<PAGE>

                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

                           ------------------------

                                   FORM 10-Q

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

                   FOR THE THREE MONTHS ENDED JUNE 30, 2001
                          COMMISSION FILE NO. 0-30889

                           ------------------------

                          HARBOR GLOBAL COMPANY LTD.
            (exact name of registrant as specified in its charter)

                           ------------------------



           BERMUDA                                       52-2256071
 (STATE OR OTHER JURISDICTION OF                      (I.R.S. EMPLOYER
 INCORPORATION OR ORGANIZATION)                      IDENTIFICATION NO.)

     ONE FANEUIL HALL MARKETPLACE
              4TH FLOOR                                  02109-1820
        BOSTON, MASSACHUSETTS                            (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)


                           ------------------------

                                (617) 878-1600
             (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

                           ------------------------

                                  NO CHANGES
  (Former name, former address and former fiscal year, if changes since last
                                    report)

                           ------------------------

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

  As of June 30, 2001, the Registrant had 5,643,311 common shares, par value
$.0025 per share, issued and outstanding.
<PAGE>

                        PART I -- FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                          HARBOR GLOBAL COMPANY LTD.

                          CONSOLIDATED BALANCE SHEETS
                (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>


                                                                         June 30,   December 31,
                                                                           2001         2000
                                                                       ----------   ------------
                                                                      (Unaudited)
<S>                                                                    <C>            <C>
ASSETS
Cash and Cash Equivalents............................................  $  7,513       $ 24,338
Restricted Cash......................................................        13            382
Marketable Securities................................................    31,297          5,321
Accounts Receivable..................................................     3,224          3,703
Prepaid Charges......................................................     1,343          1,897
Timber Inventory.....................................................     5,639          3,907
Other Current Assets.................................................       235              7
                                                                       --------       --------
Total Current Assets.................................................    49,264         39,555

Long-Term Restricted Cash............................................     6,863          6,820
Goodwill.............................................................     1,096          1,239
Polish Venture Capital Investments...................................    25,659         31,964
Long-term Investments................................................    13,913         11,738
Building.............................................................    23,704         23,965
Timber Equipment.....................................................     8,414          9,899
Other Long-term Assets...............................................     1,093          2,883
Marketable Securities................................................       238          5,665
Note Receivable......................................................     8,677         10,593
                                                                       --------       --------
Total Assets.........................................................  $138,921       $144,321
                                                                       ========       ========

LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts Payable.....................................................  $  2,330       $  2,175
Dividend Payable.....................................................     2,697             --
Accrued Expenses.....................................................     2,706          4,275
Foreign Taxes Payable................................................       706          4,238
                                                                       --------       --------
Total Current Liabilities............................................     8,439         10,688

Long-term Escrow Liability...........................................     1,800          1,800
Note Payable.........................................................     5,000          5,000
                                                                       --------       --------
Total Liabilities....................................................    15,239         17,488

Minority Interest....................................................    43,969         51,577
                                                                       --------       --------
SHAREHOLDERS' EQUITY

Common shares, par value $.0025 per share; authorized 48,000,000
  shares; 5,643,311 shares issued and outstanding as of June 30, 2001
  and December 31, 2000..............................................        14             14
Preferred shares, par value $.01 per share; authorized 1,000,000
  shares; none issued................................................        --             --
Retained Earnings (Accumulated Deficit)..............................     3,960           (521)
Cumulative Translation Adjustment....................................       (24)            --
Paid-in Capital......................................................    75,763         75,763
                                                                       --------       --------
Total Shareholders' Equity...........................................    79,713         75,256
                                                                       --------       --------

Total Liabilities and Shareholders' Equity...........................  $138,921       $144,321
                                                                       ========       ========
</TABLE>





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

                                       2
<PAGE>

                          HARBOR GLOBAL COMPANY LTD.

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
                                  (UNAUDITED)

<TABLE>
<CAPTION>


                                                                Three Months           Six Months
                                                                   Ended                  Ended
                                                                  June 30,               June 30,
                                                             -------------------   -------------------
                                                               2001      2000       2001       2000
                                                             --------   --------   --------   --------
<S>                                                          <C>        <C>        <C>        <C>
Revenues:
 Timber Sales..............................................  $  6,978   $  5,325   $  7,343   $  5,325
 Real Estate Rental Revenue................................     1,565      2,106      3,126      4,046
 Other.....................................................     1,220        540      2,786      1,419
                                                             --------   --------   --------   --------
  Total Revenues...........................................     9,763      7,971     13,255     10,790
                                                             --------   --------   --------   --------

Operating Expenses:
 Timber Cost of Goods Sold.................................    (5,752)    (5,978)    (6,085)    (5,978)
 Salary and Benefit Expenses...............................    (1,322)      (746)    (2,084)    (1,404)
 Facility Expenses.........................................      (349)      (309)      (675)      (659)
 Building and Property Management Expenses.................      (835)      (576)    (1,419)    (1,016)
 Other Expenses............................................    (2,685)    (1,332)    (5,413)    (3,788)
 Allocation of Former Parent Company Costs.................        --     (2,563)        --     (4,703)
                                                             --------   --------   --------   --------
  Total Operating Expenses.................................   (10,943)   (11,504)   (15,676)   (17,548)
                                                             --------   --------   --------   --------

  Operating Loss...........................................    (1,180)    (3,533)    (2,421)    (6,758)

Other (Expense) Income:
 Net Unrealized and Realized (Losses) Gains on Securities..     2,137        605      2,872      2,084
 Write-down of Venture Capital Investments.................    (2,430)        --     (5,283)        --
 Gain on Sale of Tas-Yurjah................................     7,303         --      7,303         --
 Write-Off of Investment in Polish Real Estate Fund........    (1,875)        --     (1,875)        --
 Interest Income (Expense).................................        --       (150)        (1)      (250)
                                                             --------   --------   --------   --------
  Total Other Income.......................................     5,135        455      3,016      1,834
                                                             --------   --------   --------   --------

  Income (Loss) from Continuing Operations before
   Provision for Income Taxes and Minority Interest........     3,955     (3,078)       595     (4,924)

Provision for Income Taxes.................................    (1,028)      (273)    (1,006)      (595)
                                                             --------   --------   --------   --------
  Income (Loss) from Continuing Operations before
   Minority Interest.......................................     2,927     (3,351)      (411)    (5,519)

Minority Interest Income (Expense).........................     2,263       (118)     4,892       (274)
                                                             --------   --------   --------   --------

  Net Income (Loss) from Continuing Operations.............     5,190     (3,469)     4,481     (5,793)

Net Income from Discontinued Operations....................        --      1,134         --      1,326
                                                             --------   --------   --------   --------

  Net Income (Loss)........................................  $  5,190   $ (2,335)  $  4,481   $ (4,467)
                                                             ========   ========   ========   ========
Earnings (Loss) Per Share:
Continuing Operations......................................  $   0.92   $  (0.61)  $   0.79   $  (1.03)
Discontinued Operations....................................        --       0.20         --       0.24
                                                             --------   --------   --------   --------
Basic and Diluted Earnings (Loss) Per share................  $   0.92   $  (0.41)  $   0.79   $  (0.79)
                                                             ========   ========   ========   ========

