UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-06445
The Herzfeld Caribbean Basin Fund, Inc.
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(Exact name of registrant as specified in charter)
P.O. BOX 161465, MIAMI, FLORIDA 33116
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(Address of principal executive offices) (Zip code)
THOMAS J. HERZFELD
P.O. BOX 161465, MIAMI, FL 33116
--------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: 305-271-1900
Date of fiscal year end: 06/30
Date of reporting period: 07/01/07 - 12/31/07
Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
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ITEM 1. SHAREHOLDER REPORT
[FRONT COVER]
THE HERZFELD
CARIBBEAN BASIN
FUND, INC.
SEMI-ANNUAL REPORT
December 31, 2007
================================================================================
The Herzfeld Caribbean Basin Fund, Inc.
The Herzfeld Building
PO Box 161465
Miami, FL 33116
(305) 271-1900
Investment Advisor
HERZFELD/CUBA
a division of Thomas J. Herzfeld Advisors, Inc.
PO Box 161465
Miami, FL 33116
(305) 271-1900
Transfer Agent & Registrar
State Street Bank and Trust
200 Clarendon Street, 16th Floor
Boston, MA 02116
(617) 443-6870
Custodian
State Street Bank and Trust
200 Clarendon Street, 5th Floor
Boston, MA 02116
Counsel
Pepper Hamilton LLP
3000 Two Logan Square
18th and Arch Streets
Philadelphia, PA 19103
Independent Auditors
Rothstein Kass & Company, LLP
101 Montgomery Street, 22nd Floor
San Francisco, CA 94104
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The Herzfeld Caribbean Basin Fund's investment objective is long-term capital
appreciation. To achieve its objective, the Fund invests in issuers that are
likely, in the Advisor's view, to benefit from economic, political, structural
and technological developments in the countries in the Caribbean Basin, which
include, among others, Cuba, Jamaica, Trinidad and Tobago, the Bahamas, the
Dominican Republic, Barbados, Aruba, Haiti, the Netherlands Antilles, the
Commonwealth of Puerto Rico, Mexico, Honduras, Guatemala, Belize, Costa Rica,
Panama, Colombia, the United States and Venezuela ("Caribbean Basin Countries").
The fund invests at least 80% of its total assets in equity and equity-linked
securities of issuers, including U.S.-based companies which engage in
substantial trade with, and derive substantial revenue from, operations in the
Caribbean Basin Countries.
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Listed NASDAQ Capital Market
Symbol: CUBA
-2-
Letter to Stockholders
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[PHOTO]
Thomas J. Herzfeld
Chairman and President
February 4, 2008
Dear Fellow Stockholders:
We are pleased to present our semi-annual report for the period ended December
31, 2007. On that date, the net asset value of The Herzfeld Caribbean Basin
Fund, Inc. stood at $8.23 per share, a gain of 18.72% for the calendar year, and
a loss of 2.18% for the six month period, adjusted for the $1.28 per share
year-end stock distribution (unaudited). The Fund's large 98.51% premium to net
asset value at the end of 2006 inverted to a small discount of -2.43% by the
close of 2007. Accordingly, the share price declined 41.65% for the calendar
year, and 31.39% for the six months ended December 31, 2007, adjusted for the
$1.28 per share year-end stock distribution (unaudited).
Portfolio Commentary
Since I wrote to you last year, there have been a number of significant changes
in our portfolio. Florida East Coast Industries, for many years our largest
position, was taken over by Fortress Investment Group LLC, resulting in a very
substantial capital gain to the Fund. We also sold our holding of Florida Rock
Industries, which was our fifth largest position at this time last year, after a
takeover of that company was announced by Vulcan Materials Company. This, also,
was a very profitable sale for us.
The cash proceeds from the two transactions, combined with the money raised
through our October rights offering, was quite substantial and has allowed us to
make a more diversified reallocation of the portfolio.
Since December 31, 2007, we have added four companies to the portfolio,
including companies based in the Bahamas, the Cayman Islands and Puerto Rico.
These companies are still under accumulation.
We maintained relatively high cash positions throughout the fall of 2007, and
this level was increased by approximately $18 million from the proceeds of our
rights offering. Most of the markets where we are invested have been in a period
of decline since November. We therefore invested at a very measured pace; the
result was that our Fund's net asset value declined by less than the underlying
markets in which we hold positions. As the markets began to look especially
cheap in December and January, we became more aggressive in our buying, to the
point where we have currently become almost fully invested and we did so at what
we consider to be quite attractive prices. The result is that even though the
stock markets in the U.S. and Caribbean are down substantially year-to-date, our
net asset value is actually up a touch. As of the close on Friday, February 1,
2008, our net asset value stood at $8.28 per share (unaudited), versus $8.23 per
share on December 31, 2007 (unaudited).
-3-
Letter to Stockholders (continued)
================================================================================
Rights Offering
The Fund conducted a non-transferable rights offering during the period.
Stockholders of record September 26, 2007, were permitted to subscribe for one
additional share for each share held at a price equal to 85% of the average
volume-weighted closing share price on the expiration date of the offering and
four preceding trading days. The offering was completed on October 26, 2007, and
was fully subscribed. In my view, it was a very successful offering because it
allowed our existing stockholders to acquire new shares at a discount to the
market price; but at the same time, it was accretive to net asset value.
Stockholders who subscribed got a bargain, and those who chose not to
participate benefited from an increase in the net asset value per share. This
two-pronged beneficial result is quite unusual in the closed-end fund industry.
I'm pleased to report that officers and directors of the Fund acquired stock
through the offering. I personally purchased over $1 million worth of shares for
my own account. I'd like to thank the stockholders for their vote of confidence
and participation.
Although the share price is currently lower than the $10.04 per share price at
which the rights offering was completed, I believe this is the result of three
factors: 1) the Fund is trading ex- the year-end stock distribution of $1.28; 2)
the appearance of Fidel Castro on television with President Chavez of Venezuela
seems to indicate that he is still alive, although many in Miami find this hard
to believe; and 3) general doom and gloom in the equity markets have been
widespread in recent months.
As we have discussed in the past, in our view, the single most important
economic and political development in the Caribbean would be U.S. resumption of
trade with Cuba. The general belief is that the chances that the current embargo
with that country being eased or lifted would be greatly enhanced should there
be a new government there. Fidel Castro's health, therefore, bears directly on
this issue.
Year-End Distribution
Although we do not generally pay a dividend from net investment income, the Fund
has been able to pay nine capital gains distributions since its inception 15
years ago, including several large ones. For instance, in the past two years the
Fund has distributed $1.00 and $1.223 per share from long-term gains, and as of
December 31, 2007, the portfolio has about $0.85 of net unrealized appreciation
(unaudited).
