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.
---------------------------------------
(Exact name of registrant as specified in charter)
P.O. BOX 161465, MIAMI, FLORIDA 33116
-------------------------------------
(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: 07/01/08 - 12/31/08
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.
ITEM 1. SHAREHOLDER REPORT
[GRAPHIC OMITTED]
THE HERZFELD
CARIBBEAN BASIN
FUND, INC.
SEMI-ANNUAL REPORT
December 31, 2008
================================================================================
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
--------------------------------------------------------------------------------
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.
--------------------------------------------------------------------------------
Listed NASDAQ Capital Market
Symbol: CUBA
- 2 -
LETTER TO STOCKHOLDERS
================================================================================
[PHOTO OMITTED]
Thomas J. Herzfeld
Chairman, President and
Portfolio Manager
February 5, 2009
Dear Fellow Shareholders:
We are pleased to present our semiannual report for the period ended December
31, 2008.
The global slowdown has continued to create a challenging investment environment
for the Fund. Although oil prices have collapsed from historic 2008 summer
highs, global demand for the goods and services has been drastically reduced.
Both developed and emerging markets, including the Caribbean Basin, have
faltered severely, and nearly all of our holdings have been negatively impacted
in some way by the drop in global demand.
As of December 31, 2008, the Fund's net asset value was $4.79 per share, which
represents a loss of 31.7% for the six month period then ended (adjusted for
distributions). The Fund's share price closed the year at $4.20, down from $7.69
per share on June 30, 2008, and representing a 43.1% loss for the six month
period (adjusted for distributions). A year-end distribution of $0.211 per share
was paid on January 5, 2009, to shareholders of record December 12, 2008.
Our investment focus remains two-fold: first, to invest in companies which we
feel will benefit from a resumption of trade with Cuba; second, to concentrate
on Caribbean Basin companies which we believe have good prospects even if there
is no change in U.S. policy towards Cuba.
Many of the companies best poised to experience significant growth from the
eventual normalization of relations with Cuba are service-based companies,
specifically in the leisure sector which has been especially hard hit. With the
Obama administration taking office, we anticipate that some immediate changes
will take place in
- 3 -
LETTER TO STOCKHOLDERS (CONTINUED)
================================================================================
[PHOTO OMITTED]
Erik M. Herzfeld
Portfolio Manager
U.S.-Cuba policy. We are confident that an early step of the new administration
will be to relax restrictions on cash remittances and family travel by Cuban
Americans to Cuba. To capitalize on this expected change, we added Western Union
(NYSE: WU) to the portfolio after the reporting period. We believe Western Union
is well positioned to benefit from the increase in remittance payments between
Cuban Americans and their relatives. We also are hopeful that one or more bills
in Congress will pass, expanding exports to Cuba during the Obama
administration. We are confident that when taken together, these progressive
steps, coupled with Fidel Castro's faltering health, will pave the way for a new
U.S.-Cuba policy that will lead to normalization of trade with Cuba. For now, we
continue to position the portfolio in a manner we believe will benefit from
these events as they transpire; for the future, we continue to explore
opportunities to invest directly in Cuba, when it is legally permitted.
Our largest investment, Seaboard Corporation (NYSE: SEB), is an illustration of
a company we feel could do well even with no change in U.S. policy towards Cuba.
Besides operating containerized shipping service between the United States, the
Caribbean Basin, and Central and South America, Seaboard is also one of the
largest pork producers and processors in the United States. We feel that the
company's business mix will outperform even in the current bearish environment.
In November, 2008, Erik Herzfeld was formally appointed as a Portfolio Manager
of the Fund. Erik, my son, joined Thomas J. Herzfeld Advisors, Inc. in February,
2007 and has worked closely with me, researching investment opportunities in the
Caribbean. He completed his undergraduate work in Economics and Mathematics at
Johns Hopkins University and received his MS from the Massachusetts Institute of
Technology, Sloan School of Management. Before joining the advisor, he worked in
quantitative research and trading roles with both Lehman Brothers and JPMorgan,
where he served as a Vice President in New York and Asia. He brings his
expertise in emerging markets and extensive knowledge of closed-end funds to his
new role with the Fund.
- 4 -
LETTER TO STOCKHOLDERS (CONTINUED)
================================================================================
LARGEST ALLOCATIONS
The following tables present our largest investment and geographic allocations
as of December 31, 2008.
