<DOCUMENT>
<TYPE>EX-99.(R)
<SEQUENCE>9
<FILENAME>v081245_ex99-codeeth.txt
<TEXT>
<PAGE>

                                 CODE OF ETHICS

                                       OF

                     THE HERZFELD CARIBBEAN BASIN FUND, INC.
                                        &
                        THOMAS J. HERZFELD ADVISORS, INC.

                                    PREAMBLE

            This Code of Ethics is being adopted in compliance with the
requirements of Rule 17j-1 under the Investment Company Act of 1940 (the "Act")
and Rule 204A-1 under the Investment Advisers Act of 1940 (the "Advisers Act")
adopted by the United States Securities and Exchange Commission to effectuate
the purposes and objectives of the rules.

            Rule 17j-1 makes it unlawful for certain persons, in connection with
purchase or sale by such person of a security held or to be acquired by The
Herzfeld Caribbean Basin Fund, Inc. (the "Fund"):

            (1)   To employ a device, scheme or artifice to defraud the Fund;

            (2)   To make to the Fund any untrue statement of a material fact or
                  omit to state to the Fund a material fact necessary in order
                  to make the statements made, in light of the circumstances in
                  which they are made, not misleading;

            (3)   To engage in any act, practice or course of business which
                  operates or would operate as a fraud or deceit upon the Fund;
                  or

            (4)   To engage in a manipulative practice with respect to the Fund.

            Section 206 of the Advisers Act makes it unlawful for certain
persons including Thomas J. Herzfeld Advisors, Inc. (the "Adviser"):

            (1) To employ any device, scheme or artifice to defraud any client
or prospective client;

            (2) To engage in any transaction, practice or course of business
which operates as a fraud or deceit upon any client or prospective client;

            (3) Acting as principal for his own account, knowingly to sell any
security to or purchase any security from a client; or acting as broker for a
person other than such client, knowingly to effect any sale or purchase of any
security for the account of such client, without disclosing to such client in
writing before the completion of such transaction, the capacity in which he is
acting and obtaining the consent of the client to such transaction. The
prohibitions of this paragraph (3) shall not apply to any transaction with a
customer of a broker or dealer if such broker or dealer is not acting as an
investment adviser in relation to such transaction; or

<PAGE>

            (4) To engage in any act, practice, or course of business which is
fraudulent, deceptive or manipulative.

Rule 17j-1 and/or Rule 204A-1 require the Fund and its investment adviser to
adopt a written Code of Ethics containing provisions reasonably necessary to
prevent persons from engaging in acts in violation of the above standard and to
use reasonable diligence, and institute procedures reasonably necessary to
prevent violations of the Code.

                  Set forth below is the Code of Ethics adopted by the Board of
Directors of the Fund (the "Fund Board") and by the Adviser in compliance with
the Rule. This Code is based upon the principle that the directors and officers
of the Fund, and certain affiliated persons of the Fund and Adviser, owe a
fiduciary duty to, among others, the shareholders of the Fund to conduct their
affairs, including their personal securities transactions, in such manner to
avoid (i) serving their own personal interests ahead of shareholders; (ii)
taking inappropriate advantage of their position with the Fund; and (iii) any
actual or potential conflicts of interest or any abuse of their position of Fund
and responsibility.

1.    DEFINITIONS

      (a)   "Access Person" means any Advisory Person of the Fund or the Fund's
            Adviser.

      (b)   "Advisory Person" means

            (i)   any director, trustee, officer, general partner or employee of
                  the Fund or its Adviser (or any company in a control
                  relationship to the Fund or investment adviser) who, in
                  connection with his or her regular functions or duties, makes,
                  participates in, or obtains information regarding, the
                  purchase or sale of Covered Securities by the Fund, or whose
                  functions relate to the making of any recommendations with
                  respect to such purchase or sales; and

            (ii)  any natural person in a control relationship to the Fund or
                  the Adviser who obtains information concerning recommendations
                  made to the Fund with regard to the purchase or sale of a
                  Covered Security by the Fund.

      (c)   A security is "being considered for purchase or sale" or is "being
            purchased or sold" when a recommendation to purchase or sell the
            security has been made and communicated to the trading desk, which
            includes when the Fund has a pending "buy" or "sell" order with
            respect to a security, and, with respect to the person making the
            recommendation, when such person seriously considers making such a
            recommendation.