-4-
Letter to Stockholders (continued)
================================================================================
Since inception our Board has elected to pay out these distributions; and the
payments have been welcomed by stockholders. In 2007 we declared the
distribution in stock rather than cash, at the suggestion of stockholders who
requested that we make it easier to reinvest their year-end distributions. We
expect to continue this policy.
Largest Allocations
The following tables present our largest investment and geographic allocations
as of December 31, 2007.
-------------------------------- ---------------------------------------------
Geographic % of Net Assets Largest Portfolio Positions % of Net Assets
Allocation
USA 25.68% Consolidated Water Co. 5.62%
Mexico 17.77% Seaboard Corporation 5.11%
Cayman Islands 6.13% Carnival Corp. 3.94%
Panama 3.90% Latin America Equity Fund 2.98%
Latin American Regional 2.98% Orthofix International N.V. 2.75%
Netherlands Antilles 2.75% Royal Caribbean Cruises Ltd. 2.73%
Colombia 1.95% Atlantic Tele-Network, Inc. 2.34%
Bahamas 0.92% Watsco Incorporated 2.30%
Puerto Rico 0.81% Copa Holdings S.A. 2.22%
Belize 0.71% Trailer Bridge, Inc. 2.12%
Costa Rica 0.40%
Venezuela 0.05%
Cuba 0.00%
Other 2.18%
-------------------------------- ---------------------------------------------
Daily net asset values and press releases on the Fund are available on the
Internet at www.herzfeld.com.
I would like to thank the members of the Board of Directors for their hard work
and guidance and also to thank my fellow stockholders for their continued
support and suggestions.
Sincerely,
/s/ Thomas J. Herzfeld
----------------------
Thomas J. Herzfeld
Chairman of the Board and President
-5-
Schedule of Investments as of December 31, 2007
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Shares or Principal Amount Description Market Value
--------------------------------------------------------------------------------
Common stocks - 66.22% of net assets
Banking and finance - 4.38%
16,500 Bancolombia, S.A. $ 561,330
29,720 Banco Latinoamericano de Exportaciones, S.A. 484,733
2,500 Doral Financial Corp.* 45,100
16,400 Grupo Financiero Banorte, S.A.B. de C.V. Series O 67,768
9,900 Grupo Financiero Inbursa, S.A.B. de C.V. Series O 25,725
63,000 W Holding Co., Inc. 76,230
Communications - 12.03%
9,000 America Movil, S.A.B. de C.V. ADR 552,510
35,600 America Movil, S.A.B. de C.V. Series A 108,389
50,891 America Movil, S.A.B. de C.V. Series L 156,203
19,950 Atlantic Tele-Network, Inc. 673,911
11,900 Carso Global Telecom, S.A.B. de C.V. Series A1* 55,715
141,000 Fuego Entertainment* 73,320
6,000 Garmin Ltd. 582,000
871 Grupo Iusacell, S.A.B. de C.V. Series V* 11,570
19,410 Grupo Radio Centro, S.A.B. ADR 246,507
20,400 Grupo Televisa, S.A.B. ADR 484,908
13,400 Grupo Televisa, S.A.B. Series CPO 63,953
39,320 Spanish Broadcasting System Inc.* 72,742
5,000 Telefonos de Mexico, S.A.B. de C.V. ADR Series L 184,200
23,800 Telefonos de Mexico, S.A.B. de C.V. Series A 44,245
78,600 Telefonos de Mexico, S.A.B. de C.V. Series L 145,472
13,900 TV Azteca, S.A. de C.V. Series CPO 8,342
Conglomerates - 1.73%
250,000 Admiralty Holding Company* 750
5,400 Alfa, S.A.B. de C.V. Series A 34,881
42,595 BB Holdings Ltd.* 203,495
13,000 Carlisle Holdings, Inc.* 32,735
13,000 Cockleshell Ltd. ord. 38,602
30,300 Corporacion Interamericana de
Entretenimiento, S.A.B. de C.V.
Series B* 8,942
20 Dermet de Mexico, S.A.B. Series B 3
11,000 Grupo Carso, S.A.B. de C.V. Series A1 41,634
--------------------------
*Non-income producing
See accompanying notes.
-6-
Schedule of Investments as of December 31, 2007 (continued)
================================================================================
Shares or Principal Amount Description Market Value
--------------------------------------------------------------------------------
Conglomerates (continued)
1,580 Grupo Kuo, S.A.B. de C.V. $ 1,666
3,250 Shellshock Ltd. ord. 4,108
2,900 Vitro, S.A.B. de C.V. Series A 6,377
19,000 Vitro, S.A.B. de C.V. ADR 125,020
Construction and related - 2.54%
6,098 Cemex, S.A.B. de C.V. ADR 157,633
47,864 Cemex, S.A.B. de C.V. Series CPO 124,064
2,032 Ceramica Carabobo Class A ADR* 5,115
17,200 Consorcio ARA, S.A.B. de C.V.* 19,226
1,580 Dine S.A.B. de C.V. Series B* 1,737
3,583 Empresas ICA, S.A.B. de C.V. 26,633
800 Grupo Cementos de Chihuahua, S.A.B. de C.V. 5,058
38,950 Mastec, Inc.* 396,122
Consumer products and related manufacturing - 4.34%
800,000 Atlas Electricas, S.A. 115,635
11,973 Grupo Casa Saba, S.A.B. de C.V. ADR 472,934
18,000 Watsco Incorporated 661,680
Food, beverages and tobacco - 2.35%
1,200 Alsea, S.A.B. de C.V. 1,682
10,500 Coca Cola Femsa, S.A.B. de C.V. ADR 517,440
200 Coca Cola Femsa, S.A.B. de C.V., Series L 983
18,900 Fomento Economico Mexicano,
S.A.B. de C.V., Series UBD 72,315
800 Gruma, S.A.B. de C.V., Series B 2,676
7,600 Grupo Bimbo, S.A.B. de C.V., Series A 45,304
7,700 Grupo Modelo, S.A.B. de C.V., Series C 36,679
Housing - 0.88%
1,700 Corporacion Geo, S.A.B. de. C.V., Series B* 4,891
100 Desarrolladora Homex, S.A.B. de C.V. 826
13,500 Lennar Corp 241,515
400 Sare Holding, S.A.B. de C.V., Series B* 545
1,500 Urbi Desarrollos Urbanos, S.A.B. de C.V.* 5,181
--------------------------
*Non-income producing
See accompanying notes.
