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
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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
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(Name and address of agent for service)
Registrant's telephone number, including area code: 305-271-1900
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Date of fiscal year end: 06/30/05
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Date of reporting period: 07/01/04 - 12/31/04
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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]
THE HERZFELD
CARIBBEAN BASIN
FUND, INC.
SEMI-ANNUAL REPORT
December 31, 2004
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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
Investors Bank & Trust Company
200 Clarendon Street, 16th Floor
Boston, MA 02116
(617) 443-6870
Custodian
Investors Bank & Trust Company
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
Kaufman, Rossin & Co., P.A.
2699 South Bayshore Drive
Miami, FL 33133
www.kaufmanrossin.com
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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
consist of 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
and Venezuela. The fund invests 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 revenue from, operations in the
Caribbean Basin Countries.
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Listed NASDAQ SmallCap Market
Symbol: CUBA
- 2 -
Letter to Stockholders
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Febraury 7, 2005
[PHOTO]
Thomas J. Herzfeld
Chairman and President
Dear Fellow Stockholders:
Our investment strategy continues to be to invest in companies in the Caribbean
Basin which we believe will do well even if there is no change in U.S. relations
with Cuba. At the same time, when we make those investments, we try to select
companies which we believe will benefit from a resumption of trade with that
country. When the embargo is lifted, we will seek to re-deploy a substantial
part of our capital directly in Cuba.
We are pleased to report that our strategy has worked quite well. As of December
31, 2004, The Herzfeld Caribbean Basin Fund's net assets were a record
$11,721,829 and its per share net asset value was $6.99, compared with
$8,719,841 or $5.20 per share a year earlier, representing a gain in net asset
value of +34.4% for the calendar year and +28.7% for the six month period ended
December 31, 2004. These gains follow a 52.0% gain in net asset value for the
previous calendar year. For the benefit of new shareholders, at inception our
net assets were $8,388,000 and we have paid out $2,535,847 in distributions,
resulting in a 70% gain in net asset value from inception.
Here are a few examples of some of the more interesting companies in which we
are invested which meet our two-pronged investment criteria:
Seaboard Corporation (SEB), listed on the American Stock Exchange, made a new
high last week at $1113 per share. We started accumulating our position in the
$262 per share range and added to our holding at prices as low as $227 per
share. The company is primarily a diversified international agribusiness and
transportation company, including a large fleet of containerized cargo ships
operating throughout the Caribbean. They also operate an electric utility in the
Dominican Republic.
- 3 -
Letter to Stockholders (continued)
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Two cruise line operators, Royal Caribbean Cruises Ltd. (RCL) and Carnival Corp.
(CCL), are also naturals for our portfolio. The companies rebounded strongly
after the 9/11 setback and have been doing very well. Indeed, just today
Carnival announced that it "expects to carry a record 3.3 million passengers and
operate an unprecedented number of voyages in the coming year." Should the
embargo be lifted, tourism will be in the forefront, and we believe that RCL and
CCL are ideally positioned for this market. Incidentally, Cuba received two
million tourists in 2004, an increase of 8% from 2003.
Perhaps the best example of our investment strategy is our largest position,
Florida East Coast Industries (FLA), which made a new high last December. This
investment has contributed significantly to the increase in the Fund's net
asset value. FLA is in both the railroad and real estate business. The company
owns the Florida East Coast Railway which is the main freight line running
between Jacksonville and Miami. We believe that when the embargo is lifted,
there will be a large increase in two-way freight traffic between Florida and
Cuba.
A different focus of our portfolio is closed-end funds--a subject on which I
have written five books. By regulation we are limited to 10% of our assets in
this category; we currently hold three positions which represent 7.47% of the
portfolio. Although Herzfeld Caribbean is a closed-end fund, many of our
investors are not familiar with the fundamentals of closed-end funds. For the
benefit of those stockholders, a closed-end fund is quite similar to a mutual
fund; one difference, however, is that the share price of a closed-end fund is
determined by supply and demand in the market place, just like any other
publicly traded stock. Its share price, therefore, can be at a premium to net
asset value when buyers dominate, or at a discount when there are more sellers.
