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OMB Number: 3235-0570
Expires: Nov. 30, 2005
Estimated average burden
hours per response: 5.0
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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: 06/30/2003
----------------------
Date of reporting period: 06/30/2003
----------------------
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
THE HERZFELD
CARIBBEAN BASIN
FUND, INC.
ANNUAL REPORT
JUNE 30, 2003
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
Listed NASDAQ SmallCap Market
Symbol: CUBA
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
consists 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.
-2-
LETTER TO STOCKHOLDERS
--------------------------------------------------------------------------------
August 12, 2003
Dear Fellow Stockholders:
We are pleased to present our annual report for the period ended June 30, 2003.
On that date The Herzfeld Caribbean Basin Fund's net assets were $6,626,004 and
its net asset value per share was $3.95 after payment of a distribution of
$0.07746 per share, compared with $6,568,076, or $3.92 per share, at the
beginning of the period. This represents a gain of 3.19% in net asset value
after adjustment for the distribution and an increase of 2.70% in share price
(after adjustment for the distribution) from $3.48 to $3.49 per share.
Calendar year 2003 is going quite well. Year-to-date (through August 12, 2003)
our net asset value is up 26.90% (unaudited) while our share price has gained
17.17% (unaudited). Our net asset value was favorably impacted by the strong
recovery in the share prices of cruise line stocks; CARNIVAL CORP. (CCL) and
ROYAL CARIBBEAN CRUISES LTD. (RCL) are among our ten largest holdings and
represented 4.96% and 4.89% of net assets as of June 30, 2003, respectively.
Most of our other major holdings are also showing good performance so far in
2003. For example, FLORIDA EAST COAST INDUSTRIES (FLA) remains by far our
largest position representing 22.05% of our net assets at fiscal yearend.
Year-to-date FLA is up 29.57%, hitting a new yearly high as of the date of this
letter at $30.22.
Since our fiscal year end, we have added one new company to the portfolio,
GARMIN LTD. (GRMN), a Cayman Islands-incorporated company which manufactures,
markets and distributes Global Positioning Systems (GPS).
We added to our position in MARGO CARIBE, INC. (MRGO), a Puerto Rico-based
distributor of lawn and garden products. Shares of MRGO are up 129.71%
year-to-date.
[PHOTO]
Thomas J. Herzfeld
Chairman and President
-3-
LETTER TO STOCKHOLDERS (CONTINUED)
--------------------------------------------------------------------------------
LARGEST ALLOCATIONS
The following tables present our largest investment and geographic allocations
as of June 30, 2003.
--------------------------------------------------------------------------------
GEOGRAPHIC ALLOCATION % OF NET ASSETS
--------------------- ---------------
USA 49.67%
Mexico 15.55%
Cayman Islands 10.07%
Puerto Rico 4.26%
Netherlands Antilles 3.95%
Latin American Regional 3.89%
Belize 2.09%
Panama 1.82%
Virgin Islands 1.48%
Costa Rica 0.79%
Dominican Republic 0.62%
Colombia 0.60%
Venezuela 0.15%
Cuba 0.00%
--------------------------------------------------------------------------------
LARGEST PORTFOLIO POSITIONS % OF NET ASSETS
--------------------------- ---------------
Florida East Coast Industries Inc. 22.06%
Consolidated Water Co. 7.59%
Florida Rock Industries 6.54%
Carnival Corp. 4.96%
Royal Caribbean Cruises Ltd. 4.89%
Margo Caribe Inc. 4.26%
Watsco Incorporated 4.21%
Orthofix International N.V 3.95%
Coca Cola Femsa 3.70%
Latin American Equity Fund 2.63%
--------------------------------------------------------------------------------
PREMIUM/DISCOUNT
As the graph below 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.
[GRAPHIC OMITTED]
PREMIUM/DISCOUNT OF THE HERZFELD CARIBBEAN BASIN FUND FROM INCEPTION
-4-
LETTER TO STOCKHOLDERS (CONTINUED)
--------------------------------------------------------------------------------
Daily net asset values and press releases on the Fund are available on the
Internet at www.herzfeld.com.
