Taiwan Fund : Monthly Insights – July 2023

July 2023 Monthly Insights

THE TAIWAN FUND, INC.

Manager's Commentary

Market Review

The Taiwan Stock Exchange Weighted Index ("TWSE") rose 1.51% in July 2023, in US dollar terms, with electronics again leading the rise. The top three outperforming industry groups were Technology Hardware & Equipment, Insurance and Financial Services. The top three underperforming industry groups were Consumer Services, Media & Entertainment and Consumer Discretionary Distribution & Retail. The Taiwan TPEx Exchange Index, ("TWOTCI", the over-the-counter index) declined 1.93% in July, in US dollar terms.

Fund Review (Attribution Reports)

The Taiwan Fund, Inc. (the "Fund") outperformed the Taiwan TAIEX Total Return Index (the "Benchmark") in July 2023, as it benefited from the outperformance of electronics holdings. On an industry group level, the overweight position in Technology Hardware & Equipment and the underweight position in Materials contributed positively to performance. Conversely, the Fund's performance was negatively impacted by the overweight position in Semiconductor & Semiconductor Equipment. At the stock selection level, the largest contributors were Quanta Computer, Inc., Wistron Corporation and Gigabyte Technology Co., Ltd., while the largest relative detractors were eMemory Technology, Inc., ASPEED Technology Inc., and Taiwan Semiconductor Manufacturing Company, Ltd.

Key Transactions

The total securities holdings of the Fund stood at 86.81% of assets at July month- end. This represented a slight decrease from 88.62% at June month-end. Of the Fund's securities holdings, approximately 76.71% were held in TWSE traded stocks and approximately 10.10% in OTC ("over-the-counter") securities. The major changes in the portfolio were reductions to the Semiconductor & Semiconductor Equipment and Technology Hardware & Equipment industry groups given

the weaker than expected capital expenditure in general purpose servers and continuing delays in new server platform launches. The Fund divested its positions in the Financial Services industry group in consideration of the weak loan demand in China post COVID-19. Conversely, the Fund strategically increased its positions in non-tech industry groups (i.e. capital goods, consumer durables & apparel, and food beverage & tobacco) eyeing some attractive valuations.

The Fund reduced exposure in the Semiconductor & Semiconductor Equipment industry group by reducing its position in Jentech Precision Industrial Co. Ltd. and ASPEED Technology, Inc. based on a conservative demand forecast for general purpose servers in the second half of 2023. The Fund also reduced its exposure in the Technology Hardware & Equipment industry group by reducing its positions in Lotes Co. Ltd. and Gold Circuit Electronics Ltd. based on delays in new server

Fund Data

Description	Seeks long-term
	capital appreciation
	primarily through
	investments in equity
	securities listed in Taiwan.
Inception Date	December 23, 1986
Total Fund Assets	$299.0
(millions)
Median Market	$2.84
Cap (in billions)
Distribution	Annual
Frequency
Management	Nomura Asset
Firm	Management U.S.A. Inc.

Fund Manager

Sky Chen

Lead Portfolio Manager

Performance

(US$ Returns as of 7/31/2023)

Fund Benchmark1

One Month	4.15%	1.51%
Three Month	25.08%	10.36%
One Year	32.03%	13.09%
Three Year	18.04%	12.16%
(Annualized)

Net Asset Value/Market Price

(as of 7/31/2023)

NAV/Market Price	$40.15 / $33.32

High/Low Ranges (52-Week)

High/Low NAV	$41.48 / $23.07
High/Low Market Price	$34.18 / $18.70
Premium/Discount to NAV	-17.011%
(as of 7/31/2023)

Fund Data (Common Shares)

Shares	7,447,238
Outstanding
Average Daily	7,113
Volume
Expense Ratio2	1.62%

NOMURA ASSET MANAGEMENT

1Taiwan TAIEX Total Return Index.	Nomura Asset Management U.S.A. Inc.
2Six months ended February 28, 2023, annualized, unaudited, before fee waiver.
The unaudited expense ratio after the fee waiver is 1.45%.	1

Manager's Commentary (Key Transactions continued)

platform launches and a weaker demand for general-purpose servers. The Fund realized gains by reducing its positions in Quanta Computer, Inc. and Asia Vital Components Co. Ltd., following the recent share price rally. The Fund sold off its holdings in Chailease Holding Co. Ltd. on concerns of a weakened economic situation in its major market - China. The Fund has initiated positions in Sunonwealth Electric Machine Industry Co. Ltd. and Fortune Electric Co. Ltd. in light of rising demand for heat dissipation and electric transmission products. The Fund has also gradually increased its positions in consumer related industries, notably Nien Made Enterprise Co. Ltd., Merida Industry Co. Ltd. and President Chain Store Corp. as each benefitted from the forecasted long-term consumption recovery.

