<Page>

================================================================================


                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

(Mark one)

/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

    For the quarterly period ended June 30, 2001

                                       OR

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934

                           Commission File No. 0-23911

                          FOG CUTTER CAPITAL GROUP INC.
             (Exact name of registrant as specified in its charter)

              MARYLAND                              52-2081138
              --------                              ----------
    (State or other jurisdiction of              (I.R.S. Employer
    incorporation or organization)               Identification No.)

                             1631 SW COLUMBIA STREET
                               PORTLAND, OR 97201
               (Address of principal executive offices) (Zip Code)
                                 (503) 721-6500
              (Registrant's telephone number, including area code)

      Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /.

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

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

                CLASS                            OUTSTANDING AT JUNE 30, 2001
 Common Stock, par value $0.0001 per share             10,507,313 shares

================================================================================

<Page>

                          FOG CUTTER CAPITAL GROUP INC.

                                    FORM 10-Q

                                    I N D E X

                                                                   PAGE NO.

PART I--FINANCIAL INFORMATION

Item 1.  Interim Financial Statements (Unaudited):

      Consolidated Statements of Financial Condition.................3

      Consolidated Statements of Operations..........................4

      Consolidated Statement of Changes in Stockholders' Equity......6

      Consolidated Statements of Cash Flows..........................7

      Notes to Consolidated Financial Statements.....................8

Item 2.  Management's Discussion and Analysis of Financial
            Condition and Results of Operations.....................11

Item 3.  Quantitative and Qualitative Disclosures about Market
            Risk....................................................18


PART II--OTHER INFORMATION

Item 1.  Legal Proceedings..........................................23

Item 2.  Changes in Securities and Use of Proceeds..................25

Item 3.  Defaults Upon Senior Securities............................25

Item 4.  Submission of Matters to a Vote of Security Holders........25

Item 5.  Other Information..........................................25

Item 6.  Exhibits and Reports on Form 8-K...........................25

Signatures..........................................................26



                                       2
<Page>

PART I -- FINANCIAL INFORMATION

ITEM 1.  INTERIM FINANCIAL STATEMENTS

                         FOG CUTTER CAPITAL GROUP INC.
                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                   (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

<Table>
<Caption>

                                                                June 30,      December 31,
                                                                  2001            2000
                                                                ---------     ------------
                                                               (Unaudited)
<S>                                                             <C>            <C>
ASSETS

     Cash and cash equivalents........................          $   2,214      $   3,394
     Securities available for sale, at fair value.....             61,586         74,731
     Loans, net.......................................             30,278         30,404
     Investments in real estate held for sale.........             24,502         24,767
     Investments in WFSG and affiliates, net..........              7,606          5,593
     Investment in BEP................................              5,574             --
     Accrued interest receivable......................                293            522
     Other assets.....................................              3,750         10,893
                                                                ---------      ---------
         Total assets                                           $ 135,803      $ 150,304
                                                                =========      =========

LIABILITIES AND STOCKHOLDERS' EQUITY

   Liabilities:
     Borrowings.......................................          $  81,558      $  88,930
     Accounts payable and accrued liabilities.........              3,246          4,006
     Dividends payable................................                859          1,717
                                                                ---------      ---------
         Total liabilities............................             85,663         94,653
                                                                ---------      ---------

   Commitments and Contingencies (see Note 5)

   Stockholders' Equity:
     Preferred stock, $.0001 par value; 25,000,000 shares
       authorized; no shares issued and outstanding...                 --             --
     Common stock, $.0001 par value; 200,000,000 shares
       authorized; 11,500,000 shares issued; and 10,507,313
       shares outstanding.............................            166,981        166,981
     Treasury stock; 992,687 common shares, at cost...             (2,171)        (2,171)
     Accumulated deficit..............................           (114,166)      (106,077)
     Recourse loans to officers to acquire stock......             (1,048)        (1,026)
     Accumulated other comprehensive income (loss)....                544         (2,056)
                                                                ---------      ---------
         Total stockholders' equity...................             50,140         55,651
                                                                ---------      ---------
         Total liabilities and stockholders' equity...          $ 135,803      $ 150,304
                                                                =========      =========
</Table>


        The accompanying notes are an integral part of these consolidated
                             financial statements.


                                       3
<Page>

                          FOG CUTTER CAPITAL GROUP INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)
                    (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

<Table>
<Caption>

                                                           Quarter Ended            Six Months Ended
                                                              June 30,                  June 30,
                                                        --------------------      --------------------
                                                         2001         2000         2001          2000
                                                        -------      -------      -------      -------
<S>                                                     <C>          <C>          <C>          <C>
Net Interest Income:
    Loans .......................................       $   761      $   983      $ 1,585      $ 2,087
    Securities...................................         1,899        2,502        4,150        5,838
    Other investments............................            27          134           87          214
                                                        -------      -------      -------      -------
       Total interest income.....................         2,687        3,619        5,822        8,139
    Interest expense.............................         1,270        1,708        2,841        4,004
                                                        -------      -------      -------      -------
       Net interest income before recovery of loan
         losses..................................         1,417        1,911        2,981        4,135
    Recovery of loan losses......................            --          555           --          555
                                                        -------      -------      -------      -------
       Net interest income after recovery of loan
         losses..................................         1,417        2,466        2,981        4,690
                                                        -------      -------      -------      -------

Real Estate Operations:
    Operating income.............................           609        1,463        1,206        2,827
    Operating expense............................          (134)        (103)        (228)        (335)
    Interest expense.............................          (348)        (777)        (703)      (1,589)
    Gain on sale of real estate..................            --           97           --        1,094
    Depreciation.................................          (131)        (292)        (267)        (584)
                                                        -------      -------      -------      -------
         Total real estate operations............            (4)         388            8        1,413
                                                        -------      -------      -------      -------

Other Operating (Loss) Income:
    Gain on sale of loans and securities.........           233        2,175          550        5,501
    Equity in losses in BEP......................          (575)          --         (802)          --
    Market valuation losses and impairments......            --           --       (4,081)      (1,791)
    Other revenue................................            (6)         (36)        (116)         (54)
                                                        -------      -------      -------      -------
         Total other operating (loss) income.....          (348)       2,139       (4,449)       3,656
                                                        -------      -------      -------      -------

Operating Expenses:
    Compensation and employee benefits...........         1,059        1,201        2,260        2,507
    Professional fees............................           241          723          559        1,056
    Other........................................           676          656        1,423        1,143
                                                        -------      -------      -------      -------
         Total operating expenses................         1,976        2,580        4,242        4,706
                                                        -------      -------      -------      -------

Net (loss) income before provision for income taxes
  and cumulative effect of a change in accounting
  principle......................................          (911)       2,413       (5,702)       5,053
Provision for income taxes.......................            --           25           --          125
                                                        -------      -------      -------      -------
Net (loss) income before cumulative effect
  Of a change in accounting principle............          (911)       2,388       (5,702)       4,928
Cumulative effect of a change in accounting
  principle......................................        (1,021)          --       (1,021)          --
                                                        -------      -------      -------      -------
Net (Loss) Income................................       $(1,932)     $ 2,388      $(6,723)     $ 4,928
                                                        =======      =======      =======      =======
</Table>

        The accompanying notes are an integral part of these consolidated
                             financial statements.


