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 September 30,
               2002

                        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
                                          -----

As of October 31, 2002, the registrant's common shares closed at $18.75 per
share and the aggregate market value of the registrant's common shares held by
non-affiliates of the registrant was approximately $6,305,044. At that date
approximately 336,269 shares of $.01 par value common stock were held by
non-affiliates of the registrant. The shares are listed on the American Stock
Exchange.

<PAGE>
                                     PART I
                                     ITEM 1.



                              FINANCIAL STATEMENTS



                                        2


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

                          Notes to Financial Statements
           For the nine-month period ended September 30, 2002 and 2001

                                 Balance Sheet

<TABLE>
<CAPTION>
                                                                             (Unaudited)        (Audited)
                                                                        September 30, 2002   December 31, 2001
                                                                        ------------------   -----------------
ASSETS
<S>                                                                       <C>                 <C>
    Cash and cash equivalents                                             $    222,911        $    441,909
    Restricted cash                                                            836,399           1,285,382
    Marketable Securities                                                        8,959                --
    Accounts receivable                                                        544,254             292,588
    Due from affiliates                                                         14,770                 890
    Notes receivable:
       Warehousing facilities to related parties                             3,045,697           4,217,408
       Mortgage notes recievable                                            18,960,365          17,738,923
       Allowance for loan losses                                              (275,000)           (180,000)
                                                                          ------------        ------------
          Net Receivable                                                    21,731,062          21,776,331
    Real estate owned                                                           92,000             234,527
    Investments in affiliates                                                1,071,652           1,062,210
    Origination costs (net)                                                    239,594             227,392
    Prepaid items (net)                                                         21,861              23,062
                                                                          ------------        ------------

    Total assets                                                          $ 24,783,462        $ 25,344,291
                                                                          ============        ============

LIABILITIES AND STOCKHOLDERS' EQUITY

    Liabilities
         Mortgage note holdbacks                                          $    836,399        $  1,285,382
         Loans payable                                                       9,453,697           9,613,292
         Due to affiliate                                                       39,572             127,874
         Other liabilities                                                     173,384             223,202
                                                                          ------------        ------------
    Total liabilities                                                       10,503,052          11,249,750
                                                                          ------------        ------------

    Stockholders' Equity
       Preferred stock, $.01 par value; 675,000 shares authorized;               2,138               2,138
           213,819 shares issued and outstanding at December 31, 2001;
           213,820 shares issued and outstanding at September 30, 2002
       Additional paid in capital - preferred stock                          5,669,123           5,669,123
         Less: 3,176 preferred shares held in treasury at cost (2001)             --               (86,944)
         Less: 3,176 preferred shares held in treasury at cost (2002)          (86,944)               --

       Common stock, $.01 par value; 5,000,000 shares authorized;                4,952               4,952
           495,161 shares issued and outstanding at December 31, 2001;
           495,161 shares issued and outstanding at September 30, 2002
       Additional paid in capital - common stock                             9,370,895           9,370,895
         Less: 81,479 common shares held in treasury at cost (2001)               --            (1,041,812)
         Less: 70,392 common shares held in treasury at cost (2002)           (939,515)               --
       Accumulated other comprehensive income                                     (980)               --
       Retained Earnings                                                       260,741             176,189
                                                                          ------------        ------------

    Total stockholders' equity                                              14,280,410          14,094,541
                                                                          ------------        ------------

    Total liabilities and stockholders' equity                            $ 24,783,462        $ 25,344,291
                                                                          ============        ============
</TABLE>

                                        3
<PAGE>
                       CAPITAL ALLIANCE INCOME TRUST LTD.,
                         A REAL ESTATE INVESTMENT TRUST

                          Notes to Financial Statements
           For the nine-month period ended September 30, 2002 and 2001

                            Statement of Operations
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                              Three Months Ended            Nine Months Ended
                                                                 September 30,                September 30,
                                                             2002           2001           2002           2001
                                                             ----           ----           ----           ----
<S>                                                     <C>            <C>            <C>            <C>
REVENUES
       Interest income                                  $   660,673    $   501,539    $ 1,992,938    $ 1,333,186
       Interest income from affiliates                       46,258        176,504        164,877        428,354
       Investment income from affiliates                    (69,998)       135,872        (34,920)       331,248
       Other income                                           2,175         15,727         15,965         34,140
                                                        -----------    -----------    -----------    -----------
           Total revenues                                   639,108        829,642      2,138,860      2,126,928
                                                        -----------    -----------    -----------    -----------

EXPENSES
       Loan servicing fees to related parties               124,492        110,960        354,529        311,107
       Management fees to related parties                    62,690         73,001        211,587        187,951
       Interest expense on loans                            106,703        143,010        334,690        337,637
       Interest expense on loans from related parties         9,208         15,375         18,869         17,045
       Provision for loan losses                             53,000         67,816         95,000        143,387
       Amortization                                           9,816         19,313         33,463         57,938
       General and administrative                            57,630         61,266        216,555        194,946
       Taxes                                                  5,700         10,100         23,691         21,765
                                                        -----------    -----------    -----------    -----------
             Total expenses                                 429,239        500,841      1,288,384      1,271,776
                                                        -----------    -----------    -----------    -----------

INCOME BEFORE GAIN (LOSS) ON REO                        $   209,869    $   328,801    $   850,476    $   855,152
                                                        -----------    -----------    -----------    -----------
       Operating expenses of REO                             (1,184)        (3,139)        (2,699)       (13,021)
       Gain (Loss) on Real Estate Owned                        --             --          (22,527)          --
                                                        -----------    -----------    -----------    -----------

NET INCOME                                              $   208,685    $   325,662    $   825,250    $   842,131
                                                        ===========    ===========    ===========    ===========

PREFERRED DIVIDENDS                                     $    87,257    $   116,364    $   262,948    $   393,898
                                                        -----------    -----------    -----------    -----------

NET INCOME AVAILABLE TO COMMON                          $   121,428    $   209,298    $   562,302    $   448,233
                                                        ===========    ===========    ===========    ===========

BASIC EARNINGS PER
       COMMON SHARE                                     $      0.29    $      0.48    $      1.35    $      0.97

DILUTED EARNINGS PER
       COMMON SHARE                                     $      0.23    $      0.43    $      1.12    $      0.88

DIVIDENDS PAID PER
       COMMON SHARE                                     $      0.45    $      0.26    $      1.15    $      0.77

WEIGHTED AVERAGE COMMON
       SHARES - BASIC EARNINGS                              423,036        438,936        417,226        460,913

WEIGHTED AVERAGE COMMON
       SHARES - DILUTED EARNINGS                            525,023        489,304        502,641        511,281
</TABLE>

                                        4
<PAGE>
                       CAPITAL ALLIANCE INCOME TRUST LTD.,
                         A REAL ESTATE INVESTMENT TRUST

                          Notes to Financial Statements
           For the nine-month period ended September 30, 2002 and 2001

                            Statement of Cash Flows
                                  (Unaudited)
<TABLE>
<CAPTION>
                                                                       Nine Months Ended
                                                                          September 30,
                                                                      2002            2001
                                                                      ----            ----
<S>                                                             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES
      Net Income                                                $    825,250    $    842,131
      Adjustments to reconcile net income to net cash:
        Amortization (net)                                            33,463          44,391
        (Gain) loss on real estate owned                              22,257            --
        (Income) loss from investment in affiliate                    34,920        (331,248)
        (Increase) decrease in prepaid items                            (560)           --
        Provision for loan losses                                     95,000          70,056
        (Increase) decrease in accounts receivable                  (251,666)         (5,366)
        Increase (decrease) in due to / due from affiliates         (102,182)          2,591
        Increase (decrease) in other liabilities                     (49,818)         62,893
                                                                ------------    ------------
          Net cash provided by (used in) operating activities        606,664         685,448
                                                                ------------    ------------

CASH FLOWS FROM INVESTING ACTIVITIES
      (Increase) decrease in warehousing facilities                1,171,711      (1,438,448)
      (Increase) in investments                                      (44,362)        (30,218)
      Increase in marketable securities                               (9,939)           --
      Investments in mortgage notes receivable                    (7,580,115)    (12,901,385)
      Repayments of mortgage notes receivable                      6,275,446       9,380,496
      Net proceeds from sale of real estate owned                       --           108,250
      Capital costs of real estate owned                                --            (2,438)
                                                                ------------    ------------
        Net cash provided by (used in) investing                    (187,259)     (4,883,743)
                                                                ------------    ------------

CASH FLOWS FROM FINANCING ACTIVITIES
      Proceeds from bank loans                                      (159,595)      5,614,340
      Loan fees paid                                                 (19,500)           --
      Purchase of treasury stock                                     (71,924)       (845,808)
      Sale of treasury stock                                         174,221            --
      Preferred dividends paid                                      (262,948)       (393,898)
      Common dividends paid                                         (477,752)       (370,541)
                                                                ------------    ------------
        Net cash provided by (used in) financing activities         (638,403)      4,004,093
                                                                ------------    ------------

NET INCREASE (DECREASE) IN CASH                                     (218,998)       (194,202)
CASH AT BEGINNING OF PERIOD                                          441,909         368,241
                                                                ------------    ------------

CASH AT END OF PERIOD                                           $    222,911    $    174,039
                                                                ============    ============


SUPPLEMENTAL CASHFLOW INFORMATION:
      Interest expense paid                                     $    364,191    $    354,682
      Taxes paid                                                $     33,978    $     15,865
      Contribution to affiliate                                 $     44,362    $     30,218
</TABLE>

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

                          Notes to Financial Statements
           For the nine-month period ended September 30, 2002 and 2001


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

       Capital Alliance Income Trust Ltd., A Real Estate Investment Trust (the
       "Trust"), a Delaware corporation, invests primarily in mortgage loans
       secured by real estate. The Trust was formed December 12, 1995 as a
       mortgage Real Estate Investment Trust, which invests primarily in loans
       secured by deeds of trust on one-to-four unit residential properties as
       the loan's primary collateral.

