February 29, 2024: The Semi-Annual Report is now available

THE HERZFELD

CARIBBEAN BASIN

FUND, INC.

SEMI-ANNUALREPORT

DECEMBER 31, 2023

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

Equiniti Trust Company, LLC

6201 15th Avenue

Brooklyn, 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 former Netherlands Antilles, the Commonwealth of Puerto Rico, Mexico, Honduras, Guatemala, Belize, Costa Rica, Panama, Colombia, the United States, Guyana 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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Thomas J. Herzfeld

Chairman and

Portfolio Manager

Letter to Stockholders (unaudited)

Dear Fellow Stockholders,

We are pleased to present our Semi-Annual Report for the six-month period ended December 31, 2023. On that date, the Fund's net asset value ("NAV") per share (reflecting NAV dilution from the Rights Offering (defined below)) was $3.49, down

27.07% over the six months then ended, adjusted for distributions. The Fund's share price closed the period at $2.78 per share, a decline of 26.24% over the same semi-annual time period, adjusted for distributions. For calendar year 2023, the Fund's net asset value per share (reflecting NAV dilution from the Rights Offering) and market price declined 14.45% and 13.60%, respectively, in each case adjusted for distributions. During the six-month period,

the discount to NAV was relatively unchanged narrowing from -20.52% to -20.34%. Notwithstanding the NAV dilution from the Rights Offering, the underlying holdings performed well during the period and for the calendar year as evidenced by aggregate increases in net assets of 6.48% for the period and 24.98% for the calendar year.

The Fund completed a non-transferable rights offering (the "Rights Offering") on December 13, 2023 which resulted in the issuance of nine million (9,000,000) additional shares of common stock at a price of $2.31 per share, reflecting NAV dilution per share of $1.6053.

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

Growth in the Caribbean Basin economies was strong in 2023 providing a positive investment backdrop. The main drivers of growth have been increases in American tourist arrivals, oil production, and "nearshoring" of supply chains.

"Nearshoring" of U.S. supply chains refers to a shift from the use of off-shore suppliers (particularly suppliers located in Asia) to suppliers that are more strategically located in the Western Hemisphere. There are a number of factors that have led to this shift including continuing political tensions with China and historical difficulties in receiving

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Erik M. Herzfeld

President and

Portfolio Manager

Letter to Stockholders (unaudited) (continued)

inventories from Asian suppliers during the COVID and post- COVID period. As a result, Caribbean economies are benefitting as U.S. companies shift to supply partners closer to home. For example, Mexico is now the largest U.S. trading partner in dollars, surpassing China. Responding to nearshoring trends, Jamaica is making strategic investments in its ports to enable increased export of Jamaican agricultural products to the U.S. and abroad. We believe the nearshoring trend will provide a long-term positive impact in the region and add diversity to an economic base that was previously heavily weighted to tourism, banking, and commodities.

Positive movements in the region's oil and gas industry have also been a driver of growth during the period. Guyana's massive offshore oil discovery is turning one of the most impoverished

countries in Latin America into one of its richest, driving not only oil related industries but the general service sector as well. The newfound riches for Guyana have inflamed tensions with neighboring Venezuela as the Maduro government has claimed the Essequibo area of Guyana as part of Venezuela. However, the border dispute has not stopped oil production offshore which is nearly 400 thousand barrels a day and expected to triple over the next few years.

With respect to the important tourism sector, the majority of Caribbean nations continue to see double-digityear-over-year growth in visitors as a result of the resilient economy in the U.S. Only the U.S. Virgin Islands saw a decline of 3.8% in visitors while the Cayman Islands and British Virgin Islands both saw visitors increase 60.5% combined year-over- year. As recession fears abate in the U.S. and the Federal Reserve is poised to start cutting rates, we believe continued growth in arrivals to the Caribbean will continue.

Cuba also saw a sharp uptick in visitor arrivals in 2023 after a disastrous few years since the pandemic. The number of tourism arrivals in Cuba still remains well below its pre- pandemic high which has contributed to a shrinking economy. With U.S. trade restrictions still in place, the Cuban economy continues to weaken, resulting in an acceleration of the number of Cubans fleeing the country for the U.S. Over the last two years, an estimated 400,000 Cubans have emigrated to the U.S., further impacting Cuba's economy.

The Cuban government is arguably at its weakest point in the last 60 years. This has led to a loosening of socialist policies that allow for more capitalism, resulting in a growing entrepreneurial small business sector. In our annual report, we mentioned a shift in U.S. policy may be coming soon per discussions we have had with private citizens currently doing business in Cuba and signs emanating from the Biden Administration. Among the specific policy shifts expected is a proposal to allow Cuban citizens to open bank accounts with U.S. banks. This would provide fuel for entrepreneurial small business owners, helping to drive growth in Cuba. While we believe that a policy shift may still come to pass, we are concerned that these issues will take a back seat to other issues facing the administration, including the expanding war in the Middle East, the continuing war in the Ukraine, and of course the upcoming November elections.

