SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

                  For the quarterly period ended June 30, 1998
                                                 --------------
                                       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 22, 1998, there were 3,253,324 shares of the registrant's  Common Stock
outstanding.


<PAGE>



                                       



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

                                      INDEX
                                      -----
                                                                        Page #
                                                                        ------
Part I

Item 1.     Consolidated Financial Statements:

            Consolidated Balance Sheets
                 June 30, 1998 and December 31, 1997                     1

            Consolidated Statements of Operations
                 and Comprehensive Income for the                        
                 Three and Six Months Ended June 30, 1998 and 1997       2

            Consolidated Statements of Cash Flows for the
                 Six Months Ended June 30, 1998 and 1997                 3

            Condensed Notes to Consolidated Financial Statements        4-9

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

Item 3.     Quantitative and Qualitative Disclosures
                 About Market Risk                                      17


Part II

Item 1.     Legal Proceedings                                           18

Item 4.     Submission of Matters to a Vote of Securitiy Holders        18

Item 6.     Exhibits and Reports on Form 8-K                            19


Signatures                                                              20
----------

                                      (i)

<PAGE>


                                        POINT WEST CAPITAL CORPORATION
                                          CONSOLIDATED BALANCE SHEETS
                                     June 30, 1998 and December 31, 1997


<TABLE>
<CAPTION>

                                                                             June 30,               December 31,
                              ASSETS                                           1998                    1997
                                                                            --------------         --------------
<S>                                                                          <C>                    <C>

Cash and cash equivalents                                            $         2,354,067  $         10,039,560
Restricted cash                                                                3,700,148             3,756,714
Investment securities (note 2)
          Held-to-maturity                                                     2,220,000             2,220,000
          Available-for-sale                                                  12,626,483             3,597,343
Matured policies receivable                                                      325,225               305,435
Loans receivable, net of unearned income of $117,650
          and $59,884, respectively (note 3)                                   6,575,908             4,015,716
Assets held for sale (note 4)                                                     74,812               129,334
Purchased life insurance policies (note 5)                                    34,539,544            36,586,788
Non-marketable securities (note 6)                                             3,732,148             1,658,478
Deferred financing and organizational costs, net of
          accumulated amortization of $747,196 and
          $621,884, respectively                                                 450,122               525,433
Furniture and equipment, net of accumulated depreciation of
          $1,544 and $341, respectively                                           17,542                 6,862
Other assets                                                                     264,111               127,590
                                                                          --------------        --------------
          Total assets                                               $        66,880,110  $         62,969,253
                                                                          ==============        ============== 
               LIABILITIES AND STOCKHOLDERS' EQUITY

Accrued expenses                                                     $           178,439  $            183,150
Accounts payable                                                                 179,081               216,851
Accrued compensation payable                                                     100,000               193,000
Reserve for equity interest in wholly owned financing
          subsidiary (note 5)                                                    407,324             2,300,037
Long term notes payable  (note 7)                                             38,528,914            38,804,107
Deferred income taxes                                                            706,000                 6,000
                                                                          --------------        --------------
          Total liabilities                                                   40,099,758            41,703,145
                                                                          --------------        --------------
Stockholders' equity:
          Common stock, $0.01 par value; 15,000,000 authorized shares,
               4,291,824 shares issued
               3,253,324 shares outstanding                                       42,918                42,918
          Additional paid-in-capital                                          29,496,720            29,496,720
          Comprehensive income-- net unrealized
               investment gains (note 2 and 8)                                 8,276,263             2,597,239
          Retained deficit                                                    (8,161,517)           (7,996,737)
          Treasury stock, 1,038,500 shares                                    (2,874,032)           (2,874,032)
                                                                          --------------        --------------
          Total stockholders' equity                                          26,780,352            21,266,108

          Total liabilities and stockholders' equity                 $        66,880,110  $         62,969,253
                                                                          ==============        ==============

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

</TABLE>                              

                                        1
<PAGE>




                         POINT WEST CAPITAL CORPORATION
         CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
            For the Three and Six Months Ended June 30, 1998 and 1997


<TABLE>
<CAPTION>

                                                                        Three Months Ended              Six Months Ended
                                                                             June 30,                       June 30,
                                                                      1998            1997            1998            1997
                                                                  --------------  --------------  --------------  --------------
<S>                                                                   <C>               <C>             <C>          <C>


Income:
     Earned discounts on matured policies (note 9)              $        49,519 $       101,691         365,652 $       285,977
     Interest income                                                    347,848         337,574         699,155         545,210
     Gain on sale of convertible
           preferred shares                                                  --              --              --         699,665
     Gain on assets sold (note 4)                                        11,689         492,217         150,526       1,362,858
     Other                                                              105,403          38,681         168,888          69,875
                                                                    --------------  --------------  --------------   --------------
           Total income                                                 514,459         970,163       1,384,221       2,963,585

Expenses:
     Interest expense                                                   867,922         885,789       1,772,042       1,824,259
     Compensation and benefits                                          345,779         283,825         695,338         554,108
     Other general and administrative expenses                          414,562         459,377         847,819       1,025,113
     Amortization                                                        62,656          58,720         125,312         117,146
     Depreciation                                                           785              --           1,203              --
                                                                  --------------  --------------  --------------  --------------
           Total expenses                                             1,691,704       1,687,711       3,441,714       3,520,626
                                                                  --------------  --------------  --------------  --------------

           Loss before net loss in wholly
           owned financing subsidiary
           charged to reserve for equity interest                    (1,177,245)       (717,548)     (2,057,493)       (557,041)

Net loss in wholly owned financing subsidiary charged
     to reserve for equity interest (note 5)                          1,092,037         949,958       1,892,713       1,884,651

                                                                  -------------  --------------  --------------  --------------
           Net income (loss)                                    $      (85,208) $       232,410       (164,780) $     1,327,610
                                                                  ==============  ==============  ==============  ==============

Comprehensive income -- net unrealized
     investment gains (note 8)                                        2,540,152              --       5,679,024              --
Total comprehensive income (note 8)                                   2,454,944                       5,514,244

Basic earnings (loss) per share (note 10)                                (0.03)            0.07          (0.05)            0.35
Diluted earnings (loss) per share (note 10)                              (0.03)            0.06          (0.05)            0.34

