UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   FORM 10-KSB
(Mark One)
  (X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
      ACT OF 1934
                                     For the fiscal year ended December 31, 2004

                                       OR

  ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
      EXCHANGE ACT OF 1934
                                               Commission File Number: 333-11625

       CAPITAL ALLIANCE INCOME TRUST LTD., A REAL ESTATE INVESTMENT TRUST
--------------------------------------------------------------------------------
                 (Name of small business issuer in its charter)

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

         100 Pine Street
         Suite 2450
         San Francisco, California                               94111
----------------------------------                        ----------------------
         (Address of principal executive office)               (zip code)

Issuer's telephone number                                    (415) 288-9575
--------------------------------------------------------------------------------

Securities registered pursuant to Section 12(b) of the Act:

          Title of each class Name of each exchange on which registered Common
Stock $0.01 par value American Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None.

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes X   No
   ---

Registrant meets the condition of General Instruction G(1)(a) and (b) of Form
10-KSB and is filing this form 10-KSB pursuant to its reduced disclosure format.

Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B is not contained in this form and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]

Issuer's revenues for its most recent fiscal year were $2,125,857.

As of February 28, 2005, the issuer's common shares closed at $13.80 and the
aggregate market value of the issuer's shares of Common Stock, $.01 par value,
held by non-affiliates of the issuer was approximately $4,485,000. At that date
approximately 435,000 common shares were outstanding and 325,000 common shares
were held by non-affiliates.

Transitional Small Business Disclosure Format. Yes   No X
                                                       ---
<PAGE>
                                TABLE OF CONTENTS

PART I........................................................................4


ITEM 1. DESCRIPTION OF BUSINESS...............................................4
      General.................................................................4

MORTGAGE INVESTMENT BUSINESS..................................................4
      General.................................................................4
      Mortgage Loan Portfolio.................................................4
      Financing...............................................................5

WAREHOUSE LENDING BUSINESS....................................................5

MORTGAGE CONDUIT BUSINESS.....................................................5
      General.................................................................5
      Marketing and Production................................................6
      Underwriting............................................................7
      Whole Loan Sales........................................................7

HEDGING.......................................................................7

SERVICING.....................................................................8
      Servicing Portfolio.....................................................8
      Geographical Distribution...............................................8
      Interest................................................................8
      Maturity................................................................9
      Delinquencies...........................................................9

REGULATION....................................................................9

COMPETITION..................................................................10

EMPLOYEES....................................................................10

SELECTED FINANCIAL DATA......................................................11

ITEM 2. DESCRIPTION OF PROPERTY..............................................11

ITEM 3. LEGAL PROCEEDINGS....................................................11

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS..................12

PART II......................................................................12


ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.............12

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION............13

OVERVIEW.....................................................................13

CRITICAL ACCOUNTING POLICIES.................................................14
      Operating Strategy.....................................................15
      Loan Origination and Loan Servicing....................................15
      Contingencies and Commitments..........................................15

YEAR ENDED DECEMBER 31, 2004 COMPARED TO YEAR ENDED DECEMBER 31, 2003........16

LIQUIDITY AND CAPITAL RESOURCES..............................................17

LIQUIDITY AND CAPITAL RESOURCES FOR THE YEAR ENDED DECEMBER 31, 2004.........17

LIQUIDITY AND CAPITAL RESOURCES FOR THE YEAR ENDED DECEMBER 31, 2003.........17

                                       2
<PAGE>
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK....................18
      Market Risk............................................................18
      Asset and Liability Management.........................................18

ITEM 7. FINANCIAL STATEMENTS.................................................19

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURES................................................21

ITEM 8A. CONTROLS AND PROCEDURES.............................................21

PART III.....................................................................21


ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
        COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT....................21

DIRECTORS....................................................................21

AUDIT COMMITTEE - FINANCIAL EXPERTS..........................................22

EXECUTIVE OFFICERS...........................................................23

ITEM 10. EXECUTIVE COMPENSATION..............................................23

COMPENSATION OF OFFICERS.....................................................23

COMPENSATION OF DIRECTORS....................................................23
      Director Fees..........................................................23
      Committee and Other Meeting Fees.......................................23
      Reimbursements.........................................................23

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
          RELATED STOCKHOLDER MATTERS........................................24
      (a)   Equity Compensation Plan Information.............................24
      (b)   Security Ownership of Certain Non-Management or Non-Affiliate
            Beneficial Owners................................................24
      (c)   Security Ownership of Management.................................24
      (d)   Changes in Control...............................................25

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS......................25
      Arrangements and Transactions with Members of the Manager..............25
      Sale and Purchase of Loan..............................................26
      Other Business Activities..............................................26

PART IV......................................................................27


ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K....................................27
      (a)   Exhibits.........................................................27
      (b)   Reports on Form 8-K..............................................27
      (c)   Miscellaneous Exhibits...........................................28

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES..............................28

SIGNATURES...................................................................28

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF
2002.........................................................................30

CERTIFICATION OF FORM 10-KSB OF CAPITAL ALLIANCE INCOME TRUST LTD.,..........31

PRESS RELEASE................................................................32

                                       3
<PAGE>
--------------------------------------------------------------------------------
                                     PART I
--------------------------------------------------------------------------------

ITEM 1. DESCRIPTION OF BUSINESS

General
-------
         Unless the context otherwise requires, references herein to the
"Company" refer to Capital Alliance Income Trust Ltd., A Real Estate Investment
Trust (the "Trust"), and Capital Alliance Funding Corporation ("CAFC"),
collectively. The Trust was incorporated in Delaware on December 12, 1995. On
April 29, 1996 two Delaware business trusts, Capital Alliance Income Trust I and
Capital Alliance Income Trust II were merged into the Trust. On April 15, 1997
the Trust formed its non-qualified REIT subsidiary to conduct a mortgage conduit
business and holds a 99% economic interest in CAFC through ownership of all of
its Series "A" Preferred Stock. The Trust's Manager holds all of the Common
Shares of CAFC and a 1% economic interest in CAFC

         Capital Alliance Income Trust Ltd., A Real Estate Investment Trust, is
a specialty mortgage finance company, which, together with its subsidiary,
operates a mortgage banking concern that emphasizes three areas referred to
herein as (1) the Mortgage Investment Business, (2) the Mortgage Conduit
Business, and (3) the Warehouse Lending Business. All mortgage investments
originated by the Company are originated by CAFC and portfolio investments are
currently sold to the Trust by CAFC at par. The Trust directly conducts its
Mortgage Investment Business, which invests for the Trust's portfolio of
collateral-oriented, high-yielding, non-conforming residential mortgage loans
and home equity loans and its Warehouse Lending Business which provides secured
warehouse and repurchase financing to CAFC and an affiliated mortgage banker.
The Mortgage Conduit Business, which originates and purchases as a wholesale
mortgage banker, non-conforming residential mortgage loans is conducted through
CAFC in which the Trust holds a 99% economic interest. Both the Company and CAFC
are externally advised by Capital Alliance Advisors, Inc. ("CAAI" or "Manager").

         References to financial information of the Company for the years ending
2002 and 2003 reflect the financial operations of the Trust's Mortgage
Investment Business, Warehouse Lending Business, and the Trust's equity interest
in the Mortgage Conduit Business conducted by CAFC. References to financial
information of the Company for the year ending 2004 reflect the financial
operations of the Trust's Mortgage Investment Business and Warehouse Lending
Business, and the Trust's ownership in the Mortgage Conduit Business conducted
by CAFC as an asset held for sale.

MORTGAGE INVESTMENT BUSINESS

General
-------
         The Trust's Mortgage Investment Business, acquires mortgage loans which
are principally non-conforming residential mortgage loans with a maximum 75%
combined loan-to-value ratio for investment. The Mortgage Investment Business
invests in both first and junior mortgage loans. Income is earned principally
from the net interest income received on mortgage loans held in its portfolio.
Such acquisitions are financed with the Trust's shareholders' equity and
borrowings. The Company's borrowings, other than warehouse lines of credit and
repurchase financing obtained by CAFC, are restricted by the Trust's Bylaws to
four (4) times the Trust's total shareholders' equity.

Mortgage Loan Portfolio
-----------------------
         The Trust's Mortgage Investment Business invests a substantial portion
of its portfolio in non-conforming first and second mortgage loans. Although the
Trust may purchase such loans from unaffiliated third parties, mortgage
investments are primarily purchased from CAFC. Management believes that
non-conforming mortgage loans provide an attractive net earnings profile and
produce higher yields without commensurately higher credit risks when compared
with conforming mortgage loans. As a matter of investment policy, all loans held
for the Trust's portfolio have a combined loan-to-value, at the time of
origination, of not more than 75% of the collateral's value. The collateral's
value is verified by independent appraisal. As of December 31, 2004 the Trust's
Mortgage Investment Business loan portfolio totaled $19,053,474 with an average
loan size of $293,130, an average weighted yield of 11.28%, a weighted average
adjusted maturity of 41 months and a weighted average combined loan-to-value
ratio of 69.7%. First deeds of trust comprised 50% of the portfolio's dollar
value and junior deeds of trust comprised 50%. As of December 31, 2003 the
Trust's Mortgage Investment Business loan portfolio totaled $20,556,488 with an
average loan size of $221,038, an average weighted yield of 12.26%, a weighted
average adjusted maturity of 44 months and a weighted average combined
loan-to-value ratio of 69.5%. First deeds of trust comprised 28% of the
portfolio's dollar value and junior deeds of trust comprised 72%. The highest
concentration of nonconforming mortgage loans, owned by the Trust, is located in
California because of the general prevalence of higher property values and
mortgage loan balances.

                                       4
<PAGE>
Financing
---------
         The Mortgage Investment Business is financed by the shareholders'
equity and bank borrowings. The Trust's Bylaws restrict the encumbrance of the
Trust's assets to four (4) times the Trust's total shareholders' equity. The
Trust's portfolio of mortgage loans at December 31, 2004 was partially
encumbered by a bank line of credit in the amount of $25,000,000. This
encumbrance limitation does not apply to CAFC.

         The Trust may plan to issue Mortgage-backed Securities, such as
Collateralized Mortgage Obligations or mortgage pass-through certificates
representing an undivided interest in pools of mortgage loans formed by the
Trust. However, there is no assurance that the Trust will adopt financing
strategies in the future which will include the issuance of mortgage-backed
securities as an alternative financing of its Mortgage Investment Business.
Similarly, the investment policies of the Trust for its Mortgage Investment
Business and its Bylaws may be modified by the Trust's Board of Directors.

