N-Q 1 fp0016920_nq.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM N-Q
 
QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF
REGISTERED MANAGEMENT INVESTMENT COMPANY

Investment Company Act file number 811-06445

The Herzfeld Caribbean Basin Fund, Inc.
(Exact name of registrant as specified in charter)

119 Washington Avenue, Suite 504, Miami Beach FL 33139
(Address of principal executive offices) (Zip code)

THOMAS J. HERZFELD
119 Washington Avenue, Suite 504, Miami Beach FL 33139
(Name and address of agent for service)

Registrant's telephone number, including area code: 305-271-1900

Date of fiscal year end: 06/30/16

Date of reporting period: 09/30/15


ITEM 1. SCHEDULE OF INVESTMENTS

SCHEDULE OF INVESTMENTS AS OF September 30, 2015 (unaudited)
 
Shares or
Principal
Amount
 
Description
 
Market Value
 
       
 
Common stocks – 97.76% of net assets
   
       
 
Airlines – 10.68%
   
 
157,794
 
Avianca Holdings, SA Spon ADR
   
747,944
 
 
48,550
 
Copa Holdings, S.A.
   
2,035,702
 
 
21,515
 
ERA Group Inc.
   
322,080
 
 
18,000
 
Spirit Airlines, Inc.
   
851,400
 
               
     
Banking and finance – 10.04%
       
 
19,780
 
Bancolombia, S.A.
   
636,916
 
 
55,166
 
Banco Latinoamericano de Exportaciones, S.A.
   
1,277,093
 
 
6,000
 
Bank of Nova Scotia
   
264,480
 
 
22,643
 
Evertec Inc.
   
409,159
 
 
29,000
 
Popular Inc.
   
876,670
 
 
3,844
 
W Holding Co. Inc.
   
--
 
 
14,000
 
Western Union
   
257,040
 
               
     
Communications – 9.42%
       
 
44,690
 
America Movil, S.A.B. de C.V. ADR
   
739,620
 
 
71,200
 
America Movil, S.A.B. de C.V. Series A
   
58,903
 
 
209,144
 
America Movil, S.A.B. de C.V. Series L
   
173,395
 
 
11,988
 
Atlantic Tele-Network, Inc.
   
886,272
 
 
514,715
 
Fuego Enterprises Inc.
   
679,424
 
 
210,994
 
Grupo Radio Centro, S.A.B. de C.V. Series A
   
161,855
 
 
28,400
 
Grupo Televisa, S.A.B. ADR
   
738,968
 
 
10,030
 
Spanish Broadcasting System, Inc.
   
52,758
 
               
     
Conglomerates and holdings companies – 0.59%
       
 
250,000
 
Admiralty Holding Company
   
--
 
 
5,000
 
Archer Daniels Midland Co.
   
207,250
 
 
70,348
 
BCB Holdings Ltd.
   
5,328
 
 
3,250
 
Marlowe Holdings Ltd.
   
5,046
 
               
     
Construction and related – 10.84%
       
 
146,372
 
Cemex S.A.B. de C.V. ADR
   
1,023,140
 
 
65,264
 
Cemex S.A.B. de C.V. Series CPO
   
45,443
 
 
20
 
Ceramica Carabobo Class A ADR
   
--
 
 
3,000
 
Martin Marietta Materials
   
455,850
 
 
134,927
 
Mastec, Inc.
   
2,135,894
 
 
4,000
 
Vulcan Materials
   
356,800
 
               
     
Consumer products and related manufacturing – 3.23%
       
 
327,290
 
Grupo Casa Saba, S.A.B. de C.V. ADR
   
--
 
 
10,100
 
Watsco Incorporated
   
1,196,648
 
               
     
Food, beverages and tobacco – 5.52%
       
 
53,874
 
Cleanpath Resources Corp.
   
5
 
 
8,799
 
Coca Cola Femsa, S.A.B. de C.V. ADR
   
610,475
 
 
18,900
 
Fomento Economico Mexicano, S.A.B. de C.V. Series UBD
   
168,560
 
 
12,000
 
Fomento Economico Mexicano, S.A.B. de C.V. ADR
   
1,071,000
 
 
5,000
 
Fresh Del Monte Produce Inc.
   
