UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-06445
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The Herzfeld Caribbean Basin Fund, Inc.
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(Exact name of registrant as specified in charter)
P.O. BOX 161465, MIAMI, FLORIDA 33116
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(Address of principal executive offices) (Zip code)
THOMAS J. HERZFELD
P.O. BOX 161465, MIAMI, FL 33116
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(Name and address of agent for service)
Registrant's telephone number, including area code: 305-271-1900
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Date of fiscal year end: 06/30
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Date of reporting period: 07/01/06 - 12/31/06
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. SHAREHOLDER REPORT
[FRONT COVER]
THE HERZFELD
CARIBBEAN BASIN
FUND, INC.
SEMI-ANNUAL REPORT
December 31, 2006
The Herzfeld Caribbean Basin Fund, Inc.
The Herzfeld Building
PO Box 161465
Miami, FL 33116
(305) 271-1900
Investment Advisor
HERZFELD/CUBA
a division of Thomas J. Herzfeld Advisors, Inc.
PO Box 161465
Miami, FL 33116
(305) 271-1900
Transfer Agent & Registrar
Investors Bank & Trust Company
200 Clarendon Street, 16th Floor
Boston, MA 02116
(617) 443-6870
Custodian
Investors Bank & Trust Company
200 Clarendon Street, 5th Floor
Boston, MA 02116
Counsel
Pepper Hamilton LLP
3000 Two Logan Square
18th and Arch Streets
Philadelphia, PA 19103
Independent Auditors
Rothstein Kass & Company, LLP
500 Ygnacio Valley Road, Suite 200
Walnut Creek, CA 94596
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The Herzfeld Caribbean Basin Fund'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
consist of 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
and Venezuela. The fund invests at least 80% of its total assets in a broad
range of securities of issuers, including U.S.-based companies which engage in
substantial trade with, and derive substantial revenue from, operations in the
Caribbean Basin Countries.
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Listed NASDAQ Capital Market
Symbol: CUBA
-2-
Letter to Stockholders
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[PICTURE OF MR. HERZFELD]
Thomas J. Herzfeld
Chairman and President
January 23, 2007
Dear Fellow Shareholders:
We are pleased to present our semi-annual report for the period ended December
31, 2006. On that date, the net asset value of The Herzfeld Caribbean Basin Fund
stood at $8.05 per share, a gain of 12% for the six month period, adjusted for
the $1.00 per share capital gain distribution. Within the same time frame, the
share price climbed 128.84% and on the last calendar day of 2006 stood at
approximately a 98% premium to net asset value.
As of last night's closing price of $17.40, as reported by Lipper, a Reuters
Company, on the Closed-End Fund Association website, our Fund's share price
gained 150.78% (adjusted for the distribution) which, according to their
rankings, placed us number one in market return of all closed-end funds for the
one year period then ended. Additionally, as I write this letter, the net asset
value of our Fund is making a record high (adjusted for distributions) at $8.24
per share.
Interest in the Fund remains high, and this is reflected in the Fund's ongoing
premium to net asset value, which peaked at 121% in mid-January and currently
stands at about 113%. This premium has placed the Fund in first position of the
600 or so closed-end funds covered by Lipper's Premium/Discount calculations as
reported on the Closed-End Fund Association's website (www.cefa.com).
Portfolio Commentary
Our portfolio strategy remains unchanged. We seek to invest in companies that we
believe will do well even if the trade embargo with Cuba is not lifted; but at
the same time, we place emphasis on companies which will benefit from resumption
of trade with that country. Once U.S. law permits, we will consider direct
investment opportunities in Cuba--not only in the country's traditional
-3-
Letter to Stockholders (continued)
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industries, such as sugar, rum, tobacco, mining, tourism and fisheries, but also
in new areas, such as ethanol, for instance. Projects related to rebuilding the
infrastructure of the country and new housing also seem particularly
interesting. We continue to have wide-ranging discussions with Cuban-American
businessmen in South Florida relating to all types of investment opportunities.
In August of last year, Fidel Castro was hospitalized and turned over control of
his government to his brother Raul. At the time of writing this letter, Fidel
Castro is reported to be in serious condition; there have even been several
rumors of his death. When we formed the Fund, 14 years ago, we knew then, and
continue to believe now that it is impossible to predict when the United States
will lift the trade embargo with Cuba. I believe, however, that the death of
Fidel Castro could be a significant development toward an eventual change in
U.S. policy. It is noteworthy that in recent months Raul Castro has taken a more
conciliatory posture towards the U.S. The key, in my view, is to see how far the
Cuban government will go towards releasing Cuba's political prisoners, holding
free elections, compensating U.S. citizens for confiscated property, and
returning the country to capitalism.
In the meantime, as we await political change, the Fund's holdings have shown
strong gains. During the past few months we have seen 13 new 12-month highs in
the share prices of the companies in our portfolio. These include five of our
ten largest holdings: Florida East Coast Industries, Inc. (FLA), Seaboard
Corporation (SEB), Garmin Ltd. (GRMN), Orthofix International N.V. (OFIX), and
Grupo Televisa (TV). The eight other holdings posting new highs recently
included: The Mexico Fund (MXF), Vitro Sociedad Anonima ADR (VTO), Coca Cola
Femsa S.A. de C.V. ADR (KOF), Telefonos de Mexico S.A. de C.V. (TMX), Grupo
Radio Centro S.A. ADR (RC), Grupo Casa Saba, S.A. ADR (SAB), Atlantic
Tele-Network (ATNI), and Copa Holdings S.A. (CPA).
