UNITEDTable STATESof Contents

~~SECURITIES~~UNITED ~~AND~~STATES ~~EXCHANGE COMMISSION~~

~~Washington,~~SECURITIES ~~D.C.~~AND ~~20549~~EXCHANGE COMMISSION

~~FORM~~Washington, ~~10-Q~~D.C. 20549

~~(Mark~~FORM ~~One)~~10-Q

~~x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15~~(dMark One) ~~OF THE SECURITIES EXCHANGE ACT OF 1934~~

~~For~~x ~~the~~QUARTERLY ~~quarterly~~REPORT ~~period~~PURSUANT ~~ended~~TO ~~September~~SECTION ~~30,~~13 ~~2004~~OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

ORFor the quarterly period ended March 31, 2005

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

~~For~~¨ ~~the~~TRANSITION ~~transition~~REPORT ~~period~~PURSUANT ~~from to~~ TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

~~Commission~~For ~~file~~the ~~number~~transition ~~0-30889~~period from to

~~HARBOR~~Commission ~~GLOBAL~~file ~~COMPANY~~number ~~LTD.~~0-30889

~~(Exact~~HARBOR ~~name~~GLOBAL ofCOMPANY ~~registrant~~LTD. ~~as specified in its charter)~~

BERMUDA		52-2256071
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

(Exact name of registrant as specified in its charter)

ONE FANEUIL HALL MARKETPLACE

BERMUDA

52-2256071

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

~~4TH~~ONE ~~FLOOR~~FANEUIL HALL MARKETPLACE

~~BOSTON,~~4TH ~~MASSACHUSETTS~~FLOOR

~~(Address~~BOSTON, ofMASSACHUSETTS ~~principal executive offices)~~

~~02109-1820~~(Address of principal executive offices)

~~(Zip~~02109-1820 ~~Code)~~

(~~617~~Zip Code) ~~878-1600~~

(~~Registrant’s telephone number, including area code~~617) 878-1600

NO(Registrant’s ~~CHANGES~~telephone number, including area code)

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

~~Indicate by check mark whether the registrant~~ (1)Former ~~has~~name, ~~filed~~former ~~all~~address ~~reports~~and ~~required~~former tofiscal beyear, ~~filed~~if bychanges ~~Section~~since 13last ~~or 15(d~~report) 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(1) anhas ~~accelerated~~filed ~~filer~~all ~~(as~~reports ~~defined~~required into ~~Rule~~be ~~12b-2~~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 x¨

AsIndicate ofby ~~October~~check ~~29,~~mark whether ~~2004,~~ the registrant ~~had~~is ~~5,667,311~~an ~~common~~accelerated ~~shares,~~filer ~~par~~(as ~~value~~defined ~~$.0025~~in ~~per~~Rule ~~share,~~12b-2 ~~issued~~of ~~and~~the ~~outstanding~~Exchange Act). Yes ¨ No x

~~PART~~As Iof —April ~~FINANCIAL~~15, ~~INFORMATION~~2005, the registrant had 5,667,311 common shares, par value $.0025 per share, issued and outstanding.

ITEMTable 1.of FINANCIAL STATEMENTS Contents

HARBOR GLOBAL COMPANY LTD.

~~CONSOLIDATED~~FORM ~~BALANCE~~10-Q ~~SHEETS~~

~~(DOLLARS~~FOR ~~IN THOUSANDS~~THE ~~EXCEPT~~QUARTER ~~PER~~ENDED ~~SHARE~~MARCH ~~AMOUNTS)~~31, 2005

~~(UNAUDITED)~~INDEX

	September 30, 2004			December 31, 2003
PART I.	FINANCIAL INFORMATION		3
ASSETS
Item 1.	Financial Statements (Unaudited)		3
Cash and Cash Equivalents	$	7,460		$	23,957
	Consolidated Balance Sheets –December 31, 2004 and March 31, 2005		3
Restricted Cash		12,448			6,291
	Consolidated Statements of Operations –three ended March 31, 2004 and 2005		4
Marketable Securities		20,264			16,217
	Consolidated Statements of Cash Flows –three months ended March 31, 2004 and 2005		5
Accounts Receivable		977			1,233
	Notes to Consolidated Financial Statements		6
Note Receivable		—			4,700
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		13
Prepaid Expenses		1,801			1,569
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		19
Other Current Assets		6			8
Item 4.	Controls and Procedures		21
Total Current Assets		42,956			53,975
PART II.	OTHER INFORMATION		21
Polish Venture Capital Investment		370			666
Item 6.	Exhibits		21
Marketable Securities		21,703			19,197
SIGNATURE			22
Long-term Investments		9,425			2,375
EXHIBIT INDEX
Building		21,534			22,035
Other Long-term Assets		1,032			1,060
Goodwill		1,253			1,253
Total Assets	$	98,273		$	100,561
LIABILITIES AND SHAREHOLDERS’ EQUITY
Accounts Payable	$	609		$	1,262
Dividend Payable		12,448			6,291
Accrued Expenses		3,406			1,727
Accrued Fees Payable to Calypso Management		869			708
Foreign Taxes Payable		299			1,407
Deferred Taxes		217			376
Total Current Liabilities		17,848			11,771
Deferred Taxes		2,101			1,613
Total Liabilities		19,949			13,384
Minority Interest		27,532			32,453
STOCKHOLDERS’ EQUITY
Common shares, par value $.0025 per share; authorized 48,000,000 shares; 5,661,311 shares issued and outstanding as of September 30, 2004 and December 31, 2003		14			14
Preferred shares, par value $.01 per share; authorized 1,000,000 shares; none issued		—			—
Paid-in Capital		52,142			52,282
Accumulated Deficit		(5,156	)		(533	)
Accumulated Other Comprehensive Income
Net Unrealized Gains on Available for Sale Marketable Securities		3,792			2,961
Total Stockholders’ Equity		50,792			54,724
Total Liabilities and Stockholders’ Equity	$	98,273		$	100,561

~~The~~2 ~~accompanying notes are an integral part of these Consolidated Financial Statements.~~

2Table of Contents

~~HARBOR~~ PART ~~GLOBAL~~I ~~COMPANY~~— ~~LTD.~~FINANCIAL INFORMATION

~~CONSOLIDATED~~ ITEM ~~STATEMENTS~~1. OFFINANCIAL ~~OPERATIONS~~STATEMENTS

~~(DOLLARS~~ HARBOR INGLOBAL ~~THOUSANDS~~COMPANY ~~EXCEPT~~LTD. ~~PER SHARE AMOUNTS)~~

~~(UNAUDITED)~~CONSOLIDATED BALANCE SHEETS

	Three Months Ended September 30,						Nine Months Ended September 30,
	2004			2003			2004			2003
Revenues:
Real Estate Revenue	$	1,960		$	1,802		$	5,861		$	5,634
Other Income		693			822			2,924			1,892
Total Revenues		2,653			2,624			8,785			7,526
Operating Expenses:
Salary and Benefit Expenses		(1,033	)		(1,124	)		(3,408	)		(3,015	)
Facility Expenses		(376	)		(381	)		(1,132	)		(1,081	)
Building and Property Management Expenses		(802	)		(538	)		(1,983	)		(1,563	)
Management Fee Expense		(605	)		(516	)		(2,312	)		(2,555	)
Other Expenses		(1,499	)		(1,434	)		(4,928	)		(3,664	)
Total Operating Expenses		(4,315	)		(3,993	)		(13,763	)		(11,878	)
Operating Loss		(1,662	)		(1,369	)		(4,978	)		(4,352	)
Other Income (Expense):
Net Unrealized and Realized Gains on Securities		112			854			1,140			13,639
Extinguishment of Note Payable		—			—			—			1,250
Early Settlement of Note Receivable		—			—			—			(191	)
Gain on Sale of Gold Option		—			—			—			875
Interest Income		537			575			1,542			1,859
Total Other Income, Net		649			1,429			2,682			17,432
(Loss) Income from Operations before Provision for Income Taxes, Minority Interest and Equity Gain (Loss) on Investment		(1,013	)		60			(2,296	)		13,080
Provision for Income Taxes		(202	)		(293	)		(1,737	)		(3,743	)
(Loss) Income from Operations before Minority Interest and Equity (Loss) Gain on Investment		(1,215	)		(233	)		(4,033	)		9,337
Minority Interest Income (Expense)		89			(389	)		(682	)		(5,231	)
Equity (Loss) Gain on Venture Capital Investment		(107	)		62			91			(144	)
Net (Loss) Income	$	(1,233	)	$	(560	)	$	(4,624	)	$	3,962
(Loss) Earnings Per Share:
Basic and Diluted (Loss) Earnings Per Share	$	(0.22	)	$	(0.10	)	$	(0.82	)	$	0.70
Weighted Average Basic and Diluted Shares Outstanding		5,661			5,655			5,661			5,655

(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

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


	March 31, 2005			December 31, 2004
	(Unaudited)
ASSETS
Cash and Cash Equivalents	$	6,615		$	7,754
Restricted Cash		12,983			13,035
Marketable Securities		17,051			17,456
Accounts Receivable		1,034			986
Prepaid Expenses		2,190			1,880
Other Current Assets		7			7

Total Current Assets		39,880			41,118

Polish Venture Capital Investment		259			273
Marketable Securities		23,329			19,998
Long-term Investments		6,414			8,715
Building		21,553			21,726
Other Long-term Assets		1,274			1,190
Goodwill		1,253			1,253

Total Assets	$	93,962		$	94,273

LIABILITIES AND SHAREHOLDERS’ EQUITY
Accounts Payable	$	614		$	1,140
Dividend Payable		12,983			13,035
Accrued Expenses		1,859			2,206
Accrued Fees Payable to Calypso Management		186			739
Foreign Taxes Payable		695			196
Deferred Taxes		252			241

Total Current Liabilities		16,589			17,557

Deferred Taxes		2,133			2,039

Total Liabilities		18,722			19,596

Minority Interest		27,983			27,109

STOCKHOLDERS’ EQUITY

Common shares, par value $.0025 per share; authorized 48,000,000 shares; 5,667,311 shares issued and outstanding as of March 31, 2005 and December 31, 2004		14			14
Preferred shares, par value $.01 per share; authorized 1,000,000 shares; none issued		—			—
Paid-in Capital		48,284			48,284
Accumulated Deficit		(5,041	)		(4,541	)
Other Comprehensive Income
Net Unrealized Gains on Available for Sale Marketable Securities		4,000			3,811

Total Stockholders’ Equity		47,257			47,568

Total Liabilities and Stockholders’ Equity	$	93,962		$	94,273

3The accompanying notes are an integral part of these Consolidated Financial Statements.

~~HARBOR~~3 ~~GLOBAL COMPANY LTD.~~

CONSOLIDATEDTable STATEMENTSof OF CASH FLOWS Contents

~~(DOLLARS~~ HARBOR INGLOBAL ~~THOUSANDS~~COMPANY ~~EXCEPT~~LTD. ~~PER SHARE AMOUNTS)~~

~~(UNAUDITED)~~CONSOLIDATED STATEMENTS OF OPERATIONS

	NINE MONTHS ENDED SEPTEMBER 30,
	2004			2003
Cash Flows from Operating Activities:
Net (Loss) Income	$	(4,624	)	$	3,962
Adjustments to Reconcile Net Income to Net Cash Used in Operating Activities —
Non-cash Interest Income on Note Receivable		—			(203	)
Restricted Unit Awards		169			293
Depreciation and Amortization		761			657
Unrealized and Realized Gains on Venture Capital, Marketable Securities, and Long-term Investments, Net		(1,140	)		(13,100	)
Extinguishment of Note Payable		—			(1,250	)
Early Settlement of Note Receivable		—			191
Gain on Sale of Gold Option		—			(875	)
Minority Interest		682			5,231
Equity (Gain) Loss on Venture Capital Investment		(91	)		144
Changes in Operating Assets and Liabilities —
Other Current Assets		(6,358	)		(4,129	)
Accrued Expenses and Accounts Payable		(87	)		(1,182	)
Total Adjustments and Changes in Operating Assets and Liabilities		(6,064	)		(14,223	)
Net Cash Used in Operating Activities		(10,688	)		(10,261	)
Cash Flows from Investing Activities:
Net Proceeds from Sale of Russian Timber Operations		—			2,000
Purchase of Long-term Investments and Marketable Securities		(23,179	)		(19,190	)
Other Long-term Assets		(112	)		(342	)
Proceeds from Sale of Long-term Investments and Marketable Securities		19,013			26,746
Proceeds from Payment on Notes Receivable		4,700			3,000
Proceeds from Sale of Gold Option		—			875
Proceeds from Prospect Poland Fund		388			—
Net Cash Provided by Investing Activities		810			13,089
Cash Flows from Financing Activities:
Distributions Paid		—			(7,900	)
Dividends Paid		(154	)		(28	)
Purchase of Restricted Stock		(308	)		—
Reclassification of Restricted Cash		(6,157	)		2,783
Payment on Note Payable		—			(3,750	)
Net Cash Used In Financing Activities		(6,619	)		(8,895	)
Net Decrease in Cash and Cash Equivalents		(16,497	)		(6,067	)
Cash and Cash Equivalents, Beginning of Period		23,957			12,381
Cash and Cash Equivalents, End of Period	$	7,460		$	6,314

(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

~~The~~(UNAUDITED) ~~accompanying notes are an integral part of these Consolidated Financial Statements.~~


	Three Months Ended March 31,
	2005			2004
Revenues:
Real Estate Rental Revenue	$	2,093		$	1,926
Other Income		781			1,462

Total Revenues		2,874			3,388

Operating Expenses:
Salary and Benefit Expenses		(1,281	)		(1,313	)
Facility Expenses		(358	)		(379	)
Building and Property Management Expenses		(635	)		(689	)
Management Fee Expense		(795	)		(980	)
Other Expenses		(1,380	)		(635	)

Total Operating Expenses		(4,449	)		(3,996	)

Operating Loss		(1,575	)		(608	)

Other Income:
Net Unrealized and Realized Gains on Securities		2,242			562
Interest Income		483			508

Total Other Income		2,725			1,070

Income from Operations before Provision for Income Taxes, Minority Interest and Equity Loss on Investment		1,150			462

Provision for Income Taxes		(879	)		(249	)

Income from Operations before Minority Interest and Equity Loss on Investment		271			213

Minority Interest		(757	)		(812	)
Equity Loss on Venture Capital Investments		(14	)		(10	)

Net Loss	$	(500	)	$	(609	)

Loss Per Share:
Basic and Diluted Loss Per Share	$	(0.09	)	$	(0.11	)

Weighted Average Basic and Diluted Shares Outstanding		5,667			5,661

~~HARBOR~~The ~~GLOBAL~~accompanying ~~COMPANY~~notes are ~~LTD~~an integral part of these Consolidated Financial Statements.

~~NOTES~~4 ~~TO CONSOLIDATED FINANCIAL STATEMENTS~~

(UNAUDITED)Table of Contents

~~September~~ HARBOR ~~30,~~GLOBAL ~~2004~~COMPANY LTD.