                                       4
<Page>

                          FOG CUTTER CAPITAL GROUP INC.
                CONSOLIDATED STATEMENTS OF OPERATIONS (Continued)
                                   (Unaudited)
                    (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

<Table>
<Caption>

                                                             Quarter Ended                         Six Months Ended
                                                                June 30,                                June 30,
                                                    ----------------------------------     ----------------------------------
                                                         2001                2000               2001                2000
                                                    --------------      --------------     --------------      --------------
<S>                                                 <C>                 <C>                <C>                 <C>
Basic and Diluted Net (Loss) Income Per
  Share Before Cumulative Effect of a Change in
  Accounting Principle..........................    $        (0.08)     $         0.23     $        (0.54)     $         0.47
Cumulative effect of a change in accounting
  principle per share...........................             (0.10)                 --              (0.10)                 --
                                                    --------------      --------------     --------------      --------------
Basic and Diluted Net (Loss) Income Per Share...    $        (0.18)     $         0.23     $        (0.64)     $         0.47
                                                    ==============      ==============     ==============      ==============

Weighted Average Shares Outstanding.............        10,507,313          10,507,313         10,507,313          10,507,313
</Table>



        The accompanying notes are an integral part of these consolidated
                             financial statements.



                                       5
<Page>

                          FOG CUTTER CAPITAL GROUP INC.
            CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                                   (Unaudited)
                    (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

<Table>
<Caption>

                                                                                              Recourse
                                                                                              Loans to     Accumulated
                                     Common Stock          Treasury Stock                    Officers to     Other
                              ------------------------ -----------------------  Accumulated    Acquire    Comprehensive
                               Shares (1)     Amount      Shares     Amount       Deficit      Stock      Income (Loss)    Total
                              -----------  ----------- ----------- -----------  -----------  -----------  ------------ ------------

<S>                            <C>         <C>             <C>     <C>          <C>          <C>          <C>          <C>
Balance at January 1, 2001     10,507,313  $   166,981     992,687 $    (2,171) $  (106,077) $    (1,026) $    (2,056) $    55,651
Comprehensive loss:
  Net loss...................          --           --          --          --       (6,723)          --           --       (6,723)
  Other comprehensive loss:
   Foreign currency
   translation...............          --           --          --          --           --           --         (419)        (419)
   Unrealized holding losses
    on securities available
    for sale................           --           --          --          --           --           --       (1,955)      (1,955)
   Reclassification
    adjustment for net losses
    on securities included in
    net loss................           --           --          --          --           --           --        4,974        4,974
                                                                                                                       -----------
Total comprehensive loss....                                                                                                (4,123)
Loans to officers, net......           --           --          --          --           --          (22)          --          (22)
Dividends declared..........           --           --          --          --       (1,366)          --           --       (1,366)
                              -----------  ----------- ----------- -----------  -----------  -----------  -----------  -----------
Balance at June 30, 2001....   10,507,313  $   166,981     992,687 $    (2,171) $  (114,166) $    (1,048) $       544  $    50,140
                              ===========  =========== =========== ===========  ===========  ===========  ===========  ===========
</Table>

----------
(1) Issued and outstanding.


        The accompanying notes are an integral part of these consolidated
                             financial statements.


                                       6
<Page>

                          FOG CUTTER CAPITAL GROUP INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                             (DOLLARS IN THOUSANDS)

<Table>
<Caption>

                                                                     Quarter Ended             Six Months Ended
                                                                       June 30,                    June 30,
                                                                ----------------------      ----------------------
                                                                  2001          2000          2001         2000
                                                                --------      --------      --------      --------
<S>                                                             <C>           <C>           <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net (loss) income..........................................   $ (1,932)     $  2,388      $ (6,723)     $  4,928
  Adjustments to reconcile net (loss) income to net cash
  (used in) provided by operating activities:
   Depreciation..............................................        182           310           366           628
   Amortization of premiums and accretion of discounts, net..         --            (3)           --          (146)
   Recovery of loan losses...................................         --          (555)           --          (555)
   Market valuation losses and impairments...................         --            --         4,081         1,791
   Loss on foreign currency translation......................          6            36           116            54
   Gain on sale of securities available for sale.............         --        (2,016)           --        (5,342)
   Gain on sale of real estate...............................         --           (97)           --        (1,094)
   Gain on sale of loans.....................................       (233)         (159)         (550)         (159)
   Equity in losses in BEP...................................        575            --           802            --
   Cumulative effect of a change in accounting principle.....      1,021            --         1,021            --
   Change in:
    Investments in WFSG and affiliates, net..................         --           645            --           664
    Accrued interest receivable..............................         58           231           229           271
    Other assets.............................................          4          (446)          281          (298)
    Accounts payable and accrued liabilities.................     (1,000)          282          (731)          606
                                                                --------      --------      --------      --------
  Net cash (used in) provided by operating activities........     (1,319)          616        (1,108)        1,348
                                                                --------      --------      --------      --------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Repayments of securities available for sale................        196           145           846         1,151
  Purchase of securities available for sale..................         --       (19,481)         (695)      (19,481)
  Proceeds from sale of loans................................      4,305           396         7,304           396
  Proceeds from sale of securities available for sale........      2,344        35,134         2,344        44,368
  Purchase of loans and discounted loans.....................     (1,193)           --        (1,193)         (101)
  Principal repayments on loans and discounted loans.........         10           177            27         1,925
  Proceeds from sale of real estate..........................         98           440            98         8,774
  Other......................................................        (27)           --           (48)           --
                                                                --------      --------      --------      --------
  Net cash provided by investing activities..................      5,733        16,811         8,683        37,032
                                                                --------      --------      --------      --------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from borrowings...................................        460        11,069           460        11,069
  Repayments on borrowings...................................     (3,945)      (26,010)       (6,976)      (47,187)
  Dividend payments on common stock..........................     (2,224)           --        (2,224)           --
  Other......................................................         --           (25)           --           (25)
                                                                --------      --------      --------      --------
  Net cash used in financing activities......................     (5,709)      (14,966)       (8,740)      (36,143)
                                                                --------      --------      --------      --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH......................         (1)          (35)          (15)          (79)
                                                                --------      --------      --------      --------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS.........     (1,296)        2,426        (1,180)        2,158
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD.............      3,510         5,594         3,394         5,862
                                                                --------      --------      --------      --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD...................   $  2,214      $  8,020      $  2,214      $  8,020
                                                                ========      ========      ========      ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
  Cash paid for interest.....................................   $  1,680      $  2,644      $  3,595      $  6,056
  Cash paid for taxes........................................   $     --      $     --      $     --      $     --
</Table>


        The accompanying notes are an integral part of these consolidated
                              financial statements.


                                       7
<Page>

                          FOG CUTTER CAPITAL GROUP INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

NOTE 1 - BASIS OF PRESENTATION

      The accompanying interim consolidated financial statements of Fog Cutter
Capital Group Inc. and Subsidiaries ("FCCG" or the "Company") (formerly known as
Wilshire Real Estate Investment Inc.) are unaudited and have been prepared in
conformity with the requirements of Regulation S-X promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), particularly
Rule 10-01 thereof, which governs the presentation of interim financial
statements. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles ("GAAP") for
complete financial statements. The accompanying interim consolidated financial
statements should be read in conjunction with the Company's 2000 Annual Report
on Form 10-K. A summary of the Company's significant accounting policies is set
forth in Note 2 to the consolidated financial statements in the 2000 Annual
Report on Form 10-K.

      In the Company's opinion, all adjustments, comprised of normal recurring
accruals necessary for the fair presentation of the interim financial
statements, have been included in the accompanying consolidated financial
statements. Operating results for the six months ended June 30, 2001 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2001.

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

      Certain items in the previously reported consolidated financial statements
were reclassified to conform to the June 30, 2001 presentation, none of which
affect previously reported results of operations.

NOTE 2 - ORGANIZATION

      Effective January 25, 2001, the Company changed its name to Fog Cutter
Capital Group Inc. to better reflect the opportunistic nature of its business
and investments.

NOTE 3 - SIGNIFICANT TRANSACTIONS

      In February 2001, the Company (through a 26% owned Jersey, Channel Islands
company known as BEP Acquisitions) closed a 42 million British pound purchase of
all of the outstanding capital stock of Bourne End Properties PLC ("Bourne
End"). Bourne End is a specialist investor in retail property, currently owning
fifteen town shopping centers located in England and Scotland. The centers range
in size from 80,000 square feet to 340,000 square feet.

