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 China Securities Investment Trust Corporation (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
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
The Fund is treated as a Qualified Foreign Institutional Investor (QFII) which limits the Fund's ownership of a
company's shares to no more than 15% of such shares. In addition, all QFIIs together can not own more than
30% of a company's shares. All Funds managed by China Securities Investment Trust Company (CSITC) are
limited in aggregate to 10% ownership of a company's shares.
The policies described below are consistently followed by the Fund in the preparation of its financial statements in
conformity with U.S. generally accepted accounting principles.
Security Valuation. All securities for which market quotations are readil