Manager's Commentary

Market Review

The Taiwan Stock Exchange closed the month of February 2022 down 0.91% in US dollar terms, with the technology sector down 2.85%, the non-technology sector up 3.99%, the financial sector down 0.47% and over-the-counter ("OTC") stocks down 0.80%. The top three outperforming sectors were shipping, printed circuit board (PCB) manufacturing and leisure & tourism. The boom three underperforming sectors were smartphone manufacturing, solar energy and integrated circuit original equipment manufacturers ("IC OEM").

Fund Review (Aribuon Reports)

The Taiwan Fund, Inc. (the "Fund") outperformed the Taiwan TAIEX Total Return Index (the "benchmark"). Although sector allocaon was negave, stock selecon was posive. On the sector level, the Fund's overweight posions in health care equipment & services, as well as underweight posions in consumer durables & apparel, retailing and food & staples retailing helped performance. In contrast, the Fund's overweight posions in semiconductors, semiconductor equipment and insurance hurt performance, as did underweight posions in transportaon, materials and telecommunicaon services. On the stock level, the best acve contributors were Alchip Technologies Ltd., Faraday Technology Corp. and Unimicron Technology Corp.; the worst acve detractors were Formosa Sumco Technology Corp., Evergreen Marine Corporaon and SDI Corp.

Key Transacons

Performance this month connued to suffer from our technology-heavy bias. As the global market panic found more fuel in the Ukraine crisis, Taiwan was relavely calm in February. We saw some volality, but the local benchmark TAIEX closed the shortened month just a lile below where we began. The MSCI Taiwan Index suffered greater losses. We took advantage of this weakness in the laer part of February to iniate posions in two stocks: Asia Vital Components Co., Ltd. ("AVC") and uPI Semiconductor Corp.

AVC produces equipment for thermal management soluons used in servers and related hardware. The company has enjoyed steady sales growth momentum into 2022, driven by the increasing share of highly profitable server-related sales in its product mix. Our analysis of AVC and gross margin suggests that this steady improvement will persist, supporng overall earnings growth which is currently not fully reflected in the stock. We have added AVC as a potenal re-rang opportunity.

Turning to uPI Semiconductor Corp., this newly listed analog integrated circuit design company has a solid technology background, once again related to the server industry. We expect that the company's products could successfully penetrate the notebook/ personal computer market, which would likely increase its earnings over the coming years.

Furthermore, this firm is a good substute for Silergy Corp., which has a similar profile but is more expensive and suffers from more China-related risk than uPI Semiconductor Corp.

We also added slightly to our holdings in Advanced Energy Soluon Holding Co., Ltd., Nan Ya Printed Circuit Board Corp., Faraday Technology Corp. and Sino-American Silicon Products, Inc. on price weakness.

During this uncertainty, we are, in general, looking to add companies with growth potenal that will be sustainable into at least 2023. On the other hand, we sold out of Novatek Microelectronics Corp. this month at levels which might be considered cheap. We now believe, however, that the driver integrated circuit industry could suffer going forward due to weak end-demand through second half 2022 into 2023.

1Taiwan TAIEX Total Return Index. 2One year ended August 31, 2021.

Fund Data

DescriponIncepon Date

Seeks long-term capital appreciaon primarily through investments in equity securies listed in Taiwan.

December 31, 1986

Total Fund Assets $301.5 (millions)

Median Market $2.7 Cap (in billions)

Distribuon Frequency

Management Firm

Fund Manager

Corrina Xiao

Lead Porolio Manager

Performance

Allianz Global Investors

US LLC

(US$ Returns as of 2/28/2022)

Annual

Fund Benchmark1

One Month

0.87%

-0.91%

Three Month

-4.49%

0.60%

One Year

31.79%

12.96%

Three Year

39.26%

27.53%

(Annualized)

Net Asset Value/Market Price

(as of 2/28/2022)

NAV/Market Price

$40.36 / $33.83

High/Low Ranges (52-Week)

