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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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FORM 10-Q



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QUARTERLY REPORT PURSUANT TO SECTION
13 OR 15(D)

OF THE SECURITIES EXCHANGE ACT OF 1934



FOR THE QUARTERLY PERIOD ENDED June 30, 2003

COMMISSION FILE NO. 0-30889



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HARBOR GLOBAL COMPANY LTD.

(exact name of registrant as specified in its charter)



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|BERMUDA                                                        |  | 52-2256071                          
|-------------------------------------------------------------- |  | ------------------------------------
|(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION) |  | (I.R.S. EMPLOYER IDENTIFICATION NO.)
|                                                               | 
|ONE FANEUIL HALL MARKETPLACE 4TH FLOOR BOSTON, MASSACHUSETTS   |  | 02109-1820                          
|(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                       |  | (ZIP CODE)                          



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(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)



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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 ̈



Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange
Act).     Yes ̈No  x



As of July 31, 2003, the registrant had 5,655,311 common shares, par value
$.0025 per share, issued and outstanding.



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PART IFINANCIAL INFORMATION



ITEM 1. FINANCIAL STATEMENTS



HARBOR GLOBAL COMPANY LTD.



CONSOLIDATED BALANCE SHEETS

(DOLLARS IN
THOUSANDS EXCEPT PER SHARE AMOUNTS)

(UNAUDITED)



|                                                                                                                                                           |  | June 30,2003 |        |   | December 31,2002 |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ------ | - | ---------------- | -
|ASSETS                                                                                                                                                     |  |              |        |   |                  |  
|Cash and Cash Equivalents                                                                                                                                  |  | $            | 12,302 |   |                  | $
|Restricted Cash                                                                                                                                            |  |              | 6,104  |   |                  |  
|Marketable Securities                                                                                                                                      |  |              | 15,075 |   |                  |  
|Accounts Receivable                                                                                                                                        |  |              | 910    |   |                  |  
|Note Receivable                                                                                                                                            |  |              | 4,700  |   |                  |  
|Other Current Assets                                                                                                                                       |  |              | 1,448  |   |                  |  
|                                                                                                                                                           |  |              |        |   |                  |  
|Total Current Assets                                                                                                                                       |  |              | 40,539 |   |                  |  
|                                                                                                                                                           |  |             
|Long-Term Restricted Cash and Investments                                                                                                                  |  |              |       |   |                  |  
|Polish Venture Capital Investment                                                                                                                          |  |              | 614    |   |                  |  
|Marketable Securities                                                                                                                                      |  |              | 30,182 |   |                  |  
|Long-term Investments                                                                                                                                      |  |              | 2,386  |   |                  |  
|Building                                                                                                                                                   |  |              | 22,368 |   |                  |  
|Other Long-term Assets                                                                                                                                     |  |              | 1,038  |   |                  |  
|Note Receivable                                                                                                                                            |  |              |       |   |                  |  
|Goodwill                                                                                                                                                   |  |              | 1,253  |   |                  |  
|                                                                                                                                                           |  |              |        |   |                  |  
|Total Assets                                                                                                                                               |  | $            | 98,380 |   |                  | $
|                                                                                                                                                           |  |              |        |   |                  |  
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                                                       |  |              |        |   |                  |  
|Accounts Payable                                                                                                                                           |  | $            | 1,169  |   |                  | $
|Dividend Payable                                                                                                                                           |  |              | 6,104  |   |                  |  
|Accrued Expenses                                                                                                                                           |  |              | 1,815  |   |                  |  
|Accrued Fees Payable to Calypso Management                                                                                                                 |  |              | 365    |   |                  |  
|Foreign Taxes Payable                                                                                                                                      |  |              | 1,954  |   |                  |  
|Deferred Taxes                                                                                                                                             |  |              | 553    |   |                  |  
|                                                                                                                                                           |  |              |        |   |                  |  
|Total Current Liabilities                                                                                                                                  |  |              | 11,960 |   |                  |  
|Deferred Taxes                                                                                                                                             |  |              | 2,986  |   |                  |  
|Note Payable                                                                                                                                               |  |              |       |   |                  |  
|                                                                                                                                                           |  |              |        |   |                  |  
|Total Liabilities                                                                                                                                          |  |              | 14,946 |   |                  |  
|Minority Interest                                                                                                                                          |  |              | 30,362 |   |                  |  
|                                                                                                                                                           |  |              |        |   |                  |  
|STOCKHOLDERS EQUITY                                                                                                                                       |  |              |        |   |                  |  
|                                                                                                                                                           |  |             
|Common shares, par value $.0025 per share; authorized 48,000,000 shares; 5,655,311 shares issued and outstanding as of June 30,
2003 and December 31, 2002 |  |              | 14     |   |                  |  
|Preferred shares, par value $.01 per share; authorized 1,000,000 shares; none issued                                                                       |  |              |       |   |                  |  
|Paid-in Capital                                                                                                                                            |  |              | 51,682 |   |                  |  
|Accumulated Deficit                                                                                                                                        |  |              | (3,847 | ) |                  |  
|Other Comprehensive Income                                                                                                                                 |  |              |        |   |                  |  
|Net Unrealized Gains on Available for Sale Marketable Securities                                                                                           |  |              | 5,223  |   |                  |  
|                                                                                                                                                           |  |              |        |   |                  |  
|Total Stockholders Equity                                                                                                                                 |  |              | 53,072 |   |                  |  
|                                                                                                                                                           |  |              |        |   |                  |  
|Total Liabilities and Stockholders Equity                                                                                                                 |  | $            | 98,380 |   |                  | $
|                                                                                                                                                           |  |              |        |   |                  |  



The accompanying notes
are an integral part of these Consolidated Financial Statements.



2



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HARBOR GLOBAL COMPANY LTD.



CONSOLIDATED STATEMENTS OF EARNINGS

(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

(UNAUDITED)



|                                                                                                                     |  | Three MonthsEndedJune 30, |        |   | Six MonthsEndedJune 30, |  
|-------------------------------------------------------------------------------------------------------------------- |  | ------------------------- | ------ | - | ----------------------- | -
|                                                                                                                     |  | 2003                      |        |   | 2002                    |  
|Revenues:                                                                                                            |  |                           |        |   |                         |  
|Real Estate Revenue                                                                                                  |  | $                         | 1,953  |   |                         | $
|Interest Income                                                                                                      |  |                           | 537    |   |                         |  
|Other Income                                                                                                         |  |                           | 438    |   |                         |  
|                                                                                                                     |  |                           |        |   |                         |  
|Total Revenues                                                                                                       |  |                           | 2,928  |   |                         |  
|                                                                                                                     |  |                           |        |   |                         |  
|Operating Expenses:                                                                                                  |  |                           |        |   |                         |  
|Salary and Benefit Expenses                                                                                          |  |                           | (896   | ) |                         |  
|Facility Expenses                                                                                                    |  |                           | (376   | ) |                         |  
|Building and Property Management Expenses                                                                            |  |                           | (504   | ) |                         |  
|Management Fee Expense                                                                                               |  |                           | (942   | ) |                         |  
|Other Expenses                                                                                                       |  |                           | (1,412 | ) |                         |  
|                                                                                                                     |  |                           |        |   |                         |  
|Total Operating Expenses                                                                                             |  |                           | (4,130 | ) |                         |  
|                                                                                                                     |  |                           |        |   |                         |  
|Operating Loss                                                                                                       |  |                           | (1,202 | ) |                         |  
|                                                                                                                     |  |                           |        |  
|Other Income (Expense):                                                                                              |  |                           |        |   |                         |  
|Net Unrealized and Realized Gains on Securities                                                                      |  |                           | 8,763  |   |                         |  
|Extinguishment of Note Payable                                                                                       |  |                           |       |   |                         |  
|Early Settlement of Note Receivable                                                                                  |  |                           |       |   |                         |  
|Gain on Sale of Gold Option                                                                                          |  |                           | 875    |   |                         |  
|                                                                                                                     |  |                           |        |   |                         |  
|Total Other Income, Net                                                                                              |  |                           | 9,638  |   |                         |  
|                                                                                                                     |  |                           |        |   |                         |  
|Income from Continuing Operations before Provision for Income Taxes, Minority Interest and Equity Loss on
Investment |  |                           | 8,436  |   |                         |  
|Provision for Income Taxes                                                                                           |  |                           | (2,449 | ) |                         |  
|                                                                                                                     |  |                           |        |   |                         |  
|Income from Continuing Operations before Minority Interest and Equity Loss on Investment                             |  |                           | 5,987  |   |                         |  
|Minority Interest                                                                                                    |  |                           | (3,249 | ) |                         |  
|Equity Loss on Venture Capital Investment                                                                            |  |                           | (10    | ) |                         |  
|                                                                                                                     |  |                           |        |   |                         |  
|Net Income from Continuing Operations before Discontinued Operations                                                 |  |                           | 2,728  |   |                         |  
|                                                                                                                     |  |                           |        |  
|Discontinued Operations:                                                                                             |  |                           |        |   |                         |  
|                                                                                                                     |  |                           |        |  
|Gain on Disposal                                                                                                     |  |                           |       |   |                         |  
|                                                                                                                     |  |                           |        |   |                         |  
|Net Income                                                                                                           |  | $                         | 2,728  |   |                         | $
|                                                                                                                     |  |                           |        |   |                         |  
|Earnings Per ShareBasic and Diluted:                                                                                |  |                           |        |   |                         |  
|Continuing Operations                                                                                                |  | $                         | 0.48   |   |                         | $
|Discontinued Operations                                                                                              |  |                           |       |   |                         |  
|                                                                                                                     |  |                           |        |   |                         |  
|Basic and Diluted Earnings Per share                                                                                 |  | $                         | 0.48   |   |                         | $
|                                                                                                                     |  |                           |        |   |                         |  
|Weighted Average Basic and Diluted Shares Outstanding                                                                |  |                           | 5,655  |   |                         |  
|                                                                                                                     |  |                           |        |   |                         |  