Weighted Average Basic and Diluted Shares Outstanding......     5,643      5,643      5,643      5,643
                                                             ========   ========   ========   ========

</TABLE>



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

                                       3
<PAGE>

                          HARBOR GLOBAL COMPANY LTD.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
                                  (UNAUDITED)


<TABLE>
<CAPTION>


                                                                       SIX MONTHS ENDED JUNE 30,
                                                                     -----------------------------
                                                                         2001               2000
                                                                     ----------           --------
<S>                                                                   <C>                 <C>
Cash Flows from Operating Activities:
  Net Income (Loss)............................................      $  4,481            $(4,467)
  Net Income from Discontinued Operations......................            --              1,326
                                                                     --------            -------
        Net Income (Loss) from Continuing Operations...........         4,481             (5,793)
  Adjustments to Reconcile Net Loss to Net Cash Used in
Operating Activities --
    Depreciation and Amortization..............................         2,447              2,365
    Loss on Disposal of Timber Equipment.......................           371                 --
    Unrealized and Realized Losses (Gains) on Venture Capital
      Marketable Securities, and Long-term Investments, Net....         3,100             (2,084)
    Minority Interest..........................................        (4,892)               274
    Non-cash Interest Income on Note Receivable................          (584)                --
    Allocation of Former Parent Company Costs..................            --              4,703
    Interest Earned on Restricted Cash.........................           (42)                --
Changes in Operating Assets and Liabilities --
    Timber Inventory...........................................        (1,731)              (967)
    Other Current Assets.......................................       (25,180)              (104)
    Other Long-term Assets and Marketable Securities...........         7,133                857
    Accrued Expenses and Accounts Payable......................        (4,965)            (1,761)
                                                                     --------            -------

        Total Adjustments and Changes in Operating Assets
          and Liabilities......................................       (24,343)             3,283
                                                                     --------            -------

        Net Cash Used in Continuing Operating Activities.......       (19,862)            (2,510)
                                                                     --------            -------

        Net Cash Provided by Discontinued Operations...........            --              7,265
                                                                     --------            -------

Cash Flows from Investing Activities:
  Building.....................................................           (81)                --
  Purchase of Long-term Investments............................        (4,536)            (2,411)
  Proceeds from Sale of Long-term Investments..................         4,545              2,589
  Net Cash Flow from Other Investing Activities................         1,022                825
  Proceeds from Note Receivable................................         2,500                 --
  Purchase of Timber Equipment.................................          (757)              (429)
                                                                     --------            -------

        Net Cash Provided by Investing Activities..............         2,693                574
                                                                     --------            -------

Cash Flows from Financing Activities:
  Capital Contributions........................................            --              3,769
  Due to Affiliates, Net.......................................            --             (6,300)
  Repayment of Note Payable....................................            --               (620)
  Reclassification of Restricted Cash..........................           369             (1,671)
                                                                     --------            -------

        Net Cash Provided by (Used in) Financing Activities....           369             (4,822)
                                                                     --------            -------
Effect of Foreign Currency Exchange Rate Changes on Cash and
   Cash Equivalents............................................           (25)                --
Net (Decrease) Increase in Cash and Cash Equivalents...........       (16,825)               507
                                                                     --------            -------

Cash and Cash Equivalents, Beginning of Period.................        24,338              5,177
                                                                     --------            -------

Cash and Cash Equivalents, End of Period.......................      $  7,513            $ 5,684
                                                                     ========            =======
</TABLE>





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

                                       4
<PAGE>

                          HARBOR GLOBAL COMPANY LTD.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)
                                 June 30, 2001


(1)  BACKGROUND AND BASIS OF PRESENTATION

BACKGROUND

     Prior to October 24, 2000, Harbor Global Company Ltd., a Bermuda limited
duration company ("Harbor Global" or the "Company"), was a wholly-owned
subsidiary of The Pioneer Group, Inc., a Delaware corporation ("Pioneer").  On
May 14, 2000, Pioneer and UniCredito Italiano, S.p.A., an Italian financial
institution ("UniCredito"), entered into a merger agreement under which a
wholly-owned subsidiary of UniCredito would merge with and into Pioneer (the
"Merger Agreement").  As a condition to closing the merger and pursuant to a
Distribution Agreement dated as of October 24, 2000 by and among the Company,
Pioneer and Harbor Global II Ltd. (the "Distribution Agreement"), Pioneer
transferred selected assets and liabilities  to Harbor Global and distributed
all of the outstanding common shares of Harbor Global to its stockholders (the
"Spin-off").  Pioneer stockholders received one Harbor Global common share for
every five shares of Pioneer common stock held on that date.

     The Company's assets primarily consist of the following: Russian real
estate management and investment management operations; Polish venture capital
investment and management operations; real estate management operations; timber
harvesting and sales in Russia ("Russian timber operations"); and its other
assets and operations ("Other"). Other includes approximately $31.4 million in
cash and marketable securities, of which $5 million is restricted to satisfy
liabilities associated with Pioneer's former gold mining operations and $1.8
million is restricted to satisfy a compensation liability payable to Harbor
Global's Chief Executive Officer, and a non-interest-bearing promissory note
with a face value of $13.8 million and a balance outstanding of $11.3 million,
payable to Pioneer Goldfields II Limited, a wholly-owned subsidiary of the
Company.

BASIS OF PRESENTATION

     In the opinion of management, the accompanying interim financial statements
contain all adjustments necessary to present fairly the financial position as of
June 30, 2001 and results of operations for the three and six months ended June
30, 2001 and 2000 and cash flows for the six months ended June 30, 2001 and
2000.  Results for interim periods may not be necessarily indicative of the
results to be expected for the year.  These interim financial statements should
be read in conjunction with the Company's 2000 Annual Report on Form 10-K for
the year ended December 31, 2000 filed with the Securities and Exchange
Commission.

     The consolidated financial statements included herein have been prepared
using the historical cost basis of the assets and liabilities and historical
results of operations related to the Company's businesses.  The historical
consolidated financial statements for the three and six months ended June 30,
2000 include allocations of certain Pioneer expenses relating to the Company's
businesses that were transferred to the Company from Pioneer.  These costs are
included in the Statement of Operations as costs allocated by a former parent
and include an allocation of indirect costs such as legal, finance and human
resources and direct costs such as salary and benefit costs of Pioneer employees
who worked exclusively for the Company, travel and political risk insurance.
The cost of the shared services charged to the Company is not necessarily
indicative of the costs that would have been incurred if the Company had
performed these functions as a stand-alone entity.  Following the Spin-off, the
Company began performing these shared functions using its own resources or
purchased services.

     Since Harbor Global is a Bermuda limited duration company, the Company
expects that for United States federal income tax purposes it will be taxed as a
partnership and, as a result, all United States federal income tax expenses will
be

                                       5
<PAGE>

borne by its shareholders. The income tax provisions and deferred taxes included
in the accompanying consolidated financial statements relate to the Company's
corporate subsidiaries that are located primarily in Russia and Poland.

     The consolidated financial statements included herein may not necessarily
reflect the consolidated results of operations, financial position, and cash
flows of the Company if it had been a separate, stand-alone entity during the
periods presented.