Weighted average number of shares of common stock
     outstanding (note 10)                                            3,253,324       3,538,269       3,253,324       3,794,597
Weighted average number of shares of common stock
     and common stock equivalents outstanding (note 10)               3,253,324       3,620,246       3,253,324       3,870,388

<FN>
           See accompanying condensed notes to consolidated financial statements
</FN>
</TABLE>
                                        2
<PAGE>

                                          POINT WEST CAPITAL CORPORATION
                                       CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 For the Six Months Ended June 30, 1998 and 1997


<TABLE>
<CAPTION>


                                                                                       Six Months Ended
                                                                                           June 30,
                                                                                 1998                    1997
                                                                          --------------------   -------------------


<S>                                                                              <C>                      <C>
Cash flows for operating activities:
    Net income (loss)                                                  $             (164,780)$           1,327,610
    Adjustments to reconcile net income (loss) to net cash
         (used in) provided by operating activities:
          Depreciation and amortization                                               126,515               117,146
          Gain on assets                                                             (150,526)           (1,362,858)
          Gain on sale of convertible preferred shares                                     --              (699,665)
          Earned discounts on policies                                               (365,652)             (285,977)
          Purchase of life insurance policies                                              --              (915,272)
          Collections on matured life insurance policies                            2,275,514             4,215,074
          Increase in other assets                                                   (136,637)             (101,004)
          Increase in accrued expenses                                                 (4,711)               (2,626)
          Increase (decrease) in accounts payable                                     (37,771)              563,281
          Decrease in accrued compensation payable                                    (93,000)              (86,419)
          Decrease in reserve for equity interest in wholly
                   owned financing subsidiary                                      (1,775,769)           (1,884,651)
                                                                          --------------------   -------------------
                   Net cash (used in) provided by operating activities               (326,817)              884,639
                                                                          --------------------   -------------------

Cash flows from investing activities:
    Proceeds from sale of assets held for sale                                        205,696            11,856,688
    Purchase of furniture and equipment                                               (11,883)                   --
    Return of restricted cash                                                          56,566               495,144
    Purchase of investment and non-marketable securities                           (4,723,670)           (2,275,551)
    Additions to loans receivable                                                  (2,617,234)                   --
    Principal payments on loans receivable                                             57,042                    --
    Sale of investment in convertible preferred stock                                      --             2,021,187
                                                                          --------------------   -------------------
                   Net cash (used in) provided by  investing activities            (7,033,483)           12,097,468
                                                                          --------------------   -------------------

Cash flows from financing activities:
    Principal payments on long term notes payable                                    (275,193)           (2,317,515)
    Purchase of treasury stock                                                             --            (2,484,032)
    Increase in financing costs                                                       (50,000)               (5,000)
                                                                          --------------------   -------------------
                                                                          
                   Net cash used in financing activities                             (325,193)           (4,806,547)
                                                                          --------------------   -------------------

                   Net (decrease) increase in cash and cash equivalents            (7,685,493)            8,175,560

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

Cash and cash equivalents, end of period                               $            2,354,067 $          14,762,007
                                                                          ====================   ===================


Supplemental disclosures:
Supplemental disclosure of non-cash activities:
    Unrealized gain on securities available for sale (net of taxes)    $            8,276,263 $                  --
                                                                          ====================   ===================
Supplemental disclosure of cash flow information:
    State taxes paid                                                   $                8,530 $              31,456
                                                                          ====================   ===================
    Cash paid for interest                                             $            1,776,753 $           1,826,885
                                                                          ====================   ===================


<FN>
           See accompanying condensed notes to consolidated financial statements

</FN>
</TABLE>

                                       3



<PAGE>



                                                        
                        POINT WEST CAPITAL CORPORATION
                        ------------------------------
              CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              ----------------------------------------------------

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

         The unaudited  consolidated  financial statements of Point West Capital
Corporation  ("Point West") and its consolidated  entities (the "Company") as of
June 30, 1998 and for the three and six month  periods  ended June 30, 1998 have
been prepared in accordance with generally  accepted  accounting  principles for
interim financial information,  in accordance with Rule 10-01 of Regulation S-X.
Accordingly,  such  statements do not include all of the  information  and notes
thereto that are included in the annual consolidated  financial  statements.  In
the opinion of  management,  all  adjustments  considered  necessary  for a fair
presentation  have been included.  Operating results for the three and six month
periods ended June 30, 1998 are not  necessarily  indicative of the results that
may be expected for the year ending  December 31, 1998.  The balance sheet as of
December  31,  1997 has been  derived  from the audited  consolidated  financial
statements of the Company.  The  statements  and notes thereto  included  herein
should be read in conjunction with the audited consolidated financial statements
and notes thereto  included in the Company's  Annual Report on Form 10-K for the
year ended December 31, 1997 (the "Form 10-K").

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

         Until February  1997, the Company  provided  viatical  settlements  for
terminally ill persons.  See "Management's  Discussion and Analysis of Financial
Condition and Results of Operations - Overview."  Subsequently,  the Company has
sought to become a broad-based  specialty  financial  services company.  To that
end,  the Company has  expanded  its  financial  services  business  through the
formation of Fourteen Hill Management and Fourteen Hill Capital, which invest in
small  businesses,  and Allegiance and Allegiance  Funding,  which lend funds to
funeral  home and  cemetery  owners.  The Company  continues to service the life
insurance  policies held by its wholly owned special purpose  subsidiary,  DPFC,
and to evaluate other strategic  business  opportunities.  Fourteen Hill Capital
and Allegiance are indicative of the types of business opportunities the Company
intends to pursue.  See  "Management's  Discussion  and  Analysis  of  Financial
Condition and Results of Operations  -- Fourteen  Hill  Management  and Fourteen
Capital" and "-- Allegiance and Allegiance Funding."

         During 1997, the Financial  Accounting  Standard Board ("FASB")  issued
Financial Accounting Standard No. 131 ("SFAS 131"), Disclosure About Segments of
An Enterprise and Related  Information.  SFAS 131 is effective with the year-end
1998  financial  statements.   The  Company  will  comply  with  the  disclosure
requirements.

