SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K
                                    ---------

            [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                   For the fiscal year ended December 31, 1999
                                       OR
              [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                For the transition period from _______ to _______

                                                 Commission file number 0-27736

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


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


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

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

        Securities registered pursuant to Section 12(b) of the Act: None
        ----------------------------------------------------------
           Securities registered pursuant to Section 12(g) of the Act:
           ----------------------------------------------------------

                        Common Stock, $0.01 par value
                                (Title of Class)

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 [  ]

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

The aggregate  market value of the  registrant's  common stock,  $0.01 par value
held  by   non-affiliates  of  the  registrant  as  of  February  29,  2000  was
approximately $24,421,400.

The  number  of  shares  of the  registrant's  common  stock,  $0.01  par  value
outstanding as of February 29, 2000 was 3,352,624.

                      Documents Incorporated by Reference:
                      -----------------------------------
The  registrant's  proxy  statement  (to be filed)  related  to its 2000  annual
meeting of stockholders is incorporated by reference in Part III hereof.


<PAGE>


                         POINT WEST CAPITAL CORPORATION

                             Form 10-K Annual Report
                   For the Fiscal Year Ended December 31, 1999

                                Table of Contents
<TABLE>
<CAPTION>


<S>                                                                                             <C>

PART I                                                                                          Page
     Item 1.  Business................................................................            1
     Item 2.  Properties..............................................................            10
     Item 3.  Legal Proceedings.......................................................            10
     Item 4.  Submission of Matters to a Vote of Security Holders.....................            11
 .

PART II
     Item 5.  Market for the Registrant's Common Equity and Related Stockhloders
              Matters ................................................................            12
     Item 6.  Selected Financial Data.................................................            13
     Item 7.  Management's Discussion and Analysis of Financial Condition and
               Results of Operations..................................................            15
     Item 7A. Quantitative and Qualitative Disclosures About Market Risks.............            32
     Item 8.  Financial Statements and Supplementary Data.............................            32
     Item 9.  Changes in and Disagreements with Accountants on Accounting
               and Financial Disclosure...............................................            32


PART III
     Item 10. Directors and Executive Officers of the Registrant......................            56
     Item 11. Executive Compensation..................................................            56
     Item 12. Security Ownership of Certain Beneficial Owners and Management .........            56
     Item 13. Certain Relationships and Related Transactions..........................            56
 .

PART IV
     Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K ........            56

Signatures............................................................................            61

</TABLE>



                                       i

<PAGE>



Unless the context  otherwise  requires,  all references to "Point West Capital"
refer to Point West Capital  Corporation  and all  references  to the  "Company"
refer to Point West Capital Corporation and its consolidated entities.


                                     PART I
                                     ------

ITEM 1--BUSINESS
----------------

General
-------

         The Company is a specialty financial services company. During 1997, the
Company expanded its financial services business through the operations of Point
West Venture Management,  LLC (formerly known as Fourteen Hill Management,  LLC)
("Point West  Management")  and Point West  Ventures,  L.P.  (formerly  known as
Fourteen Hill Capital,  L.P.) ("Point West  Ventures"),  which make loans to and
invest in small  businesses  which are generally  highly focused in the areas of
e-commerce,  Internet  and  telecommunications;   and  Allegiance  Capital,  LLC
("Allegiance  Capital"),  Allegiance  Funding  I,  LLC  ("Allegiance  Funding"),
Allegiance  Capital Trust I  ("Allegiance  Trust I") and  Allegiance  Management
Corp. ("Allegiance  Management"),  which lend funds to funeral home and cemetery
owners.  During 1998, the Company formed Point West Securities,  LLC ("PWS"),  a
broker-dealer  licensed by the National Association of Securities Dealers,  Inc.
("NASD").  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.

         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
connection  with a viatical  settlement,  the  policyholder  assigned his or her
policy to the Company,  which became the holder,  owner or certificate holder of
the policy and the  beneficiary  thereunder  with the right to receive  from the
insurance company the face value payable under the policy following the death of
the insured.  In the third quarter of 1996,  the Company  decided to sell all or
substantially  all of its  assets  at that  time.  See  "Asset  Sales;  Viatical
Settlement  Business." In February 1997, Point West Capital's Board of Directors
(the "Board")  decided to cease  purchasing new policies in connection  with the
Company's  viatical  settlement  business.  See Note 1 of Notes to  Consolidated
Financial  Statements.  The Company,  through its wholly owned  special  purpose
subsidiary,  Dignity  Partners  Funding  Corp.  I  ("DPFC"),  continues  to hold
policies  which are  pledged as  security  for the  Securitized  Notes  (defined
herein).  Point West Capital  continues to service the life  insurance  policies
held by  DPFC.  For a  discussion  of a  potential  default  by DPFC  under  the
Indenture  (defined  herein),  see  "Management's  Discussion  and  Analysis  of
Financial  Condition  and  Results of  Operations  -- Results of  Operations  by
Segment -- Viatical Settlements -- Potential Default by DPFC."

         The  Company  operates  in  four  business  segments:  Ventures  (small
business  loans  and  investments);  Allegiance  (loans  to  funeral  homes  and
cemeteries);  Viatical  Settlements,  which is conducted primarily through DPFC;
and  Other  (other  activities  of Point  West  Capital  and  PWS).  Information
regarding the income,  contributed net income (loss) and identifiable assets for
each of the Company's business segments is contained in Note 15 of the Company's
consolidated financial statements included herein.

         The Company  continues to evaluate new  business  opportunities  and to
seek advice from  financial  advisors to assist it in its strategy of developing
or acquiring new operating businesses. See

                                       1

<PAGE>


"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations -- Considerations Under the Investment Company Act of 1940."

The Company
-----------

     General
     -------

         Point West Capital was incorporated in the State of Delaware as Dignity
Partners,  Inc. in September  1992 and commenced  operations on January 2, 1993.
Effective   August  1,  1997,  its  name  was  changed  to  Point  West  Capital
Corporation.  The  Company's  principal  executive  offices  are located at 1700
Montgomery Street, Suite 250, San Francisco, California 94111, and its telephone
number is (415) 394-9467.

     Ventures
     --------

         In June 1997, the Company  formed Point West  Management and Point West
Ventures.  Point West Management is a limited  liability company wholly owned by
Point West Capital.  It was formed solely to serve as the general partner of one
or more small business investment  companies ("SBIC").  Point West Ventures is a
limited  partnership  operating as an SBIC.  Point West  Management  is the sole
general  partner and owns 99.981% of Point West Ventures.  Point West Capital is
one of the two  nominal  limited  partners  of Point West  Ventures.  Point West
Ventures  provides loans,  debt and equity capital to small companies as defined
by SBA regulations.  Point West Ventures commenced operations in August 1997 and
received  its SBIC  license from the Small  Business  Administration  ("SBA") in
September 1997.

     Allegiance
     ----------

         Allegiance  Capital is a limited  liability company formed in September
1997 as a specialty finance company to provide senior secured loans to owners of
funeral homes and  cemeteries.  Point West Capital has a 65% ownership  interest
in, and 95% voting  control of,  Allegiance  Capital and serves as the  managing
member.  Allegiance Capital's president and its vice president of marketing have
the  balance  of such  interests.  Allegiance  Capital  owns 100% of  Allegiance
Funding,  which is a special purpose subsidiary formed to acquire and securitize
loans  originated by Allegiance  Capital.  Pursuant to a Trust  Agreement  dated
August 1, 1998 (the "Allegiance Trust  Agreement"),  Allegiance Funding formed a
trust, Allegiance Trust I, to consummate a structured financing (the "Allegiance
Financing") which, through December 31, 1999, has provided $28.7 million of debt
to support Allegiance's lending activities.  Based upon current loan origination
activities, Allegiance expects to borrow an additional $5 million to $10 million
under the  Allegiance  Financing  prior to its April 15, 2000  expiration  date.
However,  no assurance  can be given that  Allegiance  will be able to originate
sufficient  loans  to  borrow  such  amount.  Allegiance  Capital  owns  100% of
Allegiance  Management,  which is a special purpose  subsidiary formed to manage
Allegiance Funding. Allegiance commenced operations in December 1997.

     DPFC
     ----

         DPFC is a wholly owned  subsidiary of Point West Capital formed for the
limited  purposes of issuing Senior Viatical  Settlement  Notes,  Series 1995-A,
Stated Maturity March 10, 2005 (the  "Securitized  Notes").  DPFC purchased life
insurance  policies  with  proceeds  of the  Securitized  Notes.  DPFC no longer
purchases policies,  but it continues to beneficially own the policies that have
not matured. Those policies are pledged as collateral for the Securitized Notes.
DPFC is a bankruptcy remote entity.

                                       2
<PAGE>



     PWS
     ---

         PWS  is  a  limited   liability  company  formed  in  July  1998  as  a
broker-dealer.  PWS is wholly  owned by Point West  Capital.  PWS  received  its
license from the NASD to become a licensed securities  broker-dealer in December
1998. In addition,  PWS is registered as a broker-dealer with the Securities and
Exchange  Commission  ("SEC")  and in  California,  New York and  several  other
states.  PWS commenced  operations in December 1998.  Operations for PWS in 1999
and 1998 were immaterial.

Asset Sales; Viatical Settlement Business
-----------------------------------------

     Introduction
     ------------

         In December 1996, the holders of the Company's Common Stock,  $0.01 par
value ("Common Stock"), authorized the Board to sell all or substantially all of
the assets of the Company.  The Company  subsequently sold  substantially all of
the  Company's  life  insurance  policies  other than the policies held by DPFC.
Substantially  all of these sales took place during  1997.  The sale of policies
held by DPFC,  all of which are pledged as security for the  Securitized  Notes,
requires  the consent of the Company  and the holders of the  Securitized  Notes
("Noteholders"). The Company and the Noteholders have not determined whether the
policies  will be sold or whether such a sale of policies is feasible.  Although
the Company and the Noteholders were previously in discussions that contemplated
a  purchase  of the  policies,  and  cancellation  of the  indebtedness,  by the
Noteholders,  these  discussions have ceased.  The Company continues to evaluate
its options related to DPFC policies. See "Management's  Discussion and Analysis
of Financial  Condition  and Results of  Operations  -- Results of Operations by
Segment -- Viatical  Settlements" and "-- Description of Securitized Notes." For
a  discussion  of  a  potential  default  by  DPFC  under  the  Indenture,   see
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations  -- Results of  Operations  by Segment  --  Viatical  Settlements  --
Potential Default by DPFC."

     Terms of Sale Agreements
     ------------------------

         Through   December  1997,  Point  West  Capital  entered  into  several
agreements to sell  substantial  portions of its portfolio of policies.  In 1998
and 1999 Point West Capital  entered into  agreements  to sell a small number of
policies.  None of the  purchasers is affiliated  with the Company or any of its
directors or officers. The sale agreements provided for the sale of an aggregate
of 375  life  insurance  policies.  The  agreements  contained  cross  indemnity
provisions  pursuant to which Point West  Capital  and the  purchaser  agreed to
indemnify  each  other  against  losses,   liabilities  or  damages  arising  in
connection   with  a  claim   under  any  policy  or  with  any  breach  of  any
representation  or warranty made by the  breaching  party in the  agreement.  By
December 31, 1999,  Point West Capital had  completed  the sale of (or otherwise
collected) all but six policies under these sales agreements.

     Viatical Business
     -----------------

         As of December 31, 1999, the Company held 463 policies,  all but six of
which were held through DPFC. The Company ceased purchasing policies in February
1997.  Therefore,  the  Company's  only  activities  in the viatical  settlement
business are  monitoring  and  collection  activities.  Point West  Capital,  as
servicer under the Securitized  Notes,  performs these functions with respect to
DPFC  policies.  For a  discussion  of a  potential  default  by DPFC  under the
Indenture,  see "Management's Discussion and Analysis of Financial Condition and
Results  of   Operations  --  Results  of  Operations  by  Segment  --  Viatical
Settlements -- Potential Default by DPFC."

                                       3

<PAGE>



         Monitoring

                  The  insureds  are   regularly   monitored  to  obtain  timely
         information  concerning  their status so that proceeds may be collected
         as  promptly  as  possible  following  the  death  of the  insured.  In
         addition,  the Company  monitors the policy to ensure it does not lapse
         because of a failure to pay timely  premiums.  Premiums are paid by the
         Company  unless a waiver  is in  place.  Some  protection  against  the
         failure to pay premiums is provided by  statutory or policy  provisions
         that require  insurance  companies  to provide  written  notice  before
         terminating a policy for failure to pay premiums. As owner of record of
         the policy,  the Company  generally  receives  those notices  directly.
         Furthermore,  the Company  monitors  the policy to ensure that  premium
         waivers are renewed and that,  when  required,  the policy is converted
         (e.g.,  from a group term policy to an individual whole life policy) in
         a timely manner. See "Management's Discussion and Analysis of Financial
         Condition and Results of Operations -- Results of Operations by Segment
         -- Viatical Settlements -- Certain Accounting Implications for DPFC."

         Collection

                  Once the Company learns of an insured's death, a request for a
         copy of the death certificate is filed in the appropriate  governmental
         office. The Company then files the death certificate with the insurance
         company  and  requests  payment of the  policy  proceeds.  The  Company
         monitors the collection  status until it receives the face value of the
         policy.

Consideration of Strategic Options and New Businesses
-----------------------------------------------------

         In September 1996, in light of the  uncertainties  facing the Company's
viatical settlement  business,  the Company engaged an investment bank to assist
the Company in the  evaluation  of its strategic  direction.  As a result of the
Company's  evaluation,  the  Company  embarked  on a  strategy  to become a more
broadly-based  specialty  financial  services company.  The Company continues to
pursue other potential business  opportunities and to seek advice from financial
advisors to assist it in its strategy of  developing  or acquiring new operating
businesses. See "Management's Discussion and Analysis of Financial Condition and
Results of  Operations --  Considerations  Under the  Investment  Company Act of
1940."

Ventures (Small Business Loans and Investments)
-----------------------------------------------

     Overview
     --------

         Point  West  Ventures  is  licensed  by the SBA as an SBIC.  Point West
Ventures  focuses on creating a  diversified  portfolio of loans to and debt and
equity investments in later-stage growth and expansion  companies.  From time to
time,  Point West Ventures  invests in early-stage  growth  companies.  To date,
Point  West  Ventures  has  focused  on  businesses  in the area of  e-commerce,
Internet and telecommunications.  Point West Ventures' loans and investments are
structured  in a variety of ways,  including  loans,  debt  investments  such as
subordinated  debt with equity  participation  through  warrants  or  conversion
rights, and investments in preferred and common stock.

     Regulation
     ----------

         As an SBIC,  Point West Ventures is required to make loans to or invest
in qualified  entities as defined by  regulations  promulgated by the SBA. These
entities are generally  companies  with a net worth of less than $18 million and
average net income of less than $6 million for the last two years. Additionally,
at least  20% of Point  West  Ventures'  loans and  investments  must be made to
entities with a

                                       4

<PAGE>


net worth of less than $6 million and average net income of less than $2 million
for the last two years. Point West Ventures holds an SBIC debenture license.  As
a result,  Ventures pays interest and other fees to the SBA instead of a portion
of its profits.

         SBIC's such as Point West Ventures are also limited with respect to the
rates of  interest  they can  charge on their  loans and debt  investments.  The
maximum  rate of interest  permitted  at present for loans is the greater of (i)
19% and (ii) 1100 basis points over the rate for ten year  debentures  issued by
SBIC's and funded through public  certificates  bearing the SBA's guarantee (the
"Debenture Rate") or  weighted-average  cost of capital incurred  (including SBA
debt). The maximum rate of interest permitted at present for debt investments is
the  greater of (i) 14% and (ii) 600 basis  points  over the  Debenture  Rate or
weighted-average cost of capital incurred (including SBA debt).

         Point  West  Ventures  is subject  to usury and other  similar  laws in
jurisdictions  in which it  operates  and may in the  future  become  subject to
licensing requirements as a lender in those jurisdictions.

     Origination & Investment Selection
     ----------------------------------

         Point West Ventures focuses on later-stage  growth  companies,  but has
also  provided  capital  to early and  mezzanine  stage  companies.  Point  West
Ventures seeks to lend to or invest in well-managed,  growing, public or private
companies that seek capital to finance a variety of activities. These activities
include  (1) new  product  development,  (2)  expansion  into new  markets,  (3)
increasing   production   capacity  or  (4)  the  acquisition  of  complementary
businesses.  The size of each individual  transaction by Point West Ventures has
historically  ranged from $100,000 to $3 million,  but the average size has been
$800,000. Point West Ventures' investments in small businesses are made with the
intent of having the loans  repaid  and  liquidating  the equity  portion of the
investments  after five years.  Although  Point West Ventures at the time of any
investment expects to dispose of the investment after five years, situations may
arise in which it may hold equity  securities  for a  different  period of time,
especially in the areas of e-commerce and the Internet which frequently  undergo
significant and rapid changes.

         Point West  Ventures  considers a number of criteria in making loan and
investment  decisions.  Although the criteria  below may not be applied in every
instance and their importance may vary depending on the relevant  circumstances,
the following  characteristics  generally are sought when evaluating a potential
borrower or  investment:  (1) highly skilled  management  with the capability to
organize  resources,  develop  products and exploit  market  opportunities,  (2)
superior growth and the presence of a clearly defined  marketing  strategy which
addresses  the  conditions  of  the  market,  the  needs  of the  customers  and
established competitive practices exhibited in the relevant industry, (3) strong
demonstrable  cash flows,  historical or  projected,  or other  collateral,  (4)
access  to  additional  capital  and  (5) the  existence  of a  reasonable  exit
strategy.  Point West Ventures employs third party experts where  appropriate to
assess the market  opportunity  or  operational  capabilities  of the  potential
borrower or investment.

         Point West Ventures locates potential SBIC investments through contacts
with investment bankers, fund managers, lenders, venture capitalists,  leveraged
buyout  sponsor  groups  and other  SBIC's.  Point  West  Ventures  uses its own
analysts  that review  informational  packages  in order to  identify  potential
investments.  After  identifying  investments  that meet  Point  West  Ventures'
investment  criteria,  the analysts  conduct a more thorough  investigation  and
analysis of the applicant.  The process often includes on-site visits, review of
historical and prospective  financial  information,  interviews with management,
employees,  customers  and  vendors  of the  applicant,  background  checks  and
research on the applicant's product, service or particular industry.

                                       5

<PAGE>



         Point West  Ventures  has an  Investment  Committee  that  consists  of
Bradley N.  Rotter,  Alan B. Perper and John Ward Rotter,  Point West  Capital's
executive  officers.  All loan and  investment  decisions  are  presented to the
Investment Committee for their approval prior to commitment.

     Monitoring Investments
     ----------------------

         Portfolio  loans and  investments  have a  designated  employee  who is
responsible for periodic contact and all initial troubleshooting.  Additionally,
this individual carefully reviews operating results,  cash flow, working capital
and financial structure against budgets. Any additional financing,  divestiture,
foreclosure or restructuring must be approved by the Investment Committee.

     Competition
     -----------

         Point  West   Ventures'   principal   competitors   include   financial
institutions,  venture capital firms and other non-traditional  lenders. Many of
these entities have greater  financial and managerial  resources than Point West
Ventures.  The  Company  believes  that  many of these  entities  do not have an
interest in the relatively small size of transactions  which Point West Ventures
targets.  Additionally,  the Company believes that Point West Ventures  competes
effectively  with  those  entities  primarily  on the  basis of its  quality  of
service,  reputation and timely decision-making  process, and to a significantly
lesser  degree  on the  interest  rates or other  terms  it  offers  on loans or
investments to those seeking capital.

Allegiance (Loans to Funeral Homes and Cemeteries)
--------------------------------------------------

     Overview
     --------

         Allegiance provides long-term debt to experienced owners of established
funeral home and cemetery  businesses on a senior  secured basis at  competitive
rates.  The funeral home and cemetery  businesses  comprise  what is  frequently
called the "death care" industry.  Death care historically has been a relatively
stable and mature industry, partly due to the inevitable nature of mortality. In
addition,  most areas of the country are already  served by one or more  funeral
homes and cemetery establishments and opportunities for expansion mostly consist
of consolidation of existing establishments.  Though subject to consolidation in
recent years, the death care industry remains highly fragmented.  The for-profit
ownership  base within the death care industry is split among private  entities,
primarily  smaller  family-owned  businesses,  and  a  number  of  large  public
corporations,  including  Service  Corporation  International,  Loewen Group and
several  others.  A variety of  factors,  including  turnover  among the base of
privately  owned death care  businesses and the  recognition of the  substantial
potential value of these businesses,  have combined to create demand for capital
within the industry.  These capital needs have been  underserved  by traditional
lending sources.

         Allegiance  generally  seeks  to  finance  funeral  home  and  cemetery
businesses  which are  well-established  by virtue  of years of  service  in the
communities  they  serve and  which are  operated  by  owners  with  substantial
experience  and  expertise in operating  such  businesses.  Although some of the
public market participants such as Service  Corporation  International and Lowen
Group have experienced  significant declines in the price of their common stock,
the Company believes that the heritage,  reputation and attendant goodwill built
up by privately owned funeral homes and cemeteries  provide superior  collateral
value.

     Marketing & Origination
     -----------------------

         Allegiance  targets  family-owned  and other private  owners of funeral
home and cemetery  establishments.  Loans are sourced by marketing employees and
independent  parties both directly through

                                       6

<PAGE>


the  solicitation  of  owners  of  funeral  homes and  cemetery  businesses  and
indirectly  through contacts with industry  associations,  professional  groups,
business advisors and others. Origination activities are supported through print
advertising  in industry  trade  publications,  newsletters  and  attendance  at
industry conferences.

         Loans are offered with fixed or adjustable interest rates, generally in
minimum  amounts of  $500,000.  Loan  proceeds may be used by the borrower for a
variety of purposes,  including  acquisitions,  debt refinancing and stockholder
buyouts. Allegiance charges a loan arrangement fee payable at closing as well as
a commitment fee, which may be credited against the loan arrangement fee paid at
closing,  and may  charge  other fees from time to time.  Contractual  repayment
terms require monthly payments  sufficient to pay accrued interest and a portion
of principal  sufficient to amortize the loan balance over a long-term repayment
schedule, generally 15 to 18 years.