      BEP Acquisitions was incorporated in Jersey, Channel Islands for the
purpose of acquiring Bourne End. BEP Acquisitions is a wholly-owned subsidiary
of BEP Property Holdings Limited ("BEP"), which is 26% owned by the Company, 71%
owned by Merrill Lynch (Jersey) Holdings Limited (a subsidiary of Merrill Lynch
& Co., Inc.) and 3% owned by Greenbau Estuary Limited. Merrill Lynch (Jersey)
Holdings Limited also provided mezzanine financing. Greenbau Estuary Limited is
the day-to-day manager of Bourne End.

      In March 2001, the Company converted its investment in two mortgage-backed
securities into ownership of the underlying loans and real estate which had
served as collateral supporting these securities. The securities, which had a
carrying value of $6.6 million, were converted into loans with a carrying value
of $5.5 million and real estate with a carrying value of $1.1 million.


                                       8
<Page>

      During the quarter ended March 31, 2001, the Company sold loans with a
carrying value of $2.7 million at a gain of $0.3 million. The total proceeds
from the sale were approximately $3.0 million of which $0.7 million was used to
repay borrowings.

      During the quarter ended June 30, 2001, the Company sold loans with a
carrying value of $4.1 million at a gain of $0.2 million. The total proceeds
from the sale were approximately $4.3 million. No borrowings were repaid as a
result of this transaction.

      On May 3, 2001, the Company paid a cash dividend of $0.13 per share to
shareholders of record as of April 30, 2001.

NOTE 4 - MARKET VALUATION LOSSES AND IMPAIRMENTS

      The Company evaluates, on an ongoing basis, the carrying value of its
securities portfolio, which is accounted for as available-for-sale. To the
extent differences between the book basis of the securities and their current
market values are deemed to be temporary in nature, such unrealized gains or
losses are reflected directly in equity as "other comprehensive income or loss."
In calculating the extent to which declines in the value of available-for-sale
securities are other than temporary, the Company analyzes actual performance of
the securities and underlying collateral, including prepayment and default
statistics, as well as expectations for such performance in the future. To the
extent reasonable expectations for future performance are not likely to offset
declines in current market valuations, a write-down is recorded in "Market
Valuation Losses and Impairments" in the consolidated statement of operations.

      During the six months ended June 30, 2001 and 2000, market valuation
losses and impairments of $4.1 million and $1.8 million, respectively, were
recorded. During such periods, these market valuation losses and impairments
related to the portfolio of mortgage-backed securities primarily reflecting
higher than anticipated delinquencies, losses in loans underlying certain
securities and varying prepayment speeds.

NOTE 5 - COMMITMENTS, CONTINGENCIES & OFF-BALANCE SHEET RISK

      The Company and two of its senior officers have been named, among other
defendants, in a series of lawsuits related to the receivership of Capital
Consultants, L.L.C. ("CCL"), an unaffiliated investment company. In their
claims, multiple plaintiffs allege several theories of liability, including
knowing participation in fiduciary breach and prohibited transactions under the
Employee Retirement Income Security Act of 1974. The plaintiffs have not
described with any specificity the proportion or share of losses and related
amounts which they claim are attributable to the Company or its executives.
Management has directed that the Company participate in good faith along with
the other parties in confidential mediation in an effort to determine whether a
mediated settlement may be achievable. In the event a mediated settlement is not
achieved, management has directed that these cases be defended against
vigorously. Because the cases are still in early stages of the pleadings and
because the amount of discovery has been limited, the financial loss to the
Company, if any, cannot be reasonably estimated at this time. Under their
employment arrangements with the Company, the Company's senior officers may be
entitled to indemnification by the Company. Messrs. Wiederhorn and Mendelsohn
have notified the Company that they are reserving their rights to seek such
indemnity. In addition, other former employees of the Company or of firms that
were previously affiliated with the Company have requested indemnity from the
Company for costs of their defense. The Company has not agreed to any such
indemnity requests.

      In addition to the civil litigation, the CCL failure has led to
governmental investigations, including a criminal investigation. Messrs.
Wiederhorn and Mendelsohn have received letters from the United States
Attorney's office in Portland, Oregon advising them that they are the subjects
of a grand jury investigation into the failure of CCL. At this stage, it is not
possible to predict the outcome of this investigation.

      The Company also is involved in various legal proceedings occurring in the
ordinary course of business which the Company believes will not have a material
adverse effect on its consolidated financial condition or operations.


                                       9
<Page>

      The Company is authorized to utilize a wide variety of off-balance sheet
financial techniques to assist in the management of interest rate risk. In
hedging the interest rate and/or exchange rate exposure of a foreign currency
denominated asset or liability, the Company may enter into hedge transactions to
counter movements in the different currencies, as well as interest rates in
those currencies. These hedges may be in the form of currency and interest rate
swaps, options, and forwards, or combinations thereof. During the quarter ended
and at June 30, 2001, the Company had no outstanding positions in these
instruments.

NOTE 6 - RECENTLY ISSUED ACCOUNTING STANDARDS

      In July 2000, the Emerging Issues Task Force ("EITF") finalized the
provisions of EITF Issue No. 99-20, "Recognition of Interest Income and
Impairment of Purchased and Retained Beneficial Interests in Securitized
Financial Assets", ("EITF 99-20"). EITF 99-20 sets forth rules for recognizing
interest income and determining when securities must be written down to fair
value because of other than temporary impairments. EITF 99-20 requires the
prospective method of adjusting the recognition of interest income when the
anticipated cash flows have either increased or decreased. Anticipated cash
flows can change as the result of factors such as credit losses and prepayment
rates. Pursuant to EITF 99-20, declines in fair value are to be considered other
than temporary when: (i) the carrying value of the beneficial interests exceeds
the fair value of such beneficial interests using current assumptions, and (ii)
the timing and/or extent of cash flows expected to be received on the beneficial
interests has adversely changed (as defined) from the previous valuation date.

      The effective date for adoption of EITF 99-20 was April 1, 2001. As a
result of the implementation of EITF 99-20 the Company recorded a "cumulative
effect of a change in accounting principle" adjustment of $1.0 million relating
to other than temporary impairment of mortgage-backed securities.

NOTE 7 - SUBSEQUENT EVENTS

      During July 2001, the Company sold a mortgage-backed security with a
carrying value of $5.0 million. The total proceeds from the sale were $5.1
million, of which $4.9 million was used to repay borrowings.



                                       10
<Page>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

      THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH
THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS OF FOG CUTTER CAPITAL GROUP INC.
AND THE NOTES THERETO INCLUDED ELSEWHERE IN THIS FILING. REFERENCES IN THIS
FILING TO "FOG CUTTER CAPITAL GROUP INC.," "WE," "OUR," AND "US" REFER TO FOG
CUTTER CAPITAL GROUP INC. AND ITS SUBSIDIARIES UNLESS THE CONTEXT INDICATES
OTHERWISE.

GENERAL

      Fog Cutter Capital Group Inc. ("FCCG" or the "Company") is a Nasdaq-listed
corporation which focuses on the acquisition of assets where its expertise in
intensive asset management, mortgage and real estate credit analysis and
financial structuring can create value. The Company invests primarily in the
following types of assets:

      o     mortgage-backed securities,
      o     mortgage loans,
      o     real estate, and
      o     other real estate-related investments.