(2)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, PRINCIPLES OF CONSOLIDATION

CONSOLIDATION

     The accompanying consolidated financial statements include the Company's
wholly-owned and majority-owned subsidiaries and certain partnerships that it
controls.  Intercompany transactions and balances have been eliminated.  The
Company has consolidated Pioneer Poland U.S., L.P. and Pioneer Poland UK, L.P.
(collectively, the "Pioneer Poland Fund") in which the Company's ownership
interests are 7.2% and 9.2%, respectively.  Control is defined by several
factors, including, but not limited to, the fact that the Company is the general
partner of both Pioneer Poland U.S., L.P. and Pioneer Poland UK, L.P., the
general partner has absolute and unilateral authority to make investment
decisions, the limited partners may not remove the general partner, and the
general partner has absolute and unilateral authority to declare, or not to
declare, distributions of partnership income to the partners.  Investments in
which the Company has less than a 20% ownership interest are generally accounted
for under the cost method of accounting.

     The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the
reported amounts of revenues and expenses.  Actual results could differ from
those estimates.  The most significant estimates with regard to these
consolidated financial statements relate to the valuation of investments of the
Open Joint-Stock Company "Pioneer First Investment Fund" ("Pioneer First
Investment Fund") and venture capital investments and the estimated future cash
flows of the Company's timber operations, as discussed herein.

POLISH VENTURE CAPITAL INVESTMENT

     No market quotes are available for the venture capital investments.  Most
of these investments are valued at fair value, as determined in good faith by
management.  In determining fair value, investments are initially stated at cost
until significant subsequent events require a change in valuation.  The Company
considers the financial condition and operating results of the investee, prices
paid in subsequent private offerings of the same or similar securities, the
amount that the Company can reasonably expect to realize upon the sale of these
securities, and other factors deemed relevant.  For the three and six months
ended June 30, 2001, charges of approximately $2,430,000 and $5,283,000,
respectively, were recorded relative to the write-down of two investments in the
venture capital portfolio.  A majority of this write-down, approximately 92%,
was attributable to minority shareholders.  In 2000, there were no venture
capital portfolio write-downs during the first six months of the year.

CONCENTRATION OF RISK

     The Company's operations are concentrated in Russia and Central Europe.
Additionally, the Company's timber project sells its timber primarily in the
Asian markets.  The Company performs ongoing evaluations of its subsidiaries and
investments and endeavors to mitigate its exposure in these foreign countries.

     Harbor Global's Russian real estate management and investment management
operations and its Russian timber operations are no longer eligible for
political risk insurance coverage previously provided by Overseas Private
Investment Corporation ("OPIC"). Pursuant to its charter, OPIC may only insure
companies with

                                       6
<PAGE>

beneficial US ownership of at least 51%. Since Harbor Global does not meet this
criterion, the Company has been actively pursuing political risk insurance from
other sources.

RECENT ACCOUNTING PRONOUNCEMENTS

     For the year beginning January 1, 2001, the Company adopted SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities".  The impact of
the adoption was not material to the financial statements of the Company.

     The Financial Accounting Standards Board approved the issuance of SFAS No.
141, Business Combinations and SFAS No. 142, Goodwill and Other Intangible
Assets in July 2001.  SFAS No. 141 will require all business combinations to be
accounted for using the purchase method of accounting; use of the pooling-of-
interest method will be prohibited. The provisions of SFAS No. 141 will apply to
all business combinations initiated after June 30, 2001. SFAS No. 142 will
require that goodwill should not be amortized but should be tested for
impairment at least annually at the reporting unit level. SFAS No. 142 is
effective for fiscal years beginning after December 15, 2001 for all goodwill
and other intangible assets regardless of when those assets were initially
recognized. SFAS No. 141 is not anticipated to have an impact on the Company's
operating results or financial condition when adopted.  The Company has yet to
determine the effect of SFAS No. 142 on the Company's operating results and
financial condition upon adoption.


(3)  EARNINGS (LOSS) PER SHARE

     The earnings (loss) per share has been computed assuming that the 5,643,311
common shares of the Company issued and outstanding as of June 30, 2001 were
outstanding for all periods presented.

     The Company had no share options or other common stock equivalents
outstanding during the periods presented and consequently basic and diluted loss
per share are the same.


(4)  RESTRICTED CASH

     Restricted cash of $6.9 million at June 30, 2001 represents $5 million to
satisfy liabilities associated with Pioneer's former gold mining operations,
$1.8 million to satisfy a compensation liability payable to Harbor Global's
Chief Executive Officer and $0.1 million of interest.  After the fifth
anniversary of the closing of the sale of Pioneer's former gold mining
operations, Harbor Global is obliged to pay Pioneer the lesser of $5 million or
the actual proceeds received by Pioneer Goldfields II from Ashanti Goldfields
Teberebie Limited ("Ashanti") under the purchase agreement less any
indemnification claims paid under the purchase agreement.  With respect to the
compensation liability, which is disclosed as a long-term escrow liability, $1.8
million is payable on October 24, 2002.


(5)  NOTE RECEIVABLE

     The note receivable consists of a stated non-interest-bearing promissory
note from Ashanti with a face value of $13.8 million, of which $11.3 million
remains outstanding at June 30, 2001. The effective interest rate is thirteen
percent based on LIBOR plus an appropriate credit risk factor for the underlying
payee.  The note represents part of the base purchase price paid to Pioneer
Goldfields II Limited, a wholly-owned subsidiary of Harbor Global, for the sale
of its gold mining operations in Ghana in July 2000.  Under the promissory note,
Ashanti is obligated to pay the purchase price over five years, with principal
amounts of between $2.5 million and $3.75 million due annually, as specified in
the purchase agreement.  For the three and six months ended June 30, 2001,
approximately $261,000 and $585,000, respectively, of interest income was
recognized by the Company.

                                       7
<PAGE>

(6)  NOTE PAYABLE

     The non-interest bearing note payable of $5.0 million at June 30, 2001
represents that portion of proceeds received by Pioneer in connection with the
sale of its gold mining operations in Ghana to Ashanti.  In connection with the
merger with UniCredito, Pioneer contributed all proceeds from the sale of its
gold mining operation, including $5.0 million in cash, $13.8 million in a non-
interest bearing promissory note and the right to receive payments of up to $5.0
million, contingent upon prevailing gold prices and productivity.  However,
Harbor Global agreed that promptly after the fifth anniversary of the closing of
the purchase agreement with Ashanti, it will return to Pioneer the lesser of
$5.0 million or the proceeds received by Pioneer Goldfields II from Ashanti
under the purchase agreement less any indemnification claims paid under the
purchase agreement.


(7)  RELATED PARTY TRANSACTIONS

     The Company entered into an administration and liquidation agreement with
Calypso Management LLC ("Calypso Management" or the "Manager"), under which
Calypso Management manages the liquidation of the Company and operates the
Company's assets as going concern businesses until they are liquidated.  The
principal executive officers of the Company also serve as the principal
executive officers of the Manager.  The Manager is owned and operated by the
Company's President and Chief Executive Officer as well as the Company's Chief
Operating Officer and Chief Financial Officer.  Under the administration and
liquidation agreement, the Company pays expenses of the Manager incurred in
connection with its provision of services and a percentage of the net proceeds
realized from the liquidation of its assets.