         Allegiance  obtains a senior,  secured  position  with  respect  to the
borrowers  and  business  establishments  it  finances.  Security  for  loans is
generally  provided  through a  mortgage  providing  a first  priority  security
interest in the owned or leased real  property  associated  with the  borrower's
business  establishment(s);  a first priority  security  interest in the related
personal property, intangible assets and intellectual property; a first priority
security  interest in the  borrower's  stock (if a  corporation);  and  personal
guarantees of the borrower's principals.

     Underwriting
     ------------

         Loan  commitments  are  made  based  on  an  in-depth  qualitative  and
quantitative  underwriting analysis. This analysis focuses on the applicant, its
ownership and management, and the funeral home and/or cemetery establishments it
owns and  operates.  The  process  begins  with the  collection  of  information
concerning the  prospective  borrower.  Information  collected from the borrower
includes  detailed  information  regarding  ownership,  business  locations  and
characteristics,  personnel,  real and personal property used in connection with
the business, the market environment in which the business operates, banking and
trade references and historical financial statements and tax returns.

         The  management  review  seeks to assess the quality,  sufficiency  and
commitment of management,  with an emphasis on the borrower's owners or managers
("key  principals").  This  assessment  includes a review of the key principals'
backgrounds,   including  education,  professional  experience,  other  business
experience and other activities such as community  involvement.  Staffing levels
of licensed and other professionals are reviewed to determine  sufficiency given
historic service volume and any projected  increases.  Allegiance  requires that
the funeral  home and  cemetery  establishments  financed by it, and the funeral
directors and embalmers associated with such  establishments,  be fully licensed
in compliance with applicable legal requirements.

         The business portion of the underwriting  analysis includes a review of
tangible aspects of the business such as property condition and appearance,  and
intangible  factors  affecting  business value and  economics,  such as history,
location and market demographics. Financial statements are analyzed to determine
historic  adjusted  cash  flow in light of the  proposed  loan  amount  and debt
service burden. In addition,  third-party  consultants  independently  determine
adjusted  cash flow and assess  business  value.  Business  value of the subject
business is assessed based primarily on its historic  financial  performance and
secondarily  on the real property and other assets of the business.  Assessments
of business value are used to determine a loan-to-business value ratio.

         Prior to  closing,  any  real  property  to be  pledged  as  collateral
undergoes an environmental  review.  The Company uses third-party  environmental
service  providers  for the  environmental  review.  In  addition

                                       7

<PAGE>

to providing  assurance as to the quality of the real property  collateral,  the
review  generally  meets  standards for due diligence  developed to avoid lender
liability.

         All loan decisions are presented to Allegiance's  Investment  Committee
for its approval prior to commitment. The committee is comprised of two of Point
West Capital's  executive  officers and the President of Allegiance.  Allegiance
relies on outside legal counsel to prepare loan documents and to facilitate loan
closings.

         Allegiance  may,  from time to time in the future,  purchase from other
lenders in the death care  industry  portfolios  of existing  loans held by such
lenders.  In such case, the underwriting  procedures followed by such lenders in
connection  with loan  originations  and by Allegiance  in connection  with such
purchase  may be  different  from those  described  above.  However,  Allegiance
intends, to the extent reasonable,  to undertake  underwriting and due diligence
procedures  that are prudent in the  circumstances  and that are  established by
Allegiance's Investment Committee.

     Servicing
     ---------

         Point West Capital  performs  certain  basic loan  servicing  functions
related to loans made by Allegiance. These functions include (1) sending monthly
billing  statements and other  notices,  (2) tracking and posting loan payments,
(3) directing the transfer of loan payments to the appropriate  accounts and (4)
maintaining loan files.

         In  addition  to  the  functions   performed  by  Point  West  Capital,
Allegiance  performs loan portfolio  surveillance  functions in order to monitor
credit quality.  Borrowers provide certain information  periodically,  including
quarterly  and annual  financial  statements  as well as  supplemental  business
activity  information.  Allegiance uses this information to monitor periodically
covenant  compliance  and  the  credit  quality  of  the  borrowers'  underlying
businesses.  As a senior secured lender, in the event of default,  Allegiance is
in a relatively  strong position to control any disposition of the businesses it
finances. However, the monitoring process is intended to help borrowers identify
and address  problems to avoid  defaults.  To date,  Allegiance has had only one
non-performing loan. This loan is in the foreclosure process. See "Item 3--Legal
Proceedings."

     Competition
     -----------

         Allegiance faces  competition  from  alternative  providers of capital,
including primarily financial institutions,  the financial services industry and
to a lesser  extent other  companies in the death care  industry.  The financial
services  industry  is  highly   competitive.   Allegiance  competes  with  both
traditional  lenders such as commercial banks,  thrifts and finance companies as
well as specialized  lenders such as Provident  Services,  Inc. (a subsidiary of
Service  Corporation  International) and Franchise  Mortgage  Acceptance Co. The
Company  believes  that  Allegiance's  focus on and  knowledge of the death care
industry, its ability to offer loans on terms which meet the needs of owners and
acquirers of death care  businesses,  and its  attractiveness  to borrowers as a
non-industry lender, provide it with the ability to compete effectively.

     Regulation
     ----------

         In October  1998,  Allegiance  Capital  received  its  finance  lenders
license  from the State of  California.  Allegiance  makes  filings  or  obtains
licenses  as  counsel  deems   appropriate  to  meet  individual  state  lending
requirements.  It is also  subject  to  usury  and  other  similar  laws in such
jurisdictions.

                                       8

<PAGE>

Broker-Dealer Activities
------------------------
     Overview
     --------

         PWS is a  broker-dealer  licensed by the NASD and  registered  with the
SEC. PWS is also licensed as a broker-dealer in California, New York and several
other  states.  PWS  intends  to offer  investment  banking  services  targeting
e-commerce,  telecommunications,   Internet  and  other  growth  companies.  PWS
commenced operations in December 1998. The full scope of services to be provided
by PWS has not yet been  determined.  To  date,  PWS'  operations  have not been
material.

     Competition
     -----------

         PWS  encounters  intense  competition  in  its  business  and  competes
directly  with  numerous   securities   firms,   virtually  all  of  which  have
substantially  greater capital and other resources.  PWS also faces  competition
from banks, insurance companies and financial institutions. The companies in the
industries to which PWS targets its investment  banking  services are relatively
small. PWS believes that its larger competitors will not target those companies.
The  Company  hopes  that PWS will be able to  compete  effectively  with  those
competitors  primarily  on the  basis of the  quality  of its  service,  product
selection and price. However,  because of the uncertainty regarding the scope of
the services to be provided by PWS, the Company cannot  predict the  competition
PWS will encounter or its ability to compete.

     Regulation
     ----------

         The  securities  industry in the United  States is subject to extensive
regulation  under  federal  and  state  laws.  The  SEC  is the  federal  agency
responsible for the administration of the federal securities laws. However, much
of the  regulation  of  broker-dealers  has been  delegated  to  self-regulatory
organizations,  principally  the  NASD and the New York  Stock  Exchange.  These
self-regulatory  organizations adopt rules (which are subject to approval by the
SEC) for  governing  the industry and conduct  periodic  examinations  of member
broker-dealers.  Securities  firms  are  also  subject  to  regulation  by state
securities commissions in the states in which they are registered.

         The regulations to which  broker-dealers  are subject cover all aspects
of the securities business,  including sales methods, trading practices, capital
structure, record keeping and the conduct of directors,  officers and employees.
Additional  legislation,  changes  in  rules  promulgated  by  the  SEC  and  by
self-regulatory organizations or changes in the interpretation or enforcement of
existing  laws and rules  often  directly  affect  the method of  operation  and
profitability of broker-dealers.  The SEC and the self-regulatory  organizations
may  conduct  administrative  proceedings  that can  result  in  censure,  fine,
suspension  or expulsion of a  broker-dealer,  its  officers or  employees.  The
principal  purpose  of  regulation  and  discipline  of  broker-dealers  is  the
protection  of clients and the  securities  markets  rather than  protection  of
creditors and shareholders of broker-dealers.

Other Investments
-----------------

         From time to time, Point West Capital invests in companies directly and
not through Ventures. These activities include loans and equity investments.

Employees
---------

         As of December 31, 1999, the Company employed 19 individuals,  three of
whom (in  addition to Point West  Capital's  executive  officers)  also  perform
services  on  behalf of The  Echelon  Group of

                                       9

<PAGE>


Companies,  LLC ("Echelon"),  a financial services company.  Echelon is owned by
Point West Capital's  executive  officers.  None of the Company's employees is a
member of a labor union.  The Company  believes that it maintains good relations
with its employees.

ITEM 2--PROPERTIES
------------------

         The Company currently leases  approximately 6,150 square feet of office
space in San Francisco which it shares with Echelon.  Point West Capital,  which
is the lessee under the lease, charges Echelon for 20% of the rent of the entire
office space. See "Certain  Relationships and Related Transactions." The Company
believes  that  its  current  office  space  will be  adequate  for its  current
operations  through the  expiration  of the lease in May 2004.  However,  if the
Company  is  successful  in  expanding  into new  businesses,  it might  require
additional office space.

ITEM 3--LEGAL PROCEEDINGS
-------------------------

         From time to time, the Company is involved in routine legal proceedings
incidental to its business,  including  litigation in connection  with (i) loans
and  investments  made by  Point  West  Ventures  and  Allegiance,  and (ii) the
collection of amounts owed under life  insurance  policies by insurance  company
obligors. The Company does not expect that these proceedings, individually or in
the aggregate,  will have a material  adverse effect on the Company's  financial
position, liquidity or results of operations.

         On  December  19,  1996,  a  complaint  was filed in the United  States
District  Court,  Northern  District of  California  (the  "Court")  (Docket No.
C96-4558)  against Dignity Partners,  Inc. (now Point West Capital  Corporation)
and each of its  directors by three  individuals  purporting to act on behalf of
themselves  and an alleged class  consisting of all  purchasers of the Company's
common stock during the period February 14, 1996 to July 16, 1996. The complaint
alleges that the defendants  violated  Section 10(b) of the Securities  Exchange
Act of 1934 and Rule 10b-5  thereunder  and Section 11 of the  Securities Act of
1933 and seeks, among other things,  compensatory  damages,  interest,  fees and
costs. The allegations were based on alleged misrepresentations in and omissions
from the Company's  registration statement and prospectus related to its initial
public  offering and certain  documents  filed by the Company under the Exchange
Act. In the second quarter of 1999, a settlement in principle was reached and on
February 25, 2000, the Court approved a settlement  agreement  pursuant to which
all claims  against all  defendants  will be dismissed and $3.15 million will be
paid to the plaintiffs.  Under the terms of the Company's D&O insurance  policy,
the Company's insurer paid 70% of the settlement amount. As a result, during the
second quarter of 1999, the Company  recorded an accrued  litigation  settlement
liability of $3.15 million,  an expense of $945,000,  and an accounts receivable
from its insurance company of $2.2 million (which is included in other assets in
the  Consolidated  Balance Sheet and was paid into an escrow  account in January
2000).

         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 Echelon by an individual
purporting  to act on behalf of himself and an alleged  class  consisting of all
purchasers of the Company's  common stock during the period February 14, 1996 to
July 16, 1996. The complaint alleges that the defendants  violated section 25400
of the California  Corporate Code and seeks to recover damages.  The allegations
are based on alleged  misstatements,  concealment and/or  misrepresentations and
omissions of allegedly  material  information  in connection  with the Company's
initial  public  offering and subsequent  disclosures.  The case has been stayed
since its  inception by agreement  of the parties.  However,  the claims in this
case are covered by the settlement  agreement  described  above and will also be
dismissed pursuant to the settlement agreement described above

                                       10

<PAGE>


         In October 1999,  Allegiance brought an action in the District Court of
Webb County,  Texas seeking to collect on a defaulted  loan with an  outstanding
principal  balance of $2.1 million.  In response to the lawsuit,  on October 29,
1999, the defendants filed a counterclaim  against  Allegiance and a third-party
petition against an individual who is an officer of Allegiance. The counterclaim
and the third-party  petition allege that Allegiance and the Allegiance  officer
committed fraud, conversion,  deceptive trade practices,  negligence,  breach of
fiduciary duty, negligent misrepresentation, conspiracy and other wrongful acts,
and  seeks,   among  other  things,   compensatory   and  punitive  damages  (or
cancellation of indebtedness), interest, fees and costs. The defendants retained
a consulting firm owned by the Allegiance  officer to consult in the acquisition
of a funeral home and to assist in financing such  acquisition.  The defendants'
allegations  and the third-party  petition are based on (i) allegedly  erroneous
advice  provided  by the  Allegiance  officer,  (ii) an  alleged  failure by the
Allegiance  officer to disclose his  relationship  with Allegiance and (iii) the
allegedly  wrongful  exercise  by  Allegiance  of its  rights in the  collateral
securing the  defaulted  loan.  The Company  believes that the  counterclaim  is
without  merit and intends to  prosecute  the  original  action,  and defend the
counterclaim, vigorously.

ITEM 4--SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
-----------------------------------------------------------

         No  matters  were  submitted  to a vote of the  Company's  stockholders
during the fourth quarter of 1999.

                                       11


<PAGE>


                                     PART II
                                     -------

ITEM 5--MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
-------------------------------------------------------------
        STOCKHOLDERS MATTERS
        --------------------


         Point West Capital's  Common Stock trades on the National Market System
of The Nasdaq Stock  Market(R)  under the symbol "PWCC." As of February 7, 2000,
there were 118 holders of record of Common  Stock,  including  banks,  brokerage
firms and other nominees.  A substantial portion of the publicly-held  shares of
Common Stock are held in book-entry  form.  As of February 7, 2000,  the Company
estimates  that  there  were more  than 500  beneficial  owners of Common  Stock
including more than 500 round lot holders.  The following table sets forth,  for
the  fiscal  quarters  indicated,  the high and low sales  prices for the Common
Stock on The Nasdaq Stock Market(R).

                                 1999                    High          Low
                                 ----                    -----         ---
                First Quarter ...................... $   23 7/8    $   4 5/8
                Second Quarter......................     29 3/4        7
                Third Quarter.......................     11 1/8        4 11/16
                Fourth Quarter......................     19 6/7        4 3/8

                                 1998                    High          Low
                                 ----                    ----          ---
                First Quarter ...................... $    6        $   3 3/4
                Second Quarter......................      7 1/8        4 3/4
                Third Quarter.......................      6            4
                Fourth Quarter......................      7            2 1/4

         The  Company  has  never  declared  or paid any cash  dividends  on its
capital stock. The indenture pursuant to which the Securitized Notes were issued
(the "Indenture")  limits the Company's ability to pay dividends by restricting,
prior to repayment in full of the  Securitized  Notes,  the Company's  access to
cash generated through the collection of pledged policies. The Company currently
intends  to  retain  its  future  earnings,  if any,  to  finance  its  existing
businesses and any new  businesses.  Therefore,  the Company does not anticipate
paying cash dividends on the Common Stock for the foreseeable future.

                                       12


<PAGE>


ITEM 6--SELECTED FINANCIAL DATA
-------------------------------

         The  data  presented  below  should  be read in  conjunction  with  the
consolidated financial statements and notes thereto and "Management's Discussion
and  Analysis  of  Financial  Condition  and  Results  of  Operations"  included
elsewhere herein. Because the Company changed its accounting policy with respect
to the viatical  settlement  business  effective for all periods beginning after
June 30, 1996 and ceased the  viatical  settlement  business  in February  1997,
information  for  1996  and 1995  and as of  December  31,  1996 and 1995 is not
comparable  to later periods or as of  subsequent  year ends.  In addition,  two
businesses  started  in the second  half of 1997  generated  substantially  more
activity in 1999 compared to 1998 and 1997

<TABLE>
<CAPTION>

                                                                          Years Ended December 31,
                                                                          ------------------------
                                                              1999        1998        1997        1996        1995
                                                              ----        ----        ----        ----        ----
                                                               (Dollars  in    thousands, except per share amounts)
                                                               ----------------------------------------------------
<S>                                                           <C>         <C>         <C>         <C>         <C>


Statements of Operations Data:
-----------------------------
Earned discounts on life insurance  policies (1).            $  --       $  --       $  --      $ 3,697     $ 6,933
Earned  discounts   on  prior   maturities    and
     matured policies (1)........................              204         439         489        1,782          --
Interest income..................................            3,314       1,494       1,184          783         267
Net gain (loss) on securities....................           15,785       (999)         680           --          --
Gain (loss) on assets sold.......................                8         165       1,463        (180)          --
Total income.....................................           19,718       1,334       3,918        6,405       7,389
Interest expense.................................            4,963       3,680       3,599        3,984       3,352
Provision for loss on assets held for sale.......               --          --         328        3,140          --
Loss on investment in   wholly  owned   financing
     subsidiary..................................               --          --          --        6,940          --
Total expenses...................................           10,476       7,279       6,795       17,118       5,394
Income (loss)  before income  taxes,     minority
     interest and  net  loss  in   wholly   owned
     financing subsidiary charged  to reserve for
     equity  interest............................            9,242     (5,945)     (2,877)     (10,713)       1,996
Income tax benefit (expense).....................              590         (6)         (4)          526       (625)
Net  loss  in  wholly owned financing  subsidiary
     charged to reserve for equity interest......               --       2,300       3,891          488          --
Net income (loss) (2)............................            9,832     (3,650)       1,011      (9,699)         803
Basic earnings (loss) per share (3)..............           $ 2.95     $(1.12)      $ 0.29      $(2.46)      $ 0.51
Diluted earnings (loss) per share (3)............           $ 2.70     $(1.12)      $ 0.28      $(2.46)      $ 0.42

Balance Sheet Data (at December 31):
------------------------------------
Cash and cash equivalents........................         $ 12,836     $ 6,668    $ 10,040      $ 6,586     $ 1,057
Investment securities............................            9,024       2,113       5,817           --          --
Loans receivable.................................           35,467      10,188       4,016           --          --
Purchased life insurance policies................           31,728      33,893      36,587       41,246      48,938
Non-marketable securities........................            5,933       5,397       1,658        3,000          --
Total assets.....................................          101,526      62,443      62,969       68,944      58,226
Accrued litigation settlement....................            2,205          --          --           --          --
Reserve  for  equity  interest in   wholly  owned
     financing subsidiary........................               --          --       2,300        6,453          --
Total revolving certificates.....................            4,200       5,400          --           --          --
Total long-term debt (4).........................           66,028      41,529      38,804       41,218      40,549

                                       13
</TABLE>


<PAGE>


<TABLE>
<CAPTION>


                                                                          Years Ended December 31,
                                                                          ------------------------
                                                              1999        1998        1997        1996        1995
                                                              ----        ----        ----        ----        ----
                                                               (Dollars  in    thousands, except per share amounts)
                                                               ----------------------------------------------------
<S>                                                           <C>         <C>         <C>         <C>         <C>



Total liabilities................................           73,983      47,613      41,703       48,802      46,680
Total stockholders' equity (2)...................           27,543      14,830      21,266       20,142       4,866

Operating Data
--------------
Ventures
--------
Number  of   loans  and   investments  originated
    during the year..............................               16           6           2           --          --
Number of  loans  and   investments  outstanding,
    end of year..................................               15           6           2           --          --
Aggregate  amount   of   loans   and  investments
    originated during year at cost...............         $ 11,204     $ 6,695     $ 1,250           --          --
Aggregate  amount  of   loans   and   investments
     outstanding, end of year at cost............          $ 9,285     $ 6,456     $ 1,250           --          --

Allegiance
----------
Number of loans originated during year...........               16           4           1           --          --
Number of loans outstanding, end of year.........               21           5           1           --          --
Aggregate  principal amount  of  loans originated
     during year                                          $ 25,075     $ 5,425     $ 3,826           --          --
Aggregate     principal     amount     of   loans
     outstanding, end of year....................         $ 33,778     $ 9,103     $ 3,826           --          --
Interest accrued during year (5).................          $ 1,729      $  582       $  12           --          --
Weighted-average    interest    rate   on   loans
     originated during year (6)..................             9.9%        9.2%        9.4%           --          --
Weighted-average    interest    rate   on   loans
     outstanding, end of year (6)................             9.8%        9.3%        9.4%           --          --
Weighted-average   cost    of    funds   on  debt
     outstanding, end of year (7)................             8.4%        8.2%          --           --          --

<FN>


 --

(1)  See  "Management's  Discussion  and  Analysis of  Financial  Condition  and
     Results  of  Operations  - Results  of  Operations  by  Segment -  Viatical
     Settlements - Method of Accounting for Viatical Settlements."
(2)  Includes  minority interest of $568 in 1995 on the statements of operations
     data and minority interest of $6,680 in 1995 on the balance sheet data. The
     minority interest was eliminated in 1996.
(3)  Reflects the following  transactions as if such transaction had occurred at
     the  beginning  of 1995 and 1996:  (a) On September  30,  1995,  Point West
     Capital  and its then  sole  stockholder,  The  Echelon  Group  Inc.  ("Old
     Echelon"),  which was owned  entirely  by Point  West  Capital's  executive
     officers,  entered  into  a  series  of  transactions  (collectively,   the
     "Reorganization")  to separate  the business of Point West Capital from Old
     Echelon's  other business  interests;  (b) On January 12, 1996,  Point West
     Capital  effected a reverse stock split pursuant to which each  outstanding
     share of Common Stock was converted  into .7175 of a share of Common Stock;
     (c) In  February  1996,  all  outstanding  shares of Point  West  Capital's
     Cumulative  Pay-in-Kind  Preferred Stock were converted into 321,144 shares
     of  Common  Stock.  The  Reorganization  included  a sale of  assets by Old
     Echelon to Echelon,  which was also owned  entirely by Point West Capital's
     executive  officers,  and a merger of Old Echelon into Point West  Capital.
     Point West Capital's initial public offering occurred in February 1996.
(4)  Includes term certificates,  securitized notes payable,  debentures payable
     and other long term liabilities.
(5)  Includes  origination  fees  recognized  over the life of the related loans
     using the level yield method. See "Management's  Discussion and Analysis of
     Financial  Condition  and Results of  Operations - Results of Operations by
     Segment - Allegiance - Method of Accounting for Loans."
(6)  Includes one loan  currently in default;  excludes  origination  fees.
(7)  Reflects cost of term certificates and revolving certificates.

