<DOCUMENT>
<TYPE>N-30D
<SEQUENCE>1
<FILENAME>n30d-801.txt
<DESCRIPTION>HERZFELD CARIBBEAN BASIN FUND, INC.
<TEXT>


                                  THE HERZFELD
                                CARIBBEAN BASIN
                                   FUND, INC.

                                 ANNUAL REPORT
                                  JUNE 30, 2001

<PAGE>

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

THE HERZFELD CARIBBEAN BASIN FUND, INC.
The Herzfeld Building
PO Box 161465
Miami, FL  33116
(305) 271-1900

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

TRANSFER AGENT & REGISTRAR
Investors Bank & Trust Company
200 Clarendon Street, 16th Floor
Boston, MA  02116
(617) 443-6870

CUSTODIAN
Investors Bank & Trust Company
200 Clarendon Street, 5th Floor
Boston, MA  02116

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

INDEPENDENT AUDITORS
Kaufman, Rossin & Co.
2699 South Bayshore Drive
Miami, FL  33133

--------------------------------------------------------------------------------
The Herzfeld  Caribbean Basin Fund's  investment  objective is long-term capital
appreciation.  To achieve its  objective,  the Fund  invests in issuers that are
likely, in the Advisor's view, to benefit from economic,  political,  structural
and  technological  developments in the countries in the Caribbean Basin,  which
consist of Cuba,  Jamaica,  Trinidad  and Tobago,  the  Bahamas,  the  Dominican
Republic,  Barbados, Aruba, Haiti, the Netherlands Antilles, the Commonwealth of
Puerto Rico, Mexico, Honduras,  Guatemala,  Belize, Costa Rica, Panama, Colombia
and  Venezuela.  The fund  invests  at least 65% 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 SmallCap Market
                                  Symbol: CUBA

<PAGE>

LETTER TO STOCKHOLDERS
================================================================================

                                                                  [PHOTO]
                                                            Thomas J. Herzfeld
                                                          Chairman and President

August 13, 2001

Dear Fellow Stockholders:

For the fiscal year ended June 30, 2001,  our net asset value has gained  2.59%,
increasing from $5.02 per share to $5.15 per share.

The Fund is  currently  fully  invested  with  holdings  in 13  Caribbean  Basin
countries.  We are particularly  interested in Cuba. Our single position in that
country at present is in Cuban sovereign debt, specifically the Republic of Cuba
4.5%, 1977 bonds, issued pre-Castro (trading in default). We continue to monitor
market  conditions so that we will be  positioned to increase our  investment in
that country when the U.S. embargo is lifted.

Today is Fidel Castro's 75th birthday and Cuba's future remains  uncertain.  One
thing is for  sure,  however;  if there is a  political  change  in Cuba and the
embargo  is lifted,  there  will be a  tremendous  need for  investment  in that
country.  Our current  portfolio  strategy  remains to  concentrate on companies
which we believe  will do well if there is no  political  change.  Nevertheless,
many of the  companies  we are  invested  in were  selected  in part  because we
believe  they will benefit  from the lifting of the U.S.  embargo;  Florida East
Coast Industries,  Carnival Corp. and Royal Caribbean are excellent  examples of
the latter.

As for now, we are pleased that several of our Caribbean  investments  have done
quite well. In  particular,  Consolidated  Water Co. Ltd.  (CWCO),  based in the
Cayman Islands, which develops and operates seawater conversion plants and water
distribution  systems in areas where  natural  supplies  of  drinking  water are
scarce, recently expanded into the Bahamas. Our Fund holds 35,600 shares of CWCO
at a cost of approximately  $6.39 per share. Today, the shares were trading at a
new high of $11.90.

Doral  Financial  (DORL),  based in Puerto Rico, is a financial  holding company
engaged in mortgage banking,  banking,  insurance and broker-dealer  activities.
Net income for the year 2000  increased  25% over the prior year. We have been a
long-term  investor in Doral;  our Fund holds 6,000 shares at an average cost of
$8.10 per share. Today's price was above $38.00 per share.

