THE HERZFELD
CARIBBEAN BASIN
FUND, INC.
ANNUAL REPORT
JUNE 30, 2002
================================================================================
--------------------------
THE HERZFELD CARIBBEAN BASIN FUND, INC. The Herzfeld Caribbean
The Herzfeld Building Basin Fund's investment
PO Box 161465 objective is long-term
Miami, FL 33116 capital appreciation. To
(305) 271-1900 achieve its objective,
the Fund invests in
INVESTMENT ADVISOR issuers that are likely,
HERZFELD / CUBA in the Advisor's view, to
a division of Thomas J. Herzfeld Advisors, Inc. benefit from economic,
PO Box 161465 political, structural and
Miami, FL 33116 technological
(305) 271-1900 developments in the
countries in the
TRANSFER AGENT & REGISTRAR Caribbean Basin, which
Investors Bank & Trust Company consist of Cuba, Jamaica,
200 Clarendon Street, 16th Floor Trinidad and Tobago, the
Boston, MA 02116 Bahamas, the Dominican
(617) 443-6870 Republic, Barbados,
Aruba, Haiti, the
CUSTODIAN Netherlands Antilles, the
Investors Bank & Trust Company Commonwealth of Puerto
200 Clarendon Street, 5th Floor Rico, Mexico, Honduras,
Boston, MA 02116 Guatemala, Belize, Costa
Rica, Panama, Colombia
COUNSEL and Venezuela. The fund
Pepper Hamilton LLP invests at least 80% of
3000 Two Logan Square its total assets in a
18th and Arch Streets broad range of securities
Philadelphia, PA 19103 of issuers including
U.S.-based companies,
INDEPENDENT AUDITORS which engage in
Kaufman, Rossin & Co., P.A. substantial trade with
2699 South Bayshore Drive and derive substantial
Miami, FL 33133 revenue from operations
in the Caribbean Basin
Countries.
--------------------------
Listed NASDAQ SmallCap Market
Symbol: CUBA
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LETTER TO STOCKHOLDERS
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August 9, 2002 [PHOTO OMITTED]
Thomas J. Herzfeld
Chairman and President
Dear Fellow Stockholders:
We are pleased to present our annual report for the period ended June 30, 2002.
On that date The Herzfeld Caribbean Basin Fund's net assets were $6,568,076 and
its net asset value per share was $3.92 after payment of a distribution of
$0.1551 per share, compared with $8,642,634 (net asset value at $5.15 per share)
at the beginning of the period. This represents a loss of 20.5% in net asset
value after adjustment for the distribution, while our share price declined
13.45% (after adjustment for the distribution) from $4.20 to $3.48.
Although there was little change in the Fund's portfolio composition during the
year, you will notice many new names in the list of securities. These changes
are a result of our accepting a tender offer in THE MEXICO FUND, INC. (MXF)
which allowed us to exchange MXF shares for that fund's underlying portfolio
holdings at 98% of net asset value. MXF is also a closed-end fund, and we took
advantage of the fact that it traded at wide discounts to its net asset value in
mid-1999 to buy shares at bargain prices. At the time of our purchases, the fund
traded at prices which represented between 22.5% and 24% discounts to net asset
value per share. In 1999, we sold many of the Mexican securities we held in our
portfolio and loaded up on MXF at deep discounts. In this way we have maintained
our exposure to the Mexican market. The 2002 tender offer gave us an opportunity
to reverse our 1999 switch by allowing us to reacquire many of the same Mexican
securities, and since the tender permitted us to receive securities valued at
98% of net asset value, we gained the benefit of most of the discount.
The most potentially significant event for the Caribbean region is the eventual
lifting of the U.S. embargo against Cuba. In that respect, today's Miami Herald
had some interesting comments by House Majority leader Dick Armey, who states
that he believes Congressional backing for the embargo is fading; and he
predicts we may see less than a year of support for the restrictions on travel
and trade. The White House, on the other hand, persists in backing the embargo.