       The Trust acquired an investment in Capital Alliance Funding Corporation
       ("CAFC"), a taxable subsidiary, during the second quarter of 1997. The
       investment in CAFC is accounted for by the equity method and its
       financial statements are not consolidated with those of the Trust. The
       Trust holds 100% of the non-voting preferred stock of CAFC with a 99%
       economic interest in CAFC. CAFC acquires loans for sale, secured by deeds
       of trust on one-to-four unit residential property as the loans primary
       collateral. The investment in CAFC is reported in "Investments in
       affiliates" on the Trust's Balance Sheet and in "Investment income from
       affiliates" in the Trust's Statement of Operations. CAFC's Balance Sheet
       and Statement of Operations are presented in Note 11.

       Capital Alliance Advisors, Inc. (the "Manager") originates, services and
       sells the Trust's and CAFC's loans.

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 accounting
       principles generally accepted in the United States of America 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,
       2001 filed pursuant to 15d-2 on Form 10-K with the Securities and
       Exchange Commission.

       The unaudited interim financial statements for the nine months ended
       September 30, 2002 and September 30, 2001 represent the financial
       statements of the Trust.

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

       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. However, if the mortgage's collateral is
       considered insufficient to satisfy the outstanding balance and estimated
       foreclosure and sales costs, interest is not accrued.

       Use of estimates. The preparation of financial statements in conformity
       with accounting principles generally accepted in the United States of
       America requires management to make estimates and

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

                          Notes to Financial Statements
           For the nine-month period ended September 30, 2002 and 2001


       assumptions that affect 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.

       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.

       Marketable securities. Marketable securities are classified as either
       trading, or available-for-sale. Management has not acquired any
       securities positions classified as trading securities. Other securities
       are classified as available-for-sale. Trading securities, if acquired,
       would be reported at fair value, and changes in their fair value would be
       reported as other income in the statement of operations. Available-
       for-sale securities are reported at fair value with unrealized gains and
       loses excluded from earnings and reported in accumulated other
       comprehensive income. Realized gains and loses on sales of both trading
       and available-for-sale securities are determined on an average cost
       basis.

       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.

       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 potential losses inherent in the loan portfolio. Accounts
       receivable deemed uncollectible are written off or reserved. The Trust's
       actual losses may differ from the estimate. The Trust does not accrue
       interest income on impaired loans.

       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. Any 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 rental income, interest expense of real estate owned and as
       operating expenses of real estate owned on the Statements of Operations.

       Investments. The Trust owns 100% of the non-voting preferred shares and
       has a 99% economic interest in CAFC. As the Trust does not own the voting
       common shares of CAFC or control CAFC, its investment in CAFC is
       presented by the equity method of accounting. Under this method, original
       equity investments are recorded at cost and adjusted by the Trust's share
       of earnings or losses and decreased by dividends received. Therefore,
       CAFC's financial information is not reported on a consolidated basis in
       the Trust's financial statements.

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

                          Notes to Financial Statements
           For the nine-month period ended September 30, 2002 and 2001


       Origination costs. Origination costs relating to mortgage notes
       receivable are capitalized and amortized over the term of the notes.

       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 90%
       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 and nine-month periods ended September 30, 2002 and
       September 30, 2001, the distributions per preferred and common share are
       allocated 100% as ordinary income for tax purposes. As of December 31,
       2001 the Trust had undistributed taxable income of $20,401 which was
       fully distributed during the first quarter of 2002 to comply with the
       applicable Internal Revenue Code requirements.

       Earnings per share. Earnings per share and shares outstanding have been
       adjusted on the Statement of Operations for the three to one reverse
       stock split made May 11, 2001.

       Reclassifications. Certain 2001 amounts may have been reclassified to
       conform to 2002 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 September 30, 2002 and
       December 31, 2001, mortgage note holdbacks from the consummation of
       mortgage loans made amounted to $836,399 and $1,285,382 respectively.

5.     Marketable securities.
       ------------------------

       As of September 30, 2002 the market value of the Trusts
       available-for-sale securities totaled $8,959 which includes an unrealized
       loss of $980. Unrealized gains and losses are excluded from earnings and
       reported in accumulated other comprehensive income. During the nine

                                       8
<PAGE>
       months ended September 30, 2002, the Trust realized net gain of $1,573
       from the sale of equity securities, classified as available-for-sale.
       Realized gains and losses on sales of both trading and available-for-sale
       securities are included in other income.

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

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

7.     Lines of credit to related parties
       ------------------------------------

       The Trust entered into a loan purchase agreement on December 12, 1997
       with Capital Alliance Funding Corporation ("CAFC"). Under the terms of
       the agreement, the Trust advances funds to CAFC to acquire mortgage loans
       secured by real estate. The Trust then acquires all of CAFC's right,
       title and interest in such loans. CAFC is obligated to reacquire the
       loans from the Trust at a preset price. As of September 30, 2002 and
       December 31, 2001, the Trust advanced to CAFC $3,045,697 and $4,217,408.
       The interest rate on this warehousing facility varies with market
       conditions and is payable monthly. As of September 30, 2002 and December
       31, 2001, the applicable interest rate was 7.0%.

       The Trust entered into a loan purchase agreement on January 1, 1998 with
       Calliance Mortgage Trust, which subsequently merged into the Mortgage
       Division of Calliance Realty Fund, LLC ("CRF") on May 30, 2000. Under the
       terms of the agreement, the Trust advances funds to CRF to acquire
       mortgage loans secured by real estate. The Trust then acquires all of
       CRF's right, title and interest in such loans. CRF is obligated to
       reacquire the loans from the Trust at a preset price. The interest rate
       on this warehousing facility is between 7.0% and 12.0%, varies with
       market conditions and is payable monthly. As of September 30, 2002 and
       December 31, 2001, no borrowings from the Trust were outstanding.

       The Trust also borrows on an unsecured basis from CRF with interest
       payable monthly at an annual rate of between 5.0% and 12.0%. As of
       September 30, 2002 and December 31, 2001, the Trust had repaid all
       borrowings from CRF.

8.     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
       mortgage lending including the risk of borrower default and bankruptcy.

       Mortgage notes receivable are stated at the principal outstanding.
       Interest on the mortgages is usually due monthly and principal is usually
       due as a balloon payment at loan maturity. The balances as of September
       30, 2002 and December 31, 2001, were $18,960,365 and $17,738,923,
       respectively.

9.     Loan loss reserve.
       -----------------

       The Trust measures loan impairment based on the fair value of the related
       collateral since all loans subject to this measurement are collateral
       dependent. Management believes a $275,000 loan loss reserve is adequate
       to protect against potential losses inherent in all receivables as of

                                       9
<PAGE>
       September 30, 2002. The Trust's loan loss reserve as of December 31, 2001
       was $180,000. The Trust's actual losses may differ from the estimate.

10.    Real estate owned.
       -----------------

       As of September 30, 2002, the Trust owned one property with a balance of
       $92,000. As of December 31, 2001, the Trust owned two properties with a
       balance of $234,527.

11.    Investment in affiliates.
       ------------------------

       Capital Alliance Funding Corporation.

       On April 11, 1997 the Trust formed a non-qualified REIT subsidiary,
       Capital Alliance Funding Corporation ("CAFC"), to conduct a mortgage
       banking business. The Trust owns all of the outstanding Series "A"
       Preferred Stock (2,000 shares of non-voting stock), which constitutes a
       99% economic interest in CAFC. The Trust's Manager owns all of the Common
       Shares (1,000 shares) of CAFC, which constitutes a 1% economic interest,
       and has 100% voting control. The Trust's Manager also manages CAFC and
       provides mortgage origination and sale services for CAFC. The Trust
       accounts for its investment in CAFC by the equity method. CAFC's
       financial information is not reported on a consolidated basis in the
       Trust's financial statements.