       The Trust is negotiating for additional lines of credit secured by a
portion of the Trust's mortgage loan portfolio and at rates that are consistent
with its financing objectives described herein. The Trust, through CAFC, has
obtained third-party warehouse financing at interest rates that are consistent
with its financing objectives described herein. The Trust also extends a
warehouse reverse repurchase facility to CAFC, which at December 31, 2004
aggregated $1,415,487. A reverse repurchase agreement, although structured as a
sale and repurchase obligation, acts as a financing vehicle under which CAFC
effectively pledges its mortgage loans as collateral to secure a short-term
loan. Generally, the other party to the agreement makes the loan in an amount
equal to a percentage of the market value of the pledged collateral.

WAREHOUSE LENDING BUSINESS

         The Trust's second line of business is its Warehouse Lending Business.
Such operations consist primarily of financing for its affiliated mortgage
bankers, including CAFC and Calliance Realty Fund, LLC. The non-conforming
mortgage loans funded with such financing may be acquired by the Trust for its
portfolio when such loans meet its investment criteria. These facilities provide
reverse financing for mortgage loans from the time of closing the loan to the
time of its sale or other settlement with the pre-approved investor. The Trust's
financing is non-recourse and the Trust can only look to the sale or liquidation
of the mortgage loans as a source of repayment or repurchase. Any claim of the
Trust as a secured lender in a bankruptcy proceeding may be subject to
adjustment and delay. Borrowings under these facilities are presented on the
Trust's balance sheet as "Notes receivables: Warehousing facilities to related
parties."

         The Trust provides $5 million and $1.5 million reverse repurchase
facilities to CAFC and Calliance Realty Fund, LLC. The lines of credit
outstanding on the Trust's balance sheet is structured to qualify under the REIT
asset tests and to generate income qualifying under the 75% gross income test.
The terms of the line are market based and may include a per loan fee of up to
$500 with an advance rate of 100% of the fair value of the mortgage loans
outstanding.

         Utilizing reverse repurchase agreements, at December 31, 2004, the
Trust had outstanding balances of $1,415,487 to CAFC and $0 to Calliance Realty
Fund. As of December 31, 2003, the Trust had outstanding balances of $2,638,226
to CAFC and $0 to Calliance Realty Fund. CAFC and Calliance Realty Fund, LLC are
both affiliated mortgage banking companies.

MORTGAGE CONDUIT BUSINESS

General
-------
         On November 11, 2004, the Trust was notified that its entire preferred
share ownership of CAFC would be acquired and retired by CAFC. Subsequently, the
Trust determined that its ownership of CAFC required reporting as an asset held
for sale. The Trust's ownership of CAFC is entirely comprised of preferred
stock. The Trust's preferred shares are available for immediate delivery and the
transaction is expected to be completed within one year of CAFC's common
shareholder's notification to the Trust. Management expects the sale of the
Trust's CAFC preferred stock to approximate its fair value. In all prior
reporting periods, CAFC was reported pursuant to the equity method of
accounting. The Trust does not expect to report a loss on the sale of CAFC.

         CAFC was organized on April 15, 1997 as a taxable subsidiary and began
its mortgage origination and whole loan sales operations on a start-up basis in
August, 1997. The Mortgage Conduit Business consists primarily of the
origination and the purchase and sale of mortgage loans with a complete spectrum
of credit grades secured by first liens

                                       5
<PAGE>
and second liens on single (one-to-four) family residential properties that are
originated in accordance with its underwriting guidelines. The Trust's Mortgage
Conduit Business acts as a conduit between the originators of such mortgage
loans and permanent investors in such loans. Capital Alliance Advisors, Inc.
contracts with CAFC for its management and for its mortgage origination, loan
processing and underwriting, and secondary sales services. CAFC has its
executive offices in San Francisco, a branch office in Irvine, and a satellite
office in San Diego, California. The Trust's Manager owns a 1% economic interest
and 100% of the voting control of CAFC.

         The Trust's policy for its Mortgage Investment Business, which limits
the financing or leveraging of its mortgage loan portfolio, does not apply to
its Mortgage Conduit Business since such mortgage loans are generally held in
CAFC for less than ninety days prior to their sale.

         Correspondents originate and close mortgage loans under CAFC's mortgage
loan programs on a loan-by-loan basis. Correspondents include mortgage bankers
and mortgage brokers. However, the Mortgage Conduit Business will assume the
potential risk of any increased delinquency rates and/or credit losses as well
as interest rate risk in the event there is a delay in the sale of such loans.
Normally, such on-going risks, upon the sale of a loan will pass to the
purchaser without recourse to CAFC and are reduced by the relatively short
period that such loans are held and accumulated prior to their sale. All
non-conforming loans purchased or originated by CAFC which meet the Trust's
underwriting guidelines, which include its 75% Loan-to-Value limitation, are
made available for sale to the Trust at fair market value at the date of sale
and subsequent transfer to the Trust. Loans not purchased by the Trust for its
Mortgage Investment Business will be sold in the secondary market through whole
loan sales or to an affiliate of the Manager, Calliance Realty Fund, LLC.

         The Mortgage Conduit Business acquires all of the servicing rights on
loans it originates or purchases and such servicing rights will normally be
relinquished when loans are sold into the secondary market. The Mortgage Conduit
Business generally has no on-going risk of loss after a whole loan sale other
than liability with respect to normal warranties and representations given in
such sales, fraud in the origination process or early default on such mortgage
loan.

Marketing and Production
------------------------
         CAFC's competitive strategy in its Mortgage Conduit Business is to
offer to its mortgage loan broker and correspondent network, a complete spectrum
of credit-grade residential mortgage loans to be sold in the secondary market
network. This approach attempts to shift the high fixed costs of interfacing
with the homeowner to the correspondents and brokers. The marketing strategy for
the Mortgage Conduit Business is designed to accomplish three objectives: (1)
attract a diverse group of loan originators and loan correspondents throughout
California and the western United States, (2) establish relationships with such
brokers and, (3) originate and/or purchase the loans on both an individual and
bulk basis and sell them into the secondary market or, where they meet the
Trust's underwriting standards, to the Trust's Mortgage Investment Business. To
accomplish these objectives, the Mortgage Conduit Business intends to provide
responsive and consistent underwriting and funding services to mortgage brokers
and the Manager has assured the Trust that subsequent to the sale of the Trust's
Mortgage Conduit Business, CAFC will continue to offer mortgage loans to the
Trust. CAFC and the Trust emphasize flexibility in their mortgage loan products
to attract, establish and maintain relationships. CAFC also maintains
relationships with numerous end-investors so that it may develop products that
they may be interested in as market conditions change, which in turn may be
offered through the origination network.

         A substantial portion of the mortgage loans to be originated or
purchased through the Mortgage Conduit Business are non-conforming mortgage
loans. Such non-conforming loans may involve some greater risk as a result of
underwriting and product guidelines which will differ from those applied by FNMA
and FHLMC primarily with respect to loan size, borrower income or credit
history, required documentation, interest rates, and borrower occupancy of the
mortgaged property. In general, nonconforming residential mortgage loans made to
borrowers with lower credit ratings than borrowers of higher quality, or so
called "A" grade mortgage loans, are normally subject to higher rates of loss
and delinquency than the other non-conforming loans to be purchased by the
Mortgage Conduit Business. As a result, these loans normally bear a higher rate
of interest, and may be subject to higher fees (including greater prepayment
fees and late payment penalties), than non-conforming loans of "A" quality.

         The mortgage loans originated or acquired by the Mortgage Conduit
Business that are identified for sale into the secondary mortgage market will be
secured by first liens and/or second liens on single (one-to-four) family
residential properties with either fixed or adjustable interest rates.
Fixed-rate mortgage loans have a constant interest rate over the life of the
loan, which is generally 15, 20 or 30 years. The interest rate on an adjustable
rate mortgage ("ARM") is typically tied to an index (such as LIBOR) and is
adjusted periodically at various intervals.

                                       6
<PAGE>
         The Trust's Manager, through its origination network, including the
Trust's subsidiary CAFC which is managed by CAAI, accounted for 100% of the
total mortgage loans purchased by the Trust during the year ended December 31,
2004. These loans were purchased at par.

Underwriting
------------
         The Trust's Manager, CAAI, provides documentation for the origination
or purchase of mortgage loans and performs the underwriting function for all of
the Trust's loans on a contract basis with the Trust. The Trust's Manager also
performs a full credit review and analysis to ensure compliance with its loan
eligibility requirements. This review specifically includes, among other things,
an analysis of the underlying property and associated appraisal and an
examination of the credit, employment and income history of the borrower. Under
all of these methods, loans are originated or purchased only after completion of
a legal documentation and eligibility criteria review.

         Under all of the Trust's and CAFC's underwriting methods, loan
documentation requirements for verifying the borrowers' income and assets vary
according to loan-to-value ratios, credit ratings and other factors. This
variation is necessary to be competitive and responsive to the needs of the
non-conforming mortgage loan sellers. Generally, as the standards for required
documentation are lowered, borrowers' down payment requirements are increased
and the required loan-to-value ratios are decreased. These types of loans with
less documentation are reviewed on a risk analysis underwriting basis. Reduced
documentation loans require the borrower to have a stronger credit history and
larger cash reserves and the appraisal of the property is validated by either an
enhanced desk or field review. The underwriters utilize a risk analysis approach
to determine the borrower's ability and willingness to repay the debt and to
determine if the property taken as security has sufficient value to recover the
debt in the event that the loan defaults. Each loan is reviewed for compensating
factors (i.e., credit reports, sufficient assets, appraisal, job stability,
ability to repay the loan), and overall compensating factors are reviewed to
fully analyze the risk.

         CAAI reviews each loan prior to CAFC's commitment to originate or
purchase a mortgage loan to ensure that the mortgage loans meet its quality
standards. The type and extent of the quality control review depends on the
nature of the seller and the characteristics of the loans. In performing a
quality control review on a loan, CAAI analyzes the underlying property
appraisal and examines the credit and income history of the borrower. In
addition, all documents submitted in connection with the origination or purchase
of the loans, including insurance policies, title policies, deeds of trust or
mortgages and promissory notes, are examined for compliance with the Trust's and
CAFC's guidelines, secondary market requirements, and to ensure compliance with
state and federal regulations.

Whole Loan Sales
----------------
         CAFC sells its mortgage loans on a loan-by-loan or "flow" basis,
service released. CAFC does not accumulate a pool of mortgage loans for sale to
investors in whole loan sale transactions. While the loans sold by the Mortgage
Conduit Business will generally be sold on a non-recourse basis with respect to
economic interest and rate risk, such sales will generally be made pursuant to
agreements that provide for recourse by the purchaser against the Mortgage
Conduit Business in the event of a breach of any representation or warranty made
by the Mortgage Conduit Business, any fraud or misrepresentation during the
mortgage loan origination process or upon early default on such mortgage loans.
The Mortgage Conduit Business will generally try to limit the remedies of such
purchasers to the remedies the Mortgage Conduit Business receives from the
persons from whom the Mortgage Conduit Business purchases a portion of such
mortgage loans. However, in some cases, the remedies available to a purchaser of
mortgage loans may be broader than those available to the Mortgage Conduit
Business against its seller, and should a purchaser exercise its remedies and
rights against it, the Mortgage Conduit Business may not always be able to
enforce whatever remedies it may have against its sellers.

