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: 06/30/07

                  Date of reporting period: 07/01/06 - 6/30/07

Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.

A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.



ITEM 1. SHAREHOLDER REPORT


THE HERZFELD
CARIBBEAN BASIN
FUND, INC.

                               [GRAPHIC OMITTED]

ANNUAL REPORT
JUNE 30, 2007



================================================================================

The Herzfeld Caribbean Basin Fund, Inc.
The Herzfeld Building
PO Box 161465
Miami, FL  33116
(305) 271-1900

Investment Advisor
HERZFELD/CUBA
a division of Thomas J. Herzfeld Advisors, Inc.
PO Box 161465
Miami, FL  33116
(305) 271-1900

Transfer Agent & Registrar
State Street Bank and Trust
200 Clarendon Street, 16th Floor
Boston, MA  02116
(617) 443-6870

Custodian
State Street Bank and Trust
200 Clarendon Street, 5th Floor
Boston, MA  02116

Counsel
Pepper Hamilton LLP
3000 Two Logan Square
18th and Arch Streets
Philadelphia, PA  19103

Independent Auditors
Rothstein Kass & Company, LLP
101 Montgomery Street, 22nd Floor
San Francisco, CA  94104

--------------------------------------------------------------------------------
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. 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.
--------------------------------------------------------------------------------

                          Listed NASDAQ Capital Market
                                  Symbol: CUBA


                                     - 2 -


Letter to Stockholders
================================================================================

                                                                [PHOTO]
                                                           Thomas J. Herzfeld
                                                         Chairman and President

Dear Fellow Shareholders:

I'm pleased to report that our Fund's investments have been doing very well. As
of June 30, 2007 the end of our fiscal year, the Fund's net asset value was
$9.77 per share, which represents a gain of 31.08% for the one year period then
ended (adjusted for distributions). The Fund's share price closed the fiscal
year at $13.59 per share, up from $7.57 per share on June 30, 2006 and
representing a 94.61% gain for the year (adjusted for distributions). A
long-term capital gains distribution of $1.00 per share was paid in January,
2007 to shareholders of record December 15, 2006.

The Fund traded at a premium to net asset value most of the fiscal year,
reflecting strong interest by investors. At the same time, events in the
Caribbean, and especially in Cuba, have sparked interest in future investment
opportunities in the region.

It is now a little over a year since Fidel Castro went into the hospital and
turned over power to his brother Raul. Speculation, both publicly and privately,
about Fidel's health as well as the future of Cuba's foreign policy towards the
U.S., continues to vary greatly. In my view, any consideration of a change in
U.S. policy is likely to take place toward the end of this year, especially if
Cuba were to make the first gesture., i.e., release the political prisoners
and/or announce plans for free elections.

We continue to position the Fund's portfolio in companies we believe will
benefit from resumption of trade with Cuba and we have a very good working list
of companies we would add to the portfolio once it appears the embargo will be
lifted. In this regard, we believe it would be in the shareholders' best
interest to have a larger pool of capital available for investment whenever
these opportunities present themselves, rather than be forced to liquidate
existing holdings. For this and other reasons, the Board of Directors has
approved a rights offering.


                                     - 3 -


Letter to Stockholders (continued)
================================================================================

Rights Offering

Very shortly you will be receiving information from the Fund regarding a rights
offering. A rights offering allows current shareholders to buy additional shares
of the Fund at a discount to the average market price of the shares on the
expiration date of the offer. The rights will be non-transferable, meaning they
cannot be sold and can only be used by shareholders of record to subscribe for
new shares. It is expected that one right will be required to subscribe for each
new share, and any shares not subscribed for will be made available to other
shareholders through an over-subscription privilege. If the subscription price
is higher than the Fund's net asset value on the pricing date, the Fund will
also have the option of issuing additional new shares to fulfill
over-subscription requests.

Please watch for mailings from the Fund as your response will be required before
the expiration of the rights offer in order to participate. The shares issued in
connection with the rights offering will be sold by prospectus only. The
prospectus contains important information about the Fund including information
about its investment objectives, risks, and charges and expenses.

Please read the prospectus carefully before you make your decision. A
registration statement relating to the rights offering has been filed with the
Securities and Exchange Commission, but has not yet become effective. The
statements herein regarding the rights offering shall not constitute an offer to
sell or the solicition of an offer to buy, nor shall there be any sale of the
securities to be offered in any state in which such offer, solicition or sale
would be unlawful prior to the registration or qualification under the
securities laws of any such state. We are available at 305-271-1900 if you have
questions about the offer or how to participate.

Appointment of New Independent Director

I am pleased to announce that Kay W. Tatum, Ph.D., CPA has joined the Fund's
Board of Directors as an independent director. Dr. Tatum replaces Albert L.
Weintraub who retired from the Board in July at the age of 77. We thank Mr.
Weintraub for his dedication to the Fund over the eight years he served on the
board.

We are honored to have Dr. Tatum as part of the Board. She is currently Chair
and Associate Professor of Accounting at the University of Miami's School of
Business Administration. In addition, Dr. Tatum has served on the Public Company
Accounting Oversight Board's initial Standing Advisory Group, and was a member
of the American Institute of Public Accountant's International Auditing
Standards Subcommittee. Her articles on audit-related topics have appeared in
the Journal of Accountancy and The CPA Journal. Dr. Tatum is also a contributing
author to the book Audit Committees: A Guide for Directors, Management and
Consultants.


                                     - 4 -


Letter to Stockholders (continued)
================================================================================

Largest Allocations

The following tables present our largest investment and geographic allocations
as of June 30, 2007:

----------------------------         -------------------------------------------
Geographic          % of Net                                            % of Net
Allocation           Assets          Largest Portfolio Positions         Assets

USA                   53.67%         Florida East Coast Industries, Inc.  20.54%
Mexico                21.15%         Seaboard Corporation                 10.24%
Cayman Islands         8.40%         Consolidated Water Co.                7.51%
Panama                 4.29%         Garmin Ltd.                           4.49%
Multi-national         3.80%         Watsco Incorporated                   3.96%
Netherlands Antilles   2.91%         Royal Caribbean Cruises Ltd.          3.52%
Colombia               1.89%         Trailer Bridge, Inc.                  3.16%
Puerto Rico            1.74%         Carnival Corp.                        3.11%
Belize                 1.32%         Orthofix International N.V.           2.91%
Costa Rica             0.43%         Mexico Fund                           2.42%
Venezuela              0.09%         -------------------------------------------
Cuba                   0.00%
----------------------------

Daily net asset values, annual and semi-annual reports as well as press releases
and other SEC filings 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

This letter is intended to assist stockholders in understanding how the Fund
performed during the fiscal year ended June 30, 2007 and reflects the views of
Mr. Herzfeld at the time of its writing. Of course these views may change and
they do not guarantee the future performance of the Fund or the markets.


