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 March 31,
               2000

                        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
 incorporation or organization)                          Identification Number)

         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  twelve 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 April 30, 2000, the aggregate market value of the  registrant"s  shares of
Common  Stock,  $.01 par value,  held by non  affiliates of the  registrant  was
approximately  $4,454,220.  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



<PAGE>
                       CAPITAL ALLIANCE INCOME TRUST LTD.,
                         A Real Estate Investment Trust
<TABLE>
<CAPTION>
                                 Balance Sheets

                                                                      (unaudited)       (audited)
                                                                    March 31, 2000   December 31, 1999
                                                                    --------------   -----------------
<S>                                                                  <C>             <C>
Cash and cash equivalents                                            $    458,722    $     41,939
Restricted cash                                                           384,158         487,174
Accounts receivable                                                       234,622         233,017
Due from affiliates                                                       488,222         637,491
Notes receivable:
     Warehouse lines of credit to related parties                       2,887,164       3,189,317
     Mortgage notes receivable                                         11,335,374      10,807,664
     Allowance for loan losses                                            (17,500)        (85,000)
                                                                     ------------    ------------
          Net receivable                                               14,205,038      13,991,981
Real estate owned                                                         298,622         644,326
Investments in affiliates                                                 811,166         870,466
Origination costs                                                         164,128         163,635
Loan Fee                                                                   11,667          16,667

Total assets                                                         $ 17,044,678    $ 17,006,696
                                                                     ============    ============



Liabilities
     Mortgage note holdbacks                                         $    384,158    $    487,174
     Loan payable                                                       1,089,000         904,750
     Other liabilities                                                    199,937         187,938
                                                                     ------------    ------------
Total liabilities                                                       1,673,095       1,579,862
                                                                     ------------    ------------

Stockholders' Equity
      Preferred stock, $.01 par value per share;                            6,413           6,413
              675,000 shares authorized; 641,283 shares
              issued and 631,757 outstanding at March 31, 2000
              and December 31, 1999
      Additional paid in capital -preferred stock                       5,752,907       5,752,907
      Less: treasury stock, 9,526 shares at cost                          (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 March 31, 2000 and December 31,1999
      Additional paid in capital - common stock                         9,684,360       9,739,611
                                                                     ------------    ------------

Total stockholders' equity                                             15,371,583      15,426,834
                                                                     ------------    ------------

Total liabilities and stockholders' equity                           $ 17,044,678    $ 17,006,696
                                                                     ============    ============

</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
                                                                 March 31,
                                                          2000            1999
                                                          ----            ----
<S>                                                     <C>         <C>
    Interest income                                     420,190     $   398,440
    Interest income from affiliates                      88,848         125,944
    Investment income from affiliates                   (59,300)       (157,815)
    Other income                                            425           4,888
                                                    -----------     -----------
        Total revenues                                  450,163         371,457
                                                    -----------     -----------

EXPENSES
    Loan servicing fees to related party                 76,402          75,609
    Management fees to related party                     38,156          38,233
    Interest expense                                     32,288          39,950
    Provision for loan losses                            17,500          32,500
    Operating expenses of real estate owned              13,820           5,620
    Taxes                                                 8,200           5,300
    General and administrative                           37,781          30,854
                                                    -----------     -----------
          Total expenses                                224,147         228,066
                                                    -----------     -----------

INCOME BEFORE GAIN (LOSS) ON REAL
ESTATE OWNED                                            226,016         143,391
    Gain (loss) on real estate owned                     (5,024)           --
                                                    -----------     -----------
NET INCOME                                          $   220,992     $   143,391
                                                    ===========     ===========



PREFERRED DIVIDENDS                                 $   150,039     $   138,789


BASIC EARNINGS PER  COMMON SHARE                    $     0.047     $     0.003


DILUTED EARNINGS PER  COMMON SHARE                  $     0.047     $     0.003


AVERAGE COMMON SHARES
    OUTSTANDING - BASIC EARNINGS PER SHARE            1,484,740       1,484,740

AVERAGE COMMON SHARES
    OUTSTANDING - DILUTED EARNINGS PER SHARE          1,484,740       1,484,740

</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)


