CAPITAL ALLIANCE INCOME TRUST LTD.,
                         A REAL ESTATE INVESTMENT TRUST







August 13, 1999



SECURITIES & EXCHANGE COMMISSION
450 Fifth Street, N.W.
Washington, D.C.  20549

Re:      Capital Alliance Income Trust Ltd., A Real Estate Investment Trust
         ------------------------------------------------------------------
         SEC File No. 333-11625
         Our File No. 76021.0002

Dear Sir/Madam:

Pursuant  to  Sections  13 and  15(d) of the  Securities  Exchange  Act of 1934,
enclosed for filing via EDGAR please find a Form 10-Q for the quarter ended June
30, 1999. If you have any questions, please do not hesitate to call.

                                                     Very truly yours,

                                                     /s/ Richard J. Wrensen

                                                     Richard J. Wrensen
                                                     Chief Financial Officer

Enclosures

cc:      Stephen C. Ryan, Esq.



50 California Street, Suite 2020 , San Francisco, CA 94111
(415) 288-9575 o fax (415) 288-9590

<PAGE>
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                               -------------------

                                    FORM 10-Q

(Mark One)

   (X)    Quarterly Report Under Section 13 or 15(d) of the Securities  Exchange
          Act of 1934 For the quarterly period ended June 30, 1999

                        Commission File Number: 333-11625

                               -------------------

                       CAPITAL ALLIANCE INCOME TRUST LTD.,
                         A REAL ESTATE INVESTMENT TRUST
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

           Delaware                                   94-3240473
----------------------------------       ---------------------------------------
(State or other Jurisdiction of          (I.R.S. Employer Identification Number)
  incorporation or organization)

      50 California Street
      Suite 2020
      San Francisco, California                          94111
----------------------------------       ---------------------------------------
(Address of principal executive office)               (zip code)

                              (415) 288-9575
                              --------------
            (Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

                           Yes_X_        No__

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date.

As of August 6, 1999, the aggregate market value of the  registrant's  shares of
Common  Stock,  $.01 par value,  held by non  affiliates of the  registrant  was
approximately  $5,196,590. At that date  1,484,740  shares of common  stock were
outstanding.   The shares are listed  and publicly traded  on the American Stock
Exchange.

<PAGE>
                                     PART I
                                     ITEM 1.


                              FINANCIAL STATEMENTS



                                        2

<PAGE>
                       CAPITAL ALLIANCE INCOME TRUST LTD.,
                         A REAL ESTATE INVESTMENT TRUST
<TABLE>
<CAPTION>
                                 Balance Sheets


                                                                               (Unaudited)      (Audited)
                                                                              June 30, 1999   December, 1998
                                                                              -------------   --------------
ASSETS
<S>                                                                           <C>             <C>
      Cash and cash equivalents ...........................................   $     11,236    $    570,710
      Restricted cash .....................................................        570,067         594,693
      Accounts receivable .................................................        244,661         193,241
      Due from affiliates .................................................         89,537         103,301
      Notes receivable:
         Note receivable to related party .................................        247,500         225,000
         Warehouse lines of credit to related parties .....................      3,771,524       5,157,098
         Mortgage notes recievable ........................................     11,949,718       8,986,645
         Allowance for loan losses ........................................       (247,500)       (170,000)
                                                                              ------------    ------------
            Net Receivable ................................................     15,721,242      14,198,743
      Real estate owned ...................................................        323,986         149,663
      Security deposits ...................................................         17,234          32,133
      Investments in affiliates ...........................................        725,702         831,936
      Origination costs ...................................................        120,217         120,217
      Organization costs (net of accumulated amortization of $14,157 at
              June 30, 1999 and 11,955 at December 31, 1998) ..............          8,144          10,346
                                                                              ------------    ------------
      Total assets ........................................................   $ 17,832,026    $ 16,804,983
                                                                              ============    ============

LIABILITIES AND STOCKHOLDERS' EQUITY

      Liabilities
         Mortgage note holdbacks ..........................................   $    570,067    $    594,693
         Other liabilities ................................................        205,067         162,839
         Notes payable ....................................................      1,392,771            --
                                                                              ------------    ------------
      Total liabilities ...................................................      2,167,905         757,532
                                                                              ------------    ------------

      Stockholders' Equity
         Preferred stock, $.01 par value (liquidation value $9.50 .........          6,413           6,413
              per share); 675,000 shares authorized; 641,283 shares
              issued and outstanding at June 30, 1999 and
              December 31, 1998 respectively ..............................
         Additional paid in capital-preferred stock .......................      5,868,711       5,868,711
              Less 9,526 preferred shares held in treasury ................        (86,944)        (86,944)

         Common stock, $.01 par value; 5,000,000 shares ................         14,847          14,847
              authorized ; 1,484,740 shares issued and outstanding at
              June 30, 1999 and December 31, 1998
         Additional paid in capital - common stock .......................      9,861,094      10,244,424
                                                                              ------------    ------------
      Total stockholders' equity ..........................................     15,664,121      16,047,451
                                                                              ------------    ------------
      Total liabilities and stockholders' equity ..........................   $ 17,832,026    $ 16,804,983
                                                                              ============    ============
</TABLE>

                See accompanying notes to financial statements.


                                       3
<PAGE>
                       CAPITAL ALLIANCE INCOME TRUST LTD.,
                         A REAL ESTATE INVESTMENT TRUST
<TABLE>
<CAPTION>
                            Statements of Operations
                                  (Unaudited)

                                                                            Three Months Ended            Six Months Ended
                                                                                 June 30,                     June 30,
                                                                            1999           1998           1999           1998
                                                                            ----           ----           ----           ----
<S>                                                                   <C>            <C>            <C>            <C>
REVENUES
       Interest income ............................................   $   434,571    $   313,454    $   833,011    $   589,118
       Interest income from affiliates ............................        93,946         57,050        212,390        101,413
       Investment income from affiliates ..........................      (265,919)        (9,207)      (416,234)       (45,502)
       Other income ...............................................           548          3,150          5,436         11,922
                                                                      -----------    -----------    -----------    -----------
           Total revenues .........................................       263,146        364,447        634,603        656,951
                                                                      -----------    -----------    -----------    -----------