-------------------------------- ---------------------------------------------
Geographic % of Net Assets Largest Portfolio Positions % of Net Assets
Allocation
USA 45.67% Seaboard Corporation 8.06%
Mexico 26.03% Watsco Incorporated 6.69%
Panama 8.85% Copa Holdings S.A. 5.62%
Cayman Islands 7.61% Atlantic Tele-Network, Inc. 5.49%
Bahamas 4.18% Carnival Corp. 5.13%
Colombia 3.97% Consolidated Water Co. 4.79%
Puerto Rico 2.12% Coca Cola Femsa, S.A.B.
Netherlands Antilles 2.01% de C.V. ADR 4.77%
Latin American Regional 1.87% Mastec, Inc. 4.37%
Belize 0.65% Freeport McMoran Copper & Gold Inc. 4.26%
Venezuela 0.07% Norfolk Southern Corporation 4.23%
Cuba 0.00% ---------------------------------------------
Cash and Other (3.68%)
--------------------------------
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, President and
Portfolio Manager
/s/ Erik M. Herzfeld
Erik M. Herzfeld
Portfolio Manager
- 5 -
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 2008
================================================================================
Shares or Principal Amount Description Market Value
--------------------------------------------------------------------------------
Common stocks - 103.68% of net assets
Banking and finance - 9.45%
30,280 Bancolombia, S.A. $ 707,038
40,000 Banco Latinoamericano de Exportaciones, S.A. 574,400
6,500 Doral Financial Corp.* 48,750
16,400 Grupo Financiero Banorte, S.A.B. de C.V. Series O 29,606
9,900 Grupo Financiero Inbursa, S.A.B. de C.V. Series O 23,234
50,000 Popular Inc. 258,000
3,844 W Holding Co., Inc. 39,593
Communications - 17.55%
20,000 America M vil, S.A.B. de C.V. ADR 619,800
35,600 America M vil, S.A.B. de C.V. Series A 53,984
50,891 America M vil, S.A.B. de C.V. Series L 78,090
36,819 Atlantic Tele-Network, Inc. 977,545
11,900 Carso Global Telecom, S.A.B. de C.V. Series A1* 46,316
176,000 Fuego Entertainment* 5,280
871 Grupo Iusacell, S.A.B. de C.V. Series V* 1,345
21,120 Grupo Radio Centro, S.A.B. ADR 154,176
32,400 Grupo Televisa, S.A.B. ADR 484,056
13,400 Grupo Televisa, S.A.B. Series CPO 39,575
80,304 Spanish Broadcasting System Inc.* 7,789
15,000 Telefonos de Mexico, S.A.B. de C.V. ADR Series L 314,100
23,800 Telefonos de Mexico, S.A.B. de C.V. Series A 24,404
78,600 Telefonos de Mexico, S.A.B. de C.V. Series L 81,446
15,000 Telmex International S.A.B. de C.V. ADR 170,400
23,800 Telmex International S.A.B. de C.V. Series A 13,405
78,600 Telmex International S.A.B. de C.V. Series L 44,214
13,900 TV Azteca, S.A. de C.V. Series CPO 5,520
Conglomerates - 1.31%
250,000 Admiralty Holding Company* 250
5,400 Alfa, S.A.B. de C.V. Series A 11,503
42,595 BB Holdings Ltd.* 113,296
30,300 Cockleshell Ltd. ord.* 23,307
3,200 Corporacion Interamericana de Entretenimiento,
S.A.B. de C.V. Series B* 2,184
----------------------
* Non-income producing
See accompanying notes.
