Thomas J. Herzfeld
|
Joseph V. Del Raso, Esq. | |
The Herzfeld Building | Pepper Hamilton LLP | |
P.O. Box 161465 | 3000 Two Logan Square | |
Miami, FL 33116 | 18th and Arch Streets | |
Philadelphia,
PA 19103
|
Title
of Securities Being Registered
|
Amount
Being Registered
|
Proposed
Maximum Offering Price Per Share (1)
|
Proposed
Maximum Aggregate Offering Price (2)
|
Amount
of Registration Fee
|
||||
Common
Stock
|
3,375,112
|
$11.8575
|
$40,020,390
|
$1,228.63
|
Estimated
Subscription
Price1
|
Estimated
Sales
Load
|
Estimated
Proceeds
to the Fund2
|
||||
Per
Share
|
None
|
|||||
Total
|
None
|
PROSPECTUS
SUMMARY
|
1
|
The
Offer
|
1
|
Important
Terms of the Offer
|
1
|
Important
Dates for the Offer
|
2
|
Key
Elements of the Offer
|
2
|
Information
Regarding the Fund
|
4
|
Information
Regarding the Adviser and Custodian
|
5
|
Risk
Factors and Special Considerations
|
5
|
Fee
Table
|
7
|
FINANCIAL
HIGHLIGHTS
|
9
|
THE
FUND
|
11
|
Share
Price Data
|
11
|
THE
OFFERING
|
11
|
Terms
of the Offer
|
11
|
Purpose
of the Offer
|
12
|
Subscription
Price
|
14
|
Over-Subscription
Privilege
|
14
|
Expiration
of the Offer
|
14
|
Subscription
Agent
|
15
|
Method
of Exercising Rights
|
15
|
Payment
for Shares
|
15
|
Delivery
of Stock Certificates
|
17
|
Foreign
Restrictions
|
17
|
Federal
Income Tax Consequences Associated With the Offer
|
17
|
Employee
Plan Considerations
|
18
|
USE
OF PROCEEDS
|
18
|
RISK
FACTORS AND SPECIAL CONSIDERATIONS
|
18
|
Dilution
of Net Asset Value and Effect of Non-Participation in the
Offer
|
18
|
Discount
From Net Asset Value
|
19
|
Risks
of Investing in Caribbean Basin Countries
|
19
|
Geographic
Concentration Risk
|
20
|
Foreign
Securities Risk
|
20
|
Foreign
Economy Risk
|
20
|
Currency
Risk
|
21
|
Governmental
Supervision and Regulation/Accounting Standards
|
21
|
Certain
Risks of Holding Fund Assets Outside the United States
|
22
|
Settlement
Risk
|
22
|
Emerging
Markets Risk
|
22
|
INVESTMENT
OBJECTIVE AND POLICIES
|
23
|
Investment
Policies - General
|
23
|
Special
Leverage Considerations
|
25
|
Hedging
Transactions
|
25
|
Forward
Foreign Currency Exchange Contracts
|
25
|
Options
on Foreign Currencies
|
26
|
Futures
Contracts
|
26
|
Options
on Securities and Options on Indices
|
27
|
Repurchase
Agreements
|
27
|
Debt
Securities
|
28
|
Securities
Lending
|
28
|
Portfolio
Turnover
|
29
|
Investment
Restrictions
|
29
|
MANAGEMENT
OF THE FUND
|
30
|
Board
of Directors
|
30
|
Information
About Directors and Officers
|
30
|
Committees
of the Board
|
31
|
Ownership
of the Fund By Directors
|
32
|
Investment
Adviser and Portfolio Manager
|
33
|
Investment
Adviser
|
33
|
Portfolio
Manager
|
33
|
Investment
Advisory Agreement
|
34
|
Benefit
to the Adviser
|
35
|
Expenses
of the Fund
|
35
|
PORTFOLIO
TRANSACTIONS AND BROKERAGE
|
36
|
CODE
OF ETHICS
|
36
|
PROXY
VOTING POLICIES AND PROCEDURES
|
37
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
|
37
|
DESCRIPTION
OF COMMON STOCK
|
37
|
Share
Repurchases and Tender Offers
|
37
|
Certain
Provisions of Articles of Incorporation and Bylaws
|
39
|
DIVIDENDS
AND DISTRIBUTIONS; DIVIDEND REINVESTMENT PLAN
|
40
|
TAXATION
|
42
|
Federal
Taxation of the Fund and its Distributions
|
42
|
Sales
of Shares
|
45
|
Backup
Withholding
|
45
|
Other
Tax Considerations
|
45
|
DETERMINATION
OF NET ASSET VALUE
|
45
|
CUSTODIAN,
TRANSFER AGENT, DIVIDEND DISBURSING AGENT, AND
REGISTRAR
|
46
|
LEGAL
MATTERS
|
47
|
INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
|
47
|
FINANCIAL
STATEMENTS
|
47
|
APPENDIX
A
|
A-1
|
APPENDIX
B
|
B-3
|
Total
number of shares of Common Stock
|
|
available
for primary subscription:
|
1,687,556
|
Number
of Rights you will receive for each
|
|
outstanding
share of Common Stock you own
|
|
on
the Record Date:
|
One
Right for every one Share *
|
Number
of shares of Common Stock you
|
|
may
purchase with your Rights at the
|
|
Subscription
Price per share
|
One
share for every one Right **
|
Subscription
Price:
|
85%
of the average volume-weighted sales price per share of the Fund’s Common
Stock on the NASDAQ Capital Market on October 19, 2007 and the
four
preceding trading days.
|
Estimated
Subscription Price
|
$[____]
|
*
|
The
number of Rights to be issued to a stockholder on the Record Date
will be
rounded up to the nearest whole number of Rights; no fractional Rights
will be issued.
|
**
|
Stockholders
will be able to acquire additional shares of Common Stock pursuant
to an
over-subscription privilege in certain
circumstances.
|
Record
Date:
|
September
26, 2007
|
Subscription
Period:
|
October
1, 2007 to October 19, 2007
|
Expiration
Date and Pricing Date:
|
October
19, 2007*
|
Subscription
Certificate and
|
|
Payment
for Shares Due**
|
October
19, 2007*
|
Notice
of Guaranteed Delivery Due**
|
October
19, 2007*
|
Final
Payment for Shares (if any) Due***
|
October
26, 2007*
|
Confirmation
Mailed to Participants
|
November
4, 2007*
|
*
|
Unless
the Offer is extended.
|
**
|
Record
Date Stockholders (defined below) exercising Rights must deliver
to the
Subscription Agent by the Expiration Date either (i) the Subscription
Certificate together with the estimated payment or (ii) a Notice
of
Guaranteed Delivery.
|
***
|
Additional
amounts may be due at settlement for additional shares purchased
upon
exercising Rights because the Estimated Subscription Price may
be less
than the actual Subscription Price. See “The Offer -- Payment for
Shares.”
|
One-for-One
Offering
|
The
Offer will give stockholders on the Record Date (“Record Date
Stockholders”) the right to purchase one share of Common Stock for every
one Right received. For example, if you own 100 shares of common
stock on
the Record Date, you will receive 100 Rights entitling you to purchase
100
shares of Common Stock of the Fund. Stockholders may exercise all
or some
of their Rights. However, stockholders who do not exercise all
of their
Rights will not be able to participate in the Over-Subscription
Privilege.