</FN>
</TABLE>

                                       14

<PAGE>


ITEM 7--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  at  December  31,  1999  and  results  of
operations  for the Company for the three years ended  December 31, 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
consolidated  financial statements and related notes appearing elsewhere herein.
In  addition,  two  businesses  started  in the  second  half of 1997  generated
substantially more activity in 1999 compared to 1998 and 1997.

Overview
--------

         The Company is a specialty  financial  services company.  The Company's
financial statements consolidate the assets, liabilities and operations of DPFC,
Ventures,  Allegiance  and PWS. The principal  business  activity of the Company
through  February 1997 was to provide  viatical  settlements  for terminally ill
persons.  See  "Cessation  of  Viatical  Settlement  Business;  Sale of Assets."
Subsequent  to  February  1997,  the  Company  has  become a more  broadly-based
specialty  financial services company. To that end, the Company has expanded its
financial  services business through  Ventures,  Allegiance and PWS. The Company
continues to evaluate new business opportunities.  Ventures, Allegiance and PWS,
whose business activities are described under "Item 1--Business," may or may not
be indicative of the types of business  opportunities  the Company will continue
to  pursue.  See  "Method  of  Consolidation"  and  "Considerations   Under  the
Investment  Company  Act of 1940"  below.  No  assurance  can be given  that the
Company will be successful in identifying any new business opportunities or that
any such enterprise will be successful.

Cessation of Viatical Settlement Business; Sale of Assets
---------------------------------------------------------

         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
the third quarter of 1996, the Company decided to sell all or substantially  all
of its assets at that time. In February 1997, Point West Capital's Board decided
to cease the  Company's  viatical  settlement  business.  See Note 1 of Notes to
Consolidated  Financial  Statements.  Through December 31, 1999, the Company had
entered into  agreements  to sell 375 policies  with an aggregate  sale price of
$19.5 million,  representing  $29.3 million in aggregate face value. By December
31, 1999, the Company had completed the sale of (or otherwise collected) all but
six  policies  (having an aggregate  face value of  $358,000)  under these sales
agreements.  Substantially  all of the sales took place during 1997.  Point West
Capital  continues to service the life insurance  policies held by DPFC which at
December 31, 1999 totaled 457 policies  with a face value of $36.6 million and a
carrying value of $31.7 million. See "Item 1--Business -- Asset Sales;  Viatical
Settlement Business -- Viatical Business."

         As a result of the decision in the third quarter of 1996 to sell all or
substantially all of the Company's assets,  the Company  reclassified all of its
assets at that time (other than the policies held by DPFC) to a  "held-for-sale"
category  during  the third  quarter  of 1996.  Accordingly,  these  assets  are
accounted for at the lower of carrying value or fair value less cost to sell.

Method of Consolidation
-----------------------

     The Company's financial statements consolidate the assets,  liabilities and
operations of DPFC,  Ventures,  Allegiance  and PWS. See "Item  1--Business--The
Company" and Note 1 of Notes to

                                       15

<PAGE>


Consolidated  Financial  Statements.  Operations  for PWS in 1999 and 1998  were
immaterial.  With the exception of  Allegiance,  Point West Capital  directly or
indirectly  owns  virtually  all of the  equity  interests  in its  consolidated
entities.

         Point West has a 65%  ownership  interest in and 95% voting  control of
Allegiance Capital.  Allegiance Capital owns 100% of both Allegiance Funding and
Allegiance  Management.  Allegiance Funding owns approximately 15% of Allegiance
Trust I. 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  ("SFAS
125") because the terms of the Allegiance  Financing entitle  Allegiance Funding
to  repurchase  loans  prior to the  point at which the cost of  servicing  them
becomes burdensome.  Accordingly, the Allegiance Financing will not receive gain
on sale treatment under SFAS 125. The loans and borrowings  under the Allegiance
Financing are reflected in the Consolidated Balance Sheets.

         Point West formed  Allegiance  Capital in September  1997, and made the
only capital contribution to Allegiance Capital. During 1998, Point West Capital
was allocated  99.5% of the interest on loans through  November 20, 1998,  which
was the initial funding date for the Allegiance Financing. Point West Capital is
allocated a preferred return (based on the weighted-average interest rate of all
loans outstanding) to the extent that Point West Capital's capital investment in
Allegiance exceeds $3.0 million. In addition,  net profits of Allegiance Capital
for each calendar year are allocated to Point West Capital 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 is 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  Capital to the extent that in each
year sufficient profits are available with no carry forward provided.

Share Repurchase Program
------------------------

         In October 1996, the Board approved a share repurchase program pursuant
to which  the  Company  was  authorized  to  purchase  from time to time up to 1
million shares of Common Stock at prevailing  market prices.  In June 1997, such
authority  was increased to 1.04 million  shares of Common Stock.  In June 1997,
the Company  completed  the share  repurchase  program,  having  repurchased  an
aggregate of 1.04 million shares at a weighted-average price of $2.77 per share.

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

     Year Ended December 31, 1999 Compared to Year Ended December 31, 1998
     ---------------------------------------------------------------------

         Total Income.  Total income increased $18.4 million to $19.7 million in
1999 from $1.3  million in 1998  primarily  due to $13.0  million of net gain on
securities  recognized by Ventures.  Also  contributing  to the increase was (i)
$2.8  million of net gain on  securities  sold by Point West Capital and (ii) an
increase in interest  income  primarily  related to an increase in loans held by
Allegiance and Ventures. Offsetting the increase in 1999 compared to 1998 was an
aggregate  decrease  of $393,000 in income  related to the  Viatical  Settlement
segment.  See "Results of Operations by Segment -- Viatical  Settlements -- Year
Ended  December 31, 1999 Compared to Year Ended December 31, 1998 and Year Ended
December 31, 1998 Compared to Year Ended  December 31, 1997 -- Earned  Discounts
on Matured Policies" and " -- Gain on Assets Sold."

         Total Expenses. Total expenses increased 43.8% to $10.5 million in 1999
from $7.3 million in 1998.  This  increase was  primarily  due to a $1.3 million
increase  in  interest  expense  related  to  borrowings

                                       16

<PAGE>


by Allegiance. Also contributing to the increase were (i) $945,000 of litigation
expense  recorded in 1999 reflecting the net amount of the settlement  agreement
related to the pending  federal  class  action and state  alleged  class  action
lawsuits not covered by insurance, (ii) an increase in compensation and benefits
for  employees  in 1999,  (iii) an increase in legal and  professional  expenses
related  to  Allegiance,  and  (iv) a  write-off  of a  loan.  See  "Results  of
Operations  by Segment -- Other -- Other General and  Administrative  Expenses."
The settlement agreement is subject to Court approval.

         Income  Taxes.  The income tax benefit of $590,000  recorded in 1999 is
primarily  related  to  the  elimination  of the  valuation  allowance  and  the
utilization of the net operating  losses (NOLs) to offset net gain on securities
recognized by Ventures. See "Income Taxes." In 1998, the Company recorded $5,600
for minimum state income taxes.  See Note 8 of Notes to  Consolidated  Financial
Statements.

         Net Loss in Wholly Owned  Financing  Subsidiary  Charged to Reserve for
Equity Interest. The DPFC net loss of $4.2 million for 1999 and $1.7 million for
1998 was included in the Company's net income (loss). During 1998, an additional
$2.3 million of DPFC loss was charged against the reserve for equity interest in
wholly owned financing subsidiary.  Prior to the depletion of the reserve during
the third  quarter of 1998,  losses were charged  against the reserve for equity
interest  in wholly  owned  financing  subsidiary.  After the  reserve was fully
depleted during the third quarter of 1998,  DPFC's losses have been reflected in
the Company's net income (loss). All additional losses of DPFC will be reflected
in the  Company's  net income  (loss)  during the  periods in which such  losses
occur.

     Year Ended December 31, 1998 Compared to Year Ended December 31, 1997
     ---------------------------------------------------------------------

         Total Income. Total income decreased 66.7% to $1.3 million in 1998 from
$3.9  million  in 1997  due  primarily  to a $1.0  million  loss  on  securities
recognized  by Ventures in 1998.  Total income for 1997 included a $680,000 gain
on securities sold by Point West Capital.  Also contributing to the decrease was
a $1.3 million decrease in the gain on life insurance policies sold.  Offsetting
this decrease was an increase of $310,000 for 1998 in interest income related to
the activities of Allegiance and Ventures.

         Total Expenses.  Total expenses  increased 7.4% to $7.3 million in 1998
from $6.8 million in 1997.  Contributing  to the increase  were:  (i) a $363,000
increase in compensation and benefits  resulting from the hiring of employees to
support  Allegiance's  and PWS' activities and an increase in salaries and other
benefits for other  employees  for 1998;  and (ii) a $253,000  increase in other
general and  administrative  expenses due to increased premium expenses incurred
in  connection  with life  insurance  policies  held by DPFC.  The 1997 expenses
include a $328,000 provision for loss on assets held for sale.

         Income Tax Expense.  In 1998, the Company  recorded  $5,600 for minimum
state income taxes versus  $4,000 in 1997.  See Note 8 of Notes to  Consolidated
Financial Statements.

         Net Loss in Wholly Owned  Financing  Subsidiary  Charged to Reserve for
Equity Interest.  The DPFC net loss of $2.3 million and $3.9 million recorded in
1998 and 1997,  respectively,  were included in the Company's loss before income
taxes and net loss in wholly owned financing  subsidiary  charged to reserve for
equity interest.

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

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

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

                                       17

<PAGE>


         Method of Accounting for Viatical Settlements

         Through  June 30,  1996,  the Company  used the level  yield  method to
recognize  income on life insurance  policies.  See the Company's 1998 Form 10-K
for a further description thereof. As a result of the Company's decision in 1996
to sell all or  substantially  all of its  assets,  the  Company  established  a
reserve for loss on sale of assets  during  1996.  This  reserve is  reevaluated
quarterly.  The reserve for loss on sale of assets was  $132,000 and $167,000 as
of  December  31,  1999 and  1998,  respectively.  In  1996,  the  Company  also
established a reserve for loss of Point West Capital's  equity interest in DPFC.
By the end of the third  quarter of 1998,  the reserve was fully  depleted.  See
"Certain Accounting Implications for DPFC."

         During 1999, 1998 and 1997, the Company  recognized income with respect
to its viatical settlement business upon receipt of proceeds on policies (either
pursuant to sale of the policy or the death of the insured). The income is equal
to the difference  between the policy proceeds (less any back-end sourcing fees)
and the carrying  value of the policies  after giving  effect to any reserve for
loss on the sale of such policies.  The Company also no longer includes,  in the
carrying value of policies in the Consolidated Balance Sheet,  premiums incurred
after  June 30,  1996,  but  began  expensing  these  costs in the  Consolidated
Statement of Operations.

         Certain Accounting Implications for DPFC

         Although  the  Securitized  Notes have a stated  maturity  of March 10,
2005, the Securitized Notes were originally  expected to be repaid by the fourth
quarter  of  1997.  However,  at  December  31,  1999,  $38.5  million  remained
outstanding  under  the  Securitized  Notes.  As a result  of the  substantially
delayed  collection of DPFC policies,  DPFC had a deficit of approximately  $5.9
million at December 31, 1999.

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

         In 1999,  the total loss realized by DPFC was $4.2  million,  which was
reflected in the Company's net income.  In 1998, the total loss realized by DPFC
was $4.0  million,  $2.3  million of which was  charged  against the reserve for
equity interest in wholly owned financing subsidiary,  and $1.7 million of which
was reflected in the Company's net loss. The average historical quarterly losses
in DPFC  have been  approximately  $1  million  per  quarter  over the past four
quarters.  Upon the  retirement  of the  Securitized  Notes,  the  Company  will
recognize a gain in an amount  approximately equal to any accumulated deficit of
DPFC net of any tax effect.

         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 principal or interest deficiencies thereunder.

                                       18

<PAGE>


         Potential Default by DPFC

         The  Company  and  the  Noteholders   were  previously  in  discussions
regarding ongoing  responsibilities  for the Securitized Notes and the potential
liquidation of DPFC. However,  these discussions have ceased. If the Company and
the Noteholders do not modify existing  obligations and responsibilities for the
Securitized  Notes, it appears likely that sometime  between March and June 2000
there will be  insufficient  funds available to pay interest on, and other costs
associated with, the Securitized  Notes.  Such other costs consist  primarily of
Point West Capital's  monthly  servicing fee of $36,000 and the reimbursement to
Point West  Capital  for  premiums  paid (which  during  1998 and 1999  averaged
$23,000  per  month).  The exact  point in time that there will be  insufficient
funds cannot be  determined  because it is dependent  on life  insurance  policy
collections.  Based on the liquidity account balance as of February 29, 2000 and
on policies  collected  during February 2000,  sufficient funds are available to
pay interest on, and a portion of other costs  associated  with, the Securitized
Notes through  February  2000. A failure to pay interest  under the  Securitized
Notes would constitute an event of default under the Indenture.  In addition,  a
failure to pay other costs  associated with the Securitized  Notes would, if not
cured within 30 days,  constitute  an event of default under the  Indenture.  An
event of default would give the  Noteholders the right to accelerate the payment
of the  Securitized  Notes,  foreclose on the  policies  and dismiss  Point West
Capital as the servicer. In addition, when DPFC is liquidated or the Securitized
Notes are  otherwise  retired,  the  Company  will  have  income  tax  liability
associated  with the gain  from debt  forgiveness.  The  Company  may be able to
utilize the carryforward  losses from DPFC to offset such liability,  unless the
carryforward  losses  have  been  previously  utilized.  The  Company  does  not
currently know what actions might be taken or claims might be made by either the
Noteholders  or  the  Company  with  respect  to an  event  of  default  or  any
insufficiency of funds to pay costs associated with the Securitized Notes.

         Year Ended  December 31, 1999 Compared to Year Ended  December 31, 1998
         and Year Ended  December 31, 1998  Compared to Year Ended  December 31,
         1997

         Earned  Discounts.  Earned discounts on matured polices decreased 53.5%
to $204,000  in 1999 from  $439,000 in 1998,  and  decreased  10.2% in 1998 from
$489,000 in 1997.  The  decreases  are due primarily to fewer deaths of insureds
and  secondarily  to a decrease in the size of the  Company's  portfolio of life
insurance  policies.  During 1999,  earned  discounts on matured  policies  were
recognized on 38 policies with a face value of $2.4 million,  compared to 46 and
77 policies with a face value of $2.9 million and $4.9 million in 1998 and 1997,
respectively.  See  "Method  of  Accounting  for  Viatical  Settlements."  As of
December 31, 1999,  the Company  held 463  policies  with an aggregate  carrying
value of $31.8 million  (comprised of "purchased life insurance  policies" and a
portion of "other assets") and an aggregate face value of $36.9 million.  All of
the  "purchased  life  insurance  policies"  are  pledged  as  security  for the
Securitized Notes.

         Interest  Income.  Interest  income  decreased 60.5% to $79,000 in 1999
from  $200,000 in 1998,  and 13.8% in 1998 from $232,000 in 1997, as a result of
lower  cash  balances  attributable  to DPFC and to lower  yields  on such  cash
balances.  DPFC's  cash  balances  are  affected by the amount and timing of any
policy  collections  and by the amount and timing of expenses (such as interest,
trustee fees,  premium costs and servicing  fees) related to its portfolio.  The
cash generated by DPFC policy collections is restricted under the Indenture.

         Gain on Assets Sold. The gain on assets sold decreased  95.2% to $8,000
in 1999 from  $165,000 in 1998 and 89.0% in 1998 from $1.5 million in 1997.  The
Company  collected sale proceeds on one policy in 1999 compared to seven and 246
policies in 1998 and 1997, respectively.  The realized gain was calculated based
on the difference  between the sale proceeds and the carrying value after giving
effect to the provision for loss on sale of assets.  See  "Cessation of Viatical
Settlement  Business;  Sale of Assets."

                                       19

<PAGE>


The Company  collected a large portion of the sale proceeds from life  insurance
policies in 1997. Therefore,  there have been and will be minimal (if any) gains
or  losses  on  any  policies  sold  in  future  periods  pursuant  to  existing
agreements.

         Other  Income.  Components  of  other  income  include  collections  on
policies of dividends, interest and paid-up cash values, increases in face value
of matured  policies and refunds of premiums on matured  policies.  Other income
decreased  55.5% to $77,000 in 1999 from $173,000 in 1998. This decrease was due
to the face value increase described below and to the decrease in the number and
amount of matured policies. Other income increased $106,000 in 1998 from $67,000
in 1997 due to a $65,000  increase  in face  value on one  policy in 1998 and an
aggregate of $43,000 in paid-up cash values on two policies in 1998.

         Interest Expense. Interest expense remained relatively constant at $3.5
million in 1999 and $3.6 million in 1998 and 1997.  Average borrowings under the
Securitized Notes changed less than $1.0 million over the past three years.

         Other   General  and   Administrative   Expenses.   Other  general  and
administrative  expenses  decreased  44.1% to $356,000 in 1999 from  $637,000 in
1998. During 1998 the Company recorded a historically high premium expense.  The
Company believes that if the life insurance  policies continue to mature slowly,
life  insurance   premium  costs  are  likely  to  increase  in  future  periods
notwithstanding the decrease in 1999. See "Certain  Accounting  Implications for
DPFC." Other general and administrative expenses increased $402,000 in 1998 from
$235,000  in 1997.  This  increase  was due  primarily  to an  increase  in life
insurance policy premium costs. However, because such premium costs were largely
charged  against  the  reserve for equity  interest  in wholly  owned  financing
subsidiary  until it was depleted in the third quarter of 1998, the increase had
a marginal effect on the Company's 1998 net income (loss) relative to 1997.

         Provision  for Loss on Assets Held for Sale.  The  Company  recorded in
1996 a provision for loss on sale of assets totaling $3.1 million.  In 1997, the
Company recorded an additional provision in the amount of $328,000 in connection
with the remaining  policies not yet sold,  based on  management's  revised best
estimate of proceeds from the sale of such  policies.  No further  provision was
considered  necessary  in 1999 or 1998  because  management  believed  that  the
existing provision was adequate.

     Ventures
     --------

         Method of Accounting for Loans and Debt and Equity Securities

         Statement of Financial  Accounting  Standards No. 115,  Accounting  for
Certain  Investments  in Debt  and  Equity  Securities  ("SFAS  115"),  requires
marketable debt and equity  securities to be classified  into  held-to-maturity,
available-for-sale   and   trading   categories.    Securities   classified   as
available-for-sale are reported in the Consolidated Balance Sheets at fair value
with any  cumulative  unrealized  gains and  losses as a separate  component  of
stockholders'   equity.  The  Company  uses  the  cost  method  to  account  for
non-marketable  securities.  The  Company  reviews  on  a  quarterly  basis  all
non-marketable  securities  and  attempts  to  ascertain  whether  the  value is
impaired. For further information regarding accounting for securities classified
as available-for-sale, see Note 2 of Notes to Consolidated Financial Statements.
Any realized gains and losses,  interest and dividend and  unrealized  losses on
securities  judged to be  other-than-temporary  are reported in the Consolidated
Statements of Operations on an appropriate line.

         The Company accounts for loans at the principal amount outstanding, and
accruing  interest on outstanding  balances.  At December 31, 1999 and 1998, the
Company  evaluated each of Ventures'  outstanding  loans and determined  that an
allowance for loan losses was not necessary.  As Ventures' loan

                                       20

<PAGE>


portfolio  grows or upon  subsequent  evaluation,  the Company  will provide for
allowances for loan losses to the extent considered necessary. See Note 3 of the
Notes to Consolidated Financial Statements.

         Year Ended  December 31, 1999 Compared to Year Ended  December 31, 1998
         and Year Ended  December 31, 1998  Compared to Year Ended  December 31,
         1997

         Interest Income. Interest income increased to $1.2 million in 1999 from
$300,000 in 1998. This increase was primarily due to $625,000 of interest income
recognized  in 1999 as a result of  warrants  (valued  using  the  Black-Scholes
option-pricing  model) received in connection with one of Ventures' loans.  Also
contributing to the increase was a $284,000  original issue discount  recognized
in connection  with a debt security that was repaid in December  1999.  Interest
income  increased  $167,000 in 1998 from $133,000 in 1997. This increase was due
primarily  to $98,000 of  interest  income  recognized  in 1998 as a result of a
warrant received in connection with the loan described above.  Also contributing
to the  increase  was an increase in the number of loans made by  Ventures.  See
"Method of Accounting for Loans and Debt and Equity Securities."

         Net  Gain  (Loss)  on  Securities.  Ventures  recognized  a net gain on
securities of $13.0 million in 1999 primarily in connection with the sale of two
of its investments.  See "Income Tax." Ventures reviews on a quarterly basis all
non-marketable  securities  and  attempts  to  ascertain  whether  the  value is
impaired.  As a result of such  review,  Ventures  determined  that  $535,000 of
non-marketable  equity  securities  held of one company was impaired at June 30,
1999 and $500,000 of  non-marketable  equity  securities held of another company
was impaired at December  31, 1999.  Therefore,  Ventures  wrote-off  the entire
$1,035,000  carrying value of such securities in 1999,  which is included in the
net gain on  securities.  This  write-off  partially  offset  Venture's  gain on
securities during 1999. Ventures recognized a net loss on securities of $979,000
in 1998  primarily  because it  determined  that  $1,004,000  of  non-marketable
securities held of one company was impaired at September 30, 1998, and therefore
wrote-off the entire  $1,004,000  carrying value of such security in 1998.  This
write-off  completely  offset Venture's  $25,000 gain on securities during 1998.
Ventures did not recognize any net gain (loss) on securities in 1997.

