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, 2000
OR
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to ________

Commission file number 0-27736


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POINT WEST CAPITAL CORPORATION

Delaware(State or other jurisdiction of 
    incorporation or organization)
    94-3165263(I.R.S. Employer
    Identification Number)1700 Montgomery Street, Suite
    250
    San Francisco, California(Address of principal executive offices)
    94111 (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. [X]

The aggregate market value of the registrants common stock, $0.01
par value, held by non-affiliates of the registrant as of February 21, 2001 was
approximately $1,603,040.

The number of shares of the registrants common stock, $0.01 par
value, outstanding as of February 21, 2001 was 3,352,624.

Documents Incorporated by Reference:

The registrants definitive proxy statement (to be filed) related to its 2001
annual meeting of stockholders is incorporated by reference in Part III hereof.





POINT WEST CAPITAL CORPORATION

Form 10-K Annual Report
For the Fiscal Year Ended December 31, 2000

Table of Contents

PART I
    
    PageItem 1.
    Business
    1Item 2.
    Properties
    ..
    9Item 3.
    Legal Proceedings
    .
    9Item 4.
    Submission of Matters to a Vote of Security
    Holders ...
    11PART IIItem 5.
    Market for the Registrants Common Equity
    and Related Stockholders Matters .
    11Item 6.
    Selected Financial Data
    .
    13Item 7.
    Managements Discussion and Analysis of
    Financial Condition and
         Results of Operations
    15Item 7A.
    Quantitative and Qualitative Disclosures About
    Market Risks .....
    29Item 8.
    Financial Statements and Supplementary Data
    .
    30Item 9.
    Changes in and Disagreements with
    Accountants on Accounting
         and Financial Disclosure
    ..
    30PART IIIItem 10.
    Directors and Executive Officers of the
    Registrant ...
    59Item 11.
    Executive Compensation
    ...
    59Item 12.
    Security Ownership of Certain Beneficial
    Owners and Management ...
    59Item 13.
    Certain Relationships and Related Transactions
    ...
    59PART IVItem 14.
    Exhibits, Financial Statement Schedules and
    Reports on Form 8-K .
    59Signatures
    
    66




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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

Overview

The Company is a specialty financial services company with historic operations in four
business segments: (i) small business loans and investments through Point West Venture
Management, LLC ("Point West Management") and Point West Ventures, LP
("Point West Ventures"), (ii) loans to funeral homes and cemeteries through
Allegiance Capital, LLC ("Allegiance Capital"), Allegiance Funding I, LLC
("Allegiance Funding"), Allegiance Capital Trust I ("Allegiance Trust
I") and Allegiance Management Corp. ("Allegiance Management"), (iii)
viatical settlements through Dignity Partners Funding Corp I ("DPFC") and (iv)
other activities through Point West Capital, SocietyPool.com, LLC, a Delaware limited
liability company ("SocietyPool") and Point West Securities, LLC
("PWS"). Information regarding the income, contributed net income (loss) and
identifiable assets for each of the Companys business segments is contained in Note
16 of the Notes to Consolidated Financial Statements included herein. 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.

Recent Developments

During the fourth quarter of 2000, the Company engaged in substantially less new business
activity and began reducing costs considerably. Ventures reduced significantly its number
of new investments in the second half of 2000 as a result of volatility and uncertainty in
the financial markets. In the fourth quarter of 2000, Ventures made only one investment in
a new entity and provided additional capital to a limited number of existing portfolio
companies. See "Managements Discussion and Analysis of Financial Condition and
Results of OperationsLiquidity and Capital Resources." While this volatility
and uncertainty in the financial markets continue, Ventures is assessing its future level
of activities.

As a result of non-performing loans made by Allegiance, beginning in December 2000,
Allegiance was unable to access further debt under the Allegiance Financing (as defined
herein) during the final month of that facility. The Allegiance Financing expired in
December 2000. Allegiance has no current source of funding available to make additional
loans and, as a result, no current ability to continue to originate loans. Consequently,
Allegiance suspended its loan origination activities, and began reducing costs through
employee layoffs during December 2000. In addition, Allegiance was unable to convert to
term loan certificates or otherwise repay $9.1 million of revolving certificates issued
under the Allegiance Financing. As a result, the interest payable under the revolving loan
certificates increased by 1% per annum, effective February 15, 2001, to 10.5%. If
Allegiance is unable to repay the revolving loan certificates by July 15, 2001, the
Investors (as defined herein) could declare an event of default under the Allegiance
Financing. In addition, if Allegiance is unable to resolve the non-performing loans by
April 15, 2001, the Investors could declare an event of default under the Allegiance
Financing. If the Investors were to declare an event of default, all amounts owed under
the Allegiance Financing could be accelerated. Also as a result of non-performing loans,
under the terms of the Allegiance Financing (1) neither Point West Capital nor Allegiance
Capital is currently receiving payment for the servicing

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activities that it provides to Allegiance and (2) Allegiance Capital is
not currently receiving any principal or interest payments under revolving or term
certificates issued to Allegiance Capital under the Allegiance Financing. See
"Managements Discussion and Analysis of Financial Condition and Results of
OperationsDescription of Revolving and Term Certificates."

Allegiance is attempting to work out the non-performing loans and is hopeful that it will
be given additional time beyond April 15, 2001 by the Investors to work out the
non-performing loans. If the loans are worked out to the satisfaction of Allegiance and
the Investors, the Company expects that payments to Point West Capital and Allegiance
Capital for servicing activities and to Allegiance Capital under the debt certificates
issued to Allegiance Capital will resume. There can be no assurance that Allegiance will
be able to work out the non-performing loans by April 15, 2001 or at all, or that it will
be given additional time to do so. In addition, Allegiance is exploring possible funding
sources to repay the revolving certificates by July 15, 2001 and to finance further
lending activities. However, there can be no assurance that Allegiance will be able to
locate a funding source or that, if a funding source is found, it will be available on
economically feasible terms.

SocietyPool has not commenced operations and it is unclear whether SocietyPool will ever
commence operations. See "Item 3Legal Proceedings." In light of the
Court's March 13, 2001 order, the Company is considering what steps, if any, to be
undertaken in connection with SocietyPool.

To date, the operations of PWS have not been material to the Company. The Company does not
currently intend to expand PWS operations. Therefore, the Company does not believe
that PWS operations will become material in the future.

The Company continues to assess its current businesses and its future operations.

Historical Development

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.

The principal business activity of the Company through February 1997 was to provide
viatical settlements for terminally ill persons. Aviatical 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. The Company subsequently sold
substantially all of the Companys life insurance policies other than the policies
held by DPFC. See "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. The Company,
through its wholly owned special purpose subsidiary, 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.

During 1997, the Company expanded its financial services business through the operations
of Ventures and Allegiance. During 1998, the Company formed PWS, a broker-dealer licensed
by the

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National Association of Securities Dealers, Inc. ("NASD").
During 2000, the Company formed SocietyPool. See "Item 3Legal
Proceedings."



Ventures (Small Business Loans and Investments)

> Structure

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 regulations of the Small Business Administration ("SBA"). Point
West Ventures commenced operations in August 1997 and received its SBIC license from the
SBA in September 1997.

> Overview

Point West Ventures focuses on creating a diversified portfolio of debt and equity
investments in later-stage growth and expansion companies. From time to time, Point West
Ventures invests in early-stage growth companies as well. To date, Point West Ventures has
focused on equity investments in businesses in the area of e-commerce, Internet and
telecommunications. Point West Ventures 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. See "Recent Developments" above.

> 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 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, Point West Ventures pays interest and other
fees to the SBA instead of a portion of its profits. Under SBA regulations, Point West
Ventures is also required to have a portfolio mix of a specific minimum percentage of its
investments in the form of debt instruments, but it has not done so. See
"Managements Discussion and Analysis of Financial Condition and Results of
OperationsLiquidity and Capital Resources."

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.

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> 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 $933,000.
Point West Ventures loans and 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. After identifying investments that meet Point West Ventures
investment criteria, a more thorough investigation and analysis of the applicant is
performed. 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.

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 loans
and investments must be approved by the Investment Committee 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. Most 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

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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)

> Structure

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.
Allegiance commenced operations in December 1997. Point West Capital has a 65% ownership
interest in, and a 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 15,
2000, provided $33 million of debt to support Allegiances lending activities. The
Allegiance financing expired in December 2000 and Allegiance does not currently have a
source of funding. See "Recent Developments" above. Allegiance Funding
owns approximately 13% of Allegiance Trust I. Allegiance Capital owns 100% of Allegiance
Management, which is a special purpose subsidiary formed to manage Allegiance Funding.

> Overview

Allegiance has provided, and is pursuing financing to enable it to again provide,
long-term debt to experienced owners of established funeral home and cemetery businesses
on a senior secured basis at competitive rates. See "Recent Developments"
above. 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 dispositions by Service Corporation and
Loewen and turnover among the base of privately owned death care businesses, have combined
to create demand for capital within the industry. These capital needs have been
underserved by traditional lending sources.

Allegiance generally sought to finance funeral home and cemetery businesses that were well
established by virtue of years of service in the communities they serve and which were
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 Loewen Group have experienced significant financial problems, including significant
declines in the price of their common stock and bankruptcy, the Company believes that the
heritage, reputation and attendant goodwill built up by privately owned funeral homes and
cemeteries provide superior collateral value. Additionally, the Company believes that
facilities acquired from Service Corporation and Loewen by strong owners/managers provide
superior collateral value.

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> Marketing & Origination

Although Allegiance does not currently market its services or originate loans, it is
exploring possible funding sources to repay the revolving certificates by July 15, 2001
and to finance further lending activities. See "Recent Developments"
above. Prior to December 2000, Allegiance targeted family-owned and other private owners
of funeral home and cemetery establishments. Loans were sourced by marketing employees and
independent parties both directly through 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 were supported
through print advertising in industry trade publications, newsletters and attendance at
industry conferences.

Loans were offered with fixed or adjustable interest rates, generally in minimum amounts
of $500,000. Loan proceeds were then used by the borrower for a variety of purposes,
including acquisitions, debt refinancing and stockholder buyouts. Allegiance charged a
loan arrangement fee payable at closing as well as a commitment fee, which could be
credited against the loan arrangement fee paid at closing, and also charged other fees
from time to time. Repayment terms on outstanding loans 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 years.

Allegiance obtained a senior, secured position with respect to the borrowers and business
establishments it financed. Security for loans was generally provided through a mortgage
providing a perfected 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 were made based on an in-depth qualitative and quantitative underwriting
analysis. This analysis focused on the applicant, its ownership and management, and the
funeral home and/or cemetery establishments it owned and operated. The process began with
the collection of information concerning the prospective borrower. Information collected
from the borrower included 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 sought to assess the quality, sufficiency and commitment of
management, with an emphasis on the borrowers owners or managers ("keyprincipals").
This assessment included 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 were reviewed
to determine sufficiency given historic service volume and any projected increases.
Allegiance required 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 included 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 were analyzed to determine historic adjusted cash flow in light of the proposed
loan amount and debt service burden. In addition, third-party consultants independently
determined adjusted cash flow and assessed business value. Business value of the subject
business was assessed based primarily on its historic financial

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performance and secondarily on the real property and other assets of
the business. Assessments of business value were used to determine a loan-to-business
value ratio.

Prior to closing, any real property to be pledged as collateral underwent an environmental
review. The Company used third-party environmental service providers for the environmental
review. In addition to providing assurance as to the quality of the real property
collateral, the review generally met standards for due diligence developed to avoid lender
liability.

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

> Servicing

Point West Capital performs certain basic loan servicing functions related to loans
previously 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.
Point West Capital is not currently being paid for these servicing functions. See
"Recent Developments" above.

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
periodically monitor 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, there can be no assurance that Allegiance would be able to realize sufficient
proceeds from any disposition to cover its loans and related expenses. The monitoring
process is intended to help borrowers identify and address problems to avoid defaults.
Allegiance is not currently being paid for these servicing functions. To date, Allegiance
has had three non-performing loans. One loan was resolved through litigation and a
settlement in the third quarter of 2000. See "Item 3-
Legal Proceedings." Allegiance is attempting to resolve the other two non-performing
loans. See "Recent Developments" above.

> Competition

Allegiance has faced 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 Amresco Commercial
Finance, Inc. and Fieldwood Financial (an affiliate of Northwest Bank of Houston). 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 have, in the
past, provided it with an ability to compete effectively. However, Allegiance does not
currently have the capital required to engage in its lending activities. See
"Recent Developments" above and "Managements Discussion and
Analysis of Financial Condition and Results of OperationsLiquidity and Capital
Resources."

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> 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.

Viatical Settlement Business

Currently, the Companys only activities in the viatical settlement business are
monitoring and collection activities. 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 ceased
purchasing policies in February 1997, 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. See "Managements Discussion and Analysis of
Financial Condition and Results of Operations- Description of
Securitized Notes."

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

In December 1996, the Companys stockholders approved the sale of all or
substantially all of the assets of the Company, which, at the time, consisted primarily of
purchased life insurance policies. The Company subsequently sold substantially all of the
Companys life insurancepolicies other than those held by DPFC. Substantially
all of these sales took place during 1997. As of December 31, 2000, the Company held 436
policies, all but five of which were held through DPFC.

Broker-Dealer Activities

> Structure; Overview

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. PWS commenced operations in December 1998. Operations for PWS in 2000, 1999
and 1998 were immaterial and are not expected to be material in the foreseeable future.
See "Recent Developments" above.

> 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-

8

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 instead of through
Ventures. These activities include loans and equity investments.

Employees

As of December 31, 1999, December 31, 2000 and February 15, 2001, the Company employed 19,
17 and 13 individuals, respectively. The decrease in employees from December 31, 1999
reflects layoffs and attrition resulting from the lower level of business activity at
Ventures and Allegiance.

Point West Capitals executive officers also perform services on behalf of The
Echelon Group of 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. Echelon shared approximately 20% of this space with the Company until December
31, 2000. See "Certain Relationships and Related Transactions." As a result of
(1) the Companys lower level of business activity and (2) Echelons ceasing to
share a portion of the Companys office space, the Companys current space
substantially exceeds its needs. In order to reduce unnecessary costs, the Company is
attempting to sublease 60%-70% of its current space. Any such sublease requires landlord
consent. There can be no assurance that the Company will be able to sublease any of its
current space or that, if a sublease were possible, the sublease would compensate the
Company fully for the portion of rental payments and other expenses owed with respect to
such subleased space.

ITEM 3- LEGAL PROCEEDINGS

General

From time to time, the Company is involved in routine legal proceedings incidental to its
business, including litigation in connection with loans and investments made by Point West
Ventures and Allegiance and the collection of amounts owed under life insurance policies
by insurance company obligors. Except as disclosed below, 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.

9

Society Pool

In May 2000, Point West Capital and three individuals formed SocietyPool. SocietyPool was
formed to develop and pursue a new financial product. To date, SocietyPool has conducted
limited market research but has not commenced any operations. Point West Capital is a
member and the Manager of SocietyPool with 51% voting and economic interests. There are
three other members. One is the former chief executive officer (the "Former
CEO") of SocietyPool with a 15.67% voting interest and a 15.44% economic interest.
Another is a former special consultant (the "Former Special Consultant") of
SocietyPool and owns a 33.33% voting interest and a 28.66% economic interest. The third
has a 4.90% economic interest and no voting interest.

Point West Capital provided $1.8 million in May 2000 to fund SocietyPools research
and start-up costs. In July 2000, the Former Special Consultant filed a claim with the
American Arbitration Association seeking arbitration of a dispute with Point West Capital.
The claim seeks a declaratory judgment on an issue relating to the control and management
of SocietyPool and its assets. The American Arbitration Association denied the Former
Special Consultants request that this dispute be resolved on an emergency basis and
ruled that the dispute would be resolved under standard arbitration procedures. In July
2000, the Former CEO resigned claiming that certain actions of Point West Capital, which
are at issue in the arbitration, constituted constructive termination of his employment.
In August 2000, the Former CEO filed an action in arbitration seeking a declaration that
he was constructively terminated. Also in August 2000, SocietyPool terminated the Former
Special Consultant for cause and, in the arbitration proceedings Point West Capital filed
an answer, affirmative defenses and counterclaim against the Former Special Consultant and
Former CEO and a third-party complaint against the Former CEO.