The accompanying notes
are an integral part of these Consolidated Financial Statements.



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HARBOR GLOBAL COMPANY LTD.



CONSOLIDATED STATEMENTS OF CASH FLOWS

(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

(UNAUDITED)



|                                                                                                         |  | SIX MONTHS ENDED JUNE 30, |        
|-------------------------------------------------------------------------------------------------------- |  | ------------------------- | -------
|                                                                                                         |  | 2003                      |        
|Cash Flows from Operating Activities:                                                                    |  |                           |        
|Net Income                                                                                               |  | $                         | 4,523  
|Net Income from Discontinued Operations                                                                  |  |                           |       
|                                                                                                         |  |                           |        
|Net Income from Continuing Operations                                                                    |  |                           | 4,523  
|Adjustments to Reconcile Net Income from Continuing Operations to Net Cash Used in Operating Activities: |  |                           |        
|Non-cash Interest Income on Note Receivable                                                              |  |                           | (203   
|Interest Earned on Restricted Cash                                                                       |  |                           |       
|Depreciation and Amortization                                                                            |  |                           | 420    
|Unrealized and Realized Gains on Venture Capital, Marketable Securities, and Long-term Investments, Net  |  |                           | (11,889
|Extinguishment of Note Payable                                                                           |  |                           | (1,250 
|Early Settlement of Note Receivable                                                                      |  |                           | 191    
|Gain on Sale of Gold Option                                                                              |  |                           | (875   
|Minority Interest                                                                                        |  |                           | 4,841  
|Equity Loss on Venture Capital Investment                                                                |  |                           | 206    
|Changes in Operating Assets and Liabilities:                                                             |  |                           |        
|Other Current Assets                                                                                     |  |                           | (152   
|Accrued Expenses and Accounts Payable                                                                    |  |                           | 130    
|                                                                                                         |  |                           |        
|Total Adjustments and Changes in Operating Assets and Liabilities                                        |  |                           | (8,581 
|                                                                                                         |  |                           |        
|Net Cash Used in Continuing Operating Activities                                                         |  |                           | (4,058 
|                                                                                                         |  |                           |        
|Net Cash Used In Discontinued Operations                                                                 |  |                           |       
|                                                                                                         |  |                           |        
|Cash Flows from Investing Activities:                                                                    |  |                           |        
|Net Proceeds from Sale of Russian Timber Operations                                                      |  |                           | 2,000  
|Purchase of Long-term Investments and Marketable Securities                                              |  |                           | (14,969
|Other Long-term Assets                                                                                   |  |                           | (222   
|Proceeds from Sale of Long-term Investments and Marketable Securities                                    |  |                           | 22,196 
|Proceeds from Payment on Notes Receivable                                                                |  |                           | 3,000  
|Proceeds from Sale of Gold Option                                                                        |  |                           | 875    
|                                                                                                         |  |                           |        
|Net Cash Provided by Investing Activities                                                                |  |                           | 12,880 
|                                                                                                         |  |                           |        
|Cash Flows from Financing Activities:                                                                    |  |                           |        
|Distributions Paid                                                                                       |  |                           | (7,900 
|Dividends Paid                                                                                           |  |                           | (7     
|Reclassification of Restricted Cash                                                                      |  |                           | 2,756  
|Payment on Note Payable                                                                                  |  |                           | (3,750 
|                                                                                                         |  |                           |        
|Net Cash Used In Financing Activities                                                                    |  |                           | (8,901 
|                                                                                                         |  |                           |        
|Net (Decrease) Increase in Cash and Cash Equivalents                                                     |  |                           | (79    
|                                                                                                         |  |                           |        
|Cash and Cash Equivalents, Beginning of Period                                                           |  |                           | 12,381 
|                                                                                                         |  |                           |        
|Cash and Cash Equivalents, End of Period                                                                 |  | $                         | 12,302 
|                                                                                                         |  |                           |        



The accompanying notes
are an integral part of these Consolidated Financial Statements.



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HARBOR GLOBAL COMPANY LTD.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

June 30, 2003



(1) BACKGROUND AND BASIS OF PRESENTATION



BACKGROUND



Harbor Global Company Ltd., a Bermuda limited duration company (Harbor Global or the Company), was formed in May 2000 as a wholly
owned subsidiary of Pioneer Investment Management USA Inc. (formerly known as The Pioneer Group, Inc.), a Delaware corporation (Pioneer), to facilitate the merger between Pioneer and UniCredito Italiano, S.p.A., an Italian financial
institution (UniCredito). 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., a wholly owned subsidiary of the Company
(the Distribution Agreement), Pioneer agreed to transfer certain of its assets to Harbor Global and to distribute all of the outstanding Harbor Global common shares to its stockholders. Pioneer transferred to Harbor Global all of the
assets required to be transferred pursuant to the merger agreement and the Distribution Agreement, and on October 24, 2000, Pioneer 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 primary assets by segment consist of the following:



| |  |  | Russian real estate management and investment management operations
| | - |  | -------------------------------------------------------------------



| |  |  | Real estate management operations
| | - |  | ---------------------------------



| |  |  | Other:
| | - |  | ------



| |  |  | approximately $7.2 million in cash, cash equivalents and marketable securities held directly by Harbor Global
| | - |  | -------------------------------------------------------------------------------------------------------------



| |  |  | a non-interest-bearing promissory note with a face value of $12.7 million, of which $4.7 million remained outstanding at June 30, 2003, payable to Pioglobal Goldfields II Limited
(Goldfields II), an indirect wholly owned subsidiary of the Company
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | an approximately 8% limited partnership interest in the Prospect Poland Fund
| | - |  | ----------------------------------------------------------------------------



Harbor Global seeks to liquidate its assets in a timely fashion on economically advantageous terms and continues to operate its assets as going concern
businesses until they are liquidated. Harbor Globals memorandum of association provides that the liquidation of its assets must be completed upon the earlier of October 24, 2005, the fifth anniversary of the date of the Spin-off, or the
distribution by Harbor Global of all its assets to its shareholders. If Harbor Global has not liquidated all of its assets before October 24, 2005, the Harbor Global board of directors (Board of Directors), in its discretion, may
authorize Harbor Global to continue to operate its assets for up to three additional one year periods.



