Taiwan Fund : Monthly Insights - January 2022

January 2022 Monthly Insights

THE TAIWAN FUND, INC.

Manager's Commentary

Market Review

The Taiwan Stock Exchange closed the month of January 2022 down 3.49% in US Dollar terms, with the technology sector down 2.97%, non-technology down 6.77%, the financial sector up 1.61% and over-the-counter ("OTC") stocks down 9.86%. The top three outperforming sectors were integrated circuit thoroughfare business, banking and financial holding. The bottom three underperforming sectors were smartphone manufacturing, shipping and optical lens.

Fund Review (Attribution Reports)

The Taiwan Fund, Inc. (the "Fund") underperformed the Taiwan TAIEX Total Return Index (the "benchmark"). Although stock selection was negative, sector allocation was positive. On the sector level, the Fund's overweight positions in semiconductors & semiconductor equipment, as well as underweight positions in transportation, technology hardware & equipment and retailing helped performance. In contrast, the Fund's overweight positions in insurance and health care equipment & services hurt performance, as did underweight positions in banks, telecommunication services and energy. On the stock level, the best active contributors, versus the benchmark, were MediaTek Inc., Evergreen Marine Corp. Taiwan Ltd. and Momo Com Inc. We did not own these names. The worst active detractors were Silergy Corp., eMemory Technology, Inc. and Unimicron Technology Corp. Our underperformance resulted from their relative overweight position.

Key Transactions

Performance was impacted by our tilt towards technology over non-technology sectors in January. The growth style in technology suffered from increasingly hawkish market expectations for United States Federal Reserve ("Fed") policy in 2022. Naturally, stocks with higher valuations pulled back substantially, including Silergy Corp., eMemory Technology, Inc., Alchip Technologies Ltd. and Faraday Technology Corp. We trimmed several of these positions in January to ensure that we have flexibility to allocate more capital to these core names in the near future, if they fall much further.

Another area that impacted performance was our overweight to silicon wafer stocks which were hurt by the break of the Globalwafers Co., Ltd/Siltronic deal and fears of future overcapacity. In this case, we continue to hold our positions and will look to buy more in this high-conviction space if prices continue to slide.

Elsewhere, we took some risk off the table by reducing our positions in Unimicron Technology Corp., Kinsus Interconnect Technology Corp. and Pan Jit International, Inc. Some of these investments have become a little crowded by local institutional investors and this has added to volatility and potential liquidity risks.

We also exited the marine shipping industry due to expectations that freight rates will decline after the Lunar New Year. We took small losses in Evergreen Marine Corp. Taiwan Ltd. and Wan Hai Lines Ltd., our two holdings in the space.

Over the month, we built up our holding in Cathay Financial Holding Co., Ltd. to give us more exposure to the financials sector. This takes our exposure to financials from 3.6% at the end of December to 6.2% as at the end of January.

At the end of the month, as the market sell-off accelerated, we added a few technology names. Two new small positions were initiated in Jentech Precision Industrial Co, Ltd. and Nuvoton Technology Corp. We also added slightly to our holdings in Nan Ya Printed Circuit Board Corp., Gigabyte Technology Co., Ltd. and Faraday Technology Corp. on price weakness.

Fund Data

Description	Seeks long-term
	capital appreciation
	primarily through
	investments in equity
	securities listed in Taiwan.
Inception Date	December 31, 1986
Total Fund Assets	$298.9
(millions)
Median Market	$2.9
Cap (in billions)
Distribution	Annual
Frequency
Management	Allianz Global Investors
Firm	US LLC

Fund Manager

Corrina Xiao

Lead Portfolio Manager

Performance

(US$ Returns as of 1/31/2022)

Fund Benchmark1

One Month	-8.61%	-3.49%
Three Month	-1.57%	4.17%
One Year	39.77%	20.78%
Three Year	41.69%	29.77%
(Annualized)

Net Asset Value/Market Price

(as of 1/31/2022)

NAV/Market Price	$40.01 / $33.94

High/Low Ranges (52-Week)

High/Low NAV	$46.45 / $31.06
High/Low Market Price	$39.60 / $26.94
Premium/Discount to NAV	-15.17
(as of 1/31/202)

Fund Data (Common Shares)

Shares	7,470,494
Outstanding
Average Daily	15,065
Volume
Expense Ratio2	1.44%

1Taiwan TAIEX Total Return Index.

2One year ended August 31, 2021.

January 2022 Monthly Insights

THE TAIWAN FUND, INC.

Manager's Commentary

Outlook and Strategy

As discussed in last month's Outlook, the market did indeed experience an unpleasant start to 2022. We can find no other cause for the volatility except for fears over Fed policy. As there are no changes to our fundamental investment theses for key investments, such as those we hold in application-specific integrated circuit ("ASIC"), silicon wafer and the foundry industries, we have not taken as much risk off the table as might have been expected.