~~(1)~~CONSOLIDATED STATEMENTS ~~BACKGROUND AND BASIS~~ OF ~~PRESENTATION~~CASH FLOWS

~~BACKGROUND~~(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

~~Harbor Global Company Ltd., a Bermuda limited duration company~~ (~~“Harbor Global” or the “Company”~~UNAUDITED), 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 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:


	THREE MONTHS ENDED MARCH 31,
	2005			2004
Cash Flows from Operating Activities:
Net Loss	$	(500	)	$	(609	)
Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities —
Depreciation and Amortization		263			231
Restricted Unit Awards		—			76
Unrealized and Realized Gains on Venture Capital, Marketable Securities, and Long-term Investments, Net		(2,242	)		(562	)
Minority Interest		757			812
Equity Loss on Venture Capital Investment		14			10
Changes in Operating Assets and Liabilities —
Other Current Assets		219			(3,876	)
Accrued Expenses and Accounts Payable		(957	)		(1,178	)

Total Adjustments and Changes in Operating Assets and Liabilities		(1,946	)		(4,487	)

Net Cash Used in Operating Activities		(2,446	)		(5,096	)

Cash Flows from Investing Activities:
Purchase of Long-term Investments and Marketable Securities		(8,340	)		(4,745	)
Other Long-term Assets		(133	)		6
Proceeds from Sale of Long-term Investments and Marketable Securities		9,742			6,038
Proceeds from Payment on Note Receivable		—			4,700

Net Cash Provided by Investing Activities		1,269			5,999

Cash Flows from Financing Activities:
Dividends Paid		(15	)		(5	)
Reclassification of Restricted Cash		53			(207	)

Net Cash Provided By (Used In) Financing Activities		38			(212	)

Net (Decrease) Increase in Cash and Cash Equivalents		(1,139	)		691

Cash and Cash Equivalents, Beginning of Period		7,754			23,957

Cash and Cash Equivalents, End of Period	$	6,615		$	24,648

•The ~~Russian~~accompanying ~~real~~notes are ~~estate~~an ~~management~~integral ~~and~~part ~~investment~~of ~~management~~these ~~operations:~~Consolidated ~~investment~~Financial ~~advisory~~Statements. ~~and management operations~~

•5 ~~Real estate management operations: real estate management services, including property management and advisory services~~

•Table Other: administration and liquidation of operations, includingContents

• HARBOR ~~approximately~~GLOBAL ~~$14~~COMPANY LTD.8 ~~million in cash, cash equivalents and marketable securities held directly by Harbor Global~~

•NOTES anTO CONSOLIDATED ~~approximately~~FINANCIAL 8%STATEMENTS ~~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. On October 18, 2004, pursuant to the Company’s memorandum of association, the Harbor Global board of directors (~~“Board of Directors”~~UNAUDITED) unanimously authorized the Company to continue operating its assets for an additional one year period or through October 24, 2006, unless and until the Company has distributed all of its assets to its shareholders to the extent permitted by the Bermuda Companies Act of 1981 (“Companies Act”). If Harbor Global has not liquidated all of its assets before October 24, 2006, the Board of Directors, in its discretion, may authorize Harbor Global to continue to operate its assets for up to two additional one-year periods.

~~BASIS~~March OF31, ~~PRESENTATION~~2004

In(1) ~~the~~BACKGROUND ~~opinion~~AND ofBASIS ~~management, the accompanying consolidated financial~~OF ~~statements~~PRESENTATION contain all adjustments necessary, consisting of normal and recurring adjustments, to present fairly the financial position as of September 30, 2004 and the results of operations and cash flows for the three and nine months ended September 30, 2004 and 2003. 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 2003 Annual Report on Form 10-K for the year ended December 31, 2003 filed with the Securities and Exchange Commission.

5BACKGROUND

~~Since~~ Harbor Global isCompany Ltd., a Bermuda limited duration company, (“Harbor Global” or the “Company”), ~~expects~~was ~~that~~formed ~~for~~in ~~United~~May ~~States federal~~2000 ~~income~~as ~~tax~~a ~~purposes~~wholly itowned ~~will~~subsidiary beof ~~taxed~~Pioneer Investment Management USA Inc. (formerly known as The Pioneer Group, Inc.), a ~~partnership~~Delaware corporation (“Pioneer”), to facilitate the merger between Pioneer and asUniCredito aItaliano, ~~result~~S.p.A., ~~virtually~~an ~~all~~Italian ~~United~~financial ~~States~~institution ~~federal~~(“UniCredito”). ~~income~~As ~~tax~~a ~~expenses~~condition ~~have~~to ~~been~~closing the merger and ~~will~~pursuant beto ~~borne~~a byDistribution ~~its~~Agreement ~~shareholders.~~dated ~~However,~~as onof ~~April~~October 1224, ~~2004,~~2000 ~~Pioglobal~~by ~~First~~and ~~Russia~~among the Company, Pioneer ~~Inc~~and Harbor Global II Ltd., ~~an indirect~~a wholly owned subsidiary of the Company (the “Distribution Agreement”), ~~through~~Pioneer ~~which~~agreed ato ~~portion~~transfer certain of ~~the~~its ~~Company’s~~assets ~~Russian~~to ~~real~~Harbor ~~estate~~Global ~~management~~ and ~~investment~~distribute ~~management~~all ~~operations~~of ~~are~~the ~~conducted,~~outstanding ~~converted~~Harbor ~~from~~Global acommon ~~Delaware~~shares to ~~corporation~~its ~~into~~stockholders. aPioneer ~~Delaware~~transferred ~~limited~~to ~~liability~~Harbor ~~company, Pioglobal~~Global ~~First~~all ~~Russia,~~of ~~LLC~~the ~~(“Pioglobal~~assets ~~First~~required ~~Russia”).~~to Asbe atransferred ~~result,~~pursuant to the ~~Company~~merger ~~anticipates~~agreement ~~that~~and itthe ~~will~~Distribution ~~indirectly~~Agreement, ~~(through~~and ~~Pioglobal~~on ~~First~~October ~~Russia)~~24, ~~incur~~2000, aPioneer ~~United~~distributed ~~States~~all ~~federal~~of ~~income~~the ~~tax~~outstanding ~~liability~~common shares of ~~approximately~~Harbor ~~$1,100,000,~~Global ~~which~~to ~~is reported~~its instockholders ~~provision~~(the ~~for~~“Spin-off”). ~~income~~Pioneer ~~taxes~~stockholders inreceived ~~the~~one ~~Consolidated~~Harbor ~~Statement~~Global common share for every five shares of ~~Operations~~Pioneer common stock held on that date.

~~Other~~The than the Pioglobal First Russia United States federal income tax liability, the income tax provisions and deferred taxes included in the accompanying consolidated financial statements principally relate to the Company’s ~~subsidiaries~~primary ~~that~~assets ~~are~~by ~~located~~segment ~~primarily~~consist inof the ~~Russian Federation (“Russia”).~~ following:

~~(2)~~• ~~SUMMARY~~Russian OFreal ~~SIGNIFICANT~~estate ~~ACCOUNTING~~management ~~POLICIES,~~and ~~PRINCIPLES~~investment OFmanagement ~~CONSOLIDATION~~operations: investment advisory and management operations

~~PRINCIPLE~~• OFReal ~~CONSOLIDATION~~estate management operations: real estate management services, including property management and advisory services

~~The~~• accompanying consolidated financial statements include the accounts of Harbor Global and its majority-owned subsidiaries. The Company maintains an approximate 8% interest in the Prospect Poland Fund, a limited partnership. Because it is a limited partner investor, the Company accounts for this investment using the equity method of accounting. Equity gains and losses from this investment are included in equity gain (loss) on venture capital investments on the accompanying Consolidated Statements of Operations. All intercompany accounts and transactions have been eliminated from the accompanying consolidated financial statements. Other:

~~USE~~• OFapproximately ~~ESTIMATES~~$7.5 million in cash, cash equivalents and marketable securities held directly by Harbor Global

~~The~~• ~~preparation~~an ofapproximately ~~the accompanying~~8% ~~consolidated~~limited ~~financial~~partnership ~~statements~~interest in ~~conformity with generally accepted accounting principles in~~ the ~~United~~Prospect ~~States~~Poland of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and disclosure of contingent assets and liabilities at the date of the accompanying consolidated financial statements. Actual results could differ from those estimates. Fund

~~POLISH~~Harbor ~~VENTURE~~Global ~~CAPITAL~~seeks ~~INVESTMENT~~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 dated May 22, 2000 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. On October 18, 2004, pursuant to the Company’s memorandum of association, the Harbor Global board of directors (“Board of Directors”) unanimously authorized the Company to continue operating its assets for an additional one year period or through October 24, 2006, unless and until the Company has distributed all of its assets to its shareholders to the extent permitted by the Bermuda Companies Act of 1981. If Harbor Global has not liquidated all of its assets before October 24, 2006, the Board of Directors, in its discretion, may authorize Harbor Global to continue to operate its assets for up to two additional one-year periods.

~~The~~BASIS ~~Company~~OF ~~reports~~PRESENTATION 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. These investments are valued at fair value, as determined by Prospect Poland Fund’s management. For the three months ended September 30, 2004, the Company wrote-down its investment by approximately $107,000 and for the nine months ended September 30, 2004, the Company recorded a gain on its investment of approximately $91,000. For the three months ended September 30, 2003, the Company recorded a gain on its investment of approximately $62,000 and for the nine months ended September 30, 2003, the Company wrote-down its investment by approximately $144,000.

6The interim financial data as of March 31, 2005 and for the three months ended March 31, 2005 is unaudited; however, in the opinion of management, the accompanying Consolidated Financial Statements contain all adjustments, consisting of normal and recurring adjustments, necessary for a fair statement of the financial position of the Company as of March 31, 2005 and the results of operations and cash flows of the Company for the three month periods ended March 31, 2005 and 2004. 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 2004 Annual Report on Form 10-K for the year ended December 31, 2004 filed with the Securities and Exchange Commission.

~~Summarized~~6 ~~financial information for the Prospect Poland Fund is as follows:~~

	2004			2003
	(In Thousands)
Balance Sheet Data, at September 30,
Current Assets	$	722		$	1,133
Non-Current Assets		4,080			7,308
Current Liabilities		(211	)		(85	)
Partners’ Capital, at September 30	$	4,591		$	8,356
	2004			2003
	(In Thousands)
Operating Data, for the nine months ended September 30
Net Operating Loss	$	(517	)	$	(445	)
Net Realized and Unrealized Gain (Loss) from Investments		1,684			(1,789	)
Net Increase (Decrease) in Partner’s Capital from Operations	$	1,167		$	(2,234	)

~~Current~~Since ~~Marketable~~Harbor ~~Securities~~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”).

United States Treasury securities are classified as held-to-maturity and are recorded at amortized cost. Russian government and municipal securities are classified as trading securities and are marked-to-market, with unrealized gains or losses reported in the Consolidated Statements of Operations pursuant to Statement of Financial Accounting Standards (~~“SFAS”~~2) ~~No.~~SUMMARY ~~115,~~OF ~~“Accounting~~SIGNIFICANT ~~for~~ACCOUNTING Certain Investments in Debt and Equity Securities”. Russian federal and municipal government securities are held primarily in the Open Joint-Stock Company “PIOGLOBAL Real Estate Investment Fund” (“PIOGLOBAL Real Estate Investment Fund”)POLICIES, anPRINCIPLES ~~approximately~~OF ~~52%~~CONSOLIDATION owned subsidiary of the Company. Security transactions are recorded on the settlement date. Investments are valued at the weighted average daily price if they are traded on the valuation date; otherwise, the bid price is used. Set forth on the following tables are the balances of marketable securities, segregated between United States Treasury obligations and Russian obligations at September 30, 2004 and December 31, 2003 and unrealized gains and losses recorded on Russian government securities for the three and nine months ended September 30, 2004 and 2003.

~~Balances~~PRINCIPLES ofOF ~~Current~~CONSOLIDATION ~~Marketable Securities~~

	September 30, 2004		December 31, 2003
	(In Thousands)
Russia (trading)	$	8,504	$	10,160
United States (held to maturity)		11,760		6,057
Total Marketable Securities	$	20,264	$	16,217

The Consolidated Financial Statements include the accounts of Harbor Global and its majority-owned subsidiaries. The Company maintains an approximate 8% interest in the Prospect Poland Fund, a limited partnership. Because it is a limited partner investor, the Company accounts for this investment using the equity method of accounting. Equity losses from this investment are included in equity loss on venture capital investments on the accompanying Consolidated Statements of Operations. All intercompany accounts and transactions have been eliminated from the Consolidated Financial Statements.

~~Unrealized~~USE ~~Gain~~OF ~~and~~ESTIMATES ~~Loss on Russian Federal and Municipal Government Securities~~

	Three Months Ended September 30,						Nine Months Ended September 30,
	2004			2003			2004			2003
	(In Thousands)
Gross Unrealized Gain	$	48		$	57		$	368		$	951
Gross Unrealized Loss		(56	)		(435	)		(592	)		(805	)
Net Unrealized (Loss) Gain	$	(8	)	$	(378	)	$	(224	)	$	146

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, liabilities, revenues and expenses and disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements. Actual results could differ from those estimates.

7Current Marketable Securities

~~LONG~~United States Treasury securities are classified as held-~~TERM~~to-maturity ~~MARKETABLE~~and ~~SECURITIES~~are recorded at amortized cost. Russian Government and Municipal securities are classified as trading securities and are marked-to-market, with unrealized gains or losses reported in the Consolidated Statements of Operations pursuant to Statement of Financial Accounting Standards (“SFAS”) No. 115, “Accounting for Certain Investments in Debt and Equity Securities”. Russian federal and municipal government securities are held primarily in the PIOGLOBAL Real Estate Investment Fund, an approximately 52% owned subsidiary of the Company. Security transactions are recorded on the settlement date. Investments are valued at the weighted average daily price if they are traded on the valuation date; otherwise, the bid price is used. Set forth in the following tables are the balances of marketable securities, segregated between United States Treasury obligations and Russian obligations at March 31, 2005 and December 31, 2004. Unrealized gains and losses recorded on Russian government securities are presented for the three months ended March 31, 2005 and 2004.

~~Long-term~~Balances ~~Marketable Securities consist primarily~~ of ~~Russian~~Current ~~equity~~Marketable ~~and~~Securities fixed income securities, including Russian corporate bonds held in the portfolio of the PIOGLOBAL Real Estate Investment Fund. In addition, certain subsidiaries of the Company maintain investments in unit funds and trust management accounts managed by Closed Joint-Stock Company “PIOGLOBAL Asset Management” (“PIOGLOBAL Asset Management”).

Equity securities, corporate bonds and investments in unit funds and trust management accounts are classified as available-for-sale and recorded at fair value pursuant to SFAS No. 115. In this regard, such securities are recorded in long-term marketable securities based on quoted prices on the Russian Trading System and Moscow Interbank Currency Exchange. The cost of securities sold is based on the weighted-average method. Dividend income received on investments is recognized on a cash basis. Unrealized gains and unrealized losses for equity securities, corporate bonds and investments in unit fund and trust management accounts are recorded net of deferred taxes and minority interest in other comprehensive income.