In August 2000, the Former CEO and the Former Special Consultant delivered a so-called
"Management Report" to Point West Capital which they contend triggered Point
West Capitals option under SocietyPools Operating Agreement to contribute an
additional $1 million to SocietyPool. Although Point West Capital believes that the
"Management Report" did not trigger Point West Capitals option to
contribute an additional $1 million, in order to protect its and SocietyPools rights
and interests, Point West Capital contributed $1 million in August 2000 to SocietyPool
pursuant to SocietyPools Operating Agreement. The Former CEO and Former Special
Consultant have asserted that the contribution did not comply with the Operating Agreement
and further alleged that, as a result, Point West Capital ceased being the Manager of
SocietyPool and that Point West Capitals voting and economic interests in
SocietyPool were reduced to 15.67%. They further alleged that they are the majority owners
of SocietyPool and that one is the Manager of SocietyPool. On September 5, 2000, they
filed a petition in federal bankruptcy court in New Mexico (In Re: SocietyPool.com, LLC,
No. 11-00-14735 MA) on behalf of SocietyPool. On September 11, 2000, Point West Capital
filed a motion to dismiss the bankruptcy petition, alleging that (i) the Former CEO and
the Former Special Consultant lacked the requisite authority to file for bankruptcy on
SocietyPools behalf and (ii) SocietyPool is not insolvent or otherwise in need of
bankruptcy protection. The first issue raised in Point West Capitals motion to
dismiss was tried by the Court in November 2000 and January and February 2001. On March
13, 2001, the Court granted Point West Capitals motion to dismiss the bankruptcy
petition on the ground that the former CEO and Former Special Consultant lacked the
requisite authority to file for bankruptcy on SocietyPools behalf. The actions in
arbitration have been stayed during the bankruptcy proceeding.

The outcome of the arbitration proceedings cannot be determined at this time; however, the
Company does not believe that the Former CEO or the Former Special Consultant are entitled
to the requested relief in arbitration. Management of Point West Capital believes that the
claims of the two other members of SocietyPool are without merit. Point West Capital
cannot predict whether or to what extent these matters will affect Point West
Capitals decision to invest additional funds in SocietyPool or SocietyPools
financial condition or prospects.

10

Allegiance

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 defendant borrowers 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 alleged 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 sought, among other things, compensatory and punitive damages
(or cancellation of indebtedness), interest, fees and costs. The defendants had owned one
funeral home and retained a consulting firm owned by the Allegiance officer to consult in
the acquisition of two funeral homes and to assist in financing the acquisition. In the
counterclaim and third-party petition, the defendants alleged, among other things, that
(1) the Allegiance officer provided erroneous advice to the defendants, (2) the Allegiance
officer failed to disclose his relationship with Allegiance and (3) Allegiance wrongfully
exercised its rights in the collateral securing the defaulted loan. In September 2000,
Allegiance, the Allegiance officer and the defendants settled the actions. Under the
settlement agreement, Allegiance paid the defendants $150,000 and released its security
interest in the defendants original funeral home, one of the three funeral homes securing
the $2.1 million loan; the Allegiance officer made a cash payment to Allegiance of $50,000
and agreed to pay Allegiance an additional $50,000 over three years; Allegiance acquired
the ownership of the two additional funeral homes acquired with its loan proceeds; and all
claims against all parties were dismissed. Allegiance is in the process of attempting to
sell its ownership interest in those two funeral homes while continuing to manage their
operations in order to maximize their value.

Point West Ventures

In February 2000, Point West Ventures brought an action in Santa Clara County against
Universal Access, Inc., certain of its directors and other parties seeking to collect for
damages for breach of contract, breach of fiduciary duty including breach of contract,
misappropriation of trade secret, unjust enrichment, tortious interference, conspiracy and
unfair competition. The action was related to an aborted purchase by Universal Access,
Inc. of a company in which Point West Ventures had invested. On July 17, 2000, the court
ruled that all claims were subject to arbitration. In December 2000, Point West Ventures
filed a demand for arbitration.

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 2000.

PART II



Point West Capitals Common Stock trades on the National Market System of The Nasdaq
Stock Market ("NMS") under the symbol "PWCC." As of February 7, 2001,
there were 121 holders of record of Common Stock, including banks, brokerage firms and
other nominees. A substantial portion of the publicly held shares of Common Stock is held
in book-entry form. As of February 7, 2001, 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.

11



2000
    
    High
    
    LowFirst Quarter
    ...
    $
    14.438
    $
    6.625Second Quarter
    ..
    
    7.438
    
    3.125Third Quarter
    .........
    
    4.219
    
    2.281Fourth Quarter
    .
    
    2.750
    
    0.188


1999
    
    High
    
    LowFirst Quarter
    ....
    $
    23.875
    $
    4.625Second Quarter
    ..
    
    29.750
    
    7.000Third Quarter
    ...
    
    11.125
    
    4.688Fourth Quarter
    
    19.857
    
    4.375


On November 13, 2000, the Company received a notice from Nasdaq, which indicated that,
because of the recent decline in the price of the Companys Common Stock, the Company
failed to meet one of the listing requirements of the NMS to maintain a public float
having a market value equal to at least $5 million. Nasdaq indicated that, if the Company
did not satisfy such requirement by February 12, 2001, Nasdaq would de-list the Common
Stock at the opening of business on February 14, 2001 unless the Company requested a
hearing to appeal the decision. As of February 12, 2001, the Company had a public float of
approximately 2.1 million shares with a market value of approximately $1.5 million and did
not satisfy such requirement. On February 8, 2001, however, the Company filed a request
for a hearing to appeal the de-listing. The hearing is set for March 28, 2001, and the
de-listing of the Common Stock has been suspended until that date.

In January 2001, the Company received a Nasdaq Staff Determination Letter advising the
Company that its Common Stock had failed to maintain a $1.00 minimum bid price over the 30
consecutive trading days preceding the date of the January letter. Under Nasdaqs
listing maintenance standards, if the closing bid price of the Common Stock is under $1.00
per share for 30 consecutive trading days and does not thereafter regain compliance for a
minimum of 10 consecutive trading days during the 90 days following notification by
Nasdaq, Nasdaq may de-list the Common Stock from trading on Nasdaq. The Common Stock has
traded below $1.00 per share since December 7, 2000. The Company plans to file an
application for listing on the Nasdaq Stock Markets SmallCap Market ("SmallCap
Market").

No assurance can be given that the Companys Common Stock will not be de-listed from
the NMS or that its Common Stock will be listed on the SmallCap Market. Although the
Common Stock does not currently satisfy the listing requirement of a $1 minimum bid price
for the SmallCap Market, the Board of Directors of the Company has approved, subject to
stockholder approval, a reverse stock split. The Company is hopeful that Nasdaq will give
the Company additional time beyond March 28, 2001 to effect the reverse split and to file
an application to transfer the Companys Common Stock to the SmallCap Market. If the
Company is unable to obtain approval for a listing on the SmallCap Market, the
Companys Common Stock may be traded on the Nasdaq OTC Bulletin Board or de-listed
entirely.

The Company has never declared or paid any cash dividends on its capital stock. 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

ITEM 6- SELECTED FINANCIAL DATA

The data presented below should be readin 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 as of December 31, 1996 is not
comparable to later periods or as of subsequent year ends. In addition, Point West
Ventures and Allegiance began operations in the second half of 1997 and generated
substantially more activity in 1999 compared to 1998 and 1997. Allegiance no longer has
funds to continue its loan origination activities and Ventures reduced significantly its
number of new investments in the second half of 2000. See "Item
1BusinessRecent Developments."

Years Ended December 31,2000
    
    1999
    
    1998
    
    1997
    
    1996(Dollars in thousands, except per share amounts)Statements
    of Operations Data:Earned
    discounts on life insurance policies(1).
    $
    -
    $
    -
    $
    -
    $
    -
    $
    3,697Earned discounts on prior
    maturities andmatured policies(1).
    
    -
    
    204
    
    439
    
    489
    
    1,782Interest income
    ..
    
    4,889
    
    3,314
    
    1,494
    
    1,184
    
    783Net (loss) gain
    on securities ......
    
    (10,714)
    
    15,785
    
    (999)
    
    680
    
    -Total revenue
    ..
    
    (5,589)
    
    19,718
    
    1,334
    
    3,918
    
    6,405Interest
    expense .
    
    3,486
    
    4,963
    
    3,680
    
    3,599
    
    3,984Provision for
    loss on assets held for sale...
    
    -
    
    -
    
    -
    
    328
    
    3,140Total expenses
    ...
    
    10,609
    
    10,476
    
    7,279
    
    6,795
    
    17,118(Loss) gain before
    income taxes, net loss in
           wholly owned financing subsidiary charged
           reserve for equity interest and
           extraordinary gain .(16,198)
    
    9,242
    
    (5,945)
    
    (2,877)
    
    (10,713)Income tax
    benefit (expense) ....
    
    (610)
    
    590
    
    (6)
    
    (4)
    
    526Extraordinary
    gain(2).
    
    1,242
    
    -
    
    -
    
    -
    
    -Net (loss)
    income...
    
    (15,566)
    
    9,832
    
    (3,650)
    
    1,011
    
    (9,699)Basic (loss)
    earnings per share(3) ..
    $
    (4.64)
    $
    2.95
    $
    (1.12)
    $
    0.29
    $
    (2.46)Diluted (loss)
    earnings per share(3) ..
    $
    (4.64)
    $
    2.70
    $
    (1.12)
    $
    0.28
    $
    (2.46)Balance
    Sheet Data (at December 31):Cash and cash
    equivalents .
    $
    2,988
    $
    12,836
    $
    6,668
    $
    10,040
    $
    6,586Investment
    securities .
    
    116
    
    9,024
    
    2,113
    
    5,817
    
    -Loans
    receivable
    
    36,890
    
    35,467
    
    10,188
    
    4,016
    
    -Purchased life
    insurance policies ..
    
    30,405
    
    31,728
    
    33,893
    
    36,587
    
    41,246Non-marketable
    securities .
    
    10,444
    
    5,933
    
    5,397
    
    1,658
    
    3,000Total assets
    
    85,633
    
    101,526
    
    62,443
    
    62,969
    
    68,944Accrued
    litigation settlement
    
    -
    
    2,205
    
    -
    
    -
    
    -Total revolving
    certificates .
    
    9,133
    
    4,200
    
    5,400
    
    -
    
    -Total long-term
    debt(4)
    
    65,674
    
    66,028
    
    41,529
    
    38,804
    
    41,218Total
    liabilities ..
    
    75,862
    
    73,983
    
    47,613
    
    41,703
    
    48,802Total
    stockholders equity......
    
    9,771
    
    27,543
    
    14,830
    
    21,266
    
    20,142




13



Years Ended
    December 31,2000
    
    1999
    
    1998
    
    1997
    
    1996(Dollars in thousands, except per share amounts)Operating DataVenturesNumber of loans and investments originatedduring the year ...
    
    12
    
    16
    
    6
    
    2
    
    -Number of loans and investments outstanding,end of year
      .
    
    20
    
    15
    
    6
    
    2
    
    -Aggregate amount of loans and investmentsoriginated during year at cost
    $
    14,272
    $
    11,204
    $
    6,695
    $
    1,250
    
    -Aggregate amount of loans and investmentsoutstanding, end of year at cost .
    $
    9,621
    $
    9,285
    $
    6,456
    $
    1,250
    
    -AllegianceNumber of loans originated
    during year ..
    
    7
    
    16
    
    4
    
    1
    
    -Number of loans
    outstanding, end of year
    
    27
    
    21
    
    5
    
    1
    
    -Aggregate principal amount of loans originatedduring year .
    $
    6,890
    $
    25,075
    $
    5,425
    $
    3,826
    
    -Aggregate principal amount of loansoutstanding, end of year
    $
    37,843
    $
    33,778
    $
    9,103
    $
    3,826
    
    -Interest accrued during
    year(5) ......
    $
    3,076
    $
    1,729
    $
    582
    $
    12
    
    -Weighted-average interest rate on loansoriginated during year(6).....
    
    10.8%
    
    9.9%
    
    9.2%
    
    9.4%
    
    -Weighted-average interest rate on loansoutstanding, end of year(6).
    
    10.0%
    
    9.8%
    
    9.3%
    
    9.4%
    
    -Weighted-average cost of funds on debtoutstanding, end of year(7).
    
    8.5%
    
    8.4%
    
    8.2%
    
    -
    
    -


-

(1)
    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."(2)
    See "Managements Discussion and Analysis of
    Financial Condition and Results of Operations  Results of Operations for the Company
     Extraordinary Gain."(3)
    Reflects the following transactions as if such transaction
    had occurred at the beginning of 1996: (a) 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; (b) 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. Point West Capitals initial public offering
    occurred in February 1996.(4)
    Includes term certificates, securitized notes payable and
    debenture payable.(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  Description of Revolving and Term Certificates."(6)
    Includes two delinquent loans currently
    in default; excludes origination fees.(7)
    Reflects cost of term certificates and
    revolving certificates.


> 14



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, 2000 and results of operations for the Company for the three years
ended December 31, 2000, 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.

Overview

During the fourth quarter of 2000, the Company engaged in substantially less
revenue-generating activity and began reducing costs significantly. See "Item
1BusinessRecent Developments." The Company is assessing its current
businesses and its future operations.

The Company is a specialty financial services company. The Companys financial
statements consolidate the assets, liabilities and operations of Ventures, Allegiance,
DPFC, SocietyPool and PWS. The principal business activity of the Company through February
1997 was to provide viatical settlements for terminally ill persons. Subsequent to
February 1997, the Company became a more broadly-based specialty financial services
company. See "Item 1BusinessHistorical Development."

Information regarding the revenues, contributed income (loss) and identifiable assets for
each of the Companys business segments is contained in Note 16 of the Notes to the
Consolidated Financial Statements.

Method of Consolidation

The Companys financial statements consolidate the assets, liabilities and operations
of Ventures, Allegiance, DPFC, SocietyPool and PWS. See "Item 1-
Business" and Note 1 of the Notes to Consolidated Financial Statements. Operations
for PWS in 2000, 1999 and 1998 were immaterial. See "Item 1Business" for a
description of the ownership of the consolidated entities. See Notes 6 and 7 of the Notes
to Consolidated Financial Statements for descriptions of the Allegiance Financing and the
DPFC Agreement (as defined herein.) See "Item 3Legal Proceedings" for a
description of SocietyPool.  In light of the Court's March 13, 2001 order, the
Company is considering what steps, if any, to be undertaken in connection with
SocietyPool.

Results of Operations for the Company

> Year Ended December 31, 2000 Compared to Year Ended December 31,
>   1999

Total Revenue. Total revenue decreased $25.3 million to negative $5.6 million in 2000
from revenue of $19.7 million in 1999 primarily due to $10.4 million of net loss on
securities recognized by Ventures during 2000 compared to $13 million of net gain on
securities recognized by Ventures in 1999. Also contributing to the decrease was a
$304,000 net loss on securities in 2000, compared to a $2.8 million net gain on securities
in 1999, for Point West Capital. The net losses on securities in 2000 resulted primarily
from write-downs and write-offs of impaired investments.

Total Expenses. Total expenses increased slightly to $10.6 million in 2000 from $10.5
million in 1999.

15

Income Taxes. The income tax expense of $610,000 recorded in 2000 is primarily related
to the re-establishment of a valuation allowance against the Companys deferred tax
assets. A valuation allowance is required when it is unlikely that the Company will
generate sufficient future taxable income to allow it to utilize net operating losses
("NOLs") and other deferred tax assets to offset future taxable gains. See
"Income Taxes." In 1999, the Company recorded an income tax benefit of $590,000,
which was primarily related to the elimination of the valuation allowance. See Note 9 of
the Notes to the Consolidated Financial Statements.

Extraordinary Gain. The Company recognized an extraordinary gain on a troubled debt
restructuring in the amount of $1.2 million, net of income taxes of $822,000, in March
2000 in connection with the DPFC Agreement described below under "Results of
Operations by SegmentViatical SettlementsCertain Accounting Implications for
DPFC" and in Notes 1d and 7 of the Notes to Consolidated Financial Statements. As a
result of the DPFC Agreement, the Company reduced the outstanding principal amount of the
Securitized Notes in the consolidated balance sheet as of March 31, 2000 by $2.1 million
to $36.4 million (which equaled the face value of the life insurance policies and
restricted cash held by DPFC as of that date) and recognized income in a like amount. See
"Results of Operations by Segment- Viatical Settlements- Certain Accounting Implications for DPFC."

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

Total Revenue. Total revenue 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 were $2.8 million of net gains on
securities sold by Point West Capital and 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, 2000 and Year Ended December 31, 1999 Compared to Year Ended
December 31, 1998- Earned Discounts on Matured Policies"
and "- Gain on Assets Sold."

Total Expenses. Total expenses increased 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 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 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 received court approval during the first quarter of 2000.

Income Tax Expense. The income tax benefit of $590,000 recorded in 1999 is primarily
related to the elimination of the valuation allowance. See "Income Taxes." In
1998, the Company recorded $5,600 for minimum state income taxes. See Note 9 of the 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 were 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, all additional
losses of

16

DPFC have been reflected in the Companys net income (loss) during
the periods in which such losses occurred.

Results of Operations by Segment

> Ventures
>   Overview

The Company accounts for loans at the principal amount outstanding, and interest accrues
on outstanding balances. At December 31, 2000, there were no loans outstanding. At
December 31, 1999, the Company evaluated each of Ventures outstanding loans and
determined that an allowance for loan losses was not necessary.

Beginning in 1999, because of the volatility of Internet and Internet related stocks,
Point West Capital shorted stocks of certain competitors of one of the investments held by
Ventures. The effect of those hedging activities was reflected in the Companys
consolidated statement of operations during 1999. During 2000, no such hedges were in
place. The Company recognized a $317,000 gain in connection with such hedging activities
during the first quarter of 1999. See "Item 7A-
Quantitative and Qualitative Disclosures About Market Risk."

