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 09/30/17)
Net asset value per share	$23.36
Market price	$20.58
Premium/discount	-11.90%
Total net assets	$191.37 m
Market cap	$168.65 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	8,194,938
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 09/30/17)

 

 

Cumulative Performance1						(as at 09/30/17)
%	1m	3m	YTD2	1Y	3Y	5Y	10Y
The Taiwan Fund, Inc.	-3.1	4.5	25.5	15.8	30.4	49.2	37.0
Market Price	-3.7	4.0	27.8	18.9	27.2	45.5	39.8
TSE Index	-2.9	-0.3	18.6	16.5	15.6	29.4	18.1
TAIEX Total Return Index3	-2.8	2.6	23.3	21.1	30.0	54.5	71.1
MSCI Taiwan Index	-3.4	0.8	22.6	19.9	30.5	55.4	52.5

Rolling 12 month performance1				(as at 09/30/17)
%	2017/2016	2016/2015	2015/2014	2014/2013	2013/2012
The Taiwan Fund, Inc.	15.8	21.2	-7.1	3.8	10.2
Market Price	18.9	19.6	-10.6	5.4	8.5
TSE Index	16.5	17.7	-15.7	6.6	5.0
TAIEX Total Return Index3	21.1	22.6	-12.4	9.9	8.1
MSCI Taiwan Index	19.9	22.7	-11.3	12.2	6.2

Top 10 holdings	(as at 09/30/17)
Holding	Fund %
Taiwan Semiconductor Manufacturing Co., Ltd.	9.6%
Hon Hai Precision Industry Co., Ltd.	7.3%
Largan Precision Co., Ltd.	4.4%
Cathay Financial Holding Co., Ltd.	3.3%
MediaTek, Inc.	2.8%
CTBC Financial Holding Co., Ltd.	2.5%
Nan Ya Plastics Corp.	2.4%
Formosa Plastics Corp.	2.4%
Nanya Technology Corp.	2.2%
Airtac International Group	2.1%

1	In US Dollar terms

2	Calendar year to date

3	TAIEX Total Return Index (prior to January 1, 2003, TAIEX Index)

 

 

Sector breakdown

(as at 09/30/17)

Sector Allocation	Fund %	Benchmark	Deviation
Automobile	0.0	1.3	-1.3
Biotechnology & Medical Care	0.0	0.6	-0.6
Building Material & Construction	0.0	1.4	-1.4
Cement	0.9	0.8	0.1
Chemical	0.0	1.0	-1.0
Communications & Internet	3.8	6.0	-2.2
Computer & Peripheral Equipment	5.5	5.4	0.1
Electric & Machinery	7.0	2.0	5.0
Electrical & Cable	0.0	0.3	-0.3
Electronic Parts & Components	4.7	4.3	0.4
Electronic Products Distribution	0.0	0.8	-0.8
Financial & Insurance	9.4	12.6	-3.2
Foods	1.6	2.0	-0.4
Glass & Ceramic	0.0	0.2	-0.2
Information Service	0.0	0.1	-0.1
Iron & Steel	0.6	1.9	-1.3
Oil, Gas & Electricity	1.4	3.5	-2.1
Optoelectronic	7.1	5.2	1.9
Other	4.9	3.3	1.6
Other Electronic	9.7	8.1	1.6
Paper & Pulp	0.0	0.4	-0.4
Plastics	6.1	6.4	-0.3
Rubber	0.0	1.1	-1.1
Semiconductor	24.9	26.1	-1.2
Shipping & Transportation	0.7	1.6	-0.9
Textiles	1.3	1.6	-0.3
Tourism	1.4	0.5	0.9
Trading & Consumers' Goods	1.7	1.5	0.2
Cash	7.3	0.0	7.3
OVERALL TOTAL	100.0%	100.0%	0.0%

Market review

The TAIEX Total Return Index (TAIEX) closed down 2.8% in September, after nine months of consecutive gains. There was some profit-taking, especially in the iPhone supply chain, and foreign investors sold around US$2bn of stock from the market. The launch of the new iPhone 8 was seen as uninspiring with weak sales. Weakness in iPhone related names was not surprising given that approximately half of the demand for the new iPhone arises from the iPhone X model, for which pre-ordering was not available in September.

Fund update

The Fund underperformed the TAIEX by 0.3% in September. Profit-taking in the Apple Inc. supply chain negatively impacted performance, led by Catcher Technology Co., Ltd., Merry Electronics Co., Ltd., Hon Hai Precision Industry Co., Ltd., General Interface Solution Holding Ltd. and Largan Precision Co., Ltd.. Evergreen Marine Corp. (Taiwan) Ltd. struggled on concerns of a possible reduction in shipping rates arising from increasing supplies. The Fund’s underweight position in Taiwan Semiconductor Manufacturing Co., Ltd. continued to detract from the Fund’s performance. In contrast, stocks that contributed positively to the Fund’s performance included Nanya Technology Corp. and Macronix International, which rose on rising prices for computer memory components. Global PMX Co., Ltd. and ASPEED Technology, Inc. benefitted from strong revenue growth expectations. Taiwan Paiho Ltd. outperformed given solid margins generated by its footwear materials. Epistar Corp. also rallied on optimism of strong sales of its micro-LED displays.

The Fund made no change to its core investment approach and remained focused on quality companies with strong growth profiles. The Fund continues to prefer consumer growth names with sustainable franchises, including those in the sportswear industry and automobile parts within the electronic sector. The Fund also favored its exposure to companies involved in automation. Additionally, the Fund remained overweight in technology companies in the Apple Inc. supply chain, and in the cloud, internet-of-things, gaming and semi-conductor sectors. The Fund remained underweight in telecommunications and basic materials.