                                     - 5 -


Schedule of Investments as of June 30, 2007
================================================================================

Shares or Principal Amount          Description                    Market Value
--------------------------------------------------------------------------------

Common stocks - 99.70% of net assets

Banking and finance - 4.96%
    9,500  Bancolombia, S.A.                                       $    311,885
   19,720  Banco Latinoamericano de Exportaciones, S.A.                 370,736
   30,000  Doral Financial Corp.                                         35,400
   16,400  Grupo Financiero Banorte, S.A. de C.V. Series O               75,209
    9,900  Grupo Financiero Inbursa, S.A. de C.V. Series O               23,948

Communications - 15.01%
    2,000  America Movil ADR                                           123,860
   35,600  America Movil, S.A. de C.V. Series A                        109,972
   50,891  America Movil, S.A. de C.V. Series L                        157,350
   11,950  Atlantic Tele-Network, Inc.                                  342,248
   11,900  Carso Global Telecom, S.A. de C.V. Series A1*                 61,322
  141,000  Fuego Entertainment Inc.*                                     21,150
   10,000  Garmin Ltd.                                                  739,700
      725  Grupo Iusacell, S.A. de C.V. Series V                         10,684
   18,800  Grupo Radio Centro, S.A. ADR                                 233,120
   12,900  Grupo Televisa, S.A. GDR                                     356,169
   13,400  Grupo Televisa, S.A. Series CPO                               74,144
    1,000  Telefonos de Mexico ADR Series L                              37,890
   23,800  Telefonos de Mexico, S.A. de C.V. Series A                    45,441
   78,600  Telefonos de Mexico, S.A. de C.V. Series L                   149,120
   13,900  TV Azteca, S.A. de C.V. Series CPO                            12,303

Conglomerates - 2.731%
  250,000  Admiralty Holding Company*                                     8,750
    5,400  Alfa, S.A. de C.V. Series A                                   42,642
   42,595  BB Holdings Ltd.*                                            217,897
   13,000  Carlisle Group Ltd.*                                          37,033
    3,200  Corporacion Interamericana de Entretenimiento,
             S.A. de C.V. Series B*                                       9,256
   11,000  Grupo Carso, S.A. de C.V. Series A1                           42,614
      600  Grupo Imsa, S.A. de C.V., Series UBC                           3,844
    1,580  Grupo Kuo S.A.B. de C.V.                                       1,479
    2,525  OneSource Services, Inc.*                                     30,392
    3,300  U.S. Commercial Corp., S.A. de C.V.*                             376
    2,900  Vitro, S.A. Series A                                           7,741
    6,000  Vitro Sociedad Anonima ADR                                    47,460

------------
*Non-income producing

                            See accompanying notes.


                                     - 6 -


Schedule of Investments as of June 30, 2007 (continued)
================================================================================

Shares or Principal Amount          Description                    Market Value
--------------------------------------------------------------------------------

Construction and related - 5.25%
    4,098  Cemex, S.A. de C.V. ADR                                 $    151,216
   47,864  Cemex, S.A. de C.V. Series CPO                               176,071
    2,032  Ceramica Carabobo Class A ADR*                                 6,319
   17,200  Consorcio ARA, S.A. de C.V.*                                  27,737
    1,580  Dine S.A.B. de C.V.*                                           1,565
    3,583  Empresas ICA, Sociedad Controladora, S.A. de C.V.*            18,198
      800  Grupo Cementos de Chichuahua, S.A. de C.V.                     5,858
    4,000  Lennar Corp.                                                 146,240
   20,950  Mastec, Inc.*                                                331,429

Consumer products and related manufacturing - 5.49%
  800,000  Atlas Electricas, S.A.                                        70,187
    5,900  Grupo Casa Saba, S.A. ADR                                    181,956
   12,000  Watsco Incorporated                                          652,800

Food, beverages and tobacco - 2.24%
    1,200  Alsea, S.A. de C.V.                                            2,113
    4,500  Coca Cola Femsa, S.A. de C.V. ADR                            199,260
      200  Coca Cola Femsa, S.A. de C.V. Series L                           886
   18,900  Fomento Economico Mexicano, S.A. de C.V. Series UBD           74,185
      800  Gruma, S.A. de C.V. Series B                                   2,665
    7,600  Grupo Bimbo, S.A. de C.V. Series A                            47,898
    7,700  Grupo Modelo, S.A. de C.V. Series C                           41,999

Housing - 0.11%
    1,700  Corporacion Geo S.A. de C.V. Series B*                         9,350
      100  Desarrolladora Homex, S.A. de C.V.*                            1,007
      400  Sare Holding, S.A. de C.V. Series B*                             660
    1,500  Urbi Desarrollos Urbanos, S.A. de C.V.                         6,916

Investment companies - 5.81%
    9,500  The Mexico Fund, Inc.                                        398,905
   16,728  Western Asset Emerging Markets Debt Fund                     298,929
   19,000  Western Asset Worldwide Income Fund                          260,300

Leisure - 6.63%
   10,500  Carnival Corp.                                               512,085
   13,500  Royal Caribbean Cruises Ltd.                                 580,230

------------
*Non-income producing

                            See accompanying notes.


                                     - 7 -


Schedule of Investments as of June 30, 2007 (continued)
================================================================================

Shares or Principal Amount          Description                    Market Value
--------------------------------------------------------------------------------

Medical - 3.03%
    8,386  Micromet Inc.                                           $     19,120
   10,660  Orthofix International N.V.*                                 479,380

Mining - 0.05%
    1,200  Grupo Mexico, S.A. de C.V. Series B                            7,385

Pulp and paper - 0.16%
    6,100  Kimberly-Clark de Mexico, S.A. de C.V. Series A               26,572

Railroad and landholdings - 20.54%
   40,800  Florida East Coast Industries, Inc.                        3,385,584

Retail - 1.24%
    3,700  Controladora Comercial Mexicana, S.A. de C.V.
             Series UBC                                                   9,533
    1,380  Grupo Elektra, S.A. de C.V. Series CPO                        24,033
   45,111  Wal-Mart de Mexico, S.A. de C.V. Series V                    171,422

Service - 0.02%
      700  Grupo Aeroportuario del Sureste, S.A. de C.V.
             Series B                                                     3,685
      100  Promotora Ambiental, S.A. de C.V.*                               278

Trucking and marine freight - 13.71%
   14,800  Grupo TMM, S.A. ADR*                                          50,172
      720  Seaboard Corporation                                       1,688,400
   42,699  Trailer Bridge, Inc.*                                        521,355

Utilities - 9.10%
   12,000  Caribbean Utilities Ltd. Class A                             147,000
   42,241  Consolidated Water, Inc.                                   1,238,084
      700  Cuban Electric Company*                                       11,900
    6,000  Teco Energy Inc.                                             103,080

------------
*Non-income producing

                            See accompanying notes.


