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Contributors: Douglas McIntyre Jon C. Ogg

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Tuesday, August 01, 2006

A Backdoor Investment Vehicle Into Cuba on Fidel Castro Illness

Stock Tickers: CUBA, RCL, CCL

So, Fidel Castro has had to temporarily cede power to his younger brother Raul. Younger may be a stretch as he is 75 years old. Castro had been operated on to repair a sharp intestinal crisis with sustained bleeding, but there had been rumors he was ill and he looked paltry in receny video while travelling in South America.

So why are we discussing this on a financial site? We do not like to play the role of a vulture in case someone dies, but we actually have an obligation to share the available information. Castro has not died, but if he does there is actually a stock play outside of the cruiselines like Royal Caribbean (RCL) and Carnival (CCL).

There is a closed-end fund called Herzfeld Caribbean Basin Fund, and its ticker is "CUBA". Here is the company's description:

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 that engage in substantial trade with, and derive substantial revenue from, operations in the Caribbean Basin Countries.

CUBA closed yesterday at $7.05, and it has a 52-week trading range of $6.32 to $8.85. The thing you have to know more than anything about this closed-end fund is that it is extremely thin volume with an average daily volume at just over 2000 shares per day. Most of the holdings are not really in Cuba, but much of the holdings are deemed to benefit if Cuba is opened up to investment and tourism down the road. You can also see a list of the fund's holdings on the website below, although you need to know that it is as of September 30, 2005.

Please understand that we are not trying to endorse this fund, but it is one worth pointing out. It has gone up in the past when there were rumors that Fidel Castro had passed away. Castro is now the world's current longest lasting ruler that is still in power of any country.

According to the company's website, the July 28 closing price was $7.13 and the closing Net Asset Value was listed as $7.59.

Jon C. Ogg
August 1, 2006

Here is the corporate website shown with the description of the fund:

http://www.herzfeld.com/favorite.htm
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