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Letter to Stockholders (unaudited) (continued)

Portfolio

With the Federal Reserve pausing interest rate hikes and signaling three cuts by the end of 2024, our bank holdings continued to rebound after the March 2023 banking crisis that engulfed U.S. banks. Energy also saw strong gains in the period. Our holdings in utilities were mixed as higher rates continued to compete with defensive stocks for investment dollars. Additionally, a slow start to infrastructure spending in the U.S. following the landmark passage of the Inflation Reduction Act and Bipartisan Infrastructure Law resulted in weak performance from companies expected to benefit from that legislation.

Ryan M. Paylor

Portfolio Manager

The largest gainer in the period was Consolidated Water Co.

Ltd. (CWCO), which gained 47.81% on the back of record revenues of $49.85 million for the most recent quarter. The company has seen significant growth in its services segment which now makes up 50% of revenues. Additionally, water scarcity is becoming a more visible issue globally as drought threatens agriculture, global population increases, and manufacturing growth draws on supply. As a result, water desalination, recycling and reuse technologies are seeing significant investments which are benefitting CWCO. The negative effects of climate change along with the factors impacting supply cited above are resulting in more demand for CWCO's products and services which we do not see changing anytime in the near-term.

Our bank holdings all saw double-digit gains in the period, increasing between 14.69% and 45.61%. OFG Bancorp (OFG) was the biggest gainer in the period while Popular Inc. (BPOP) and First Bancorp (FBP) were not far behind rising 37.90% and 37.27% respectively. As we stated in previous communications, we believed Puerto Rican banks were well insulated from the turmoil on the mainland and our portfolio was rewarded over the period. Banco Latinoamericano de Comercio Exterior (BLX), known as Bladex, gained 14.69% in the period. We continue to believe banks servicing the Caribbean and Latin America are poised for a pickup in growth as nearshoring leads to more investment in the region. Additionally, the region is expected to benefit from stronger growth relative to the rest of the world and war in the Middle East is increasing demand for alternative routes for trade. Bladex's expertise is in trade finance for Latin America and the Caribbean, which is expected to expand due to changes in supply chains but also global increases in commodity demand.

Another top performer in the period was PGT Innovations Inc. (PGTI) which gained 39.62% over the last half of 2023. PGTI has been the target of a bidding war between Masonite and Miter Brands which has resulted in a $41 bid from Masonite and a $41.5 bid from Miter Brands. At the present time, PGTI has not decided which offer to accept but we believe there to be limited price upside from the most recent bids.

The largest detractor over the six-month period was MasTec Inc. (MTZ) which declined 35.81%. We are among the investors expecting a boom in infrastructure spending following the passage of the Inflation Reduction Act and Bipartisan Infrastructure Law

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Letter to Stockholders (unaudited) (continued)

and have been disappointed so far as rising interest rates and rising inflation costs resulted in cancellations and postponements of proposed projects. MasTec's acquisition spree over the course of the last few years helped diversify the company's business away from large clients like AT&T and should bode well for future growth. However, increased debt interest as part of this growth initiative has resulted in a decline in free cash flow and a pause in share repurchases since 2020. With inflation declining and the Fed poised to cut rates in 2024, we expect a pickup in infrastructure projects as the economics improve. MasTec should therefore be able to concentrate on paying down debt and resuming share repurchases.

Marriot Vacations Worldwide Corporation (VAC) also struggled in the second half, declining 29.71%. The vacation ownership, rental, and property manager saw record revenues in 2022 only for growth to stagnate in 2023. VAC was able to weather the pandemic without having to add significant debt like many of its peers in the hospitality and lodging business. This allowed the company to repurchase shares and continue to raise its dividend. While the flat growth was not part of our forecast, the company is generating enough free cash flow to increase share repurchases and the dividend. At a 1 year forward PE of 10, manageable debt maturities, and increasing return of capital to shareholders, we believe the stock price will rise even if revenues remain unchanged for the second year in a row.

Becle SAB de CV (CUERVO) was another weak performer in the period, declining 18.69%. The Mexican beverage company experienced its first annual decline in revenues since it went public in 2017. An appreciating Mexican peso along with higher input costs led to declines in sales and lower gross margins as foreign buyers' purchasing power decreased. Also, overall weakness in the alcoholic beverage market due to inflation and changing tastes weighed on valuations as CUERVO's peers saw similar weakness in 2023. The company is poised to rebound as inflation declines and currency volatility decreases. CUERVO is the leader in the tequila market with 30% of market share. They have also diversified their brands into vodka, whiskey, gin, rum, and ready-to-drink offerings. The company is estimated to return to sales growth in 2024 and with a lower leverage profile than its peers. As a result, we believe CUERVO should trade at a premium to its peer group.