      (d)   "Beneficial ownership" shall be as defined in, and interpreted in
            the same manner as it would be in determining whether a person is
            subject to the provisions of, Section 16 of the Securities Exchange
            Act of 1934 and the rules and regulations thereunder which,
            generally speaking, encompasses those situations where the
            beneficial owner has the right to enjoy some economic benefit from
            the ownership of the security regardless of who is the registered
            owner. This would include:


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            (i)   securities which a person holds for his or her own benefit
                  either in bearer form, registered in his or her own name or
                  otherwise regardless of whether the securities are owned
                  individually or jointly;

            (ii)  securities held in the name of a member of his or her
                  immediate family (spouse or child) sharing the same household;

            (iii) securities held by a trustee, executor, administrator,
                  custodian or broker;

            (iv)  securities owned by a general partnership of which the person
                  is a member or a limited partnership of which such person is a
                  general partner;

            (v)   securities held by a corporation which can be regarded as a
                  personal holding company of a person; and

            (vi)  securities recently purchased by a person and awaiting
                  transfer into his or her name.

      (e)   "Control" shall have the same meaning as that set forth in Section
            2(a)(9) of the Act.

      (f)   "Chief Compliance Officer" means Cecilia Gondor or her successor(s)
            appointed by the Board, on the one hand, and by the board of
            directors of the Adviser, on the other hand.

      (g)   "Covered Security" means a security, except that it shall not
            include

            (i)   direct obligations of the Government of the United States;

            (ii)  bankers' acceptances, bank certificates of deposit, commercial
                  paper and high quality short-term debt instruments, including
                  repurchase agreements; and

            (iii) shares issued by registered, open-end investment companies,
                  including the Fund.

      (h)   "Independent Director" means a Director of the Fund who is not an
            "interested person" of the Fund within the meaning of Section
            2(a)(19) of the Act.

      (i)   "Initial Public Offering" ("IPO") means an offering of securities
            registered under the Securities Act of 1933 ("Securities Act"), the
            issuer of which, immediately before the registration, was not
            subject to the reporting requirements of Sections 13 or 15(d) of the
            Securities Exchange Act of 1934.


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      (j)   "Investment Personnel" means:

            (i)   Any Advisory Person who, in connection with his regular
                  functions or duties, makes or participates in making
                  recommendations regarding the purchase or sale of securities
                  by the Fund.

            (ii)  Any natural person who controls the Fund or Adviser and who
                  obtains current information concerning recommendations made to
                  the Fund regarding the purchase or sale of securities by the
                  Fund.

      (k)   "Limited Offering" means an offering that is exempt from
            registration under the Securities Act pursuant to Section 4(2) or
            Section 4(6) or pursuant to rule 504, rule 505 or rule 506 under the
            Securities Act.

      (l)   "Purchase or Sale of a Covered Security" includes the writing of an
            option to purchase or sell a Covered Security.

      (m)   "Security Held or to be Acquired" by the Fund means:

            (i)   any Covered Security which, within the most recent fifteen
                  (15) days:

                  (A)   is or has been held by the Fund; or

                  (B)   is being or has been considered by the Fund or the
                        Adviser for purchase by the Fund; and

            (ii)  any option to purchase or sell, and any security convertible
                  into or exchangeable for, a Covered Security described in
                  paragraph (m)(i) of this section.

      (n)   "security" as defined in Section 2(a)(36) of the Act means any note,
            stock, treasury stock, bond, debenture, evidence of indebtedness,
            certificate of interest or participation in any profit-sharing
            agreement, collateral-trust certificate, preorganization certificate
            or subscription, transferable share, investment contract,
            voting-trust certificate, certificate of deposit for a security,
            fractional undivided interest in oil, gas, or other mineral rights,
            any put, call, straddle, option, or privilege on any security
            (including a certificate of deposit) or on any group or index of
            securities (including any interest therein or based on the value
            thereof), or any put, call, straddle, option, or privilege entered
            into in a national securities exchange relating to foreign currency,
            or, in general, any interest or instrument commonly known as a
            "security," or any certificate of interest or participation in,
            temporary or interim certificate for, receipt for, guarantee of, or
            warrant or right to subscribe to or purchase, any of the foregoing.

2.    PROHIBITED TRANSACTIONS

      (a)   No Access Person shall engage in any act, practice or course of
            conduct, which would violate the provisions of Rule 17j-1 under the
            Act, Section 206 of the Adviser Act or Rule 204A-1 under the
            Advisers Act.


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      (b)   No Access Person shall:

            (i)   purchase or sell, directly or indirectly, any security in
                  which he has or by reason of such transaction acquires, any
                  direct or indirect beneficial ownership and which to his or
                  her actual knowledge at the time of such purchase or sale:

                  (A)   is being considered for purchase or sale by the Fund, or

                  (B)   is being purchased or sold by the Fund;

            (ii)  disclose to other persons the securities activities engaged in
                  or contemplated for the various series of the Fund;

            (iii) seek or accept anything of value, either directly or
                  indirectly, from broker-dealers or other persons providing
                  services to the Fund because of such person's association with
                  the Fund. For the purposes of this provision, the following
                  gifts from broker-dealers or other persons providing services
                  to the Fund will not be considered to be in violation of this
                  section:

                  (A)   an occasional meal;

                  (B)   an occasional ticket to a sporting event, the theater or
                        comparable entertainment;

                  (C)   a holiday gift of fruit or other foods, or other
                        comparable gift.

