<SEC-DOCUMENT>0001398344-25-004583.txt : 20250303
<SEC-HEADER>0001398344-25-004583.hdr.sgml : 20250303
<ACCEPTANCE-DATETIME>20250303170003
ACCESSION NUMBER:		0001398344-25-004583
CONFORMED SUBMISSION TYPE:	DEFA14A
PUBLIC DOCUMENT COUNT:		1
FILED AS OF DATE:		20250303
DATE AS OF CHANGE:		20250303

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			HERZFELD CARIBBEAN BASIN FUND INC
		CENTRAL INDEX KEY:			0000880406
		ORGANIZATION NAME:           	
		IRS NUMBER:				650396889
		STATE OF INCORPORATION:			MD
		FISCAL YEAR END:			0630

	FILING VALUES:
		FORM TYPE:		DEFA14A
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	811-06445
		FILM NUMBER:		25699123

	BUSINESS ADDRESS:	
		STREET 1:		119 WASHINGTON AVENUE, SUITE 504
		CITY:			MIAMI BEACH
		STATE:			FL
		ZIP:			33139
		BUSINESS PHONE:		305-777-1660

	MAIL ADDRESS:	
		STREET 1:		119 WASHINGTON AVENUE, SUITE 504
		CITY:			MIAMI BEACH
		STATE:			FL
		ZIP:			33139

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	FIRST CUBA FUND INC
		DATE OF NAME CHANGE:	19920929
</SEC-HEADER>
<DOCUMENT>
<TYPE>DEFA14A
<SEQUENCE>1
<FILENAME>fp0092520-1_defa14a.htm
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<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>UNITED STATES<BR>
SECURITIES AND EXCHANGE COMMISSION<BR>
<FONT STYLE="font-size: 11pt">Washington, D.C. 20549</FONT></B>&nbsp;</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>SCHEDULE 14A</B>&nbsp;</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: center">Proxy Statement Pursuant to Section&nbsp;14(a) of
the<BR>
Securities Exchange Act of 1934 (Amendment No.&#9;)&nbsp;</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0">Filed by the Registrant <FONT STYLE="font-family: Times New Roman, Times, Serif">[X]</FONT></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0">Filed by a Party other than the Registrant <FONT STYLE="font-family: Times New Roman, Times, Serif">[ &nbsp;]</FONT></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0">Check the appropriate box:</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 11pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0in"></TD><TD STYLE="width: 0.25in; text-align: left">[ &nbsp;]</TD><TD STYLE="text-align: justify">Preliminary Proxy Statement</TD>
</TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 11pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0in"></TD><TD STYLE="width: 0.25in; text-align: left">[ &nbsp;]</TD><TD STYLE="text-align: justify">Confidential, for Use of the Commission Only (as permitted by
Rule&nbsp;14a-6(e)(2))</TD>
</TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 11pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif">[ &nbsp;] </FONT></TD><TD STYLE="text-align: justify">Definitive Proxy Statement</TD>
</TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 11pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif">[ &nbsp;]</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">Definitive
Additional Materials</FONT></TD>
</TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 11pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif">[X]</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">Soliciting
Material under &sect;240.14a-12</FONT></TD>
</TR></TABLE>

<P STYLE="font: 14pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 14pt Times New Roman, Times, Serif; margin: 0; text-align: center; border-bottom: Black 0.75pt solid"><B>Herzfeld Caribbean
Basin Fund, Inc.</B></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: center">(Name of Registrant as Specified In Its Charter)</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; border-bottom: Black 0.75pt solid"></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: center">(Name of Person(s) Filing Proxy Statement, if other
than the Registrant)</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: left">Payment of Filing Fee (Check all boxes that apply):</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 11pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0in"></TD><TD STYLE="width: 0.25in; text-align: left">[X]</TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">No
fee required.</FONT></TD>
</TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 11pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0in"></TD><TD STYLE="width: 0.25in; text-align: left">[ &nbsp;]</TD><TD STYLE="text-align: justify">Fee paid previously with preliminary materials.</TD>
</TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 11pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif">[ &nbsp;]</FONT></TD><TD STYLE="text-align: justify">Fee computed on table in exhibit required by Item&nbsp;25(b)
per Exchange Act Rules 14a-6(i)(1) and 0-11.</TD>
</TR></TABLE>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