See “Over-Subscription Privilege” below.
|
Non-Transferable
Rights
|
The
Rights issued in the Offer will be “non-transferable” and, therefore, may
not be purchased or sold. Rights not exercised will expire without
residual value at the Expiration Date. The Rights will not be listed
for
trading on the NASDAQ Capital Market or any other securities exchange.
However, the shares of Common Stock to be issued pursuant to the
Offer
will be listed for trading on the NASDAQ Capital Market, subject
to the
NASDAQ Capital Market being officially notified of the issuance
of those
shares.
|
Dilution/Non-Participation
in Offer
|
Record
Date Stockholders who do not fully exercise their Rights including
the
Over-Subscription Privilege described in the section of this Prospectus
entitled “The Offer - Over-Subscription Privilege,” will, at the
completion of the Offer, own a smaller proportional interest in
the Fund
than if they exercised their Rights. If the Subscription Price
per Share
is below the then current NAV per share, stockholders will experience
an
immediate dilution of the aggregate NAV of their Shares if they
do not
participate in the Offer and will experience a reduction in the
NAV per
share whether or not they participate in the Offer. In contrast,
Stockholders who fully exercise their rights and over-subscribe
benefit
from a slight accretion to the value of their shares to the extent
the
non-subscribing stockholders fail to fully exercise their rights.
The Fund
cannot state precisely the extent of this dilution (if any) if
stockholders do not exercise their Rights because the Fund does
not know
what the NAV per share will be at the time of the Offer or what
proportion
of the Rights will be exercised.
|
See “Risk Factors and Special Considerations- Dilution of Net Asset Value and Effect of Non-Participation in the Offer.” |
Subscription
Price
|
Shares
of Common Stock issued upon exercise of Rights will be sold at
a price
equal to 85% of the volume-weighted average closing sales price
of a share
of common stock on the NASDAQ Capital Market on the Expiration
Date and
the four preceding trading days. The Subscription Price is discussed
further under “The Offer—Subscription Price.” In addition, information
with respect to the quarterly high and low sale prices of the
Fund’s
Common Stock on the NASDAQ Capital Market and the corresponding
NAVs per
share of Common Stock is provided under “The Fund”.
|
Over-Subscription
Privilege
|
Each
Record Date Stockholder who fully exercises all Rights issued
to him is
entitled to subscribe for shares which were not otherwise subscribed
for
by others in the primary subscription (the “Over-Subscription Privilege”).
If enough shares are available, all of these requests will be
honored in
full. If these requests for shares exceed the shares available,
the Fund
may determine after the expiration of the Offer, at the discretion
of the
Fund, to issue additional Common Stock up to an amount equal
to 100% of
the shares available pursuant to the Offer (up to an additional
1,687,556
shares of Common Stock) in order to cover these requests. Regardless
of
whether the Fund issues such additional shares, to the extent
shares are
not available to honor all requests, the available shares will
be
allocated pro rata among those Record Date Stockholders who over-subscribe
based on the number of Rights originally issued to them by the
Fund.
|
Exercising
Rights
|
Except
as described below, subscription certificates evidencing the
Rights
(“Subscription Certificates”) will be sent to Record Date Stockholders or
their nominees. There is no minimum number of Rights which must
be
exercised for the Offer to close. If you wish to exercise your
Rights, you
may do so in the following ways:
|
1.
Complete, sign and date the Subscription Certificate. Enclose
it in the
envelope provided, together with payment in full and mail or
deliver the
envelope to the Subscription Agent at the address indicated on
the
Subscription Certificate calculating the total payment on the
basis of the
Estimated Subscription Price of $[____]
per share (i.e., the estimated subscription price based on the
Fund’s
market price on September 21, 2007). Your Subscription Certificate
and
payment must be received by the Expiration Date. Payment pursuant
to this
method must be in United States dollars by money order or check
drawn on a
bank located in the United States and must be payable to “The Herzfeld
Caribbean Fund, Inc.”
|
|
2.
Contact your broker, banker or trust company, which can arrange,
on your
behalf, to guarantee delivery of payment and delivery of a properly
completed and executed Subscription Certificate pursuant to a
notice of
guaranteed delivery (“Notice of Guaranteed Delivery”) by the close of
business on the third Business Day after the Expiration Date.
For purposes
of this prospectus, a “Business Day” shall mean any day on which trading
is conducted on the NASDAQ Capital Market. A fee may be charged
for this
service. The Notice of Guaranteed Delivery must be received by
the
Expiration Date. Rights holders will have no right to rescind
a purchase
after the Subscription Agent has received the Subscription Certificate
or
Notice of Guaranteed Delivery. See “The Offer--Method of Exercising
Rights” and “The Offer--Payment for Shares.” The Subscription Agent will
deposit all checks received by it prior to the final due date
into a
segregated interest bearing account at Colbent Corporation
pending
distribution of the shares from the Offer. All interest will
accrue to the
benefit of the Fund and investors will not earn interest on payments
submitted.
|
|
Restrictions
on Foreign Stockholders
|
The
Fund will not mail Subscription Certificates to stockholders whose
record
addresses are outside the United States or who have an APO or FPO
address.
Stockholders whose addresses are outside the United States or who
have an
APO or FPO address and who wish to subscribe to the Offer either
partially
or in full should contact the Subscription Agent by written instruction
or
recorded telephone conversation no later than three Business Days
prior to
the Expiration Date.
|
Purpose
of the Offer
|
The
Board of the Fund has determined that it is in the best interests
of the
Fund and its stockholders to increase the assets of the Fund available
for
investment so that the Fund will be in a better position to take
full
advantage of investment opportunities. The Board believes that
increasing
the size of the Fund will increase the liquidity of the Fund’s shares of
Common Stock and also may reduce the Fund’s expenses as a proportion of
average net assets. The Offer also may allow the Fund to make capital
gain
distributions required to maintain its tax status as a regulated
investment company without causing a reduction in the net assets
of the
Fund. Any such reduction will reduce the amount of cash available
for
additional investment opportunities. The Board also believes that
a larger
number of outstanding shares and a larger number of beneficial
owners of
shares could increase the level of market interest in and visibility
of
the Fund and improve the trading liquidity of the Fund’s common stock on
the NASDAQ Capital Market.
|
In addition, the Offer seeks to reward the Fund’s stockholders by giving them the right to purchase additional shares of Common Stock at a price that will be below the market price without incurring any direct transaction costs. The Offer will benefit both the Fund and its stockholders by providing the Fund with the ability to make additional investments without selling current investments if otherwise not desirable. Moreover, if the Subscription Price is greater than the NAV per share of Common Stock of the Fund on the Expiration Date (less offering expenses), the Offer will increase the NAV per share. See “The Offer—Purpose of the Offer.” |
Use
of Proceeds:
|
The
net proceeds of the Offer are estimated to be approximately [____].