Outlook

After two years of interest rate hikes across the globe implemented to combat inflation, global central banks are projecting interest rate cuts over the next year. Even with tightening monetary policy at its peak, the Caribbean was able to deliver real GDP growth of 9.8% in 2023. With less restrictive monetary policy going forward in 2024 and the resulting increasing chances of a "soft landing" in the Americas, Caribbean economies should be major beneficiaries of discretionary spending on travel along with increased investment in commodities and nearshoring infrastructure. The Fund's recent Rights Offering that was concluded in December has increased our ability to deploy capital in the region to take advantage of what we view as an attractive investment backdrop. Guyana is already seeing a "gold rush" of sorts with investors flocking to the country to invest in the fastest growing economy in the world. We believe there will be ancillary benefits

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Letter to Stockholders (unaudited) (continued)

in surrounding countries as banking, infrastructure, and trade finance will be needed to support growth.

There has already been significant investment in nearshoring in Mexico as U.S. trade decouples from China and other overseas supply chains reliant upon adversarial countries. As discussed above, we believe there are significant opportunities in the Caribbean to take advantage of nearshoring.

We continue to be bullish on cruise lines, maintaining an overweight position in the industry. The return of profitability should allow them to retire and refinance higher cost debt issued during the pandemic. The potential for lower rates also provides them a tailwind to lower financing costs. We also remain overweight companies we believe will benefit from the Inflation Reduction Act and Bipartisan Infrastructure Law as lower rates should result in more projects coming back online as cost of capital declines.

Largest Allocations

The following tables present our largest investment and geographic allocations1 as of December 31, 2023.

	% of Net		% of Net
Geographic Allocation	Assets	Largest Portfolio Positions	Assets
USA	33.55%		Royal Caribbean Cruises Ltd.	6.88%
Mexico	20.88%		Norwegian Cruise Line Holdings Ltd.	6.65%
Puerto Rico	14.78%		New Fortress Energy, Inc.	6.28%
Panama	8.12%		MasTec, Inc.	5.24%
Liberia	6.88%		First BanCorp.	4.99%
Bermuda	6.65%		Popular, Inc.	4.69%
Netherlands	6.61%		NextEra Energy, Inc.	4.40%
Bahamas	1.07%		Martin Marietta Materials, Inc.	4.30%
Cayman Islands	0.83%		Cemex S.A.B. de C.V.	4.15%
Cuba	0.00%		Playa Hotels and Resorts	3.46%
Money Market	12.65%
Liabilities in excess of
other assets	-12.02%
	100.00%

Quarterly Distributions in Stock and Cash

On December 29, 2023, under the Fund's managed distribution policy (the "Policy"), we announced a quarterly distribution in the amount of $0.135375 per share for common stockholders to be paid January 31, 2024. The distribution will be paid in cash or shares

1 Geographic allocation is determined by the issuer's legal domicile.

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Letter to Stockholders (unaudited) (continued)

of our common stock at the election of stockholders. The distribution in stock and cash is consistent with the Fund's most recent prior quarterly distributions.

The total amount of cash distributed to all stockholders will be limited to 20% of the total distribution to be paid excluding any cash paid for fractional shares. The remainder of the distribution (approximately 80%) will be paid in the form of shares of our common stock. The exact distribution of cash and stock to any given stockholder will be dependent upon his/her election as well as elections of other stockholders, subject to the pro-rata limitations.

We believe this cash and stock distribution will allow the Fund to strengthen its balance sheet and to be in position to capitalize on potential future investment opportunities.

The primary purpose of the Policy is to provide stockholders with a constant, but not guaranteed, fixed minimum rate of distribution each quarter (currently set at the annual rate of 15% of the Fund's net asset value as determined on December 19, 2023 and payable in quarterly installments). The Fund cannot predict what effect, if any, the Policy will have on the market price of its shares or whether such market price will reflect a greater or lesser discount to net asset value as compared to prior to the adoption of the Policy.