                  [Remainder of page intentionally left blank.]


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

                          Notes to Financial Statements
           For the nine-month period ended September 30, 2002 and 2001

                      CAPITAL ALLIANCE FUNDING CORPORATION
                                  BALANCE SHEET

<TABLE>
<CAPTION>
                                                               (Unaudited)             (Audited)
                                                           September 30, 2002      December 31, 2001
                                                           ------------------      -----------------
<S>                                                          <C>                     <C>
ASSETS

    Cash and cash equivalents                                $    381,427            $    338,146
    Restricted cash                                               343,142                 517,655
    Accounts receivable                                           105,974                 164,261
    Note receivable:
        Mortgage notes receivable                               6,352,355               8,631,751
        Allowance for loan losses                                (215,000)               (118,000)
                                                             ------------            ------------
        Net Receivable                                          6,137,355               8,513,751
    Real estate owned                                             119,493                 567,000
    Investment in affiliate                                         5,000                   5,000
    Other assets                                                   40,525                  45,934
                                                             ------------            ------------

    Total assets                                             $  7,132,916            $ 10,151,747
                                                             ============            ============

LIABILITIES AND STOCKHOLDERS' EQUITY

    Liabilities
        Mortgage note holdbacks                              $    343,142            $    517,655
        Warehousing facilities                                  2,577,011               4,205,695
        Warehousing facilities from related parties             3,045,697               4,217,408
        Due to affiliate                                           19,694                  12,283
        Other liabilities                                          84,560                 144,984
                                                             ------------            ------------
    Total liabilities                                           6,070,104               9,098,025
                                                             ------------            ------------

    Stockholders' Equity
       Preferred shares, no par value                                --                      --
           2,000 shares authorized, issued and outstanding
       Common shares, no par value                                   --                      --
           1,000 shares authorized, issued and outstanding
       Additional paid in capital                               1,970,092               1,925,730
       Accumulated deficit                                       (907,280)               (872,008)
                                                             ------------            ------------

    Total stockholders' equity                                  1,062,812               1,053,722
                                                             ------------            ------------

    Total liabilities and stockholders' equity               $  7,132,916            $ 10,151,747
                                                             ============            ============
</TABLE>

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

                          Notes to Financial Statements
           For the nine-month period ended September 30, 2002 and 2001

                      CAPITAL ALLIANCE FUNDING CORPORATION
                             STATEMENT OF OPERATIONS
                                   (unaudited)

<TABLE>
<CAPTION>
                                                             Three Months Ended             Nine Months Ended
                                                               September 30,                  September 30,
                                                             2002           2001           2002           2001
                                                             ----           ----           ----           ----
<S>                                                     <C>            <C>            <C>            <C>
REVENUES
       Interest income                                  $   164,459    $   277,569    $   540,144    $   645,134
       Loan origination income                              206,498        317,132        441,325        722,447
       Service release premium                               17,173         43,356         14,478         64,982
       Other income                                           3,600         17,849         28,483         24,156
                                                        -----------    -----------    -----------    -----------
           Total revenues                                   391,730        655,906      1,024,430      1,456,719
                                                        -----------    -----------    -----------    -----------

EXPENSES
       Management fees to related parties                    14,028         22,604         32,738         52,404
       Interest expense on loans                             48,025         24,466         96,463         64,000
       Interest expense on loans from related parties        46,258        176,804        164,877        365,665
       Loan origination costs                                17,142         29,790         91,103         61,118
       Provision for loan losses                            155,643        101,736        179,788        130,092
       Wages and salaries                                   119,279        126,102        367,495        337,951
       General and administrative                            60,513         30,770        123,411         90,765
       Taxes                                                  3,500            380         14,514         10,745
                                                        -----------    -----------    -----------    -----------
             Total expenses                                 464,388        512,652      1,070,389      1,112,740
                                                        -----------    -----------    -----------    -----------

INCOME BEFORE GAIN (LOSS) ON REO                        $   (72,658)   $   143,254    $   (45,959)   $   343,979
                                                        -----------    -----------    -----------    -----------
       Operating expenses of REO                              1,953        (16,320)       (10,631)       (28,097)
       Gain (Loss) on Real Estate Owned                        --           10,306         21,317         20,207
                                                        -----------    -----------    -----------    -----------

NET INCOME                                              $   (70,705)   $   137,240    $   (35,273)   $   336,089
                                                        ===========    ===========    ===========    ===========
</TABLE>

                                       12
<PAGE>
                       CAPITAL ALLIANCE INCOME TRUST LTD.,
                         A REAL ESTATE INVESTMENT TRUST

                          Notes to Financial Statements
           For the nine-month period ended September 30, 2002 and 2001


       The following are selected footnote disclosures to CAFC's financial
       statements:

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

       Accounts receivable consists primarily of amounts due from borrowers for
       items such as interest, property taxes, insurance, and interest on a
       first deed mortgage that were paid by CAFC on behalf of the property
       securing the mortgage notes. As of September 30, 2002 and December 31,
       2001, amounts due from borrowers were $105,974 and $164,261,
       respectively.

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

       Mortgage notes receivable are stated at the principal outstanding.
       Interest on the loans is usually due monthly. The loans are secured by
       first and junior deeds of trust on commercial and residential properties.
       CAFC is subject to the risks inherent in mortgage lending including the
       risk of borrower default and bankruptcy. The balances as of September 30,
       2002 and December 31, 2001 were $6,352,355 and $8,631,751, respectively.

       Some of the mortgage loans originated and purchased by CAFC are held for
       sale to the Trust. The remaining originations and purchases are
       designated for sale to independent third parties. The Trust's purchase
       price is the mortgage loans outstanding balance (par value) plus any
       accrued interest. Loans designated for sale to a third party are
       pre-approved for purchase by the third party, before the loan is acquired
       by CAFC. Sales to third parties are usually greater than CAFC's total
       purchase price.

       Loan loss reserve.
       ------------------

       CAFC measures loan impairment based on the fair value of the related
       collateral since all loans subject to this measurement are collateral
       dependent. Management believes a $215,000 loan loss reserve is adequate
       to protect against potential losses inherent in all receivables as of
       September 30, 2002. CAFC's loan loss reserve as of December 31, 2001 was
       $118,000. CAFC's actual losses may differ from the estimate.

       Real estate owned.
       ------------------

       As of September 30, 2002, CAFC held two properties with a balance of
       $119,493. As of December 31, 2001, CAFC held one property with a balance
       of $567,000.

       Warehouse lines of credit.
       --------------------------

       As of September 30, 2002, CAFC had borrowed $1,923,725 under a $5,000,000
       funding agreement. The agreement provides a 100% advance rate on the
       notes outstanding balance at an interest rate of Prime plus 1.00% with a
       floor of 6.00%. Interest is payable monthly. As of September 30, 2002 the
       Prime rate was 4.75% and the funding agreement had accrued interest of
       $11,385. The facility is cancellable by either party upon 30 days written
       notice.

       As of September 30, 2002, CAFC had borrowed $653,286 from a mortgage
       secured credit facility. The facility provides a 100% advance rate on the
       notes outstanding balance at an interest rate of 10.75%. Interest is
       payable monthly. As the mortgage notes outstanding balance is reduced,
       CAFC's borrowings are repaid. CAFC may prepay the outstanding balance
       without penalty, until November 2002. As of September 30, 2002, the
       borrowings had accrued interest of $5,856. The Trust has guaranteed the
       repayment of both principal and interest. The facility matures October
       2003.

                                       13
<PAGE>
                       CAPITAL ALLIANCE INCOME TRUST LTD.,
                         A REAL ESTATE INVESTMENT TRUST

                          Notes to Financial Statements
           For the nine-month period ended September 30, 2002 and 2001


       As of September 30, 2002 and December 31, 2001, CAFC had borrowed
       $3,045,697 and $4,217,408 respectively, under a loan sale agreement with
       the Trust. Under the terms of the agreement, the Trust advances funds to
       CAFC to acquire mortgage loans secured by real estate. CAFC then
       surrenders all rights of title and interest on such loans. CAFC is
       obligated to reacquire the loans from the Trust at a preset price. The
       interest rate on this facility varies with market conditions and is
       payable monthly. As of September 30, 2002 and December 31, 2001, the
       applicable interest rate was 7.0%

       During the second quarter of 2002, CAFC repaid, on schedule, a warehouse
       line of credit. CAFC had received advances under the facility, up to a
       maximum of $5,000,000, with mortgage loans pledged as collateral against
       the advances received and with a permissible warehouse period of ninety
       (90) days. Interest was LIBOR (London Interbank Offered Rate for U.S.
       dollar deposits) plus 1.50% during the permissible warehouse period and
       was payable monthly. Interest on loans that are held for more than 90
       days was LIBOR plus 3.00%.