This figure is based on the Estimated Subscription Price per
share of
$[____]
and assumes all shares offered are sold and that the expenses
related to
the Offer estimated at approximately $[____]
are paid. The Adviser anticipates that it will take no longer
than three
months for the Fund to invest these proceeds in accordance with
its
investment objective and policies under current market conditions.
Pending
investment, the proceeds will be invested in short-term cash-equivalent
instruments. Although the Adviser anticipates that a substantial
portion
of the proceeds will be invested pursuant to its investment objective
and
policies, some of the proceeds may be used to make capital gain
distributions required to maintain its tax status as a regulated
investment company. As of June 30, 2007, the aggregate capital
gains for
calendar year 2007 were $1,670,170. See “Use of Proceeds”
below.
|
Dilution/Non-Participation
in Offer
|
Stockholders
who do not fully exercise their Rights including the Over-Subscription
Privilege described in the section of this Prospectus entitled
“The
Offer-Over-Subscription Privilege,” will, at the completion of the Offer,
own a smaller proportional interest in the Fund than if they exercised
their Rights. If the Subscription Price per Share is below the
then
current NAV per share, stockholders will experience an immediate
dilution
of the aggregate NAV of their Shares if they do not participate
in the
Offer and will experience a reduction in the NAV per share whether
or not
they participate in the Offer. The Fund cannot state precisely
the extent
of this dilution (if any) if stockholders do not exercise their
Rights
because the Fund does not know what the NAV per share will be at
the time
of the Offer or what proportion of the Rights will be exercised.
In
contrast, Stockholders who fully exercise their rights and over-subscribe
benefit from a slight accretion to the value of their shares to
the extent
the non-subscribing stockholders fail to fully exercise their rights.
“Accretion” is the dilution experienced by the non-exercising stockholders
less the pro-rata share of the offering expenses. Assuming,
for example, that all Rights are exercised, the Estimated Subscription
Price is $[____]
and the Fund’s NAV per share is $[____],
the Fund’s NAV per share (after payment of estimated offering expenses)
would be reduced by approximately $[____]
per share. See “Risk Factors and Special Considerations- Dilution of Net
Asset Value and Effect of Non-Participation in the
Offer”
|
Discount
From NAV
|
Shares
of closed-end funds frequently trade at a market price that is
less than
the value of the net assets attributable to those shares (a “discount”).
The possibility that the Fund’s shares will trade at a discount from NAV
is a risk separate and distinct from the risk that the Fund’s NAV will
decrease. The risk of purchasing shares of a closed-end fund that
might
trade at a discount or unsustainable premium is more pronounced
for
investors who wish to sell their shares in a relatively short period
of
time after purchasing them because, for those investors, realization
of a
gain or loss on their investments is likely to be more dependent
upon the
existence of a premium or discount than upon portfolio
performance.
|
Caribbean
Basin Countries
|
Investing
in the securities of non-U.S. issuers involves certain risks and
considerations not typically associated with investing in securities
of
U.S. issuers. These risks include currency fluctuations, political
and
economic risks, including nationalization and expropriation, reduced
levels of publicly available information concerning issuers and
reduced
levels of government regulation of foreign securities markets.
Also,
investment in Caribbean Basin Countries may involve special
considerations, such as limited liquidity and small market capitalization
of the Caribbean Basin securities markets, currency devaluations,
high
inflation and repatriation
restrictions.
|
Equity
Securities Risk:
|
Consistent
with its objective, the Fund will invest a substantial portion
of its
assets in equity securities of Caribbean Basin Companies. Equity
securities, such as common stock, generally represent an ownership
interest in a company. An adverse event, such as an unfavorable
earnings
report, may depress the value of a particular equity security held by
the Fund. Also, the prices of equity securities, particularly
common
stocks, are sensitive to general movements in the stock market.
The Fund’s
share price can fall because of weakness in the markets in which
it
invests, a particular industry or specific holdings. Markets
as a whole
can decline for many reasons, including adverse political or
economic
developments, changes in investor psychology, or heavy institutional
selling. The prospects for an industry or company may deteriorate
because of a variety of factors, including disappointing earnings
or
changes in the competitive environment. Investments in futures
and
options, if any, are subject to additional volatility and potential
losses.
|
Cuba
Specific Issues
|
Investment
in Cuban securities or any investment in Cuba directly or indirectly
is
currently prohibited under U.S. law. There can be no assurances
that the
U.S. trade embargo against Cuba will ever be lifted or eased or,
if and
when such a normalization commences, that the Adviser will be able
to
identify direct investments in issuers domiciled in Cuba that are
acceptable for the Fund.
|
However,
if investment in securities issued by companies domiciled in Cuba
were to
be permitted under U.S. law, certain considerations not typically
associated with investing in securities of U.S. companies should
be
considered, including: (1) restrictions on foreign investment and
on
repatriation of capital invested in Cuba; (2) unstable currency
exchange
and fluctuation; (3) the cost of converting foreign currency into
U.S.
Dollars; (4) potential price volatility and lesser or lack of liquidity
of
shares listed on a securities market (if one is established); (5)
continued political and economic risks including a new government
that if
not properly stabilized may lead to the risk of nationalization
or
expropriation of assets and the risk of civil war; (6) the absence
of a
developed legal structure governing private property; (7) the absence
of a
capital market structure or market oriented economy; and (8) the
difficulty of assessing the financial status of particular companies.
|
|
“Non-diversified”
Investment Company
|
As
a “non-diversified” investment company, the Fund’s investments involve
greater risks than would be the case for a similar diversified
investment
company because the Fund is not limited by the Investment Company
Act of
1940, as amended (the “1940 Act”), in the proportion of its assets that
may be invested in the assets of a single issuer. Although the
Fund is not
diversified for the purposes of the 1940 Act, it must maintain
a certain
degree of diversification in order to comply with certain requirements
of
the U.S. Internal Revenue Code of 1986, as amended (the “Code”),
applicable to regulated investment companies. See “Risk Factors/Special
Considerations” and “Taxation.”
|
Management
Risk
|
The
Adviser’s judgment about the attractiveness, relative value or potential
appreciation of a particular security or investment strategy
may prove to be incorrect.
|
Dividends
and Distributions
|
The
Fund distributes annually to its stockholders substantially all
of its net
investment income and net short-term capital gains. The Fund determines
annually whether to distribute any net realized long-term capital
gains in
excess of net realized short-term capital losses. See “Dividends and
Distributions” and “Taxation.”
|
Certain
Charter Provisions
|
The
Fund’s Articles of Incorporation include provisions that could have
the
effect of: inhibiting the Fund’s possible conversion to open-end status;
limiting the ability of other entities or persons to acquire control
of
the Fund or to change the composition of its Board; and depriving
stockholders of an opportunity to sell their shares at a premium
over
prevailing market prices by discouraging a third party from seeking
to
obtain control of the Fund. See “Description of Common
Stock.”