EXPENSES
       Loan servicing fees to related parties .....................        74,744         57,034        150,353        105,844
       Management fees to related parties .........................        37,775         32,121         76,008         57,303
       Interest expense ...........................................        44,170            638         84,120            638
       Provision for loan losses ..................................        45,000           --           77,500           --
       Operating expenses of
         real estate owned ........................................         5,213          2,961         10,833          5,851
       Taxes ......................................................         5,000          5,516         10,300         11,227
       General and administrative .................................        46,202         27,099         77,056         57,876
                                                                      -----------    -----------    -----------    -----------
             Total expenses .......................................       258,104        125,369        486,170        238,739
                                                                      -----------    -----------    -----------    -----------

Income Before Loss on Real Estate Owned ...........................   $     5,042    $   239,078    $   148,433    $   418,212
       Loss on Real Estate Owned ..................................        (1,779)          --           (1,779)          --
                                                                      -----------    -----------    -----------    -----------

NET INCOME ........................................................   $     3,263    $   239,078    $   146,654    $   418,212
                                                                      ===========    ===========    ===========    ===========



PREFERRED DIVIDENDS ...............................................   $   138,789    $   152,305    $   277,577    $   304,609


BASIC EARNINGS PER
       COMMON SHARE ...............................................   $     (0.09)   $      0.09    $     (0.09)   $      0.13

DILUTED EARNINGS PER
       COMMON SHARE ...............................................   $     (0.09)   $      0.07    $     (0.09)   $      0.12


</TABLE>

                 See accompanying notes to financial statements.


                                       4
<PAGE>
                       CAPITAL ALLIANCE INCOME TRUST LTD.,
                         A REAL ESTATE INVESTMENT TRUST
<TABLE>
<CAPTION>
                            Statements of Cash Flows
                                  (Unaudited)

                                                                        Six Months Ended
                                                                             June 30,
                                                                       1999           1998
                                                                       ----           ----

<S>                                                              <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
      Net Income .............................................   $     3,263    $   418,212
      Adjustments to reconcile net income to net cash provided
      by operating activities:
        Amortization .........................................         2,202          2,202
        (Increase) decrease in  accounts receivable ..........       (51,420)       (94,203)
        Increase (decrease) in loan loss reserve .............        77,500           --
        (Increase) decrease in security deposits .............        14,899           --
        Increase (decrease) in due to / due from affiliates ..        13,764       (174,861)
        Increase (decrease) in other liabilities .............        42,228         53,207
                                                                 -----------    -----------
          Net cash provided by (used in) operating activities        102,436        204,557
                                                                 -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES
      (Increase) decrease in restricted cash .................        24,626        (26,436)
      Increase (decrease) in mortgage note holdbacks .........       (24,626)        26,436
      (Increase) decrease in warehouse lines of credit .......     1,385,574     (2,027,833)
      (Increase) in investments ..............................       106,234       (164,493)
      (Increase) in related party note receivable ............       (22,500)      (225,000)
      Investments in mortgage notes receivable ...............    (5,428,850)    (6,038,500)
      Repayments of mortgage notes receivable ................     2,609,167      3,172,951
      Capital costs of real estate owned .....................      (174,323)          --
                                                                 -----------    -----------
        Net cash provided by (used in) investing .............    (1,524,698)    (5,282,875)
                                                                 -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES
      Redemption of shares ...................................          --         (448,953)
      Proceeds from issuance of shares .......................          --        4,944,320
      Proceeds of mortgage notes payable .....................     1,392,771           --
      Organizational and offering costs ......................          --         (583,308)
      Preferred dividends paid ...............................      (277,577)      (304,609)
      Common dividends paid ..................................      (252,406)      (150,001)
                                                                 -----------    -----------
        Net cash provided by (used in) financing activities ..       862,788      3,457,449
                                                                 -----------    -----------

NET INCREASE (DECREASE) IN CASH ..............................      (559,474)    (1,620,869)
CASH AT BEGINNING OF PERIOD ..................................       570,710      1,748,485
                                                                 -----------    -----------

CASH AT END OF PERIOD ........................................   $    11,236    $   127,616
                                                                 ===========    ===========

SUPPLEMENTAL CASHFLOW INFORMATION:
      Interest expense paid ..................................   $    74,255    $       638
      Taxes paid .............................................   $       800    $    13,371
</TABLE>
                 See accompanying notes to financial statements.


                                       5
<PAGE>
                       CAPITAL ALLIANCE INCOME TRUST LTD.,
                         A REAL ESTATE INVESTMENT TRUST

                          Notes to Financial Statements
                 For the six months ended June 30, 1999 and 1998
                                   (Unaudited)

1.    Organization
      ------------

      Capital  Alliance Income Trust Ltd., A Real Estate  Investment  Trust (the
      "Trust"),  a Delaware  corporation,  primarily  invests in mortgage  loans
      secured  by real  estate.  The  Trust  was  formed  December  12,  1995 to
      facilitate  the  combination  of the  mortgage  investment  operations  of
      Capital  Alliance Income Trust I, a Delaware  business trust,  and Capital
      Alliance Income Trust II, a Delaware  business  trust.  CAIT I and CAIT II
      were  both  privately-held   mortgage  investment  trusts  which  invested
      primarily  in  loans  secured  by  deeds  of  trust  on  one-to-four  unit
      residential properties.  The Manager, Capital Alliance Advisors, Inc. (the
      "Manager") originates, services and sells the Trust's loans.

      Effective  February 12, 1997, the Trust  registered its common shares with
      the Securities and Exchange  Commission  pursuant to the Securities Act of
      1933,  as amended in  connection  with a"best  efforts"  offering of up to
      1,500,000  common  shares at $8.00 per share and  warrants  to purchase an
      additional 150,000 common shares at $5.60 per share. On September 30, 1998
      the offering closed and a total of 1,484,700 common shares were issued.



2.    Basis of presentation
      ---------------------

      The accompanying  financial  statements include the accounts of the Trust.
      The financial  information  presented has been prepared from the books and
      records without audit.  The  accompanying  financial  statements have been
      prepared  in  accordance  with the  instructions  to Form  10-Q and do not
      include all of the  information  and the  footnotes  required by generally
      accepted accounting principles for complete statements.  In the opinion of
      management,   all   adjustments,   consisting  only  of  normal  recurring
      adjustments,   necessary  for  a  fair   presentation  of  such  financial
      statements, have been included.

      The  preparation of the financial  statements in conformity with generally
      accepted  accounting  principles requires management to make estimates and
      assumptions that affect the reported amounts of assets and liabilities and
      disclosure  of  contingent  assets  and  liabilities  at the  date  of the
      financial  statements  and the  reported  amounts of revenues and expenses
      during the  reporting  period.  Actual  results  could  differ  from those
      estimates.