We have recently made a few notable changes to the Fund's portfolio. For
instance, after the semi-annual period, our position in The Mexico Fund (MXF)
was sold in January for approximately a 41% profit. Also, at the end of last
year we added some speculative positions to the portfolio. One of these
companies, Fuego Entertainment (FUGO), is headed by Hugo Cancio, a prominent,
highly regarded Cuban-American. In October, Fuego announced it has entered into
an agreement to license a feature film depicting the story of Los Zafiros, a
popular Cuban vocal quartet in the 1960's. Fuego is primarily engaged in the
media and entertainment business.
-4-
Letter to Stockholders (continued)
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Other Developments
Late last year we launched a dividend reinvestment plan which gives our
shareholders the opportunity to reinvest their distributions in additional
shares at a favorable price. For the 2006 distribution, shareholders received
new shares at $11.90 per share, a 5% discount to the market price. Those who
took the stock option rather than cash are currently ahead approximately $5.50
per share, as of last night's close.
Largest Allocations
The following tables present our largest investment and geographic allocations
as of December 31, 2006.
---------------------------------- ------------------------------------------
Geographic % of Net Assets Largest Portfolio Positions% of Net Assets
Allocation
USA 61.45% Florida East Coast Industries, Inc. 21.42%
Mexico 18.63% Seaboard Corporation 9.15%
Cayman Islands 9.90% Consolidated Water Co. 8.73%
Panama 4.13% Watsco Incorporated 5.59%
Netherlands Antilles 3.95% Florida Rock Industries, Inc. 5.29%
Puerto Rico 2.71% Garmin Ltd. 4.95%
Virgin Islands 2.01% Royal Caribbean Cruises Ltd. 4.60%
Colombia 1.96% Carnival Corp. 4.36%
Belize 0.88% Orthofix International N.V. 3.95%
Costa Rica 0.55% Grupo Televisa GDR 2.86%
Venezuela 0.06%
Cuba 0.00%
Other 4.12%
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Daily net asset values and press releases on the Fund are available on the
Internet at www.herzfeld.com.
I would like to thank the members of the Board of Directors for their hard work
and guidance and also to thank my fellow stockholders for their continued
support and suggestions.
Sincerely,
/s/ Thomas J. Herzfeld
------------------------------------
Thomas J. Herzfeld
Chairman of the Board and President
-5-
Schedule of Investments as of December 31, 2006
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Shares or Principal Amount Description Market Value
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Common stocks - 110.35% of net assets
Banking and finance - 5.97%
8,500 Bancolombia, S.A. $ 264,775
21,920 Banco Latinoamericano de Exportaciones, S.A. 371,763
30,000 Doral Financial Corp. 86,100
16,400 Grupo Financiero Banorte, S.A. de C.V. Series O 63,996
9,900 Grupo Financiero Inbursa, S.A. de C.V. Series O 19,426
Communications - 15.65%
35,600 America Movil, S.A. de C.V. Series A 80,015
2,000 America Movil, S.A. de C.V. Series L 90,440
12,500 America Telecom, S.A. de C.V. Series A1* 113,745
9,250 Atlantic Tele-Network, Inc. 271,025
11,900 Carso Global Telecom, S.A. de C.V. Series A1 42,545
93,800 Fuego Entertainment 18,760
12,000 Garmin Ltd. 667,920
725 Grupo Iusacell, S.A. de C.V. Series V* 5,526
16,800 Grupo Radio Centro, S.A. ADR 180,600
14,300 Grupo Televisa, S.A. ADR 386,243
13,400 Grupo Televisa, S.A. Series CPO 72,455
1,000 Telefonos de Mexico ADR Series L 28,240
23,800 Telefonos de Mexico, S.A. de C.V. Series A 33,420
78,600 Telefonos de Mexico, S.A. de C.V. Series L 111,243
13,900 TV Azteca, S.A. de C.V. Series CPO 10,529
Conglomerates - 2.28%
250,000 Admiralty Holding Company 5,000
5,400 Alfa, S.A. de C.V. Series A 35,868
42,595 BB Holdings* 118,254
13,000 Carlisle Holdings, Inc.* 24,995
3,200 Corporacion Interamericana de Entretenimiento,
S.A. de C.V. Series B* 9,903
1,580 Desc, S.A. de C.V. Series B* 2,335
11,000 Grupo Carso, S.A. de C.V. 40,637
600 Grupo Imsa, S.A. de C.V., Series UBC 2,589
2.525 OneSource Services, Inc. 29,647
3,300 U.S. Commercial Corp., S.A. de C.V.* 460
2,900 Vitro, S.A. Series A 5,438
6,000 Vitro Sociedad Anonima ADR 33,240
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*Non-income producing
See accompanying notes.