         Other Income. In 1999,  Ventures  recognized other income of $64,000 in
connection  with a  partial  recovery  of a $1.0  million  investment  that  was
completely  written-off  in 1998 and a fee  related to one of  Ventures'  loans.
Ventures recognized no other income in 1998 and minimal other income in 1997.

         Interest  Expense.  Interest expense increased to $208,000 in 1999 from
$98,000 in 1998 due to a full year of interest  owed on funds  borrowed from the
SBA in July 1998. The fixed  interest rate  (including a 1% annual fee) is 6.9%.
Prior to July 1998, Ventures had no debt.

         Amortization.  Amortization  costs  decreased  51.6% to $30,000 in 1999
from $62,000 in 1998. The 1998 period  reflects  organizational  costs which are
currently required to be expensed as incurred and were written-off at the end of
1998.  Amortization  costs increased $58,000 in 1998 from $4,000 in 1997 because
of the  financing  costs  associated  with the funds  borrowed  in July 1998 and
because organizational costs were expensed in 1998.

     Allegiance
     ----------

         Method of Accounting for Loans

         The Company  accounts for loans advanced by Allegiance by carrying them
at the  principal  amount  outstanding,  and  accruing  interest on  outstanding
balances.  At  December  31,  1999 and 1998 the  allowance  for loan  losses was
$155,000 and $50,000,  respectively.  The allowance for loan losses is

                                       21

<PAGE>


estimated  by  management  based on a review of the loans and  factors  which in
management's  judgement indicate  impairment is inherent in the portfolio on the
balance  sheet date.  Management  believes that the allowance for loan losses is
adequate.  Although management uses available information to recognize losses on
loans,  future  additions to the allowance may be necessary  based on changes in
economic  conditions.  At  December  31,  1999,  one loan was in default  and on
non-accrual  status.  This loan is not included in the  collateral  securing the
Allegiance Financing.

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

         The Allegiance  Financing  provides for long-term  fixed and short-term
fixed  and  floating  rate  debt.  See   "Description   of  Revolving  and  Term
Certificates."  Allegiance,  from time to time, uses futures  contracts to hedge
certain  interest rate exposure between the time of origination of the loans and
the expected issuance of term  certificates.  The futures contracts are intended
to  protect a portion  of the net  interest  margins  earned on the  loans.  Any
realized  gain or loss related to these hedges are  deferred and  recognized  by
Allegiance  over the  life of the  related  loan as an  adjustment  of  interest
income.  Pursuant  to  Statement  of  Financial  Accounting  Standards  No.  80,
Accounting  for Futures  Contracts  ("SFAS 80"),  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 December 31, 1999, Allegiance had net realized gains
on its hedging activities of $215,000 which decreased loans receivable in a like
amount.  As of December 31, 1999,  Allegiance had no open hedges. As of December
31,  1998,  Allegiance  had net  realized  losses on its hedging  activities  of
$261,000 which increased loans receivable in a like amount.
Unrealized net losses from open hedges as of December 31, 1998 were $800.

         Year Ended  December 31, 1999 Compared to Year Ended  December 31, 1998
         and Year Ended  December 31, 1998  Compared to Year Ended  December 31,
         1997

         Interest Income. Interest income increased to $1.8 million in 1999 from
$589,000 in 1998 and $14,000 in 1997. This increase was due to increased lending
activity by  Allegiance.  However,  offsetting  this  increase  was  $132,000 of
interest in 1999 that was not accrued on one delinquent loan.  Allegiance had 21
loans  outstanding in the aggregate amount of $33.8 million at December 31, 1999
as compared to five loans and one loan  outstanding  in the aggregate  amount of
$9.1  million and $3.8  million at  December  31, 1998 and  December  31,  1997,
respectively. The weighted-average interest rate on the loans outstanding during
1999 was 8.9%  compared  to 9.4%  during  1998 and  1997.  The  weighted-average
interest  rate  is  calculated  based  on the  total  interest  earned  for  the
appropriate  period,  excluding one loan on non-accrual  status,  divided by the
weighted-average  principal balance  outstanding during the appropriate  period.
The  weighted-average  interest rate for the 1999 period  decreased  because one
loan in the amount of $2.1 million was  delinquent  and on  non-accrual  status.
Allegiance  cannot  predict  at this  time  whether  the  loan  will  remain  on
non-accrual  status.  However,  to the  extent  that the  loan  does  remain  on
non-accrual  status,  Allegiance does not anticipate  receiving  interest income
(approximately  $16,000 per month) from such loan.  Allegiance  has  declared an
event of default on the delinquent  loan and is in the process of taking actions
to foreclose on assets securing the loan.  Based on a preliminary  assessment of
the business and operations of the defaulted  borrower,  Allegiance  believes it
will not  incur  any loss in  connection  with such  loan.  See  "Item  3--Legal
Proceedings."

         Interest  Expense.  Interest expense  increased to $1.2 million in 1999
from  $31,000  in 1998 as a result of the  interest  paid  under the  Allegiance
Financing.  During 1999 the weighted-average  interest rate under the Allegiance
Financing  was 7.9%  and the  weighted-average  borrowings  were  $15.4  million

                                       22

<PAGE>


compared  to a  weighted-average  interest  rate  of 9.2%  and  weighted-average
borrowings of $299,000 for 1998. Prior to November 1998, Allegiance had no debt.

         Compensation and Benefits. Compensation and benefits increased 55.4% to
$286,000  in 1999 from  $184,000  in 1998 and  increased  $137,000  in 1998 from
$47,000  in 1997.  These  increases  resulted  from  the  hiring  of  additional
employees to support Allegiance's lending activities.

         Other   General  and   Administrative   Expenses.   Other  general  and
administrative  expenses increased $344,000 to $522,000 in 1999 from $178,000 in
1998.  This increase was due  primarily to a $152,000  increase in general legal
expense,  a $55,000 increase in allowance for loan losses, a $64,000 increase in
professional  fees related to the one delinquent loan, and a $49,000 increase in
expenses related to the Allegiance  Financing.  Other general and administrative
expenses  increased  $145,000 in 1998 from  $33,000 in 1997.  This  increase was
primarily due to an increase in  Allegiance's  activities  and the allowance for
loan losses that was recorded in 1998. See "Method of Accounting for Loans."

         Amortization. Amortization costs increased $167,000 to $223,000 in 1999
from  $56,000 in 1998 and $55,000 in 1998 from  $1,000 in 1997.  The 1999 period
reflects a full year of financing costs associated with the Allegiance Financing
which was completed in August 1998.  The 1998 period  reflects  financing  costs
associated  with the  Allegiance  Financing and  organizational  costs which are
currently required to be expensed as incurred and were written-off at the end of
1998. The 1997 period reflects organizational costs.

     Other
     -----

         The Other segment includes operating results for Point West Capital and
PWS.  Except for  compensation  and benefit  expenses  clearly  attributable  to
Allegiance, corporate overhead is included in the Other segment and has not been
allocated to other  segments.  Activities  for PWS were  immaterial  in 1999 and
1998.

         Year Ended  December 31, 1999 Compared to Year Ended  December 31, 1998
         and Year Ended  December 31, 1998  Compared to Year Ended  December 31,
         1997

         Interest  Income.  Interest  income  declined 43.1% to $231,000 in 1999
from $406,000 in 1998. Interest income declined because a larger portion of cash
balances have been invested in lower yielding instruments  (primarily government
securities)  in  1999  compared  to  higher  yielding   instruments   (primarily
commercial  paper and corporate  bonds) in 1998. See  "Considerations  Under the
Investment  Company Act of 1940." Interest  income  decreased 49.5% in 1998 from
$804,000 in 1997.  This  decrease in 1998  compared to 1997 is due to lower cash
balances.  In 1998,  the  Company  used a portion of  proceeds  from the sale of
policies  in the first  half of 1997 to grow  other  businesses.  In 1997,  such
proceeds were invested in short term securities and marketable securities.

         Net Gain (Loss) on Securities. Net gain on securities increased to $2.8
million in 1999 from  ($20,000) in 1998.  This increase was primarily the result
of a $2.4 million gain in connection  with the partial sale by Point West of one
of its investments.  Also  contributing to the increase was a gain in connection
with hedging activities of Internet related stocks of $312,000.  Under generally
accepted accounting  principles such hedging activities do not constitute hedges
under SFAS 80. Therefore, such hedging activities are reflected in the Company's
Consolidated  Statement of Operations.  At December 31, 1999 no such hedges were
in place. See "Item 7A -- Quantitative and Qualitative  Disclosures About Market
Risks." Net gain on  securities  decreased in 1998 from $680,000 in 1997 because
Point West Capital recognized a $680,000 gain in 1997 in connection with another
partial sale of the investment described above.

                                       23

<PAGE>



         Other Income.  Other income  increased to $252,000 in 1999 from $70,000
in 1998.  This  increase was due to (i) an increase of $140,000 in fees received
by PWS for investment  banking services and (ii) $42,000 in trading  commissions
generated  by PWS in 1999.  The amount and  timing of these  services  in future
periods cannot be predicted  because of the limited operating history of PWS and
the  uncertainty  regarding  the scope of services to be provided by PWS.  Other
income  increased  $44,000  in 1998 from  $26,000  in 1997.  This  increase  was
primarily a result of a $70,000  placement fee received by Point West Capital in
connection  with an investment made by co-investors of Point West Ventures in an
unaffiliated  small business entity.  The placement fee received was in the form
of preferred shares.  These preferred shares were written off in 1998 as part of
the $1.1 million write off of non-marketable  securities. See Note 4 of Notes to
Consolidated Financial Statements.

         Compensation and Benefits. Compensation and benefits increased 30.8% to
$1.7  million  in 1999  from  $1.3  million  in 1998 and 18.2% in 1998 from $1.1
million  in  1997.  These  increases  were  due  primarily  to  an  increase  in
compensation and benefits for employees.

         Other   General  and   Administrative   Expenses.   Other  general  and
administrative  expenses  increased  $1.3  million to $2.2  million in 1999 from
$882,000 in 1998.  This  increase was  primarily  due to $945,000 of  litigation
expense  recorded in 1999 reflecting the net amount of the settlement  agreement
related to the pending  federal  class  action and state  alleged  class  action
lawsuits not covered by insurance.  On February 25, 2000,  the Court  approved a
proposed  settlement of the  lawsuits.  As a result,  the Company  expects legal
expenses to decrease  substantially in 2000 relative to 1999 and 1998. See "Item
3--Legal  Proceedings."  Also  contributing to the increase were a $140,000 loan
write-off, a $101,000 increase in legal expenses incurred in connection with the
federal and state  alleged  class action  lawsuits,  a $65,000  increase in rent
expense and a $55,000 increase in accounting expense.  During the second quarter
of 1999,  the  Company  renewed the lease on its current  space.  The  Company's
monthly rent increased from $5,240 per month to approximately $15,000 per month.
Other  general and  administrative  expenses  decreased  26.5% in 1998 from $1.2
million in 1997. This decrease was due primarily to a decrease in legal expenses
in 1998 in the amount of $228,000  incurred in  connection  with the federal and
state alleged class action lawsuits. This decrease was largely a result of Point
West Capital's  directors and officers  insurance  policy  retention limit being
satisfied,  requiring  the  insurance  carrier  to  fund  the  majority  of  the
continuing costs of such litigation.

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

     Point West Capital and PWS

         At present,  neither Point West Capital nor PWS has an external funding
source from which to fund its  working  capital  and  general  corporate  needs.
During 1999, the Company  supported the operations of Point West Capital and PWS
primarily   from   existing  cash  balances  and  sale  proceeds  of  investment
securities.  In prior periods,  the Company  generated cash primarily from sales
proceeds of life  insurance  policies  and  investment  securities.  The Company
invested the cash in the growth of its businesses.  At December 31, 1999,  Point
West Capital and PWS' cash and cash equivalents  were $767,000.  At December 31,
1999,  Point  West  Capital  and  PWS'  investment   securities   classified  as
held-to-maturity  were $2.5 million,  which consisted of government  securities.
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 and PWS and any other business opportunities the Company pursues. See
"Considerations  Under the  Investment  Company  Act of  1940."  There can be no
assurance  that  Point  West  Capital  or PWS will be  successful  in  obtaining
external  financing  on  satisfactory  terms  assuming  the  Company  determines
additional  funds  are  needed.  The  Company  at  present   anticipates  having
sufficient  liquidity to meet the working capital and operational needs of Point
West Capital and PWS through 2000, using current cash and cash equivalents.

                                       24

<PAGE>


     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.  As of December 31, 1999, the outstanding  principal amount of
the  Securitized  Notes  was  $38.5  million.  As of the  same  date,  DPFC  had
restricted cash of $1.0 million,  which cannot be accessed by Point West Capital
except for  reimbursement of costs incurred in connection with its activities as
servicer under the Indenture. Principal and interest payments on the Securitized
Notes are payable  solely  from  collections  on policies  pledged to secure the
payment  thereof and do not require  Point West Capital to expend cash or obtain
financing to satisfy such principal and interest  obligations.  For a discussion
of the  adverse  effects  of a  potential  default by DPFC on the  Company,  see
"Results of Operations by Segment -- Viatical  Settlements -- Potential  Default
by DPFC."

     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. During 1997, 1998 and 1999 Point
West Capital  contributed  to Ventures $2.5 million,  $2.5 million and $800,000,
respectively.  During 1999,  Ventures  generated  $21.3 million of cash proceeds
(net of  commissions)  from the sale of securities  and  repayment of loans.  At
December 31, 1999, Ventures' cash and cash equivalents were $11.5 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. Any
borrowings   bear   interest  at  the  Debenture   Rate.   Interest  is  payable
semi-annually. In addition, there is a leverage and underwriting fee of 3.5% and
a  fee  of 1%  per  annum  on  the  outstanding  amount  of  debt.  Among  other
requirements,  an SBIC  with an SBIC  debenture  license  must  maintain  proper
diversification of its portfolio. This requirement generally means that in order
to borrow funds from the SBA, no single  investment may exceed 20% of the SBIC's
regulatory capital plus its net unrealized  investment gains. The net unrealized
investment  gains may be used in this  calculation only if the SBIC has positive
retained earnings.  Additionally,  the portfolio must consist of a proper mix of
debt and equity  investments.  In July 1998,  Point West Ventures  borrowed $3.0
million from the SBA.

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

     Allegiance

         As of December 31, 1999,  Point West Capital had invested  $7.5 million
in Allegiance  Capital.  In August 1998,  Allegiance put in place the Allegiance
Financing.  See  "Description of Revolving and Term  Certificates."  The Company
expects that the Allegiance  Financing will provide  sufficient funds to support
Allegiance's  current  level of  lending  activities  through  April  15,  2000.
Allegiance  is  attempting  to  arrange   additional   financing  for  its  loan
origination  activities after April 15, 2000, but no assurance can be given that
such financing  will be obtained or obtained on terms  acceptable to Allegiance.
See Note 5 of Notes to Consolidated Financial Statements.

                                       25

<PAGE>


Description of Revolving and Term Certificates
----------------------------------------------

         Pursuant  to  the  Allegiance  Financing,  a  consortium  of  insurance
companies (the "Investors")  provided funding through September 20, 1999, with a
balance at that date of $24.9 million, on a non-recourse  revolving  certificate
basis  which  was used for the  purchase  or  funding  of  loans  originated  by
Allegiance Capital and transferred,  through Allegiance  Funding,  to Allegiance
Trust I. On September 21, 1999, the revolving certificates then outstanding were
repaid through the issuance of the term certificates described below.

         Under the Allegiance  Financing,  various classes of revolving and term
certificates  of  Allegiance  Trust I have been issued.  The original  revolving
certificates  were issued in August 1998 in four  classes,  consisting  of Class
A-R,  Class  B-R,  Class C-R and Class  D-R.  The Class D-R  certificate,  which
represents  the right to receive all excess cash flow from  Allegiance  Trust I,
was unrated while the other revolving  certificates received ratings from Duff &
Phelps Credit  Rating Co.  ("Duff & Phelps")  ranging from A to BB. At September
20, 1999, the following principal amounts of Class A-R, Class B-R, Class C-R and
Class D-R revolving certificates were outstanding,  respectively: $19.5 million,
$3.2  million,  $2.2  million  and $2.4  million.  At  September  21,  1999 such
revolving certificates were repaid through the issuance in the following amounts
of Class A, Class B,  Class C,  Class D, Class E and Class F term  certificates:
$17.8 million,  $1.8 million,  $2.0 million, $1.8 million, $1.3 million and $2.6
million.  The Class F term  certificate,  which was retained by Allegiance,  was
unrated while the other term  certificates  received  ratings from Duff & Phelps
ranging  from AA to B.  The  weighted-average  fixed  interest  rate of the term
certificates held by third parties is 8.1%.

         The  Company and  Investors  executed  amendments  which  extended  the
Allegiance Financing through April 15, 2000. The Investors agreed to continue to
provide revolving debt, subject to certain limitations,  through April 15, 2000,
on terms similar to those under the original  revolving  certificates  under the
Allegiance  Financing,  but with the  addition  of  another  class of  revolving
certificates  as  described  below.  Allegiance  has agreed to retain an unrated
revolving  certificate  related to the  extension.  In addition,  the  Investors
agreed to provide up to $20.2 million of additional term  financing,  subject to
certain limitations, through April 15, 2000, on terms similar to those under the
original term  certificates  issued under the  Allegiance  Financing.  The fixed
interest rate on the additional term  certificates will be based on the ten-year
U.S.  Treasury yield plus a spread ranging from 2.0% to 8.5%. As of December 31,
1999,  Allegiance  has borrowed $4.2 million  under the revolving  certificates.
Allegiance  anticipates  converting to term debt any outstanding  revolving debt
under the Allegiance Financing as of April 15, 2000.

         Pursuant to the  extension,  as  additional  funds are  utilized  going
forward,  the amount issued under the various classes of term  certificates will
increase,  and such increases may be disproportionate to the current proportions
of term certificates outstanding.  In December 1999, Allegiance Trust I reissued
the Class C-R revolving  certificate as two classes,  Class C1-R and Class C2-R,
and  funded  the Class  B-R,  Class  C1-R,  Class  C2-R and Class D-R  revolving
certificates. The Class C1-R certificates were funded in the principal amount of
$1.4 million and the Class C2-R certificates were funded in the principal amount
of $1.1 million.  The Class B-R certificates were funded in the principal amount
of $1.7 million.  Such  certificates  bear interest at a fixed rate based on the
one-year  U.S.  Treasury  yield  plus a  weighted-average  spread  of 4.7%.  The
weighted-average  interest  rate of the  revolving  certificates  held by  third
parties at  December  31, 1999 was 10.4%.  Allegiance  funded and  retained  the
unrated Class D-R revolving certificate in the amount of $2,197,000.

         The Allegiance Financing does not qualify for sale treatment under SFAS
125  because it entitles  Allegiance  Funding to  repurchase  loans prior to the
point at which the cost of servicing them becomes burdensome.  Accordingly,  the
Allegiance Financing will not receive gain on sale treatment under SFAS

                                       26

<PAGE>


125. The loans and borrowings  under the  Allegiance  Financing are reflected in
the Consolidated Balance Sheets.

         In connection with the Allegiance Financing,  Allegiance Capital paid a
$175,000 commitment fee when funds were initially  borrowed.  Of such commitment
fee,  $58,000  has  been  amortized  over  the  expected  life of the  revolving
certificates (10 months) and $117,000 are being amortized over the expected life
of  the  term  certificates  (15  years).  In  connection  with  the  extension,
Allegiance  paid a  $125,000  commitment  fee.  Of  such  fee,  $42,000  will be
amortized  over the expected life of the revolving  certificates  (8 months) and
$83,000 will be 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.

         Allegiance's  ability to borrow under the Allegiance Financing is based
on the  delivery  of loans  meeting  certain  eligibility  criteria  relating to
loan-level  and pool-level  credit  criteria,  form of security and  appropriate
legal   documentation.   The  loan-level   credit   criteria  and  security  and
documentation   requirements   generally  follow   Allegiance's   basic  lending
guidelines.  The  pool-level  criteria  create  requirements  with  respect to a
variety of  parameters  intended  to achieve  certain  overall  levels of credit
quality and credit diversification. The ability to borrow is also subject to the
non-occurrence of certain events of default,  some of which are curable and some
of which result in permanent loss of borrowing rights. Permanent loss of funding
will result from, among other things, the following: (i) non-payment of interest
on the revolving  certificates (ii) any event of default by the servicer,  Point
West Capital, or special servicer,  Allegiance Capital (as described below), not
cured or  waived  within 30 days;  (iii) the  occurrence  of  certain  events of
bankruptcy, insolvency or reorganization with respect to Allegiance Funding; and
(iv) the occurrence of certain specified levels of delinquent or defaulted loans
or loan losses.  Temporary  loss of funding will result from  exceeding  certain
specified  levels of  delinquent  or  defaulted  loans or loan  losses,  or from
non-compliance with required liquidity account levels (as described below).

         Under the  Allegiance  Financing,  a liquidity  account  (the  "Reserve
Account") is required to be maintained, generally at 1% of the aggregate balance
of loans underlying the revolving and term certificates, subject to a minimum of
$250,000.  The  required  amount  can  increase  by a  formula  amount  upon the
incurrence of, and based on a fraction of the dollar amount of, any  delinquent,
defaulted or underperforming loans.

