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8-K - TAIWAN FUND INCfp0015681_8k.htm
 
 
Investment objective
 
The Fund's investment objective is to seek long-term capital appreciation primarily through investments in equity securities listed in Taiwan.
 
Fund facts
(as at 07/31/15)
Net asset value per share
$17.69
Market price
$15.76
Premium/discount
-10.91%
Total net assets
$ 145.42 m
Market cap
$ 129.62 m
 
Fund statistics
Investment adviser (date of appointment)
JF International Management, Inc. (07/22/14)
Fund manager
Shumin Huang
Listed
NYSE
Launch date
12/23/86
Shares outstanding
8,224,330
Last dividend (Ex-dividend date)
$2.6332
(December 26, 2014)
Benchmark
TAIEX Total Return Index
 
Fund codes
Bloomberg
TWN
Sedol
286987895
CUSIP
874036106
ISIN
US8740361063
 
10 year performance data
(as at 07/31/15)
 
 
Cumulative performance*
(as at 07/31/15)
%
1m
3m
YTD
1Y
3Y
5Y
10Y
The Taiwan Fund, Inc.
-8.9
-10.6
-1.1
-5.6
23.2
34.2
65.3
Market Price
-11.4
-10.8
-3.6
-6.0
22.3
35.2
71.8
TSE Index
-9.2
-14.4
-6.8
-11.6
13.2
13.36
38.8
TAIEX Total Return IndexA
-7.5
-12.2
-4.4
-8.4
24.6
34.7
100.4
MSCI Taiwan Index
-7.3
-10.4
-2.7
-4.6
29.7
37.3
67.5
 
Rolling 12 month performance*  (as at 07/31/15)
%
2015/2014
2014/2013
2013/2012
2012/2011
2011/2010
The Taiwan Fund, Inc.
-5.6
12.9
15.5
-21.3
38.4
Market Price
-6.0
13.7
14.5
-20.0
38.1
TSE Index
-11.6
14.9
11.5
-19.1
23.8
TAIEX Total Return IndexA
-8.4
18.3
15.0
-16.1
28.9
MSCI Taiwan Index
-4.6
19.0
14.3
-15.5
25.3
 
Top 10 holdings
(as at 07/31/15)
Holding
Fund %
Taiwan Semiconductor Manufacturing Co., Ltd.
9.4
Hon Hai Precision Industry Co., Ltd.
5.6
Largan Precision Co., Ltd.
4.1
Cathay Financial Holding Co., Ltd.
4.1
Fubon Financial Holding Co., Ltd.
3.6
Catcher Technology Co., Ltd.
3.5
Advanced Semiconductor Engineering, Inc.
3.3
Pegatroc Corp.
3.1
CTBC Financial Holding Co., Ltd.
2.9
Eclat Textile Co., Ltd.
2.6
 
*
In US Dollar terms
A
TAIEX Total Return Index (prior to January 1, 2003, TAIEX Index)
 

 
Sector Breakdown
 
Sector
Fund %
Benchmark4
Deviation
Automobile
0.0%
1.7%
-1.7%
Biotechnology & Medical Care
0.0%
0.8%
-0.8%
Building Material & Construction
0.0%
1.7%
-1.7%
Cement
0.0%
1.1%
-1.1%
Chemical
0.0%
1.0%
-1.0%
Communications & Internet
1.6%
6.4%
-4.8%
Computer & Peripheral Equipment
6.0%
6.0%
0.0%
Electric & Machinery
6.8%
1.6%
5.2%
Electrical & Cable
0.0%
0.3%
-0.3%
Electronic Parts & Components
8.6%
4.2%
4.4%
Electronic Products Distribution
0.0%
0.8%
-0.8%
Financial & Insurance
17.1%
15.5%
1.6%
Foods
2.5%
2.0%
0.5%
Glass & Ceramic
0.0%
0.2%
-0.2%
Information Service
0.0%
0.2%
-0.2%
Iron & Steel
0.0%
2.1%
-2.1%
Oil, Gas & Electricity
1.8%
3.0%
-1.2%
Optoelectronic
5.4%
4.1%
1.3%
Other
3.7%
3.6%
0.1%
Other Electronic
11.7%
7.8%
3.9%
Paper & Pulp
0.0%
0.3%
-0.3%
Plastics
5.1%
6.2%
-1.1%
Rubber
0.0%
1.3%
-1.3%
Semiconductor
17.3%
21.8%
-4.5%
Shipping & Transportation
0.8%
1.9%
-1.1%
Textiles
6.0%
2.2%
3.8%
Tourism
0.2%
0.5%
-0.3%
Trading & Consumers' Goods
2.7%
1.7%
1.0%
Cash
2.7%
0.0%
2.7%
Overall Total
100.0%
100.0%
0.0%
 