     For the three and six months ended June 30, 2001, the Company had
management fee expenses of $720,000 and $1,393,000, respectively.  Of the
management fee expense for the period, $309,000 is outstanding at June 30, 2001.

     Harbor Global is obligated under its administration and liquidation
agreement with Calypso Management to make certain distributions.  When it
becomes probable that amounts will become payable under this agreement, an
accrual will be recorded.


(8)  COMMITMENTS

     The Company committed to contribute up to $5,700,000 for Class B shares of
the Pioneer Polish Real Estate Fund, S.A. (the "Fund"), an investment of the
Company, of which approximately $285,000 had been contributed as of March 31,
2001.  In April 2001, Harbor Global announced its intention to liquidate the
Fund.  In connection with the liquidation, Harbor Global's wholly-owned
subsidiary, PREA, L.L.C. ("PREA"), entered into definitive agreements with the
Fund's unaffiliated investors to purchase all of the shares held by such
investors for an aggregate purchase price of $1.59 million.  The purchase, which
closed during April 2001, relieves Harbor Global of its obligation to make
capital contributions to the Fund in the amount of approximately $5.4 million
pursuant to the Subscription and Shareholders' Agreement dated as of October 20,
1999 by and among the Fund and the investors.  Management is now in the process
of liquidating the Fund.  Consequently, the Company wrote-off its investment in
the Fund, which is included in other (expense) income, in the second quarter of
2001.  In addition, the Company is in the process of liquidating its real estate
management business in Poland, PREA Poland Sp. z o.o.  The liquidation of both
the Fund and PREA Poland Sp. z o.o. are expected to be completed in 2002.  These
liquidations will not completely terminate operations in the real estate
management segment.

     On October 16, 1996, Pioglobal Omega L.L.C. ("Pioglobal Omega"), a wholly-
owned subsidiary of the Company, and the International Finance Corporation
("IFC"), an unrelated party, entered into a put and call agreement with respect
to the IFC's shares of the stock of Pioneer First Russia, Inc. ("Pioneer First
Russia"), a majority-owned subsidiary.  Under this agreement, from October 2000
to October 2004, upon written notice to Pioglobal Omega, the IFC will have the
right to cause Pioglobal Omega to purchase all of the IFC's shares of Pioneer
First Russia common stock. From October 2004 to October 2006, upon written
notice to the IFC, Pioglobal

                                       8
<PAGE>

Omega will have the right to buy all of the IFC's shares of Pioneer First Russia
common stock.

     Under the administration and liquidation agreement, Harbor Global is
obligated to pay a $1.8 million signing and retention bonus to Stephen G.
Kasnet, President and Chief Executive Officer of Harbor Global, subject to
certain conditions, on October 24, 2002 (See Note 4).


(9)  GAIN ON SALE OF TAS-YURJAH

     During the second quarter of 2001, Harbor Global's wholly-owned subsidiary,
Harbor Far East Exploration, L. L. C., completed the sale of its 94.5% direct
interest in Closed Joint-Stock Company "Tas-Yurjah" Mining Company" ("Tas
Yurjah") for an aggregate sales price of approximately $8.5 million pursuant to
a definitive sales agreement. As a result of the transaction, Harbor Global
reported a gain, after withholding taxes and closing costs, of approximately
$7.3 million in the second quarter of 2001. There is no corporate income tax
effect on this transaction.


(10) SUBSEQUENT EVENTS

     On August 1, 2001, Harbor Global's Board of Directors declared a dividend
of approximately $14.5 million or $2.57 per share on Harbor Global's Common
Shares.  Pursuant to an Administration and Liquidation Agreement, Calypso
Management LLC will receive a payment equal to 10% of such dividend or $0.26 per
share.  The balance of $2.31 per share will be payable on November 15, 2001 to
shareholders of record as of October 24, 2001.


(11) FINANCIAL INFORMATION BY BUSINESS SEGMENT

     In accordance with SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information", the Company presents its segment
information for continuing operations using the management approach. The
management approach is based on the way that management organizes the segments
within a company for making operating decisions and assessing performance. The
Company's operating segments are organized around services and products
provided, as well as geographic regions.

     The Company derives its revenues from the following products and services
by segment:

     .  Russian Real Estate Management and Investment Management Operations:
        investment and management services

     .  Polish Venture Capital Investment and Management Operations: venture
        capital investment and management services

     .  Real Estate Management Operations: real estate management services
        including property management and advisory services

     .  Russian Timber Operations: harvest and sale of timber primarily to
        Pacific Rim countries

                                       9
<PAGE>

                              SEGMENT DISCLOSURES

<TABLE>
<CAPTION>


                                                          Russian        Polish
                                                         Real Estate     Venture
                                                         Management      Capital
                                                            and        Investment     Real
                                                         Investment       and         Estate      Russian
                                                         Management    Management   Management    Timber
                                                         Operations    Operations   Operations   Operations    Other      Total
                                                         ----------    ----------   ----------   ----------   -------    --------
<S>                                                      <C>           <C>          <C>          <C>          <C>         <C>
As of and for the six months ended June 30, 2001
------------------------------------------------
Net Revenues and Sales................................     $ 3,963      $    97      $   648      $ 7,343      $ 1,204    $ 13,255
                                                           -------      -------      -------      -------      -------    --------
Income (Loss) from Continuing Operations before
  Provision for Income Taxes and Minority Interest....       2,304       (6,145)      (2,527)         (31)       6,993         595

Provision for Income Taxes............................        (998)          (8)          --           --           --      (1,006)

Minority Interest (Expense) Income....................        (645)       5,537           --           --           --       4,892
                                                           -------      -------      -------      -------      -------    --------
Net Income (Loss) from Continuing Operations..........     $   661      $  (616)     $(2,527)     $   (31)     $ 6,993    $  4,481
                                                           =======      =======      =======      =======      =======    ========

Depreciation and Amortization.........................     $   532      $     6      $    38      $ 1,871      $    --    $  2,447
                                                           =======      =======      =======      =======      =======    ========

Interest Expense......................................     $    --      $    --      $    --      $    --      $    --    $     --
                                                           =======      =======      =======      =======      =======    ========

Total Assets..........................................     $63,654      $26,322      $   502      $18,675      $29,768    $138,921
                                                           =======      =======      =======      =======      =======    ========
</TABLE>



<TABLE>
<CAPTION>


                                                          Russian        Polish
                                                         Real Estate     Venture
                                                         Management      Capital
                                                            and        Investment     Real
                                                         Investment       and         Estate      Russian
                                                         Management    Management   Management    Timber
                                                         Operations    Operations   Operations   Operations    Other      Total
                                                         ----------    ----------   ----------   ----------   -------    --------
<S>                                                      <C>           <C>          <C>          <C>          <C>         <C>
As of and for the six months ended June 30, 2000
------------------------------------------------
Net Revenues and Sales................................     $ 4,112      $   446      $   907      $ 5,325      $    --    $ 10,790
                                                           -------      -------      -------      -------      -------    --------
Income (Loss) from Continuing Operations before
  Provision for income Taxes and Minority Interest....       1,371         (683)      (1,683)      (3,801)        (128)     (4,924)