> Year Ended December 31, 2000 Compared to Year Ended December 31,
>     1999 and Year Ended December 31, 1999 Compared to Year Ended December 31, 1998

Interest Income. Interest income increased to $1.5 million in 2000 from $1.2 million
in 1999. This increase was primarily due to a $170,000 increase in interest income
recognized in 2000 as a result of warrants (valued using the Black-Scholes option-pricing
model) received in connection with one of Ventures debt securities. Additionally,
there was an overall increase in interest from the investment of cash balances held by
Ventures. Interest income increased $900,000 in 1999 from $300,000 in 1998, due primarily
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.

Net (Loss) Gain on Securities. Ventures recognized a net loss on securities of $10.4
million in 2000primarily in connection with the
write-down or write-off of impaired investments. During 2000, Ventures determined that an
aggregate $12.3 million of investments in debt and equity securities of 13 companies was
impaired and wrote-down or wrote-off $12.3 million in carrying values of such securities.
The write-downs or write-offs were a result of deterioration of growth prospects for some
companies and the uncertainty that such companies will be able to raise additional capital
in light of the market downturn related to Internet and other technology stocks. In 1999,
Ventures recognized a net gain on securities of $13.0 million (after the write-offs
described below) primarily in connection with the sale of two of its investments. Also
during 1999, Ventures determined that $1,035,000 of non-marketable equity securities in
two companies was impaired and therefore wrote-off the entire $1,035,000 carrying value of
such securities in 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, and therefore wrote-off the entire $1,004,000 carrying value of such
security in 1998. The Company does not write-down or write-off, through the consolidated
statement of operations, any investments it considers to be temporarily impaired.

Interest Expense. Interest expense increased to $389,000 in 2000 from $208,000 in 1999
due to an additional $3.5 million of borrowings incurred during 2000 to fund a portion of
Ventures investments. Interest expense increased $110,000 in 1999 from $98,000 in
1998 due to a full year of interest accrued

17

on funds initially borrowed from the SBA in July 1998. During 2000, the
weighted-average interest rate on funds borrowed from the SBA was 7.7% and the
weighted-average borrowings were $5.8 million compared to the weighted-average interest
rate of 6.9% and 6.9% and weighted average borrowings of $3.0 million and $1.4 million in
1999 and 1998, respectively.

> Allegiance

Overview

The Allegiance Financing represents the obligations solely of Allegiance. Point West
Capital did not guarantee repayment of the revolving or term certificates and is not
required to fund any principal or interest deficiencies thereunder.

At December 31, 2000, two loans held by Allegiance were in default and on non-accrual
status. Based on appraisals of the collateral securing these loans, management believes
that Allegiance will not incur material losses in connection with such loans. At December
31, 1999, one loan was in default and on non-accrual status. In October 1999, Allegiance
brought an action seeking to collect on this loan and the defendants counterclaimed. In
September 2000, Allegiance settled this litigation. Allegiance incurred total losses of
$1.3 million in connection with this loan, which are reflected in other general and
administrative expenses in the consolidated statement of operations for 2000. Allegiance
also owns two funeral homes valued at $850,000, in the aggregate, as a result of this
settlement. Allegiance is now operating these two funeral homes and is in the process of
attempting to sell its ownership interest in them. See "Item 3Legal
Proceedings" and Note 12 of the Notes to Consolidated Financial Statements for a
further explanation of this litigation and settlement. Based on appraisals and bids for
the funeral homes Allegiance is in the process of attempting to sell, management believes
that Allegiance will not incur further material losses in connection with such funeral
homes.

> Year Ended December 31, 2000 Compared to Year Ended December 31,
>     1999 and Year Ended December 31, 1999 Compared to Year Ended December 31, 1998

Interest Income. Interest income increased to $3.2 million in 2000 from $1.8 million
in 1999 and $589,000 in 1998. These increases were due to increased lending activity by
Allegiance. However, offsetting this increase was $233,000 of interest in 2000 that was
not accrued on two delinquent loans. Allegiance had 27 loans outstanding in the aggregate
amount of $37.8 million at December 31, 2000 as compared to 21 loans and five loans
outstanding in the aggregate amount of $33.8 million and $9.1 million at December 31, 1999
and 1998, respectively. The weighted-average interest rates on the loans outstanding were
8.7%, 8.9% and 9.4% for 2000, 1999 and 1998, respectively. The weighted-average interest
rate calculation for 2000 excludes two defaulted loans in the aggregate principal amount
of $3.9 million, which were on non-accrual status. As a result, the weighted-average
interest rate for 2000 decreased. Allegiance cannot predict at this time whether the loans
will remain on non-accrual status. However, to the extent that the loans remain on
non-accrual status, Allegiance does not anticipate receiving interest income
(approximately $42,000 per month) from such loans. Allegiance is attempting to work out
these two loans. Based on a preliminary assessment of the business and operations of the
defaulted borrowers, Allegiance believes it will not incur any material loss in connection
with such loans. See "Item 1BusinessRecent Developments." Allegiance
is not currently originating loans. Therefore, although interest income for 2001 is
expected to be moderately higher than interest income for 2000 as a result of earning a
full year of interest on loans made during 2000, Allegiance does not expect material
increases in interest income in future periods.

Interest Expense. Interest expense increased to $2.5 million in 2000 from $1.2 million
in 1999 and $31,000 in 1998 primarily as a result of increased borrowings under the
Allegiance Financing. The

18

increase in 2000 was also a result of higher interest rates applicable
to borrowings under the Allegiance Financing. During 2000, the weighted-average interest
rate under the Allegiance Financing was 8.5% and the weighted-average borrowings were $30
million compared to a weighted-average interest rate of 7.9% and weighted-average
borrowings of $15.4 million for 1999. During 1998 the weighted-average interest rate under
the Allegiance Financing was 9.2% and the weighted-average borrowings were $299,000. The
Allegiance Financing terminated in December 2000. See "Item
1BusinessRecent Developments."

Compensation and Benefits. Compensation and benefits increasedto $360,000 in 2000 from $286,000 in 1999 and increased $102,000
in 1999 from $184,000 in 1998. These increases resulted from the hiring of additional
employees to support Allegiances lending activities. During the fourth quarter of
2000, Allegiance laid off two employees, as a result compensation and benefits in 2001 is
currently expected to be approximately $135,000.

Other General and Administrative Expenses. Other general and administrative expenses
increased $1.7 million to $2.2 million in 2000 from $522,000 in 1999. This increase was
primarily due to a $1.3 million write-off of a delinquent loan during 2000. See
"Overview." In addition, this increase was partly attributable to a
$338,000 increase in legal expenses primarily related to the delinquent loan written off
during 2000. Other general and administrative expenses increased $344,000 in 1999 from
$178,000 in 1998. This increase was due primarily to a $152,000 increase in general legal
expense. Because two non-performing loans are currently in default, it is likely that
additional general and administrative expenses will be incurred in connection with the
work out of those loans. Allegiance cannot, however, predict the overall level of other
general and administrative expenses in 2001 relative to 2000.

> Viatical Settlements

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

> Overview

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
$93,000 and $132,000 as of December 31, 2000 and 1999, 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."

> Certain Accounting Implications for DPFC

From June 30, 1996 through February 29, 2000, the Company recognized income (earned
discounts) with respect to its viatical settlement business upon receipt of proceeds on
policies (either pursuant to sale of the policy or the death of the insured). Income
recognized was equal to the difference between such proceeds (less any back-end sourcing
fees) and the carrying value of such policies after giving effect to any reserve for loss
on the sale of such policies.

As a result of the imminent default of DPFC under the terms of the Securitized Notes,
Point West Capital and the holders of the Securitized Notes (the "Noteholders")
entered into an agreement in March 2000 (the "DPFC Agreement") that amended
certain of the terms of the Securitized Notes. Pursuant to

19

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

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

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.

> Year Ended December 31, 2000 Compared to Year Ended December 31,
>     1999 and Year Ended December 31, 1999 Compared to Year Ended December 31, 1998

Interest Income. As a result of the DPFC Agreement, DPFC has not recognized any
interest income related to the Securitized Notes subsequent to February 29, 2000 and will
not recognize interest income related to the Securitized Notes in future periods.
Consequently, interest income decreased to $7,000 in 2000 from $79,000 in 1999. Interest
income decreased in 1999 from $200,000 in 1998 as a result of lower cash balances
attributable to DPFC and to lower yields on such cash balances. The cash generated by DPFC
policy collections is restricted under the Indenture.

Earned Discounts on Matured Policies. DPFC did not recognize any earned discounts on
matured policies during 2000 and will not recognize any earned discounts in any future
period. See "Certain Accounting Implications for DPFC." Earned discounts on
matured policies amounted to $204,000 and $439,000 in 1999 and 1998, respectively. The
decrease was 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 2000, 29
policies matured with a face value of $1.6 million, compared to 38 and 46 policies with
face values of $2.4 and $2.9 million during 1999 and 1998, respectively. See
"Overview." As of December 31, 2000, the Company held 436 policies with an
aggregate carrying value of $30.6 million (comprised of "matured policies
receivable" "purchased life insurance policies" and a portion of
"other assets") and an aggregate face value of $35.5 million. All of the
"purchased life insurance policies" are pledged as security for the Securitized
Notes.

Gain on Assets Sold. The gain on assets sold was negligible in 2000 and 1999 and
totaled $165,000 in 1998. There will be minimal (if any) gains or losses on any policies
sold in future periods.

Interest Expense. As a result of the DPFC Agreement, DPFC has not recognized any
interest expense related to the Securitized Notes subsequent to February 29, 2000 and will
not recognize interest

20

expense related to the Securitized Notes in future periods.
Consequently, interest expense decreased to $589,000 in 2000 from $3.5 million in 1999.
See "Certain Accounting Implications for DPFC." Interest expense remained
relatively constant at $3.5 million and $3.6 million in 1999 and 1998, respectively.

Other General and Administrative Expenses. DPFC did not recognize any general and
administrative expenses subsequent to February 29, 2000 and will not recognize any general
and administrative expenses in any future period. See "Certain Accounting
Implications for DPFC." As a result, other general and administrative expenses
decreased to $133,000 in 2000 from $356,000 in 1999. See "Certain Accounting
Implications for DPFC." Other general and administrative expenses decreased $281,000
in 1999 from $637,000 in 1998. This decrease was due primarily to a historically large
premium expense in 1998 compared to that of 1999.

> Other

The Other segment includes operating results for Point West Capital, SocietyPool and PWS.
Except for compensation and benefit expenses clearly attributable to Allegiance, corporate
overhead is included in the "Other" segment and has not been allocated.
Activities for PWS were immaterial in 2000, 1999 and 1998 and are not expected to be
material in the foreseeable future.

> Year Ended December 31, 2000 Compared to Year Ended December 31, 1999
>     and Year Ended December 31, 1999 Compared to Year Ended December 31, 1998

Interest Income. Interest income declined to $195,000 in 2000 from $231,000 in 1999
and from $406,000 in 1998. The decline in 2000 was due to a decrease in cash balances.
Interest income declined in 1999 because the Company invested a larger portion of cash
balances in lower yielding instruments (primarily government securities) compared to
higher yielding instruments (primarily commercial paper and corporate bonds) in 1998. See
"Considerations Under the Investment Company Act of 1940."

Net (Loss) Gain on Securities. Net (loss) gain on securities decreased to a loss of
$304,000 in 2000 from a gain of $2.8 million in 1999. This decrease was the result of a
$304,000 loss on the sale of a bond held by Point West Capital. Net gain on securities
increased in 1999 from a loss of $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 Capital 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
principlessuch 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, 2000 and 1999 no such hedges were in place. See
"Item 7A- Quantitative and Qualitative Disclosures About
Market Risks."

Other Income. Other income decreased to $17,000 in 2000 from $252,000 in 1999. This
decrease was due to a $36,000 decrease in trading commissions generated by PWS and a
$199,000 decrease in fees received by PWS for investment banking services. Other income
increased $182,000 in 1999 from $70,000 in 1998. This increase was due to an increase of
$140,000 in fees received by PWS for investment banking services and $42,000 in trading
commissions generated by PWS in 1999.

Compensation and Benefits. Compensation and benefits increased to $2.2 million in 2000
from $1.7 million in 1999 and $1.3 million in 1998. These increases were due primarily to
an increase in compensation and benefits for employees. However, during 2001, the salaries
of executive officers were reduced by over 50%. In addition, employee layoffs and
attrition began in December 2000. As a result, compensation and benefits for 2001 are
expected to be approximately $1 million less than the 2000 amount.

21

Other General and Administrative Expenses. Other general and administrative expenses
were $2.0 millionin 2000, compared to $2.2 million
in 1999 and $882,000 in 1998. Contributing to the increase in 1999 was $945,000 of
litigation expense reflecting the net amount of the settlement agreement related to the
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.
Notwithstanding the $945,000 loss in 1999, general and administrative expenses increased
in 2000 relative to 1999. This increase is primarily due to expenses incurred with the
formation and expenses of SocetyPool and legal expenses in connection with legal actions
concerning SocietyPool. See "Item 3Legal Proceedings" and Note 12 of the
Notes to Consolidated Financial Statements.

Liquidity and Capital Resources

At December 31, 2000 the Company had $3.0 million of cash and cash equivalents, $116,000
of investment securities and $10.4 million of non-marketable securities, compared to $12.8
million of cash and cash equivalents, $9.0 million of investment securities and $5.9
million of non-marketable securities at December 31, 1999. These decreases resulted
primarily from the activities of Ventures. During 2000, Ventures made $14.3 million of
additional investments. These investments were funded primarily through existing cash
balances and, to a lesser extent, $5.5 million of net proceeds from the sale and
maturities of securities and repayments on loans and $3.5 million of SBA borrowings.
Substantially all of the additional investments made during 2000 constituted
non-marketable securities.

The Companys consolidated financial statements included herein have been prepared
assuming that the Company will continue as a going concern. See Note 2 of the Notes to
Consolidated Financial Statements.

> Point West Capital, SocietyPool and PWS

At present, Point West Capital, SocietyPool and PWS have no external funding source from
which to fund their working capital and general corporate needs. During 2000, the Company
supported the operations of Point West Capital, SocietyPool and PWS primarily from
existing cash balances. In prior periods, the Company generated cash primarily from sales
proceeds of investment securities and life insurance policies and used the cash to grow
its businesses. At December 31, 2000, Point West Capital and PWS cash and cash
equivalents were $1.7 million. The Company continues to analyze its current and future
needs for financing, which will be dependent on its ability to develop its existing
businesses and any other business opportunities the Company pursues. See
"Considerations Under the Investment Company Act of 1940."

The Company currently anticipates having sufficient liquidity to meet the working capital
and operational needs of Point West Capital and PWS through December 31, 2001 using
current cash and cash equivalents, proceeds from sales of investment securities held by
Point West Capital and distributions from Ventures. Assuming the Company determines
additional funds are needed, there can be no assurance that it will be successful in
obtaining external financing on satisfactory terms or at all.

Restricted cash as of December 31, 2000 includes $2.0 million for SocietyPool. Access to
SocietyPools funds by SocietyPools management or by any creditor or member of
SocietyPool has been prohibited pursuant to a separate court order. As a result of the
Court's having granted Point West Capitals motion to dismiss the bankruptcy action,
the Company intends to request the Court to vacate such separate order. The Company is not
able to predict what the working capital and operational needs of SocietyPool will be and
whether it will have sufficient capital for those needs. See "Item 3Legal
Proceedings."

22

> Ventures

Ventures activities during 2000 and 1999 were primarily supported through existing
cash balances and the sale of investments. During 2000 and 1999 Ventures generated $5.5
million and $21.3 million, respectively, of net proceeds from the sales of securities and
repayments on loans. In addition, Ventures activities have been supported through capital
contributions from Point West Capital and loans from the SBA. Through 1999, Point West
Capital contributed $5.8 million to Ventures. Point West Capital did not contribute
further to Ventures during 2000. During 2000, Ventures also borrowed $3.5 million from the
SBA.  At December 31, 2000 Ventures had $1.0 million of cash and cash equivalents.

During 2000, funds generated by Ventures also supported, in part, the activities of the
Companys other businesses. During 2000, Ventures distributed $4.0 million to Point
West Capital. During 1999, Ventures did not distribute funds to Point West Capital.

Ventures has an SBA debenture license and, therefore, may be permitted, based on capital
contributions by Point West Capital and realized gains on the sale of securities, to
borrow up to $16.6 million from the SBA, subject to compliance with SBA requirements. As
of December 31, 2000, Ventures had borrowed $6.5 million and had outstanding commitments
from the SBA to borrow an additional $6.0 million (for which Ventures has paid the 1%
non-refundable leverage fee described below.) Any borrowings bear interest at the rate for
ten-year debentures issued by Small Business Investment Companies and funded through
public certificates bearing the SBAs guarantee. Interest is payable semi-annually.
In addition, there is a leverage and underwriting fee of 3.5% and a fee of 1% per annum on
the outstanding amount of debt.