197,550
 
 

     
Housing – 6.43%
       
 
49,500
 
Lennar Corporation
   
2,382,435
 
               
     
Investment companies – 1.91%
       
 
9,800
 
iShares MSCI Mexico Capped ETF
   
505,288
 
 
800
 
Latin American Discovery Fund, Inc.
   
6,240
 
 
1,637
 
Mexico Equity and Income Fund
   
18,007
 
 
5,000
 
Mexico Fund, Inc.
   
87,100
 
 
6,412
 
Salient Midstream & MLP Fund
   
89,704
 
 
70,348
 
Waterloo Investment Holdings Ltd
   
--
 
               
     
Leisure – 17.09%
       
 
27,000
 
Carnival Corp.
   
1,341,900
 
 
3,000
 
Marriott Vacations Worldwide Corp.
   
204,420
 
 
36,443
 
Norwegian Cruise Line Holdings
   
2,088,184
 
 
30,313
 
Royal Caribbean Cruises Ltd.
   
2,700,585
 
               
     
Mining – 1.52%
       
 
3,872
 
Grupo Mexico, S.A.B. de C.V. Series B
   
9,342
 
 
32,000
 
Freeport Mcmoran Copper
   
310,080
 
 
31,900
 
Tahoe Resources, Inc.
   
246,906
 
               
     
Pulp and paper – 0.11%
       
 
18,300
 
Kimberly-Clark de Mexico, S.A.B. de C.V. Series A
   
41,283
 
               
     
Railroad – 1.19%
       
 
5,750
 
Norfolk Southern Corporation
   
439,300
 
               
     
Retail – 1.66%
       
 
1,270
 
Grupo Elektra, S.A.B. de C.V. Series CPO
   
21,955
 
 
1,000
 
Pricesmart, Inc.
   
77,340
 
 
210,222
 
Wal-Mart de Mexico, S.A.B. de C.V. Series V
   
517,406
 
               
     
Service – 0.03%
       
 
700
 
Grupo Aeroportuario del Sureste, S.A.B. de C.V. Series B
   
10,656
 
               
     
Trucking and marine freight – 5.80%
       
 
580
 
Seaboard Corporation
   
1,785,820
 
 
2,000
 
Seacor Holdings, Inc.
   
119,620
 
 
9,589
 
Teekay LNG Partners LP
   
229,369
 
 
36,000
 
Ultrapetrol Bahamas Ltd.
   
14,760
 
               
     
Utilities – 10.68%
       
 
12,000
 
Caribbean Utilities Ltd. Class A
   
125,928
 
 
129,538
 
Consolidated Water, Inc.
   
1,502,641
 
 
700
 
Cuban Electric Company
   
--
 
 
40,500
 
Teco Energy Inc.
   
1,063,530
 
 
13,000
 
Nextera Energy, Inc.
   
1,268,150
 
               
     
Other – 1.02%
       
 
25,000
 
Geltech Solutions Inc.
   
9,875
 
 
4,420
 
Gusborne PLC
   
3,013
 
 
55,921
 
Margo Caribe, Inc.
   
363,487
 
 
895
 
Siderurgica Venezolana Sivensa, S.A. ADR
   
--
 
 
79
 
Siderurgica Venezolana Sivensa, S.A. Series B
   
--
 
               
     
Total common stocks – 97.76% (cost $39,030,175)
   
36,232,992
 
               
     
Bonds – 0.00% of net assets
       
               
 
165,000
 
Republic of Cuba - 4.5%, 1977 – in default (cost $63,038)
   
--
 
               
Other assets less liabilities – 2.24% of net assets
 
$
831,910
 
               
Net assets - 100% (applicable to 5,681,559 shares; equivalent to $6.52 per share)
 
$
37,064,902
 


Security Valuation

The Herzfeld Caribbean Basin Fund, Inc. (the “Fund”) records its investments in securities at fair value. Under generally accepted accounting principles (“GAAP”), fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date.

In determining fair value, the Fund uses various valuation approaches. GAAP establishes a fair value hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available.

Observable inputs are those that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund’s assumptions about the inputs market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The fair value hierarchy is categorized into three levels based on the inputs as follows:

Level 1:
quoted prices in active markets for identical investments
Level 2:
other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)
Level 3:
significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments)

The availability of valuation techniques and observable inputs can vary from security to security and is affected by a wide variety of factors including the type of security, whether the security is new and not yet established in the marketplace, and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Those estimated values do not necessarily represent the amounts that may be ultimately realized due to the occurrence of future circumstances that cannot be reasonably determined. Because of the inherent uncertainty of valuation, those estimated values may be materially higher or lower than the values that would have been used had a ready market for the securities existed. Accordingly, the degree of judgment exercised by the Fund in determining fair value is greatest for securities categorized in Level 3. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement in its entirety falls, is determined based on the lowest level input that is significant to the fair value measurement.

