehensive income:
           Net Income .......................................................     1,257,672
           Other comprehensive income: ....................................
             Net unrealized investment gains, net of tax
              of $3.6 million .............................................      15,161,140
                                                                                 ----------
               Comprehensive income .......................................      16,418,812
          Common stock -- options exercised ...............................             973
          Additional paid-in-capital -- options exercised .................         589,989
                                                                                -----------
         Stockholders' equity, end of period...............................     $31,389,335
                                                                                ===========

</TABLE>

                                       9


<PAGE>



9.       Earnings Per Share
--       ------------------

         The  weighted-average  number of common  stock  shares  and  additional
common stock equivalent shares used in computing income (loss) per share for the
three and six  months  ended  June 30,  2000 and 1999 are set forth  below.  The
following is a  reconciliation  of the  numerator and  denominator  of basic and
diluted net income (loss) per share:

<TABLE>
<CAPTION>

                                                     Three Months Ended                 Six Months Ended
                                                            June 30,                           June 30,
                                                            --------                           --------
                                                      2000              1999             2000             1999
                                                      ----              ----             ----             ----
<S>                                                  <C>                  <C>           <C>               <C>

Numerator:
     (Loss)  income before extraordinary
      gain....................................    $ (3,343,040)       $   1,757,696    $ (3,426,715)    $   1,257,672
     Extraordinary gain .......................              --                  --        1,242,003               --
                                                  -------------       -------------    -------------    -------------
     Net (loss) income.......................     $ (3,343,040)       $   1,757,696    $ (2,184,712)    $   1,257,672
                                                  =============       =============    =============    =============

Denominator:
     Weighted-average shares..............            3,352,624           3,341,635        3,352,443        3,307,82
                                                  -------------       -------------    -------------    -------------
     Denominator for basic net income (loss),
       basic and diluted loss before
       extraordinary gain and diluted net loss
       calculation.........                           3,352,624           3,341,635        3,352,443        3,307,820
     Weighted-average    effect   of   dilutive
       securities:
          Employee stock options............                 --             181,853               --          221,829
          Warrants..............................             --             134,508               --          150,442
                                                  -------------       -------------    -------------    -------------
     Denominator  for  diluted  net  income and
      extraordinary gain calculation .                3,352,624           3,657,996        3,352,443        3,680,091
                                                  =============       =============    =============    =============


(Loss) income per share:
     Basic
          (Loss) income before
          extraordinary gain...............       $      (1.00)       $        0.53    $      (1.02)    $        0.38
          Extraordinary gain ..................              --                  --             0.37               --
                                                  -------------       -------------    -------------    -------------
          Net (loss) income....................   $      (1.00)       $        0.53    $      (0.65)    $        0.38
                                                  =============       =============    =============    =============
     Diluted
          Loss (income) before
          extraordinary gain...............       $      (1.00)       $        0.48    $      (1.02)    $        0.34
          Extraordinary gain..................              --                   --             0.37               --

          Net (loss) income....................   $      (1.00)       $        0.48    $      (0.65)    $        0.34
                                                  =============       =============    =============    =============

</TABLE>

         Options outstanding during the three and six months ended June 30, 1999
to purchase approximately 30,000 shares of common stock were not included in the
computation  of  diluted  income per share  because  the  exercise  price of the
options was greater than the average market price of the common stock during the
period and, therefore,  would be anti-dilutive.  As a result of the net loss for
the three and six months ended June 30, 2000,  options and warrants  outstanding
during this period were not  included  in the  computation  of diluted  loss per
share because of the anti-dilutive effect.

                                       10

<PAGE>


10.      Segment Reporting
---      -----------------

         Statement of Financial  Accounting Standards No. 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.  Point West  Capital's  chief
operating  decision making group is comprised of the Chairman of the Board,  the
President and the Chief Financial Officer.

         The  Company's   reportable   operating   segments  include   Ventures,
Allegiance  and Viatical  Settlements.  The Other  segment  includes  Point West
Capital, PWS and SocietyPool.  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.

                                       11

<PAGE>

         The following tables represent the Company's  results from segments for
the three months ended June 30, 2000 and 1999.

<TABLE>
<CAPTION>


                                                    Three Months Ended June 30, 2000
                            ----------------------------------------------------------------------------------------

<S>                              <C>              <C>               <C>                  <C>                 <C>
                                                                     Viatical
                                                                     --------
                                  Ventures         Allegiance       Settlements(1)         Other             Total
                                  ---------       -----------       -------------          -----             -----
Interest income......        $      68,719     $    855,618         $          --       $     30,752      $     955,089
Net loss on
securities   ........          (3,251,640)               --                    --                 --        (3,251,640)
Other income .........               3,794               --                78,406                270             82,470
                               ------------      ------------        ------------        ------------      ------------
Total (loss) income .          (3,179,127)          855,618                78,406             31,022        (2,214,081)
Interest expense......             82,117           613,624                    --                 --            695,741
Depreciation and
   amortization.......             12,917            31,626                    --              4,611             49,154
Income tax
(expense) benefit
 (2) .................              (800)           (4,015)                    --          1,822,716          1,817,901
Extraordinary gain ..                  --                --                    --                 --                 --
Contributed net
(loss) income (2)....        $(3,297,938)      $  (715,745)         $      78,406       $    592,237      $ (3,343,040)
                             =============      =============        =============       =============    =============
Identifiable assets...       $ 21,584,916      $ 35,784,138         $  31,634,428       $  6,735,927      $  95,739,409
                             =============      =============        =============       =============    =============

</TABLE>


<TABLE>
<CAPTION>


                                                    Three Months Ended June 30, 1999
                            ----------------------------------------------------------------------------------------

<S>                              <C>              <C>               <C>                  <C>                 <C>
                                                                     Viatical
                                                                     --------
                                  Ventures         Allegiance       Settlements(1)         Other             Total
                                  ---------       -----------       -------------          -----             -----
Interest income......        $      132,183     $    370,942         $     18,087       $     58,267      $     579,479
Net gain on
securities   ........             4,256,871              --                    --                 --          4,256,871
Other income .........               46,458              --                93,937            146,191            286,586
                               ------------      ------------        ------------        ------------      ------------
Total income..........            4,435,512         370,942               112,024            204,458          5,122,936
Interest expense......               51,907         241,002               871,205                 --          1,164,114
Depreciation and
   amortization.......                7,500          62,068                58,720              1,878            130,166
Income tax expense
 (2) .................                (800)         (8,700)                 (800)            (2,400)           (12,700)
Contributed net
 income (loss) (2)....       $    4,369,931    $   (86,634)         $   (884,676)       $(1,640,925)      $   1,757,696
                               =============     =============      =============       =============     =============
Identifiable assets...       $   32,012,940    $ 19,529,868         $  34,955,555       $  9,403,932      $  95,902,295
                               =============     =============      =============       =============     =============

</TABLE>


                                      12

<PAGE>


         The following tables represent the Company's  results from segments for
the six months ended June 30, 2000 and 1999.