	March 31, 2005		December 31, 2004
	(In Thousands)
Russia (trading)	$	10,034	$	9,883
United States (held to maturity)		7,017		7,573

Total Marketable Securities	$	17,051	$	17,456

~~Set~~7 forth in the following tables are the balances of long-term marketable securities at September 30, 2004 and December 31, 2003, as well as cumulative unrealized gains and losses, before deferred taxes and minority interest, recorded in other comprehensive income at September 30, 2004 and December 31, 2003:

BalanceTable of Long-term Marketable Securities Classified as Available for Sale Contents

	September 30, 2004			December 31, 2003
	(In Thousands)
Equity Securities	$	14,676		$	10,206
Corporate Bonds		5,475			7,599
Unit Funds		1,552			1,392
Total Marketable Securities	$	21,703		$	19,197
Cumulative Unrealized Gain and Loss Recorded in Other Comprehensive Income
	September 30, 2004			December 31, 2003
	(In Thousands)
Equity Securities
Gross Unrealized Gain	$	7,724		$	5,543
Gross Unrealized Loss		(52	)		(9	)
Net Unrealized Gain	$	7,672		$	5,534
Corporate Bonds
Gross Unrealized Gain	$	183		$	394
Gross Unrealized Loss		(40	)		—
Net Unrealized Gain	$	143		$	394
Unit Funds
Gross Unrealized Gain	$	939		$	789
Gross Unrealized Loss		—			—
Net Unrealized Gain	$	939		$	789

Net Unrealized Gain on Russian Federal and Municipal Government Securities

BUILDING


	Three months ended March 31,
	2005			2004
	(In Thousands)
Gross Unrealized Gain	$	128		$	294
Gross Unrealized Loss		(90	)		(69	)

Net Unrealized Gain	$	38		$	225

~~The building represents an office building in Moscow, Russia, the Meridian Commercial Tower. The Meridian Commercial Tower is carried at cost and is being depreciated on a straight~~LONG-~~line~~TERM ~~basis~~MARKETABLE ~~over 40 years. A significant portion of the assets of PIOGLOBAL Real Estate Investment Fund consists of its ownership of the~~SECURITIES ~~Meridian Commercial Tower. Meridian Commercial Tower lease revenues accounted for approximately 88% of the revenues of PIOGLOBAL Real Estate Investment Fund and~~

8Long-term Marketable Securities consist primarily of Russian equity and fixed income securities, including Russian corporate bonds held in the portfolio of the PIOGLOBAL Real Estate Investment Fund and Closed Joint-Stock Company “PIOGLOBAL Asset Management” (“PIOGLOBAL Asset Management”). In addition, certain subsidiaries of the Company maintain investments in unit funds and trust management accounts managed by PIOGLOBAL Asset Management.

~~approximately~~Equity ~~73%~~securities, corporate bonds and investments in unit funds and trust management accounts are classified as available-for-sale and recorded at fair value pursuant to SFAS No. 115. In this regard, such securities are recorded in long-term marketable securities based on quoted prices on the Russian Trading System and Moscow Interbank Currency Exchange (“MICEX”). The cost of securities sold is based on the ~~total~~weighted-average ~~revenue~~method. ~~generated~~Dividend byincome ~~Harbor~~received ~~Global’s~~on ~~Russian~~investments ~~real~~is ~~estate~~recognized ~~management~~on a cash basis. Unrealized gains and ~~investment~~unrealized losses for equity securities, corporate bonds and investments in unit fund and trust management ~~operations~~accounts ~~for~~are ~~the~~recorded ~~nine~~net ~~months~~of ~~ended~~deferred ~~September~~taxes ~~30,~~and ~~2004~~minority interest in other comprehensive income.

~~CONCENTRATION~~Set OFforth ~~RISK~~in the following tables are the balances of long-term marketable securities at March 31, 2005 and December 31, 2004, as well as cumulative unrealized gains and losses, before deferred taxes and minority interest, recorded in other comprehensive income at March 31, 2005 and December 31, 2004:

~~The~~Balance ~~Company’s operations~~of ~~are~~Long-term ~~generally~~Marketable ~~concentrated~~Securities inClassified ~~Russia.~~as ~~The~~Available ~~Company does not maintain political risk insurance~~ for ~~any~~Sale ~~of its businesses.~~

(3) EARNINGS PER SHARE


	March 31, 2005		December 31, 2004
	(In Thousands)
Equity Securities	$	16,136	$	13,333
Corporate Bonds		5,482		5,043
Unit Funds		1,711		1,622

Total Marketable Securities	$	23,329	$	19,998

~~Basic~~8 ~~and diluted earnings per share (“EPS”) are computed by dividing reported earnings by weighted average shares outstanding. There are currently no potentially dilutive securities.~~

(4)Table NOTEof RECEIVABLE Contents

InCumulative ~~May~~Unrealized ~~2000,~~Gain Pioglobal Goldfields II Limited (“Goldfields II”), an indirect wholly owned subsidiary of the Company, 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~~Loss ofRecorded ~~the Ghanaian gold mine. On June 19, 2000, $5,000,000 of the base purchase price was paid to Goldfields II~~ in ~~cash~~Other ~~and~~Comprehensive ~~$13,800,000~~Income ~~of the base purchase price was paid in the form of a non-interest bearing 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. The Company received the final payment of $4,700,000 from Ashanti during the first quarter of 2004.


	March 31, 2005			December 31, 2004
	(In Thousands)
Equity Securities
Gross Unrealized Gain	$	7,826		$	7,276
Gross Unrealized Loss		(266	)		(115	)

Net Unrealized Gain	$	7,560		$	7,161

Corporate Bonds
Gross Unrealized Gain	$	288		$	329
Gross Unrealized Loss		(33	)		—

Net Unrealized Gain	$	255		$	329

Unit Funds
Gross Unrealized Gain	$	1,067		$	992
Gross Unrealized Loss		—			—

Net Unrealized Gain	$	1,067		$	992

~~(5) CHANGES~~BUILDING ~~IN STOCKHOLDERS’ EQUITY~~

~~For~~The building represents an office building in Moscow, Russia, the ~~three~~Meridian Commercial Tower. The Meridian Commercial Tower is carried at cost and ~~nine~~is being depreciated on a straight-line basis over 40 years. Building improvements are depreciated on a straight-line basis over either five or ten years. A significant portion ~~months~~of ~~ended~~the ~~September~~assets ~~30,~~of ~~2004~~PIOGLOBAL Real Estate Investment Fund consists of its ownership of Meridian Commercial Tower. Meridian Commercial Tower lease revenues accounted for approximately 80% of the total revenue generated by Harbor Global’s Russian real estate management and ~~2003,~~investment management operations during the ~~Company~~quarterly ~~reported~~period ~~changes~~ended inMarch ~~stockholders~~31, 2005, and approximately 74% of Harbor Global’s ~~equity~~total asrevenue ~~follows:~~during the same period.

	THREE MONTHS ENDED SEPTEMBER 30,
	2004			2003
	(In Thousands)
Net (Loss) Income	$	(1,233	)	$	(560	)
Net Unrealized Gains on Long term Marketable Securities (Net of deferred taxes of $324,000 and $943,000 and minority interest of $475,000 and $1,485,000 for the three months ended September 30, 2004 and 2003, respectively)		553			1,502
Total Comprehensive (Loss) Income	$	(680	)	$	942
Additional Paid In Capital		—			293
Change in Stockholder’s Equity	$	(680	)	$	1,235

CONCENTRATION OF RISK

9The Company’s operations are generally concentrated in Russia. The Company does not maintain political risk insurance for any of its businesses.

	NINE MONTHS ENDED SEPTEMBER 30,
	2004			2003
	(In Thousands)
Net (Loss) Income	$	(4,624	)	$	3,962
Net Unrealized Gains on Long term Marketable Securities (Net of deferred taxes of $488,000 and $1,695,000 and minority interest of $716,000 and $2,573,000 for the nine months ended September 30, 2004 and 2003, respectively)		831			2,792
Total Comprehensive (Loss) Income	$	(3,793	)	$	6,754
Distribution to Stockholders		—			(7,900	)
Additional Paid In Capital		(140	)		293
Change in Stockholder’s Equity	$	(3,932	)	$	(853	)

RECLASSIFICATIONS

~~(6)~~Certain ~~RELATED~~reclassifications ~~PARTY~~have ~~TRANSACTIONS~~been made to the 2004 amounts to conform to the 2005 presentation.

~~On July 10, 2003, the Company entered into an amended and restated administration and liquidation agreement with Calypso Management LLC~~ (~~“Calypso Management”~~3), ~~pursuant~~EARNINGS toPER ~~which~~SHARE Calypso Management manages the liquidation of the Company and operates the Company’s assets pending their liquidation. Calypso Management is owned and operated by Stephen G. Kasnet, the Company’s Chief Executive Officer, and Donald H. Hunter, the Company’s Chief Financial Officer. Mr. Kasnet is Calypso Management’s President and Chief Executive Officer and Mr. Hunter is Calypso Management’s Chief Operating Officer and Chief Financial Officer. Calypso Management performs its services pursuant to operating plans and budgets approved by the Harbor Global Board of Directors in accordance with the amended and restated administration and liquidation agreement.

~~The~~Basic ~~amended~~ and ~~restated~~diluted ~~administration~~earnings ~~and~~per ~~liquidation~~share ~~agreement~~(“EPS”) ~~provides~~are ~~that~~computed ~~the~~by dividing ~~Company~~reported ~~pays~~earnings ~~the~~by ~~operating~~weighted ~~expenses~~average ofshares ~~Calypso~~outstanding. ~~Management~~There ~~incurred~~are incurrently ~~connection~~no ~~with~~potentially ~~the~~dilutive ~~provision of services to the Company~~securities.

In9 addition, as compensation for its provision of services to the Company, Calypso Management receives a portion of the total net proceeds distributed from the liquidation of the Company’s assets, generally according to the following schedule:

•Table with respect to the first $36 million in net proceeds to be distributed, Calypso Management shall receive a payment equal to 10% of such net proceeds;Contents

•(4) ~~with~~CHANGES ~~respect~~IN toSTOCKHOLDERS’ ~~the~~EQUITY ~~next $72 million in net proceeds to be distributed, Calypso Management shall receive a payment equal to 7.5% of such net proceeds; and~~

•For ~~with~~the ~~respect~~three tomonths ~~any~~ended ~~additional~~March ~~net~~31, ~~proceeds~~2005 toand ~~be distributed~~2004, ~~Calypso~~the ~~Management~~Company ~~shall~~reported ~~receive~~changes ain ~~payment~~stockholders’ ~~equal~~equity toas ~~10% of such net proceeds.~~follows:

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 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 fee schedule. Instead, Calypso Management will receive only 5% of the Ashanti proceeds that are distributed to shareholders.


	THREE MONTHS ENDED MARCH 31,
	2005			2004
	(In Thousands)
Net Loss	$	(500	)	$	(609	)
Net Unrealized Gains on Marketable Securities (Net of deferred taxes of $94,000 and $914,000 and minority interest of $117,000 and $1,287,000) for the three months ended March 31, 2005 and 2004, respectively)		189			1,615

Total Comprehensive (Loss) Income	$	(311	)	$	1,006
Additional Paid In Capital		—			76

Change in Stockholder’s Equity	$	(311	)	$	1,082

In(5) ~~addition,~~RELATED ifPARTY ~~an individual, entity or group acquires at least 80% of the Company’s outstanding common shares or~~TRANSACTIONS 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

On July 10, 2003, the Company entered into an amended and restated administration and liquidation agreement with Calypso Management LLC (“Calypso Management”), pursuant to which Calypso Management manages the liquidation of the Company and operates the Company’s assets pending their liquidation. Calypso Management is owned and operated by Stephen G. Kasnet, the Company’s Chief Executive Officer, and Donald H. Hunter, the Company’s Chief Financial Officer. Mr. Kasnet is Calypso Management’s President and Chief Executive Officer and Mr. Hunter is Calypso Management’s Chief Operating Officer and Chief Financial Officer. Calypso Management performs its services pursuant to operating plans and budgets approved by the Harbor Global Board of Directors in accordance with the amended and restated administration and liquidation agreement.

~~resulting~~The ~~entity~~amended (aand ~~“Deemed~~restated ~~Sale”),~~administration ~~Calypso~~and ~~Management~~liquidation isagreement ~~entitled~~provides tothat ~~receive a portion of~~ the ~~consideration, in~~Company ~~accordance~~pays ~~with~~ the ~~compensation~~operating ~~schedule~~expenses ~~described above, as would be received by all shareholders if all~~ of ~~the~~Calypso ~~outstanding~~Management ~~common~~incurred ~~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~~connection ~~transaction. Also, in the event of a change in control (as defined in the agreement) coupled~~ with ~~a material change in~~ the ~~engagement~~provision ~~status~~ of ~~Calypso~~services ~~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~~Company.

~~With~~In ~~respect to ongoing asset sales~~addition, ~~Harbor~~as ~~Global~~compensation ~~accrues~~for ~~management~~its ~~fees~~provision ~~at the earlier~~ of ~~(1)~~services to the ~~formal~~Company, ~~declaration~~Calypso byManagement ~~the~~receives ~~Board~~a ofportion ~~Directors~~ of ~~a distribution and (2)~~ the ~~time~~total ~~when~~net aproceeds ~~distributable~~distributed ~~amount~~from ~~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’s orassets, agenerally ~~change~~according into ~~control as defined in~~ the ~~amended~~following ~~and~~schedule: ~~restated administration and liquidation agreement.~~

~~For~~• ~~the~~with ~~three~~respect ~~months~~to ~~ended September 30, 2004 and 2003,~~ the ~~Company~~ ~~incurred~~first ~~management fee expenses of approximately~~ $~~602,000~~36 ~~and~~million ~~$516,000,~~in ~~respectively~~net ~~related~~proceeds to ~~the~~be ~~reimbursement~~distributed, ~~of expenses incurred by~~ Calypso Management. ~~For~~shall ~~the~~receive ~~nine~~a ~~months~~payment ~~ended~~equal ~~September 30, 2004 and 2003, the Company incurred management fee expenses of approximately $1,978,000 and $1,972,000, respectively related~~ to ~~the~~10% ~~reimbursement~~ of ~~expenses~~such ~~incurred~~net ~~by Calypso Management. Of this management fee, approximately $535,000 and $548,000 was outstanding at September 30, 2004 and 2003, respectively.~~ proceeds;

~~For~~• ~~the~~with ~~nine~~respect ~~months~~to ~~ended September 30, 2004,~~ the ~~Company~~next ~~had~~$72 ~~also~~million ~~accrued~~in ~~management~~net ~~fee~~proceeds ~~expense and a corresponding payable~~ to ~~Calypso~~be ~~Management of $334~~distributed,~~000.~~ ~~This represents the management fee expense that will be paid to~~ Calypso Management ~~pursuant~~shall toreceive ~~the~~a ~~amended~~payment ~~and restated~~equal ~~administration and liquidation agreement in connection with the November 15, 2004 distribution~~ to ~~shareholders~~7.5% ~~Pursuant to the administration and liquidation agreement, for the nine months ended September 30, 2003, the Company also incurred management fee expenses~~ of ~~approximately~~such ~~$583,000~~net inproceeds; ~~connection with the distribution to shareholders on June 27, 2003.~~ and

~~Calypso~~• ~~Management~~with ~~pays~~respect ~~the~~to ~~rent~~any onadditional ~~behalf~~net ofproceeds ~~the~~to ~~Company~~be ~~for its offices at One Faneuil Hall Marketplace~~distributed, ~~Boston,~~Calypso ~~Massachusetts~~Management ~~and~~shall isreceive ~~reimbursed~~a bypayment ~~the Company~~equal ~~pursuant~~ to ~~the~~10% ~~administration~~of ~~and~~such ~~liquidation~~net ~~agreement~~proceeds.