Ventures may not have sufficient liquidity, at least in the short term, to grow its
business. Ventures may not be able to access additional debt from the SBA as a result of
Ventures failure to originate a sufficient amount of debt investments. At present,
Ventures has no debt investments outstanding and, since inception of the SBA borrowings,
has made relatively few debt investments. As a result, the SBA could prevent further
borrowings by Ventures and could also accelerate the payment of the outstanding debentures
because of a failure to comply with applicable SBA debt/equity requirements. If the SBA
were to accelerate the outstanding debt, Ventures may not have sufficient cash to repay
the debt and might have to dispose of investment securities to repay the debt. The
dispositions may occur at times and on terms that would not maximize the value of those
investments and the proceeds of any dispositions may not be sufficient to repay the debt.
In addition, because of laws and regulations regarding the Investment Company Act of 1940
(the "1940 Act"), the Company may be required to restrict Ventures growth
or dispose of investments in order to avoid registration under the 1940 Act at some time
in the future. See "Considerations Under the Investment Company Act of 1940."

> Allegiance

Allegiance has had no current source of funding available to make additional loans since
December 15, 2000 and, as a result, no current ability to continue to make new loans or to
grow its business. See "Item 1BusinessRecent Developments" and Note
6 of the Notes to Consolidated Financial Statements.

> 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

23

in the Indenture. Principal, interest payments and other costs related
to the Securitized Notes are payable solely from collections on policies pledged to secure
the payment thereof.

Description of Revolving and Term Certificates

Pursuant to the Allegiance Financing, a consortium of insurance companies (the
"Investors") provided funding to Allegiance beginning in November 1998. The
Company and the Investors executed amendments that extended the Allegiance Financing,
which was originally scheduled to end in September 1999, through April 15, 2000, and
executed additional amendments that extended it through December 15, 2000.

Under the Allegiance Financing, various classes of revolving and term certificates of
Allegiance Trust I have been issued. At December 31, 2000, revolving certificates held by
third parties were outstanding in the aggregate principal amount of $9.1 million. At
December 31, 2000, such certificates bore interest at fixed and variable rates based on
the one-year U.S. Treasury yield and one-month LIBOR plus a weighted-average spread of
3.3%. The weighted-average interest rate of the revolving certificates held by third
parties at December 31, 2000 was 9.5%. See "Item 1BusinessRecent
Developments." Allegiance funded and retained an unrated revolving certificate in the
principal amount of $2.2 million. The unrated certificate represents the right to receive
all excess cash flow from Allegiance Trust I related to the revolving certificates. The
revolving certificates held by third parties have ratings from Fitch, Inc. ranging from A
to B. At December 31, 2000, the term certificates held by third parties were outstanding
in the aggregate principal amount of $23.9 million. The weighted-average fixed interest
rate of the term certificates held by third parties was 8.1%.
Allegiance funded and retained an unrated term certificate that represents the right to
receive a 17.5% coupon subject to other priority payments, including payments on the
senior certificates. At December 31, 2000, the outstanding principal balance of the
unrated term certificate was $2.6 million. Allegiance retained an additional unrated term
certificate that represents the right to receive 90% of the excess cash flow from
Allegiance Trust I related to the term certificates. This term certificate does not have a
principal balance. The term certificates held by third parties have ratings from Fitch,
Inc. ranging from AA to B.

In connection with the Allegiance Financing and the extensions thereunder, Allegiance
Capital paid an aggregate of $375,000 in commitment fees when funds were initially
borrowed. Of such commitment fees, $125,000 was amortized over the expected life of the
initial revolving certificates and $250,000 is being amortized over the expected life of
the term certificates (15 years). These allocations were based on an estimate of the
portion of the commitment fee attributable to the revolving certificates and the term
certificates. In the event that a default occurs and the Investors liquidate the
collateral, any remaining unamortized commitment fees will be expensed in the period in
which such actions occur.

Because two loans held by Allegiance were in default in the fourth quarter of 2000,
Allegiance was not able to utilize funds available under the Allegiance Financing during
the final month of the facility and also was not able to issue term certificates on
December 15, 2000 to retire the outstanding revolving certificates. Because the revolving
debt was not repaid by February 15, 2001, the interest rate on such debt increased by
1.00%. The Company and the Investors recently executed amendments providing additional
time to work out the non-performing loans and to retire the revolving certificates. A
failure to work out the non-performing loans by April 15, 2001 or to retire the revolving
debt by July 15, 2001 could result in a default. In addition, if a default occurs, the
Investors have the right to accelerate all debt issued under the Allegiance Financing,
terminate Point West Capital as the servicer and Allegiance Capital as the special
servicer and liquidate the collateral. Also as a result of non-performing loans, under the
terms of the Allegiance Financing, (1) neither Point West Capital nor Allegiance Capital
is currently receiving payment for the servicing activities that it provides to Allegiance
and (2) Allegiance Capital is not currently receiving any principal or interest payments
under revolving or term certificates issued to

24

Allegiance Capital under the Allegiance Financing. During 2000,
servicing fees paid to Point West Capital and Allegiance Capital were approximately $5,000
and $4,000 per month, respectively. Payments under the revolving and term certificates
issued to Allegiance Capital are initially expected to be approximately $42,000 per month,
assuming all the underlying loans were performing, but would decrease as the principal
balances on underlying loans decreased.

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 under-performing loans. As a result of the
two defaulted loans, as of February 15, 2001 the Reserve Account balance was required to
be $853,000, but the balance was $429,000. Therefore, cash not needed to make payments to
third party certificate holders, and which would therefore be paid to Allegiance and Point
West as described above, is generally being deposited in the Reserve Account. Pursuant to
recent amendments executed by the Company and the Investors, certain expenses being
incurred in connection with the non-performing loans are being permitted to be paid from
funds held in the Reserve Account.

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. However, such payments to Point West Capital and Allegiance Capital are not being
made while the two loans remain in default. 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 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.

25

The Indenture contains certain covenants restricting the activities of DPFC. 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 a monthly
fee of $18,000 from March 2000 through June 2002. 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. To the extent that cash available under the
Indenture through collection activities is insufficient to reimburse Point West Capital,
the Noteholders pursuant to the DPFC Agreement are required to deposit monies sufficient
to make such payments. For further discussion see "Results of Operations by Segment - Viatical Settlements - Certain
Accounting Implications for 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.

Income Taxes

The Company has significant NOLs for tax purposes. The NOLs are primarily related to
losses incurred by DPFC. The Company believes that a substantial portion of its NOLs will
not be utilized due to its inability to consistently generate taxable earnings. As a
result, during 2000 the Company re-established valuation allowances which reduced the
deferred tax asset to zero. 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.

Considerations Under the Investment Company Act of 1940

The 1940 Act creates a comprehensive regulatory framework applicable generally to
investment companies (i.e., companies engaged primarily in the business of investing,
reinvesting or trading in securities within the meaning of the 1940 Act, whether or not
those companies intend to be engaged primarily in such business). Companies that are
subject to the 1940 Act must register with the SEC as investment companies and upon
registration become subject to extensive regulation. The Company believes, based on its
current activities and the nature of its assets, that it should not be deemed to be an
investment company because it is not engaged primarily in the business of investing,
reinvesting or trading in securities within the meaning of the 1940 Act and the rules of
the SEC promulgated thereunder, and does not hold itself out as an investment company.

26



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

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

A decline in the Companys non-investment activities, including a
    decrease in Allegiances loan origination activities and DPFCs future servicing
    activities;The Companys inability 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;
    andThe success of other investments by Point West Capital.


The majority of investment securities held by the Company have been acquired since January
1998. As those investment securities increased substantially in value, beginning in 1999,
Ventures sold some of its investments in part to address issues under the 1940 Act. The
Company has realized substantial gains in connection with the sales of some of these
investments. The proceeds of these sales have been invested in U.S. government securities
pending final use, which has included further investments by Ventures.

The Company is assessing its long-term strategy including its strategy to ensure that it
is not deemed to be an investment company. However, some elements of this strategy may, at
least in the short term, materially and 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 may involve:

> Pursuing the growth of new operating businesses, by
>       acquisition or internal development;Attempting to resume Allegiances loan origination
>       activities; andContinuing 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 that are complementary to
the Companys current businesses, these businesses may not necessarily involve
financial services. These businesses will be operating entities that do not own, trade or
hold any significant amount of investment securities. Since 1998, the Company has been
unable to develop or acquire new suitable operating businesses on terms acceptable to the
Company. The Company may not find any suitable businesses to acquire or develop on terms
acceptable to the Company. In addition, the Company may not have sufficient capital or
access to outside funding to finance the development or acquisition of complimentary
businesses. Furthermore, the Company may not be able to successfully integrate the
operations of any new businesses. Finally, any

27

new businesses may not contribute positively to the Companys
financial condition or results of operations.

Resuming Allegiances Loan Origination Activities

The Company is evaluating its plans to resume and grow Allegiances commercial loan
activities. However, these plans are dependent on Allegiances ability to obtain an
external funding source to repay the revolving certificates under the Allegiance Financing
and support further loan origination activities. No assurance can be given that Allegiance
will be able to locate a funding source or that, if a funding source is found, that it
will be available on economically feasible terms. Assuming that Allegiance obtains an
external funding source, its activities will depend on the markets acceptance of its
product offerings and services, Allegiances ability to find suitable creditworthy
borrowers and competitive pressures in the lending industry.

Disposing of Investment Securities/Limiting Growth of Ventures

The Company may determine that it must dispose of additional investment securities to
avoid being deemed an investment company or to fund the Companys current operations
or the growth of its other businesses. The dispositions may occur at times and on terms
that would not maximize the value of these investments. Given the volatile nature of the
market, and in some cases, lack of a market, for some of these investments, sales could
occur at severely depressed prices. In addition, the dispositions may result in
disadvantageous tax consequences. The Company intends to use any proceeds of any
additional sale to support its working capital (including further investments by
Ventures). Pending final use, proceeds of any additional sale will likely be invested in
U.S. government securities.

The Company also currently intends to limit the growth of Ventures business.
Although Ventures may invest in investment securities, the Company does not intend to
contribute more capital to Ventures. Limiting Ventures growth may materially
adversely affect the Companys future financial condition and results of operations.

Forward Looking Statements

This report includes forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. All statements made herein which are not based
on historical facts are forward looking and, accordingly, involve risks and uncertainties
that could cause actual results to differ materially from those discussed. Such forward
looking statements include those under "Managements Discussion and Analysis of
Financial Condition and Results of Operations" relating to (1) the amount of any loss
resulting from the sale of two funeral homes now owned by Allegiance as a result of a
litigation settlement reached in 2000, (2) the amount of any loss experienced in
connection with two loans made by Allegiance that are in default, (3) adequacy of the
Companys allowance for loan losses, (4) the resumption of payments to Point West
Capital and Allegiance Capital for servicing activities provided to Allegiance and to
Allegiance Capital under revolving and term certificates issued to Allegiance Capital
under the Allegiance Financing, (5) level of other general and administrative expenses for
2001, (6) sufficiency of the Companys liquidity and capital resources (see
"Liquidity and Capital Resources"), (7) 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"), (8) amounts of
additional cash to be contributed to Allegiance Trust I, (9) Ventures ability to
borrow funds from the SBA (see "Liquidity and Capital Resources"), (10)
SocietyPools development and offering of a new type of financial product and (11)
managements belief that the Former CEO or the Former Special Consultant is not
entitled to the relief requested in its action against Point West Capital (see "Item
3Legal Proceedings"). Such statements are based on managements belief,
judgment and analysis as well as assumptions made by and

28

information available to management at the date hereof. In addition to
any assumptions and cautionary factors referred to specifically in this report in
connection with such forward looking statements, factors that could cause actual results
to differ materially from those contemplated by the forward looking statements include (1)
Allegiances ability to realize upon liquidation the value attributed to the two
funeral homes now owned by Allegiance, (2) Allegiances ability to foreclose on the
collateral and realize an amount on foreclosure at least equal to the carrying value of
two Allegiance loans which are currently in default, (3) the continuing ability of
borrowers to perform under loans previously made by Allegiance and factors such as general
economic conditions that would affect such ability, (4) Allegiances ability to
resolve the two currently non-performing loans, (5) litigation expenses arising from
current and future legal proceedings related to the Companys businesses, including
non-performing loans or investments and SocietyPool, (6)the results of the
Companys consideration of strategic options and any costs associated with a chosen
option, (7) availability and cost of capital, (8) the factors described under
"Considerations Under the Investment Company Act of 1940," (9) increases in the
LIBOR rate and future amounts outstanding under the Class A-R revolving certificates, (10)
Ventures ability to access more SBA debt, (11) Ventures ability to originate a
sufficient amount of debt investments that qualify for financing under the SBA regulations
and (12) the outcome of the litigation relating to SocietyPool and the viability of and
the markets acceptance of SocietyPools new financial product.

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. Management reviews the effects of the market 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, 2000 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, 2000:

2001
    2002
    2003
    2004
    2005
    ThereafterFixed rate loans(1)(2)
    $ 882,086
    $ 999,925
    $ 1,102,787
    $ 1,216,279
    $ 1,341,505
    $28,400,010Average interestRates(1)
    8.5%
    8.5%
    8.5%
    8.5%
    8.5%
    8.5%


(1)
    The principal cash flows for fixed
    rate loans and average interest rates do not include two defaulted loans.(2)
    The Company hedged its interest rate exposure related to
    the loans made by Allegiance because the interest rate at which Allegiance anticipated
    issuing term certificates in connection with the extension of the Allegiance Financing
    were to be set in the future. Allegiance utilized futures contracts to hedge certain
    interest rate exposure between the time of origination of the loans and the expected
    issuance of such term certificates. At present, Allegiance has no open hedges.


In connection with the Allegiance Financing, Point West Capital agreed to provide
additional cash to Allegiance Trust I in the event that monthly LIBOR interest rates
exceed 6.16%. To date, Point

29

West Capital has been required to make immaterial payments. The amount
of additional cash, if any, to be provided will be a function of several variables
including the monthly LIBOR interest rate and the outstanding balance of one of the
Allegiance Financing revolving certificates.

ITEM 8- FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA

> See pages 31 through 58.

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.



30

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 sheets of Point
West Capital Corporation and Subsidiaries as of December 31, 2000 and 1999, and the
related consolidated statements of operations, changes in stockholders equity, and
cash flows for the years 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 audits. The financial statements of Point West Capital
Corporation and Subsidiaries for the year ended December 31, 1998 were audited by other
auditors whose report dated February 27, 1999 expressed an unqualified opinion on those
statements.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform the audits
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 and Subsidiaries as of December 31, 2000 and 1999 and the results of their
operations and their cash flows for the years then ended, in conformity with accounting
principles generally accepted in the United States.

Ernst & Young LLP


San Francisco, California
March 13, 2001



31

Report of KPMG, LLP Independent Auditors



The Board of Directors and Stockholders
Point West Capital Corporation:

We have audited the accompanying consolidated statements of operations,
changes in stockholders equity, and cash flows of Point West Capital Corporation for
the year 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 audit.

We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. 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 results of their operations, changes in
stockholders equity and their cash flows for the year ended December 31, 1998, in
conformity with accounting principles generally accepted in the United States of America

KPMG LLP


> 

San Francisco, California
February 27, 1999



32



POINT WEST CAPITAL
    CORPORATION AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETSDecember 31,
    
    December 31,ASSETS
    
    2000
    
    1999Cash and cash equivalents
    $
    2,987,686
    $
    12,836,125Restricted cash
    
    2,442,315
    
    3,074,057Investment securities:Held-to-maturity
    
    
    
    2,504,610Available-for-sale
    
    115,599
    
    6,519,821Matured policies receivable
    
    243,728
    
    Taxes receivable
    
    196,094
    
    Loans
    receivable, net of unearned income of $713,520 and
             $540,867, respectively, and net of an
    allowance for
              loan losses of $190,000 and
    $155,000, respectively36,889,745
    
    35,467,079Purchased life insurance policies
    
    30,405,291
    
    31,727,966Non-marketable
    securities
    
    10,443,654
    
    5,933,133Deferred financing costs, net of accumulated amortization of
                 $1,558,265 and
    $1,378,623, respectively720,063
    
    656,376Furniture and equipment, net of accumulated depreciation of $32,468 and
    $12,976, respectively70,782
    
    34,917Other assets
    
    1,118,250
    
    2,771,767Total assets
    $
    85,633,207
    $
    101,525,851LIABILITIES
    AND STOCKHOLDERS' EQUITYAccrued interest expense
    $
    263,537
    $
    346,483Accounts payable
    
    375,115
    
    238,326Accrued compensation payable
    
    416,891
    
    543,400Accrued litigation
    settlement
    
    
    
    2,205,000Taxes payable
    
    
    
    141,100Revolving certificates
    
    9,133,287
    
    4,200,000Term certificates
    
    23,897,245
    
    24,498,815Securitized notes payable
    
    35,276,369
    
    38,528,914Debenture payable
    
    6,500,000
    
    3,000,000Deferred income taxes
    
    
    
    281,020Total liabilities
    $
    75,862,444
    $
    73,983,058Stockholders' equity:Common stock, $0.01 par value; 15,000,000 authorized
    shares,
               4,391,124 and 4,390,124
    shares, respectively, issued 
               3,352,624 and 3,351,624
    shares, respectively, outstanding43,911
    
    43,901Additional paid-in-capital
    
    30,091,689
    
    30,088,949Accumulated comprehensive (loss) income, net of tax
    
    (109,522)
    
    2,098,960Accumulated deficit
    
    (17,381,283)
    
    (1,814,985)Treasury stock,
    1,038,500 shares
    
    (2,874,032)
    
    (2,874,032)Total stockholders' equity
    $
    9,770,763
    $
    27,542,793Total liabilities and stockholders' equity
    $
    85,633,207
    $
    101,525,851




See accompanying notes to consolidated finanaical statements.