      These  financial  statements  should  be  read  in  conjunction  with  the
      financial  statements  and notes  thereto for the year ended  December 31,
      1998 filed pursuant to 15d-2 on Form 10-K with the Securities and Exchange
      Commission.

      The unaudited interim  financial  statements for the six months ended June
      30, 1998 and June 30, 1999  represent the the financial  statements of the
      Trust.

                                       6
<PAGE>
                       CAPITAL ALLIANCE INCOME TRUST LTD.,
                         A REAL ESTATE INVESTMENT TRUST

                          Notes to Financial Statements
                 For the six months ended June 30, 1999 and 1998
                                   (Unaudited)

3.    Summary of significant accounting policies
      ------------------------------------------

      Use of estimates.  The  preparation  of financial statements in conformity
      with generally accepted accounting  principles requires management to make
      estimates and  assumptions that effect the accounts  reported in financial
      statements  and the accompanying  notes.  Actual results could differ from
      those estimates.

      Cash and cash  equivalents.  Cash and cash  equivalents  include  cash and
      liquid  investments with an original maturity of three months or less. The
      Trust  deposits  cash in  financial  institutions  insured by the  Federal
      Deposit Insurance Corporation.  At times, the Trust's account balances may
      exceed the insured limits.  Restricted cash represents segregated cash and
      is to be disbursed  only to mortgage  loan  borrowers  upon  completion of
      certain improvements to the secured property (see Note 4).

      Revenue  recognition.  Interest income is recorded on the accrual basis of
      accounting in accordance with the terms of the loans.  When the payment of
      principal or interest is 90 or more days past due,  management reviews the
      likelihood  that the loan  will be  repaid.  For these  delinquent  loans,
      management continues to record interest income and establishes a loan loss
      reserve as  necessary  to  protect  against  losses in the loan  portfolio
      including accrued interest.

      Concentration  of credit risk.  The Trust holds  numerous  mortgage  notes
      receivable.  These  notes  are  secured  by deeds of trust on  residential
      properties  located   primarily  in  California,   which   results   in  a
      concentration of credit risk.  The value of the portfolio may be affected
      by changes in the economy or other conditions of the geographic area.   A
      portion of the portfolio is secured by second trust deeds on real estate.

      Loan loss reserve. Management reviews its loan loss provision periodically
      and the  Trust  maintains  an  allowance  for  losses  on  mortgage  notes
      receivable at an amount that management  believes is sufficient to protect
      against  losses  in  the  loan  portfolio.   Accounts   receivable  deemed
      uncollectible  are  written  off or  reserved.  The Trust  does not accrue
      interest  income on impaired  loans (Note 5). As of June 30, 1998 and June
      30, 1999 the loan loss reserves were $0 and $247,500, respectively.

      Investments.  Prior to December 31, 1997 the Trust held an  investment  in
      Sierra Capital  Acceptance  ("SCA").  On December 31, 1997 SCA completed a
      tax  free-merger  with Sierra  Capital  Funding,  LLC ("SCF"),  a Delaware
      Limited   Liability   Company  which  originates  and  sells   residential
      mortgages, by exchanging all the Class A and Class B shares of SCA for the
      Sierra common and preferred shares of SCF. SCA will continue operations as
      a  separate  operating  division  of  SCF.  The  Trust  owns  100%  of the
      non-voting  Sierra  preferred shares of SCF.  SCF-Sierra  Preferred shares
      receive a 15% interest per annum. Sierra Capital Services, Inc., a related
      party,  owns 99% of the Sierra common  shares of SCF and maintains  voting
      control.

      On April 11,  1997 the Trust  formed  its  non-qualified  REIT  subsidiary
      Capital  Alliance  Funding  Corporation  ("CAFC") to conduct its  mortgage
      conduit  business.  The Trust  owns  100% of the  outstanding  Series  "A"
      Preferred  stock  (2,000  shares  of  non-voting  stock)  in  CAFC,  which
      constitute a 99% economic  interest in CAFC. The Trust's Manager owns 100%
      of the  Common  Shares  (1,000  shares)  of CAFC,  which  constitute  a 1%
      economic  interest and has 100% voting  control.  The Trust's Manager also
      manages CAFC and provides  mortgage  origination and sale and services for
      CAFC.  The Trust  accounts  for its  investment  in CAFC  under the equity
      method.

                                        7
<PAGE>
                       CAPITAL ALLIANCE INCOME TRUST LTD.,
                         A REAL ESTATE INVESTMENT TRUST

                          Notes to Financial Statements
                 For the six months ended June 30, 1999 and 1998
                                   (Unaudited)




      Income  taxes.  The Trust intends at all times to qualify as a real estate
      investment trust ("REIT") for federal income tax purposes , under Sections
      856  through  860 of the  Internal  Revenue  Code of 1986,  as amended and
      applicable Treasury Regulations.  Therefore, the Trust will not be subject
      to federal  corporate income taxes, if the Trust  distributes at least 95%
      of its taxable income to its shareholders. To qualify as a REIT, the trust
      must elect to be so treated and must meet on a  continuing  basis  certain
      requirements  relating  to the  Trusts  organization,  sources  of income,
      nature of assets,  and distribution of assets to  shareholders.  The Trust
      must maintain  certain  records and request certain  information  from its
      stockholders  designed  to  disclose  actual  ownership  of its stock.  In
      addition the Trust must satisfy  certain  gross  income  requirements  and
      certain asset tests at the close of each quarter of its taxable year.

      If the Trust fails to qualify for taxation as a REIT in any taxable  year,
      and the relief  provisions do not apply,  the Trust will be subject to tax
      on its  taxable  income  at  regular  corporate  rates.  Distributions  to
      stockholders  in any year in which the Trust fails to qualify  will not be
      deductible  by the  Trust  nor will they be  required  to be made.  Unless
      entitled to relief under  specific  statutory  provisions,  the Trust will
      also be  disqualified  from  taxation as a REIT for the four taxable years
      following the year during which qualification was lost.

      Based on the  Trust's  belief  that it has  operated  in a manner so as to
      allow it to elect to be taxed as a REIT since inception,  no provision for
      federal income taxes has been made in the financial statements.