RESULTS OF OPERATIONS -- SIX MONTHS ENDED JUNE 30, 2001 COMPARED TO SIX MONTHS
ENDED JUNE 30, 2000

      NET INCOME. Our net loss for the six months ended June 30, 2001 was $6.7
million, or $0.64 per share, compared with net income of $4.9 million, or $0.47
per share, for the six months ended June 30, 2000. The net loss for the 2001
period is attributable to net interest income of $3.0 million, gain on sale of
loans of $0.5 million, offset by market valuation losses and impairments on our
portfolio of mortgage-backed securities of $4.1 million, the cumulative effect
of a change in accounting principle of $1.0 million, the equity in losses of BEP
of $0.8 million and other operating expenses of $4.3 million. The net income for
the 2000 period is attributable to net interest income of $4.1 million, gain on
sale of loans and securities of $5.5 million, recovery of loan losses of $0.6
million and income from real estate operations of $1.4 million, partially offset
by market valuation losses and impairments on our portfolio of mortgage-backed
securities of $1.8 million and other operating expenses of $4.7 million.


                                       11
<Page>

      NET INTEREST INCOME. Our net interest income for the six months ended June
30, 2001 was $3.0 million, compared with $4.1 million for the six months ended
June 30, 2000. The decrease is primarily attributable to a reduction of assets
(reflecting our sales of mortgage-backed securities and loans and paydowns of
the related debt facilities), resulting in decreases in interest income on
securities, loans and other investments of $1.7 million, $0.5 million and $0.1
million, respectively, partially offset by a decrease in interest expense of
$1.2 million. The following tables set forth information regarding the total
amount of income from interest-earning assets and expense from interest-bearing
liabilities and the resulting average yields and rates:

<Table>
<Caption>

                                                             For the Six Months Ended June 30, 2001
                                                          --------------------------------------------
                                                          Average          Interest         Annualized
                                                          Balance      Income (Expense)     Yield/Rate
                                                          --------     ----------------    -----------
                                                                    (DOLLARS IN THOUSANDS)
<S>                                                       <C>             <C>                <C>
Interest-Earning Assets:

     Loan portfolios.................................     $ 30,802        $  1,585           10.3%
     Mortgage-backed securities available for sale...       66,302           4,150           12.5%
     Other investments...............................        3,657              87            4.8%
                                                          --------        --------         ------
         Total interest-earning assets...............     $100,761        $  5,822           11.6%
                                                          --------        --------         ------

Interest-Bearing Liabilities:

     Borrowings (1)..................................     $ 67,392        $ (2,841)           8.4%
                                                          --------        --------         ------
         Total interest-bearing liabilities..........     $ 67,392        $ (2,841)           8.4%
                                                          --------        --------         ------

     Net interest income before provision for
       loan losses/spread (2)........................                     $  2,981            3.2%
                                                                          ========         ======
     Net interest margin (3).........................                                         5.9%
                                                                                           ======
</Table>

----------
(1)   Excludes borrowings related to investments in real estate.
(2)   Net interest spread represents the difference between the average rate on
      interest-earning assets and the average cost of interest-bearing
      liabilities.
(3)   Net interest margin represents net interest income divided by average
      interest-earning assets.

<Table>
<Caption>

                                                           For the Six Months Ended June 30, 2000
                                                     ----------------------------------------------------
                                                        Average            Interest         Annualized
                                                        Balance        Income (Expense)     Yield/Rate
                                                     ---------------  -------------------  --------------
                                                                   (DOLLARS IN THOUSANDS)
<S>                                                       <C>             <C>                <C>
Interest-Earning Assets:

     Loan portfolios..................................    $ 35,355        $  2,087           11.8%
     Mortgage-backed securities available for sale....      87,159           5,838           13.4%
     Other investments................................       7,477             214            5.7%
                                                          --------        --------         ------
         Total interest-earning assets................    $129,991        $  8,139           12.5%
                                                          --------        --------         ------

Interest-Bearing Liabilities:

     Borrowings (1)...................................    $ 95,079        $ (4,004)           8.4%
                                                          --------        --------         ------
         Total interest-bearing liabilities...........    $ 95,079        $ (4,004)           8.4%
                                                          --------        --------         ------

     Net interest income before provision for loan
      losses/spread (2)...............................                    $  4,135            4.1%
                                                                          ========         ======
     Net interest margin (3)..........................                                        6.4%
                                                                                           ======
</Table>

----------
(1)   Excludes borrowings related to investments in real estate.
(2)   Net interest spread represents the difference between the average rate on
      interest-earning assets and the average cost of interest-bearing
      liabilities.
(3)   Net interest margin represents net interest income divided by average
      interest-earning assets.


                                       12
<Page>

      RECOVERY OF LOAN LOSSES. At June 30, 2001, we had $30.3 million of loans,
net that are performing according to their terms with no required loan loss
allowance. During the six months ended June 30, 2000, we reviewed the adequacy
of loan loss reserves and recaptured the remaining reserve balance of $0.6
million.

      REAL ESTATE OPERATIONS. Our real estate operations represent activity from
our investment in various office buildings, retail stores, and other commercial
property located in Oregon, California and the United Kingdom. During the six
months ended June 30, 2001, we realized no income from real estate operations,
compared with net income of $1.4 million for the six months ended June 30, 2000.
This decrease was primarily attributable to a gain on the sale of real estate in
the prior period of $1.0 million and the elimination of net rental income from
office properties located in Portland, Oregon which were sold during the prior
year.

      MARKET VALUATION LOSSES AND IMPAIRMENTS. The term "Market Valuation Losses
and Impairments" as used herein refers to impairment losses recognized primarily
on our mortgage-backed securities and loan portfolios. During the six months
ended June 30, 2001 and 2000, market valuation losses and impairments of $4.1
million and $1.8 million, respectively, were recorded. In addition, during 2001,
we recorded the cumulative effect of a change in accounting principle of $1.0
million relating to the impairment of mortgage-backed securities. These charges
to the portfolio of mortgage-backed securities primarily reflect higher than
anticipated delinquencies, losses in loans underlying certain securities, and
varying prepayment speeds.

RESULTS OF OPERATIONS -- QUARTER ENDED JUNE 30, 2001 COMPARED TO QUARTER ENDED
JUNE 30, 2000

      NET INCOME. Our net loss for the quarter ended June 30, 2001 was $1.9
million, or $0.18 per share, compared with net income of $2.4 million, or $0.23
per share, for the quarter ended June 30, 2000. The net loss for the 2001 period
was primarily due to the cumulative effect of a change in accounting principle
of $1.0 million and the equity in losses of BEP of $0.6 million. The net income
for the 2000 period is attributable to net interest income of $1.9 million, gain
on sale of securities of $2.0 million, recovery of loan losses of $0.6 million
and income from real estate operations of $0.4 million, partially offset by
other operating expenses of $2.6 million.


                                       13
<Page>

      NET INTEREST INCOME. Our net interest income for the quarter ended June
30, 2001 was $1.4 million, compared with $1.9 million for the quarter ended June
30, 2000. The decrease is primarily attributable to a reduction of assets
(reflecting our sales of mortgage-backed securities and loans and paydowns of
the related debt facilities), resulting in decreases in interest income on
securities, loans and other investments of $0.6 million, $0.2 million and $0.1
million, respectively, partially offset by a decrease in interest expense of
$0.4 million. The following tables set forth information regarding the total
amount of income from interest-earning assets and expense from interest-bearing
liabilities and the resulting average yields and rates:

<Table>
<Caption>

                                                          For the Quarter Ended June 30, 2001
                                                     ---------------------------------------------
                                                       Average          Interest        Annualized
                                                       Balance      Income (Expense)    Yield/Rate
                                                     ------------   ----------------    ----------
                                                                 (DOLLARS IN THOUSANDS)
<S>                                                       <C>            <C>               <C>
Interest-Earning Assets:

     Loan portfolios................................      $30,282        $   761           10.1%
     Mortgage-backed securities available for sale..       61,401          1,899           12.4%
     Other investments..............................        3,063             27            3.5%
                                                          -------        -------         ------
         Total interest-earning assets..............      $94,746        $ 2,687           11.3%
                                                          -------        -------         ------

Interest-Bearing Liabilities:

     Borrowings (1).................................      $65,585        $(1,270)           7.7%
                                                          -------        -------         ------
         Total interest-bearing liabilities.........      $65,585        $(1,270)           7.7%
                                                          -------        -------         ------

     Net interest income before provision for
       loan losses/spread (2).......................                     $ 1,417            3.6%
                                                                         =======         ======
     Net interest margin (3)........................                                        6.0%
                                                                                         ======
</Table>

----------
(1)   Excludes borrowings related to investments in real estate.
(2)   Net interest spread represents the difference between the average rate on
      interest-earning assets and the average cost of interest-bearing
      liabilities.
(3)   Net interest margin represents net interest income divided by average
      interest-earning assets.