         Point West  Capital  acts as servicer  and  Allegiance  Capital acts as
special servicer  pursuant to a Servicing  Agreement (the "Allegiance  Servicing
Agreement").  As  servicer,  Point West  Capital is required to provide  monthly
reports to the trustee regarding loan collections,  to maintain the loan payment
records and to provide related monitoring services.  Point West Capital receives
a fee of 0.20% per annum on the outstanding balance of the loan pool, underlying
the  revolving  and term  certificates  and bears all  expenses  related  to its
duties,  as well as the trustee  fee. As special  servicer,  Allegiance  Capital
provides quarterly reports to the trustee regarding loan collateral  performance
and is responsible for managing any delinquencies,  defaults or liquidations. An
unaffiliated  third party  provides  additional  services  with  respect to loan
collateral monitoring as servicing advisor. Allegiance Capital receives a fee of
0.20% per annum on the  outstanding  balance  of the loan  pool  underlying  the
revolving and term  certificates,  and bears all expenses related to its duties,
as well as the servicing advisor's fees. Point West Capital,  Allegiance Capital
and the  servicing  advisor  are  entitled  to receive  reimbursement  from loan
collections  for certain  expenses  which may be incurred  with  respect to loan
defaults, work-outs or dispositions.  All amounts owed to Point West Capital and
Allegiance  Capital are subject to availability of cash after payment of certain
other priority amounts  pursuant to the Allegiance Trust Agreement.  An event of
default under the Allegiance  Servicing  Agreement will occur upon,  among other
things,  (i) failure by the servicer,  special servicer or servicing  advisor to
remit any loan  collections  received  by them;  (ii)  failure by the  servicer,
special  servicer or  servicing  advisor to deliver  the reports  required to be
delivered by

                                       27

<PAGE>


them; or (iii) the  occurrence of certain  events of  bankruptcy,  insolvency or
reorganization  with  respect to the  servicer,  special  servicer or  servicing
advisor. If an event of default occurs and is not remedied, the offending party,
servicer, special servicer, or servicing advisor, may be replaced at the request
of the Investors and replaced by a nominee of Allegiance Funding, subject to the
approval of the Investors.

Description of Securitized Notes
--------------------------------

         The  Securitized  Notes bear  interest at a fixed annual rate of 9.17%.
The principal amount of the Securitized Notes to be repaid in any month is equal
to  proceeds of  policies  collected  during the  preceding  month less  certain
required  monthly  payments (such as interest and servicing and trustee fees) to
be paid on such date.

         The ownership  interest in policies purchased by DPFC is nominally held
by an unaffiliated  third party trustee under the Indenture but the policies are
beneficially  owned by DPFC. The Company accounts for this  securitization  as a
debt  financing  and not as a sale of assets,  which is in  accordance  with the
accounting literature in effect for bankruptcy remote entities with non-recourse
debt. The assets,  liabilities  and operations of DPFC are  consolidated  in the
Company's consolidated financial statements.

         The Indenture contains certain covenants  restricting the activities of
DPFC.  DPFC is  required  to maintain  in an account  under the  Indenture  (the
"Liquidity  Account") a balance of 10% of the outstanding  principal  balance of
the Securitized Notes. Subject to certain  restrictions,  funds in the Liquidity
Account may be used to pay,  among other  things,  servicing  and trustee  fees,
principal and interest and taxes.  Events of default under the Indenture include
(i) a default in payment of principal or interest on the Securitized  Notes when
due,  (ii) a default by DPFC in the  performance  of any material  covenant or a
material  breach of a  representation  or  warranty  of DPFC  which is not cured
within  30  days,  and  (iii)  certain  events  of  bankruptcy,  insolvency  and
reorganization involving DPFC.

         Point West Capital acts as servicer  under the Indenture  pursuant to a
Contribution,  Sale and Servicing Agreement (the "DPFC Servicing Agreement") and
receives monthly,  pursuant and subject to the terms of the Indenture,  a fee of
$36,000  until the earlier to occur of  collection of the face value of the last
policy in the Pool or  payment  in full of the  Securitized  Notes.  Point  West
Capital is required  under the DPFC  Servicing  Agreement to monitor each policy
and to cause the  collection  and remittance to the trustee of the face value of
matured  policies.  Point  West  Capital  pays  all  expenses  related  to  such
monitoring and collection services, including paying premiums and back-end fees,
and is reimbursed for certain  expenses.  All amounts owed to Point West Capital
pursuant to the monitoring and collecting activities are subject to availability
of cash after payment of other  priority  amounts as provided in the  Indenture.
For a  discussion  of a  potential  default  by DPFC  under the  Indenture,  see
"Results of Operations by Segment -- Viatical  Settlements -- Potential  Default
by DPFC." The DPFC Servicing  Agreement  contains certain covenants  restricting
Point West Capital's  activities,  including (i)  restrictions on mergers,  (ii)
provisions  related to  respecting  the separate  legal status of DPFC,  (iii) a
requirement that no person will own a greater percentage of the aggregate voting
power  of  equity  securities  of Point  West  Capital  entitled  to vote in the
election of directors than the percentage collectively beneficially owned by the
Point West  Capital's  executive  officers  and no person  other than Point West
Capital's  executive  officers will own more than 20% of such  aggregate  voting
power,  (iv)  a  requirement  that  Point  West  Capital's   executive  officers
constitute  a  majority  of the  Board,  and (v) a  requirement  that Point West
Capital employ at least two of Point West Capital's  executive officers (or such
other personnel  reasonably  acceptable to the  Noteholders) in their respective
current  capacities.  An event of default  will occur  under the DPFC  Servicing
Agreement  if,  among other  things,  (i) an event of default  occurs  under the
Indenture,  or (ii) certain events of bankruptcy,  insolvency or  reorganization
occur with respect to Point West  Capital.  If an event of default  occurs under
the DPFC  Servicing  Agreement,  Point West  Capital can be replaced as servicer
under the  Indenture.  The back-up  servicer is the trustee under the Indenture.

                                       28

<PAGE>


Income Taxes
------------

         The  Company  has  significant  NOLs  for tax  purposes.  The  NOLs are
primarily  related to losses  incurred  by DPFC.  Prior to  December  1999,  the
Company  established  valuation  allowances which offset completely the deferred
tax  assets  related  to NOLs  because  the  Company  and DPFC  were  unable  to
consistently  generate taxable earnings. In 1999, the majority of NOLs were used
to offset the income primarily  related to sales of securities by Ventures.  The
Company  recorded  a tax  benefit in the amount of  $590,000  and the  valuation
allowance  was  eliminated  in the  fourth  quarter  of 1999.  See  "Results  of
Operations by Segment -- Viatical Settlements -- Potential Default by DPFC."

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

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

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

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

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

         *     The  success  of  Ventures,  which  holds a number of  investment
               securities, has exceeded expectations;

         *     The success of other  investments  by the  Company  has  exceeded
               expectations; and

         *     An event of default  under the  Indenture  is  expected  to occur
               sometime between March and June 2000.

         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.
During 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.

                                       29

<PAGE>



         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  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.  At present,  Allegiance does not
have an external funding source beyond April 2000.

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) and
may consider using such proceeds to repay SBA debt.  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.

                                       30

<PAGE>



Year 2000 Issue Update
----------------------

         The Company did not experience any  significant  malfunctions or errors
in its  operating  or business  systems when the date changed from 1999 to 2000.
Based on  operations  since  January 1, 2000,  the  Company  does not expect any
significant impact to its ongoing business as a result of the "Year 2000 Issue."
However,  it is possible  that the full impact of the date change,  which was of
concern due to computer  programs that use two digits  instead of four digits to
define years, has not been fully recognized.  For example,  it  is possible that
Year 2000 or similar issues such as leap  year-related  problems may occur.  The
Company  believes that any such problems are likely to be minor and correctable.
In addition,  the Company could still be negatively  affected if its  borrowers,
customers  or  suppliers  are  adversely  affected  by the Year 2000 or  similar
issues.  The  Company  currently  is not aware of any  significant  Year 2000 or
similar problems that have arisen for its borrowers, customers and suppliers.

         The  Company  incurred  Year  2000  compliance  costs of  approximately
$27,000, of which $19,000 has been capitalized. These efforts included replacing
some  outdated,  noncompliant  hardware  and  noncompliant  software  as well as
identifying and remediating Year 2000 problems.

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

         This report includes forward looking  statements  within the meaning of
the Private Securities Litigation Reform Act of 1995. All statements made herein
which are not based on historical  facts are forward  looking and,  accordingly,
involve  risks and  uncertainties  that  could  cause  actual  results to differ
materially from those discussed.  Such forward looking  statements include those
under  "Management's  Discussion and Analysis of Financial Condition and Results
of Operations"  relating to (i) the ability of Allegiance to avail itself of the
benefits of the extension of the  Allegiance  Financing,  (ii) the collection of
interest, no incurrence of any loss and potential foreclosure and liquidation of
one  of the  loans  made  by  Allegiance,  (iii)  sufficiency  of the  Company's
liquidity and capital  resources (See "Liquidity and Capital  Resources"),  (iv)
the  Company's  ability  to  continue  not being  subject  to  registration  and
regulation under the 1940 Act (See "Considerations  Under the Investment Company
Act of 1940"), (v) expected future life insurance policy premium costs, (vi) the
potential  default under the Indenture and the consequences  thereof  (including
amount of gain and tax  consequences  thereof) and (vii)  amounts of  additional
cash to be  contributed  to  Allegiance  Trust I. Such  statements  are based on
management's  belief,  judgment and analysis as well as assumptions  made by and
information  available  to  management  at the date  hereof.  In addition to any
assumptions  and cautionary  factors  referred to specifically in this report in
connection with such forward looking statements, factors that could cause actual
results to differ  materially  from those  contemplated  by the forward  looking
statements include (i) Allegiance's ability to originate a sufficient number and
amount of loans that qualify for securitization under the Allegiance  Financing,
(ii) the borrower's ability to make future payments on the defaulted  Allegiance
loan,  Allegiance's  ability to foreclose on the  collateral at a price at least
equal to the amount of debt  (including  foreclosure  fees and expenses) of such
loan and the outcome of the pending  counterclaim  filed in connection  with the
foreclosure  action,  (iii)  the  results  of  the  Company's  consideration  of
strategic  options  and  any  costs  associated  with  a  chosen  option,   (iv)
availability   and  cost  of   capital,   (v)  the   factors   described   under
"Considerations  Under the  Investment  Company Act of 1940," (vi) the  maturity
rate of DPFC's  portfolio of life  insurance  policies and actual  premium costs
associated with unmatured policies,  (vii) Point West Capital's ability to avoid
default under the Indenture,  by reaching an agreement  with the  Noteholders or
other  alternatives,  (viii)  DPFC's  ability to generate  cash  through  policy
collections to pay principal,  interest, the servicing fees and premiums and the
timing of such  collections  and (ix)  increases  in the LIBOR  rate and  future
amounts outstanding under the Class A-R revolving certificates.

                                       31

<PAGE>


ITEM 7A--QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
---------------------------------------------------------------------

         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  December  31, 1999 no such  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 December 31, 1999:

<TABLE>
<CAPTION>

                          2000      2001       2002       2003        2004       Thereafter
                          ----      ----       ----       ----        ----       ----------
<S>                       <C>        <C>       <C>        <C>         <C>         <C>

Fixed rate loans (1)(2) $ 731,984  $ 857,670  $ 944,994  $1,041,238   $1,147,316  $26,999,732
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  intends to hedge  partially with futures  contracts its
            interest rate exposure  between the time of origination of the loans
            and the expected issuance of term  certificates  under the extension
            of the Allegiance Financing.

</FN>
</TABLE>


         In connection  with the extension of 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 not been required to make any such payments.  The amount of cash, if any, to
be provided will be a function of several variables  including the monthly LIBOR
interest  rate  and  the   outstanding   balance  of  the  Class  A-R  revolving
certificate.  At  February  23,  2000 the  outstanding  balance of the Class A-R
revolving certificate was zero.

ITEM 8--FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
---------------------------------------------------

         See pages 33 through 55.

ITEM 9--CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
-------------------------------------------------------------------
         AND FINANCIAL DISCLOSURE
         ------------------------
         None other than as previously reported in Point West Capital's Form 8-K
         dated September 20, 1999 and filed on September 27, 1999.

                                       32


<PAGE>

  ERNST & YOUNG LLP             Suite 1700                Phone: 415 951 3000
                                555 California Street
                                San Francisco, California 94104



                Report of Ernst & Young LLP, Independent Auditors
                --------------------------------------------------


The Board of Directors and
Stockholders of Point West Capital Corporation

We have  audited  the  accompanying  consolidated  balance  sheet of Point  West
Capital  Corporation  as of December  31,  1999,  and the  related  consolidated
statements of operations,  changes in stockholders'  equity,  and cash flows for
the year then ended.  These financial  statements are the  responsibility of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial  statements based on our audit. The financial statements of Point West
Capital Corporation for the years ended December 31, 1998 and 1997, were audited
by other  auditors whose report dated February 27, 1999 expressed an unqualified
opinion on those statements.

We conducted our audit in accordance with auditing standards  generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable  assurance about whether the financial  statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting  the amounts and  disclosures in the financial  statements.  An audit
also includes assessing the accounting principles used and significant estimates
made by  management,  as well as  evaluating  the  overall  financial  statement
presentation.  We believe  that our audit  provides a  reasonable  basis for our
opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the financial position of Point West Capital
Corporation  as of December  31, 1999 and the  results of their  operations  and
their  cash  flows  for the year  then  ended,  in  conformity  with  accounting
principles generally accepted in the United States.


                                      /s/Ernst & Young LLP



San Francisco, California
February 29, 2000



                                       33

<PAGE>
KPMG
         Three Embarcadero Center
         San Francisco, CA  94111


                          Independent Auditors' Report
                          ----------------------------


The Board of Directors and Stockholders
Point West Capital Corporation:

We have  audited  the  accompanying  consolidated  balance  sheet of Point  West
Capital  Corporation  as of December  31,  1998,  and the  related  consolidated
statements of operations,  stockholders' equity, and cash flows for the two-year
period ended December 31, 1998. These consolidated  financial statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards  require that we plan and perform the audit to obtain reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the financial position of Point West Capital
Corporation  as of December 31, 1998,  and the results of their  operations  and
their cash flows for each of the years in the two-year period ended December 31,
1998, in conformity with generally accepted accounting principles.


                                            /s/KPMG LLP

San Francisco, California
February 27, 1999


                                       34


<PAGE>

                                             POINT WEST CAPITAL CORPORATION
                                               CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>



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



Cash and cash equivalents                                                  $         12,836,125  $           6,668,126
Restricted cash                                                                       3,074,057              3,153,513
Investment securities
           Held-to-maturity                                                           2,504,610                   --
           Available-for-sale                                                         6,519,821              2,113,034
Matured policies receivable                                                               --                    12,000
Loans receivable, net of unearned income of $540,867 and
     $117,709, respectively, and net of an allowance for
     loan losses of $155,000 and $50,000, respectively                               35,467,079             10,187,590
Purchased life insurance policies                                                    31,727,966             33,893,017
Non-marketable securities                                                             5,933,133              5,396,607
Deferred financing costs, net of accumulated amortization
     of $1,378,623 and $907,848, respectively                                           656,376                810,545
Furniture and equipment, net of accumulated depreciation of
     $12,976 and $4,469, respectively                                                    34,917                 25,365
Other assets                                                                          2,771,767                182,964
                                                                             -------------------   --------------------

           Total assets                                                    $        101,525,851  $          62,442,761
                                                                             ===================   ====================

                  LIABILITIES AND STOCKHOLDERS' EQUITY

Accrued interest expense                                                   $            346,483  $             263,805
Accounts payable                                                                        238,326                192,436
Accrued compensation payable                                                            543,400                222,000
Accrued litigation settlement                                                         2,205,000                  --
Taxes payable                                                                           141,100                  --
Revolving certificates                                                                4,200,000              5,400,045
Term certificates                                                                    24,498,815                  --
Securitized notes payable                                                            38,528,914             38,528,914
Debentures payable                                                                    3,000,000              3,000,000
Deferred income taxes                                                                   281,020                  6,000
                                                                             -------------------   --------------------

           Total liabilities                                                         73,983,058             47,613,200
                                                                             -------------------   --------------------

Stockholders' equity:
     Common stock, $0.01 par value; 15,000,000 authorized shares,
          4,390,124 and 4,291,824 shares, respectively, issued
          3,351,624 and 3,253,324 shares, respectively, outstanding                      43,901                 42,918
     Additional paid-in-capital                                                      30,088,949             29,496,720
     Accumulated comprehensive income (loss)                                          2,098,960               (188,966)
     Retained deficit                                                                (1,814,985)           (11,647,079)
     Treasury stock, 1,038,500 shares                                                (2,874,032)            (2,874,032)
                                                                             -------------------   --------------------

           Total stockholders' equity                                                27,542,793             14,829,561
                                                                             -------------------   --------------------

           Total liabilities and stockholders' equity                      $        101,525,851  $          62,442,761
                                                                             ===================   ====================

<FN>


          See accompanying notes to consolidated financial statements.

</FN>
</TABLE>

                                       35

<PAGE>





                POINT WEST CAPITAL CORPORATION
             CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>



                                                                                    Years Ended December 31,
                                                                         1999                  1998                  1997
                                                                  -------------------   -------------------   -------------------
<S>                                                                      <C>                    <C>                    <C>


Income:
     Earned discounts on matured policies                       $            203,801  $            438,792  $            488,563
     Interest income                                                       3,314,280             1,494,079             1,183,919
     Gain on assets sold                                                       7,751               165,346             1,463,080
     Net gain (loss) on securities                                        15,785,036             (998,813)               679,665
     Other                                                                   407,439               234,673               102,663
                                                                  -------------------   -------------------   -------------------
           Total income                                                   19,718,307             1,334,077             3,917,890
                                                                  -------------------   -------------------   -------------------
Expenses:
     Interest expense                                                      4,962,878             3,679,566             3,599,487
     Compensation and benefits                                             1,936,807             1,514,812             1,151,574
     Other general and administrative expenses                             3,097,131             1,728,169             1,474,916
     Amortization                                                            470,775               352,181               240,194
     Depreciation                                                              8,507                 4,128                   341
     Provision for loss on assets held for sale                                --                    --                  328,236
                                                                  -------------------   -------------------   -------------------
           Total expenses                                                 10,476,098             7,278,856             6,794,748
                                                                  -------------------   -------------------   -------------------

           Income (loss) before income taxes and net loss
               in wholly owned financing subsidiary
               charged to reserve for equity interest                      9,242,209           (5,944,779)           (2,876,858)

Income tax benefit (expense)                                                 589,885               (5,600)               (4,000)

Net loss in wholly owned financing subsidiary charged
     to reserve for equity interest                                            --                2,300,037             3,891,494
                                                                  -------------------   -------------------   -------------------
           Net income (loss)                                    $          9,832,094  $        (3,650,342)  $          1,010,636
                                                                  ===================   ===================   ===================

Basic income (loss) per share                                   $               2.95  $             (1.12)  $               0.29
Diluted income (loss) per share                                                 2.70                (1.12)                  0.28

Weighted-average number of shares of common stock
     outstanding                                                           3,329,409             3,253,324             3,521,736
Weighted-average number of shares of common stock
     and common stock equivalents outstanding                              3,641,716             3,253,324             3,605,674


<FN>

          See accompanying notes to consolidated financial statements.

</FN>
</TABLE>


                                       36

<PAGE>








                         POINT WEST CAPITAL CORPORATION
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
              For the years ended December 31, 1999, 1998 and 1997


<TABLE>
<CAPTION>




                                                                           Accumulated
                                        Common Stock        Additional    comprehensive    Retained
                                    ---------------------
                                      Shares      Amount   paid-in-capital income (loss)   (deficit)    Treasury Stock    Total
                                     -----------  --------  --------------- -------------  ------------- -------------- ------------
<S>                                    <C>          <C>         <C>             <C>           <C>            <C>           <C>


Balances at December 31, 1996        4,291,824  $ 42,918 $   29,496,720             --    (9,007,373)        (390,000)   20,142,265

Comprehensive income:
  Net income                                --        --             --             --     1,010,636               --     1,010,636
  Other comprehensive income:
     Unrealized investment gains            --        --             --      2,597,239            --               --     2,597,239
                                                                          -------------                                ------------
          Comprehensive income              --        --             --             --            --               --     3,607,875

Purchase of treasury stock                  --        --             --             --             --     (2,484,032)    (2,484,032)
                                    -----------  --------  -------------  -------------  -------------  -------------  -------------
Balances at December 31, 1997        4,291,824    42,918     29,496,720      2,597,239    (7,996,737)     (2,874,032)    21,266,108
Comprehensive loss:
  Net loss                                  --        --             --             --    (3,650,342)             --     (3,650,342)
  Other comprehensive loss:
   Net unrealized investment losses         --        --             --    (2,786,205)             --             --     (2,786,205)
                                                                          -------------                                -------------
          Comprehensive loss                --        --             --             --             --             --     (6,436,547)
                                    -----------  --------  -------------  -------------  -------------  -------------  -------------
Balances at December 31, 1998        4,291,824    42,918     29,496,720      (188,966)   (11,647,079)     (2,874,032)    14,829,561
Comprehensive income:
  Net income                                --        --             --             --     9,832,094              --      9,832,094
  Other comprehensive income, net of
    income tax:
     Net unrealized investment gains,
      net of  tax of $1.4 million           --        --             --      2,287,926             --             --      2,287,926
                                                                          -------------                                -------------
          Comprehensive income              --        --             --             --             --             --     12,120,020

Issuances of common stock
     (options exercised, including
       tax effect)                      98,300       983        592,229             --             --             --        593,212
                                    -----------  --------  -------------  -------------  -------------  -------------  -------------
Balances at December 31, 1999        4,390,124  $ 43,901  $  30,088,949 $    2,098,960  $  (1,814,985) $  (2,874,032) $  27,542,793
                                    ===========  ========  =============  =============  =============  =============  =============
<FN>

          See accompanying notes to consolidated financial statements.