      For the  six-month  period  ended June 30,  1998,  the  distributions  per
      preferred share are allocated 100% as ordinary income and the common share
      distribution  is  allocated  76 %  ordinary  income and 24% as a return of
      capital  for tax  purposes.  For the  period  ended  June  30,  1999,  the
      distributions  per preferred  share are allocated 81% ordinary  income and
      19% a return of capital and the common  share  distribution  is  allocated
      100% a return of capital for tax purposes.

      Fair value of financial  instruments.  For cash and cash equivalents,  the
      carrying amount is a reasonable  estimate of fair value. For mortgage note
      receivables,  fair value is estimated by discounting the future cash flows
      using the current  interest  rates at which similar loans would be made to
      borrowers   with  similar  credit  ratings  and  for  the  same  remaining
      maturities.  It was determined  that the  difference  between the carrying
      amount and the fair value of the mortgage notes receivable is immaterial.

      Origination costs. Origination costs relating to mortgage notes receivable
      are deferred and recognized as an adjustment to yield over the term of the
      notes.

      Organizational costs.  Organization costs are capitalized and amortized on
      a straight-line basis over five years.

      Deferred  offering  costs.  Deferred  offering  costs  relate to the "best
      efforts" offering of common stock. While the offering was underway,  these
      costs were offset  pro-rata  against  the  proceeds  from the  issuance of
      common stock and as a reduction of stockholder's equity.

                                        8
<PAGE>
                       CAPITAL ALLIANCE INCOME TRUST LTD.,
                         A REAL ESTATE INVESTMENT TRUST

                          Notes to Financial Statements
                 For the six months ended June 30, 1999 and 1998
                                   (Unaudited)


      Real estate  owned.  Real  estate owned results  from foreclosur  of loans
      and at time of foreclosure is recorded at the lower of carrying  amount or
      fair value of the property  minus  estimated  costs to sell.  At this time
      senior debt  to  which  the  asset is  subject  is  reported  as  mortgage
      payable.  Subsequent  to   foreclosure,  the  foreclosed  asset  value  is
      periodically reviewed  and is adjusted to fair value.  No  depreciation is
      taken  on  the real estate held for sale.  Income and expenses related  to
      real estate owned are   recorded  as  other   income, interest expense and
      general and administrative expenses on the Statements of Operations.

      Reclassifications. Certain 1998 amounts have been  reclassified to conform
      with  1999  classifications.  Such  reclassifications  had  no  effect  on
      reported net income.


4.    Restricted cash and mortgage note holdbacks
      -------------------------------------------

      Pursuant to mortgage loan agreements  between the Trust and certain of its
      borrowers,  a  portion  of the  loan  proceeds  are  held by the  Trust in
      segregated accounts to be disbursed only to such borrowers upon completion
      of certain  improvements on the secured property.  As of June 30, 1998 and
      June 30, 1999,  mortgage note holdbacks from the  consummation of mortgage
      loans made amounted to $231,792 and $570,067 respectively.


5.    Mortgage notes receivable
      -------------------------

      Mortgage  notes   receivable   represent  home  equity  loans  secured  by
      residential real estate. At their original  origination,  all loans have a
      combined  loan-to-value of not more than 75% of the underlying collateral.
      The Trust is subject to the risks  inherent in finance  lending  including
      the risk of borrower default and bankruptcy.

      Mortgage  notes  receivable  are  stated  at  the  principal  outstanding.
      Interest on the mortgages is due monthly and principal is due as a balloon
      payment at loan maturity.


6.    Accounts receivable
      -------------------

      Accounts  receivable  consists  of  accrued  interest  on  mortgage  notes
      receivable and other amounts due from borrowers.


7.    Mortgage notes payable
      ----------------------

      As of June 30, 1998 the Trust held a mortgage  notes  payable of $258,671.
      As of June 30, 1999 the Trust,  through a warehouse  line of credit issued
      to CAFC has borrowed $1,392,771 to finance a portion of its mortgage notes
      receivable.

                                       9
<PAGE>
                       CAPITAL ALLIANCE INCOME TRUST LTD.,
                         A REAL ESTATE INVESTMENT TRUST

                          Notes to Financial Statements
                 For the six months ended June 30, 1999 and 1998
                                   (Unaudited)

8.    Related party transactions
      --------------------------

      The  Manager,  which  is  owned  by  several  of the  Trustees  and  their
      affiliate,  contracted with the Trust to provide  administration  services
      and receives a fee for these services from the Trust.  The Manager is also
      entitled to reimbursement for clerical and administrative services at cost
      based on relative  utilization of facilities  and  personnel.  The Manager
      bears all expenses of services for which it is separately compensated.

      The Manager  receives a management fee equal to  one-twelfth  (1/12) of 1%
      annually of the book value of mortgages, mortgage-related  investments and
      real  property  ("Gross Mortgage Asset")  of  the  Trust  plus one-twelfth
      (1/12)  of one half percent  (1/2%) of the book value of  the non-mortgage
      assets of the Trust computed at the end of each month.  The Trust paid the
      Manager a  management fee of $32,121  and $37,775 for the six months ended
      June 30, 1998 and June 30, 1999, respectively.

      The Manager also  receives a loan  origination  and servicing fee equal to
      one-twelfth  (1/12) of  2%  annually of  the Gross Mortgage  Assets of the
      trust computed  at the end of  each  month.  The Trust paid the  Manager a
      loan origination  and  servicing fee of $105,884 and $150,353  for the six
      months ended June 30, 1998 and June 30, 1999, respectively.

      The Manager also receives incentive  compensation for each fiscal quarter,
      equal to 25% of the net  income of the Trust in  excess  of an  annualized
      return on equity for such quarter equal to the ten year U.S. Treasury Rate
      plus 2% provided that the payment of such incentive compensation  does not
      reduce the  Trust's annualized  return on equity for such  quarter to less
      than the ten year U.S. Treasury Rate plus 2% after the preferred  dividend
      has  been  paid.  As of June  30,  1998  and  June 30,  1999 no  incentive
      compensation was paid.

      As described in Note 3, the Trust holds an  investment  in Sierra  Capital
      Funding  and  receives a 15%  guaranteed  return  per annum.  For each six
      months ended June 30, 1998, and June 30, 1999 the Trust earned interest of
      $15,000 from the investment.

