February 24, 2023: The Semi-Annual Report is now available

THE HERZFELD

CARIBBEAN BASIN

FUND, INC.

SEMI-ANNUALREPORT

DECEMBER 31, 2022

The Herzfeld Caribbean

Basin Fund, Inc.

119 Washington Avenue, Suite 504 Miami Beach, FL 33139

[phone]

Investment Advisor

HERZFELD/CUBA

a division of Thomas J. Herzfeld Advisors, Inc. 119 Washington Avenue, Suite 504

Miami Beach, FL 33139 [phone]

Administrator, Transfer Agent and Fund Accountant

Ultimus Fund Solutions, LLC

225 Pictoria Drive, Suite 450

Cincinnati, OH 45246

Sub-Transfer Agent

American Stock Transfer & Trust Company,

LLC

6201 15th Avenue Brooklyn

New York, NY 11219

Custodian

Fifth Third Bank N.A.

Fifth Third Center

38 Fountain Square Plaza

Cincinnati, OH 45263

Counsel

Troutman Pepper Hamilton Sanders LLP

3000 Two Logan Square

18th and Arch Streets

Philadelphia, PA 19103

The Herzfeld Caribbean Basin Fund, Inc.'s investment objective is long-term capital appreciation. To achieve its objective, the Fund invests in issuers that are likely, in the Advisor's view, to benefit from economic, political, structural and technological developments in the countries in the Caribbean Basin, which include, among others, Cuba, Jamaica, Trinidad and Tobago, the Bahamas, the Dominican Republic, Barbados, Aruba, Haiti, the Netherlands Antilles, the Commonwealth of Puerto Rico, Mexico, Honduras, Guatemala, Belize, Costa Rica, Panama, Colombia, the United States and Venezuela ("Caribbean Basin Countries"). The Fund invests at least 80% of its total assets in equity and equity-linked securities of issuers, including U.S.-based companies which engage in substantial trade with, and derive substantial revenue from, operations in Caribbean Basin Countries.

Independent Registered Public

Accounting Firm

Tait, Weller & Baker LLP

50 South 16th Street, Suite 2900

Philadelphia, PA 19102

Listed NASDAQ Capital Market

Symbol: CUBA

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Letter to Stockholders (unaudited)

Dear Fellow Stockholders,

We are pleased to present our Semi-Annual Report for the six-month period ended December 31, 2022. On that date, the net asset value ("NAV") of the Fund was $4.55 per share, up 5.18% over the six months then ended, adjusted for distributions. The Fund's share price closed the period at $3.68 per share, a decline of 0.77% over the same semi-annual time period, adjusted for distributions. For calendar year 2022, the Fund's net asset value and price declined 19.08% and 20.27%, respectively, in each case adjusted for distributions. Our NAV per share increase during the six-month period, together with the decrease in our share price, resulted in a widening of the price discount to NAV from -13.39% to -19.12%.

Thomas J. Herzfeld

Chairman and

Portfolio Manager

The Fund 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 is 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.

Caribbean Basin Update

The Caribbean Basin economies continued their recovery that started in 2021. The global pandemic caused significant economic pain to the tourism-centric Caribbean as Gross Domestic Product ("GDP") dropped more than 10% in 2020 for almost all Caribbean countries with countries like The Bahamas, St. Lucia, and Antigua and Barbuda declining more than 20%. After starting their recovery later than most Group of Twenty ("G20") countries, the countries of the Caribbean have seen some of the quickest recoveries as tourism has returned and commodity exports have increased. Real GDP growth for the region was 5.1% in 2021, accelerated to 12.4% for 2022, and is now estimated by the International Monetary Fund ("IMF") to be 7.3% for 2023, the highest of any region.

Tourist arrivals to the islands continue to trend in the right direction increasing 68.1% year-over-year to nearly 17 million people. This is only 11.7% off 2019's record pace of arrivals to the region. With all the positive indicators in the region, global belt tightening by the world's central banks could yet constrict performance in the region by negatively affecting demand for commodity exports and reducing discretionary spending available for use in the Caribbean. So far, interest rate hikes have not significantly slowed the

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Erik M. Herzfeld

President and

Portfolio Manager

Letter to Stockholders (unaudited) (continued)

recovery in the region but we are cognizant of the experience from the last two recessions, the Great Recession of 2008 and the COVID-19 recession, both of which saw significant pullbacks in Caribbean economies. With that cautionary view in mind and given that we see no immediate meaningful economic downturn on the horizon, we believe the trend of continued growth in the region will continue.