<TABLE>
<CAPTION>


                                                    Six Months Ended June 30, 2000
                            ----------------------------------------------------------------------------------------

<S>                              <C>              <C>               <C>                  <C>                 <C>
                                                                     Viatical
                                                                     --------
                                  Ventures         Allegiance       Settlements(1)         Other             Total
                                  ---------       -----------       -------------          -----             -----

Interest income......            $ 1,371,854      $ 1,678,380        $     6,818       $    113,221       $  3,170,273
Net loss on
securities ...........           (2,833,369)               --                 --                 --        (2,833,369)
Other income .........                 2,093            3,188             97,242             12,912            115,435
                                 ------------     ------------       ------------       -------------     ------------
Total (loss) income..            (1,459,422)        1,681,568            104,060            126,133            452,339
Interest expense......               134,024        1,220,977            588,850                 --          1,943,851
Depreciation and
   amortization.......                22,917           83,854                 --              7,700            114,471
Income tax
(expense) benefit
(2)...................                 (800)          (4,585)                 --          1,875,935          1,870,550
Extraordinary gain ..                     --               --          1,242,003                 --          1,242,003
Contributed net
(loss)income (2)....           $ (1,640,374)    $ (1,028,552)        $   623,774      $   (139,560)      $ (2,184,712)
                               =============    =============         ==========         ==========      =============
Identifiable assets...         $  21,584,916      $35,784,138        $31,634,428      $   6,735,927      $  95,739,409
                               =============    =============         ===========        ==========      =============

</TABLE>
<TABLE>
<CAPTION>




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

                                                                   Viatical
                                Ventures        Allegiance      Settlements (1)        Other            Total
                                --------        ----------      ---------------        -----            -----


Interest income......        $   319,583       $  592,364       $        45,690   $    112,834     $   1,070,471
Net gain on
securities ..........          4,907,769               --                    --        317,450         5,225,219
Other income........              46,458               --               163,526        219,357           429,341
                            ------------     ------------          ------------    -------------    ------------
Total income .........         5,273,810          592,364               209,216        649,641         6,725,031
Interest expense......           103,244          349,423             1,754,480             --         2,207,147
Depreciation and
   amortization.......            15,000          119,531               117,440          3,676           255,647
Income  tax   expense
  (2) ................   .         (800)         (13,500)                 (800)        (2,400)          (17,500)
Contributed net
income(loss) (2)....         $ 5,149,320      $ (190,266)       $   (1,881,803)   $(1,819,579)     $   1,257,672
                              ===========     ===========          ============    ===========       ===========
Identifiable assets...       $ 32,012,940     $19,529,868       $    34,955,555   $  9,403,932     $  95,902,295
                              ===========     ===========          ============    ===========       ===========

<FN>

--
(1)  The  Viatical   Settlements  segment  includes  results  of  operations  in
     connection with viatical settlements for DPFC and Point West.
(2)  Corporate  overhead  and income tax  (expense)  benefit  are not  generally
     allocated between segments and are included in the Other segment.

</FN>
</TABLE>

                                       13

<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 June 30,  2000,  and of the results of
operations  for the Company for the three and six months ended June 30, 2000 and
1999, 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.

Overview
--------

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

         During 1997,  the Company  expanded  its  financial  services  business
through the  operations  of Ventures,  which makes loans to and invests in small
businesses that are generally  focused in the areas of e-commerce,  Internet and
telecommunications;  and  Allegiance,  which  lends  funds to  funeral  home and
cemetery owners.  During 1998, the Company formed PWS, a broker-dealer  licensed
by the NASD.  On May 8, 2000,  the Company  formed  SocietyPool,  a company that
plans to offer a new type of financial product. In addition,  in connection with
the principal  business activity of the Company through February 1997 (which was
to provide  viatical  settlements  for  terminally  ill  persons),  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.  See the Form 10-K for further  information
regarding the Company's former principal business activity.

         Information  regarding  the  revenues,  contributed  income  (loss) and
identifiable  assets for each of the Company's business segments is contained in
Note 10 of the Condensed Notes to Consolidated Financial Statements.

         The Company continually  evaluates new business  opportunities.  In May
2000, the Company provided $1.8 million to fund exploratory research for a newly
formed entity,  SocietyPool,  which is 51% owned by Point West Capital and plans
to offer a new type of financial product.  The Company has the option to provide
up to an additional $4.4 million of funding.  The Company's ownership percentage
could be reduced if it chooses  not to  provide  additional  funding.  A dispute
involving  Point West  Capital and two of the other  members of  SocietyPool  is
currently the subject of an arbitration  proceeding.  That proceeding may affect
the Company's  decisions  concerning the additional  funding of SocietyPool and,
thus,  its ownership  percentage,  and may also affect  SocietyPool's  financial
condition. Ventures, 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
-------------------------------------

         Total  (Loss)  Income.  Total  loss was $2.2  million  during the three
months ended June 30, 2000  compared to total income of $5.1 million  during the
three months  ended June 30, 1999.  The total loss during the three months ended
June 30, 2000 was primarily due to a $3.3 million net loss on securities

                                       14

<PAGE>


related to Ventures.  See "Results of Operations by Segment -- Ventures -- Three
and Six Months  Ended June 30, 2000  Compared to the Three and Six Months  Ended
June 30, 1999 -- Net (Loss) Gain on Securities."  Offsetting the net loss during
the three months ended June 30, 2000 was a $376,000  increase in interest income
primarily  related to an  increase  in loans held by  Allegiance.  Total  income
decreased  93.3% to $452,000 during the six months ended June 30, 2000 from $6.7
million  during the six  months  ended June 30,  1999,  primarily  due to a $2.8
million net loss on  securities  related to  Ventures.  Offsetting  the decrease
during  the six  months  ended  June 30,  2000 was a $2.1  million  increase  in
interest income primarily related to an increase in loans held by Allegiance and
Ventures.