- 6 -
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 2008 (CONTINUED)
================================================================================
Shares or Principal Amount Description Market Value
--------------------------------------------------------------------------------
Conglomerates (continued)
11,000 Grupo Carso, S.A.B. de C.V. Series A1 $ 28,992
1,580 Grupo Kuo, S.A.B. de C.V.* 479
20 Grupo Pochteca, S.A.B. de C.V.* 2
3,250 Shellshock Ltd. ord.* 2,593
2,900 Vitro, S.A.B. de C.V. Series A 1,675
27,918 Vitro, S.A.B. de C.V. ADR 48,577
Construction and related - 5.85%
21,863 Cemex, S.A.B. de C.V. ADR 199,828
49,599 Cemex, S.A.B. de C.V. Series CPO 44,913
20 Ceramica Carabobo Class A ADR* 4,657
17,200 Consorcio ARA, S.A.B. de C.V. 6,521
1,580 Dine S.A.B. de C.V. Series B* 645
3,583 Empresas ICA, S.A.B. de C.V.* 5,912
800 Grupo Cementos de Chihuahua, S.A.B. de C.V. 1,721
67,132 Mastec, Inc.* 777,389
Consumer products and related manufacturing - 8.18%
13,273 Grupo Casa Saba, S.A.B. de C.V. ADR 265,460
31,000 Watsco Incorporated 1,190,400
Food, beverages and tobacco - 8.02%
1,219 Alsea, S.A.B. de C.V.* 547
3,000 Chiquita Brands International Inc.* 44,340
19,500 Coca Cola Femsa, S.A.B. de C.V. ADR 848,445
200 Coca Cola Femsa, S.A.B. de C.V., Series L 872
18,900 Fomento Econ mico Mexicano, S.A.B. de C.V., Series UBD 56,501
18,690 Fresh Del Monte Produce Inc.* 419,030
800 Gruma, S.A.B. de C.V., Series B* 404
7,600 Grupo Bimbo, S.A.B. de C.V., Series A* 31,995
7,700 Grupo Modelo, S.A.B. de C.V., Series C 24,465
Housing - 1.66%
1,700 Corporaci n Geo, S.A.B. de. C.V., Series B* 1,915
100 Desarrolladora Homex, S.A.B. de C.V.* 376
33,500 Lennar Corp 290,445
400 Sare Holding, S.A.B. de C.V., Series B* 85
1,500 Urbi Desarrollos Urbanos, S.A.B. de C.V.* 2,047
----------------------
* Non-income producing
See accompanying notes.
- 7 -
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 2008 (CONTINUED)
================================================================================
Shares or Principal Amount Description Market Value
--------------------------------------------------------------------------------
Investment companies - 3.79%
17,000 The Mexico Fund, Inc. 258,400
18,110 Latin America Equity Fund 330,508
4,420 Shellproof Limited* 3,082
144 Western Asset Emerging Markets Debt Fund 1,813
9,000 Western Asset Worldwide Income Fund 82,530
Leisure - 8.88%
37,500 Carnival Corp. 912,000
33,500 Royal Caribbean Cruises Ltd. 460,625
7,000 Steiner Leisure Ltd.* 206,640
Medical - 2.22%
8,386 Micromet Inc.* 36,563
23,360 Orthofix International N.V.* 358,109
Mining - 4.27%
31,000 Freeport McMoran Copper & Gold, Inc. 757,640
3,727 Grupo Mexico, S.A.B. de C.V., Series B 2,395
Pulp and paper - 0.11%
6,100 Kimberly-Clark de Mexico, S.A.B. de C.V. Series A 20,262
Railroad - 4.23%
16,000 Norfolk Southern Corporation 752,800
Retail - 0.99%
3,700 Controladora Comercial Mexicana, S.A.B. de C.V.
Series UBC 788
1,270 Grupo Elektra, S.A. de C.V. Series CPO 54,107
45,111 Wal-Mart de Mexico, S.A.B. de C.V. Series V 120,526
Service - 0.02%
700 Grupo Aeroportuario del Sureste, S.A.B. de C.V.
Series B 2,610
100 Promotora Ambiental S.A.B. de C.V.* 75
----------------------
* Non-income producing
See accompanying notes.
- 8 -
SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 2008 (CONTINUED)
================================================================================
Shares or Principal Amount Description Market Value
--------------------------------------------------------------------------------
Trucking and marine freight - 13.12%
61,404 Grupo TMM, S.A.B. ADR* $ 43,597
1,201 Seaboard Corporation 1,433,994
21,000 Teekay Corporation 412,650
8,361 Teekay LNG Partners L.P. 124,997
66,797 Trailer Bridge, Inc.* 245,813
23,000 Ultrapetrol Bahamas Ltd.* 73,370
Utilities - 8.16%
12,000 Caribbean Utilities Ltd. Class A 81,600
64,241 Consolidated Water, Inc. 853,013
700 Cuban Electric Company* 5,075
41,500 Teco Energy Inc. 512,525
Other - 5.87%
33,000 Copa Holdings S.A. 1,000,560
13,000 Impellam Group* 4,486
55,921 Margo Caribe, Inc.* 31,316
300 Mexichem S.A.B. de C.V. 270
895 Siderurgica Venezolana Sivensa, S.A. ADR 6,669
79 Siderurgica Venezolana Sivensa, S.A. Series B 589
45,000 Xcelera, Inc. (Note 2)* --
------------
TOTAL COMMON STOCKS (COST $26,101,388) $ 18,445,834
------------
Bonds - 0% of net assets
165,000 Republic of Cuba - 4.5%, 1977 - in default $ --
------------
TOTAL BONDS (COST $63,038) (NOTE 2)* $ --
------------
OTHER ASSETS LESS LIABILITIES - (3.68%) OF NET ASSETS ($ 654,625)
------------
NET ASSETS - 100% $ 17,791,209
============
----------------------
* Non-income producing
See accompanying notes.