High/Low NAV

$46.45 / $31.06

High/Low Market Price

$39.60 / $26.94

Premium/Discount to NAV

-16.18

(as of 2/28/2022)

Fund Data (Common Shares)

Shares

7,470,494

Outstanding

Average Daily

7,342

Volume

Expense Rao2

1.44%

Manager's Commentary

Outlook and Strategy

Many voices in the media are breathlessly comparing Taiwan's posion to that of Ukraine. Superficial differences aside, this comparison does not stand up to any serious degree of scruny. Nonetheless, we have seen foreign investors express their concerns, notably with the American Depositary Receipt ("ADR") for Taiwan Semiconductor Manufacturing Co., Ltd. trading at a discount for the first me since the COVID market crash.

The performance of the Russians in Ukraine, along with the surprisingly unified response from the democrac world, has made chances of a similar tragedy here even less likely than before. In China, cooler heads prevail, despite all the inflammatory rhetoric in the media on the Taiwan issue. Russia's rapid economic collapse at the hands of a coordinated and stunningly effecve series of global sancons is all the more reason not to expect Beijing to emulate.

Turning to the supply chain for commodies linked to semiconductor manufacturing, we checked with the industry and there is no immediate threat to the overall semiconductor supply chain. From the demand side, Russia accounts for less than 0.1% of global chip purchases, according to Semiconductor Industry Associaon.

Furthermore, given the improvements made to the semiconductor supply chain in the face of the uncertaines caused by COVID, we expect that the industry is well prepared for these relavely minor disrupons, due to higher levels of inventory. As always, we will sck to analyzing the fundamentals and remain alert for any signs of significant change in the supply chain situaon.

Returns (%)

1 Month

3 MonthYTD

1 Year

3 Year

5 Year

10 Since Year Incepon

Calendar Year Returns (%)

Past performance is not indicave of future results.

Returns are expressed in US dollars and are annualized except for periods of less than one year. Source: Virtus, ulizing 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 liabilies divided by the number of shares outstanding. NAV performance includes the deducon of management fees and other expenses. NAV and market price returns do not reflect broker sales charges or commissions, which would reduce returns. Expense Rao: 1.44%. For the one year ended August 31, 2021.

Premium/Discount (1/3/00 - 2/28/22)

1/00

Past performance is not indicave of future results.

Sector Breakdown (%)

Informaon Technology

Financials

Health Care

Industrials

Consumer Discreonary

Materials

Communicaon Services

Real Estate

Ulies

Consumer Staples

Energy

Fund Benchmark

84.28 6.52 2.48 2.45

0.10 0.00 0.00 0.00 0.00 0.00 0.00

Top 10 Holdings (%)

Taiwan Semiconductor Manufacturing Co., Ltd.

Alchip Technologies Ltd.

Unimicron Technology Corp.

Faraday Technology Corp.

Nanya Technology Corporaon

Formosa Sumco Technology Corporaon

Cathay Financial Holdings Co., Ltd.

Winbond Electronics Corp.

Pan Jit Internaonal Inc.

Asmedia Technology Inc.

Holdings and sector weighngs are subject to change. As of 2/28/2022.

57.33

12.51

0.40 8.07

5.23

8.34 2.96 1.26 0.14

2.05

1.72

25.22

7.82

5.11

4.01 3.70

3.51

3.27

3.25

3.16

2.98

Porolio Characteriscs

Fund Benchmark

Forward P/E Rao 18.78 15.84

P/B Rao 3.07 1.74

Number of Issues

33 938

Foreign Holdings (%) 95.83 100.00

Cash (%) 4.17 0.00

Dividend Yield (%) 1.52 2.07

As of 2/28/2022.

Distribuon History (10 Year)

Risk Stascs (3 Year)

Standard Deviaon of Market Price 23.24

Long-term

Short-term

Ex-dividend Date

Record Date

Payable Date

Distribuon/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

Distribuon/Share includes income, long-term capital gains, and short-term capital gains.