BASIS OF PRESENTATION



In the opinion of management, the accompanying consolidated financial statements contain all adjustments necessary, consisting of normal and recurring
adjustments, to present fairly the financial position as of June 30, 2003 and the results of operations and cash flows for the three and six months ended June 30, 2003 and 2002. Results for interim periods may not be necessarily indicative of the
results to be expected for the year. These interim consolidated financial statements should be read in conjunction with the Companys 2002 Annual Report on Form 10-K for the year ended December 31, 2002 filed with the Securities and Exchange
Commission.



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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 (Consolidated Financial Statements).



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, virtually all United States federal income tax expenses have been and will be borne by its shareholders. The income tax provisions and deferred taxes included in the accompanying Consolidated Financial Statements
principally relate to the Companys corporate subsidiaries that are located primarily in the Russian Federation (Russia).



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



CONSOLIDATION



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.



POLISH VENTURE CAPITAL INVESTMENT



The Company reports its approximately 8% limited partnership interest in the Prospect Poland Fund on the equity basis of accounting. No market quotes are available for the venture capital investments. Most of these
investments are valued at fair value, as determined by Prospect Poland Funds management. For the three and six months ended June 30, 2003, the Company wrote-down its investment by approximately $10,000 and $206,000, respectively. For the three
and six months ended June 30, 2002, the Company wrote-down its investment by approximately $356,000 and $385,000, respectively. Summarized financial information for the Prospect Poland Fund is as follows:



|                                                  |  | 2003           |        |   | 2002 |  
|------------------------------------------------- |  | -------------- | ------ | - | ---- | -
|                                                  |  | (In Thousands) |       
|Balance Sheet Data                                |  |                |        |   |      |  
|Assets, at June 30,                               |  | $              | 7,683  |   |      | $
|Liabilities, at June 30,                          |  |                | 96     |   |      |  
|                                                  |  |                |        |   |      |  
|Partners Capital, at June 30                     |  | $              | 7,587  |   |      | $
|                                                  |  |                |        |   |      |  
|Operating Data, for the six months ended June 30  |  |                |        |   |      |  
|Net Operating Loss                                |  | $              | (414   | ) |      | $
|Net Realized and Unrealized Loss from Investments |  |                | (2,143 | ) |      |  
|                                                  |  |                |        |   |      |  
|Net Decrease in Partners Capital from Operations |  | $              | (2,557 | ) |      | $
|                                                  |  |                |        |   |      |  



RUSSIAN INVESTMENTS



Russian investments consist of Russian equity and fixed income
securities, including Russian government bonds and Russian corporate bonds, held in the portfolio of the PIOGLOBAL Real Estate Investment Fund (formerly known as the PIOGLOBAL Investment Fund), an approximately 52% owned subsidiary of the Company.
The equity securities are either classified as available-for-sale and recorded at fair value in long-term marketable securities pursuant to Statement of Financial Accounting Standards (SFAS) No. 115, Accounting for Certain
Investments in Debt and Equity Securities or as long-term investments and recorded at cost with adjustments for other-than-temporary impairment. Russian government bonds are classified as trading securities and



6



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Russian corporate bonds are characterized as available-for-sale, both of which are recorded at fair value pursuant to
SFAS No. 115.



Management has determined that for certain of
these equity securities there is sufficient liquidity in the Russian market to account for them as long-term marketable securities based on quoted prices on the Russian Trading System. Unrealized gains and losses are recorded directly in
stockholders equity as other comprehensive income. The cost of securities sold is based on the specific identification method. Realized gains or losses and any other-than-temporary declines in value are reported in other income and expense.
The Company classifies Russian equity investments that do not meet its liquidity threshold as long-term investments and carries such investments at cost with adjustments made for other-than-temporary impairment. Of PIOGLOBAL Real Estate Investment
Funds equity portfolio, approximately $21,600,000 of $26,800,000 and approximately $19,000,000 of $24,300,000 were carried at quoted market prices at June 30, 2003 and December 31, 2002, respectively.



As of June 30, 2003 and December 31, 2002, the gross unrealized gains of
approximately $12,000,000 and approximately $9,430,000, respectively and gross unrealized losses of approximately $0 and approximately $0, respectively of equity securities are recorded net of deferred taxes and minority interest in other
comprehensive income. Additionally, gross unrealized gains of approximately $370,000 and approximately $3,000 and gross unrealized losses of approximately $0 and approximately $4,000 of Russian corporate bonds as of June 30, 2003 and December 31
2002, respectively are recorded net of deferred taxes and minority interest in other comprehensive income. For the three and six months ended June 30, 2003, the Company recorded unrealized gains on Russian government bonds of approximately $222,000
and approximately $1,360,000, respectively. For the three months ended June 30, 2002, the Company recorded unrealized losses of approximately $26,000 and for the six months ended June 30, 2002, the Company recorded unrealized gains of approximately
$489,000 on Russian government bonds. The unrealized gains (losses) are recorded in net unrealized and realized gains in the Consolidated Statement of Earnings.



BUILDING



The building represents an office building in Russia, the Meridian Commercial Tower. The Meridian Commercial Tower is carried at cost and is being
depreciated on a straight-line basis over 40 years.



CONCENTRATION OF RISK



The Companys operations are generally concentrated
in Russia. The Company performs ongoing evaluations of its subsidiaries and investments and endeavors to mitigate its exposure in Russia. The Company does not maintain political risk insurance for any of its businesses.



(3) EARNINGS PER SHARE



Basic and diluted earnings per share (EPS) are computed by
dividing reported earnings by weighted average shares outstanding not including contingently issuable shares. There are currently no potentially dilutive securities.



(4) NOTE RECEIVABLE AND NOTE PAYABLE



In May 2000, Goldfields II sold its gold mining operations in Ghana to Ashanti Goldfields Teberebie Limited
(Ashanti) for an $18,800,000 base purchase price plus additional payments of up to $5,000,000, contingent upon the market price of gold and productivity of the Ghanaian gold mine (the Purchase Agreement). On June 19, 2000,
$5,000,000 of the base purchase price was paid to Goldfields II in cash and $13,800,000 of the base purchase price was paid in the form of a non-interest bearing promissory note. As of June 30, 2003, the



7



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Company had received a total of $8,000,000 due from Ashanti under the promissory note.



Effective March 19, 2003, Goldfields II and Ashanti executed an amendment to
the Purchase Agreement. Pursuant to the amendment, Ashanti agreed to release Goldfields II from its obligation to indemnify Ashanti for breach of representations and warranties relating to tax and environmental matters contained in the Purchase
Agreement in exchange for a $1,100,000 reduction in the amount remaining due from Ashanti to Goldfields II under the Purchase Agreement and related promissory note. Accordingly, under the amended Purchase Agreement and related promissory note,
Ashanti is obligated to make a final payment to the Company in the amount of $4,700,000 on March 31, 2004. The Company adjusted the carrying value of the note receivable during the first quarter of 2003 by approximately $191,000 as a result of the
amendment. The Company recorded the adjustment in other income (expense) in the Consolidated Statement of Earnings.



In connection with the release of Goldfields II from its indemnification obligations to Ashanti, Pioneer and the Company entered into an amendment to the
Distribution Agreement. Under the Distribution Agreement, the Company was obligated to return to Pioneer, in 2005, the lesser of $5,000,000 or the actual proceeds received by Goldfields II from Ashanti under the Purchase Agreement less any
indemnification claims paid under the Purchase Agreement. Pursuant to the amendment, Pioneer agreed to accept $3,750,000 in satisfaction of the foregoing obligation, if the amount was paid on or before March 31, 2003. The Company paid $3,750,000 to
Pioneer on March 20, 2003. As a result of the foregoing reduction in, and satisfaction of, the note payable to Pioneer, the Company recorded a gain of $1,250,000 during the first quarter of 2003, which is reflected in the Consolidated Statement of
Earnings as a component of other income (expense).