Provision for Income Taxes............................        (562)          --          (33)          --           --        (595)

Minority Interest (Expense) Income....................        (866)         592           --           --           --        (274)
                                                           -------      -------      -------      -------      -------    --------
Net (Loss) Income from Continuing Operations..........     $   (57)     $   (91)     $(1,716)     $(3,801)     $  (128)   $ (5,793)
                                                           =======      =======      =======      =======      =======    ========

Depreciation and Amortization.........................     $   465      $     7      $    61      $ 1,832      $    --    $  2,365
                                                           =======      =======      =======      =======      =======    ========

Interest Expense......................................     $    --      $    --      $    --      $   250      $    --    $    250
                                                           =======      =======      =======      =======      =======    ========

Total Assets..........................................     $39,682      $51,484      $ 1,157      $20,450      $   952    $113,725
                                                           =======      =======      =======      =======      =======    ========
</TABLE>

                                       10
<PAGE>

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

OVERVIEW

     The consolidated financial statements of Harbor Global's principal
operations include its Russian real estate management and investment management
operations, Polish venture capital investment and management operations, real
estate management operations, and Russian timber operations.  Management's
Discussion and Analysis of Financial Condition and Results of Operations is
presented in three sections:  Results of Operations for the three and six months
ended June 30, 2001 and 2000; Liquidity and Capital Resources; and Future
Operating Results.

RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2001 AND 2000

Consolidated Operations.

     Harbor Global reported net income of $5.2 million ($0.92 per share) on
revenues of $9.8 million in the second quarter of 2001 compared with a net loss
of $2.4 million ($0.41 per share) on revenues of $8.0 million for the second
quarter of 2000.  Income from continuing operations was $5.2 million in the
second quarter of 2001 compared to a net loss of $3.5 million in the second
quarter of 2000.  The $8.7 million increase in income from continuing operations
reflects the $7.3 million gain on the sale of the Company's gold exploration
subsidiary, Tas-Yurjah, and a $2.0 million reduction in corporate overhead
costs. Tas-Yurjah is included under Other in the Company's segment reporting.
Additionally, the timber operation reported a $1.2 million increase in operating
income attributable, in part, to increases in production and average realized
prices. Offsetting the increased income was the $1.9 million write-off of the
Company's investment in the Pioneer Polish Real Estate Fund, an investment that
constituted part of the Company's real estate management segment. Income from
discontinued Russian banking and brokerage operations totaled $1.1 million in
the second quarter of 2000.

     For the six months ended June 30, 2001, the Company reported net income of
$4.5 million ($0.79 per share). For the first half of 2000, Harbor Global
reported a net loss of $4.5 million ($0.79 per share), consisting of a net loss
from continuing operations of $5.8 million ($1.03 per share) and net income from
discontinued Russian banking and brokerage operations of $1.3 million ($0.24 per
share).  The $10.3 million increase in net income from continuing operations was
attributable to the $7.3 million gain on the sale of Tas-Yurjah, a $3.7 million
reduction in corporate overhead expenses, and a $1.2 million increase in the
timber operation's operating income.  Offsetting these increases was the $1.9
million write-off of the Company's investment in the Pioneer Polish Real Estate
Fund.

                                       11
<PAGE>

     Set forth on the following table are the details of revenues and net income
(loss) by business segment for the three and six months ended June 30, 2001 and
2000:

                        REVENUES AND NET INCOME OR LOSS
                             (DOLLARS IN MILLIONS)

<TABLE>
<CAPTION>


                                                                    NET INCOME                           NET INCOME
                                                  REVENUES            (LOSS)          REVENUES             (LOSS)
                                              ---------------    ---------------    ---------------    ----------------
                                                THREE MONTHS       THREE MONTHS       SIX MONTHS         SIX MONTHS
                                                   ENDED              ENDED              ENDED              ENDED
                                                  JUNE 30,           JUNE 30,           JUNE 30,           JUNE 30,
                                              ---------------    ---------------    ---------------    ----------------
                                              2001       2000    2001       2000    2001       2000    2001        2000
                                              ----       ----    ----       ----    ----       ----    ----        ----
<S>                                           <C>        <C>     <C>        <C>     <C>        <C>     <C>         <C>
BUSINESS SEGMENT
----------------
Russian Real Estate Management
  and Investment Management
  Operations.........................         $ 2.0      $ 2.0   $ 0.4      $ 0.2   $ 4.0      $ 4.1   $ 0.7       $(0.1)
Polish Venture Capital Investment
  And Management Operations..........            --        0.2    (0.3)      (0.2)    0.1        0.5    (0.6)       (0.1)
Real Estate Management Operations               0.3        0.5    (2.3)      (0.9)    0.7        0.9    (2.5)       (1.7)
Russian Timber Operations............           6.9        5.3     0.3       (2.5)    7.3        5.3    (0.1)       (3.8)
Other................................           0.6         --     7.1       (0.1)    1.2         --     7.0        (0.1)
                                              -----      -----   -----      -----   -----      -----   -----       -----
Total from continuing
  operations.........................         $ 9.8      $ 8.0   $ 5.2      $(3.5)  $13.3      $10.8   $ 4.5       $(5.8)
                                              -----      -----   -----      -----   -----      -----   -----       -----

Income from discontinued
  operations.........................            --         --      --        1.1      --         --      --         1.3
                                              -----      -----   -----      -----   -----      -----   -----       -----

     Totals..........................         $ 9.8      $ 8.0   $ 5.2      $(2.4)  $13.3      $10.8   $ 4.5       $(4.5)
                                              -----      -----   -----      -----   -----      -----   -----       -----
</TABLE>


Russian Real Estate Management and Investment Management Operations.

     The Russian real estate management and investment management operations
reported net income of $0.4 million for the second quarter 2001, an increase of
$0.2 million compared with net income of $0.2 million reported in the second
quarter of 2000.  The increase was attributable to a $1.5 million increase in
portfolio gains and a $0.5 million reduction in corporate overhead costs, offset
partially by a non-recurring insurance settlement and expense reimbursements
aggregating $1.0 million which were received in the second quarter of 2000.  In
addition, earnings from the Meridian Commercial Tower decreased by $0.8 million
compared with the second quarter of 2000 due to a higher vacancy rate and a
related increase in absorbed building operating expenses.

     During the six months ended June 30, 2001, the Russian real estate
management and investment management business reported net income of $0.7
million, an increase of $0.8 million compared with the corresponding period in
2000.  The increase in income was attributable to a $1.0 million reduction in
corporate overhead costs, a $0.8 million increase in portfolio gains, a $0.8
million increase in interest income and a $0.4 million decrease in intercompany
expenses.  These increases were offset by a $1.3 million reduction in income
from the Meridian Commercial Tower associated with a higher vacancy rate and a
related increase in absorbed building operating expenses and the non-recurring
insurance settlement and expense reimbursements aggregating $1.0 million, which
were received in 2000.

Polish Venture Capital Investment and Management Operations.