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<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0"></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0"><B><U>Letter Notifying Shareholders of Upcoming Proxy Solicitation<BR>
As included in the Registrants N-CSR Filed with the Commission on March 3, 2025</U></B></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Dear Fellow Stockholders,</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">This communication to you is perhaps the most important
since we launched the Fund in 1994. During the more than thirty years since that launch, we have managed the Fund with the goal of providing
investors with risk adjusted returns from the Caribbean Basin while we waited for the opportunity to invest in Cuba following an anticipated
opening of U.S. trading relations with Cuba. Over that long period, the Fund has generally traded up and down with news related to the
political situation in Washington and Havana, at times without much correlation to the Fund&rsquo;s actual Net Asset Value.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Over the past several years, however, our NAV performance
has been over-shadowed by a discount, which remains persistently wide to this day. Our Board and the Fund&rsquo;s investment manager,
Thomas J. Herzfeld Advisors, Inc. (&ldquo;Herzfeld Advisors&rdquo;), implemented several policies designed to narrow the discount, including
tender offers, 15% distributions annually, and a voluntary waiver of advisory fees.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In 2023, we conducted a dilutive rights offering based
upon our belief that the Biden State Department was likely to relax certain trade policies toward Cuba. Despite the Biden State Department&rsquo;s
attempts to begin the re-establishment of trade relations with Cuba, the Cuban Government rejected that olive branch. Donald Trump was
then elected to a second term as President of the United States in 2024 and nominated Senator Marco Rubio to serve as U.S. Secretary of
State. As both a private citizen and as Senator for the State of Florida, Mr. Rubio has consistently advocated against any thawing of
U.S./Cuba trade relations.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As we sit here today, we are, for the first time in
the Fund&rsquo;s history, unconvinced that the central thesis of the Fund &ndash; the opening of investment opportunities in Cuba &ndash;
will occur within any foreseeable future. That leaves us at a crossroads.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In Q4 of 2024, the Board challenged Herzfeld Advisors
to use its expertise to present options for Board consideration with the primary goal of determining a strategy to narrow the discount
significantly and enhance value to all shareholders of the Fund. In the weeks leading up to the Board&rsquo;s most recent meeting on February
27, 2025, the Fund&rsquo;s Chairman Emeritus, Thomas Herzfeld, who retired from the Board effective December 31, 2024, together with new
Board Chairperson, Cecilia Gondor, and the entire membership of the Board has been meeting regularly to evaluate several strategic options
presented by Herzfeld Advisors. Those options included, among other strategies, liquidating the Fund, implementing larger and frequent
tender offers, and modifying the Fund&rsquo;s investment strategy.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="text-align: justify; font: 11pt Times New Roman, Times, Serif; margin: 0">It is important to recognize that for more than 40 years, under the leadership
of Mr. Thomas Herzfeld, Herzfeld Advisors has been a leader and expert in the closed end fund industry. Still led by Mr. Herzfeld, the
firm has advised many closed-end fund management teams on strategies for improving performance of their closed end funds. The firm considers
itself a &ldquo;steward&rdquo; in the industry and has consistently been a vocal contributor to the principles of responsible closed-end
fund management and investment. Today Herzfeld Advisors manages approximately $950 million of assets across a number of investment strategies
including investing in other closed-end funds. Notably, the core of the firm&rsquo;s investment advisory business is formed by strategies
that invest in the credit markets including private and public credit and equity, municipal bonds, CLOs, and other strategies. The Firm
has been a consistent top Morningstar manager, having earned recognition as a 5 Star performer in multiple categories for 40 consecutive
quarters.<FONT STYLE="font-family: Times New Roman, Times, Serif"><SUP>1</SUP></FONT></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>



<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0"></P>

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<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 11pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0in"></TD><TD STYLE="width: 0.25in; text-align: left"><I><SUP>1</SUP></I></TD><TD STYLE="text-align: justify"><I>Herzfeld Advisors has received certain nominations or awards
by third-parties as reflected herein. Investors should review the criteria for each nomination or award as reflected on the third-party's
webpage. In addition, the nominations and awards reflect past performance of the nominee or award designee and may not reflect the current
performance or status of any such firm or individual and may no longer be applicable. Morningstar award content presented with permission
and licensing fee. Contact us for more information on how the ratings are apportioned and for full disclosures regarding third party
news and awards.</I></TD>
</TR></TABLE>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