                                       3
<PAGE>

LETTER TO STOCKHOLDERS (CONTINUED)
================================================================================

The Mexico Fund (MXF),  a New York Stock  Exchange-listed  closed-end  fund,  of
which we own 40,000  shares at a cost of $12.40 per share,  was  changing  hands
today at $19.49.  We acquired most of this position when the shares were trading
at 20% to 25%  discounts to net asset value.  We believe that  closed-end  funds
trading at wide discounts can provide attractive opportunities. As of today, The
Mexico Fund's discount has narrowed to 14%.

For the  benefit  of new  investors,  I'd like to review a few  closed-end  fund
basics. The price of a closed-end fund is determined by supply and demand in the
open market.  This is quite  different  from the way  open-end  mutual funds are
priced, which is based directly on net asset value per share. If buyers dominate
the marketplace,  the share price of a closed-end fund is pushed higher, and may
thereby  exceed  its net asset  value,  to a  premium.  Conversely,  if  sellers
dominate the  marketplace,  the share price of a  closed-end  fund sinks and may
thereby fall below its net asset value, to a discount.

Approximately 30% of the 470 closed-end funds in the United States are currently
trading at  premiums  to net asset  value and 70% at  discounts.  Discounts  for
closed-end  funds  have been  narrowing,  and in some  cases  have  inverted  to
premiums.  The  Herzfeld  Closed-End  Average,  a measure of the share prices of
domestic equity funds, today stands at 1.17% premium,  in contrast to a discount
of -16.6% when the average was created on December 31, 1987. At that time 95% of
the issues in that average  were trading at discounts to net asset value.  Today
47% in the average are trading at premiums to net asset value.

PREMIUM/DISCOUNT

The  following is a graph of the  historic  premium and discount of The Herzfeld
Caribbean Basin Fund from inception. Today the fund was trading at a discount of

PREMIUM/DISCOUNT OF THE HERZFELD CARIBBEAN BASIN FUND FROM INCEPTION

[GRAPHIC OMITTED]

                                       4
<PAGE>

LETTER TO STOCKHOLDERS (CONTINUED)
================================================================================

approximately  15%,  but as you can see from the  chart,  the Fund has traded at
both  premiums and  discounts  to net asset value,  but there hasn't been a year
since inception that it hasn't hit a premium.

LARGEST ALLOCATIONS

The following tables present our largest investments and geographic  allocations
as of June 30, 2001.

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

USA                      44.37%   Florida East Coast Industries Inc.     24.04%
Mexico                   18.26%   The Mexico Fund, Inc.                   8.97%
Panama                   11.72%   PanAmerican Beverage Inc. Cl. A         7.47%
Latin American Regional   5.61%   Banco Latinoamericano de Exportaciones  4.25%
Puerto Rico               5.48%   Florida Rock Industries, Inc.           3.80%
Cayman Islands            5.46%   Consolidated Water Co.                  3.75%
Belize                    2.50%   Royal Caribbean Cruises Ltd.            3.58%
Netherlands Antilles      2.48%   Coca Cola Femsa                         3.26%
Dominican Republic        1.38%   WorldCom Inc.-WCOM                      3.13%
Costa Rica                0.94%   AT&T Latin America Corp.                3.00%
Virgin Islands            0.42%
Colombia                  0.35%
Venezuela                 0.28%
Canada                    0.10%
Cuba                      0.00%
--------------------------------------------------------------------------------

Daily net asset  values  and press  releases  on the Fund are  available  on the
Internet at www.herzfeld.com.

I would like to take the time to thank the members of the Board of Directors for
their hard work and guidance and also to thank my fellow  stockholders for their
continued support and suggestions.