- 9 -
STATEMENT OF ASSETS AND LIABILITIES AS OF
DECEMBER 31, 2008 (UNAUDITED)
================================================================================
ASSETS
Investments in securities, at market value (cost $26,164,426)
(Note 2) $ 18,445,834
Cash 119,768
Dividends receivable 97,999
Receivable for investments sold 77,520
Other assets 33,249
------------
TOTAL ASSETS 18,774,370
------------
LIABILITIES
Distributions payable 783,458
Accrued investment advisor fee (Note 3) 62,710
Other payables 136,993
------------
TOTAL LIABILITIES 983,161
------------
NET ASSETS (Equivalent to $4.79 per share
based on 3,713,071 shares outstanding) $ 17,791,209
============
NET ASSETS CONSIST OF THE FOLLOWING:
Common stock, $.001 par value; 100,000,000
shares authorized; 3,713,071 shares issued
and outstanding $ 3,713
Additional paid-in capital 27,149,983
Accumulated net investment loss (2,917,183)
Accumulated net realized gain on investments 1,273,288
Net unrealized loss on investments (7,718,592)
------------
TOTAL $ 17,791,209
============
See accompanying notes.
- 10 -
STATEMENT OF OPERATIONS SIX MONTHS
ENDED DECEMBER 31, 2008 (UNAUDITED)
================================================================================
INVESTMENT INCOME
Dividends $ 537,054
EXPENSES
Investment advisor fees (Note 3) $ 160,272
Professional fees 30,907
Custodian fees 27,500
Insurance 15,650
Transfer agent fees 8,750
Listing fees 7,500
CCO Expense 13,456
Proxy services 4,623
Printing and Postage 14,630
Director fees 7,800
Miscellaneous 20,867
------------
Total investment expenses 311,955
------------
NET INVESTMENT INCOME 225,099
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN CURRENCY
Net realized loss on investments and foreign
currency (1,339,724)
Net increase (decrease) in unrealized
appreciation (depreciation) on investments
and foreign currency (7,441,262)
------------
NET LOSS ON INVESTMENTS (8,780,986)
------------
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS ($ 8,555,887)
============
See accompanying notes.
- 11 -
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)
================================================================================
SIX MONTHS
ENDED YEAR ENDED
12/31/08 6/30/08
(UNAUDITED)
INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS:
Net investment income $ 225,099 $ 417,567
Net realized gain (loss) on investments and
foreign currency (1,339,724) 3,127,940
Net increase (decrease) in unrealized appreciation
(depreciation) on investments and foreign currency (7,441,262) (8,184,478)
------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS (8,555,887) (4,638,971)
DISTRIBUTIONS TO STOCKHOLDERS
Net investment income (600,032) (200,000)
Long-term realized gains (183,426) (4,279,807)
------------ ------------
NET DISTRIBUTIONS TO STOCKHOLDERS (783,458) (4,479,807)
CAPITAL STOCK TRANSACTIONS
Shares issued in reinvestment of distribution
(213,222 shares in 2008) (Note 6) -- 1,692,977
Shares issued in rights offering net of
rights offering costs (1,812,293 shares) (Note 6) -- 18,075,138
------------ ------------
Total Capital Stock Transactions -- 19,768,115
NET INCREASE IN NET ASSETS ($ 9,339,345) $ 10,649,337
NET ASSETS:
Beginning of period 27,130,554 16,481,217
------------ ------------
End of period $ 17,791,209 $ 27,130,554
============ ============
See accompanying notes.
