UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-04893
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THE TAIWAN FUND, INC.
(Exact name of registrant as specified in charter)
225 FRANKLIN STREET
BOSTON, MA 02110
(Address of principal executive offices)(Zip code)
(Name and Address of Agent for Service) Copy to:
State Street Bank and Trust Company Leonard B. Mackey, Jr., Esq.
Attention: Mary Moran Zeven Clifford Chance US LLP
Assistant Secretary 31 West 52nd Street
225 Franklin Street New York, New York 10019-6131
Boston, Massachusetts 02110
Registrant's telephone number, including area code: 1-800-636-9242
Date of fiscal year end: August 31, 2005
Date of reporting period: August 31, 2005
1
ITEM 1. REPORT TO STOCKHOLDERS.
2
THE TAIWAN
FUND, INC.(R)
. . . . . . . . . . . . . . . .
THE TAIWAN
Annual Report FUND, INC.
August 31, 2005 WHAT'S INSIDE
Page
----
Chairman's Statement 2
Report of the Investment 4
Manager
Portfolio Snapshot 12
Sector Allocation 13
Investments 14
Financial Statements 16
Notes to Financial 19
Statements
Report of Independent 23
Registered Public
Accounting Firm
Other Information 24
Summary of Dividend 26
Reinvestment and
Cash Purchase Plan
Directors and Officers 29
. . . . . . . . . . . . .
CHAIRMAN'S STATEMENT
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Dear Shareholders:
We are pleased to present the Annual Report of The Taiwan Fund, Inc. (the
"Fund") for the fiscal year ended August 31, 2005.
On August 31, 2005, the Fund's net asset value ("NAV") per share was US$14.76.
The Fund's NAV increased by 15.8% in U.S. dollar terms and increased by 11.1% in
New Taiwan ("NT") dollar terms for the fiscal year. During the same period, the
Taiwan Stock Exchange Index (the "TAIEX") increased by 8.8% in U.S. dollar terms
and increased by 4.6% in NT dollar terms. The U.S. dollar appreciated by 3.8%
against the NT dollar during this period. The Fund outperformed the TAIEX by
6.4% in U.S. dollar terms during the fiscal year.
At the Board Meeting held on 18 July, I was honored to be elected the Chairman
of the Board. On behalf of the Board, I thank my predecessor, S. Y. Wang, for
his leadership in the past years. We continue to benefit from his advice, as he
remains a Director of the Board. I would also like to express my appreciation
for the services of David Dean, Jack Tang and Professor Lawrence Lau, who
retired as Directors of the Board at the January Board meeting. A warm welcome
is extended to new Directors, Christina Liu and Blair Pickerell, who were
elected at the January 2005 Annual Meeting of Stockholders.
Thank you for your continued support of The Taiwan Fund, Inc. and we look
forward to sharing with you results of The Taiwan Fund, Inc. over the longer
term.
Sincerely,
/s/ Harvey Chang
Harvey Chang
Chairman
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REPORT OF THE INVESTMENT MANAGER
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INVESTMENT PERFORMANCE
The Fund's net asset value ("NAV") increased by 15.8% in U.S. dollar terms and
increased by 11.1% in New Taiwan ("NT") dollar terms for the fiscal year ended
August 31, 2005. During the same period, the Taiwan Stock Exchange Index (the
"TAIEX") increased by 8.8% in U.S. dollar terms and increased by 4.6% in NT
dollar terms. The Fund outperformed the TAIEX by 7.0% in U.S. dollar terms
during the year.
Based on the performance-attribution report generated by FactSet (an investment
research service), the Fund's positive performance relative to the TAIEX for the
2005 fiscal year was attributed to both sector allocation and stock selection.
The portfolio benefited from our overweight positions in the integrated circuit
("IC") design and handset sectors and overweight positions in such stocks as
Honhai Precision and Mediatek.
ECONOMIC OUTLOOK
The global economy is expected to grow by 3.5% in 2005, slowing from 4.1% growth
recorded in 2004. The United States, China and Japan have raised their 2005 GDP
growth targets in the past months. We expect monetary and liquidity conditions
to support continued growth of the global economy in the coming quarters. As the
Organization for Economic Cooperation and Development ("OECD") leading
indicators have been trending downward since 2004, we expect them to bottom out
and then begin to improve in the coming months.
Despite damage caused by Hurricane Katrina, the U.S. economy appears to be
fundamentally solid. We believe that an increase in capital spending plans by
U.S. corporations and improvement in business confidence will further support
U.S. economic growth in 2005, albeit at a decreasing pace. Hurricane Katrina
could potentially have some slightly negative impact on the U.S. economy in the
third quarter of 2005, but the damages could be only a short-term effect. If we
consider the stimulus from the rebuilding of the damaged area, the overall GDP
impact could be neutral for 2005 and 2006 GDP growth may not be affected. The
U.S. government's move to release some of its oil reserves to help ease the
supply situation may signal that the U.S. government is "drawing the line" on
oil prices at current levels. This may ease concerns about a further oil price
hike, which would likely impede economic growth. U.S. real GDP growth is
forecast to be 3.6% in 2005 and 3.4% in 2006, and such growth would likely be
driven by both domestic demand and exports.
4
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Despite the expected slowdown of the global economy, the United States and
Chinese will likely remain the principal engines of global growth. Healthy
growth rates are also expected in other Asian emerging markets. The China
economy is expected to grow moderately by 9.0% in 2005 and 8.5% in 2006, mainly
driven by strong domestic demand and exports against the backdrop of ongoing
efforts by the Chinese government to prevent the economy from expanding too
quickly. As inflation uncertainty has resurfaced with recent higher oil prices,
future interest-rate increases are unpredictable and may hamper the pace of the
global economic recovery. Nevertheless, we believe that the global economy has
enough strength to continue expanding at approximately 3.5% in 2005 and
approximately 3.2% in 2006.
Taiwan's economic growth appears to have bottomed out in the first quarter of
2005 and a recovery appears on track. Economic data showed that Taiwan is
undergoing a mild recovery. We expect a modest recovery in export growth coupled
with a steady increase in consumption and resilient investment to support
economic expansion at 4.1% in the second half of 2005. Trade growth is expected
to increase mildly in the second half of 2005 and we expect exports to return to
a modest upward trend with the global technology recovery. Export growth is
expected to be 7.9%, and import growth is expected to be 9.9% in 2005. Taiwan's
consumer price index is expected to increase by 2.0% in 2005, mainly due to
increasing oil prices and weather-induced spikes in fresh food prices.
For 2006, we anticipate that Taiwan's economic fundamentals will remain
resilient, supporting expansion of both domestic and external demand. The
Central Bank is likely to continue to raise rates gradually into the first half
of 2006, amid an expected modest economic recovery and rising inflationary
pressure. The spillover effect of persistently high oil prices will probably
become more evident in the fourth quarter of 2005 and weigh on both business and
consumers through early 2006. Investment by Taiwanese companies could slow, but
the outlook remains favorable due to economic links between China and Taiwan,
strong domestic demand and exports as well as the healthy outlook for the U.S.
and Chinese economies. We anticipate Taiwan's GDP to grow 4.0% in 2006. However,
if the U.S. economy slows down unexpectedly or if China imposes additional
macro-economic cooling measures, then this would have an adverse impact on
Taiwan. Another uncertainty that could unsettle the market would be a renewed
surge in oil prices.
5
REPORT OF THE INVESTMENT MANAGER (continued)
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Despite high oil prices, the global economy is expected to continue to grow
moderately in the coming year, and we believe Taiwan will remain a favorable
market for long-term investment. After some slowing in the current year,
corporate earnings growth is expected to return to positive territory in 2006.
Taiwan companies' competitive strengths -- which include their quality
engineers, close relations with their customers and lower-cost production
facilities in China -- will underpin the positive longer-term outlook for the
stock market.
MARKET OUTLOOK AND INVESTMENT STRATEGY
Despite concern over higher oil prices and monetary tightening in the past year,
Taiwan equities performed well and continued to gain ground. The TAIEX rose by
4.6% (in NT dollar terms). This rise was helped by a strong demand for
industrial cyclical products in 2004/early 2005, as strong demand for technology
products continued in the past year. The TAIEX rise was also partially
attributable to foreign inflows after the second phase of Morgan Stanley Capital
International's ("MSCI") re-weighting of the MSCI Emerging Market Index at the
end of May 2005. MSCI increased the LIF (Limited Investability Factor) from 75%
to 100% in the second phase re-weighting, with Taiwan becoming the country with
the largest weighting (more than 20% in May 2005) within the MSCI Emerging
Market Index. The MSCI re-weighting fueled investors' buying interest, and that
in turn benefited Taiwan's large market capitalization stocks. The technology
sector enjoyed the highest return and received the majority of both foreign and
domestic buying interest. Foreigners bought approximately US$19 billion of
Taiwan shares in the past year due to the MSCI re-weighting and the recovery in
the technology sector. Foreigners currently own approximately 28% of the Taiwan
stock market.
Politics are expected to have minimal impact on the stock market in the
near-term future. County and local mayoral elections in December 2005 are
expected to have little impact on the stock market, and Taiwan politics will
likely remain gridlocked until March 2008 when a Presidential election is
scheduled.