         Total Expenses.  Total expenses  decreased 14.7% to $2.9 million during
the three months  ended June 30, 2000 from $3.4 million  during the three months
ended June 30, 1999.  This  decrease was due to $945,000 of  litigation  expense
recorded  in the  second  quarter  of 1999  reflecting  the  amount  of the then
proposed  settlement  arrangement of the pending  federal class action and state
alleged class action  lawsuits not covered by insurance.  The court approved the
settlement of these lawsuits in February 2000. In addition,  the decrease in the
second  quarter  of 2000 was due to a  $871,000  decrease  in  interest  expense
related to DPFC.  See "Results of Operations by Segment -- Viatical  Settlements
-- Certain Accounting Implications for DPFC." Offsetting the decrease during the
three  months  ended  June 30,  2000 was (i) a  $650,000  reserve  related  to a
delinquent  loan  held  by  Allegiance,   (ii)  $479,000  in  royalty  fees  and
organizational and research expenses related to SocietyPool and (iii) a $373,000
increase in interest expense related to borrowings by Allegiance. Total expenses
increased  5.6% to $5.7  million  during the six months ended June 30, 2000 from
$5.4 million during the six months ended June 30, 1999. This increase was due to
(i) a $851,000 increase in interest expense related to borrowings by Allegiance,
(ii) a $650,000 reserve related to a delinquent loan held by Allegiance, (iii) a
$507,000 increase in compensation and benefits due primarily to salary increases
and secondarily to additional employees and (iv) $479,000 in expenses related to
SocietyPool described above. Offsetting the increase during the six months ended
June 30, 2000 was a $1.2 million  decrease in interest  expense  related to DPFC
and the $945,000 estimated litigation expense described above.

         Extraordinary   Gain.  In  accordance   with   Statement  of  Financial
Accounting  Standards No. 15  "Accounting  by Debtors and Creditors for Troubled
Debt Restructurings," the Company recognized an extraordinary gain on a troubled
debt  restructuring  in the amount of $1.2  million,  net of income taxes in the
amount of $822,000,  during the three months ended March 31, 2000 in  connection
with the DPFC  Agreement  described in Notes 4 and 6 of the  Condensed  Notes to
Consolidated  Financial  Statements.  As a  result  of the DPFC  Agreement,  the
Company reduced the outstanding principal amount of the Securitized Notes on the
consolidated balance sheet as of March 31, 2000 by $2.1 million to $36.4 million
(which is equal to the face value of the life insurance  policies and restricted
cash held by DPFC as of that date) and recognized  income in a like amount.  See
"Results of Operations by Segment -- Viatical  Settlements -- Certain Accounting
Implications for DPFC."

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

     Ventures
     --------

         Accounting Considerations

         Beginning in 1999,  because of the  volatility of Internet and Internet
related stocks,  Point West Capital shorted stocks of certain competitors of one
of the investments held by Ventures.  The effect of those hedging  activities is
reflected in the Company's consolidated statement of operations during the three
months ended March 31,  1999.  During  2000,  no such hedges were in place.  The
Company

                                       15


<PAGE>

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."

         Three and Six Months Ended June 30, 2000 Compared to the Three and Six
         Months Ended June 30, 1999

         Interest Income.  Interest income decreased to $69,000 during the three
months ended June 30, 2000 from $132,000  during the three months ended June 30,
1999. This decrease was primarily due to $93,000 of interest  income  recognized
during the three  months  ended June 30,  1999 as a result of a warrant  (valued
using the Black-Scholes option-pricing model) received in connection with one of
Ventures'  loans.  Interest  income for the three  months  ended June 30,  2000,
reflected  higher cash balances held by Ventures.  Interest income  increased to
$1.4 million during the six months ended June 30, 2000 from $320,000  during the
six months ended June 30, 1999.  This increase was primarily due to $1.1 million
of interest income  recognized during the three months ended March 31, 2000 as a
result  of a  warrant  (valued  using the  Black-Scholes  option-pricing  model)
received in connection with one of Ventures' debt securities.

         Net (Loss) Gain on Securities.  Net loss on securities was $3.3 million
during the three months ended June 30, 2000 compared to a net gain on securities
of $4.3  million  during  the three  months  ended  June 30,  1999.  Net loss on
securities  was $2.8 million  during the six months ended June 30, 2000 compared
to a net gain on securities of $4.9 million during the six months ended June 30,
1999. The net loss on securities  during the three and six months ended June 30,
2000 was primarily the result of the  write-down  of impaired  investments.  The
write-downs  were a result of the market downturn  related to Internet and other
technology stocks. Ventures determined that an aggregate $3.9 million investment
in the securities of four different companies was impaired at June 30, 2000, and
therefore  wrote-down the cost of such investments.  Ventures  determined that a
$750,000 investment in non-marketable  securities of one company was impaired at
March 31, 2000, and therefore  wrote-off the entire  $750,000  carrying value of
such  investment  during the three months ended March 31, 2000.  Such write-offs
were  substantially  larger than those in 1999.  During the three  months  ended
March 31, 1999,  no  investments  were  written-off  and during the three months
ended June 30, 1999, only $535,000 of investments were written-off.

         Interest  Expense.  Interest  expense  increased to $82,000  during the
three months ended June 30, 2000 from $52,000 during the three months ended June
30, 1999 and to $134,000 during the six months ended June 30, 2000 from $103,000
during the six months  ended June 30, 1999 due to an increase in funds  borrowed
from the SBA in May 2000.  During the three and six months  ended June 30, 2000,
the  weighted-average  interest rate on the funds borrowed from the SBA was 7.4%
and 7.2%,  respectively,  and the weighted-average  borrowings were $4.4 million
and $3.7 million,  respectively,  compared to the weighted-average interest rate
of 6.9% and weighted-average borrowings of $3.0 million during the three and six
months ended June 30, 1999.

