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 boom three underperforming sectors were smartphone manufacturing, solar energy and integrated circuit original equipment manufacturers ("IC OEM").
Fund Review (Aribuon Reports)
The Taiwan Fund, Inc. (the "Fund") outperformed the Taiwan TAIEX Total Return Index (the "benchmark"). Although sector allocaon was negave, stock selecon was posive. On the sector level, the Fund's overweight posions in health care equipment & services, as well as underweight posions in consumer durables & apparel, retailing and food & staples retailing helped performance. In contrast, the Fund's overweight posions in semiconductors, semiconductor equipment and insurance hurt performance, as did underweight posions in transportaon, materials and telecommunicaon services. On the stock level, the best acve contributors were Alchip Technologies Ltd., Faraday Technology Corp. and Unimicron Technology Corp.; the worst acve detractors were Formosa Sumco Technology Corp., Evergreen Marine Corporaon and SDI Corp.
Key Transacons
Performance this month connued to suffer from our technology-heavy bias. As the global market panic found more fuel in the Ukraine crisis, Taiwan was relavely calm in February. We saw some volality, but the local benchmark TAIEX closed the shortened month just a lile below where we began. The MSCI Taiwan Index suffered greater losses. We took advantage of this weakness in the laer part of February to iniate posions in two stocks: Asia Vital Components Co., Ltd. ("AVC") and uPI Semiconductor Corp.
AVC produces equipment for thermal management soluons 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, supporng overall earnings growth which is currently not fully reflected in the stock. We have added AVC as a potenal re-rang 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 substute 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 Soluon 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 potenal 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
DescriponIncepon Date
Seeks long-term capital appreciaon primarily through investments in equity securies listed in Taiwan.
December 31, 1986
Total Fund Assets $301.5 (millions)
Median Market $2.7 Cap (in billions)
Distribuon Frequency
Management Firm
Fund Manager
Corrina Xiao
Lead Porolio Manager
Performance
Allianz Global Investors
US LLC
(US$ 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 Rao2 | 1.44% |
Manager's Commentary
Outlook and Strategy
Many voices in the media are breathlessly comparing Taiwan's posion to that of Ukraine. Superficial differences aside, this comparison does not stand up to any serious degree of scruny. 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 democrac 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 effecve series of global sancons is all the more reason not to expect Beijing to emulate.
Turning to the supply chain for commodies 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 Associaon.
Furthermore, given the improvements made to the semiconductor supply chain in the face of the uncertaines caused by COVID, we expect that the industry is well prepared for these relavely minor disrupons, due to higher levels of inventory. As always, we will sck to analyzing the fundamentals and remain alert for any signs of significant change in the supply chain situaon.
Returns (%)
1 Month
3 MonthYTD
1 Year
3 Year
5 Year
10 Since Year Incepon
Calendar Year Returns (%)
Past performance is not indicave of future results.
Returns are expressed in US dollars and are annualized except for periods of less than one year. Source: Virtus, ulizing 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 liabilies divided by the number of shares outstanding. NAV performance includes the deducon of management fees and other expenses. NAV and market price returns do not reflect broker sales charges or commissions, which would reduce returns. Expense Rao: 1.44%. For the one year ended August 31, 2021.
Premium/Discount (1/3/00 - 2/28/22)
1/00
Past performance is not indicave of future results.
Sector Breakdown (%)
Informaon Technology
Financials
Health Care
Industrials
Consumer Discreonary
Materials
Communicaon Services
Real Estate
Ulies
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 Corporaon
Formosa Sumco Technology Corporaon
Cathay Financial Holdings Co., Ltd.
Winbond Electronics Corp.
Pan Jit Internaonal Inc.
Asmedia Technology Inc.
Holdings and sector weighngs 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
Porolio Characteriscs
Fund Benchmark
Forward P/E Rao 18.78 15.84
P/B Rao 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.
Distribuon History (10 Year)
Risk Stascs (3 Year)
Standard Deviaon of Market Price 23.24
Long-term | Short-term | |||||
Ex-dividend Date | Record Date | Payable Date | Distribuon/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 |
Distribuon/Share includes income, long-term capital gains, and short-term capital gains.
All Porolio Holdings
As of February 28, 2022
Company | |||||
(exchange | |||||
Sector | cker) | Price TWD | Holding | Value US$ | % of Fund |
Informaon 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 Corporaon | 2408-TW | 77.10 | 4,052,000 | 11,143,542 | 3.70 |
Formosa Sumco Technology Corporaon | 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 Internaonal 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 Corporaon | 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 Corporaon | 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 Corporaon | 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 Corporaon | 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 Soluon Holding Co., Ltd. | 6781-TW | 1305.00 | 159,000 | 7,401,284 | 2.45 |
Consumer Discreonary | 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.
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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.