                                        Sincerely,

                                        /s/ Thomas J. Herzfeld

                                        Thomas J. Herzfeld
                                        Chairman of the Board and President

                                       5
<PAGE>

SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2001
================================================================================
Shares or Principal Amount           Description                       Value
--------------------------           -----------                       -----

COMMON STOCKS - 99.39% OF NET ASSETS

Banking and finance - 6.99%
     8,000    Bancolombia S.A.                                      $     18,000
     3,500    Banco Ganadero S.A.                                         12,425
    10,000    Banco Latinoamericano de Exportaciones                     367,700
     6,000    Doral Financial                                            205,800

Communications - 11.10%
     2,400    Atlantic Tele-Network*                                      31,824
    52,000    AT&T Latin America Corp.                                   258,960
     1,800    Bracknell Corp.                                              8,730
     6,750    Corecomm, Inc.*                                              1,283
    16,000    Grupo Radio Centro S.A. ADR                                116,000
     3,500    Grupo Televisa S.A. GDR                                    140,035
    19,000    Tricom S.A. ADR                                            119,700
    18,100    WorldCom Inc.-WCOM                                         270,776
       724    WorldCom Inc.-MCI                                           11,656

Conglomerates - 2.52%
    42,024    Carlisle Holdings, Inc.                                    216,003
       200    Grupo Imsa S.A.                                              1,780

Construction and related - 8.99%
    12,000    Bufete Industrial S.A. ADR600
     1,936    Ceramica Carabobo Cl. A ADR                                  2,669
    13,000    Empresas ICA Sociedad Controladora ADR                      35,230
     7,000    Florida Rock Industries, Inc.                              328,300
    17,950    Mastec, Inc.                                               236,940
     7,300    Puerto Rican Cement Co.                                    173,375

Consumer products and related manufacturing - 15.14%
   800,000    Atlas Electricas S.A.                                       81,591
     1,918    Buenos Aires Embotelladora S.A. (Note 2)*                       19
    11,400    Coca Cola Femsa S.A.                                       281,580
     6,400    Grupo Casa Autrey S.A. ADR                                  37,760
    31,800    PanAmerican Beverage Inc. Cl. A                            645,540
    11,500    Savia S.A. ADR                                              32,200
    13,000    Vitro Sociedad Anonima ADR                                  34,580
    13,850    Watsco Incorporated                                        195,285

                            See accompanying notes.

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

                                       6
<PAGE>

SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2001 (CONTINUED)
================================================================================

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

Investment companies - 11.59%
     3,000    The Latin American Discovery Fund, Inc.               $     31,050
    14,680    The Latin America Equity Fund, Inc.                        195,244
    40,000    The Mexico Fund, Inc.                                      775,200

Leisure - 5.68%
     5,900    Carnival Corp.                                             181,130
     1,500    Grand Adventure Tour & Travel                                  450
    14,000    Royal Caribbean Cruises Ltd.                               309,540

Medical - 2.48%
     8,000    Orthofix International N.V.*                               214,640

Railroad and landholdings - 24.04%
    58,700    Florida East Coast Industries Inc.                       2,077,980

Retail - 0.06%
     2,500    Little Switzerland Inc.*                                     4,875

Trucking and marine freight - 3.96%
       800    Seaboard Corporation                                       166,320
    35,000    Trailer Bridge, Inc.                                        56,000
    10,000    Transportacion Maritima Mexicana ADR                       119,800

Utilities - 5.46%
    12,000    Caribbean Utilities Ltd. Cl. A                             148,200
    35,600    Consolidated Water Co. Ltd.                                323,960

Other - 1.38%
     3,300    Consorcio G Grupo Dina ADR                                   3,630
       193    Hvide Marine, Inc. warrants                                     72
     2,414    Mantex S.A.I.C.A.                                           21,171
    29,200    Margo Caribe, Inc.*                                         93,440
       833    Siderurgica Venezolana Sivensa ADR                             564
        75    Siderurgica Venezolana Sivensa "B"                              51
                                                                    ------------
TOTAL COMMON STOCKS (COST $8,083,011)                                  8,589,662

BONDS - 0% OF NET ASSETS

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

Other assets less liabilities - 0.61% of net assets                       52,972
                                                                    ------------

Net assets - 100%                                                   $  8,642,634
                                                                    ============

                            See accompanying notes.