                                     - 8 -


Schedule of Investments as of June 30, 2007 (continued)
================================================================================

Shares or Principal Amount          Description                    Market Value
--------------------------------------------------------------------------------

Other - 3.62%
    5,000  Copa Holdings S.A.                                      $    336,200
   55,921  Margo Caribe, Inc.                                           251,645
      100  Mexichem S.A. de C.V.                                            329
      843  Siderurgica Venezolana Sivensa ADR                             7,118
       75  Siderurgica Venezolana Sivensa Series B                          640
   45,000  Xcelera, Inc.*                                                    --
                                                                   ------------
Total common stocks (cost $8,810,888)                              $ 16,431,014

Bonds - 0% of net assets
$ 165,000  Republic of Cuba - 4.5%, 1977 - in default
             (cost $63,038) (Note 2)*                                        --

Other assets less liabilities - 0.30% of net assets                $     50,203
                                                                   ------------
Net assets - 100%                                                  $ 16,481,217
                                                                   ============

The above investments are concentrated in the following geographic regions (as
percentages of net assets):

United States of America                                                  53.67%
Mexico                                                                    21.15%
Cayman Islands                                                             8.40%
Other, individually under 5%                                              16.78%
                                                                   ------------
                                                                         100.00%
------------
*Non-income producing

                            See accompanying notes.


                                     - 9 -


Statement of Assets and Liabilities as of June 30, 2007
================================================================================

ASSETS

   Investments in securities, at market value
     (cost $8,873,926) (Notes 1 and 2)                             $ 16,431,014
   Cash                                                                 267,239
   Receivable for securities sold                                        82,869
   Dividends receivable                                                  16,802
   Other assets                                                          33,249
                                                                   ------------
      TOTAL ASSETS                                                   16,831,173

LIABILITIES

   Payable for securities purchased                      276,930
   Accrued investment advisor fee (Note 3)                57,753
   Other payables                                         15,273
                                                    ------------
      TOTAL LIABILITIES                                                 349,956
                                                                   ------------

NET ASSETS (Equivalent to $9.77 per share
  based on 1,687,556 shares outstanding)                           $ 16,481,217
                                                                   ============
Net assets consist of the following:
   Common stock, $.001 par value; 100,000,000
     shares authorized; 1,687,556* shares issued
     and outstanding                                               $      1,688
   Additional paid-in capital                                         7,263,609
   Accumulated net realized gain on investments
     (Note 5)                                                         1,658,832
   Net unrealized gain on investments
     (Notes 4 and 5)                                                  7,557,088
                                                                   ------------
      TOTAL                                                        $ 16,481,217
                                                                   ============

*9,920 shares issued through dividend reinvestment plan

                            See accompanying notes.


                                     - 10 -


Statement of Operations
Year Ended June 30, 2007
================================================================================

INVESTMENT INCOME AND EXPENSES
   Dividends                                                       $    200,748
   Interest                                                                 198
   Other                                                                  7,091
                                                                   ------------
      Total investment income                                           208,037

   Investment advisor fees (Note 3)                 $    208,505
   Professional fees                                     108,232
   Custodian fees                                         54,000
   Insurance                                              27,548
   Transfer agent fees                                    17,500
   Printing, postage and proxy services                   15,957
   Listing fees                                           15,000
   Salaries                                               12,918
   Director fees                                           7,800
   Other                                                   4,521
                                                    ------------
      Total investment expenses                                         471,981
                                                                   ------------
      INVESTMENT LOSS - NET                                            (263,944)

REALIZED AND UNREALIZED GAIN
  ON INVESTMENTS AND FOREIGN CURRENCY
   Net realized gain on investments and
     foreign currency                                  1,894,365
   Net increase (decrease) in unrealized
     appreciation (depreciation) on investments
     and foreign currency                              2,866,877
                                                    ------------

      NET GAIN ON INVESTMENTS                                         4,761,242
                                                                   ------------
NET INCREASE IN NET ASSETS RESULTING
  FROM OPERATIONS                                                  $  4,497,298
                                                                   ============

                            See accompanying notes.


                                     - 11 -


Statements of Changes in Net Assets
Years Ended June 30, 2007 and 2006
================================================================================

                                                         2007          2006

INCREASE IN NET ASSETS RESULTING FROM
  OPERATIONS:
   Net investment loss                              $   (263,944)  $   (264,847)
   Net realized gain on investments and
     foreign currency                                  1,894,365      2,021,250
   Net increase (decrease) in unrealized
     appreciation (depreciation) on investments
     and foreign currency                              2,866,877       (201,615)
                                                    ------------   ------------
NET INCREASE IN NET ASSETS
  resulting from operations                            4,497,298      1,554,788

DISTRIBUTIONS TO SHAREHOLDERS:
   Long-term realized gains (Note 5)                  (1,677,636)      (293,251)
                                                    ------------   ------------
CAPITAL STOCK TRANSACTIONS:
   Effect due to shares issued in reinvestment of
     distributions (9,920 shares) (Note 6)               108,062             --
                                                    ------------   ------------
TOTAL INCREASE IN NET ASSETS                           2,927,724      1,261,537

NET ASSETS:

   Beginning of year                                  13,553,493     12,291,956

   End of year                                      $ 16,481,217   $ 13,553,493
                                                    ============   ============

                            See accompanying notes.


                                     - 12 -


Financial Highlights
Years Ended June 30, 2003 through 2007
================================================================================



                                                    2007             2006             2005             2004             2003
                                                ------------     ------------     ------------     ------------     ------------
                                                                                                     
PER SHARE OPERATING PERFORMANCE
(For a share of capital stock outstanding for the year)

Net asset value, beginning of year              $       8.08     $       7.33     $       5.43     $       3.95     $       3.92
                                                ------------     ------------     ------------     ------------     ------------

Operations:
   Net investment loss(1)                              (0.14)           (0.16)           (0.09)           (0.07)           (0.11)
   Net realized and unrealized gain (loss) on
     investment transactions(1)                         2.83             1.08             1.99             1.55             0.22
                                                ------------     ------------     ------------     ------------     ------------
      Total from operations                             2.69             0.92             1.90             1.48             0.11
                                                ------------     ------------     ------------     ------------     ------------

Distributions:
   From net investment income                             --               --               --               --               --
   From net realized gains                             (1.00)           (0.17)              --               --            (0.08)
                                                ------------     ------------     ------------     ------------     ------------
      Total distributions                              (1.00)           (0.17)              --               --            (0.08)
                                                ------------     ------------     ------------     ------------     ------------

Net asset value, end of year                            9.77     $       8.08     $       7.33     $       5.43     $       3.95
                                                ------------     ------------     ------------     ------------     ------------

Per share market value, end of year                    13.59     $       7.57     $       6.30     $       4.87     $       3.49
                                                ------------     ------------     ------------     ------------     ------------

Total investment return (loss) based on
   market value per share                              94.61%           22.86%           29.36%           39.54%            2.70%
                                                ------------     ------------     ------------     ------------     ------------