Pursuant to
the Purchase Agreement, Ashanti agreed to pay Goldfields II additional supplemental payments of $250,000 per calendar quarter from April 1, 2001 through March 31, 2006, contingent on the market price of gold and productivity of the Ghanaian gold
mine. The Company earned its first supplemental payment of $250,000 for the quarter ending March 31, 2003. On April 25, 2003, Goldfields II agreed to sell its right to receive the remaining twelve (12) additional supplemental payments from Ashanti
to HSBC Bank USA (HSBC) in exchange for one cash payment of $875,000. The transaction was consummated on April 30, 2003 and, as a result, the Company recorded a gain of $875,000 in the second quarter of 2003, which is reflected in the
Consolidated Statement of Earnings as a component of other income (expense). In connection with the sale, Goldfields II has agreed to indemnify HSBC with respect to Goldfields IIs representations and warranties contained in the purchase
agreement for a period of one year up to the amount of the purchase price, reduced by supplemental payments collected by HSBC from Ashanti.



(5) DIVIDEND PAYABLE



The dividend payable of approximately $6,104,000 and approximately $3,859,000 at June 30, 2003 and December 31, 2002, respectively, represents a payable
to minority shareholders of PIOGLOBAL Real Estate Investment Fund. Approximately $6,104,000 and approximately $3,859,000 has been set aside by PIOGLOBAL Real Estate Investment Fund as of June 30, 2003 and December 31, 2002, respectively, to satisfy
this liability and is classified as restricted cash.



8



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(6) CHANGES IN STOCKHOLDERS EQUITY



For the three and six months ended June 30, 2003 and 2002, the Company
reported changes in stockholders equity as follows:



|                                                                                                                                                                                                                                         |  | THREE MONTHS ENDEDJUNE 30, |       
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------- | ------
|                                                                                                                                                                                                                                         |  | 2003                       |       
|                                                                                                                                                                                                                                         |  | (In Thousands)             |       
|Net Income                                                                                                                                                                                                                               |  | $                          | 2,728 
|Net Unrealized Gains (Losses) on Long term Marketable Securities (Net of deferred taxes of $983,000 and ($662,000) and minority
interest of $1,473,000 and ($1,004,000) for the three months ended June 30, 2003 and 2002, respectively) |  |                            | 1,639 
|                                                                                                                                                                                                                                         |  |                            |       
|Total Comprehensive Income (Loss)                                                                                                                                                                                                        |  | $                          | 4,367 
|Distribution to Stockholders                                                                                                                                                                                                             |  |                            | (7,900
|                                                                                                                                                                                                                                         |  |                            |       
|Change in Stockholders Equity                                                                                                                                                                                                           |  | $                          | (3,533
|                                                                                                                                                                                                                                         |  |                            |       



|                                                                                                                                                                                                                        |  | SIX MONTHS ENDEDJUNE 30,
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------
|                                                                                                                                                                                                                        |  | 2003                    
|                                                                                                                                                                                                                        |  | (In Thousands)          
|Net Income                                                                                                                                                                                                              |  | $                       
|Net Unrealized Gains on Long term Marketable Securities (Net of deferred taxes of $751,000 and $382,000 and minority interest of
$1,087,000 and $910,000 for the six months ended June 30, 2003 and 2002, respectively) |  |                         
|                                                                                                                                                                                                                        |  |                         
|Total Comprehensive Income                                                                                                                                                                                              |  | $                       
|Distribution to Stockholders                                                                                                                                                                                            |  |                         
|                                                                                                                                                                                                                        |  |                         
|Change in Stockholders Equity                                                                                                                                                                                          |  | ($                      
|                                                                                                                                                                                                                        |  |                         



(7)
RELATED PARTY TRANSACTIONS



The Company has an administration
and liquidation agreement with Calypso Management LLC (Calypso Management), under which Calypso Management manages the liquidation of the Company and operates the Companys assets as going concern businesses pending their
liquidation. The principal executive officers of the Calypso Management also serve as the principal executive officers of the Company. Calypso Management 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.



On July 10, 2003, the Company entered into an amended and restated administration and liquidation agreement whereby the Company pays the operating expenses of Calypso Management incurred in connection with its provision of services to the
Company and a percentage of the net proceeds realized from the liquidation of its assets that are ultimately distributed to the Companys shareholders, generally according to the following schedule:



| |  |  | with respect to the first $36 million in net proceeds available for distribution, Calypso Management shall receive a payment equal to 10% of such net proceeds;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | with respect to the next $72 million in net proceeds available for distribution, Calypso Management shall receive a payment equal to 7.5% of such net proceeds; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



9



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| |  |  | with respect to any additional net proceeds, Calypso Management shall receive a payment equal to 10% of such net proceeds.
| | - |  | --------------------------------------------------------------------------------------------------------------------------



Net proceeds do not include any unexpended portion of the approximate
$19,100,000 contributed by Pioneer to Harbor Global at the time of the Spin-Off. However, because Harbor Global entered into a transaction in which it was released from its indirect obligation to fulfill its existing capital commitment of
approximately $5.4 million to the Pioneer Polish Real Estate Fund, $5.4 million of the amount contributed by Pioneer is included in the calculation of net proceeds. In addition, the proceeds received by Goldfields II in connection with the sale of
its Ghanaian gold mine to Ashanti are not subject to the preceding schedule. Instead, Calypso Management will receive only 5% of the Ashanti proceeds that are distributed to shareholders.



In addition, if an individual, entity or group acquires at least 80% of the Companys outstanding common shares or
Harbor Global is a party to a merger, reorganization or similar business combination and the shareholders immediately prior to such transaction cease to own at least 50% of the outstanding common shares and voting power entitled to vote generally in
the election of directors of the resulting entity (a Deemed Sale), Calypso Management is entitled to receive a portion of the consideration, in accordance with the compensation schedule described above, as would be received by all
shareholders if all of the outstanding common shares were sold at the valuation of Harbor Global based on the per share consideration received by each shareholder who sold, exchanged or otherwise disposed of shares in the transaction. Also, in the
event of a change in control (as defined in the agreement) coupled with a material change in the engagement status of Calypso Management or the employment status of its principal officers, Calypso Management will be paid a cash amount equal to a
portion of the value of the underlying assets, in accordance with the compensation schedule described above, with such value determined pursuant to a predetermined valuation schedule.



With respect to ongoing asset sales, Harbor Global accrues management fees at the earlier of (1) the formal declaration by
the Board of Directors of a distribution and (2) the time when a distributable amount is estimable following the sale or liquidation of an asset. Harbor Global will also accrue management fees when a distribution to Calypso Management is triggered
following a Deemed Sale of the Company or a change in control pursuant to the amended and restated administration and liquidation agreement.



For the three months ended June 30, 2003 and 2002, the Company incurred management fee expenses of approximately $707,000 and $635,000, respectively
related to the reimbursement of expenses incurred by Calypso Management. For the six months ended June 30, 2003 and 2002, the Company incurred management fee expenses of approximately $1,456,000 and $1,365,000, respectively related to the
reimbursement of expenses incurred by Calypso Management. Of this management fee, approximately $365,000 and $370,000 was outstanding at June 30, 2003 and 2002, respectively.



Pursuant to the administration and liquidation agreement, for the six months ended June 30, 2003, the Company also incurred
management fee expenses of approximately $583,000 in connection with the distribution to shareholders on June 27, 2003. As of June 30, 2002, the Company had an outstanding payable to Calypso Management of $1,450,000, which had been recorded in 2001,
reflecting the amount owed to Calypso Management and paid on October 24, 2002 in connection with the distribution paid to shareholders on November 15, 2001.



(8) DISCONTINUED OPERATIONS



On February 5, 2002, the Companys Board of Directors approved the disposition of the Russian timber operation. Accordingly, the Russian timber
business was separated from the results of continuing operations and was reported as a discontinued operation commencing in 2001. Pursuant to Accounting



10



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Principles Board Opinion No. 30, Reporting the Results of Operations-Reporting the Effects of Disposal of a Segment
of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions, the Company recorded the disposal effective December 31, 2001. Prior to 2001, the Company reported its Russian timber operations as a separate
segment.