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

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


                                       4

<PAGE>


Many of the equity securities  classified as  available-for-sale  are securities
(or are convertible  into  securities)  traded in the  over-the-counter  ("OTC")
market.  Fair market  value is  estimated  by the  Company  based on the average
closing bid of the  securities  for the last three trading days of the reporting
period  and  is  adjusted  to  reflect   management's   estimate  of   liquidity
constraints.  The Company had no trading securities at June 30, 1998 or December
31,  1997.  Any  unrealized  gains and losses,  declines in value of  securities
judged to be  other-than-temporary  and accrued  interest  and  dividends on all
securities will be reported in the income statement when realized.

         The amortized  costs and estimated fair value of investment  securities
as of June 30, 1998 and December 31, 1997 are as follows:

<TABLE>

<CAPTION>

                                                        June 30, 1998
------------------------------------------------------------------------------------------------------------
                                                   Gross Unrealized    Gross Unrealized
                                 Amortized Cost          Gains               Loss
                                                                                             Fair Value
<S>                               <C>                <C>                 <C>                  <C>    


Held-to-maturity
     Corporate bonds           $    2,220,000      $       130,000    $        (17,500)   $    2,332,500
                               --------------      ---------------    -----------------   --------------
Total held-to-maturity         $    2,220,000      $       130,000    $        (17,500)   $    2,332,500

Available-for-sale
     Common stock              $    3,650,000      $    8,975,856     $              --   $    12,625,856
     Warrants                  $            0      $          627     $              --   $           627
                               ------------------  -----------------  ------------------  ------------------
 
Total available-for-sale       $    3,650,000      $    8,976,483     $              --   $    12,626,483
                                                                      
</TABLE>

<TABLE>
<CAPTION>



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

                                                   Gross Unrealized    Gross Unrealized
                                 Amortized Cost          Gains               Loss
                                                                                            Fair Value

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



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

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

</TABLE>

         The Company  classifies  debt  securities for which it has the positive
intent and ability to hold to maturity as  held-to-maturity.  All investments in
debt securities classified as held-to-maturity at June 30, 1998 and December 31,
1997 have maturity dates ranging from one to six years.  Warrants  classified as
available-for-sale have expiration dates ranging from one to five years. Certain
warrants  outstanding  at  December  31,  1997 were  exercised  during the first
quarter of 1998 and the securities  purchased upon such conversion are reflected
as available-for-sale.

         Unrealized  gains  on   available-for-sale   securities   (representing
differences  between  estimated  fair value and cost) of $9.0  million  and $2.6
million at June 30, 1998 and December 31, 1997, respectively,

                                       5

<PAGE>

were  credited  (net  of  applicable  taxes)  to a  separate  component  of
stockholders'  equity  called   "Comprehensive  Income  --  Net  Unrealized
Investment Gains."

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

         Loans  receivable  includes  loans made to  unaffiliated  third parties
through  Allegiance  and  Fourteen  Hill  Capital.  Such loans are  reported  at
amortized  cost,  and interest is accrued as earned.  All loans at June 30, 1998
and December 31, 1997 were current, and no reserves were considered necessary as
of either date.

         Allegiance had two loans  outstanding at June 30, 1998 in the aggregate
principal  amount  of $5.9  million,  one of  which  bears  interest  at a fixed
interest rate per annum of 9.4% and the other of which bears interest at a fixed
interest  rate per annum of 9.8%.  Principal  payments  are due  monthly on such
loans, and such loans mature, subject to permitted prepayments, in approximately
fifteen  years.  Allegiance  intends  to  aggregate  and sell  these  loans  and
therefore hedges its interim interest rate exposure. Any gain or loss related to
these hedges are deferred and recognized by the Company when the loans are sold.
Until such time,  any  realized  gains or losses on hedges are  reflected on the
balance sheet as an increase or decrease, as appropriate,  in the carrying value
of loans  receivable.  For the  quarter  ended June 30,  1998,  the  Company had
realized  gains on its  hedging  activities  of $28,000  which  decreased  loans
receivable  in a  like  amount  and  unrealized  net  losses  from  its  hedging
activities  of $70,000  which are not  reflected on the balance  sheet and which
management believes are offset by increases in the market value of the loans.


         Fourteen Hill Capital had one loan  outstanding at June 30, 1998 in the
principal amount of $795,000. Such loan bears a fixed interest rate per annum of
15% and matures, subject to permitted prepayments, in approximately 5 years.

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

         As a  result  of  the  Company's  decision  in  1996  to  sell  all  or
substantially  all of its assets,  it  reclassified  all assets owned as of such
date,  other  than  the  assets  of DPFC,  to a  "held-for-sale"  category.  See
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations  -- Overview."  Accordingly,  such assets are recorded on the balance
sheet as of June 30, 1998 and December  31, 1997 at the lower of carrying  value
or fair value less  estimated  cost to sell. In connection  with the decision to
sell  assets,  the Company  established  a reserve for loss on sale of assets in
1996 and reevaluates such reserve each quarter.
Assets held for sale consist of:

 <TABLE>
<CAPTION>

                                                                 June 30 , 1998           December 31, 1997
                                                                 --------------           ----------------- 
<S>                                                              <C>                       <C>     
     Capitalized costs                                        $         264,934           $       525,697
     Earned discounts on life insurance policies                          1,084                     2,482
     Reserve for loss on sale                                          (191,211)                 (398,845)
                                                              ------------------          ----------------
     Assets held for sale                                     $          74,812           $       129,334
                                                              ==================          ==================
                                                              
</TABLE>

         The  reserve  for  loss  on  sale  was  calculated  based  on the  life
expectancy of the insured under each life insurance policy in relation to prices
obtained by the Company in connection with other sales, management's estimate of
the current  saleability of such policy, the type of policy (e.g., term or whole
life), the age of the insured and premiums on such policy.  Any gain or loss due
to the difference  between actual proceeds (less any back end sourcing fees) and
the carrying value after giving effect to the reserve for loss on sale of assets
is  reported  as a  realized  gain or loss on  assets  sold at the time any sale
proceeds are received.
                                       6

<PAGE>




         Through December 31, 1997, the Company entered into several  agreements
to sell portions of its portfolio of policies. None of the purchasers thereunder
is  affiliated  with the Company or any of its  directors or officers.  The sale
agreements   provided  for  the  sale,  upon  the  issuing  insurance  company's
acknowledgment of transfer of ownership,  of an aggregate of 373 policies having
an aggregate face value of $29.2 million. Through June 30, 1998, the sale of 354
policies  with an aggregate  face value of $28.8  million had been  consummated.
Eleven  policies  covered  by the sales  agreements  were not sold  because  the
insured died prior to the issuing insurance company's acknowledgment of transfer
of ownership of the policy and the Company  collected the death benefit  instead
of selling these policies. The remaining 8 policies (representing  approximately
$493,000 in face amount)  were carried on the balance  sheet at June 30, 1998 at
$74,812 after giving effect to the reserve for loss on assets held for sale.