-7-
Schedule of Investments as of December 31, 2007 (continued)
================================================================================
Shares or Principal Amount Description Market Value
--------------------------------------------------------------------------------
Investment companies -7.82%
8,000 iShares MSCI Mexico $ 448,000
10,500 The Mexico Fund, Inc. 368,550
18,110 Latin America Equity Fund 856,784
17,222 Western Asset Emerging Markets Debt Fund 306,379
2,300 Western Asset Emerging Markets 26,772
19,000 Western Asset Worldwide Income Fund 246,260
Leisure - 7.59%
25,500 Carnival Corp. 1,134,495
18,500 Royal Caribbean Cruises Ltd. 785,140
6,000 Steiner Leisure Ltd.* 264,960
Medical - 2.81%
8,386 Micromet Inc.* 17,275
13,660 Orthofix International N.V.* 791,870
Mining - 0.03%
1,200 Grupo Mexico, S.A.B. de C.V., Series B 7,542
Pulp and paper - 0.09%
6,100 Kimberly-Clark de Mexico, S.A.B. de C.V. Series A 26,637
Railroad and landholdings - 1.23%
7,000 Norfolk Southern Corporation 353,080
Retail - 0.71%
3,700 Controladora Comercial Mexicana,
S.A.B. de C.V. Series UBC 9,323
1,270 Grupo Elektra, S.A. de C.V. Series CPO 37,820
45,111 Wal-Mart de Mexico, S.A.B. de C.V. Series V 157,268
Service - 0.02%
700 Grupo Aeroportuario del Sureste,
S.A.B. de C.V. Series B 4,284
100 Promotora Ambiental S.A.B. de C.V.* 307
--------------------------
*Non-income producing
See accompanying notes.
-8-
Schedule of Investments as of December 31, 2007 (continued)
================================================================================
Shares or Principal Amount Description Market Value
--------------------------------------------------------------------------------
Trucking and marine freight - 8.06%
29,800 Grupo TMM, S.A.B. ADR* $ 67,050
1,001 Seaboard Corporation 1,471,470
52,045 Trailer Bridge, Inc.* 611,008
10,000 Ultrapetrol Bahamas Ltd.* 170,100
Utilities - 6.97%
12,000 Caribbean Utilities Ltd. Class A 146,640
64,241 Consolidated Water, Inc. 1,618,231
700 Cuban Electric Company* 11,200
13,500 Teco Energy Inc. 232,335
Other - 2.64%
17,000 Copa Holdings S.A. 638,690
55,921 Margo Caribe, Inc.* 111,842
100 Mexichem S.A.B. de C.V. 400
843 Siderurgica Venezolana Sivensa, S.A. ADR 8,048
75 Siderurgica Venezolana Sivensa, S.A. Series B 716
45,000 Xcelera, Inc. (Note 2)* --
-----------
Total common stocks (cost $16,033,580) $19,066,796
-----------
Bonds - 0% of net assets
165,000 Republic of Cuba - 4.5%, 1977 - in default $ --
-----------
Total bonds (cost $63,038) (Note 2)* $ --
-----------
U.S. Treasury Obligations - 34.69% of net assets
$5,000,000 U.S. Treasury Bills due 1/10/08, 0% coupon $ 4,997,900
$5,000,000 U.S. Treasury Bills due 1/24/08, 0% coupon 4,992,013
-----------
Total U.S. Treasury Bills (cost $9,969,996) $ 9,989,913
-----------
Other assets less liabilities - (0.91%) of net assets ($ 262,320)
-----------
Net assets - 100% $28,794,390
===========
--------------------------
*Non-income producing
See accompanying notes.
-9-
Statement of Assets and Liabilities as of
December 31, 2007 (unaudited)
================================================================================
ASSETS
Investments in securities, at market value (cost $26,066,614)
(Note 2) $29,056,709
Cash 4,868,499
Dividends receivable 262,203
Other assets 33,249
-----------
TOTAL ASSETS 34,220,660
-----------
LIABILITIES
Payable for investments purchased 727,360
Distributions payable 4,479,807
Accrued investment advisor fee (Note 3) 93,249
Other payables 125,854
-----------
TOTAL LIABILITIES 5,426,270
-----------
NET ASSETS (Equivalent to $8.23 per share
based on 3,499,849 shares outstanding) $28,794,390
===========
Net assets consist of the following:
Common stock, $.001 par value; 100,000,000
shares authorized; 3,499,849 shares issued
and outstanding $ 3,500
Additional paid-in capital 25,301,240
Accumulated net investment loss (2,173,824)
Accumulated net realized gain on investments 2,673,379
Net unrealized gain on investments 2,990,095
-----------
TOTAL $28,794,390
===========
See accompanying notes.
-10-
Statement of Operations Six Months
Ended December 31, 2007 (unaudited)
================================================================================
INVESTMENT INCOME
Dividends $ 889,131
EXPENSES
Investment advisor fees (Note 3) $ 152,003
Professional fees 57,545
Custodian fees 27,000
Insurance 15,413
Transfer agent fees 9,782
Listing fees 7,500
CCO Expense 7,625
Proxy services 9,450
Printing and Postage 9,550
Director fees 6,600
Miscellaneous 21,578
-----------
Total investment expenses 324,046
-----------
INVESTMENT GAIN - NET 565,085
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS AND FOREIGN CURRENCY
Net realized gain on investments and foreign
currency 2,755,447
Change in unrealized gain on investments and
foreign currency (4,566,994)
-----------
NET GAIN (LOSS) ON INVESTMENTS (1,811,547)
-----------
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS ($ 1,246,462)
===========
See accompanying notes.
-11-
Statements of Changes in Net Assets (unaudited)
================================================================================
Six Months
Ended Year Ended
12/31/07 6/30/07
(unaudited)
INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS:
Net investment gain (loss) $ 565,085 ($ 263,944)
Net realized gain on investments and
foreign currency 2,755,447 1,894,365
Change in unrealized gain (loss) on investments
and foreign currency (4,566,994) 2,866,877
------------ -----------
Net increase in net assets resulting from
operations (1,246,462) 4,497,298
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment income and short-term realized gains (200,000) --
Realized gains - long-term (4,279,907) (1,677,636)
------------ -----------
Total Distributions (4,479,807) (1,677,636)
CAPITAL STOCK TRANSACTIONS
Effect due to shares issued in reinvestment of
distribution (9,920 shares) (Note 6) -- 108,062
Net proceeds of rights offering (Note 6) 18,039,442 --
------------ -----------
Total Capital Stock Transactions 18,039,442 108,062
NET INCREASE IN NET ASSETS $ 12,313,173 $ 2,927,724
NET ASSETS:
Beginning of period 16,481,217 13,553,493
------------ -----------
End of period $ 28,794,390 $16,481,217
============ ===========
See accompanying notes.