I would like to thank the members of the Board of Directors for their hard work
and guidance and also to thank my fellow stockholders for their continued
support and suggestions.
Sincerely,
/s/Thomas J. Herzfeld
---------------------
Thomas J. Herzfeld
Chairman of the Board and President
-5-
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2003
--------------------------------------------------------------------------------
Shares or Principal Amount Description Market Value
-------------------------- ----------- ------------
Common stocks - 94.94% of net assets
Banking and finance - 3.05%
8,000 Bancolombia S.A. $ 39,520
15,120 Banco Latinoamericano de Exportaciones, S.A. 120,507
28,300 Grupo Financiero BBVA Bancomer, S.A. de C.V. Series O* 23,959
3,600 Grupo Financiero Banorte, S.A. de C.V. Series O* 10,182
8,400 Grupo Financiero Inbursa, S.A. de C.V. Series O* 8,183
Communications - 8.31%
11,000 America Movil, S.A. de C.V. Series A 10,294
43,800 America Movil, S.A. de C.V. Series L 41,154
11,100 America Telecom, S.A. de C.V. Series A1 10,430
4,400 Atlantic Tele-Network, Inc. 98,076
72,000 AT&T Latin America Corp.* 9,360
11,100 Carso Global Telecom, S.A. de C.V., Series A1* 14,134
14,500 Grupo Iusacell, S.A. de C.V. Series V* 449
19,000 Grupo Radio Centro, S.A. ADR 102,980
3,400 Grupo Televisa S.A. GDR* 117,300
12,100 Grupo Televisa, S.A. Series CPO* 20,940
11,000 Telefonos de Mexico, S.A. de C.V. Series A 17,381
39,300 Telefonos de Mexico, S.A. de C.V. Series L 61,870
21,000 Tricom, S.A. ADR* 40,950
13,900 TV Azteca, S.A. de C.V. Series CPO* 5,598
Conglomerates - 2.96%
4,900 Alfa, S.A. de C.V. Series A* 9,842
42,024 Carlisle Holdings, Inc.* 138,679
3,100 Corporacion Interamericana de Entretenimiento,
S.A. de C.V. - Series B* 5,504
4,200 Desc, S.A. de C.V. Series B 1,611
3,300 Grupo Carso, S.A. de C.V. Series A1* 9,998
3,300 U.S. Commercial Corp., S.A. de C.V.* 1,361
2,600 Vitro, S.A. Series A 1,807
13,000 Vitro Sociedad Anonima ADR 27,170
---------------------------------------
*Non-income producing
See accompanying notes.
-6-
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2003 (CONTINUED)
--------------------------------------------------------------------------------
Shares or Principal Amount Description Market Value
-------------------------- ----------- ------------
Construction and related - 9.13%
10,000 Cemex, S.A. de C.V. Series CPO $ 44,679
1,936 Ceramica Carabobo Class A ADR* 2,762
4,000 Consorcio ARA, S.A. de C.V. Series A1* 7,958
5,200 Empresas ICA, Sociedad Controladora, S.A. de C.V.* 1,172
10,500 Florida Rock Industries, Inc. 433,440
19,950 Mastec, Inc.* 114,912
Consumer products and related manufacturing - 9.82%
800,000 Atlas Electricas, S.A. 52,080
11,400 Coca Cola Femsa, S.A. de C.V. ADR 245,100
6,400 Grupo Casa Saba, S.A. ADR* 74,560
16,850 Watsco Incorporated 279,036
Food, beverages and tobacco - 0.80%
5,800 Fomento Economico Mexicano, S.A. de C.V. Series UBD 23,912
7,300 Grupo Bimbo, S.A. de C.V. Series A 12,248
7,300 Grupo Modelo, S.A. de C.V. Series C 16,658
Investment companies - 3.75%
15,245 The Latin America Equity Fund, Inc. 174,555
7,900 The Latin American Discovery Fund, Inc. 74,102
Leisure - 9.85%
10,100 Carnival Corp. 328,351
14,000 Royal Caribbean Cruises Ltd. 324,240
Medical - 3.95%
8,000 Orthofix International N.V.* 261,920
Pulp and paper - 0.23%
5,700 Kimberly-Clark de Mexico, S.A. de C.V. Series A 15,302
Railroad and landholdings - 22.06%
57,200 Florida East Coast Industries, Inc. 1,461,460
---------------------------------------
*Non-income producing
See accompanying notes.