<Table>
<Caption>

                                                             For the Quarter Ended June 30, 2000
                                                       ----------------------------------------------
                                                          Average        Interest         Annualized
                                                          Balance     Income (Expense)     Yield/Rate
                                                       ------------   ----------------    -----------
                                                                   (DOLLARS IN THOUSANDS)
<S>                                                       <C>             <C>                <C>
Interest-Earning Assets:

     Loan portfolios.................................     $ 35,132        $    983           11.2%
     Mortgage-backed securities available for sale...       82,858           2,502           12.1%
     Other investments...............................        7,762             134            6.9%
                                                          --------        --------         ------
         Total interest-earning assets...............     $125,752        $  3,619           11.5%
                                                          --------        --------         ------

Interest-Bearing Liabilities:

     Borrowings (1)..................................     $ 89,953        $ (1,708)           7.6%
                                                          --------        --------         ------
         Total interest-bearing liabilities..........     $ 89,953        $ (1,708)           7.6%
                                                          --------        --------         ------

     Net interest income before provision for loan
      losses/spread (2)..............................                     $  1,911            3.9%
                                                                          ========         ======
     Net interest margin (3).........................                                         6.1%
                                                                                           ======
</Table>

----------
(1)   Excludes borrowings related to investments in real estate.
(2)   Net interest spread represents the difference between the average rate on
      interest-earning assets and the average cost of interest-bearing
      liabilities.
(3)   Net interest margin represents net interest income divided by average
      interest-earning assets.


                                       14
<Page>

      RECOVERY OF LOAN LOSSES. At June 30, 2001, we had $30.3 million of loans,
net that are performing according to their terms with no required loan loss
allowance. During the quarter ended June 30, 2000, we reviewed the adequacy of
loan loss reserves and recaptured the remaining reserve balance of $0.6 million.

      REAL ESTATE OPERATIONS. Our real estate operations represent activity from
our investment in various office buildings, retail stores, and other commercial
property located in Oregon, California and the United Kingdom. During the
quarter ended June 30, 2001, we realized no income from real estate operations,
compared with net income of $0.4 million for the quarter ended June 30, 2000.
The decrease is primarily the result of a reduction in assets, reflecting sales
of real estate during the last half of 2000.

CHANGES IN FINANCIAL CONDITION

      GENERAL. Total assets decreased from approximately $150.3 million at
December 31, 2000 to approximately $135.8 million at June 30, 2001. Total
liabilities decreased from approximately $94.7 million at December 31, 2000 to
approximately $85.7 million at June 30, 2001. Stockholders' equity decreased by
approximately $5.5 million resulting primarily from net loss of $6.7 million for
the six months ended June 30, 2001.

      SECURITIES AVAILABLE FOR SALE. The balance of mortgage-backed securities
available for sale decreased from $74.7 million at December 31, 2000 to $61.6
million at June 30, 2001. The decrease in the balance of mortgage-backed
securities was primarily due to the reclassification of $6.6 million of
securities to loans and real estate, the sale of securities with a carrying
value of $2.4 million and a reduction in market value of $4.8 million. These
decreases were partially offset by the acquisition of $0.7 million of
mortgage-backed securities.

      We mark our securities portfolio to fair value at the end of each month
based upon broker/dealer valuations (if available), subject to an internal
review process. For those securities that do not have an available market
quotation, we determine the fair value of the securities by modeling the
anticipated cash flows using certain estimates (e.g. prepayment speeds, default
rates, severity of losses, and discount rate). Because our subordinated
securities may not be readily marketable, as trading activity may be infrequent,
the market value is typically available from only a small group of
broker/dealers, and in many cases, only one broker/dealer. As of each reporting
period, we evaluate whether and to what extent any unrealized decline in value
is to be recognized as other than temporary.

      At June 30, 2001, securities available for sale were as follows:

<Table>
<Caption>

                                                  Gross           Gross
                                Amortized       Unrealized      Unrealized
                                 Cost (1)         Gains           Losses         Fair Value
                               -----------     -----------      ----------       ----------
                                                  (DOLLARS IN THOUSANDS)

<S>                            <C>             <C>              <C>              <C>
Mortgage-backed securities     $    62,135     $       318      $     (867)      $   61,586
                               ===========     ===========      ==========       ==========
</Table>

----------
(1)   The amortized cost of the securities reflects the market valuation losses
      and impairments discussed above and excludes accrued interest of $0.1
      million.

      LOANS, NET. During the six months ended June 30, 2001, our loans, net
decreased by approximately $0.1 million due primarily to the acquisition and
subsequent sale of approximately $5.5 million of loans acquired through the
restructuring of mortgage-backed securities previously owned by the Company.


                                       15
<Page>

      BORROWINGS. Borrowings decreased by approximately $7.4 million during the
six months ended June 30, 2001, primarily due to scheduled principal payments
and currency adjustments for foreign denominated debt.

      STOCKHOLDERS' EQUITY. Stockholders' equity decreased by approximately $5.5
million during the six months ended June 30, 2001 primarily due to our net loss
of $6.7 million and the dividend declared of $1.4 million, partially offset by
decreases in other comprehensive loss of $2.6 million.

LIQUIDITY AND CAPITAL RESOURCES

      Liquidity is a measurement of our ability to meet potential cash
requirements, including ongoing commitments to repay borrowings, fund
investments, engage in loan acquisition and lending activities, meet collateral
calls and for other general business purposes. The primary sources of funds for
liquidity during the six months ended June 30, 2001 consisted of net cash
provided by investing activities, including the cash repayments related to our
mortgage-backed securities and loan portfolios.

      Our borrowings and the availability of further borrowings are
substantially affected by, among other things, changes in interest rates,
changes in market spreads whereby the market value of the collateral securing
such borrowings may decline substantially, or decreases in credit quality of
underlying assets. In the event of declines in market value or credit quality,
we may be required to provide additional collateral for, or repay a portion of
outstanding balances of, our short-term borrowing facilities. As of June 30,
2001, we had no outstanding collateral calls. For additional information with
respect to our monthly mark-to-market of our securities available for sale
portfolio, see "CHANGES IN FINANCIAL CONDITION-SECURITIES AVAILABLE FOR SALE."

      Fluctuations in interest rates will continue to impact our net interest
income to the extent our fixed-rate assets are funded by variable-rate debt or
our variable-rate assets reprice on a different schedule or in relation to a
different index than any floating-rate debt which in turn could impact potential
returns to shareholders. See "Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK."

      At June 30, 2001, we had total consolidated secured indebtedness of $81.6
million, as well as $4.1 million of other liabilities. The consolidated secured
indebtedness consisted of (i) $31.8 million of repurchase agreements secured by
$14.0 million of mortgage-backed securities and $25.0 million of loans, (ii)
lines of credit aggregating $1.1 million which are secured by loans and
securities and (iii) $48.7 million outstanding of other borrowings maturing
between 2001 and 2020 which are secured by real estate and mortgage-backed
securities. Approximately $32.8 million of this indebtedness had terms which
allowed the lender to request additional collateral if the value of the
underlying collateral declined (including financing facilities for both
mortgage-backed securities and loans).