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

       The Manager earns an administration fee equal to 25 basis points on loans
       funded for the benefit of CAFC as defined in the First Amended
       Residential Mortgage Loan Services Agreement. For the three months ending
       September 30, 2002 and 2001, the Manager earned administrative fees of
       $14,028 and $22,604, respectively. For the nine months ending September
       30, 2002 and 2001, the Manager earned administrative fees of $32,738 and
       $52,404, respectively.

       As described in Note 7, CAFC received an advance of $3,045,697 under a
       warehousing facility from the Trust, and accrued interest of $14,770
       related to this line of credit as of September 30, 2002 and reported on
       the Balance Sheet as part of Due to Affiliates. The Trust charges a
       variable interest rate on this warehouse line of credit determined by
       current market rates. The rate charged to CAFC on the warehousing
       facility as of September 30, 2002 and December 31, 2001 was 7.0% per
       annum.

       On occasion CAFC and its affiliates had related receivables and payables
       arising from ordinary business transactions. As of September 30, 2002,
       CAFC had a payable of $4,925 to the Manager. This account is shown on the
       balance sheet as part of Due To Affiliates. No interest is charged on the
       inter-company accounts.

       CAFC paid $5,000 in 2001 for an interest in Sierra Capital Corporate
       Advisors (SCCA), an entity owned by some of the owners of the Manager.

12.    Notes payable.
       -------------

       As of September 30, 2002 and December 31, 2001, the Trust had borrowed
       $6,740,850 and $6,964,300, with outstanding accrued interest of $18,705
       and $23,668, respectively. The Trust receives advances under a term loan
       agreement up to a maximum of $7,000,000, with the mortgage loans pledged
       as collateral against the advances received. The annual interest rate is
       the preceding 30-day average of 1-month LIBOR (London Interbank Offered
       Rate for U.S. dollar deposits 30-day average at September 30, 2002 was
       1.82 %) plus 2.00% and is payable monthly. Maturity date for this line of
       credit is November 2002.

       As of September 30, 2002 and December 31, 2001, the Trust had borrowed
       $2,550,000 and $2,250,000, with accrued interest of $8,750 and $11,301,
       respectively under a second term loan. The Trust receives advances under
       the agreement up to a maximum of $4,000,000, with the mortgage loans
       pledged as collateral against the advances received. Annual interest is

                                       14
<PAGE>
                       CAPITAL ALLIANCE INCOME TRUST LTD.,
                         A REAL ESTATE INVESTMENT TRUST

                          Notes to Financial Statements
           For the nine-month period ended September 30, 2002 and 2001


       the applicable prime rate (4.75% as ofSeptember 30, 2002) plus 0.50% and
       is payable monthly. The maturity date for this line of credit is April
       2003.

       Both term loans are revolving lines that are paid down as the mortgage
       loans, held as collateral, are sold. The accrued interest liability is
       reported as a part of Other Liabilities.

       The Trust has financed a portion of its stock repurchases by borrowing on
       margin from a brokerage company. The amount borrowed on margin is charged
       at the broker call rate (3.5% as of September 30, 2002) plus 0.75%.
       Margin debt is callable at the discretion of the lender. As of September
       30, 2002 and December 31, 2001, the Trust owed $162,847 and $398,991 in
       margin debt.

13.    Related party transactions.
       --------------------------

       The Manager, which is owned by several of the directors and their
       affiliates, contracted with the Trust to provide management and advisory
       services and receives fees for these services from the Trust. The Manager
       is also entitled to reimbursement from the Trust for clerical and
       administrative services at cost based on relative utilization of
       facilities and personnel. The Manager is also reimbursed by CAFC for
       direct expenses and administrative services.

       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 management fee
       also includes reimbursement for the direct costs of overseeing the
       administration and disposition of real estate owned by the Trust and CAFC
       and includes any applicable incentive compensation. The total management
       fees earned by the Manager were $62,690 and $73,001 for the three months
       ended September 30, 2002 and 2001, respectively, and $211,587 and
       $187,951 for the nine months ended September 30, 2002 and 2001,
       respectively.

       The Manager's REO fee for management and administration of the properties
       obtained through foreclosure of mortgage notes held is $500 per month for
       each property held by the Trust and CAFC. The Manager earned $4,000 and
       $4,500 in REO management fees for the three months ended September 30,
       2002 and 2001, respectively, and $12,500 and $13,500 in REO management
       fees for the nine months ended September 30, 2002 and 2001, respectively.

       The Manager's incentive compensation for each fiscal quarter, equals 25%
       of the net income of the Trust in excess of an annualized return on
       common equity for such quarter equal to the ten year U.S. Treasury Rate
       plus 2.00%, provided that the payment of such incentive compensation does
       not reduce the Trust's annualized return on common equity for such
       quarter to less than the ten year U.S. Treasury Rate after the preferred
       dividend has been paid. No incentive compensation was earned during the
       third quarter of 2002. For the three months ending September 30, 2001,
       the incentive compensation was $12,000. The incentive compensation for
       the nine months ended September 30, 2002 and 2001 was $13,466 and
       $12,000, respectively. Incentive compensation awards are reported as part
       of the management fees.

       The Manager also receives a loan origination and servicing fee equal to
       one-twelfth (1/12) of 2% of the Gross Mortgage Assets of the Trust
       computed at the end of each month. During 2002, the Trust has capitalized
       50% of this fee as loan origination costs and amortizes loan origination
       costs over the adjusted weighted average maturity of the portfolio. The
       remaining 50% of the fee is expensed as the portion attributed to
       servicing. During 2001, the Trust capitalized 55% of this fee as loan

                                       15
<PAGE>
                       CAPITAL ALLIANCE INCOME TRUST LTD.,
                         A REAL ESTATE INVESTMENT TRUST

                          Notes to Financial Statements
           For the nine-month period ended September 30, 2002 and 2001


       origination costs and amortized them over the average life of the loans
       originated in the month. The remaining 45% of the fee was expensed as the
       portion attributed for servicing. For the three months ended September
       30, 2002 and 2001, the Trust incurred loan servicing expenses of $124,492
       and $110,960, respectively. For the nine months ended September 30, 2002
       and 2001, the Trust incurred loan servicing expenses of $354,529 and
       $311,107, respectively.

       On occasions the Trust and its affiliates had related receivables and
       payables arising from ordinary business transactions. As of September 30,
       2002, the Trust had a receivable of $14,770 from CAFC, a payable of
       $31,811 to the Manager and a payable of $7,761 to CRF. As of December 31,
       2001, the Trust had a receivable of $740 from CAFC, a receivable of $150
       from Sierra Capital Corporate Advisors and a payable of $127,874 to the
       Manager. These accounts are reported on the balance sheet as Due From
       Affiliates of $14,770 and $890 and Due To Affiliates of $39,572 and
       $127,874 as of September 30, 2002, and December 31, 2001, respectively.
       No interest is charged on these inter-company accounts.

       As described in Note 7 and the related party section of Note 11, as of
       September 30, 2002 and December 31, 2001 the Trust advanced $3,045,697
       and $4,217,408 to CAFC under lines of credit to affiliates.

14.    Preferred, common and treasury stock.
       ------------------------------------

       The Preferred Shareholders are entitled to a dividend preference in an
       amount equal to an annualized return on the Adjusted 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). The annualized return is the lesser of: (a) 10.25%, (b)
       1.50 % over the Prime Rate (determined on a not less than quarterly
       basis) or (c) the rate set by the Board of Directors. The preferred
       dividend preference is not cumulative. As of September 30, 2002 and 2001,
       each Series "A" Preferred Share has a book value of approximately $26.51
       and accrued interest, payable monthly at the annualized rate of 6.25% and
       7.50% respectively.

       After declaring dividends for a given year to the Preferred Shareholders
       in the amount of the dividend preference, no further dividends may be
       declared on the Preferred Shares for the subject year, until the
       dividends declared on each Common Share for that year equals the dividend
       preference for each Preferred Share for such year. Any additional
       dividends generally will be allocated such that the amount of dividends
       per share to the Preferred Shareholders and Common Shareholders for the
       subject year are equal. The Preferred Shareholder's distribution
       preference and additional dividends, if any, are not cumulative.

       Preferred Shareholders 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 Common
       Shareholders and Preferred Shareholders pro rata.

