(Exact Name of Registrant as Specified in Charter)

Delaware		811-04893		042942862
(State or Other Jurisdiction of Incorporation)		(Commission File Number)		(IRS Employer Identification Number)

225 Franklin Street, Boston, Massachusetts		02110
(Address of Principal Executive Offices)		(Zip Code)

HSBC Asset Management (Taiwan) Limited
24/F No. 99, Tunhwa S. Rd., Sec. 2		Tel: (8862) 2325-7888
Taipei 106, Taiwan		Fax: (8862) 2706-5371

Portfolio Review

---

Market overview and portfolio performance
In November, the Taiwan Stock Exchange Index (the “TAIEX”) advanced 2.99% in U.S. dollar terms, reversing a 0.7% drop in October on NT dollar appreciation and foreign investors buying ahead of the Morgan Stanley Capital International’s (“MSCI”) re-weighting of the Taiwan market. The MSCI re-weighting took effect on November 30, 2004. Foreign investors, local mutual funds and proprietary traders together were net purchasers of US$3.55 billion for the month. On the sector performance level, textile was the best performing sector, gaining 7.71% month-over-month in anticipation of increasing orders resulting from the lifting of imported textile quotas in the U.S. market at the beginning of 2005. The cement and steel sectors also did well, with respective month-over-month gains of 6.26% and 5.97%, while transportation rose 5.74% month-over-month on weakening crude oil prices and surging Baltic Dry Index (which is the measure of the shipments of dry bulk commodities). In spite of disappointing third quarter corporate earnings results, weak outlook guidance for the fourth quarter of 2004 and the full year of 2005 and NT dollar appreciation against the U.S. dollar, the technology sector gained 4.08% for the month of November driven by investors increasing interests in large market capitalization technology shares ahead of MSCI’s re-weighting of Taiwan. The automobile sector was the worst performing sector, dropping 1.14% month-over-month on profit taking after months of strong performance, while the banking sector was flat. In terms of the market’s daily turnover, it declined 15.1% month-over-month to US$2.10 billion. In November, The Taiwan Fund, Inc. (the “Fund”) outperformed the TAIEX by 2.7%. In terms of sectors, our overweighting in telecom operator shares brought a positive contribution to the Fund’s performance, while our underweighting in the Thin Film Transistor-Liquid Crystal Display (“TFT-LCD”) and overweighting in Integrated Circuit (“IC”) design shares resulted in negative contributions to the Fund’s performance.

Market outlook and portfolio strategy
For the early part of December, we believe the market focus will be on the Legislative Yuan election scheduled for December 11, and the market will remain range bound. In terms of corporate earnings outlook, we believe there could be more downside risks to the current forecasts both for 4Q04 result and 2005. We expect to see potential earnings downgrades for the export-driven sectors for two reasons. First, NT dollar appreciation against the U.S. dollar would hurt Taiwanese corporate earnings, particularly for export-driven and downstream technology companies. Second, a weaker 2005 macro-economic outlook may soften end-market demand. Coupled with slower global growth, overcapacity in several global sectors, such as foundry, TFT-LCD and shipping could further hurt corporate earnings. Another critical issue would be slower-than-expected inventory digestion. Upon slower-than-expected sales of consumer electronic products during the Christmas season, more order cut backs could be seen, which would also have a negative affect on profitability. In terms of sectors, we anticipate holding a neutral weighting in technology shares for the rest of 2004 and into 2005. We believe that strong market liquidity, undemanding valuations and potential increasing foreign fund inflows based on NT dollar appreciation against the U.S. dollar could result in the TAIEX continuing a consolidation trading range before heading into the Chinese New Year in February 2005. However, we anticipate steady growth for domestic demand sectors to persist in 2005 and, thus, to draw investor interests for certain sectors, particularly in the banking sector. In addition, technology shares with stable earnings growth in 2005 and attractive valuations should also attract investor interests, in our view. Therefore, our strategy remains unchanged and we will continue to add domestic-related shares and reduce cyclical growth sectors in the coming few weeks. We will also continue to search for quality small-cap stocks with growth potential to add to the Fund’s portfolio.

---

---

---

---

Returns in US$ (%)*

---

Premium/Discount of TWN

---

---

---