UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

July 1, 2004
Date of report (Date of earliest event reported)

The Taiwan Fund, Inc.

(800) 426-5523
(Registrant’s telephone number, including area code)

Table of Contents

Item 7.01. Regulation FD Disclosure.

     Pursuant to Regulation FD Rules 100-103, The Taiwan Fund, Inc. (the “Fund”) furnishes the July 2004 Monthly Review of the Fund’s performance by the Fund’s investment adviser.

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SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Dated: September 8, 2004

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THE TAIWAN FUND, INC. REVIEW
July 2004

Portfolio Review

Market overview and portfolio performance

During the month of July, a decline in U.S. corporate earnings in the second quarter of 2004, weak forward-looking earnings guidance, rising oil prices and increasing concerns with respect to rising interest rates resulted in negative sentiment to the overall Taiwan market. The Taiwan Stock Exchange Index (the “TAIEX”) fell to a five-month in July of 5,420, down 8.2% month-over-month in U.S. dollar terms, against the 3.2% decline for June. In July, the electronic technology shares sector was hit hard, under-performing the TAIEX by 2.6%, while the rubber and plastics sectors were the best out-performing sectors, with out-performance of 10.5% and 8% compared to the TAIEX, respectively. Notably, Integrated Circuit (“IC”) design shares had the biggest drop followed by Thin Film Transistor-Liquid Crystal Display (“TFT-LCD”) and foundry and packaging sectors. The declines in these sectors were largely attributed to concerns over end-market inventory buildups and product pricing erosion.

Notwithstanding the above, the Fund outperformed the TAIEX by 1.02% in July, partially attributable to our over-weighting in Communication and Printed Circuit Board (“PCB”) sectors and industrial cyclical stocks (i.e., rubber, steel and construction).

Market Outlook

Looking forward, the TAIEX may have some downside and drop to as low as 5,000 to 5,200 in the coming weeks, due to the following key reasons: Economic slowdown caused by oil price hikes, weaker than expected corporate profit in the third quarter, inventory buildups, low visibility for the overall technology sector and cross straight tension between Taiwan and China. However, considering the Taiwan market’s attractive valuations (i.e., current price to earnings ratio of 10.5 times versus average five-year mean of 19.0 times, the current price to book value ratio of 1.5 times, compared to five-year average of 2.3 times) and the healthy domestic demand (estimated 4% growth in 2004), we believe the outlook for the Taiwan market could remain appealing. Moreover, already-solid earnings results for the cyclical sectors, including steel, petrochemical and shipping, should continue to boost the Taiwan market.

In addition, we reiterate our positive view on Morgan Stanley Capital International’s (“MSCI”) re-weighting to the Taiwan market as this should provide a positive catalyst for the Taiwan equity market and, thus, offer the potential foreign fund inflows to boost market liquidity in the next 12 months. Note that the MSCI decision to increase the Limited Investability Factor (“LIF”), from 0.55 to 1.0 is expected to be implemented in two stages, first on November 20, 2004 and second on May 31, 2005.

Portfolio Strategy

The portfolio strategy will be to continue to hold quality blue chips in various sectors and some small-caps with growth momentum in the second half of 2004, such as PCB, handset components, IC packaging and consumer electronics. Companies with high inventory level concerns and those that are facing oversupply situations in the coming months will be reduced. Overall, the weighting in cyclical growth sectors will be maintained to wait for rebound. When the index is approaching 6,000 levels, we plan to reduce weighting in cyclical growth sectors and move towards more defensive sectors.

Total Fund Sector Allocation

Top 10 Holdings of Total Fund Portfolio

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Returns in US$ (%)*

Premium/Discount of TWN

Market Data

The daily NAV of the Fund is available from Lipper and CDA Weisenberger, or you may obtain it by calling toll free (800) 636-9242.

Lead Fund Manager: Victor Shih
Deputy Fund Manager: Sally Chang

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