The valuation of Taiwan's stock market appears to be attractive. The dividend
yield is 4%. The market forward PER (price to earnings ratio) is 12.8 times and
the market PBR (price to book ratio) is 1.7 times. Taiwan securities are trading
at lower valuations than most Asian market securities, and Taiwan's stock market
has a moderate upside potential in the next two quarters.
6
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In line with moderate global economic growth in 2006 and continuing recovery of
technology demand, we expect 14% year-on-year corporate earnings growth in 2006
for our stock universe, against a 5% decline in 2005.
High oil prices have weighed on our outlook in 2006. The Taiwan government has
tried to limit increases in domestic energy prices, so the rises in world oil
prices have so far had a moderate impact on growth and inflation. High oil
prices could exert an indirect effect by weakening global economic growth, with
that weakness hitting overseas demand for Taiwanese products. Sectors most
adversely impacted include shipping, airlines, plastics and petrochemicals.
Slowdown in U.S. consumer demand may trim demand for Taiwanese electronic goods,
car parts and container shipping capacity. The slowdown in growth of Taiwan's
two major export markets (the United States and China) indicates that Taiwan's
2006 export growth would only be moderate, as U.S. economic expansion will
likely start to decelerate moderately into 2006, and the growth of China's
economy is likely to be moderate.
After seeing 2.1% appreciation in 2005 in the Reminbi ("RMB"), China's currency,
global investors are anticipating further appreciation. The inflow of hot money
into Taiwan is expected as a play on China and further appreciation in the RMB.
This expected inflow would be positive for the liquidity of the Taiwan market
and will drive the domestic reflation theme further. The NT dollar is likely to
appreciate by a lesser percentage than the RMB due to weakness in exports and
lower-than-expected GDP growth in the first half of 2005. RMB appreciation is
negative for downstream electronics industries with production facilities in
China, which would have to export at a higher price. However, it is positive for
traditional industries such as auto, cement, rubber and construction materials
due to stronger domestic demand driven by a stronger local currency.
We expect technology to remain the main growth sector in the coming year.
Hardware company valuations are still reasonable at 12.5 times anticipated 2006
earnings. We are positive on new product launches, which include Microsoft's
Longhorn, 3G handsets and next-generation game consoles. We expect 2006 will be
a healthy year for the semiconductor industry due to recovery of global
semiconductor capital expenditures from restraint in 2005, a reasonable 2006
global economic outlook and new product launches driving PC demand. The market
may continue its rebound for a few months due to seasonal strong
7
REPORT OF THE INVESTMENT MANAGER (continued)
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demand for technology products, easing of high oil prices and improvement in
cross-strait relations.
In the short term, PC seasonal demand exists ahead of the year-end. Strong
growth and seasonal demand should combine to drive outperformance of PC related
shares in the fourth quarter of 2005. Our strategy is to increase our exposure
in high-beta stocks, which should offer reasonable returns if cautiously
invested. In addition, there is more good news from the technology sector-rising
utilization rates in most semiconductor companies; strong demand for notebook
PCs, handsets and LCD panels; as well as the coming peak season of consumer
electronics products. Most technology companies continue to deliver
stronger-than-expected sales and are issuing positive outlooks for the coming
two quarters. Therefore, we expect that share prices of technology companies
should continue outperforming in the coming months. We plan to increase our
exposure to semiconductor, handset and consumer electronics-related shares. Our
main focus will be technology stocks with good value and expected stable
earnings growth in 2006.
We will remain underweight in the material sectors, such as steel,
petrochemical, paper and textile, in the coming quarters. Weakening of demand
for materials from China as it strengthens its austerity measures to cool down
its economy and the demand/supply imbalance (resulting from increase in capacity
of commodity sectors in the past two years) may pose a threat to corporate
earnings growth in the commodity sector in the coming quarters.
We will continue to be underweight in the financial sector. Financial sector
earnings growth is expected to slow, as consumer lending may fall moderately in
2006 in the face of rising interest rates and relatively high oil prices.
Financial stocks are good proxy for domestic consumption and asset reflation
themes; but slow consolidation progress, flattening of the yield curve and
lackluster loan growth (7% in 2005 vs. 10% in 2004) could result in the
financial sector underperforming in the coming year.
Despite our positive long-term outlook on the Taiwan market, we expect that the
market will range trade in 2006 as gains in the technology sector might be
offset by declines in other sectors. We will use a bottom-up approach with a
focus on stock picking in 2006. Against a backdrop of softening commodity
prices, improving cross-strait relations and possible further RMB appreciation,
we have identified four themes
8
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for picking stocks in 2006 -- secular growth stocks, new product development,
cash dividend yield and China concept shares.
SECULAR GROWTH STOCKS
We will identify growth stocks in the technology sector. We expect technology
sector earnings to rise by more than 18% in 2006 after declining approximately
15% in 2005. Technology stock valuations still appear to be reasonable.
Technology stock earnings appeared to bottom in the second quarter of 2005 and
could be on a recovery path through the second half of 2006. IC Insights
projects that global semiconductor capital expenditures will fall 6% and is
forecasted to be 24% of sales in 2005. A drop in capital expenditures during
2005 and 2006 would lead to a stronger rebound in the semiconductor industry in
2006 and 2007. In addition to global economic growth and capacity growth,
inventory adjustment also drives the technology stock cycle and earnings.
Inventories in the U.S. electronics supply chain are reasonably lean. With
inventories down to a healthier level, profit margins should begin to improve,
which is a catalyst of share price movement.
NEW PRODUCTS IN 2006
The new-product theme will drive demand in the following sectors: (1) 3G handset
(third generation mobile phone technology service), (2) cell phones priced at
less than US$50, (3) digital home (wireless/broadband), (4) game console
upgrades and (5) PCs with Longhorn CPUs. For handsets, integrating
high-resolution cameras, bluetooth, wireless LAN and VOIP to handset chipset
solutions would help to sustain growth momentum in 2006. Demand for high-end
0.13, 0.11 and 0.09 micron technology products could drive growth momentum for
semiconductor companies. If the Notebook PC upgrade cycle continues over the
next four to six quarters, market share gain could accelerate its growth
momentum. Notebooks will be 36% of PC sales by the end of 2005 and will
eventually account for 50% of PC sales. We believe that the rising demand for
transistor-liquid crystal display ("TFT-LCD") TVs will serve as the key catalyst
for the sector and more affordable prices will continue to stimulate demand in
2006 and beyond. It is projected that a compound annual growth rate for the
TFT-LCD TV segment will be 41% in the next three years. In the longer-term, the
TFT-LCD industry is expected to double its growth to reach US$42 billion in
2007.
9
REPORT OF THE INVESTMENT MANAGER (continued)
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HIGH CASH YIELD
The 4% dividend yield of the Taiwan securities market is relatively high among
Asian securities markets. Many stocks, including telecommunications, auto and
certain technology stocks, could provide high dividend yield. Since we expect
the market to range trade in 2006, we anticipate increasing investments in
stocks able to deliver stable earnings and good yield. Taiwan securities' high
dividend yield, which exceeds the 10-year bond yield of 1.8%, should provide
good downside support.
CHINA CONCEPT SHARES
If Taiwan opens up to tourists from China, we expect domestic demand to
increase. Following the meetings between Taiwan's opposition party leaders, Lien
Chan and James Soong with China's president Hu Jintao, cross-strait relations
appear to be heading in a favorable direction, although the exact timing of any
major breakthrough is difficult to predict. The improvement of the geopolitical
climate is enhancing the environment for industries such as tourism, retail,
property, financials and transportation. Other potential beneficiaries of this
investment theme in 2006 would be companies with exposure to China's domestic
demand such as the retail, auto and cement industries.
To conclude, we expect investors to receive reasonable rewards from certain
sectors' positive results. In the year ahead, we intend to maintain exposure in
high-beta stocks to take advantage of these diverse themes and achieve better
investment returns. We will continue to strive to achieve superior performance
through a process of bottom-up stock selection. We are confident that the
Taiwanese stock market and healthy economic conditions will provide significant
investment opportunities for investors in the foreseeable future.
Thank you for your support and we look forward to presenting our strategy again
in coming reports.