RATIOS AND SUPPLEMENTAL DATA
Net assets, end of year (in 000's)              $     16,481     $     13,553     $     12,292     $      9,109     $      6,626
                                                ------------     ------------     ------------     ------------     ------------
Ratio of expenses to average net assets                 3.28%            3.37%            3.55%            3.67%            4.46%
                                                ------------     ------------     ------------     ------------     ------------
Ratio of net investment loss
  to average net assets                                (1.83%)          (1.95%)          (1.47%)          (1.39%)          (3.15%)
                                                ------------     ------------     ------------     ------------     ------------
Portfolio turnover rate                                   28%              40%              30%              23%               3%
                                                ------------     ------------     ------------     ------------     ------------


(1)   Computed by dividing the respective year's amounts from the Statement of
      Operations by the average outstanding shares for each year presented

                            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 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, 2007, the Fund had foreign investments in companies operating
principally in Mexico and the Cayman Islands representing approximately 21% and
8% of the Fund's net assets, respectively.

The Fund's custodian and transfer agent is State Street Bank & Trust Company
("SSBT"), based in Boston, Massachusetts.

Security Valuation

Investments in securities traded on a national securities exchange (or reported
on the NASDAQ national market or capital market) are stated at the last reported
sales price on the day of valuation (or at the NASDAQ official closing price);
other securities traded in the over-the-counter market and listed securities for
which no sale was reported on that date are stated at the last quoted bid price.
Restricted securities and other securities for which quotations are not readily
available are valued at fair value as determined by the Board of Directors.

In September, 2006, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 157, "Fair Value Measurements"
(SFAS No. 157). SFAS No. 157 defines fair value, establishes a framework for
measuring fair value in


                                     - 14 -


Notes to Financial Statements
================================================================================

accordance with generally accepted accounting principals and expands disclosure
about fair value measurements. SFAS No. 157 is effective for fiscal years
beginning after November 15, 2007. Management is currently evaluating the impact
the adoption of SFAS No. 157 will have on the Fund's financial statement
disclosures.

In February, 2007, FASB issued Statement of Financial Accounting Standards No.
159, "The Fair Value Option for Financial Assets and Financial Liabilities -
including an amendment of FASB Statement No. 115" (SFAS No. 159). SFAS No. 159
permits entities to elect to measure certain financial assets and liabilities at
fair value. Unrealized gains and losses on items for which the fair value option
has been elected will be reported in earnings at each subsequent reporting date.
SFAS No. 159 is effective as of the beginning of the first fiscal year that
begins after November 15, 2007. Management is currently evaluating the impact
the adoption of SFAS No. 159 wil have on the Fund's financial statements.

Income Recognition

Security transactions are recorded on the trade date. Gains and losses on
securities sold are determined on the basis of identified cost. Dividend income
is recognized on the ex-dividend date, or in the case of certain foreign
securities, as soon as the Fund is notified, and interest income is recognized
on an accrual basis. Pursuant to a custodian agreement, SSBT receives a fee
reduced by credits which are determined based on the average daily cash balance
the Fund maintains with SSBT. Credit balances used to reduce the Fund's
custodian fees for the year ended June 30, 2007, were approximately $8,927.
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


                                     - 15 -


Notes to Financial Statements
================================================================================

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.

NOTE 2. NON-MARKETABLE SECURITY OWNED

Investments in securities, at market value include 45,000 common shares of
Xcelera, Inc. purchased for $73,890 and $165,000 principal, 4.5%, 1977 Republic
of Cuba bonds purchased for $63,038. Shares of Xcelera are no longer being
traded in over-the-couonter markets. The bonds are listed on the New York Stock
Exchange and had been trading in default since 1960. A Oregulatory haltO on
trading was imposed by the New York Stock Exchange in July 1995. As of June 30,
2007, these positions were valued at $0 by the Board of Directors, which
approximates the positions' 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, 2007 amounted to $208,505 of which $57,753 is payable at year
end.

During the year ended June 30, 2007, the Fund paid approximately $12,000 of
brokerage commissions to Thomas J. Herzfeld & Co., Inc., an affiliate of the
Advisor, at an average cost per share of $0.036.

A director of the Fund serves on the Board of Directors of Margo Caribe, Inc., a
company in which the Fund has an investment.

A director of the Fund is the owner of the Advisor and Thomas J. Herzfeld & Co.,
Inc.


                                     - 16 -


Notes to Financial Statements
================================================================================

NOTE 4. INVESTMENT TRANSACTIONS

During the year ended June 30, 2007, purchases and sales of investment
securities were $3,999,212 and $5,476,205, respectively.

At June 30, 2007, the Fund's investment portfolio had gross unrealized gains of
$7,999,350 and gross unrealized losses of $442,262, resulting in a net
unrealized gain of $7,557,088.

NOTE 5. INCOME TAX INFORMATION

On November 16, 2006, a long-term capital gain distribution of $1,677,636 ($1.00
per share) was declared. The distribution was paid on January 12, 2007 to
shareholders of record on December 15, 2006.

For financial statement purposes, the Fund's net investment loss for the year
ended June 30, 2007 differs from the net investment loss for tax purposes due to
the tax characterization of certain dividends received by the Fund. Realized
gains differ for financial statement and tax purposes primarily due to differing
treatments of wash sales.

The cost basis of securities owned for financial statement purposes is lower
than the cost basis for income tax purposes by $11,339 due to wash sale
adjustments.

As of June 30, 2007, undistributed realized gains were $1,670,170, gross
unrealized gains were $7,988,011, and gross unrealized losses were $442,262 for
income tax purposes.

Permanent differences accounted for during the year ended June 30, 2007 result
from differences between book and tax accounting. Such amounts have been
reclassified as follows:

                                              Accumulated Net
                          Accumulated Net    Realized Gain on    Additional Paid
                          Investment Loss       Investments        in Capital
--------------------------------------------------------------------------------
Year ended June 30, 2007     $  263,944         $ (164,089)       $  (99,855)
--------------------------------------------------------------------------------

In June, 2006, FASB issued FASB Interpretation No. 48, "Accounting for
Uncertainty in Income Taxes -- an interpretation of FASB Statement No. 109"
("FIN 48"). FIN 48 clarifies the accounting for uncertainty in income taxes
recognized in accordance with FASB Statement No. 109, "Accounting for Income
Taxes." This interpretation prescribes a recognition threshold and measurement
attribute for the financial statement recognition and measurement of a tax
position taken or expected to be taken in a tax return. It also provides
guidance on de-recognition, classification, interest and penalties, accounting
in interim periods, disclosure and transition. FIN 48 is effective for fiscal
years beginning after December 15, 2006. The Fund is currently evaluating the
impact of applying the various provisions of FIN 48.