-7-
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2003 (CONTINUED)
--------------------------------------------------------------------------------
Shares or Principal Amount Description Market Value
-------------------------- ----------- ------------
Retail - 0.98%
3,700 Controladora Comercial Mexicana, S.A. de C.V. Series UBC $ 2,480
1,380 Grupo Elektra, S.A. de C.V. Series CPO 4,233
7,900 Wal-Mart de Mexico, S.A. de C.V. Series C 21,284
12,500 Wal-Mart de Mexico, S.A. de C.V. Series V 36,924
Trucking and marine freight - 5.13%
800 Seaboard Corporation 165,600
46,600 Trailer Bridge, Inc.* 152,382
10,000 Grupo TMM, S.A. ADR* 22,000
Utilities - 10.07%
12,000 Caribbean Utilities Ltd., Class A 164,400
32,600 Consolidated Water, Inc. 502,692
Other - 4.85%
2,414 Mantex S.A.I.C.A* 6,526
39,120 Margo Caribe Inc.* 282,055
843 Siderurgica Venezolana Sivensa ADR* 553
75 Siderurgica Venezolana Sivensa Series B 49
20,000 Xcelera, Inc.* 31,800
-----------
TOTAL COMMON STOCKS (COST $6,214,195) $ 6,290,664
Bonds - 0% of net assets
165,000 Republic of Cuba - 4.5%, 1977 - in default (cost $63,038) (note 2)* --
OTHER ASSETS LESS LIABILITIES - 5.06% OF NET ASSETS $ 335,340
-----------
NET ASSETS - 100% $ 6,626,004
-----------
---------------------------------------
*Non-income producing
See accompanying notes.
-8-
STATEMENT OF ASSETS AND LIABILITIES AS OF JUNE 30, 2003
--------------------------------------------------------------------------------
ASSETS
Investment in securities, at market value
(cost $6,277,233) (Note 2) $ 6,290,664
Cash 341,984
Dividends receivable 8,493
Other assets 40,749
-------------
TOTAL ASSETS $ 6,681,890
LIABILITIES
Accrued investment advisor fee (Note 3) $ 22,799
Other payables 33,087
-------------
TOTAL LIABILITIES 55,886
-------------
NET ASSETS (Equivalent to $3.95 per share
based on 1,677,636 shares outstanding) $ 6,626,004
=============
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 (1,129,902)
Accumulated net realized loss on investments (621,705)
Net unrealized gain on investments 13,431
-------------
TOTAL $ 6,626,004
=============
See accompanying notes.
-9-
STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 2003
--------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends $ 77,124
EXPENSES
Investment advisor fee (Note 3) $ 84,837
Custodian fees 54,000
Professional fees 34,450
Insurance 25,631
Transfer agent fees 17,986
Listing fees 15,000
Printing 8,162
Director fees 7,800
Postage 5,870
Miscellaneous 9,402
-------------
Total expenses 263,138
-------------
INVESTMENT LOSS - NET ($ 186,014)
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS AND FOREIGN CURRENCY
Net realized loss on investments
and foreign currency (964,095)
Change in unrealized gain on investments
and foreign currency 1,337,987
-------------
NET GAIN ON INVESTMENTS 373,892
-------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 187,878
=============
See accompanying notes.
-10-
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED JUNE 30, 2003 AND 2002
--------------------------------------------------------------------------------
2003 2002
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS:
Investment loss - net ($ 186,014) ($ 176,134)
Net realized gain (loss) on
investments and foreign currency (964,095) 129,946
Change in unrealized gain
(loss) on investments and foreign currency 1,337,987 (1,768,169)
------------ ------------
Net increase (decrease) in net assets from
operations 187,878 (1,814,357)
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment income and short-term realized
gains -- (170,448)
Realized gains - long-term (129,950) (89,753)
Total distributions (129,950) (260,201)
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS $ 57,928 ($2,074,558)
NET ASSETS:
Beginning of year $ 6,568,076 $ 8,642,634
------------ ------------
End of year $ 6,626,004 $ 6,568,076
============ ============
See accompanying notes.