      (c)   No Investment Personnel shall:

            (i)   Acquire directly or indirectly any beneficial ownership in any
                  securities in an IPO if such security is being considered for
                  purchase or sale by the Fund or is being purchased or sold by
                  the Fund.

            (ii)  Acquire directly or indirectly any beneficial ownership in any
                  securities in a Limited Offering without prior approval of the
                  Chief Compliance Officer or other person designated by the
                  Fund Board. Any person authorized to purchase securities in a
                  Limited Offering shall disclose such investment when they play
                  a part in any subsequent consideration of an investment by the
                  Fund in the issuer. In such circumstances, the Fund's decision
                  to purchase securities of the issuer shall be subject to
                  independent review by the Fund's officers with no personal
                  interest in the issuer.

            (iii) Applicable only to Fund managers identified on Schedule A from
                  time to time, buy or sell a Covered Security within at least
                  seven (7) calendar days before and after any series of the
                  Fund that he or she manages trades in that security. Any
                  profits realized on trades within the proscribed period are
                  required to be disgorged. Schedule A will be amended as
                  necessary by the Fund Board to reflect changes in Adviser
                  personnel.


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            (iv)  Profit in the purchase and sale, or sale and purchase, of the
                  same (or equivalent) securities within 60 calendar days. Any
                  profits realized on such short-term trades must be disgorged.

            (v)   Serve on the board of directors of any publicly traded company
                  without prior authorization of the Chairman and/or President
                  of the Fund. Any such authorization shall be based upon a
                  determination that the board service would be consistent with
                  the interests of the Fund and its shareholders.

3.    EXEMPTED TRANSACTIONS

            The prohibitions of Sections 2(b) and 2(c) shall not apply to:

      (a)   purchases or sales effected in any account over which the Access
            Person has no direct or indirect influence or control;

      (b)   purchases or sales which are non-volitional on the part of either
            the Access Person or the Fund;

      (c)   purchases which are part of an automatic dividend reinvestment plan;

      (d)   purchases effected upon the exercise of rights issued by an issuer
            pro rata to all holders of a class of its securities, to the extent
            such rights were acquired from such issuer, and sales of such rights
            so acquired; and

      (e)   purchases or sales other than those exempted in (a) through (d) of
            this Section 3 that have been authorized in advance and in writing
            by the Chief Compliance Officer following a specific determination
            that the transaction is consistent with the provisions of the
            Preamble.

4.    COMPLIANCE PROCEDURES

      (a)   Pre-clearance

            With the exception of the Independent Directors, all Access Persons
            shall receive prior approval from the Chief Compliance Officer or
            other officer designated by the Fund Board or Adviser's board, as
            the case may be, before purchasing or selling securities. Any
            approval is valid only for one day after authorization is received.
            If an Access Person is unable to effect the securities transaction
            during such period, he or she must re-obtain approval prior to
            effecting the securities transaction.

      (b)   Reporting Requirements

            Initial & Annual Reports All Access Persons, except Independent
            Directors, shall disclose to the Chief Compliance Officer within 10
            days of becoming an Access Person, and thereafter on an annual basis
            as of December 31(i) the name, number of shares and principal amount
            of each Covered Security in which the Access Person has any direct
            or indirect beneficial ownership and (ii) the name of any broker,
            dealer or bank with whom the Access Person maintains a securities
            account. The initial holdings report shall be made on the form
            attached as Exhibit A, and the annual holdings report shall be made
            on the form attached as Exhibit B. The information on the initial
            holdings and annual reports must be current as of a date no more
            than 45 days before the date the person becomes an Access Person.


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<PAGE>

            Quarterly Reports Every Access Person shall report to the Chief
            Compliance Officer the information described below with respect to
            transactions in any Covered Security in which such person has, or by
            reason of such transaction acquires, any direct or indirect
            beneficial ownership in the security; provided, however, that an
            Access Person shall not be required to make a report with respect to
            transactions effected for any account over which such person has no
            direct or indirect influence or control.

            (i)   Each Independent Director need only report a transaction in a
                  Covered Security if such Director, at the time of that
                  transaction, knew, or, in the ordinary course of fulfilling
                  his official duties as a trustee, should have known that
                  during the 15-day period immediately before or after the date
                  of the Director's transaction, such Covered Security was
                  purchased or sold by the Fund or was being considered for
                  purchase or sale by the Fund or Adviser.