                                     - 17 -


Notes to Financial Statements
================================================================================

NOTE 6. CAPITAL SHARE TRANSACTIONS

During the year ended June 30, 2007, the Board of Directors of the Fund adopted
a Dividend Reinvestment Plan (the "Plan"). Under the Plan, dividends and
distributions to shareholders who participate in the Plan are automatically
reinvested in shares of common stock. The Plan provides for the payment of
dividends to participants in the Plan with either (i) newly issued shares of
common stock of the Fund in the event the market price of the common stock is
trading on the open market at a premium to net asset value, or (ii) shares
purchased on the open market in the event the market price of the shares are
traded at a discount to net asset value.

For the year ended June 30, 2007, the Fund issued 9,920 shares for reinvestment
of distributions. The net effect of the reinvestment of distributions resulted
in an increase in net assets of $108,062.

NOTE 7. SUBSEQUENT EVENTS

Rights Offering

On July 24, 2007, the Fund announced plans for a non-transferable rights
offering and filed a registration statement on Form N-2 with the SEC to register
shares in connection with the rights offering. The rights will entitle the
holder to subscribe for one additional share of the Fund's common stock for each
right at a subscription price equal to a discount to the market price. Record
date stockholders who fully exercise their rights may participate in an
over-subscription privilege subject to certain limitations and allotment. Final
terms of the proposed offering, including the record date, subscription price
and subscription period, will be announced at a later date. The rights offering
will be made only by means of a prospectus. Subject to making the necessary
filings with the SEC and such filings becoming effective, it is expected that
the rights offering will be conducted in September or October of 2007.


                                     - 18 -


Notes to Financial Statements
================================================================================

New Independent Director

On August 7, 2007 the Fund announced the appointment of Kay W. Tatum, Ph.D., CPA
to the Board of Directors. Dr. Tatum replaces Albert L. Weintraub who retired
from the Board in July, 2007. Dr. Tatum will also serve as Chair of the Audit
Committee and as the audit committee financial expert.

On July 30, 2007, the Fund notified the staff of Nasdaq that due to Mr.
Weintraub's retirement, the Fund no longer complied with the Nasdaq's audit
committee composition requirements as set forth in Marketplace Rule 4350(d)(2)
requiring an audit committee comprised of three independent directors. On July
31, 2007, the Nasdaq provided notice to the Fund acknowledging the Fund's
notification of its non-compliance and apprising the Fund of the cure period
provided by Marketplace Rules 4350(c)(1) and 4350(d)(4). Upon notification to
Nasdaq of Dr. Tatum's appointment, the Nasdaq staff issued a letter on August 7,
2007 stating that the Fund now complies with the Marketplace Rule 4350 and that
the matter is closed.


                                     - 19 -


Directors and Officers of the Fund
================================================================================



                                                                                                       Number of
                                                                                                       Portfolios     Other
Name                         Position(s)  Term of Office                                               In Complex     Directorships
Address                      Held         and Lenth of         Principal Occupation(s)                 Overseen       Held by
and Age                      with Fund    Time Served          During Past 5 Years                     By Director    Director
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                       
Interested Directors

Thomas J. Herzfeld*          President,   three years;         Chairman and President of               2              The Cuba
PO Box 161465                Chairman,    1993 to present      Thomas J. Herzfeld & Co., Inc.,                        Fund, Inc.
Miami, FL  33116             Director                          a broker dealer, and Thomas J.                         (in
Age: 62                                                        Herzfeld Advisors, Inc.                                registration)


Independent Directors

Ann S. Lieff                 Director     three years;         President of the Lieff Company, a       1              Hastings
c/o The Herzfeld Caribbean                1998 to present      management consulting firm that                        Entertainment,
Basin Fund, Inc.                                               offers ongoing advisory services as                    Inc.; Birks
PO Box 161465                                                  a corporate director to several                        & Mayors, Inc.
Miami, FL 33116                                                leading regional and national
Age: 55                                                        retail operations, 1998-present;
                                                               former CEO Spec's Music 1980-1998,
                                                               a retailer of recorded music.

Michael A. Rubin             Director     three years;         Partner of Michael A. Rubin P.A.,       1              Margo
c/o The Herzfeld Caribbean                2002 to present      attorney at law; Broker, Oaks                          Caribe, Inc.
Basin Fund, Inc.                                               Management & Real Estate Corp.,
PO Box 161465                                                  a real estate brokerage corporation
Miami, FL 33116
Age: 65

Kay W. Tatum, Ph.D., CPA     Director     three years;         Chair and Associate Professor of        1              None
c/o The Herzfeld Caribbean                2007 to present      Accounting, University of Miami
Basin Fund, Inc.                                               School of Business Administration,
PO Box 161465                                                  2004-present; Associate Professor
Miami, FL 33116                                                of Accounting, University of Miami
Age: 55                                                        1992-present; Assistant Professor
                                                               of Accounting, University of Miami,
                                                               1986-1992.
Officers

Cecilia L. Gondor            Secretary,   1993 to present      Executive Vice President of                            N/A
PO Box 161465                Treasurer                         Thomas J. Herzfeld & Co., Inc.,
Miami, FL  33116                                               a broker dealer, and Thomas J.
Age: 45                                                        Herzfeld Advisors, Inc.


*Mr. Herzfeld is considered an "interested person" of the Fund, as defined in
Section 2(a)(19) of the 1940 Act and the rules thereunder because of his
position with the Advisor


                                - 20 - and - 21 -


                 Certified     Rothstein, Kass & Company, LLP      Beverly Hills
                 Public        101 Montgomery Street, 22nd Floor   Dallas
                 Accountants   San Francisco, CA 94596             Denver
                               Tel  415.788.6666                   Grand Cayman
                               Fax  415.788.1890                   New York
                               www.rkco.com                        Richmond
                                                                   San Francisco
                                                                   Walnut Creek

[LOGO] Rothstein Kass

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockbrokers of 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. (the
"Fund") as of June 30, 2007, and the related statement of operations for the
years then ended, and the statement of changes in net assets 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. The financial highlights for each of the years in the three
year period ended June 30, 2005 were audited by an independent registered
accounting firm whose reports dated July 14, 2005 expressed an unqualified
opinion on those financial highlights.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). 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 misstatements. The Fund
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audits included consideration of
the internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing opinion on the effectiveness of the Fund's internal control over
financial reporting. Accordingly, we express no such opinion. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statement. Our procedures included confirmation of securities
owned as of June 30, 2007, by correspondence with the custodian. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements and 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, 2007, the results of the
operations for the year then ended, the changes in net assets for each of the
two years in the period ended, and the financial highlights for each of the two
years in the period then ended, in conformity with accounting principles
generally accepted in the United States of America.


/s/ Rothstein, Kass & Company, LLP

San Francisco, California
August 20, 2007


                                     - 22 -


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.

Quarterly Portfolio Reports
================================================================================

The Fund files quarterly schedules of portfolio holdings with the 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 800-732-0330.