HEDGING

         The mortgage loans held by the Mortgage Investment Business mostly
carry fixed rates and have relatively short maturities. As the portfolio of
fixed-rate mortgage loans increases or if the portfolio's scheduled maturities
increase, it is anticipated that various hedging strategies will be implemented
to provide protection against interest rate risks. The nature and quantity of
hedging transactions will be determined by the Manager based on various factors,
including market condition, the expected volume of mortgage loan originations
and purchases for investment and the mortgage volume and period of time required
to accumulate and to sell mortgage loans.

                                       7
<PAGE>
         However, an effective hedging strategy is complex and no hedging
strategy can completely insulate the Mortgage Conduit Business or Mortgage
Investment Business from interest rate risks. In addition, hedging involves
transaction and other costs, and such costs could increase as the period covered
by the hedging protection increases or in a period of rising and fluctuating
interest rates. Therefore, the Mortgage Conduit Business or Mortgage Investment
Business may be prevented from effectively hedging its interest rate risks,
without significantly reducing its return on equity.

SERVICING

         As the Trust and CAFC, respectively, acquire and originate mortgage
loans, they acquire the servicing rights. The Trust and CAFC subcontract all of
their servicing obligations under such loans to CAAI, the Manager. Servicing
includes collecting and remitting loan payments, making required advances,
accounting for principal and interest, holding escrow or impound funds for
payment of improvement holdbacks, interest, taxes and insurance, if applicable,
making required inspections of the mortgaged property, contacting delinquent
borrowers and supervising foreclosures and property dispositions in the event of
unremedied defaults in accordance with the Trust's guidelines. All or a portion
of the aforementioned servicing responsibilities may be subcontracted by the
Manager.


Servicing Portfolio
-------------------
         The following tables set forth certain information regarding the
Trust's Mortgage Investment Business servicing portfolio of loans for the years
ended.

<TABLE>
<CAPTION>
                                           December 31, 2002      December 31, 2003       December 31, 2004
                                           -----------------      -----------------       -----------------

<S>                                            <C>                    <C>                    <C>
Beginning servicing portfolio                  $17,738,923            $19,906,391            $20,556,488
Loans added to the servicing portfolio         $14,195,708            $14,827,987            $13,973,068

Loans sold, servicing released and principal
     paydowns (1)                              $12,028,240            $14,177,890            $15,476,082
                                               -----------            -----------            -----------

Ending servicing portfolio                     $19,906,391            $20,556,488            $19,053,474
                                               ===========            ===========            ===========

Number of loans serviced                               100                     93                     65
Average loan size                              $   199,064            $   221,038            $   293,130
</TABLE>

         (1) Includes normal loan payoffs, principal amortization prepayments,
and loans contributed as capital to CAFC, less reserves and foreclosures.


Geographical Distribution
-------------------------
         The following table sets forth the geographic distribution of the
Trust's Mortgage Investment Business servicing portfolio at the dates presented:

<TABLE>
<CAPTION>
                  December 31, 2002            December 31, 2003              December 31, 2004
                  -----------------            -----------------              -----------------
                Number         $-% of       Number         $-% of           Number         $-% of
 State         of loans      Portfolio     of loans       Portfolio         of loans      Portfolio
 -----         --------      ---------     --------       ---------         --------      ---------

<S>             <C>            <C>           <C>           <C>                 <C>          <C>
 CA              96             97%           91            99%                63            97%
 Other            4              3%            2             1%                 2             3%
                 --             --            --           ---                 --           ---

 Totals:        100            100%           93           100%                65           100%
                ===            ===            ==           ===                 ==           ===
</TABLE>

Interest
--------
         The weighted average interest for the Trust's Mortgage Investment
Business portfolio of loans at December 31, 2002 was 13.19%, at December 31,
2003 was 12.26% and at December 31, 2004 was 11.28%.

                                       8
<PAGE>
Maturity
--------
         The weighted average adjusted maturity of the Trust's Mortgage
Investment Business portfolio of loans at December 31, 2002 was 30 months, at
December 31, 2003 was 44 months and at December 31, 2004 was 41 months. The
following table shows the Trust's loan maturities at the dates presented.

<TABLE>
<CAPTION>
                        December 31, 2002           December 31, 2003                 December 31, 2004
                        -----------------           -----------------                 -----------------
     Terms             Amount        $-% of           Amount       $-% of            Amount         $-% of
     of Loans          of loans     Portfolio        of loans    Portfolio          of loans       Portfolio
     --------          --------     ---------        --------    ---------          --------       ---------

<S>                  <C>               <C>         <C>               <C>          <C>                 <C>
   0-12 months        $6,659,116        34%         $2,776,410        13%           3,470,019          19%
   13-24 months        2,097,044        10%          2,027,664        10%           2,373,143          12%
   25-36 months        1,227,613         6%          2,704,179        13%           2,873,214          15%
   37-48 months        3,816,916        19%          2,993,039        15%           2,130,334          11%
   Over 48             6,105,703        31%         10,055,196        49%           8,206,764          43%
                     -----------       ---         -----------       ---          -----------         ---

     Totals:         $19,906,392       100%        $20,556,488       100%         $19,053,474         100%
                     ===========       ====        ===========       ====         ===========         ====
</TABLE>

Delinquencies
-------------
         The following table shows the Trust's Mortgage Investment Business
delinquency statistics for its servicing portfolio at the dates presented.

<TABLE>
<CAPTION>
                           December 31, 2002           December 31, 2003                December 31, 2004
                           -----------------           -----------------                -----------------
         Loans            Number         $-% of        Number         $-% of           Number         $-% of
     Delinquent For:      of loans      Portfolio     of loans      Portfolio        of loans      Portfolio
     ---------------      --------      ---------     --------      ---------        --------      ---------

<S>                         <C>            <C>           <C>           <C>             <C>           <C>
     31-60 days             10             11%            7             8%              10            10%
     61-90 days              0              0%            6            10%               5             4%
     91 days +              16 (1)         19%            8 (2)        12%               6 (3)         9%
                            --             --            --            --               --            --
     Totals:                26             30%           21            30%              21            23%
                            ==             ==            ==            ==               ==            ==
</TABLE>

     (1)  12 of the 91 days+ delinquent loans were either paid off in full or
          brought current by March 31, 2003.
     (2)  Two of the 91 days+ delinquent loans were either paid off in full or
          brought current by March 15, 2004.
     (3)  Three of the 91 days+ delinquent loans were either paid off in full or
          brought current by February 28, 2005.

REGULATION

         The Trust at all times intends to conduct its business so as not to
become regulated as an investment Trust under the Investment Trust Act. The
Investment Trust Act exempts entities that are "primarily engaged in the
business of purchasing or otherwise acquiring mortgages and other liens on and
interests in real estate" ("Qualifying Interest"). Under the current
interpretation of the staff of the Commission, in order to qualify for this
exemption, the Trust must maintain at least 55% of its assets directly in
mortgage loans, and certain other Qualifying Interests in real estate. If the
Trust fails to qualify for exemption from registration as an investment trust,
its ability to use leverage in its Mortgage Investment Business would be
substantially reduced, and it would be unable to conduct its business as
described herein. The Trust has not requested a legal opinion from counsel
indicating that, it will be exempt from the Investment Trust Act.

         Because the Trust's business is highly regulated, the laws, rules and
regulations applicable to the Trust are subject to regular modifications and
change. There are currently proposed various laws, rules and regulations which,
if adopted, could impact the Trust. There can be no assurance that these
proposed laws, rules and regulations, or other such laws, rules or regulations,
will not be adopted in the future which could make compliance much more
difficult or expensive, restrict the Trust's ability to originate, broker,
purchase or sell loans, further limit or restrict the amount of commissions,
interest and other charges earned on loans originated, brokered, purchased or
sold by the Trust, or otherwise affect the business or prospects of the Trust.
Also, members of Congress and government officials have from time to time

                                       9
<PAGE>
suggested the elimination of the mortgage interest deduction for federal income
tax purposes, either entirely or in part, based on borrower income, type of loan
or principal amount. Because many of the Trust's loans are made to borrowers for
the purpose of consolidating consumer debt or financing other consumer needs,
the competitive advantages of tax deductible interest, when compared with
alternative sources of financing, could be eliminated or seriously impaired by
such government action. Accordingly, the reduction or elimination of these tax
benefits could have a material adverse effect on the demand for loans of the
kind offered by the Trust.

         Additionally, there are various state and local laws and regulations
affecting the Mortgage Conduit Business. CAFC is licensed in those states
requiring such a license. Mortgage operations also may be subject to applicable
state usury statutes. The Trust is presently in material compliance with all
material rules and regulations to which it is subject.

COMPETITION

         The Trust believes that it will continue to be able to compete in the
Mortgage Investment Business by securing from CAFC or other third parties
sufficient high yielding, risk appropriate mortgages and other real estate
investment permitted by a real estate investment trust and by providing prompt
and responsive service and flexible underwriting for independent mortgage
brokers and correspondents.

         Consolidation in the mortgage banking industry may reduce the number of
current correspondents available to the Mortgage Conduit Business, thus reducing
the Trust's potential customer base, resulting in CAFC or the Trust purchasing a
larger percentage of mortgage loans from a smaller number of sellers. Such
changes could negatively impact the Mortgage Conduit Business.

         The Trust faces competition in its Mortgage Investment Business and
Mortgage Conduit Business from other financial institutions, including but not
limited to banks, investment banks, specialty finance companies and private
mortgage investors. At present such competition is not material to Warehouse
Lending Business. Many of the institutions with which the Company competes have
significantly greater financial resources.

EMPLOYEES

         The Company has no employees. The Manager employs and provides all of
the persons required for the operation of the Company's business. At December
31, 2004, the Manager employed 19 persons. None of the Manager's employees is
subject to a collective bargaining agreement. The Manager believes that its
relations with its employees are satisfactory.




                 [ REMAINDER OF PAGE INTENTIONALLY LEFT BLANK ]



                                       10
<PAGE>
SELECTED FINANCIAL DATA

         The following table presents selected historical financial data derived
from the financial statements of the Company with CAFC reported by the equity
method of accounting for the years ended December 31, 2000, 2001, 2002, and 2003
and with CAFC reported by variable entity accounting for the year ended December
31, 2004.

         The historical financial information is not necessarily indicative of
future operations and should not be so construed. The selected financial data
should be read in conjunction with "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS."