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<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0"></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>Change in Investment Strategy</B></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0">After much collaboration with Herzfeld Advisors, and due consideration,
based upon the totality of information provided, and the discussions at several meetings, the Board determined that it would be in the
best interests of the Fund's shareholders to set aside the Fund&rsquo;s current investment strategy and redirect the Fund to focus on
a &ldquo;CLO Equity Strategy&rdquo;. With this change, the Fund&rsquo;s primary investment objective will change to a total return strategy
with a secondary objective of returning high current income to shareholders. The Fund will focus on investing in equity and junior debt
tranches of collateralized loan obligations, or &ldquo;CLOs&rdquo;. CLOs are portfolios of collateralized loans consisting primarily of
below investment grade U.S. senior secured loans with a large number of distinct underlying borrowers across various industry sectors.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="text-align: justify; font: 11pt Times New Roman, Times, Serif; margin: 0">This step has not been taken lightly. Not only has the Herzfeld name has
been synonymous with potential Cuba investment for these many years, but we also realize that many of our long-term shareholders have
been willing to remain committed to the Fund &ldquo;for as long as it takes&rdquo;. In presenting its plan to redirect the Fund&rsquo;s
strategy, Herzfeld Advisors has taken into consideration the possibility that unforeseeable geo-political events could occur and reignite
the opportunity to invest in Cuba (see discussion below).</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0">However, we firmly believe now is the time to set aside Cuba and take steps
to seek to materially narrow the discount and enhance value to Fund shareholders.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="text-align: justify; font: 11pt Times New Roman, Times, Serif; margin: 0">The Board unanimously approved the proposed changes to the Fund&rsquo;s
investment strategy and will recommend that the Fund&rsquo;s shareholders approve the changes. The Board also approved changes to the
Fund&rsquo;s name to &ldquo;Herzfeld Credit Income Fund, Inc.&rdquo; (or similar name to be determined) and NASDAQ ticker symbol, and
that certain fundamental policies be modified or eliminated.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="text-align: justify; font: 11pt Times New Roman, Times, Serif; margin: 0">Note that we believe that a complete liquidation of the Fund is not in
the best interest of shareholders, as we strongly believe that the Fund could trade at premiums under the new investment strategy, similar
to the share prices of certain other CLO equity funds in the market today. Shareholders who elect to stay in the Fund will have a potential
opportunity to sell at prices above NAV liquidation prices. Providing this optionality for shareholders&rsquo; is something that the Board believes
has the best potential to maximize opportunities for shareholders.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0"><B>Continuation of Managed Distribution Policy</B></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Note that the Board has kept in place the current
Managed Distribution Policy (&ldquo;MDP&rdquo;) through June 30, 2025, which is designed to provide shareholders with a constant, but
not guaranteed, fixed minimum rate of distribution. The MDP sets distributions at an annual rate of 15% of the Fund&rsquo;s NAV payable
quarterly, semi-annually or annually to be reviewed by the Board each quarter. The MDP also includes a Self-Tender Policy, under which
the Fund will commence a tender offer by October 31 each year for up to 5% of outstanding shares of the Fund at 97.5% of NAV, if the average
discount is greater than 10% for the then ended fiscal year. The determination of the percentage of shares to be repurchased under any
Tender Offer will be made after the conclusion of the Fund&rsquo;s fiscal year. In addition, Herzfeld Advisors has continued to waive
portions of its management fees. The MDP will remain in effect until June 30, 2025 at which point the Board will evaluate whether to extend
the MDP for an additional time period.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>Change to Advisory Fees</B></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="text-align: justify; font: 11pt Times New Roman, Times, Serif; margin: 0">The Board also authorized amendments to the Fund&rsquo;s
investment management agreement with Herzfeld Advisors in connection with the new strategy, subject to shareholder approval. These include
a change to the fee structure consistent with fee structures of existing registered closed-end funds engaged in CLO strategies. The proposed
amended management fee comprises a management fee of 1.25% based upon assets under management and an incentive fee based upon the income
earned by the Fund of 10%, subject to a hurdle rate of 9%. Currently, the investment management agreement between the Fund and Herzfeld
Advisors sets the management fee at 1.45% of assets under management and has no incentive fee component.<FONT STYLE="font-family: Times New Roman, Times, Serif"><SUP>2
</SUP></FONT>The new fee structure may result in higher or lower management fees than the current the Fund&rsquo;s current fee structure
because the asset based fee portion is lower than the current contractual fee and payment of any incentive fees are conditioned on the
performance of the Fund.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; text-align: justify; margin: 0">&nbsp;</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 11pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0pt; width: 100%"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0in"></TD><TD STYLE="width: 0.25in; text-align: left"><I><SUP>2</SUP></I></TD><TD STYLE="text-align: justify"><I>Under an agreement offered by Herzfeld Advisors as part of a discount narrowing strategy,
                                            the management fee has been voluntarily waived to (i) 1.35% of the Fund&rsquo;s assets up
                                            to and including $30 million and (ii) 1.25% of the Fund&rsquo;s assets in excess of $30 million,
                                            until June 30, 2025.</I></TD>
</TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0"></P>