Mutual funds' shares, on the other hand, are priced based on their net asset
value.
The three closed-end funds in our portfolio were acquired at substantial
discounts to net asset value, at levels we consider to be attractive. One of
these, Mexico Fund (MXF), which we bought at a 19% discount (before adjustment
for dilution from a rights offering), recently made a tender offer at a 1.25%
discount to net asset value. We tendered a part of our holding in exchange for
shares of Mexican companies in their portfolio. This is the second time we have
made this arbitrage in MXF. By the way, the shares of Herzfeld Caribbean are
currently changing hands at a 12% discount to net asset value, which is about
one
- 4 -
Letter to Stockholders (continued)
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percentage point narrower than the average discount of the existing Latin
American and Mexican closed-end funds, but still, in our view, attractive. In
fact, I recently added to my personal position at discounts in the area of 16%.
A graph of the Herzfeld Caribbean's premium/discount from inception appears
below.
Premium/Discount
As the following graph depicts, the Fund has traded at both premiums and
discounts every year except the 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.
Premium/Discount of The Herzfeld Caribbean Basin Fund from Inception
[GRAPHIC OMITTED]
- 5 -
Letter to Stockholders (continued)
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Largest Allocations
The following tables present our largest investment and geographic allocations
as of December 31, 2004.
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Geographic % of Net Assets
Allocation
USA 55.24%
Mexico 12.64%
Cayman Islands 7.75%
Latin American Regional 6.18%
Netherlands Antilles 3.08%
Puerto Rico 2.98%
Panama 2.71%
Belize 2.43%
Virgin Islands 1.14%
Colombia 0.84%
Costa Rica 0.27%
Venezuela 0.12%
Dominican Republic 0.02%
Cuba 0.00%
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Largest Portfolio Positions % of Net Assets
Florida East Coast Industries, Inc. 18.66%
Florida Rock Industries, Inc. 7.82%
Consolidated Water Co. 6.61%
Royal Caribbean Cruises Ltd. 6.27%
Seaboard Corporation 5.11%
Watsco Incorporated 4.66%
The Latin American Equity Fund, Inc. 4.01%
Trailer Bridge Inc. 3.22%
Garmin Ltd. 3.11%
Orthofix International N.V. 3.09%
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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
- 6 -
Schedule of Investments as of December 31, 2004
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Shares or Principal Amount Description Market Value
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Common stocks - 95.40% of net assets
Banking and finance - 3.88%
7,000 Bancolombia, S.A. $ 98,840
15,920 Banco Latinoamericano de Exportaciones, S.A. 317,445
3,600 Grupo Financiero Banorte, S.A. de C.V. Series O 22,676
8,400 Grupo Financiero Inbursa, S.A. de C.V. Series O 15,459
Communications - 11.51%
11,000 America Movil, S.A. de C.V. Series A 28,918
43,800 America Movil, S.A. de C.V. Series L 115,111
2,000 America Movil ADR Series L 104,700
11,100 America Telecom, S.A. de C.V. Series A1* 31,879
4,100 Atlantic Tele-Network, Inc. 133,250
11,100 Carso Global Telecom, S.A. de C.V. Series A1 19,769
6,000 Garmin Ltd. 365,040
725 Grupo Iusacell, S.A. de C.V. Series V* 1,570
16,800 Grupo Radio Centro, S.A. ADR 113,400
4,500 Grupo Televisa, S.A. ADR 272,250
12,100 Grupo Televisa, S.A. Series CPO 36,534
500 Telefonos de Mexico ADR Series L 19,160
11,000 Telefonos de Mexico, S.A. de C.V. Series A 21,120
39,300 Telefonos de Mexico, S.A. de C.V. Series L 75,462
18,000 Tricom, S.A. ADR* 2,160
13,900 TV Azteca, S.A. de C.V. Series CPO 8,818
Conglomerates - 3.09%
4,900 Alfa, S.A. de C.V. Series A 25,061
39,400 Carlisle Holdings, Inc.* 285,256
3,100 Corporacion Interamericana de Entretenimiento,
S.A. de C.V. Series B* 9,735
7,000 Desc, S.A. de C.V. Series B* 2,010
3,300 Grupo Carso, S.A. de C.V. 17,766
3,300 U.S. Commercial Corp., S.A. de C.V.* 1,379
2,600 Vitro, S.A. Series A 2,712
6,000 Vitro Sociedad Anonima ADR 18,180
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* Non-income producing
See accompanying notes.