We continue to watch the political struggle with great interest.
3
LETTER TO SHAREHOLDERS (CONTINUED)
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LARGEST ALLOCATIONS
The following tables present our largest investments and geographic allocations
as of June 30, 2002.
GEOGRAPHIC % OF LARGEST PORTFOLIO % OF NET ASSETS
ALLOCATION NET ASSETS POSITIONS
USA 46.84% Florida East Coast Industries Inc. 22.61%
Mexico 17.70% PanAmerican Beverage Inc., Class A 7.55%
Panama 9.85% Consolidated Water Co. Ltd. 7.07%
Cayman Islands 9.18% Florida Rock Industries, Inc. 5.72%
Netherlands Antilles 4.29% Watsco Incorporated 4.68%
Latin American Regional 4.23% Orthofix International N.V. 4.28%
Belize 1.89% Carnival Corp. 4.26%
Puerto Rico 1.35% Coca Cola Femsa 4.17%
Virgin Islands 1.09% Royal Caribbean Cruises Ltd. 4.16%
Dominican Republic 1.04% Mastec, Inc. 3.61%
Colombia 0.29%
Venezuela 0.14%
Cuba 0.00%
PREMIUM/DISCOUNT
As the graph below depicts, the Fund has traded at both premiums and discounts
every year except its year of inception in which it traded only at a premium. As
I have stated before, we believe that closed-end funds trading at discounts to
net asset value represent good value. Following this philosophy, I added to my
personal holdings of The Herzfeld Caribbean Basin Fund several times during the
year.
PREMIUM/DISCOUNT OF THE HERZFELD CARIBBEAN BASIN FUND FROM INCEPTION
[CHART]
4
LETTER TO SHAREHOLDERS (CONTINUED)
================================================================================
Daily net asset values and press releases on the Fund are available on the
Internet at WWW.HERZFELD.COM.
The Fund will hold its annual meeting of stockholders on November 13, 2002, in
Miami, Florida. We hope you will be able to attend.
I would like to take this time to thank the members of the Board of Directors
for their hard work and guidance and also to thank you, my fellow stockholders,
for your continued support and suggestions.
Sincerely,
/s/ Thomas J. Herzfeld
Thomas J. Herzfeld
Chairman of the Board and President
5
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2002
================================================================================
Shares or Principal Amount Description Value
-------------------------- ----------- -----
COMMON STOCKS - 100.71% OF NET ASSETS
Banking and finance - 3.18%
8,000 Bancolombia S.A. $ 19,200
12,000 Banco Latinoamericano de Exportaciones, S.A. 150,600
28,300 Grupo Financiero BBVA Bancomer, S.A. de C.V. Series O* 23,084
3,600 Grupo Financiero Banorte, S.A. de C.V. Series O* 8,296
8,400 Grupo Financiero Inbursa, S.A. de C.V. Series O* 7,636
Communications - 9.37%
11,000 America Movil, S.A. de C.V. Series A 7,470
43,800 America Movil, S.A. de C.V. Series L 29,302
11,100 America Telecom, S.A. de C.V. Series A1 6,646
4,400 Atlantic Tele-Network 66,880
72,000 AT&T Latin America Corp.* 38,880
1,800 Bracknell Corp.* 2
11,100 Carso Global Telecom, S.A. de C.V. Series A1* 11,930
14,500 Grupo Iusacell, S.A. de C.V. Series V* 2,433
19,000 Grupo Radio Centro, S.A. ADR 57,950
5,500 Grupo Televisa, S.A. GDR* 205,590
12,100 Grupo Televisa, S.A. Series CPO* 22,523
11,000 Telefonos de Mexico, S.A. de C.V. Series A 17,569
39,300 Telefonos de Mexico, S.A. de C.V. Series L 62,769
21,000 Tricom S.A. ADR* 72,030
13,900 TV Azteca, S.A. de C.V. Series CPO* 5,892
31,200 WorldCom Inc.-WCOM* 7,176
724 WorldCom Inc.-MCI* 652
Conglomerates - 3.04%
4,900 Alfa, S.A. de C.V. Series A* 8,338
42,024 Carlisle Holdings, Inc.* 123,971
3,100 Corporacion Interamericana de Entretenimiento,
S.A. de C.V. Series B* 5,811
4,200 Desc, S.A. de C.V. Series B 2,342
3,300 Grupo Carso, S.A. de C.V. Series A1* 9,921
200 Grupo Imsa S.A. 2,480
2,600 Vitro, S.A. Series A 2,962
13,000 Vitro Sociedad Anonima ADR 43,940
See accompanying notes.