Fair value is a market-based measure considered from the perspective of a market participant rather than an entity-specific measure. Therefore, even when market assumptions are not readily available, the Fund’s own assumptions are set to reflect those that market participants would use in pricing the asset or liability at the measurement date. The Fund uses prices and inputs that are current as of the measurement date, including periods of market dislocation. In periods of market dislocation, the observability of prices and inputs may be reduced for many securities. This condition could cause a security to be reclassified to a lower level within the fair value hierarchy.


Investments in securities traded on a national securities exchange (or reported on the NASDAQ National Market or Capital Market) are stated at the last reported sales price on the day of valuation (or at the NASDAQ official closing price); other securities traded in the over-the-counter market and listed securities for which no sale was reported on the date are stated at the last quoted bid price. Restricted securities and other securities for which quotations are not readily available are valued at fair value as determined by the Board of Directors.
 
The following table summarizes the classification of the Fund’s investments by the above fair value hierarchy levels as of September 30, 2015:

      
Level 1
   
Level 2
   
Level 3
   
Total
 
Assets (at fair value)
               
Common Stocks
               
USA
 
$
22,172,551
   
$
5
   
$
0
   
$
22,172,556
 
Mexico
   
5,556,660
     
0
     
0
     
5,556,660
 
Panama
   
4,060,739
     
0
     
0
     
4,060,739
 
Puerto Rico
   
1,285,829
     
363,487
     
0
     
1,649,316
 
Cayman
   
1,628,569
     
0
     
0
     
1,628,569
 
Colombia
   
636,916
     
0
     
0
     
636,916
 
Other
   
528,236
     
0
     
0
     
528,236
 
Bonds
                               
Cuba
   
0
     
0
     
0
     
0
 
Total Investments in securities
 
$
35,869,500
   
$
363,492
   
$
0
   
$
36,232,992
 

The following is a reconciliation of assets in which significant unobservable inputs (Level 3) were used to determine fair value:

 
Investments in Securities at
Fair Value
 
Balance June 30, 2015
 
$
406,977
 
Unrealized gain/(loss)
   
434,302
 
Purchases
   
0
 
Sales
   
(0
)
Transfers into Level 3
   
0
 
Transfers out of Level 3
   
(841,279
)
Balance September 30, 2015
 
$
0
 

Transfers from Level 3 to Level 1 were $841,279.

Unrealized Appreciation/(Depreciation)

As of September 30, 2015, the cost basis for federal income tax purposes, gross unrealized appreciation, gross unrealized depreciation and net unrealized appreciation/(depreciation) were as follows:

Tax Cost of
Securities
Tax Unrealized
Appreciation
Tax Unrealized
(Depreciation)
Net Tax Unrealized
Appreciation/(Depreciation)
$39,359,925
$7,236,092
($10,363,025)
($3,126,933)
 

ITEM 2. CONTROLS AND PROCEDURES

(a) The registrant's principal executive and principal financial Officers, or persons performing similar functions, have concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the "1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days of the filing date of this Form N-Q that includes the disclosure required by this paragraph based on their evaluation of the controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b))and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934 (17 CFR 240.13a-15(b) or 240.15d-15(b)).

(b) There were no changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the registrant's last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.

ITEM 3. EXHIBITS

The certifications required by Rule 30a-2(a) under the Investment Company Act of 1940, as amended, and Section 302 of the Sarbanes-Oxley Act of 2002 are attached as an exhibit to this filing.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

The Herzfeld Caribbean Basin Fund, Inc.

By
/s/ Thomas J. Herzfeld
 
Thomas J. Herzfeld
 
Chairman and President
 
     
Date:
November 25, 2015
 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated.

By
/s/ Thomas J. Herzfeld
 
Thomas J. Herzfeld
 
Chairman and President
 
     
Date:
November 25, 2015
 
     
By
/s/ Reanna Lee
 
Reanna Lee
 
Treasurer
 
     
Date:
November 25, 2015