~~PREA~~Net ~~L.L.C.,~~proceeds ~~the~~do ~~subsidiary~~not ~~through~~include ~~which~~any ~~the~~unexpended ~~Company’s~~portion ~~real~~of ~~estate~~the ~~management~~approximate $19,100,000 ~~operations~~contributed ~~are~~by ~~conducted~~Pioneer ~~(“PREA”),~~to ~~leases~~Harbor Global at the ~~Meridian~~time ~~Commercial~~of ~~Tower~~the ~~from~~Spin-off. ~~PIOGLOBAL~~However, ~~Real~~because ~~Estate~~Harbor ~~Investment~~Global ~~Fund~~entered ~~under~~into a ~~master~~transaction ~~lease~~in ~~agreement and~~which init ~~turn,~~was ~~subleases~~released ~~the~~from ~~premises~~its indirect obligation to ~~tenants~~fulfill its existing capital commitment of approximately $5.4 ~~PREA~~million ~~pays~~to ~~PIOGLOBAL~~the Polish Real Estate ~~Investment~~ Fund, an$5.4 million of the amount ~~equal~~contributed toby ~~gross~~Pioneer ~~revenues~~is ~~less~~included ~~building~~in ~~operating~~the ~~expenses~~calculation of net proceeds. In addition, the ~~PREA~~proceeds ~~property~~received ~~management~~by ~~fee~~Goldfields ~~and~~II ~~any~~in ~~value~~connection ~~added~~with ~~taxes~~the orsale ~~similar~~of ~~taxes.~~its Ghanaian Agold ~~new master~~mine ~~lease~~to ~~agreement~~Ashanti ~~between~~are ~~PIOGLOBAL~~not ~~Real~~subject ~~Estate~~to ~~Investment~~the ~~Fund~~preceding ~~and~~fee ~~PREA~~schedule. ~~was~~Instead, ~~signed~~Calypso onManagement ~~May~~will receive only 5,% ~~2004~~of ~~and~~the ~~expires~~Ashanti inproceeds ~~2043~~that are distributed to shareholders.

~~Under~~In aaddition, ~~management~~if ~~agreement~~an ~~between~~individual, ~~PIOGLOBAL~~entity ~~Asset~~or ~~Management~~group ~~and~~acquires ~~PIOGLOBAL~~at ~~Real~~least ~~Estate~~80% ~~Investment~~of ~~Fund,~~the ~~PIOGLOBAL~~Company’s ~~Asset~~outstanding ~~Management~~common ~~provides~~shares ~~portfolio~~or ~~management~~Harbor ~~services~~Global is a party to ~~PIOGLOBAL~~a ~~Real~~merger, ~~Estate~~reorganization ~~Investment~~or ~~Fund~~similar ~~for~~business ancombination ~~annual~~and ~~fee~~the ofshareholders 5%immediately ofprior ~~assets~~to ~~net~~such oftransaction ~~any~~cease ~~value~~to ~~added~~own ~~taxes~~at orleast ~~similar~~50% ~~taxes.~~of the outstanding common shares

1110

(7)Table INDEMNIFICATIONof CONTRACTS Contents

~~Under~~ and voting power entitled to vote generally in the ~~Distribution~~election ~~Agreement~~of directors of the resulting entity (a “Deemed Sale”), ~~Harbor~~Calypso ~~Global~~Management ~~agreed~~is entitled to ~~indemnify~~receive ~~Pioneer~~a ~~for~~portion ~~liabilities~~of the consideration, ~~other~~in ~~than~~accordance ~~tax~~with ~~liabilities~~the compensation schedule described above, ~~incurred~~as would be received by ~~Pioneer~~all ~~relating to~~shareholders if all of the ~~businesses~~outstanding orcommon ~~operations~~shares ofwere sold at the valuation of Harbor Global ~~assets.~~based ~~Additionally~~on the per share consideration received by each shareholder who sold, ~~under~~exchanged aor ~~tax~~otherwise ~~separation~~disposed ~~agreement~~of ~~between~~shares ~~Harbor~~in ~~Global~~the ~~and~~transaction. ~~Pioneer~~Also, ~~generally,~~in ~~Harbor~~the ~~Global~~event ~~agreed~~of toa ~~indemnify~~change ~~Pioneer~~in ~~for~~control ~~tax~~(as ~~liabilities~~defined ~~relating~~in tothe agreement) coupled with a material change in the ~~Harbor~~engagement ~~Global~~status ~~businesses.~~of ~~Currently~~Calypso Management or the employment status of its principal officers, ~~there~~Calypso ~~are~~Management nowill ~~suits~~be ~~pending~~paid ~~under~~a ~~the~~cash ~~indemnification~~amount orequal ~~other~~to ~~provisions~~a portion of the ~~Distribution~~value ~~Agreement~~of orthe ~~tax~~underlying ~~separation~~assets, ~~agreement~~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 (81) ~~SUBSEQUENT~~the ~~EVENTS~~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 as defined in the amended and restated administration and liquidation agreement.

OnThe ~~October 18, 2004, pursuant to the~~ Company’s ~~memorandum~~incurred ofmanagement ~~association,~~fee expenses ~~the Harbor Global Board~~ of ~~Directors~~approximately ~~unanimously~~$795,000, ~~authorized~~and ~~the~~$745,000 ~~Company to continue operating its assets~~ for anthe ~~additional~~three ~~one~~months ~~year~~ended ~~period~~March ~~or through October 24~~31, ~~2006~~2005, ~~unless~~ and ~~until~~2004, ~~the~~respectively, ~~Company~~related ~~has distributed all of its assets~~ to ~~its shareholders to~~ the ~~extent~~reimbursement ~~permitted~~of ~~by the Companies Act~~expenses. IfOf ~~Harbor~~this ~~Global~~management ~~has~~fee, ~~not liquidated~~approximately ~~all~~$186,000 ofand ~~its assets before October 24~~$178,000 ~~2006,~~were ~~the~~outstanding ~~Board~~at ofMarch ~~Directors~~31, 2005 inand ~~its discretion~~2004, ~~may authorize Harbor Global to continue to operate its assets for up to two additional one-year periods~~respectively.

OnDuring ~~October 18, 2004,~~ the ~~Company’s~~first ~~shareholders~~quarter ~~approved~~of 2004 the ~~Amended~~Company ~~and Restated~~also ~~Non-Employee~~accrued ~~Director~~management ~~Share~~fee ~~Plan,~~expense ~~which amends~~ and ~~restates~~a ~~the~~corresponding ~~Non-Employee~~payable ~~Director Share Plan~~ to ~~both~~Calypso ~~increase~~Management ~~the number~~ of ~~Common~~approximately ~~Shares authorized for issuance under the plan from 25~~$235,000 ~~Common~~associated ~~Shares to an aggregate of 48,000 Common Shares and extends the term of the plan to be coterminous~~ with ~~any~~proceeds ~~extension~~which ofwere ~~the~~ultimately ~~time~~included ~~period~~in ~~permitted for~~ the ~~operation~~distribution ~~and~~paid ~~liquidation of the Company’s assets, as may be determined by the Board of Directors from time~~ to ~~time~~shareholders ~~in accordance with the Company’s Memorandum of Association. The Amended and Restated Non-Employee Director Share Plan was approved by the Company’s Board of Directors~~ on ~~June~~November 415, 2004. ~~Prior to the approval of the Amended and Restated Non-Employee~~ Director Share Plan, the plan was set to terminate on October 24, 2005 pursuant to its terms. Except as described above, the Amended and Restated Non-Employee Director Share Plan does not amend, alter or change any other terms of the plan.

~~(9)~~Calypso ~~RESTRICTED~~Management ~~UNIT~~pays ~~AWARDS~~the rent on behalf of the Company for its offices at One Faneuil Hall Marketplace, Boston, Massachusetts and is reimbursed by the Company pursuant to the administration and liquidation agreement.

~~Pursuant~~PREA ~~to Unit Agreements dated May 19, 2004, Pioglobal First Russia granted restricted units in Pioglobal First Russia to three officers of PIOGLOBAL Asset Management~~L. ~~Under the unit agreements~~L.C., ~~Pioglobal First Russia awarded, at no cost to~~ the ~~officers,~~subsidiary anthrough ~~aggregate~~which ~~number of units equivalent to approximately 4% of~~ the ~~issued~~Company’s ~~and~~real ~~outstanding~~estate ~~units~~management ofoperations ~~Pioglobal~~are ~~First~~conducted ~~Russia~~(“PREA”), onleases ~~a fully diluted basis. Upon~~ the ~~full~~Meridian Commercial ~~vesting~~Tower offrom ~~these~~PIOGLOBAL ~~awards,~~Real ~~the~~Estate ~~Company~~Investment ~~will~~Fund ~~continue~~under ~~to own approximately 91% of the outstanding units in Pioglobal First Russia. Such units are required to be issued over~~ a ~~period~~master oflease ~~three~~agreement ~~years beginning on May 19, 2004~~ and ~~ending on December 31, 2006, according to the schedules set forth~~ in ~~the respective unit agreements~~turn, ifsubleases the ~~respective~~premises ~~officer continues~~ to betenants. ~~employed~~PREA bypays PIOGLOBAL ~~Asset~~ ~~Management~~Real asEstate aInvestment ~~full-time~~Fund ~~employee.~~an Atamount ~~each~~equal ~~award date, each officer is considered fully vested with respect~~ to ~~the~~gross ~~award.~~revenues ~~The~~less ~~fair~~building ~~value of the units issued during the quarterly period ended June 30, 2004 was calculated using the valuation~~operating ~~services of an independent third party as of March 31~~expenses, ~~2004. During~~ the ~~second~~PREA ~~quarter~~property ofmanagement ~~2004,~~fee ~~Pioglobal~~and ~~First~~any ~~Russia~~value ~~recorded~~added ~~compensation~~taxes ~~expense~~or ofsimilar ~~approximately~~taxes. ~~$93,000~~The inmaster ~~connection~~lease ~~with~~agreement ~~the~~between ~~granting~~PIOGLOBAL ofReal ~~the~~Estate ~~restricted~~Investment ~~unit~~Fund ~~awards. This amount is included in salary~~ and ~~benefit~~PREA ~~expense~~expires in ~~the Consolidated Statement of Operations~~2043.

~~(10)~~Under ~~FINANCIAL~~a ~~INFORMATION~~management BYagreement ~~BUSINESS~~between ~~SEGMENT~~PIOGLOBAL Asset Management and PIOGLOBAL Real Estate Investment Fund, PIOGLOBAL Asset Management provides portfolio management services to PIOGLOBAL Real Estate Investment Fund for an annual fee of 5% of all assets owned by PIOGLOBAL Real Estate Investment Fund net of any value added taxes or similar taxes.

In(6) ~~accordance~~INDEMNIFICATION ~~with~~CONTRACTS 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.

12Under 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 agreed to indemnify Pioneer for tax liabilities relating to the Harbor Global businesses. Currently, there are no suits pending under the indemnification or other provisions of the Distribution Agreement or tax separation agreement.

~~The~~(7) ~~Company~~FINANCIAL ~~derives~~INFORMATION ~~its~~BY ~~revenues~~BUSINESS ~~from~~SEGMENT ~~the following products and services by segment:~~

•In ~~Russian~~accordance ~~Real~~with ~~Estate~~SFAS ~~Management~~No. ~~and~~131, ~~Investment~~“Disclosures ~~Management~~about ~~Operations:~~Segments ~~investment~~of ~~advisory~~an Enterprise and Related Information”, the Company presents its segment information for continuing operations using the management ~~services~~approach. The management approach is

•11 ~~Real Estate Management Operations: real estate management services, including property management and advisory services~~

•Table Other: administration and liquidation of operationsContents

~~SEGMENT~~ based ~~DISCLOSURES~~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.

	Russian Real Estate Management And Investment Management Operations			Real Estate ManagementOperations			Other			Total
For the three months ended September 30, 2004
Net Revenues and Sales	$	2,407		$	246		$	—		$	2,653
(Loss) Income before Provision for Income Taxes, Minority Interest, and Equity Gain on Investment		(914	)		(185	)		86			(1,013	)
Provision for Income Taxes		(176	)		(26	)		—			(202	)
Minority Interest Income		89			—			—			89
Equity Loss on Venture Capital Investment		—			—			(107	)		(107	)
Net Loss	$	(1,001	)	$	(211	)	$	(21	)	$	(1,233	)
Depreciation and Amortization	$	257		$	6		$	—		$	263

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

13• Russian Real Estate Management and Investment Management Operations: investment advisory and management services

	Russian Real Estate Management And Investment Management Operations			Real Estate Management Operations			Other			Total
For the three months ended September 30, 2003
Net Revenues and Sales	$	2,385		$	239		$	—		$	2,624
Income (Loss) before Provision for Income Taxes, Minority Interest, and Equity Loss on Investment		169			(194	)		85			60
Provision for Income Taxes		(293	)		—			—			(293	)
Minority Interest Expense		(389	)		—			—			(389	)
Equity Gain on Venture Capital Investment		—			—			62			62
Net (Loss) Income	$	(513	)	$	(194	)	$	147		$	560
Depreciation and Amortization	$	231		$	6		$	—		$	237
	Russian Real EstateManagementAndInvestmentManagementOperations			Real EstateManagementOperations			Other			Total
As of and for the nine months ended September 30, 2004
Net Revenues and Sales	$	8,048		$	737		$	—		$	8,785
(Loss) Income before Provision for Income Taxes, Minority Interest, and Equity Gain on Investment		(1,716	)		(688	)		108			(2,296	)
Provision for Income Taxes		(1,692	)		(35	)		(10	)		(1,737	)
Minority Interest Expense		(682	)		—			—			(682	)
Equity Gain on Venture Capital Investment		—			—			91			91
Net (Loss) Income	$	(4,090	)	$	(723	)	$	189		$	(4,624	)
Depreciation and Amortization	$	743		$	18		$	—		$	761
Total Assets	$	92,669		$	1,549		$	4,055		$	98,273
	Russian Real Estate Management And Investment Management Operations			Real Estate Management Operations			Other			Total
As of and for the nine months ended September 30, 2003
Net Revenues and Sales	$	6,561		$	721		$	244		$	7,526
Income (Loss) before Provision for Income Taxes, Minority Interest, and Equity Loss on Investment		11,533			(629	)		2,176			13,080
Provision for Income Taxes		(3,681	)		(62	)		—			(3,743	)
Minority Interest Expense		(5,231	)		—			—			(5,231	)
Equity Loss on Venture Capital Investment		—			—			(144	)		(144	)
Net Income (Loss)	$	2,621		$	(691	)	$	2,032		$	3,962
Depreciation and Amortization	$	637		$	20		$	—		$	657
Total Assets	$	91,592		$	821		$	8,687		$	101,100

•

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

14• Other

~~ITEM~~SEGMENT 2.DISCLOSURES ~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

CRITICAL ACCOUNTING POLICIES AND ESTIMATES


	Russian Real Estate Management And Investment Management Operations			Real Estate Management Operations			Other			Total
As of and for the three months ended March 31, 2005
Net Revenues and Sales	$	2,620		$	254		$	—		$	2,874