      Loans are financed through both short-term and long-term financing
facilities. If the value of the assets securing the loan declines as determined
by the lender, the lender may request that the amount of the loan be reduced by
cash payments from the borrower or additional collateral be provided by the
borrower (generally known as "collateral calls"). Accordingly, in an environment
where lenders consistently mark down the value of the underlying assets, a
borrower can become subject to collateral calls, which can have a significant
impact on liquidity. Similarly, if interest rates increase significantly, the
borrowing cost under the financing facility may also increase while the interest
rate on the assets securing the loan may not increase at the same time or to the
same degree. Real property acquisitions are generally financed with intermediate
or long-term mortgages with banks and other financial institutions.

      We have historically financed acquisitions of mortgage-backed securities
through committed and uncommitted thirty-day repurchase agreements with major
Wall Street investment banks. Repurchase agreements are secured lending
arrangements which involve the borrower selling an asset to a lender at a fixed
price with the borrower having an obligation to repurchase the asset within a
specified period (generally 30 days) at a higher price reflecting the interest
cost of the loan. If the lender marks the asset lower, the lender may request
that the amount of the loan be reduced by cash payments from the borrower


                                       16
<Page>

or additional collateral be provided by the borrower (generally known as
"collateral calls"). Mortgage-backed securities which are subject to repurchase
agreements, as well as loans which secure other indebtedness, periodically are
revalued by the lender, and a decline in the value that is recognized by the
lender (whether or not the lender recognizes the full fair value of the
security) may result in the lender requiring us to provide additional collateral
to secure the indebtedness.

      If we are unable to fund additional collateral requirements or to repay,
renew or replace maturing indebtedness on terms reasonably satisfactory to us,
we may be required to sell (potentially on short notice) a portion of our
assets, and could incur losses as a result. Furthermore, since from time to time
there is extremely limited liquidity in the market for subordinated and residual
interests in mortgage-related securities, there can be no assurance that we will
be able to dispose of such securities promptly for fair value in such
situations.

      Excluding the sale of assets from time to time, we are currently operating
with negative cash flow primarily due to the continued repayment of debt and
refinancing of our mortgage-backed securities portfolio. We believe that our
existing sources of funds will be adequate for purposes of meeting our
short-term liquidity needs, however, there can be no assurance that this will be
the case. Material increases in interest expense from variable-rate funding
sources, collateral calls, or material decreases in monthly cash receipts,
generally would negatively impact our liquidity. On the other hand, material
decreases in interest expense from variable-rate funding sources or an increase
in market value of our mark-to-market financial assets generally would
positively affect our liquidity.


                                       17
<Page>

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

      Market risk is the exposure to loss resulting from changes in interest
rates, foreign currency exchange rates, commodity prices, and equity prices.
Although the Company's exposure to foreign currency fluctuations has increased
over the past year, the primary market risk to which the Company is exposed is
interest rate risk, which 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 Company.
Changes in the general level of interest rates can affect the Company's net
interest income, which is the difference between the interest income earned on
interest-earning assets and the interest expense incurred in connection with its
interest-bearing liabilities, by affecting the spread between the Company's
interest-earning assets and interest-bearing liabilities. Changes in the level
of interest rates also can affect, among other things, the ability of the
Company to acquire loans, the value of the Company's mortgage-backed securities
and other interest-earning assets, and its ability to realize gains from the
sale of such assets.

      It is the objective of the Company to attempt to control risks associated
with interest rate movements. In general, the Company's strategy is to limit our
exposure to earnings variations and variations in the value of assets and
liabilities as interest rates change over time. Our asset and liability
management strategy is formulated and monitored regularly to review, among other
things, the sensitivity of our assets and liabilities to interest rate changes,
the book and market values of assets and liabilities, unrealized gains and
losses, including those attributable to hedging transactions, purchase and
securitization activity, and maturities of investments and borrowings.


                                       18
<Page>

      The following tables quantify the potential changes in net interest income
and net portfolio value as of June 30, 2001 should interest rates go up or down
(shocked) by 100 to 400 basis points, assuming the yield curves of the rate
shocks will be parallel to each other and instantaneous. Net portfolio value is
calculated as the sum of the value of off-balance sheet instruments and the
present value of cash in-flows generated from interest-earning assets net of
cash out-flows in respect of interest-bearing liabilities. The cash flows
associated with the loan portfolios and securities available for sale are
calculated based on prepayment and default rates that vary by asset but not by
changes in interest rates. Projected losses, as well as prepayments, are
generated based upon the actual experience with the subject pool, as well as
similar, more seasoned pools. To the extent available, loan characteristics such
as loan-to-value ratio, interest rate, credit history and product types are used
to produce the projected loss and prepayment assumptions that are included in
the cash flow projections of the securities. The following tables apply the U.S.
Treasury yield curve generally for assets and LIBOR for repurchase agreement
liabilities and assume a uniform change in both rates. The tables assume that
changes in interest rates occur instantaneously. The tables also reflect that
the Company has a significant exposure to LIBOR rates since its repurchase
agreement borrowings are generally based on LIBOR rates. Actual results could
differ significantly from those estimated in the tables.

<Table>
<Caption>

                           Projected Percent Change in
      -----------------------------------------------------------------

        Change in Interest         Net Interest        Net Portfolio
             Rates (1)                Income               Value
      ------------------------  -------------------  ------------------
<S>                                   <C>                  <C>
           -400Basis Points           34.6%                14.3%
           -300Basis Points           26.0%                10.4%
           -200Basis Points           17.3%                 6.7%
           -100Basis Points            8.7%                 3.2%
              0Basis Points            0.0%                 0.0%
            100Basis Points           -8.7%                -3.0%
            200Basis Points          -17.3%                -5.8%
            300Basis Points          -26.0%                -8.5%
            400Basis Points          -34.6%               -10.9%
</Table>

----------
(1)   Assumes that uniform changes occur instantaneously in both the yield on
      10-year U.S. Treasury notes and the interest rate applicable to U.S.
      dollar deposits in the London interbank market.

<Table>
<Caption>

                                Change in Monthly        Change in
        Change in Interest         Net Interest        Net Portfolio
             Rates (1)                Income               Value
      ------------------------  -------------------  ------------------
<S>                                <C>                   <C>
           -400Basis Points        $ 136,973             $ 7,192,571
           -300Basis Points        $ 102,730             $ 5,199,181
           -200Basis Points        $  68,487             $ 3,343,750
           -100Basis Points        $  34,243             $ 1,614,278
              0Basis Points               --                      --
            100Basis Points        $ (34,243)            $(1,508,757)
            200Basis Points        $ (68,487)            $(2,920,708)
            300Basis Points        $(102,730)            $(4,243,717)
            400Basis Points        $(136,973)            $(5,484,897)
</Table>

----------
(1)   Assumes that uniform changes occur instantaneously in both the yield on
      10-year U.S. Treasury note and the interest rate applicable to U.S. dollar
      deposits in the London interbank market.



                                       19
<Page>

      The following table sets forth information as to the type of funding used
to finance the Company's assets as of June 30, 2001. As indicated in the table,
a large percentage of the Company's fixed-rate assets are financed by
floating-rate liabilities and the Company's variable-rate assets are generally
funded by variable-rate liabilities which use the same index.