Review
 
Weak demand and relatively high inventory levels have not only led to a disappointing second quarter 2015 (2Q15) results season but also a weaker outlook for the technology sector in the third quarter 2015 (3Q15). The TAIEX lost 7.5% in July. Apple reported lower than expected iPhone shipments in the previous quarter and gave muted sales guidance for the coming quarter, which further dampened investors’ confidence. Taiwan’s 2Q15 Gross Domestic Product (GDP) was dismal, growing annually at +0.6% against the consensus estimate of +2.6%, the slowest rate of growth in three years. Exports were the key drag, off-setting the better than expected rise in private consumption. Both foreign and local institutional investors were heavy net sellers. Small and mid-cap stocks, as well as higher beta technology companies, suffered the biggest losses over the month.
 
The Fund’s overweight position in the consumer sector contributed to performance in July. The Fund’s underweight position in Mediatek also contributed, as the stock price declined sharply due to weak smartphone demand in China. Conversely, underweight positions in both Chunghwa Telecom and Taiwan Semiconductor Manuafacturing Co., Ltd. hurt performance. Given the sharp sell-off over the month, the Fund consolidated its positions in the technology sector by adding to names that were forecast to have better earnings outlooks, including Flexium, Catcher, ASE and Largan. The Fund also exited positions in the TFT-LCD (Thin-film-transistor liquid-crystal display) and DRAM (Dynamic Random-access Memory) sectors as end demand remained muted.
 
Outlook
 
Market sentiment is likely to remain poor due to the weak 2Q15 GDP data. For the second half of the year, investors will be concerned about sluggish demand forecasts for the technology sector. However, 2Q15 macro numbers could mark the near-term bottom in terms of export and GDP growth. As Apple is likely to launch its next iPhone model with new hardware features in September of this year, the supply chain should see signs of a ramp-up in 3Q15. Outside the technology sector, the financial sector and the consumption related sectors should see decent growth in the second half of 2015. Overall, despite the uncertain outlook, we maintain a constructive view of the market given Taiwan’s relatively attractive valuation and the muted performance elsewhere in the region.
 

 
Full portfolio holdings
(as at 07/31/15)
 