      As described  in Note 3, the Trust has a  non-qualified  REIT  subsidiary,
      Capital  Alliance Funding  Corporation.  For the six months ended June 30,
      1998 and June 30,  1999 the Trust was  allocated  losses  of  $60,502  and
      $431,234,  respectively.  The  subsidiaries  six  month  1998  loss on the
      disposition of real estate owned. was $83,663.  The six month 1999 loss is
      attributable  to  the  expansion  of  the   subsidiaries   wholesale  loan
      origination capacity.

      On  February 1, 1998 , the Trust  advanced  $225,000  to Equity  1-2-3,  a
      division  of Sierra  Capital Funding LLC, a related party, and recorded it
      as a related party note  receivable.   The note bears interest at  15% per
      annum and interest is payable  quarterly.  As of June 30, 1998 $14,062 was
      earned on this note. On February 10, 1999 the Trust advanced an additional
      $22,500 to Equity 1-2-3. For the six months ending June 30, 1999 the Trust
      has not recognized any interest from this note.

                                       10
<PAGE>
                       CAPITAL ALLIANCE INCOME TRUST LTD.,
                         A REAL ESTATE INVESTMENT TRUST

                          Notes to Financial Statements
                 For the six months ended June 30, 1999 and 1998
                                   (Unaudited)


9.

     Preferred stock and common stock
     --------------------------------

     The Preferred Shares are entitled to a distribution preference in an amount
     equal to an annualized return on the Net Capital  Contribution of Preferred
     Shares at each dividend  record date during such year (or, if the Directors
     do not set a record  date,  as of the first day of the month)  equal to the
     lesser of 10.25% or 150 basis points over the Prime Rate  (determined  on a
     not less than quarterly basis).

     After  declaration of dividends for a given quarter to the Preferred Shares
     in the amount of the distribution preference,  no further distributions may
     be  declared  on the  Preferred  Shares for the  quarter  until the current
     Distributions  declared on each Common  Share for that  quarter  equals the
     distribution  preference  for each  Preferred  Share for such quarter.  Any
     additional  distributions  generally will be allocated such that the amount
     of  distributions  per share to the  holders  of the  Preferred  Shares and
     Common Shares for the quarter are equal. The distribution preference of the
     Preferred Shares is not cumulative.

     Preferred  Shares are  entitled  to receive all  liquidating  distributions
     until they have  received an amount equal to their  aggregate  adjusted net
     capital contribution.  Thereafter,  Common Shareholders are entitled to all
     liquidation   distributions   until  the  aggregate  adjusted  net  capital
     contributions of all Common Shares has been reduced to zero. Any subsequent
     liquidating distributions will be allocated among the holders of the Common
     Shares and Preferred Shares pro rata.

     The  Preferred  Shares,  at the  option  of the  Board  of  Directors,  are
     redeemable by a  Shareholder  annually on June 30 for  redemption  requests
     received by May 15 of such year.  The Board of Directors  may in their sole
     discretion  deny,  delay,  postpone or consent to any or all  requests  for
     redemption.  The  redemption  amount  to be  paid  for  redemption  of such
     Preferred  Shares is the  adjusted  net  capital  contribution  plus unpaid
     accrued dividends,  divided by the aggregate net capital contributions plus
     accrued  but  unpaid   dividends   attributable  to  all  Preferred  Shares
     outstanding, multiplied by the net asset value of the Trust attributable to
     the  Preferred  Shares  which shall be that  percentage  of the Trust's net
     asset value that the aggregate  adjusted net capital  contributions  of all
     Preferred  Shares bears to the adjusted  net capital  contributions  of all
     Shares  outstanding.  A  liquidation  charge  is  charged  by the  Trust in
     connection  with each  redemption as follows:  1% of  redemption  amount in
     1998, and none thereafter.

     The trust has the power to redeem or prohibit  the transfer of a sufficient
     number of common and/or Preferred shares or the exercise of warrants and to
     prohibit  the  transfer of shares to persons that would result in violation
     of the Trust's share holding requirements.  In addition, the Bylaws provide
     that no shareholder may own more than 9.8% of the total outstanding  shares
     after the conclusion of the initial public offering of Common Shares.

     One  Shareholder  Warrant was issued for every 10 Common Shares  purchased.
     Each shareholder  Warrant entitles the holder to purchase one Common Share.
     The exercise price for each Shareholder  warrant is $5.60. The Warrants may
     now be exercised  through  April 28, 2001.  In order to protect the Warrant
     holders against dilution, the exercise price of the Warrants and the number
     of which may be purchased  upon  exercise of the Warrants  will be adjusted
     should certain events occur (i.e. stock dividends, split-ups, combinations,
     and reclassifications).  Provision is also made to protect against dilution
     in  the  event  of a  merger,  consolidation,  or  disposition  of  all  or
     substantially  all of the Trust's  assets.  Warrant holders do not have the
     rights of a  shareholder  and they are not  entitled  to  participate  in a
     distributio of the trust's assets in a liquidation, dissolution, or winding
     up of the trust, unless the Warrants have been exercised.

                                       11
<PAGE>
                       CAPITAL ALLIANCE INCOME TRUST LTD.,
                         A REAL ESTATE INVESTMENT TRUST

                          Notes to Financial Statements
                 For the six months ended June 30, 1999 and 1998
                                   (Unaudited)



The Trust may  refuse to allow the  exercise  of a warrant if the effect of such
exercise would  disqualify the Trust as a REIT under the Internal  Revenue Code.

Under the 1998  Incentive  Stock Option Plan,  adopted by the board of directors
and approved by the stockholders, options for the purchase of a total of 150,000
common shares of the Trust were granted effective  September 30, 1998.  Officers
and  employees  of the  Manager,  and  Directors  of the board are the  eligible
recipients  of the  options.  The  options  have a term of 10 years with a first
exercise  date six (6) months after the date of the grant.  The initial  options
for the  purchase of 75,000  common  shares can be exercised at $8.00 per share.
The options for the  purchase of the  remaining  75,000 of common  shares can be
exercised  at the closing  price of the Trust's  common  shares on the  American
Stock Exchange on April 1, 1999, which was $4.50 per common share..

During 1998 the Trust's net purchase of treasury  preferred stock was 9,526. The
purchases  were  recorded at cost and as a  reduction  to  preferred  shares and
additional  paid in capital  from  preferred  shares.  No  additional  common or
preferred shares were purchased for the treasury as of June 30, 1999.


10.    Earnings per share
       ------------------

The following table is a reconciliation of the numerator and denominators of the
basic and diluted earnings per common share.