In addition to these economic factors, there has been recent litigation that has the potential to be a drag on performance for some companies doing business in Cuba. In May of 2019, the Trump administration ended the suspension of Title III of the Helms-Burton Act, thereby allowing people with valid claims to confiscated property in Cuba to seek compensation. Following this change, 44 lawsuits were filed by these claimants seeking

compensation from businesses using the subject properties. Up until December 30th, none had resulted in a significant award with six cases being dismissed, 10 being appealed, and one settled. However, on December 30th, in a ruling that was a surprise to many, a U.S. district court judge in Florida ruled that four cruise line operators, Carnival Corp., MSC Cruises S.A., Norwegian Cruise Line Holdings Ltd., and Royal Caribbean Cruises Ltd., must pay $436 million in total damages to Havana Docks Corp., previous owner of the Havana Cruise Port Terminal before confiscation by the Cuban government, for using its port for business. The cruise lines immediately announced their intention to appeal. One potential side note to this action is that many of the 6,000 Cuban claim holders who have not chosen to litigate at this time may become emboldened by the ruling and pursue their claims through litigation. Whether or not the Havana Docks Corp. ruling is upheld on appeal, investors in Caribbean Basin companies doing business in Cuba (and investors in any future Cuban businesses) will have to evaluate the risk of exposure to potential litigation under the Helms-Burton Act.

Portfolio

2022 was a year that many investors are going to want to forget. Equities and fixed income saw their first significant bear markets in some time. For equities, this was the first protracted bear market since the Great Recession 15 years earlier while at the same time the 40-year rally in fixed income came to an abrupt close with the worst year for U.S. and Global Aggregate fixed income on record. With few places to hide, 2022 was extremely difficult for investors to navigate. We saw these impacts on our portfolio holdings as rising interest rates gave investors pause as to what multiple they were willing to pay for equities now that the risk-free rate of return was no longer zero.

Royal Caribbean Cruises Ltd. (RCL) was the top performer over the six-month period gaining 41.59%. RCL turned in its first profitable quarter after 10 consecutive quarters of losses in the wake of the global pandemic. Just when cruise lines appeared to be on the mend, rising interest rates caused investors to pause in the first half of 2022. Cruise lines generally added significant debt to their balance sheets during the early part of the pandemic in order to stay solvent when revenues dropped abruptly to zero. With rates

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Ryan M. Paylor

Portfolio Manager

Letter to Stockholders (unaudited) (continued)

rising sharply throughout 2022, refinancing some of the short- term debt incurred by the cruise lines is now significantly more expensive. On a positive note, 2023 is forecast to be the first calendar year of profits for RCL since 2019 which should help the company dig its way out of its sizable debt burden. RCL's revenue results have exceeded analyst expectations for the last two quarters, which bodes well for the company as it continues to see cruisers return even as the global economy slows. We believe the recovery will continue for the industry and RCL will be one of the leaders as it has now surpassed Carnival Corp. (CCL) as the largest cruise line by market cap.

Copa Holdings S.A. (CPA), the portfolio's regional airline holding, was another top performer gaining 31.25% over the

six-month period. Much like the cruise lines, CPA has benefitted from the reopening of economies from the depths of the pandemic. CPA's most recent monthly traffic statistics show it has more than fully recovered as the return to travel, strong pricing power, and leaner cost structure should be a recipe for further gains. The airline has guided 15% capacity growth for 2023 which could increase revenues significantly as much of the investments made in the 2022 expansion could start to bear fruit. Jet fuel prices dropping in the latter half of 2022 also provided opportunities for airlines to hedge jet fuel costs at lower levels while maintaining their pricing power with travelers. At its current valuation, we believe CPA appears cheap versus its peers as it has one of the lowest debt profiles in the industry and it appears poised to reinstate its dividend in 2023.

Lennar Corp. (LEN) rounds out the top performers gaining 29.50% over the six-month period. One of the region's largest homebuilders, LEN had a tumultuous year as aggressive Fed hikes caused average 30-year mortgage rates to jump from 3.27% at the start of the year to a high of 7.35% thereby eating into affordability for many homeowners. LEN sold off the early part of 2022 as investors weighed rising rates and a potential slowdown in new homes built. Despite these headwinds, LEN was able to generate record revenue of $33.7 billion, a 24% gain over 2021's previous record revenue. With the pandemic housing boom ending, we do not expect the company to be able to replicate the last two years of profit margins and revenues which is why the company is trading at a price per earnings ratio ("P/E") of 5.00. While we believe housing demand will continue to outstrip supply until the imbalance that started during the Great Recession is over, the bigger issue right now is affordability. We expect demand to soften as a result of these rate impacts but at the current valuation, we believe the slowdown to be priced in.

The largest detractor over the six-month period was Popular, Inc. (BPOP) which declined 12.44%. BPOP reported record revenue in 2022 but with rates rising sharply, investors reassessed the price they were willing to pay for the bank's shares. The company started the year at a P/E of 7.03 and finished the year at a P/E of 4.79. BPOP closed 2022 as the cheapest regional bank by P/E while also generating 22% return on equity (ROE), the second highest of the 50 plus regional banks that we track. BPOP has been able to generate significant ROE despite net interest margins decreasing by over 100 basis points

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