Results of Rights Offering

On December 18, 2023, the Fund announced the final results of its non-transferable rights offering (the "Offering") that expired on December 13, 2023 (the "Expiration Date"). The Fund issued a total of 9,000,000 new shares of common stock as a result of the Offering. The Offering's final subscription price per share was determined to be $2.31. The subscription price was established pursuant to the terms of the Offering and based on a formula equal to 92% of the volume weighted average closing sales price of a share of common stock on the NASDAQ Capital Market on the Expiration Date of the Offering and the four preceding trading days. The Offering was oversubscribed and the over- subscription requests exceeded the primary subscription shares available (i.e., 7,150,673 shares). The Board of Directors of the Fund determined to issue an additional 25.86% of the number of shares issued in the primary subscription, or 1,849,327 additional shares, for a total issuance of 9,000,000 new shares of common stock. The shares issued as part of the oversubscription privilege of the Offering were allocated pro rata among record

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Letter to Stockholders (unaudited) (continued)

date stockholders who submitted over-subscription requests based on the number of rights originally issued to them by the Fund. Gross proceeds from the Offering, before any expenses of the Offering, totaled approximately $20.8 million.

Thomas J. Herzfeld	Erik M. Herzfeld	Ryan M. Paylor
Chairman of the Board	President and	Portfolio Manager
and Portfolio Manager	Portfolio Manager

The above commentary is for informational purposes only and does not represent an offer, recommendation or solicitation to buy, hold or sell any security. The commentary is intended to assist stockholders in understanding our performance during the six months ended December 31, 2023. The views and opinions in this letter were current as of February 29, 2024. Statements other than those of historical facts included herein may constitute forward-looking statements regarding management's future expectations, beliefs, intentions, goals, strategies, plans or prospects, including statements relating to management's beliefs that the cash and stock distribution will allow the Fund to strengthen its balance sheet and to be in a position to capitalize on potential future investment opportunities, when there can be no assurance either will occur, and other factors may contain forward looking statements within the meaning of the Private Securities Litigation Reform Act, with respect to the Fund's future financial or business performance, strategies or expectations. Nothing herein should be relied upon as a representation as to the future performance or portfolio holdings of the Fund. We undertake no duty to update any forward-looking statement made herein. The specific securities identified and described do not represent all of the securities purchased or sold and you should not assume that investments in the securities identified and discussed will be profitable. Portfolio composition is subject to change.

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Investment Results (unaudited)

Average Annual Total Returns* (For the periods ended December 31, 2023)

	Six Months	One Year	Five Year	Ten Year
The Herzfeld Caribbean Basin Fund
Net asset value per share	-27.07%	-14.45%	0.08%	-1.44%
Market value per share	-26.24%	-13.60%	3.68%	-1.04%
S&P 500® Index**	8.04%	26.29%	15.69%	12.03%
MSCI Emerging Markets ex Asia
Index ***	8.95%	18.17%	2.55%	0.16%

Total annual operating expenses, as disclosed in the Herzfeld Caribbean Basin Fund (the "Fund") Form N-2 dated August 23, 2023, as amended October 24, 2023, were 3.45% of average daily net assets. During the six months ended December 31, 2023, the Advisor's voluntarily waived its management fee by 10 basis points (from 1.45% to 1.35%) in support of the Fund's initiative to attempt to reduce the stock price discount to net asset value. Effective November 22, 2023, the Advisor has further agreed to voluntarily waive its management fee on the Fund's net assets in excess of $30 million by an additional ten (10) basis points. Accordingly, the Adviser's management fee after the voluntary waivers is (i) 1.35% of the Fund's assets up to and including $30 million and (ii) 1.25% of the Fund's assets in excess of $30 million. Additional information pertaining to the Fund's expense ratios as of December 31, 2023 can be found in the financial highlights.

The performance quoted represents past performance, which does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The returns shown do not reflect deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The Fund's investment objectives, risks, charges and expenses must be considered carefully before investing. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by calling [phone].

• Return figures reflect any change in price per share and assume the reinvestment of all distributions. The Fund's returns reflect any fee reductions during the applicable periods. If such fee reductions had not occurred, the quoted performance would have been lower. Total returns for periods less than 1 year are not annualized.
• The S&P 500® Index is a widely recognized unmanaged index of equity securities and is representative of a broader domestic equity market and range of securities than is found in the Fund's portfolio. Individuals cannot invest directly in the index; however, an individual can invest in exchange traded funds or other investment vehicles that attempt to track the performance of a benchmark index.
• The MSCI Emerging Markets ex Asia Index (the "Index") captures large and mid cap representation across 15 Emerging Markets countries (Brazil, Chile, Colombia, Czech Republic, Egypt, Greece, Hungary, Mexico, Peru, Poland, Qatar, Saudi Arabia, South Africa, Turkey and United Arab Emirates). With 247 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in each country excluding Asia. The index is representative of a broader domestic equity market and range of securities than is found in the Fund's portfolio. Individuals cannot invest directly in the index; however, an individual can invest in exchange traded funds or other investment vehicles that attempt to track the performance of a benchmark index.

The Fund's investment objectives, strategies, risks, charges and expenses must be considered carefully before investing. The prospectus contains this and other important information about the Fund and may be obtained by calling the same number as above. Please read it carefully before investing.

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