- 7 -
Schedule of Investments as of December 31, 2004 (continued)
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Shares or Principal Amount Description Market Value
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Construction and related - 10.68%
12,000 Bufete Industrial S.A. ADR* $ 600
10,442 Cemex, S.A. de C.V. Series CPO 76,265
1,936 Ceramica Carabobo Class A ADR* 3,604
4,000 Consorcio ARA, S.A. de C.V.* 12,023
15,600 Empresas ICA, Sociedad Controladora, S.A. de C.V.* 6,018
15,400 Florida Rock Industries, Inc. 916,762
1,665 Hylsamex S.A. de C.V. Series B* 4,976
22,950 Mastec, Inc.* 232,025
Consumer products and related manufacturing - 5.55%
800,000 Atlas Electricas, S.A. 31,400
4,900 Grupo Casa Saba, S.A. ADR 72,765
15,500 Watsco Incorporated 545,910
Food, beverages and tobacco - 1.56%
4,800 Coca Cola Femsa, S.A. de C.V. ADR 114,048
5,800 Fomento Economico Mexicano, S.A. de C.V. Series UBD 30,462
7,300 Grupo Bimbo, S.A. de C.V. Series A 18,445
7,300 Grupo Modelo, S.A. de C.V. Series C 20,082
Investment companies - 7.47%
13,904 The Latin American Discovery Fund, Inc. 254,026
21,745 The Latin America Equity Fund, Inc. 470,562
7,000 The Mexico Fund, Inc. 151,480
Leisure - 8.97%
5,500 Carnival Corp. 316,965
13,500 Royal Caribbean Cruises Ltd. 734,940
Medical - 3.38%
3,159 CancerVax Corp. 34,275
9,160 Orthofix International N.V.* 361,628
Pulp and paper - 0.17%
5,700 Kimberly-Clark de Mexico, S.A. de C.V. Series A 19,690
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* Non-income producing
See accompanying notes.
- 8 -
Schedule of Investments as of December 31, 2004 (continued)
================================================================================
Shares or Principal Amount Description Market Value
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Railroad and landholdings - 18.66%
48,500 Florida East Coast Industries, Inc. $ 2,187,350
Retail - 0.75%
3,700 Controladora Comercial Mexicana,
S.A. de C.V. Series UBC 4,166
1,380 Grupo Elektra, S.A. de C.V. 12,816
20,669 Wal-Mart de Mexico, S.A. de C.V. Series V 71,029
Trucking and marine freight - 8.79%
14,800 Grupo TMM, S.A. ADR* 54,168
600 Seaboard Corporation 598,800
39,600 Trailer Bridge, Inc.* 376,992
Utilities - 7.75%
12,000 Caribbean Utilities Ltd. Class A 134,160
25,000 Consolidated Water, Inc. 774,500
Other - 3.19%
2,414 Mantex S.A.I.C.A* 7,022
41,337 Margo Caribe, Inc.* 349,628
843 Siderurgica Venezolana Sivensa ADR 2,660
75 Siderurgica Venezolana Sivensa Series B 237
45,000 Xcelera, Inc.* 14,850
Total common stocks (cost $6,836,816) $11,182,989
Bonds - 0% of net assets
165,000 Republic of Cuba - 4.5%, 1977 - in default
(cost $63,038) (Note 2)* --
Other assets less liabilities - 4.60% of net assets $ 538,840
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Net assets - 100% (a) $11,721,829
===========
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* Non-income producing
(a) The cost for federal income tax purposes was $6,899,854. At December 31,
2004, net unrealized gain for all securities based on tax cost was $4,283,136.