|
Market
Disruption Risk:
|
Certain
events have had a disruptive effect on the securities markets,
such as
terrorist attacks, war and other geopolitical events, hurricanes,
droughts, floods and other disasters. The Fund cannot predict
the effects
of similar events in the future on the markets or economies of
Caribbean
Basin Countries.
|
Stockholder
Transaction Expenses:
|
|
Sales
Load
|
None
|
Expenses
of the Offer (as a percentage of offering price)
|
[____]
%
|
Dividend
Reinvestment Plan Fees
|
None
|
Annual
Expenses (as a percentage of net assets):
|
|
Management
Fees
|
1.45%
|
Other
Expenses (1)
|
[____]
%
|
Acquired
Fund Fees and Expenses (2)
|
[____]
%
|
Total
Annual Expenses
|
[____]
%
|
Cumulative
Expenses Paid for the Period of:
|
||||
Example
|
1
year
|
3
years
|
5
years
|
10
years
|
An
investor would pay the following expenses on
a $1,000 investment, assuming a 5% annual return throughout
the periods
|
$[____]
|
$[____]
|
$[____]
|
$[____]
|
Year
Ended June 30,
|
|||||||||
2007
|
2006
|
2005
|
2004
|
2003
|
|||||
Per
Share Operating Performance (For
a share of capital stock outstanding for each time period
indicated)
|
|||||||||
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%
|
||||
Average
commission rate
(per
share)*
|
0.0223
|
0.0424
|
0.0481
|
0.0473
|
0.05
|
||||
(1) Computed
by dividing the respective period’s amounts from the Statement of
Operations by the average outstanding
shares for each time period presented.
* Unaudited.
|
|||||||||
Year
Ended June 30,
|
|||||||||
2002
|
2001
|
2000
|
1999
|
1998
|
|||||
Per
Share Operating Performance (For
a share of capital stock outstanding for each time period
indicated)
|
|||||||||
Net
asset value, beginning of period
|
$5.15
|
$5.02
|
$6.12
|
$6.43
|
$6.34
|
||||
Operations:
|
|||||||||
Net
investment loss(1)
|
(0.10)
|
(0.07)
|
(0.10)
|
(0.11)
|
(0.01)
|
||||
Net
realized and unrealized gain (loss) on investment transactions
(1)
|
(0.98)
|
0.20
|
(1.00)
|
0.51
|
0.54
|
||||
Total
from operations
|
(1.08)
|
0.13
|
(1.10)
|
0.40
|
0.53
|
||||
Distributions:
|
|||||||||
From
net investment income
|
(0.10)
|
--
|
--
|
--
|
--
|
||||
From
net realized gains
|
(0.05)
|
--
|
--
|
(0.71)
|
(0.44)
|
||||
Total
distributions
|
(0.15)
|
--
|
--
|
(0.71)
|
(0.44)
|
||||
Net
asset value, end of period
|
$3.92
|
$5.15
|
$5.02
|
$6.12
|
$6.43
|
||||
Per
share market value, end of period
|
$3.48
|
$4.20
|
$5.06
|
$6.00
|
$6.00
|
||||
Total
investment return (loss) based on market value per share
|
(13.45)%
|
(17.04)%
|
(15.63)%
|
11.83%
|
23.54%
|
||||
Ratios
And Supplemental Data
|
|||||||||
Net
assets, end of period (in 000’s)
|
$6,568
|
$8,643
|
$8,424
|
$10,272
|
$10,784
|
||||
Ratio
of expenses to average net assets
|
3.77%
|
3.11%
|
3.11%
|
3.30%
|
3.21%
|
||||
Ratio
of net investment loss to average net assets
|
(2.45)%
|
(1.33)%
|
(1.76)%
|
(1.95)%
|
(0.14)%
|
||||
Portfolio
turnover rate
|
18%
|
27%
|
10%
|
59%
|
40%
|
Quarter
Ended
|
High
Close
|
NAV
(on
High
Close
Date)
|
Premium/
Discount
(on
High
Close
Date)
|
Low
Close
|
NAV
(on
Low
Close
Date)
|
Premium/
Discount
(on
Low
Close
Date)
|
||||||
6/30/2007
|
|
$14.34
|
|
$9.66
|
|
48.45%
|
|
$10.20
|
|
$8.70
|
|
17.24%
|
3/31/2007
|
|
$17.40
|
|
$8.15
|
|
113.50%
|
|
$11.15
|
|
$8.08
|
|
38.00%
|
12/31/2006
|
|
$16.25
|
|
$8.07
|
|
101.36%
|
|
$7.75
|
|
$8.17
|
|
-5.14%
|
9/30/2006
|
|
$8.81
|
|
$7.61
|
|
15.77%
|
|
$7.05
|
|
$7.55
|
|
-6.62%
|
6/30/2006
|
|
$8.36
|
|
$8.83
|
|
-5.32%
|
|
$7.20
|
|
$8.07
|
|
-10.78%
|
3/31/2006
|
|
$8.25
|
|
$8.91
|
|
-7.41%
|
|
$7.41
|
|
$8.13
|
|
-8.86%
|
12/31/2005
|
|
$8.46
|
|
$8.02
|
|
5.49%
|
|
$6.35
|
|
$7.53
|
|
-15.67%
|
9/30/2005
|
|
$7.25
|
|
$7.66
|
|
-5.35%
|
|
$6.15
|
|
$7.37
|
|
-16.55%
|
6/30/2005
|
|
$6.39
|
|
$7.31
|
|
-12.59%
|
|
$5.47
|
|
$6.61
|
|
-17.25%
|
3/31/2005
|
|
$6.44
|
|
$6.91
|
|
-6.80%
|
|
$5.76
|
|
$6.67
|
|
-13.64%
|
Stockholder’s
Record Date Position
|
X
|
Excess
Shares Remaining
|
Total
Record Date Position of All
Over-Subscribers
|
a.
|
Notice
of Guaranteed Delivery and Subscription Certificate (with payment)
sent
separately.
If,
prior to 5:00 p.m., Eastern Time, on the Expiration Date, the Subscription
Agent shall have received a notice of guaranteed delivery by telegram
or
otherwise, from a bank or trust company or a NYSE member firm guaranteeing
delivery of (i) payment of the Estimated Subscription Price of $
[____]
per share for the shares subscribed for in the Primary Subscription
and
any additional shares subscribed for pursuant to the Over-Subscription
Privilege and (ii) a properly completed and executed Subscription
Certificate, the subscription will be accepted by the Subscription
Agent.
The Subscription Agent will not honor a notice of guaranteed delivery
unless a properly completed and executed Subscription Certificate
is
received by the Subscription Agent prior to 5:00 p.m., Eastern Time,
on
the third Business Day after the Expiration Date (the “Protection
Period”).
|
b.
|
Subscription
Certificate sent with Payment.