     Allegiance
     ----------

         Accounting Considerations

         In connection with the Allegiance Financing,  Point West Capital agreed
to provide additional cash to Allegiance Trust I in the event that monthly LIBOR
interest  rates exceed  6.16%.  To date Point West Capital has been  required to
make payments in an immaterial amount. The amount of additional cash, if any, to
be provided  is a function  of several  variables  including  the monthly  LIBOR
interest rate and the  outstanding  balance of one of the  Allegiance  Financing
revolving certificates.

                                       16

<PAGE>




         For information  regarding  accounting for the loans held by Allegiance
and the Allegiance Financing and loan levels, see Notes 3 and 5 of the Condensed
Notes to Consolidated Financial Statements.

         Three and Six Months Ended June 30, 2000 Compared to the Three and Six
         Months Ended June 30, 1999

         Interest Income. Interest income increased to $856,000 during the three
months ended June 30, 2000 from $371,000  during the three months ended June 30,
1999 and $1.7 million  during the six months  ended June 30, 2000 from  $592,000
during the six months ended June 30, 1999,  due  primarily to increased  lending
activity by Allegiance. During the three and six months ended June 30, 2000, the
weighted-average   interest   rate   earned  on  the  loans  was  9.2%  and  the
weighted-average  principal  amounts  outstanding  were $35.9  million and $34.9
million,  respectively,  compared to the weighted-average  interest rate of 8.6%
and 8.9%, respectively,  and the weighted-average  principal amounts outstanding
of $16.5  million  and $12.9  million,  respectively,  during  the three and six
months ended June 30, 1999.  The  weighted-average  interest  rate  calculations
include one loan in the principal  amount of $2.1 million  which was  delinquent
and on non-accrual status.

         Interest  Expense.  Interest  expense  increased to $614,000 during the
three  months  ended June 30, 2000 from  $241,000  during the three months ended
June 30, 1999 and $1.2  million  during the six months  ended June 30, 2000 from
$349,000  during the six months  ended  June 30,  1999 as a result of  increased
borrowings under the Allegiance Financing. During the three and six months ended
June 30, 2000, the weighted-average interest rate under the Allegiance Financing
was 8.4% and the  weighted-average  borrowings  were  $29.1  million  and  $28.8
million,  respectively,  compared to the weighted-average  interest rate of 7.5%
and 7.7%,  respectively,  and  weighted-average  borrowings of $12.8 million and
$9.1 million, respectively, during the three and six months ended June 30, 1999.

         Compensation and Benefits.  Compensation and benefits increased $18,000
to $79,000  during the three months ended June 30, 2000 from $61,000  during the
three months  ended June 30, 1999 and $87,000 to $202,000  during the six months
ended June 30, 2000 from  $115,000  during the six months  ended June 30,  1999.
This increase  resulted  from the hiring of  additional  employees in the second
half of 1999 to support Allegiance's lending activities.

         Other   General  and   Administrative   Expenses.   Other  general  and
administrative  expenses  increased $758,000 to $843,000 during the three months
ended June 30, 2000 from $85,000 during the three months ended June 30, 1999 and
$1.0  million to $1.2  million  during the six months  ended June 30,  2000 from
$185,000  during  the six months  ended June 30,  1999.  This  increase  was due
primarily to a $650,000 reserve related to a delinquent loan held by Allegiance.
Based on recent bids received for businesses and other  collateral  securing the
defaulted  loan,  management  believes  that  Allegiance  will  incur  a loss in
connection with such loan.  Management  believes such loss will be approximately
$650,000 and, therefore,  has recorded a reserve in connection therewith in such
amount.  In addition,  the  increase  was due to increases in legal  expense and
other  professional  fees related to the delinquent loan and fees related to due
diligence for a potential loan portfolio acquisition.

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

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

                                       17


<PAGE>


         Certain Accounting Implications for DPFC

         From June 30, 1996 through the  effective  date of the DPFC  Agreement,
the Company  recognized  income (earned  discounts) 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).  Income recognized was 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.

         In March 2000,  the Company and the  Noteholders  entered into the DPFC
Agreement  pursuant to which the Noteholders will provide funds through June 30,
2002,  to pay  servicing  fees,  premiums and certain other costs of DPFC in the
event policy collections are insufficient.  Under the DPFC Agreement, Point West
Capital will  continue to act as servicer for a fee of $18,000 per month for the
period  March 2000  through  June 2002.  The DPFC  Agreement  also  provides the
Noteholders  with an  option  to  purchase  from  Point  West  Capital  the DPFC
outstanding  stock for a nominal amount on June 30, 2002. If the  Noteholders do
not exercise such option, Point West Capital may liquidate DPFC. "See Results of
Operations for the Company -- Extraordinary Gain."

         As a result of the DPFC  Agreement,  the Company will not recognize any
future  gain or loss  related to DPFC until the  Noteholders  purchase  the DPFC
stock or DPFC is liquidated pursuant to the DPFC Agreement.  The Company expects
to recognize a pre-tax gain in an amount approximately equal to the $4.6 million
accumulated  deficit  of DPFC upon the  occurrence  of  either of these  events.
Additionally,  when  the DPFC  stock is  purchased  or DPFC is  liquidated,  the
Company  will  have  income  tax  liability  associated  with the gain from debt
forgiveness. The Company may be able to use the carryforward losses from DPFC to
offset such  liability,  unless the  carryforward  losses  have been  previously
utilized.  The Company will recognize the $18,000 monthly  servicing fee paid to
Point West Capital as other income in the  consolidated  statement of operations
from March 2000 through June 2002.

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

         Three and Six Months Ended June 30, 2000 Compared to the Three and Six
         Months Ended June 30, 1999

         Interest Income.  DPFC did not recognize any interest income during the
three months ended June 30, 2000 and will not recognize  any interest  income in
any  future  period.  See  "Certain  Accounting  Implications  for  DPFC."  DPFC
recognized  interest  income in the amount of $18,000 for the three months ended
June 30, 1999.  Interest  income  declined to $7,000 during the six months ended
June 30,  2000 from  $46,000  during the six months  ended June 30,  1999,  as a
result of the DPFC Agreement.