This consisted of aggregate gross unrealized appreciation for all securities in
which there was an excess value over tax cost of $5,050,644 and aggregate gross
unrealized depreciation for all securities in which there was an excess of tax
cost over value of $767,508.
See accompanying notes.
- 9 -
Statement of Assets and Liabilities as of December 31, 2004
================================================================================
ASSETS
Investments in securities, at market value (cost $6,899,854)
(Notes 2 and 5) $ 11,182,990
Cash 498,808
Dividends receivable 29,300
Receivable for investments sold 29,949
Other assets 33,249
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TOTAL ASSETS $ 11,774,296
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LIABILITIES
Accrued investment advisor fee (Note 3) $ 36,987
Other payables 15,480
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TOTAL LIABILITIES 52,467
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NET ASSETS (Equivalent to $6.99 per share
based on 1,677,636 shares outstanding) $ 11,721,829
============
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
Accumulated net investment loss (Note 5) (1,301,069)
Accumulated net realized gain on investments (Note 5) 375,582
Net unrealized gain on investments (Notes 4 and 5) 4,283,136
------------
TOTAL $ 11,721,829
============
See accompanying notes.
- 10 -
Statement of Operations
Year Ended December 31, 2004
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INVESTMENT INCOME
Dividends $ 101,343
EXPENSES
Investment advisor fees (Note 3) $ 69,314
Custodian fees 27,000
Professional fees 22,540
Insurance 13,395
Transfer agent fees 8,750
Listing fees 7,500
Director fees 3,900
Printing 4,724
Postage 4,033
CCO Expense 2,725
Miscellaneous 1,300
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Total investment expenses 165,181
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INVESTMENT LOSS - NET ($ 63,838)
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS AND FOREIGN CURRENCY
Net realized gain on investments and foreign
currency (Note 5) 646,615
Change in unrealized gain on investments and
foreign currency (Note 4) 2,029,890
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NET GAIN ON INVESTMENTS 2,676,505
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NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 2,612,667
===========
See accompanying notes.
- 11 -
Statements of Changes in Net Assets
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Six Months
Ended Year Ended
12/31/04 6/30/04
(unaudited)
INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS:
Net investment loss ($ 63,838) ($ 115,085)
Net realized gain on investments and
foreign currency 646,615 358,431
Change in unrealized gain on investments
and foreign currency 2,029,890 2,239,812
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Net increase in net assets resulting from
operations 2,612,667 2,483,158
NET INCREASE IN NET ASSETS $ 2,612,667 $ 2,483,158
NET ASSETS:
Beginning of year $ 9,109,162 $ 6,626,004
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End of year $ 11,721,829 $ 9,109,162
============ ============
See accompanying notes.