                             Assets and Liabilities
                               As of June 30, 2001
                             (Dollars in thousands)

<Table>
<Caption>

                                                 Assets            Interest         Liabilities     Interest
                                                 ------            --------         -----------     --------
<S>                                            <C>                <C>              <C>                <C>
Interest-Bearing Assets
-----------------------
Fixed-Rate Assets, Financed Floating.........  $       61,210       Fixed          $        46,173    LIBOR
Fixed-Rate Assets, No Financing..............           5,654       Fixed                       --    None
Floating-Rate Assets, Financed Floating......          25,000       LIBOR                   18,887    LIBOR
Cash and Cash Equivalents....................           2,214     Fed Funds                     --    None
                                               --------------                      ---------------
                  Subtotal...................          94,078                               65,060

Other Assets
------------
Investments in Real Estate...................          24,502        N/A                    16,498    Fixed
Investments in WFSG and affiliates, net......           7,606        N/A                        --    None
Investment in BEP............................           5,574        N/A                        --    None
Other........................................           4,043        N/A                        --    None
                                               --------------                      ---------------
                  Subtotal...................          41,725                               16,498

Liability Only
--------------
Dividends....................................              --                                  859    Fixed
Accounts Payable and Accrued Liabilities.....              --                                3,246    None
                                               --------------                      ---------------
                  Subtotal...................              --                                4,105

---------------------------------------------------------------------------------------------------------------
                  Total                        $      135,803                      $        85,663
===============================================================================================================
</Table>


      Asset and liability management involves managing the timing and magnitude
of the repricing of assets and liabilities. It is the objective of the Company
to attempt to control risks associated with interest rate movements. Asset and
liability management can utilize a wide variety of off-balance sheet financial
techniques to assist it in the management of interest rate risk. For example, in
hedging the interest rate and exchange rate exposure of a foreign currency
denominated asset or liability, we may enter into hedge transactions to counter
movements in the different currencies as well as interest rates in those
currencies. These hedges may be in the form of currency and interest rate swaps,
options, and forwards, or combinations thereof. No such techniques were in use
during the six months ended and at June 30, 2001.

      Methods for evaluating interest rate risk include an analysis of the
Company's interest rate sensitivity "gap," which is defined as the difference
between interest-earning assets and interest-bearing liabilities maturing or
repricing within a given time period. A gap is considered positive when the
amount of interest-rate sensitive assets exceeds the amount of interest-rate
sensitive liabilities. A gap is considered negative when the amount of
interest-rate sensitive liabilities exceeds interest-rate sensitive assets.
During a period of rising interest rates, a negative gap would tend to adversely
affect net interest income, while a positive gap would tend to result in an
increase in net interest income. During a period of falling interest rates, a
negative gap would tend to result in an increase in net interest income, while a
positive gap would tend to affect net interest income adversely. Since different
types of assets and liabilities with the same or similar maturities may react
differently to changes in overall market rates or conditions, changes in
interest rates may affect net interest income positively or negatively even if
an institution were perfectly matched in each maturity category.


                                       20
<Page>

      The following tables set forth the estimated maturity or repricing of the
Company's interest-earning assets and interest-bearing liabilities at June 30,
2001 (dollars in thousands):

<Table>
<Caption>


                                             Within        4 to 12     One Year to     More than
                                             3 Months       Months       3 Years        3 Years         Total
                                             --------      --------      --------       --------       --------
<S>                                          <C>           <C>           <C>            <C>            <C>
Interest-sensitive assets(1):
---------------------------
Cash and cash equivalents.................   $  2,214      $     --      $     --       $     --       $  2,214
Securities available for sale.............         --            --            --         61,586         61,586
Loans(2)..................................     25,198           391           891          3,798         30,278
                                             --------      --------      --------       --------       --------
Total rate-sensitive assets...............   $ 27,412      $    391      $    891       $ 65,384       $ 94,078
                                             ========      ========      ========       ========       ========

Interest-sensitive liabilities:
------------------------------
Borrowings................................   $ 13,939      $     --      $  1,046       $ 66,573       $ 81,558
Dividends payable.........................        859            --            --             --            859
                                             --------      --------      --------       --------       --------
Total rate-sensitive liabilities..........   $ 14,798      $     --      $  1,046       $ 66,573       $ 82,417
                                             ========      ========      ========       ========       ========

Interest rate sensitivity gap.............   $ 12,614      $    391      $   (155)      $ (1,189)
Cumulative interest rate sensitivity gap..   $ 12,614      $ 13,005      $ 12,850       $ 11,661
Cumulative interest rate sensitivity
  gap as a percentage of total rate-
  sensitive assets........................         13%           14%           14%            12%
</Table>


----------
(1)   Real estate property holdings are not considered interest rate sensitive.
(2)   Amortizing fixed rate loans are assumed to prepay at a Constant Prepayment
      Rate ("CPR") of 10%.




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<Page>



FORWARD-LOOKING STATEMENTS

CERTAIN STATEMENTS CONTAINED HEREIN AND CERTAIN STATEMENTS CONTAINED IN FUTURE
FILINGS BY THE COMPANY WITH THE SEC MAY NOT BE BASED ON HISTORICAL FACTS AND ARE
"FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES
ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934,
AS AMENDED. FORWARD-LOOKING STATEMENTS WHICH ARE BASED ON VARIOUS ASSUMPTIONS
(SOME OF WHICH ARE BEYOND THE COMPANY'S CONTROL) MAY BE IDENTIFIED BY REFERENCE
TO A FUTURE PERIOD OR PERIODS, OR BY THE USE OF FORWARD-LOOKING TERMINOLOGY,
SUCH AS "MAY," "WILL," "BELIEVE," "EXPECT," "ANTICIPATE," "CONTINUE," OR SIMILAR
TERMS OR VARIATIONS ON THOSE TERMS, OR THE NEGATIVE OF THOSE TERMS. ACTUAL
RESULTS COULD DIFFER MATERIALLY FROM THOSE SET FORTH IN FORWARD-LOOKING
STATEMENTS DUE TO A VARIETY OF FACTORS, INCLUDING, BUT NOT LIMITED TO, THOSE
RELATED TO THE ECONOMIC ENVIRONMENT, PARTICULARLY IN THE MARKET AREAS IN WHICH
THE COMPANY OPERATES, THE FINANCIAL AND SECURITIES MARKETS AND THE AVAILABILITY
OF AND COSTS ASSOCIATED WITH SOURCES OF LIQUIDITY, COMPETITIVE PRODUCTS AND
PRICING, THE REAL ESTATE MARKET, FISCAL AND MONETARY POLICIES OF THE U.S.
GOVERNMENT, CHANGES IN PREVAILING INTEREST RATES, ACQUISITIONS AND THE
INTEGRATION OF ACQUIRED BUSINESSES, CREDIT RISK MANAGEMENT, ASSET/LIABILITY
MANAGEMENT AND THE IMPACT OF ONGOING LITIGATION. EXCEPT AS MAY BE REQUIRED BY
LAW, THE COMPANY DOES NOT UNDERTAKE, AND SPECIFICALLY DISCLAIMS ANY OBLIGATION,
TO PUBLICLY RELEASE THE RESULTS OF ANY REVISIONS WHICH MAY BE MADE TO ANY
FORWARD-LOOKING STATEMENTS TO REFLECT THE OCCURRENCE OF ANTICIPATED OR
UNANTICIPATED EVENTS OR CIRCUMSTANCES AFTER THE DATE OF SUCH STATEMENTS.