Sincerely,
/s/ Victor Shih
Victor Shih
Portfolio Manager
10
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11
PORTFOLIO SNAPSHOT*
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TOP TEN EQUITY HOLDINGS
HOLDINGS AS OF AUGUST 31, 2005 %
--------------------------------------------------
MediaTek, Inc. 7.0
--------------------------------------------------
Hon Hai Precision Industry Co. Ltd. 5.6
--------------------------------------------------
Silicon Intergrated System Corp. 4.8
--------------------------------------------------
Taiwan Semiconductor Manufacturing Co. 4.7
--------------------------------------------------
Chi Mei Optoelectronics Corp. 4.5
--------------------------------------------------
Asustek Computer, Inc. 4.5
--------------------------------------------------
Au Optronics Corp. 3.8
--------------------------------------------------
Tripod Technology Corp. 3.8
--------------------------------------------------
Powerchip Semiconductor Corp. 3.7
--------------------------------------------------
Chinatrust Financial Holding Co. Ltd. 3.6
--------------------------------------------------
TOP TEN EQUITY INDUSTRY WEIGHTINGS
WEIGHTINGS AS OF AUGUST 31, 2005 %
--------------------------------------------------
PC & Peripherals 20.1
--------------------------------------------------
IC Design 14.6
--------------------------------------------------
Electronics 10.9
--------------------------------------------------
TFT-LCD 10.2
--------------------------------------------------
Semi-conductor Manufacturing 9.1
--------------------------------------------------
Financial Services 6.7
--------------------------------------------------
Electronic Components 6.5
--------------------------------------------------
Telecommunications 5.8
--------------------------------------------------
Memory IC 3.7
--------------------------------------------------
Iron & Steel 3.5
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TOP TEN EQUITY HOLDINGS
HOLDINGS AS OF AUGUST 31, 2004 %
--------------------------------------------------
Taiwan Semiconductor Manufacturing Co. 7.9
--------------------------------------------------
Asustek Computer, Inc. 6.1
--------------------------------------------------
Chunghwa Telecom Co. Ltd. 6.0
--------------------------------------------------
Cathay Financial Holding Co. Ltd. 5.3
--------------------------------------------------
Hon Hai Precision Industry Co. Ltd. 4.5
--------------------------------------------------
Mega Financial Holding Co. 4.3
--------------------------------------------------
Chinatrust Financial Holding Co. Ltd. 4.2
--------------------------------------------------
China Steel Corp. 4.0
--------------------------------------------------
Taishin Financial Holdings Co. Ltd. 3.8
--------------------------------------------------
United Microelectronics Corp. Ltd. 3.6
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TOP TEN EQUITY INDUSTRY WEIGHTINGS
WEIGHTINGS AS OF AUGUST 31, 2004 %
--------------------------------------------------
Financial Services 17.7
--------------------------------------------------
Semi-conductor 17.6
--------------------------------------------------
PC & Peripherals 14.3
--------------------------------------------------
Electronics 11.5
--------------------------------------------------
Telecommunications 9.9
--------------------------------------------------
Plastics 4.6
--------------------------------------------------
Iron & Steel 4.0
--------------------------------------------------
Textiles & Apparel 2.6
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General Merchandise Stores 2.4
--------------------------------------------------
Petroleum Services 2.1
--------------------------------------------------
* Percentages based on total investments at August 31, 2005 and August 31, 2004,
respectively.
12
SECTOR ALLOCATION
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INDUSTRY ALLOCATION (AS A PERCENTAGE OF TOTAL INVESTMENTS)
13
PIE CHART
Other 6.9%
Basic Industries 5.5%
Finance 6.7%
Technology 80.9%
Fund holdings are subject to change and percentages shown above are based on
total investments as of August 31, 2005. The pie chart illustrates the
allocation of the investments by sector. A complete list of holdings as of
August 31, 2005 is contained in the Portfolio of Investments included in this
report. The most currently available data regarding portfolio holdings and
industry allocation can be found on our website, www.thetaiwanfund.com. You may
also obtain updated holdings by calling (800)-636-9242.
14
THE TAIWAN FUND, INC.
INVESTMENTS/AUGUST 31, 2005 (SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT
IN SECURITIES)
--------------------------------------------------------------------------------
US$
VALUE
SHARES (NOTE 1)
------ --------
COMMON STOCKS -- 94.8%
BASIC INDUSTRIES -- 5.5%
IRON & STEEL -- 3.5%
China Steel Corp. ................... 9,660,000 $ 8,332,672
------------
PLASTICS/CHEMICALS -- 2.0%
Nan Ya Plastics Corp. ............... 4,002,000 4,881,829
------------
TOTAL BASIC INDUSTRIES............... 13,214,501
------------
FINANCE -- 6.7%
FINANCIAL SERVICES -- 6.7%
Cathay Financial Holding Co. Ltd. ... 4,000,000 7,487,023
Chinatrust Financial Holding Co.
Ltd. ............................... 9,152,539 8,523,738
------------
TOTAL FINANCE........................ 16,010,761
------------
TECHNOLOGY -- 80.9%
ELECTRONICS -- 10.9%
Asia Optical Co., Inc. .............. 879,791 5,359,338
Cheng Uei Precision Industry Co.
Ltd. ............................... 3,300,000 8,363,359
Compal Communications Inc. .......... 1,980,000 5,834,198
Merry Electronics Co. Ltd. .......... 3,000,000 6,522,137
------------
26,079,032
------------
PC & PERIPHERALS -- 20.1%
Asustek Computer, Inc. .............. 4,400,000 10,680,916
Foxconn Technology Co. Ltd. ......... 1,540,000 5,830,840
Hon Hai Precision Industry Co. Ltd.
(a)................................. 2,596,000 13,396,153
Quanta Computer Inc. ................ 2,100,000 3,340,763
Simplo Technology Co. Ltd. .......... 2,855,468 6,670,024
Waffer Technology Co., Ltd. ......... 5,669,000 8,135,664
------------
48,054,360
------------
TELECOMMUNICATIONS -- 5.8%
Chunghwa Telecom Co. Ltd. ........... 3,100,000 5,774,046
Zyxel Communications Corp. .......... 4,104,000 8,082,687
------------
13,856,733
------------
IC DESIGN -- 14.6%
MediaTek, Inc. ...................... 1,980,000 16,746,870
RichTek Technology Corp. ............ 2,070,000 6,605,038
Silicon Integrated Systems Corp.
(a)................................. 18,000,000 11,459,542
------------
34,811,450
------------
US$
VALUE
SHARES (NOTE 1)
------ --------
SEMI-CONDUCTOR MANUFACTURING -- 9.1%
Powertech Technology Inc. ........... 1,195,000 $ 3,119,771
Taiwan Semiconductor
Manufacturing Co. ................... 6,800,976 11,213,823
United Microelectronics Corp.
Ltd. ............................... 12,394,683 7,417,887
------------
21,751,481
------------
ELECTRONIC COMPONENTS -- 6.5%
Kinsus Interconnect Technology
Corp. ............................. 3,450,000 6,647,176
Tripod Technology Corp. ............. 4,560,000 8,994,687
------------
15,641,863
------------
TFT-LCD -- 10.2%
Au Optronics Corp. .................. 6,213,000 9,162,989
Chi Mei Optoelectronics Corp. ....... 8,556,415 10,698,785
Radiant Opto-Electronics Corp. ...... 1,829,822 4,581,539
------------
24,443,313
------------
MEMORY IC -- 3.7%
Powerchip Semiconductor Corp. ....... 14,368,000 8,774,351
------------
TOTAL TECHNOLOGY..................... 193,412,583
------------
TRANSPORTATION -- 1.7%
TRANSPORTATION -- 1.7%
Yang Ming Marine Transport........... 6,000,000 4,103,817
------------
TOTAL COMMON STOCKS
(Identified Cost -- $177,004,590)... 226,741,662
------------
RIGHTS -- 0.0% (C)
TFT-LCD -- 0.0%
Radiant Opto-Electronics Corp. (a)... 1,500,000 28,406
------------
TOTAL RIGHTS
(Identified Cost -- $0)............. 28,406
------------
14 The accompanying notes are an integral part of the financial statements.
INVESTMENTS/AUGUST 31, 2005 (continued)
--------------------------------------------------------------------------------
PRINCIPAL US$
AMOUNT VALUE
NT$ (NOTE 1)
--------- --------
COMMERCIAL PAPER -- 5.0%
Bank Sinopac
1.20%, 11/17/05 (b)................ 10,008,251 $ 305,596
Chang Chun Petro Chemical Co.:
1.20%, 9/05/05 (b)................. 6,979,305 213,109
1.40%, 10/25/05 (b)................ 49,849,281 1,522,115
Chang Hwa Bank:
1.21%, 10/03/05 (b)................ 9,966,474 304,320
1.25%, 10/03/05 (b)................ 9,982,012 304,794
1.25%, 11/01/05 (b)................ 19,948,190 609,105
China Trust Commercial Bank:
1.25%, 9/20/05 (b)................. 19,986,377 610,271
1.25%, 9/23/05 (b)................. 99,759,914 3,046,104
E Sun
1.24%, 9/01/05 (b)................. 49,981,982 1,526,168
SinoPac Bank
1.24%, 9/01/05 (b)................. 50,133,832 1,530,804
The First Commercial Bank
1.25%, 10/12/05 (b)................ 49,821,208 1,521,258
The Shanghai Commercial Bank
1.235%, 9/09/05 (b)................ 15,975,741 487,809
------------
TOTAL COMMERCIAL PAPER
(Identified Cost -- $12,240,123).... 11,981,453
------------
MATURITY
AMOUNT
US$
--------
REPURCHASE AGREEMENT -- 0.2%
State Street Bank & Trust Co. at
1.10% dated 8/29/05, due 9/6/05
(collateralized by U.S. Treasury
Note 3.625%, 1/15/10, market
value $360,059).................. $ 349,085 $ 349,000
------------
TOTAL INVESTMENTS -- 100%
(COST -- $189,593,713)............. $239,100,521
============
LEGEND:
US$ - United States dollar
NT$ - New Taiwan dollar
(a) Non-income producing
(b) Certificates of Deposit and Commercial Paper that are traded through Bills
Finance Corporations must be guaranteed by either a bank, a trust company or
a Bills Finance Corporation. Since there is no recognized credit rating
system in the Republic of China, the guarantee may not be comparable to a
guarantee issued by a U.S. institution.
