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 02/28/15)
Net asset value per share	$18.55
Market price	$16.87
Premium/discount	-9.06%
Total net assets	$ 152.57 m
Market cap	$ 138.74 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

 

Review

Despite the long Chinese New Year (CNY) break, the TAIEX Index rose 3.1% to close at its highest level since 2007, on foreign buying. The market was helped by strong earnings and forward guidance and a strong technology take in the US during the CNY break. Foreign holders of Taiwan equities reached an all-time historical high of 39% at the end of February. Upstream technology names and Apple related supply chain names continued to do well on robust fourth quarter results. It was the non-technology sector that led gains with textile and financials outperforming. Plastics also outperformed thanks to the lower oil price, which helped widen the spread and hence margins. Transportation continued to see some selling pressure in anticipation of a reversal in the oil price.

 

Outlook

Taiwan has led the emerging markets in earnings upgrades, it has a high exposure to Apple products and the US market in general. At the same time, Taiwan is a beneficiary of weak commodity prices and is trading on reasonable valuations. Apple’s suppliers are likely to continue to perform well, amid stocking demand prior to the Apple Watch and other new products. Abundant liquidity should also continue to fuel positive sentiment. However, while upward momentum is likely, near term consolidation is needed for a strong base to be formed. We reduced some technology names in the recent rally and also cut in the industrial sector. The Fund remains overweight in the technology sector.

 

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Full portfolio holdings

(as at 02/28/15)

Holding	Market Value USD	Fund %
Semiconductor	37,345,692	24.5%
Taiwan Semiconductor Manufacturing Co., Ltd.	14,812,784	9.7%
MediaTek, Inc.	5,602,802	3.7%
Advanced Semiconductor Engineering, Inc.	3,753,864	2.5%
United Microelectronics Corp.	3,185,735	2.1%
Novatek Microelectronics Corp. Ltd.	1,894,220	1.2%
ILI Technology Corp.	1,668,429	1.1%
ASPEED Technology, Inc.	1,299,146	0.8%
Parade Technologies Ltd.	1,174,176	0.8%
Siliconware Precision Industries Co.	1,165,881	0.8%
CHIPBOND Technology Corp.	1,145,996	0.7%
Sino-American Silicon Products, Inc.	772,998	0.5%
Powertech Technology, Inc.	719,876	0.5%
Nanya Technology Corp	149,785	0.1%
Financial & Insurance	14,973,026	9.8%
Fubon Financial Holding Co., Ltd.	5,097,343	3.3%
Cathay Financial Holding Co., Ltd.	2,956,736	2.0%
China Development Financial Holding Corp.	2,494,453	1.6%
E. Sun Financial Holding Co., Ltd.	1,997,861	1.3%
China Life Insurance Co., Ltd.	1,347,378	0.9%
CTBC Financial Holding Co., Ltd.	1,089,255	0.7%
Electric & Machinery	13,391,074	8.8%
Yeong Guan Energy Technology Group Co., Ltd.	2,243,123	1.5%
Hota Industrial Manufacturing Co., Ltd.	1,839,290	1.2%
Teco Electric and Machinery Co., Ltd.	1,690,165	1.1%
Airtac International Group	1,504,537	1.0%
Yungtay Engineering Co., Ltd.	1,437,223	0.9%
Cub Elecparts, Inc.	1,405,297	0.9%
Iron Force Industrial Co., Ltd.	1,330,011	0.9%
Sumeeko Industries Co., Ltd.	1,070,669	0.7%
Macauto Industrial Co., Ltd.	614,393	0.4%
Hiwin Technologies Corp.	256,366	0.2%
Computer & Peripheral Equipment	12,362,333	8.1%
Advantech Co., Ltd.	3,628,299	2.4%
Pegatron Corp.	3,271,785	2.1%
Posiflex Technology, Inc.	1,673,141	1.1%
Ennoconn Corp.	1,660,182	1.1%
Axiomtek Co., Ltd.	1,332,033	0.9%
TSC Auto ID Technology Co., Ltd.	745,662	0.5%
ARBOR Technology Corp.	51,231	0.0%
Optoelectronic	11,300,806	7.4%
Largan Precision Co., Ltd.	3,669,479	2.4%
Innolux Corp.	2,408,977	1.6%
Au Optronics Corp.	2,324,009	1.5%
TPK Holding Co., Ltd.	1,474,542	1.0%
Epistar Corp.	1,423,799	0.9%
Other Electronic	10,704,038	7.0%
Hon Hai Precision Industry Co., Ltd.	5,154,833	3.4%
Catcher Technology Co., Ltd.	3,527,527	2.3%
Chroma ATE, Inc.	1,320,802	0.9%
DYNACOLOR, Inc.	700,876	0.4%

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 U.S. 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.