-------------------------------
*Non-income producing
6
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2002 (CONTINUED)
================================================================================
Shares or Principal Amount Description Value
-------------------------- ----------- -----
Construction and related - 9.19%
12,000 Bufete Industrial, S.A. ADR* $ 240
10,000 Cemex, S.A. de C.V. Series CPO 52,948
4,000 Consorcio ARA, S.A. de C.V., Series A1* 5,838
13,000 Empresas ICA, Sociedad Controladora ADR* 20,150
5,200 Empresas ICA, Sociedad Controladora,
S.A. de C.V.* 1,332
10,500 Florida Rock Industries, Inc. 376,005
19,950 Mastec, Inc.* 146,832
Consumer products and related manufacturing - 10.67%
800,000 Atlas Electricas S.A. 55,719
1,918 Buenos Aires Embotelladora S.A.* 2
11,400 Coca Cola Femsa S.A. de C.V. ADR 273,600
6,400 Grupo Casa Saba, S.A. ADR* 59,520
1,500 Savia S.A. ADR* 4,440
16,850 Watsco Incorporated 307,513
Food, beverages and tobacco - 8.41%
5,800 Fomento Economico Mexicano, S.A.
de C.V. Series UBD 22,752
7,300 Grupo Bimbo, S.A. de C.V. Series A 16,345
7,300 Grupo Modelo, S.A. de C.V. Series C 17,203
34,800 PanAmerican Beverage Inc. Class A 495,900
Investment companies - 3.63%
15,211 The Latin America Equity Fund, Inc. 68,098
7,900 The Latin American Discovery Fund, Inc. 170,363
Leisure - 8.42%
10,100 Carnival Corp. 279,669
1,500 Grand Adventure Tour and Travel Publishing Corp.* 8
14,000 Royal Caribbean Cruises Ltd. 273,000
Medical - 4.28%
8,000 Orthofix International N.V.* 281,200
Pulp and Paper - 0.23%
5,700 Kimberly-Clark de Mexico, S.A. de C.V. Series A 15,271
Railroad and landholdings - 22.61%
58,700 Florida East Coast Industries, Inc. 1,485,110
See accompanying notes.
---------------------------
*Non-income producing
7
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2002 (CONTINUED)
================================================================================
Shares or Principal Amount Description Value
-------------------------- ----------- -----
Retail - 0.95%
3,700 Controladora Comercial Mexicana,
S.A. de C.V. Series UBC $ 2,189
3,900 Grupo Elektra, S.A. de C.V. Series CPO 3,322
2,500 Little Switzerland, Inc.* 4,375
7,900 Wal-Mart de Mexico, S.A. de C.V. Series C* 18,276
12,500 Wal-Mart de Mexico, S.A. de C.V. Series V* 33,940
Trucking and marine freight - 5.81%
800 Seaboard Corporation 198,760
46,600 Trailer Bridge, Inc.* 113,704
10,000 Transportacion Maritima Mexicana ADR* 69,100
Utilities - 9.17%
12,000 Caribbean Utilities Ltd., Class A 138,000
32,600 Consolidated Water, Inc. 464,550
Other - 1.75%
193 Seabulk International, Inc., Class A warrants* 72
2,414 Mantex S.A.I.C.A. 9,022
32,120 Margo Caribe, Inc.* 88,651
833 Siderurgica Venezolana Sivensa ADR 109
20,000 Xcelera, Inc.* 17,000
----------
TOTAL COMMON STOCKS (COST $7,938,959) $6,614,403
Bonds - 0% of net assets
165,000 Republic of Cuba - 4.5%, 1977 - in default
(cost $63,038) (note 2)* --
OTHER ASSETS LESS LIABILITIES - (0.71%) OF NET ASSETS ($46,327)
----------
NET ASSETS - 100% $6,568,076
==========
See accompanying notes.