- 12 -
FINANCIAL HIGHLIGHTS
================================================================================
SIX MONTHS ENDED YEAR ENDED JUNE 30
12/31/08 -------------------------------------------------------
(UNAUDITED) 2008 2007 2006 2005
---------- ---------- ---------- ---------- ----------
PER SHARE OPERATING PERFORMANCE
(FOR A SHARE OF CAPITAL STOCK OUTSTANDING FOR EACH TIME PERIOD INDICATED)
Net asset value, beginning of year $ 7.31 $ 9.77 $ 8.08 $ 7.33 $ 5.43
---------- ---------- ---------- ---------- ----------
Operations:
Net investment income (loss)(1) 0.06 0.22 (0.14) (0.16) (0.09)
Net realized and unrealized gain (loss) on
investment transactions(1) (2.36) (1.40) 2.83 1.08 1.99
---------- ---------- ---------- ---------- ----------
Total from operations (2.30) (1.18) 2.69 0.92 1.90
---------- ---------- ---------- ---------- ----------
Distributions:
From net investment income (0.16) (0.06) -- -- --
From net realized gains (0.05) (1.22) (1.00) (0.17) --
---------- ---------- ---------- ---------- ----------
Total distributions (0.21) (1.28) (1.00) (0.17) --
---------- ---------- ---------- ---------- ----------
Net asset value, end of year $ 4.79 $ 7.31 $ 9.77 $ 8.08 $ 7.33
---------- ---------- ---------- ---------- ----------
Per share market value, end of year $ 4.20 $ 7.69 $ 13.59 $ 7.57 $ 6.30
---------- ---------- ---------- ---------- ----------
Total investment return (loss) based on
market value per share (43.07%) (34.29%) 94.61% 22.86% 29.36%
---------- ---------- ---------- ---------- ----------
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of year (in 000's) $ 17,791 $ 27,131 $ 16,481 $ 13,553 $ 12,292
---------- ---------- ---------- ---------- ----------
Ratio of expenses to average net assets 2.73%(2) 2.74% 3.28% 3.37% 3.55%
---------- ---------- ---------- ---------- ----------
Ratio of net investment income (loss)
to average net assets 1.97%(2) 1.70% (1.83%) (1.95%) (1.47%)
---------- ---------- ---------- ---------- ----------
Portfolio turnover rate 7% 25% 28% 40% 30%
---------- ---------- ---------- ---------- ----------
(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, 2008, the Fund had foreign investments in companies operating
principally in Mexico and Panama, representing approximately 26.03% and 8.85% 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
------------------
The Fund adopted the provisions of SFAS No. 157, "Fair Value Measurements"
("SFAS No. 157"), effective January 1, 2008. Under SFAS No. 157, fair value is
defined as the price that would be received to sell an asset or paid to transfer
a liability (i.e., the "exit price") in an orderly transaction between market
participants at the measurement date.
In determining fair value, the Fund uses various valuation approaches. SFAS No.
157 establishes a fair value hierarchy for inputs used in measuring fair value
that maximizes the use of observable inputs and minimizes the use of
unobservable inputs by requiring that the most observable inputs be used when
available. Observable inputs are those that market participants would use in
pricing the asset or liability based on market data obtained from sources
independent of the Fund. Unobservable inputs reflect the Fund's assumptions
about
- 14 -
NOTES TO FINANCIAL STATEMENTS
================================================================================
the inputs market participants would use in pricing the asset or liability
developed based on the best information available in the circumstances. The fair
value hierarchy is categorized into three levels based on the inputs as follows:
Level 1: quoted prices in active markets for identical investments
Level 2: other significant observable inputs (including quoted prices for
similar investments, interest rates, prepayment speeds, credit risk,
etc.)
Level 3: significant unobservable inputs (including the Fund's own
assumptions in determining the fair value of investments)
The availability of valuation techniques and observable inputs can vary from
security to security and is affected by a wide variety of factors including, the
type of security, whether the security is new and not yet established in the
marketplace, and other characteristics particular to the transaction. To the
extent that valuation is based on models or inputs that are less observable or
unobservable in the market, the determination of fair value requires more
judgment. Those estimated values do not necessarily represent the amounts that
may be ultimately realized due to the occurrence of future circumstances that
cannot be reasonably determined. Because of the inherent uncertainty of
valuation, those estimated values may be materially higher or lower than the
values that would have been used had a ready market for the securities existed.
Accordingly, the degree of judgment exercised by the Fund in determining fair
value is greatest for securities categorized in Level 3. In certain cases, the
inputs used to measure fair value may fall into different levels of the fair
value hierarchy. In such cases, for disclosure purposes, the level in the fair
value hierarchy within which the fair value measurement in its entirety falls,
is determined based on the lowest level input that is significant to the fair
value measurement.
Fair value is a market-based measure considered from the perspective of a market
participant rather than an entity-specific measure. Therefore, even when market
assumptions are not readily available, the Fund's own assumptions are set to
reflect those that market participants would use in pricing the asset or
liability at the measurement date. The Fund uses prices and inputs that are
current as of the measurement date, including periods of market dislocation. In
periods of market dislocation, the observability of prices and inputs may be
reduced for many securities. This condition could cause a security to be
reclassified to a lower level within the fair value hierarchy.