On April 22, 2002, Harbor Globals wholly owned
subsidiary, Pioneer Forest, Inc. (Pioneer Forest), entered into an agreement for the sale of its Russian timber business conducted through Closed Joint-Stock Company Forest-Starma (Forest-Starma). On May 28, 2002,
Pioneer Forest sold its entire interest in Pioglobal Forest, L.L.C. (Pioglobal Forest), the sole shareholder of Forest-Starma, to a British Virgin Islands company for an aggregate purchase price of $7,550,000, of which $5,550,000 was
paid in cash at the closing and $2,000,000 was paid in the form of a one-year promissory note. The remaining $2,000,000 was received, and the promissory note paid in full, on June 3, 2003.



(9) SUBSEQUENT EVENTS



On July 10, 2003, the Company entered into an amended and restated
administration and liquidation agreement with Calypso Management (see Footnote 7).



(10) 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.



Previously the Company reported its Russian timber operations as a separate segment. Due to the sale of the Russian timber operations segment, these
results have been segregated from continuing operations. The segment disclosures previously reported have been reformatted to reflect the Companys continuing segments.



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
| | - |  | -------------------------------------------------------------------------------------------------------



| |  |  | Real Estate Management Operations: real estate management services including property management and advisory services
| | - |  | ----------------------------------------------------------------------------------------------------------------------



| |  |  | Other: management services
| | - |  | --------------------------



SEGMENT DISCLOSURES



|As of and for the three months ended June 30, 2003                                                                           |  | RussianReal EstateManagementAndInvestmentManagementOperations |        |   | RealEstateManagementOperations |   |      | Other |  | Total |    
|---------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------- | ------ | - | ------------------------------ | - | ---- | ----- |  | ----- | ---
|Net Revenues and Sales                                                                                                       |  | $                                                             | 2,638  |   |                                | $ | 244  |       |  | $     | 46 
|                                                                                                                             |  |                                                               |        |   |                                |   |      |       |  |       |    
|Income (Loss) from Continuing Operations before Provision for Income Taxes, Minority Interest, and Equity Loss on
Investment |  |                                                               | 7,816  |   |                                |   | (235 | )     |  |       | 855
|Provision for Income Taxes                                                                                                   |  |                                                               | (2,449 | ) |                                |   |     |       |  |       |   



11



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|Minority Interest Expense                    |  |   | (3,249 | ) |  |   |     |   |  |   |    |   |  |   | (3,249 | )
|-------------------------------------------- |  | - | ------ | - |  | - | ---- | - |  | - | --- | - |  | - | ------ | -
|Equity Loss on Venture Capital Investment    |  |   |       |   |  |   |     |   |  |   | (10 | ) |  |   | (10    | )
|                                             |  |   |        |   |  |   |      |   |  |   |     |   |  |   |        |  
|Net Income (Loss) from Continuing Operations |  | $ | 2,118  |   |  | $ | (235 | ) |  | $ | 845 |   |  | $ | 2,728  |  
|                                             |  |   |        |   |  |   |      |   |  |   |     |   |  |   |        |  
|Depreciation                                 |  | $ | 212    |   |  | $ | 7    |   |  | $ |    |   |  | $ | 219    |  
|                                             |  |   |        |   |  |   |      |   |  |   |     |   |  |   |        |  



12



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|As of and for the three months ended June 30, 2002                                                                           |  | RussianReal EstateManagementAndInvestmentManagementOperations |        |   | RealEstateManagementOperations |   |      | Other |  |   | Total |  
|---------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------- | ------ | - | ------------------------------ | - | ---- | ----- |  | - | ----- | -
|Net Revenues and Sales                                                                                                       |  | $                                                             | 2,367  |   |                                | $ | 198  |       |  | $ | 374   |  
|                                                                                                                             |  |                                                               |        |   |                                |   |      |       |  |   |       |  
|Income (Loss) from Continuing Operations before Provision for Income Taxes, Minority Interest, and Equity Loss on
Investment |  |                                                               | 4,623  |   |                                |   | (262 | )     |  |   | 437   |  
|                                                                                                                             |  |                                                               |        |  
|Provision for Income Taxes                                                                                                   |  |                                                               | (1,422 | ) |                                |   |     |       |  |   |      |  
|                                                                                                                             |  |                                                               |        |  
|Minority Interest Expense                                                                                                    |  |                                                               | (1,989 | ) |                                |   |     |       |  |   |      |  
|                                                                                                                             |  |                                                               |        |  
|Equity Loss on Venture Capital Investment                                                                                    |  |                                                               |       |   |                                |   |     |       |  |   | (356  | )
|                                                                                                                             |  |                                                               |        |   |                                |   |      |       |  |   |       |  
|Net Income (Loss) from Continuing Operations                                                                                 |  | $                                                             | 1,212  |   |                                | $ | (262 | )     |  | $ | 81    |  
|                                                                                                                             |  |                                                               |        |   |                                |   |      |       |  |   |       |  
|Depreciation                                                                                                                 |  | $                                                             | 196    |   |                                | $ | 7    |       |  | $ |      |  
|                                                                                                                             |  |                                                               |        |   |                                |   |      |       |  |   |       |  



|As of and for the six months ended June 30, 2003                                                                             |  | RussianReal EstateManagementAndInvestmentManagementOperations |        |   | RealEstateManagementOperations |   |      | Other |  |   | Total |  
|---------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------- | ------ | - | ------------------------------ | - | ---- | ----- |  | - | ----- | -
|Net Revenues and Sales                                                                                                       |  | $                                                             | 5,144  |   |                                | $ | 483  |       |  | $ | 559   |  
|                                                                                                                             |  |                                                               |        |   |                                |   |      |       |  |   |       |  
|Income (Loss) from Continuing Operations before Provision for Income Taxes, Minority Interest, and Equity Loss on
Investment |  |                                                               | 11,364 |   |                                |   | (435 | )     |  |   | 2,091 |  
|                                                                                                                             |  |                                                               |        |  
|Provision for Income Taxes                                                                                                   |  |                                                               | (3,388 | ) |                                |   | (62  | )     |  |   |      |  
|                                                                                                                             |  |                                                               |        |  
|Minority Interest Expense                                                                                                    |  |                                                               | (4,841 | ) |                                |   |     |       |  |   |      |  
|                                                                                                                             |  |                                                               |        |  
|Equity Loss on Venture Capital Investment                                                                                    |  |                                                               |       |   |                                |   |     |       |  |   | (206  | )
|                                                                                                                             |  |                                                               |        |   |                                |   |      |       |  |   |       |  
|Net Income (Loss) from Continuing Operations                                                                                 |  | $                                                             | 3,135  |   |                                | $ | (497 | )     |  | $ | 1,885 |  
|                                                                                                                             |  |                                                               |        |   |                                |   |      |       |  |   |       |  
|Depreciation and Amortization                                                                                                |  | $                                                             | 406    |   |                                | $ | 14   |       |  | $ |      |  
|                                                                                                                             |  |                                                               |        |   |                                |   |      |       |  |   |       |  
|Total Assets                                                                                                                 |  | $                                                             | 88,308 |   |                                | $ | 875  |       |  | $ | 9,197 |  
|                                                                                                                             |  |                                                               |        |   |                                |   |      |       |  |   |       |  



13



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|As of and for the six months ended June 30, 2002                                                                             |  | RussianReal EstateManagementAndInvestmentManagementOperations |        |   | RealEstateManagementOperations |   |      | Other |  |   | Total  |  
|---------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------- | ------ | - | ------------------------------ | - | ---- | ----- |  | - | ------ | -
|Net Revenues and Sales                                                                                                       |  | $                                                             | 4,693  |   |                                | $ | 393  |       |  | $ | 802    |  
|                                                                                                                             |  |                                                               |        |   |                                |   |      |       |  |   |        |  
|Income (Loss) from Continuing Operations before Provision for Income Taxes, Minority Interest, and Equity Loss on
Investment |  |                                                               | 7,513  |   |                                |   | (536 | )     |  |   | 911    |  
|                                                                                                                             |  |                                                               |        |  
|Provision for Income Taxes                                                                                                   |  |                                                               | (2,682 | ) |                                |   |     |       |  |   |       |  
|                                                                                                                             |  |                                                               |        |  
|Minority Interest Expense                                                                                                    |  |                                                               | (3,236 | ) |                                |   |     |       |  |   |       |  
|                                                                                                                             |  |                                                               |        |  
|Equity Loss on Venture Capital Investment                                                                                    |  |                                                               |       |   |                                |   |     |       |  |   | (385   | )
|                                                                                                                             |  |                                                               |        |   |                                |   |      |       |  |   |        |  
|Net Income (Loss) from Continuing Operations                                                                                 |  | $                                                             | 1,595  |   |                                | $ | (536 | )     |  | $ | 526    |  
|                                                                                                                             |  |                                                               |        |   |                                |   |      |       |  |   |        |  
|Depreciation                                                                                                                 |  | $                                                             | 385    |   |                                | $ | 14   |       |  | $ |       |  
|                                                                                                                             |  |                                                               |        |   |                                |   |      |       |  |   |        |  
|Total Assets                                                                                                                 |  | $                                                             | 74,359 |   |                                | $ | 484  |       |  | $ | 33,295 |  
|                                                                                                                             |  |                                                               |        |   |                                |   |      |       |  |   |        |  