33



POINT
    WEST CAPITAL CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF
    OPERATIONSYears Ended December 31,2000
    
    1999
    
    1998Revenues:Interest income
    $
    4,888,832
    $
    3,314,280
    $
    1,494,079Net (loss) gain on securities
    
    (10,714,267)
    
    15,785,036
    
    (998,813)Gain on assets sold
    
    
    
    7,751
    
    165,346Other
    
    236,544
    
    407,439
    
    234,673Earned discounts on matured policies
    
    
    
    203,801
    
    438,792Total Revenues
    
    (5,588,891)
    
    19,718,307
    
    1,334,077Expenses:Interest expense
    
    3,485,649
    
    4,962,878
    
    3,679,566Compensation and benefits
    
    2,541,750
    
    1,936,807
    
    1,514,812Other general and administrative expenses
    
    4,382,950
    
    3,097,131
    
    1,728,169Amortization
    
    179,642
    
    470,775
    
    352,181Depreciation
    
    19,492
    
    8,507
    
    4,128Total expenses
    
    10,609,483
    
    10,476,098
    
    7,278,856(Loss) gain before income taxes, net loss in wholly owned financing subsidiary charged
        to reserve for equity interest and extraordinary gain
    
    (16,198,374)
    
    9,242,209
    
    (5,944,779)Income tax benefit (expense)
    
    (609,927)
    
    589,885
    
    (5,600)Net loss in wholly owned financing subsidiary chargedto reserve for equity interest
    
    
    
    
    
    2,300,037(Loss) income per share before extrordinary gain
    
    (16,808,301)
    
    9,832,094
    
    (3,650,342)Extraordinary gain, net of income taxes of $822,154
    
    1,242,003
    
    
    
    Net (loss) income
    $
    (15,566,298)
    $
    9,832,094
    $
    (3,650,342)Earnings per share - Basic:(Loss) income per share before extraordinary gain:
    $
    (5.01)
    $
    2.95
    $
    (1.12)Extraordinary gain
    
    0.37
    
    
    
    Net (loss) income
    $
    (4.64)
    $
    2.95
    $
    (1.12)Earnings per share - Diluted:(Loss) income per share before extraordinary gain:
    $
    (5.01)
    $
    2.70
    $
    (1.12)Extraordinary gain
    
    0.37
    
    
    
    Net (loss) income
    $
    (4.64)
    $
    2.70
    $
    (1.12)Weighted-average number of shares of common stockoutstanding
    
    3,352,534
    
    3,329,409
    
    3,253,324Weighted-average number of shares of common stockand common stock equivalents outstanding
    
    3,352,534
    
    3,641,716
    
    3,253,324


See accompanying notes to consolidated finanaical statements.

34



POINT
    WEST CAPITAL CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF
    STOCKHOLDERS' EQUITYFor the years ended December
    31, 2000, 1999 and 1998AccumulatedCommon
    Stock
    
    Additional
    
    Comprehensive
    
    RetainedShares
    
    Amount
    
    Paid-in-Capital
    
    Income (Loss)
    
    (Deficit)
    
    Treasury Stock
    
    TotalBalances at January 1, 1998
    $
    4,291,824
    $
    42,918
    $
    29,496,720
    $
    2,597,239
    $
    (7,996,737)
    $
    (2,874,032)
    $
    21,266,108Comprehensive
    loss:Net loss
    
    
    
    
    
    
    
    
    (3,650,342)
    
    
    
    (3,650,342)Other comprehensive loss: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)
    
    14,829,561Comprehensive
    income:Net income
    
    
    
    
    
    
    
    
    9,832,094
    
    
    
    9,832,094Other comprehensive income, net ofincome tax:Net unrealized investment gains, netof tax of $1.4 million
    
    
    
    
    
    
    2,287,926
    
    
    
    
    
    2,287,926Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    12,120,020Issuances
    of common stock(options exercises, including tax effect)
    98,300
    
    983
    
    592,229
    
    
    
    
    
    
    
    593,212Balances
    at December 31, 1999
    4,390,124
    
    43,901
    
    30,088,949
    
    2,098,960
    
    (1,814,985)
    
    (2,874,032)
    
    27,542,793Comprehensive
    income:Net loss
    
    
    
    
    
    
    
    
    (15,566,298)
    
    
    
    (15,566,298)Other comprehensive loss, net ofincome tax:Net unrealized investment losses
    
    
    
    
    
    
    (2,208,482)
    
    
    
    
    
    (2,208,482)Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    (17,774,780)Issuances of common stock(options exercised, including tax effect)
    1,000
    
    10
    
    2,740
    
    
    
    
    
    
    
    2,750Balances at December
    31, 2000
    $
    4,391,124
    $
    43,911
    $
    30,091,689
    $
    (109,522)
    $
    (17,381,283)
    $
    (2,874,032)
    $
    9,770,763


See accompanying notes to consolidated finanaical statements.

35



POINT
    WEST CAPITAL CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH
    FLOWSYears Ended
    December 31,2000
    
    1999
    
    1998Cash flows from operating activities:Net (loss) income
    $
    (15,566,298)
    $
    9,832,094
    $
    (3,650,342)Adjustments to reconcile net (loss) income to net cashused in operating activities:Depreciation and amortization
    
    199,134
    
    479,282
    
    356,309Loss on loan receivable
    
    1,204,964
    
    140,000
    
    Gain on assets sold
    
    
    
    (7,751)
    
    (165,346)Provision for loan losses
    
    35,000
    
    105,000
    
    50,000Net loss (gain) on securities
    
    10,714,267
    
    (15,785,036)
    
    998,813Interest income received as warrants
    
    (1,101,532)
    
    (624,918)
    
    (97,816)Earned discounts on matured policies
    
    
    
    (203,801)
    
    (438,792)Deferred tax asset
    
    371,069
    
    (1,117,141)
    
    Extraordinary gain
    
    (1,242,003)
    
    
    
    Changes in operating assets and liabilities:Collections on matured life insurance policies
    
    1,191,412
    
    2,377,984
    
    3,209,114Other assets
    
    186,118
    
    (400,375)
    
    11,600Taxes receivable (payable)
    
    (337,194)
    
    479,376
    
    Accrued interest expense
    
    (82,946)
    
    82,678
    
    80,655Accounts payable
    
    136,789
    
    45,890
    
    (24,415)Accrued compensation payable
    
    (126,509)
    
    321,400
    
    29,000Decrease in reserve for equity interest in whollyowned financing subsidiary
    
    
    
    
    
    (2,084,412)Net cash used in operating activities
    
    (4,417,729)
    
    (4,275,318)
    
    (1,725,632)Cash flows from investing activities:Proceeds from sale of other assets
    
    
    
    27,126
    
    229,067Purchase of furniture and equipment
    
    (55,357)
    
    (18,059)
    
    (22,630)Decrease in restricted cash
    
    631,742
    
    79,456
    
    603,201Purchase of held-to-maturity securities
    
    
    
    (4,479,856)
    
    Proceeds from maturity of held-to-maturity securities
    
    2,504,610
    
    1,975,246
    
    Purchase of investment and non-marketable securities
    
    (14,288,678)
    
    (9,493,806)
    
    (6,808,817)Proceeds from sale of investment and non-marketable securities
    
    2,886,852
    
    24,640,599
    
    3,087,691Additions to loans receivable
    
    (7,013,553)
    
    (26,175,058)
    
    (6,549,689)Principal payments on loans receivable
    
    3,500,923
    
    650,569
    
    327,815Net cash used in investing activities
    
    (11,833,461)
    
    (12,793,783)
    
    (9,133,362)Cash flows from financing activities:Principal payments on securitized notes payable
    
    (1,188,388)
    
    
    
    (275,193)Proceeds from SBA debenture
    
    3,500,000
    
    
    
    3,000,000Proceeds from revolving certificates
    
    5,098,000
    
    23,908,039
    
    5,400,045Principal payments on revolving certificates
    
    (164,713)
    
    (25,108,084)
    
    Proceeds from term certificates
    
    
    
    24,635,000
    
    Principal payments on term certificates
    
    (601,570)
    
    (136,185)
    
    Increase in deferred financing costs
    
    (243,328)
    
    (316,606)
    
    (637,292)Proceeds from options exercised
    
    2,750
    
    254,936
    
    Net cash provided by financing activities
    
    6,402,751
    
    23,237,100
    
    7,487,560Net (decrease) increase in cash and cash equivalents
    
    (9,848,439)
    
    6,167,999
    
    (3,371,434)Cash and cash equivalents, beginning of period
    
    12,836,125
    
    6,668,126
    
    10,039,560Cash and cash equivalents, end of period
    $
    2,987,686
    $
    12,836,125
    $
    6,668,126Supplemental disclosures:Supplemental disclosure of non-cash activities:Unrealized (loss) gain on securities available for sale, net of tax
    $
    (2,208,482)
    $
    2,287,926
    $
    (2,786,205)Receipt of warrants
    $
    1,101,532
    $
    624,918
    $
    97,816Reduction in securitized notes payable inconnection with extraordinary gain
    $
    2,064,157
    $
    
    $
    Establishment of receivable from insurance company
    $
    
    $
    2,205,000
    $
    Accrued litigation settlement
    $
    
    $
    2,205,000
    $
    Accrued litigation settlement offset against other assets
    $
    2,205,000
    $
    
    $
    Increase in other assets offset by reduction in loans receivable
    $
    850,000
    $
    
    $
    Supplemental disclosure of cash flow information:Taxes paid
    $
    610,790
    $
    64,156
    $
    19,680Cash paid for interest
    $
    3,378,086
    $
    4,880,200
    $
    3,598,911


See accompanying notes to consolidated finanaical statements.

36



Point West Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements

Years Ended December 31, 2000, 1999 and 1998

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 with historic operations in four business segments: (i) small business
loans and investments through Point West Venture Management, LLC ("Point West
Management") and Point West Ventures, LP ("Point West Ventures"), (ii)
loans to funeral homes and cemeteries through Allegiance Capital, LLC ("Allegiance
Capital"), Allegiance Funding I, LLC ("Allegiance Funding"), Allegiance
Capital Trust I ("Allegiance Trust I") and Allegiance Management Corp.
("Allegiance Management"), (iii) viatical settlements through Dignity Partners
Funding Corp I ("DPFC") and (iv) other activities through Point West Capital,
SocietyPool.com, LLC ("SocetyPool") and Point West Securities, LLC
("PWS").

Subsequent to February 1997, the Company expanded its financial services business through
the operations of Point West Management, Point West Ventures, Allegiance Capital,
Allegiance Funding, Allegiance Trust I and Allegiance Management. During 1998, the Company
formed PWS, a broker-dealer licensed by the National Association of Securities Dealers,
Inc. ("NASD"). During 2000 the Company formed SocietyPool. SocietyPool was
formed to develop and pursue a new financial product. It is still in the development
stage. See Note 12. 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 activities of Ventures and
Allegiance changed substantially in 2000. See Note 2.

The principal business activity of the Company through February 1997 was to provide
viatical settlements for terminally ill persons. Aviatical 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. In the third quarter of 1996 the Company
decided to sell all or substantially all of its life insurance policies, other than those
owned by DPFC, and completed substantially all of the sales in 1997. Point West Capital
continues to service the life insurance policies held by DPFC.

To date, SocietyPool has conducted limited market research but has not engaged in
operations. See Note 12. To date, the operations of PWS have not been material to the
Company.

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. 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 inter-company accounts and
transactions.

The Company 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")

37

Point West Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements

license from the Small Business Administration ("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.
One unaffiliated limited partner owns the remaining 0.002% of the partnership interests.
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.

The Company consolidates the assets, liabilities and operations of Allegiance Capital,
Allegiance Funding, Allegiance Trust I and Allegiance Management. 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 contributions to
Allegiance Capital in the aggregate amount of $8.1 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 (as defined in Note 6). Subsequent
to November 20, 1998, Point West Capital was 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 to be
carried forward indefinitely to the next calendar year or years in which net profits are
sufficient to make such allocation. An additional 5% return for each calendar year will be
allocated first to Point West Capital to the extent that in each year sufficient profits
are available with no carry forward provided. To date, net profits have not been
sufficient to make such allocations. As a result, a shortfall of approximately $4.2
million is being carried over indefinitely. 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 provided $33 million of
debt to support Allegiances lending activities (the "Allegiance
Financing"). See Note 6.

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

In addition, the Company consolidates the assets, liabilities, and operations of
SocietyPool, which was formed to develop and pursue a new financial product. The Company
has a 51% ownership in and 51% voting control of SocietyPool and is the Manager. The
Company is involved in arbitration with two other members of SocietyPool.  See Note
12.

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. PWS is registered as a
broker-dealer registered with the Securities and Exchange Commission (the "SEC")
and in California.



> c. Loans Receivable and Allowance for Loan Losses

Loans receivable at December 31, 2000 includes loans made to unaffiliated third parties
through Allegiance. Loans receivable at December 31, 1999 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

38

Point West Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements

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 that in managements judgement indicate impairment inherent in
the portfolio on the balance sheet date. At December 31, 2000 and 1999 the allowance for
loan losses was $190,000 and $155,000, respectively. Management believes that the
allowance for loan losses is adequate. Although management uses all available information
to recognize losses on loans at the time the allowance is established, future additions to
the allowance may be necessary. 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 4.

> d. Purchased Life Insurance Policies

From January 1, 1998 through February 29, 2000, the Company recognized income (earned
discounts) 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). Income recognized was 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 amounts
accreted under the level yield method. The Company ceased using the level yield method for
periods beginning after June 30, 1996. 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 through February 29, 2000 have
been reflected in the Companys net income (loss) for the appropriate period. See
Note 7.

Purchased life insurance policies consist only of those policies held by DPFC. The
policies held by DPFC are pledged as security for the Securitized Notes (as defined in
Note 7). As a result of the imminent default of DPFC under the terms of the Securitized
Notes, in March 2000 Point West Capital and the holders of the Securitized Notes (the
"Noteholders") entered into an agreement (the "DPFC Agreement") that
amended certain of the terms of the Securitized Notes. Pursuant to the DPFC Agreement,
which is effective from March 2000 through June 2002, the Noteholders will provide funds
to pay servicing fees, premiums and certain other costs of DPFC in the event policy
collections are insufficient. Under the DPFC Agreement, Point West Capital will continue
to act as servicer for a fee of $18,000 per month for the period March 2000 through June
2002. The DPFC Agreement also provides the Noteholders with an option to purchase
DPFCs outstanding stock from Point West Capital for a nominal amount on June 30,
2002. If the Noteholders do not exercise such option, Point West Capital may liquidate
DPFC. See Note 7.

> e. Deferred Financing Costs

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

> f. 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.



39

Point West Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements

> g.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 9.

> h. Cash and Cash Equivalents

The Company considers all highly liquid investments purchased within three months of their
maturity date to be cash and cash equivalents. Cash and cash equivalents included U.S.
Treasury bills with maturities less than three months of$2.0
million and $8.3 million at December 31, 2000 and 1999, respectively.

> i. Restricted Cash

Restricted cash as of December 31, 2000 includes $2.0 million for
SocietyPool. The balance of restricted cash is comprised of funds held by Allegiance
Capital Trust and DPFC.  Access to SocietyPools funds by SocietyPools
management or by any creditor or member of SocietyPool has been prohibited pursuant to a
separate court order. As a result of the Court's having granted Point West Capitals
motion to dismiss the bankruptcy action, the Company intends to request the Court to
vacate such separate order.  The Company is not able to predict what the working
capital and operational needs of SocietyPool will be and whether it will have sufficient
capital for those needs. See Note 12.

> j. Earnings Per Share

Earnings 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. 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 accounting principles
generally accepted in the United States. Actual results could differ from those estimates.

40



Point West Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements

> l. 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 ("APB No. 25"). Pro forma net (loss)
income 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 are
valued using the Black-Scholes method prescribed by SFAS 123.

> m. Recent Accounting Developments

In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 133 ("SFAS 133"), Accounting for
Derivative Instruments and Hedging Activities, which establishes new accounting and
reporting standards for derivative instruments. In June 1999, the FASB issued SFAS No.
137, Accounting for Derivative Instruments and Hedging Activities-
Deferral of the Effective Date of FASB Statement No. 133, and in June 2000, the FASB
issued SFAS No. 138, Accounting for Certain Derivative Instruments and Certain Hedging
Activities- An Amendment of FASB Statement No. 133.