         The  policies  representing  "assets  held for sale"  consist  of the 8
policies under the  aforementioned  sales  agreements.  The Company  experienced
delays or difficulties in transferring the ownership of the remaining 8 policies
described  above  and,  due  to  contractual  provisions  in the  related  sales
agreements, the sales of these policies have not been consummated.  However, the
Company is pursuing other alternatives for the sale of these policies.

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

         Effective July 1996,  purchased life insurance  policies consisted only
of those  policies held by DPFC. The sale of policies held by DPFC, all of which
are  pledged  as  security  for the  Securitized  Notes (as  defined in Note 7),
requires  the  consent of the  Company  and the  Noteholders.  The  Company  has
discussed  potential sales of DPFC policies with the Noteholders;  however,  the
Company  has not  determined  whether it will decide to sell such  policies  and
cannot determine  whether the Noteholders will consent to such a sale or whether
such a sale is  feasible.  A reserve was  recorded in 1996 in the amount of $6.9
million to reflect the estimated  loss of Point West's equity  interest in DPFC.
As of June 30, 1998 and  December  31,  1997,  the reserve was $407,000 and $2.3
million,  respectively. The reserve provides for the write-off of the unrealized
residual value associated with DPFC. See Note 7.

6.        Non-Marketable Securities
--        -------------------------

         Non-marketable  securities include  investments in non-marketable  debt
and equity securities through Point West and Fourteen Hill Capital.  The Company
accounts for such non-marketable securities using the cost method.

         In 1996, Point West purchased  convertible preferred shares in American
Information  Company,  Inc. ("American  Information").  As of June 30, 1998, the
carrying value of such non-marketable preferred shares was $1.7 million. See the
Form 10-K for further information regarding American Information.

         In the second  quarter  of 1998,  Fourteen  Hill  Capital  invested  $1
million in the convertible  preferred shares (convertible into common shares) of
one  unaffiliated  small  business  entity and  invested  $1 million in the debt
securities  (which are  convertible  into  preferred  shares,  which in turn are
convertible into common shares) of another  unaffiliated  small business entity.
The investment in the convertible  debt bears a fixed interest rate per annum of
6.4%.  Such interest is payable  semi-annually  (at the option of the holder) in
cash or in preferred shares of the small business entity.
                                       7

<PAGE>


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

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

         The Securitized  Notes  represent the  obligations  solely of DPFC. The
Company's consolidated financial statements include the assets,  liabilities and
operations  of  DPFC;  however,  the  assets  of DPFC are not  available  to pay
creditors  of  Point  West.  The  assets  of DPFC are the  beneficial  ownership
interests in the life insurance  policies and funds which secure the Securitized
Notes.  However,  to the  extent  that the  losses  of DPFC  exceed  its  equity
(creating  a deficit),  the deficit  would be recorded by the Company as a loss.
Upon the  retirement  of the  Securitized  Notes at less  than book  value,  the
Company  would  recognize  a gain  for the  difference,  which  is  expected  to
approximate  the  deficit  of DPFC.  At June 30,  1998,  the  equity of DPFC was
$407,000.

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

8.        Stockholders' Equity
--        --------------------

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

Stockholders' equity, beginning of period                       $   21,266,108
   Comprehensive income -- net unrealized investment gains           5,679,024
   Net loss                                                          (164,780)
                                                              -----------------
Stockholders' equity, end of period                             $   26,780,352


         During 1997, FASB issued  Financial  Accounting  Standard No.130 ("SFAS
130"),  Reporting  Comprehensive  Income.  SFAS 130 is effective for interim and
annual  periods  beginning  after  December  15,  1997.  At June 30,  1998,  the
Company's total  comprehensive  income includes net unrealized  investment gains
which represents the increase in the Company's investment  securities classified
as available-for-sale, net of applicable taxes.

9.        Earned Discount
--        ---------------

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

10.       Earnings per Share
---       ------------------

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


                                       8

<PAGE>


         The  weighted  average  number of common  stock  shares and  additional
common stock equivalent shares used in computing EPS are set forth below for the
periods indicated.
<TABLE>
<CAPTION>
                                                                      For the three months      For the six months 
                                                                        ended June 30,            ended June 30, 
                                                                       ================           ===============
                                                                         1998       1997            1998         1997

<S>                                                                   <C>                      <C>    
Weighted  average  number of shares of common   
     Stock outstanding.......................................          3,253,324  3,538,269       3,253,324    3,794,597
Additional common stock equivalents ..............                            --     81,977              --       75,791
                                                                       ---------  ---------       ---------    ---------
Weighted  average  number of shares of common  stock 
and  common stock equivalents outstanding ........                     3,253,324  3,620,246       3,253,324    3,870,388
                                                                       =========  =========       =========    =========
</TABLE>
                                                                                

         Diluted  EPS for the three and six months  ended  June 30,  1998 do not
include any common stock equivalents due to their anti-dilutive  effect.  Common
Stock  equivalents for the three and six months ended June 30, 1997 include,  to
the extent they do not have an  anti-dilutive  effect,  employee  stock options,
non-employee  director stock options and warrants issued to Jefferies & Company,
Inc., the investment  banking firm which advised the Company in connection  with
strategic options.

11.       Litigation
--        ----------

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

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

         On July 16, 1998,  Fourteen  Hill Capital  borrowed $3 million from the
Small Business Administration ("SBA").