-11-
FINANCIAL HIGHLIGHTS
YEARS ENDED JUNE 30, 1999 THROUGH 2003
--------------------------------------------------------------------------------
2003 2002 2001 2000 1999
------------ ------------ ------------ ------------ ------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 3.92 $ 5.15 $ 5.02 $ 6.12 $ 6.43
------------ ------------ ------------ ------------ ------------
Operations:
Net investment loss (0.11) (0.10) (0.07) (0.10) (0.11)
Net realized and unrealized gain (loss)
on investments (0.22) (0.98) 0.20 (1.00) 0.51
------------ ------------ ------------ ------------ ------------
Total from (to) operations (0.11) (1.08) 0.13 (1.10) 0.40
------------ ------------ ------------ ------------ ------------
Distributions:
From investment income net -- (0.10) -- -- --
------------
From net realized gains (0.08) (0.05) -- -- (0.71)
------------ ------------ ------------
Total distributions (0.08) (0.15) -- -- (0.71)
Net asset value, end of period $ 3.95 $ 3.92 $ 5.15 $ 5.02 $ 6.12
------------ ------------ ------------ ------------ ------------
Per share market value, end of period $ 3.49 $ 3.48 $ 4.20 $ 5.06 $ 6.00
------------ ------------ ------------ ------------ ------------
Total investment return (loss) based on
market value per share 2.70% (13.45%) (17.04%) (15.63%) 11.83%
------------ ------------ ------------ ------------ ------------
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $ 6,626 $ 6,568 $ 8,643 $ 8,424 $ 10,272
------------ ------------ ------------ ------------ ------------
Ratio of expenses to average net assets 4.46% 3.77% 3.11% 3.11% 3.30%
------------ ------------ ------------ ------------ ------------
Ratio of investment loss -
net to average net assets (3.15%) (2.45%) (1.33%) (1.76%) (1.95%)
------------ ------------ ------------ ------------ ------------
Portfolio turnover rate 3% 18% 27% 10% 59%
------------ ------------ ------------ ------------ ------------
See accompanying notes.
-12-
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND RELATED MATTERS
--------------------------------
The Herzfeld Caribbean Basin Fund, Inc. (the Fund) is a non-diversified,
closed-end management investment company incorporated under the laws of the
State of Maryland on March 10, 1992, and registered under the Investment Company
Act of 1940. The Fund commenced investing activities in January, 1994. The Fund
is listed on the NASDAQ SmallCap Market and trades under the symbol "CUBA".
The Fund's investment 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 June 30, 2003, the Fund had investments in companies operating principally in
Mexico, and the Cayman Islands, representing approximately 16% and 10% of the
Fund's net assets, respectively.
The Fund's custodian and transfer agent is Investors Bank & Trust Company, based
in Boston, Massachusetts.
SECURITY VALUATION
------------------
Investments in securities traded on a national securities exchange (or reported
on the NASDAQ national market) are stated at the last reported sales price on
the day of valuation; other securities traded in the over-the-counter market and
listed securities for which no sale was reported on that date are stated at the
last quoted bid price. Short-term notes are stated at amortized cost, which is
equivalent to value. Restricted securities and other securities for which
quotations are not readily available are valued at fair value as determined by
the Board of Directors.
-13-
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
INCOME RECOGNITION
------------------
Security transactions are recorded on the trade date. Gains and losses on
securities sold are determined on the basis of identified cost. Dividend income
is recognized on the exdividend date, and interest income is recognized on an
accrual basis. Discounts and premiums on securities purchased are amortized over
the life of the respective securities.
DEPOSITS WITH FINANCIAL INSTITUTIONS
------------------------------------
The Fund may, during the course of its operations, maintain account balances
with financial institutions in excess of federally insured limits.