(c) Amount represents less than 0.1% of total value of investments.
INCOME TAX INFORMATION:
At August 31, 2005, the aggregate cost basis of the Fund's investment securities
for income tax purposes was $189,662,242.
Net unrealized appreciation of the Fund's investment securities was $49,438,279
of which $54,350,164 related to appreciated investment securities and $4,911,885
related to depreciated investment securities for the fiscal year ended August
31, 2005. In addition, as of August 31, 2005, the Fund had a capital loss
carryforward of ($61,467,359) for Federal income tax purposes which may be
utilized to offset future capital gains through August 31, 2010 ($37,466,000)
and August 31, 2011 ($24,001,359). For the year ended August 31, 2005, The
Taiwan Fund, Inc. utilized $9,903,776 of its capital loss carryforward for U.S.
Federal income tax purposes.
The accompanying notes are an integral part of the financial statements. 15
FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
August 31, 2005
ASSETS
Investments in securities, at value (cost
$189,593,713) (Notes 1 and 2) - See
accompanying schedule.................. $239,100,521
Cash in New Taiwan dollars (cost
$835,082)............................... 831,241
Dividend receivable...................... 2,416,314
Interest receivable...................... 8,669
------------
Total assets............................ 242,356,745
------------
LIABILITIES
Payable to custodian..................... $ 9,964
Accrued management fee (Note 3).......... 249,971
Taiwan withholding tax payable (Note 508,079
1)......................................
Other payables and accrued expenses...... 35,075
-----------
Total liabilities....................... 803,089
------------
NET ASSETS............................... $241,553,656
============
Net Assets consist of (Note 1):
Paid in capital.......................... $252,776,094
Undistributed net investment income...... 856,258
Accumulated undistributed net realized
loss on investments in securities and
foreign currency........................ (61,535,890)
Net unrealized appreciation on investment
securities and foreign currency......... 49,457,194
------------
NET ASSETS............................... $241,553,656
============
NET ASSET VALUE, per share
($241,553,656/16,365,572 shares
outstanding)............................ $14.76
============
STATEMENT OF OPERATIONS
For the Year Ended August 31, 2005
INVESTMENT INCOME
Dividends................................. $ 7,726,708
Interest.................................. 94,833
-----------
7,821,541
Less: Taiwan withholding tax (Note 1)..... (1,550,723)
-----------
Total Income............................. 6,270,818
EXPENSES:
Management fee (Note 3)
Basic fee................................ $ 3,583,326
Performance adjustment................... (640,251)
Custodian fees and expenses............... 397,123
Administration and accounting fees (Note
3)....................................... 236,628
Directors compensation (Note 3)........... 328,771
Legal..................................... 275,291
Audit..................................... 85,859
Shareholder communications................ 67,084
Insurance fees............................ 98,456
Delaware franchise tax.................... 55,295
Miscellaneous............................. 25,963
Transfer agent fees....................... 17,669
Taiwan stock dividend tax (Note 1)........ 690,002
-----------
Total expenses........................... 5,221,216
-----------
NET INVESTMENT INCOME.................... 1,049,602
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS (NOTE 1)
Net realized gain (loss) on:
Investment securities.................... 16,902,507
Foreign currency transactions............ (218,124)
-----------
16,684,383
Change in net unrealized appreciation
(depreciation) on:
Investment securities.................... 15,202,891
Assets and liabilities denominated in
foreign currencies..................... (50,856)
-----------
15,152,035
-----------
Net realized and unrealized gain.......... 31,836,418
-----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS............................... $32,886,020
===========
16 The accompanying notes are an integral part of the financial statements.
FINANCIAL STATEMENTS (continued)
--------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
Year Ended Year Ended
August 31, 2005 August 31, 2004
---------------- ---------------
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment gain (loss)................................. $ 1,049,602 $ 475,165
Net realized gain on investments and foreign currency
transactions............................................. 16,684,383 23,761,336
Change in net unrealized appreciation on investments and
foreign currency transactions............................ 15,152,035 (26,019,393)
------------ ------------
Net increase (decrease) in net assets resulting from
operations............................................... 32,886,020 (1,782,892)
------------ ------------
Distributions to shareholders
From net investment income................................. (498,168) --
------------ ------------
Total distributions to shareholders........................ (498,168) --
------------ ------------
Total increase in net assets............................... 32,387,852 (1,782,892)
------------ ------------
NET ASSETS
Beginning of period........................................ 209,165,804 210,948,696(a)
------------ ------------
End of period.............................................. 241,553,656 209,165,804
============ ============
Undistributed net investment income End of period.......... $ 856,258 $ 1,597,555
============ ============
(a) Restated (Note 6).
The accompanying notes are an integral part of the financial statements. 17
FINANCIAL STATEMENTS (continued)
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Year Ended August 31,
-----------------------------------------------------------------------
2005 2004 2003 2002 2001
---------- ---------- ---------- ---------- -----------
SELECTED PER SHARE DATA
Net asset value, beginning of
period....................... $ 12.78 $ 12.89(c) $ 11.37(c) $ 10.81(c) $ 21.49(c)
---------- ---------- ---------- ---------- -----------
Income from Investment
Operations
Net investment income (gain)
(a).......................... 0.06 0.03 0.00(c) (0.12)(c) (0.22)(c)
Net realized and unrealized
gain (loss) on
investments................ 1.95 (0.14) 1.52 0.68 (10.26)
---------- ---------- ---------- ---------- -----------
Total from investment
operations................. 2.01 (0.11) 1.52(c) 0.56(c) (10.48)(c)
---------- ---------- ---------- ---------- -----------
Less Distributions
From net investment income... (0.03) -- -- -- --
From net realized gains...... -- -- -- -- (0.20)
---------- ---------- ---------- ---------- -----------
Total distributions.......... (0.03) -- -- -- (0.20)
---------- ---------- ---------- ---------- -----------
Net asset value, end of
period....................... $ 14.76 $ 12.78 $ 12.89(c) $ 11.37(c) $ 10.81(c)
========== ========== ========== ========== ===========
Market value, end of period... $ 13.34 $ 10.99 $ 11.09 $ 9.27 $ 9.88
========== ========== ========== ========== ===========
TOTAL RETURN
Per share market value........ 21.68% (0.90)% 19.63% (6.17)% (43.16)%
RATIO AND SUPPLEMENTAL DATA
Net assets, end of period (000
omitted)..................... $ 241,554 $ 209,166 $ 210,949(c) $ 186,032(c) $ 176,945(c)
Ratio of expenses to average
net assets (b)............... 2.23%(d) 2.07% 2.05%(c) 2.20%(c) 2.69%(c)
Ratio of expenses to average
net assets, excluding stock
dividend tax expense......... 1.93%(d) 1.82% 1.76%(c) 1.98%(c) 2.21%(c)
Ratio of net investment income
(loss) to average net
assets....................... 0.45%(d) 0.21% 0.01%(c) (0.97)%(c) (1.56)%(c)
Portfolio turnover rate....... 80% 76% 148% 167% 125%
(a) Based on average shares outstanding during the period.
(b) Expense ratio includes 20% tax paid on stock dividends received by the
Fund.
(c) Restated. (Note 6)
(d) Ratio includes one time charge to the Management fees; see Note 3. Without
this charge the ratios would be 2.00%, 1.70% and 0.68%, respectively.
18 The accompanying notes are an integral part of the financial statements.
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
The Taiwan Fund, Inc. (the "Fund"), a Delaware corporation, is registered under
the Investment Company Act of 1940, as amended (the "Act"), as a diversified
closed-end management investment company.
The Fund is not permitted to invest directly in the securities of Republic of
China ("ROC") companies. Therefore, it invests through a contractual securities
investment trust fund arrangement. This arrangement was established by means of
the Securities Investment Trust, Investment Management and Custodian Contract
("Management Contract") among HSBC Investments (Taiwan) Limited ("Adviser"), the
International Commercial Bank of China (Custodian) and the Fund. Under the
Management Contract the Adviser manages and invests the assets of the Fund and
the Custodian holds the assets. The Fund is the sole beneficiary of the assets
held under the Management Contract and, as required by ROC regulations, its
interest in the assets is evidenced by units of beneficial interest.
The Fund concentrates its investments in the securities listed on the Taiwan
Stock Exchange. Because of this concentration, the Fund may be subject to
additional risks resulting from future political or economic conditions in
Taiwan and the possible imposition of adverse governmental laws of currency
exchange restrictions affecting Taiwan.
The policies described below are consistently followed by the Fund in the
preparation of its financial statements in conformity with accounting principles
generally accepted in the United States of America.
Security Valuation. All securities, including those traded over-the-counter,
for which market quotations are readily available are valued at the last sales
price prior to the time of determination of the Fund's net asset value per share
or, if there were no sales on such date, at the closing price quoted for such
securities (but if bid and asked quotations are available, at the mean between
the last current bid and asked prices, rather than such quoted closing price).