</FN>
</TABLE>

                                       37

<PAGE>




               POINT WEST CAPITAL CORPORATION
            CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

                                                                              Years Ended December 31,
                                                                     1999               1998             1997
                                                                ----------------  -----------------  --------------

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

Cash flows from operating activities:
    Net income (loss)                                         $       9,832,094 $       (3,650,342)$     1,010,636
    Adjustments to reconcile net income (loss) to net cash
         (used in) provided by operating activities:
        Depreciation and amortization                                   479,282            356,309         240,535
        Loss on loan receivable                                         140,000               --                --
        Gain on assets sold                                              (7,751)          (165,346)     (1,463,080)
        Provision for loans receivable                                  105,000             50,000              --
        Net gain (loss) on securities                               (15,785,036)           998,813        (679,665)
        Interest income received as warrants                           (624,918)           (97,816)             --
        Provisions for loss on sale of assets                               --                --           328,236
        Earned discounts on policies                                   (203,801)          (438,792)       (488,563)
        Deferred tax benefit                                         (1,117,141)              --                --
        Changes in operating assets and liabilities:
          Purchase of life insurance policies                               --                --         (882,848)
          Collections on matured life insurance policies              2,377,984          3,209,114       6,051,149
          (Increase) decrease in other assets                          (400,375)            11,600        (25,096)
          Increase (decrease) in accrued interest expense                82,678             80,655         (7,744)
          Increase (decrease) in accounts payable                        45,890            (24,415)      (103,726)
          Increase in accrued compensation payable                      321,400             29,000           6,610
          Increase in taxes payable                                     479,376               --                --
          Decrease in reserve for equity interest in wholly
           owned financing subsidiary                                        --         (2,084,412)     (3,891,494)
                                                                ----------------  -----------------  --------------
                Net cash (used in) provided by operating
                activities                                           (4,275,318)        (1,725,632)         94,950
                                                                ----------------  -----------------  --------------

Cash flows from investing activities:
    Proceeds from sale of other assets                                   27,126            229,067      12,692,793
    Purchase of furniture and equipment                                 (18,059)           (22,630)         (7,203)
    Decrease in restricted cash                                          79,456            603,201         868,949
    Purchase of held-to-maturity securities                          (4,479,856)              --                --
    Proceeds from sale of held-to-maturity securities                 1,975,246               --                --
    Purchase of investments and non-marketable securities            (9,493,806)        (6,808,817)     (3,220,000)
    Proceeds from sale of investments and non-marketable
    securities                                                       24,640,599          3,087,691       2,021,187
    Additions to loans receivable                                   (26,175,058)        (6,549,689)     (4,015,716)
    Principal payments on loans receivable                              650,569            327,815              --
                                                                ----------------  -----------------  --------------
                Net cash (used in) provided by investing
                activities                                          (12,793,783)        (9,133,362)      8,340,010
                                                                ----------------  -----------------  --------------

Cash flows from financing activities:
    Proceeds from debentures payable                                        --           3,000,000              --
    Principal payments on securitized notes payable                         --            (275,193)     (2,414,098)
    Proceeds from revolving certificates                             23,908,039          5,400,045              --
    Principal payments on revolving certificates                    (25,108,084)              --                --
    Proceeds from term certificates                                  24,635,000               --                --
    Principal payments on term certificates                            (136,185)              --                --
    Purchase of treasury stock                                              --                --        (2,484,032)
    Increase in financing costs                                        (316,606)         (637,292)         (83,717)
    Proceeds from options exercised                                     254,936               --                --
                                                                ----------------  -----------------  --------------
                Net cash provided by (used in) financing
                activities                                           23,237,100         7,487,560       (4,981,847)
                                                                ----------------  -----------------  --------------

                Net increase (decrease) in cash and cash
                equivalents                                           6,167,999         (3,371,434)      3,453,113

Cash and cash equivalents, beginning of year                          6,668,126         10,039,560       6,586,447
                                                                ----------------  -----------------  --------------

Cash and cash equivalents, end of year                        $      12,836,125 $        6,668,126 $    10,039,560
                                                                ================  =================  ==============


Supplemental disclosures:
Supplemental disclosure of non-cash activities:
    Unrealized gain (loss) on securities available for sale,
    net of tax                                                $       2,287,926 $       (2,786,205)$     2,597,239
    Receipt of warrants                                       $         624,918 $           97,816 $            --
    Establishment of receivable from insurance company        $       2,205,000 $             --   $            --
    Accrued litigation settlement                             $       2,205,000 $             --   $            --
Supplemental disclosure of cash flow information:
    Taxes paid                                                $          64,156 $           19,680 $        40,233
    Cash paid for interest                                    $       4,880,200 $        3,598,911 $     3,607,231


<FN>

          See accompanying notes to consolidated financial statements.

</FN>
</TABLE>


                                       38

<PAGE>



                         Point West Capital Corporation

                   Notes to Consolidated Financial Statements

                  Years Ended December 31, 1999, 1998 and 1997


1.       Summary of Significant Accounting Policies
--       ------------------------------------------

         a.   General Description

         Point West Capital  Corporation  ("Point West Capital"),  including its
consolidated  entities  (collectively the "Company"),  is a specialty  financial
services company.

         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 Capital'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 at that
time. Through December 31, 1999, the Company had entered into agreements to sell
375 policies with an aggregate sale price of $19.5 million,  representing  $29.3
million in aggregate  face value.  By December 31, 1999,  Point West Capital had
completed the sale of (or otherwise  collected) all but six policies  (having an
aggregate face value of $358,000)  under these sales  agreements.  Substantially
all of the sales took place during 1997. Point West Capital continues to service
the life insurance policies held by its wholly owned special purpose subsidiary,
Dignity Partners Funding Corp. I ("DPFC").

         Subsequent   to   February   1997,   the  Company  has  become  a  more
broadly-based  specialty  financial  services company.  During 1997, the Company
expanded its financial  services  business  through the operations of Point West
Venture  Management,  LLC  (formerly  known as Fourteen  Hill  Management,  LLC)
("Point West  Management")  and Point West  Ventures,  L.P.  (formerly  known as
Fourteen Hill  Capital,  L.P.)  ("Point West  Ventures"),  which invest in small
businesses;  and Allegiance  Capital,  LLC  ("Allegiance  Capital"),  Allegiance
Funding I, LLC ("Allegiance  Funding"),  Allegiance Capital Trust I ("Allegiance
Trust I") and Allegiance Management Corp. ("Allegiance Management"),  which lend
funds to funeral home and cemetery owners. During 1998, the Company formed Point
West  Securities,   LLC  ("PWS"),  a  broker-dealer  licensed  by  the  National
Association of Securities Dealers, Inc. ("NASD").  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.

         Point West Capital was incorporated in the State of Delaware as Dignity
Partners,  Inc. in September  1992 and commenced  operations on January 2, 1993.
Effective   August  1,  1997,  its  name  was  changed  to  Point  West  Capital
Corporation.

         b.   Accounting Principles

         The consolidated  financial statements are presented in conformity with
accounting principles generally accepted in the United States.

                                       39

<PAGE>

                         Point West Capital Corporation

                   Notes to Consolidated Financial Statements


         c.   Principles of Consolidation

         The  consolidated  financial  statements  include the accounts of Point
West Capital and its majority owned subsidiaries  described below. The revenues,
expenses,  assets  and  liabilities  of the  subsidiaries  are  included  in the
respective  line  items  in the  consolidated  financial  statements  after  the
elimination of intercompany accounts and transactions.

         The Company consolidates the assets,  liabilities and operations of its
wholly owned special purpose subsidiary, DPFC.

         The Company also consolidates the assets, liabilities and operations of
Point West Management,  a wholly owned limited liability company, and Point West
Ventures,  a related limited  partnership,  both formed in June 1997. Point West
Ventures  received its small business  investment  company ("SBIC") license from
the Small Business  Administration  (the "SBA") effective  September 1997. Point
West  Management is the sole general  partner of Point West  Ventures,  and owns
99.981%  of the  partnership  interests.  Point  West  Capital is one of the two
limited  partners  of Point West  Ventures  and owns  0.017% of the  partnership
interests.  The remaining  0.002% of the  partnership  interests is owned by one
unaffiliated  limited  partner.  Point West Ventures  provides  loans,  debt and
equity  capital to small  companies as defined by the SBA.  Point West  Ventures
commenced operations in August 1997.

         In September  1997, the Company formed  Allegiance  Capital,  a limited
liability  company,  to provide  senior secured loans to owners of funeral homes
and  cemeteries.  Point West  Capital has a 65%  ownership  interest in, and 95%
voting  control  of,  Allegiance  Capital  and  serves as the  managing  member.
Allegiance  Capital's  president  and its vice  president of marketing  have the
balance of such interests. Point West Capital made the only capital contribution
to  Allegiance  Capital in the amount of $7.5 million.  During 1998,  Point West
Capital was allocated 99.5% of the interest on loans through  November 20, 1998,
which  was the  initial  funding  date  for the  Allegiance  Financing  (defined
herein).  Point West  Capital is  allocated  a  preferred  return  (based on the
weighted-average  interest  rate of all loans  outstanding)  to the extent  that
Point West Capital's capital investment in Allegiance  exceeds $3.0 million.  In
addition, net profits of Allegiance Capital for each calendar year are allocated
to  Point  West  Capital  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 is 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 Capital to the extent that in each year  sufficient  profits
are available with no carry forward  provided.  Allegiance  Capital owns 100% of
Allegiance Funding,  which is a special purpose subsidiary formed to acquire and
securitize loans originated by Allegiance  Capital,  and Allegiance  Management,
which is a special  purpose  subsidiary  formed to  manage  Allegiance  Funding.
Pursuant  to a Trust  Agreement  dated  August 1, 1998  (the  "Allegiance  Trust
Agreement"),   Allegiance  Funding  formed  a  trust,  Allegiance  Trust  I,  to
consummate a structured  financing  which has provided $28.7 million of debt and
may provide an additional $16.0 million of debt to support  Allegiance's lending
activities (the "Allegiance  Financing").  The Company  consolidates the assets,
liabilities and operations of Allegiance Capital, Allegiance Funding, Allegiance
Trust I and Allegiance Management. See Note 5.

         In  addition,  the Company  consolidates  the assets,  liabilities  and
operations  of PWS, a wholly owned  limited  liability  company,  formed in July
1998.  PWS received  its license  from the NASD to become a licensed  securities
broker-dealer   in  December   1998.  In  addition,   PWS  is  registered  as  a
broker-dealer  with the Securities and Exchange  Commission and California,  New
York and several other states. Point West Capital capitalized PWS with $414,000.

                                       40

<PAGE>
                         Point West Capital Corporation

                   Notes to Consolidated Financial Statements


        d.   Loans Receivable and Allowance for Loan Losses

         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. Unearned income represents fees paid by borrowers to Allegiance
Capital net of direct  expenses.  The  allowance for loan losses is estimated by
management  based on a review  of the loans and  factors  which in  management's
judgement  indicate  impairment  inherent in the  portfolio on the balance sheet
date.  Management  believes  that the  allowance  for loan  losses is  adequate.
Although  management  uses available  information to recognize  losses on loans,
future  additions to the allowance may be necessary based on changes in economic
conditions.  Loans are generally  placed on  non-accrual  status when payment in
full is in  doubt or the loan is 90 days or more  past  due as to  principal  or
interest.  Loans are returned to accrual status once the above noted factors are
no longer present and the loan is current. See Note 3.

         e.   Purchased Life Insurance Policies

         During 1999, 1998 and 1997, the Company  recognized income with respect
to its viatical  settlement  business (i.e.  purchased life insurance  policies)
upon receipt of proceeds on policies  (either  pursuant to sale of the policy or
the death of the  insured).  The income is equal to the  difference  between the
policy proceeds (less any back-end  sourcing fees) and the carrying value of the
policies  after  giving  effect  to any  reserve  for  loss on the  sale of such
policies.  The carrying  value for each policy  consists of the purchase  price,
other  capitalized  costs  and  through  June 30,  1996,  the  earned  discounts
recognized under the level yield method.  Matured policies receivable represents
policies  for which the Company has received  notification  that the insured has
died and for which the  Company is  awaiting  collection  of the face  value.  A
reserve  was  recorded  in 1996 in the amount of $6.9  million  to  reflect  the
estimated  loss of Point West  Capital's  equity  interest in DPFC.  The reserve
provided for the write-off of the  unrealized  residual  value  associated  with
DPFC.  The losses of DPFC were charged first against the reserve  which,  during
the third quarter of 1998, was fully depleted. Losses associated with DPFC after
depletion  of the reserve  during the third  quarter of 1998 have been,  and all
future  losses  associated  with DPFC will be,  reflected in the  Company's  net
income (loss) for the appropriate period. See Note 6.

         Purchased life insurance policies consisted only of those policies held
by DPFC. The sale of policies held by DPFC, all of which are pledged as security
for the  Securitized  Notes (as defined in Note 6),  requires the consent of the
Company and the holders of the Securitized Notes ("Noteholders"). As of February
29, 2000, DPFC's liquidity  account had a balance of $281,000.  Monthly interest
payments due on the notes are  approximately  $294,000.  Based on the  liquidity
account  balance as of  February  29,  2000 and on  policies  collected  through
February 2000,  sufficient funds are available to pay interest on, and a portion
of other costs associated  with, the Securitized  Notes through February 2000. A
failure to pay interest under the Securitized Notes would constitute an event of
default.  In  addition,  a  failure  to pay  other  costs  associated  with  the
Securitized  Notes would,  if not cured within 30 days,  constitute  an event of
default.  An event of default would give the Noteholders the right to accelerate
the payment of the  Securitized  Notes,  foreclose  on the  policies and dismiss
Point West Capital as servicer.

         f.   Deferred Financing Costs

         Financing costs are  capitalized and amortized using the  straight-line
method over the respective expected terms of the financing arrangements.

                                       41

<PAGE>
                         Point West Capital Corporation

                   Notes to Consolidated Financial Statements


         g.   Furniture and Equipment

         Furniture  and  equipment  are  stated  at  cost  net  of   accumulated
depreciation.  Depreciation  is  provided  on a  straight-line  basis  over  the
estimated useful lives of the assets, which is generally five years.

         h.   Income Taxes

         The Company  accounts  for income  taxes using the asset and  liability
method.  Under this method,  deferred tax assets and  liabilities are recognized
for the estimated  future tax consequences  attributable to differences  between
the financial  statement carrying amounts of existing assets and liabilities and
their  respective  tax basis  (temporary  differences).  Deferred tax assets and
liabilities  are measured  using enacted tax rates  expected to apply to taxable
income in the years in which  those  temporary  differences  are  expected to be
recovered  or settled.  The effect on deferred tax assets and  liabilities  of a
change in tax rates is  recognized  in income in the period  that  includes  the
enactment date of the tax change.

         Deferred tax assets are recognized for deductible temporary differences
and operating loss and tax credit  carryforwards,  and a valuation  allowance is
established, if necessary, to reduce the deferred tax asset if it is more likely
than not that the related tax benefits will not be realized in future years. See
Note 8.

         i.   Cash and Cash Equivalents

         The Company considers as cash equivalents all highly liquid investments
with an original maturity of three months or less.

         j.   Income (Loss) Per Share

         Income  (loss) per share has been  computed  according  to Statement of
Financial  Accounting  Standards No. 128, Earnings per Share ("SFAS 128"), which
requires  disclosure  of basic and diluted  earnings per share.  Under SFAS 128,
basic income (loss) per common share is calculated by dividing net income (loss)
by the weighted-average number of common shares outstanding during the reporting
period and excludes any dilutive effects of options and warrants. Diluted income
(loss) per common share reflects the potential  dilutive  effect,  determined by
the treasury  stock method,  of additional  common shares that are issuable upon
exercise of outstanding stock options and warrants. See Note 10.

         k.   Profit Sharing Plan

         Point West  Capital  has a profit  sharing  plan (the  "Plan")  for its
employees.  Each  employee who has been employed for at least one year becomes a
participant   in  the  Plan.   The  Plan  provides  for   discretionary   annual
contributions by Point West Capital for the account of each participant.  In any
year in which the Plan is "top-heavy" within the meaning of the Internal Revenue
Code (the "Code"),  the Plan requires,  consistent with the Code, that a minimum
contribution be made for non-key employees.  The contribution is allocated among
participants  based on their compensation under an allocation formula integrated
with Social  Security.  Participants  vest 20% in their Plan accounts  after two
years of  service  and an  additional  20% after  each of the next four years of
service. Upon termination following permanent disability or on retirement at age
65, all amounts credited to a participant's  account are distributed,  in a lump
sum or in installments,  as directed by the participant. Upon death, all amounts
credited to a  participant's  account become fully vested and are distributed to
the participant's surviving spouse or designated beneficiary.  Each year, profit
sharing  contributions,  if any, are determined by the

                                       42

<PAGE>

                         Point West Capital Corporation

                   Notes to Consolidated Financial Statements

Compensation  Committee of the Board. The Plan  contribution  expenses which are
included in compensation  and benefits during 1999, 1998 and 1997 were $141,000,
$85,000 and $86,000, respectively.

         l.   Use of Estimates

         Management   of  the  Company  has  made  a  number  of  estimates  and
assumptions  relating  to the  reporting  of  assets  and  liabilities  and  the
disclosure  of contingent  assets and  liabilities  to prepare  these  financial
statements in conformity with generally accepted accounting  principles.  Actual
results could differ from those estimates.

         m.   Stock-Based Compensation

         The  Company  accounts  for grants of stock  options to  employees  and
directors  according to Accounting  Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees" and related  Interpretations  ("ABP No. 25"). Pro
forma net income  (loss)  information,  as required by  Statement  of  Financial
Accounting  Standards No. 123,  Accounting for Stock-Based  Compensation  ("SFAS
123"),  is included in Note 14. Options granted to consultants are accounted for
in accordance with Emerging  Issues Task Force Consensus No. 96-18,  "Accounting
for Equity Investments That Are Issued to Other Than Employees for Acquiring, or
In  Conjunction  with  Selling,   Goods  or  Services,"  and  valued  using  the
Black-Scholes method prescribed by SFAS 123.

         n.   Recent Accounting Developments

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

         o.   Reclassifications

         Certain  prior-year  amounts have been reclassified to conform with the
current year's presentation.

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

         Statement of Financial  Accounting  Standards No. 115,  Accounting  for
Certain  Investments  in Debt  and  Equity  Securities  ("SFAS  115"),  requires
marketable debt and equity  securities to be classified  into  held-to-maturity,
available-for-sale   and   trading   categories.    Securities   classified   as
available-for-sale are reported in the Consolidated Balance Sheets at fair value
with any cumulative unrealized gains and losses included in comprehensive income
and reported as a separate  component  of  stockholders'  equity.  Fair value is
estimated by management  based on the average  closing bid of the securities for
the last three  trading days of the  reporting  period,  adjusted for  liquidity
constraints.  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 $8.3 million and $4.9 million at December
31, 1999 and 1998,  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  on an  appropriate
line.

                                       43
<PAGE>
                         Point West Capital Corporation

                   Notes to Consolidated Financial Statements


         The costs and estimated fair value of investment  securities  reflected
in the  Consolidated  Balance  Sheets as of  December  31,  1999 and 1998 are as
follows:
<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>


<TABLE>
<CAPTION>


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


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

</TABLE>



         Cumulative unrealized gains (losses) on  available-for-sale  securities
(representing  differences  between  estimated  fair  value and cost)  were $3.5
million and ($189,000) at December 31, 1999 and 1998,  respectively.  A separate
balance   sheet   component  of   stockholders'   equity   called   "Accumulated
Comprehensive  Income (Loss)"  reflects such cumulative  gains (losses),  net of
applicable taxes.

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

         Allegiance  had 21  loans  outstanding  at  December  31,  1999  in the
aggregate principal amount of $33.8 million, which bear a weighted-average fixed
interest  rate per  annum of 9.8%.  Allegiance  had five  loans  outstanding  at
December 31, 1998 in the aggregate principal amount of $9.1 million,  which bore
a weighted-average fixed interest rate per annum of 9.3%. Principal payments are
due  monthly  on such  loans,  and  such  loans  mature,  subject  to  permitted
prepayments,  in  approximately  fifteen  years from the initial  loan date.  At
December  31,  1999,  one loan was in default and on  non-accrual  status.  Loan
origination  fees  and  direct  loan  origination   costs  are  capitalized  and
recognized over the life of the related loan as an adjustment of yield (interest
income) in accordance with Statement of Financial  Accounting  Standards No. 91,
Accounting  for  Nonrefundable  Fees and Costs  Associated  with  Originating or
Acquiring Loans and Initial Direct Costs of Leases ("SFAS 91").

         In August 1998,  Allegiance put in place the Allegiance Financing which
provides  short-term  financing  and long-term  financing  with respect to loans
Allegiance  has  made in the  past  and  may  make in the  future.  See  Note 5.
Allegiance  uses  futures  contracts to hedge  certain  interest  rate  exposure
between

                                       44

<PAGE>
                         Point West Capital Corporation

                   Notes to Consolidated Financial Statements



the  time  of  origination  of the  loans  and  the  expected  issuance  of term
certificates. The futures contracts are intended to protect a portion of the net
interest margins earned on the loans. Any realized gain or loss related to these
hedges are deferred and  recognized by  Allegiance  over the life of the related
loan as an  adjustment  of interest  income.  Pursuant to Statement of Financial
Accounting  Standards No. 80,  Accounting for Futures Contracts ("SFAS 80"), 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  December  31,  1999,
Allegiance  had  cumulative  net  realized  gains on its hedging  activities  of
$215,000 which decreased loans  receivable in a like amount.  As of December 31,
1999 Allegiance had no open hedges. As of December 31, 1998,  Allegiance had net
realized  losses on its hedging  activities of $261,000  which  increased  loans
receivable  in a like  amount.  Unrealized  net  losses  from open  hedges as of
December 31, 1998 were $800.

         Ventures  had  two  loans  outstanding  at  December  31,  1999  in the
aggregate  principal  amount of $2.6  million,  one of which was  originated  in
January 1998 and bears  interest at a fixed  interest  rate per annum of 15% and
the other of which was  originated  in  November  1999 and bears  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  matures,  subject  to
permitted prepayments,  approximately 5 years from the initial loan date and the
loan originated in November 1999 matures,  subject to permitted prepayments,  on
April 30, 2000.  Ventures had two loans  outstanding at December 31, 1998 in the
aggregate principal amount of $864,000,  one of which is described above and the
other of which was  originated  in September  1998 and bore  interest at a fixed
interest rate per annum of 14%, but was repaid in 1999.