                                                                      Three Months Ended
                                                                            March 31,
                                                                     2000           1999
                                                                     ----           ----
<S>                                                             <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
      Net Income ............................................   $   220,992    $   143,391
      Adjustments to reconcile net income to net cash
        Amortization ........................................         5,000          1,101
        Gain (loss) on real estate owned ....................        (5,024)          --
        (Increase) decrease in  accounts receivable .........        (1,605)        14,806
        Accrued interest capitalized to real estate owned ...          --          (34,075)
        Provisions for loan loss ............................        17,500         32,500
        Increase in organization costs ......................          --             --
        Increase (decrease) in security deposits ............          --           (5,857)
        Increase (decrease) in due to affiliates ............       149,269       (146,360)
        Increase (decrease) in other liabilities ............        11,999         48,861
                                                                -----------    -----------
          Net cash provided by (used in) operating activities       398,131         54,367
                                                                -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES
      (Increase) decrease in restricted cash ................       103,106         75,158
      Increase (decrease) in mortgage note holdbacks ........      (103,106)       (75,158)
      Increase (decrease) in origination costs ..............          --             --
      (Increase) decrease in warehouse lines of credit ......       302,153        707,534
      (Increase) in investments .............................        59,300        157,815
      Increase in related party note receivable .............          --          (22,500)
      Investments in mortgage notes receivable ..............    (2,470,210)    (3,408,469)
      Repayments of mortgage notes receivable ...............     1,942,500      2,077,651
      Net proceeds from sale of real estate owned ...........       461,151           --
      Capital costs of foreclosed property ..................          --          (13,967)
                                                                -----------    -----------
        Net cash provided by (used in) investing ............       294,894       (501,936)
                                                                -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES
      Note payable to related party .........................          --             --
      Redemption of shares ..................................          --             --
      Proceeds from issuance of shares ......................          --             --
      Payment of mortgage notes payable .....................          --          745,950
      Preferred dividends paid ..............................      (150,039)      (138,789)
      Common dividends paid .................................      (126,203)      (252,406)
                                                                -----------    -----------
        Net cash provided by (used in) financing activities .      (276,242)       354,755
                                                                -----------    -----------

NET INCREASE (DECREASE) IN CASH .............................       416,783        (92,814)
CASH AT BEGINNING OF PERIOD .................................        41,939        570,710
                                                                -----------    -----------

CASH AT END OF PERIOD .......................................   $   458,722    $   477,896
                                                                ===========    ===========

SUPPLEMENTAL CASHFLOW INFORMATION:
      Interest expense paid .................................   $    32,288    $    39,922
      Taxes paid ............................................   $       800    $       800

</TABLE>

                 See accompanying notes to financial statements

                                        5
<PAGE>
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 as a
      mortgage  investment which invests  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.

      On September 30, 1998, the Trust  completed its initial public offering of
      1,484,740  at $8.00 per share  and  warrants  to  purchase  an  additional
      148,474 common shares at $5.60 per share.

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.

      These  financial  statements  should  be  read  in  conjunction  with  the
      financial  statements  and notes  thereto for the year ended  December 31,
      1999 filed pursuant to 15d-2 on Form 10-K with the Securities and Exchange
      Commission.

      The  unaudited  interim  financial  statements  for the three months ended
      March 31, 2000 and March 31, 1999  represent the  financial  statements of
      the Trust.

3.    Summary of significant accounting policies & nature of operations.
      -----------------------------------------------------------------

      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.

                                       6
<PAGE>
     Loan loss reserve.  Management reviews its loan loss provision periodically
     and the Trust  maintains an  allowance  for losses from  receivables  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 March  31,  2000 and  March 31,  1999 the loan loss
     reserves were $15,000 and $202,500, respectively.

     Investments.  The Trust hold an  investment  in Sierra  Capital  Acceptance
     ("SCA"),  a division of Sierra  Capital  Funding,  LLC ("SCF"),  a Delaware
     Limited Liability Company which originates and sells residential mortgages.
     SCA will continue  operations as a separate  operating division of SCF. The
     Trust's investment in receives a 15% preferential interest distribution per
     annum.  Sierra Capital  Services,  Inc., a related  party,  owns 99% of the
     Sierra common shares of SCF and maintains voting control.

     During 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.

     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  three-month  period ended March 31, 2000,  the  distributions  per
     preferred  share are allocated 100% as ordinary income and the common share
     distribution  is allocated 100% ordinary  income for tax purposes.  For the
     period ended March 31, 1999,  the  distributions  per  preferred  share are
     allocated  100%  ordinary  income  and the  common  share  distribution  is
     allocated 100% ordinary income 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.

                                       7
<PAGE>
     Origination costs.  Origination costs relating to mortgage notes receivable
     are deferred and  recognized as an adjustment to yield over the term of the
     notes.

     Real estate owned.  Real estate owned results from foreclosure 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 as operating expenses of
     real estate owned on the Statements of Operations.

     Reclassifications. Certain 1999 amounts may be reclassified to conform with
     2000 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  to  borrowers  upon  completion  of
     improvements on the secured property. As of March 31, 2000 and December 31,
     1999,  mortgage note holdbacks from the consummation of mortgage loans made
     amounted to $ 384,158 and $487,174 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's
     appraisal.  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 March 31, 2000 and December 31, 1999 the Trust held no mortgage notes
     payable

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  Assets")  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 $38,156 and $38,233 for the three months ended
     March 31, 2000 and March 31, 1999, respectively.