<TABLE>
<CAPTION>
                                                       Year Ended December 31
                                                       ----------------------

Financial Summary                    2000          2001          2002          2003          2004
                                     ----          ----          ----          ----          ----

<S>                              <C>           <C>           <C>           <C>           <C>
Operations:
Revenue                          $ 1,623,656   $ 2,858,179   $ 2,866,253   $ 2,605,765   $ 2,125,857

Net income                           515,023     1,142,896     1,108,264       909,530       669,871

Per Share Data:
Weighted average basic
     earnings (split-adjusted)          --     $      1.46   $      1.81   $      1.40   $      0.80

Weighted average diluted
     earnings (split-adjusted)          --     $      1.05   $      1.50   $      1.19   $      0.69

Balance Sheet Data:
Mortgage notes receivable        $11,906,589   $17,738,923   $19,906,391   $20,556,488   $19,053,474

Total assets                      19,299,332    25,343,401    25,973,457    26,612,605    25,769,249

Total liabilities                  4,589,168    11,248,860    11,713,401    12,401,943    11,694,078

Stockholders' equity              14,710,164    14,094,541    14,260,056    14,210,662    14,075,170

Common share equity                9,125,847     8,510,224     8,675,739     8,626,345     8,490,853

Common shares (split-adjusted)       467,754       410,095       424,144       434,769       442,325

Common share book value          $     19.51   $     20.75   $     20.45   $     19.84   $     19.20
</TABLE>


ITEM 2. DESCRIPTION OF PROPERTY

         The Trust and its Manager leases executive and administrative offices
located at 100 Pine Street, Suite 2450, San Francisco, California, 94111, that
consists of approximately 5,000 square feet.

         CAFC leases space in Irvine and San Diego, California for its branch
and satellite offices on a short-term basis.

         Management believes that the terms of the leases are at least as
favorable as could have been obtained from an unaffiliated third party.
Management believes that these facilities are adequate for the Manager's, the
Trust's and CAFC's foreseeable needs and that alternate space at reasonable
rental rates is available, if necessary.

ITEM 3. LEGAL PROCEEDINGS
         The Trust and CAFC were joined as defendants in a case filed in the
Superior Court of the State of California on August 11, 2004. The plaintiff
alleged that the Trust and CAFC had failed to provide required disclosures and

                                       11
<PAGE>
alleged other violations, and sought a refund of $235,000 for payments made on
the mortgage in question as well as $665,000 of principal paid thereon, together
with punitive damages and attorney's fees. After mediation, the action was
settled on March 3, 2005 and dismissed without contribution of any monetary
payment to the plaintiff by either the Trust or CAFC.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS

         No matters were submitted to a vote of the Trust's security holders
during the last quarter of its fiscal year ended December 31, 2004.

--------------------------------------------------------------------------------
                                     PART II
--------------------------------------------------------------------------------

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Trust's Common Stock was listed and began trading on the American Stock
Exchange under the symbol "CAA" on October 1, 1998. The range of high and low
sale prices of the Common Stock as quoted on the American Stock Exchange for the
last three years were:

      Year           Quarter            High            Low         Dividend per
                                                                    Common Share
--------------    --------------    ------------    ------------   -------------
      2002              1st             14.20           12.91            0.30
                        2nd             22.50           14.45            0.40
                        3rd             21.15           17.70            0.45
                        4th             18.99           17.25            0.45

      2003              1st             17.25           15.90            0.45
                        2nd             19.20           16.00            0.45
                        3rd             19.48           17.01            0.45
                        4th             19.38           17.77            0.00

      2004              1st             20.90           17.96            0.45
                        2nd             20.35           16.00            0.45
                        3rd             17.87           16.71            0.30
                        4th             17.50           13.25            0.00
      2005         Jan.1 - Feb.28       14.64           13.30            0.10

         On December 31, 2004, there were approximately 60 holders of record
(including holders who are nominees for an undetermined number of beneficial
owners) of the Trust's Common Stock and 90 holders of record (including holders
who are nominees for an undetermined number of beneficial owners) of the Trust's
Preferred Stock, which is not publicly traded. The Trust believes that its
Preferred and Common Stock is beneficially held by in excess of 750
shareholders.

         To maintain its qualification as a REIT, the Trust has made and intends
during 2005 to make annual distributions to stockholders of at least 90% of its
taxable income (which may not necessarily equal net income as calculated in
accordance with GAAP), determined without regard to the deduction for dividends
paid and excluding any net capital gains or loan loss reserves. The Trust's
Board of Directors meets to declare the quarterly Common dividend distributions
and monthly Preferred dividend distributions. Any taxable income remaining after
the distribution of the dividends will be distributed annually on or prior to
the date of the first regular Common dividends payment date of the following
taxable year. The dividend policy is subject to revision at the discretion of
the Board of Directors. All distributions in excess of those required for the
Trust to maintain REIT status will be made by the Trust at the discretion of the
Board of Directors and will depend on the financial condition of the Trust and
such other factors as the Board of Directors deems relevant.

         The Board of Directors has not established a minimum distribution level
for the Trust's Common Stock. During 2004, the Trust paid quarterly dividends on
the Common Stock for the quarters ending March 31, June 30, September 30, and
December 31 at $0.45, $0.45, $0.30 and $0.00 per share respectively. The Trust
reinstated its Common Share dividend in the first quarter of 2005 at $0.10 per
Common Share. The Trust also paid 12 consecutive monthly dividends during 2004
on the Preferred Stock at an average of approximately $.126 per share per month.
During 2003, the Trust paid quarterly dividends on the Common Stock for the
quarters ending March 31, June 30, September 30, and December 31 at $0.45,

                                       12
<PAGE>
$0.45, $0.45 and $0.00 per share respectively. The Trust also paid 12
consecutive monthly dividends during 2003 on the Preferred Stock at an average
of approximately $.126 per share per month.

         Holders of the Preferred Shares 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.

         After declaring dividends for a given year to the Preferred Shares in
the amount of the dividend preference, no further distributions 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 Distributions associated with a payment date
that is declared after the Directors have declared Distributions on Common
Shares in the amount of the additional dividend generally will be allocated such
that the amount of dividends per share to the Preferred Shares and Common Shares
for the subject year is equal. The Preferred Shares additional dividend is not
cumulative.

         Distributions to stockholders are generally taxable as ordinary income,
although a portion of such distributions may be designated as capital gain or
may constitute a tax-free return of capital.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

         Certain statements contained herein are not based on historical
information, and certain statements contained in future filings by the Company
with the SEC, in the Company's press releases or in the Company'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.

         Preparation of Company's financial statements is based upon the
operating results of the Trust and CAFC. Management's discussion and analysis of
the results of operation for the years ended December 31, 2004 and December 31,
2003 follows.

OVERVIEW

         In May of 1997, the Trust registered its common shares with the
Securities and Exchange Commission under the Securities Act of 1933. On
September 30, 1998, the initial public offering of Common Shares was completed.
Since October 1, 1998, the common shares have been listed on the American Stock
Exchange with the exchange symbol of "CAA".

         From 1997 through 2003, the Trust's financial statement reported CAFC
by the equity method of accounting. The equity method of accounting records an
equity investment at cost and adjusts it by the investment's share of earnings
or losses and decreases it by dividends received.

         For year end 2004, the Trust implemented reporting CAFC pursuant to the
requirement of Financial Accounting Standards Board Interpretation No.46 ("FIN
46"). The interpretation requires the consolidation of variable interest
entities such as CAFC and the Trust's Mortgage Investment and Warehouse Lending
Businesses to report the Company's results.

         Prior to year end 2004, Management identified CAFC as an asset held for
sale within the meaning of Financial Accounting Standard No.144 ("FAS 144"). On
November 11, 2004, CAFC's common shareholder notified the Trust of its intention
to retire 100% of CAFC's preferred stock. The Trust's investment in CAFC is
entirely comprised of preferred stock. The Trust's preferred shares are
available for immediate delivery and the transaction is expected to be completed
within one year of CAFC's common shareholder's notification. Management expects
the sale of the Trust's CAFC preferred stock to approximate its fair value.

         Since the pending transfer of the Trust's interest in CAFC satisfies
the disposal criteria of FAS 144, the Trust's interest in CAFC's net income is
presented as a non-revenue line item in the Trust's 2004 statement of operations
and CAFC's assets are reported in the Trust's 2004 balance sheet as an asset
held for sale.

                                       13
<PAGE>
         Management believes the retirement of the Trust's preferred share
investment in CAFC will provide numerous benefits. These benefits include:
restoring the Trust to its original intent as an investor in non-conforming
mortgages; reducing a source of volatility in the Trust's reported net income;
reducing the cost of annual audits and quarterly reviews; reducing the costs of
Sarbanes Oxley compliance; reducing the number of related party transactions;
simplifying the process of cost allocation; and accelerating the compilation and
reporting of operating results. The costs of disposing of the Trust's investment
in CAFC include: the loss of CAFC's potential profitability; less control over
the mortgage investment supply chain; and restrictions of the Trust's access to
CAFC's funding agreement. During 2004, 2003, 2002, 2001, and 2000, CAFC has
generated annual net income or (net loss) of $134,745, ($162,763), ($25,901),
$385,006, ($494,452), respectively, or a cumulative (net loss) of ($163,365)
during the last five years. CAFC has never paid a dividend.

CRITICAL ACCOUNTING POLICIES

         The accounting and reporting policies of the Company are in accordance
with accounting principles generally accepted in the United States of America.
The Company's significant accounting policies are described in the notes to the
financial statements. Certain accounting policies require management to make
significant estimates and assumptions, which have a material impact on the
carrying value of certain assets and liabilities, and the Company considers
these to be critical accounting policies. The estimates and assumptions used are
based on historical experience and other factors, which management believes to
be reasonable under the circumstances. Actual results could differ significantly
from these estimates and assumptions, which could have a material impact on the
carrying value of assets and liabilities at the balance sheet dates and results
of operations for the reporting periods.

         The following are critical accounting policies that require the most
significant estimates and assumptions that are particularly susceptible to a
significant change in the preparation of the financial statements and are not
presented in their relative order of importance.

Revenue recognition. Interest income accrues as it is earned. Loans may be
placed on a nonaccrual status when any portion of the principal or interest is
three scheduled payments past due or earlier when concern exists as to the
ultimate collectibility of principal or interest. Nonaccrual status loans are
returned to an accrual status when principal and interest become current and are
anticipated to be fully collectible.

Allowance for Loan Losses. A provision for loan losses in based on management's
evaluation of an amount that is adequate to absorb losses inherent in the
existing loan portfolio. The evaluation, which includes a review of all loans on
which full collection may not be reasonably assumed, considers among other
matters, general economic conditions, the fair market value or the estimated net
realizable value of the underlying collateral, past loan loss experience, trends
in loan delinquency and other factors that warrant recognition in providing for
an adequate loan loss allowance to absorb inherent losses.

Real estate owned. Real estate owned represents property acquired in foreclosure
of mortgage notes receivable. The real estate is carried at the lower of the
value of the mortgage note receivable less selling costs on the real estate or
fair market value. Certain estimates and assumptions are required in determining
the cost to sell or in estimating the fair market value of the real estate.