All Porolio Holdings

As of February 28, 2022

Company

(exchange

Sector

cker)

Price TWD

Holding

Value US$

% of Fund

Informaon Technology

84.28

Taiwan Semiconductor Manufacturing Co., Ltd.

2330-TW

604.00

3,529,000

76,030,533

25.22

Alchip Technologies Ltd.

3661-TW

1075.00

615,000

23,582,129

7.82

Unimicron Technology Corp.

3037-TW

254.00

1,702,000

15,420,296

5.11

Faraday Technology Corp.

3035-TW

272.50

1,245,000

12,101,391

4.01

Nanya Technology Corporaon

2408-TW

77.10

4,052,000

11,143,542

3.70

Formosa Sumco Technology Corporaon

3532-TW

257.00

1,155,000

10,588,015

3.51

Winbond Electronics Corp.

2344-TW

33.00

8,325,000

9,799,358

3.25

Pan Jit Internaonal Inc.

2481-TW

100.50

2,654,000

9,514,072

3.16

Asmedia Technology Inc.

5269-TW

1700.00

148,000

8,974,496

2.98

Silergy Corp.

6415-TW

3640.00

64,000

8,309,613

2.76

eMemory Technology, Inc.

3529-TW

1845.00

125,000

8,226,324

2.73

Nan Ya Printed Circuit Board Corporaon

8046-TW

524.00

392,000

7,326,841

2.43

GlobalWafers Co., Ltd.

6488-TW

688.00

249,000

6,110,647

2.03

Gigabyte Technology Co., Ltd.

2376-TW

140.00

1,124,000

5,612,984

1.86

SDI Corporaon

2351-TW

131.00

1,094,000

5,111,967

1.70

Kinsus Interconnect Technology Corp.

3189-TW

227.00

611,000

4,947,280

1.64

uPI Semiconductor Corp.

6719-TW

776.00

149,000

4,124,273

1.37

Nuvoton Technology Corporaon

4919-TW

136.50

839,000

4,085,019

1.35

Visual Photonics Epitaxy Co., Ltd.

2455-TW

111.50

881,000

3,503,888

1.16

Win Semiconductors Corp.

3105-TW

302.00

303,000

3,263,991

1.08

LARGAN Precision Co., Ltd.

3008-TW

2020.00

45,000

3,242,376

1.08

ASPEED Technology, Inc.

5274-TW

2720.00

30,000

2,910,647

0.97

Hon Hai Precision Industry Co., Ltd.

2317-TW

103.00

790,000

2,902,443

0.96

Sino-American Silicon Products Inc.

5483-TW

182.00

417,000

2,707,116

0.90

Asia Vital Components Co., Ltd.

3017-TW

110.00

537,000

2,107,009

0.70

Jentech Precision Industrial Co., Ltd.

3653-TW

382.00

127,000

1,730,480

0.57

Yageo Corporaon

2327-TW

451.50

46,000

740,824

0.25

Financials

6.52

Cathay Financial Holdings Co., Ltd.

2882-TW

62.30

4,439,000

9,864,444

3.27

Fubon Financial Holding Co., Ltd.

2881-TW

75.10

2,304,694

6,173,801

2.05

Chailease Holding Co. Ltd.

5871-TW

251.00

404,000

3,617,050

1.20

Health Care

2.48

Pegavision Corp.

6491-TW

437.00

480,000

7,482,076

2.48

Industrials

2.45

Advanced Energy Soluon Holding Co., Ltd.

6781-TW

1305.00

159,000

7,401,284

2.45

Consumer Discreonary

0.10

Global PMX Co., Ltd.

4551-TW

160.50

52,000

297,699

0.10

Source: State Street Bank and Trust Company, Virtus.

5

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

This is an excerpt of the original content. To continue reading it, access the original document here.

Attachments

  • Original Link
  • Original Document
  • Permalink

Disclaimer

The Taiwan Fund Inc. published this content on 18 April 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 18 April 2022 14:03:08 UTC.