-12-
Financial Highlights
================================================================================
Six Months Ended Year Ended June 30
12/31/07
(unaudited) 2007 2006 2005 2004
------------- ---- ---- ---- ----
PER SHARE OPERATING PERFORMANCE
(For a share of capital stock outstanding for each time period indicated)
Net asset value, beginning of year $9.77 8.08 $7.33 $5.43 $3.95
----- ---- ----- ----- -----
Operations:
Net investment gain (loss)(1) 0.16 (0.14) (0.16) (0.09) (0.07)
Net realized and unrealized gain (loss) on investment
transactions(1) (0.51) 2.83 1.08 1.99 1.55
------ ---- ---- ---- ----
Total from operations (0.35) 2.69 0.92 1.90 1.48
------ ---- ---- ---- ----
Distributions:
From net investment income (0.057) -- -- -- --
From net realized gains (1.223) (1.00) (0.17) -- --
------- ------ ------
Total distributions (1.280) (1.00) (0.17) -- --
------- ------ ------
Effect of rights offering 0.09 -- -- -- --
Net asset value, end of year $8.23 $9.77 $8.08 $7.33 $5.43
----- ----- ----- ----- -----
Per share market value, end of year $8.03 $13.59 $7.57 $6.30 $4.87
----- ------ ----- ----- -----
Total investment return (loss) based on
market value per share (31.39%) 94.61% 22.86% 29.36% 39.54%
------- ------ ------ ------
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of year (in 000's) $28,794 $16,481 $13,553 $12,292 $9,109
------- ------- ------- ------- ------
Ratio of expenses to average net assets 3.16%(2) 3.28% 3.37% 3.55% 3.67%
----- ----- ----- ----- -----
Ratio of net investment gain (loss)
to average net assets 5.51%(2) (1.83%) (1.95%) (1.47%) (1.39%)
----- ------- ------- ------- -------
Portfolio turnover rate 22% 28% 40% 30% 23%
--- --- --- --- ---
(1)Computed by dividing the respective period's amounts from the Statement of
Operations by the average outstanding shares for each time period presented.
(2)This figure has been annualized; however, the percentage shown is not
necessarily indicative of results for a full year.
See accompanying notes.
-13-
Notes to Financial Statements
================================================================================
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Related Matters
The Herzfeld Caribbean Basin Fund, Inc. (the Fund) is a non-diversified,
closed-end management investment company incorporated under the laws of the
State of Maryland on March 10, 1992, and registered under the Investment Company
Act of 1940. The Fund commenced investing activities in January, 1994. The Fund
is listed on the NASDAQ Capital Market and trades under the symbol "CUBA".
The Fund's investment objective is to obtain long-term capital appreciation. The
Fund pursues its objective by investing primarily in equity and equity-linked
securities of public and private companies, including U.S.-based companies, (i)
whose securities are traded principally on a stock exchange in a Caribbean Basin
Country or (ii) that have at least 50% of the value of their assets in a
Caribbean Basin Country or (iii) that derive at least 50% of their total revenue
from operations in a Caribbean Basin Country (collectively, "Caribbean Basin
Companies"). Under normal conditions, the Fund invests at least 80% of its total
assets in equity and equity-linked securities of Caribbean Basin Companies. The
Fund's investment objective is fundamental and may not be changed without the
approval of a majority of the Fund's outstanding voting securities.
At December 31, 2007, the Fund had foreign investments in companies operating
principally in Mexico and the Cayman Islands, representing approximately 17.77%
and 6.13% of the Fund's net assets, respectively.
The Fund's custodian and transfer agent is State Street Bank and Trust Company
("SSBT"), 200 Clarendon Street, PO Box 9130, Boston, Massachusetts 02117.
Security Valuation
Investments in securities traded on a national securities exchange (or reported
on the NASDAQ National Market or Capital Market) are stated at the last reported
sales price on the day of valuation (or at the NASDAQ official closing price);
other securities traded in the over-the-counter market and listed securities for
which no sale was reported on that date are stated at the last quoted bid price.
Restricted securities and other securities for which quotations are not readily
available are valued at fair value as determined by the Board of Directors.
In September, 2006, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 157, "Fair Value Measurements"
(SFAS No. 157). SFAS No. 157 defines fair value, establishes a framework for
measuring fair value in accordance with generally accepted accounting principals
and expands disclosure about fair value measurements. SFAS No. 157 is effective
for fiscal years beginning after November 15, 2007. Management is currently
evaluating the impact the adoption of SFAS No. 157 will have on the Fund's
financial statement disclosures.
-14-
Notes to Financial Statements
================================================================================
In February, 2007, FASB issued Statement of Financial Accounting Standards No.
159, "The Fair Value Option for Financial Assets and Financial Liabilities -
including an amendment of FASB Statement No. 115" (SFAS No. 159). SFAS No. 159
permits entities to elect to measure certain financial assets and liabilities at
fair value. Unrealized gains and losses on items for which the fair value option
has been elected will be reported in earnings at each subsequent reporting date.
SFAS No. 159 is effective as of the beginning of the first fiscal year that
begins after November 15, 2007. Management is currently evaluating the impact
the adoption of SFAS No. 159 wil have on the Fund's financial statements.
Income Recognition
Security transactions are recorded on the trade date. Gains and losses on
securities sold are determined on the basis of identified cost. Dividend income
is recognized on the ex-dividend date, or in the case of certain foreign
securities, as soon as the Fund is notified, and interest income is recognized
on an accrual basis. Pursuant to a custodian agreement, SSBT receives a fee
reduced by credits which are determined based on the average daily cash balance
the Fund maintains with SSBT. Credit balances used to reduce the Fund's
custodian fees for the six months ended December 31, 2007, were approximately
$2,169. Discounts and premiums on debt securities purchased are amortized over
the life of the respective securities. It is the Fund's practice to include the
portion of realized and unrealized gains and losses on investments denominated
in foreign currencies as components of realized and unrealized gains and losses
on investments and foreign currency.
Deposits with Financial Institutions
The Fund may, during the course of its operations, maintain account balances
with financial institutions in excess of federally insured limits.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
-15-
Notes to Financial Statements
================================================================================
Income Taxes
The Fund's policy is to continue to comply with the provisions of the Internal
Revenue Code that are applicable to regulated investment companies and to
distribute all its taxable income to its stockholders. Under these provisions,
the Fund is not subject to federal income tax on its taxable income and no
federal tax provision is required.