Alternatively,
a stockholder can, together with the properly completed and executed
Subscription Certificate, send payment for the shares acquired in
the
Primary Subscription and any additional shares subscribed for pursuant
to
the Over-Subscription Privilege, to the Subscription Agent based
on the
Estimated Subscription Price of $[____]
per share. To be accepted, such payment, together with the Subscription
Certificate, must be received by the Subscription Agent prior to
5:00
p.m., Eastern Time, on the Expiration
Date.
|
1.
|
U.S.
Stockholders who receive Rights pursuant to the Offer should not
recognize
taxable income for U.S. Federal income tax purposes upon their receipt
of
the Rights. If Rights issued to a U.S. Stockholder expire without
being
exercised, no basis should be allocated to such Rights, and such
Stockholder should not recognize any gain or loss for U.S. Federal
income
tax purposes upon such expiration.
|
2.
|
The
tax basis of a U.S. Stockholder’s Common Stock should remain unchanged and
the stockholder’s basis in the Rights should be zero, unless such U.S.
Stockholder affirmatively and irrevocably elects (in a statement
attached
to such stockholder’s U.S. Federal income tax return for the year in which
the Rights are received) to allocate the basis in the Common Stock
between
such Common Stock and the Rights in proportion to their respective
fair
market values on the date of
distribution.
|
3.
|
A
U.S. Stockholder who exercises Rights should not recognize any gain
or
loss for U.S. Federal income tax purposes upon the exercise. The
tax basis
of the newly acquired Common Stock should equal the Subscription
Price
paid for the Common Stock (plus the basis, if any, allocated to the
Rights
in the manner described in the immediately preceding paragraph).
The
holding period for Common Stock acquired upon the exercise of Rights
should begin on the date of exercise of the Rights.
|
4.
|
Each
U.S. Stockholder is urged to consult his or her own tax adviser with
respect to the specific Federal, state and local tax consequences
to such
U.S. Stockholder of receiving Rights in this
offer.
|
·
|
The
Subscription Price per share is 85%
of the average volume-weighted closing sales price of a share of
common
stock on the NASDAQ Capital Market on the Pricing Date and the
four
immediately preceding trading days (which may be lower than the
NAV);
|
·
|
All
Stockholders will indirectly bear the expenses of the Offer;
and
|
·
|
the
number of shares outstanding after the Offer will have increased
proportionately more than the increase in the size of the Fund’s net
assets
|
Net
Asset Value (“NAV”)
|
$[____]
|
Subscription
Price
|
$[____]
|
[Increase/Reduction]
in NAV ($)
|
$[____]
|
[Increase/Reduction]
in NAV (%)
|
[____]%
|
1.
|
Purchase
any securities (other than obligations of the U.S. government, its
agencies or instrumentalities or securities of other regulated investment
companies) if as a result more than 25% of the Fund’s total assets would
be invested in securities of any single
issuer.
|
2.
|
Invest
25% or more of the value of its total assets in a particular industry.
This restriction does not apply to securities issued or guaranteed
by the
U.S. government, its agencies or instrumentalities, but will apply
to
foreign government obligations until such time as the SEC permits
their
exclusion.
|
3.
|
Purchase
more than 10% of the outstanding voting securities of any one
issuer.
|
4.
|
Issue
senior securities, pledge its assets or borrow money in excess of
10% of
the total value of its assets (including the amount borrowed) less
its
liabilities (not including its borrowings) and other than for temporary
or
emergency purposes or for the clearance of transactions, except that
the
Fund may borrow from a bank or other entity in a privately arranged
transaction for repurchases and/or tenders for its shares, if after
such
borrowing there is asset coverage of at least 300% as defined in
the 1940
Act, and may pledge its assets to secure any permitted borrowing.
For the
purposes of this investment restriction, the Fund will not purchase
additional portfolio securities while borrowings exceed 5% of the
Fund’s
total assets; and collateral arrangements with respect to the writing
of
options or the purchase or sale of futures contracts are not deemed
a
pledge of assets or the issuance of a senior
security.
|
5.
|
Make
loans, except through purchasing debt obligations, lending portfolio
securities and entering into repurchase agreements consistent with
the
Fund’s investment objective and
policies.
|
6.
|
Purchase
or sell real estate or real estate mortgage loans, except that the
Fund
may purchase and sell securities secured by real estate or interests
therein.
|
7.
|
Make
short sales of securities or maintain a short position in any
security.
|
8.
|
Purchase
securities on margin, except such short-term credits as may be necessary
or routine for the clearance or settlement of transactions, and except
that the Fund may engage in transactions as described under “Investment
Objective and Policies--Hedging Transactions” and post margin in
connection therewith consistent with its investment
policies.
|
9.
|
Underwrite
securities of other issuers, except insofar as the Fund may be deemed
an
underwriter under the Securities Act of 1933 in selling portfolio
securities.
|
10.
|
Buy
or sell commodities, commodity contracts or futures contracts (other
than
as described under “Investment Objective and Policies—Hedging
Transactions”).
|
11.
|
Buy,
sell or write put or call options (other than as described under
“Special
Leverage Considerations--Hedging
Transactions”).
|
Name,
Address, Age
|
Position(s)
Held With Fund
|
Length
of Term Served, and Term of Office
|
Principal
Occupation(s) During the Past Five Years
|
Number
of Portfolios in Fund Complex Overseen by
Director
|
Other
Directorships Held by Director
|
Disinterested
Directors
|
|||||
Ann
S. Lieff
c/o
The Herzfeld Caribbean Basin Fund, Inc.
P.O.
Box 161465
Miami,
Florida 33116
Age:
55
|
Director
|
Director
since 1998. Three year term of office.
|
President
of the Lieff Company, a management consulting firm that offers ongoing
advisory services as a corporate director to several leading regional
and
national retail operations, 1998 to present; former CEO Spec’s Music,
1980-1998, a retailer of recorded music.
|
1
|
Hastings
Entertainment, Inc; and Birks & Mayors, Inc.
|
Michael
A. Rubin
c/o
The Herzfeld Caribbean Basin Fund, Inc.
P.O.
Box 161465
Miami,
Florida 33116
Age:
65
|
Director
|
Director
since 2002. Three year term of office.
|
Partner
of Michael A. Rubin, P.A., attorney at law; Broker, Oaks Management
&
Real Estate Corp., a real estate brokerage corporation
|
1
|
Margo
Caribe, Inc.
|
Dr.
Kay W. Tatum, Ph.D., CPA
c/o
The Herzfeld Caribbean Basin Fund, Inc.
P.O.
Box 161465
Miami,
Florida 33116
Age:
55
|
Director
since 2007. Three year term of office.
|
Chair
and Associate Professor of Accounting, University of Miami School
of
Business Administration, 2004 to present; Associate Professor of
Accounting, University of Miami, 1992 to present; and Assistant
Professor
of Accounting, University of Miami, 1986 to 1992.
|
1
|
None
|
Interested
Directors and Officers
|
|||||
Thomas
J. Herzfeld *
P.O.