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<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0"></P>

<P STYLE="text-align: justify; font: 11pt Times New Roman, Times, Serif; margin: 0">The Fund intends to hold a special meeting of shareholders as soon as practicable
to obtain shareholder approval as required by the Investment Company Act of 1940, as amended (the &ldquo;1940 Act&rdquo;), which requires
any change to a fundamental policy to be approved by &ldquo;a majority of the outstanding voting securities&rdquo; of the Fund (as defined
under the 1940 Act), and to obtain shareholders&rsquo; approval of the amended and restated investment management agreement.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0"><B>Cuba Opportunities</B></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="text-align: justify; font: 11pt Times New Roman, Times, Serif; margin: 0">It is imperative to us that our long-term shareholders understand that
we have not given up on the opportunities that we believe ultimately will exist in Cuba and for investment in the region. While we think
the strategy change for the Fund is in the overall best interests of the Fund&rsquo;s shareholders at this time, Herzfeld Advisors continues
to look forward to the day when the U.S. and Cuban governments move beyond the current stalemate. The Advisor has reserved rights to use
the CUBA ticker on NASDAQ and, should circumstances warrant, will seek to explore future investment in Cuba when that day comes. Until
then, however, Herzfeld Advisors and the Board believe that better use of the Fund&rsquo;s closed-end fund structure is in the new CLO
strategy.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="text-align: justify; font: 11pt Times New Roman, Times, Serif; margin: 0">The information presented herein is still preliminary and subject to change.
Additional information about the changes to the strategy will be provided in a proxy statement (the &ldquo;Proxy Statement&rdquo;) that
the Fund will provide in connection with its special shareholder meeting.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0"><B>The Herzfeld Caribbean Fund Performance</B></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We are pleased to present in the remainder of this
Shareholder Letter the Fund&rsquo;s Semi-Annual Report for the six-month period ended December 31, 2024. On that date, the net asset value
(&ldquo;NAV&rdquo;) of the Fund was $3.07 per share, an increase of 6.53% over the six months then ended, adjusted for distributions.
The Fund&rsquo;s share price closed the period at $2.335 per share, an increase of 9.26% over the same semi-annual time period, adjusted
for distributions. For calendar year 2024, the Fund&rsquo;s net asset value per share and price increased 2.61% and 2.79%, respectively,
in each case adjusted for distributions. During the six-month period, the discount to NAV widened from -22.86% to -23.94%.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Fund currently seeks long-term capital appreciation
through investment in companies that we believe are poised to benefit from economic, political, structural, and technological developments
in the Caribbean Basin. Part of the investment strategy focuses on companies in the region that we believe would benefit from the resumption
of U.S. trade with Cuba. Since it has been impossible to predict when the U.S. embargo will be lifted, we have concentrated on investments
that we believe can do well even if there is no political or economic change with respect to Cuba.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>Caribbean Basin Update</B></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Growth in the Caribbean Basin economies continue to
show strength as a whole but varies wildly on a country and industry basis. While tourism-dependent countries have reached or exceeded
pre-pandemic levels we have seen their growth moderate. Commodity-dependent countries in the region continue on higher growth trajectories.
The IMF reported year-over-year real GDP growth of 2.8% for tourism-dependent countries and 16.5% for commodity-dependent countries in
the region as of the end of September 2024.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Puerto Rico has struggled as of late with large scale
blackouts across the island. The island has seen an increase in chronic power outages since Hurricane Maria in 2017. The power outages
have become more frequent over the last few months as aging infrastructure has not been properly maintained. The patchwork fixes following
Hurricane Maria have not been able to keep up with the island&rsquo;s energy demands, which is one of the factors resulting in the continued
population decline. Until the electrical infrastructure is updated with funds from FEMA and other sources of funding, growth in Puerto
Rico will be difficult.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