     For the second quarter of 2001, the Polish venture capital investment and
management operations reported losses of $0.3 million compared with net losses
of $0.2 million in the second quarter of 2000.  For the six months ended June
30, 2001, the venture capital business reported losses of $0.6 million compared
with a net loss of $0.1 million for the same period in 2000.  The increase in
losses of $0.5 million was attributable to the $3.1 million write-down of two
portfolio positions.

                                       12
<PAGE>

The Company reported a loss, net of minority interest, of $0.5 million
associated with these write-downs.

Real Estate Management Operations.

     The real estate management operations reported losses of $2.3 million in
the second quarter of 2001 compared with losses of $0.9 million in the second
quarter of 2000.  The $1.4 million increase in losses was due to a $1.9 million
write-off of PREA's investment in the Fund, offset partially by a $0.5 million
reduction in corporate overhead costs.  For the six months ended June 30, 2001,
the real estate management operations reported losses of $2.5 million compared
to losses of $1.7 million for the same period in 2000.  The $0.8 million
increase in losses is also attributable to the foregoing investment write-off
less reductions in corporate overhead costs.

Russian Timber Operations.

     The Russian timber operations reported second quarter 2001 net income of
$0.3 million, an increase of $2.8 million compared with losses of $2.5 million
reported in the second quarter of 2000. For the six months ended June 30, 2001,
the Russian timber operations reported losses of $0.1 million, a decrease in
losses of $3.7 million compared with the corresponding period in 2000.  The
earnings increases were attributable principally to reductions in corporate
overhead costs of $0.8 million and $1.7 million for the respective three and six
months ended June 30, 2001; increases in production, which reduced the cost per
cubic meter; and improvements in the grade mix of logs shipped and average
realized prices.  Losses were also higher in 2000 because of an $0.8 million
inventory lower of cost or market adjustment recorded in the second quarter of
2000.

     A comparison of production and production costs for the three and six
months ended June 30, 2001 with the corresponding periods in 2000 is set forth
on the following table:

<TABLE>
<CAPTION>
                                             Three months                                       Six months
                                             ended June 30,              Percentage            ended June 30,   Percentage
                                        --------------------              Increase/           ---------------    Increase/
                                          2001          2000              (decrease)            2001    2000    (decrease)
--------------------------------------------------------------------------------------------------------------------------
<S>                                     <C>           <C>                 <C>                 <C>     <C>       <C>
Production (cubic meters in                74            60                  23%                168     125        34%
 thousands)
--------------------------------------------------------------------------------------------------------------------------
Cash Costs per cubic meter              $  39         $  44                 (11%)             $  33   $  41       (20%)
 produced
--------------------------------------------------------------------------------------------------------------------------
Total Cost per cubic meter              $  50         $  59                 (15%)             $  45   $  54       (17%)
 produced
-------------------------------------------------------------------------------------------------------------------------
</TABLE>

     The significant increase in production and related decrease in the cost per
cubic meter is a result of the harvesting and development of a new concession
previously owned by Closed Joint-Stock Company "Udinskoye", an inactive
subsidiary of the Company, as well as productivity increases experienced at the
original concession, "Forest Starma".  In 2001, the Company expects that the
timber at the Udinskoye concession will be harvested primarily during the first
and fourth quarters and shipped during the summer months.

     During the first half of 2001, the Company's russian timber subsidiary,
Closed Joint-Stock Company "Forest-Starma" ("Forest-Starma"), shipped
approximately 137,000 cubic meters at an average realized price of $53 per cubic
meter, approximately 96% of which was shipped in the second quarter.  In the
first half of 2000, Forest-Starma shipped 107,000 cubic meters at an average
realized price of $50 per cubic meter, all of which were shipped in the second
quarter of that year. Forest-Starma currently sells all of its timber production
through its marketing and sales agent, Rayonier, Inc.

                                       13
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

     Liquid assets consisting of cash and marketable securities maintained for
general corporate purposes were $31.4 million as of June 30, 2001. This
represents a $5.6 million increase from the 2000 fiscal year end.  The increase
is attributable principally to proceeds from the sale of Tas-Yurjah.

     The assets of the Company's majority-owned Russian subsidiary, Pioneer
First Investment Fund, consist of cash and cash equivalents, equity securities
(both liquid and illiquid), marketable securities, real estate holdings, and
other miscellaneous assets.  In recent years Russia has undergone substantial
political, economic and social change, and as a result, the Russian securities
markets are volatile and are strongly influenced by global trends and trends
that influence emerging markets.  In addition, the Russian securities markets
are significantly smaller and less liquid than the securities markets in the
United States.  As a result, the Company recognizes gains or losses on its
income statement only when the securities are sold; it also currently carries
these investments at lower of cost or fair market value.  Management evaluates
this practice on a continuous basis.

     On April 26, 2001, the shareholders of Harbor Global's majority owned
Russian subsidiary, Pioneer First Investment Fund, approved a dividend of
approximately $5.3 million. The dividend will be paid over a period of one year
beginning on September 1, 2001 to shareholders of record on March 10, 2001.
Harbor Global expects to receive its proportionate share of such dividend in the
amount of approximately $2.8 million during the second half of 2001.

     At June 30, 2001 and December 31, 2000, the Company's Polish venture
capital fund, the Pioneer Poland Fund, had approximately $60.6 million in
committed capital, of which approximately $51.8 million and $50.5 million,
respectively, has been invested in 10 privately held Polish companies.  The
carrying value of these investments at June 30, 2001 and December 31, 2000 was
$25.6 million and $32.0 million, respectively.

FUTURE OPERATING RESULTS

     From time to time, management may make forward-looking statements in this
Quarterly Report on Form 10-Q, in other documents that the Company files with
the Securities and Exchange Commission (including those documents incorporated
by reference into the Form 10-Q), in press releases or in other public
discussions.  The Private Securities Litigation Reform Act of 1995 provides a
"safe harbor" for these statements. For this purpose, a forward-looking
statement is any statement that is not a statement of historical fact.  Forward-
looking statements include those about asset realization plans and strategies,
anticipated expenses, liquidity and capital resources and expectations about
market conditions.  Forward-looking statements can be identified by the words
"may," "believes," "anticipates," "plans," "expects," "estimates" and similar
expressions.  Forward-looking statements are based on currently available
information and management's expectations of future results but involve certain
assumptions.  Management cautions readers that assumptions involve substantial
risks and uncertainties.  Consequently, any forward-looking statement could turn
out to be wrong.  Many factors could cause actual results to differ materially
from expectations.  Described below are some of the important factors that could
affect revenues or results of operations.

THERE CAN BE NO ASSURANCE THAT SHAREHOLDERS WILL BE ABLE TO SELL THEIR HARBOR
GLOBAL COMMON SHARES.

     Harbor Global common shares are not listed on any securities exchange or on
The Nasdaq Stock Market(R).

     Furthermore, Harbor Global does not intend to:

     - engage the services of any market maker;

     - facilitate the development of an active public trading market in Harbor
       Global common shares, or encourage others to do so;

     - place any advertisements in the media promoting an investment in Harbor
       Global; or

                                       14
<PAGE>

     - except as required by the Securities Exchange Act of 1934, collect or
       publish information about prices at which Harbor Global common shares may
       be traded.

     Harbor Global cannot provide assurances as to the prices at which Harbor
Global common shares may trade or provide assurances that shareholders will be
able to sell their Harbor Global common shares.