Box 161465
Miami,
Florida 33116
Age:
62
|
President,
Chairman of the Board, and Director
|
Director
of Fund since 1993. Three year term of office.
|
Chairman
and President of Thomas J. Herzfeld & Co., Inc., and Thomas J.
Herzfeld Advisors, Inc.
|
1**
|
None
|
Cecilia
Gondor *
P.O.
Box 161465
Miami,
Florida 33116
Age:
45
|
Secretary,
Treasurer and Chief Compliance Officer
|
Officer
since 1993.
|
Executive
Vice President of Thomas J. Herzfeld & Co., Inc., and Thomas J.
Herzfeld Advisors, Inc.
|
N/A
|
None
|
*
|
Each
of Mr. Herzfeld and Ms. Gondor is an “interested person” of the Fund
because each is an officer of the Fund’s
Adviser.
|
**
|
Mr.
Herzfeld also serves as a director of The Cuba Fund, Inc., a registered
closed-end investment company which has not yet commenced
operations.
|
Name
of Director
|
Dollar
Range of Equity
Securities
in the Fund
|
Aggregate
Dollar Range of
Equity
Securities in All Funds in Family of Investment
Companies
|
||
Disinterested
Directors
|
||||
Ann
S. Lieff
|
$10,001-
$50,000
|
$10,001-
$50,000
|
||
Michael
A. Rubin.
|
$10,001-
$50,000
|
$10,001-
$50,000
|
||
Dr.
Kay W. Tatum
|
NONE
|
NONE
|
||
Interested
Directors
|
||||
Thomas
J. Herzfeld
|
Over
$100,000
|
Over
$100,000
|
Name
of Person and
Position
with the Fund
|
Aggregate
Compensation
from
the Fund
|
Pension
or Retirement Benefits Accrued As Part of Fund
Expenses
|
Total
Compensation from the Fund and Fund Complex Paid to
Directors
|
|||
Disinterested
Directors
|
||||||
Ann
S. Lieff
|
$2,600
|
$0
|
$2,600
|
|||
Michael
A. Rubin
|
$2,600
|
$0
|
$2,600
|
|||
Albert
L. Weintraub*
|
$2,600
|
$0
|
$2,600
|
|||
Interested
Directors
|
||||||
Thomas
J. Herzfeld
|
$0
|
$0
|
$0
|
Type
of Account
|
Number
of Accounts
|
Total
Assets
(in
millions)
|
Registered
Investment Companies
|
0
|
$0
|
Pooled
Investment Vehicles
|
0
|
$0
|
Other
Accounts
|
44
|
$54.1
|
1.
|
State
Street Bank and Trust (the “Agent”) will act as agent for each
Participant. The Agent will open an account for each registered
stockholder as a Participant under the Plan in the same name in which
such
Participant’s shares of Common Stock are registered.
|
2.
|
CASH
OPTION. Pursuant to the Fund’s Plan, unless a holder of Common Stock
otherwise elects, all dividend and capital gains distributions
(“Distributions”) will be automatically reinvested by the Agent in
additional Common Stock of the Fund. Stockholders who elect not to
participate in the Plan will receive all distributions in cash paid
by
check mailed directly to the stockholder of record (or, if the shares
are
held in street or other nominee name then to such nominee) by the
Agent,
as dividend paying agent. Stockholders and Participants may elect
not to
participate in the Plan and to receive all distributions of dividends
and
capital gains in cash by sending written instructions to the Agent,
as
dividend paying agent, at the address set forth below.
|
3.
|
MARKET
PREMIUM ISSUANCES. If on the payment date for a Distribution, the
NAV per
share of Common Stock is equal to or less than the market price per
Common
Stock plus estimated brokerage commissions, the Agent shall receive
newly
issued Common Stock (“Additional Common Stock”) from the Fund for each
Participant’s account. The number of Additional Common Stock to be
credited shall be determined by dividing the dollar amount of the
Distribution by the greater of (i) the NAV per share of Common Stock
on
the payment date, or (ii) 95% of the market price per share of Common
Stock on the payment date.
|
4.
|
MARKET
DISCOUNT PURCHASES. If the NAV per share of Common Stock exceeds
the
market price plus estimated brokerage commissions on the payment
date for
a Distribution, the Agent (or a broker-dealer selected by the Agent)
shall
endeavor to apply the amount of such Distribution on each Participant’s
Common Stock to purchase Common Stock on the open market. In the
event of
a market discount on the payment date, the Agent will have 30 days
after
the dividend payment date (the “last purchase date”) to invest the
dividend amount in shares acquired in open-market purchases. The
weighted
average price (including brokerage commissions) of all Common Stock
purchased by the Agent as Agent shall be the price per Common Stock
allocable to each Participant. If, before the Agent has completed
its
purchases, the market price plus estimated brokerage commissions
exceeds
the NAV of the Common Stock as of the payment date, the purchase
price
paid by Agent may exceed the NAV of the Common Stock, resulting in
the
acquisition of fewer Common Stock than if such Distribution had been
paid
in Common Stock issued by the Fund. Because of the foregoing difficulty
with respect to open-market purchases, the Plan provides that if
the Plan
Agent is unable to invest the full dividend amount in open-market
purchases during the purchase period or if the market discount shifts
to a
market premium during the purchase period, the Plan Agent may cease
making
open-market purchases and may invest the uninvested portion of the
dividend amount in newly issued Common Stock at the NAV per share
of
Common Stock at the close of business on the last purchase date.
Participants should note that they will not be able to instruct the
Agent
to purchase Common Stock at a specific time or at a specific price.
Open-market purchases may be made on any securities exchange where
Common
Stock are traded, in the over-the-counter market or in negotiated
transactions, and may be on such terms as to price, delivery and
otherwise
as the Agent shall determine. Each Participant’s uninvested funds held by
the Agent will not bear interest. The Agent shall have no liability
in
connection with any inability to purchase Common Stock within the
time
provided, or with the timing of any purchases effected. The Agent
shall
have no responsibility for the value of Common Stock acquired. The
Agent
may commingle Participants’ funds to be used for open-market purchases of
the Fund’s shares and the price per share allocable to each Participant in
connection with such purchases shall be the average price (including
brokerage commissions and other related costs) of all Fund shares
purchased by Agent. The rules and regulations of the SEC may require
the
Agent to limit the Agent’s market purchases or temporarily cease making
market purchases for Participants.
|
5.
|
The
market price of Common Stock on a particular date shall be the last
sales
price on the securities exchange where the Common Stock are listed
on that
date (currently the NASDAQ Capital Market)(the “Exchange”), or, if there
is no sale on the Exchange on that date, then the average between
the
closing bid and asked quotations on the Exchange on such date will
be
used. The NAV per share of Common Stock on, a particular date shall
be the
amount calculated on that date (or if not calculated on such date,
the
amount most recently calculated) by or on behalf of the Fund.
|
6.
|
Whenever
the Agent receives or purchases shares or fractional interests for
a
Participant’s account, the Agent will send such Participant a notification
of the transaction as soon as practicable. The Agent will hold such
shares
and fractional interests as such Participant’s agent and may hold them in
the Agent’s name or the name of the Agent’s nominee. The Agent will not
send a Participant stock certificates for shares unless a Participants
so
requests in writing or unless a Participant’s account is terminated as
stated below. The Agent will vote any shares so held for a Participant
in
accordance with any proxy returned to the Fund by such Participant
in
respect of the shares of which such Participant is the record holder.
|
7.
|
There
is presently no service charge for the Agent serving as Participants’
agent and maintaining Participants’ accounts. The Agent may, however,
charge Participants for extra services performed at their request.