         Earned Discounts on Matured Policies. DPFC did not recognize any earned
discounts  on matured  policies  during 2000 and will not  recognize  any earned
discounts in any future period. See "Certain Accounting  Implications for DPFC."
Earned  discounts on matured  polices was $50,000 and $111,000  during the three
and six months ended June 30, 1999, respectively.  During the three months ended
June 30, 2000, 11 policies matured with a face value of $633,000, compared to 12
policies  with a face value of $622,000  during the three  months ended June 30,
1999. During the six months ended June 30, 2000, 20 policies matured with a face
value of  $837,000,  compared to 24 policies  with a face value of $1.5  million
during the six months ended June 30, 1999. As of June 30, 2000, the Company held
450 policies with an aggregate  carrying  value of $31.3  million  (comprised of
"matured policies receivable," "purchased life insurance policies" and a portion
of "other  assets") and an  aggregate  face value of $36.3

                                       18

<PAGE>


million.  All of the "matured policies receivable" and "purchased life insurance
policies" are pledged as security for the Securitized Notes.

         Interest  Expense.  DPFC did not recognize any interest expense for the
three months ended June 30, 2000. As a result of the DPFC  Agreement,  DPFC will
not  recognize  any interest  expense  related to the  Securitized  Notes in any
future  period  (approximately  $900,000 per quarter).  See "Certain  Accounting
Implications  for  DPFC."  DPFC  recognized  interest  expense  in the amount of
$871,000 for the three months ended June 30, 1999.  Interest expense declined to
$589,000  during the six months ended June 30, 2000 from $1.8 million during the
six months ended June 30, 1999.

         Other General and Administrative  Expenses.  DPFC did not recognize any
general and administrative expenses for the three months ended June 30, 2000 and
will not recognize any general and administrative expenses in any future period.
See "Certain  Accounting  Implications  for DPFC." DPFC recognized other general
and  administrative  expense in the amount of $67,000 for the three months ended
June 30, 1999. Other general and  administrative  expenses  declined to $133,000
during the six months  ended June 30, 2000 from  $219,000  during the six months
ended June 30, 1999 as a result of the DPFC Agreement.

     Other
     -----

         The Other segment  includes  operating  results for Point West Capital,
PWS and  SocietyPool.  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 during the three
and six months ended June 30, 2000 and 1999.

         Three and Six Months Ended June 30, 2000 Compared to the Three and Six
         Months Ended June 30, 1999

         Interest Income.  Interest income decreased to $31,000 during the three
months ended June 30, 2000 from  $58,000  during the three months ended June 30,
1999 primarily due to a decrease in cash balances.  Interest income was $113,000
for both the six months ended June 30, 2000 and June 30, 1999.

         Net Gain on Securities.  Point West Capital  recognized a $317,000 gain
during the six months ended June 30, 1999 in connection with hedging  activities
of  Internet-related  stocks.  See  "Item  3  --  Quantitative  and  Qualitative
Disclosures About Market Risk." There were no hedging  activities during the six
months ended June 30, 2000.

         Other  Income.  Other  income  declined  99.8% to $270 during the three
months ended June 30, 2000 from $146,000  during the three months ended June 30,
1999 and  94.1% to  $13,000  during  the six  months  ended  June 30,  2000 from
$219,000  during the six months  ended June 30, 1999 as a result of a decline in
fees received by PWS for investment  banking services.  The amount and timing of
these  services in future  periods  cannot be  predicted  because of the limited
operations of PWS.

         Compensation and Benefits. Compensation and benefits increased 57.4% to
$592,000  during the three months ended June 30, 2000 from  $376,000  during the
three  months  ended June 30,  1999 due  primarily  to the hiring of  additional
employees in 2000 to support Point West Capital and SocietyPool's activities and
secondarily to an increase in salaries for existing employees.  Compensation and
benefits  increased  64.7% to $1.1 million  during the six months ended June 30,
2000 from $668,000  during the six months ended June 30, 1999. This increase was
due  primarily  to an increase in salaries  for  existing  employees in 2000 and
secondarily to the hiring of additional  employees in 2000 to support Point West
Capital and SocietyPool's activities.

                                       19

<PAGE>


         Other   General  and   Administrative   Expenses.   Other  general  and
administrative  expenses  decreased  55.7% to $665,000  during the three  months
ended June 30, 2000 from $1.5  million  during the three  months  ended June 30,
1999. This decrease was primarily due to $945,000 of litigation expense recorded
in the  second  quarter  of 1999  reflecting  the  amount  of the then  proposed
settlement  arrangement  of the pending  federal  class action and state alleged
class  action  lawsuits  not  covered  by  insurance.  The  court  approved  the
settlement of these  lawsuits in February  2000. In addition,  other general and
administrative  expenses  decreased  due to a  $133,000  decrease  in legal fees
related to the litigation  and a $140,000  write-off of a loan during the second
quarter of 1999.  Offsetting  such  decrease  was  $479,000 in royalty  fees and
organizational  and research expenses related to SocietyPool.  Other general and
administrative  expenses  decreased  44.4% to $1.0 million during the six months
ended June 30, 2000 from $1.8 million  during the six months ended June 30, 1999
primarily due to the $945,000  litigation  expense described above. In addition,
other general and  administrative  expenses decreased due to a $269,000 decrease
in legal fees  related to the  litigation  and a  $140,000  write-off  of a loan
during the second  quarter of 1999.  Offsetting  such  decrease  was $479,000 in
expenses  related to  SocietyPool.  The federal  class action and state  alleged
class  action  lawsuits  were  settled in the first  quarter of 2000,  and, as a
result,  the Company  expects legal  expenses to decline  substantially  in 2000
relative to 1999.

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

     Point West Capital, PWS and SocietyPool

         At present,  neither Point West  Capital,  PWS nor  SocietyPool  has an
external  funding  source  from which to fund its  working  capital  and general
corporate  needs.  During  the six  months  ended  June 30,  2000,  the  Company
supported the operations of Point West Capital,  PWS and  SocietyPool  primarily
from  existing cash  balances.  In prior  periods,  the Company  generated  cash
primarily  from sales  proceeds  of  investment  securities  and life  insurance
policies.  The Company used the cash to grow its  businesses.  At June 30, 2000,
Point West Capital,  PWS and  SocietyPool's  cash and cash equivalents were $2.5
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
Ventures,  Allegiance, PWS and SocietyPool, and any other business opportunities
the Company pursues.  See  "Considerations  Under the Investment  Company Act of
1940." Assuming the Company determines additional funds are needed, there can be
no  assurance  that it will be  successful  in obtaining  external  financing on
satisfactory  terms  or at  all.  The  Company  at  present  anticipates  having
sufficient  liquidity to meet the working capital and operational needs of Point
West Capital,  PWS and SocietyPool through December 31, 2000, using current cash
and  cash  equivalents,   proceeds  from  sales  of  investment  securities  and
distributions from Ventures.