THE POTENTIAL VALUES TO BE REALIZED UPON THE SALE OR LIQUIDATION OF MOST OF
HARBOR GLOBAL'S ASSETS, IF ANY, ARE SPECULATIVE.

     The potential values to be realized upon the sale of Harbor Global's
Russian real estate management and investment management operations and Russian
timber operations, if any, are speculative.  Harbor Global sells the timber it
harvests primarily to markets in the Pacific Rim.  The value of Harbor Global's
timber harvesting and sales operations to be realized upon its sale or
liquidation, if any, is and will continue to be affected by changes in market
demand and prices for timber and the stability of the economies in the Pacific
Rim.

     A significant portion of Harbor Global's Russian real estate management and
investment management operations consists of its approximately 52% interest in
Pioneer First Investment Fund, a company that invests in Russian real estate
and, to a lesser extent, securities of Russian companies. Generally, the Russian
real estate and securities markets are significantly smaller and less liquid
than the markets in the United States, and as a result, a portion of the assets
held by Pioneer First Investment Fund are illiquid. There is also limited
liquidity in the publicly traded securities of Pioneer First Investment Fund.
Consequently, Harbor Global may have difficulty selling its investment in
Pioneer First Investment Fund or causing Pioneer First Investment Fund to
liquidate its underlying assets, and may only be able to do so at prices which
may not reflect the long-term value of its investments.

HARBOR GLOBAL'S BUSINESSES, PARTICULARLY THOSE CONDUCTED IN EMERGING MARKETS,
ARE SUSCEPTIBLE TO NUMEROUS RISKS AND UNCERTAINTIES ASSOCIATED WITH
INTERNATIONAL OPERATIONS.

     Harbor Global conducts business in countries outside of the United States,
primarily in Russia and Poland. Harbor Global will continue to operate its
international businesses until those businesses are liquidated and will continue
to be subject to the risks of doing business internationally, including:

     - unexpected changes in regulatory requirements and underdeveloped legal
       systems in some countries;

     - export controls relating to timber;

     - tariffs and other trade barriers;

     - difficulties in staffing and managing foreign operations;

     - political and economic instability;

     - fluctuations in currency exchange rates;

     - restrictions on currency exchange and repatriation;

     - restrictions on foreign investment in its businesses;

     - seasonal reductions in timber harvesting operations;
       and

     - potentially adverse tax consequences.

     For example, in recent years Russia has undergone substantial political,
economic and social change.  As is typical of an emerging market, Russia does
not

                                       15
<PAGE>

possess a well-developed business, legal and regulatory infrastructure that
would generally exist in the United States or in a more mature free market
economy. Accordingly, Harbor Global's Russian timber operations and Russian real
estate management and investment management operations involve significant
risks, such as those listed above, that are not typically associated with
developed markets. The liquidation of these businesses and the businesses Harbor
Global operates in other emerging markets, as well as the successful operation
of these businesses pending their liquidation, will depend on the stability of,
and economic conditions in, these emerging markets.

THE LOSS OF KEY OFFICERS AND MANAGERS COULD IMPAIR THE ABILITY OF HARBOR GLOBAL
TO SUCCESSFULLY OPERATE AND MANAGE ITS ASSETS PRIOR TO THEIR LIQUIDATION.

     Mr. Kasnet is the President and Chief Executive Officer, and Mr. Hunter is
the Chief Operating Officer and Chief Financial Officer of Harbor Global. Mr.
Kasnet previously served as the President, and Mr. Hunter previously served as
the Chief Operating Officer and Senior Vice President of Pioneer Global
Investments, a division of Pioneer. As executive officers of Pioneer Global
Investments, Mr. Kasnet and Mr. Hunter operated substantially all the businesses
that Harbor Global now owns. In addition, Harbor Global has entered into an
administration and liquidation agreement with Calypso Management, an entity
owned and operated by Mr. Kasnet and Mr. Hunter, under which Calypso Management
will manage the liquidation of Harbor Global and operate its assets as going
concern businesses until they are liquidated.

     Because Harbor Global's assets are a diverse range of businesses and are
generally located in countries in which successfully conducting and selling
businesses requires significant experience, Harbor Global believes that its
success in liquidating its assets and operating its assets pending their
liquidation will depend to a significant extent upon the continued efforts of
Mr. Kasnet and Mr. Hunter. The loss of the services of either Mr. Kasnet or Mr.
Hunter could have a material adverse effect upon Harbor Global's results of
operations and financial condition. The services of Mr. Kasnet and Mr. Hunter
may also be critical to Harbor Global's ability to liquidate its assets at
prices which will enable Harbor Global to make meaningful distributions to its
shareholders.

     Mr. Kasnet and Mr. Hunter have both entered into employment agreements with
Calypso Management. Mr. Kasnet's employment agreement provides for a minimum
term of two years and may be terminated by Mr. Kasnet upon 120 days prior
written notice following the second anniversary of the distribution date. Mr.
Hunter's employment agreement provides that Mr. Hunter's employment with Calypso
Management is at will, subject to termination by either Calypso Management or
Mr. Hunter upon 60 days prior written notice. If either Mr. Kasnet's or Mr.
Hunter's employment with Calypso Management is terminated, he will cease to be
an officer of Harbor Global. In addition, if either Mr. Kasnet or Mr. Hunter
terminates his employment before the second anniversary of the distribution
date, he will forfeit his right to receive incentive compensation under the
administration and liquidation agreement and his employment agreement.  Harbor
Global has obtained key officer life insurance policies with benefits payable to
Harbor Global for Mr. Kasnet and Mr. Hunter.

HARBOR GLOBAL WILL INDEMNIFY PIONEER FOR SOME LIABILITIES ACCRUING AFTER THE
SPIN-OFF.

     Under the Distribution Agreement, Harbor Global agreed to indemnify Pioneer
for liabilities, other than tax liabilities, incurred by Pioneer relating to the
businesses or operations of the Harbor Global assets. For example, in connection
with the sale of its gold mining operations in Ghana to Ashanti, Pioneer has
agreed to indemnify Ashanti for claims arising under the purchase agreement
before June 19, 2005 relating to its Ghanaian gold mining operations. Under the
Distribution Agreement, Pioneer transferred Pioneer Goldfields II Limited, the
Pioneer subsidiary through which Pioneer's gold mining operations in Ghana were
conducted, to Harbor Global. As a result of the transfer, Harbor Global is
obligated to reimburse Pioneer in the event that Ashanti seeks indemnification
for any claim.  Harbor Global's indemnification obligations to Pioneer in
connection with the Ashanti purchase agreement are capped at the amount of the
total purchase price paid by Ashanti to Pioneer Goldfields II under the purchase
agreement.

                                       16
<PAGE>

     Additionally, under a tax separation agreement between Harbor Global and
Pioneer, generally, Harbor Global has agreed to indemnify Pioneer for tax
liabilities relating to the Harbor Global businesses. Currently, there are no
suits pending that would require payment by Harbor Global to Pioneer under the
indemnification provisions of the Distribution Agreement or tax separation
agreement. However, Harbor Global cannot provide assurances that no legal
proceeding or other claim will occur that would require Harbor Global to
indemnify Pioneer. Furthermore, Harbor Global and its subsidiaries may be
subject to legal proceedings or other claims arising in the ordinary course of
business, including employment related claims, environmental claims and
regulatory fees or fines associated with its international operations.