The
Plan may be amended in the future to impose a service charge. In
acting as
Participants’ agent under the Plan, the Agent shall be liable only for
acts, omissions, losses, damages or expenses caused by the Agent’s willful
misconduct or gross negligence. In addition, the Agent shall not
be liable
for any taxes, assessments or governmental charges which may be levied
or
assessed on any basis whatsoever in connection with the administration
of
the Plan.
|
8.
|
The
Agent may hold each Participant’s Common Stock acquired pursuant to the
Plan together with the Common Stock of other Stockholders of the
Fund
acquired pursuant to the Plan in non-certificated form in the Agent’s name
or that of the Agent’s nominee. Each Participant will be sent a
confirmation by the Agent of each acquisition made for his or her
account
as soon as practicable, but in no event later than 60 days, after
the date
thereof. Upon a Participant’s request, the Agent will deliver to the
Participant, without charge, a certificate or certificates for the
full
Common Stock. Although each Participant may from time to time have
an
undivided fractional interest in a Common Share of the Fund, no
certificates for a fractional share will be issued. Similarly,
Participants may request to sell a portion of the Common Stock held
by the
Agent in their Plan accounts by calling the Agent, writing to the
Agent,
or completing and returning the transaction form attached to each
Plan
statement. The Agent will sell such Common Stock through a broker-dealer
selected by the Agent within 5 business days of receipt of the request.
The sale price will equal the weighted average price of all Common
Stock
sold through the Plan on the day of the sale, less brokerage commissions.
Participants should note that the Agent is unable to accept instructions
to sell on a specific date or at a specific price. Any share dividends
or
split shares distributed by the Fund on Common Stock held by the
Agent for
Participants will be credited to their accounts. In the event that
the
Fund makes available to its Stockholders rights to purchase additional
Common Stock, the Common Stock held for each Participant under the
Plan
will be added to other Common Stock held by the Participant in calculating
the number of rights to be issued to each Participant.
|
If
a Participant holds more than one Common Stock Certificate registered
in
similar but not identical names or if more than one address is
shown for a
Participant on the Fund’s records, all of such Participant’s shares of
Common Stock must be put into the same name and address if all
of them are
to be covered by one account. Additional shares subsequently
acquired by a
Participant otherwise than through the Plan will be covered by
the Plan.
|
9.
|
The
reinvestment of Distributions does not relieve Participants of any
federal, state or local taxes which may be payable (or required to
be
withheld on Distributions.) Participants will receive tax information
annually for their personal records and to help them prepare their
federal
income tax return. For further information as to tax consequences
of
participation in the Plan, Participants should consult with their
own tax
advisors.
|
10.
|
Each
registered Participant may terminate his or her account under the
Plan by
notifying the Agent in writing at State Street Bank and Trust, P.O.
Box
642, Mail Code: OPS22, Boston, MA 02117, or by calling the Agent
at (617)
937-6870. Such termination will be effective with respect to a particular
Distribution if the Participant’s notice is received by the Agent prior to
such Distribution Record Date. The Plan may be terminated by the
Agent or
the Fund upon notice in writing mailed to each Participant at least
60
days prior to the effective date of the termination. Upon any termination,
the Agent will cause a certificate or certificates to be issued for
the
full shares held for each Participant under the Plan and cash adjustment
for any fraction of a Common Share at the then current market value
of the
Common Shares to be delivered to him. If preferred, a Participant
may
request the sale of all of the Common Shares held by the Agent in
his or
her Plan account in order to terminate participation in the Plan.
If any
Participant elects in advance of such termination to have Agent sell
part
or all of his shares, Agent is authorized to deduct from the proceeds
the
brokerage commissions incurred for the transaction. If a Participant
has
terminated his or her participation in the Plan but continues to
have
Common Shares registered in his or her name, he or she may re-enroll
in
the Plan at any time by notifying the Agent in writing at the address
above.
|
11.
|
These
terms and conditions may be amended by the Agent or the Fund at any
time
but, except when necessary or appropriate to comply with applicable
law or
the rules or policies of the SEC or any other regulatory authority,
only
by mailing to each Participant appropriate written notice at least
30 days
prior to the effective date thereof. The amendment shall be deemed
to be
accepted by each Participant unless, prior to the effective date
thereof,
the Agent receives notice of the termination of the Participant’s account
under the Plan. Any such amendment may include an appointment by
the Agent
of a successor Agent, subject to the prior written approval of the
successor Agent by the Fund.
|
(i)
|
the
value of any cash on hand or on deposit, bills and demand notes and
accounts receivable, prepaid expenses, cash dividends and interest
declared or accrued and not yet received, will be its face amount,
unless
the Adviser has determined that its value is less, in which case
its value
will be deemed to be such amount as the Adviser determines to be
reasonable;
|
(ii)
|
the
value of any security which is traded on a stock exchange (except
as
specified in (iii) below) will be determined by taking the latest
available sales price on the primary exchange on which the security
is
traded or, if no such price is available, by taking the last quoted
bid
price;
|
(iii)
|
the
value of any security traded in the unregulated market will be determined,
by taking the last quoted bid
price;
|
(iv)
|
investments
(if any) in securities of the U.S. government, its agencies and
instrumentalities having a maturity of 60 days or less are valued
at
amortized cost;
|
(v)
|
the
value of a forward contract is calculated by reference to the price
quoted
at the date of valuation of the contract by the customary banking
sources
of the Fund;
|
(vi)
|
the
value of commodity futures or option contracts entered into by the
Fund
are the margin deposit plus or minus the difference between the value
of
the contract on the date NAV is calculated and the value on the date
the
contract originated, value being that established on a recognized
commodity or options exchange, or by reference to other customary
sources,
with a gain or loss being
recognized;
|
(vii)
|
the
value of any security or property for which no price quotation is
available as provided above is the fair value determined in such
manner as
the Board, acting in good faith, deems appropriate, although the
actual
calculation may be done by others; and
|
(viii)
|
the
liabilities of the Fund are deemed to include, without limitation,
all
bills and accounts payable, all other contractual obligations for
the
payment of money, including the amount of distributions declared
and
unpaid, all accrued and unpaid management fees, advisory fees and other
expenses, all reserves for taxes or contingencies and all other
liabilities of the Fund determined in accordance with generally accepted
accounting principles.
|
1. Issues
regarding the issuer’s Board entrenchment and 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”.
|
Oppose
|
2. Providing
cumulative voting rights.