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

                                       7
<PAGE>

STATEMENT OF ASSETS AND LIABILITIES AS OF JUNE 30, 2001
================================================================================

ASSETS

   Investment in securities, at value (cost $8,146,049) (Note 2)   $  8,589,662
   Cash                                                                  76,528
   Dividends and interest receivable                                     11,014
   Other assets                                                          38,943
                                                                   ------------
     TOTAL ASSETS                                                     8,716,147

LIABILITIES

   Accrued investment advisor fee (Note 3)        $     30,364
   Other payables                                       43,149
                                                  ------------
     TOTAL LIABILITIES                                                   73,513
                                                                   ------------

NET ASSETS (Equivalent to $5.15 per share
  based on 1,677,636 shares outstanding)                           $  8,642,634
                                                                   ============


Net assets consist of the following:
   Common stock, $.001 par value; 100,000,000
      shares authorized; 1,677,636 shares issued
      and outstanding                                              $      1,678
   Additional paid-in capital                                         8,362,502
   Undistributed net investment loss                                   (597,306)
   Undistributed net realized gain on investments                       432,147
   Net unrealized gain on investments                                   443,613
                                                                   ------------
       TOTAL                                                       $  8,642,634
                                                                   ============

                            See accompanying notes.

                                       8
<PAGE>

STATEMENT OF OPERATIONS YEAR ENDED JUNE 30, 2001
================================================================================

INVESTMENT INCOME
   Dividends                                                       $    150,699
   Interest                                                               1,422
                                                                   ------------
      Total income                                                      152,121

EXPENSES
   Investment advisor fee (Note 3)                $    125,431
   Custodian fees                                       53,854
   Professional fees                                    21,041
   Transfer agent                                       17,454
   Insurance                                            15,492
   Listing fees                                          6,209
   Postage                                               5,809
   Printing                                              5,490
   Directors fees                                        5,400
   Miscellaneous                                         8,759
                                                  ------------
      Total expenses                                                    264,939
                                                                   ------------
      INVESTMENT LOSS - NET                                            (112,818)

REALIZED AND UNREALIZED GAIN
   (LOSS) ON INVESTMENTS
   Net realized gain on investments                    382,758
   Change in unrealized gain on investments            (51,785)
                                                  ------------
      NET GAIN ON INVESTMENTS                                           330,973
                                                                   ------------
NET INCREASE IN NET ASSETS RESULTING
  FROM OPERATIONS                                                  $    218,155
                                                                   ============

                            See accompanying notes.

                                       9
<PAGE>

STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED JUNE 30, 2001 AND 2000
================================================================================

                                                      2001             2000
                                                  ------------     ------------

INCREASE (DECREASE) IN NET ASSETS FROM
 OPERATIONS:
   Investment loss - net                          ($   112,818)    ($   161,567)
   Net realized gain on investments                    382,758           42,255
   Change in unrealized gain on investments            (51,785)      (1,727,853)
                                                  ------------     ------------
      Net increase (decrease) in net assets
        from operations, representing change
        in net assets                                 (218,155)      (1,847,165)

NET ASSETS:

   Beginning of year                              $  8,424,479     $ 10,271,644
                                                  ------------     ------------

   End of year                                    $  8,642,634     $  8,424,479
                                                  ============     ============

                            See accompanying notes.