                                        9

<PAGE>



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

         The  following  is  a  discussion  and  analysis  of  the  consolidated
financial  condition of the Company as of June 30,  1998,  and of the results of
operations  for the Company for the three and six months ended June 30, 1998 and
1997, and of certain factors that may affect the Company's prospective financial
condition and results of operations. The following should be read in conjunction
with the unaudited consolidated financial statements and related notes appearing
elsewhere   herein.   For  the   reasons   set  forth   below   (including   the
reclassification  into  "assets held for sale" of a  substantial  portion of the
Company's assets in 1996 and related accounting consequences and the starting of
two new  businesses  in the  second  half of  1997)  the  Company's  results  of
operations  and cash flows for the three and six months  ended June 30, 1998 are
not comparable to those for the three and six months ended June 30, 1997.

Overview
--------

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

         The principal  business  activity of the Company through  February 1997
was to provide  viatical  settlements  for  terminally  ill persons.  A viatical
settlement  is the payment of cash in return for an  ownership  interest in, and
right to receive the death benefit (face value) of, a life insurance  policy. In
February 1997,  Point West's Board of Directors  (the "Board")  decided to cease
the Company's viatical settlement  business.  The Board's decision resulted from
(i) accounts of research results reported at the  International  AIDS Conference
held in Vancouver,  British Columbia in July 1996 (the "AIDS Conference"),  (ii)
the Board's belief regarding  increased risks of purchasing and holding policies
insuring the lives of individuals  diagnosed with HIV or AIDS, (iii) accounts of
subsequent  research results which appeared to confirm the reports from the AIDS
Conference, and (iv) a determination by the Board that it was not viable for the
Company  to  continue  to  operate a  viatical  settlement  business  solely for
non-AIDS policies. Also as a result of the accounts of research results reported
at the AIDS Conference, the Company decided in the third quarter of 1996 to sell
all or substantially  all of its assets.  Through December 31, 1997, the Company
had entered into agreements to sell 373 policies with an aggregate face value of
$29.2 million and had consummated the sale of all but 8 of such policies (having
an  aggregate  face  value  of  $493,000)  at June 30,  1998.  See  "Results  of
Operations -- Three and Six Months Ended June 30, 1998 Compared to Three and Six
Months Ended June 30, 1997 -- Gain on Assets  Sold" and Note 4 of the  Condensed
Notes to  Consolidated  Financial  Statements  (contained  herein)  for  further
information regarding assets held for sale.

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


                                       10

<PAGE>


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

         On June 3, 1997,  the  Company  formed  Fourteen  Hill  Management  and
Fourteen  Hill  Capital.  Fourteen  Hill  Management  is a wholly owned  limited
liability  company of Point West formed solely for the purpose of serving as the
general  partner of one or more small business  investment  companies  ("SBIC").
Fourteen Hill Capital is a limited  partnership formed solely for the purpose of
operating as an SBIC.  Fourteen Hill Capital  received its SBIC license from the
SBA effective  September 26, 1997.  Fourteen Hill Management is the sole general
partner of Fourteen Hill Capital, and owns 99.978% of the partnership interests.
Point West is one of the two limited  partners of Fourteen Hill Capital and owns
0.02% of the  partnership  interests.  The remaining  0.002% of the  partnership
interest is owned by one unaffiliated  limited  partner.  Point West capitalized
Fourteen Hill Management with $5.0 million.

         Fourteen Hill Capital provides loans,  debt and equity capital to small
companies (i.e.,  generally companies with a net worth less than $l8 million and
average net income less than $6 million for the last two years).  Fourteen  Hill
Capital  commenced  operations in August 1997.  At June 30, 1998,  Fourteen Hill
Capital had one loan, one debt with equity features and four equity  investments
outstanding for which it had originally  provided funds in the aggregate  amount
of $6.4 million.  At June 30, 1998, such loans and  investments  were carried on
the balance sheet at $15.4 million.  The difference  between such carrying value
(net of  applicable  taxes) and the  original  funds  provided is  reflected  as
"Comprehensive  Income -- Net  Unrealized  Investment  Gains"  in  stockholders'
equity. Many of the equity securities,  which are held, by Fourteen Hill Capital
and which are classified as available-for-sale, are securities traded in the OTC
Market.  Fair  market  value is  estimated  by the  Company  and is based on the
average  closing  bid of the  stock  for  the  last  three  trading  days of the
reporting  period and  decreased to reflect  management's  estimate of liquidity
constraints.

         As of July 16, 1998, Fourteen Hill Capital had borrowed $3 million from
the SBA. See "Liquidity and Capital Resources." The Company believes that, until
Fourteen  Hill  Capital  liquidates  a  portion  of one of  its  investments  or
increases  its  regulatory  capital,  Fourteen  Hill  Capital may not be able to
borrow additional funds from the SBA. See the Form 10-K and Notes 2 and 3 of the
Condensed  Notes to Consolidated  Financial  Statements  (contained  herein) for
further  information  regarding  Fourteen  Hill  Management  and  Fourteen  Hill
Capital.

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

         Allegiance is a limited  liability  company formed on September 5, 1997
as a specialty  finance  company to provide senior secured loans to funeral home
and cemetery owners.  Through June 30, 1998,  Allegiance had funded two loans in
the aggregate principal amount of $5.9 million.  Point West provided the capital
to  Allegiance  for such  loans. Point West has a 65% ownership interest and 95%
voting  control in Allegiance  and serves as the managing  member of Allegiance.
Allegiance's  president and its vice  president of  marketing,  each of whom was
hired in September  1997,  have the balance of such interests and have an option
to acquire 5% of the equity  interests if certain events occur.  Allegiance owns
100% of Allegiance  Funding,  which is a special  purpose  subsidiary  formed to
facilitate the potential securitization of loans consummated by Allegiance.  Net
profits of Allegiance  for each  calendar year will be allocated  first to Point
West in an amount equal to a return of 10% per annum, compounded monthly, on the
amount of its capital  contribution,  but not in excess of such net profits. Any
shortfall  will be carried  forward  indefinitely  to the next  calendar year or
years in which net profits are sufficient to make such allocation. An additional
5% return for each  calendar  year will be allocated  first to Point West to the
extent that in each year sufficient  profits are available with no carry forward
provided.  See the Form 10-K and Note 3 of the Notes to  Consolidated  Financial
Statements  (contained herein) for further information  regarding Allegiance and
Allegiance Funding.