The Fund has adopted a June 30 year-end for federal income tax purposes.
Distributions to Stockholders
Distributions to stockholders are recorded on the ex-dividend date. Income and
capital gain distributions are determined in accordance with income tax
regulations which may differ from accounting principles generally accepted in
the United States of America. For the six months ended December 31, 2007, a
distribution from long-term capital gains of $1.223 per share and an income
distribution of $0.057 per share was declared on November 26, 2007, payable on
January 9, 2008 to shareholders of record December 12, 2007. The distribution
was paid in stock, unless an election to receive cash was made by the
stockholder. Shares were issued at a reinvestment price of $7.94 per share which
was equal to the net asset value of the common shares on the payable date of the
distribution, January 9, 2008.
NOTE 2. NON-MARKETABLE SECURITIES OWNED
Investments in securities include $165,000 principal, 4.5%, 1977 Republic of
Cuba bonds purchased for $63,038. The bonds were listed on the New York Stock
Exchange and had been trading in default since 1960. A "regulatory halt" on
trading was imposed by the New York Stock Exchange in July, 1995 and trading in
the bonds was suspended as of December 28, 2006. The New York Stock Exchange has
stated that following the suspension of trading, application will be made to the
Securities and Exchange Commission to delist the issue. As of December 31, 2007,
the position was valued at $0 by the Board of Directors, which approximates the
bonds' fair value.
Investments in securities also include 45,000 shares of Xcelera, Inc. The
security traded on the Pink Sheets until the first quarter of 2007 when trading
was discontinued. As of December 31, 2007, the position was valued at $0 by the
Board of Directors, which approximates the position's fair value.
NOTE 3. TRANSACTIONS WITH AFFILIATES
HERZFELD / CUBA (the "Advisor"), a division of Thomas J. Herzfeld Advisors,
Inc., is the Fund's investment advisor and charges a monthly fee at the annual
rate of 1.45% of the Fund's average daily net assets. Total advisory fees for
the six months ended December 31, 2007 amounted to $152,003, of which $93,249
was payable as of December 31, 2007.
-16-
Notes to Financial Statements
================================================================================
During the six months ended December 31, 2007, the Fund paid $19,061 of
brokerage commissions to Thomas J. Herzfeld & Co., Inc., an affiliate of the
Advisor.
NOTE 4. INVESTMENT TRANSACTIONS
During the six months ended December 31, 2007, purchases and sales of investment
securities were $9,590,837 and $3,176,999, respectively.
At December 31, 2007, the Fund's investment portfolio had gross unrealized gains
of $4,287,150 and gross unrealized losses of $1,297,055, resulting in a net
unrealized gain of $2,990,095 for financial statement purposes.
NOTE 5. INCOME TAX INFORMATION
For the six months ended December 31, 2007, the Fund had net realized gains of
$2,755,447.
NOTE 6: CAPITAL SHARE TRANSACTIONS
Rights Offering
On October 26, 2007 the Fund issued 1,812,293 common shares in connection with a
rights offering. Stockholders of record September 26, 2007 were issued one
non-transferable right for every share owned on that date. The rights entitled
the stockholders to purchase one new common share for every right held. In
addition, the Fund had the discretion to increase the number of shares of common
stock subject to subscription by up to 100% of the shares offered, or up to an
additional 1,678,556 additional shares of common stock.
The subscription price was equal to 85% of the average volume-weighted sales
price per share of the Fund's common stock on the NASDAQ Capital Market on
October 26, 2007 and the four preceding trading days. The final subscription
price was $10.04 per share. Net proceeds to the Fund were $18,039,442 after
deducting rights offering costs of $155,979. The net aset value of the Fund's
common shares was increased by approximately $0.09 per share as a result of the
share issuance.
2006 Year-End Distribution
For the year ended June 30, 2007, the Fund issued 9,920 shares for reinvestment
of distributions. The net effect of the reinvestment of distributions resulted
in an increase in net assets of $108,062.
-17-
Notes to Financial Statements
================================================================================
NOTE 7: SUBSEQUENT EVENT
On January 9, 2008, the Fund issued 213,211 common shares in connection with a
year-end distribution of $1.28 per share paid in stock. Stockholders were also
given the option of receiving the payment in cash. Shares were issued at $7.94
per share, equal to the net asset value of the Fund on the payable date of
January 9, 2008.
-18-
Dividend Reinvestment Plan
================================================================================
Registered holders ("Stockholders") of shares of common stock, $0.001 par value
("Common Stock") of Herzfeld Caribbean Basin Fund, Inc. (the "Fund") will
automatically be enrolled ("Participants") in the Fund's Dividend Reinvestment
Plan (the "Plan") and are advised as follows:
1. State Street Bank & Trust Company (the "Agent") will act as agent for each
Participant. The Agent will open an account for each registered
shareholder as a Participant under the Plan in the same name in which such
Participant's shares of Common Stock are registered.
2. CASH OPTION. Pursuant to the Fund's Plan, unless a holder of Common Stock
otherwise elects, all dividend and capital gains distributions payable in
cash ("Distributions") will be automatically reinvested by the Agent in
additional Common Stock of the Fund. Stockholders who elect not to
participate in the Plan will receive all cash distributions in cash paid
by check mailed directly to the shareholder of record (or, if the shares
are held in street or other nominee name then to such nominee) by the
Agent, as dividend paying agent. Stockholders and Participants may elect
not to participate in the Plan and to receive all cash distributions of
dividends and capital gains in cash by sending written instructions to the
Agent, as dividend paying agent, at the address set forth below.
3. MARKET PREMIUM ISSUANCES. If on the payment date for a Distribution, the
net asset value per Common Stock is equal to or less than the market price
per Common Stock plus estimated brokerage commissions, the Agent shall
receive newly issued Common Stock ("Additional Common Stock") from the
Fund for each Participant's account. The number of Additional Common Stock
to be credited shall be determined by dividing the dollar amount of the
Distribution by the greater of (i) the net asset value per Common Share on
the payment date, or (ii) 95% of the market price per Common Share on the
payment date.