AS A RESULT OF HOLDING HARBOR GLOBAL COMMON SHARES, HARBOR GLOBAL'S SHAREHOLDERS
MAY RECOGNIZE TAXABLE INCOME AND BE REQUIRED TO PAY TAX WITHOUT A CORRESPONDING
DISTRIBUTION OF CASH FROM HARBOR GLOBAL TO ITS SHAREHOLDERS.

     For United States federal income tax purposes, Harbor Global is treated as
a partnership. For United States federal income tax purposes, Harbor Global's
shareholders will be treated as partners in a Bermuda partnership and their
Harbor Global common shares will represent partnership interests. Because of its
classification as a partnership for United States federal income tax purposes,
Harbor Global is not itself subject to United States federal income tax.
Instead, items of income, gain, loss, deduction and expense will flow through to
Harbor Global's shareholders, and they will be required to include their
allocable share of these items in computing their own United States federal
income tax for each taxable year of Harbor Global. Cash distributions made by
Harbor Global to its shareholders generally will not be taxable, except to the
extent that those distributions exceed a shareholder's adjusted tax basis in the
Harbor Global common shares.

     Harbor Global believes that one or more of the majority or minority owned
foreign subsidiaries of Harbor Global may be classified as a foreign personal
holding company or passive foreign investment company for United States federal
income tax purposes. If any such subsidiary is classified as a foreign personal
holding company or passive foreign investment company, Harbor Global's
shareholders may be required to recognize taxable income and pay tax with
respect to a portion of the subsidiary's income, even in the absence of the
receipt of any payment of cash or other property from the subsidiary. The tax
rules regarding foreign partnerships, foreign personal holding companies and
passive foreign investment companies are complicated. Harbor Global's
shareholders should consult their tax advisors to determine the tax consequences
to them of holding Harbor Global common shares.

HARBOR GLOBAL WILL BE SUBJECT TO SIGNIFICANT RESTRICTIONS IF IT BECOMES AN
INVESTMENT COMPANY.

     Harbor Global intends to conduct its businesses and operations so as to
avoid being required to register as an investment company.  If, nevertheless,
Harbor Global were to be required to register as an investment company, because
Harbor Global is a foreign company, the Investment Company Act would prohibit
Harbor Global and any person deemed to be an underwriter of Harbor Global's
securities from offering for sale, selling or delivering after sale, in
connection with a public offering, any security issued by Harbor Global in the
United States.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

     Harbor Global monitors its exposure to adverse changes in interest rates,
foreign currency exchange rates and the market price paid for timber.

     Harbor Global is exposed to certain changes in foreign currency exchange
rates, primarily as a result of its operations in Russia and Poland.  The
functional currency of its Russian operations is the United States dollar, while
the functional currency of its Polish operations is the local currency.  All of
these operations have some costs denominated in the local currency, which acts
as a natural hedge to the revenues denominated in local currencies.

     In addition, Harbor Global conducts timber operations in Russia.  The
prices it receives for its timber products are denominated in United States
dollars. However, as most of the timber produced is sold to the Asian markets,
the United

                                       17
<PAGE>

States dollar prices have been influenced by changes in the foreign currency
exchange rates.  The revenues of this business are also subject to changes in
the market price paid for timber.

PART II -- OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

  (a) Exhibits:  The Exhibit Index immediately precedes the Exhibits filed
herein and is incorporated by reference.

  (b) Form 8-K:

     On April 11, 2001, the Company filed a Current Report on Form 8-K in
connection with the execution by Harbor Far East Exploration of a definitive
agreement to sell its Russian gold exploration business and the execution by
PREA of definitive agreements to purchase all outstanding shares of the Pioneer
Polish Real Estate Fund.

                                       18
<PAGE>

                                  SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

Dated: August 7, 2001

                                       HARBOR GLOBAL COMPANY LTD.

                                          /s/ Donald H. Hunter
                                 --------------------------------------
                                             Donald H. Hunter
                                         Chief Operating Officer
                                         Chief Financial Officer

                             (Duly authorized officer and principal financial
                                         and accounting officer)

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<PAGE>

                               INDEX TO EXHIBITS

EXHIBIT
NUMBER                           DESCRIPTION
-------                          -----------
2.1*     Form of Distribution Agreement by and among The Pioneer Group, Inc.,
         Harbor Global Company Ltd. and Harbor Global II Ltd.

3.1+     Memorandum of Association of Harbor Global Company Ltd.

3.2+     Bye-Laws of Harbor Global Company Ltd.

4.1**    Specimen Common Share Certificate

10.1***  Supplemental Agreement dated May 28, 2001, to Share Purchase Agreement
         dated March 30, 2001 by and between Harbor Far East Exploration L.L.C.,
         Closed Joint-Stock Company "Artel Staratelei Amur" and Closed Joint-
         Stock Company "Tas-Yurjah" Mining Company.

10.2++   Share Purchase Agreement dated April 06, 2001 between Cadim Servotech
         B.V., Vienna Leas International S. A., Towarzystwo Obrotu
         Nieruchomosciami Agro S. A., Fundacja Na Rzecz Nauki Polskiej, Pioneer
         Real Estate Advisors Poland Spolka z o.o. i Spolka Spolka Komandytowa,
         PREA, L.L.C. and Pioneer Polski Fundusz Nieruchomosci S. A.

10.3++   Share Purchase Agreement dated April 06, 2001 between European Bank for
         Reconstruction and Development, PREA, L.L.C. and Pioneer Polski Fundusz
         Nieruchomosci S. A.

10.4++   Termination Agreement dated as of April 06, 2001 by and between
         European Bank for Reconstruction and Development, Cadim Servotech B.V.,
         Vienna Leas International S. A., Towarzystwo Obrotu Nieruchomosciami
         Agro S. A., Fundacja Na Rzecz Nauki Polskiej, Pioneer Real Estate
         Advisors Poland Spolka z o.o. i Spolka Spolka Komandytowa, PREA, L.L.C.
         and Pioneer Polski Fundusz Nieruchomosci S. A.

10.5***  Delivery Contract #DT1 dated June 25, 2001 between Turner Equipment
         Services LTD and JSC "Forest-Starma."

10.6***  Delivery Contract #30199 dated July 15, 2001 between Pioneer Forest,
         Inc. and JSC "Forest-Starma."

***      Filed herewith.

**       Incorporated by reference to Harbor Global Company Ltd.'s Quarterly
         Report on Form 10-Q (file number 0-30889) filed on November 13, 2000.

++       Incorporated by reference to Harbor Global's Report on Form 8-K (file
         number 000-30889) filed on April 11, 2001.

*        Incorporated by reference to Amendment No. 1 to Harbor Global Company
         Ltd.'s Registration Statement on Form 10/A (file number 0-30889) filed
         on August 8, 2000.

+        Incorporated by reference to Harbor Global Company Ltd.'s Registration
         Statement on Form 10 (file number 0-30889) filed on June 26, 2000.

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