-6-
Schedule of Investments as of December 31, 2006 (continued)
================================================================================
Shares or Principal Amount Description Market Value
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Construction and related - 9.64%
46,718 Cemex, S.A. de C.V. Series CPO $ 158,005
4,000 Cemex, ADR 135,320
2,032 Ceramica Carabobo Class A ADR* 4,254
4,300 Consorcio ARA, S.A. de C.V.* 29,197
3,583 Empresas ICA, Sociedad Controladora, S.A. de C.V.* 13,505
16,600 Florida Rock Industries, Inc. 714,630
800 Grupo Cementos de Chichuahua, S.A. de C.V. 3,843
20,950 Mastec, Inc.* 241,763
Consumer products and related manufacturing - 7.28%
800,000 Atlas Electricas, S.A. 74,625
5,900 Grupo Casa Saba, S.A. ADR 153,400
16,000 Watsco Incorporated 754,560
Food, beverages and tobacco - 2.53%
300 Alsea, S.A. de C.V. 1,632
4,800 Coca Cola Femsa, S.A. de C.V. ADR 182,400
200 Coca Cola Femsa, S.A. de C.V., Series L 754
6,300 Fomento Economico Mexicano, S.A. de C.V., Series UBD 72,954
800 Gruma, S.A. de C.V., Series B 2,912
7,600 Grupo Bimbo, S.A. de C.V., Series A 37,913
7,700 Grupo Modelo, S.A. de C.V., Series C 42,538
Housing - 0.11%
1,700 Corporacion Geo, S.A. de. C.V., Series B 8,496
100 Desarrolladora Homex, S.A. de C.V. 980
400 Sare Holding, S.A. de C.V., Series B 560
1,500 Urbi Desarrollos Urbanos, S.A. de C.V. 5,404
Investment companies - 4.89%
4,000 The Mexico Fund, Inc. 158,160
19,000 Western Asset Worldwide Income Fund 260,300
13,575 Western Asset Emerging Markets Debt Fund 242,042
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*Non-income producing
See accompanying notes.
-7-
Schedule of Investments as of December 31, 2006 (continued)
================================================================================
Shares or Principal Amount Description Market Value
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Leisure - 8.96%
12,000 Carnival Corp. $ 588,600
15,000 Royal Caribbean Cruises Ltd. 620,700
Medical - 4.14%
8,386 Micromet Inc. 25,158
10,660 Orthofix International N.V.* 533,000
Mining - 0.03%
1,200 Grupo Mexico, S.A. de C.V., Series B 4,390
Pulp and paper - 0.21%
6,100 Kimberly-Clark de Mexico, S.A. de C.V. Series A 28,120
Railroad and landholdings - 21.42%
48,500 Florida East Coast Industries, Inc. 2,890,600
Retail - 1.65%
3,700 Controladora Comercial Mexicana, S.A. de C.V.
Series UBC 9,571
1,380 Grupo Elektra, S.A. de C.V. 16,699
44,612 Wal-Mart de Mexico, S.A. de C.V. Series V 195,887
Service - 0.02%
700 Grupo Aeroportuario del Sureste, S.A. de C.V.,
Series B 2,962
100 Promotora Ambiental S.A. de C.V. 166
Trucking and marine freight - 12.09%
14,800 Grupo TMM, S.A. ADR* 37,296
700 Seaboard Corporation 1,235,500
41,799 Trailer Bridge, Inc.* 359,471
Utilities - 9.97%
12,000 Caribbean Utilities Ltd. Class A 158,280
47,241 Consolidated Water, Inc. 1,177,718
700 Cuban Electric 9,100
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*Non-income producing
See accompanying notes.
-8-
Schedule of Investments as of December 31, 2006 (continued)
================================================================================
Shares or Principal Amount Description Market Value
--------------------------------------------------------------------------------
Other - 3.51%
4,000 Copa Holdings S.A. $ 186,240
55,921 Margo Caribe, Inc.* 279,605
100 Mexichem S.A. de C.V. 174
843 Siderurgica Venezolana Sivensa ADR 2,965
75 Siderurgica Venezolana Sivensa Series B 264
45,000 Xcelera, Inc.* 4,500
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Total common stocks (cost $8,546,640) $14,894,245
===========
Bonds - 0% of net assets
165,000 Republic of Cuba - 4.5%, 1977 - in default
(cost $63,038) (Note 2)* $ --
Other assets less liabilities - (0.81%) of net assets ($1,397,049)
-----------
Net assets - 100% $13,497,196
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*Non-income producing
See accompanying notes.
-9-
Statement of Assets and Liabilities as of
December 31, 2006 (unaudited)
================================================================================
ASSETS
Investments in securities, at market value (cost $8,609,678)
(Note 2) $ 14,894,245
Cash 285,653
Dividends receivable 45,998
Other assets 33,249
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TOTAL ASSETS $ 15,259,145
============
LIABILITIES
Payable for investments purchased $ 1,980
Distributions payable 1,677,636
Accrued investment advisor fee (Note 3) 51,700
Other payables 30,633
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TOTAL LIABILITIES 1,761,949
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NET ASSETS (Equivalent to $8.05 per share
based on 1,677,636 shares outstanding) $ 13,497,196
============
Net assets consist of the following:
Common stock, $.001 par value; 100,000,000
shares authorized; 1,677,636 shares issued
and outstanding $ 1,678
Additional paid-in capital 7,234,230
Accumulated net investment loss (1,667,054)
Accumulated net realized gain on investments 1,643,775
Net unrealized gain on investments 6,284,567
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TOTAL $ 13,497,196
============
See accompanying notes.