*Non-income producing
---------------------------
8
STATEMENT OF ASSETS AND LIABILITIES AS OF JUNE 30, 2002
================================================================================
ASSETS
Investment in securities, at value
(cost $7,938,959) (Note 2) $ 6,614,403
Dividends and interest receivable 10,568
Other assets 33,249
TOTAL ASSETS 6,658,220
LIABILITIES
Due to bank $ 27,770
Accrued investment advisor fee (Note 3) 26,019
Other payables 36,355
------------
TOTAL LIABILITIES 90,144
------------
NET ASSETS (Equivalent to $3.92 per share
based on 1,677,636 shares outstanding) $ 6,568,076
============
Net assets consist of the following:
Common stock, $.001 par value; 100,000,000
shares authorized; 1,677,636 shares issued
and outstanding $ 1,678
Additional paid-in capital 8,362,502
Undistributed net investment loss (943,888)
Undistributed net realized gain on investments 472,340
Net unrealized loss on investments (1,324,556)
------------
TOTAL $ 6,568,076
============
See accompanying notes.
9
STATEMENT OF OPERATIONS YEAR ENDED JUNE 30, 2002
================================================================================
INVESTMENT INCOME
Dividends $ 94,191
Interest 1,201
------------
Total income 95,392
EXPENSES
Investment advisor fee (Note 3) $ 103,509
Custodian fees 53,934
Professional fees 38,048
Insurance 19,917
Transfer agent 17,060
Directors fees 8,600
Postage 7,940
Listing fees 6,000
Printing 5,242
Miscellaneous 11,276
------------
Total expenses 271,526
------------
INVESTMENT LOSS - NET (176,134)
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Net realized gain on investments 129,946
Change in unrealized loss on investments (1,768,169)
------------
NET LOSS ON INVESTMENTS (1,638,223)
------------
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 1,814,357
============
See accompanying notes.
10
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED JUNE 30, 2002 AND 2001
================================================================================
2002 2001
---- ----
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS:
Investment loss - net ($ 176,134) ($ 112,818)
Net realized gain on investments 129,946 382,758
Change in unrealized loss on investments (1,768,169) (51,785)
------------ ------------
Net increase (decrease) in net assets from
operations (1,814,357) (218,155)
DISTRIBUTION TO SHAREHOLDRES FROM:
Investment income and short-term
realized gains (170,448) --
Realized gains - long-term (89,753) --
------------ ------------
Total distributions (260,201) --
TOTAL INCREASE (DECREASE) IN NET ASSETS ($ 2,074,558) $ 218,155
NET ASSETS:
Beginning of year $ 8,642,634 $ 8,424,479
------------ ------------
End of year $ 6,568,076 $ 8,642,634
============ ============
See accompanying notes.
