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 the Company's consolidated financial statements is based upon the operating results of the Trust and WCFC. Management's discussion and analysis of the results of operations for the three and six months ended June 30, 2008 and 2007 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 ("AMEX"). During the fourth quarter of 2006, the Company's shareholders voted to terminate the outside manager ("Former Manager" or "CAAI") and initiate internal management. On December 29, 2006, the Former Manager's management and advisory contracts were terminated and the Company commenced self-management. On July 2, 2008, the shareholder approved a new corporate name, Eastern Light Capital, Incorporated. The new name will become official in the third quarter of 2008 and the common shares will continue to trade on the AMEX with a new ticker symbol.

Since the onset of 2007, the mortgage industry has experienced and is continuing to experience tumultuous change. Many industry participants have announced significant workforce reductions, delayed earnings reports and experienced precipitous drops in their share price. The most unfortunate companies have sought bankruptcy protection or have been forced into regulatory supervised mergers with better capitalized companies. The trends which precipitated these changes include the absence of credit, increasing residential mortgage delinquencies, loan foreclosures and the protracted withdrawal of investor interest in mortgage securities and whole loans.

The Company's residential loan portfolio continues to harbor unacceptable levels of non-performing assets. The portfolio's delinquencies will also reduce current revenues until the non-performing loans are monetized and their proceeds re-invested. During 2007, significant loan loss reserves were taken to recognize the embedded losses in non-performing loans and the general decline in residential mortgage loan values. In response to these problems and to maximize shareholder value, Management has continued to focus on efficient asset management as the strategic alternative to selling loans at depressed valuations. As mortgage loans are monetized, the Company's investment focus will expand to provide a source of future profitability and increased shareholder value. Foreclosed loans, also known as Other Real Estate Owned or "REO" typically require additional time to monetize. However, Management does not expect to report additional writedowns on its current REO balance.

The Trust is a real estate investment trust ("REIT") and REIT's are generally required to distribute at least 90% of their annual taxable income as dividend payments. During 2005, 2006 and 2007, the Trust incurred taxable losses. On account of these losses, dividend payments were curtailed during 2005. These taxable losses, also known as Net Operating Losses ("NOL"), allow the Trust to retain future taxable income equal to the cumulative amount of its NOL balance. The Internal Revenue Code waives mandatory dividend payments until prior years taxable losses are recovered.

When the Trust produces pre-NOL taxable income, the Trust's Board of Directors will need to reconcile the competing opportunities of strengthening the Company's balance sheet and the priority of restoring dividend payments. This issue will require additional review and analysis by the Board of Directors.

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 consolidated 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 are placed on a nonaccrual status when any portion of the principal or interest is four scheduled payments past due or earlier when concern exists as to the ultimate collectability 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 is 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.

Allowance for Doubtful Accounts. An allowance for accounts receivable claims is based on management's evaluation of the likelihood of collection. The evaluation is based on the payee's ability and willingness to pay the claim in full as well as the costs associated with possible legal action.

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 options. Stock options granted prior to December 15, 2005 were issued with exercise prices no less than the market price of the Trust's common stock on the dates of grant. Because the exercise price is fixed at or above market price and other key terms are fixed, use of the intrinsic-value method was utilized and the Trust did not recognize an 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. Options granted after December 15, 2005 are issued with exercise prices not less than 110% of the market price of the Trust's common stock on the award dates and are subject to a mandatory expense calculation at the award dates and recognized upon vesting.

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

Operating Strategy.

Mortgage investment loans are reported as mortgage notes receivable and are held until prepayment, maturity or foreclosure. The Company owns non-conforming mortgage loans on one-to-four unit residential properties secured by first and second deeds of trust. These loans are primarily secured by California real estate. Historically, the Trust limited its mortgage investments to a cumulative loan to value ratio ("CLTV") that did not exceed 75% of the underlying collateral at the time of investment. The Company seeks to maximize the value of its loan portfolio through active asset management. The Company is reviewing its current investment policies to include other REIT permissible assets in addition to residential mortgage loans.

Loan Origination. During 2007 and the six months ended June 30, 2008, the Company did not make or acquire any new loans. Prospectively, portfolio loans may be internally originated or acquired from unaffiliated third parties.

Asset Management. Asset management is mortgage loan servicing and real estate owned ("REO") dispositions. 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, and in the event of unremedied defaults performing other administrative duties including supervising foreclosures. In assessing a delinquent mortgage loan, management reviews the likelihood that a net gain will be recognized from foreclosing on the delinquent mortgage loan. 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.

Only mortgage loans owned by the Company are serviced. The Company does not acquire loan servicing rights or maintain a loan's servicing rights at disposition. REO dispositions include all of the supervisory and administrative processes of preparing a foreclosed asset for sale.