            (ii)  Reports required to be made under this Paragraph (b) shall be
                  made not later than 30 days after the end of the calendar
                  quarter. Every Access Person shall be required to submit a
                  report for all periods, including those periods in which no
                  securities transactions were effected. A report shall be made
                  on the form attached hereto as Exhibit C or on any other form
                  containing the following information:

                  With respect to any transaction during the quarter in a
                  Covered Security in which the Access Person had any direct or
                  indirect beneficial ownership:

                  (A)   the date of the transaction, the name, the interest rate
                        and maturity date (if applicable), the number of shares,
                        and the principal amount of each Covered Security
                        involved;

                  (B)   the nature of the transaction (i.e., purchase, sale or
                        any other type of acquisition or disposition);

                  (C)   the price of the Covered Security at which the
                        transaction was effected;

                  (D)   the name of the broker, dealer or bank with or through
                        which the transaction was effected; and


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<PAGE>

                  (E)   the date that the report is submitted by the Access
                        Person.

                  With respect to any securities account established at a
                  broker, dealer, or bank during the quarter for the direct or
                  indirect benefit of the Access Person:

                  (A)   the name of the broker, dealer or bank with whom the
                        Access Person established the account;

                  (B)   the date the account was established; and

                  (C)   the date that the report is submitted by the Access
                        Person.

            Any report may contain a statement that the report shall not be
            construed as an admission by the person making such report that he
            or she has any direct or indirect beneficial ownership in the
            security to which the report relates.

      (c)   Provision of Brokers' Statements

            With the exception of the Independent Directors, every Access Person
            shall direct their brokers to supply to the Chief Compliance
            Officer, on a timely basis, duplicate copies of the confirmation of
            all personal securities transactions and copies of all periodic
            statements for all securities accounts.

      (d)   Notification of Reporting Obligations

            The Chief Compliance Officer shall notify each Access Person that he
            or she is subject to these reporting requirements, and shall deliver
            a copy of this Code of Ethics to each such person upon request.

      (e)   Certification of Compliance with Code of Ethics

            With the exception of the Independent Directors, every Access Person
            shall certify in an annual report that:

            (i)   they have read and understand the Code of Ethics and recognize
                  that they are subject thereto;

            (ii)  they have complied with the requirements of the Code of
                  Ethics; and

            (iii) they have reported all personal securities transactions
                  required to be reported pursuant to the requirements of the
                  Code of Ethics.

      (f)   Conflict of Interest

            Every Access Person shall notify the Chief Compliance Officer of any
            personal conflict of interest relationship which may involve the
            Fund, such as the existence of any economic relationship between
            their transactions and securities held or to be acquired by any
            series of the Fund. Such notification shall occur in the
            pre-clearance process.


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      (g)   Review of Reports

            The Chief Compliance Officer or her designate immediately shall
            review all personal holdings reports, submitted by each Access
            Person, including confirmations of personal securities transactions,
            to ensure no trading has taken place in violation of Rule 17j-1,
            Rule 204A-1 or the Code of Ethics. Any violations of the Code of
            Ethics shall be reported to the Fund Board in accordance with
            Section 5 of the Code. The Chief Compliance Officer shall maintain a
            list of the personnel responsible for reviewing the transactions and
            personal holdings reports.

5.    REPORTING OF VIOLATIONS

      (a)   All apparent violations of this Code of Ethics shall be promptly
            reported to the Chief Compliance Officer.

      (b)   The Chief Compliance Officer shall promptly report to the Fund
            Board:

            (i)   all apparent violations of this Code of Ethics and the
                  reporting requirements thereunder; and

            (ii)  any reported transaction in a Covered Security which was
                  purchased or sold by the Fund within fifteen (15) days before
                  or after the date of the reported transactions.

      (c)   When the Chief Compliance Officer finds that a transaction otherwise
            reportable to the Fund Board under Paragraph (b) of this Section
            could not reasonably be found to have resulted in a fraud, deceit or
            manipulative practice in violation of Rule 17j-1(a), it may, in its
            discretion, lodge a written memorandum of such finding and the
            reasons therefor with the reports made pursuant to this Code of
            Ethics, in lieu of reporting the transaction to the Fund Board.

      (d)   The Fund Board, or a committee of directors thereof created by the
            Fund Board for that purpose, shall consider reports made to the Fund
            Board hereunder and shall determine whether or not this Code of
            Ethics has been violated and what sanctions, if any, should be
            imposed in respect of transactions related to the Fund, and the
            board of the Adviser shall take such similar action in respect of
            transactions unrelated to the Fund.