11
FINANCIAL HIGHLIGHTS
YEARS ENDED JUNE 30, 1998 THROUGH 2002
YEAR ENDED JUNE 30
--------------------------------------------------------------------------
2002 2001 2000 1999 1998
---- ---- ---- ---- ----
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 5.15 $ 5.02 $ 6.12 $ 6.43 $ 6.34
---------- ---------- ---------- ---------- ----------
Operations:
Net investment loss (0.10) (0.07) (0.10) (0.11) (0.01)
Net realized and unrealized gain (loss)
on investments (0.98) 0.20 (1.00) 0.51 0.54
---------- ---------- ---------- ---------- ----------
Total from (to) operations (1.08) 0.13 (1.10) 0.40 0.53
---------- ---------- ---------- ---------- ----------
Distributions:
From investment income net (0.10) -- -- -- --
From net realized gains (0.05) -- -- (0.71) (0.44)
---------- ---------- ---------- ---------- ----------
Total distributions (0.15) -- -- (0.71) (0.44)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 3.92 $ 5.15 $ 5.02 $ 6.12 $ 6.43
---------- ---------- ---------- ---------- ----------
Per share market value, end of period $ 3.48 $ 4.20 $ 5.06 $ 6.00 $ 6.00
---------- ---------- ---------- ---------- ----------
Total investment return (loss) based on
market value per share (13.45%) (17.04%) (15.63%) 11.83% 23.54%
---------- ---------- ---------- ---------- ----------
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $ 6,568 $ 8,643 $ 8,424 $ 10,272 $ 10,784
---------- ---------- ---------- ---------- ----------
Ratio of expenses to average net assets 3.77% 3.11% 3.11% 3.30% 3.21%
---------- ---------- ---------- ---------- ----------
Ratio of investment loss -
net to average net assets (2.45%) (1.33%) (1.76%) (1.95%) (0.14%)
---------- ---------- ---------- ---------- ----------
Portfolio turnover rate 18% 27% 10% 59% 40%
---------- ---------- ---------- ---------- ----------
See accompanying notes.
12
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 SmallCap 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. 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 June 30, 2002, the Fund had investments in companies operating principally in
Mexico and Panama representing approximately 18% and 10% of the Fund's net
assets, respectively.
The Fund's custodian and transfer agent is Investors Bank & Trust Company, based
in Boston, Massachusetts.
Security Valuation
------------------
Investments in securities traded on a national securities exchange (or reported
on the NASDAQ national market) are stated at the last reported sales price on
the day of valuation; 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. Short-term notes are stated at amortized cost, which is
equivalent to value. Restricted securities and other securities for which
quotations are not readily available are valued at fair value as determined by
the Board of Directors.
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, and interest income is recognized on an
accrual basis. Discounts and premiums on securities purchased are amortized over
the life of the respective securities.
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.
13
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
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 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.
Income Taxes
------------
The Fund qualifies as a "regulated investment company" and as such (and by
complying with the applicable provisions of the Internal Revenue Code of 1986,
as amended) is not subject to federal income tax on taxable income (including
realized capital gains) that is distributed to shareholders.
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.
NOTE 2. NON-MARKETABLE SECURITES OWNED
Investment in securities includes $165,000 principal, 4.5%, 1977 Republic of
Cuba bonds purchased for $63,038. The bonds are 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. As of June 30,
2002, the position was valued at $0 by the Board of Directors, which
approximates the bonds' 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 monthly net assets.
During the year ended June 30, 2002, the Fund paid $5,527 of brokerage
commissions to Thomas J. Herzfeld & Co., Inc., an affiliate of the Advisor.
NOTE 4. INVESTMENT TRANSACTIONS
During the fiscal year ended June 30, 2002, purchases and sales of investment
securities were $1,290,480 and $1,528,408, respectively.
At June 30, 2002, the Fund's investment portfolio had gross unrealized gains of
$1,186,346 and gross unrealized losses of $2,510,902, resulting in a net
unrealized loss of $1,324,556.