- 15 -
NOTES TO FINANCIAL STATEMENTS
================================================================================
The following table summarizes the valuation of the Fund's investments by the
above fair value hierarchy levels as of December 31, 2008:
LEVEL Investments in Securities Other Financial Instruments
-----------------------------------------------------------------
Level 1 $18,445,834 $0
Level 2 $0 $0
Level 3 $0* $0
* See Note 2, non-marketable securities owned
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, 2008, were approximately
$26. 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.
- 16 -
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, 2008, a
distribution from long-term capital gains of $0.0494 per share and an income
distribution of $0.1616 per share was declared on November 11, 2008, payable on
January 5, 2009 to shareholders of record December 12, 2008. 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 $4.9896 per share
which was the price paid by the fund to purchase the required number of shares
in the open market in order to pay the distribution.
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, 2008,
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, 2008, 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, 2008 amounted to $160,272, of which $62,710
was payable as of December 31, 2008.
- 17 -
NOTES TO FINANCIAL STATEMENTS
================================================================================
During the six months ended December 31, 2008, the Fund paid $5,352 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, 2008, purchases and sales of investment
securities were $1,808,749 and $1,704,571, respectively.
At December 31, 2008, the Fund's investment portfolio had gross unrealized gains
of $932,235 and gross unrealized losses of $8,650,827, resulting in a net
unrealized loss of $7,718,592 for financial statement purposes.
NOTE 5. INCOME TAX INFORMATION
For the six months ended December 31, 2008, the Fund had net realized loss of
$1,339,724.
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 asset value of the Fund's
common shares was increased by approximately $0.09 per share as a result of the
share issuance.
NOTE 7: SUBSEQUENT EVENT
On January 5, 2009, the Fund paid a year-end distribution of $0.211 per share
paid in stock. Stockholders were also given the option of receiving the payment
in cash. Shares were purchased in the open market to pay the distribution at a
reinvestment price of $4.9896 per share including brokerage commissions.
- 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
- 19 -
DIVIDEND REINVESTMENT PLAN (CONTINUED)
================================================================================
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.
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 021170642, 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
- 21 -
DIVIDEND REINVESTMENT PLAN (CONTINUED)
================================================================================
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.
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 12, 2008.
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, 2007 and unaudited
financial statements for the six months ended June 30, 2008; (v) the Advisor's
Form ADV Parts I and II; (vi) comparative performance data for the Fund relative
to peer funds (small closedend 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 12, 2008 meeting and at previous meetings of
the Board, the Board and the Independent Directors determined to continue the
Agreement for an additional oneyear 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.
- 24 -
RESULTS OF NOVEMBER 11, 2008 STOCKHOLDER MEETING
================================================================================
The annual meeting of stockholders of the Fund was held on November 11, 2008. At
the meeting two nominees for Director posts were elected as follows:
VOTES FOR VOTES WITHHELD
Thomas J. Herzfeld 3,080,593 67,368
Michael A. Rubin 3,080,098 67,863
The terms of office as directors of Ann S. Lieff and Kay W. Tatum 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, 2007 to June 30, 2008, 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
ERIK M. HERZFELD
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, 2008 and
ending July 31,
2008)
-----------------------------------------------------------------------------------------------------------
Month #2 (beginning 0 n/a n/a n/a
August 1, 2008 and
ending August 31,
2008)
-----------------------------------------------------------------------------------------------------------
Month #3 (beginning 0 n/a n/a n/a
September 1, 2008 and
ending September 30, 2008)
-----------------------------------------------------------------------------------------------------------
Month #4 (beginning 0 n/a n/a n/a
October 1, 2008 and
ending October 31, 2008)
-----------------------------------------------------------------------------------------------------------
Month #5 (beginning 0 n/a n/a n/a
November 1, 2008 and
ending November 30, 2008)
-----------------------------------------------------------------------------------------------------------
Month #6 (beginning 0 n/a n/a n/a
December 1, 2008 and
ending December 31, 2008)
-----------------------------------------------------------------------------------------------------------
Total 0 n/a n/a n/a
-----------------------------------------------------------------------------------------------------------
================================================================================
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.
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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 27, 2009
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 27, 2009
By: /s/ Cecilia L. Gondor
-------------------------
Cecilia L. Gondor
Secretary and Treasurer
(Principal Financial Officer)
Date: February 27, 2009