<TABLE>
<CAPTION>
                                                  June 30, 1998    June 30, 1999
                                                 --------------    -------------
<S>                                              <C>               <C>
Numerator:
    Net income ..............................      $   418,212      $   146,654
    Less: Preferred Dividend ................      $   304,609      $   277,577
                                                   -----------      -----------


Numerator for basic and diluted
earnings per share ..........................      $   113,603      $  (130,923)
                                                   -----------      -----------

Denominator:
    Basic weighted average shares ...........          871,780        1,484,700
    Effect of dilutive warrants .............          118,080                0
                                                   -----------      -----------
    Diluted weighted average shares .........          989,860        1,484,700
                                                   -----------      -----------

Basic earnings per common share .............      $      0.13      $     (0.09)
                                                   -----------      -----------
Diluted earnings per common share ...........      $      0.12      $     (0.09)
                                                   -----------      -----------
</TABLE>
                                       12
<PAGE>
                                     PART I
                                     ITEM 2.


                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATION

                                       13
<PAGE>
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


      The  financial  statements of Capital  Alliance  Income Trust Ltd., A Real
Estate  Investment  Trust (the  "Trust")  dated  herein were  prepared  from the
unaudited books and ledgers of the Trust.

General

      Recent  Trends.  The Trust  invests in  non-conforming  mortgage  loans on
one-to-four unit residential  properties because management  believes that there
is a large demand for non-conforming mortgage loans on these kinds of properties
which produce higher yields without comparably higher credit risks when compared
with conforming  mortgage  loans.  Management  invests  primarily in A-, B/C (or
less) credit rated home equity loans  secured by deeds of trust.  In general,  B
and C credit  rated home equity  loans are made to  borrowers  with lower credit
ratings than  borrowers of higher  credit  quality,  such as A credit rated home
equity  loans.  Home  equity  loans  rated A-, B/C (or less) tend to have higher
rates of loss and  delinquency,  but higher rates of interest than  borrowers of
higher credit quality.

     Management believes there is strong demand for high-yielding non-conforming
mortgage  loans  caused by a demand by  investors  for higher  yields due to low
interest  rates  over the past few years  and  securitization  of  high-yielding
non-conforming mortgage loans by the investment banking industry.

      Loan Origination and Loan Servicing. Mortgage loan origination consists of
establishing  a  relationship  with a  borrower  or his  broker,  obtaining  and
reviewing documentation concerning the credit rating and net worth of borrowers,
inspecting and appraising  properties that are proposed as the subject of a home
equity  loan,  processing  such  information  and  underwriting  and funding the
mortgage  loan.  Mortgage loan  servicing  consists of collecting  payments from
borrowers,   accounting  for  interest  payments,  holding  escrow  funds  until
fulfillment  of mortgage loan  requirements,  contacting  delinquent  borrowers,
foreclosing  in  the  event  of  unremedied   defaults  and   performing   other
administrative  duties.  Mortgage  loan  origination  and  loan  servicing  were
provided to the Trust by CAAI, its Manager.

         Commitments and  Contingencies.  As of June 30 , 1999, the Trust's loan
portfolio included 83 loans totaling $11,949,718 of which $1,802,906 of the loan
portfolio were delinquent over sixty days.  There were eleven  delinquent  loans
representing  $1,065,731of  the portfolio  were in the process of foreclosure at
June 30, 1999.  In assessing the  collectibility  of these  delinquent  mortgage
loans,  management  estimates  a net  gain  will be  realized  upon  sale of the
properties  securing  these loans,  if it is  necessary  to  foreclose  upon the
mortgage loans due to the Trust.  Management's estimate is based on a discounted
sales price of the property less the sum of pre-existing  liens,  costs of sale,
the face amount of the mortgage loan and accrued interest receivable.  The Trust
generally  issues loan  commitments  only on a  conditional  basis and generally
funds such loans promptly upon removal of any conditions. Accordingly, the Trust
did not  have any  commitments  to fund  loans as of June 30,  1999 and June 30,
1998.

      The historical  information presented herein is not necessarily indicative
of future operations.

      Three  months and six months  ended March 31, 1999 and 1998.  Revenues for
the second  quarterof 1999 decreased to $263,146 as compared to $364,447 for the
same period in the previous  year.  Revenues for six months of 1999 decreased to
$634,603 as compared to $656,951 for the same period of the previous year.


      The 1999 interest  income and interest  income from  affiliates  increased
significantly for the quarter and six months, compared to the same period in the
previous year.  These increases are due to larger mortgage notes  receivable and
warehouse lines of credit balances than in the same period of previous year. The
interest  income  gains,  however,  were more than offset by  investment  income
losses incurred during the quarter  and six months

                                       14
<PAGE>
for the origination expansion costs of Capital Alliance Funding Corporation. The
origination  expansion  costs are the primary reason for lower quarterly and six
month revenues.

      Expenses for the second  quarter 1999 increased to $258,104 as compared to
$125,369 for the same period in the previous  year.  Expenses for the six months
period of 1999 increased to $486,170 as compared to $238,739 for the same period
of the previous year.

      The  increase  in the second  quarter of 1999  compared  to 1998 is due to
$23,364  of higher  loan  servicing,  and  management  fees  resulting  from the
increase in the Trust's asset value,  increased  interest expenses of $43,532 to
finance a larger  loan  portfolio  and a $45,000  reserve for loan  losses.  The
increase  in the six months of 1999  compared  to 1998 is  similarly  explained.
Higher loan servicing and management fees of $63,214  resulted from the increase
in the Trust's asset value, increased interest expenses of $83,482 were incurred
to finance a larger loan  portfolio and an additional  $77,500 loan loss reserve
was established.

Inflation

      The  financial  statements  of the  Trust,  prepared  in  accordance  with
generally accepted accounting principles,  report the Trust's financial position
and operating  results in terms of historical  dollars and does not consider the
impact of inflation.  Inflation affects the Trust's operations primarily through
its effect on interest  rates,  since interest rates  normally  increase  during
period of high  inflation and decrease  during  periods of low  inflation.  When
interest rates increase,  the demand for mortgage loans and a borrower's ability
to qualify for mortgage financing may be adversely affected.