Holding
Market Value USD
Fund %
Semiconductor
25,137,387
17.3%
Taiwan Semiconductor Manufacturing Co., Ltd.
13,613,528
9.4%
Advanced Semiconductor Engineering, Inc.
4,825,587
3.3%
ASPEED Technology, Inc.
1,454,015
1.0%
Parade Technologies Ltd.
1,168,918
0.8%
RichTek Technology Corp.
1,071,995
0.7%
Silicon Motion Technology Corp.
1,000,160
0.7%
MediaTek, Inc.
820,234
0.6%
CHIPBOND Technology Corp.
783,856
0.5%
Hermes Microvision, Inc.
399,094
0.3%
Financial & Insurance
24,892,476
17.1%
Cathay Financial Holding Co., Ltd
5,956,879
4.1%
Fubon Financial Holding Co., Ltd.
5,219,695
3.6%
CTBC Financial Holding Co., Ltd.
4,225,63570
2.9%
China Development Financial Holding Corp.
3,217,028
2.2%
China Life Insurance Co., Ltd.
2,909,642
2.0%
Mega Financial Holding Co., Ltd.
2,117,479
1.4%
E. Sun Financial Holding Co., Ltd.
1,246,118
0.9%
Other Electronic
17,075,434
11.7%
Hon Hai Precision Industry Co., Ltd.
8,206,681
5.6%
Catcher Technology Co., Ltd.
5,059,373
3.5%
Tung Thih Electronic Co., Ltd.
1,677,969
1.2%
Bizlink Holding, Inc.
872,554
0.6%
Sporton International, Inc.
784,505
0.5%
Voltronic Power Technology Corp.
474,352
0.3%
Electronic Parts & Components
12,498,494
8.6%
Zhen Ding Technology Holding Ltd.
3,383,080
2.3%
Delta Electronics, Inc.
2,792,661
1.9%
King Slide Works Co., Ltd.
2,566,555
1.8%
Flexium Interconnect, Inc.
2,215,495
1.5%
Cheng Uei Precision Industry Co., Ltd.
1,540,703
1.1%
Electric & Machinery
9,917,534
6.8%
Hota Industrial Manufacturing Co., Ltd.
2,768,806
1.9%
Yeong Guan Energy Technology Group Co., Ltd.
2,432,270
1.7%
Iron Force Industrial Co., Ltd.
1,862,059
1.3%
Cub Elecparts, Inc.
1,604,3986
1.1%
Sumeeko Industries Co., Ltd.
673,305
0.4%
Macauto Industrial Co., Ltd.
574,696
0.4%
Computer & Peripheral Equipment
8,809,949
6.0%
Pegatron Corp.
4,458,071
3.0%
Ennoconn Corp.
3,324,8989
2.3%
Posiflex Technology, Inc.
697,062
0.5%
Axiomtek Co., Ltd.
329,918
0.2%
Textiles
8,668,973
6.0%
Eclat Textile Co., Ltd.
3,743,645
2.6%
Makalot Industrial Co., Ltd.
3,337,64671
2.3%
Toung Loong Textile Manufacturing Co., Ltd.
1,587,682
1.1%
 

 
Full portfolio holdings (cont'd)
 
Holding
Market Value USD
Fund %
Optoelectronic
7,798,299
5.4%
Largan Precision Co., Ltd.
5,989,421
4.1%
Radiant Opto-Electronics Corp.
1,074,830
0.8%
Gigasolar Materials Corp.
734,048
0.5%
Plastics
7,428,218
5.1%
Nan Ya Plastics Corp.
3,080,816
2.1%
Formosa Chemicals & Fibre Corp.
2,203,380
1.5%
Formosa Plastics Corp.
2,144,022
1.5%
Other
5,411,460
3.7%
Taiwan Paiho Ltd.
1,748,609
1.2%
Pou Chen Corp.
1,282,777
0.9%
Merida Industry Co., Ltd.
1,005,717
0.7%
KMC Kuei Meng International, Inc.
704,734
0.5%
Sunspring Metal Corp.
669,623
0.4%
Trading & Consumers' Goods
3,935,805
2.7%
President Chain Store Corp.
1,686,458
1.1%
Poya Co., Ltd.
1,578,869
1.1%
Taiwan FamilyMart Co., Ltd.
670,478
0.5%
Foods
3,593,277
2.5%
Uni-President Enterprises Corp.
3,593,277
2.5%
Oil, Gas & Electricity
2,586,256
1.8%
Formosa Petrochemical Corp.
2,586,256
1.8%
Communications & Internet
2,388,107
1.6%
Wistron NeWeb Corp.
2,388,107
1.6%
Shipping & Transportation
1,110,583
0.8%
Eva Airways Corp.
565,431
0.4%
China Airlines Ltd.
545,152
0.4%
Tourism
287,664
0.2%
TTFB Co., Ltd.
287,664
0.2%
Cash
3,876,662
2.7%
Grand Total
145,416,578
100.0%
 

 
Source: MSCI. Neither MSCI nor any other party involved in or related to compiling, computing or creating the MSCI data makes any express of implied warranties or representations with respect to such data (or the results to be o bta ined by the use thereof), and all su ch parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any of s uch data. Without limiting any of the foregoing, in no eve nt sha ll MSCI, any of its affiliates or any thir d party involved in or related to compiling computing or creating the data have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages. No further distribution or dissemination of the MSCI data is permitted without MSCI's express written consent.
 