4. MARKET DISCOUNT PURCHASES. If the net asset value per Common Stock exceeds
the market price plus estimated brokerage commissions on the payment date
for a Distribution, the Agent (or a broker-dealer selected by the Agent)
shall endeavor to apply the amount of such Distribution on each
Participant's Common Stock to purchase Common Stock on the open market. In
the event of a market discount on the payment date, the Agent will have 30
days after the dividend payment date (the "last purchase date") to invest
the dividend amount in shares acquired in open-market purchases. The
weighted average price (including brokerage commissions) of all Common
Stock purchased by the Agent as Agent shall be the price per Common Stock
allocable to each Participant. If, before the Agent has completed its
purchases, the market price plus estimated brokerage commissions exceeds
the net asset value of the Common Stock as of the payment date, the
purchase price paid by Agent may exceed the net asset value of the Common
Stock, resulting in the acquisition of fewer Common Stock than if such
Distribution had been paid in Common Stock issued by the Fund. Because of
the foregoing difficulty with respect to open-market purchases, the Plan
provides that if the Plan Agent is unable to invest the full dividend
amount in open-market purchases during the purchase period or if the
market discount shifts to a market premium during the purchase period, the
Plan Agent may cease making open-market purchases and may invest the
uninvested portion of the dividend amount in newly issued Common Stock at
the net asset value per Common Stock at the close of business on the last
purchase date. Participants should note that they will not be able to
instruct the Agent to purchase Common Stock at a specific time or at a
specific price. Open-market purchases may be made on any securities
exchange where Common Stock are traded, in the over-the-counter market or
in negotiated transactions, and may be on such terms as to price, delivery
and otherwise as the Agent shall determine. Each Participant's uninvested
funds held by the Agent will not bear interest. The Agent shall have no
liability in connection with any inability to purchase Common Stock within
the time provided, or with the timing of any purchases effected. The Agent
shall have no responsibility for the value of Common Stock acquired. The
Agent may commingle Participants' funds to be used for open-market
purchases of the Fund's shares and the price per share allocable to each
Participant in connection with such purchases shall be the average price
(including brokerage commissions and other related costs) of all Fund
shares purchased by Agent. The rules and regulations of the Securities and
Exchange Commission may require the Agent to limit the Agent's market
purchases or temporarily cease making market purchases for Participants.
-19-
Dividend Reinvestment Plan (continued)
================================================================================
5. The market price of Common Stock on a particular date shall be the last
sales price on the securities exchange where the Common Stock are listed
on that date (currently the NASDAQ Capital Market)(the "Exchange"), or, if
there is no sale on the Exchange on that date, then the average between
the closing bid and asked quotations on the Exchange on such date will be
used. The net asset value per Common Stock on, a particular date shall be
the amount calculated on that date (or if not calculated on such date, the
amount most recently calculated) by or on behalf of the Fund.
6. Whenever the Agent receives or purchases shares or fractional interests
for a Participant's account, the Agent will send such Participant a
notification of the transaction as soon as practicable. The Agent will
hold such shares and fractional interests as such Participant's agent and
may hold them in the Agent's name or the name of the Agent's nominee. The
Agent will not send a Participant stock certificates for shares unless a
Participants so requests in writing or unless a Participant's account is
terminated as stated below. The Agent will vote any shares so held for a
Participant in accordance with any proxy returned to the Fund by such
Participant in respect of the shares of which such Participant is the
record holder.
7. There is presently no service charge for the Agent serving as
Participants' agent and maintaining Participants' accounts. The Agent may,
however, charge Participants for extra services performed at their
request. The Plan may be amended in the future to impose a service charge.
In acting as Participants' agent under the Plan, the Agent shall be liable
only for acts, omissions, losses, damages or expenses caused by the
Agent's willful misconduct or gross negligence. In addition, the Agent
shall not be liable for any taxes, assessments or governmental charges
which may be levied or assessed on any basis whatsoever in connection with
the administration of the Plan.
-20-
Dividend Reinvestment Plan (continued)
================================================================================
8. The Agent may hold each Participant's Common Stock acquired pursuant to
the Plan together with the Common Stock of other Stockholders of the Fund
acquired pursuant to the Plan in non-certificated form in the Agent's name
or that of the Agent's nominee. Each Participant will be sent a
confirmation by the Agent of each acquisition made for his or her account
as soon as practicable, but in no event later than 60 days, after the date
thereof. Upon a Participant's request, the Agent will deliver to the
Participant, without charge, a certificate or certificates for the full
Common Stock. Although each Participant may from time to time have an
undivided fractional interest in a Common Share of the Fund, no
certificates for a fractional share will be issued. Similarly,
Participants may request to sell a portion of the Common Stock held by the
Agent in their Plan accounts by calling the Agent, writing to the Agent,
or completing and returning the transaction form attached to each Plan
statement. The Agent will sell such Common Stock through a broker-dealer
selected by the Agent within 5 business days of receipt of the request.
The sale price will equal the weighted average price of all Common Stock
sold through the Plan on the day of the sale, less brokerage commissions.
Participants should note that the Agent is unable to accept instructions
to sell on a specific date or at a specific price. Any share dividends or
split shares distributed by the Fund on Common Stock held by the Agent for
Participants will be credited to their accounts. In the event that the
Fund makes available to its Stockholders rights to purchase additional
Common Stock, the Common Stock held for each Participant under the Plan
will be added to other Common Stock held by the Participant in calculating
the number of rights to be issued to each Participant.
If a Participant holds more than one Common Stock Certificate registered
in similar but not identical names or if more than one address is shown
for a Participant on the Fund's records, all of such Participant's shares
of Common Stock must be put into the same name and address if all of them
are to be covered by one account. Additional shares subsequently acquired
by a Participant otherwise than through the Plan will be covered by the
Plan.
9. The reinvestment of Distributions does not relieve Participants of any
federal, state or local taxes which may be payable (or required to be
withheld on Distributions.) Participants will receive tax information
annually for their personal records and to help them prepare their federal
income tax return. For further information as to tax consequences of
participation in the Plan, Participants should consult with their own tax
advisors.
10. Each registered Participant may terminate his or her account under the
Plan by notifying the Agent in writing at State Street Bank and Trust,
P.O. Box 642, Boston, MA 02117-0642, or by calling the Agent at (617)
937-6870. Such termination will be effective with respect to a particular
Distribution if the Participant's notice is received by the Agent prior to
such Distribution record date. The Plan may be terminated by the Agent or
the Fund upon notice in writing mailed to each Participant at least 60
days prior to the effective date of the termination. Upon any termination,
the Agent will cause a certificate or certificates to be issued for the
full shares held for each Participant under the Plan and cash adjustment
for any fraction of a Common Share at the then current market value of the
Common Shares to be delivered to him. If preferred, a Participant may
request the sale of all of the Common Shares held by the Agent in his or
her Plan account in order to terminate participation in the Plan. If any
Participant elects in advance of such termination to have Agent sell part
or all of his shares, Agent is authorized to deduct from the proceeds the
brokerage commissions incurred for the transaction. If a Participant has
terminated his or her participation in the Plan but continues to have
Common Shares registered in his or her name, he or she may re-enroll in
the Plan at any time by notifying the Agent in writing at the address
above.