These rules require that all derivative instruments be reported in the consolidated
financial statements at fair value. Changes in the fair value of derivatives are to be
recorded each period in earnings or other comprehensive income, depending on whether the
derivative is designated and effective as part of a hedged transaction, and on the type of
hedged transaction. Gains or losses on derivative instruments reported in other
comprehensive income must be reclassified as earnings in the period in which earnings are
affected by the underlying hedged item, and the portion of all hedges not effective must
be recognized in earnings in the current period. These new standards may result in
additional volatility in reported earnings, other comprehensive income and accumulated
other comprehensive income.

These rules become effective for the Company on January 1, 2001. The effect of this change
in accounting is not expected to be material to the Companys results of operations
and financial position.

In September 2000, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 140 ("SFAS 140"), Accounting for Transfers of
Financial Assets and Extinguishments of Liabilities. SFAS 140 is a replacement of SFAS
125 and is effective for recognition and reclassification of collateral and disclosures
relating to securitization transactions and collateral for years ending after December 15,
2000, and is effective for transfers and servicing of financial assets and extinguishments
of liabilities occurring after March 31, 2001. The Company believes that the adoption of
SFAS 140 will not have a material effect on the accounting for the Allegiance Financing or
on the financial statements of the Company.

In April 2000, the Financial Accounting Standards Board issued Interpretation No. 44,
"Accounting for Certain Transactions Involving Stock Compensation-
An Interpretation of APB Opinion No. 25" (FIN 44). FIN 44 clarifies the application
of APB No. 25 for certain issues. Among other issues, FIN 44 clarifies the definition of
employee for purposes of applying APB No. 25, the criteria for determining whether a plan
qualifies as a non-compensatory plan, the accounting consequences of various modifications
to the term of a previously fixed stock option or award and the accounting for an exchange
of stock compensation awards in a business combination. FIN 44 became effective July 1,
2000, but certain conclusions in this interpretation cover specific events that occur
after either December 15, 1998

41



Point West Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements

or January 12, 2000. The adoption of FIN 44 did not have
a significant effect on the Companys financial position or results of operations.

> n.  Reclassifications

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



2.
                
Liquidity

The accompanying consolidated financial statements have been prepared assuming the Company
will continue as a going concern. For the year ended December 31, 2000, the Company
incurred a loss before extraordinary gain of $16.8 million, which reduced
stockholders equity to $9.8 million and increased accumulated deficit to $17.4
million. The Company has also experienced continuing negative cash flows from operations.
Cash flows used in operating activities for the years ended December 31, 2000, 1999 and
1998 were $4.4 million, $4.3 million and $1.7 million, respectively.

In addition, on November 13, 2000, the Company received a notice from Nasdaq, which
indicated that, because of the recent decline in the price of the Companys Common
Stock, the Company failed to meet one of the listing requirements of The Nasdaq Stock
Markets National Market System ("NMS") to maintain a public float having a
market value equal to at least $5 million. Nasdaq indicated that, if the Company did not
satisfy such requirement by February 12, 2001, Nasdaq would de-list the Common Stock at
the opening of business on February 14, 2001 unless the Company requested a hearing to
appeal the decision. The Company does not satisfy such requirement. On February 8, 2001,
however, the Company filed a request for a hearing to appeal the de-listing. The hearing
is set for March 28, 2001, and the de-listing of the Common Stock has been suspended until
that date.

In January 2001, the Company also received a Nasdaq Staff Determination Letter advising
the Company that its Common Stock had failed to maintain a $1.00 minimum bid price over
the 30 consecutive trading days preceding the date of the January letter. Under
Nasdaqs listing maintenance standards, if the closing bid price of the Common Stock
is under $1.00 per share for 30 consecutive trading days and does not thereafter regain
compliance for a minimum of 10 consecutive trading days during the 90 days following
notification by Nasdaq, Nasdaq may de-list the Common Stock from trading on Nasdaq. The
Common Stock has traded below $1.00 per share since December 7, 2000. The Company plans to
file an application for listing on the Nasdaq Stock Markets SmallCap Market
("SmallCap Market."). Although the Common Stock does not currently satisfy the
listing requirement of a $1 minimum bid price for the SmallCap Market, the Board of
Directors of the Company has approved, subject to stockholder approval, a reverse stock
split. If the Company is unable to obtain approval for a listing on the SmallCap Market,
the Companys Common Stock may be traded on the Nasdaq OTC Bulletin Board .

Also, during December 2000, Allegiances ability to access further debt under the
Allegiance Financing was suspended as a result of two non-performing loans. On December
15, 2000, the Allegiance Financing expired. Allegiance has no current source of funding
available to make additional loans. Consequently, Allegiance suspended its loan
origination activities, and began reducing costs through employee layoffs during December
2000. In addition, Allegiance was unable by February 15, 2001 to convert to term loan
certificates or otherwise repay $9.1 million of revolving certificates issued under the
Allegiance Financing. As a result, the interest payable under the revolving loan
certificates increased by 1% per annum, effective February 15, 2001, to 10.5%. If
Allegiance is unable to repay the revolving loan certificates by July 15, 2001, the
Investors could declare an event of default under the Allegiance Financing. In addition,
if Allegiance is unable to resolve the non-performing loans by April 15, 2001, the
Investors (as defined in Note 6) could declare an event of default under the Allegiance

42



Point West Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements

Financing. If the Investors were to declare an event of default, all
amounts owed under the Allegiance Financing could be accelerated. Also as a result of
non-performing loans, under the terms of the Allegiance Financing (1) neither Point West
Capital nor Allegiance Capital is currently receiving payment for the servicing activities
that it provides to Allegiance and (2) Allegiance Capital is not currently receiving any
principal or interest payments under the debt certificates issued to Allegiance Capital
under the Allegiance Financing. If the loans are worked out to the satisfaction of
Allegiance and the Investors, the Company expects that payments to Point West Capital and
Allegiance Capital for servicing activities and to Allegiance Capital under the debt
certificates issued to Allegiance Capital will resume.

Additionally, Ventures has failed to comply with applicable SBA portfolio mix
requirements, which currently require that at least 30% of its investments be in the form
of debt securities. At present, Ventures has no debt investments outstanding and, since
inception of the SBA borrowings, has made relatively few debt investments. As a result,
the SBA could prevent further borrowings by Ventures and could also accelerate the payment
of the outstanding debentures. If the SBA were to take this action, Ventures may not have
sufficient liquidity, at least in the short term, to grow its business. Additionally,
Ventures may not have sufficient cash to repay the SBA debt and might have to dispose of
investment securities to repay the debt. The dispositions may occur at times and on terms
that would not maximize the value of those investments and the proceeds of any
dispositions may not be sufficient to repay the debt.

Furthermore, as a result of volatility and uncertainty in the financial markets during the
latter part of 2000, the Company substantially reduced new business activity and began a
cost reduction effort. During the fourth quarter, Ventures made only one new investment
and provided additional capital to a limited number of existing portfolio companies.

Finally, on September 5, 2000, two members of SocietyPool filed a petition
in federal bankruptcy court in New Mexico on behalf of SocietyPool. On September 11, 2000
Point West Capital filed a motion to dismiss the bankruptcy petition, alleging that two
members lacked the requisite authority to file for bankruptcy on SocietyPools behalf
and that SocietyPool is not insolvent or otherwise in need of bankruptcy protection. The
first issue raised in Point West Capitals motion to dismiss was tried by the Court
in November 2000 and January and February 2001. On March 13, 2001, the Court granted Point
West Capitals motion to dismiss the bankruptcy petition on the ground that the
former CEO and Former Special Consultant lacked the requisite authority to file for
bankruptcy on SocietyPools behalf. The actions in arbitration have been stayed
during the bankruptcy proceeding. These arbitration matters could affect whether and to
what extent Point West Capital may decide to invest additional funds in SocietyPool and
SocietyPools financial condition or prospects.

In light of the circumstances set forth above, management prepared an assessment of its
ability to continue to meet its obligations as they become due through December 31, 2001.
One of the main factors to consider in assessing whether the Company can remain liquid
through December 31, 2001 is that contractual recourse in an event of default under the
Allegiance Financing is limited to Allegiance Funding I and its assets. Another key factor
in assessing whether the Company can remain liquid through December 31, 2001 is that Point
West Capital did not guarantee and is not a payor on the SBA debentures. As a result,
although Allegiance and Ventures may not be able to meet their obligations as they came
due in the event either the Investors or the SBA accelerated its respective debt, Point
West Capital should still be liquid. Furthermore, the Company has successfully executed
the majority of its cost reduction program and, based on its reduced operating plan for
year 2001, the Company projects that it has sufficient cash on hand as of December 31,
2000, to allow it to continue to meet its obligations as they become due through December
31, 2001.

43



Point West Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements

3.
                
Investment Securities

Investment securities consist of marketable debt and equity securities. Statement of
Financial Accounting Standards No. 115, Accounting for Certain Investments in Debt and
Equity Securities, requires marketable debt and equity securities to be classified
into held-to-maturity, available-for-sale and trading categories. Securities classified as
available-for-sale are reported in the consolidated balance sheets at fair value with any
cumulative unrealized gains and losses, net of any tax effect, included in comprehensive
income and reported as a separate component of stockholders equity. Management
estimates fair value, considering factors such as sales restrictions, the bid and offer
prices of securities and volume. Securities classified as held-to-maturity included U.S.
Treasury bills reported at fair value with original maturities greater than three months,
but less than one year. 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. During 2000, Ventures determined that an aggregate
of $2.5 million of marketable equity securities of 5 companies was impaired and therefore
wrote-down $2.5 million carrying values of such securities, which was reflected in the
consolidated statements of operations for the year ended December 31, 2000. These
write-downs were a result of deterioration of growth prospects for some companies and the
uncertainty that such companies will be able to raise additional capital in light of the
market downturn related to Internet and other technology stocks.

The cost and estimated fair value of investment securities as of December 31, 2000 and
1999 are as follows:

December 31, 2000Cost
    
    Gross Unrealized Gains
    
    Gross Unrealized Losses
    
    FairValueAvailable-for-sale
    $
    307,204
    $
    -
    $
    (191,605)
    $
    115,599




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

|                         |   | Cost      |   | Gross Unrealized Gains |   | Gross Unrealized Losses |   | FairValue
|------------------------ | - | --------- | - | ---------------------- | - | ----------------------- | - | ---------
|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
|                         |   |           |   |                        |   |                         |   |          



Cumulative net unrealized (losses) gains on available-for-sale securities (representing
differences between estimated fair value and cost) were $(191,605) and $3.5 million at
December 31, 2000 and 1999, respectively. These cumulative net unrealized (losses) gains,
net of applicable taxes, are included in accumulated comprehensive (loss) income, a
separate component of stockholders equity.

44



Point West Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements

4.
                 
Loans Receivable

Allegiance had 27 loans outstanding at December 31, 2000 in an aggregate principal amount
of $37.8 million, which bore a weighted-average fixed interest rate per annum of 8.9%.
Allegiance had 21 loans outstanding at December 31, 1999 in an aggregate principal amount
of $33.8 million, which bore a weighted-average fixed interest rate per annum of 9.8%.
Principal and interest payments are due monthly on such loans, and such loans mature,
subject to permitted prepayments, approximately fifteen years from the initial loan date.
At December 31, 2000, two loans were in default and on non-accrual status. Based on
collateral securing the defaulted loans, management believes that Allegiance will not
incur a material loss in connection with such loans.

At December 31, 1999, one loan was in default and on non-accrual status. In October 1999,
Allegiance brought an action seeking to collect on this loan and the defendants
counterclaimed. In September 2000, Allegiance settled this litigation. Allegiance incurred
total losses of $1.3 million in connection with this matter, which are reflected in other
general and administrative expenses in the consolidated statement of operations for 2000.
Also, other assets in the consolidated balance sheet as of December 31, 2000 includes
funeral homes valued at $850,000, which Allegiance now owns as a result of the settlement.
See Note 12.

From time to time, Allegiance used futures contracts to hedge certain interest rate
exposure between the time of loan origination and the expected issuance of term
certificates. See Note 6. The futures contracts were intended to protect a portion of the
net interest margins earned on the loans. Any realized gain or loss related to these
hedges was deferred and recognized by Allegiance over the life of the related loan as an
adjustment of interest income. Pursuant to Statement of Financial Accounting Standards No.
80, Accounting for Futures Contracts, all such deferred amounts are reflected in
the consolidated balance sheets as an increase (in the case of a hedging loss) or decrease
(in the case of a hedging gain), in the carrying value of loans receivable. As of December
31, 2000, Allegiance had cumulative net realized gains on its hedging activities of
$100,000 that reduced loans receivable in a like amount. As of December 31, 1999,
Allegiance had cumulative net realized gains on its hedging activities of $215,000 that
reduced loans receivable in a like amount. As of December 31, 2000 and 1999, Allegiance
had no open hedges.

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

5.
                
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.

Ventures recognized a net loss on securities of $10.4 million in 2000primarily in connection with the write-down or
write-off of impaired investments. During 2000, Ventures determined that an aggregate of
$9.8 million of non-marketable debt and equity securities of 11 companies was impaired and
wrote-down or wrote-off $9.8 million carrying values of such securities. The write-downs
or write-offs were a result of deterioration of growth prospects for some companies and
the uncertainty that such companies will be able to raise additional capital in light of
the market downturn related to Internet and other technology stocks. Ventures recognized a
net gain on securities of $13.0 million (after the write-

45



Point West Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements

offs described below) in 1999 primarily in connection with the sale of
two of its investments. Also during 1999, Ventures determined that $1,035,000 of
non-marketable equity securities in two companies was impaired and therefore wrote-off the
entire $1,035,000 carrying value of such securities in 1999.

6.
                 
Revolving and Term Certificates

Through December 2000, Allegiance financed its loans receivable under a structured
financing arrangement established in August 1998 (the "Allegiance Financing").
Under the Allegiance Financing, various classes of revolving and term certificates of
Allegiance Trust I have been issued. At December 31, 2000, revolving certificates held by
third parties were outstanding in the aggregate principal amount of $9.1 million. At
December 31, 2000, such certificates bore interest at fixed and variable rates based on
the one-year U.S. Treasury yield and one-month LIBOR plus a weighted-average spread of 3

In April 2000, the Company and a consortium of insurance companies (the
"Investors") executed amendments that extended the Allegiance Financing through
December 15, 2000. The Investors agreed to continue to provide revolving debt, subject to
certain limitations, through November 30, 2000, on terms similar to those under the
original Allegiance Financing revolving certificates. In addition, the Investors agreed to
provide up to approximately $20.0 million of additional term financing, subject to certain
limitations, through December 15, 2000, on terms similar to those under the original
Allegiance Financing term certificates. Because two loans held by Allegiance are currently
in default, Allegiance was not able to utilize all funds available under the Allegiance
Financing and was not able to issue term certificates or issue term certificates on terms
satisfactory to Allegiance. As a result of these defaulted loans, cash flow payable to
Point West Capital (for servicing fees) and to Allegiance (for interest on the
certificates it holds and for servicing fees) will be accrued and held under the
indenture, pending satisfaction of certain conditions. Such cash flow has been
approximately $5,000 and $4,000 per month in 2000 for servicing fees payable to Point West
Capital and Allegiance, respectively. The certificates held by Allegiance are expected to
produce approximately $42,000 of monthly cash flow, assuming all the underlying loans are
performing. These amounts decrease as the loan balances decrease. Because the revolving
debt was not retired by February 15, 2001, the interest rate on the revolving debt
increased by 1.00%. A failure to work out the non-performing loans to the satisfaction of
Allegiance and the Investors by April 15, 2001 or retire the revolving debt by July 15,
2001 could result in a default, giving the Investors the right to terminate Point West
Capital as the servicer and liquidate the collateral.

The Allegiance Financing is accounted for 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.

46



Point West Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements

The Allegiance Financing represents the obligations solely of Allegiance. The
Companys consolidated financial statements include the assets, liabilities and
operations of Allegiance; however, the assets of Allegiance are not available to pay
creditors of Point West Capital or its other consolidated entities.

In connection with the Allegiance Financing and the extensions thereunder, Allegiance
Capital paid an aggregate of $375,000 in commitment fees when funds were initially
borrowed. Of such commitment fees, $125,000 was amortized over the expected life of the
initial revolving certificates and $250,000 is being amortized over the expected life of
the term certificates (15 years). These allocations were based on an estimate of the
portion of the commitment fee attributable to the revolving certificates and the term
certificates. In the event that a default occurs and the Investors liquidate the
collateral, any remaining unamortized commitment fees will be expensed.

7.
                
Securitized Notes Payable

In 1995, DPFC issued its Senior Viatical Settlement Notes, Series 1995-A with a stated
maturity of March 10, 2005 (the "Securitized Notes"). Principal and interest
payments on and other costs of the Securitized Notes are payable solely from collections
on pledged policies, deposited funds and funds provided by the Noteholders. The
Securitized Notes bear a fixed interest rate of 9.17% per annum. Point West Capital is the
servicer of the policies pledged under the Indenture pursuant to which the Securitized
Notes were issued and incurs servicing expenses and receives servicing income. See Note 1d
for further information regarding the servicing of DPFC.