Outlook and Strategy

As expected, the US Federal Reserve Board (the "Fed") raised interest rates to a range of 5.25% - 5.50% at the July FOMC ("Federal Open Market Committee") meeting. FOMC chair Powell underscored that the Fed has been able to achieve disinflation while the unemployment rate remains low. The next two U.S. Bureau of Labor Statistics Consumer Price Index ("CPI") and jobs reports are key to the September decision. On the other hand, Taiwan's exports dropped 6.6% month- on-month ("MoM") in June, with the decline widening to -4.8% in May and

to -23.8%year-on-year. Exports fell broadly across major product categories, with tech exports falling the most at 11.4% MoM. Those results were below expectations.

In July, the technology industries continued to outperform, as artificial intelligence ("AI") server providers remained the focus, but with higher volatility. In addition to the strong demand, AI server shipments have been constrained by the shortage of capacity chips, advanced packaging and no inventory burden. In contrast, Taiwan Semiconductor Manufacturing Company, Ltd. has reported a prolonged inventory adjustment at the customers' end, with an exception with regards to AI servers. They believe that AI servers have a higher growth potential in the next few years. As a result, liquidity has continued to flow into this market segment, driven by a fear-of-missing-out sentiment. We continue to have a positive view in the AI server demand for long term. However, we are carefully monitoring the changes in inventory consumption in other tech and non-tech market segments. Related tech product consumption is expected to gradually recover in pace with the tapering off of inventories in 2024. Therefore, we forecast a return to earnings growth in 2024 across all major industries. Our strategy is to hold onto positions in top tier companies in the Semiconductor, HPC ("high performance computing"), AI and green energy categories. In addition, we have carefully accumulated positions in Consumer Staples and Consumer Discretionary sectors which are expected to benefit from the anticipated consumption recovery in the mid to long term.

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Returns (%)

	1	3		1	3	5	10	Since
	Month	Month	YTD	Year	Year	Year	Year Inception
NAV	4.15	25.08	43.91	32.03	18.04	20.04	13.79	10.12
Market Price	6.32	29.75	44.30	28.20	19.76	18.96	13.01	8.56
Taiwan TAIEX	1.51	10.36	21.98	13.09	12.16	12.80	11.41	-
Total Return Index
Taiwan TAIEX	0.45	7.66	18.61	8.90	8.06	8.60	7.27	-
Price Index
MSCI Taiwan	0.78	10.01	20.87	10.08	9.74	12.60	11.36	-
Index (net)

Calendar Year Returns (%)

	2015	2016	2017	2018	2019	2020	2021	2022
NAV	-6.43	11.17	28.44	-14.96	47.11	41.97	55.09	-36.27
Market Price	-10.52	10.05	33.61	-19.11	46.75	39.81	58.26	-38.54
Taiwan TAIEX	-10.40	17.81	29.45	-7.86	32.19	35.62	29.04	-26.80
Total Return Index
Taiwan TAIEX	-13.81	13.11	24.56	-11.51	26.46	31.01	25.59	-30.15
Price Index
MSCI Taiwan	-11.72	18.54	27.53	-8.93	36.37	40.99	26.13	-29.76
Index (net)

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: Nomura Asset Management U.S.A. Inc., 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: 1.62% for the six months ended February 28, 2023, annualized, unaudited, before fee waiver. The unaudited expense ratio after the fee waiver is 1.45%.

Premium/Discount (1/3/00 - 7/31/23)

10%

0%

-10%

-20%

-30%

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

1/23 7/23

1/00

Past performance is not indicative of future results.

Sector Breakdown (%)

	Fund	Benchmark
Information	65.75	58.76
Technology
Consumer	6.79	5.67
Discretionary
Industrials	5.44	7.02
Consumer Staples	3.45	2.27
Communication	2.82	2.83
Services
Materials	2.57	7.30
Energy	0.00	1.43
Financials	0.00	12.61
Health Care	0.00	0.62
N/A	0.00	0.02
Real Estate	0.00	1.24
Utilities	0.00	0.23

Top 10 Holdings (%)
Taiwan Semiconductor	19.57
Manufacturing Co. Ltd.
eMemory Technology, Inc.	4.42
Gigabyte Technology Co. Ltd.	4.39
Asia Vital Components Co. Ltd.	4.33
Quanta Computer, Inc.	4.27
Global Unichip Corp.	4.19
Alchip Technologies Ltd.	4.07
Wistron Corp.	4.00
Delta Electronics, Inc.	3.90
Nuvoton Technology Corp.	2.67

Holdings and sector weightings are subject to change. Source: State Street Bank & Trust Company, Bloomberg L.P. as of 7/31/2023.

