EXHIBIT B

DYNEX DYNEX CAPITAL, INC.
4551 COX ROAD, SUITE 300
GLEN ALLEN, VIRGINIA 23060
804-217-5800
FAX 804-217-5860

January 26, 2001

VIA FACSIMILE AND CERTIFIED MAIL
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California Investment Fund, LLC
550 West C Street
10th Floor
San Diego, CA 92101

Attention: Michael R. Kelly, Managing Member

RE: MERGER AGREEMENT DATED NOVEMBER 7, 2000

Dear Mr. Kelly:

Reference is made to the Agreement and Plan of Merger dated November
7, 2000, as amended ("Merger Agreement") between California Investment
Fund, LLC ("CIF"), DCI Acquisition Corporation and Dynex Capital, Inc.
("Dynex") and to the letter dated December 22, 2000 between Dynex and CIF
(the "December 22nd Letter"). Dynex hereby notifies you that Dynex is
terminating the Merger Agreement for CIF's breaches of its obligations
under numbered paragraphs 2 and 3 of the December 22nd Letter and pursuant
to Section 7(a)(vii) of the Merger Agreement.

Very truly yours,
DYNEX CAPITAL, INC.

By: /s/ Stephen J. Benedetti
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Stephen J. Benedetti
Vice President, Treasurer

cc: Stephen Fraidin, Esquire