     Ventures

         Ventures'   activities   have   generally  been  supported  by  capital
contributions from Point West Capital, by the sale of investments, by loans from
the  SBA and the  repayment  by  obligors  of  loans.  Point  West  Capital  has
contributed  $5.8 million to Ventures  since  inception.  During 1999,  Ventures
generated $21.3 million of cash proceeds (net of  commissions)  from the sale of
securities  and  repayment of loans.  During the six months ended June 30, 2000,
Ventures  generated $5.3 million of cash proceeds (net of commissions)  from the
sale of securities and repayment of loans. At June 30, 2000,  Ventures' cash and
cash equivalents were $6.3 million.

         Point West Ventures has an SBA debenture license and, therefore, may be
permitted,  based on capital  contributions  by Point West  Capital and realized
gains on the sale of  securities,  to borrow up to $16.6  million  from the SBA,
subject to complying with SBA requirements.  Any borrowings bear interest at the
rate for ten year debentures issued by Small Business  Investment  Companies and
funded  through public  certificates  bearing the SBA's  guarantee.  Interest is
payable semi-annually.  In addition, there is a

                                       20

<PAGE>


leverage  and  underwriting  fee  of  3.5%  and a fee  of 1%  per  annum  on the
outstanding  amount of debt.  In July 1998,  Point West  Ventures  borrowed $3.0
million  from the SBA and on May 24,  2000,  Point  West  Ventures  borrowed  an
additional $3.5 million.

         Ventures may not have sufficient liquidity, at least in the short term,
to grow its business. In addition, because of laws and regulations regarding the
Investment  Company Act of 1940 (the "1940 Act"), the Company may be required to
restrict   Ventures'  growth  or  dispose  of  investments  in  order  to  avoid
registration under the 1940 Act at some time in the future. See  "Considerations
Under the Investment Company Act of 1940."

     Allegiance

         As of June 30, 2000,  Point West  Capital had invested  $7.7 million in
Allegiance  Capital.   In  August  1998,   Allegiance  arranged  the  Allegiance
Financing.  The Company  expects  that the  Allegiance  Financing  will  provide
sufficient  funds to support  Allegiance's  current level of lending  activities
through  December 15, 2000.  See Note 5 of the Condensed  Notes to  Consolidated
Financial  Statements.  Allegiance is attempting to acquire a portfolio of loans
with an outstanding  principal amount in excess of $125 million. The acquisition
is dependent on Allegiance obtaining an external financing source.

     DPFC

         DPFC operations are in run-off.  Point West Capital,  as servicer under
the Securitized Notes,  performs  monitoring and collection  activities for DPFC
and incurs  administrative  costs associated with these  activities.  Point West
Capital is reimbursed for these costs subject to priority  provisions  contained
in  the  Indenture.   Principal,  interest  payments  and  other  costs  on  the
Securitized  Notes are payable solely from  collections  on policies  pledged to
secure the payment  thereof and do not require Point West Capital to expend cash
or obtain financing to satisfy such obligations.

Considerations Under 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). Companies that are subject to the 1940 Act must register with
the  SEC as  investment  companies  and  upon  registration  become  subject  to
extensive regulation.  The Company believes, based on its current activities and
the  nature  of its  assets,  that it should  not 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.

         There are also various  percentage of assets and income tests and other
subjective  tests  under the 1940 Act and  related  rules that are  relevant  in
considering whether a company is deemed to be an investment company.


                                       21


<PAGE>



         Although  the  Company  believes  that it should not be deemed to be an
investment  company,  it is  possible  that it could be  deemed  one in the near
future as a result of the following:

         *        Allegiance has not  grown its  commercial lending  business a
                  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 Ventures, 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 and the Company has realized
substantial  gains in  connection  with the sales of some of these  investments.
Since  1999,  Ventures  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,  which  has  included  further  investments  by
Ventures.

         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 Ventures' business.  Although the Company intends to
              continue  Ventures'  investment  activities,  the Company does not
              intend to contribute more capital to Ventures.

Growth of New Operating Businesses

         The Company continues to seek 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 continue to grow the
commercial lending business of Allegiance.  However, the growth of Allegiance is
dependent on the market's  acceptance  of the product

                                       22

<PAGE>


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.

Disposing of Investment Securities/Limiting Growth of Ventures

         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.  Given the volatile nature of the market,  and, in some cases, lack
of a  market,  for some of these  investments,  sales  could  occur at  severely
depressed  prices. In addition,  the dispositions may result in  disadvantageous
tax consequences. The Company intends to use any proceeds of any additional sale
to support its working  capital  (including  further  investments  by Ventures).
Pending final use,  proceeds of any  additional  sale will likely be invested in
U.S. Government securities.

         The Company  also  currently  intends to limit the growth of  Ventures'
business.   Although  Ventures  intends  to  continue  investing  in  investment
securities,  the Company does not intend to contribute more capital to Ventures.
Limiting  Ventures' growth may materially  adversely affect the Company's future
financial condition and 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 (1) the amount of any loss and potential  foreclosure
and  liquidation of one of the loans made by Allegiance,  (2) sufficiency of the
Company's   liquidity  and  capital   resources  (see   "Liquidity  and  Capital
Resources"),  (3) 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"),  (4)  amounts  of  additional  cash  to be
contributed  to  Allegiance  Trust I, (5) the ability of Point West  Ventures to
borrow  funds  from the SBA and (6)  SocietyPool's  plans to offer a new type of
financial product.  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  (1)
Allegiance's ability to foreclose on the collateral at a price at least equal to
the carrying value,  giving effect to the reserve,  of such loan and the outcome
of the pending counterclaim filed in connection with the foreclosure action, (2)
the results of the Company's  consideration  of strategic  options and any costs
associated with a chosen option,  (3) availability and cost of capital,  (4) the
factors  described  under  "Considerations  Under the Investment  Company Act of
1940," (5) increases in the LIBOR rate and future amounts  outstanding under the
Class A-R revolving certificates,  (6) Point West Venture's ability to originate
a sufficient  amount of  investments  that qualify for  financing  under the SBA
regulations  and (7) the market's  acceptance  of  SocietyPool's  new  financial
product and the feasibility of it.