4.       Non-Marketable Securities
--       -------------------------

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

         The Company reviews on a quarterly basis all non-marketable  securities
and  attempts to ascertain  whether the value is  impaired.  As a result of such
reviews,  Ventures determined that $535,000 of non-marketable  equity securities
held of one company was impaired at June 30, 1999 and $500,000 of non-marketable
equity  securities  held of another  company was  impaired at December 31, 1999.
Therefore,  the Company wrote-off the entire  $1,035,000  carrying value of such
securities in 1999.  In addition,  the Company  determined  that $1.1 million of
non-marketable  securities  held of one company was  impaired at  September  30,
1998,  and therefore  wrote-off the entire $1.1 million  carrying  value of such
security in 1998. These write-offs are included in net gain (loss) on securities
in the Consolidated Statements of Operations.

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

         Pursuant  to  the  Allegiance  Financing,  a  consortium  of  insurance
companies (the "Investors")  provided funding through September 20, 1999, with a
balance at that date of $24.9 million, on a non-recourse  revolving  certificate
basis  which  was used for the  purchase  or  funding  of  loans  originated  by
Allegiance Capital and transferred,  through Allegiance  Funding,  to Allegiance
Trust I. On September 21, 1999, the revolving certificates then outstanding were
repaid through the issuance of the term certificates described below.

         Under the Allegiance  Financing  various  classes of revolving and term
certificates  of  Allegiance  Trust I have been issued.  The original  revolving
certificates  were issued in August 1998 in four  classes,  consisting  of Class
A-R,  Class  B-R,  Class C-R and Class  D-R.  The Class D-R  certificate,  which

                                       45

<PAGE>

                         Point West Capital Corporation

                   Notes to Consolidated Financial Statements


represents  the right to receive all excess cash flow from  Allegiance  Trust I,
was unrated while the other revolving  certificates received ratings from Duff &
Phelps  Credit  Rating Co.  ranging  from A to BB. At September  20,  1999,  the
following  principal  amounts of Class A-R,  Class B-R,  Class C-R and Class D-R
revolving  certificates  were  outstanding,  respectively:  $19.5 million,  $3.2
million,  $2.2 million and $2.4 million.  At September  21, 1999 such  revolving
certificates  were repaid through the issuance in the following amounts of Class
A,  Class B,  Class C,  Class D,  Class E and Class F term  certificates:  $17.8
million,  $1.8  million,  $2.0  million,  $1.8  million,  $1.3  million and $2.6
million.  The Class F term  certificate,  which was retained by Allegiance,  was
unrated while the other term  certificates  received  ratings from Duff & Phelps
ranging  from AA to B.  The  weighted-average  fixed  interest  rate of the term
certificates held by third parties is 8.1%.

         The  Company and  Investors  executed  amendments  which  extended  the
Allegiance Financing through April 15, 2000. The Investors agreed to continue to
provide revolving debt, subject to certain limitations,  through April 15, 2000,
on terms similar to those under the original  revolving  certificates  under the
Allegiance  Financing,  but with the  addition  of  another  class of  revolving
certificates  as  described  below.  Allegiance  has agreed to retain an unrated
revolving  certificate  related to the  extension.  In addition,  the  Investors
agreed to provide up to $20.2 million of additional term  financing,  subject to
certain limitations, through April 15, 2000, on terms similar to those under the
original term  certificates  issued under the  Allegiance  Financing.  The fixed
interest on the additional term  certificates will be based on the ten-year U.S.
Treasury yield plus a spread ranging from 2.0% to 8.5%. As of December 31, 1999,
Allegiance has borrowed $4.2 million under the revolving certificates.

         Pursuant to the  extension,  as  additional  funds are  utilized  going
forward,  the amount issued under the various classes of term  certificates will
increase,  and such increases may be disproportionate to the current proportions
of term certificates outstanding.  In December 1999, Allegiance Trust I reissued
the Class C-R revolving  certificate as two classes,  Class C1-R and Class C2-R,
and  funded  the Class  B-R,  Class  C1-R,  Class  C2-R and Class D-R  revolving
certificates. The Class C1-R certificates were funded in the principal amount of
$1.4 million and the Class C2-R certificates were funded in the principal amount
of $1.1 million.  The Class B-R certificates were funded in the principal amount
of $1.7 million.  Such  certificates  bear interest at a fixed rate based on the
one-year  U.S.  Treasury  yield  plus a  weighted-average  spread  of 4.7%.  The
weighted-average  interest  rate of the  revolving  certificates  held by  third
parties at  December  31, 1999 was 10.4%.  Allegiance  funded and  retained  the
unrated Class D-R revolving certificate in the amount of $2,197,000.

         The Allegiance Financing does not qualify for sale treatment under SFAS
125 because its terms entitle  Allegiance  Funding to repurchase  loans prior to
the point at which the cost of servicing them becomes  burdensome.  Accordingly,
the Allegiance Financing will not receive gain on sale treatment under SFAS 125.
The loans and  borrowings  under the  Allegiance  Financing are reflected in the
Consolidated Balance Sheets.

         In connection with the Allegiance Financing,  Allegiance Capital paid a
$175,000 commitment fee when funds were initially  borrowed.  Of such commitment
fee,  $58,000  has  been  amortized  over  the  expected  life of the  revolving
certificates (10 months) and $117,000 are being amortized over the expected life
of  the  term  certificates  (15  years).  In  connection  with  the  extension,
Allegiance  paid a  $125,000  commitment  fee.  Of  such  fee,  $42,000  will be
amortized  over the expected life of the revolving  certificates  (8 months) and
$83,000 will be 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.

                                       46

<PAGE>
                         Point West Capital Corporation

                   Notes to Consolidated Financial Statements


         In connection  with the extension of 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 not been required to make any such payments.  The amount of cash, if any, to
be provided will be a function of several variables  including the monthly LIBOR
interest  rate  and  the   outstanding   balance  of  the  Class  A-R  revolving
certificate.  At February 23,  2000,  the  outstanding  balance of the Class A-R
revolving certificate was zero.

6.       Securitized 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 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 Capital. The assets of DPFC are the beneficial ownership
interests in the life insurance  policies and funds which secure the Securitized
Notes.  From 1996 through the third quarter of 1998, losses associated with DPFC
were charged  against the reserve which was  originally  established in 1996 for
the estimated loss of Point West Capital's equity interest in DPFC. See Note 1e.
Since the third quarter of 1998,  losses associated with DPFC after depletion of
the  reserve  have been  reflected  in the  Company's  net income  (loss) in the
appropriate  period.  Upon the retirement of the Securitized  Notes, the Company
will  recognize  a gain in an  amount  approximately  equal  to any  accumulated
deficit reflected net of any tax effect. For 1999, the loss associated with DPFC
was approximately $4.2 million. At December 31, 1999, DPFC's accumulated deficit
was approximately $5.9 million.

         Point 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,  subject to certain priority
payments, in connection therewith.

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

         Point West Ventures has issued one debenture in the principal amount of
$3 million payable to the SBA with semi-annual interest only payments at a fixed
rate of 5.9% (plus a 1% annual fee) and a scheduled  maturity  date of September
1, 2008.  In addition,  Point West Ventures paid to the SBA a $105,000 fee (3.5%
of the total  borrowings)  to borrow such money.  The  debenture is subject to a
prepayment penalty if repaid prior to September 1, 2003.


                                       47

<PAGE>
                         Point West Capital Corporation

                   Notes to Consolidated Financial Statements



8.       Income Taxes
--       ------------

         Point West Capital and its subsidiaries file a consolidated tax return.
The  components of the  provision  for income tax included in the  statements of
operations for the years ended December 31, are as follows:

<TABLE>
<CAPTION>


                                                      1999               1998                 1997
                                                      ----               ----                 ----
<S>                                                  <C>                  <C>                  <C>



     Federal:
          Current expense....................     $ (26,112)           $    --             $      --
          Deferred benefit...................       985,583                 --                    --
     State:
          Current expense....................      (501,144)            (5,600)               (4,000)
          Deferred benefit ....................     131,558                 --                    --
                                                 ---------------    ---------------      ---------------
     Income tax benefit (expense)........        $  589,885           $ (5,600)           $   (4,000)
                                                 ===============    ================     ================

</TABLE>


         The tax effects of temporary  differences that give rise to significant
portions of the deferred tax assets and deferred tax  liabilities as of December
31, are presented below.

<TABLE>
<CAPTION>


                                                                                  1999                  1998
                                                                                  ----                  ----

<S>                                                                              <C>                      <C>

     Deferred tax assets:
          Revenue and expenses recognized on the cash
               basis for tax purposes....................................    $  100,374             $  270,173
          Depreciation, amortization and other...........................         4,052                  6,961
          Allowance for assets held for sale.............................            --                 66,407
          Allowance for loss on non-marketable securities................       199,172                427,620
          Allowance for loan losses......................................        61,743                 19,917
          Unrealized loss on securities available for sale...............            --                 75,265
          Net operating loss carryforwards...............................     2,009,039              5,773,727
                                                                            ------------------    -----------------
                                                                              2,374,380              6,640,070
          Valuation allowance............................................            --            (4,296,383)
                                                                            ------------------    -----------------
          Deferred tax assets net of valuation allowance.................     2,374,380              2,343,687

     Deferred tax liabilities:
          Unrealized gain on securities available for sale..............      1,392,161                     --
          Accretion recognized on a cash basis for tax purposes.........      1,263,239              2,349,687
                                                                            ------------------    -----------------
                                                                              2,655,400              2,349,687
                                                                            ------------------    -----------------
     Net deferred tax liability.........................................     $(281,020)             $  (6,000)
                                                                            ==================    =================

</TABLE>

                                       48


<PAGE>

                         Point West Capital Corporation

                   Notes to Consolidated Financial Statements


         A  reconciliation  of the  difference  between the amount of income tax
benefit  (expense)  recorded and the amount calculated using the federal rate of
34% is as follows:

<TABLE>
<CAPTION>


                                                           1999                   1998                  1997
                                                           ----                   ----                  ----
<S>                                                         <C>                    <C>                  <C>


     Tax benefit  (expense) at statutory rate
       (34%)..................................       $ (3,142,351)           $  1,239,212          $  (344,976)
     State taxes, net of federal benefits.....           (243,927)                 76,409             (189,173)
     Change in valuation allowance (1)........           4,221,118            (1,319,532)               530,149
     Other....................................           (244,955)                (1,689)                    --
                                                     ------------------    ------------------    ------------------=
                   Income tax benefit (expense) ...     $  589,885            $   (5,600)           $   (4,000)
                                                     ==================    ===================    ==================
<FN>
--
(1)      $75,265 of the change in tax valuation  allowance has been reflected in
         the statement of changes in stockholders' equity in connection with the
         unrealized loss on securities available-for-sale.

</FN>
</TABLE>

         At December  31,  1999,  the Company has an  estimated  federal tax net
operating loss  carryforward of $5,278,409  expiring in the years 2012 and 2018,
and a California tax net operating loss carryforward of approximately $3,764,417
expiring in the year 2003.

9.       Common Stock
--       ------------

         In October 1996, the Board approved a share repurchase program pursuant
to which  the  Company  was  authorized  to  purchase  from time to time up to 1
million shares of common stock at prevailing  market prices.  In June 1997, such
authority  was increased to 1.04 million  shares of common stock.  In June 1997,
the Company  completed  the share  repurchase  program,  having  repurchased  an
aggregate of 1.04 million shares at a weighted-average price of $2.77 per share.

10.      Income (Loss) 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
years ended December 31, 1999, 1998 and 1997 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>


                                                                  1999             1998             1997
                                                                  ----             ----             ----
<S>                                                               <C>               <C>              <C>



  Numerator:
       Net income (loss).................................        $9,832,094     $ (3,650,342)      $1,010,636
                                                                 =============  =============     =============

  Denominator:
       Weighted-average shares..........................          3,329,409         3,253,324       3,521,736
                                                                 -------------  -------------     -------------
       Denominator for basic calculation...............           3,329,409         3,253,324       3,521,736
       Weighted-average effect of dilutive securities:
            Employee stock options.....................             201,249                --          83,938
            Warrants...................................             111,058                --              --
                                                                 -------------  -------------     -------------
       Denominator for diluted calculation.............           3,641,716         3,253,324       3,605,674
                                                                 =============  =============     =============

  Income (loss) per share:
       Basic...........................................           $   2.95          $  (1.12)       $   0.29
                                                                  =========         =========       ========
       Diluted.........................................           $   2.70          $  (1.12)       $   0.28
                                                                  =========         ==========      ========
</TABLE>

                                       49

<PAGE>
                         Point West Capital Corporation

                   Notes to Consolidated Financial Statements


         Options outstanding during the year ended December 31, 1999 to purchase
approximately 40,000 shares of common stock were not included in the computation
of diluted income per share because the options' exercise price was greater than
the average  market price of the common  stock  during the year and,  therefore,
would be anti-dilutive.  Options  outstanding during the year ended December 31,
1998 are not included in the  computation of diluted income per share because of
the anti-dilutive effect. Options and warrants outstanding during the year ended
December 31, 1997 to purchase  approximately 340,000 shares of common stock were
not included in the computation of diluted income per share because the options'
exercise  price was greater  than the average  market  price of the common stock
during the year and, therefore, would be anti-dilutive.

11.      Commitments
---      -----------

         The Company has a lease  obligation  for its  California  office space,
which expires on May 31, 2004.  The Company shares the monthly rent expense with
The Echelon Group of Companies,  LLC ("Echelon") under a cost sharing agreement.
Echelon is owned by Point West Capital's  executive  officers.  The monthly rent
through May 31, 2001 is $18,963,  of which (under the current  terms of the cost
sharing agreement) the Company pays $15,170 and Echelon pays $3,793. The monthly
rent from June 1, 2001  through  May 31, 2002 is  $19,475,  of which  (under the
current  terms of the cost sharing  agreement)  the Company will pay $15,580 and
Echelon will pay $3,895. The monthly rent from June 1, 2002 through May 31, 2004
is $19,988, of which (under the current terms of the cost sharing agreement) the
Company will pay $15,990 and Echelon will pay $3,998.

         Future  minimum  rental  payments  (less  amounts to be paid by Echelon
under the current  terms of the cost  sharing  agreement)  at December 31, 1999,
under operating leases with an initial term of one year or more, are as follows:

                                Year ending December 31,
                                        2000..........             $ 182,040
                                        2001..........               184,910
                                        2002..........               189,830
                                        2003..........               191,880
                                        2004..........                79,950
                                                                    ---------
                                        Total.........             $ 828,610
                                                                    =========

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

         From time to time, the Company is involved in routine legal proceedings
incidental to its business,  including  litigation in connection  with (i) loans
and  investments  made by  Point  West  Ventures  and  Allegiance,  and (ii) the
collection of amounts owed under life  insurance  policies by insurance  company
obligors. The Company does not expect that these proceedings, individually or in
the aggregate,  will have a material  adverse effect on the Company's  financial
position, liquidity or results of operations.

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

                                       50

<PAGE>
                         Point West Capital Corporation

                   Notes to Consolidated Financial Statements


statement  and  prospectus  related to its initial  public  offering and certain
documents  filed by the Company under the Exchange Act. In the second quarter of
1999, a settlement in principle was reached and on February 25, 2000,  the Court
approved  a  settlement  agreement  pursuant  to which all  claims  against  all
defendants  will be dismissed and $3.15 million will be paid to the  plaintiffs.
Under the terms of the  Company's D&O insurance  policy,  the Company's  insurer
paid 70% of the  settlement  amount.  As a result,  during the second quarter of
1999, the Company recorded an accrued litigation  settlement  liability of $3.15
million,  an expense of $945,000 and an accounts  receivable  from its insurance
company of $2.2 million  (which is included in other assets in the  Consolidated
Balance Sheet and was paid into an escrow account in January 2000).

         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 Echelon by an individual
purporting  to act on behalf of himself and an alleged  class  consisting of all
purchasers of the Company's  common stock during the period February 14, 1996 to
July 16, 1996. The complaint alleges that the defendants  violated section 25400
of the California  Corporate Code and seeks to recover damages.  The allegations
are based on alleged  misstatements,  concealment and/or  misrepresentations and
omissions of allegedly  material  information  in connection  with the Company's
initial  public  offering and subsequent  disclosures.  The case has been stayed
since its  inception by agreement  of the parties.  However,  the claims in this
case are covered by the settlement  agreement  described  above and will also be
dismissed pursuant to the settlement agreement described above.

         In October 1999,  Allegiance brought an action in the District Court of
Webb County,  Texas seeking to collect on a defaulted  loan with an  outstanding
principal  balance of $2.1 million.  In response to the lawsuit,  on October 29,
1999, the defendants filed a counterclaim  against  Allegiance and a third-party
petition against an individual who is an officer of Allegiance. The counterclaim
and the third-party  petition allege that Allegiance and the Allegiance  officer
committed fraud, conversion,  deceptive trade practices,  negligence,  breach of
fiduciary duty, negligent misrepresentation, conspiracy and other wrongful acts,
and  seeks,   among  other  things,   compensatory   and  punitive  damages  (or
cancellation of indebtedness), interest, fees and costs. The defendants retained
a consulting firm owned by the Allegiance  officer to consult in the acquisition
of a funeral home and to assist in financing such  acquisition.  The defendants'
allegations  and the third-party  petition are based on (i) allegedly  erroneous
advice  provided  by the  Allegiance  officer,  (ii) an  alleged  failure by the
Allegiance  officer to disclose his  relationship  with Allegiance and (iii) the
allegedly  wrongful  exercise  by  Allegiance  of its  rights in the  collateral
securing the  defaulted  loan.  The Company  believes that the  counterclaim  is
without  merit and intends to  prosecute  the  original  action,  and defend the
counterclaim, vigorously.

13.      Fair Value of Financial Instruments
---      -----------------------------------

         The following  methods and  assumptions  were used to estimate the fair
value of each class of financial instruments:

         Cash  and  cash  equivalents,  restricted  cash  and  matured  policies
receivable are stated at approximate fair value because of the short maturity of
these  instruments.  All balances have maturities  within 60 days of the balance
sheet date.

         Investment  securities  are stated at fair value based on quoted market
prices with adjustments for liquidity constraints.

         Loans receivable are stated at cost which  approximates  fair value, as
underlying  rates  approximate  current market rates.

                                       51

<PAGE>
                         Point West Capital Corporation

                   Notes to Consolidated Financial Statements



         The portfolio of purchased  life  insurance  policies is stated at cost
plus accretion through June 1996. Fair value is not readily determinable.

         The Company  does not believe that it is practical to estimate the fair
value for its investments in non-marketable securities.

         The  revolving  and term  certificates,  securitized  notes payable and
debenture  payable  are all stated at cost which  approximates  fair  value,  as
underlying rates described below approximate current market rates. The revolving
certificates  outstanding at December 31, 1999 bear a fixed interest rate of the
weighted-average  spread of 4.7% over the one-year U.S. Treasury yield. The term
certificates  bear  a  fixed   weighted-average   interest  rate  of  8.1%.  The
securitized  notes payable bear a fixed  interest rate of 9.2%.  The  debentures
bear a fixed interest rate of 6.9%.

14.      Stock-Based Compensation
---      ------------------------

         The Company has two stock option plans.  Under the Amended and Restated
1995 Stock Option Plan ("1995  Plan"),  Point West Capital may grant  options to
employees,  consultants and directors of Point West Capital and its subsidiaries
for up to 450,000  shares of common stock.  Point West Capital has increased the
number of shares  that may be issued  under the 1995 Plan to 950,000  subject to
stockholder  approval.  Options in excess of 450,000  shares under the 1995 Plan
have been granted  subject to receipt of stockholder  approval.  Under the Stock
Option Plan For  Non-Employee  Directors  ("Director  Plan"),  options for up to
75,000  shares  of  common  stock  are  granted  automatically  to  non-employee
directors of Point West  Capital.  Point West has increased the number of shares
that may be issued under the Director  Plan to 150,000,  subject to  stockholder
approval.  The exercise price of each granted option generally equals the market
price of the Common Stock on the date of grant.  Each option  generally  expires
ten years  after the date of grant.  Under the 1995 Plan,  each  granted  option
generally  vests 20% per year over five  years.  Some  incentive  stock  options
granted to  executive  officers  under the 1995 Plan have  different  terms than
generally described above. These options have an exercise price equal to 110% of
market  value on the date of grant,  vest 25% per year over 4 years and expire 5
years after the date of grant.  Under the  Director  Plan,  initially,  each new
non-employee  director,  when joining the board,  is granted 10,000 options that
vest 34%,  33% and 33% at the next three  annual  meetings  following  the grant
date.  At each annual  meeting,  each  non-employee  director  is granted  5,000
options that vest at the next annual meeting.

                                       52

<PAGE>

                         Point West Capital Corporation

                   Notes to Consolidated Financial Statements


         A summary of the Company's  stock option activity during 1999, 1998 and
1997 follows:

<TABLE>
<CAPTION>


                                     1999                           1998                            1997
                             -------------------------    --------------------------    ---------------------------

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


                                         Weighted-                      Weighted-                      Weighted-
                                         Average                        Average                        Average
                                         Exercise                       Exercise                       Exercise
                                         Price Per                      Price Per                      Price Per

                               Options     Option             Options    Option             Options     Option
                               -------     ------             --------   ------             -------     ------
Outstanding at
  Beginning of year            385,500     $  3.45            273,000     $  3.40            181,000     $  3.33
Granted                        362,500     $  6.61            125,500     $  3.41             96,000     $  3.44
Exercised                     (98,300)     $  2.59                 --          --                 --          --
Forfeited                     (44,000)     $  2.47            (13,000)    $  1.85            (4,000)     $  1.38
Canceled                      (27,000)     $ 10.88                 --          --                 --          --
                           ------------                   -------------                  -------------
Outstanding at end
  of year                      578,700     $  5.31            385,500     $  3.45            273,000     $  3.40
                           ============                   =============                  =============

Options exercisable
  at year-end                  101,950     $ 5.80             111,400     $  5.03             53,733     $ 6.47
                           ============                  =============                  =============
</TABLE>


         The  weighted-average  fair value of options  granted during 1999, 1998
and 1997 were $3.99, $2.20 and $2.38, respectively.