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<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Cuba is dealing with similar electrical issues along
with food shortages and a mass exodus of the country&rsquo;s population. Overtures to the country by the Biden Administration over the
last few years appear poised to be rescinded under the Trump Administration which appointed Cuba hardliner Marco Rubio as Secretary of
State. Even before the change in administration, the Cuban government rejected some of those Biden-era policies we detailed in the previous
shareholder letter, showing Cuba&rsquo;s reticence to collaborate with the U.S. With the new policies outlined by the incoming administration
taking shape, we foresee a similar scenario to the first Trump administration unfolding where harsher restrictions are placed on the island
nation and the potential for improving relations with Cuba to be non-existent under Cuban President Miguel D&iacute;az-Canel.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Guyana continues to be the growth leader in the region
as oil production has swelled from 15,000 barrels per day in 2019 to 660,000 in 2024. The country plans to increase production to 1.3
million barrels per day by 2027 thereby doubling 2024 production in three years. Capital continues to flow to the island as the modern
day black gold rush does not show any signs of slowing.</P>

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<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>Portfolio</B></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The largest gainer for the six-month period was Playa
Hotels &amp; Resorts (PLYA), which gained 50.77%. Hyatt Hotels Corporation disclosed an exclusive agreement with Playa under which Playa
agreed to negotiate exclusively with Hyatt regarding potential strategic alternatives. These may include the acquisition of Playa by Hyatt.
This sent the stock soaring in December 2024 as the market priced in a potential acquisition of the company. We have since exited the
position as we believe the remaining potential upside to the price is limited.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Cruise lines and cruise line-related companies rounded
out the remaining top performers as Royal Caribbean Cruises Ltd. (RCL), Norwegian Cruise Line Holdings ltd. (NCLH), Carnival Corporation
(CCL), and OneSpaWorld Holdings Limited (OSW) gained 45.37%, 36.93%, 33.12%, and 30.09% respectively. The companies continue to benefit
from the record revenues from cruising, higher margins on their private islands, new ship launches, and refinancing of expensive pandemic
era debt. It is our view that the cruise line industry and those benefitting from it, such as OSW, are still undervalued despite recent
gains as revenue growth remains intact while price to earnings ratios remain well below market averages. RCL was the first to reinstate
its dividend in the second half of 2024 after discontinuing distributions in 2020. The free cash flow positive cruise lines are poised
for buy backs and more distributions in 2025 and beyond.</P>