                                       23

<PAGE>


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 the Company's  investments in the
stock of public and  private  companies,  fixed rate loans and debt  investments
made by  Allegiance  and  Ventures  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.

         During  1999 the  Company  hedged  a  position  it held in an  Internet
service  provider and realized a $317,000 gain in  connection  with such hedging
activity.  At June 30,  2000 no hedges were in place.  However,  the Company may
hedge certain positions in the future.

         The table below  represents  principal cash flows and  weighted-average
interest rates for the Allegiance loans outstanding at June 30, 2000:

<TABLE>
<CAPTION>


                                 2000          2001           2002           2003           2004         Thereafter
                                 ----          ----           ----           ----           ----         ----------

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


Fixed rate loans (1)(2)      $  399,420    $  915,093    $1,008,589      $1,111,669     $1,225,318     $29,304,889
Average interest
     rates (1)                   9.8%          9.8%           9.8%           9.8%           9.8%            9.8%

<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  in  connection  with  the  extension  of  the
     Allegiance  Financing  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 such term
     certificates.

</FN>
</TABLE>


         In connection with the Allegiance Financing,  Point West Capital agreed
to provide additional cash to Allegiance Trust I in the event that monthly LIBOR
interest  rates exceed  6.16%.  To date Point West Capital has been  required to
make immaterial payments.  The amount of additional cash, if any, to be provided
is a function of several variables including the monthly LIBOR interest rate and
the  outstanding   balance  of  one  of  the  Allegiance   Financing   revolving
certificates.


                                       24

<PAGE>


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

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

         In  May  2000,  Point  West  Capital  and  three   individuals   formed
         SocietyPool,  an  entity  that  plans to offer a new type of  financial
         product. Point West Capital is a member and manager of SocietyPool with
         51%  voting and  economic  interests.  One of the other  members is the
         former chief executive officer (the "Former CEO") of SocietyPool with a
         15.67% voting interest and a 15.44% economic  interest.  Another member
         is a former special  consultant  (the "Former  Special  Consultant") of
         SocietyPool  and owns  33.33%  voting  interest  and a 28.66%  economic
         interest.  The third other member has a 4.90% economic  interest and no
         voting interest.  In May 2000, Point West Capital provided $1.8 million
         to fund exploratory research of SocietyPool's  proposed new product and
         business plan. On July 20, 2000, the Former Special  Consultant filed a
         claim with the American Arbitration  Association seeking arbitration of
         a dispute with Point West  Capital  concerning  SocietyPool.  The claim
         sought   emergency  relief  on  issues  relating  to  the  control  and
         management of SocietyPool and its assets.  The emergency  relief sought
         by the Former Special Consultant has been denied. On July 27, 2000, the
         Former CEO resigned as such claiming that certain actions of Point West
         Capital which are at issue in the arbitration constituted  constructive
         termination  of  his  employment.   On  August  11,  2000,  SocietyPool
         terminated for cause the Former Special Consultant. On August 10, 2000,
         Point  West  Capital   filed  an  answer,   affirmative   defenses  and
         counterclaim  against the Former  Special  Consultant and a third-party
         complaint against the Former CEO. The matter is continuing  through the
         arbitration process.

         Under  SocietyPool's  Operating  Agreement,  Point West Capital has the
         option  to  provide  up to an  additional  $4.4  million  of  funds  to
         SocietyPool.  Point West Capital's ownership  percentage in SocietyPool
         could depend on the amount of additional funding it chooses to provide.

         The outcome of this matter cannot be determined at this time;  however,
         the Company  does not believe  that the Former  Special  Consultant  is
         entitled to the requested  relief.  Point West Capital  cannot  predict
         whether or to what extent this matter will affect Point West  Capital's
         decision  to invest  additional  funds in  SocietyPool,  the  timing or
         implementation  of  SocietyPool's  business plan,  Point West Capital's
         role or ownership percentage in SocietyPool or SocietyPool's  financial
         condition.

         See the Form 10-K for further information regarding legal proceedings.

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

         On  May  16,  2000,   the  Company  held  an  Annual   Meeting  of  its
         stockholders.  The election of two directors, the proposal to amend the
         Company's  1995  Stock  Option  Plan  and the  proposal  to  amend  the
         Company's Stock Option Plan for Non-Employee  Directors as set forth in
         the  proxy  statement  were  presented.  Alan  B.  Perper  and  Paul A.
         Volberding  were  re-elected  to  the  Board  of  Directors  for a term
         expiring in 2003.
         The voting tallies were:

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

                Alan B. Perper             3,105,229                 100,730

              Paul A. Volberding           3,105,029                 100,930

                                       25

<PAGE>


         The other  directors  whose term of office  continued after the meeting
         are: John Ward Rotter (term expiring in 2001),  Bradley N. Rotter (term
         expiring in 2002) and Stephen T. Bow (term expiring in 2002).

         The  proposal to amend the  Company's  1995 Stock  Option Plan was also
approved. The voting tallies were:

<TABLE>
<CAPTION>


                                       Votes For      Votes Against      Votes Abstain       Broker Non-Votes
                                       ---------      -------------      -------------       ----------------

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

         Proposal to amend the
         Company's 1995
         Stock Option Plan             1,351,466         152,842            12,485              1,689,166

</TABLE>


         The proposal to amend the Company's Stock Option Plan for  Non-Employee
         Directors was also approved. The voting tallies were:
<TABLE>
<CAPTION>


                                       Votes For      Votes Against      Votes Abstain       Broker Non-Votes
                                       ---------      -------------      -------------       ----------------

          <S>                             <C>              <C>               <C>                 <C>
         Proposal to amend the
         Company's
         Stock Option Plan for
         Non-Employee
         Directors                     1,394,060          108,083             14,650              1,689,166

</TABLE>



Item 5. Other Information
-------------------------

         On May 16, 2000, the Board of Directors amended Sections 1.9 and 2.4 of
         Point West Capital's  By-Laws ("Order of Business" and  "Nominations of
         Directors;  Election")  in  response  to  changes  in Rule 14a-4 of the
         Securities  and Exchange  Commission  promulgated  under the Securities
         Exchange Act of 1934. The amended By-Laws provide that the Secretary of
         the Company must receive written  notification  describing any business
         (including  nominations  for  director)  proposed to be  presented by a
         stockholder  at an annual  meeting at least 60 days  before the date on
         which the  Company  mailed  its proxy  materials  for the prior  year's
         annual meeting.