- 12 -
Financial Highlights
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Six Months Ended Year Ended June 30
12/31/04 --------------------------------------------
(unaudited) 2004 2003 2002 2001
----------- ---- ---- ---- ----
PER SHARE OPERATING PERFORMANCE
(For a share of capital stock outstanding for each time period indicated)
Net asset value, beginning of year $ 5.43 $ 3.95 $ 3.92 $ 5.15 $ 5.02
------- ------- ------- ------- -------
Operations:
Net investment loss(1) (0.03) (0.07) (0.11) (0.10) (0.07)
Net realized and unrealized gain (loss) on investment
transactions(1) 1.59 1.55 0.22 (0.98) 0.20
------- ------- ------- ------- -------
Total from operations 1.56 1.48 0.11 (1.08) 0.13
------- ------- ------- ------- -------
Distributions:
From net investment income -- -- -- (0.10) --
From net realized gains -- -- (0.08) (0.05) --
------- -------
Total distributions -- -- (0.08) (0.15) --
------- -------
Net asset value, end of year $ 6.99 $ 5.43 $ 3.95 $ 3.92 $ 5.15
------- ------- ------- ------- -------
Per share market value, end of year $ 6.00 $ 4.87 $ 3.49 $ 3.48 $ 4.20
------- ------- ------- ------- -------
Total investment return (loss) based on
market value per share 46.41%(2) 39.54% 2.70% (13.45%) (17.04%)
------- ------- ------- ------- -------
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of year (in 000's) $11,722 $ 9,109 $ 6,626 $ 6,568 $ 8,643
------- ------- ------- ------- -------
Ratio of expenses to average net assets 3.40%(2) 3.67% 4.46% 3.77% 3.11%
------- ------- ------- ------- -------
Ratio of net investment loss
to average net assets (1.31%)(2) (1.39%) (3.15%) (2.45%) (1.33%)
------- ------- ------- ------- -------
Portfolio turnover rate 14% 23% 3% 18% 27%
------- ------- ------- ------- -------
(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 ratio 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
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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 policy is to invest at least 80% of its assets in
investments that are economically tied to Caribbean Basin Countries. 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 December 31, 2004, the Fund had foreign investments in companies operating
principally in Mexico and the Cayman Islands, representing approximately 12.64%
and 7.75% 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 or SmallCap 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.
- 14 -
Notes to Financial Statements
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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 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.
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, 2004, no
distributions were declared or paid to stockholders.
- 15 -
Notes to Financial Statements
================================================================================
NOTE 2. NON-MARKETABLE SECURITY OWNED
Investments in securities include $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 December
31, 2004, 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 daily net assets. Total fees for the six
months ended December 31, 2004 amounted to $69,314.
During the six months ended December 31, 2004, the Fund paid $5,791 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, 2004, purchases and sales of investment
securities were $1,336,394 and $1,902,247, respectively.
At December 31, 2004, the Fund's investment portfolio had gross unrealized gains
of $5,050,644 and gross unrealized losses of $767,508, resulting in a net
unrealized gain of $4,283,136 for both financial statement and income tax
purposes.
NOTE 5. INCOME TAX INFORMATION
The cost of securities owned for financial statement purposes equals the cost
basis for income tax purposes.
The income tax basis of distributive earnings as of December 31, 2004, include
$1,301,069 of accumulated net investment loss, $375,582 of accumulated net
realized gain on investments and $4,283,136 of net unrealized gain on
investments.
For the six months ended December 31, 2004, the Fund had net realized gains of
$646,615, which could, if unchanged, utilize the remaining capital loss
carryforward of $605,664 in the current fiscal year. Any net capital gain in
excess of the capital loss carryforward, which expires in the tax year ended
June 30, 2008, are anticipated to be distributed in accordance with Sub-chapter
M of the Internal Revenue Code.
- 16 -
Results of November 18, 2004 Stockholder Meeting
================================================================================
The annual meeting of stockholders of the Fund was held on November 18, 2004. At
the meeting one nominee for Director was elected as follows:
Votes for Votes withheld
-----------------------------------
Ann S. Lieff 1,291,666 69,234
The terms of office as directors of Thomas J. Herzfeld, Michael A. Rubin, and
Albert L. Weintraub continued after the meeting.
- 17 -
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.
- 18 -
Proxy Voting Policies and Procedures
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Information regarding how the Fund voted proxies relating to portfolio
securities from July 1, 2003 to June 30, 2004, 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.
Quarterly Portfolio Reports
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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.
Officers and Directors
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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
ALBERT L. WEINTRAUB
Director
- 19 -
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.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END FUND MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
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 7(d)(2)(ii)(G) 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
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Thomas J. Herzfeld
President and Chairman
Date: February 28, 2005
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, 2005
By: /s/ Cecilia L. Gondor
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Cecilia L. Gondor
Secretary and Treasurer
(Principal Financial Officer)
Date: February 28, 2005