Income (Loss) before Provision for Income Taxes, Minority Interest, and Equity Loss on Investment		1,347			(284	)		87			1,150

Provision for Income Taxes		(817	)		(1	)		(61	)		(879	)

Minority Interest Expense		(757	)		—			—			(757	)

Equity Loss on Venture Capital Investment		—			—			(14	)		(14	)

Net (Loss) Income	$	(227	)	$	(285	)	$	12		$	(500	)

Depreciation and Amortization	$	257		$	6		$	—		$	263

Total Assets	$	84,353		$	1,434		$	8,175		$	93,962

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


	Russian Real Estate Management And Investment Management Operations			Real Estate Management Operations			Other			Total
As of and for the three months ended March 31, 2004
Net Revenues and Sales	$	3,144		$	244		$	—		$	3,388

Income (Loss) before Provision for Income Taxes, Minority Interest, and Equity Loss on Investment		898			(256	)		(180	)		462

Provision for Income Taxes		(230	)		(9	)		(10	)		(249	)

Minority Interest Expense		(812	)		—			—			(812	)

Equity Loss on Venture Capital Investment		—			—			(10	)		(10	)

Net Loss	$	(144	)	$	(265	)	$	(200	)	$	(609	)

Depreciation and Amortization	$	224		$	7		$	—		$	231

Total Assets	$	95,803		$	1,512		$	6,158		$	103,473

~~The~~12 preparation of the accompanying consolidated financial statements requires management to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, income and expenses. The Company evaluates its estimates on an on-going basis. 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, income and expenses that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

TheTable Company considers its critical accounting policies to include those related to (i) current marketable securities, (ii) long-term marketable securities, (iii) the valuation of its Polish venture capital investment, (iv) accrued management fees and (v) deferred taxes. Contents

~~Current marketable securities consist primarily of United States Treasury securities and Russian Government and Municipal securities. United States~~ ~~Treasury~~ITEM ~~securities are classified as held-to-maturity and recorded at amortized cost~~2. ~~Russian~~MANAGEMENT’S ~~government~~DISCUSSION ~~and~~AND ~~municipal~~ANALYSIS ~~securities~~OF ~~are~~FINANCIAL ~~classified~~CONDITION asAND ~~trading~~RESULTS ~~securities~~OF ~~and~~OPERATIONS are marked-to-market, with unrealized gains or losses reported in other income (expense) in the Consolidated Statements of Operations pursuant to SFAS No. 115. Russian government securities are held primarily in the PIOGLOBAL Real Estate Investment Fund. Security transactions are recorded on the settlement date. Investments are valued at the weighted average daily price if they are traded on the valuation date; otherwise, the bid price is used.

~~Long-term~~CRITICAL ~~marketable~~ACCOUNTING ~~securities~~POLICIES ~~consist~~AND ~~primarily~~ESTIMATES of Russian equity and fixed income securities, including Russian corporate bonds, held in the portfolio of the PIOGLOBAL Real Estate Investment Fund. In addition, certain subsidiaries of the Company maintain investments in unit funds and trust management accounts managed by PIOGLOBAL Asset Management. Russian corporate bonds and investments in unit fund and trust management accounts are characterized as available-for-sale and recorded at fair value based on quoted market prices pursuant to SFAS No. 115. The equity securities are also classified as available-for-sale and recorded at fair value pursuant to SFAS No. 115. 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 and Moscow Interbank Currency Exchange. Investments that do not have a readily determinable fair value are recorded in long term investments at cost with adjustments for other than temporary impairment. The cost of securities sold is based on the weighted-average method. Dividend income received on investments is recognized on a cash basis. Unrealized gains and unrealized losses are recorded net of deferred taxes and minority interest in stockholders equity as other comprehensive income in the Consolidated Balance Sheets. Realized gains or losses and any other than temporary declines in value are reported in other income (expense) in the Consolidated Statements of Operations.

The Company’s ~~reports~~discussion ~~its~~and ~~approximately~~analysis 8%of ~~aggregate~~its ~~limited~~financial ~~partnership~~condition ~~interest~~and inresults ~~the Prospect Poland Fund on the equity basis~~ of ~~accounting.~~operations ~~No market quotes~~ are ~~available~~based ~~for~~upon the ~~Polish venture capital investments. These investments are valued at fair value, as determined by Prospect Poland Fund~~Company’s ~~management.~~Consolidated ~~Unrealized~~Financial Statements, ~~and~~which ~~realized~~have ~~gains~~been orprepared ~~losses are recorded~~ in ~~the~~accordance ~~Consolidated~~with ~~Statements of~~accounting ~~Operations.~~principles ~~The~~generally ~~Company~~accepted ~~analyzes the assumptions supporting changes~~ in the ~~fair~~United ~~value~~States of ~~these investments for appropriateness on a quarterly basis~~America.

15The preparation of the Consolidated Financial Statements requires management to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, income and expenses. The Company evaluates its estimates on an on-going basis. 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, income and expenses that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

OnThe ~~July~~Company ~~10,~~considers 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 the Company, Calypso~~ ~~Management~~critical ~~receives~~accounting apolicies ~~portion of the net proceeds distributed~~ to ~~shareholders~~include inthose ~~connection~~related ~~with the liquidation of the Company’s assets. In addition, in the event 80% of the Company’s common shares are sold or if the Company’s shareholders immediately prior~~ to a business combination or transaction cease to own at least 50% of the outstanding common shares and voting power entitled to vote generally in the election of directors following such combination or transaction (~~referred to as a “deemed sale”~~i), ~~Calypso~~current ~~Management~~marketable is entitled to receive a portion of the consideration 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 soldsecurities, ~~exchanged~~(ii) orlong-term ~~otherwise~~marketable ~~disposed of shares in the transaction. Also~~securities, ~~in the event of a change in control~~ (~~as defined in the amended and restated administration and liquidation agreement~~iii) ~~coupled with a material change in~~ the ~~engagement~~valuation ~~status~~ of ~~Calypso Management or the employment status of~~ its ~~principal~~Polish ~~officers,~~venture ~~Calypso~~capital Management will be paid a cash amount equal to a portion of the value of the underlying assets with such value determined pursuant to a predetermined valuation schedule. Compensation to Calypso Management represents a percentage of such distributionsinvestment, ~~deemed~~(iv) ~~distributions~~accrued ormanagement ~~distributions~~fees ~~related to a change in control, which varies depending upon the source of the distribution~~ and ~~the~~(v) ~~cumulative~~deferred ~~amount of distributions since the Spin-off~~taxes.

~~With~~Current ~~respect~~marketable tosecurities ~~ongoing~~consist ~~asset~~primarily ~~sales,~~of ~~Harbor~~United States ~~Global~~Treasury ~~accrues~~securities ~~management~~and ~~fees~~Russian atGovernment ~~the~~and ~~earlier~~Municipal ofsecurities. ~~(1)~~United ~~the~~States ~~formal~~Treasury ~~declaration~~securities byare ~~the~~classified ~~Board~~as ofheld-to-maturity ~~Directors~~and ofrecorded aat ~~distribution~~amortized orcost. ~~(2)~~Russian ~~the~~government ~~time~~and ~~when~~municipal asecurities ~~distributable~~are ~~amount~~classified isas trading ~~estimable~~securities ~~following~~and ~~the~~are ~~sale~~marked-to-market, with unrealized gains or ~~liquidation~~losses reported in other income (expense) in the Consolidated Statements of anOperations ~~asset~~pursuant to SFAS No. ~~Harbor~~115. ~~Global~~Russian ~~will~~government ~~also~~securities ~~accrue~~are ~~management~~held ~~fees~~primarily ~~when~~in athe ~~distribution~~PIOGLOBAL toReal Estate ~~Calypso~~Investment ~~Management~~Fund. isSecurity ~~triggered~~transactions ~~following~~are arecorded ~~deemed~~on ~~sale~~the ofsettlement date. Investments are valued at the ~~Company~~weighted oraverage adaily ~~change~~price inif ~~control~~they asare ~~defined~~traded inon the ~~amended and~~valuation ~~restated~~date; ~~administration~~otherwise, ~~and~~the ~~liquidation~~bid ~~agreement~~price is used.

~~The Company~~Long-term ~~recognizes~~marketable ~~deferred~~securities ~~tax~~consist ~~assets~~primarily of Russian equity and ~~liabilities~~fixed income ~~based~~securities, onincluding Russian corporate bonds, held in the ~~difference~~portfolio ~~between~~of the ~~financial~~PIOGLOBAL ~~statement~~Real ~~carrying~~Estate ~~amounts~~Investment ~~and~~Fund. ~~the~~In ~~tax~~addition, ~~basis~~certain subsidiaries of ~~assets~~the Company maintain investments in unit funds and ~~liabilities~~trust management accounts managed by PIOGLOBAL Asset Management. ~~The~~Russian ~~Company~~corporate ~~regularly~~bonds ~~reviews~~and ~~its~~investments ~~deferred~~in ~~tax~~unit ~~assets~~fund and trust management accounts are characterized as available-for-sale ~~recoverability~~and recorded at fair value based on quoted market prices pursuant to SFAS No. 115. The equity securities are also classified as available-for-sale and recorded at fair value pursuant to SFAS No. 115. In determining fair value, individual equity securities must first satisfy certain trading volume and bid-ask spread criteria established by ~~establishes~~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 and MICEX. Investments that do not have a ~~valuation~~readily ~~allowance~~determinable fair value are recorded in long term investments at cost with adjustments for other than temporary impairment. The cost of securities sold is based on ~~historical~~the ~~taxable~~weighted-average method. Dividend income, ~~projected~~received ~~future~~on ~~taxable~~investments ~~income~~is recognized on a cash basis. Unrealized gains and ~~the~~unrealized ~~expected~~losses ~~timing~~are recorded net of deferred taxes and minority interest in stockholders equity as other comprehensive income in the ~~reversals~~Consolidated ofBalance Sheets. ~~existing~~Realized gains or losses and any other than temporary ~~differences~~declines in value are reported in other income (expense) in the Consolidated Statements of Operations.

~~OVERVIEW~~The Company reports its approximately 8% aggregate limited partnership interest in the Prospect Poland Fund on the equity basis of accounting. No market quote is available for the remaining Polish venture capital investment. This investment is valued at fair value, as determined by Prospect Poland Fund’s management. Unrealized and realized gains or losses are recorded in the

~~The~~13 accompanying 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 nine months ended September 30, 2004 and 2003, Liquidity and Capital Resources, and Future Operating Results.

RESULTSTable OFof OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003 Contents

Consolidated Statements of Operations. The Company analyzes the assumptions supporting changes in the fair value of the investment for appropriateness on a quarterly basis.

On July 10, 2003, Harbor Global ~~reported~~entered ainto an ~~net~~amended ~~loss~~and restated administration and liquidation agreement with Calypso Management pursuant to which Calypso Management manages the liquidation of ~~$1.2~~Harbor ~~million~~Global ~~($0~~and operates Harbor Global’s assets pending their liquidation.22 ~~per~~As compensation ~~share)~~for onits ~~revenues~~provision of $2services to the Company, Calypso Management receives a portion of the net proceeds distributed to shareholders in connection with the liquidation of the Company’s assets.7 ~~million~~In addition, in the ~~third~~event ~~quarter~~80% of ~~2004~~the Company’s ~~compared~~common ~~with~~shares are sold or if the Company’s shareholders immediately prior to a ~~net~~business ~~loss~~combination or transaction cease to own at least 50% of the outstanding common shares and voting power entitled to vote generally in the ~~$0.5~~election ~~million~~of directors following such combination or transaction (~~$0.10~~referred ~~per~~to ~~share~~as a “deemed sale”), onCalypso ~~revenues~~Management is entitled to receive a portion of ~~$2.6~~the ~~million~~consideration ~~for~~as would be received by all shareholders if all of the ~~third~~outstanding common ~~quarter~~shares were sold at the valuation of ~~2003.~~Harbor ~~The~~Global $0based on the per share consideration received by each shareholder who sold, exchanged or otherwise disposed of shares in the transaction.7 ~~million~~Also, ~~decrease~~in the event of a change in ~~income~~control ~~was~~(as ~~attributable~~defined in ~~principally~~the amended and restated administration and liquidation 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 $0a portion of the value of the underlying assets with such value determined pursuant to a predetermined valuation schedule.6 ~~million~~Compensation to Calypso Management represents a percentage of ~~lower~~such ~~realized~~distributions, ~~portfolio~~deemed ~~gains~~distributions ~~from~~or distributions related to a change in control, which varies depending upon the ~~Russian~~source ~~real~~of ~~estate~~the ~~management~~distribution and ~~investment~~ ~~management~~the ~~operations~~cumulative amount of distributions since the Spin-off.

~~For~~With ~~the~~respect ~~nine~~to ~~months~~ongoing ~~ended September~~asset 30sales, ~~2004,~~Harbor ~~the~~Global ~~Company~~accrues ~~reported~~management afees ~~net~~at ~~loss~~the earlier of ~~$4.6 million~~ (~~$0.82~~1) ~~per~~the ~~share)~~formal ~~compared~~declaration ~~with~~by the ~~net~~Board ~~income~~of Directors of ~~$3.9~~a ~~million~~distribution or (~~$0.70~~2) ~~per~~the ~~share)~~time ~~for~~when ~~the~~a ~~nine~~distributable ~~months~~amount ~~ended~~is ~~September~~estimable ~~30,~~following ~~2003.~~the ~~The~~sale $8or liquidation of an asset.5 ~~million~~Harbor ~~decrease~~Global ~~was~~will ~~attributable~~also ~~primarily~~accrue ~~to $4.8~~management ~~million~~fees ofwhen ~~lower~~a ~~realized~~distribution ~~portfolio~~to ~~gains~~Calypso ~~from~~Management ~~the~~is ~~Russian~~triggered following ~~real~~a ~~estate~~deemed ~~management~~sale ~~and~~of ~~investment~~the ~~management~~Company ~~operations,~~or a ~~non-recurring~~change ~~2003~~in ~~gain~~control ofas ~~approximately~~defined ~~$1.3~~in ~~million~~the ~~from~~amended ~~the~~and ~~early~~restated ~~settlement~~administration ofand ~~the~~liquidation agreement.

16The Company recognizes deferred tax assets and liabilities based on the difference between the financial statement carrying amounts and the tax basis 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.

~~Company’s~~OVERVIEW $5 million note payable to Pioneer, a $1.1 million federal income tax liability associated with the conversion of Pioglobal First Russia, Inc. into a Delaware limited liability company, a $0.9 million non-recurring 2003 gain on the sale to HSBC Bank USA (“HSBC”) of the Company’s right to receive supplemental payments from Ashanti and a $0.8 million increase in withholding taxes associated with an increase in the PIOGLOBAL Real Estate Investment Fund dividend. The lower gains and expense increases were offset partially by a $1.0 million increase in management fee income.

~~Set~~The ~~forth~~Consolidated onFinancial ~~the~~Statements ~~following~~of ~~table~~Harbor ~~are~~Global’s ~~the~~principal operations ~~details~~include its Russian real estate management and investment management operations, real estate management operations and other operations. Management’s Discussion and Analysis of ~~revenues~~ Financial Condition and ~~net~~Results ~~(loss)~~of ~~income~~Operations byare presented ~~business~~in ~~segment~~three sections: Results of Operations for the three ~~and nine~~ months ended ~~September~~March 3031, 2005 and 2004, Liquidity and ~~2003:~~Capital Resources, Off-Balance Sheet Arrangements, and Future Operating Results.