                                       22
<Page>

PART II -- OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

      The Company, Fog Cap L.P. (a subsidiary of the Company and formerly known
      as Wilshire Real Estate Partnership L.P.) and its two top executives,
      Messrs. Wiederhorn and Mendelsohn, have been named in a series of lawsuits
      relating to the receivership of Capital Consultants, L.L.C. ("CCL"). The
      cases are TOM HAZZARD, ET AL., V. CCL, ET AL., U.S. District Court of
      Oregon, Civil No. CV 00-1338-HU; MARK EIDEM, ET AL., V. TRUSTEES UNITED
      ASSN. UNION LOCAL 290, ET AL., U.S. District Court of Oregon, Civil No. CV
      00-1446-HA; NANCY SCHULTZ, ET AL., V. GARY KIRKLAND, ET AL., U.S. District
      Court of Oregon, Civil No. CV 00-1377-HA; LARRY MILLER, ET AL., V. LEE
      CLINTON, ET AL., U.S. District Court of Oregon, Civil No. CV00-1317-HA;
      SALVATORE J. CHILIA, ET AL., V. CCL, ET AL., U.S. District Court of
      Oregon, Civil No. CV 00-1633 JE; and MADOLE V. CAPITAL CONSULTANTS ET.
      AL., U.S. District Court of Oregon, Civil No. CV 00-1600-HU. In the
      HAZZARD, CHILIA and MADOLE cases, the trustees of several Taft-Hartley
      trusts filed suit against CCL and several individuals and organizations
      CCL did business with (including the Company and Messrs. Wiederhorn and
      Mendelsohn). In the EIDEM, SCHULTZ and MILLER cases, the trustees who are
      plaintiffs in HAZZARD are in turn named as defendants in class action
      suits filed by beneficiaries of the Taft-Hartley trusts on which they
      serve as plaintiff-trustees. In the cases in which the trustees are
      defendants, they have filed third-party complaints against several
      parties, including the Company and Messrs. Wiederhorn and Mendelsohn. In
      addition, a group of investors that are not Taft-Hartley trusts have filed
      a similar complaint against the same defendants, as well as other
      individuals not named in the prior complaints, in the case of AMERICAN
      FUNERAL & CEMETERY TRUST SERVICES ET. AL. v CAPITAL CONSULTANTS ET. AL.,
      U.S. District Court of Oregon, Civil No. 01-00609-HU. The complaints and
      third-party complaints are all virtually identical. They include claims
      against the Company, Messrs. Wiederhorn and Mendelsohn alleging breaches
      of fiduciary duties under the Employee Retirement Income Security Act of
      1974 ("ERISA"); knowing participation in a fiduciary breach under ERISA;
      knowing participation in a prohibited transaction under ERISA; knowing
      transfer of trust assets under ERISA; negligence; common law claim for
      breach of fiduciary duty; tortious interference with contract; conversion;
      constructive trust, restitution and unjust enrichment; fraud; state
      securities law claims; and breach of contract. The suits also allege
      claims against Messrs. Wiederhorn and Mendelsohn of tortious interference
      with business relationships between the Taft-Hartley trusts and CCL, as
      well as violations of the Racketeering Influenced and Corrupt Organization
      provisions of the Organized Crime Control Act of 1970, 18 U.S.C. Section
      1961-1965 ("RICO"). The claimants also seek attorneys' fees under their
      ERISA and RICO claims.

      The above suits name multiple defendants in addition to the Company and
      its executives. In addition, the claimants have asserted but have not yet
      filed claims against a number of additional parties regarding the same
      alleged losses, including a number of professional advisors to named
      defendants. The claimants have not described with any specificity the
      proportion or share of losses which they claim are attributable to the
      Company or its executives, as compared to the other parties and other
      potential defendants. The overall remedies sought against all defendants
      include claims for broad relief under the remedial provisions of ERISA,
      such as rescission of transactions and the imposition of a constructive
      trust over any trust assets which plaintiffs claim were obtained in
      violation of ERISA. Certain of the claims against the Company appear to be
      covered by releases that were given by CCL to the Company and Messrs.
      Wiederhorn and Mendelsohn. The claimants' suits seek to rescind the
      transactions in which the releases were granted. The claimants also seek
      common law remedies such as damages and punitive damages. However, certain
      of these common law claims may be preempted by ERISA.

      Although these cases were filed during the period between October 2000 and
      April 2001, they are still in preliminary stages of pleading and
      discovery. CCL was placed in receivership by the Department of Labor and
      the Securities and Exchange Commission in the cases of SEC V.


                                       23
<Page>

      CAPITAL CONSULTANTS, L.L.C., et. al., U.S. District Court of Oregon, Case
      No. 00-1290-KI, and HERMAN V. CAPITAL CONSULTANTS, L.L.C., et. al., U.S.
      District Court of Oregon, Case No. 001291-KI. When the receivership order
      was entered, the court stayed other proceedings against CCL for several
      weeks. Once the stay was partially lifted, the parties deferred discovery
      and delayed the filing of any answers or legal challenges to the
      sufficiency of the pleadings in order to facilitate a confidential global
      mediation process. U.S. Circuit Court Judge Edward Leavy of the Ninth
      Circuit Court of Appeals has been selected as the mediator. Discovery and
      motion practice has been stayed pending the outcome of the mediation,
      excepting only a limited amount of document production by all of the
      parties to the litigation. No motions challenging the sufficiency of the
      claimants' claims have been filed or heard, and the Company and other
      defendants have not yet filed their answers or any cross-claims that they
      may have among themselves. No discovery depositions have been taken.

      The plaintiffs and third-party plaintiffs in the CCL litigation claim
      total losses by the various plaintiffs against all defendants in the range
      of $400 million. Approximately $160 million of this amount arises from
      losses on investments which plaintiffs allege relate to Messrs. Wiederhorn
      and Mendelsohn and companies with which they were affiliated, for which
      plaintiffs allege the Company shares some portion of the liability.
      Additional damages are claimed for prejudgment interest dating from the
      date of each investment under securities law claims under which plaintiffs
      are seeking rescission remedies. The RICO claims include additional claims
      for triple damages and the tort claims include claims for punitive
      damages. Attorneys' fees are also sought under the ERISA, RICO and
      securities law claims.

      The mediation process has been ongoing since May, 2001. Management has
      directed that the Company participate in good faith along with the other
      parties in the confidential mediation in an effort to determine whether a
      mediated settlement may be achievable. In the event a mediated settlement
      is not achieved, management has directed that these cases be defended
      against vigorously. Because the cases are still in early stages of the
      pleadings and because the amount of discovery has been limited, the
      financial loss to the Company, if any, cannot be reasonably estimated at
      this time

      The employment agreements between the Company and Messrs. Wiederhorn and
      Mendelsohn contain provisions under which they may be entitled to
      indemnity for litigation expenses and personal losses that are
      attributable to actions which they took on account of their positions as
      directors or officers of the Company. Messrs. Wiederhorn and Mendelsohn
      have notified the Company that they are reserving their rights to seek
      such indemnity. In addition, other former employees of the Company or of
      firms that were previously affiliated with the Company have been named as
      parties or have been requested to respond to discovery requests and/or
      government investigations regarding the collapse of CCL. Several of these
      individuals have requested indemnity from the Company for the costs of
      their defense. The Company has not agreed to any such indemnity requests.

      In addition to the civil litigation, the CCL failure has led to
      governmental investigations, including a criminal investigation. Messrs.
      Wiederhorn and Mendelsohn have received letters from the United States
      Attorney's office in Portland, Oregon, advising them that they are the
      subjects of a grand jury investigation into the failure of CCL. At this
      stage, it is not possible to predict the outcome of this investigation.

      At this time, it is not possible to determine the extent of liability, if
      any, the Company may face with regard to such indemnity claims because of
      the preliminary nature of the underlying litigation. In addition, certain
      of the litigation expenses faced by Messrs. Wiederhorn and Mendelsohn may
      be subject to reimbursement or payment from other sources because of
      employment agreements and indemnity rights they may have under the
      articles and bylaws of other defendants named in the litigation.



                                       24
<Page>

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.

        Not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

        Not applicable.

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

        None.

ITEM 5. OTHER INFORMATION.

        Not Applicable.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

        (a) Exhibits

               11    Computation of Per Share Earnings

        (b) Reports on Form 8-K:

         A form 8-K was filed with the Securities and Exchange Commission on
         June 7, 2001 by the Company announcing the resignation of Chris Tassos
         as Chief Financial Officer and naming R. Scott Stevenson as Senior Vice
         President-Chief Financial Officer.


                                       25
<Page>



                                   SIGNATURES

      Pursuant to the requirements of the exchange act, the registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

        Fog Cutter Capital Group Inc.

            By:  /s/ Lawrence A. Mendelsohn
            -------------------------------------------------
            Lawrence A. Mendelsohn
            President


            By:  /s/ R. Scott Stevenson
            -------------------------------------------------
            R. Scott Stevenson
            Senior Vice President and Chief Financial Officer




Date:  August 17, 2001




                                       26