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



CRITICAL ACCOUNTING POLICIES AND ESTIMATES



The Companys discussion and analysis of its financial condition and results of operations are based upon the Companys Consolidated Financial Statements, which have been prepared in accordance with
accounting principles generally accepted in the United States of America.



The preparation of the Consolidated Financial Statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, income, and expenses. On an on-going basis, the
Company evaluates its estimates. The Companys estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments
about the Companys assets, liabilities, and income that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.



The Company considers its critical accounting policies to include those
related to the fair value of Russian investments classified as available-for-sale pursuant to SFAS No. 115, valuations of its Polish venture capital investment, accrued management fees and deferred taxes.



Russian investments consist of equity and fixed income securities held in the
portfolio of the PIOGLOBAL Real Estate Investment Fund. Equity securities are classified as either available-for-sale, recorded at fair value pursuant to SFAS No. 115, or as long-term investments, recorded at cost with adjustments for other than
temporary impairment. Fixed income securities are characterized as either available-for-sale and recorded at fair value pursuant to SFAS No. 115 or as trading securities. In determining fair value, individual equity securities must first satisfy
certain trading volume and bid-ask spread criteria established by management, to demonstrate that there is sufficient breadth and scope in the market for that security. Equity securities that satisfy these criteria are recorded in long-term
marketable securities based on the quoted price in the Russian Trading System. Unrealized gains and losses are recorded in stockholders equity as other comprehensive income. Realized gains or losses



14



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and any other than temporary declines in value are reported in other income (expense). For Russian investments that do
not meet these criteria, the Company continues to classify these equity securities as long-term investments and carry such investments at cost with adjustments made for other than temporary impairment.



The Company retains an approximately 8% limited partnership interest in the
Prospect Poland Fund. Polish venture capital investments within the Prospect Poland Fund are recorded at fair value as determined by the management of the Prospect Poland Fund. Unrealized and realized gains or losses are recorded in the Consolidated
Statement of Earnings. The Company analyzes the assumptions supporting changes in the fair value of these investments for appropriateness on a quarterly basis.



On July 10, 2003, Harbor Global entered into an amended and restated administration and liquidation agreement with Calypso Management pursuant to which
Calypso Management manages the liquidation of Harbor Global and operates Harbor Globals assets pending their liquidation. As compensation for its provision of services to Harbor Global, Calypso Management receives a portion of the net proceeds
distributed from the liquidation of Harbor Globals assets or a Deemed Sale of the Company or a change in control (refer to Note 7- Related Party Transactions for the definition of Deemed Sale). In the event of a change in control coupled with
a material change in the engagement status of Calypso Management or the employment status of its principal officers, Calypso Management will be paid based on the value of the underlying assets pursuant to a predetermined schedule. Compensation to
Calypso Management represents a percentage of such distributions or deemed distributions, which varies depending upon the source of the distribution and the cumulative amount of distributions since the Spin-off. With respect to ongoing asset sales,
Harbor Global accrues such management fees at the earlier of (1) the formal declaration by the Board of Directors of a distribution and (2) the time when a distributable amount is estimable following the sale or liquidation of an asset. Harbor
Global will also accrue management fees when a distribution to Calypso Management is triggered following a Deemed Sale of the Company or a change in control pursuant to the amended and restated administration and liquidation agreement.



The Company recognizes deferred tax assets and liabilities based on the
difference between the financial statement carrying amounts and the tax bases of assets and liabilities. The Company regularly reviews its deferred tax assets for recoverability and establishes a valuation allowance based on historical taxable
income, projected future taxable income, and the expected timing of the reversals of existing temporary differences.



OVERVIEW



The Consolidated Financial Statements of Harbor Globals principal operations include its Russian real estate management and investment management operations, real estate management operations and other operations. Managements
Discussion and Analysis of Financial Condition and Results of Operations are presented in three sections: Results of Operations for the three and six months ended June 30, 2003 and 2002, Liquidity and Capital Resources, and Future Operating Results.



The Company previously reported its Russian timber operations
as a separate segment. Due to the sale of the Russian timber operations segment, the results from the Russian timber operations have been segregated from continuing operations. The segment disclosures previously reported have been reformatted to
reflect the Companys continuing segments.



RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2003 AND 2002



Consolidated Operations.



Harbor Global
reported net income of $2.7 million ($0.48 per share) on revenues of $2.9 million in the second quarter of 2003 compared with net income



15



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of $1.0 million ($0.18 per share) on revenues of $2.9 million for the second quarter of 2002. The $1.7 million increase
in income was attributable principally to a $1.1 million increase in realized portfolio gains from the Russian real estate management and investment management operations and a gain of $0.9 million recorded on the sale to HSBC of the Companys
right to receive supplemental payments from Ashanti, contingent on the market price of gold and production levels of the Ghanaian gold mine. These gains were offset partially by a $0.2 million increase in management fees paid to Calypso Management
in connection with the distribution to shareholders during the second quarter of 2003.



For the six months ended June 30, 2003, the Company reported net income of $4.5 million ($0.80 per share) compared with net income of $2.0 million ($0.36 per share) for the first half of 2002. Net income from
continuing operations was $4.5 million ($0.80 per share), an increase of $2.9 million compared with net income from continuing operations of $1.6 million ($0.28 per share) during the first six months of 2002. The increase was attributable primarily
to a $1.3 million gain from the early settlement of the Companys note payable to Pioneer, higher realized portfolio gains of $1.2 million from the Russian real estate management and investment management operations and a $0.9 million gain
recorded in connection with the sale to HSBC of the Companys right to receive supplemental payments from Ashanti. These increases were offset by management fees paid to Calypso Management of $0.6 million associated with the second quarter 2003
distribution to shareholders. Income from discontinued timber operations for the six months ended June 30, 2002 was $0.4 million ($0.08 per share).



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, 2003
and 2002:



REVENUES AND NET INCOME OR LOSS

(DOLLARS IN MILLIONS)



|                                                                    |  | REVENUES                  |     | NET INCOME(LOSS)          |   |      | REVENUES                |   | NET INCOME(LOSS)        |  
|------------------------------------------------------------------- |  | ------------------------- | --- | ------------------------- | - | ---- | ----------------------- | - | ----------------------- | -
|                                                                    |  | THREE MONTHSENDEDJUNE 30, |     | THREE MONTHSENDEDJUNE 30, |   |      | SIX MONTHSENDEDJUNE 30, |   | SIX MONTHSENDEDJUNE 30, |  
|BUSINESS SEGMENT                                                    |  | 2003                      |     | 2002                      |   | 2003 |                         |   | 2002                    |  
|Russian Real Estate Management and Investment Management Operations |  | $                         | 2.6 |                           | $ | 2.4  |                         | $ | 2.1                     |  
|Real Estate Management Operations                                   |  |                           | 0.2 |                           |   | 0.2  |                         |   | (0.2                    | )
|Other                                                               |  |                           | 0.1 |                           |   | 0.3  |                         |   | 0.8                     |  
|                                                                    |  |                           |     |                           |   |      |                         |   |                         |  
|Total from continuing operations                                    |  | $                         | 2.9 |                           | $ | 2.9  |                         | $ | 2.7                     |  
|                                                                    |  |                           |     |                           |   |      |                         |   |                         |  
|Income from discontinued operations                                 |  |                           |    |                           |   |     |                         |   |                        |  
|                                                                    |  |                           |     |                           |   |      |                         |   |                         |  
|Totals                                                              |  | $                         | 2.9 |                           | $ | 2.9  |                         | $ | 2.7                     |  
|                                                                    |  |                           |     |                           |   |      |                         |   |                         |  



16



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Russian Real Estate Management and Investment Management Operations.