~~REVENUES~~RESULTS ~~AND~~OF ~~NET~~OPERATIONS ~~INCOME~~FOR ORTHE ~~LOSS~~THREE MONTHS ENDED MARCH 31, 2005 AND 2004

~~(DOLLARS~~Consolidated INOperations. ~~MILLIONS)~~

	REVENUES				NET INCOME(LOSS)						REVENUES				NET INCOME(LOSS)
	THREE MONTHSENDED SEPTEMBER 30,				THREE MONTHSENDED SEPTEMBER 30,						NINE MONTHSENDED SEPTEMBER 30,				NINE MONTHSENDED SEPTEMBER 30,
	2004		2003		2004			2003			2004		2003		2004			2003
BUSINESS SEGMENT
Russian Real Estate Management and Investment Management Operations	$	2.4	$	2.4	$	(1.0	)	$	(0.5	)	$	8.1	$	6.6	$	(4.1	)	$	2.6
Real Estate Management Operations		0.3		0.2		(0.2	)		(0.2	)		0.7		0.7		(0.7	)		(0.7	)
Other		—		—		—			0.2			—		0.2		0.2			2.0
Totals	$	2.7	$	2.6	$	(1.2	)	$	(0.5	)	$	8.8	$	7.5	$	(4.6	)	$	3.9

Harbor Global reported a net loss of $0.5 million ($0.09 per share) on revenues of $2.9 million in the first quarter of 2005 compared with a net loss of $0.6 million ($0.11 per share) on revenues of $3.4 million for the first quarter of 2004. The $0.1 million decrease in losses was attributable principally to a $0.7 million increase in realized portfolio gains from the Russian real estate management and investment management operations and a $0.2 million reduction in management fees payable to Calypso Management; offset partially by, a $0.5 million reduction in foreign exchange gains and lower dividend income of $0.3 million.

~~Russian~~14 ~~Real Estate Management and Investment Management Operations.~~

TheTable Russian real estate management and investment management operations reported a net loss of $1.0 million for the third quarter 2004, compared with a net loss of $0.5 million reported in the third quarter of 2003. The $0.5 million increase in losses was attributable principally to $0.6 million of lower realized portfolio gains and $0.2 million lower dividend income. These decreases were offset partially by a $0.3 million increase in management fee income. Contents

~~For~~Set ~~the~~forth ~~nine~~on ~~months~~the ~~ended~~following ~~September~~table ~~30,~~are ~~2004,~~ the ~~Russian~~details ~~real~~of ~~estate management~~revenues and ~~investment management business reported a~~ net (loss) ~~of $4.1 million, a $6.7 million~~ income ~~decrease~~by ~~compared~~business ~~with the corresponding period in 2003. The decrease in income was attributable to $4.8 million of lower realized portfolio~~segment ~~gains,~~for the ~~$1.1~~three ~~million~~months ~~federal~~ended ~~income~~March ~~tax liability from the Pioglobal First Russia conversion~~31, a2005 $0.8 million increase in withholding taxes paid by the Company due to an increase in the PIOGLOBAL Real Estate Investment Fund annual dividend, a $0.4 million increase in salary expense, $0.3 million of additional corporate overhead expense and a2004: $0.2 million increase in advertising expense. The lower gains and increase in expenses were offset partially by $1.0 million of additional management fee income attributable to an increase in assets under management.

PIOGLOBAL Asset Management provides management services to PIOGLOBAL Real Estate Investment Fund. PIOGLOBAL Asset Management also serves as an investment manager to three Russian open-end unit investment funds, two interval funds, and trustREVENUES ~~management~~AND ~~accounts~~NET ~~for~~LOSS ~~institutional and high net worth clients. Assets under management for these products at September 30, 2004 and 2003 are set forth on the following table:~~

	September 30,
	2004		2003
	(IN MILLIONS)
Open-end Unit Funds	$	59,735	$	22,345
Interval Funds		4,663		2,151
Trust Management		51,462		15,801
Assets under management	$	115,820	$	40,297

(DOLLARS IN MILLIONS)


	REVENUES				NET LOSS
	THREE MONTHS ENDED MARCH 31,				THREE MONTHS ENDED MARCH 31,
BUSINESS SEGMENT	2005		2004		2005			2004
Russian Real Estate Management and Investment Management Operations	$	2.6	$	3.2	$	(0.2	)	$	(0.1	)
Real Estate Management Operations		0.3		0.2		(0.3	)		(0.3	)
Other		0.0		0.0		0.0			(0.2	)

Totals	$	2.9	$	3.4	$	(0.5	)	$	(0.6	)

Russian Real Estate Management and Investment Management Operations.

The Russian real estate management and investment management operations reported ~~losses~~a net loss of $0.2 million infor the ~~third~~first quarter of ~~2004~~2005 compared ~~with~~to ~~losses~~a net loss of $0.21 million infor the ~~third~~first quarter of ~~2003~~2004. ~~For~~The ~~the~~additional ~~nine~~$0.1 ~~months~~million ~~ended~~loss ~~September~~was ~~30,~~attributable ~~2004~~principally to a $0.5 million reduction in currency translation gains and ~~September~~$0.3 ~~30,~~million ~~2003,~~in ~~the~~lower ~~real~~dividend ~~estate~~income ~~management~~offset, ~~operations~~in ~~reported~~part, ~~losses~~by ofa $0.7 million. ~~The~~increase ~~losses~~in ~~for~~realized ~~all~~portfolio ~~periods represent corporate overhead allocations~~gains.

~~Other~~PIOGLOBAL Asset Management provides management services to PIOGLOBAL Real Estate Investment Fund. PIOGLOBAL Asset Management also serves as an investment manager to three Russian open-end unit investment funds, an index interval fund and an institutional interval fund, whose assets under management at March 31, 2005 and 2004 are set forth on the following table:

Harbor Global’s other operations broke even for the three months ended September 30, 2004 compared to net income of $0.2 million for the corresponding period in 2003. The $0.2 million decrease in income is attributable to a $0.1 million write-down of the venture capital investment in 2004 compared to a $0.1 million gain recorded on the venture capital investment in 2003.


	March 31,
	2005		2004
	(IN MILLIONS)
Open-end Unit Funds	$	63.0	$	43.3
Interval Funds		4.7		6.0
Trust Management		58.1		38.5

Assets under management	$	125.8	$	87.8

~~For the~~Real ~~nine~~Estate ~~months~~Management ~~ended September 30, 2004, Harbor Global’s other operations reported income of $0~~Operations.~~2 million compared to $2.0 million for the nine months ended September 30, 2003. The $1.8 million decrease in income was attributable principally~~ to the $1.3 million non-recurring gain recorded in 2003 from the early settlement of the Company’s note payable to Pioneer and the $0.9 million non-recurring gain recorded in 2003 on the sale to HSBC of Goldfield’s II right to receive supplemental payments from Ashanti. These gains were offset partially by lower Calypso management fees of $0.3 million.

~~LIQUIDITY~~The ~~AND~~real ~~CAPITAL~~estate ~~RESOURCES~~management operations recorded a net loss of $0.3 million in both the first quarter of 2005 and the first quarter of 2004 due primarily to corporate overhead allocations in each comparative quarter.

~~Liquid assets held directly by Harbor Global consisting of cash and cash equivalents and marketable securities maintained for general corporate purposes were $14~~Other.8 million as of September 30, 2004. This represents a $7.2 million increase from the 2003 fiscal year end and is attributable principally to the $5.7 million dividend received from PIOGLOBAL Real Estate Investment Fund and receipt of the final installment payment of $4.7 million from Ashanti associated with the sale of Goldfield II’s gold mining operations in Ghana less the funding of operations and the settlement of year end accruals. Management believes that the cash available for general corporate purposes is sufficient to fund operations over the next two years.

~~The~~Harbor ~~assets~~Global’s ofother operations broke even for the ~~Company’s~~three ~~majority-owned~~months ~~Russian~~ended ~~subsidiary~~March 31, ~~PIOGLOBAL~~2005 ~~Real~~compared ~~Estate~~to ~~Investment~~a ~~Fund,~~net ~~consist~~loss of ~~cash~~$0.2 ~~and~~million ~~cash~~for ~~equivalents~~the three months ended March 31, ~~equity securities~~2004. ~~(both~~During ~~liquid~~the ~~and~~first ~~illiquid)~~quarter of 2004, ~~marketable~~the Company ~~securities~~accrued ~~and~~$0.2 ~~real~~million ~~estate~~of ~~holdings~~management fee expense in anticipation of a distribution to shareholders.

On15 May 20, 2004, the shareholders of PIOGLOBAL Real Estate Investment Fund approved a dividend of approximately $13.1 million. The dividend will be paid over a period of one year beginning on July 5, 2004 to shareholders of record on April 2, 2004. Harbor Global received its proportionate share of such dividend in the amount of approximately $5.7 million after withholding taxes during the third quarter of 2004.

OnTable September 15, 2004, the Board of Directors of the Company declared a distribution of approximately $4.25 million or $0.75 per share on the Company’s common shares. Pursuant to the amended and restated administration and liquidation agreement, Calypso Management will receive a payment equal to approximately 7.9% of such distribution or approximately $0.06 per share. The balance of approximately $0.69 per will be paid on November 15, 2004 to shareholders of record as of November 5, 2004. Contents

~~OFF-BALANCE~~LIQUIDITY ~~SHEET~~AND ~~ARRANGEMENTS~~CAPITAL RESOURCES

Liquid assets held directly by Harbor Global ~~does~~consisting ~~not~~of ~~have~~cash ~~any~~and ~~off-balance~~cash ~~sheet~~equivalents ~~arrangements~~and ~~that~~marketable ~~have~~securities ormaintained ~~are~~for ~~reasonably~~general ~~likely~~corporate purposes towere ~~have~~approximately a$7.5 ~~current~~million ~~or future~~as ~~effect~~of onMarch 31, 2005. This represents an approximately $1.9 million decrease from the ~~Company’s~~2004 ~~financial~~fiscal ~~condition,~~year ~~changes~~end inand ~~financial~~is ~~condition,~~attributable ~~revenues~~principally orto ~~expenses,~~the ~~results~~funding of operations, ~~liquidity,~~and ~~capital~~the ~~expenditures,~~settlement orof ~~capital~~year ~~resources~~end accruals. Management believes that ~~are~~the ~~material~~cash available for general corporate purposes is sufficient to ~~investors~~fund operations over the next two years.

18The assets of the Company’s majority-owned Russian subsidiary, PIOGLOBAL Investment Fund, consist primarily of cash and cash equivalents, equity securities (both liquid and illiquid), marketable securities, and real estate holdings.

~~FUTURE~~OFF-BALANCE ~~OPERATING~~SHEET ~~RESULTS~~ARRANGEMENTS

~~From~~Harbor ~~time~~Global todoes not ~~time,~~have ~~management~~any ~~may make forward~~off-~~looking~~balance ~~statements~~sheet inarrangements ~~this Quarterly Report on Form 10-Q, in other documents~~ that ~~the~~have ~~Company~~or ~~files~~are ~~with~~reasonably ~~the~~likely ~~Securities~~to ~~and~~have ~~Exchange~~a ~~Commission~~current ~~(including~~or ~~those~~future ~~documents~~effect ~~incorporated~~on ~~by reference into~~ the ~~Form~~Company’s ~~10-Q)~~financial condition, inchanges ~~press releases or~~ in ~~other~~financial ~~public~~condition, ~~discussions.~~revenues ~~The~~or ~~Private~~expenses, ~~Securities~~results ~~Litigation Reform Act~~ of ~~1995 provides a “safe harbor” for these statements. For this purpose~~operations, ~~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~~liquidity, capital ~~anticipated expenses~~expenditures, ~~liquidity~~or ~~and~~ capital resources ~~and~~that 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~~material 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 statement could turn out to ~~be wrong~~investors. ~~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.~~

~~THE~~DISCLOSURE ~~POTENTIAL VALUES TO BE REALIZED UPON THE SALE OR LIQUIDATION~~ OF ~~MOST~~CONTRACTUAL OFOBLIGATIONS ~~HARBOR GLOBAL’S ASSETS, IF ANY, ARE SPECULATIVE.~~

~~The~~On ~~potential~~March ~~values~~31, 2005, the Company entered into an amendment to beits ~~realized~~lease ~~upon~~for its principal executive offices, extending the ~~sale~~term from October 25, 2005 through October 15, 2006 at an annual rent of approximately $161,000. Accordingly, the known contractual obligations of Harbor Global’s ~~Russian~~between ~~real~~October ~~estate~~2005 ~~management~~ and ~~investment~~October ~~management~~2006 ~~operations,~~have ifincreased ~~any,~~by ~~are~~approximately ~~speculative~~$161,000.

AFUTURE ~~significant~~OPERATING ~~portion~~RESULTS of Harbor Global’s Russian real estate management and investment management operations consists of its approximately 52% interest in PIOGLOBAL Real Estate Investment Fund. 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.

ANFrom time ~~INCREASE~~to INtime, ~~COMPETITION~~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 INForm ~~THE~~10-Q), ~~RUSSIAN~~in ~~COMMERCIAL~~press ~~REAL~~releases ~~ESTATE~~or ~~MARKET~~in ~~MAY~~other ~~ADVERSELY~~public ~~AFFECT~~discussions. ~~THE~~The ~~COMPANY’S~~Private ~~REVENUES~~Securities ~~AND~~Litigation ~~THE~~Reform ~~VALUE~~Act OFof ~~THE~~1995 ~~COMPANY~~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’Ss ~~PRINCIPAL~~expectations ~~ASSET~~of future results but involve certain assumptions. Management cautions readers that assumptions involve substantial risks and uncertainties. Consequently, ~~THE~~any ~~MERIDIAN~~forward-looking ~~COMMERCIAL~~statement ~~TOWER~~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.

~~PIOGLOBAL~~THE ~~Real~~POTENTIAL ~~Estate~~VALUES ~~Investment~~TO ~~Fund~~BE isREALIZED ~~Harbor~~UPON ~~Global’s~~THE ~~principal~~SALE ~~asset.~~OR ALIQUIDATION ~~significant~~OF ~~portion~~MOST ofOF ~~the~~HARBOR ~~assets~~GLOBAL’S ~~of PIOGLOBAL Real Estate Investment Fund consists of its ownership of the Meridian Commercial Tower. For the nine months ended September 30~~ASSETS, ~~2004,~~IF ~~revenues from the PIOGLOBAL Real Estate Investment Fund comprised approximately 76% of Harbor Global’s total revenue. Furthermore~~ANY, ~~Meridian~~ARE Commercial Tower lease revenues accounted for approximately 88% of the revenues of PIOGLOBAL Real Estate Investment Fund and approximately 73% of the total revenue generated by Harbor Global’s Russian real estate management and investment management operationsSPECULATIVE.