6.    ANNUAL REPORTING TO THE FUND BOARD

      (a)   The Chief Compliance Officer and Adviser shall furnish to the Fund
            Board, and the Fund Board must consider, an annual report relating
            to this Code of Ethics. Such annual report shall:

            (i)   describe any issues arising under the Code of Ethics or
                  procedures during the past year;


                                       9-

<PAGE>

            (ii)  identify any material violations of this Code or procedures,
                  including sanctions imposed in response to such violations
                  during the past year;

            (iii) identify any recommended changes in the existing restrictions
                  or procedures based upon the Fund's experience under its Code
                  of Ethics, evolving industry practices or developments in
                  applicable laws or regulations; and

            (iv)  certify that the Fund, Adviser and principal underwriter have
                  adopted procedures reasonably necessary to prevent Access
                  Persons from violating the Code of Ethics.

7.    SANCTIONS

            Upon discovering a violation of this Code, the Fund Board or the
board of the Adviser, as the case may be, may impose such sanctions as they deem
appropriate, including, among other things, a letter of censure or suspension or
termination of the employment of the violator.

8.    RETENTION OF RECORDS

            This Code of Ethics, a list of all persons required to make reports
hereunder from time to time, a copy of each report made by an Access Person
hereunder, a list of all persons responsible for reviewing the reports required
hereunder, a record of any decision and the reasons supporting the decision to
approve the acquisition by Investment Personnel of securities in a Limited
Offering, each memorandum made by the Chief Compliance Officer hereunder and a
record of any violation hereof and any action taken as a result of such
violation, shall be maintained by the Fund as required under Rule 17j-1 and by
the Adviser as required under Rule 204-2.

9.    ADOPTION AND APPROVAL

            The Fund Board, including a majority of Independent Directors, shall
approve this Code of Ethics and any material changes to the Code.

            Before approving this Code or any amendment to this Code, the Fund
Board shall have received a certification from the Fund and the Adviser that it
has adopted procedures reasonably necessary to prevent Access Persons from
violating the Code.

Dated: ____________________


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<PAGE>

                                   SCHEDULE A

Portfolio Manager

Thomas J. Herzfeld


                                       11-

<PAGE>

                        THOMAS J. HERZFELD ADVISORS, INC.

                       POLICY STATEMENT ON INSIDER TRADING


SECTION I. POLICY STATEMENT ON INSIDER TRADING

      A.    Policy Statement on Insider Trading

            Thomas J. Herzfeld Advisors, Inc. (the "Adviser") forbids any
director, officer or employee from trading, either personally or on behalf of a
Client Account, on material nonpublic information, or communicating material
nonpublic information to other persons in violation of the law. This conduct is
frequently referred to as "insider trading". The Adviser's policy applies to
every director, officer and employee and extends to activities within and
outside their duties for the Adviser. Every officer and employee must read and
retain a copy of this policy statement. Any questions regarding the Adviser's
policy and procedures should be referred to the Chief Compliance Officer.

            The term "insider trading" is not defined in the federal securities
laws, but generally is used to refer to the use of material nonpublic
information to trade in securities (whether or not one is an "insider") or to
communications of material nonpublic information to others.

            While the law concerning insider trading is not static, it is
generally understood that the law prohibits:

                  i)    trading by an insider, while in possession of material
                        nonpublic information, or

                  ii)   trading by a non-insider, while in possession of
                        material nonpublic information, where the information
                        either was disclosed to the non-insider in violation of
                        an insider's duty to keep it confidential or was
                        misappropriated, or

                  iii)  communicating material nonpublic information to others.

            The elements of insider trading and the penalties for such unlawful
conduct are discussed below. If, after reviewing this policy statement, you have
any questions, you should consult the Adviser's Chief Compliance Officer,
Cecilia Gondor, or her successor.

            2. Who is an Insider?

            The concept of "insider" is broad. It includes partners and
employees of a company. In addition, a person can be a "temporary insider" if he
or she enters into a special confidential relationship in the conduct of a
company's affairs and as a result is given access to information solely for the
company's purposes. A temporary insider can include, among others, a company's
attorneys, accountants, consultants, bank lending officers, and the employees of
such organizations. In addition, the Adviser may become a temporary insider of a
company it advises or for which it performs other services. According to the
U.S. Supreme Court, the company must expect the outsider to keep the disclosed
nonpublic information confidential and the relationship must at least imply such
a duty before the outsider will be considered an insider.


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<PAGE>

            3. What is Material Information?

            Trading on inside information is not a basis for liability unless
the information is material. "Material information" generally is defined as
information for which there is a substantial likelihood that a reasonable
investor would consider it important in making his or her investment decisions,
or information that is reasonably certain to have a substantial effect on the
price of a company's securities. Information that managing members and employees
should consider material includes, but is not limited to: dividend changes,
earnings estimates, changes in previously released earnings estimates,
significant merger or acquisition proposals or agreements, major litigation,
liquidation problems, and extraordinary management developments.