       The Preferred Shares are redeemable by a shareholder, subject to the
       consent of the Board of Directors, annually on June 30 for written
       redemption requests received by May 15 of such year. The Board of
       Directors may in its 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

                                       16
<PAGE>
                       CAPITAL ALLIANCE INCOME TRUST LTD.,
                         A REAL ESTATE INVESTMENT TRUST

                          Notes to Financial Statements
           For the nine-month period ended September 30, 2002 and 2001


       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.

       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/or options and to prohibit the transfer of shares to persons
       that would result in a violation of the Trust's shareholding
       requirements. The Bylaws provide that only with the explicit approval of
       the Trust's Board of Directors may a shareholder own more than 9.8% of
       the total outstanding shares.

       The 1998 Incentive Stock Option Plan, adopted by the board of directors
       and approved by stockholders, provided options for the purchase of a
       total of 247,500 Common Shares of the Trust. Officers and employees of
       the Manager, and Directors of the Trust are the eligible recipients of
       the options. The options have a term of 10 years with a first exercise
       date generally two (2) to six (6) months after the date of the grant.
       Options for the purchase of 68,875 shares were granted April 1, 1999 with
       an exercise price of $13.50 per new Common Share (as adjusted for the 1
       for 3 reverse stock split on May 11, 2001). On February 2, 2000, options
       for the purchase of 109,750 shares were granted with an adjusted exercise
       price of $9.00 per new Common Share. On February 8, 2001, options for the
       purchase of 68,875 shares were granted with an adjusted exercise price of
       $9.06 per new Common Share. The exercise of common stock options reduced
       the number and cost of shares held in the Trust's treasury. As of
       September 30, 2002, options for the purchase of 25,574 shares of common
       stock were exercised and there are 221,926 fully vested outstanding
       options to purchase common stock at exercise prices between $9.00 to
       $13.50 per share that expire between April 1, 2009 and February 8, 2011.


                       Options        Options           Total
       Exercise       Exercised      Exercised         Options       Outstanding
         Price         in 2001        in 2002         Exercised        Options
         -----         -------        -------         ---------        -------

        9.00 (a)        6,000         13,324            19,324          90,426

        9.06 (b)          ---          3,750             3,750          65,125

       13.50 (c)          ---          2,500             2,500          66,375
                        -----         ------            ------         -------

         Total          6,000         19,574            25,574         221,926


           (a) exercise period ends February 8, 2011
           (b) exercise period ends April 1, 2009
           (c) exercise period ends May 2, 2010


       On June 19, 2001 the Board of Directors increased the Common Stock
       repurchase authorization to $550,000. On March 10, 2002, the repurchase
       authorization was increased to $695,000. As of September 30, 2002, the
       Trust's public Common Stock purchases reached 48,466 and the remaining
       repurchase authorization is $167,608. Separately, in a September 3, 2001
       private transaction, the Trust purchased 47,500 Common Shares at $13.50.
       As of September 30, 2002, the cumulative number of Common Stock purchased
       was 95,966 shares and exercised Common Stock options reduced the
       treasury's Common Stock balance to 70,392 shares.

                                       17
<PAGE>
                       CAPITAL ALLIANCE INCOME TRUST LTD.,
                         A REAL ESTATE INVESTMENT TRUST

                          Notes to Financial Statements
           For the nine-month period ended September 30, 2002 and 2001


       On November 17, 2000, the Trust duly approved (subject to satisfaction of
       miscellaneous filing requirements) a one share for each three shares (1
       for 3) reverse stock split of its Common and Preferred Shares which
       became effective at the close of business on May 11, 2001. Upon
       effectiveness of the reverse split, one (1) new Common Share and one (1)
       new Series "A" Preferred Share was exchanged for each three (3)
       outstanding Common and Preferred Share, respectively, and there were
       approximately 495,161 issued and outstanding Common Shares and
       approximately 213,820 issued and outstanding Preferred Shares. As a
       result, the January 1, 2001 Common Share treasury balance became 27,160
       post-split shares and the January 1, 2001 Preferred Share treasury
       balance became 3,176 post- split shares, each with $.01 par value. On May
       14, 2001, the commencement of post-split trading, the price of a Common
       Share on the American Stock Exchange was increased to three (3) times the
       closing price of such shares on May 11, 2001 and the Adjusted Net Capital
       Contribution attributable to each Series "A" Preferred Share was
       increased to approximately $26.51 per share, three (3) times the existing
       Adjusted Net Capital Contribution of each such Preferred Share
       (approximately $8.83) as of June 30, 2001. The authorized capital of the
       Trust remained unchanged with 5,000,000 Common Shares and 675,000 Series
       "A" Preferred Shares authorized. At the 2002 annual meeting, held on June
       14, 2002, the amendment to the corporation's Certificate of
       Incorporation, allowing a decrease in authorized capital to 2,130,000
       shares, 1,700,000 being Common Stock and 430,000 being Preferred Stock,
       each with a par value of $0.01 was approved.

15.    Earnings per share.
       ------------------

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

                                      Three Months Ended     Nine Months Ended
                                         September 30,        September 30,


                                       2002       2001       2002       2001
                                       ----       ----       ----       ----
Numerator:
   Net income                        $208,685   $325,662   $825,250   $842,131
   Less: Preferred Dividend            87,257    116,364    262,948    393,898
                                     --------   --------   --------   --------
Numerator for basic and diluted
   earnings per share                $121,428   $209,298   $562,302   $448,233

Denominator:
   Basic weighted average shares      423,036    438,936    417,226    460,913
   Effect of dilutive options (a)     101,997     50,368     85,415     50,368
                                     --------   --------   --------   --------
   Diluted weighted average shares    525,023    489,304    502,641    511,281

Basic earnings per common share      $   0.29   $   0.48   $   1.35   $   0.97

Diluted earnings per common share    $   0.23   $   0.43   $   1.12   $   0.88


          (a) Treasury share method used to determine dilutive effect.

                                       18
<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
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 tend to have higher rates of loss and
delinquency, but higher rates of interest than borrowers of higher credit
quality. Management believes there is continued strong demand for non-
conforming mortgage loans by borrowers and strong demand by investors for high
yielding, non-conforming mortgages for securitization.

      Increasing the Trust's non-warehouse mortgage notes receivable balance is
a trend that management actively seeks to continue. For the nine months ended
September 30, 2002, the Trust achieved a 6.9% increase in the non-warehouse
mortgage notes receivable balance. During the same period, however, CAFC's notes
receivable balance declined. This decline is attributable to the Trust's
accelerated purchase of mortgage notes receivable from CAFC and a temporary
delay in CAFC's origination of new loans during the first half of 2002 while a
replacement funding facility was introduced. Future notes receivable balances
will continue to be strongly influenced by the level of originations and the
availability and mix of term financing, warehouse lines of credit and other
funding facilities.

      During the recent economic downturn, the delinquencies and foreclosures of
conforming and non-conforming mortgage loans on one-to-four unit residential
properties have increased. Although the Trust's mortgage loan portfolio may
prospectively continue to incur increased delinquencies, Management believes the
underwriting criteria that limits the Trust's lending to not more than 75% of
the collaterals value at the time of the initial advance will significantly
offset the risk of increased foreclosures and potential loan losses greater than
the established reserves. For the nine months ended September 30, 2002, the
Trust increased loan loss reserves by $95,000. If economic conditions continue
to deteriorate, the Trust may need to reserve for additional loan losses.

      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
overseen and provided to the Trust by CAAI, its Manager.

      Commitments and Contingencies. As of September 30, 2002, the Trust's loan
portfolio included 98 loans totaling $18,960,365 of which 13 loans totaling
$2,844,240 and representing 16% of the loan portfolio were delinquent over two
months. One delinquent loan totaling $79,939 and representing .4% of the
portfolio was brought current by October 31, 2002. After reducing the September
30, 2002 delinquent balances for these adjustments, 12 loans totaling $2,764,301
or 15% of the loan portfolio are delinquent over two months. In assessing the
collectibility of these delinquent mortgage loans, management has established a
loan loss reserve of $275,000, if it is necessary to foreclose upon the mortgage

                                       19
<PAGE>
18 loans. For the nine months ended September 30, 2002 the Trust increased loan
loss reserves by $95,000. If economic conditions continue to deteriorate, the
Trust may need to reserve for additional loan losses.

      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
September 30, 2002 and September 30, 2001.

Results of Operations

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

      Three months and nine months ended September 30, 2002 and 2001. Revenues
for the third quarter 2002 decreased to $639,108 as compared to $829,642 for the
same period in the prior year. The decrease in revenue, during the third quarter
of 2002 was due to a loss in CAFC. The investment income from CAFC declined to
$(69,998) from $135,871 for the same period in the prior year, primarily due to
CAFC's $138,594 net increase in reserves for loan losses and secondarily from
lower interest income from lower mortgage portfolio balances. The Trust's
interest income from CAFC declined from $176,504 to $46,258 due to reduced
borrowings from the Trust.