-10-
Statement of Operations Six Months
Ended December 31, 2006 (unaudited)
================================================================================
INVESTMENT INCOME
Dividends $ 133,773
EXPENSES
Investment advisor fees (Note 3) $ 99,788
Professional fees 59,116
Custodian fees 27,000
Insurance 13,774
Transfer agent fees 8,775
Listing fees 7,500
CCO Expense 6,441
Proxy services 3,491
Printing and Postage 4,488
Director fees 3,900
Miscellaneous 6,718
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Total investment expenses 240,991
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INVESTMENT LOSS - NET ($107,218)
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS AND FOREIGN CURRENCY
Net realized gain on investments and foreign
currency 155,383
Change in unrealized gain on investments and
foreign currency 1,573,174
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NET GAIN ON INVESTMENTS 1,728,557
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NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 1,621,339
============
See accompanying notes.
-11-
Statements of Changes in Net Assets (unaudited)
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Six Months
Ended Year Ended
12/31/06 6/30/06
(unaudited)
INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS:
Net investment loss ($107,218) ($264,847)
Net realized gain on investments and
foreign currency 155,383 2,021,250
Change in unrealized gain on investments
and foreign currency 1,573,174 (201,615)
Net increase in net assets resulting from
operations 1,621,339 1,554,788
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment income and short-term realized gains -- --
Realized gains - long-term (1,677,636) (293,251)
------------ ------------
Total Distributions (1,677,636) (293,251)
NET INCREASE IN NET ASSETS ($56,296) $ 1,261,537
NET ASSETS:
Beginning of period $ 13,553,493 $ 12,291,956
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End of period $ 13,497,196 $ 13,553,493
============ ============
See accompanying notes.
-12-
Financial Highlights
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Six Months Ended Year Ended June 30
12/31/06 ------------------------------------------------------------
(unaudited) 2006 2005 2004 2003
---------- ---------- ---------- ---------- ----------
PER SHARE OPERATING PERFORMANCE
(For a share of capital stock outstanding for each time period indicated)
Net asset value, beginning of year $ 8.08 $ 7.33 $ 5.43 $ 3.95 $ 3.92
---------- ---------- ---------- ---------- ----------
Operations:
Net investment loss(1) (0.06) (0.16) (0.09) (0.07) (0.11)
Net realized and unrealized gain (loss)
on investment transactions(1) 1.03 1.08 1.99 1.55 0.22
---------- ---------- ---------- ---------- ----------
Total from operations 9.05 0.92 1.90 1.48 0.11
---------- ---------- ---------- ---------- ----------
Distributions:
From net investment income -- -- -- -- --
From net realized gains (1.00) (0.17) -- -- (0.08)
---------- ---------- ---------- ---------- ----------
Total distributions (1.00) (0.17) -- -- (0.08)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year $ 8.05 $ 8.08 $ 7.33 $ 5.43 $ 3.95
---------- ---------- ---------- ---------- ----------
Per share market value, end of year $ 15.98 $ 7.57 $ 6.30 $ 4.87 $ 3.49
---------- ---------- ---------- ---------- ----------
Total investment return (loss) based on
market value per share 128.84% 22.86% 29.36% 39.54% 2.70%
---------- ---------- ---------- ---------- ----------
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of year (in 000's) $ 13,497 $ 13,553 $ 12,292 $ 9,109 $ 6,626
---------- ---------- ---------- ---------- ----------
Ratio of expenses to average net assets 3.51%(2) 3.37% 3.55% 3.67% 4.46%
---------- ---------- ---------- ---------- ----------
Ratio of net investment loss
to average net assets (1.56%)(2) (1.95%) (1.47%) (1.39%) (3.15%)
---------- ---------- ---------- ---------- ----------
Portfolio turnover rate 8% 40% 30% 23% 3%
---------- ---------- ---------- ---------- ----------
(1) Computed by dividing the respective period's amounts from the Statement of
Operations by the average outstanding shares for each time period
presented.
(2) This figure has been annualized; however, the percentage shown is not
necessarily indicative of results for a full year.
See accompanying notes.
-13-
Notes to Financial Statements
================================================================================
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 Capital Market and trades under the symbol "CUBA".
The Fund's investment policy is to invest at least 80% of its assets in
investments that are economically tied to Caribbean Basin Countries. 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.
At December 31, 2006, the Fund had foreign investments in companies operating
principally in Mexico and the Cayman Islands, representing approximately 18.63%
and 9.90% of the Fund's net assets, respectively.
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 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 that 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.
-14-
Notes to Financial Statements
================================================================================
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 debt securities purchased are amortized
over the life of the respective securities. It is the Fund's practice to include
the portion of realized and unrealized gains and losses on investments
denominated in foreign currencies as components of realized and unrealized gains
and losses on investments and foreign currency.
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's policy is to continue to comply with the provisions of the Internal
Revenue Code that are applicable to regulated investment companies and to
distribute all its taxable income to its stockholders. Under these provisions,
the Fund is not subject to federal income tax on its taxable income and no
federal tax provision is required.
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 accounting principles generally accepted in
the United States of America. For the six months ended December 31, 2006, a
distribution from long-term capital gains of $1.00 per share was declared on
November 15, 2006, payable on January 12, 2007 to shareholders of record
December 15, 2006.
-15-
Notes to Financial Statements
================================================================================
NOTE 2. NON-MARKETABLE SECURITY OWNED
Investments in securities include $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 and trading in
the bonds was suspended as of December 28, 2006. The New York Stock Exchange has
stated that following the suspension of trading, application will be made to the
Securities and Exchange Commission to delist the issue. As of December 31, 2006,
the position was valued at $0 by the Board of Directors, which 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 daily net assets. Total advisory fees for
the six months ended December 31, 2006 amounted to $99,788, of which $51,700 was
payable as of December 31, 2006.