The Securitized Notes are accounted for 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 DPFC Agreement discussed in Note 1d was negotiated due to the imminent default of DPFC
under the terms of the Securitized Notes and, accordingly, has been accounted for as a
troubled debt restructuring. As such, during the first quarter of 2000, an extraordinary
gain of $1.2 million, net of taxes of $822,000, was recorded and the stated amount of the
Securitized Notes of $38.5 million was reduced to $36.4 million, reflecting the maximum
future cash payments the Noteholders could receive under the DPFC Agreement. The $36.4
million equaled the face value of the life insurance policies and restricted cash held by
DPFC as of March 31, 2000.

The Securitized Notes represent the obligations solely of DPFC. The Companys
consolidated financial statements include the assets, liabilities and operations of DPFC;
however, the assets of DPFC are not available to pay creditors of Point West Capital. The
assets of DPFC are the beneficial ownership interests in the life insurance policies and
funds that secure the Securitized Notes.

8.
                
Debenture Payable

Ventures has issued two debentures payable to the SBA in the principal amount of $6.5
million. One debenture was issued in July 1998 in the principal amount of $3.0 million
with semi-annual interest only payments at a fixed rate of 5.9% per annum (plus a 1%
annual fee) and a scheduled maturity date of September 1, 2008. The debenture is subject
to a prepayment penalty if repaid prior to September 1, 2003. The other debenture was
issued on May 24, 2000 in the principal amount of $3.5 million with semi-annual interest
only payments at a fixed rate of 7.5% per annum (plus a 1% annual fee) and a scheduled
maturity date of September 1, 2010

47



Point West Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements

9.
                
Income Taxes

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

|                                        |   | 2000      |   | 1999      |   | 1998   
|--------------------------------------- | - | --------- | - | --------- | - | -------
|Federal:                                |   |           |   |           |   |        
|Current benefit (expense)....         | $ | 408,386   | $ | (26,112)  | $ | -      
|Deferred (expense) benefit..          |   | (985,583) |   | 985,583   |   | -      
|State:                                  |   |           |   |           |   |        
|Current benefit (expense)....         |   | 92,828    |   | (501,144) |   | (5,600)
|Deferred (expense) benefit..          |   | (125,558) |   | 131,558   |   | -      
|                                        |   |           |   |           |   |        
|Income tax (expense)
    benefit(1)... | $ | (609,927) | $ | 589,885   | $ | (5,600)
|                                        |   |           |   |           |   |        

> (1)
>       Excludes $822,154 of tax expense recognized in 2000 on
>       extraordinary gain of $2,064,157. See Note 7.

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.

2000
    
    1999Deferred tax assets:Revenue and expenses recognized on the cashbasis for tax purposes
    $
    53,393
    $
    100,374Depreciation, amortization and other..
    
    287,577
    
    4,052Provision for assets held for
      sale.
    
    536,737
    
    -Allowance for loss on non-marketable
      securities
    
    4,696,533
    
    199,172Allowance for loan losses
    
    75,685
    
    61,743Unrealized loss on securities available for sale
    
    82,083
    
    -Net operating loss carryforwards
    
    3,666,156
    
    2,009,0399,398,164
    
    2,374,380Valuation allowance
    
    (6,702,387)
    
    -Deferred tax assets net of valuation
      allowance.
    
    2,695,777
    
    2,374,380Deferred tax liabilities:Extraordinary gain taxable in future period(1)
    $
    2,064,157
    $
    -Unrealized gain on securities available for
      sale.
    
    -
    
    1,392,161Accretion recognized on a cash basis for tax purposes
      ...
    
    631,620
    
    1,263,2392,695,777
    
    2,655,400Net deferred tax liability ...
    $
    -
    $
    (281,020)


> (1) See Note 7.
>     48
>     
>     Point West Capital Corporation and Subsidiaries
>     Notes to Consolidated Financial Statements

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

|                                             |   | 2000        |   | 1999        |   | 1998       
|-------------------------------------------- | - | ----------- | - | ----------- | - | -----------
|Tax benefit (expense)  at statutory rate     |   |             |   |             |   |            
|(34%) (1).......                         | $ | 5,507,447   | $ | (3,142,351) | $ | 1,239,212  
|State taxes, net of federal
    benefits (1) |   | 828,316     |   | (243,927)   |   | 76,409     
|Change in valuation allowance (2) ...      |   | (6,620,305) |   | 4,221,118   |   | (1,319,532)
|Other .                                     |   | (325,385)   |   | (244,955)   |   | (1,689)    
|                                             |   |             |   |             |   |            
|Income tax (expense) benefit ..             | $ | (609,927)   | $ | 589,885     | $ | (5,600)    
|                                             |   |             |   |             |   |            

> 

> (1)
>       Excludes $822,154 of tax expense recognized in 2000 on
>       extraordinary gain of $2,064,157. See Note 7.(2)
>       $82,083 of the change in deferred tax asset valuation
>       allowance for 2000 has been reflected in the statement of changes in stockholders
>       equity in connection with the unrealized loss on securities available-for-sale.

As of December 31, 2000, the Company has an estimated federal tax net operating loss
carryforward of $9.8 million that will begin to expire in 2012 and an estimated California
tax net operating loss carryforward of $5.7 million that will begin to expire in 2003.

49



Point West Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements



10.
              
Earnings Per Share

The weighted-average number of common stock shares and additional common stock equivalent
shares used in computing (loss) income per share for the years ended December 31, 2000,
1999 and 1998 are set forth below. The following is a reconciliation of the numerator and
denominator of basic and diluted net (loss) income per share:

|                                                  |   | 2000         |   | 1999      |   | 1998       
|------------------------------------------------- | - | ------------ | - | --------- | - | -----------
|Numerator:                                        |   |              |   |           |   |            
|(Loss) gain before extraordinary gain ....        | $ | (16,808,301) | $ | 9,832,094 | $ | (3,650,342)
|Extraordinary gain, net of income tax.....        |   | 1,242,003    |   | -         |   | -          
|                                                  |   |              |   |           |   |            
|Net (loss) income ..........                 | $ | (15,566,298) | $ | 9,832,094 | $ | (3,650,342)
|                                                  |   |              |   |           |   |            
|Denominator:                                      |   |              |   |           |   |            
|Weighted-average shares ..                      |   | 3,352,534    |   | 3,329,409 |   | 3,253,324  
|                                                  |   |              |   |           |   |            
|Denominator for basic net (loss) income, basic    |   |              |   |           |   |            
|and diluted loss before extraordinary gain,       |   |              |   |           |   |            
|extraordinary gain and diluted net ( loss) income |   |              |   |           |   |            
|calculation ....                          |   | 3,352,534    |   | 3,329,409 |   | 3,253,324  
|Weighted-average effect of dilutive securities:   |   |              |   |           |   |            
|Employee stock options ....                      |   | -            |   | 201,249   |   | -          
|Warrants ....                               |   | -            |   | 111,058   |   | -          
|                                                  |   |              |   |           |   |            
|Denominator for diluted calculation               |   | 3,352,534    |   | 3,641,716 |   | 3,253,324  
|                                                  |   |              |   |           |   |            
|Earnings per share:                               |   |              |   |           |   |            
|Basic                                             |   |              |   |           |   |            
|(Loss) income before extraordinary gain.....      | $ | (5.01)       | $ | 2.95      | $ | (1.12)     
|Extraordinary gain .............                 |   | 0.37         |   | -         |   | -          
|                                                  |   |              |   |           |   |            
|Net (loss) income ...........                    | $ | (4.64)       | $ | 2.95      | $ | (1.12)     
|Diluted                                           |   |              |   |           |   |            
|(Loss) income before extraordinary gain ......    | $ | (5.01)       | $ | 2.70      | $ | (1.12)     
|Extraordinary gain............                    |   | 0.37         |   | -         |   | -          
|                                                  |   |              |   |           |   |            
|Net (loss) income...........                      | $ | (4.64)       | $ | 2.70      | $ | (1.12)     
|                                                  |   |              |   |           |   |            

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 exercise price of the options was greater than the average market price
of the common stock during the year and, therefore, would be anti-dilutive. As a result of
the net loss for 2000 and 1998, all options and warrants outstanding during this period
were not included in the computation of diluted loss per share because their inclusion
would be anti-dilutive.

11.
              
Commitments

The Company has a lease obligation for its California office space, which expires on May
31, 2004. The monthly rent through May 31, 2001 is $20,088. The monthly rent from June 1,
2001 through May 31, 2002 is $20,600. The monthly rent from June 1, 2002 through May 31,
2004 is $21,113. The Echelon Group of Companies, LLC, which is owned by Point West Capital
Corporations executive officers, had sub-leased approximately 20% of the
Companys office space through December 31, 2000. The Company is attempting to
sublease approximately 60%-70% of its current office space.

50



Point West Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements

Future minimum rental payments at December 31, 2000, under non-cancelable operating leases
with an initial term of one year or more, are as follows:

> Year ending December 31,

2001
    .
    $
    244,6382002
    .
    
    250,7882003
    .
    
    253,3512004
    .
    
    105,563Total
    ...
    $
    854,340




12.
              
Litigation

General

From time to time, the Company is involved in routine legal proceedings incidental to its
business, including litigation in connection with loans and investments made by Point West
Ventures and Allegiance and the collection of amounts owed under life insurance policies
by insurance company obligors. Except as disclosed below, 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.

Society Pool

In May 2000, Point West Capital and three individuals formed SocietyPool. SocietyPool was
formed to develop and pursue a new financial product. To date, SocietyPool has conducted
limited market research but has not commenced any operations. Point West Capital is a
member and the Manager of SocietyPool with 51% voting and economic interests. There are
three other members. One is the former chief executive officer (the "Former
CEO") of SocietyPool with a 15.67% voting interest and a 15.44% economic interest.
Another is a former special consultant (the "Former Special Consultant") of
SocietyPool and owns a 33.33% voting interest and a 28.66% economic interest. The third
has a 4.90% economic interest and no voting interest.

Point West Capital provided $1.8 million in May 2000 to fund SocietyPools research
and start-up costs. In July 2000, the Former Special Consultant filed a claim with the
American Arbitration Association seeking arbitration of a dispute with Point West Capital.
The claim seeks a declaratory judgment on an issue relating to the control and management
of SocietyPool and its assets. The American Arbitration Association denied the Former
Special Consultants request that this dispute be resolved on an emergency basis and
ruled that the dispute would be resolved under standard arbitration procedures. In July
2000, the Former CEO resigned claiming that certain actions of Point West Capital, which
are at issue in the arbitration, constituted constructive termination of his employment.
In August 2000, the Former CEO filed an action in arbitration seeking a declaration that
he was constructively terminated. Also in August 2000, SocietyPool terminated the Former
Special Consultant for cause and, in the arbitration proceedings Point West Capital filed
an answer, affirmative defenses and counterclaim against the Former Special Consultant and
Former CEO and a third-party complaint against the Former CEO.

In August 2000, the Former CEO and the Former Special Consultant delivered a so-called
"Management Report" to Point West Capital which they contend triggered Point
West Capitals option under SocietyPools Operating Agreement to contribute an
additional $1 million to SocietyPool. Although Point West Capital believes that the
"Management Report" did not trigger Point West Capitals option to
contribute an additional $1 million, in order to protect its and SocietyPools rights
and interests, Point West Capital contributed $1 million in August 2000 to SocietyPool
pursuant to SocietyPools

51



Point West Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements

Operating Agreement. The Former CEO and Former Special Consultant have
asserted that the contribution did not comply with the Operating Agreement and further
alleged that, as a result, Point West Capital ceased being the Manager of SocietyPool and
that Point West Capitals voting and economic interests in SocietyPool were reduced
to 15.67%. They further alleged that they are the majority owners of SocietyPool and that
one is the Manager of SocietyPool. On September 5, 2000, they filed a petition in federal
bankruptcy court in New Mexico (In Re: SocietyPool.com, LLC, No. 11-00-14735 MA) on behalf
of SocietyPool. On September 11, 2000, Point West Capital filed a motion to dismiss the
bankruptcy petition, alleging that (i) the Former CEO and the Former Special Consultant
lacked the requisite authority to file for bankruptcy on SocietyPools behalf and
(ii) SocietyPool is not insolvent or otherwise in need of bankruptcy protection. The first
issue raised in Point West Capitals motion to dismiss was tried by the Court in
November 2000 and January and February 2001. On March 13, 2001, the Court granted Point
West Capitals motion to dismiss the bankruptcy petition on the ground that the
former CEO and Former Special Consultant lacked the requisite authority to file for
bankruptcy on SocietyPools behalf. The actions in arbitration have been stayed
during the bankruptcy proceeding.

The outcome of the arbitration proceedings cannot be determined at this time; however, the
Company does not believe that the Former CEO or the Former Special Consultant are entitled
to the requested relief in arbitration. Management of Point West Capital believes that the
claims of the two other members of SocietyPool are without merit. Point West Capital
cannot predict whether or to what extent these matters will affect Point West
Capitals decision to invest additional funds in SocietyPool or SocietyPools
financial condition or prospects.

Allegiance

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 defendant borrowers 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 alleged 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 sought, among other things, compensatory and punitive damages
(or cancellation of indebtedness), interest, fees and costs. The defendants had owned one
funeral home and retained a consulting firm owned by the Allegiance officer to consult in
the acquisition of two funeral homes and to assist in financing the acquisition. In the
counterclaim and third-party petition, the defendants alleged, among other things, that
(1) the Allegiance officer provided erroneous advice to the defendants, (2) the Allegiance
officer failed to disclose his relationship with Allegiance and (3) Allegiance wrongfully
exercised its rights in the collateral securing the defaulted loan. In September 2000,
Allegiance, the Allegiance officer and the defendants settled the actions. Under the
settlement agreement, Allegiance paid the defendants $150,000 and released its security
interest in the defendants original funeral home, one of the three funeral homes securing
the $2.1 million loan; the Allegiance officer made a cash payment to Allegiance of $50,000
and agreed to pay Allegiance an additional $50,000 over three years; Allegiance acquired
the ownership of the two additional funeral homes acquired with its loan proceeds; and all
claims against all parties were dismissed. Allegiance is in the process of attempting to
sell its ownership interest in those two funeral homes while continuing to manage their
operations in order to maximize their value.

Point West Ventures

In February 2000, Point West Ventures brought an action in Santa Clara County against
Universal Access, Inc., certain of its directors and other parties seeking to collect for
damages for breach of contract, breach of fiduciary duty including breach of contract,
misappropriation of trade secret, unjust

52



Point West Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements

enrichment, tortious interference, conspiracy and unfair competition.
The action was related to an aborted purchase by Universal Access, Inc. of a company in
which Point West Ventures had invested. On July 17, 2000, the court ruled that all claims
were subject to arbitration. In December 2000, Point West Ventures filed a demand for
arbitration.

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 90 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.

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,
2000 bear interest at fixed and variable rates based on the one-year U.S. Treasury yield
and one-month LIBOR plus a weighted-average spread of 3.3% per annum. The term
certificates bear a fixed weighted-average interest rate of 8.1% per annum. The
securitized notes payable bear a fixed interest rate of 9.2%. The debentures bear a fixed
weighted-average interest rate of 7.8% per annum.

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 1,070,000
shares of common stock. Under the Stock Option Plan For Non-Employee Directors
("Director Plan"), options for up to 150,000 shares of common stock are granted
automatically to non-employee directors of Point West Capital. 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.

53



Point West Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements

A summary of the Companys stock option activity during 2000, 1999
and 1998 follows:

|                                       | 2000      |   | 1999                                                   |  | 1998    
|-------------------------------------- | --------- | - | ------------------------------------------------------ |  | --------
|                                       |           |   |                                                        |  |         
|                                       | Options   |   | Weighted-
    Average
    Exercise
    Price PerOption |  | Options 
|Outstanding at
      Beginning of year | 578,700   | $ | 5.31                                                   |  | 385,500 
|Granted                                | 527,000   | $ | 4.05                                                   |  | 362,500 
|Exercised                              | (1,000)   | $ | 2.75                                                   |  | (98,300)
|Forfeited                              | (196,000) | $ | 7.55                                                   |  | (44,000)
|Canceled                               | (15,000)  | $ | 10.58                                                  |  | (27,000)
|                                       |           |   |                                                        |  |         
|Outstanding at end
       of year      | 893,700   | $ | 3.97                                                   |  | 578,700 
|                                       |           |   |                                                        |  |         
|Options exercisable
       at year-end | 219,200   | $ | 5.48                                                   |  | 101,950 
|                                       |           |   |                                                        |  |         

The weighted-average fair value of options granted during 2000, 1999 and 1998 were $2.62,
$3.99 and $2.20, respectively.