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<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The largest detractor over the period was Grupo Elektra
SAB de CV (ELEKTRA*) which declined 71.12%. Controlling shareholder, Ricardo Salinas, is embroiled in litigation with Astor Asset Management
which resulted in the halting of Elektra stock. Astor claims Salinas defaulted on a $110 million loan pledged with Elektra shares while
Salinas has alleged fraud by Astor. The long halt in the stock resulted in Elektra being removed from the S&amp;P/BMV IPC index along
with other S&amp;P/BMW indices resulting in forced selling of the stock once the halt was removed. In December 2024, shareholders approved
a proposal by Salinas to take the company private following the plunge in the stock price and removal from indices. Mexican security law
states Salinas will have to offer the higher of book value (which is currently $419 pesos per share) or the average price of the past
30 days of trading. The stock closed the 2024 calendar year at a stock price of $348.17 pesos; the minimum take private price of $419
pesos required by Mexican securities law represents a 20% gain.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Another Mexican company, Grupo Rotoplas SAB de CV
(AGUA*) also struggled declining 48.57%. The Mexican stock market had grappled with the landslide sweep by leftist politicians in the
June 2024 elections and saw further declines following the U.S. presidential election of Donald Trump. President Trump&rsquo;s planned
tariffs on Mexico would be detrimental to the Mexican economy, for which the U.S. is the largest trade partner. Grupo Rotoplas had seen sequential
revenue declines since they peaked in the third quarter of 2022. The company has guided revenue increases in 2025 but the threat of tariffs
by the U.S. has increased uncertainty whether those targets can be met.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Becle SAB de CV (CUERVO*) was another detractor to
the portfolio, declining 36.87%. The Mexican spirits company suffered from the same political headwinds as AGUA*. More than half of the
company&rsquo;s exports are to the U.S. which are in the crosshairs of potential tariffs. We believe this was the main reason for the
recent decline in the stock. Tequila sales make up nearly 80% of revenues. CUERVO* is unable to produce tequila outside the Jalisco region,
so production in the U.S. to avoid tariffs is not an option. Since the U.S. election, we have been selling holdings in Mexican companies
that we believe would struggle under the potential U.S. tariff regime.</P>

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<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>Outlook</B></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The outlook for the region is decidedly negative following
the beginning of implementation of isolationist policies from Washington, D.C.. We view these policies as a headwind for foreign companies
despite the current free trade agreements in place. With the U.S. plans to increase tariffs on the region, increase restrictions on immigration,
and implement large scale deportations, the economies of Mexico, the Caribbean, and Central American countries will be negatively impacted
in our view. Additionally, any hope for improving relations with Cuba that were restarted under the Biden administration appear lost.
We have been reallocating the portfolio to more U.S.-centric companies in the Caribbean Basin. We have also increased our cash allocation
to take advantage of the current market volatility.</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>Additional Information about the Strategy Changes</B></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>This&nbsp;letter&nbsp;is not intended to, and does
not solicit a proxy from any shareholder of the Fund. The solicitation of proxies to effect the proposed changes will only be made by
a definitive Proxy Statement.</B></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>This&nbsp;letter&nbsp;references a Proxy Statement,
to be filed by the Fund. The Proxy Statement has yet to be filed with the Securities and Exchange Commission (the &ldquo;SEC&rdquo;).
After the Proxy Statement is filed with the SEC, it may be amended or withdrawn. The Fund and its directors, officers and employees, and
Herzfeld Advisors, and its shareholders, officers and employees and other persons may be deemed to be participants in the solicitation
of proxies with respect to the proposed fundamental policy changes and the proposed approval of the investment advisory agreement. Investors
and shareholders may obtain more detailed information regarding the direct and indirect interests of the Fund&rsquo;s directors, officers
and employees, and Herzfeld Advisors and its shareholders, officers and employees and other persons by reading the Proxy Statement when
it is filed with the SEC. INVESTORS AND SECURITY HOLDERS OF THE FUND ARE URGED TO READ THE PROXY STATEMENT AND OTHER DOCUMENTS FILED WITH
THE SEC CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THESE DOCUMENTS WILL CONTAIN IMPORTANT INFORMATION ABOUT THE
PROPOSED CHANGES. INVESTORS SHOULD CONSIDER THE INVESTMENT OBJECTIVE, RISKS, CHARGES AND EXPENSES OF THE FUND CAREFULLY. THE PROXY STATEMENT
WILL CONTAIN INFORMATION WITH RESPECT TO THE INVESTMENT OBJECTIVE, RISKS, CHARGES AND EXPENSES OF THE FUND. The Proxy Statement will not
constitute an offer to buy or sell securities, in any state where such offer or sale is not permitted. Security holders may obtain free
copies (when it becomes available) of the Proxy Statement and other documents filed with the SEC at the SEC&rsquo;s web site at www.sec.gov.
In addition, free copies (when it becomes available) of the Proxy Statement and other documents filed with the SEC may also be obtained
by directing a request to the Fund at (800)&nbsp;854-3863.</B></P>

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