During the six months ended December 31, 2006, the Fund paid $4,228 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, 2006, purchases and sales of investment
securities were $1,049,927 and $1,205,470, respectively.
At December 31, 2006, the Fund's investment portfolio had gross unrealized gains
of $6,868,496 and gross unrealized losses of $583,929, resulting in a net
unrealized gain of $6,284,567 for financial statement purposes.
NOTE 5. INCOME TAX INFORMATION
The cost of securities owned for financial statement purposes is lower than the
cost basis for income tax purposes by approximately $7,002 due to wash sale
adjustments.
For the six months ended December 31, 2006, the Fund had net realized gains of
$155,383.
-16-
Dividend Reinvestment Plan
================================================================================
Registered holders ("Stockholders") of shares of common stock, $0.001 par value
("Common Stock") of Herzfeld Caribbean Basin Fund, Inc. (the "Fund") will
automatically be enrolled ("Participants") in the Fund's Dividend Reinvestment
Plan (the "Plan") and are advised as follows:
1. Investor's Bank and Trust (the "Agent") will act as agent for each
Participant. The Agent will open an account for each registered
shareholder as a Participant under the Plan in the same name in which such
Participant's shares of Common Stock are registered.
2. CASH OPTION. Pursuant to the Fund's Plan, unless a holder of Common Stock
otherwise elects, all dividend and capital gains distributions
("Distributions") will be automatically reinvested by the Agent in
additional Common Stock of the Fund. Stockholders who elect not to
participate in the Plan will receive all distributions in cash paid by
check mailed directly to the shareholder of record (or, if the shares are
held in street or other nominee name then to such nominee) by the Agent,
as dividend paying agent. Stockholders and Participants may elect not to
participate in the Plan and to receive all distributions of dividends and
capital gains in cash by sending written instructions to the Agent, as
dividend paying agent, at the address set forth below.
3. MARKET PREMIUM ISSUANCES. If on the payment date for a Distribution, the
net asset value per Common Stock is equal to or less than the market price
per Common Stock plus estimated brokerage commissions, the Agent shall
receive newly issued Common Stock ("Additional Common Stock") from the
Fund for each Participant's account. The number of Additional Common Stock
to be credited shall be determined by dividing the dollar amount of the
Distribution by the greater of (i) the net asset value per Common Share on
the payment date, or (ii) 95% of the market price per Common Share on the
payment date.
4. MARKET DISCOUNT PURCHASES. If the net asset value per Common Stock exceeds
the market price plus estimated brokerage commissions on the payment date
for a Distribution, the Agent (or a broker-dealer selected by the Agent)
shall endeavor to apply the amount of such Distribution on each
Participant's Common Stock to purchase Common Stock on the open market. In
the event of a market discount on the payment date, the Agent will have 30
days after the dividend payment date (the "last purchase date") to invest
the dividend amount in shares acquired in open-market purchases. The
weighted average price (including brokerage commissions) of all Common
Stock purchased by the Agent as Agent shall be the price per Common Stock
allocable to each Participant. If, before the Agent has completed its
purchases, the market price plus estimated brokerage commissions exceeds
the net asset value of the Common Stock as of the payment date, the
purchase price paid by Agent may exceed the net asset value of the Common
Stock, resulting in the acquisition of fewer Common Stock than if such
Distribution had been paid in Common Stock issued by the Fund. Because of
the foregoing difficulty with respect to open-market purchases, the Plan
provides that if the Plan Agent is unable to invest the full dividend
amount in open-market purchases during the purchase period or if the
market discount shifts to a market premium during the purchase period, the
Plan Agent may cease making open-market purchases and may invest the
uninvested portion of the dividend amount in newly issued Common Stock at
-17-
Dividend Reinvestment Plan (continued)
================================================================================
the net asset value per Common Stock at the close of business on the last
purchase date. Participants should note that they will not be able to
instruct the Agent to purchase Common Stock at a specific time or at a
specific price. Open-market purchases may be made on any securities
exchange where Common Stock are traded, in the over-the-counter market or
in negotiated transactions, and may be on such terms as to price, delivery
and otherwise as the Agent shall determine. Each Participant's uninvested
funds held by the Agent will not bear interest. The Agent shall have no
liability in connection with any inability to purchase Common Stock within
the time provided, or with the timing of any purchases effected. The Agent
shall have no responsibility for the value of Common Stock acquired. The
Agent may commingle Participants' funds to be used for open-market
purchases of the Fund's shares and the price per share allocable to each
Participant in connection with such purchases shall be the average price
(including brokerage commissions and other related costs) of all Fund
shares purchased by Agent. The rules and regulations of the Securities and
Exchange Commission may require the Agent to limit the Agent's market
purchases or temporarily cease making market purchases for Participants.
5. The market price of Common Stock on a particular date shall be the last
sales price on the securities exchange where the Common Stock are listed
on that date (currently the NASDAQ Capital Market)(the "Exchange"), or, if
there is no sale on the Exchange on that date, then the average between
the closing bid and asked quotations on the Exchange on such date will be
used. The net asset value per Common Stock on, a particular date shall be
the amount calculated on that date (or if not calculated on such date, the
amount most recently calculated) by or on behalf of the Fund.