The Russian real estate management and investment management operations
reported net income of $2.1 million for the second quarter 2003, an increase of $0.9 million compared with net income of $1.2 million reported in the second quarter of 2002. The increase was attributable to a $1.1 million increase in realized
portfolio gains and a $0.2 million increase in foreign exchange gains. These increases were offset partially by a $0.3 million increase in corporate overhead allocations and higher salary and employee related expenses of $0.1 million.



During the six months ended June 30, 2003, the Russian real estate management
and investment management business reported net income of $3.1 million, an increase of $1.5 million compared with the corresponding period in 2002. The increase in income was attributable to a $1.2 million increase in realized portfolio gains, a
$0.4 million increase in foreign exchange gains, a $0.3 million increase in gains on government bonds, and a $0.2 million increase in interest income. These increases were offset partially by higher salary and employee related expenses of $0.4
million and an increase in corporate overhead allocations of $0.2 million.



Real Estate Management Operations.



The real
estate management operations reported losses of $0.2 million in the second quarter of 2003 compared with losses of $0.3 million in the second quarter of 2002. For the six months ended June 30, 2003 and June 30, 2002, the real estate management
operations reported losses of $0.5 million. The losses for all periods represent corporate overhead allocations.



Other.



Harbor Globals other operations reported net income of $0.8 million for the three months ended June 30, 2003 compared to net income of $0.1 million for the corresponding period in 2002. The $0.7 million increase
in income was attributable principally to the $0.9 million gain recorded on the sale to HSBC of Goldfield IIs right to receive supplemental payments from Ashanti and a $0.3 million reduction in write-downs of the Companys venture capital
portfolio. These increases were offset partially by $0.3 million of lower interest income and additional management fees paid to Calypso Management of $0.1 million associated with the second quarter 2003 distribution to shareholders.



For the six months ended June 30, 2003, Harbor Globals other operations
reported income of $1.9 million compared to $0.5 million for the six months ended June 30, 2002. The $1.4 million increase in income is attributable principally to a $1.3 million gain from the early settlement of the Companys note payable to
Pioneer, the $0.9 million gain recorded on the sale to HSBC of Goldfields II right to receive supplemental payments from Ashanti, a supplemental payment from Ashanti of approximately $0.3 million earned by Goldfields II during the first
quarter of 2003 and a lower write-down of the Companys Polish venture capital investment by $0.2 million. These increases were offset partially by management fees of $0.6 million associated with the second quarter 2003 distribution to
shareholders, lower interest income of $0.5 million and a $0.2 million charge to operations reflecting the $1.1 million reduction in the deferred purchase price due from Ashanti to Goldfields II in connection with the sale of Goldfield IIs
gold mining operations in Ghana.



Discontinued Operations.



On February 5, 2002, the Companys Board of Directors approved the
disposition of the Russian timber operations. Accordingly, the Russian timber operations segment is reflected as a discontinued operation. Pursuant to Accounting Principles Board Opinion No. 30, Reporting the Results of
OperationsReporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions, the Company recorded the disposal effective December 31, 2001. During the fourth



17



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quarter of 2001, management made its best estimate of the loss on disposal based on an estimated selling price and a
projection of costs and expenses to be incurred up to the anticipated date of disposal and recorded an estimated loss of $8.3 million. On April 22, 2002, Pioneer Forest entered into a definitive agreement for the sale of its Russian timber
operations segment for an aggregate purchase price of $7.55 million. Based on this purchase price and estimated costs through the anticipated date of disposal, the Company recorded a credit of approximately $0.4 million in the first quarter of 2002.



LIQUIDITY AND CAPITAL RESOURCES



Liquid assets held directly by Harbor Global consisting of cash and cash
equivalents and marketable securities maintained for general corporate purposes were $7.2 million as of June 30, 2003. This represents a $9.0 million decrease from the 2002 fiscal year end and is attributable principally to the $7.9 million
distribution to shareholders (net of an approximately $0.6 million management fee paid to Calypso Management pursuant to the amended and restated administration and liquidation agreement), the $3.8 million payment to Pioneer in early settlement of
the $5 million note payable pursuant to the Distribution Agreement, and the funding of operations and settlement of year-end accruals. These disbursements were offset partially by cash inflows of $3.0 million from Ashanti pursuant to the promissory
note payable to Goldfields II in connection with the sale of Goldfield IIs gold mining operations in Ghana, $2.0 million paid to Pioneer Forest in satisfaction of the promissory note due to Pioneer Forest in connection with the sale of the
Russian timber operations and $0.9 million received from HSBC for the sale to HSBC of Goldfields IIs right to receive supplemental payments from Ashanti. Management believes that the cash available for general corporate purposes is sufficient
to fund operations over the next two years.



The assets of the
Companys majority-owned Russian subsidiary, PIOGLOBAL Real Estate Investment Fund, consist of cash and cash equivalents, equity securities (both liquid and illiquid), marketable securities, real estate holdings, and other miscellaneous assets.



On May 15, 2003, the shareholders of PIOGLOBAL Real Estate
Investment Fund approved a dividend of approximately $4.2 million. The dividend will be paid over a period of one year beginning on September 1, 2003 to shareholders of record on March 28, 2003. Harbor Global expects to receive its proportionate
share of such dividend in the amount of approximately $1.8 million after taxes during the fourth quarter of 2003.



On June 3, 2003, the Board of Directors of the Company declared a distribution of approximately $8.5 million or $1.50 per share on the Companys
common shares. Pursuant to the administration and liquidation agreement, Calypso Management will receive a payment equal to approximately 6.9% of such distribution or approximately $0.10 per share. The balance of approximately $1.40 per share was
paid on June 27, 2003 to shareholders of record as of June 17, 2003.



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 they involve certain assumptions. Management cautions readers that assumptions involve substantial risks and uncertainties. Consequently, any forward-looking



18



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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.



HARBOR GLOBAL HAS A LIMITED OPERATING HISTORY AS AN INDEPENDENT COMPANY.



Harbor Global has operated as an independent public company since October 24, 2000 and therefore has a limited operating history as an
independent company. The financial statements included in this Form 10-Q may not necessarily reflect the results of operations, financial condition and cash flows that would have been achieved had Harbor Global and its subsidiaries operated as an
independent company prior to the Spin-Off, particularly in light of Harbor Globals intent to liquidate its assets within a limited period of time.



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
| | - |  | ----------------------------------------------------------------------------------



| |  |  | 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, if any, are speculative.



A
significant portion of Harbor Globals Russian real estate management and investment management operations consists of its approximately 52% interest in PIOGLOBAL Real Estate 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
PIOGLOBAL Real Estate Investment Fund are illiquid. There is also limited liquidity in some of the publicly traded securities of PIOGLOBAL Real Estate Investment Fund. Consequently, Harbor Global may have difficulty selling some of its investment in
PIOGLOBAL Real Estate Investment Fund or causing PIOGLOBAL Real Estate Investment Fund to liquidate some of 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. 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:



19



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



| |  |  | 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; 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 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 real estate management and investment management
operations involve significant risks, such as those listed above, which are not typically associated with developed markets. The liquidation of these businesses, 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.



Stephen G. Kasnet is the President and Chief Executive Officer, and Donald H. 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 manages the liquidation of Harbor Global and operates 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 that will enable Harbor Global to make meaningful distributions to its shareholders.