Proxy Voting Policies and Procedures
================================================================================

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.

Information on how the investment adviser voted proxies on the Fund's behalf for
the twelve month period ended June 30 is provided in the Fund's Form N-PX which
is is available on the SEC's EDGAR database at www.sec.gov. In addition, the
Form N-PX 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 800-732-0330.


                                     - 23 -


THE HERZFELD CARIBBEAN BASIN FUND, INC.
The Herzfeld Building
P.O. Box 161465
Miami, FL  33116



ITEM 2. CODE OF ETHICS

(a) The registrant, as of the end of the period covered by this report, has
adopted a 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.

(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.

As of the end of the period covered by the report, the registrant's board of
directors has determined that Albert L. Weintraub is an "audit committee
financial expert" serving on its audit committee and that he is "independent" as
such terms are defined by Item 3 of Form N-CSR. After the fiscal year-end, Mr.
Weintraub retired from the board and was replaced by Dr. Kay Tatum, who now
serves as the fund's "audit committee financial expert" as such term is defined
by Item 3 of Form N-CSR. Dr. Tatum is "independent" as such term is defined by
Item 3 of Form N-CSR.

ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

(a) - (d)

Set forth in the table below are audit fees and non-audit related fees billed to
the registrant by its principal accountant (the "Auditor") for the audit of the
registrant's annual financial statements and services provided by the Auditor in
connection with statutory and regulatory filings during and for the Registrant's
fiscal years ended June 30, 2005 and 2006.

Fiscal Year                          Audit-Related        Tax       All Other
Ended June 30,      Audit Fees           Fees           Fees(1)      Fees(2)

2006                 $37,500            $6,000          $5,000         $0
2007                 $36,500            $4,500          $5,250         $0

(1) These fees related to services consisting of the review or preparation of
U.S. federal, state, local and excise tax returns

(2) These fees related to services consisting of accounting consultations,
agreed upon procedure reports, attestation reports, comfort letters and review
of statutory and regulatory filings.

(e) The registrant's Audit Committee charter requires that the Audit Committee
pre-approve all auditing services and non-audit services (including the fees for
such services and terms thereof) to be performed for the registrant by its
Auditor, and the committee has not adopted pre-approval policies and procedures,
although it may determine to do so in the future. The engagement to render
auditing and non-auditing services would be presented to and pre-approved by the
Audit Committee. All of the audit, audit-related and tax services described
above for which the Auditor billed the registrant fees for the fiscal years
ended June 30, 2006 and 2007 were pre-approved by the Audit Committee.

(f) Not applicable.

(g) The aggregate non-audit fees bills by the registrant's Auditor for services
rendered to the registrant, and rendered to the registrant's investment adviser,
and any entity controlling, controlled by, or under common control with the
adviser that provides ongoing services to the registrant for each of the last
two fiscal years of the registrant were $0 for 2006 and $0 for 2007.

(h) Not applicable.



ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.

(a) The registrant has a separately-designated standing audit committee
established in accordance with Section 3(a)(58)(A) of the Exchange Act. As of
June 30, 2007, the registrant's audit committee was comprised of Albert L.
Weintraub, Ann S. Lieff, and Michael A. Rubin. On August 1, 2007, Dr. Tatum
replaced Mr. Weintraub as a member of the Committee and serves as its
chairperson.

(b) 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.

A copy of the registrant's proxy voting policies and procedures as well as its
adviser's policies and procedures are attached hereto as Appendix A.

ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

(a)(1) Thomas J. Herzfeld, Chairman and President of The Herzfeld Caribbean
Basin Fund, Inc. serves as the portfolio manager of the Fund and has held this
position since its inception in 1993. This information is as of August 30, 2007.

(a)(2)(i) and (ii) Mr. Herzfeld is also portfolio manager for approximately 44
private clients, however, none with an investment focus of investing in the
Caribbean Basin. The Fund is the only investment company managed by Mr.
Herzfeld; the Fund has total assets of approximately $16 million. Other accounts
have total assets of approximately $54 million.

(a)(2)(iii) No accounts are charged fees based on performance. For accounts
other than the Fund, fees are calculated as a percentage of the value of assets
under management at the end of each quarter.

(a)(2)(iv) The Fund does not believe that any material conflicts are likely to
arise through Mr. Herzfeld's management of other accounts in addition to the
Fund in that there is very little overlap in the type of investments made for
the Fund and other accounts, which generally trade shares of closed-end funds.
The Fund is permitted, to a limited extent, to buy shares of other closed-end
funds and occasionally other clients or Mr. Herzfeld may buy shares of
securities also held in the portfolio of the Fund. The advisor and the Fund have
adopted procedures overseen by the Chief Compliance Officer ("CCO") intended to
monitor compliance with such policies which include conflicts which may occur
regarding allocation of investment opportunities between the Fund and other
account. The CCO of the Fund reports directly to the Board of Directors at least
annually.

(3) Mr. Herzfeld receives no direct compensation from the Fund for his services
as Portfolio Manager. Mr. Herzfeld is 100% owner of the Advisor, a Subchapter S
Corporation, therefore he profits from the success of the Advisor and is taxed
on its profits.

(4)(a) Range of value of shares of the Fund owned by Mr. Herzfeld as of June 30,
2006: $100,001-$500,000.

(4)(b) Range of value of shares of the Fund owned by Mr. Herzfeld as of the date
of this filing: $100,001-$500,000.



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
January 1, 2006 and
ending January 31, 2006)
----------------------------------------------------------------------------------------------------------------------
Month #2 (beginning                 0                     n/a                     n/a                    n/a
February 1, 2006 and
ending February 28,
2006)
----------------------------------------------------------------------------------------------------------------------
Month #3 (beginning                 0                     n/a                     n/a                    n/a
March 1, 2006 and
ending March 31, 2006)
----------------------------------------------------------------------------------------------------------------------
Month #4 (beginning                 0                     n/a                     n/a                    n/a
April 1, 2006 and
ending April 30, 2006)
----------------------------------------------------------------------------------------------------------------------
Month #5 (beginning May             0                     n/a                     n/a                    n/a
1, 2006 and ending May
31, 2006)
----------------------------------------------------------------------------------------------------------------------
Month #6 (beginning                 0                     n/a                     n/a                    n/a
June 1, 2006 and ending
June 30, 2006)
----------------------------------------------------------------------------------------------------------------------
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 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) (1) Code of ethics is filed as Exhibit 99.CodeEth to the N-CSR filing dated
8/31/05.

(a)(2) Certifications pursuant to Rule 30a-2(b) under the 1940 Act and Section
302 of the Sarbanes-Oxley Act of 2002 are filed herewith as Exhibits 99.302
Cert.

(a)(3) Not applicable.

(b) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 906
of the Sarbanes-Oxley Act of 2002 are filed herewith as Exhibits 99.906 Cert.


                                   Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.