6. Whenever the Agent receives or purchases shares or fractional interests
for a Participant's account, the Agent will send such Participant a
notification of the transaction as soon as practicable. The Agent will
hold such shares and fractional interests as such Participant's agent and
may hold them in the Agent's name or the name of the Agent's nominee. The
Agent will not send a Participant stock certificates for shares unless a
Participants so requests in writing or unless a Participant's account is
terminated as stated below. The Agent will vote any shares so held for a
Participant in accordance with any proxy returned to the Fund by such
Participant in respect of the shares of which such Participant is the
record holder.
7. There is presently no service charge for the Agent serving as
Participants' agent and maintaining Participants' accounts. The Agent may,
however, charge Participants for extra services performed at their
request. The Plan may be amended in the future to impose a service charge.
In acting as Participants' agent under the Plan, the Agent shall be liable
only for acts, omissions, losses, damages or expenses caused by the
Agent's willful misconduct or gross negligence. In addition, the Agent
shall not be liable for any taxes, assessments or governmental charges
which may be levied or assessed on any basis whatsoever in connection with
the administration of the Plan.
8. The Agent may hold each Participant's Common Stock acquired pursuant to
the Plan together with the Common Stock of other Stockholders of the Fund
acquired pursuant to the Plan in non-certificated form in the Agent's name
or that of the Agent's nominee. Each Participant will be sent a
confirmation by the Agent of each acquisition made for his or her
-18-
Dividend Reinvestment Plan (continued)
================================================================================
account as soon as practicable, but in no event later than 60 days, after
the date thereof. Upon a Participant's request, the Agent will deliver to
the Participant, without charge, a certificate or certificates for the
full Common Stock. Although each Participant may from time to time have an
undivided fractional interest in a Common Share of the Fund, no
certificates for a fractional share will be issued. Similarly,
Participants may request to sell a portion of the Common Stock held by the
Agent in their Plan accounts by calling the Agent, writing to the Agent,
or completing and returning the transaction form attached to each Plan
statement. The Agent will sell such Common Stock through a broker-dealer
selected by the Agent within 5 business days of receipt of the request.
The sale price will equal the weighted average price of all Common Stock
sold through the Plan on the day of the sale, less brokerage commissions.
Participants should note that the Agent is unable to accept instructions
to sell on a specific date or at a specific price. Any share dividends or
split shares distributed by the Fund on Common Stock held by the Agent for
Participants will be credited to their accounts. In the event that the
Fund makes available to its Stockholders rights to purchase additional
Common Stock, the Common Stock held for each Participant under the Plan
will be added to other Common Stock held by the Participant in calculating
the number of rights to be issued to each Participant.
If a Participant holds more than one Common Stock Certificate registered
in similar but not identical names or if more than one address is shown
for a Participant on the Fund's records, all of such Participant's shares
of Common Stock must be put into the same name and address if all of them
are to be covered by one account. Additional shares subsequently acquired
by a Participant otherwise than through the Plan will be covered by the
Plan.
9. The reinvestment of Distributions does not relieve Participants of any
federal, state or local taxes which may be payable (or required to be
withheld on Distributions.) Participants will receive tax information
annually for their personal records and to help them prepare their federal
income tax return. For further information as to tax consequences of
participation in the Plan, Participants should consult with their own tax
advisors.
10. Each registered Participant may terminate his or her account under the
Plan by notifying the Agent in writing at Investors Bank & Trust, P.O. Box
642, Boston, MA 02117-0642, or by calling the Agent at (617) 937-6870.
Such termination will be effective with respect to a particular
Distribution if the Participant's notice is received by the Agent prior to
such Distribution record date. The Plan may be terminated by the Agent or
the Fund upon notice in writing mailed to each Participant at least 60
days prior to the effective date of the termination. Upon any termination,
the Agent will cause a certificate or certificates to be issued for the
full shares held for each Participant under the Plan and cash adjustment
for any fraction of a Common Share at the then current market value of the
Common Shares to be delivered to him. If preferred, a Participant may
request the sale of all of the Common Shares held by the Agent in his or
her Plan account in order to terminate participation in the Plan. If any
Participant elects in advance of such termination to have Agent sell part
or all of his shares, Agent is authorized to deduct from the proceeds the
brokerage commissions incurred for the transaction. If a Participant has
terminated his or her participation in the Plan but continues to have
Common Shares registered in his or her name, he or she may re-enroll in
the Plan at any time by notifying the Agent in writing at the address
above.
-19-
Dividend Reinvestment Plan (continued)
================================================================================
11. These terms and conditions may be amended by the Agent or the Fund at any
time but, except when necessary or appropriate to comply with applicable
law or the rules or policies of the Securities and Exchange Commission or
any other regulatory authority, only by mailing to each Participant
appropriate written notice at least 30 days prior to the effective date
thereof. The amendment shall be deemed to be accepted by each Participant
unless, prior to the effective date thereof, the Agent receives notice of
the termination of the Participant's account under the Plan. Any such
amendment may include an appointment by the Agent of a successor Agent,
subject to the prior written approval of the successor Agent by the Fund.
12. These terms and conditions shall be governed by the laws of the State of
Maryland.