                                       11

<PAGE>



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

         As a result of the Company's  decision to sell all or substantially all
of its  assets,  the  Company  established  a reserve for loss on sale of assets
during 1996 and reevaluates this reserve quarterly. The Company also established
a reserve for loss of Point West's  equity  interest in DPFC during 1996 because
of the  uncertainties  created by the data presented at the AIDS  Conference and
subsequent  reports of the efficacy of new treatments for AIDS/HIV.  The reserve
for loss on sale of assets was  $191,000  and  $399,000  as of June 30, 1998 and
December 31,  1997,  respectively.  The reserve for loss of Point West's  equity
interest in DPFC was  $407,000 and $2.3 million as of June 30, 1998 and December
31, 1997,  respectively.  In  addition,  beginning  in 1996,  the Company  began
recognizing income with respect to its viatical settlement business upon receipt
of proceeds on policies  (either  pursuant to sale of the policy or the death of
the insured). Such income is equal to the difference between such proceeds (less
any back-end sourcing fees) and the carrying value of such policies after giving
effect to any reserve for loss on the sale of such  policies.  See the Form 10-K
and Notes 4 and 5 of the Condensed  Notes to Consolidated  Financial  Statements
(contained  herein) for further  information  regarding  the reserve for loss on
sale of assets and the reserve for loss of Point West's equity interest in DPFC.

         SFAS 115  requires  marketable  debt and equity  securities  (including
those held by Fourteen  Hill Capital) to be  classified  into  held-to-maturity,
available-for-sale   and   trading   categories.    Securities   classified   as
held-to-maturity   are  reported  at  amortized   cost  and   available-for-sale
securities  are reported at fair market value with  unrealized  gains and losses
(net of applicable taxes) as a separate  component of stockholders'  equity. The
Company had no trading  securities  at June 30, 1998 or December 31,  1997.  Any
unrealized  gains  and  losses,  declines  in value of  securities  judged to be
other-than-temporary  and accrued  interest and dividends on all securities will
be reported in the income  statement  as realized.  See Note 2 of the  Condensed
Notes to Consolidated Financial Statements (contained herein).

         The Company  accounts for loans  advanced by Fourteen  Hill Capital and
Allegiance by accruing interest on outstanding balances.  Since only three loans
were  outstanding at June 30, 1998 and December 31, 1997, the Company  evaluated
the loans and determined that a specific reserve was not necessary.  As the loan
portfolio  grows,  general  reserves  will be  added  to the  extent  considered
necessary.  See  Note  3  of  the  Condensed  Notes  to  Consolidated  Financial
Statements (contained herein).

         The  Company  uses  the  cost  method  to  account  for  non-marketable
securities.

         Allegiance  intends to  aggregate  and sell the loans that it holds and
therefore hedges its interim interest rate exposure.  There is no assurance that
Allegiance  will be able to sell these loans.  Any gain or loss related to these
hedges are deferred and recognized by the Company when the loans are sold. Until
such time,  any realized  gains or losses on hedges are reflected on the balance
sheet as an increase or decrease, as appropriate, in the carrying value of loans
receivable.  For the quarter ended June 30, 1998, the Company had realized gains
on its hedging  activities of $28,000 which decreased loans receivable in a like
amount and  unrealized  net losses from its hedging  activities of $70,000 which
are not reflected on the balance sheet and which management  believes are offset
by increases in the market value of the loans.

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

         Although  the  Securitized  Notes had an expected  life of 2.1 years in
September  1995, the Securitized  Notes were not retired through  collections by
October  1997.  At June 30,  1998,  $38.5  million  was  outstanding  under  the
Securitized Notes. In the event that the collection experience for DPFC policies
continues to be substantially  delayed,  the equity of DPFC may become negative.
Based on the recent  collection  experience,  the Company believes the equity of
DPFC will become negative in the third quarter of 1998.

                                       12

<PAGE>


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

         In light of the foregoing, to the extent that the losses of DPFC exceed
its equity (creating a deficit), the deficit would be recorded by the Company as
a loss.  Upon the retirement of the  Securitized  Notes at less than book value,
the  Company  would  recognize a gain for the  difference,  which is expected to
approximate  the  deficit  of DPFC.  At June 30,  1998,  the  equity of DPFC was
$407,000.  The Securitized  Notes represent the obligations  solely of DPFC. The
Company did not guarantee repayment of the Securitized Notes and is not required
to fund any principal or interest deficiencies thereunder.

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

Three and Six Months Ended June 30, 1998 Compared to the Three and Six Months
-----------------------------------------------------------------------------
Ended June 30, 1997
-------------------

         Earned  Discounts.  Earned discounts on matured polices decreased 51.3%
in the second  quarter of 1998 compared to the second quarter of 1997 due to the
decrease  in the number and face amount of matured  policies.  During the second
quarter of 1998,  the Company had earned  discounts  on 14 policies  with a face
value of  $590,000,  compared to 17 policies  with a face value of $1.3  million
during the second quarter of 1997. Earned discounts on matured polices increased
27.9% in the first half of 1998  compared to the first half of 1997.  During the
first half of 1998, the Company had earned  discounts on 38 policies with a face
value of $2.3 million, compared to 54 policies with a face value of $3.5 million
during the first half of 1997.  Although  the  Company had earned  discounts  on
fewer policies during the first half of 1998 compared to the first half of 1997,
the earned discounts  increased over this period due primarily to the collection
in the first quarter of 1998 of two policies with  above-average face values and
relatively low carrying values. See "Method of Accounting."

         Interest  Income.  Interest income increased 3.0% in the second quarter
of 1998  compared  to the second  quarter of 1997 and 28.2% in the first half of
1998 over the first half of 1997. This increase is due primarily to the interest
earned on loans made by Fourteen  Hill  Capital  (which was formed in June 1997)
and Allegiance (which was formed in September 1997). See "Method of Accounting."
Partially  offsetting  this  increase is the decrease in interest  earned on the
proceeds from the sale of policies which were invested in short term  securities
and marketable securities in the first half of 1997.

         Gain on Sale of Convertible  Preferred  Shares. In the first quarter of
1997 the Company  recognized  a $700,000  gain on the sale of a portion of Point
West's   investment   in   American   Information   Company,   Inc.   ("American
Information"). See the Form 10-K. The Company accounts for this investment using
the cost method.