 Liquidity and Capital Resources

      The liquidity of the Trust will be based upon the need to fund investments
in mortgage  loans.  The major  portion of the proceeds  from issuance of common
stock in the Trust,  which was  completed on September  30, 1998 was invested in
mortgage  loans.  The  Trust's  liquidity  requirements  will  also be funded by
periodical  payoffs of existing loans which are generally short term in duration
and by the sale of foreclosed  properties.  Restrictions  on cash  attributed to
holdbacks do not significantly impact the Trust's liquidity.

      Net cash provided by operating activities during the six months ended June
30, 1999 and 1998 was $102,436 and $204,557 respectively.

      Net cash (used in) investing  activities for the six months ended June 30,
1999 and 1998 was $(1,524,698) and $(5,282,875), respectively. $3,413,407 of the
difference is explained by decreased warehouse lending to affiliates.

      Net cash provided by financing activities during the six months ended June
30, 1999 and 1998 was $862,788 and  $3,457,449,  respectively.  The 1999 results
are primarily from the proceeds of mortgage notes payable . The 1998 results are
primarily from the proceeds of issuing additional common shares.

       CAFC  maintains a $4,000,000  and a $3,000,000  warehouse  line of credit
from two lenders.  Both  warehouse  lines of credit are guaranteed by the Trust.
Management  believes  that cash  flow  from  operations,  the  proceeds  of loan
repayments  plus the  establishment  of the  warehouse  lines of credit  for the
Mortgage  Conduit Business will be sufficient to meet the liquidity needs of the
Trust's businesses for the next twelve months.

Year 2000

      The Trust's  primary use of software  systems is for  accounting  and loan
documentation.  The Trust's  software  systems,  local area network,  and client
server are widely used in the financial services  industries and are represented
to be Year 2000 compliant.  Therefore, management believes that the risk of Year
2000  compliance  is not  significant  as it  relates to its  computer  software
system, network and personal computers.

      The Trust does not expect Year 2000 initiative costs to exceed $5,000.

                                       15
<PAGE>
      At this time, no estimate can be made as to any potential  adverse  impact
from the failure of borrowers ,  third-party  service  providers  and vendors to
prepare for the Year 2000.

                                       16
<PAGE>
                                     PART II

                                OTHER INFORMATION


ITEM 1    LEGAL PROCEEDINGS

          The trust is not involved in any legal proceedings at this time.

ITEM 2    CHANGES IN SECURITIES

          There have been no changes in the outstanding  securities of the Trust
          during the quarterly period ending June 30, 1999.

ITEM 3    DEFAULTS UPON SENIOR SECURITIES

          Not applicable.

ITEM 4    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

          The  Trust's  1999  Annual  Meeting  was held on July 1, 1999.  At the
          annual meeting,  Director Douglas A. Thompson was reelected as Class I
          Director for a three year term.  Directors  Thomas B.  Swartz,  Harvey
          Blomberg, Dennis R. Konczal and Stanley C. Brooks, whose term continue
          for two, two, one and one years, respectfully, continue as Directors.

          At, the annual  meeting,  the  extension  for two years by the Trust's
          board of Directors  of the  Management  Agreement of Capital  Alliance
          Advisors   Inc.  to  manage  the  Trust  was  duly   approved  by  the
          shareholders  with 1,494,702  shares voting in favor of such approval,
          32,564 voting against and 11,347 abstaining.

          The  shareholders  also ratified the selection of Novogradac & Co. LLP
          as independent  public accountants for the Trust with 1,518,228 shares
          voting  in  favor  of  such   approval,   16,500  against  and  11,374
          abstaining.

ITEM 5   OTHER INFORMATION

          Press Release,  Exhibit "A" attached here to and incorporated  herein,
          regarding  omission of dividend to finance the ramp-up of Registrant's
          mortgage banking conduit, was issued on April 2, 1999.

          Press Release,  Exhibit "B" attached here to and incorporated  herein,
          regarding the  Registrant's  continued  strong  earnings for the forth
          quarter and full year 1998, was issued on April 16, 1999.

          Press Release,  Exhibit "C" attached here to and incorporated  herein,
          regarding the Registrant's  resumption and declaration of common share
          dividends for the second quarter, was issued on June 22, 1999.

ITEM 6 REPORTS ON FORM 8-K

          Not applicable.

                                       17
<PAGE>
                                  EXHIBIT "A"

                       CAPITAL ALLIANCE INCOME TRUST LTD.
                    ANNOUNCES OMISSION OF DIVIDEND FOR FIRST
                        QUARTER TO FINANCE RAMP-UP OF ITS
                       WHOLESALE MORTGAGE BANKING CONDUIT

SAN  FRANCISCO--(Business  Wire)--April 2,  1999--Capital  Alliance Income Trust
Ltd. ("CAIT") (AMEX: CAA - news) , a home mortgage real estate investment trust,
announced  that it will omit the payment of its common  share  dividend  for the
first quarter of 1999.

The cash saved by the omission of the common share  dividend will be utilized to
"ramp-up" a major expansion of the wholesale loan origination capacity of CAIT's
mortgage  banking  conduit  subsidiary,  Capital  Alliance  Funding  Corporation
("CAFC"),  as part of its strategy for increasing CAIT's shareholder returns and
value.  CAIT will  concurrently  de-emphasize  and reserve for the  reduction of
retail origination activities of a retail mortgage banking affiliate.

Earnings  of CAFC (99% of which are  reflected  in CAIT's  financial  statements
under the equity method of accounting),  should be substantially enhanced by the
wholesale origination ramp-up and should make an increased  contribution to CAIT
shareholder returns in the near future according to Dennis R. Konczal, president
of CAIT and CAFC.  Konczal noted that during the first quarter of 1999 there was
some  recovery  in the  secondary  market  into  which CAFC makes its whole loan
sales.  CAFC's  expansion  program is designed to capitalize on that improvement
and opportunity.

He also  noted that the  alternative  growth  strategies  of  increasing  CAIT's
capital base and/or using  substantial  leverage on its existing  capital  base,
were  neither  reasonably  available  nor  desirable  in  the  current  economic
environment.  Growth of the earnings  contribution  from CAFC is a more feasible
alternative  for increasing  CAIT's  long-term  earnings  growth.  The operating
results of CAIT and CAFC during the third and fourth quarters will be constantly
reviewed by CAIT's Board with a view to restoring  common share dividends at the
earliest  possible  date,  which  is  expected  to be no later  than the  fourth
quarter.