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 qualifies as a "regulated investment company" and as such (and by
complying with the applicable provisions of the Internal Revenue Code of 1986,
as amended) is not subject to federal income tax on taxable income (including
realized capital gains) that is distributed to shareholders.
The Fund has adopted a June 30 year-end for federal income tax purposes.
DISTRIBUTIONS TO STOCKHOLDERS
-----------------------------
Distributions to stockholders are recorded on the ex-dividend date. Income and
capital gain distributions are determined in accordance with income tax
regulations which may differ from accounting principles generally accepted in
the United States of America.
-14-
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
NOTE 2. NON-MARKETABLE SECURITY OWNED
Investment 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 June 30, 2003, 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 year ended June
30, 2003 amounted to $84,837.
During the year ended June 30, 2003, the Fund paid $1,380 of brokerage
commissions to Thomas J. Herzfeld & Co., Inc., an affiliate of the Advisor.
NOTE 4. INVESTMENT TRANSACTIONS
During the fiscal year ended June 30, 2003, purchases and sales of investment
securities were $191,006 and $888,776, respectively.
At June 30, 2003, the Fund's investment portfolio had gross unrealized gains of
$1,551,526 and gross unrealized losses of $1,538,095, resulting in a net
unrealized gain of $13,431.
-15-
DIRECTORS AND OFFICERS OF THE FUND
--------------------------------------------------------------------------------
NAME POSITION(S) TERM OF OFFICE AND
ADDRESS HELD LENTH OF TIME SERVED
AGE WITH FUND
--------------------------------------------------------------------------------
Officers
--------
THOMAS J. HERZFELD President, three years;
PO Box 161465 Chairman, 1993 to present
Miami, FL 33116 Director
Age: 58
CECILIA L. GONDOR Secretary, three years;
PO Box 161465 Treasurer, 1993 to present
Maimi, FL 33116 Director
Age: 41
Independent Directors
---------------------
ANN S. LIEFF Director three years;
c/o The Herzfeld Caribbean 1998 to present
Basin Fund, Inc.
PO Box 161465
Miami, FL 33116
Age: 52
MICHAEL A. RUBIN Director three years;
c/o The Herzfeld Caribbean 2002 to present
Basin Fund, Inc.
PO Box 161465
Miami, FL 33116
Age: 61
ALBERT L. WEINTRAUB Director three years;
c/o The Herzfeld Caribbean 1999 to present
Basin Fund, Inc.
PO Box 161465
Miami, FL 33116
Age: 74
-16-
--------------------------------------------------------------------------------
PRINCIPAL OCCUPATION(S) NUMBER OF PORTFOLIOS PUBLIC
DURING PAST 5 YEARS IN COMPLEX OVERSEEN DIRECTORSHIPS
BY DIRECTOR
--------------------------------------------------------------------------------
Chairman and President of 2 The Cuba Fund, Inc.
Thomas J. Herzfeld & Co., Inc., (in registration)
a broker dealer, and Thomas J.
Herzfeld Advisors, Inc.
Executive Vice President of 2 The Cuba Fund, Inc.
Thomas J. Herzfeld & Co., Inc., (in registration)
a broker dealer, and Thomas J.
Herzfeld Advisors, Inc.
President of the Lieff Company, a 1 Hastings
management consulting firm that Entertainment, Inc.;
offers business solutions, Claire's Stores, Inc.;
strategies and CEO mentoring to Mayors Jewelers, Inc.
corporations and women/family
owned businesses, 1998-present;
former CEO Spec's Music 1980-1998,
a retailer of recorded music.
Partner of Michael A. Rubin P.A., 1 Margo Caribe, Inc.
attorney at law; Broker, Oaks
Management & Real Estate Corp.,
a real estate corporation
Senior Partner of Weintraub, 1 None
Weintraub; of counsel Orshan
et al, attornies; Chairman of
E-Lysium Transaction Systems, Inc.,
an application service provider of
transaction processing, billing
and payment systems
-17-
INDEPENDENT AUDITOR'S REPORT
--------------------------------------------------------------------------------
KAUFMAN
ROSSIN &
CO.