         The  amendments to Sections 1.9 and 2.4 became  effective upon adoption
         by the Board of Directors and will apply to Point West  Capital's  2001
         annual meeting of stockholders.  Notice of any business  proposed to be
         presented by a stockholder  at Point West Capital's 2001 annual meeting
         of stockholders must be received by the Secretary of Point West Capital
         no later than  February 13, 2001.  If  notification  is not received by
         that  date,  the  notice  will be  considered  untimely  and Point West
         Capital's proxy for the 2001 annual meeting of stockholders  will grant
         discretionary  authority to the persons named therein to exercise their
         voting  discretion with respect to such business.  Sections 1.9 and 2.4
         contain additional  requirements that apply to stockholders who wish to
         bring  business  before  an  annual  meeting.  These  requirements  are
         included in the composite copy of Point West Capital's  amended By-Laws
         filed as Exhibit No. 3.1 to this report.


                                       26

<PAGE>

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

         (a)      Exhibits:
                  Number         Description


                  3.1         Amended By-laws of the Company.

                  10.1        Amendment No.1 to Point West Capital Corporation's
                              Amended and  Restated  1995 Stock Option Plan.

                  10.2        Amendment No.1 to Point West Capital Corporation's
                              Stock  Option  Plan  for Non-Employee Directors.

                  10.3**      Third  Amended and  Restated  Supplement  to Trust
                              Agreement for Revolving Series 1998-1, dated as of
                              April 14, 2000, among  Allegiance  Funding I, LLC,
                              Manufacturers  and Traders Trust Company and Point
                              West Capital Corporation.

                  10.4**      Amended and Restated Supplement to Trust Agreement
                              for Term  Series  1999-1,  dated  as of April  14,
                              2000,   among    Allegiance    Funding   I,   LLC,
                              Manufacturers  and Traders Trust Company and Point
                              West Capital Corporation.

                  10.5        First  Amendment to Amended and  Restated  Limited
                              Liability Company Agreement of Allegiance Capital,
                              LLC,  dated as of May 22,  2000,  among Point West
                              Capital  Corporation,  Michael  W.  McDermitt  and
                              Daniel M. Isard.

                  10.6        Limited    Liability    Company    Agreement    of
                              SocietyPool.com,  LLC,  dated as of May 10,  2000,
                              among Point West  Capital  Corporation,  Robert M.
                              Janes, Paul G. Kahn and Michael D. London.

                  10.7        First  Amendment  to  Limited   Liability  Company
                              Agreement  of  SocietyPool.com,  LLC,  dated as of
                              June  26,   2000,   among   Point   West   Capital
                              Corporation,  Robert  M.  Janes,  Paul G. Kahn and
                              Michael D. London.

                  27.1        Financial Data Schedule.

         **       Certain   information  omitted   pursuant  to  a  request  for
                  confidential treatment filed with the SEC.

(b) Reports on Form 8-K filed during the quarter ended June 30, 2000:


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

               May 12, 2000           5                  The   Company   issued
                                                         a  press   release
                                                         regarding  its  results
                                                         of  operations  for the
                                                         first quarter of 2000.

                                       27

<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:  August 11, 2000                       /s/ ALAN B. PERPER
                                              --------------------------------
                                              ALAN B. PERPER
                                              President
                                              (Duly Authorized Officer)




Dated:  August 11, 2000                       /s/ JOHN WARD ROTTER
                                              --------------------------------
                                              JOHN WARD ROTTER
                                              Executive Vice President and
                                              Chief Financial Officer
                                              (Principal Financial and
                                              Accounting Officer)



                                       28

<PAGE>

                                  EXHIBIT INDEX
                                  =============

====================== ================================ =======================
Exhibit Number          Document Description             Sequential
                                                         Page Number
==============          =====================            ============

====================== ================================ =======================
    3.1                 Amended By-laws of the Company.
                                                                32
====================== ================================ =======================
   10.1                 Amendment No.1 to Point West
                        Capital Corporation's Amended
                        and Restated 1995 Stock Option
                        Plan.                                   42
====================== ================================ =======================
    10.2                Amendment No.1 to Point West
                        Capital Corporation's Stock
                        Option Plan for Non-Employee
                        Directors.                              43
====================== ================================ =======================
    10.3                Third Amended and Restated
                        Supplement to Trust Agreement for
                        Term Series 1998-1, dated as of
                        April 14, 2000, among Allegiance
                        Funding 1, LLC, Manufacturers and
                        Traders Trust Company and Point
                        West Capital Corporation.                45
====================== ================================ =======================
    10.4                Amended and Restated Supplement
                        to Trust Agreement for Term
                        Series 1999-1, dated as of April
                        14, 2000, among Allegiance
                        Funding 1, LLC, Manufacturers
                        and Traders Trust Company and
                        Point West Capital Corporation.         95
====================== ================================ =======================
    10.5                First Amendment to Amended and
                        Restated Limited Liability
                        Company Agreement of Allegiance
                        Capital, LLC, dated as of May
                        22, 2000, among Point West
                        Capital Corporation, Michael W.
                        McDermitt and Daniel M. Isard.         162
====================== ================================ =======================
    10.6                Limited Liability Company
                        Agreement of SocietyPool.com,
                        LLC, dated May 10, 2000, among
                        Point West Capital Corporation,
                        Robert M. Janes, Paul G. Kahn
                        and Michael D. London.                 172
====================== ================================ =======================
    10.7                First Amendment to Limited
                        Liability Company Agreement of
                        SocietyPool.com, LLC, dated as
                        of June, 26, 2000, among Point
                        West Capital Corporation, Robert
                        M. Janes, Paul G. Kahn and
                        Michael D. London.                     208
====================== ================================ =======================
    27.1                Financial Data Schedule.               211
====================== ================================ =======================
====================== ================================ =======================