While we do not try to anticipate short-term policy changes, such as those likely to be taken by the Fed, we do take steps to try to protect the Fund from volatility. Our strategy here is to rebalance within technology away from growth names and into more value names. It will be helpful to clarify what is meant by a "value technology stock," which might seem like a contradiction in terms. In Taiwan, the market is heavily dominated by technology stocks and, within the space, the rule of thumb is that companies with dividend yields of at least 4% qualify as value stocks. We plan to diversify our technology positions more widely over the course of the coming weeks and months by expanding our holdings in such value technology names. We will maintain our holdings in growth technology stocks, based on our fundamental research into industrial trends and, of course, our stock-picking system.

We anticipate that the diversification and rebalancing of the technology holdings in the portfolio will provide some protection and flexibility to respond to any further market dislocations.

Apart from the changes to the technology holdings in the portfolio, we have also been building up our exposure in financials, which we believe will also offer some downside mitigation in case of a panic in growth stocks later in 2022.

January 2022 Monthly Insights

THE TAIWAN FUND, INC.

Returns (%)

	1	3		1	3	5	10	Since
	Month	Month	YTD	Year	Year	Year	Year Inception
NAV	-8.61	-1.57	-8.61	39.77	41.69	25.40	15.08	10.56
Market Price	-9.66	2.72	-9.66	36.58	39.70	25.05	14.49	8.99
Taiwan TAIEX	-3.49	4.17	-3.49	20.78	29.77	20.46	13.62	-
Total Return Index
MSCI Taiwan	-1.97	5.62	-1.97	16.08	32.71	21.34	13.94	-
Index (net)
Taiwan TAIEX	-3.50	4.02	-3.50	17.54	25.26	16.09	9.60	-
Price Index

Calendar Year Returns (%)

	2014	2015	2016	2017	2018	2019	2020	2021
NAV	-2.25	-6.43	11.17	28.44	-14.96	47.11	41.97	55.09
Market Price	-1.28	-10.52	10.05	33.61	-19.11	46.75	39.81	58.26
Taiwan TAIEX	5.05	-10.40	17.81	29.45	-7.86	32.19	35.62	29.04
Total Return Index
MSCI Taiwan	9.36	-11.72	18.54	27.53	-8.93	36.37	40.99	26.13
Index (net)
Taiwan TAIEX	1.93	-13.81	13.11	24.56	-11.51	26.46	31.01	25.59
Price Index

Past performance is not indicative of future results.

Returns are expressed in US dollars and are annualized except for periods of less than one year. Source: Virtus, utilizing data from State Street Bank & Trust company. Returns for the Fund are historical returns that reflect changes in net asset value and market price per share during each period and assume that dividends and capital gains, if any, were reinvested. Net asset value is total assets less total liabilities divided by the number of shares outstanding. NAV performance includes the deduction of management fees and other expenses. NAV and market price returns do not reflect broker sales charges or commissions, which would reduce returns. Expense Ratio: 1.44%. For the one year ended August 31, 2021.

Premium/Discount (1/3/00 - 1/31/22)

10%

0%

-10%

-20%

-30%

1/00

1/01

1/02

1/03

1/04

1/05

1/06

1/07

1/08

1/09

1/10

1/11

1/12

1/13

1/14

1/15

1/16

1/17

1/18

1/19

1/20

1/21

1/22

Past performance is not indicative of future results.

Sector Breakdown (%)

	Fund	Benchmark
Information	79.69	58.54
Technology
Financials	6.23	12.51
Health Care	2.29	0.38
Industrials	1.55	7.25
Consumer	0.09	5.28
Discretionary
Materials	0.00	8.11
Communication	0.00	2.83
Services
Real Estate	0.00	1.21
Utilities	0.00	0.14
Consumer Staples	0.00	2.06
Energy	0.00	1.70

Top 10 Holdings (%)
Taiwan Semiconductor	26.99
Manufacturing Co., Ltd.
Alchip Technologies Ltd.	6.92
Formosa Sumco Technology	3.92
Corporation
Unimicron Technology Corp.	3.69
Nanya Technology Corporation	3.28
Winbond Electronics Corp.	3.00
Cathay Financial Holdings Co., Ltd.	2.91
Silergy Corp.	2.79
Asmedia Technology Inc.	2.76
Faraday Technology Corp.	2.56
Holdings and sector weightings are
subject to change. As of 1/31/2022.

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January 2022 Monthly Insights

THE TAIWAN FUND, INC.