            Material information does not have to relate to a company's
business. For example, in Carpenter v. U.S., 108 U.S. 316 (1987), the Supreme
Court considered material certain information about the contents of a
forthcoming newspaper column that was expected to affect the market price of a
security. In that case, a Wall Street Journal reporter was found criminally
liable for disclosing to others the dates that reports on various companies
would appear in the Journal and whether those reports would be favorable or not.

            4. What is Nonpublic Information?

            Information is nonpublic until it has been effectively communicated
to the market place. One must be able to point to some fact to show that the
information is generally public. For example, information found in a report
filed with the SEC, or appearing in Dow Jones, Reuters Economic Services, The
Wall Street Journal or other publications of general circulation would be
considered public.

            5. Basis for Liability.

                  i)    fiduciary duty theory

                        In 1980, the Supreme Court found that there is no
                        general duty to disclose before trading on material
                        nonpublic information, but that such a duty arises only
                        where there is a fiduciary relationship. That is, there
                        must be a relationship between the parties to the
                        transaction such that one party has a right to expect
                        that the other party will disclose any material
                        nonpublic information or refrain from trading. Chiarella
                        v. U.S., 445 U.S. 22 (1980).

                        In Dirks v. SEC, 463 U.S. 646 (1983), the Supreme Court
                        stated alternate theories under which non-insiders can
                        acquire the fiduciary duties of insiders: they can enter
                        into a confidential relationship with the company
                        through which they gain information (i.e., attorneys,
                        accountants), or they can acquire a fiduciary duty to
                        the company's shareholders as "tippees" if they are
                        aware or should have been aware that they have been
                        given confidential information by an insider who has
                        violated his fiduciary duty to the company's
                        shareholders.


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<PAGE>

                        However, in the "tippee" situation, a breach of duty
                        occurs only if the insider personally benefits, directly
                        or indirectly from the disclosure. The benefit does not
                        have to be pecuniary, but can be a gift, a reputational
                        benefit that will translate into future earnings, or
                        even evidence of a relationship that suggests a quid pro
                        quo.

                  ii)   misappropriation theory

                        Another basis for insider trading liability is the
                        "misappropriation" theory, where liability is
                        established when trading occurs on material nonpublic
                        information that was stolen or misappropriated from any
                        other person. In U.S. v. Carpenter, supra, the Court
                        found, in 1987, a columnist defrauded The Wall Street
                        Journal when he stole information from the Journal and
                        used it for trading in the securities markets. It should
                        be noted that the misappropriation theory can be used to
                        reach a variety of individuals not previously thought to
                        be encompassed under the fiduciary duty theory.

            6. Penalties for Insider Trading

            Penalties for trading on or communicating material nonpublic
information are severe, both for individuals involved in such unlawful conduct
and their employers. A person can be subject to some or all of the penalties
below even if he or she does not personally benefit from the violation.
Penalties include:

                  i)    civil injunctions

                  ii)   treble damages

                  iii)  disgorgement of profits

                  iv)   jail sentences

                  v)    fines for the person who committed the violation of up
                        to three times the profit gained or loss avoided,
                        whether or not the person actually benefitted, and

                  vi)   fines for the employer or other controlling person of up
                        to the greater of $1,000,00 or three times the amount of
                        the profit gained or loss avoided.


                                       -3-

<PAGE>

            In addition, any violation of this policy statement can be expected
to result in serious sanctions by the Adviser, including dismissal of the
persons involved.

SECTION II. PROCEDURES TO IMPLEMENT INSIDER TRADING POLICY

            The following procedures have been established to aid the officers
and employees of Thomas J. Herzfeld Advisors, Inc. to avoid insider trading, and
to aid the Adviser in preventing, detecting and imposing sanctions against
insider trading. Every officer and employee of the Adviser must follow these
procedures or risk serious sanctions, including dismissal, substantial personal
liability and criminal penalties. If you have any questions about these
procedures, you should consult the Adviser's Chief Compliance Officer.

            1. Identifying Inside Information

            Before trading for yourself or others, including Client Accounts, in
the securities of a company about which you may have potential inside
information, ask yourself the following questions:

                  i)    Is the information material? Is this information that an
                        investor would consider important in making his or her
                        investment decisions? Is this information that would
                        substantially effect the market price of the securities
                        if generally disclosed?

                  ii)   Is the information nonpublic? To whom has this
                        information been provided? Has the information been
                        effectively communicated to the marketplace by being
                        published in Reuters, The Wall Street Journal, or other
                        publications of general circulation?

            If, after consideration of the above, you believe that the
information is material and nonpublic, or if you have questions as to whether
the information is material and nonpublic, you should take the following steps.

                  iii)  Report the matter immediately to the Chief Compliance
                        Officer.

                  iv)   Do not purchase or sell the securities on behalf of
                        yourself or others, including Client Accounts.

                  v)    Do not communicate the information inside or outside the
                        Adviser, other than to the Chief Compliance Office.

                  vi)   After the Chief Compliance Officer has reviewed the
                        issue, you will be instructed to continue the
                        prohibitions against trading and communication, or you
                        will be allowed to trade and communicate the
                        information.