Important Information
 
This document is issued and approved by JF International Management, Inc. ("JFIMI"), as investment advisor of The Taiwan Fund, Inc. (the ''Fund''). JFIMI is an investment advisor registered with the US Securities and Exchange Commission. Certain information herein is believed to be reliable but has not been verified by JFIMI. JFIMI makes no representation or warranty and does not accept any responsibility in relation to such information or for opinion or conclusion which the reader may draw from this newsletter.
 
The Fund is classified as a diversified investment company under the US Investment Company Act of 1940 as amended. It meets the criteria of a closed end US fund and its shares are listed on the New York Stock Exchange. JFIMI has been appointed investment advisor to the Fund.
 
This newsletter does not constitute an offer of shares. Closed-end funds, unlike open-end funds, are not continuously offered. After the initial public offering, shares are bought and sold on the open market through a stock exchange. JFIMI, its ultimate and intermediate holding companies, subsidiaries, affiliates, clients, directors or staff may, at any time, have a position in the market referred to herein, and may buy or sell securities, currencies, or any other financial instruments in such markets. The information or opinion expressed in this newsletter should not be construed to be a recommendation to buy or sell any security, including the securities, commodities, currencies or financial instruments referred to herein.
Portfolio holdings are subject to change daily.
 
It should not be assumed that any of the securities transactions or holdings discussed here were or will prove to be profitable, or that the investment recommendations or decisions we make in the future will be profitable or will equal the investment performance of the securities discussed herein.
 
Investing in the Fund involves certain considerations in addition to the risks normally associated with making investments in securities. The value of the shares issued by the Fund, and the income from them, may go down as well as up and there can be no assurance that upon sale, or otherwise, investors will receive back the amount originally invested. There can be no assurance that you will receive comparable performance returns. Movements in foreign exchange rates may have a separate effect, unfavorable as well as favorable, on the gain or loss otherwise experienced on an investment. Past performance is not a guide to future returns. Accordingly, the Fund is only suitable for investment by investors who are able and willing to withstand the total loss of their investment. In particular, prospective investors should consider the following risks:
 
Discretionary investment is not risk-free. The past operating performance does not guarantee a minimum return for the discretionary investment fund. Apart from exercising the duty of care of a prudent adviser, JFIMI will not be responsible for the profit or loss of the discretionary investment fund, nor guarantee a minimum return.
 
It should be noted that investment in the Fund is only suitable for sophisticated investors who are aware of the risk of investing in Taiwan and should be regarded as long term. Funds which invest in one country carry a higher degree of risk than those with portfolios diversified across a number of markets.
Investment in the securities of smaller and unquoted companies can involve greater risk than is customarily associated with investment in larger, more established, companies. In particular, smaller companies often have limited product lines, markets or financial resources and their management may be dependent on a smaller number of key individuals. In addition, the market for stock in smaller companies is often less liquid than that for stock in larger companies, bringing with it potential difficulties in acquiring, valuing and disposing of such stock. Proper information for determining their value, or the risks to which they are exposed, may not be available.
Investments within emerging markets such as Taiwan can be of higher risk. Many emerging markets, and the companies quoted on their stock exchanges, are exposed to the risks of political, social and religious instability, expropriation of assets or nationalization, rapid rates of inflation, high interest rates, currency depreciation and fluctuations and changes in taxation which may affect the Fund's income and the value of its investments.
The marketability of quoted shares may be limited due to foreign investment restrictions, wide dealing spreads, exchange controls, foreign ownership restrictions, the restricted opening of stock exchanges and a narrow range of investors. Trading volume may be lower than on more developed stock markets, and equities are less liquid. Volatility of prices can also be greater than in more developed stock markets. The infrastructure for clearing, settlement and registration on the primary and secondary markets may be undeveloped. Under certain circumstances, there may be delays in settling transactions in some of the markets.