-21-
Dividend Reinvestment Plan (continued)
================================================================================
11. These terms and conditions may be amended by the Agent or the Fund at any
time but, except when necessary or appropriate to comply with applicable
law or the rules or policies of the Securities and Exchange Commission or
any other regulatory authority, only by mailing to each Participant
appropriate written notice at least 30 days prior to the effective date
thereof. The amendment shall be deemed to be accepted by each Participant
unless, prior to the effective date thereof, the Agent receives notice of
the termination of the Participant's account under the Plan. Any such
amendment may include an appointment by the Agent of a successor Agent,
subject to the prior written approval of the successor Agent by the Fund.
12. These terms and conditions shall be governed by the laws of the State of
Maryland.
Dated: November 22, 2006
-22-
Discussion Regarding the Approval of the Investment Advisory Agreement
================================================================================
The Fund's Board of Directors including a majority of those directors who are
not "interested persons" as such term is defined in the 1940 Act ("Independent
Directors") unanimously approved the continuance of the investment advisory
agreement between the Fund and the Advisor (the "Agreement") at a meeting held
on August 17, 2007.
Before meeting to determine whether to approve the Agreement, the Board had the
opportunity to review written materials provided by the Advisor and by legal
counsel to the Fund which contained information to help the Board evaluate the
Agreement. The materials included (i) a memorandum from the Fund's legal counsel
regarding the Directors' responsibilities in evaluating and approving the
Agreement, (ii) a letter from the Advisor containing detailed information about
the Advisor's services to the Fund, Fund performance, allocation of Fund
transactions, compliance and administration information, and the compensation
received by the Advisor from the Fund; (iii) a copy of the current investment
advisory agreement between the Fund and the Advisor; (iv) audited financial
statements for the Advisor for the year-ended December 31, 2006 and unaudited
financial statements for the six months ended June 30, 2007; (v) the Advisor's
Form ADV Parts I and II; (vi) comparative performance data for the Fund relative
to peer funds (small closed-end funds and foreign funds invested in the Latin
American region); and (vii) comparative statistics and fee data for the Fund
relative to peer funds.
During its deliberations on whether to approve the continuance of the Agreement,
the Board considered many factors. The Board considered the nature, extent and
quality of the services to be provided by the Advisor and determined that such
services will meet the needs of the Fund and its shareholders. The Board
reviewed the services provided to the Fund by the Advisor as compared to
services provided by other advisors, which manage investment companies with
investment objectives, strategies and policies similar to those of the Fund. The
Board concluded that the nature, extent and quality of the services provided by
the Advisor were appropriate and consistent with the terms of the advisory
agreement, that the quality of those services had been consistent with industry
norms and that the Fund was likely to benefit from the continued provision of
those services. The Board also concluded that the Advisor had sufficient
personnel, with the appropriate education and experience, to serve the Fund
effectively and had demonstrated its continuing ability to attract and retain
qualified personnel.
Both at the meeting and on an ongoing basis throughout the year, the Board
considered and evaluated the investment performance of the Fund and reviewed the
Fund's performance relative to other investment companies and funds with similar
investment objectives, strategies and policies, and its respective benchmark
index. The Board considered both the short-term and long-term performance of the
Fund. They concluded that the performance of the Fund was within an acceptable
range of performance relative to other funds with similar investment objectives,
strategies and policies.
-23-
Discussion Regarding the Approval of the Investment Advisory Agreement
(continued)
================================================================================
The Board considered the costs of the services provided by the Advisor, the
compensation and benefits received by the Advisor providing services to the
Fund, as well as the Advisor's profitability. In addition, the Board considered
any direct or indirect revenues received by affiliates of the Advisor including
the commissions paid to the Fund's affiliated broker/dealer, Thomas J. Herzfeld
& Co., Inc. The Board considered the advisory fees paid to the Advisor by the
Fund and relevant comparable fee data and statistics of a sampling of small
closed-end funds and foreign funds invested in the Latin American region. The
Board further discussed the services by the Advisor and concluded that the
advisory services performed were efficient and satisfactory and that the fee
charged was reasonable and not excessive. The Board concluded that the Advisor's
fees and profits derived from its relationship with the Fund in light of its
expenses, were reasonable in relation to the nature and quality of the services
provided, taking into account the fees charged by other advisors for managing
comparable funds with similar strategies. The Directors also concluded that the
overall expense ratio of the Fund was reasonable, taking into account the size
of the Fund, the quality of services provided by the Advisor, and the investment
performance of the Fund.
The Board also considered the extent to which economies of scale would be
realized relative to fee levels as the Fund grows, and whether the advisory fee
levels reflect these economies of scale for the benefit of shareholders. The
Board recognized that because of the closed-end structure of the Fund, and the
fact that there is no influx of capital, this particular factor is less relevant
to the Fund than it would be to an open-end fund. The Board concluded that only
marginal economies of scale could be achieved through the growth of assets since
the Fund is closed-ended.
The Board also considered its deliberations regarding the Advisor's services and
performance from the regular Board meetings held throughout the year, including
the Board's discussion of the Fund's investment objective, long-term
performance, investment style and process. The Board noted the high level of
diligence with which it reviews and evaluates the Advisor throughout the year
and the extensive information provided with respect to Advisor's performance and
the Fund's expenses on a quarterly basis. The Board also considered whether
there have occurred any events that would constitute a reason not to renew the
Agreement and concluded there were not.
After deliberation and further consideration of the factors discussed above and
information presented at the August 17, 2007 meeting and at previous meetings of
the Board, the Board and the Independent Directors determined to continue the
Agreement for an additional one-year period. In arriving at this decision, the
Board and the Independent Directors did not identify any single matter, factor
or consideration as controlling, but made their determination in light of all
the circumstances. The Board based its decision to approve the Agreement on all
the relevant factors in light of its reasonable business judgment, and with a
view to future long-term considerations.
-23-
Results of November 14, 2007 Stockholder Meeting
================================================================================
The annual meeting of stockholders of the Fund was held on November 14, 2007. At
the meeting two nominees for Director posts were elected as follows:
Votes for Votes withheld
Ann S. Lieff 1,289,802 39,314
Kay W. Tatum 1,294,657 34,460
The terms of office as directors of Thomas J. Herzfeld and Michael A. Rubin
continued after the meeting.