      Expenses for the third quarter 2002 decreased to $429,239 as compared to
$500,841 for the same period in the prior year. The decreased expenses during
the third quarter of 2002 were primarily due to lower interest rates that
reduced interest expenses by $42,474. These expenses were further offset by a
reduced provision for loan losses of $14,816 and reduced amortization expenses
of $9,497.

      Revenues for the nine months ended September 30, 2002 increased to
$2,138,860 as compared to $2,126,928 for the same period in the prior year. The
revenue increased from CAIT's larger portfolio balance at a higher interest rate
that provided additional revenue of $659,752. The Trust's investment income from
CAFC declined to $(34,920) from $331,248 for the same period in the prior year
primarily due to CAFC's lower interest income and loan origination income of
$386,112 and additional provisions for loan losses of $46,696 and higher
operating expenses of $12,342 that exceeded lower interest expenses at $168,325.
The Trust's interest income from CAFC warehouse borrowers declined from $365,665
to $164,877 due to reduced borrowings from the Trust.

      Expenses for the nine months ended September 30, 2002 increased to
$1,288,384 as compared to $1,271,776 for the same period in the prior year. The
increased expenses during the same period in the prior year were primarily due
to $67,058 of increased fees earned by the Manager and a $21,609 increase in
general and administrative items. These expenses were partially offset by a
reduced provision for loan losses of $48,387 and reduced amortization expenses
of $24,475.

Inflation

      The financial statements of the Trust, prepared in accordance with
accounting principles generally accepted in the United States of America, report
the Trust's financial position and operating results in terms of historical
dollars and do 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 periods 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 Trust has term facilities of $7,000,000 and $4,000,000 with two
different lenders. Management believes that cash flow from operations, the
mortgage loans that are paid off, the disposition of real estate owned, existing
bank loan facilities, additional lines of credit anticipated, and if necessary,
the limited sale of investment mortgages will be sufficient to meet the
liquidity needs of the Trust's businesses for the next 12 months.

As of January 1, 2002, the Trust had $441,909 of cash and cash equivalents.
After taking into effect the various transactions discussed below, cash and

                                       20
<PAGE>
cash equivalents at September 30, 2002 were $222,911. The following summarizes
the changes in net cash provided by operating activities, net cash used for
investing activities, and net cash provided by financing activities.

      Net cash provided by operating activities during the nine months ended
September 30, 2002 and 2001 was $606,664 and $685,448, respectively. During the
nine months ending September 30, 2002, Net Income provided $825,250, an increase
in accounts receivable used $251,666 and an increased due affiliates balance
used $102,182. During the nine months ending September 30, 2001, Net Income
provided $842,131, an increase in other liabilities provided $62,893 and an
increased provision for loan losses provided $70,056. CAFC, the Trust's
unconsolidated investment reduced cash from operating activities by $331,248.

      Net cash used in investing activities for the nine months ended September
30, 2002 and 2001 was $187,259 and $4,883743, respectively. During the nine
months ended September 30, 2002, the use of cash is primarily due to net
increased mortgage notes receivable which used $1,304,669 and reduced affiliate
warehouse borrowing by CAFC which provided $1,171,711. During the nine months
ended September 30, 2001, cash was primarily used for a net increase in mortgage
notes receivable of $3,520,889 and secondarily from a $1,438,448 increase in
warehousing facilities to affiliates.

      Net cash used by financing activities during the nine months ended
September 30, 2002 was $638,403 and for the nine months ended September 30, 2001
provided $4,004,093. The 2002 results used cash to repay borrowings of $159,595
and $740,700 for the payment of dividends. The 2001 results provided cash by
increased borrowings of $5,614,340 and reduced cash by $845,808 for the
acquisition of treasury shares and by $764,439 for the payment of dividends.

Critical Accounting Policies

      The Trust has several accounting policies that require significant and
critical judgements to be made by the Manager.

Loan Loss Reserves. The adequacy of loan loss reserves for inherent, but unknown
loan losses is a critical accounting issue. As of September 30, 2002, the loss
reserve totaled $275,000 or 1.45% of the loan portfolio. Based upon the
historical operating results of the Trust's core business, the established
reserve appears adequate to offset the portfolio's inherent losses.

Similarly, the adequacy of loan loss reserves for inherent, but unknown loan
losses by CAFC can significantly impact the Trust's reported Investment Income
from Affiliates. As of September 30, 2002, CAFC's loss reserve totaled $215,000
or 3.38% of CAFC's loan portfolio. Based upon the historical operation results
of CAFC, this amount appears adequate to offset the portfolio's inherent losses.

Stock Options. The Trust has issued stock options to certain employees of the
Manager and to its Directors. The stock options issued are accounted for using
the intrinsic-value method. Because the options were issued with exercise prices
no less than the market price of the Trust's common stock on the dates of grant,
and because other key terms are fixed, use of the intrinsic-value method results
in the Trust not recognizing compensation expense for these options. If the
terms of these options were changed, variable accounting might need to be used,
and the Trust might then need to begin recognizing compensation expense for the
options. As of September 30, 2002 there are 221,926 fully vested outstanding
options to purchase common stock at exercise prices between $9.00 and $13.50 per
share that expire between April 1, 2009 and February 8, 2011.

Equity method of accounting. Consistent with accounting principals generally
accepted in the United States of America, the Trust's 99% economic interest in
CAFC is presented in the Trust's financial statements according to the equity
method of accounting. This presentation requires the Trust to report the CAFC
interest as an investment. As supplemental information, the Trust includes
CAFC's Balance Sheet and Statement of Operations for the nine months ended
September 30, 2002 and 2001 as part of the financial statements' footnotes. If
required, consolidation of CAFC's financial information into the Trust may
materially change the Trust's financial statement balances, but would not affect
the Trust's net income or the earnings per common share calculations.

                                       21
<PAGE>
Management has discussed the Trust's Critical Accounting Policies and the
development, selection and disclosure of the estimates and alternatives with the
Trust's Audit Committee and obtained their approval prior to filing this report
with the Securities and Exchange Commission.

                                     PART I
                                     ITEM 3.

                          QUANTITATIVE AND QUALITATIVE
                          DISCLOSURE ABOUT MARKET RISK

Forwarding-Looking Statements

      Certain statements contained herein are not based on historical
information, and certain statements contained in future filings by the Trust
with the SEC, in the Trust's press releases or in the Trust's public and
stockholder communications may not be based on historical facts and are
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements may be identified by
reference to a future period or periods, or by the use of forward-looking terms
such as "may", "will", "expect", "anticipate", or similar terms. Actual results
could materially differ from those in the forward-looking statements due to a
variety of factors.

Market Risk

      Market risk is the exposure to loss resulting from changes in interest
rates, credit spreads, foreign exchange rates, commodity prices, and equity
prices. The primary market risks to which the Trust is exposed are interest rate
risk and credit risk.

      Interest Risk. Interest rate risk is highly sensitive to many factors,
including governmental, monetary and tax policies, domestic and international
economic and political considerations and other factors beyond the control of
the Trust. Changes in the general level of the U.S. Treasury yield curve can
have significant effects on the market value of the Trust's portfolio. The
majority of the Trust's assets are fixed-rate loans with a spread to U.S.
Treasuries. The Trust's loans are valued on the September 30, 2002 balance sheet
at the lower of cost or market.

      As U.S. Treasury securities are priced to a lower yield and/or the spread
to U.S. Treasuries used to price the Trust's assets is decreased, the market
value of the Trust's portfolio may increase. Conversely, as U.S. Treasury
securities are priced to a higher yield and/or the spread to U.S. Treasuries
used to price the Trust's assets is increased , the market value of the Trust's
portfolio may decline. Changes in the level of the U.S. Treasury yield curve can
also affect, among other things, the prepayment assumptions used to value
certain of the Trust's loans. In addition, changes in the general level of the
LIBOR money market rates can affect the Trust's net interest income. The
majority of the Trust's liabilities are floating rate based on a spread over the
average one month LIBOR. A portion of the Trust's liabilities are also based on
a spread over the daily Prime Rate. As the level of LIBOR and/or the Prime Rate
increases or decreases, the Trust's interest expense will move in the same
direction.

      On account of the relatively short adjusted weighted average maturity of
the Trust's portfolio (26 months), a variety of financial instruments available
to limit the effects of interest rate fluctuations on its operations have not
been utilized. The use of these types of derivatives (such as interest rate
swaps, caps, floors and other interest rate exchange contracts) to hedge
interest-earnings assets and/or interest-bearing liabilities carry risks,
including the risk that the net losses on a hedge position may exceed the amount
invested in such instruments. As the level of variable rate mortgage financing
of the portfolio increases or the weighted average maturity of the portfolio
increases, the Trust may utilize a variety of financial instruments to limit the
effects of interest rate fluctuations.