 
         Gain on Assets  Sold.  The gain on assets sold  decreased  97.6% in the
second  quarter of 1998 compared to the second  quarter of 1997 and 89.0% in the
first half of 1998 compared to the first half of 1997 because a large portion of
the sale proceeds from life  insurance  policies was collected  during the first
half of 1997. The Company collected the sale proceeds on 2 policies resulting in
a realized gain of

                                       13
<PAGE>

$12,000 in the second  quarter of 1998,  compared to 51 policies  resulting in a
realized gain of $492,000 in the second quarter of 1997.  The Company  collected
the sale proceeds on 6 policies  resulting in a realized gain of $151,000 in the
first half of 1998,  compared to 239 policies  resulting  in a realized  gain of
$1.4 million in the second  quarter of 1997.  The realized  gain was  calculated
based on the difference between the sale proceeds and the carrying value of such
policies after giving effect to the reserve for loss on sale of assets. See Note
4 of  the  Condensed  Notes  to  Consolidated  Financial  Statements  (contained
herein).

         Other  Income.  Components  of other  income  include  placement  fees,
collections  on  policies  of  dividends,  interest  and  paid-up  cash  values,
increases  in face value of matured  policies,  refunds of  premiums  on matured
policies and realized  capital  gains on  investments  securities.  Other income
increased  172.5%  during the  second  quarter  of 1998  compared  to the second
quarter of 1997 and 141.7%  during the first half of 1998  compared to the first
half of 1997.  This  increase is primarily a result of a $70,000  placement  fee
received by Point West in the form of convertible preferred shares in connection
with  an  investment  made  by  co-investors  of  Fourteen  Hill  Capital  in an
unaffiliated small business entity.

         Interest Expense. Interest expense decreased 2.0% in the second quarter
of 1998  compared  to the  second  quarter of 1997 and 2.9% in the first half of
1998  compared  to  the  first  half  of  1997.  Average  borrowings  under  the
Securitized Notes were $38.7 million in the first half of 1998 compared to $39.6
million in the first half of 1997.  The interest rate on the  Securitized  Notes
was 9.17% in both periods.

         Compensation and Benefits. Compensation and benefits increased 21.8% in
the second  quarter of 1998 compared to the second  quarter of 1997 and 25.5% in
the first half of 1998 compared to the first half of 1997. This increase was due
to two new employees  hired in September  1997 to support  Allegiance's  lending
activities  and an increase in  compensation  and benefits  for other  employees
(including executive officers) for 1998.

         Other   General  and   Administrative   Expenses.   Other  general  and
administrative expenses decreased 9.8% in the second quarter of 1998 compared to
the second  quarter of 1997 and 17.3% in the first half of 1998  compared to the
first half of 1997.  This  decrease is partially the result of a decrease in the
expense for  professional  fees  incurred to support the  analysis of  strategic
options ($75,000 and $150,000,  respectively, for the second quarter of 1998 and
the first  half of  1998).  Such  decrease  is also due to a  decrease  in legal
expenses  incurred in  connection  with federal and state  alleged  class action
lawsuits  filed against the Company and its officers and directors  ($70,000 and
$290,000, respectively, for the second quarter of 1998 and for the first half of
1998).

         Partially  offsetting  the decrease  was an increase in life  insurance
policy  premium  costs  ($125,000  and  $274,000,  respectively,  for the second
quarter  and the first half of 1998).  Prior to  October  1997,  policy  premium
expenses were capitalized.  Notwithstanding  the increase in premium costs, such
premium  costs  were  reflected  in the  reduction  of the  reserve  for loss on
investment in wholly owned  financing  subsidiary.  As a result,  such increased
premium costs did not impact net income.

         Net Loss in Wholly Owned  Financing  Subsidiary  Charged to Reserve for
Equity  Interest.  At June 30, 1998 and December 31, 1997 the reserve to reflect
the estimated  loss of Point West's entire equity  interest in DPFC was $407,000
and $2.3  million,  respectively.  The DPFC  net loss of $1.1  million  and $1.9
million recorded in the three and six months ended June 30, 1998,  respectively,
and $950,000 and $1.9 million recorded in the three and six moths ended June 30,
1997,  respectively,  were included in the Company's net loss before net loss in
wholly owned financing  subsidiary charged to reserve for equity interest.  This
loss was  charged  against  the  reserve  for equity  interest  in wholly  owned
financing subsidiary.

                                       14
<PAGE>


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

         As of July 16, 1998, Fourteen Hill Capital had borrowed $3 million from
the SBA. Other than any other debt  borrowings that may be available to Fourteen
Hill Capital  through the SBA, the Company does not  currently  have an external
funding  source.  Although  Fourteen  Hill  Capital's  SBIC license  permits it,
subject to  certain  conditions,  to obtain  debt from the  federal  government,
because one of Fourteen Hill Capital's investments  represents an amount greater
than 20% of its regulatory capital (at July 22, 1998 this investment constituted
40% of  regulatory  capital),  Fourteen  Hill  Capital may not be able to access
additional debt from the SBA until it liquidates a portion of such investment or
increases its regulatory  capital.  The  Securitized  Notes do not provide funds
with which to fund  operations.  Allegiance is in the process of  negotiating an
external  funding  facility  to  support  its  loan  activity.  There  can be no
assurance that Allegiance  will be able to obtain  external  funding or that any
such funding will be on terms acceptable to the Company.

         At June 30,  1998,  cash and cash  equivalents  was $2.4  million.  The
Company  continues to analyze its current and future needs for financing,  which
will be  dependent  on its ability to develop the  businesses  of Fourteen  Hill
Capital and Allegiance and any other business opportunities the Company pursues.
There can be no  assurance  that the Company  will be  successful  in  obtaining
external  financing  on  satisfactory  terms  assuming  it  determines  it needs
additional funds. Point West at present anticipates having sufficient  liquidity
to meet its capital  commitments  and  working  capital  and  operational  needs
through 1998, using current cash and cash equivalents. However, the Company does
not have  sufficient  liquidity to fund the growth of the business of Allegiance
or Fourteen Hill Capital.

