Herzfeld Caribbean Basin Stock Price, News & Analysis

The Herzfeld Caribbean Basin Fund, Inc. (NASDAQ: CUBA) is a publicly traded closed-end fund in the finance and insurance sector. According to recent disclosures and stockholder approvals, the fund is in the process of converting its investment strategy to focus on a CLO Equity Strategy, with its primary investment objective changing to a total return strategy and a secondary objective of generating high current income for stockholders. The fund has announced that, following this transition, it will change its name to Herzfeld Credit Income Fund, Inc. and will continue trading on NASDAQ under the ticker symbol HERZ.

The fund’s revised strategy centers on investing in equity and junior debt tranches of collateralized loan obligations (CLOs). As described in its public communications and SEC filings, CLOs are portfolios of collateralized loans consisting primarily of below investment grade U.S. senior secured loans with a large number of distinct underlying borrowers across various industry sectors. By focusing on CLO equity and junior debt tranches, the fund is repositioning itself from its prior Caribbean Basin–oriented approach toward a credit-oriented strategy that seeks risk-adjusted total returns and high current income.

Stockholders approved the conversion to a CLO Equity Strategy and related changes at a special meeting of stockholders held on June 17, 2025, as reported in a Form 8-K filing. The proposals approved included: an amended and restated investment advisory agreement with Thomas J. Herzfeld Advisors, Inc. to permit fees based on managed assets and an incentive fee; a revision of the investment objective from long-term capital appreciation to maximizing risk-adjusted total returns with a secondary objective of generating high current income; and amendments to fundamental policies related to borrowing, issuance of senior securities, underwriting, industry concentration, real estate, commodities, and lending.

The fund has also adopted and maintained a Managed Distribution Policy, which is described in multiple press releases. Under this policy, the fund distributes all available investment income to stockholders consistent with its investment objective and requirements of the Internal Revenue Code. If sufficient investment income is not available, the fund may distribute long-term capital gains and/or return of capital to maintain its targeted distribution level. The policy has been set at an annual rate of 15% of the fund’s net asset value as of a specified determination date, with flexibility for distributions to be made on a quarterly, semi-annual, or annual basis as reviewed by the Board of Directors.

The fund’s communications emphasize that distributions under the Managed Distribution Policy may exceed investment income and available capital gains and therefore may include a return of capital for the foreseeable future. A return of capital may occur when some or all of a stockholder’s investment is paid back and does not necessarily reflect the fund’s investment performance. The fund notes that such returns of capital can decrease total assets and potentially increase the expense ratio, and that portfolio securities may need to be sold at less than opportune times to support the distribution level.

In addition to cash distributions, the fund has used a combination of cash and stock distributions. Certain distributions have been structured so that stockholders can elect to receive cash or shares of common stock, subject to a cap on the aggregate cash portion (for example, limiting total cash to 20% of the distribution, with the remainder paid in stock). The number of shares issued in lieu of cash has been determined using the volume-weighted average price of the fund’s shares on specified trading days on the Nasdaq Capital Market. For stockholders enrolled in the fund’s dividend reinvestment or distribution reinvestment plans, distributions that are not purely cash may be automatically reinvested in additional shares as described in the applicable plan documents.

The Board of Directors has also approved amendments to the fund’s Dividend Reinvestment Plan. Among the changes described, the amended plan allows the fund to issue new shares to plan participants regardless of whether the fund’s common stock is trading at a premium or discount to net asset value. Under the prior plan, the fund was required to purchase shares on the open market when the market price was below net asset value. The amended plan also specifies that the number of shares to be received upon reinvestment of distributions is determined by dividing the distribution amount by 95% of the market price per share (or, if there is no sale on the relevant date, by 95% of the average of the closing bid and asked quotations).

The fund is externally managed by Thomas J. Herzfeld Advisors, Inc., an SEC-registered investment advisor that specializes in investment analysis and account management in closed-end funds. Public statements note that the firm also specializes in investment in the Caribbean Basin and that its HERZFELD/CUBA division serves as the investment advisor to The Herzfeld Caribbean Basin Fund, Inc. The relationship with this advisor is central to the fund’s strategy, including the transition to CLO-focused investing and the implementation of a fee structure based on managed assets and an incentive component, as approved by stockholders.

Historically, the fund has communicated that its Managed Distribution Policy is intended to provide stockholders with a constant, but not guaranteed, fixed minimum rate of distribution. The Board reviews the policy on an ongoing basis and may amend, suspend, or terminate it if deemed in the best interest of the fund or its stockholders. The fund has repeatedly cautioned that the amount distributed per share is subject to change at the discretion of the Board and that the policy’s impact on the market price of the fund’s shares and any discount or premium to net asset value cannot be predicted.

Regulatory filings and press releases also highlight that the fund is subject to the Investment Company Act of 1940 and that changes to fundamental policies and investment management agreements require approval by a majority of the outstanding voting securities as defined under that Act. The fund regularly issues notices to stockholders and accompanying press releases when distributions include amounts other than net investment income, providing estimates of the composition of distributions among net investment income, net realized capital gains, and return of capital. Final tax reporting information is provided to stockholders via Form 1099-DIV for each calendar year.

As the fund transitions from its legacy Caribbean Basin focus to a CLO Equity Strategy and prepares to operate under the new name Herzfeld Credit Income Fund, Inc. with the NASDAQ ticker HERZ, the CUBA symbol and related historical information document the fund’s evolution, its managed distribution practices, and its governance decisions as reflected in stockholder votes and Board actions.