      Credit Risk. Credit risk is the exposure to loss from loan defaults and
foreclosures. Default and foreclosure rates are subject to a wide variety of
factors, including, but not limited to, property values, supply/demand factors,
construction trends, consumer behavior, regional economics, interest rates,
price deflation, the strength of the American economy and other factors beyond
the control of the Trust.

                                       22
<PAGE>
      All loans are subject to a certain probability of default and foreclosure.
An increase in default rates will likely reduce the book value of the Trust's
assets and the Trust's earnings and cash flow available to fund operations and
pay dividends.

      The Trust manages credit risk through the underwriting process, limiting
loans at the time of funding to 75% of the collateral's appraised value,
establishing loss assumptions and carefully monitoring loan performance.
Nevertheless, the Trust assumes that a certain portion of its loans will default
and adjusts the allowance for loan losses based on that assumption. Currently
the Trust provides a loan loss reserve equal to 1.45% of the Trust's mortgage
portfolio balance. For purposes of illustration, a doubling of the assumed
losses in the Trust's portfolio would reduce third quarter 2002 GAAP income
available to common shareholders by an additional $275,000 or 131%.

Asset and Liability Management

      Asset and liability management is concerned with the timing and magnitude
of the maturity of assets and liabilities. In general, management's strategy is
to approximately match the term of the Trust's liabilities to the portfolio's
adjusted weighted average maturity (26 months).

      The majority of the Trust's assets pay a fixed coupon and the income from
such assets are relatively unaffected by interest rate changes. The Trust's
borrowings are currently under a variable rate line of credit that resets
monthly. Given this relationship between assets and liabilities, the Trust's
interest rate sensitivity gap is highly negative. This implies that a period of
falling short term interest rates will tend to increase the Trust's net interest
income, while a period of rising short term rates will tend to reduce the
Trust's net interest income.

                             One Year - Historical
                    Interest Rate Adjustment in Basis Points

<TABLE>
<CAPTION>
Borrowings         <300 bp>          <200 bp>          <100 bp>           100 bp            200 bp           300 bp
----------         --------          --------          --------           ------            ------           ------
<S>                   <C>               <C>               <C>              <C>               <C>              <C>
Net Income            12%               8%                4%               <4%>              <8%>             <11%>
   3Q-02

Net Income            12%               8%                4%               <4%>              <8%>             <12%>
   2Q-02

Net Income            12%               8%                4%               <4%>              <8%>             <12%>
   1Q-02
</TABLE>

                                     PART I
                                     ITEM 4.

                             CONTROLS AND PROCEDURES

(A) Evaluation of Disclosure Controls and Procedures. The principal executive
and financial officers of the Trust have reviewed and evaluated the
effectiveness of the design and operation of the Trust's disclosure controls and
procedures within the 90 days preceding the date of this report and have
determined (i) that such controls and procedures are operating properly and
adequately to ensure that material information relating to the Trust's
operations and required to be disclosed in this report is being made known to
them by the responsible persons involved in the Trust's operations; and (ii)
that there are neither significant deficiencies in the design and operation of
such controls and procedures that could affect the Trust's ability to record,
process, summarize and report financial data nor is there any fraud that
involves management or other employees who have a significant role in the
Trust's internal controls. The results of such review and evaluation have been
disclosed to the Trust's auditors and the Trust's audit committee.

(B) Changes in Internal Controls. There have been no significant changes in the
Trust's internal controls or in other factors that could significantly affect
those controls subsequent to the date of their evaluation. Accordingly, no
corrective actions with regard to such controls or procedures have been
required.

                                       23
<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

       During the third quarterly period ending September 30, 2002, the Trust
       purchased 2,000 common shares. Additionally, options for 4,850 common
       shares were exercised.

ITEM 3     DEFAULTS UPON SENIOR SECURITIES

       Not applicable.


ITEM 4     OTHER INFORMATION

       Press Release, Exhibit "A" attached hereto and incorporated herein,
       regarding Second Quarter 2002 Earnings dated August 7, 2002.

       Press Release, Exhibit "B" attached hereto and incorporated herein,
       announcing Fourth Quarter Dividend of $0.45 per common share dated
       October 11, 2002.

       Press Release, Exhibit "C" attached hereto and incorporated herein,
       announcing Third Quarter Earnings and Operating Results dated November
       14, 2002.


ITEM 5     REPORTS ON FORM 8-K

       Not applicable.

                                       24
<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 hereunto duly authorized.


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


Dated: November 14, 2002               By: /s/ Thomas B. Swartz
                                           ---------------------
                                           Thomas B. Swartz,
                                           Chairman and Chief Executive Officer


Dated: November 14, 2002               By: /s/ Richard J. Wrensen
                                           ----------------------
                                           Richard J. Wrensen,
                                           Chief Financial Officer
                                           Executive Vice President


                                       25
<PAGE>
                                  CERTIFICATION


         CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
          PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

         In connection with the Quarterly Report of Capital Alliance Income
         Trust Ltd. (the "Company") on Form 10-Q for the period ending September
         30, 2002 as filed with the Securities and Exchange Commission on the
         date hereof (the "Report"), I, Thomas B. Swartz, Chief Executive
         Officer of the Company, I, Richard J. Wrensen, Chief Financial
         Officer of the Company, and I, Dennis R. Konczal, President and Chief
         Operating Officer of the Company, certify, pursuant to 18 U.S.C.
         <-1-167> 1350, as adopted pursuant to <-1-167> 906 of the
         Sarbanes-Oxley Act of 2002, that:

                  (1) The Report fully compiles with the requirements of section
                  13(a) or 15(d) of the Securities Exchange Act of 1934; and

                  (2) The information contained in the Report fairly presents,
                  in all material respects, the financial condition and result
                  of operations of the Company.



Date: November 14, 2002

                           ----------------------------------------------------
                           Thomas B. Swartz
                           Chairman and Chief Executive Officer



                           ----------------------------------------------------
                           Richard J. Wrensen
                           Chief Financial Officer and Executive Vice President



                           ----------------------------------------------------
                           Dennis R. Konczal
                           President and Chief Operating Officer



                                       26
<PAGE>
                                  Certification
               of Form 10Q of Capital Alliance Income Trust Ltd.,
                     a Real Estate Investment Trust for the
                        Period Ending September 30, 2002


Under Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934


The undersigned each individually certifies that:

1.       I have reviewed this Form 10Q, dated November 14, 2002 of Capital
         Alliance Income Trust, Ltd., A Real Estate Investment Trust:

2.       Based on my knowledge, this quarterly report does not contain any
         untrue statement of a material fact or omit to state a material fact
         necessary to make the statements made, in light of the circumstances
         under which such statements were made, not misleading with respect to
         the period covered by this report;

3.       Based on my knowledge, the financial statements, and other financial
         information included in this quarterly report, fairly present in all
         material respects the financial condition, results of operations and
         cash flow of the registrant as of, and for, the periods presented in
         this quarterly report;

4.       The registrant's other certifying officers are responsible for
         establishing and maintaining disclosure controls and procedures (as
         defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
         we have:

     o   designed such disclosure controls and procedures to ensure that
         material information relating to the registrant, is made known to us by
         others within those entities, particularly during the period in which
         this report in being prepared;
     o   evaluated the effectiveness of the registrant's disclosure controls and
         procedures as of a date within 90 days prior to the filing date of this
         quarterly report (the "Evaluation Date); and
     o   presented in this report our conclusions about the effectiveness of the
         disclosure controls and procedures based on our evaluation as of the
         Evaluation Date;

5.       The registrant's other certifying officers have disclosed, based on our
         most recent evaluation, to the registrant's auditors and the audit
         committee of registrant's board of directors:

     o   all significant deficiencies in the design or operation of internal
         controls which could adversely affect the registrant's ability to
         record, process, summarize and report financial data and have
         identified for the registrant's auditors any material weaknesses in
         internal controls; and
     o   any fraud, whether or not material, that involves management or other
         employees who have a significant role in the registrant's internal
         controls; and

6.       The registrant's other certifying officers have indicated in this
         quarterly report, whether there were significant changes in internal
         controls or in other factors that could significantly affect internal
         controls subsequent to the date of our most recent evaluation,
         including any corrective actions with regard to significant
         deficiencies and material weaknesses.