Dated: November 22, 2006
Discussion Regarding the Approval of the Investment Advisory Agreement
================================================================================
The Fund's Board of Directors including a majority of those directors who are
not "interested persons" as such term is defined in the 1940 Act ("Independent
Directors") unanimously approved the continuance of the investment advisory
agreement between the Fund and the Advisor (the "Agreement") at a meeting held
on August 17, 2006.
Before meeting to determine whether to approve the Agreement, the Board had the
opportunity to review written materials provided by the Advisor and by legal
counsel to the Fund which contained information to help the Board evaluate the
Agreement. The materials included (i) a memorandum from the Fund's legal counsel
regarding the Directors' responsibilities in evaluating and approving the
Agreement, (ii) a letter from the Advisor containing detailed information about
the Advisor's services to the Fund, Fund performance, allocation of Fund
transactions, compliance and administration information, and the compensation
received by the Advisor from the Fund; (iii) a copy of the current investment
advisory agreement between the Fund and the Advisor; (iv) audited financial
statements for the Advisor for the year-ended December 31, 2005 and unaudited
financial statements for the six months ended June 30, 2006; (v) the Advisor's
Form ADV Parts I and II; (v) comparative performance data for the Fund relative
to peer funds (small closed-end funds and foreign funds invested in the Latin
American region); and (vi) comparative statistics and fee data for the Fund
relative to peer funds.
During its deliberations on whether to approve the continuance of the Agreement,
the Board considered many factors. The Board considered the nature, extent and
quality of the services to be provided by the Advisor and determined that such
services will meet the needs of the Fund and its shareholders. The Board
reviewed the services provided to the Fund by the Advisor as compared to
-20-
Discussion Regarding the Approval of the Investment
Advisory Agreement (continued)
================================================================================
services provided by other advisors, which manage investment companies with
investment objectives, strategies and policies similar to those of the Fund. The
Board concluded that the nature, extent and quality of the services provided by
the Advisor were appropriate and consistent with the terms of the advisory
agreement, that the quality of those services had been consistent with industry
norms and that the Fund was likely to benefit from the continued provision of
those services. The Board also concluded that the Advisor had sufficient
personnel, with the appropriate education and experience, to serve the Fund
effectively and had demonstrated its continuing ability to attract and retain
qualified personnel.
Both at the meeting and on an ongoing basis throughout the year, the Board
considered and evaluated the investment performance of the Fund and reviewed the
Fund's performance relative to other investment companies and funds with similar
investment objectives, strategies and policies, and its respective benchmark
index. The Board considered both the short-term and long-term performance of the
Fund. They concluded that the performance of the Fund was within an acceptable
range of performance relative to other funds with similar investment objectives,
strategies and policies.
The Board considered the costs of the services provided by the Advisor, the
compensation and benefits received by the Advisor providing services to the
Fund, as well as the Advisor's profitability. In addition, the Board considered
any direct or indirect revenues received by affiliates of the Advisor including
the commissions paid to the Fund's affiliated broker/dealer, Thomas J. Herzfeld
& Co., Inc. The Board considered the advisory fees paid to the Advisor by the
Fund and relevant comparable fee data and statistics of a sampling of small
closed-end funds and foreign funds invested in the Latin American region. The
Board further discussed the services by the Advisor and concluded that the
advisory services performed were efficient and satisfactory and that the fee
charged was reasonable and not excessive. The Board concluded that the Advisor's
fees and profits derived from its relationship with the Fund in light of its
expenses, were reasonable in relation to the nature and quality of the services
provided, taking into account the fees charged by other advisors for managing
comparable funds with similar strategies. The Directors also concluded that the
overall expense ratio of the Fund was reasonable, taking into account the size
of the Fund, the quality of services provided by the Advisor, and the investment
performance of the Fund.
The Board also considered the extent to which economies of scale would be
realized relative to fee levels as the Fund grows, and whether the advisory fee
levels reflect these economies of scale for the benefit of shareholders. The
Board recognized that because of the closed-end structure of the Fund, and the
fact that there is no influx of capital, this particular factor is less relevant
to the Fund than it would be to an open-end fund. The Board concluded that only
marginal economies of scale could be achieved through the growth of assets since
the Fund is closed-ended.
The Board also considered its deliberations regarding the Advisor's services and
performance from the regular Board meetings held throughout the year, including
-21-
Discussion Regarding the Approval of the Investment
Advisory Agreement (continued)
================================================================================
the Board's discussion of the Fund's investment objective, long-term
performance, investment style and process. The Board noted the high level of
diligence with which it reviews and evaluates the Advisor throughout the year
and the extensive information provided with respect to Advisor's performance and
the Fund's expenses on a quarterly basis. The Board also considered whether
there have occurred any events that would constitute a reason not to renew the
Agreement and concluded there were not.
After deliberation and further consideration of the factors discussed above and
information presented at the August 17, 2006 meeting and at previous meetings of
the Board, the Board and the Independent Directors determined to continue the
Agreement for an additional one-year period. In arriving at this decision, the
Board and the Independent Directors did not identify any single matter as
controlling, but made their determination in light of all the circumstances. The
Board and the Independent Directors did not consider any one of the factors and
considerations identified above to be determinative. The Board based its
decision to approve the Agreement on all the relevant factors in light of its
reasonable business judgment, and with a view to future long-term
considerations.
Privacy Policy
================================================================================
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.