In certain instances where the price determined above may not represent fair
market value, the value is determined in such manner as the Board of Directors
may prescribe. Foreign securities may be valued at fair value according to
procedures approved by the Board of Directors if the closing price is not
reflective of current market values due to trading or events occurring in the
foreign markets between the close of the established exchange and the valuation
time of the Fund. In addition, substantial changes in values in the U.S. markets
subsequent to the close of a foreign market may also affect the values of
securities traded in the foreign market. The value of foreign securities may be
adjusted if such movements in the U.S. market exceed a specified threshold.
Short-term investments, having a maturity of 60 days or less are valued at
amortized cost, which approximates market value, with accrued interest or
discount earned included in interest receivable.
Repurchase Agreements. In connection with transactions in repurchase
agreements, it is the Fund's policy that its custodian take possession of the
underlying collateral securities, the fair value of which exceeds the principal
amount of the repurchase transaction, including accrued interest, at all times.
If the seller defaults, and the fair value of the collateral declines,
realization of the collateral by the Fund may be delayed or limited.
Foreign Currency Translation. The financial accounting records of the Fund are
maintained in U.S. dollars. Investment securities, other assets and liabilities
denominated in a foreign currency are translated into U.S. dollars at the
current exchange rate. Purchases and sales of securities, income receipts and
expense payments are translated into U.S. dollars at the exchange rate on the
dates of the transactions.
Reported net realized gains and losses on foreign currency transactions
represent net gains and losses from disposition of foreign currencies, currency
gains and losses realized between the trade dates and settlement dates of
security transactions, and the difference between the amount of net investment
income accrued and the U.S. dollar amount actually received. The effects of
changes in foreign currency exchange rates on investments in securities are not
segregated in the Statement of Operations from the effects of changes in market
prices of those securities, but are
19
NOTES TO FINANCIAL STATEMENTS (continued)
--------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES - continued
included in realized and unrealized gain or loss on investments in securities.
Forward Foreign Currency Transactions. A forward foreign currency contract
("Forward") is an agreement between two parties to buy or sell currency at a set
price on a future date. The Fund may enter into Forwards in order to hedge
foreign currency risk or for other risk management purposes. Realized gains or
losses on Forwards include net gains or losses on contracts that have matured or
which the Fund has terminated by entering into an offsetting closing
transaction. Unrealized appreciation or depreciation of Forwards is included in
the Statement of Assets and Liabilities and is carried on a net basis. The
portfolio could be exposed to risk of loss if the counterparty is unable to meet
the terms of the contract or if the value of the currency changes unfavorably.
As of August 31, 2005 the Fund had no open Forwards.
Indemnification Obligations. Under the Trust's organizational documents, its
Officers and Directors are indemnified against certain liabilities arising out
of the performance of their duties to the Trust. In addition, in the normal
course of business the Trust enters into contracts that provide general
indemnifications to other parties. The Trust's maximum exposure under these
arrangements is unknown as this would involve future claims that may be made
against the Trust that have not yet occurred.
Taxes. As a qualified regulated investment company under Subchapter M of the
Internal Revenue Code, the Fund is not subject to income taxes to the extent
that it distributes all of its investment company taxable income and net
realized capital gains for its fiscal year. In addition to federal income tax
for which the Fund is liable on undistributed amounts, the Fund is subject to
federal excise tax on undistributed investment company taxable income and net
realized capital gains. The Schedule of Investments includes information
regarding income taxes under the caption "Income Tax Information." The Fund is
organized in Delaware and as such is required to pay Delaware an annual
franchise tax. Also, the Fund is currently subject to a Taiwan security
transaction tax of 0.3% on equities and 0.1% on mutual fund shares of the
transaction amount.
The Fund's functional currency for tax reporting purposes is the New Taiwan
dollar.
Investment Income. Dividend income is recorded on the ex-dividend date, except
where the ex-dividend date may have passed; certain dividends from foreign
securities are recorded as soon as the Fund is informed of the ex-dividend date.
Taiwanese companies typically declare dividends in the Fund's third fiscal
quarter of each year. As a result, the Fund receives substantially less dividend
income in the first half of its year. Interest income, which includes accretion
of original discount, is accrued as earned.
Dividend and interest income generated in Taiwan is subject to a 20% withholding
tax. Stock dividends received (except those which have resulted from
capitalization of capital surplus) are taxable at 20% of the par value of the
stock dividends received.
Distributions to Shareholders. The distributable income from the assets held
under the Management Contract, which is limited to cash dividends and interest
income received, may be distributed to the Fund only once in each year at the
Fund's discretion and is recorded on the ex-dividend date. Realized capital
gains and stock dividends may also be distributed to the Fund. Within the above
limitations the Fund will, under current ROC regulations, be able to remit out
of the ROC the proceeds of income and capital gains distributions, unit
redemptions and other distributions of assets held under the Management
Contract.
The Fund distributes to shareholders at least annually, substantially all of its
taxable ordinary income and expects to distribute its taxable net realized
gains. Certain foreign currency gains (losses) are taxable as ordinary income
and, therefore, increase (decrease) taxable ordinary income available for
distribution. Pursuant to the Dividend Reinvestment and Cash Purchase Plan (the
"Plan"), shareholders may elect to have all distributions automatically
reinvested in Fund shares. (See the summary of the Plan.) Shareholders who do
not participate in the Plan will receive all distributions in cash paid by check
in U.S. dollars. Income and capital gain distributions are determined in
accordance with income tax regulations, which may differ from generally accepted
accounting principles.
20
NOTES TO FINANCIAL STATEMENTS (continued)
--------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES - continued
These differences are primarily due to differing treatments for foreign currency
transactions, losses deferred due to wash sales and excise tax regulations.
Permanent book and tax basis differences relating to shareholder distributions
will result in reclassifications to paid in capital. Reclassifications recorded
at August 31, 2005 were ($1,292,731) from undistributed Net Investment Income,
($6,636,962) from Accumulated Gain (Loss) and $7,929,693 to Paid in Capital.
Security Transactions. Security transactions are accounted for as of the trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
Use of Estimates. The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. Actual results
could differ from those estimates.
2. PURCHASES AND SALES OF SECURITIES
For the fiscal year ended August 31, 2005, purchases and sales
of securities, other than short-term securities, aggregated $177,081,201 and
$179,205,235, respectively.
3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Management Fee. As the Fund's investment adviser, HSBC Investments (Taiwan)
Limited receives a fee that is computed daily at an annual rate of 1.30% of the
Fund's average net assets. The basic fee is subject to a performance adjustment
(up to a maximum of 0.30%) based on the Fund's investment performance as
compared to the Taiwan Stock Exchange Index over a rolling 36-month period.
For the year ended August 31, 2005, the management fee, including the
performance adjustments, was equivalent to an annual rate of 1.03% of average
net assets, excluding the following one-time charge. During the period, the
basic fee included a one-time charge of approximately $535,000 as a further
revision to performance fee adjustments for the fiscal years prior to 2000. The
management fee including this charge is equivalent to an annual rate of 1.26% of
average net assets.
Directors Fees. No director, officer or employee of the Adviser or its'
affiliates will receive any compensation from the Fund for serving as an officer
or director of the Fund. The Fund pays each of its directors who is not a
director, officer or employee of the Adviser an annual fee of $15,000 plus
$2,000 for each Board of Directors' meeting or Audit Committee meeting attended,
and $2,000 for each meeting attended by telephone. On April 18, 2005, the Board
of Directors approved increasing the fee from $1,000 to $2,000 for each meeting
attended by telephone. On July 18, 2005, the Board of Directors approved an
increase in the annual fee from $10,000 to $15,000 effective September 1, 2005.
In addition, the Fund will reimburse each of the directors for travel and
out-of-pocket expenses incurred in connection with Board of Directors' meetings.
Administration Fees. State Street Bank and Trust Company ("State Street")
provides, or arranges for the provision of certain administrative and accounting
services for the Fund, including maintaining the books and records of the Fund,
and preparing certain reports and other documents required by federal and/or
state laws and regulations. The Fund pays State Street a fee at the annual rate
of 0.11% of the Fund's average daily net assets up to $150 million, 0.08% of the
next $150 million, and 0.05% of those assets in excess of $300 million, subject
to certain minimum requirements. Effective May 1, 2005, the Fund also pays State
Street $130,000 per year for certain legal administration services, including
corporate secretarial services and preparing regulatory filings.
4. FUND SHARES
At August 31, 2005, there were 20,000,000 shares of $0.01 par value capital
stock authorized, of which 16,365,572 were issued and outstanding.
5. DISTRIBUTIONS
The Fund made a distribution of $498,168 from ordinary income during the year
ended August 31, 2005. As of August 31, 2005, the components of distributable
earnings on a tax basis were
21
NOTES TO FINANCIAL STATEMENTS (continued)
--------------------------------------------------------------------------------
5. DISTRIBUTIONS - continued
$856,258 of Undistributed Ordinary Income, $0 of Undistributed Long-Term Capital
Gain, $49,438,279 of Unrealized Appreciation, ($61,467,359) of accumulated
capital losses, and ($49,616) of other temporary adjustments.