~~There~~The ispotential ~~currently~~values ato ~~shortage of~~be ~~Class~~realized Aupon commercial real estate in Moscow, Russia, which has brought about a significant increase in planned commercial real estate construction. If and when such new buildings are commissioned, competition for tenants may increase and adversely affect the ~~Company’s~~sale ~~ability to attract new, and retain existing, tenants. The loss~~ of ~~more~~Harbor ~~than a few tenants could materially adversely affect the Company~~Global’s Russian ~~revenues. In addition, an increase in supply of commercial~~ real estate inmanagement ~~Russia may~~and ~~adversely~~investment ~~affect~~management ~~the~~operations, ~~value~~if ~~of the Meridian Commercial Tower (currently Class B rated)~~any, ~~the~~are ~~Company’s principal asset~~speculative.

~~HARBOR~~A ~~GLOBAL~~significant portion of Harbor Global’Ss ~~BUSINESSES~~Russian real estate management and investment management operations consists of its approximately 52% interest in PIOGLOBAL Real Estate Investment Fund, ~~PARTICULARLY~~a ~~THOSE~~company ~~CONDUCTED~~that invests INin ~~EMERGING~~Russian ~~MARKETS~~real estate, ~~ARE~~and ~~SUSCEPTIBLE~~to TOa ~~NUMEROUS~~lesser ~~RISKS~~extent, ~~AND~~securities ~~UNCERTAINTIES~~of ~~ASSOCIATED~~Russian ~~WITH~~companies. ~~INTERNATIONAL~~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 ~~OPERATIONS~~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~~16 ~~Global conducts business in countries outside of the United States, primarily in Russia. Harbor Global will continue to operate its international businesses until~~

19Table of Contents

~~those~~AN ~~businesses~~INCREASE ~~are~~IN ~~liquidated~~COMPETITION ~~and~~IN ~~will~~THE ~~continue~~RUSSIAN toCOMMERCIAL beREAL ~~subject~~ESTATE toMARKET ~~the~~MAY ~~risks~~ADVERSELY ofAFFECT ~~doing~~THE ~~business~~COMPANY’S ~~internationally,~~REVENUES ~~including:~~AND THE VALUE OF THE COMPANY’S PRINCIPAL ASSET, THE MERIDIAN COMMERCIAL TOWER.

•PIOGLOBAL ~~unexpected~~Real ~~changes~~Estate inInvestment ~~regulatory~~Fund ~~requirements~~is Harbor Global’s principal asset. A significant portion of the assets of PIOGLOBAL Real Estate Investment Fund consists of its ownership of the Meridian Commercial Tower. During the first quarter of 2005, revenues from the PIOGLOBAL Real Estate Investment Fund comprised approximately 74% of Harbor Global’s total revenue. Furthermore, Meridian Commercial Tower lease revenues accounted for approximately 98% of the revenues of PIOGLOBAL Real Estate Investment Fund and ~~underdeveloped~~approximately ~~legal~~80% ~~systems~~of inthe ~~some~~total ~~countries;~~revenue generated by Harbor Global’s Russian real estate management and investment management operations.

•There ~~tariffs~~is currently a shortage of commercial real estate in Moscow, Russia, which has brought about a significant increase in planned commercial real estate construction. If and ~~other~~when ~~trade~~such ~~barriers;~~new buildings are commissioned, competition for tenants may increase and adversely affect the Company’s ability to attract new, and retain existing, tenants. The loss of more than a few tenants could materially adversely affect the Company’s revenues. In addition, an increase in supply of commercial real estate in Russia may adversely affect the value of the Meridian Commercial Tower, the Company’s principal asset.

•HARBOR ~~difficulties~~GLOBAL’S inRUSSIAN ~~staffing~~BUSINESSES ~~and~~ARE ~~managing~~SUSCEPTIBLE ~~foreign~~TO ~~operations;~~NUMEROUS RISKS AND UNCERTAINTIES ASSOCIATED WITH INTERNATIONAL OPERATIONS.

•Harbor ~~political~~Global conducts business primarily in Russia. Harbor Global will continue to operate its Russian businesses until those businesses are liquidated and ~~economic~~will ~~instability;~~continue to be subject to the risks of doing business in Russia, including:

• ~~fluctuations~~unexpected changes in ~~currency~~regulatory ~~exchange~~requirements ~~rates~~and the legal system;

• ~~restrictions~~tariffs onand ~~currency~~other ~~exchange~~trade ~~and repatriation~~barriers;

• ~~restrictions~~difficulties onin ~~foreign~~staffing ~~investment~~and inmanaging ~~its~~Russian ~~businesses~~operations; ~~and~~

• ~~potentially~~political ~~adverse~~and ~~tax~~economic ~~consequences.~~instability;

~~For~~• ~~example,~~fluctuations in ~~recent~~currency ~~years~~exchange 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. rates;

~~THE~~• ~~LOSS~~restrictions OFon ~~KEY~~currency ~~OFFICERS~~exchange ~~AND~~and ~~MANAGERS COULD IMPAIR THE ABILITY OF HARBOR GLOBAL TO SUCCESSFULLY OPERATE AND MANAGE ITS ASSETS PRIOR TO THEIR LIQUIDATION.~~ repatriation;

~~Mr.~~• ~~Kasnet~~restrictions ison ~~the~~foreign ~~President~~investment ~~and~~in ~~Chief~~its Executive Officer, and Mr. Hunter is the Chief Operating Officer and Chief Financial Officer of Harbor Global. Mr. Kasnet previously served as the President, and Mr. Hunter previously served as the Chief Operating Officer and Senior Vice President of Pioneer Global Investments, a division of Pioneer. As executive officers of Pioneer Global Investments, Mr. Kasnet and Mr. Hunter operated substantially all the businesses; ~~that Harbor Global now owns. In addition, Calypso Management, an entity owned~~ and operated by Mr. Kasnet and Mr. Hunter, manages the liquidation of Harbor Global and operates Harbor Global’s assets pending their liquidation pursuant to the terms of an amended and restated administration and liquidation agreement.

~~Because~~• ~~Harbor~~potentially Global’s assets are a diverse range of businesses and are generally located in Russia 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~~tax ~~upon Harbor Global’s results of operations and financial condition~~consequences. 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.~~For ~~Kasnet~~example, ~~and~~in ~~Mr.~~recent ~~Hunter~~years ~~both~~Russia ~~entered~~has ~~into~~undergone ~~employment~~substantial ~~agreements~~political, ~~with~~economic ~~Calypso~~and ~~Management~~social change. OnAs ~~July~~is 10typical of an emerging market, ~~2003~~Russia does not possess a well-developed business, Mrlegal and regulatory infrastructure that would generally exist in the United States or in a more mature free market economy. ~~Kasnet’s~~The ~~employment~~Russian ~~agreement~~ruble ~~was~~is ~~extended~~not byfreely convertible in most countries outside of Russia and the country ~~mutual~~possesses ~~agreement~~restrictive ofcurrency Mrcontrols and relatively high inflation. ~~Kasnet~~In ~~and~~addition, the ~~Board~~tax, ofcurrency ~~Directors~~and ofcustoms ~~Harbor~~legislation ~~Global~~within ~~until~~Russia ~~October~~is 24subject to varying interpretations and changes, ~~2005.~~which Mrcan occur frequently. ~~Hunter~~Consequently, Harbor Global’s ~~employment~~Russian ~~agreement~~real ~~provides~~estate ~~that~~management ~~Mr.~~and ~~Hunter’s~~investment ~~employment~~management ~~with~~operations ~~Calypso~~involve ~~Management~~significant isrisks, atsuch ~~will~~as those listed above, ~~subject~~which toare ~~termination~~not bytypically ~~either Calypso~~associated ~~Management~~with ordeveloped Mrmarkets. ~~Hunter~~While ~~upon~~there 60have ~~days~~been ~~prior~~improvements ~~written~~in ~~notice.~~economic trends, Ifthe ~~either~~future ~~Mr.~~economic ~~Kasnet’s~~direction orof ~~Mr.~~Russia ~~Hunter’s~~is ~~employment~~largely ~~with~~dependent ~~Calypso~~upon ~~Management~~the iseffectiveness ~~terminated~~of economic, hefinancial ~~will~~and ~~cease~~monetary tomeasures beundertaken anby ~~officer~~the ofgovernment, ~~Harbor~~together ~~Global.~~with Intax, ~~addition~~legal, ~~Harbor~~regulatory, ~~Global~~and ~~has~~political developments. The liquidation ~~obtained~~of ~~key~~these ~~officer~~businesses, ~~life~~as ~~insurance~~well ~~policies~~as ~~with~~the ~~benefits~~successful ~~payable~~operation toof ~~Harbor~~these ~~Global~~businesses ~~for~~pending ~~Mr.~~their ~~Kasnet~~liquidation, will depend on the stability of, and ~~Mr.~~economic ~~Hunter~~conditions in, Russia.

2017

HARBORTable GLOBALof WILL INDEMNIFY PIONEER FOR SOME LIABILITIES ACCRUING AFTER THE SPIN-OFF. Contents

~~Under~~THE ~~the~~LOSS ~~Distribution~~OF ~~Agreement,~~KEY ~~Harbor~~OFFICERS ~~Global~~AND ~~agreed~~MANAGERS toCOULD ~~indemnify~~IMPAIR ~~Pioneer for~~THE ~~liabilities,~~ABILITY ~~other~~OF ~~than~~HARBOR ~~tax~~GLOBAL ~~liabilities,~~TO ~~incurred~~SUCCESSFULLY byOPERATE ~~Pioneer~~AND ~~relating~~MANAGE ~~to the businesses or operations of the Harbor Global assets. Additionally, under a tax separation agreement between Harbor Global and Pioneer, generally, Harbor Global agreed~~ITS toASSETS ~~indemnify~~PRIOR ~~Pioneer~~TO ~~for~~THEIR ~~tax liabilities relating to the Harbor Global businesses~~LIQUIDATION. Currently, there are no suits pending under 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.

~~THERE~~Mr. ~~CAN~~Kasnet BEis NOthe ~~ASSURANCE~~President ~~THAT~~and ~~SHAREHOLDERS~~Chief Executive ~~WILL~~Officer, BEand ~~ABLE~~Mr. TOHunter ~~SELL~~is ~~THEIR~~the ~~HARBOR~~Chief ~~GLOBAL~~Operating ~~COMMON~~Officer ~~SHARES~~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 Calypso Management, an entity owned and operated by Mr. Kasnet and Mr. Hunter, manages the liquidation of Harbor Global and operates Harbor Global’s assets pending their liquidation pursuant to the terms of an amended and restated administration and liquidation agreement.

Because Harbor Global’s ~~common~~assets ~~shares~~are a diverse range of businesses and are generally ~~not~~located ~~listed~~in onRussia, ~~any~~where ~~securities~~successfully ~~exchange~~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 onMr. Hunter could have a material adverse effect upon Harbor Global’s results of operations and financial condition. The services ~~Nasdaq~~of ~~Stock~~Mr. ~~Market(R)~~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.

~~Furthermore~~Mr. Kasnet and Mr. Hunter both entered into employment agreements with Calypso Management. On December 8, 2004, the term of Mr. Kasnet’s employment agreement was extended until October 24, 2006 to coincide with the term of the amended and restated administration and liquidation agreement. 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, the individual whose agreement is terminated will cease to be an officer of Harbor Global. ~~does~~Harbor ~~not~~Global ~~intend~~has obtained key officer life insurance policies with benefits payable to: Harbor Global for Mr. Kasnet and Mr. Hunter.

•HARBOR ~~engage~~GLOBAL ~~the~~WILL ~~services~~INDEMNIFY ofPIONEER ~~any~~FOR ~~market~~SOME ~~maker;~~LIABILITIES ACCRUING AFTER THE SPIN-OFF.

•Under ~~facilitate~~the Distribution Agreement, Harbor Global agreed to indemnify Pioneer for liabilities, other than tax liabilities, incurred by Pioneer relating to the ~~development~~businesses or operations of anthe ~~active~~Harbor ~~public~~Global ~~trading~~assets. ~~market~~Additionally, inunder a tax separation agreement between Harbor Global ~~common~~and ~~shares~~Pioneer, generally, Harbor Global 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 ~~encourage~~tax ~~others~~separation agreement. However, Harbor Global cannot provide assurances that no legal proceeding or other claim will occur that would require Harbor Global to doindemnify ~~so;~~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.

•THERE ~~place~~CAN ~~any~~BE ~~advertisements~~NO inASSURANCE ~~the~~THAT ~~media~~SHAREHOLDERS ~~promoting~~WILL anBE ~~investment~~ABLE inTO ~~Harbor~~SELL ~~Global;~~THEIR orHARBOR GLOBAL COMMON SHARES.

•Harbor ~~except~~Global ascommon ~~required~~shares byare ~~the~~not ~~Securities~~listed ~~Exchange~~on ~~Act~~any ofsecurities ~~1934, as amended, collect~~ exchange or ~~publish~~on ~~information~~The ~~about~~Nasdaq ~~prices~~Stock ~~at which Harbor Global common shares may be traded~~Market(R).

~~Harbor~~Furthermore, ~~Global cannot provide assurances as to the prices at which~~ Harbor Global ~~common~~does ~~shares~~not ~~may trade or provide assurances that shareholders will be able~~ intend to: ~~sell their Harbor Global common shares.~~

AS• Aengage ~~RESULT~~the OFservices ~~HOLDING~~of ~~HARBOR~~any ~~GLOBAL~~market ~~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.~~ maker;

~~For~~• ~~United States~~facilitate ~~federal~~the ~~income~~development ~~tax~~of ~~purposes,~~an ~~Harbor~~active ~~Global~~public istrading ~~treated~~market ~~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~~shares, ~~Harbor~~or ~~Global~~encourage isothers ~~not itself subject~~ to ~~United~~do 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. so;

~~Harbor~~18 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.

21Table of Contents

~~HARBOR~~• ~~GLOBAL~~place ~~WILL~~any BEadvertisements ~~SUBJECT~~in TOthe ~~SIGNIFICANT~~media ~~RESTRICTIONS~~promoting IFan ITinvestment ~~BECOMES~~in ANHarbor ~~INVESTMENT~~Global; ~~COMPANY.~~ or

~~Harbor~~• ~~Global~~except ~~intends to conduct its businesses and operations so~~ as ~~to avoid being~~ required to ~~register~~by ~~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~~Securities ~~Company~~Exchange Act of ~~1940 would prohibit Harbor Global and any person deemed to be an underwriter of Harbor Global’s securities from offering for sale~~1934, ~~selling~~collect or ~~delivering~~publish ~~after~~information ~~sale,~~about inprices ~~connection~~at ~~with~~which ~~a public offering, any security issued by~~ Harbor Global incommon ~~the~~shares ~~United~~may ~~States.~~be traded.

~~RECENT~~Harbor ~~PRONOUNCEMENTS~~Global OFcannot ~~THE~~provide ~~FINANCIAL~~assurances ~~ACCOUNTING~~as ~~STANDARDS~~to ~~BOARD~~the ~~AFFECTING~~prices ~~HARBOR~~at ~~GLOBAL~~which Harbor Global common shares may trade or provide assurances that shareholders will be able to sell their Harbor Global common shares.

~~None~~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.