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Portfolio Characteristics

	Fund
Number of Issues	40
Foreign Holdings (%)	86.81
Cash and Other Assets less Liabilities (%)	13.19
Dividend Yield (%)	N.A.
As of 7/31/2023.

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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All Portfolio Holdings

As of July 31, 2023

	Company
Sector	(exchange ticker)	Price TWD	Holding	Value US$	of Fund
INFORMATION TECHNOLOGY					65.75
Alchip Technologies Ltd.	3661-TW	1,990.00	192,000	12,157,892	4.07
Asia Vital Components Co. Ltd.	3017-TW	1,855.00	224,000	12,958,331	4.33
ASPEED Technology, Inc.	5274-TW	2,320.00	77,000	5,684,375	1.90
Delta Electronics, Inc.	2308-TW	365.50	1,002,000	11,653,573	3.90
E Ink Holdings, Inc.	8069-TW	225.00	731,000	5,233,640	1.75
eMemory Technology, Inc.	3529-TW	322.00	1,374,705	13,221,962	4.42
Gigabyte Technology Co. Ltd.	2376-TW	238.50	1,809,000	13,138,911	4.39
Global Unichip Corp.	3443 TW	1,635.00	241,000	12,538,304	4.19
Globalwafers Co. Ltd.	6488-TW	514.00	234,000	3,827,216	1.28
Gold Circuit Electronics Ltd.	2368-TW	169.50	100,100	539,893	0.18
Grand Process Technology Corp.	3131-TW	662.00	7,000	147,455	0.05
Jentech Precision Industrial Co. Ltd.	3653-TW	531.00	200,000	3,379,314	1.13
Lotes Co. Ltd.	3533-TW	746.00	20,972	497,832	0.17
Nuvoton Technology Corp.	4919-TW	140.00	1,915,000	7,987,526	2.67
Parade Technologies Ltd.	4966-TW	920.00	66,000	1,932,127	0.65
Quanta Computer, Inc.	2382-TW	314.00	1,315,000	12,772,517	4.27
SDI Corp.	2351-TW	106.50	955,000	3,236,361	1.08
Taiwan Semiconductor Manufacturing Co. Ltd.	2330-TW	565.00	3,255,000	58,519,880	19.57
WinWay Technology Co. Ltd.	6515-TW	782.00	124,000	3,085,549	1.03
Wistron Corp.	3231-TW	141.50	2,658,000	11,967,830	4.00
Wiwynn Corp.	6669-TW	1,780.00	38,000	2,152,324	0.72
CONSUMER DISCRETIONARY					6.79
Bafang Yunji International Co. Ltd.	2753-TW	165.00	110,000	577,538	0.19
Eclat Textile Co. Ltd.	1476-TW	542.00	152,000	2,621,482	0.88
Feng TAY Enterprise Co. Ltd.	9910-TW	212.00	290,000	1,956,311	0.65
Fulgent Sun International Holding Co. Ltd.	9802-TW	125.00	505,000	2,008,655	0.67
Giant Manufacturing Co. Ltd.	9921-TW	232.00	120,000	885,876	0.30
Gourmet Master Co. Ltd.	2723-TW	123.50	391,000	1,536,554	0.51
Makalot Industrial Co. Ltd.	1477-TW	311.50	196,000	1,942,755	0.65
Merida Industry Co. Ltd.	9914-TW	216.50	652,000	4,491,687	1.50
Nien Made Enterprise Co. Ltd.	8464-TW	325.00	414,000	4,281,419	1.43
COMMUNICATION SERVICES					2.82
Chunghwa Telecom Co. Ltd.	2412-TW	116.00	1,285,000	4,743,131	1.59
Far EasTone Telecommunications Co. Ltd.	4904-TW	71.00	1,639,000	3,702,894	1.24
INDUSTRIALS					5.44
Advanced Energy Solution Holding Co., Ltd.	6781-TW	691.00	299,000	6,354,478	2.12
Fortune Electric Co. Ltd.	1519-TW	239.00	452,000	3,437,481	1.15
Nak Sealing Technologies Corp.	9942-TW	148.50	143,000	675,720	0.23
Sunonwealth Electric Machine Industry Co. Ltd.	2421-TW	132.00	1,378,000	5,787,981	1.94
CONSUMER STAPLES					3.45
President Chain Store Corp.	2912-TW	279.00	869,000	7,714,859	2.58
Uni-President Enterprises Corp.	1216-TW	75.30	1,080,000	2,587,752	0.87
MATERIALS					2.57
Century Iron & Steel Industrial Co. Ltd.	9958-TW	160.50	1,148,000	5,863,013	1.96
Swancor Holding Co. Ltd.	3708-TW	88.20	645,000	1,810,224	0.61

Source: State Street Bank and Trust Company, Nomura Asset Management U.S.A. Inc..	5
Note: Cash (including for these purposes cash equivalents) is not included.