Commitments and Contingencies. The Company only issues loan commitments on a conditional basis and generally funds such loans promptly upon removal of any conditions. The Trust did not have any commitments to fund loans as of June 30, 2008 and 2007. On December 14, 2005, the Trust unconditionally guaranteed CAFC's sale of mortgage loans to Lehman Brothers Bank. During 2005, no loans were sold to Lehman Brothers Bank pursuant to this guarantee. During the first quarter of 2006, two loans for $2,500,000 were sold to Lehman Bothers Bank pursuant to this guarantee. Since the first quarter of 2006, the Company has not sold any loans to Lehman Brothers Bank or its affiliates.

As of June 30, 2008, the Company owned six properties. Two of these properties included Senior liens of $1,998,377 and $511,939.

As of June 30, 2008, the following table summarizes the Company's outstanding repayment obligations:

             Maximum Other
      Commercial Commitments (a)         Total Amounts
          as of June 30, 2008              Committed            Amount of Commitment Expiration Per Period
---------------------------------------- -------------- -------------- -------------- --------------- --------------
                                                          Less than     1 - 3 years       4 - 5          After 5
                                                           1 year                         years           years

Lines of Credit (b)                       $2,008,877     $2,008,877          0              0               0
Standby Repurchase Obligations                 0              0              0              0               0
Total Commercial Commitments              $2,008,877     $2,008,877          0              0               0

(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) Outstanding obligations as of June 30, 2008 due in less than 1 year were $2,008,877.

RESULTS OF OPERATIONS

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

Three months ended June 30, 2008 and 2007. Revenues for the second quarter decreased to $125,048 as compared to $309,245 for the same period in the prior year. The decrease in revenue, during the second quarter of 2008 was due to decreases in interest income of $181,810. Interest income declines on account of a reduction in the mortgage notes receivable balance.

Expenses for the second quarter of 2008 decreased to $119,860 as compared to $435,553 for the same period in the prior year. The decrease in expenses during the second quarter of 2008 was primarily due to the decreases in the provision for loan losses of $199,509, in interest expenses of $40,415, in loan origination costs of $36,962 and general and administrative of $31,674.

Six months ended June 30, 2008 and 2007. Revenues for the six months of 2008 decreased to $366,054 as compared to $650,281 for the same period in the prior year. The decrease in revenue, during the first six months of 2008 was due to decreases in interest income of $283,982. Interest income declines on account of a reduction in the mortgage notes receivable balance.

Expenses for the six months ended June 30, 2008 decreased to $397,564 as compared to $910,403 for the same period in the prior year. The decrease in expenses during the first six months of 2008 was primarily due to the decreases in the provision for loan losses of $278,158, in interest expenses of $103,882 and loan origination costs of $62,465.

LIQUIDITY AND CAPITAL RESOURCES

The Trust's $7,000,000 term facility is scheduled to mature November 14, 2008. Due to the general curtailment of mortgage credit facilities, Management does not believe that this facility will be renewed or extended. The Company's cash and near cash investments are sufficient to retire the facility's outstanding balance of approximately $2,000,000. Management believes that the cash flows from operations, mortgage principal payments and the sales proceeds of REO will be sufficient to meet the liquidity needs of the company's businesses for the next twelve months.

Six months ended June 30, 2008 and 2007. As of January 1, 2008 and 2007, the Trust had $962,190 and $599,943 of cash and cash equivalents, respectively. During the six month period ended June 30, 2008, cash and cash equivalents increased by $1,342,009. During the six month period ended June 30, 2007, cash and cash equivalents decreased by $40,359. After taking into effect the various transactions discussed below, cash and cash equivalents at June 30, 2008 and 2007 were $2,304,199 and $559,584.

The following summarizes the changes in net cash provided by operating activities, net cash used for investing activities, and net cash provided by financing activities.

Net cash used in operating activities during the six months ended June 30, 2008 and 2007 was $207,547 and $311,866, respectively. During the first six months of 2008, net income provided $11,366, a change in other liabilities used $144,983, and the provision for loan losses used $56,509. During the first six months of 2007, net loss used $272,960, an increase in accounts receivable used $211,681 and the provision for loan losses provided $221,649.

Net cash provided by investing activities for the six months ended June 30, 2008 and 2007 was $3,169,556 and $3,109,260, respectively. During the first six months of 2008, proceeds from mortgage notes receivable provided $1,327,732, and the acquisition and sale of REO provided $1,769,825. During the first six months of 2007, a net decrease in mortgage notes receivable provided $2,900,928.

Net cash used in financing activities during the six months ended June 30, 2008 and 2007 was $1,620,000 and $2,837,753, respectively. During the first six months of 2008, net payments of bank loans used cash of $1,620,000. During the first six months of 2007, net payments of bank loans used cash of $2,837,753.