The difference between book basis and tax basis unrealized appreciation and
depreciation is attributable primarily to the tax deferral of losses on wash
sales.
6. PRIOR PERIODS RESTATEMENT
On August 31, 2004, the Fund restated its statement of changes in net assets for
the year ended August 31, 2003 and its financial highlights for the years ended
August 31, 2000 through 2003 to reflect correction of errors in the calculation
of management fee performance adjustments recorded by the Fund during these
years and prior. The incorrect performance adjustments were calculated based on
average net assets of the Fund over a period different than the period over
which average net assets of the Fund should have been calculated as stipulated
in the management contract and resulted in overpayments being made to the
investment adviser. The cumulative effect at September 1, 1999, and the yearly
net effect, of these corrections on net assets, net asset value per share and
the ratio of expenses were as follows:
NAV PER EXPENSE
NET ASSETS SHARE RATIO
---------- ------- -------
Cumulative effect at
September 1, 1999 $1,088,492 $0.06 n/a
Effect on Year Ended
August 31, 2000 58,392 0.01 (0.02%)
Effect on Year Ended
August 31, 2001 (163,948) (0.01) 0.06%
Effect on Year Ended
August 31, 2002 (4,479) 0.00 0.00%
Effect on Year Ended
August 31, 2003 121,015 0.01 (0.07%)
22
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
--------------------------------------------------------------------------------
The Board of Directors and Shareholders
The Taiwan Fund, Inc.:
We have audited the accompanying statement of assets and liabilities of The
Taiwan Fund, Inc., including the Fund's investments, as of August 31, 2005, and
the related statement of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the five years in the period then ended.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of August 31, 2005 by correspondence with the custodian and
brokers, or by other appropriate auditing procedures where replies from brokers
were not received. An audit also incudes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
Taiwan Fund, Inc. as of August 31, 2005, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended, in conformity with accounting principles generally
accepted in the United States of America.
[KPMG LOGO]
Boston, Massachusetts
October 21, 2005
23
OTHER INFORMATION (unaudited)
--------------------------------------------------------------------------------
Federal Tax Information. The Taiwan Fund, Inc. has made an election under
Internal Revenue Code Section 853 to pass through foreign taxes paid by the Fund
to its shareholders. For the year ended August 31, 2005, the total amount that
will be passed through to shareholders and foreign source income for information
reporting purposes will be $2,219,980 (representing taxes withheld plus taxes on
stock dividends) and $7,759,286, respectively.
SHARE REPURCHASE PROGRAM
The Board of Directors of the Fund, at a meeting held on April 23, 2001,
authorized the Fund to repurchase up to 15% of the Fund's outstanding shares of
common stock. The Fund will purchase such shares in the open market at times and
prices determined by management of the Fund to be in the best interest of
stockholders of the Fund. As of August 31, 2005 no shares have been repurchased
by the Fund.
PRIVACY POLICY
PRIVACY NOTICE
The Taiwan Fund, Inc. collects nonpublic personal information about its
shareholders from the following sources:
[ ] Information it receives from shareholders on applications or other forms;
[ ] Information about shareholder transactions with the Fund, its affiliates, or
others; and
[ ] Information it receives from a consumer reporting agency.
THE FUND'S POLICY IS TO NOT DISCLOSE NONPUBLIC PERSONAL INFORMATION ABOUT ITS
SHAREHOLDERS TO NONAFFILIATED THIRD PARTIES (OTHER THAN DISCLOSURES PERMITTED BY
LAW).
The Fund restricts access to nonpublic personal information about its
shareholders to those agents of the Fund who need to know that information to
provide products or services to shareholders. The Fund maintains physical,
electronic, and procedural safeguards that comply with federal standards to
guard it shareholders' nonpublic personal information.
PROXY VOTING POLICIES AND PROCEDURES
A description of the policies and procedures that are used by the Fund's
investment adviser to vote proxies relating to the Fund's portfolio securities
is available (1) without charge, upon request, by calling 1-800-636-9242; and
(2) as an exhibit to the Fund's annual report on Form N-CSR which is available
on the website of the Securities and Exchange Commission at http://www.sec.gov.
Information regarding how the investment adviser voted these proxies during the
most recent 12-month period ended June 30 is available without charge, upon
request, by calling the same number and on the Commission's website.
QUARTERLY PORTFOLIO OF INVESTMENTS
The Fund files with the Securities and Exchange Commission its complete schedule
of portfolio holdings on Form N-Q for the first and third quarters of each
fiscal year. The Fund's Form N-Qs are available on the Securities and Exchange
Commission's website at http://www.sec.gov. Additionally, the Portfolio of
Investments may be reviewed and copied at the Securities and Exchange
24
OTHER INFORMATION (unaudited) (continued)
--------------------------------------------------------------------------------
Commission's Public Reference Room in Washington, D.C. Information on the
operation of the Public Reference Room may be obtained by calling
1-800-SEC-0330. The most recent Form N-Q is available without charge, upon
request, by calling 1-800-636-9242.
CERTIFICATIONS
The Fund's chief executive officer has certified to the New York Stock Exchange
that, as of February 28, 2005, he was not aware of any violation by the Fund of
applicable New York Stock Exchange corporate governance listing standards. The
Fund also has included the certifications of the Fund's chief executive officer
and chief financial officer required by Section 302 and Section 906 of the
Sarbanes-Oxley Act of 2002 in the Fund's Form N-CSR filed with the Securities
and Exchange Commission, for the period of this report.
25
SUMMARY OF DIVIDEND REINVESTMENT AND
CASH PURCHASE PLAN
--------------------------------------------------------------------------------
WHAT IS THE DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN?
The Dividend Reinvestment and Cash Purchase Plan (the "Plan") offers
shareholders of The Taiwan Fund, Inc. (the "Fund") a prompt and simple way to
reinvest their dividends and capital gains distributions in shares of the Fund.
The Fund will distribute to shareholders, at least annually, substantially all
of its net income and expects to distribute annually its net realized capital
gains. EquiServe Trust Company, N.A. (the "Plan Administrator"), a federally
chartered trust institution and a wholly owned subsidiary of Computershare
Shareholder Services, Inc., acts as Plan Administrator for shareholders in
administering the Plan. The Plan also allows you to make optional cash
investments in Fund shares through the Plan Administrator.
WHO CAN PARTICIPATE IN THE PLAN?
If you own shares in your own name, you can elect to participate directly in the
Plan. If you own shares that are held in the name of a brokerage firm, bank, or
other nominee, you should contact your nominee to arrange for them to
participate on your behalf.
WHAT DOES THE PLAN OFFER?
The Plan has two components; reinvestment of dividends and capital gains
distributions, and a voluntary cash purchase feature.
REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
If you choose to participate in the Plan, your dividends and capital gains
distributions will be promptly invested for you, automatically increasing your
holdings in the Fund. If the Fund declares a dividend or capital gains
distribution payable in cash, you will automatically receive shares purchased by
the Plan Administrator on the New York Stock Exchange or otherwise on the open
market.
If a distribution is declared which is payable in shares or cash at the option
of the shareholder and if on the valuation date (generally the payable date) the
market price of shares is equal to or exceeds their net asset value, the Fund
will issue new shares to you at the greater of the following: (a) net asset
value per share or (b) 95% of the market price per share. If the market price
per share on the valuation date is less than the net asset value per share, the
Fund will issue new shares to you at the market price per share on the valuation
date.
All reinvestments are in full and fractional shares, carried to three decimal
places. In the case of foreign (non-U.S.) shareholders, reinvestment will be
made net of applicable withholding tax.
VOLUNTARY CASH PURCHASE OPTION
Plan participants have the option of making investments in Fund shares through
the Plan Administrator. You may invest any amount from $100 to $3,000
semi-annually. The Plan Administrator will purchase shares for you on the New
York Stock Exchange or otherwise on the open market on or about February 15 and
August 15. If you hold shares in your own name, you should deal directly with
the Plan Administrator. Checks should be made payable to "Computershare". The
Plan Administrator will not accept cash, traveler's checks, money orders, or
third party checks for voluntary cash purchases. We suggest you send your check
to the following address to be received at least two business days before the
investment date: Computershare, c/o The Taiwan Fund, Inc. at P.O. Box 43010,
Providence, RI 02940-3010. The Plan Administrator will return any cash payments
received more than thirty days prior to February 15 or August 15, and you will
not receive interest on uninvested cash payments. If you own shares that are
held in the name
26
SUMMARY OF DIVIDEND REINVESTMENT AND
CASH PURCHASE PLAN (continued)
--------------------------------------------------------------------------------
of a brokerage firm, bank, or other nominee, you should contact your nominee to
arrange for them to participate in the cash purchase option on your behalf.
IS THERE A COST TO PARTICIPATE?
Each participant will pay a pro rata portion of brokerage commissions payable
with respect to purchases of shares by the Plan Administrator on the New York
Stock Exchange or otherwise on the open market. Otherwise, there is no charge to
participants for reinvesting dividends and capital gains distributions, since
the Plan Administrator's fees are paid by the Fund. Brokerage charges for
purchasing shares through the Plan are expected to be less than the usual
brokerage charges for individual transactions, because the Plan Administrator
will purchase stock for all participants in blocks, resulting in lower
commissions for each individual participant.