-22-
Quarterly Portfolio Reports
================================================================================
The Fund files quarterly schedules of portfolio holdings with the Securities and
Exchange Commission (SEC) for the first and third quarters of each fiscal year
on Form N-Q. The Form N-Q is available by link on the Fund's website at
www.herzfeld.com, by calling the Fund at 800-TJH-FUND, or on the SEC's EDGAR
database at www.sec.gov. In addition, the Form N-Q can be reviewed and copied at
the SEC's public reference room in Washington, D.C. More information about the
SEC's website or the operation of the public reference room can be obtained by
calling the SEC at 1-800-732-0330.
Proxy Voting Policies and Procedures
================================================================================
Information regarding how the Fund voted proxies relating to portfolio
securities from July 1, 2005 to June 30, 2006, and a description of the policies
and procedures used to determine how to vote proxies relating to portfolio
securities is available without charge, upon request, by calling the Fund at
800-TJH-FUND, or by accessing the SEC's website at www.sec.gov.
Results of November 15, 2006 Stockholder Meeting
================================================================================
The annual meeting of stockholders of the Fund was held on November 15, 2006. At
the meeting one nominee for a Director post was elected as follows:
Votes for Votes withheld
Albert L. Weintraub 1,214,503 103,905
The terms of office as directors of Thomas J. Herzfeld, Michael A. Rubin and Ann
S. Lieff continued after the meeting.
Officers and Directors
================================================================================
Officers
THOMAS J. HERZFELD
Director, Chairman of the Board, President and Portfolio Manager
CECILIA GONDOR
Secretary, Treasurer, Chief Compliance Officer
Independent Directors
ANN S. LIEFF
Director
MICHAEL A. RUBIN
Director
ALBERT L. WEINTRAUB
Director
-23-
THE HERZFELD CARIBBEAN BASIN FUND, INC.
The Herzfeld Building
P.O. Box 161465
Miami, FL 33116
ITEM 2. CODE OF ETHICS
(a) Not applicable.
(c) There have been no amendments, during the period covered by this report, to
a provision of the code of ethics that applies to the registrant's principal
executive officer, principal financial officer, principal accounting officer or
controller, or persons performing similar functions, regardless of whether these
individuals are employed by the registrant or a third party, and that relates to
any element of the code of ethics description.
(d) The registrant has not granted any waivers, including an implicit waiver,
from a provision of the code of ethics that applies to the registrant's
principal executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions, regardless of
whether these individuals are employed by the registrant or a third party, that
relates to one or more of the items set forth in paragraph (b) of this item's
instructions.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
Not applicable as schedule is included as part of the report to shareholders
filed under Item 1 of this Form.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
(a) Not applicable.
(b) No changes to the portfolio manager identified in paragraph 8(a)(1) of
registrant's most recent annual report on this form.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END FUND MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
-----------------------------------------------------------------------------------------------------------
(c) Total Number of (d) Maximum Number
Shares Purchased as of Shares that May
Part of Publicly Yet Be Purchased
(a) Total Number of (b) Average Price Announced Plans or Under the Plans or
PERIOD Shares Purchased Paid Per Share Programs Programs
-----------------------------------------------------------------------------------------------------------
Month #1 (beginning 0 n/a n/a n/a
July 1, 2006 and
ending July 31,
2006)
-----------------------------------------------------------------------------------------------------------
Month #2 (beginning 0 n/a n/a n/a
August 1, 2006 and
ending August 31,
2006)
-----------------------------------------------------------------------------------------------------------
Month #3 (beginning 0 n/a n/a n/a
September 1, 2006 and
ending September 31, 2006)
-----------------------------------------------------------------------------------------------------------
Month #4 (beginning 0 n/a n/a n/a
October 1, 2006 and
ending October 31, 2006)
-----------------------------------------------------------------------------------------------------------
Month #5 (beginning 0 n/a n/a n/a
November 1, 2006 and
ending November 30, 2006)
-----------------------------------------------------------------------------------------------------------
Month #6 (beginning 0 n/a n/a n/a
December 1, 2006 and
ending December 31, 2006)
-----------------------------------------------------------------------------------------------------------
Total 0 n/a n/a n/a
-----------------------------------------------------------------------------------------------------------
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which the stockholders
may recommend nominees to the registrant's board of directors, where those
changes were implemented after the registrant last provided disclosure in
response to the requirements of Item 407(c)(2)(iv) of Regulation S-K
(17CFR229.407)(as required by Item 22(b)(15) of Schedule 14A (17 CFR
240.14a-101)), or this Item.
ITEM 11. 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
the report that includes the disclosure required by this paragraph, based on
their evaluation of these 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, as amended (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 half-year (the registrant's
second fiscal half-year in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant's
internal control over financial reporting.
ITEM 12. EXHIBITS.
(a)(2) Certifications pursuant to Rule 30a-2(b) under the 1940 Act and Section
302 of the Sarbanes-Oxley Act of 2002 are filed herewith as Exhibits 99.302
Cert.
(a)(3) Not applicable.
(b) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 906
of the Sarbanes-Oxley Act of 2002 are filed herewith as Exhibits 99.906 Cert.
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
President and Chairman
Date: February 28, 2007
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
President and Chairman
Date: February 28, 2007
By: /s/ Cecilia L. Gondor
-------------------------
Cecilia L. Gondor
Secretary and Treasurer
(Principal Financial Officer)
Date: February 28, 2007