Quarterly Portfolio Reports
================================================================================
The Fund files quarterly schedules of portfolio holdings with the Securities and
Exchange Commission (SEC) for the first and third quarters of each fiscal year
on Form N-Q. The Form N-Q is available by link on the Fund's website at
www.herzfeld.com, by calling the Fund at 800-TJH-FUND, or on the SEC's EDGAR
database at www.sec.gov. In addition, the Form N-Q can be reviewed and copied at
the SEC's public reference room in Washington, D.C. More information about the
SEC's website or the operation of the public reference room can be obtained by
calling the SEC at 1-800-732-0330.
Proxy Voting Policies and Procedures
================================================================================
Information regarding how the Fund voted proxies relating to portfolio
securities from July 1, 2006 to June 30, 2007, and a description of the policies
and procedures used to determine how to vote proxies relating to portfolio
securities is available without charge, upon request, by calling the Fund at
800-TJH-FUND, or by accessing the SEC's website at www.sec.gov.
-25-
Privacy Policy
================================================================================
Information We Collect
We collect nonpublic information about you from applications or other account
forms you complete, from your transactions with us, our affiliates or others
through transactions and conversations over the telephone.
Information We Disclose
We do not disclose information about you, or our former customers, to our
affiliates or to service providers or other third parties except on the limited
basis permitted by law. For example, we may disclose nonpublic information about
you to third parties to assist us in servicing your account with us and to send
transaction confirmations, annual reports, prospectuses and tax forms to you. We
may also disclose nonpublic information about you to government entities in
response to subpoenas.
Our Security Procedures
To ensure the highest level of confidentiality and security, we maintain
physical, electronic and procedural safeguards that comply with federal
standards to guard your personal information. We also restrict access to your
personal and account information to those employees who need to know that
information to provide services to you.
-26-
Officers and Directors
================================================================================
Officers
THOMAS J. HERZFELD
Director, Chairman of the Board, President and Portfolio Manager
CECILIA GONDOR
Secretary, Treasurer, Chief Compliance Officer
Independent Directors
ANN S. LIEFF
Director
MICHAEL A. RUBIN
Director
KAY W. TATUM
Director
-27-
THE HERZFELD CARIBBEAN BASIN FUND, INC.
The Herzfeld Building
P.O. Box 161465
Miami, FL 33116
ITEM 2. CODE OF ETHICS
(a) Not applicable.
(c) There have been no amendments, during the period covered by this report, to
a provision of the code of ethics that applies to the registrant's principal
executive officer, principal financial officer, principal accounting officer or
controller, or persons performing similar functions, regardless of whether these
individuals are employed by the registrant or a third party, and that relates to
any element of the code of ethics description.
(d) The registrant has not granted any waivers, including an implicit waiver,
from a provision of the code of ethics that applies to the registrant's
principal executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions, regardless of
whether these individuals are employed by the registrant or a third party, that
relates to one or more of the items set forth in paragraph (b) of this item's
instructions.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
Not applicable as schedule is included as part of the report to shareholders
filed under Item 1 of this Form.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
(a) Not applicable.
(b) No changes to the portfolio manager identified in paragraph 8(a)(1) of
registrant's most recent annual report on this form.
================================================================================
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END FUND MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
-----------------------------------------------------------------------------------------------------------
(c) Total Number of (d) Maximum Number
Shares Purchased as of Shares that May
Part of Publicly Yet Be Purchased
(a) Total Number of (b) Average Price Announced Plans or Under the Plans or
PERIOD Shares Purchased Paid Per Share Programs Programs
-----------------------------------------------------------------------------------------------------------
Month #1 (beginning 0 n/a n/a n/a
July 1, 2007 and
ending July 31,
2007)
-----------------------------------------------------------------------------------------------------------
Month #2 (beginning 0 n/a n/a n/a
August 1, 2007 and
ending August 31,
2007)
-----------------------------------------------------------------------------------------------------------
Month #3 (beginning 0 n/a n/a n/a
September 1, 2007 and
ending September 31, 2007)
-----------------------------------------------------------------------------------------------------------
Month #4 (beginning 109,624* $10.04* n/a n/a
October 1, 2007 and
ending October 31, 2007)
-----------------------------------------------------------------------------------------------------------
Month #5 (beginning 0 n/a n/a n/a
November 1, 2007 and
ending November 30, 2007)
-----------------------------------------------------------------------------------------------------------
Month #6 (beginning 0 n/a n/a n/a
December 1, 2007 and
ending December 31, 2007)
-----------------------------------------------------------------------------------------------------------
Total 109,624* $10.04* n/a n/a
-----------------------------------------------------------------------------------------------------------
* These shares were purchased by Thomas J. Herzfeld for his account in
connection with a rights offering completed on October 26, 2007. Mr.
Herzfeld is a director and officer of the Registrant and a controlling
person of the Registrant's investment adviser. Accordingly, Mr. Herzfeld
is an "affiliated purchaser" of the Registrant's shares as such term is
defined by Rule 10b-18(a)(3) under the Exchange Act of 1934.
================================================================================
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which the stockholders
may recommend nominees to the registrant's board of directors, where those
changes were implemented after the registrant last provided disclosure in
response to the requirements of Item 407(c)(2)(iv) of Regulation S-K
(17CFR229.407)(as required by Item 22(b)(15) of Schedule 14A (17 CFR
240.14a-101)), or this Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers, or
persons performing similar functions, have concluded that the registrant's
disclosure controls and procedures (as defined in Rule 30a-3(c) under the
Investment Company Act of 1940, as amended (the "1940 Act") (17 CFR
270.30a-3(c))) are effective, as of a date within 90 days of the filing date of
the report that includes the disclosure required by this paragraph, based on
their evaluation of these controls and procedures required by Rule 30a-3(b)
under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under
the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or
240.15d-15(b)).
(b) There were no changes in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d))
that occurred during the registrant's last fiscal half-year (the registrant's
second fiscal half-year in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant's
internal control over financial reporting.
ITEM 12. EXHIBITS.
(a)(2) Certifications pursuant to Rule 30a-2(b) under the 1940 Act and Section
302 of the Sarbanes-Oxley Act of 2002 are filed herewith as Exhibits 99.302
Cert.
(a)(3) Not applicable.
(b) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 906
of the Sarbanes-Oxley Act of 2002 are filed herewith as Exhibits 99.906 Cert.
================================================================================
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
The Herzfeld Caribbean Basin Fund, Inc.
By: /s/ Thomas J. Herzfeld
-------------------------
Thomas J. Herzfeld
President and Chairman
Date: February 28, 2008
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Thomas J. Herzfeld
-------------------------
Thomas J. Herzfeld
President and Chairman
Date: February 28, 2008
By: /s/ Cecilia L. Gondor
-------------------------
Cecilia L. Gondor
Secretary and Treasurer
(Principal Financial Officer)
Date: February 28, 2008