                                       10
<PAGE>

<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
YEARS ENDED JUNE 30, 1997 THROUGH 2001
========================================================================================================================
                                                                          Year Ended June 30
                                              --------------------------------------------------------------------------
                                                 2001            2000            1999            1998            1997
                                              ----------      ----------      ----------      ----------      ----------
PER SHARE OPERATING PERFORMANCE
<S>                                           <C>             <C>             <C>             <C>             <C>
   Net asset value, beginning of period       $     5.02      $     6.12      $     6.43      $     6.34      $     5.32
   Operations:
      Net investment loss                          (0.07)          (0.10)          (0.11)          (0.01)          (0.04)
      Net realized and unrealized gain
        (loss) on investments                       0.20           (1.00)           0.51            0.54            1.14
                                              ----------      ----------      ----------      ----------      ----------
          Total from (to) operations                0.13           (1.10)           0.40            0.53            1.10
                                              ----------      ----------      ----------      ----------      ----------
   Distributions:
      From net realized gains                         --              --           (0.71)          (0.44)          (0.08)
                                              ----------      ----------      ----------      ----------      ----------
          Total distributions                         --              --           (0.71)          (0.44)          (0.08)
                                              ----------      ----------      ----------      ----------      ----------

   Net asset value, end of period             $     5.15      $     5.02      $     6.12      $     6.43      $     6.34
                                              ----------      ----------      ----------      ----------      ----------

   Per share market value, end of period      $     4.20      $     5.06      $     6.00      $     6.00      $     5.25
                                              ----------      ----------      ----------      ----------      ----------

   Total investment return (loss) based on
     market value per share                      (17.04%)        (15.63%)         11.83%          23.54%          (0.90%)
                                              ----------      ----------      ----------      ----------      ----------

RATIOS AND SUPPLEMENTAL DATA
   Net assets, end of period (in 000's)       $    8,643      $    8,424      $   10,272      $   10,784      $   10,628
                                              ----------      ----------      ----------      ----------      ----------

   Ratio of expenses to average net assets         3.11%           3.11%           3.30%           3.21%           3.01%
                                              ----------      ----------      ----------      ----------      ----------

   Ratio of investment loss -
     net to average net assets                    (1.33%)         (1.76%)         (1.95%)         (0.14%)         (0.78%)
                                              ----------      ----------      ----------      ----------      ----------

   Portfolio turnover rate                           27%             10%             59%             40%             23%
                                              ----------      ----------      ----------      ----------      ----------
</TABLE>

                             See accompanying notes.

                                       11
<PAGE>

NOTES TO FINANCIAL STATEMENTS
================================================================================

NOTE 1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Related Matters
--------------------------------

The  Herzfeld  Caribbean  Basin  Fund,  Inc.  (the  Fund) is a  non-diversified,
closed-end  management  investment  company  incorporated  under the laws of the
State of Maryland on March 10, 1992, and registered under the Investment Company
Act of 1940. The Fund commenced  investing  activities in January 1994. The Fund
is listed on the NASDAQ SmallCap Market and trades under the symbol "CUBA".

The Fund's investment 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, 2001, the Fund had investments in companies operating principally in
Mexico  and  Panama  representing  approximately  18% and 12% of the  Fund's net
assets, respectively.

The Fund's custodian and transfer agent is Investors Bank & Trust Company, based
in Boston, Massachusetts.

Security Valuation
------------------

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

Income Recognition
------------------

Security  transactions  are  recorded  on the trade  date.  Gains and  losses on
securities sold are determined on the basis of identified cost.  Dividend income
is recognized on the  ex-dividend  date, and interest income is recognized on an
accrual basis. Discounts and premiums on securities purchased are amortized over
the life of the respective securities.

Deposits with Financial Institutions
------------------------------------

The Fund may, during the course of its  operations,  maintain  account  balances
with financial institutions in excess of federally insured limits.

                                       12
<PAGE>

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================

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  requires  management to make estimates
and assumptions  that affect the reported  amounts of assets and liabilities and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results could differ from those estimates.