|
Oppose
|
3. “Social
issues,” unless specific client guidelines supersede, e.g., restrictions
regarding South Africa.
|
Oppose
|
4. Election
of directors recommended by management, except if there is a proxy
fight.
|
Approve
|
5. Election
of auditors recommended by management, unless seeking to replace
if there
exists a dispute over policies.
|
Approve
|
6. Date
and place of annual meeting.
|
Approve
|
7. Limitation
on charitable contributions or fees paid to lawyers.
|
Approve
|
8. Ratification
of directors’ actions on routine matters since previous annual
meeting.
|
Approve
|
9. Confidential
voting
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.
|
Approve
|
10. Limiting
directors’ liability
|
Approve
|
11. Eliminate
preemptive right
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.
|
Approve
|
12. Employee
Stock Purchase Plan
|
Approve
|
13. Establish
401(k) Plan
|
Approve
|
14. Rotate
annual meeting location/date
|
Approve
|
15. Establish
a staggered Board
|
Approve
|
16. Eliminate
director mandatory retirement policy
|
Case-by-Case
|
17. Option
and stock grants to management and directors
|
Case-by-Case
|
18. Allowing
indemnification of directors and/or officers after reviewing the
applicable laws and extent of protection requested.
|
Case-by-Case
|
(a) | Schedule of Investments as of June 30, 2007.* |
(b) | Statement of Assets and Liabilities as of June 30, 2007.* |
(c) | Statement of Operations Year Ended June 30, 2007.* |
(d)
|
Statements
of Changes in Net Assets for the Years Ended June 30, 2007 and
2006.*
|
(e)
|
Financial
Highlights Years Ended June 30, 2003 through 2007.*
|
(f)
|
Notes
to Financial Statements.*
|
(g)
|
Report
of Independent Registered Public Accounting
Firm.*
|
*
|
Incorporated
by reference to the Registrant’s Annual Report to Stockholders for the
fiscal year ended June 30, 2007 filed on Form N-CSR, with the Securities
and Exchange Commission (“SEC”) on August 31, 2007 (File No.
811-06445).
|
(a)
|
(1) |
Articles
of Incorporation filed with the State of Maryland dated March 10,
1992.(1)
|
(2) | Articles of Amendment to Articles of Incorporation as filed with the State of Maryland on July 23, 1993.(1) |
(b) | By Laws.(1) |
(c) | Not applicable. |
(d) | (1) | Form of Specimen Certificate of Common Stock. |
(2) | Articles Sixth, Eighth, Ninth and Tenth of the Registrant’s Articles of Incorporation filed hereto as exhibit (a)(1). |
(3) | Articles II and III of the Registrant’s By Laws filed hereto as exhibit (a)(3). |
(4) | Form of subscription certificate. |
(5) | Form of notice of guaranteed delivery. |
(6) | Form of letter to brokers. |
(7) | Form of letter to registered holders. |
(e) | Dividend Reinvestment Plan. (2) |
(f) | Not applicable. |
(g) | Investment Advisory Agreement between HERZFELD/CUBA, a division of Thomas J. Herzfeld Advisors, Inc. and the Registrant dated September 10, 1993.(1) |
(h) | Not applicable. |
(i) | Not applicable. |
(j) | Custodian Agreement between Investors Bank & Trust Company and the Registrant dated March 28, 2003.(1) |
(k) | (1) | Subscription Agent Agreement between Colbent Corporation and the Registrant. |
(l) | Opinion and Consent of Pepper Hamilton LLP. |
(m) | Not applicable. |
(n) | (1) | Consent of Rothstein, Kass & Company, LLP. |
(o) | Not applicable. |
(p) | Not applicable. |
(r)
|
Joint
Code of Ethics of the Registrant and Thomas J. Herzfeld Advisors,
Inc.(1)
|
(1)
|
Incorporated
by reference to the Registrant’s Registration Statement on Form N-2 filed
with the SEC on July 25, 2007 (File Nos. 333-144838,
811-06445).
|
(2)
|
Incorporated
by reference to Exhibit 99.2 to Form 8-K/A filed with the SEC on
November
22, 2006 (File No.
811-06445).
|
Description
of Expense
|
Estimated
Expense
|
|||
Securities
and Exchange Commission registration fees
|
$
|
1,228
|
||
NASDAQ
listing fees for additional shares
|
$
|
33,751
|
||
Printing
(other than stock certificates)
|
$
|
6,500
|
||
Accounting
fees and expenses
|
$
|
7,000
|
||
Legal
fees and expenses
|
$
|
75,000
|
||
Subscription
agent’s fees and expenses
|
$
|
17,500
|
||
Miscellaneous
|
$
|
15,000
|
||
Total
|
$
|
155,979
|
Title
Of Class
|
Number
Of
Record
Holders
As
Of
June
30, 2007
|
|
Common
Stock, $0.001 par value
|
122
|
(1)
|
Registrant
undertakes to suspend the offering of its shares until it amends
its
prospectus if: (a) subsequent to the effective date of this Registration
Statement, the net asset value per share declines more than 10% from
its
net asset value per share as of the effective date of this Registration
Statement; or (b) the net asset value increases to an amount greater
than
its net proceeds as stated in the
Prospectus.
|
(2)
|
Not
applicable.
|
(3)
|
Not
applicable.
|
(4)
|
Not
applicable.
|
(5)
|
Registrant
undertakes that: (a) for purposes of determining any liability under
the
Securities Act of 1933, as amended, the information omitted from
the form
of prospectus filed as part of this Registration Statement in reliance
upon Rule 430A and contained in a form of prospectus filed by the
Registrant pursuant to Rule 497(h) under the Securities Act shall
be
deemed to be part of this Registration Statement as of the time it
was
declared effective; and (b) that for the purpose of determining any
liability under the Securities Act of 1933, as amended, each
post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering
of
such securities at that time shall be deemed to be the initial bona
fide
offering thereof.
|
(6)
|
Not
applicable.
|
Name
|
Title
|
Date
|
||
/s/Ann
S. Lieff
|
Director
|
September
13, 2007
|
||
Ann
S. Lieff
|
||||
/s/Michael
A. Rubin
|
Director
|
September
13, 2007
|
||
Michael
A. Rubin
|
||||
/s/Dr.
Kay W. Tatum
|
Director
|
September
13, 2007
|
||
Dr.
Kay W. Tatum
|
||||
/s/Thomas
J. Herzfeld
|
Director
and President
(Principal
Executive Officer)
|
September
13, 2007
|
||
Thomas
J. Herzfeld
|
||||
/s/Cecilia
Gondor
|
Secretary
and Treasurer
(Principal
Financial Officer)
|
September
13, 2007
|
||
Cecilia
Gondor
|
Exhibit
No.
|
Description
of Exhibit
|
(d)(4)
|
Form
of subscription certificate.
|
(d)(5)
|
Form
of notice of guaranteed delivery.
|
(l)
|
Opinion
and Consent of Pepper Hamilton LLP
|
(n)(1)
|
Consent
of Rothstein Kass & Company,
LLP
|