Dear Fellow Stockholders:

We are pleased to present our semi-annual report for the period ended December 31, 2001.  On that date our net assets were $6,826,606 and net asset value per share was $4.07 after payment of a distribution of $0.1551 per share; compared with $8,183,937 (net asset value at $4.88 per share) twelve months earlier.  This represents a loss of 13.4% in net asset value after adjustment for the distribution.  Our share price declined 7.5% (after adjustment for the distribution) from $3.81 to $3.37 over the same period.

It would be difficult to pick a portfolio that was more vulnerable to the events of September 11th than ours.  For instance, we have no defense issues and no gold, and our Fund is invested in a region principally dependent on tourism.  Consequently many of our holdings, especially the cruise lines, were particularly hard hit last fall.  Case in point, Royal Caribbean Cruises Ltd. (RCL), which closed at $21.31 on September 10th, collapsed to below $8.00 per share by September 21st.  And Carnival Corp. (CCL) fell from $28.52 to as low at $17.00 over the same period.  The good news is that both have made very solid recoveries.  Since last year's lows, CCL has recovered 54.6% to $26.15, as of February 5, 2002, and RCL is 122% higher than its worst level in 2001, closing at $17.22 on February 5, 2002.

On an even more promising note, last year the United States relaxed, for the first time, its embargo with respect to Cuba, permitting food shipments to that country.  Seaboard Corporation (SEB), which has containerized cargo ships operating in the Caribbean and is also in the food business has a trading pattern similar to that of the cruise lines.  Its shares fell from $241 on September 10th to $190 on October 2nd and since then have moved above $300 per share. 

Premium/Discount of The Herzfeld Caribbean Basin Fund from Inception

[CHART]

Premium/Discount

As the graph above depicts, the Fund has traded at both premiums and discounts every year except its year of inception in which it traded only at a premium.  As I have stated before, we believe that closed-end funds trading at discounts to net asset value represent good value.  Following this philosophy, I have added to my personal holdings of The Herzfeld Caribbean Basin Fund during the year.

Largest Allocations

The following tables present our largest investments and geographic allocations as of December 31, 2001.

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

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

Sincerely,

Thomas J. Herzfeld
Chairman of the Board and President

Description

Value

$         12,480

280,500

61,360

33,960

92,453

1,884

840

33,670

71,120

196,670

139,859

492,600

283,608

226,800

296,820

1,358,905

5,150

244,800

98,000

146,400

369,684

73

13,145

  6,785,864

--

$6,826,606

$  6,785,864

  $        53,620

($       1,555,827)

($       83,788)

($      112,818)

Net realized gain (loss) on investments

(         14,023)

382,758

(    1,458,016)

(        51,785)

(    1,555,827)

(      218,155)

(      170,448)

--

(        89,753)

             --

(      260,201)

--

($ 1,816,028)

($   218,155)

$   8,642,634

$  8,424,479

$   6,826,606

$  8,642,634

Six Months Ended
12/31/01
(unaudited)

NOTE 1.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Related Matters

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

The Fund’s investment objective is to obtain long-term capital appreciation.  The Fund pursues its objective by investing primarily in equity and equity-linked securities of public and private companies, including U.S.-based companies, (i) whose securities are traded principally on a stock exchange in a Caribbean Basin Country or (ii) that have at least 50% of the value of their assets in a Caribbean Basin Country or (iii) that derive at least 50% of their total revenue from operations in a Caribbean Basin Country.   The Fund’s investment objective is fundamental and may not be changed without the approval of a majority of the Fund’s outstanding voting securities. 

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

Security Valuation

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

Income Recognition

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

Deposits with Financial Institutions

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

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

Income Taxes

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

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

Distributions to Stockholders

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

NOTE 2.  NON-MARKETABLE SECURITIES OWNED

Investment in securities includes the following securities for which readily ascertainable market values were not available:

$165,000 principal, 4.5%, 1977 Republic of Cuba bonds purchased for $63,038.  The bonds are listed on the New York Stock Exchange and had been trading in default since 1960.   A "regulatory halt" on trading was imposed by the New York Stock Exchange in July, 1995.  As of December  31, 2001 , the position was valued at -0- by the Board of Directors, which believes this approximates the bonds' fair value.

NOTE 3.      TRANSACTIONS WITH AFFILIATES

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

During the six months ended December   31, 2001, the Fund paid $3,404 of brokerage commissions to Thomas J. Herzfeld & Co., Inc., an affiliate of the Advisor.

NOTE 4.      INVESTMENT TRANSACTIONS

During the six months ended December 31, 2001, purchases and sales of investment securities, other than government securities, were $284,409 and $844,850, respectively.

At December 31, 2001, the Fund’s investment portfolio had gross unrealized gains of $1,146,404 and gross unrealized losses of $2,160,812, resulting in a net unrealized loss of $1,014,408.

The terms of office as directors of Thomas J. Herzfeld and Albert L. Weintraub continued after the meeting.

Information We Collect

We collect nonpublic information about you from applications or other account forms you complete, from your transactions with us, our affiliates or others through transactions and conversations over the telephone.

Information We Disclose

We do not disclose information about you, or our former customers, to our affiliates or to service providers or other third parties except on the limited basis permitted by law.  For example, we may disclose nonpublic information about you to third parties to assist us in servicing your account with us and to send transaction confirmations, annual reports, prospectuses and tax forms to you.  We may also disclose nonpublic information about you to government entities in response to subpoenas.

Our Security Procedures

To ensure the highest level of confidentiality and security, we maintain physical, electronic and procedural safeguards that comply with federal standards to guard your personal information.  We also restrict access to your personal and account information to those employees who need to know that information to provide services to you.