            2.    Personal Security Trading. All officers and employees of the
                  Adviser (other than managing members and employees who are
                  required to report their securities transactions to a
                  registered investment company in accordance with a Code of
                  Ethics) shall submit to the compliance officer, on a quarterly
                  basis, a report of every securities transaction in which they,
                  their families (including the spouse, minor children and
                  adults living in the same household as the managing member or
                  employee), and Funds of which they are trustees or in which
                  they have a beneficial interest have participated, or at such
                  lesser intervals as may be required from time to time. The
                  report shall include the name of the security, date of the
                  transaction, quantity, price, and broker-dealer through which
                  the transaction was effected. All managing members and
                  employees must also instruct their broker(s) to supply the
                  Chief Compliance Officer, on a timely basis, with duplicate
                  copies of confirmations of all personal securities
                  transactions and copies of all periodic statements for all
                  securities accounts.


                                       -4-

<PAGE>

            3.    Restricting Access to Material Non-public Information. Any
                  information in your possession that you identify as material
                  and non-public may not be communicated other than in the
                  course of performing your duties to anyone, including persons
                  within your company, except as provided in paragraph 1 above.
                  In addition, care should be taken so that such information is
                  secure. For example, files containing material non-public
                  information should be sealed and access to computer files
                  containing material non-public information should be
                  restricted.

            4.    Resolving Issues Concerning Insider Trading. If, after
                  consideration of the items set forth in paragraph 1, doubt
                  remains as to whether information is material or non-public,
                  or if there is any unresolved question as to the applicability
                  or interpretation of the foregoing procedures, or as to the
                  propriety of any action, it must be discussed with the Chief
                  Compliance Officer before trading or communicating the
                  information to anyone.

SECTION III. SUPERVISION

            The role of the Chief Compliance Officer is critical to the
implementation and maintenance of this Statement on Insider Trading. These
supervisory procedures can be divided into two classifications, (1) the
prevention of insider trading, and (2) the detection of insider trading.

            1.    Prevention of Insider Trading:

            To prevent insider trading the Chief Compliance Officer should:

            (a)   answer promptly any questions regarding the Statement on
                  Insider Trading;

            (b)   resolve issues of whether information received by an officer
                  or employee is material and non-public;


                                       -5-

<PAGE>

            (c)   review and ensure that officers and employees review, at least
                  annually, and update as necessary, the Statement on Insider
                  Trading; and

            (d)   when it has been determined that an officer or employee has
                  material non-public information,

                  (i)   implement measures to prevent dissemination of such
                        information, and

                  (ii)  if necessary, restrict officers, directors, and
                        employees from trading the securities. 2. Detection of
                        Insider Trading:

            To detect insider trading, the Chief Compliance Officer should:

            (a)   review the trading activity reports filed by each officer and
                  employee, to ensure no trading took place in securities in
                  which the Adviser has material non-public information;

            (b)   review the trading activity of the mutual funds managed by the
                  Adviser;

            (c)   coordinate, if necessary, the review of such reports with
                  other appropriate officers, members, trustees or employees of
                  the Adviser and any mutual funds managed by the Adviser.

            3. Special Reports to Management:

            Promptly, upon learning of a potential violation of the Statement on
Insider Trading, the Chief Compliance Officer must prepare a written report to
management of the Adviser, and provide a copy of such report to the board of
directors of the any mutual funds managed by the Adviser, providing full details
and recommendations for further action.

            4. Annual Reports:

            On an annual basis, the Chief Compliance Officer of the Adviser will
prepare a written report to the management of the Adviser, and provide a copy of
such report to the board of directors of the any mutual funds managed by the
Adviser, setting forth the following:

            (a)   a summary of the existing procedures to detect and prevent
                  insider trading;

            (b)   full details of any investigation, either internal or by a
                  regulatory agency, of any suspected insider trading and the
                  results of such investigation;

            (c)   an evaluation of the current procedures and any
                  recommendations for improvement.


                                       -6-

            The Undersigned has read, understands and agrees to abide by the
foregoing Insider Trading Policy and has retained a copy of the said document.

Date:                          Signature:
     ------------------                   --------------------------------------


                                       -7-

<PAGE>

                                                                       EXHIBIT A

                                 CODE OF ETHICS

                             INITIAL HOLDINGS REPORT

To the Chief Compliance Officer of The Herzfeld Caribbean Basin Fund, Inc. and
Thomas J. Herzfeld Advisors, Inc.