The Herzfeld Caribbean Basin Fund, Inc.


                           By:   /s/ Thomas J. Herzfeld
                                 -------------------------
                                 Thomas J. Herzfeld
                                 President and Chairman

                           Date: August 31, 2007


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 31, 2007


                           By:   /s/ Cecilia L. Gondor
                                 -------------------------
                                 Cecilia L. Gondor
                                 Secretary and Treasurer
                                 (Principal Financial Officer)

                           Date: August 31, 2007



--------------------------------------------------------------------------------

                                   APPENDIX A
                     THE HERZFELD CARIBBEAN BASIN FUND, INC.
                       Proxy Voting Policy and Procedures

      The Board of Directors of The Herzfeld Caribbean Basin Fund, Inc. (the
"Fund") hereby adopts the following policy and procedures with respect to voting
proxies relating to portfolio securities held by the Fund:

Policy

      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.' The voting of proxies is an integral part of the investment
management services that the Adviser provides pursuant to the advisory contract.

      The Adviser may, but is not required to, delegate the responsibility for
voting proxies relating to portfolio securities held by the Fund to a
sub-adviser ("Sub-Adviser") retained to provide investment advisory services, if
applicable. If such responsibility is delegated to a Sub-Adviser, then the
Sub-Adviser shall assume the fiduciary duty and reporting responsibilities of
the Adviser under these policy guidelines.

Fiduciary Duty

      The right to vote a proxy with respect to portfolio securities held by the
Fund is an asset of the Fund. The Adviser, to which authority to vote on behalf
of the Fund is delegated, acts as a fiduciary of the Fund and must vote proxies
in a manner consistent with the best interest of the Fund and its shareholders.

Procedures

      The following are the procedures adopted by the Board for the
administration of this policy:

      A. Review of Adviser Proxy Voting Procedures. The Adviser with authority
to vote proxies on behalf of the Fund shall present to the Board its policies,
procedures and other guidelines for voting proxies at least annually, and must
notify the Board promptly of material changes to any of these documents.

      B. Voting Record Reporting. No less than annually, the Adviser shall
report to the Board a record of each proxy voted with respect to portfolio
securities of the Fund during the year. With respect to those proxies that the
Adviser has identified as involving a conflict of interest(2), 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.

Revocation

      The delegation by the Board of the authority to vote proxies relating to
portfolio securities of the Fund is entirely voluntary and may be revoked by the
Board, in whole or in part, at any time.



Annual Filing

      The Fund shall file an annual report of each proxy voted with respect to
its portfolio securities during the twelve-month period ended June 30 on Form
N-PX not later than August 31 of each year.

Disclosures

      The Fund shall include in its annual report to stockholders:

      A description of this policy and of the policies and procedures used by
the Adviser to determine how to vote proxies relating to portfolio securities
(3); and

      A statement disclosing that information regarding how the Fund voted
proxies relating to portfolio securities during the most recent 12-month period
ended June 30 is available without charge, upon request, by calling the Fund's
toll-free telephone number and on the SEC website(4).

      The Fund shall also include in its annual and semi-annual reports to
stockholders:

      A statement disclosing that a description of the policies and procedures
used by or on behalf of the Fund to determine how to vote proxies relating to
portfolio securities of the Funds is available without charge, upon request, by
calling the Fund's toll-free telephone number and on the SEC website.(5)

      A statement disclosing that information regarding how the Fund voted
proxies relating to portfolio securities during the most recent 12-month period
ended June 30 is available without charge, upon request, by calling the Fund's
toll-free telephone number and on the SEC website.(6)

Review of Policy.

At least annually, the Board shall review this Policy to determine its
sufficiency and shall make and approve any changes that it deems necessary from
time to time

------------

(1)   This policy is adopted for the purpose of the disclosure requirements
      adopted by the Securities and Exchange Commission, Release Nos. 33-8188,
      34-47304, IC-25922.
(2)   As it is used in this document, the term "conflict of interest" refers to
      a situation in which the Adviser or Sub-Adviser or affiliated persons of
      the Adviser or Sub-Adviser have a financial interest in a matter presented
      by a proxy other than the obligation it incurs as investment adviser to
      the Fund which compromises the Adviser's or Sub-Adviser's independence of
      judgment and action with respect to the voting of the proxy.
(3)   This disclosure shall be included in the annual report next filed by the
      Fund, on Form N-CSR on or after July 1, 2003.
(4)   Id.
(5)   This disclosure shall be included in the report next filed by the Fund on
      or after July 1, 2003.
(6)   Id..



                       THOMAS J. HERZFELD ADVISORS, INC.

                                  PROXY VOTING

                            POLICIES AND PROCEDURES


I.    POLICY

Thomas J. Herzfeld Advisors, Inc. (the "Adviser") acts as discretionary
investment adviser for various clients, including The Herzfeld Caribbean Basin
Fund, Inc. an investment company registered under the Investment Company Act of
1940, as amended, and clients governed by the Employee Retirement Income
Security Act of 1974 ("ERISA").

Selected clients, including The Herzfeld Caribbean Basin Fund, Inc. have elected
to have the Adviser vote proxies or act on the other shareholder actions on
their behalf, while other clients vote proxies themselves.

When voting proxies or acting on corporate actions for clients, the Adviser's
utmost concern is that all decisions be made in the best interest of its clients
(for ERISA accounts, plan beneficiaries and participants, in accordance with the
letter and spirit of ERISA). The Adviser will act in a manner deemed prudent and
diligent and which is intended to enhance the economic value of the assets of
its clients' accounts.

II.   PURPOSE

The purpose of these Policies and Procedures is to memorialize the procedures
and policies adopted by the Adviser to enable it to comply with its
responsibilities and the requirements of Rule 206(4)-6 under the Investment
Advisers Act of 1940, as amended ("Advisers Act"). These Policies and Procedures
also reflect the fiduciary standards and responsibilities set forth by the
Department of Labor for ERISA accounts.

III.  PROCEDURES

Cecilia Gondor, Executive Vice President of the Adviser, is ultimately
responsible for ensuring that all proxies received by the Adviser are voted in a
timely manner and voted consistently across all portfolios. Although many proxy
proposals can be voted in accordance with the Adviser's established guidelines
(see Section V. below) (the "Guidelines"), the Adviser recognizes that some
proposals require special consideration, which may dictate that the Adviser
makes an exception to the Guidelines.

Cecilia Gondor is also responsible for ensuring that all corporate actions
received by the Adviser are addressed in a timely manner and consistent action
is taken across all portfolios.



      A. Conflicts of Interest. Where a proxy proposal raises a material
conflict of interest between the Adviser's interests and that of one or more its
clients, the Adviser shall resolve such conflict in the manner described below.

            1. Vote in Accordance with the Guidelines. To the extent that the
Adviser has little or no discretion to deviate from the Guidelines with respect
to the proposal in question, the Adviser shall vote in accordance with such
pre-determined voting policy.