                                       8
<PAGE>
     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 $76,402 and $75,609 for the three months
     ended March 31, 2000 and March 31, 1999, respectively.

     As described  in Note 3, the Trust holds an  investment  in Sierra  Capital
     Funding and  receives a 15% return per annum.  For the three  months  ended
     March 31, 2000 the  interest  was  deferred  and for the three months ended
     March 31, 1999 the Trust earned interest of $7,500.

     As  described  in Note 3, the Trust has a  non-qualified  REIT  subsidiary,
     Capital Alliance Funding Corporation.  For the three months ended March 31,
     2000 and March  31,  1999 the Trust was  allocated  losses of  $59,300  and
     157,815,  respectively.  These losses are  attributable to the expansion of
     the subsidiaries wholesale loan origination capacity.

     During the first  quarter  of 1999,  the Trust  advanced  $25,000 to Equity
     1-2-3,  a division of Sierra  Capital  Funding  LLC, a related  party,  and
     recorded it as an addition to the  $225,000  note  receivable.  from Equity
     1-2-3.  The note bore  interest at 15% per annum and  interest  was payable
     quarterly. The Trust wrote off the note receivable and the advance in 1999.

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 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 ten Common Shares  purchased.
     Each shareholder  Warrant entitles the holder to purchase one Common Share.
     The  exercise  price foe each  Shareholder  warrant is $5.60,  which may be
     exercised during the 25th through 48th month after April 28, 1997. 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

                                       9
<PAGE>
     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
     distribution  of the  Trust"s  assets  in a  liquidation,  dissolution,  or
     winding up of the trust, unless the Warrants have been exercised. 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.

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>
      Numerator:                                    March 31, 2000    March 31, 1999
                                                    --------------    --------------
<S>                                                    <C>            <C>
            Net income ...........................     $  220,992     $  143,391
            Less: Preferred Dividend .............     $  150,039     $  138,789
                                                       ----------     ----------

Numerator for basic and diluted
earnings per share ...............................     $   70,953     $    4,602
                                                       ----------     ----------

Denominator:
            Basic weighted average shares ........      1,484,740      1,484,700
            Effect of dilutive warrants ..........              0
                                                       ----------     ----------
                                                                               0
            Diluted weighted average shares ......      1,484,740      1,484,700
                                                       ----------     ----------

Basic earnings per common share ..................     $    0.047     $    0.003
                                                       ----------     ----------

Diluted earnings per common share ................     $    0.047     $    0.003
                                                       ----------     ----------
</TABLE>



                                       10
<PAGE>
                                     PART I
                                     ITEM 2.


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


      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  non-conforming  mortgage
loans  by  borrowers  and  strong   demand  by  investors  for  high   yielding,
non-conforming mortgages for securitization

      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 March 31,  2000,  the Trust"s loan
portfolio  included total loans of $11,335,374 of which $1,439,521  representing
12.7% of the loan  portfolio  were  delinquent  over  sixty  days.  There were 7
delinquent  loans which were in the process of foreclosure at March 31, 2000. In
assessing the collectibility of these delinquent mortgage loans,  management has
established a loan loss reserve of $17,500, if it is necessary to foreclose upon
the  mortgage  loans.  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 March 31, 2000 and March 31, 1999.

Results of Operations

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

      Three months ended March 31, 2000 and 1999. Revenues for the first quarter
increased  to  $450,163  as  compared  to  $371,457  for the same  period in the
previous  year.  The increase in revenue,  during the first three months of 2000
was primarily due to CAFC's improved operating results of $98,515.

                                       11
<PAGE>
      Expenses for the first  quarter 1999  decreased to $221,647 as compared to
$228,066  for the same period in the  previous  year.  The  decrease in expenses
during the first three months of 2000 was primarily  due to a $15,000  reduction
in reserves for loan losses.

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 and the repayment of existing  mortgage loans and the sale of
foreclosed  properties.  The Trust"s average  mortgage loan matures is less than
two years.

      Net cash  provided by operating  activities  during the three months ended
March 31, 2000 and 1999 was $398,131 and $54,367 respectively.

      Net cash provided by (used in) investing  activities  for the three months
ended March 31, 2000 and 1999 was $294,894 and $501,936, respectively. The large
increase  in 2000  compared  to the  prior  period is due to  increased  sale of
foreclosed real estate.

      Net cash  provided by financing  activities  during the three months ended
March 31,  2000 and 1999 was  $(276,242)  and  $354,755  respectively.  The 2000
results are from the payment of dividends  The 1999 results are from the payment
of dividends and the payoff of mortgage notes assumed upon foreclosure.