Outlook

Much of the market’s direction in the near term could be driven by the strength of iPhone sales. The demand for the iPhone X will be closely observed when pre-orders commence in late October, though shipment could be constrained by the shortage of key components. If there is a reversal of the current negative sentiment around poor initial sales of the iPhone 8, then there seems to be a possibility of a rebound in the market. Continuing attractive valuations and dividend yields should provide good support for the market.

 

 

Full portfolio holdings	(as at 09/30/17)
Holding	Market Value USD	Fund %
Semiconductor	47,745,312	24.9
Taiwan Semiconductor Manufacturing Co., Ltd.	18,462,901	9.6
MediaTek, Inc.	5,310,216	2.8
Nanya Technology Corp.	4,227,186	2.2
Silergy Corp.	3,506,629	1.8
ASPEED Technology, Inc.	3,055,236	1.6
Egis Technology, Inc.	2,435,282	1.3
Parade Technologies Ltd.	2,257,090	1.2
Macronix International	1,994,807	1.0
Powertech Technology, Inc.	1,334,461	0.7
Winbond Electronics Corp.	1,255,402	0.7
Realtek Semiconductor Corp.	1,206,140	0.6
Chunghwa Precision Test Tech Co., Ltd.	827,562	0.4
Tong Hsing Electronic Industries Ltd.	700,765	0.4
Win Semiconductors Corp.	665,348	0.3
Advanced Semiconductor Engineering, Inc.	506,287	0.3
Other Electronic	18,561,443	9.7
Hon Hai Precision Industry Co., Ltd.	13,885,939	7.3
Voltronic Power Technology Corp.	2,382,700	1.2
Bizlink Holding, Inc.	2,292,804	1.2
Financial & Insurance	18,072,251	9.4
Cathay Financial Holding Co., Ltd.	6,271,531	3.3
CTBC Financial Holding Co., Ltd.	4,713,659	2.5
Yuanta Financial Holding Co., Ltd.	3,448,843	1.8
Fubon Financial Holding Co., Ltd.	3,105,603	1.6
China Life Insurance Co., Ltd.	532,615	0.2
Optoelectronic	13,542,300	7.1
Largan Precision Co., Ltd.	8,436,882	4.4
General Interface Solution Holding Ltd.	2,217,204	1.2
Epistar Corp.	1,522,411	0.8
E Ink Holdings, Inc.	780,652	0.4
Innolux Corp.	585,151	0.3
Electric & Machinery	13,483,797	7.0
Airtac International Group	4,010,934	2.1
Hota Industrial Manufacturing Co., Ltd.	3,208,917	1.7
Hiwin Technologies Corp.	3,095,251	1.6
Global PMX Co., Ltd.	2,546,580	1.3
Macauto Industrial Co., Ltd.	622,115	0.3
Plastics	11,602,952	6.1
Nan Ya Plastics Corp.	4,687,841	2.4
Formosa Plastics Corp.	4,649,941	2.4
Formosa Chemicals & Fibre Corp.	2,265,170	1.3
Computer & Peripheral Equipment	10,542,610	5.5
Ennoconn Corp.	3,837,164	2.0
Quanta Computer, Inc.	2,589,533	1.3
Advantech Co., Ltd.	1,261,453	0.7
Mitac Holdings Corp.	1,025,277	0.5
Acer, Inc.	925,767	0.5
Inventec Corp.	903,416	0.5

 

 

Full portfolio holdings (cont'd)
Holding	Market Value USD	Fund %
Other	9,376,348	4.9
Taiwan Paiho Ltd.	3,408,834	1.8
Nien Made Enterprise Co., Ltd.	2,881,909	1.5
Chailease Holding Co., Ltd.	2,649,284	1.4
KMC Kuei Meng International, Inc.	436,321	0.2
Electronic Parts & Components	8,951,159	4.7
Delta Electronics, Inc.	3,000,006	1.6
Tripod Technology Corp.	2,603,878	1.4
Primax Electronics Ltd.	1,310,843	0.7
Elite Material Co., Ltd.	1,187,178	0.6
Sinbon Electronics Co., Ltd.	549,623	0.3
King Slide Works Co., Ltd.	299,631	0.1
Communications & Internet	7,260,855	3.8
Land Mark Optoelectronics Corp.	2,373,994	1.2
Merry Electronics Co., Ltd.	1,914,787	1.0
Advanced Ceramic X Corp.	1,878,710	1.0
Wistron NeWeb Corp.	1,093,364	0.6
Trading & Consumers' Goods	3,333,791	1.7
President Chain Store Corp.	1,786,242	0.9
Poya International Co., Ltd.	1,547,549	0.8
Foods	3,084,527	1.6
Uni-President Enterprises Corp.	3,084,527	1.6
Tourism	2,682,183	1.4
Gourmet Master Co., Ltd.	2,682,183	1.4
Oil, Gas & Electricity	2,663,847	1.4
Formosa Petrochemical Corp.	2,663,847	1.4
Textiles	2,480,278	1.3
Eclat Textile Co., Ltd.	2,480,278	1.3
Cement	1,659,682	0.9
Taiwan Cement Corp.	1,659,682	0.9
Shipping & Transportation	1,264,427	0.7
Evergreen Marine Corp. (Taiwan) Ltd.	1,264,427	0.7
Iron & Steel	1,133,025	0.6
China Steel Corp.	1,133,025	0.6
Cash	13,925,595	7.3
Cash	13,925,595	7.3
Grand Total	191,366,382	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 obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any of such data. Without limiting any of the foregoing, in no event shall MSCI, any of its affiliates or any third 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.

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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.

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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.

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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.

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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.

The Taiwan Fund, Inc.

c/o State Street Bank and Trust Company

P.O. Box 5049 One Lincoln Street

Boston MA 02206-5049

Tel: 877-217-9502