For purchases from voluntary cash payments, participants are charged a service
fee of $.75 for each investment and a pro rata share of the brokerage
commissions.
Brokerage commissions and service fees, if any, will be deducted from amounts to
be invested.
WHAT ARE THE TAX IMPLICATIONS FOR PARTICIPANTS?
You will receive tax information annually for your personal records and to help
you prepare your federal income tax return. The automatic reinvestment of
dividends and capital gains distributions does not relieve you of any income tax
which may be payable on dividends or distributions.
If the Fund issues shares upon reinvestment of a dividend or capital gains
distribution, for U.S. federal income tax purposes, the amount reportable in
respect of the reinvested amount of the dividend or distribution will be the
fair market value of the shares received as of the payment date, which will be
reportable as ordinary dividend income and/or long term capital gains. The
shares will have a tax basis equal to such fair market value, and the holding
period for the shares will begin on the day after the payment date. State, local
and foreign taxes may also be applicable.
ONCE ENROLLED IN THE PLAN, MAY I WITHDRAW FROM IT?
You may withdraw from the Plan without penalty at any time by calling the Plan
Administrator at 1-800-426-5523, by accessing your Plan account at the Plan
Administrator's website, www.computershare.com/equiserve or by written notice to
the Plan Administrator.
If you withdraw, you will receive, without charge, stock certificates issued in
your name for all full shares, or, if you wish, the Plan Administrator will sell
your shares and send you the proceeds, less a service fee of $2.50 and less
brokerage commissions. The Plan Administrator will convert any fractional shares
you hold at the time of your withdrawal to cash at the current market price and
send you a check for the proceeds.
All sale requests having an anticipated market value of $100,000.00 or more are
expected to be submitted in written form. In addition, all sale requests within
thirty (30) days of an address change are expected to be submitted in written
form.
27
SUMMARY OF DIVIDEND REINVESTMENT AND
CASH PURCHASE PLAN (continued)
--------------------------------------------------------------------------------
WHOM SHOULD I CONTACT FOR ADDITIONAL INFORMATION?
If you hold shares in your own name, please address all notices, correspondence,
questions, or other communications regarding the Plan to: Computershare, c/o The
Taiwan Fund, Inc. at P.O. Box 43010, Providence, RI 02940-3010, by telephone at
1-800-426-5523 or through the Internet at www.computershare.com/equiserve. If
your shares are not held in your name, you should contact your brokerage firm,
bank, or other nominee for more information and to arrange for them to
participate in the Plan on your behalf.
Either the Fund or the Plan Administrator may amend or terminate the Plan.
Except in the case of amendments necessary or appropriate to comply with
applicable law, rules or policies or a regulatory authority, participants will
be mailed written notice at least 30 days before the effective date of any
amendment. In the case of termination, participants will be mailed written
notice at least 30 days before the record date of any dividend or capital gains
distribution by the Fund.
28
DIRECTORS AND OFFICERS (unaudited)
--------------------------------------------------------------------------------
The following table sets forth certain information concerning each of the
directors and officers of the Fund.
PRINCIPAL OCCUPATION OR
NAME, ADDRESS PRESENT OFFICE EMPLOYMENT DURING PAST DIRECTORSHIPS IN PUBLICLY-
AND (AGE) WITH THE FUND DIRECTOR SINCE FIVE YEARS HELD COMPANIES
------------- ------------------ --------------- ----------------------- --------------------------
DIRECTORS CONSIDERED INDEPENDENT PERSONS
Harvey Chang (53) Chairman of the 2005 President and Chief Director, Taiwan Cellular
21F, No. 172-1, Section 2 Board (since July, Executive Officer, Corp.
Ji-Lung Road 2005) and Director Taiwan Mobile Company
Taipei, Taiwan, ROC 106 Limited (September
2003-present); Senior
Vice President and
Chief Financial
Officer, Taiwan
Semiconductor
Manufacturing Co.
(February
1998-September 2003)
Shao-Yu Wang (81) Director 1986 Chairman of the Board Director, America
Apt. 5H of Trustees, Soochow California Bank
No. 56 Tun Hwa University (2003-present)
South Road, Section 2 (1987-present);
Taipei, Taiwan, ROC Chairman of the Board
of Trustees, Min Chuan
University,
(1986-present);
Chairman of the Board
of Trustees, Fu-Dan
High School
(1986-present)
Chairman, Evernew
Biotech, Inc.
(1985-present);
Director, TSR Corp.
(1985-present);
Chairman, TSR Corp.
(2005-present);
Chairman of the Board
of Directors, The
Taiwan Fund, Inc.
(1986-July 2005)
Christina Liu (49) Director 2005 Consultative Board Director, Taiwan Stock
Suite 312, No. 3-1 Member, Commission On Exchange (1995-2002)
Jinan Road Economic Planning and
Taipei, Taiwan, ROC Development, Executive
Yuan, Taiwan, ROC
(1996-present);
Consultative Board
Member, Central Deposit
Insurance Corp. Taiwan,
ROC (1996-2002)
29
DIRECTORS AND OFFICERS (unaudited) (continued)
--------------------------------------------------------------------------------
PRINCIPAL OCCUPATION OR
NAME, ADDRESS PRESENT OFFICE EMPLOYMENT DURING PAST DIRECTORSHIPS IN PUBLICLY-
AND (AGE) WITH THE FUND DIRECTOR SINCE FIVE YEARS HELD COMPANIES
------------- ------------------ --------------- ----------------------- --------------------------
Joe O. Rogers (56) Director 1986 Organizing Member, The Director and Member of the
2477 Foxwood Drive Rogers Team LLC, (July Audit Committee, The China
Chapel Hill, NC 27514 2001-present); Manager, Fund, Inc. (1992-present)
The J-Squared Team LLC
(April 2003-May 2004);
Executive Vice
President, Business
Development, Planet
Portal Inc. (September
1999-
May 2001)
Lawrence F. Weber (72) Director 1995 Independent Consultant --
156 Ide Rd. (1993-present)
Williamstown, MA 01267
M. Christopher Canavan, Jr. (66) Director 2003 Independent Consultant Director and Chairman of
73 Brook Street (2000-present); The Audit Committee,
Wellesley, MA 02482 Partner, Bruker Biosciences, Inc.
PricewaterhouseCoopers (2000-present)
LLP (Coopers & Lybrand)
(1972-1999)
Anthony Kai Yiu Lo (56) Director 2003 Director, Advantage Member of Listing
1201 Sun Hung Kai Centre Ltd. (2004-present); Committee, Stock Exchange
30 Harbor Road Founder and Managing of Hong Kong Ltd.
Wanchai, Hong Kong Director, Advantage (1996-present)
Ltd. (1999-2004); Vice
Chairman, ABN Amro HG
Asia Ltd. (1998-1999)
DIRECTORS CONSIDERED INTERESTED PERSONS
*Benny T. Hu (55) President and 1993 Chairman, China Director, USI Far East
30 F, 99 Tun Hwa Director Development Industrial Corp. (2004-present);
South Road, Section 2 Bank (June 2003-May Supervisor, China Steel
Taipei, Taiwan, ROC 2004); Chairman, China Corp. (2004-present);
Development Asset Supervisor, Winbond
Management Corp. Electronics Corp. (2002-
(June 2001-May 2004); present); Director, China
Ambassador-at-Large, Development Financial
Republic of China (May Holding Corp. (June
2001-present) 2001-May 2004); Director,
Yangming Marine Transport
Corp.
(2001-present)
30
DIRECTORS AND OFFICERS (unaudited) (continued)
--------------------------------------------------------------------------------
PRINCIPAL OCCUPATION OR
NAME, ADDRESS PRESENT OFFICE EMPLOYMENT DURING PAST DIRECTORSHIPS IN PUBLICLY-
AND (AGE) WITH THE FUND DIRECTOR SINCE FIVE YEARS HELD COMPANIES
------------- ------------------ --------------- ----------------------- --------------------------
*Blair Pickerell (48) Director 2005 Chairman, HSBC --
Chief Executive, Asia-Pacific Investments (Taiwan)
HSBC Investments (Hong Kong) Ltd. (May
Limited Level 22 HSBC Main 2003-present); Chief
Building 1 Queen's Road Central Executive Officer,
Hong Kong, China Asia- Pacific, HSBC
Investments Ltd. group
of entities in Asia
Pacific (May
2003-present); Managing
Director, Capital
Holdings Ltd. (January
2003-May 2003);
Managing Director, JF
Asset Management Ltd.
(August 1999-December
2002)
OFFICER
Adelina N. Y. Louie (39) Secretary, 2004 Chief Operating --
99 Tun Hwa South Treasurer and Officer, HSBC
Road, Section 2 Chief Compliance Investments (Taiwan)
Taipei, Taiwan, ROC Officer Ltd. (March
2004-present); Area
Commercial Manager,
HSBC (U.K.) Ltd.
(February 2002-March
2004); Senior Vice
President, Custody &
Clearing, HSBC
(Indonesia) Limited
(June 2000-February
2002); Vice President,
Custody & Clearing,
HSBC (Philippines) Ltd.