Konczal  also noted that CAIT's  primary  Mortgage  Investment  Business,  which
invests in  non-conforming  1-4 unit  residential  mortgages to borrowers with a
lower  credit  standing  but with  significant  equity  in their  homes and good
repayment  histories,  continues to produce strong results.  CAIT's portfolio of
mortgage loans is unencumbered and has no material liquidity issues. The average
weighted  interest yield of the portfolio at February 28, 1999 was 12.53% with a
69.12%  combined  loan to value ratio.  Since  neither CAIT nor CAFC  securitize
their  loans,  their  financial  statements  do not  include  any "gain on sale"
accounting issues connected with the securitization of mortgages.

Certain oral and written  statements of the management of CAIT and CAFC included
in this press release may contain forward-looking statements within the
meaning of Section  27A of the  Securities  Act of 1933,  and Section 21E of the
Securities  Exchange  Act of 1934.  The accuracy of such  statements  can not be
guaranteed, as they are subject to a variety of risks.
----------------------------------------------------
Contact:       Capital Alliance Income Trust Ltd.
               Thomas B. Swartz, CEO
               (415) 288-9575


                                       18
<PAGE>
                                   EXHIBIT "B"

                       CAPITAL ALLIANCE INCOME TRUST LTD.
                     ANNOUNCES CONTINUED STRONG EARNINGS FOR
                      THE FOURTH QUARTER AND FULL YEAR 1998


SAN FRANCISCO--( BUSINESS WIRE )--April 16, 1999--Capital Alliance Income Trust,
Ltd. (AMEX: CAA - new), a home mortgage real estate investment trust,  announced
continued strong earnings of $259,447 for its 1998 fourth quarter and $1,003,706
for the 1998 full year.

The  earnings  represent  increases  of 96.9% and 87.3%  over the  $131,778  and
$535,789 in earnings experienced for the same periods, respectively, in 1997.

Thomas B.  Swartz,  chairman  and CEO,  noted that  "Capital  Alliance's  strong
earnings  reflect not only the  increased  capitalization  of the Company in the
1998  periods  as a result of its 1997 IPO,  but also the  Company's  ability to
maintain  earnings during adverse market and industry  conditions as experienced
in the fourth quarter of 1998. Those conditions  specifically included the Asian
financial crisis which precipitated  severe liquidity problems for many mortgage
lenders,  a  reduction  in the  premiums on whole loan  sales,  and  substantial
write-downs of securitized  mortgage assets by many firms due to `gains-on-sale'
accounting revisions.

"A broad decline in the market values of substantially all of the non-conforming
residential  mortgage lenders resulted.  While Capital Alliance had no liquidity
problems or any  "gains-on-sale"  accounting  problem,  its shares  nevertheless
suffered -- although not to the same extent as many in the industry."

Dennis R. Konczal,  the company's  chief  operating  officer noted that "Capital
Alliance is  expanding  its  wholesale  origination  capacity to  capitalize  on
opportunities  presented by the current state of the non-conforming  residential
mortgage market."

Capital  Alliance is a specialty  residential  mortgage  finance  company  which
invests primarily in high-yielding, non-conforming residential mortgage loans on
one-to-four  unit properties  located  primarily in California and other Western
states.  It also  originates  loans for sale to  investors on a whole loan basis
through Capital Alliance Funding Corporation, a taxable subsidiary.

Certain oral and written  statements of the  management of CAIT included in this
press  release  may  contain  forward-looking  statements  within the meaning of
Section 27A of the  Securities  Act of 1933,  and Section 21E of the  Securities
Exchange Act of 1934. The accuracy of such statements  cannot be guaranteed,  as
they are subject to a variety of risks.

----------------------------------------------------
Contact:       Capital Alliance Income Trust Ltd.
               Thomas B. Swartz, CEO
               (415) 288-9575


                                       19
<PAGE>
                                   EXHIBIT "C"

                       CAPITAL ALLIANCE INCOME TRUST LTD.
                     ANNOUNCES RESUMPTION AND DECLARATION OF
                    COMMON SHARE DIVIDENDS FOR SECOND QUARTER


SAN  FRANCISCO--(Business  Wire)--June 22,  1999--Capital  Alliance Income Trust
Ltd. ("CAIT"),  a home mortgage real estate investment trust (AMEX: CAA - news),
announced  that it has  reinstated  the payment of its common share  dividend at
$.085 per share.

The dividend will be payable on July 15, 1999 to  shareholders of record on July
1, 1999. CAIT had omitted its common share dividend in April to conserve capital
for the expansion of the  wholesale  loan  origination  capacity of its mortgage
banking conduit subsidiary, Capital Alliance Funding Corporation ("CAFC").

Thomas B.  Swartz,  CAIT's  Chairman  and CEO,  noted that,  "as  expected,  the
increased costs of expanding  CAFC's  wholesale loan  origination  capacity will
adversely  affect  CAIT's  earnings for the second  quarter  since 99% of CAFC's
earnings  (losses) are reflected in CAIT's financial  statements".  Swartz noted
also  that,  "the  positive  momentum  from  the  ramp-up  of  CAFC's  wholesale
origination  operations  warranted  the  reinstatement  of CAIT's  common  share
dividends  at this time and should  result in  increased  whole loan sales and a
positive effect on CAIT's earnings during the third quarter."  CAIT's Board will
continue to review the progress of CAFC's and CAIT's  operating  results  during
the  third  and  fourth  quarters  and  will,  as  required  by the REIT  Rules,
distribute 95% of CAIT's net income.

Certain oral and written  statements of the  management of CAIT included in this
press  release  may  contain  forward-looking  statements  within the meaning of
Section 27A of the  Securities  Act of 1933,  and Section 21E of the  Securities
Exchange Act of 1934. The accuracy of such statements  cannot be guaranteed,  as
they are subject to a variety of risks.

----------------------------------------------------
Contact:       Capital Alliance Income Trust Ltd.
               Thomas B. Swartz, CEO
               (415) 288-9575


                                       20
<PAGE>
                                   SIGNATURES


     Pursuant to the  requirements  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.


                                  CAPITAL ALLIANCE INCOME TRUST LTD.,
                                  A Real Estate Investment Trust



Dated: August 13, 1999           By: /s/ Thomas B. Swartz
                                     ------------------------------------
                                     Thomas B. Swartz, Chairman and
                                     Chief Executive Officer


Dated: August 13, 1999           By:  /s/ Richard J. Wrensen
                                      -----------------------------------
                                      Richard J. Wrensen, Senior Vice President
                                      and Chief Financial Officer



                                       21