Stock option. 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.

Assets held for sale. CAFC is identified as an asset held for sale and disposal
of this asset is expected within the twelve month period permitted by FAS 144.
On November 11, 2004, the Manager notified the Trust of its intention to retire
100% of the CAFC preferred stock owned by the Trust and concurrently issue a new
class of CAFC preferred to CAFC's sole common shareholder. The Trust does not
expect to recognize any loss on the transaction.

         Pursuant to FIN 46, the Trust's interest in CAFC was initially combined
with the Trust's 2004 financial statements to present the Company's consolidated
financial statements. The presentation was then adjusted pursuant to

                                       14
<PAGE>
FAS 144. As a result, the Trust's Mortgage Investment and Warehouse Lending
Businesses report the Trust's operating results and the Trust's interest in the
income from CAFC's operations is reported as income from assets held for sale (a
non-revenue line item) and the Trust's investment in CAFC is reported as an
asset held for sale. Included in the footnotes to the Trust's financial
statements are CAFC's financial statements for the year ended December 31, 2004.

Equity method of accounting. During 2003, the Trust's interest in CAFC is
presented in the Trust's financial statements according to the equity method of
accounting. The equity method of accounting recorded the Trust's equity
investment in CAFC at cost and adjusted the investment balance for the Trust's
share of CAFC's earnings or losses. This presentation requires the Trust to
report the CAFC interest as an investment. Included in the footnotes to the
Trust's financial statements are CAFC's financial statements for the year ended
December 31, 2003.

         Management has discussed the Trust's critical accounting policies and
the development, selection and disclosure of the estimates and alternatives with
the Audit Committee of the Trust's Board of Directors and obtained their
approval prior to filing this report with the Securities and Exchange
Commission.

Operating Strategy
------------------
         The Trust invests as a portfolio lender primarily in California
non-conforming mortgage loans on one-to-four unit residential properties
primarily secured by first and second deeds of trust. Management believes that
this segment of the mortgage market is inadequately served and that there is a
large demand for non-conforming mortgage loans with a complete spectrum of
credit grades.

         CAFC's operating strategy is to originate, through mortgage loan
brokers, conforming and non-conforming home equity loans to be sold to the Trust
and to be sold in the secondary mortgage market for cash. Although the loans
currently made are concentrated in California, CAFC may originate and/or
purchase loans on both an individual and bulk basis throughout the western
United States. Loans will then be sold into the secondary market for a premium
or to the Trust at fair market value, when they meet the Trust's underwriting
standards (which currently include a combined loan-to-value ratio that does not
exceed 75% of the underlying collateral).

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 collateral for a home equity loan, processing such
information and underwriting and funding the mortgage loan. Mortgage loan
servicing consists of collecting payments from borrowers making required
advances, accounting for principal and interest payments, holding borrowed
proceeds in escrow until fulfillment of mortgage loan requirements, contacting
delinquent borrowers, supervising foreclosures and property dispositions in the
event of unremedied defaults and performing other administrative duties. All or
a portion of the aforementioned servicing responsibilities may be subcontracted
by the Manager.

Contingencies and Commitments
-----------------------------
         The Trust's loan portfolio consists of the mortgages held by the
Mortgage Investment Business and CAFC. As of December 31, 2004, the Mortgage
Investment Business portfolio totaled $19,053,474 consisting of 65 loans, of
which 11 loans totaling $2,534,083 or 13% of the portfolio loan value were
delinquent over 60 days. As of February 28, 2005, three of the delinquent loans
were brought current or paid off and 8 loans totaling $2,061,438 or 11% of the
December 31, 2004 portfolio balance remained delinquent. As of December 31,
2004, the Trust held one property as a real estate investment.

         As of December 31, 2003, the Trust's Mortgage Investment Business owned
a loan portfolio of $20,556,488 consisting of 93 loans, of which 14 loans
totaling $4,518,527 or 22% of the portfolio loan value were delinquent over 60
days. As of March 15, 2004, four of the delinquent loans were brought current or
paid off and 10 loans totaling $2,788,312 or 14% of the December 31, 2003
portfolio balance remained delinquent. As of December 31, 2003, the Trust held
one property as a real estate investment.

         In assessing the delinquent mortgage loans, management estimates a net
gain will be recognized, if it is necessary to foreclose on the delinquent
mortgage loans due the Trust. Estimates are based on an anticipated sales price
of the foreclosed property that includes a discount from the latest appraised
value of the property, less the sum of pre-existing liens, costs of disposition,
the face amount of the mortgage loan and accrued interest receivable.

                                       15
<PAGE>
         CAFC generally issues loan commitments only on a conditional basis and
generally funds such loans promptly upon removal of all conditions. Accordingly,
there were no commitments to fund loans as of December 31, 2004 and December 31,
2003.

         As of December 31, 2004, the following table summarizes the Trust's
outstanding repayment obligations.

<TABLE>
<CAPTION>
        Maximum Other              Total
 Commercial Commitments (a)       Amounts                  Amount of Commitment Expiration Per Period
   as of December 31, 2004        Committed
----------------------------    -----------      -------------------------------------------------------------
                                                 Less than                             3 - 5           After 5
                                                   1 year         1 - 3 years          years            years
                                                   ------         -----------          -----            -----

<S>                             <C>                  <C>           <C>                   <C>              <C>
Lines of Credit (b)             $8,247,541           0              8,247,541            0                0
Standby Repurchase                  (c)              0                 0                 0                0
Obligations
Total Commercial Commitments    $8,247,541           0             $8,247,541            0                0
</TABLE>

(a)  Commercial commitments are funding commitments that could potentially
     require registrant performance in the event of demands by third parties or
     contingent events, such as under lines of credit extended or under
     guarantees of debt.

(b)  The Mortgage Investment Business' outstanding obligations as of December
     31, 2004 due in 1-3 years were $8,247,541.

(c)  The Mortgage Conduit Business has an unquantified ongoing liability with
     respect to normal warranties and representations which includes fraud in
     the origination process or early default on loans sold into the secondary
     mortgage market.

YEAR ENDED DECEMBER 31, 2004 COMPARED TO YEAR ENDED DECEMBER 31, 2003

         Revenues for the year ended December 31, 2004 decreased to $2,125,857
as compared to $2,605,765 for 2003. During 2004 a smaller mortgage investment
portfolio provided $574,708 of less interest income due to reduced lending
levels and lower interest rates while interest income from affiliates borrowings
decreased $53,906 due to reduced average affiliate borrowings. Investment income
increased by $155,372 as a result of eliminating CAFC's income as a revenue line
item.

         At year ended December 31, 2004, the Company's mortgage notes
receivable balance was $1,503,014 less than the mortgage notes receivable
balance for the year ended December 31, 2003. At year ended December 31, 2004,
the warehouse lines of credit balance to related parties was $1,222,739 less
than the year ended December 31, 2003. At year ended December 31, 2004, the real
estate held for sale balance was $265,000 more than the year ended December 31,
2003 balance.

         Expenses for the year ended December 31, 2004 decreased to $1,468,688
as compared to $1,696,235 for the previous year. The decrease in 2004 compared
to 2003 is primarily due to lower management fees to related parties of
$101,835, lower interest expenses of $118,588 due to reduced average borrowings,
lower provisions for loan losses of 46,037 and decreased amortization expenses
of $27,876. During 2004 general and administrative expenses increased $71,986
primarily due to increased professional fees, insurance expenses and bank fees.

         During 2004, there were real estate owned losses in the amount of
$105,404, real estate expenses of $15,429, and income of $133,397 from CAFC. The
2004 losses from sales of real estate held, real estate owned operating expenses
and the income from the asset held for sale were reported as separate line items
and did not reduce the year's expenses or increase the year's revenues.

         Net Income for the year ended December 31, 2004 was $669,871. Net
income for the year ended December 31, 2003 was $909,530.

                                       16
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES

         As of January 1, 2004, the Trust had lines of credit of $9,000,000 and
$2,750,000 with two different lenders. Both of these credit facilities matured
in 2004 and were retired. During 2004, the Company secured a $25,000,000
repurchase facility. Management believes that cash flow from operations, the
mortgage loans that are paid off, additional credit facilities that may be
obtained during 2005 and, if necessary, the limited sale of investment mortgages
will be sufficient to meet the liquidity needs of the company's businesses for
the next twelve months.

LIQUIDITY AND CAPITAL RESOURCES FOR THE YEAR ENDED DECEMBER 31, 2004

         As of January 1, 2004, the Trust had $1,038,010 of cash and cash
equivalents. After taking into effect the various transactions discussed below,
cash and cash equivalents at December 31, 2004 were $155,462. 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.

         The principal source of the Trust's increased liquidity was from
investing activities. The primary use of cash was financing activities.

         Net cash provided by the operating activities during the year ended
December 31, 2004 was $985,592. Net Income of $669,871, the increase in other
liabilities of $126,420, and the non-cash provision for loan losses of $84,000
were the primary providers of cash. The primary operating activity use of cash
was the increase in accounts receivable of $100,719.

         Net cash of $2,477,623 was provided from investing activities.
$13,973,068 was invested in mortgage notes receivable and repayments provided
$15,214,076.

         Net cash used in financing activities during the year ended December
31, 2004 was $4,315,763. Payments of bank loans of $11,773,149 and dividends
paid of $842,906 were the largest uses of cash from financing activities. The
primary provider of cash from financing activities was $8,247,541 drawn from
bank lines of credit. Net treasury stock sales and expensed options provided
$26,912 while the issuance of new common shares provided $25,839.

LIQUIDITY AND CAPITAL RESOURCES FOR THE YEAR ENDED DECEMBER 31, 2003

         As of January 1, 2003, the Trust had $494,443 of cash and cash
equivalents. After taking into effect the various transactions discussed below,
cash and cash equivalents at December 31, 2003 were $1,038,010. 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.

         The principal source of the Trust's increased liquidity was from
operating activities. The primary use of cash was investing activities.

         Net cash provided by the operating activities during the year ended
December 31, 2003 was $1,020,824. Net income of $909,530 and the non cash equity
in loss of affiliate of $155,372 were the primary providers of cash. The primary
operating activity uses of cash was the increase in accounts receivable of
$115,796, and the decrease in other liabilities of $71,221.

         Net cash of $314,507 was used in investing activities. $14,827,987 was
invested in mortgage notes receivable and repayments provided $13,504,757. A
decrease in affiliate warehousing provided $744,714.

         Net cash used in financing activities during the year ended December
31, 2003 was $162,750. The primary provider of cash from financing activities
was $800,799 drawn from bank lines of credit while net treasury stock
transactions and exercised options used $91,111 in financing activities.
Dividends paid of $890,438 was the largest use of cash from financing
activities.