(May 1998-June 2000)
---------------
* Director is considered to be an "interested person" (as defined in the
Investment Company Act of 1940, as amended (the "1940 Act")) of the Fund or of
the Fund's investment adviser. Mr. Pickerell is deemed to be an interested
person because of his affiliation with the Fund's investment adviser. Mr. Hu
is considered to be an interested person because he is the President of the
Fund.
31
--------------------------------------------------------------------------------
UNITED STATES ADDRESS
The Taiwan Fund, Inc.
225 Franklin Street
Boston, MA
1-800-636-9242
www.thetaiwanfund.com
INVESTMENT ADVISER
HSBC Asset Investments (Taiwan) Limited
Taipei, Taiwan
DIRECTORS AND OFFICERS
Harvey Chang, Chairman of the Board and Director
Benny T. Hu, President and Director
S.Y. Wang, Director
Christina Liu, Director
Joe O. Rogers, Director
Blair Pickerell, Director
Lawrence F. Weber, Director
M. Christopher Canavan, Jr., Director
Anthony Kai Yiu Lo, Director
Adelina N.Y. Louie, Secretary, Treasurer and Chief Compliance Officer
Mary Moran Zeven, Assistant Secretary
ADMINISTRATOR AND ACCOUNTING AGENT
State Street Bank and Trust Company
Boston, MA
CUSTODIANS
The International Commercial Bank of China
Taipei, Taiwan
State Street Bank and Trust Company
Boston, MA
TRANSFER AGENT, DIVIDEND PAYING AGENT AND REGISTRAR
EquiServe Trust Company, N.A. in care of Computershare Investor Services
LEGAL COUNSEL
Clifford Chance US LLP
New York, NY
Lee and Li
Taipei, Taiwan
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
KPMG LLP
Boston, MA
ITEM 2. CODE OF ETHICS.
(a) The Taiwan Fund, Inc. (the "Fund") has adopted a Code of Ethics that
applies to the Fund's principal executive officer and principal financial
officer.
(b) No information need be disclosed pursuant to this paragraph.
(c) There have been no amendments to the Fund's Code of Ethics during the
reporting period for Form N-CSR.
(d) There have been no waivers granted by the Fund to individuals covered by
the Fund's Code of Ethics during the reporting period for Form N-CSR.
(e) Not applicable.
(f) A copy of the Fund's Code of Ethics is attached as exhibit 12(a)(1) to this
Form N-CSR.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
(a) (1) The Board of Directors of The Taiwan Fund, Inc. (the "Fund") has
determined that the Company has one member serving on the Fund's Audit
Committee that possesses the attributes identified in Instruction 2(b)
of Item 3 to Form N-CSR to qualify as "audit committee financial
expert."
(2) The name of the audit committee financial expert is M. Christopher
Canavan, Jr. Mr. Canavan has been deemed to be "independent" as that
term is defined in Item 3(a)(2) of Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees
For the fiscal year ended August 31, 2005, KPMG LLP ("KPMG"), the Fund's
independent registered public accounting firm, billed the Fund aggregate fees of
US$51,000 for professional services rendered for the audit of the Fund's annual
financial statements and review of financial statements included in the Fund's
annual report to shareholders.
For the fiscal years ended August 31, 2004, KPMG billed the Fund aggregate
fees of US$47,500 for professional services rendered for the audit of the Fund's
annual financial statements and review of financial statements included in the
Fund's annual report to shareholders.
(b) Audit-Related Fees
For the fiscal year ended August 31, 2005, KPMG billed the Fund aggregate
fees of US$6,500 for assurances and related services that are reasonably related
to the performance of the audit or review of the Fund's financial statements and
are not reported under the section Audit Fees above. Audit-Related Fees
represent procedures applied to the semi-annual financial statement amounts
(reading the semi-annual report and valuation and existence procedures on
investments) as requested by the registrant's audit committee.
For the fiscal year ended August 31, 2004, KPMG billed the Fund aggregate
fees of US$47,500 for assurances and related services that are reasonably
related to the performance of the audit or review of the Fund's financial
statements and are not reported under the section Audit Fees above.
Audit-Related Fees represent procedures applied to the semi-annual financial
statement amounts (see above)
3
as requested by the registrant's audit committee amounting to $6,000 in 2004.
The 2004 amounts also include agreed-upon procedures engagements performed to
the registrant's performance calculations (recalculation of the registrant's
performance) included in its monthly reports posted to the registrant's website.
Total fees received for the agreed-upon procedures engagements were $41,500, of
which $20,000 was paid by the registrant's service providers and not charged to
the registrant.
(c) Tax Fees
For the fiscal year ended August 31, 2005, KPMG billed the Fund aggregate
fees of US$11,250 for professional services rendered for tax compliance, tax
advice, and tax planning. The nature of the services comprising the Tax Fees was
the review of the Fund's income tax returns and tax distribution requirements.
For the fiscal year ended August 31, 2004, KPMG billed the Fund aggregate
fees of US$10,500 for professional services rendered for tax compliance, tax
advice, and tax planning. The nature of the services comprising the Tax Fees was
the review of the Fund's income tax returns and tax distribution requirements.
(d) All Other Fees
For the fiscal year ended August 31, 2005, KPMG did not bill the Fund any
fees for products and services other than those disclosed above.
For the fiscal year ended August 31, 2004, KPMG did not bill the Fund any
fees for products and services other than those disclosed above.
(e) The Fund's Audit Committee Charter requires that the Audit Committee
pre-approve all audit and non-audit services to be provided to the Fund by the
Fund's independent registered public accounting firm; provided, however, that
the pre-approval requirement with respect to non-auditing services to the Fund
may be waived consistent with the exceptions provided for in the Securities
Exchange Act of 1934, as amended (the "1934 Act"). All of the audit and tax
services described above for which KPMG billed the Fund fees for the fiscal
years ended August 31, 2005 and August 31, 2004 were pre-approved by the Audit
Committee.
For the fiscal years ended August 31, 2005 and August 31, 2004, the Fund's
Audit Committee did not waive the pre-approval requirement of any non-audit
services to be provided to the Fund by KPMG.
(f) No disclosures are required by this Item 4(f).
(g) For the fiscal year ended August 31, 2005, KPMG did not bill the Fund any
non-audit fees. During this period, KPMG did not provide any services to HSBC
Investments (Taiwan) Limited (the "Investment Adviser").
For the fiscal year ended August 31, 2004, KPMG did not bill the Fund any
non-audit fees. During this period, KPMG did not provide any services to the
Investment Adviser.
(h) KPMG notified the Fund's Audit Committee of all non-audit services that were
rendered by KPMG to the Fund's Investment Adviser and any entity controlling,
controlled by, or under common control with the Investment Adviser that provides
ongoing services to the Fund that were not pre-
4
approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X,
allowing the Fund's Audit Committee to consider whether such services were
compatible with maintaining KPMG's independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
(a) The Fund has a separately-designated audit committee established in
accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934. The
members of the Fund's audit committee are M. Christopher Canavan, Jr., Joe
Rogers, Anthony K.Y. Lo and Lawrence F. Weber.
ITEM 6. SCHEDULE OF INVESTMENTS.
Schedule of Investments is included as part of Item 1.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
INVESTMENT COMPANIES.
The registrant has delegated to its investment adviser the voting of proxies
relating to the registrant's portfolio securities. The policies and procedures
used by the investment adviser to determine how to vote proxies relating to the
registrant's portfolio securities, including the procedures used when a vote
presents a conflict of interest involving the investment adviser or any of its
affiliates, are contained in the investment adviser's Proxy Voting Guidelines,
which are attached hereto as Exhibit 12(a)(4).
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANY.
Not Applicable
Required disclosure beginning with fiscal year end 12/31/05.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which shareholders may
recommend nominees to the registrant's Board of Directors during the period
covered by this Form N-CSR filing.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers have
concluded that the registrant's disclosure controls and procedures (as
defined in Rule 30a-3(c) under the Investment Company Act of 1940, as
amended (the "1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date
within 90 days of the filing date of this Form N-CSR based on their
evaluation of these controls and procedures required by Rule 30a-3(b) under
the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under
the 1934 Act (17 CFR 240.13a-15(b) or 240.15d-15(b)).
(b) There were no changes in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR
270.30a-3(d))) that occurred during the registrant's second fiscal
half-year that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial
reporting.
5
ITEM 12. EXHIBITS
(a)(1) Code of Ethics is attached hereto in response to Item 2(f).
(a)(2) The certifications required by Rule 30a-2 of the 1940 Act are attached
hereto.
(a)(3) Not applicable.
(a)(4) Proxy voting policies and procedures of the Fund and its investment
advisers are attached hereto in response to Item 7.
(b) The certifications required by Rule 30a-2(b) of the 1940 Act and
Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto.
6
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
THE TAIWAN FUND, INC.
By: /s/ Benny T. Hu
---------------------------------
Benny T. Hu
President of The Taiwan Fund, Inc.
Date: November 7, 2005
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Benny T. Hu
---------------------------------
Benny T. Hu
President of The Taiwan Fund, Inc.
Date: November 7, 2005
By: /s/ Adelina Louie
---------------------------------
Adelina Louie
Treasurer of The Taiwan Fund, Inc.
Date: November 7, 2005
7