The following table summarizes information about stock options outstanding at December 31,
2000:



|                               | Options
    Outstanding            |                                                 | Options Exercisable                
|------------------------------ | ---------------------------------- | ----------------------------------------------- | -----------------------------------
|                               |                                    |                                                 |                                    
|Range of
    ExercisablePrices | Number Outstanding at
    12/31/00 | Weighted-Average
    Remaining Contractual Life | Weighted-
    AverageExercise Price
|$0.97 - $1.94                  | 80,800                             | 7.15                                            | $ 1.46                             
|$2.13 - $2.75                  | 392,500                            | 5.58                                            | $ 2.25                             
|$3.25 - $3.56                  | 77,900                             | 7.03                                            | $ 3.43                             
|$4.00 - $4.50                  | 15,000                             | 9.35                                            | $ 4.33                             
|$5.00 - $7.16                  | 287,500                            | 8.74                                            | $ 5.95                             
|$10.81 - $13.50                | 40,000                             | 6.05                                            | $12.55                             
|$0.97 - $13.50                 | 893,700                            | 6.95                                            | $ 3.97                             

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

54



Point West Capital Corporation and Subsidiaries

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 (loss) income and
(loss) income per share would have been as follows:

|                                  |             | 2000 |              | 1999 |   | 1998     
|--------------------------------- | ----------- | ---- | ------------ | ---- | - | ---------
|                                  |             |      |              |      |   |          
|Net (loss) income                 | As reported | $    | (15,566,298) |      | $ | 9,832,094
|                                  | Pro forma   | $    | (16,013,628) |      | $ | 9,493,373
|Basic (loss) earnings per share   | As reported | $    | (4.64)       |      | $ | 2.95     
|                                  | Pro forma   | $    | (4.78)       |      | $ | 2.85     
|Diluted (loss) earnings per share | As reported | $    | (4.64)       |      | $ | 2.70     
|                                  | Pro forma   | $    | (4.78)       |      | $ | 2.61     

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:

|                        | 2000    | 1999    | 1998   
|----------------------- | ------- | ------- | -------
|Expected volatility     | 75%     | 75%     | 75%    
|                        |         |         |        
|1995 Plan:              |         |         |        
|Risk-free interest rate | 5.6%    | 6.5%    | 5.0%   
|Expected life           | 6 years | 6 years | 6 years
|                        |         |         |        
|Director Plan:          |         |         |        
|Risk-free interest rate | 5.6%    | 6.2%    | 4.6%   
|Expected life           | 2 years | 2 years | 2 years



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.
               
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

55



Point West Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements

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 Compensation Committee
of the Board. The Plan contribution expenses which are included in compensation and
benefits during 2000, 1999 and 1998 were $161,000, $141,000 and $85,000, respectively.

16.
              
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 Chief
Executive Officer and the President.

The Companys reportable operating segments include Ventures, Allegiance and Viatical
Settlements. The activities of each operating segment are described in Note 1b. The Other
segment includes Point West Capital, SocietyPool 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 2000, 1999 and 1998.

> 2000

|                      |   |             
|--------------------- | - | ------------
|                      |   | Ventures    
|Interest income       | $ | 1,466,862   
|Net loss on           |   |             
|securities            |   | (10,410,288)
|Other income .        |   | 2,093       
|                      |   |             
|Total revenues .      |   | (8,941,333) 
|Interest expense ... |   | 388,639     
|Depreciation &        |   |             
|amortization          |   | 51,667      
|Income tax expense    |   |             
|(2)                   |   | (800)       
|Contributed net       |   |             
|(loss) income (2).... | $ | (9,409,495) 
|                      |   |             
|Identifiable assets   | $ | 10,825,250  
|                      |   |             

> 56



Point West Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements

> 1999

|                      |   |           
|--------------------- | - | ----------
|                      |   | Ventures  
|Interest income       | $ | 1,205,203 
|Net gain on           |   |           
|securities ..      |   | 13,020,549
|Other income (3)..   |   | 63,657    
|                      |   |           
|Total revenues ...  |   | 14,289,409
|Interest expense ... |   | 208,200   
|Depreciation &        |   |           
|amortization          |   | 30,000    
|Income tax benefit    |   |           
|(expense) (2)..      |   | (800)     
|Contributed net       |   |           
|income (loss) (2).... | $ | 14,041,159
|                      |   |           
|Identifiable assets   | $ | 25,718,616
|                      |   |           
|                      |   |           

(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.(3)
    Reflects
    "Other" and "Earned discounts on matured policies."


> 57
>     Point West Capital Corporation and Subsidiaries
>     Notes to Consolidated Financial Statements



The following is a summary of the quarterly results of operations for the years ended
December 31, 2000 and 1999:

|                                            |         | 2000     
|------------------------------------------- | ------- | ---------
|                                            |         |          
|                                            |         |          
|Total revenues                              | $       | 2,666,420
|Loss before extraordinary gain              |         | (83,675) 
|Extraordinary gain, net of income
    tax   |         | 1,242,003
|Net income (loss)                           | $       | 1,158,328
|                                            |         |          
|Earnings per share:                         |         |          
|(Loss) income before extraordinary
    gain |         |          
|                                            | Basic   | $        
|                                            |         |          
|                                            | Diluted | $        
|                                            |         |          
|Net income (loss)                           |         |          
|                                            | Basic   | $        
|                                            |         |          
|                                            | Diluted | $        
|                                            |         |          
|                                            |         | 1999     
|                                            |         |          
|                                            |         |          
|Total revenues                              | $       | 1,602,095
|Net (loss) income                           | $       | (500,024)
|                                            |         |          
|Earnings per share:                         |         |          
|Net (loss) income                           |         |          
|                                            | Basic   | $        
|                                            |         |          
|                                            | Diluted | $        
|                                            |         |          

58



> 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 2001 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 31 through 58:


> Report of Ernst & Young LLPs Independent Auditors.
>           Report of KPMG LLPs Independent Auditors.
>           Consolidated Balance Sheets as of December 31, 2000 and 1999.
>           Consolidated Statements of Operations for the years ended December 31,
>           2000, 1999 and 1998.
>           Consolidated Statements of Changes in Stockholders Equity for the
>           years ended December 31, 2000, 1999 and 1998.
>           59
>           Consolidated Statements of Cash Flows for the years ended December 31,
>           2000, 1999 and 1998.
>           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.
>           ExhibitsExhibitNumber
>           Description of Document3.1
>           Composite of Second Amended and Restated Certificate of
>           Incorporation, as amended through August 1, 1997 (Incorporated by reference to Exhibit 3
>           of the Registrants Quarterly Report on Form 10-Q for the quarter ended June 30,
>           1997).3.2
>           Composite of Second Amended and Restated By-laws as amended through
>           January 11, 2001.4.1
>           Indenture, dated as of February 1, 1995 (the "Indenture") among
>           Point West Capital, as Servicer, DPFC, as Issuer, and Bankers Trust Company, as Indenture
>           Trustee ("Bankers Trust") (Incorporated by reference to Exhibit 10.12 of the
>           Registrants Registration Statement on Form S-1 (Registration No. 33-98708) (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 Registrant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 Registrant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 Registrants Annual Report on Form
>           10-K for the fiscal year ended December 31, 1997).4.6
>           Amended and Restated Indenture dated as of March 31, 2000, among Point
>           West Capital Corporation, Dignity Partners Funding Corp. I and Bankers Trust Company
>           (Incorporated by reference to Exhibit 99.2 of the Registrants Form 8-K filed on
>           April 19, 2000).10.1*
>           Point West Capital Corporation Amended and Restated 1995 Stock

> 60
>       Option Plan (Incorporated by reference to Exhibit 10 of the
>           Registrants Quarterly Report on Form 10-Q for the quarter ended June 30, 1998).10.2*
>           Amendment No. 1 to Point West Capital Corporations Amended and
>           Restated 1995 Stock Option Plan (Incorporated by reference to Exhibit 10.1 of the
>           Registrants Quarterly Report on Form 10-Q for the quarter ended June 30, 2000).10.3*
>           Stock Option Plan for Non-Employee Directors (Incorporated by reference to
>           Exhibit 10.2 of the Registration Statement).10.4*
>           Amendment No. 1 to Point West Capital Corporations Stock Option Plan
>           for Non-Employee Directors (Incorporated by reference to Exhibit 10.2 of the
>           Registrants Quarterly Report on Form 10-Q for the quarter ended June 30, 2000).10.5*
>           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 Registrants Annual Report on Form 10-K for the fiscal year ended
>           December 31, 1997).10.6*
>           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 Registrants Annual Report on Form 10-K for the fiscal year ended
>           December 31, 1998).10.7*
>           Form of option agreement dated November 11, 1999 granted to each of
>           Bradley N. Rotter, Alan B. Perper and John Ward Rotter (Incorporated by reference to
>           Exhibit 10.4 of the Registrants Annual Report on Form 10-K for the fiscal year ended
>           December 31, 1999).10.8*
>           Form of option agreement dated November 7, 2000 granted to each of Bradley
>           N. Rotter, Alan B. Perper and John Ward Rotter.10.9
>           Agreement between Point West Capital and Echelon regarding allocation of
>           costs (Incorporated by reference to Exhibit 10.4 of the Registration Statement).10.10
>           Amendment No. 1 to the Agreement between Point West Capital and Echelon
>           regarding allocation of costs (Incorporated by reference to Exhibit 10.4 of the
>           Registrants Annual Report on Form 10-K for the fiscal year ended December 31, 1999).10.11*
>           Profit Sharing Plan (Incorporated by reference to Exhibit 10.5 of the
>           Registration Statement).10.12
>           Contribution, Sale and Servicing Agreement ("Servicing
>           Agreement") dated as of February 1, 1995 among Point West Capital, DPFC and Bankers
>           Trust (Incorporated by reference to Exhibit 10.14 of the Registration Statement).10.13
>           Amendment No.1 to Servicing Agreement (Incorporated by reference to
>           Exhibit 10.15 of the Registration Statement).

> 61
>       
>       10.14
>           Amendment No.2 to the Servicing Agreement (Incorporated by reference to
>           Exhibit 10.10 of the Registrants Annual Report on Form 10-K for the fiscal year
>           ended December 31, 1995).10.15
>           Amended and Restated Contribution, Sale and Servicing Agreement, dated as
>           of March 31, 2000, among Point West Capital Corporation, Dignity Partners Funding Corp. I
>           and Bankers Trust Company (Incorporated by reference to Exhibit 99.3 of the
>           Registrants Form 8-K filed on April 19, 2000).10.16
>           Master Agreement for Purchase of Life Insurance Policies dated September
>           27, 1996 (Incorporated by reference to Exhibit 10 of the Registrants Quarterly
>           Report on Form 10-Q for the quarter ended September 30, 1996).10.17
>           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 Registrants Annual Report on Form 10-K for the fiscal year ended
>           December 31, 1996).10.18
>           Purchase and Sale Agreement dated as of January 16, 1997 (Incorporated by
>           reference to Exhibit 10.12 of the Registrants Annual Report on Form 10-K for the
>           fiscal year ended December 31, 1996).10.19
>           Second Master Agreement for Purchase of Insurance Policies dated as of
>           February 10, 1997 (Incorporated by reference to Exhibit 10.13 of the Registrants
>           Annual Report on Form 10-K for the fiscal year ended December 31, 1996).10.20
>           Third Master Agreement for Purchase of
>           Insurance Policies dated as of March 24, 1997 (Incorporated by reference to Exhibit 10.14
>           of the Registrants Annual Report on Form 10-K for the fiscal year ended December 31,
>           1996).10.21
>           Indemnification Agreement dated September 30, 1995, between Point West
>           Capital (as successor to The Echelon Group) and Echelon (Incorporated by reference to
>           Exhibit 10.18 of the Registration Statement).10.22
>           Amended and Restated Limited Liability Company Agreement of Allegiance
>           Capital, LLC (Incorporated by reference to Exhibit 10.5 of the Registrants Quarterly
>           Report on Form 10-Q for the quarter ended September 30, 1998).10.23
>           First Amendment to Amended and Restated Limited Liability Company
>           Agreement of Allegiance Capital, LLC, dated as of May 22, 2000, among Point West Capital
>           Corporation, Michael W. McDermitt and Daniel M. Isard (Incorporated by reference to
>           Exhibit 10.5 of the Registrants Quarterly Report on Form 10-Q for the quarter ended
>           June 30, 2000).10.24
>           Fourteen Hill Capital, L.P. Agreement of Limited Partnership (Incorporated
>           by reference to Exhibit 10.2 of the Registrants Quarterly Report on Form 10-Q for
>           the quarter ended September 30, 1997).10.25
>           Fourteen Hill Management, LLC Operating Agreement by Point West Capital
>           and Fourteen Hill Management, LLC as of June 9, 1997 (Incorporated by62
>       reference to Exhibit 10.3 of the Registrants Quarterly Report on
>           Form 10-Q for the quarter ended September 30, 1997).10.26**
>           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 Registrants Quarterly Report on
>           Form 10-Q for the quarter ended September 30, 1998).10.27**
>           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
>           Registrants Quarterly Report on Form 10-Q for the quarter ended September 30, 1998).10.28**
>           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 Registrants Quarterly Report on Form 10-Q for the quarter ended September 30,
>           1998).10.29**
>           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 Registrants Quarterly Report on Form 10-Q for the quarter ended September 30,
>           1998).10.30
>           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 Registrants Annual Report on Form 10-K for the fiscal year
>           ended December 31, 1998).10.31**
>           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 Registrants Quarterly Report on Form 10-Q for the quarter ended
>           September 30, 1999).10.32**
>           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 Registrants Quarterly Report on Form 10-Q for
>           the quarter ended September 30, 1999).10.33**
>           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 Registrants Quarterly Report on Form 10-Q for the quarter ended September 30,
>           1999).10.34**
>           Third Amended and Restated Supplement to Trust Agreement for Revolving
>           Series 1998-1, dated as of April 14, 2000, among Allegiance Funding I, LLC, Manufacturers
>           and Traders Trust Company and Point West Capital Corporation63
>     (Incorporated by reference to Exhibit 10.3 of the Registrants
>           Quarterly Report on Form 10-Q for the quarter ended June 30, 2000).10.35**
>           Amended and Restated Supplement to Trust Agreement for Term Series 1999-1,
>           dated as of April 14, 2000, among Allegiance Funding I, LLC, Manufacturers and Traders
>           Trust Company and Point West Capital Corporation (Incorporated by reference to Exhibit
>           10.4 of the Registrants Quarterly Report on Form 10-Q for the quarter ended June 30,
>           2000).10.36
>           Master Agreement dated as of March 31, 2000, among Point West Capital
>           Corporation, Dignity Partners Funding Corp. I, Bankers Trust Company and other parties
>           thereto (Incorporated by reference to Exhibit 99.4 of the Registrants Form 8-K filed
>           on April 19, 2000).10.37
>           Limited Liability Company Agreement of SocietyPool.com, LLC, dated as of
>           May 10, 2000, among Point West Capital Corporation, Robert M. Janes, Paul G. Kahn and
>           Michael D. London (Incorporated by reference to Exhibit 10.6 of the Registrants
>           Quarterly Report on Form 10-Q for the quarter ended June 30, 2000).10.38
>           First Amendment to Limited Liability Company Agreement of SocietyPool.com,
>           LLC, dated as of June 26, 2000, among Point West Capital Corporation, Robert M. Janes,
>           Paul G. Kahn and Michael D. London (Incorporated by reference to Exhibit 10.7 of the
>           Registrants Quarterly Report on Form 10-Q for the quarter ended June 30, 2000).10.39
>           Amendment and Waiver Agreement dated as of December 15, 2000, among
>           Allegiance Funding I, LLC, Manufacturers and Traders Trust Company, Point West Capital
>           Corporation and as consented to by the Certificate Holders.21.1
>           Subsidiaries of Point West Capital Corporation.23.1
>           Consent of Ernst & Young LLP.23.2
>           Consent of KPMG LLP.24.1
>           Powers of Attorney.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.

> 64

(b)
    Reports on Form 8-K filed during the fourth quarter of
    2000:


|Date              | Item Reported | Matter Reported                                                                                                 
|----------------- | ------------- | ----------------------------------------------------------------------------------------------------------------
|November 20, 2000 | 5             | The Company issued a press
    release regarding its results of operations for the third quarter of 2000.       
|December 4, 2000  | 5             | The Company issued a press
    release announcing the new director and a change in the 2001 annual meeting date.



65



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 14, 2001

POINT WEST CAPITAL CORPORATION


> 

/s/ John Ward RotterChief Executive Officer


> 

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 14, 2001:

|/s/ John Ward rotter                                                                                                                                                     | *                                        
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | -----------------------------------------
|John Ward
    Rotter
    Chief Executive Officer,
    Chief Financial Officer And Director
    (Principal Executive Officer, Principal Financial and Accounting Officer) | Alan B. Perper
    President and Director
|*                                                                                                                                                                        | *                                        
|Bradley N.
    Rotter
    Chairman of the Board and Director                                                                                                             | Stephen T. Bow
    Director              
|*                                                                                                                                                                        |                                          
|Conrad W.
    Hewitt
    Director                                                                                                                                        |                                          



* The undersigned, by signing his name hereunto, has hereby signed this
report on behalf of the above-named officers and directors, on March 14, 2001, pursuant to
a power of attorney executed on behalf of each such officer and director and filed with
the Securities and Exchange Commission as Exhibit 24.1 to this report.



By: /s/  John Ward Rotter


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