14
NOTES TO FINANCIAL STATEMENTS
================================================================================
NOTE 5: CHANGE IN INVESTMENT POLICY
On March 14, 2002, the Fund's Board approved a change in the investment policy
of the Fund to comply with Investment Company Act Rule 35d-1 (commonly known as
the "Names Rule"). The Names Rule requires that a fund with a name that suggests
it focuses on investments in a particular country or in a particular geographic
region must invest at least 80% of its assets in investments that are tied
economically to the particular country or georgraphic region suggested. As the
Fund's name includes the phrase "Caribbean Basin," the Fund's current policy to
invest 65% of its total assets in a broad range of securities of issuers,
including U.S. based companies, which engage in sustantial trade with and derive
substantial revenues from operation in Caribbean Basin countries has been
revised to read substantially as follows:
Under normal circumstances, the Fund will invest at least 80% of its total
assets in a broad range of securities of issuers, including U.S. based
companies, which engage in substantial trade with and derive substantial
revenues from operation in Caribbean Basin countries.
In addition, the Fund has adopted a policy to provide stockholders of the Fund
60 days' prior notice of any change in the 80% investment policy.
15
DIRECTORS AND OFFICERS OF THE FUND
====================================================================================================================================
NUMBER OF
PORTFOLIOS
NAME POSITION(S) TERM OF OFFICE IN COMPLEX
ADDRESS HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN PUBLIC
AGE WITH FUND TIME SERVED DURING PAST 5 YEARS BY DIRECTOR DIRECTORSHIPS
Officers
--------
THOMAS J. HERZFELD President, three years; Chairman and President of 2 The Cuba Fund, Inc.
PO Box 161465 Chairman, 1993 to present Thomas J. Herzfeld & Co., Inc. (in registration)
Miami, FL 33116 Director and Thomas J. Herzfeld
Age: 57 Advisors, Inc.
CECILIA L. GONDOR Secretuary, three years; Executive Vice President of 2 The Cuba Fund, Inc.
PO Box 161465 Treasurer, 1993 to present Thomas J. Herzfeld & Co., Inc. (in registration)
Maimi, FL 33116 Director and Thomas J. Herzfeld
Age: 40 Advisors, Inc.
Independent Directors
---------------------
ANN S. LIEFF Director three years; President of the Lieff Company, a 1 Hastings Entertainment,
PO Box 430330 1998 to present management consulting firm that Inc.
Miami, FL 33243 offers business solutions,
Age: 50 strategies and CEO mentoring to
corporations and women/family-
owned businesses, 1998-present;
former CEO Spec's Music 1980-1998,
a retailer of recorded music.
MICHAEL A. RUBIN Director three years; Partner of Michael A. Rubin P.A., 1 Margo Caribe, Inc.
420 Dixie Highway 2002 to present attorney at law; Broker, Oaks
Suite 4B Management & Real Estate Corp.,
Coral Gables, FL 33146 a real estate corporation
Age: 60
ALBERT L. WEINTRAUB Director three years; Senior Partner of Weintraub, 1 None
250 SW 3rd Avenue 1999 to present Weintraub, Seiden and Orshan;
Miami, FL 33129 Chairman/CEO of iTelsa, Inc., a
Age: 73 provider of Internet protocol
telephy services; Chairman of
E-Lysium Transaction Systems, Inc.,
an application service provider of
transaction processing, billing
and payment systems; City Attorney
for Miami Springs, FL
16 and 17
INDEPENDENT AUDITORS' REPORT
================================================================================
[LOGO]
To the Board of Directors and Shareholders
The Herzfeld Caribbean Basin Fund, Inc.
We have audited the accompanying statement of assets and liabilities of The
Herzfeld Caribbean Basin Fund, Inc., including the schedule of investments, as
of June 30, 2002, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended. These financial statements and the financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of June 30, 2002, by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and the financial highlights referred
to above present fairly, in all material respects, the financial position of The
Herzfeld Caribbean Basin Fund, Inc. as of June 30, 2002, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the period then ended, in conformity with accounting
principles generally accepted in the United States of America.
/s/ Kaufman, Rossin & Co.
Miami, Florida
July 18, 2002
18
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.
19