Income Taxes
------------

The Fund  qualifies  as a  "regulated  investment  company"  and as such (and by
complying with the applicable  provisions of the Internal  Revenue Code of 1986,
as amended) is not subject to federal  income tax on taxable  income  (including
realized capital gains) that is distributed to shareholders.

The Fund has adopted a June 30 year-end for federal income tax purposes.

Distributions to Stockholders
-----------------------------

Distributions to stockholders are recorded on the ex-dividend  date.  Income and
capital  gain  distributions  are  determined  in  accordance  with  income  tax
regulations which may differ from accounting  principles  generally  accepted in
the United States.

NOTE 2.   NON-MARKETABLE SECURITES OWNED

Investment in securities  includes  $165,000  principal,  4.5%, 1977 Republic of
Cuba bonds  purchased  for  $63,038.  The bonds are listed on the New York Stock
Exchange and had been  trading in default  since 1960.  A  "regulatory  halt" on
trading was imposed by the New York Stock Exchange in July, 1995. As of June 30,
2001,  the  position  was  valued  at  $0  by  the  Board  of  Directors,  which
approximates the bonds' fair value.

NOTE 3.   TRANSACTIONS WITH AFFILIATES

HERZFELD / CUBA (the Advisor), a division of Thomas J. Herzfeld Advisors,  Inc.,
is the Fund's investment advisor and charges a monthly fee at the annual rate of
1.45% of the Fund's average monthly net assets.

During  the year  ended  June 30,  2001,  the Fund  paid  $18,538  of  brokerage
commissions to Thomas J. Herzfeld & Co., Inc., an affiliate of the Advisor.

NOTE 4.   INVESTMENT TRANSACTIONS

During the fiscal year ended June 30, 2001,  purchases  and sales of  investment
securities were $2,477,353 and $2,261,344, respectively.

At June 30, 2001, the Fund's investment  portfolio had gross unrealized gains of
$2,170,443  and  gross  unrealized  losses  of  $1,726,830,  resulting  in a net
unrealized gain of $443,613.

                                       13
<PAGE>

INDEPENDENT AUDITORS' REPORT
================================================================================

[LOGO]

To the Board of Directors and Shareholders
The Herzfeld Caribbean Basin Fund, Inc.

We have  audited the  accompanying  statement of assets and  liabilities  of The
Herzfeld Caribbean Basin Fund, Inc.,  including the schedule of investments,  as
of June 30,  2001,  and the related  statement of  operations  for the year then
ended,  the statements of changes in net assets for each of the two years in the
period then ended,  and the financial  highlights  for each of the five years in
the period then ended. These financial  statements and the financial  highlights
are the  responsibility  of the  Fund's  management.  Our  responsibility  is to
express an opinion on these financial  statements and financial highlights based
on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain  reasonable  assurance  about  whether the  financial  statements  and
financial  highlights  are free of  material  misstatement.  An  audit  includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the financial  statements.  Our procedures  included  confirmation of securities
owned as of June 30, 2001, by correspondence  with the custodian and brokers. An
audit also includes  assessing the accounting  principles  used and  significant
estimates  made by  management,  as well as  evaluating  the  overall  financial
statement  presentation.  We believe that our audits provide a reasonable  basis
for our opinion.

In our opinion,  the financial  statements and the 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,  2001,  the results of its
operations  for the year then  ended,  the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the  five  years  in the  period  then  ended,  in  conformity  with  accounting
principles generally accepted in the United States.

Kaufman, Rossin & Co.

Miami, Florida
July 20, 2001

                                       14
<PAGE>

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.

OFFICERS AND DIRECTORS
================================================================================

THOMAS J. HERZFELD
   Chairman of the Board, President
   and Portfolio Manager

CECILIA L. GONDOR-MORALES
   Secretary, Treasurer and Director

ANN S. LIEFF
   Director

KENNETH A.B. TRIPPE
   Director

ALBERT L. WEINTRAUB
   Director

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</TEXT>
</DOCUMENT>