~~ITEM~~For 3United States federal income tax purposes, Harbor Global is treated as a partnership. ~~QUANTITATIVE~~For ~~AND~~United ~~QUALITATIVE~~States ~~DISCLOSURES~~federal ~~ABOUT~~income ~~MARKET~~tax ~~RISK~~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 ~~monitors~~believes that one or more of its ~~exposure~~foreign subsidiaries 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 ~~adverse~~recognize ~~changes~~taxable income and pay tax with respect to a portion of the subsidiary’s income, even in ~~interest~~the ~~rates~~absence of the receipt of any payment of cash or other property from the subsidiary. The tax rules regarding foreign partnerships, foreign ~~currency exchange~~personal ~~rates~~holding companies and ~~market~~passive ~~fluctuations~~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.

~~The~~HARBOR ~~Company’s~~GLOBAL ~~interest~~WILL ~~rate~~BE ~~risk involves~~SUBJECT 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 reportedTO ~~either~~SIGNIFICANT asRESTRICTIONS ~~cash~~IF ~~and~~IT ~~cash~~BECOMES ~~equivalents~~AN orINVESTMENT ~~marketable securities~~COMPANY. The balance of such securities at September 30, 2004 and December 31, 2003 was approximately $2.9 million and $1.1 million, respectively, of cash and cash equivalents and $20.3 million and $16.2 million, respectively, of marketable securities. Earnings from excess cash invested were approximately $0.1 million for the nine months ended September 30, 2004. Based on excess cash invested at September 30, 2004, a one percent increase in current market interest rates would have the effect of causing an approximately $0.2 million additional pre-tax credit to the Consolidated Statement of Operations.

Harbor Global intends ~~is exposed~~ to ~~certain~~conduct ~~changes~~its inbusinesses ~~foreign~~and ~~currency~~operations ~~exchange~~so ~~rates, primarily~~ as ato ~~result~~avoid ofbeing ~~its~~required ~~operations~~to inregister ~~Russia. The United States dollar (the Company’s reporting currency) has been designated~~ as ~~the~~an ~~Company’s~~investment ~~functional currency~~company. ~~Translation~~If, ~~gains~~nevertheless, ~~and~~Harbor ~~losses~~Global ~~that~~were ~~result~~to ~~from~~be ~~remeasuring~~required ~~into~~to ~~the~~register ~~United~~as ~~States~~an ~~dollar~~investment ~~are~~company, ~~included~~because inHarbor ~~the~~Global ~~Consolidated Statement~~is ofa ~~Operations. To mitigate against currency translation risk~~foreign company, the Investment Company ~~primarily~~Act ~~transacts~~of in1940 ~~United~~would ~~States~~prohibit ~~dollars~~Harbor byGlobal ~~contracting for most of its costs~~ and ~~revenues~~any inperson ~~United~~deemed ~~States dollars. This acts as a natural hedge~~ to ~~protect against~~be ~~currency~~an ~~fluctuations~~underwriter ~~from~~of ~~the~~Harbor ~~Company~~Global’s ~~operations.~~securities ~~For~~from ~~the~~offering ~~three~~for ~~months~~sale, ~~ended~~selling ~~September~~or ~~30,~~delivering ~~2004~~after ~~and 2003~~sale, ~~the~~in ~~Company~~connection ~~reported~~with ana ~~exchange~~public ~~loss of approximately $132~~offering,~~000~~ any ~~and~~security ~~$162,000,~~issued ~~respectively~~by ~~and~~Harbor ~~for~~Global ~~the~~in ~~nine months ended September 30, 2004 and 2003,~~ the ~~Company~~United ~~reported exchange gains of approximately $271,000 and $287,000, respectively~~States.

~~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~~RECENT ~~purpose~~PRONOUNCEMENTS ofOF ~~these~~THE ~~financial~~FINANCIAL ~~statements~~ACCOUNTING ~~does~~STANDARDS ~~not~~BOARD 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 September 30, 2004 and December 31, 2003~~None.

	(IN THOUSANDS)
	September 30, 2004		December 31, 2003
Monetary Assets
Cash and Cash Equivalents	$	2,104	$	19,166
Restricted Cash		12,448		6,291
Marketable Securities Held for Sale		37,443		28,770
Other		2,633		1,765
	$	54,628	$	55,992
Monetary Liabilities
Dividend Payable	$	12,448	$	6,291
Taxes Payable		299		1,390
Deferred Taxes		2,179		1,798
Other		561		599
	$	15,487	$	10,078
Net Position	$	39,141	$	45,914

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

22Harbor Global monitors its exposure to adverse changes in interest rates, foreign currency exchange rates and market fluctuations.

The Company’s ~~indirectly~~interest ~~invests~~rate inrisk ~~equity~~involves ~~instruments~~the ~~of privately~~short-~~held~~term ~~companies~~investment ~~through~~of ~~its~~excess ~~approximately~~cash. ~~52%~~This ~~interest in~~risk ~~the~~impacts ~~PIOGLOBAL~~fair ~~Real~~values, ~~Estate~~earnings ~~Investment Fund~~ and ~~it’s~~cash flows. ~~approximately~~Excess 8%cash ~~interest~~is inprimarily ~~the~~invested ~~Prospect Poland Fund. Investments~~ in ~~privately~~foreign ~~held~~government ~~companies~~bonds byand ~~the~~United ~~PIOGLOBAL~~States ~~Real~~treasury ~~Estate~~bills. ~~Investment~~These ~~Fund are recorded at cost in long~~short-term investments~~. With~~ ~~respect to the Company’s limited partnership interest in the Prospect Poland Fund, such interests~~ are ~~recorded~~reported ineither ~~Polish~~as ~~Venture~~cash ~~Capital~~and ~~Investment~~cash ~~using~~equivalents ~~the~~or ~~equity~~marketable ~~method of accounting~~securities. The ~~Company~~balance isof ~~exposed~~such tosecurities ~~market~~at ~~risk as it relates~~March to31, ~~the~~2005 ~~market~~and ~~value~~December of31, ~~its indirect investments in privately held companies. For the first nine months of~~ 2004, ~~the~~was ~~Company recorded a gain on its investment of~~ approximately $~~91,000,~~0.2 ~~reflecting~~million ~~the~~and ~~Company’s~~$0.7 ~~proportionate~~million, ~~share of realized gains on the sale of two investments of $217~~respectively,~~000~~ ~~less its proportionate share~~ of ancash ~~investment write-down~~ and ~~operating~~cash ~~expenses~~equivalents ofand $~~81,000~~17.1 million and $4517.5 million,~~000,~~ respectively., ~~The carrying value~~ of ~~the~~marketable ~~Company’s~~securities. ~~interest~~Earnings infrom ~~the~~excess ~~Prospect~~cash ~~Poland~~invested ~~Fund was~~were ~~written down by~~ approximately $~~144,000~~0.4 ~~during~~million ~~the~~for ~~first nine months of 2003, and included the Company’s proportionate share of an investment write-down of $173,000, operating expenses of $40,000 and a gain on the sale of investments of $69,000.~~

~~The~~19 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 Moscow Interbank Currency Exchange and are recorded in long-term marketable securities. Investments that do not have a readily determinable fair value are recorded in long term investments at cost with adjustments for other than temporary impairment. These available-for-sale equity investments, primarily in oil and gas companies, 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 September 30, 2004 and December 31, 2003, the fair value of equity investments contained in long-term marketable securities aggregated $14.7 million and $10.2 million, respectively. The Company recorded unrealized gains after deferred taxes and after minority interest of $3.0 million and $2.2 million at September 30, 2004 and December 31, 2003, respectively, as a separate component of stockholder’s equity. Although the breadth of industries represented on the Russian Trading System and Moscow Interbank Currency Exchange 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.

ITEMTable 4.of CONTROLS AND PROCEDURES. Contents

~~Disclosure Controls and Procedures. The Company’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Company’s~~ ~~disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under~~ the ~~Securities~~three ~~Exchange~~months ~~Act~~ended ofMarch ~~1934~~31, ~~as amended) as of September 30, 2004 (the “Evaluation Date”)~~2005. Based on ~~such~~excess ~~evaluation,~~cash ~~such~~invested ~~officers~~at ~~have~~March ~~concluded that~~31, ~~as of the Evaluation Date~~2005, ~~the~~a ~~Company’s~~one ~~disclosure~~percent ~~controls~~increase ~~and~~or ~~procedures~~decrease ~~are~~in ~~effective~~current tomarket ~~provide~~interest ~~reasonable~~rates would ~~assurance~~have ~~that~~the ~~information~~effect ~~required~~of tocausing bean ~~disclosed~~approximately by$0.2 ~~the~~million ~~Company~~additional inpre-tax ~~the~~credit ~~reports that it files~~ or ~~submits~~charge ~~under~~to the ~~Securities~~ ~~Exchange~~Consolidated ~~Act~~Statements of ~~1934, as amended, is recorded, processed, summarized and reported within the time periods specified in applicable Securities and Exchange Commission rules and forms~~Operations.

23Harbor 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 Statements of Operations. 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. During the first quarter of 2005 and 2004, the Company reported net exchange losses of approximately $25,000 and net exchange gains of approximately $918,000, respectively.

~~Internal~~The ~~Control~~Russian ~~Over~~ruble ~~Financial~~is ~~Reporting~~not a fully convertible currency outside of Russia. ~~There~~The ~~have~~translation ~~not~~of ruble ~~been~~denominated ~~any~~assets ~~significant~~and ~~changes~~liabilities ininto United States dollars for the ~~Company’s internal~~purpose ~~controls~~of ~~over~~these financial ~~reporting~~statements ~~(as~~does ~~such~~not ~~term~~indicate isthat ~~defined~~the Company could realize or settle in ~~Rules~~United ~~13a-15(f)~~States dollars the reported values of these assets and liabilities. ~~15d-15(f)~~The ~~under~~Company ~~the~~reports ~~Exchange~~all ~~Act)~~of ~~during~~its ~~the~~non-monetary ~~quarterly~~assets ~~period~~and ~~ended~~liabilities ~~September~~held ~~30,~~in ~~2004~~Russia ~~that~~at ~~have~~historical ~~materially~~exchange ~~affected~~rates, orand ~~are~~any ~~reasonably~~fluctuation ~~likely~~in toforeign ~~materially affect,~~exchange ~~the~~rates ~~Company’s~~would ~~internal~~not ~~control~~have ~~over~~any ~~financial~~impact ~~reporting.~~on reported non-monetary assets and liabilities.

~~PART~~The IItable —below ~~OTHER~~sets ~~INFORMATION~~forth in the Company’s reporting currency a summary of the monetary assets and liabilities held in rubles at March 31, 2005 and December 31, 2004 .

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K


	(IN THOUSANDS)
	March 31, 2005		December 31, 2004
Monetary Assets
Cash and Cash Equivalents	$	5,075	$	3,651
Restricted Cash		12,983		13,035
Securities Held for Sale		37,517		36,713
Other		2,671		2,182

	$	58,246	$	55,581

Monetary Liabilities
Dividend Payable	$	12,983	$	13,035
Taxes Payable		695		196
Deferred Taxes		2,230		2,132
Other		544		959

	$	16,452	$	16,322

Net Position	$	41,794	$	39,259

~~(a)~~The ~~Exhibits:~~Company ~~The~~indirectly ~~Exhibit~~invests ~~Index~~in equity ~~immediately~~instruments ~~precedes~~of privately-held companies through its approximately 52% interest in the ~~Exhibits~~PIOGLOBAL ~~filed~~Investment ~~herein~~Fund and its approximately 8% interest in the Prospect Poland Fund. Investments in privately held companies by the PIOGLOBAL 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 under Polish Venture Capital Investment using the equity method of accounting. The Company is ~~incorporated~~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 ~~reference~~$14,000 and $10,000 in the first quarter of 2005 and 2004, respectively, reflecting the Company’s proportional share of operating expenses.

~~(b)~~The ~~Form~~PIOGLOBAL ~~8-K:~~Real OnEstate ~~August~~Investment ~~11,~~Fund ~~2004,~~is ~~the~~also ~~Company~~invested ~~filed a Current Report on Form 8-K~~ in ~~connection~~equity ~~with~~instruments aof ~~press~~public ~~release~~companies, ~~announcing~~which ~~its~~are ~~financial~~classified ~~results~~as available-for ~~the~~-sale ~~quarter~~pursuant ~~ended~~to ~~June~~SFAS ~~30, 2004~~No.

On20 ~~September 16, 2004, the Company filed a Current Report on Form 8-K in connection with a press release announcing that the Board of Directors declared a dividend of approximately $4.25 million.~~

24Table of Contents

~~SIGNATURES~~ 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 MICEX and are recorded in long-term marketable securities. Investments that do not have a readily determinable fair value are recorded in long term investments at cost with adjustments for other than temporary impairment. These available-for-sale equity investments, primarily in oil and gas companies, 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 March 31, 2005 and December 31, 2004, the fair value of equity investments contained in long-term marketable securities aggregated $16.1 million and $13.3 million, respectively. The Company recorded unrealized gains after deferred taxes and after minority interest of $3.0 million and $2.8 million at March 31, 2005 and December 31, 2004, 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.

~~Pursuant~~ ITEM to4. ~~the~~CONTROLS ~~requirements~~AND ~~of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized~~PROCEDURES.

~~Dated:~~Disclosure Controls ~~November~~and 8Procedures. The Company’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of March 31, ~~2004~~2005 (the “Evaluation Date”). Based on such evaluation, such officers have concluded that, as of the Evaluation Date, the Company’s disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in applicable Securities and Exchange Commission rules and forms.

~~HARBOR~~Internal ~~GLOBAL~~Control ~~COMPANY~~Over Financial ~~LTD~~Reporting. ~~/s/~~There ~~Donald~~have H.not ~~Hunter~~been ~~Donald~~any H.significant ~~Hunter~~changes ~~Chief~~in ~~Operating~~the ~~Officer~~Company’s ~~Chief~~internal ~~Financial~~controls ~~Officer~~over financial reporting (~~Duly~~as ~~authorized~~such ~~officer~~term ~~and~~is ~~principal~~defined ~~financial~~in Rules 13a-15(f) and ~~accounting~~15d-15(f) ~~officer~~under the Exchange Act) during the first fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

25 PART II — OTHER INFORMATION

~~Exhibit~~ ITEM ~~Index~~6. 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***		Harbor Global Company Ltd. Code of Ethics and Conduct as amended on August 11, 2004.
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

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

~~***~~21 ~~Filed herewith.~~

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

* SIGNATURES ~~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.~~

+Pursuant ~~Incorporated~~to bythe ~~reference~~requirements toof ~~Harbor~~the Securities ~~Global~~Exchange ~~Company~~Act ~~Ltd.’s~~of ~~Registration~~1934, ~~Statement~~the onRegistrant ~~Form~~has 10duly ~~(file~~caused ~~number~~this ~~0-30889)~~report ~~filed~~to be signed on ~~June~~its ~~26,~~behalf ~~2000~~by the undersigned thereunto duly authorized.

26Dated: April 27, 2005

HARBOR GLOBAL COMPANY LTD.

/s/ Donald H. Hunter

Donald H. Hunter

Chief Operating Officer

Chief Financial Officer

(Duly authorized officer and principal financial

and accounting officer)

EXHIBIT INDEX


EXHIBIT NUMBER		DESCRIPTION
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**		Second Amendment to Lease dated March 28, 2005 by and between Faneuil Hall Marketplace, LLC, and Harbor Global Company Ltd.

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 Harbor Global Company Ltd.’s Registration Statement on Form 10 (file number 0-30889) filed on June 26, 2000

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