Portfolio Characteristics

	Fund	Benchmark
Forward P/E Ratio	18.40	16.91
P/B Ratio	3.33	2.48
Number of Issues	30	935
Foreign Holdings (%)	89.84	100.00
Cash (%)	10.16	0.00
Dividend Yield (%)	1.57	1.87
As of 1/31/2022.

Risk Statistics (3 Year)

Beta	1.17
R²	0.85
Standard Deviation of NAV	23.98
Standard Deviation of Market Price	23.16

Distribution History (10 Year)

					Long-term	Short-term
Ex-dividend Date	Record Date	Payable Date	Distribution/Share	Income	Capital Gain	Capital Gain
12/26/14	12/30/14	1/9/15	2.633200	0.000000	2.633200	0.000000
12/28/17	12/29/17	1/9/18	0.660000	0.660000	0.000000	0.000000
12/20/18	12/21/18	1/4/19	1.707800	0.000000	1.707800	0.000000
12/27/19	12/30/19	1/10/20	1.699100	1.469500	0.164500	0.065100
12/28/20	12/29/20	1/8/21	3.312200	0.375900	0.615600	2.320700
12/27/21	12/28/21	1/10/22	2.922700	0.478000	2.444700	0.000000

Distribution/Share includes income, long-term capital gains, and short-term capital gains.

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January 2022 Monthly Insights

THE TAIWAN FUND, INC.

All Portfolio Holdings

As of January 31, 2022

	Company
	(exchange
Sector	ticker)	Price TWD	Holding	Value US$	% of Fund
Information Technology					79.69
Taiwan Semiconductor Manufacturing Co., Ltd.	2330-TW	636.00	3,529,000	80,694,758	26.99
Alchip Technologies Ltd.	3661-TW	935.00	615,000	20,673,941	6.92
Formosa Sumco Technology Corporation	3532-TW	282.00	1,155,000	11,710,290	3.92
Unimicron Technology Corp.	3037-TW	200.00	1,536,000	11,044,798	3.69
Nanya Technology Corporation	2408-TW	72.00	3,788,000	9,805,709	3.28
Winbond Electronics Corp.	2344-TW	29.95	8,325,000	8,964,326	3.00
Silergy Corp.	6415-TW	3630.00	64,000	8,352,628	2.79
Asmedia Technology Inc.	5269-TW	1550.00	148,000	8,247,645	2.76
Faraday Technology Corp.	3035-TW	199.50	1,066,000	7,646,042	2.56
eMemory Technology, Inc.	3529-TW	1570.00	125,000	7,055,799	2.36
GlobalWafers Co., Ltd.	6488-TW	771.00	249,000	6,902,243	2.31
Pan Jit International Inc.	2481-TW	90.50	1,852,000	6,025,958	2.02
SDI Corporation	2351-TW	150.50	1,094,000	5,919,573	1.98
Nan Ya Printed Circuit Board Corporation	8046-TW	472.00	348,000	5,905,515	1.98
Gigabyte Technology Co., Ltd.	2376-TW	137.50	1,121,000	5,541,724	1.85
Yageo Corporation	2327-TW	459.00	322,000	5,313,799	1.78
Novatek Microelectronics Corp.	3034-TW	471.00	303,000	5,130,977	1.72
Kinsus Interconnect Technology Corp.	3189-TW	201.50	611,000	4,426,422	1.48
Visual Photonics Epitaxy Co., Ltd.	2455-TW	127.00	881,000	4,022,686	1.35
Win Semiconductors Corp.	3105-TW	335.50	303,000	3,654,868	1.22
LARGAN Precision Co., Ltd.	3008-TW	2030.00	45,000	3,284,317	1.10
ASPEED Technology, Inc.	5274-TW	3030.00	30,000	3,268,138	1.09
Nuvoton Technology Corporation	4919-TW	143.00	555,000	2,853,419	0.95
Jentech Precision Industrial Co., Ltd	3653-TW	390.00	127,000	1,780,758	0.60
Financials					6.23
Cathay Financial Holdings Co., Ltd.	2882-TW	63.30	3,819,000	8,691,404	2.91
Fubon Financial Holding Co., Ltd.	2881-TW	75.60	2,304,694	6,264,287	2.10
Chailease Holding Co. Ltd.	5871-TW	251.50	404,000	3,653,052	1.22
Health Care					2.29
Pegavision Corp.	6491-TW	396.00	480,000	6,833,969	2.29
Industrials					1.55
Advanced Energy Solution Holding Co., Ltd.	6781-TW	1480.00	87,000	4,629,323	1.55
Consumer Discretionary					0.09
Global PMX Co., Ltd.	4551-TW	156.00	49,000	274,826	0.09

Source: State Street Bank and Trust Company, Virtus.

Note: Cash (including for these purposes cash equivalents) is not included.

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