         As  of  June  30,  1998,  the  outstanding   principal  amount  of  the
Securitized  Notes was $38.5  million.  Principal  and interest  payments on the
Securitized  Notes are payable solely from  collections  on policies  pledged to
secure the  payment  thereof  and do not  require  the Company to expend cash or
obtain financing to satisfy such principal and interest obligations.  See Note 7
of the Condensed Notes to Consolidated Financial Statements (contained herein).

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

         The  Investment  Company  Act  of  1940  (the  "1940  Act")  creates  a
comprehensive  regulatory framework applicable generally to investment companies
(i.e.,  companies engaged  primarily in the business of investing,  reinvesting,
holding or trading in securities  within the meaning of the 1940 Act, whether or
not those companies intend to be engaged primarily in such business).  There are
various  percentage  of  assets  and  income  tests  under  the  1940  Act  (the
"Percentage Tests") that are relevant in considering whether a company is deemed
to be an  investment  company.  Companies  that are subject to the 1940 Act must
register with the  Securities  and Exchange  Commission  (the  "Commission")  as
investment   companies  and  upon  registration   become  subject  to  extensive
regulation.

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

         In  particular,   through  Fourteen  Hill  Capital  the  Company  holds
investments  in securities.  These  investments  have been made primarily  since
January 1998. The value of these and certain of the Company's other  investments
have  increased  substantially  in  the  past  several  months,  increasing  the

                                       15

<PAGE>

likelihood  that the  Company  will,  in the  future,  exceed one or more of the
Percentage  Tests,  unless the Company's other businesses grow more rapidly than
currently anticipated.


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

Other
-----

         The Company  expects to spend  approximately  $50,000 to $100,000  from
1998 to  1999  to  modify  its  computer  information  systems  enabling  proper
processing  of  transactions  relating  to the year 2000 and beyond  ("Year 2000
Compliant").  The  Company is in the process of  replacing  certain  systems,  a
portion of the cost of which may be  capitalized.  Through  June 30,  1998,  the
Company had incurred  Year 2000  Ccompliant  costs of  approximately  $24,000 of
which $19,000 has been capitalized. The Company continues to evaluate additional
courses of  corrective  action,  including  replacement  of other  systems whose
associated  costs may be  capitalized.  The Company  does not expect the amounts
required to be expensed over the next two years to have a material effect on its
financial position or results of operations.  The Company is also in the process
of reviewing whether or not its suppliers and vendors are Year 2000 Compliant.

Forward Looking Statement
-------------------------

         This report includes forward looking  statements  within the meaning of
the Private Securities Litigation Reform Act of 1995. All statements made herein
which are not based on historical  facts are forward  looking and,  accordingly,
involve  risks and  uncertainties  that  could  cause  actual  results to differ
materially from those discussed.  Such forward looking  statements include those
under  "Management's  Discussion and Analysis of Financial Condition and Results
of Operations"  relating to (i)  expectations  regarding when the equity of DPFC
will become  negative (See "Certain  Accounting  Implications  for DPFC"),  (ii)
Allegiance's  ability to sell the loans that it holds,  (iii) sufficiency of the
Company's   liquidity  and  capital   resources  (See   "Liquidity  and  Capital
Resources"),  (iv) the  Company's  ability  to  continue  not being  subject  to
registration  and regulation under the 1940 Act (See  "Considerations  Under the
Investment  Company  Act of  1940"),  and (v)  expected  expenses  to  make  the
Company's computer operations Year 2000 Compliant.  Such statements are based on
management's  belief,  judgment and analysis as well as assumptions  made by and
information  available  to  management  at the date  hereof.  In addition to any
assumptions  and cautionary  factors  referred to specifically in this report in
connection with such forward looking statements, factors that could cause actual
results to differ  materially  from those  contemplated  by the forward  looking
statements  include  (i) the  amount and  timing of actual  collections  of DPFC
policies following the death of the insured, (ii) the market's acceptance of the
asset class consisting of the loans held by Allegiance and Allegiance's  ability
to  consummate  the sale of the  loans on terms  acceptable  to the  market  and
Allegiance,  (iii) the  results  of the  Company's  consideration  of  strategic
options and any costs  associated with a chosen option,  (iv)  availability  and
cost of capital,  (v) the factors described under  "Management's  Discussion and
Analysis of Financial  Condition  and Results of  

                                      16

<PAGE>




Operations -- Considerations Under the Investment Company Act of 1940," and (vi)
the  ability  of the  Company's  suppliers  and  vendors  to  become  Year  2000
compliant.

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

         Not required.
                                       17

<PAGE>


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

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

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

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

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

         On  May  11,  1998,   the  Company  held  an  Annual   Meeting  of  its
         stockholders.  The  election of one  director and the proposal to amend
         and restate the  Company's  1995 Stock  Option Plan as set forth in the
         proxy statement were presented.  John Ward Rotter was re-elected to the
         Board of  Directors  for a term  expiring in 2001.  The voting  tallies
         were:

                    Director                  Votes For           Votes Withheld
                    --------                  ---------           --------------
                John Ward Rotter              2,553,722                1,515

         The other  directors  whose term of office  continued after the meeting
         are:  Bradley N. Rotter (term  expiring in 1999),  Stephen T. Bow (term
         expiring in 1999),  Alan B. Perper (term  expiring in 2000) and Paul A.
         Volberding (term expiring in 2000).


                                       18


<PAGE>


         The proposal to amend and restate 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 and
           restate the Company's
           1995 Stock Option Plan    2,536,112     19,115               10                 0

</TABLE>


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

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


             10          Point West Capital Corporation Amended and Restated 
                         1995 Stock Option Plan  

             27          Financial Data Schedule

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

        (b)  Reports on Form 8-K.

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

             May 20, 1998        5            May 20, 1998 5 The Company  issued
                                              a  press  release   regarding  its
                                              results  of  operations   for  the
                                              first quarter of 1998.

                                       19

<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:  July 22, 1998                          /S/ ALAN B. PERPER              
                                              -------------------------------- 
                                              ALAN B. PERPER 
                                              President
                                              (Duly Authorized Officer)




DATED:  July 22, 1998                          /S/ JOHN WARD ROTTER         
                                              -------------------------------- 
                                              JOHN WARD ROTTER
                                              Executive Vice President and
                                              Chief Financial Officer
                                              (Principal Financial and
                                              Accounting Officer)

                                       20