            1. I hereby acknowledge receipt of a copy of the Code of Ethics and
Insider Trading Policy for The Herzfeld Caribbean Basin Fund, Inc.(the "Fund")
and Thomas J. Herzfeld Advisors, Inc. (the "Adviser").

            2. I have read and understand the Code and recognize that I am
subject thereto in the capacity of an "Access Person."

            3. Except as noted below, I hereby certify that I have no knowledge
of the existence of any personal conflict of interest relationship which may
involve the Fund, such as any economic relationship between my transactions and
securities held or to be acquired by the Fund or any of its series.

            4. As of the date below I had a direct or indirect beneficial
ownership interest in the following securities:

                                                             Type of Interest
Name of Securities       Number of Shares                  (Direct or Indirect)
------------------       ----------------                  --------------------


            5. As of the date below, the following is a list of all brokers,
dealers or banks with whom I maintain an account in which securities are held
for my direct or indirect benefit:

                                                             Type of Interest
Firm                     Account                           (Direct or Indirect)
----                     -------                           --------------------


Date:                           Signature:
      ------------------                   -------------------------------------
                                Print Name:
                                            ------------------------------------
                                Title:
                                       -----------------------------------------
                                Employer's Name:
                                                --------------------------------

<PAGE>

                                                                       EXHIBIT B

                                 CODE OF ETHICS

                             ANNUAL HOLDINGS REPORT

To the Chief Compliance Officer of The Herzfeld Caribbean Basin Fund, Inc. and
Thomas J. Herzfeld Advisors, Inc.

            1. I have read and understand the Code of Ethics and recognize that
I am subject thereto in the capacity of an "Access Person."

            2. I hereby certify that, during the year ended December 31, ____, I
have complied with the requirements of the Code and I have reported all
securities transactions required to be reported pursuant to the Code.

            3. Except as noted below, I hereby certify that I have no knowledge
of the existence of any personal conflict of interest relationship which may
involve the Fund, such as any economic relationship between my transactions and
securities held or to be acquired by the Fund or any of its Series.

            4. As of December 31, ____, I had a direct or indirect beneficial
ownership interest in the following securities:

                                                             Type of Interest
Name of Securities       Number of Shares                  (Direct or Indirect)
------------------       ----------------                  --------------------


            5. As of the December 31, ____ the following is a list of all
brokers, dealers or banks with whom I maintain an account in which securities
are held for my direct or indirect benefit:

                                                             Type of Interest
Firm                     Account                           (Direct or Indirect)
----                     -------                           ---------------------


Date:                           Signature:
      ------------------                   -------------------------------------
                                Print Name:
                                            ------------------------------------
                                Title:
                                       -----------------------------------------
                                Employer's Name:
                                                --------------------------------

<PAGE>

                                                                       EXHIBIT C

                         SECURITIES TRANSACTIONS REPORT
                  FOR THE CALENDAR QUARTER ENDED: _____________

To the Chief Compliance Officer of The Herzfeld Caribbean Basin Fund, Inc. and
Thomas J. Herzfeld Advisors, Inc.

            During the quarter referred to above, the following transactions
were effected in securities of which I had, or by reason of such transaction
acquired, direct or indirect beneficial ownership, and which are required to be
reported pursuant to the Code of Ethics adopted by the Fund.

<TABLE>
<CAPTION>
   SECURITY
  (including                                                                 BROKER/
interest rate                                        NATURE OF                DEALER
 and maturity                         DOLLAR        TRANSACTION              OR BANK
   date, if      DATE OF    NO. OF   AMOUNT OF   (Purchase, Sale,            THROUGH
 applicable)   TRANSACTION  SHARES  TRANSACTION       Other)       PRICE  WHOM EFFECTED
-------------  -----------  ------  -----------  ----------------  -----  -------------
<S>            <C>          <C>     <C>          <C>               <C>    <C>









</TABLE>

During the quarter referred to above, the following accounts were established by
me in which securities were held for my direct or indirect benefit:

         FIRM NAME           DATE THE ACCOUNT WAS
(of broker, dealer or bank)       ESTABLISHED      ACCOUNT NUMBER
---------------------------  --------------------  --------------










<PAGE>

            This report (i) excludes transactions with respect to which I had no
direct or indirect influence or control, (ii) other transactions not required to
be reported, and (iii) is not an admission that I have or had any direct or
indirect beneficial ownership in the securities listed above.

            Except as noted on the reverse side of this report, I hereby certify
that I have no knowledge of the existence of any personal conflict of interest
relationship which may involve the Fund, such as the existence of any economic
relationship between my transactions and securities held or to be acquired by
the Fund or any of its series.


Date:                           Signature:
      ------------------                   -------------------------------------
                                Print Name:
                                            ------------------------------------
                                Title:
                                       -----------------------------------------
                                Employer's Name:
                                                 -------------------------------
</TEXT>
</DOCUMENT>