                                       17
<PAGE>
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

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 Trust's primary market risks 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. The Trust's loans are
valued on the December 31, 2004 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 are 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
United States Prime Rate can affect the Trust's net interest income. The
majority of the Trust's liabilities are floating rate based on a spread over the
Prime Rate. As the level of the Prime Rate increases or decreases, the Company's
interest expense will move in the same direction.

         On account of the relatively short adjusted weighted average maturity
of the Trust's portfolio (41 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, the
strength of the American economy and other factors beyond the control of the
Trust.

         All loans are subject to a certain probability of default and
foreclosure. An increase in default rates will 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. For purposes
of illustration, a doubling of the reserve for loan losses in the Trust's
Mortgage Investment Business for 2004 would reduce the 2004 GAAP income
available to common shareholders by $175,000 or 50%.

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 (41 months).

         CAFC's assets and liabilities are significantly shorter. The majority
of CAFC's assets is presold at origination for delivery within 60 days and is
financed with a repurchase facility that provides up to 60 days of financing.

         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 variable rate lines of credit that reset 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.

                                       18
<PAGE>
         CAFC's assets are a fluctuating mix of fixed and variable rate
mortgages. At origination, the disposition of these loans is identified and
their secondary market sales pricing is usually predetermined. Given this
relationship, CAFC's interest rate sensitivity is neutral, if secondary mortgage
market purchase commitments are honored.


ITEM 7. FINANCIAL STATEMENTS

         The following Company financial statements are filed as part of this
report:

              Independent Auditors' Report ...........................  F-1
              Balance Sheets .........................................  F-2
              Statements of Operation ................................  F-3
              Statements of Changes in Stockholders' Equity ..........  F-4
              Statements of Cash Flows ...............................  F-5
              Notes to Financial Statements ..........................  F-6


         The unaudited 2004 and 2003 fourth quarter operating statement is
presented on the next page with the accompanying notes to the operating
statement incorporated herein by reference to the Financial Statements with
Independent Auditor's Report for the two year period ended December 31, 2004.





                 [ REMAINDER OF PAGE INTENTIONALLY LEFT BLANK ]



                                       19
<PAGE>
                       CAPITAL ALLIANCE INCOME TRUST LTD.
                         A REAL ESTATE INVESTMENT TRUST
                            STATEMENTS OF OPERATIONS
                                   (unaudited)
<TABLE>
<CAPTION>
                                                                    Three Months Ended
                                                                       December 31
                                                                    2004         2003
                                                                    ----         ----
<S>                                                               <C>          <C>
REVENUES
     Interest income                                              $ 438,423    $ 605,119
     Interest income from affiliates                                 50,211       65,892
     Investment income from affiliates                                 --        (34,201)
     Other income                                                       133         (335)
                                                                  ---------    ---------
         Total revenues                                             488,767      636,475

EXPENSES
     Loan servicing fees to related party                            82,154      120,933
     Management fees to related parties                              50,453       70,872
     Interest expense on loans                                      139,341      113,101
     Interest expense on loans from related parties                    --          5,400
     Provisions for loan losses                                      35,000       51,893
     Taxes                                                            5,000        4,800
     Amortization                                                      --          9,176
     General and administrative                                      66,197       59,555
                                                                  ---------    ---------
         Total expenses                                             378,145      435,730
                                                                  ---------    ---------

INCOME FROM CONTINUING OPERATIONS                                 $ 110,622    $ 200,745

     Operating expenses of real estate owned                         (1,955)        --
     Gain (Loss) on real estate owned                               (55,404)        --
     Income from asset held for sale                                 42,951         --
                                                                  ---------    ---------
         Total and real estate owned                                (14,408)        --
                                                                  ---------    ---------

NET INCOME                                                        $  96,214    $ 200,745
                                                                  =========    =========

PREFERRED DIVIDENDS                                               $  86,096    $  76,788
                                                                  =========    =========

NET INCOME AVAILABLE TO COMMON                                    $  10,118    $ 123,957
                                                                  =========    =========

BASIC EARNINGS PER COMMON SHARE
     BEFORE GAIN ON ASSETS HELD FOR SALE                          $    0.05    $    0.29
     FROM ASSETS HELD FOR SALE                                    $   (0.03)   $    --
                                                                  =========    ==========
     TOTAL EARNINGS PER SHARE                                     $    0.02    $    0.29
                                                                  =========    =========

DILUTED EARNINGS PER COMMON SHARE
     BEFORE GAIN ON ASSETS HELD FOR SALE                          $    0.05    $    0.24
     FROM ASSETS HELD FOR SALE                                    $   (0.03)   $    --
                                                                  =========    =========
     TOTAL EARNINGS PER SHARE                                     $    0.02    $    0.24
                                                                  =========    =========

DIVIDENDS PAID PER PREFERRED SHARE                                $    0.41    $    0.36
                                                                  =========    =========

DIVIDENDS PAID PER COMMON SHARE                                   $    0.00    $    0.00
                                                                  =========    =========

BASIC COMMON SHARES                                                 439,813      429,769
                                                                  =========    =========

DILUTED COMMON SHARES                                               496,623      507,735
                                                                  =========    =========
</TABLE>

                 See accompanying notes to financial statements.

                                       20
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
         None.

ITEM 8A. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures. The Chief Executive
Officer, the President and Chief Operating Officer, and the Executive
Vice-President and Chief Financial Officer of the Trust have, based on their
evaluation of the Trust's disclosure controls and procedures within 90 days of
the filing date of this annual report, evaluated the effectiveness of such
controls and procedures. Based on such evaluations, they have concluded that the
Trust's disclosure controls and procedures have effectively operated to ensure
that all material information relating to the Trust and its operations and
financial condition has been made known to them by other officers and employees
within the Trust and its Manager on a timely basis.

(b) Changes in Internal Controls. There were no significant changes in the
Trust's internal controls or in other factors that could significantly affect
those controls subsequently to the date of the evaluation set forth in item
8(a).

ITEM 8B. OTHER INFORMATION
         None

--------------------------------------------------------------------------------
                                    PART III
--------------------------------------------------------------------------------

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE
ACT

DIRECTORS

Thomas B. Swartz, 73; Chairman and Chief Executive Officer (1)

         Class I Director since 1995; current term expires in 2006; Chairman and
Chief Executive Officer, Capital Alliance Advisors, Inc. (1989 to date);
Chairman, Capital Alliance Income Trust I (1991 to 1996) and Capital Alliance
Income Trust II (1994 to 1996); Chairman, Sierra Capital Acceptance (1995 to
2000); Chairman and Chief Executive Officer of Sierra Capital Companies and its
Affiliates (1980 to date); Founder Chairman, Chief Executive Officer and Trustee
of seven equity real estate investment trusts (1980-1991); Attorney at Law,
Thomas Byrne Swartz, Inc. (1980 to date), and Bronson, Bronson, & McKinnon, San
Francisco, California (Partner 1960-1980); Past President (1989-1990) and
Member, Board of Governors (1983 to 1993), National Association of Real Estate
Investment Trusts; Director (representing Federal Deposit Insurance Corporation)
of two subsidiaries of American Diversified Savings Bank (in liquidation) (1990
to 1992) Member, Real Estate Advisory Committee to California Commissioner of
Corporations (1972-1973); University of California at Berkeley Boalt School of
Law, L.L.B. 1959; Lieutenant, U.S.N.R. 1954-1956 (active) and to 1967 (reserve);
Yale University, A.B. 1954.

Dennis R. Konczal, 54; President, Director and Chief Operating Officer (1)

         Class II Director since 1995; current term expires in 2007; President
(1996 to date) and Executive Vice President (1989 to 1996) and Chief Operating
Officer, Capital Alliance Advisors, Inc.; Executive Vice-President, Trustee and
Chief Operating Officer of Capital Alliance Income Trust I (1991 to 1996) and of
Capital Alliance Income Trust II (1994 to 1996); President and Director, Sierra
Capital Acceptance (1995 to 2000); President, Director and Chief Operating
Officer of Sierra Capital Companies (1984 to date) and of Capital Alliance
Investments Incorporated (a NASD broker-dealer and Registered Investment
Advisor) (1984 to 1999); Director, President and Chief Operating Officer,
Granada Management Corporation and Granada Financial Services, Inc.,
agribusiness concerns (1981-1984); Licensed Principal, NASD (1981 to date); B.S.
Agricultural Economics, Michigan State University (1972).

Richard J. Wrensen, 49; Executive Vice-President, Director and Chief Financial
Officer (1)

         Class III Director since 2000; current term expires 2005; Executive
Vice-President and Chief Financial Officer, Capital Alliance Advisors, Inc. and
its Affiliates (including Capital Alliance Income Trust Ltd. and of Sierra

                                       21
<PAGE>
Capital Companies and its affiliates) (1997 to date); Senior Vice-President and
Chief Financial Officer, SNK Realty Group (Japanese merchant builder) (1997);
Vice-President Finance, Mattison and Shidler (national real estate investment)
(1987 to 1997); Associate, Marakon Associates (1985 to 1987); Vice-President and
Controller, Ring Brothers Corp. real estate syndication and management (1981 to
1983); Division Controller, Great Southwest Corp. (1979 to 1981); Certified
Public Accountant (1979); Coopers & Lybrand (1978 to 1979); B.S. Accounting,
University of Florida (1978); MBA, Haas School of Business Administration,
University of California, Berkeley (1985).

Stanley C. Brooks, 56; Director (2)(3)(4)

         Class II Director since 1996; current term expires 2007; President and
Chairman, Brookstreet Securities Corporation (1990 to date); Executive
Vice-President, Toluca Pacific Securities Corporation (1987 to 1989); Senior
Vice-President, First Affiliated Securities (1983 to 1986); Senior
Vice-President, Private Ledger Financial Services (1976 to 1983); Member,
National Futures Association (1991 to date); Member, National Investment Bankers
Association (1990 to date); Licensed Principal, NASD (1976 to date); California
State Polytechnic Institute, B.S. Business Administration 1970.

Harvey Blomberg, 64; Director (1)(2)(3)

         Class I Director since 1996; current term expires 2006; Founder and
principal MRHB Real Estate (real estate management company) (1988 to date);
Regional Director, Connecticut Small Business Development Center (1996 to date);
Partner and Chief Financial Officer, Bay Purveyors, Inc. (1976 to 1995); General
Manager, Deerfield Communications (1987 to 1990); Consultant to numerous
companies (financial restructuring, refinancing and marketing) (1989 to date).
Rensselaer Polytechnic Institute, M.S. Management, 1995; Hofstra University,
M.B.A. 1985; B.S. Engineering, 1966.