Mr. Kasnet and Mr. Hunter both entered into employment agreements with Calypso Management. On
July 10, 2003, Mr. Kasnets employment agreement was extended by the mutual agreement of Mr. Kasnet and the Board of Directors of Harbor Global until October 24, 2005. 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, Harbor Global has obtained key officer life insurance policies with benefits payable to Harbor Global for Mr. Kasnet and Mr. Hunter.



20



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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.



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 its 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 of 1940 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.



RECENT
PRONOUNCEMENTS OF THE FINANCIAL ACCOUNTING STANDARDS BOARD AFFECTING HARBOR GLOBAL



21



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None.



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 market fluctuations.



The Companys interest rate risk involves the short-term investment of excess cash. This
risk impacts fair values, earnings and cash flows. Excess cash is primarily invested in foreign government bonds and United States treasury bills. These short-term investments are reported either as cash and cash equivalents or marketable
securities. The balance of such securities at June 30, 2003 and December 31, 2002 was approximately $2.4 million and $4.6 million, respectively, of cash and cash equivalents and $4.5 million and $10.1 million, respectively, of marketable securities.
Earnings from excess cash invested were approximately $0.1 million for the six months ended June 30, 2003. Based on excess cash invested at June 30, 2003, a one percent increase in current market interest rates would have the effect of causing an
approximately $0.1 million additional pre-tax credit to the Consolidated Statement of Earnings.



Harbor Global is exposed to certain changes in foreign currency exchange rates, primarily as a result of its operations in Russia. The United States dollar (the Companys reporting currency) has been designated
as the Companys functional currency. Translation gains and losses that result from remeasuring into the United States dollar are included in the Consolidated Statement of Earnings. To mitigate against currency translation risk, the Company
primarily transacts in United States dollars by contracting for most of its costs and revenues in United States dollars. This acts as a natural hedge to protect against currency fluctuations from the Companys operations.



The Russian ruble is not a fully convertible currency outside of Russia. The translation of
ruble denominated assets and liabilities into United States dollars for the purpose of these financial statements does not indicate that the Company could realize or settle in United States dollars the reported values of these assets and
liabilities. The Company reports all of its non-monetary assets and liabilities held in Russia at historical exchange rates, and any fluctuation in foreign exchange rates would not have any impact on reported non-monetary assets and liabilities.



The table below sets forth in the Companys reporting currency a summary
of the monetary assets and liabilities held in rubles at June 30, 2003 and December 31, 2002.



|                                    |  | (IN THOUSANDS)
|----------------------------------- |  | --------------
|                                    |  | June 30,2003  
|Monetary Assets                     |  |               
|Cash and Cash Equivalents           |  | $             
|Restricted Cash                     |  |               
|Marketable Securities Held for Sale |  |               
|Other                               |  |               
|                                    |  |               
|                                    |  | $             
|                                    |  |               
|Monetary Liabilities                |  |               
|Dividend Payable                    |  | $             
|Taxes Payable                       |  |               
|Deferred Taxes                      |  |               
|Other                               |  |               
|                                    |  |               
|                                    |  | $             
|                                    |  |               
|Net Position                        |  | $             
|                                    |  |               



22



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The Company indirectly invests in equity instruments of privately-held companies through its approximately 52% interest
in the PIOGLOBAL Real Estate Investment Fund and its approximately 8% interest in the Prospect Poland Fund. Investments in privately held companies by the PIOGLOBAL Real Estate Investment Fund are recorded at cost in long-term investments.
With respect to the Companys limited partnership interest in the Prospect Poland Fund, such interests are recorded in Polish Venture Capital Investment using the equity method of accounting. The Company is exposed to market risk as it relates
to the market value of its indirect investments in privately held companies. The carrying value of the Companys interest in the Prospect Poland Fund was written down by approximately $206,000 in the first half of 2003, reflecting the
Companys proportional share of an investment write-down of approximately $173,000 and approximately $33,000 of operating expenses. For the first half of 2002, the Company wrote down its investment by approximately $385,000, reflecting the
Companys proportional share of an investment write-down of approximately $325,000 and approximately $60,000 of operating expenses.



The PIOGLOBAL Real Estate Investment Fund is also invested in equity instruments of public companies, which are classified as available-for-sale pursuant to SFAS No. 115.
Those publicly traded equity investments that have evinced a sufficient breadth and scope of market activity are valued based on the quoted price for such securities according to the Russian Trading System and are recorded in long-term marketable
securities. Otherwise, the investments are recorded in long-term investments at a fair value equivalent to its original cost basis. These available-for-sale equity investments, primarily in oil and gas, energy companies and the telecommunications
industry, are subject to significant fluctuations in fair value due to the volatility of the stock market and the industries in which these companies participate. As of June 30, 2003 and December 31, 2002, the fair value of equity investments
contained in long-term marketable securities aggregated $21.6 million and $19.0 million, respectively. As a result, the Company recorded unrealized gains after deferred taxes and after minority interest of $5.2 million and $3.9 million at June 30,
2003 and December 31, 2002, respectively, as a separate component of stockholders equity. Although the breadth of industries represented on the Russian Trading System is severely limited, the Company attempts to manage its exposure to stock
market fluctuations and minimize the impact of stock market declines to the Companys earnings and cash flow by increased diversification of the portfolio.



ITEM 4. CONTROLS AND PROCEDURES.



Evaluation of Disclosure Controls and Procedures. The Companys Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the
Companys design and operation of the Companys disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of June 30, 2003 (the Evaluation Date). Based on such
evaluation, such officers concluded that, as of the Evaluation Date, the Companys disclosure controls and procedures are effective in alerting them on a timely basis to material information relating to the Company (including its consolidated
subsidiaries) required to be included in the Companys reports filed or submitted under the Securities Exchange Act of 1934.



Changes in Internal Controls. There have not been any significant changes in the Companys internal controls that could significantly affect these controls
subsequent to Evaluation Date.



PART IIOTHER INFORMATION



ITEM 5. OTHER INFORMATION



On April 4, 2003 and April 10, 2003, through two purchase and sale agreements, PIOGLOBAL
Real Estate Investment Fund agreed to sell its approximately 25% interest in the Cosmos Hotel for approximately $4.9 million in the aggregate to Open Joint Stock Company Alpha Bank (Alpha). Pursuant to the April 4, 2003 agreement, Alpha
purchased approximately 62% of the shares of the Cosmos Hotel held by PIOGLOBAL Real Estate Investment Fund on April 15, 2003 for approximately $2.9 million. Pursuant to



23



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the April 10, 2003 agreement, Alpha purchased the remaining shares held by PIOGLOBAL Real Estate Investment Fund on May
20, 2003 for approximately $2.0 million.



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) On July 11, 2003, the Company filed a Current Report on Form 8-K in connection with the Companys change of certifying accountants.



On May 5, 2003, the Company filed a Current Report on Form 8-K in connection with a press release announcing its financial
results for the quarter ended March 31, 2003.



24



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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 6, 2003



HARBOR GLOBAL COMPANY LTD./s/ Donald H. HunterDonald H. Hunter Chief Operating Officer Chief Financial Officer(Duly authorized officer and principal financial and accounting officer)




25



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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           | *** |  | Purchase Agreement dated April 25, 2003 between Harbor Global Company Ltd., PIOGLOBAL Goldfields II Limited and HSBC Bank USA.                 
|               |    
|10.2           | *** |  | Assignment Agreement dated April 30, 2003 by PIOGLOBAL Goldfields II Limited in favor of HSBC Bank USA.                                        
|               |    
|10.3           | *** |  | Collateral Agreement dated April 30, 2003 between PIOGLOBAL Goldfields II Limited and HSBC Bank USA.                                           
|               |    
|10.4           | *** |  | Consent given as of April 24, 2003 by Ashanti Goldfields Company Limited and Ashanti Goldfields Teberebie Limited.                             
|               |    
|10.5           | *** |  | Amended and restated administration and liquidation agreement between Calypso Management LLC and Harbor Global Company Ltd dated July 10, 2003.
|               |    
|31.1           | *** |  | Certification of CEO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                  
|               |    
|31.2           | *** |  | Certification of CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                  
|               |    
|32.1           | *** |  | Certification of CEO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                  
|               |    
|32.2           | *** |  | Certification of CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                  

---

|*** |  | 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 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.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------