         The  following  table  summarizes   information   about  stock  options
outstanding at December 31, 1999:

<TABLE>
<CAPTION>
                                     Options Outstanding                                 Options Exercisable
                      ------------------------------------------------------    ---------------------------------

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

                                             Weighted-
    Range of                Number            Average            Weighted-            Number            Weighted-
    Exercisable          Outstanding         Remaining            Average           Exercisable          Average
     Prices              at 12/31/99     Contractual Life      Exercise Price       at 12/31/99     Exercise Price
     ------              -----------     -----------------     --------------       -----------     ---------------

   $1.38 - $1.38              50,800                 6.55             $ 1.38             12,000             $ 1.38
   $2.25 - $2.75              77,500                 6.66             $ 2.42             17,250             $ 2.42
   $3.44 - $3.44              71,900                 7.82             $ 3.44             31,100             $ 3.44
   $5.00 - $6.88             338,500                 9.72             $ 6.04             11,600             $ 6.29
  $10.81 - $13.50             40,000                 7.05             $12.55             30,000             $13.13
  ---------------            -------                 ----             ------             ------
   $1.38 - $13.50            578,700                 8.61             $ 5.31            101,950             $ 5.80

</TABLE>
         The  Company  has  elected to follow APB No. 25 in  accounting  for its
employee and director stock options because, as discussed below, the alternative
fair  value  accounting  provided  for  under  SFAS 123  requires  use of option
valuation  models  that were not  developed  for use in valuing  employee  stock
options.  Under APB No. 25, the Company does not recognize  compensation expense
with respect to awards if the exercise price equals or exceeds the fair value of
the underlying security on the date of grant and other terms are fixed.

         Pro forma income per share  information  is required by SFAS 123, which
also requires that the information be determined as if the Company had accounted
for its employee  stock  options  under the fair value  method.  This method was
developed  for use in estimating  the fair value of traded  options that have no
vesting restrictions and are fully transferable.  In addition,  option valuation
method models require the input of highly selective  assumptions,  including the
expected  life of the options.  Because the  Company's

                                       53

<PAGE>

                         Point West Capital Corporation

                   Notes to Consolidated Financial Statements


stock-based  awards  have  characteristics  significantly  different  from those
traded  options and because  changes in the  subjective  input  assumptions  can
materially affect the fair value estimate, in management's opinion, the existing
models do not necessarily provide a reliable single measure of the fair value of
its stock-based awards.

         Had  compensation  cost for the Company's two stock-based  compensation
plans been  determined  consistent  with SFAS 123, the  Company's  pro forma net
income (loss) and income (loss) per share would have been as follows:

<TABLE>
<CAPTION>



                                                                 1999                1998             1997
                                                          -----------------    ----------------- ---------------

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


  Net income (loss)                       As reported          $ 9,832,094        $ (3,650,342)     $ 1,010,636
                                          Pro forma            $ 9,493,373        $ (3,878,265)       $ 799,444
  Basic earnings (loss) per share         As reported                $2.95             $ (1.12)           $0.29
                                          Pro forma                  $2.85             $ (1.19)           $0.23
  Diluted earnings (loss) per share       As reported                $2.70             $ (1.12)           $0.28
                                          Pro forma                  $2.61             $ (1.19)           $0.22
</TABLE>

         For purposes of the Company's pro forma  disclosure,  the fair value of
each  option  is  estimated  on  the  date  of  grant  using  the  Black-Scholes
option-pricing model. The following  weighted-average  assumptions were used for
grants:
<TABLE>
<CAPTION>

                                               1999               1998                1997
                                               ----               ----                ----

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


         Expected volatility                   75%                 75%                75%

         1995 Plan:
         Risk-free interest rate               6.5%               5.0%                5.8%
         Expected life                       6 years             6 years            7 years

         Director Plan:
         Risk-free interest rate               6.2%               4.6%                5.6%
         Expected life                       2 years             2 years            2 years

</TABLE>


         In addition to the above mentioned stock option plans, on September 16,
1996 Point West Capital  granted  300,000  warrants at a purchase price of $6.00
per  share to an  investment  banking  firm.  These  warrants  were  exercisable
immediately and expire on September 16, 2001. The expense for these warrants was
determined  consistent  with  SFAS  123.  The  fair  value of each  warrant  was
estimated on the date of grant using the Black-Scholes option-pricing model with
the  following  weighted-average   assumptions:   expected  volatility  of  20%;
risk-free interest rate of 6.2%; and expected life of 5 years.

15.      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.

                                       54

<PAGE>

                         Point West Capital Corporation

                   Notes to Consolidated Financial Statements


         The  Company's   reportable   operating   segments   include   Viatical
Settlements,  Ventures and Allegiance.  The activities of each operating segment
are described in Note 1c. The Other segment includes Point West Capital and PWS.
The  accounting  policies  of the  operating  segments  are the  same  as  those
described  in the summary of  significant  accounting  policies.  The  following
tables represent the Company's results from segments for 1999 and 1998.  Segment
reporting  for 1997 has not been included  since the  operations of Ventures and
Allegiance were insignificant as of such date.

<TABLE>
<CAPTION>


                                                                      1999
                            ----------------------------------------------------------------------------------------

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

                                 Viatical
                             Settlements (1)       Ventures         Allegiance          Other             Total
                             ---------------       ---------        ----------          -----             -----
Interest income......             $   79,459       $ 1,205,203       $1,798,477       $  231,141       $  3,314,280
Net gain on
securities   .........                    --        13,020,549               --        2,764,487         15,785,036
Other income .........               288,336            63,657           15,000          251,998            618,991
                             ---------------    ---------------   -------------- ---------------    ---------------
Total income .........               367,795        14,289,409        1,813,477        3,247,626         19,718,307
Interest expense......             3,533,101           208,200        1,221,577               --          4,962,878
Depreciation &
   amortization.......              217,444            30,000          223,331            8,507             479,282
Income   tax   benefit
   (expense) (2)......                (800)             (800)         (43,880)          635,365             589,885
Contributed net income
   (loss) (2).........          (3,739,141)        14,041,159        (483,123)           13,199           9,832,094
Identifiable assets...           32,901,015        25,718,616       35,993,686        6,912,534         101,525,851

</TABLE>


<TABLE>
<CAPTION>

                                                                      1998
                            ----------------------------------------------------------------------------------------
<S>                                <C>              <C>               <C>                <C>              <C>

                                Viatical
                             Settlements (1)       Ventures         Allegiance          Other             Total
                             ---------------       --------         ----------          -----             -----
Interest income......             $  199,782       $   299,842        $ 588,639        $ 405,816        $1,494,079
Net loss on
  securities.........                     --          (979,179)               --        (19,634)         (998,813)
Other income........                 776,797                --            (8,050)         70,064           838,811
                              ---------------    ---------------   --------------  ---------------  --------------
Total income .........               976,579          (679,337)          580,589          456,246        1,334,077
Interest expense......             3,550,664             98,372           30,530               --        3,679,566
Depreciation &
   amortization.......               234,880             61,733           55,568            4,128          356,309
Income  tax   benefit
   (expense) (2)........               (800)              (800)          (1,600)          (2,400)          (5,600)
Contributed net income
   (loss) (2)....                (1,145,463)          (874,293)          129,611      (1,760,197)      (3,650,342)
Identifiable assets...            37,078,882          7,140,917       10,162,182        8,060,780       62,442,761

<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  are not  generally  allocated
     between segments and are included in the Other segment.

</FN>
</TABLE>

                                       55



<PAGE>



                                    PART III
                                    --------

ITEM 10--DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
-----------------------------------------------------------

         Information  regarding  directors  of the  Company  and  the  executive
officers of the Company (each of whom is a director) will be set forth under the
caption  "Directors  and Executive  Officers" in the Company's  proxy  statement
related to its 2000 annual meeting of stockholders  (the "Proxy  Statement") and
is  incorporated  herein  by  reference.  Information  required  by Item  405 of
Regulation  S-K will be set forth under the caption  "Section  16(a)  Beneficial
Ownership  Reporting  Compliance"  in the Proxy  Statement  and is  incorporated
herein by reference.

ITEM 11--EXECUTIVE COMPENSATION
-------------------------------

         Information  required  by this item will be set forth under the caption
"Executive  Compensation" in the Proxy Statement and, except for the information
under  the  captions  "Executive  Compensation  --  Report  of the  Compensation
Committee on Executive  Compensation" and "Executive Compensation -- Performance
Graph," is incorporated herein by reference.

ITEM 12--SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
-----------------------------------------------------------------------

         Information  required  by this item will be set forth under the caption
"Security  Ownership of Certain  Beneficial  Owners and Management" in the Proxy
Statement and is incorporated herein by reference.

ITEM 13--CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
--------------------------------------------------------

         Information regarding certain relationships and related transactions of
directors  and executive  officers will be set forth under the caption  "Certain
Relationships   and  Related   Transactions"  in  the  Proxy  Statement  and  is
incorporated herein by reference.


                                     PART IV
                                     --------

ITEM 14--EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
---------------------------------------------------------------
         FORM 8-K
         ---------

     (a)          1.       The following  designated financial statements and
                           the auditors'  reports thereon are included herein at
                           pages 33 through 55:

                                    Ernst & Young LLP's Independent Auditors'
                                    Report.

                                    KPMG LLP's Independent Auditors' Report.

                                    Consolidated  Balance  Sheets as of December
                                    31, 1999 and 1998.

                                    Consolidated  Statements of  Operations  for
                                    the years ended December 31, 1999, 1998 and
                                    1997.


                                       56

<PAGE>



                                    Consolidated   Statements  of  Stockholders'
                                    Equity  for the  years  ended  December  31,
                                    1999, 1998 and 1997.

                                    Consolidated  Statements  of Cash  Flows for
                                    the years ended December 31, 1999, 1998 and
                                    1997.

                                    Notes to Consolidated Financial Statements.

                  2.       All  schedules  are  omitted   because  the  required
                           information  is  not  present  or is not  present  in
                           amounts  sufficient  to  require  submission  of  the
                           schedule,  or because  the  required  information  is
                           included in the consolidated  financial statements or
                           notes thereto listed in Item 14(a)(1).

                  3.       Exhibits:

              Exhibit
              Number       Description of Document
              -------      -----------------------

                 3.1       Composite of Second Amended and Restated  Certificate
                           of  Incorporation,  as amended through August 1, 1997
                           (Incorporated  by  reference  to  Exhibit  3  of  the
                           Company's  Quarterly  Report  on  Form  10-Q  for the
                           quarter ended June 30, 1997).

                 3.2       Amended   and   Restated   Bylaws   of  the   Company
                           (Incorporated  by  reference  to  Exhibit  3.2 of the
                           Company's   Registration   Statement   on  Form   S-1
                           (Registration    No.33-98708)    (the   "Registration
                           Statement")).

                 4.1       Indenture,   dated  as  of   February  1,  1995  (the
                           "Indenture") among the Company, as Servicer, DPFC, as
                           Issuer,  and  Bankers  Trust  Company,  as  Indenture
                           Trustee ("Bankers Trust")  (Incorporated by reference
                           to Exhibit 10.12 of the Registration Statement).

                 4.2       Amendment  No. 1 to the  Indenture (Incorporated  by
                           reference   to  Exhibit   10.13  of the Registration
                           Statement).

                 4.3       Amendment No.2 to the  Indenture,  dated as of August
                           5, 1996. (Incorporated by reference to Exhibit 4.3 of
                           the  Company's  Annual  Report  on Form  10-K for the
                           fiscal year ended December 31, 1997).

                 4.4       Amendment No.3 to the Indenture,  dated as of July 2,
                           1997  (Incorporated by reference to Exhibit 10 of the
                           Company's  Quarterly  Report  on  Form  10-Q  for the
                           quarter ended June 30, 1997).

                 4.5       Amendment No.4 to the Indenture, dated as of November
                           4, 1997  (Incorporated by reference to Exhibit 4.5 of
                           the  Company's  Annual  Report  on Form  10-K for the
                           fiscal year ended December 31, 1997).

                10.1*      Point West Capital  Corporation  Amended and Restated
                           1995 Stock Option Plan  (Incorporated by reference to
                           Exhibit 10 of the Company's  Quarterly Report on Form
                           10-Q for the quarter ended June 30, 1998).


                                       57

<PAGE>



                10.2*      Stock   Option   Plan  for   Non-Employee   Directors
                           (Incorporated  by  reference  to Exhibit  10.2 of the
                           Registration Statement).

                10.3*      Form of option  agreement  dated  November  17,  1997
                           granted to each of Bradley N. Rotter,  Alan B. Perper
                           and John Ward Rotter.  (Incorporated  by reference to
                           Exhibit 10.4 of the  Company's  Annual Report on Form
                           10-K for the fiscal year ended December 31, 1997).

                10.4*      Form of option  agreement  dated  November  25,  1998
                           granted to each of Bradley N. Rotter,  Alan B. Perper
                           and John Ward Rotter.  (Incorporated  by reference to
                           Exhibit 10.4 of the  Company's  Annual Report on Form
                           10-K for the fiscal year ended December 31, 1998).

                10.5*      Form of option  agreement  dated  November  11,  1999
                           granted to each of Bradley N. Rotter,  Alan B. Perper
                           and John Ward Rotter.

                10.6       Agreement  between the Company and Echelon  regarding
                           allocation  of costs  (Incorporated  by  reference to
                           Exhibit 10.4 of the Registration Statement).

                10.7       Amendment No. 1 to the Agreement  between the Company
                           and Echelon regarding allocation of costs.

                10.8*      Profit  Sharing  Plan  (Incorporated  by reference to
                           Exhibit 10.5 of the Registration Statement).

                10.9       Contribution,    Sale   and    Servicing    Agreement
                           ("Servicing  Agreement") dated as of February 1, 1995
                           among   the   Company,   DPFC   and   Bankers   Trust
                           (Incorporated  by reference  to Exhibit  10.14 of the
                           Registration Statement).

                10.10      Amendment No.1 to Servicing  Agreement  (Incorporated
                           by  reference  to Exhibit  10.15 of the  Registration
                           Statement).

                10.11      Amendment    No.2   to   the   Servicing    Agreement
                           (Incorporated  by reference  to Exhibit  10.10 of the
                           Company's  Annual  Report on Form 10-K for the fiscal
                           year ended December 31, 1995).

                10.12      Master  Agreement  for  Purchase  of  Life  Insurance
                           Policies dated  September 27, 1996  (Incorporated  by
                           reference  to Exhibit 10 of the  Company's  Quarterly
                           Report on Form 10-Q for the quarter  ended  September
                           30, 1996).

                10.13      Amendment  dated as of  November  13,  1996 to Master
                           Agreement for Purchase of Insurance Policies dated as
                           of September 27, 1996  (Incorporated  by reference to
                           Exhibit 10.11 of the Company's  Annual Report on Form
                           10-K for the fiscal year ended December 31, 1996).

                10.14      Purchase and Sale  Agreement  dated as of January 16,
                           1997  (Incorporated  by reference to Exhibit 10.12 of
                           the  Company's  Annual  Report  on Form  10-K for the
                           fiscal year ended December 31, 1996).

                                      58

<PAGE>


                10.15      Second  Master  Agreement  for  Purchase of Insurance
                           Policies dated as of February 10, 1997  (Incorporated
                           by reference to Exhibit 10.13 of the Company's Annual
                           Report  on  Form  10-K  for  the  fiscal  year  ended
                           December 31, 1996).

                10.16      Third  Master  Agreement  for  Purchase of  Insurance
                           Policies dated as of March 24, 1997  (Incorporated by
                           reference to Exhibit  10.14 of the  Company's  Annual
                           Report  on  Form  10-K  for  the  fiscal  year  ended
                           December 31, 1996).

                10.17      Indemnification  Agreement, dated September 30, 1995,
                           between the Company (as successor to Old Echelon) and
                           Echelon  (Incorporated  by reference to Exhibit 10.18
                           of the Registration Statement).

                10.18      Amended  and  Restated  Limited   Liability   Company
                           Agreement of Allegiance Capital, LLC (Incorporated by
                           reference to Exhibit 10.5 of the Company's  Quarterly
                           Report on Form 10-Q for the quarter  ended  September
                           30, 1998).

                10.19      Fourteen  Hill  Capital,  L.P.  Agreement  of Limited
                           Partnership  (Incorporated  by  reference  to Exhibit
                           10.2 of the Company's  Quarterly  Report on Form  I-Q
                           for the quarter ended September 30, 1997).

                10.20      Fourteen Hill Management,  LLC Operating Agreement by
                           Point West Capital and Fourteen Hill Management,  LLC
                           as of June 9,  1997  (Incorporated  by  reference  to
                           Exhibit  10.3 of the  Company's  Quarterly  Report on
                           Form 10-Q for the quarter ended September 30, 1997).

                10.21**    Trust  Agreement,  dated as of August 1, 1998,  among
                           Allegiance Funding Corp. I, Manufacturers and Traders
                           Trust  Company  and Point  West  Capital  Corporation
                           (Incorporated  by  reference  to Exhibit  10.1 of the
                           Company's  Quarterly  Report  on  Form  10-Q  for the
                           quarter ended September 30, 1998).

                10.22**    Supplement to Trust  Agreement  for Revolving  Series
                           1998-1,  dated as of August 1, 1998 among  Allegiance
                           Funding  Corp.  I,  Manufacturers  and Traders  Trust
                           Company   and   Point   West   Capital    Corporation
                           (Incorporated  by  reference  to Exhibit  10.2 of the
                           Company's  Quarterly  Report  on  Form  10-Q  for the
                           quarter ended September 30, 1998).

                10.23**    Loan  Acquisition  Agreement,  dated as of  August 1,
                           1998, between Allegiance Capital,  LLC and Allegiance
                           Funding Corp. I (Incorporated by reference to Exhibit
                           10.3 of the Company's  Quarterly  Report on Form 10-Q
                           for the quarter ended September 30, 1998).

                10.24**    Servicing  Agreement,  dated as of  August  1,  1998,
                           among  Point  West  Capital  Corporation,  Allegiance
                           Capital,    LLC,    Allegiance   Funding   Corp.   I,
                           Manufacturers  and  Traders  Trust  Company and other
                           party thereto  (Incorporated  by reference to Exhibit
                           10.4 of the Company's  Quarterly  Report on Form 10-Q
                           for the quarter ended September 30, 1998).

                 10.25     Point West  Securities  LLC  Operating  Agreement  by
                           Point  West  Capital   Corporation   and  Point  West
                           Securities,  LLC as of July 8, 1998  (Incorporated by
                           reference to Exhibit  10.26 of the  Company's  Annual
                           Report  on  Form  10-K  for  the  fiscal  year  ended
                           December 31, 1998).


                                     59

<PAGE>


                10.26**    Amended and Restated  Supplement  to Trust  Agreement
                           for Revolving Series 1998-1, dated as of September 1,
                           1999, among Allegiance Funding I, LLC,  Manufacturers
                           and  Traders  Trust  Company  and Point West  Capital
                           Corporation.  (Incorporated  by  reference to Exhibit
                           10.1 of the Company's  Quarterly  Report on Form 10-Q
                           for the quarter ended September 30, 1999).

                10.27**    Second  Amended  and  Restated  Supplement  to  Trust
                           Agreement for Revolving  Series  1998-1,  dated as of
                           September 15, 1999, among Allegiance  Funding I, LLC,
                           Manufacturers  and  Traders  Trust  Company and Point
                           West Capital Corporation.  (Incorporated by reference
                           to Exhibit 10.2 of the Company's  Quarterly Report on
                           Form 10-Q for the quarter ended September 30, 1999).

                10.28**    Supplement to Trust Agreement for Term Series 1999-1,
                           dated as of  September  15,  1999,  among  Allegiance
                           Funding  I,  LLC,  Manufacturers  and  Traders  Trust
                           Company   and   Point   West   Capital   Corporation.
                           (Incorporated  by  reference  to Exhibit  10.3 of the
                           Company's  Quarterly  Report  on  Form  10-Q  for the
                           quarter ended September 30, 1999).

                21.1       Subsidiaries of the Company.

                23.1       Consent of Ernst & Young LLP.

                23.2       Consent of KPMG LLP.

                24.1       Powers of Attorney.

                27         Financial Data Schedule.

                99.1       Press Release for Point West Ventures, L.P.

*        Management  contract or compensation plan or arrangement.

**       Certain information omitted pursuant to an order for confidential
         treatment granted by the SEC.

         (b)      Reports on Form 8-K filed during the fourth quarter of 1999:

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

                  November 12, 1999         5            The   Company   issue
                                                         a    press     release
                                                         regarding  its  results
                                                         of   operations    for
                                                         the  third quarter  of
                                                         1999.

                                       60

<PAGE>

                                   SIGNATURES

         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

Dated March 3, 2000                              POINT WEST CAPITAL CORPORATION
                                                 /s/Alan B. Perper
                                                 -----------------------------
                                                  Alan B. Perper
                                                  President

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
this  report has been  signed  below by the  following  persons on behalf of the
registrant and in the capacities indicated on March 3,2000:


/s/ Alan B. Perper                                   *
-----------------------------                     -----------------------------
Alan B. Perper                                    John Ward Rotter
President and Director                            Executive Vice President,
(Principal Executive Officer)                     Chief Financial Officer
                                                  and Director
                                                  (Principal Financial and
                                                  Accounting Officer)


    *                                                *
-----------------------------                     -----------------------------
Bradley N. Rotter                                 Stephen T. Bow
Chairman of the Board and Director                Director



    *
-----------------------------
Paul A. Volberding, M.D.
Director


*       The  undersigned  by signing his name  hereunto  has hereby  signed this
        report on  behalf  of the  above-named  directors,  on March   3,  2000
        pursuant to a power of attorney executed on behalf of each such director
        and filed with the Securities and Exchange Commission as Exhibit 24.1 to
        this report.

By:   /s/ Alan B. Perper
     ---------------------
      Alan B. Perper

                                       61