Donald R. Looper, 52; Director (2)(3)(4)

         Class III Director since March 2001; current term expires 2005; Senior
Partner of the Houston-based law firm of Looper, Reed, & McGraw (1985 to date);
Mr. Looper's legal practice has involved the representation of both public and
privately-owned corporations and the complex structuring of substantial
financings involving mortgage financings of real estate and international
business transactions. University of Texas, B.A. degree (1974); Master of
Professional Accounting degree (specialization in Tax Accounting) (1976),
University of Texas; J.D. degree in Law, University of Houston (1979). Licensed
to practice law in Colorado (1979) and Texas (1981).
_________________________

(1)  Also is a member of the Executive Committee.
(2)  Also is a member of the Audit Committee.
(3)  Also is an Independent Director as defined in Rule 121A of the American
     Stock Exchange.
(4)  Also is an Audit Committee Financial Expert

AUDIT COMMITTEE - FINANCIAL EXPERTS

         Relevant qualifying experience of the designated Audit Committee
Financial Expert, in addition to that set forth above under Item 9, is as
follows:

Stanley C. Brooks

       Chairman, President, and Registered Financial Principal of Brookstreet
Securities Corporation; Responsible for arranging all financings obtained,
managing cash flow, preparing and filing with the SEC monthly focus reports, and
the monthly closing and reviewing of the books of Brookstreet Securities
accounting record, ledgers, and financial statements.

Donald R. Looper

       Senior Partner of Looper, Reed, & McGraw; Responsible for providing tax
advice and financial accounting advice to several public companies, conforming
footnote descriptions and text reports within financial statements to regulatory
standards, and preparing private offerings for transactions secured by real
estate.

                                       22
<PAGE>
EXECUTIVE OFFICERS

         The following persons currently serve as executive officers of the
Trust or, where indicated, the Trust's Manager. The Trust's Executive Officers
hold office at the discretion of the Directors.

          Name                 Age         Position
          ----                 ---         --------

    Thomas B. Swartz            73         Chairman and Chief Executive Officer

    Dennis R. Konczal           54         President and Chief Operating Officer

    Richard J. Wrensen          49         Executive Vice President and
                                           Chief Financial Officer

    Jennifer S. Austin          42         Corporate Secretary

         The principal occupations of the non-Director Executive Officers of the
Trust during the last five years or more are set forth below:

Jennifer S. Austin, 42, Corporate Secretary

         Office Manager/Executive Assistant/Secretary, (2002 to date); Capital
Alliance Advisors, Inc.; Executive Assistant, Assistant Operations Manager,
Oceanic Society Expeditions (2001-2002, 1993-1998), Retail Operations Manager,
America True, America's Cup Challenge 2000 (1998-2000); Employee Benefits
Coordinator, Westin Hotel, San Francisco Airport (1987-1993); Area Manager,
Great America Theme Park (1980-1986); BS, Travel/Tourism Management, San Jose
State University, San Jose, CA (1987).

ITEM 10. EXECUTIVE COMPENSATION

COMPENSATION OF OFFICERS

         The Trust has no full time employees and is managed by Capital Alliance
Advisors, Inc. as Manager of the Trust under a Management Agreement, which
requires CAAI to pay the employment expenses of its executive personnel. No
compensation was paid by the Trust to any of the named executives.

COMPENSATION OF DIRECTORS

Director Fees
-------------
         The Trust pays each unaffiliated Director an annual fee of $10,000. In
2004 and 2003 Messrs. Brooks, Blomberg and Looper each received $10,000 as a
Director's fee.

Committee and Other Meeting Fees
--------------------------------
         The Directors are also entitled to $500 for each director's or
committee meeting attended in person and $300 if attended by telephonic means.
During 2004 total committee and meeting fees for Mr. Brooks, Mr. Blomberg, and
Mr. Looper were $2,500, $2,700 and $3,000, respectively. During 2003, total
committee and meeting fees for Mr. Brooks, Mr. Blomberg, and Mr. Looper were
$1,700, $3,000, and $2,600 respectively.

Reimbursements
--------------
         All Directors are reimbursed for reasonable travel and other out of
pocket expenses incurred in attending board and committee meetings.

         Such compensation and reimbursement arrangements for Directors may be
changed by the Board of Directors pursuant to authority granted by the Trust's
Bylaws.

                                       23
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

(a)      Equity Compensation Plan Information

<TABLE>
<CAPTION>
                                         Number of securities      Weighted-average        Number of securities
                                           to be issued upon      exercise price of       remaining available for
                                              exercise of        outstanding options,      future issuance under
                                         outstanding options,    warrants and rights     equity compensation plans
                                         warrants and right *                              (excluding securities
                                                                                        reflected in column (a)) *
                                         --------------------   ---------------------   ---------------------------
                                                Column                  Column                    Column
                                                  (a)                    (b)                        (c)
         -----------------------------   -------------------    ---------------------   ---------------------------
<S>                                             <C>                     <C>                          <C>
           Equity compensation plans            173,595                 $10.67                       0
          approved by security holders

         Equity compensation plans not             0                     N/A                         0
          approved by security holders

                     Total                      173,595                 $10.67                       0
</TABLE>

         * Reflects status of Plan as of December 31, 2004.


(b)      Security Ownership of Certain Non-Management or Non-Affiliate
         -------------------------------------------------------------
         Beneficial Owners
         -----------------

         The following table sets forth certain information known to the Trust
         with respect to beneficial ownership of the Trust's Common Shares and
         Preferred Shares as of December 31, 2004 by each Non-Management or
         Non-Affiliated Beneficial Owner:

                                      Number of Shares      Percentage of Shares
                                          of Stock                of Stock
                                     Beneficially Owned      Beneficially Owned
                                     ------------------      ------------------

         Name of Beneficial Owner    Common   Preferred      Common    Preferred
         ------------------------    ------   ---------      ------    ---------

         Thomas Morford (1)......      0       16,334          0         7.7%

         ________________________

         (1) Mr. Morford is a private investor.

(c)      Security Ownership of Management
         --------------------------------

         The following table sets forth certain information known to the Trust
         with respect to beneficial ownership of the Trust's Common Shares and
         Preferred Shares as of December 31, 2004 by (1) each Management person
         known to the Trust to beneficially own more than five percent of the
         Trust's Common Shares or Preferred Shares, (2) each Director, (3) the
         Trust's executive officers, (4) the Manager's executive officers, and
         (5) all Directors and executive officers as a group. Unless otherwise
         indicated in the footnotes to the table, the beneficial owners have, to
         the knowledge of the Trust, sole voting and investment power with
         respect to the shares beneficially owned, subject to community property
         laws where applicable.

                                       24
<PAGE>
<TABLE>
<CAPTION>
                                                        Number of Shares          Percentage of Shares
                                                            of Stock                   of Stock
                                                       Beneficially Owned         Beneficially Owned
                                                       ------------------         ------------------

         Name of Beneficial Owner                     Common      Preferred       Common     Preferred
         ------------------------                     ------      ---------       ------     ---------

<S>                                                  <C>            <C>            <C>           <C>
          Thomas B. Swartz (1)(4) ................     5,133         1,879          1.2%           *
          Dennis R. Konczal (2)(4) ...............    18,332           984          4.1%           *
          Richard J. Wrensen (3)(4) ..............    64,165         3,698         14.5%         1.8%
          Stanley C. Brooks (5) ..................         0             0          0              0
          Harvey Blomberg (6) ....................         0             0          0              0
          Donald R. Looper .......................         0             0          0              0
          Jennifer S. Austin .....................         0             0          0              0
          All directors and executive officers
          as a group (7 persons) (7) .............   113,248        10,222         25.6%         4.9%
</TABLE>

         * Represents less than 1% of outstanding shares.
         ____________________

         (1) Mr. Swartz has unexercised options to purchase 53,687 shares of
         Common Stock, all of which he has the right to acquire within 60 days
         from the date hereof. Mr. Swartz's spouse owns 633 shares of Series "A"
         Preferred Shares in which Mr. Swartz claims no beneficial interest.
         Such holdings represent less than 1% of the outstanding Preferred
         Shares.

         (2) Mr. Konczal has unexercised options to purchase 38,124 shares of
         Common Stock, all of which he has the right to acquire within 60 days
         from the date hereof.

         (3) Mr. Wrensen has unexercised options to purchase 29,800 shares of
         Common Stock, all of which he has the right to acquire within 60 days
         from the date hereof. Mr. Wrensen's spouse owns 27,500 shares of Common
         Stock and 2,709 Series "A" Preferred Shares, in which Mr. Wrensen
         claims no beneficial interest. Such holdings represent 6.2% of the
         outstanding Common Shares and 1.3% of the outstanding Preferred Shares.

         (4) Capital Alliance Advisors, Inc., the Trust's Manager, owns
         beneficially 25,618 Shares of Common stock and 3,661 shares of Series
         "A" Preferred Shares, representing 5.8% of the outstanding Common
         Shares and 1.7% of the outstanding Series A Preferred Shares. Messrs.
         Swartz, Konczal and Wrensen are officers and directors of the Manager
         and collectively own all of the outstanding Common Shares of the
         Manager. The Manager has unexercised options to purchase 16,689 shares
         of Common Stock and has the right to acquire such Shares within 60 days
         from the date hereof.

         (5) Mr. Brooks has unexercised options to purchase 12,375 shares of
         Common Stock.

         (6) Mr. Blomberg has unexercised options to purchase 12,375 shares of
         Common Stock.

         (7) The totals include the Common and Preferred Shares owned by Capital
         Alliance Advisors Inc.


(d)      Changes in Control
         ------------------
         None

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Arrangements and Transactions with Members of the Manager and Other Affiliates
------------------------------------------------------------------------------
         CAAI is the Manager of the Company and provides (a) management and
advisory services to the Trust and CAFC in accordance with the Management
Agreements with each entity and (b) mortgage origination and loan servicing
services to the Trust and CAFC in accordance with the Mortgage Origination and
Servicing Agreements with each entity. As previously described, the Company will
utilize the mortgage banking experience, management expertise and resources

                                       25
<PAGE>
of CAAI in conducting its Mortgage Investment and its Mortgage Conduit Business.
Three of the six Directors and the officers of the Trust, Messrs. Swartz,
Konczal and Wrensen, own and serve as Directors and officers of CAAI. However,
Unaffiliated Directors constitute 100% of the Audit Committee of the Board of
Directors of the Trust. CAAI owns all of the voting common stock and a 1%
economic interest in CAFC, the Trust's Mortgage Conduit Business. The Trust owns
all of the nonvoting preferred stock of CAFC representing 99% of the economic
interest in CAFC. CAAI has the power to elect all of the directors of CAFC and
the ability to control the outcome of all matters for which the consent of the
holders of the common stock is required. CAAI and/or the officers and directors
of CAFC who may be officers and directors of the Trust, will be separately
compensated for their management services to the subsidiary and will provide
origination, financing and administrative services to the subsidiary through
separate agreements and an inter-company allocation of the cost of such
services. The Trustees, the Manager and their affiliates have fiduciary duties
and obligations which will require them to resolve any conflicts of interest by
exercising the utmost good faith and integrity. Additionally, the Bylaws provide
that the Manager must upon request by the Directors disclose any investments
which are within the purview of the Trust's investment policies.