PROFESSIONAL
------------
ASSOCIATION
Certified Public Accountants
To the Board of Directors and Stockholders
The Herzfeld Caribbean Basin Fund, Inc.
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of The Herzfeld Caribbean Basin Fund, Inc. as of
June 30, 2003, and the related statement of operations for the year then ended,
the statement of changes in net assets for each of the two years in the period
then ended, and the financial highlights for each of the five years in the
period then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements and financial highlights. Our procedures
include confirmation of securities owned as of June 30, 2003, by correspondence
with the custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
Herzfeld Caribbean Basin Fund, Inc. as of June 30, 2003, and the results of its
operations for the year then ended, the changes in net assets for each of the
two years in the period then ended, and the financial highlights for each of the
five years in the period then ended, in conformity with accounting principles
generally accepted in the United States of America.
/s/ Kaufman, Rossin & Co.
-------------------------
Kaufman, Rossin & Co.
Miami, Florida
July 18, 2003
-18-
PRIVACY POLICY
--------------------------------------------------------------------------------
INFORMATION WE COLLECT
We collect nonpublic information about you from applications or other account
forms you complete, from your transactions with us, our affiliates or others
through transactions and conversations over the telephone.
INFORMATION WE DISCLOSE
We do not disclose information about you, or our former customers, to our
affiliates or to service providers or other third parties except on the limited
basis permitted by law. For example, we may disclose nonpublic information about
you to third parties to assist us in servicing your account with us and to send
transaction confirmations, annual reports, prospectuses and tax forms to you. We
may also disclose nonpublic information about you to government entities in
response to subpoenas.
OUR SECURITY PROCEDURES
To ensure the highest level of confidentiality and security, we maintain
physical, electronic and procedural safeguards that comply with federal
standards to guard your personal information. We also restrict access to your
personal and account information to those employees who need to know that
information to provide services to you.
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THE HERZFELD CARIBBEAN BASIN FUND, INC.
The Herzfeld Building
P. O. Box 161465
Miami, FL 33116
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Item 2. Code of Ethics
A response to this item is not yet required.
Item 3. Audit Committee Financial Expert
A response to this item is not yet required.
Item 4. Principal Accountant Fees and Services
A response to this item is not yet required.
Item 5. Audit Committee of Listed Registrants
A response to this item is not yet required.
Item 6. Reserved.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
It is the policy of the Board of Directors of the Fund (the "Board") to delegate
the responsibility for voting proxies relating to portfolio securities held by
the Fund to the Fund's investment adviser (the "Adviser") as a part of the
Adviser's general management of the Fund, subject to the Board's continuing
oversight.
With respect to those proxies that the Adviser has identified as involving a
conflict of interest, the Adviser shall submit a separate report indicating the
nature of the conflict of interest and how that conflict was resolved with
respect to the voting of the proxy.
Item 8. Reserved.
Item 9. Controls and Procedures
(a) The registrant's principal executive officer and principal financial
officer have concluded that the registrant's disclosure controls and procedures
(as defined in Rule 30a-2(c) under the Investment Company Act of 1940, as
amended), are effective, based on their evaluation of these controls and
procedures as of a date within 90 days of the filing date of the report that
includes the disclosure required by this paragraph.
(b) There were no significant changes in the registrant's internal controls or
in other factors that could significantly affect these controls subsequent to
the date of their evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Item 10. Exhibits
(a)(1) Requirement to file an exhibit under this item 10(a) is not
applicable.
(2) Separate certifications by the registrant's principal executive
officer and principal financial officer, pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 and as required by Rule 30a-2(a) under the Investment
Company Act of 1940, are attached hereto as Exhibit 99.CERT.
(b) A certification by the registrant's principal executive officer
and principal financial officer, pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 and as required by Rule 30a-2(b) under the Investment Company Act of
1940 is attached hereto as Exhibit 99.906CERT.
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: September 5, 2003
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: August 20, 2003
By: /s/ Cecilia L. Gondor
-------------------------
Cecilia L. Gondor
Secretary and Treasurer
(Principal Financial Officer)
Date: September 5, 2003