[SIGNATURES ON NEXT PAGE]

                                       27
<PAGE>
Date: November 14, 2002


                            ----------------------------------------------------
                            Thomas B. Swartz
                            Chairman and Chief Executive Officer



                            ----------------------------------------------------
                            Richard J. Wrensen
                            Chief Financial Officer and Executive Vice President



                            ----------------------------------------------------
                            Dennis R. Konczal
                            President and Chief Operating Officer


                                        28
<PAGE>
                                   EXHIBIT "A"


                       CAPITAL ALLIANCE INCOME TRUST LTD.
                  ANNOUNCES SIXTH STRAIGHT QUARTER OF IMPROVED
                   EARNINGS AS COMPARED TO PRIOR YEAR QUARTERS


SAN FRANCISCO--(BUSINESS WIRE)--August 7, 2002 - Capital Alliance Income Trust
Ltd. (CAIT) (AMEX: CAA-news) a residential mortgage REIT, operating both
mortgage investment and mortgage banking businesses, announced an increase in
its earnings to $309,585 ($.53 basic and $ .43 diluted per share) for the three
months ending June 30, 2002 and $616,565 ($ 1.06 basic and $ .89 diluted) for
the six months ended June 30, 2002, as compared to earnings of $251,976 ($ .26
basic and $ .23 diluted per share) and $516,469 ($ .52 basic and $. 48 diluted
per share), respectively, for the like periods in 2001. Revenues also increased
to $758,274 for the three months ending June 30, 2002 and $1,499,752 for the six
month period ending June 30, 2002, as compared to $659,844 and $1,279,995 for
the same periods in 2001. The increase in quarterly earnings over the prior
year's respective quarter was the sixth straight such increase in a row for
CAIT. Based upon the closing stock price of August 6, 2002, CAIT's annualized
common share dividend yield is 9.63%.

CAIT's Form 10-Q and its financial statements included therein, to be filed by
August 14, 2002, will be duly certified pursuant to section 906 of the
Sarbanes-Oxley Act of 2002 (18 U.S.C. section 1350) by Thomas B. Swartz, Chief
Executive Officer and Richard J. Wrensen, Chief Financial Officer of CAIT.

Richard J. Wrensen, CAIT's Executive Vice-President and Chief Financial Officer
noted that the continuing improvement in CAIT's earnings is poised to continue
through the remainder of 2002 notwithstanding the uncertainty afflicting the
general economy, interest rates, and residential real estate values.

CAIT is a specialty residential lender which originates and invests as a
portfolio lender in high-yielding non-conforming residential mortgage loans on
one-to-four unit residential properties located primarily in California and
other western states. It also originates conforming and non-conforming loans on
residential properties for sale to investors in the secondary market on a whole
loan basis for cash through its mortgage banking subsidiary, Capital Alliance
Funding Corporation. CAIT's investment guidelines limit its portfolio mortgages
to 75% or less of the collateral's appraised value. As a REIT, CAIT is required
to distribute 90% of its annual taxable income.

This document contains "forward-looking statements" (within the meaning of the
Private Securities Litigation Reform Act of 1995) that inherently involve risks
and uncertainty. CAIT's actual results and liquidity can differ materially from
those anticipated in these forward-looking statements because of changes in the
level and composition of CAIT's investments and unforeseen factors. As discussed
in CAIT's filings with the Securities and Exchange Commission, these factors may
include, but are not limited to, changes in general economic conditions, the
availability of suitable investments, fluctuations in and market expectations
for fluctuations in interest rates and levels of mortgage prepayments,
deterioration in credit quality and ratings, the effectiveness of risk
management strategies, the impact of leverage, the liquidity of the secondary
markets and credit markets, increases in cost and general competitive factors.

Contact:     Capital Alliance Income Trust Ltd., San Francisco
             Richard J. Wrensen, Executive Vice President and CFO - 415/288-9575
             rwrensen@calliance.com
             www.calliance.com

                                       29
<PAGE>
                                   EXHIBIT "B"


                  CAPITAL ALLIANCE INCOME TRUST LTD. ANNOUNCES
                  FOURTH QUARTER DIVIDEND AT $1.80 ANNUAL RATE


SAN FRANCISCO-- (BUSINESS WIRE)--October 11, 2002 - Capital Alliance Income
Trust Ltd. ("CAIT") (AMEX: CAA-news) announced that its Board has declared a
fourth quarter dividend of $.45 per Common Share. This is CAIT's second
consecutive quarterly dividend at an annualized rate of $1.80. Based on the
current common stock price of $18.11 per share, the annualized dividend yield is
9.94%. CAIT's total dividends of $1.60 for 2002 represent a 52.4% increase over
its total dividends paid in 2001.

The fourth quarter dividend is payable on November 15, 2002 to shareholders of
record on November 8, 2002.

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

This document contains "forward-looking statements" (within the meaning of the
Private Securities Litigation Reform Act of 1995) that inherently involve risks
and uncertainties. CAIT's actual results and liquidity can differ materially
from those anticipated in these forward-looking statements because of changes in
the level and composition of CAIT's investments and unforeseen factors. As
discussed in CAIT's filings with the Securities and Exchange Commission, these
factors may include, but are not limited to, changes in general economic
conditions, the availability of suitable investments, fluctuations in and market
expectations for fluctuations in interest rates and levels of mortgage
prepayments, deterioration in credit quality and ratings, the effectiveness of
risk management strategies, the impact of leverage, the liquidity of secondary
markets and credit markets, increases in costs and other general competitive
factors.

Contact:      Capital Alliance Income Trust Ltd., San Francisco
              Richard J. Wrensen, Executive Vice President and CFO, 415/288-9575
              rwrensen@calliance.com
              www.calliance.com

                                       30
<PAGE>
                                  EXHIBIT "C"


                       CAPITAL ALLIANCE INCOME TRUST LTD.
                         ANNOUNCES RESULTS OF OPERATIONS
                         AND EARNINGS FOR THIRD QUARTER


SAN FRANCISCO--(BUSINESS WIRE)--November 14, 2002 - Capital Alliance Income
Trust Ltd ("CAIT") (Amex: CAA - News), a residential mortgage REIT, operating
both mortgage investment and mortgage banking businesses, announced earnings of
$208,685 ($ .29 basic and $.23 diluted) for the three months ending September
30, 2002 and $ 825,250 ($1.35 basic and $1.12 diluted) for the nine months ended
September 30, 2002, as compared to $ 325,662 ($ .48 basic and $ .43 diluted) and
$ 842,131 ($ .97 basic and $ .88 diluted) for the like periods in 2001. Revenues
were $ 639,108 and $2,138,860 for the three and nine month periods ending
September 30, 2002, compared to $829,642 and $2,126,928 for the same periods in
2001. CAIT's board of directors previously declared a cash dividend of $ .45 per
share, payable November 15, 2002 for the fourth quarter of 2002. Based on the
closing stock price on November 13, 2002, CAIT's $ 1.80 annualized common share
dividend yield is 9.9% .

Richard J. Wrensen, Executive Vice President and Chief Financial Officer of CAIT
noted that "the primary cause of the reduction in CAIT's earnings in the third
quarter was the pre-emptive establishment of larger loss reserves by CAIT and
its mortgage banking subsidiary, Capital Alliance Funding Corporation ("CAFC").
Recent macro-economic trends in the California economy including higher
unemployment, escalating bankruptcies, increased delinquencies and heightened
foreclosure rates suggest an increased reserve for potential loan losses is
prudent." During the third quarter, CAIT and CAFC increased their reserves by
$188,000 or approximately .74% of the combined loan portfolio. As of September
30, 2002, the combined loan loss reserve at $490,000 is 1.94% or 194 bps of
CAIT's and CAFC's combined loan portfolio.

Thomas B. Swartz, Chairman and Chief Executive Officer of CAIT also noted "that
both CAIT and CAFC manage risk through their underwriting and investment
process. All loans with a combined loan-to-value ratio of greater than 75% of
the collateral's appraised value at the time of funding are pre-sold into the
secondary mortgage market. Only residential loans with a combined loan-to-value
ratio of 75% or less are retained in CAIT's portfolio of mortgage investments.
On September 30, 2002, the combined loan-to-value of CAIT's portfolio was 67.4%.
The properties owner's unencumbered equity provides a significant buffer to
mitigate potential loan loss.

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

This document contains "forward-looking statements" (within the meaning of the
Private Securities Litigation Reform Act of 1995) that inherently involve risks
and uncertainties. CAIT's actual results and liquidity can differ materially
from those anticipated in these forward-looking statements because of changes in
the level and composition of CAIT's investments and unforeseen factors. As
discussed in CAIT's filings with the Securities and Exchange Commission, these
factors may include, but are not limited to, changes in general economic
conditions, the availability of suitable investments, fluctuations in and market
expectations for fluctuations in interest rates and levels of mortgage
prepayments, deterioration in credit quality and ratings, the effectiveness of
risk management strategies, the impact of leverage, the liquidity of secondary
markets and credit markets, increases in costs and other general competitive
factors.

                                       31