       As of March  10,  2000,  CAFC  extended  an  agreement  for a  $4,000,000
warehouse  line of credit which is guaranteed  by the Trust.  The Trust has also
extended a warehouse line of credit to CAFC.  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.


                                       12
<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 at this time

ITEM 3            DEFAULTS UPON SENIOR SECURITIES

                  Not applicable.

ITEM 4            SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

                  Not applicable.

ITEM 5            OTHER INFORMATION

                  On March 24, 2000  (Exhibit A) and April 17, 2000  (Exhibit B)
                  the  Registrant  issued  two (2) press  releases  attached  as
                  exhibits.

ITEM 6            REPORTS ON FORM 8-K

                  Not applicable.




                                       13
<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:   May 19, 2000            By: /s/ Richard J. Wrensen
                                     ----------------------
                                     Richard J. Wrensen, Chief Financial Officer




                                       14
<PAGE>
                                   EXHIBIT "A"

             CAPITAL ALLIANCE INCOME TRUST ANNOUNCES DECLARATION OF
                   COMMON SHARE DIVIDEND FOR FIRST QUARTER AND
          REVISED INVESTMENT POLICY TO ALLOW INCREASED USE OF LEVERAGE


         SAN FRANCISCO--(Business Wire)--March 21, 2000--Capital Alliance Income
Trust Ltd., ("CAIT") (AMEX: CAA), a non-conforming specialty residential finance
company  announced that its Board had declared  CAIT's common share dividend for
the first quarter at $.085 per share.  The dividend will be payable on April 17,
2000 to shareholders of record on April 1, 2000.

         Thomas B. Swartz,  CAIT's  Chairman and CEO, also disclosed that CAIT's
Board had authorized an increased  leveraging of CAIT's capital  position for up
to four times its capital base to increase the size of its loan portfolio and to
provide  additional  warehouse  facilities for its mortgage banking  subsidiary,
Capital  Alliance  Funding  ("CAFC").   Prior  to  this,  CAIT  has  followed  a
low-leverage policy in its mortgage investment (portfolio) business and has used
its warehouse lines only in CAFC, its mortgage banking subsidiary. Swartz stated
that,  "Notwithstanding  our prior  policy,  we believe  that with the  positive
interest  spreads  available  to us, the use of leverage can be favorable in our
portfolio operations if intelligently used, even with recent rate increases." He
also noted that, "While CAIT will utilize the additional liquidity to expand its
mortgage  portfolio,  it will, as it has done since its  inception,  continue to
hedge its risks by limiting  loans to  relatively  short  terms,  with a healthy
interest rate and a maximum 75% loan-to-value ratio." He indicated that based on
pending negotiations with a major banking institution in the mortgage field, the
new term and  warehouse  financings  should  be in place  "early  in the  second
quarter".  He also indicated that the immediate effect of the expanded liquidity
on earnings "would be muted and deferred by accounting  requirements to amortize
origination income but should be positive in the long run."

         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, Chairman
                   (415) 288-9575


<PAGE>
                                   EXHIBIT "B"

                       CAPITAL ALLIANCE INCOME TRUST LTD.
                   ANNOUNCES IMPROVED FOURTH QUARTER EARNINGS


         SAN FRANCISCO--(BUSINESS  WIRE)--April 17, 2000-Capital Alliance Income
Trust Ltd., ("CAIT") (AMEX:  CAA-news),  a non-conforming  specialty residential
mortgage  company,  announced  that net earnings for the fourth  quarter of 1999
were  $205,126 on gross  revenues of 498,831,  a 107%  increase in earnings over
earnings  for the  third  quarter  of 1999.  Earnings  for all of 1999,  totaled
$450,605 on gross  revenues of  $1,975,882 as compared to earnings of $1,003,706
for all of 1998 on gross revenues of  $1,689,082.  Earnings for all of 1999 were
depressed  by the  substantial  costs  of  expanding  the  mortgage  origination
capacity  of  CAIT's  mortgage  banking  subsidiary,  all of  which  costs  were
currently expensed and not amortized.  99% of the subsidiary's earnings (losses)
are  reflected  in  CAIT's  financial  statements  under  the  equity  method of
accounting.

         Thomas  B.  Swartz,  CAIT's  Chairman  and CEO,  noted  that  "with the
completion of CAIT's  expansion  and  reorganization  of its wholesale  mortgage
banking  subsidiary and with its pending  acquisition of both a term loan and an
expanded warehouse  facility,  CAIT's earnings should show steady improvement in
the year  2000 as the  result of a larger  mortgage  investment  portfolio  with
favorable interest spreads and a positive contribution from its mortgage banking
subsidiary."

         CAIT is a specialty residential mortgage lender 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  similar  loans for sale to  investors on a whole loan basis for cash
through its wholesale mortgage banking subsidiary.

         Certain oral and written  statements  of 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, Chairman
                   (415) 288-9575