         During 2004, the Trust entered into a Tri Party Financing and
Indemnification Agreement ("Agreement") with CAFC and the Mortgage Division of
Calliance Realty Fund, LLC. The Agreement allows the Trust to access a
$25,000,000 funding agreement maintained in CAFC's name. The Trust, however, is
not held liable for the borrowings of either CAFC or Calliance Realty Fund, LLC.
The Trust also has separate agreements with CAFC and Calliance Realty Fund, LLC
to provide warehouse lines of credit. The facilities are cancelable by either
party upon 30 days written notice.

         CAAI also has interests that may conflict with those of the Trust in
fulfilling certain duties. In addition, Messrs. Swartz, Wrensen and Konczal, the
officers and directors of CAAI are also officers and directors of the Trust. The
officers and directors of CAAI are also involved in other businesses, including
Calliance Realty Fund, LLC whose Mortgage Division invests in mortgages
encumbering commercial and mixed-use properties as well as residential
properties and which may generate profits or other compensation. The Trust will
not share in such profits or compensation.

         It is the intention of the Trust, CAAI and any affiliate managed by
CAAI that any agreements and transactions, taken as a whole, between the Trust,
on the one hand, and CAAI or its affiliates, on the other hand, are fair to all
parties. However, there can be no assurance that each of such agreements or
transactions will be on terms at least as favorable to the Trust as could have
been obtained from unaffiliated third parties.

Sale and Purchase of Loan
-------------------------
         To provide a source of mortgage loans for the Trust's Mortgage
Investment Business, CAFC, the Mortgage Conduit Business offers to the Trust for
purchase nonconforming mortgage loans and Home Equity Loans meeting the Trust's
investment criteria and policies. Commitments to acquire loans will obligate the
Trust to purchase such loans from the CAFC upon the closing and funding of the
loans, pursuant to the terms and conditions specified in the commitment. The
Trust accounts for the purchase of loans from CAFC at the lower of cost, par
value or fair market value.

Other Business Activities
-------------------------
         The Bylaws provide that the Directors and the Trust's agents, officers
and employees may engage with or for others in business activities of the types
conducted by the Trust and that they will not have any obligation to present to
the Trust any investment opportunities which come to them other than in their
capacities as Directors regardless of whether those opportunities are within the
Trust's investment policies. Each Director is required to disclose any interest
he has, and any interest known to him of any person of which he is an Affiliate,
in any investment opportunity presented to the Trust.

         The Board of Directors has adopted a Code of Business Conduct and
Ethics, which is posted on the Company's web address: www.calliance.com.

                                       26
<PAGE>
--------------------------------------------------------------------------------
                                     PART IV
--------------------------------------------------------------------------------

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits
         --------

         Exhibit No.
         3.1     Certificate of Incorporation and Amendment No. 1(1)
         3.2     Bylaws of the Registrant(1)
         3.3     Certificate of Amendment of Certificate of Incorporation(6)
         4.1     Form of Stock Certificate of Common Shares of the Registrant(2)
         10.1    Form of Management Agreement between the Registrant and Capital
                 Alliance Advisors, Inc.(1)
         10.2    Form of Indemnity Agreement between the Registrant and its
                 Directors and Officers(1)
         10.3    Form of Loan Origination and Loan Servicing Agreement between
                 the Registrant and Capital Alliance Advisors, Inc.(1)
         23.4    Consent of Landels Ripley & Diamond, LLP(5)
         23.5    Consent of Novogradac & Company LLP(5)
         24.1    Power of Attorney of Thomas B. Swartz(1)
         24.2    Power of Attorney of Dennis R. Konczal(1)
         24.4    Power of Attorney of Stanley C. Brooks(1)
         24.5    Power of Attorney of Harvey Blomberg(1)
         24.7    Power of Attorney of Richard J. Wrensen(7)
         24.8    Power of Attorney of Donald R. Looper(8)

(1)      These exhibits were previously contained in Registrant's Registration
         Statement filed on Form S-11 with the Commission on September 9, 1996,
         and are incorporated by reference herein.

(2)      These exhibits were previously contained in Amendment No. 1 to the
         Registrant's Registration Statement filed on Form S-11 with the
         Commission on January 15, 1997, and are incorporated by reference
         herein.

(3)      This exhibit was previously contained in Amendment No. 2 to the
         Registrant's Registration Statement filed on Form S-11 with the
         Commission on February 6, 1997 and is incorporated by reference herein.

(5)      These exhibits were previously contained in Post-Effective Amendment
         No. 3 to the Registrant's Registration Statement filed on Form S-11
         with the Commission on December 10, 1997, and are incorporated by
         reference herein.

(6)      These exhibits were previously contained in Form 10-Q for the period
         ending June 30, 1997 filed with the Commission on August 14, 1997, and
         are incorporated by reference herein.

(7)      This exhibit was previously contained in Form 10-K for the period
         ending December 31, 1998 filed with the Commission on April 10, 1999,
         and are incorporated by reference herein.

(8)      This exhibit was previously contained in Form 10-K for the period
         ending December 31, 2002 filed with the Commission on April 10, 2003,
         and are incorporated by reference herein.

(b)      Reports on Form 8-K
         -------------------

         Form 8-K was filed on November 18, 2004 due to press release issued on
November 16, 2004 regarding earnings for third quarter of 2004.

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<PAGE>
(c)      Miscellaneous Exhibits
         ----------------------

         Exhibit "A": Press Release, dated January 31, 2005 regarding Dividend
for First Quarter 2005.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

         The Company's independent auditors also provided to the Trust's Audit
Committee the written disclosures required by Independence Standards Board
Standard No. 1 (Independence Discussions with Audit Committees).

         The Company's independent auditors, Novogradac & Company LLP, audit the
financial statements and perform audit-related services and consultation in
connection with various accounting and financial reporting matters. Novogradac &
Company LLP also performs certain non-audit services for the Company. The Audit
Committee has determined that the provision of the services provided by
Novogradac & Company LLP as set forth herein are compatible with maintaining
Novogradac & Company LLP's independence and the prohibitions on performing
non-audit services set forth in the Sarbanes-Oxley Act and relevant Securities
and Exchange Commission rules.

         Audit Fees. The Trust's and CAFC's fees for the fiscal year ended
December 31, 2004 audit, review of form 10-KSB, and the quarterly review of
Forms 10-QSB rendered by Novogradac & Company were $53,500. Fees for the fiscal
year ended December 31, 2003 were $48,500.

         Audit Related Fees. Aggregate fees for all other audit related services
rendered by Novogradac & Company LLP for fiscal years ended December 31, 2004
and 2003 for the Trust and CAFC were $2,550 and $1,613, respectively.

         Tax Fees. Aggregate fees for all tax services rendered by Novogradac &
Company LLP for fiscal years ended December 31, 2004 and 2003 for the Trust and
CAFC were $6,400 and $6,400, respectively.

         All Other Fees. Aggregate fees for all other services rendered by
Novogradac & Company LLP for the fiscal years ended December 31, 2004 and 2003
were $0 and $0, respectively.

         Based upon the Audit Committee's discussion with management and the
independent auditors and the Audit Committee review of the representations of
management and the report of the independent accountants to the Audit Committee,
the Audit Committee recommended that the Board of Directors include the Trust's
audited financial statements in the Trust's Annual Report on Form 10-KSB for the
year ended December 31, 2004 filed with the Securities and Exchange Commission.

                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(D) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, hereunto duly authorized.

                                             Capital Alliance Income Trust, Ltd.
Dated: March 30, 2005                        A Real Estate Investment Trust

By: /s/ Richard J. Wrensen                   By: /s/ Thomas B. Swartz
    ----------------------                       --------------------
    Richard J. Wrensen                           Thomas B. Swartz
    Executive Vice President                     Chairman
    Chief Financial Officer                      Chief Executive Officer



                                       28
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.


/s/ Thomas B. Swartz                                      Dated: March 30, 2005
--------------------
Thomas B. Swartz
Chief Executive Officer and Chairman
(Principal Executive Officer)


/s/ Richard J. Wrensen                                    Dated: March 30, 2005
----------------------
Richard J. Wrensen
Chief Financial Officer and Director
(Principal Financial and Accounting Officer)


/s/ Dennis R. Konczal                                     Dated: March 30, 2005
---------------------
Dennis R. Konczal
President and Director


/s/ Stanley C. Brooks                                     Dated: March 30, 2005
---------------------
Stanley C. Brooks
Director


/s/ Harvey Blomberg                                       Dated: March 30, 2005
-------------------
Harvey Blomberg
Director


/s/ Donald R. Looper                                      Dated: March 30, 2005
--------------------
Donald R. Looper
Director



                                       29
<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 Annual Report of Capital Alliance Income Trust Ltd. (the
"Company") on Form 10-KSB for the period ending December 31, 2004 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I,
Thomas B. Swartz, Chief Executive Officer of the Company, 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. ss. 1350,
as adopted pursuant to ss. 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: March 30, 2005
/s/ Thomas B. Swartz
--------------------
                                        Thomas B. Swartz
                                        Chief Executive Officer and Chairman


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


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




                                       30
<PAGE>
       CERTIFICATION OF FORM 10-KSB OF CAPITAL ALLIANCE INCOME TRUST LTD.,
                     A REAL ESTATE INVESTMENT TRUST FOR THE
                         PERIOD ENDING DECEMBER 31, 2004

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 10-KSB, dated March 30, 2005 of Capital Alliance
     Income Trust, Ltd., A Real Estate Investment Trust:

2.   Based on my knowledge, this annual 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 annual 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 annual 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 annual 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 annual
     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.


    /s/ Thomas B. Swartz                  /s/ Richard J. Wrensen
    --------------------                  ----------------------
    Thomas B. Swartz                      Richard J. Wrensen
    Chief Executive Officer               Executive Vice President and
    and Chairman                          Chief Financial Officer


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

                                  31
<PAGE>
                                EXHIBIT "A"

                       CAPITAL ALLIANCE INCOME TRUST LTD.
                        ANNOUNCES FIRST QUARTER DIVIDEND


SAN FRANCISCO - (BUSINESS WIRE) - January 31, 2005 - Capital Alliance Income
Trust Ltd. ("CAIT") (AMEX: CAA-news) announced that its Board has declared
CAIT's first quarter Common Share dividend at the rate of $0.10 per Common
share. The dividend is payable on February 17, 2005 to shareholders of record on
February 10, 2005.

The monthly preferred dividend has been declared for shareholders of record as
of February 1 and March 1, 2005 payable February 15 and March 15, 2005 at the
rate of approximately $0.1491 per share.

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. 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 market. Only residential loans with a combined
loan-to-value of 75% or less are retained in CAIT's portfolio of mortgage
investments.

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



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