            2. Obtain Consent of Clients. To the extent that the Adviser has
discretion to deviate from the Guidelines with respect to the proposal in
question, the Adviser shall disclose the conflict to the relevant clients and
obtain their consent to the proposed vote prior to voting the securities. The
disclosure to the clients will include sufficient detail regarding the matter to
be voted on and the nature of our conflict that the clients would be able to
make an informed decision regarding the vote. When a client does not respond to
such a conflict disclosure request or denies the request, the Adviser will
abstain from voting the securities held by that client's account.

      B. Limitations. In certain circumstances, in accordance with a client's
investment advisory contract (or other written directive) or where the Adviser
has determined that it is in the client's best interest, the Adviser will not
vote proxies received. The following are some circumstances where the Adviser
will limit its role in voting proxies received on client securities:

            1. Client Maintains Proxy Voting Authority: Where a client has not
specifically delegated the authority to vote proxies to the Adviser or that it
has delegated the right to vote proxies to a third party, the Adviser will not
vote the securities and will direct the relevant custodian to send the proxy
material directly to the client. If any proxy material is received by the
Adviser, it will promptly be forwarded to the client.

            2. Terminated Account: Once a client account has been terminated
with the Adviser in accordance with its investment advisory agreement, the
Adviser will not vote any proxies received after the termination. However, the
client may specify in writing that proxies should be directed to the client for
action.

            3. Limited Value: If the Adviser concludes that the client's
economic interest or the value of the portfolio holding is indeterminable or
insignificant, the Adviser will abstain from voting a client's proxies. The
Adviser does not vote proxies received for securities which are no longer held
by the client's account. In addition, the Adviser generally does not vote
securities where the economic value of the securities in the client's account is
less than $500.

            4. Securities Lending Programs: When securities are out on loan,
they are transferred into the borrower's name and are voted by the borrower, in
its discretion. However, where the Adviser determines that a proxy vote (or
shareholder action) is materially important to the client's account, the Adviser
may recall the security.

            5. Unjustifiable Costs: In certain circumstances, after doing a
cost-benefit analysis, the Adviser may abstain from voting where the cost of
voting a client's proxy would exceed any anticipated benefits of the proxy
proposal.

IV.   RECORD KEEPING

In accordance with Rule 204-2 under the Advisers Act, the Adviser will maintain
for the time periods set forth in the Rule (i) these proxy voting procedures and
policies, and amendments thereto; (ii) all proxy statements received regarding
client securities (provided however, that the Adviser may rely on the proxy
statement filed on EDGAR as its records)(1); (iii) a record of votes cast on
behalf of clients; (iv) records of client requests for proxy voting information;
(v) any documents prepared by the adviser that were material to making a
decision how to vote or that memorialized the basis for the decision; and (vi)
records relating to requests made to clients regarding conflicts of interest in
voting the proxy.



The Adviser will describe in its Part II of Form ADV (or other brochure
fulfilling the requirement of Rule 204-3) its proxy voting policies and
procedures and advising clients how they may obtain information on how the
Adviser voted their securities. Clients may obtain information on how their
securities were voted or a copy of our Policies and Procedures by written
request addressed to the Adviser.

V.    GUIDELINES

Each proxy issue will be considered individually. The following guidelines are a
partial list to be used in voting proposals contained in the proxy statements,
but will not be used as rigid rules.

--------------------------------------------------------------------------------
(1)   Issues regarding the issuer's Board entrenchment and             Oppose
      anti-takeover measures such as the following:

      b.    Proposals to limit the ability of shareholders
            to call special meetings;

      c.    Proposals to require super majority votes;

      d.    Proposals requesting excessive increases in
            authorized common or preferred shares where
            management provides no explanation for the use
            or need for these additional shares;

      e.    Proposals regarding "poison pill" provisions;
            and

      f.    Permitting "green mail".
--------------------------------------------------------------------------------
(1)   Providing cumulative voting rights.                              Oppose
--------------------------------------------------------------------------------
(2)   "Social issues," unless specific client guidelines               Oppose
      supersede, e.g., restrictions regarding South Africa.
--------------------------------------------------------------------------------
(3)   Election of directors recommended by management,                Approve
      except if there is a proxy fight.
--------------------------------------------------------------------------------
(4)   Election of auditors recommended by management, unless          Approve
      seeking to replace if there exists a dispute over
      policies.
--------------------------------------------------------------------------------
(5)   Date and place of annual meeting.                               Approve
--------------------------------------------------------------------------------
(6)   Limitation on charitable contributions or fees paid to          Approve
      lawyers.
--------------------------------------------------------------------------------
(7)   Ratification of directors' actions on routine matters           Approve
      since previous annual meeting.
--------------------------------------------------------------------------------
(8)   Confidential voting Approve                                     Approve
--------------------------------------------------------------------------------

---------------
(1)   Because the Adviser primarily invests its clients' assets in securities of
      foreign issuers, the Adviser generally has not been receiving proxy
      statements from such issuers because the laws of the countries in which
      these issuers are domiciled respecting delivery of proxy statements to
      shareholders are different than those of the U.S.



--------------------------------------------------------------------------------
Confidential voting is most often proposed by shareholders
as a means of eliminating undue management pressure on
shareholders regarding their vote on proxy issues.

The Adviser will generally approve these proposals as
shareholders can later divulge their votes to management on
a selective basis if a legitimate reason arises.
--------------------------------------------------------------------------------
(9)   Limiting directors' liability                                   Approve
--------------------------------------------------------------------------------
(10)  Eliminate preemptive right                                      Approve

Preemptive rights give current shareholders the opportunity
to maintain their current percentage ownership through any
subsequent equity offerings. These provisions are no longer
common in the U.S., and can restrict management's ability to
raise new capital.

The Adviser approves the elimination of preemptive rights,
but will oppose the elimination of limited preemptive
rights, e.g., on proposed issues representing more than an
acceptable level of total dilution.
--------------------------------------------------------------------------------
(11)  Employee Stock Purchase Plan                                    Approve
--------------------------------------------------------------------------------
(12)  Establish 401(k) Plan                                           Approve
--------------------------------------------------------------------------------
(13)  Rotate annual meeting location/date                             Approve
--------------------------------------------------------------------------------
(14)  Establish a staggered Board Approve                             Approve
--------------------------------------------------------------------------------
(15)  Eliminate director mandatory retirement policy               Case-by-Case
--------------------------------------------------------------------------------
(16)  Option and stock grants to management and directors          Case-by-Case
--------------------------------------------------------------------------------
(17)  Allowing indemnification of directors and/or officers        Case-by-Case
      after reviewing the applicable laws and
      extent of protection requested.
--------------------------------------------------------------------------------



                                    EXHIBIT A

                  Chief Executive Officer - Thomas J. Herzfeld

                   Chief Financial Officer - Cecilia L. Gondor