TAX EXEMPT PROCEEDS FUND, INC.
IMPORTANT NOTICE TO SHAREHOLDERS
Dear Shareholder:
As you are aware, each Fund is managed and advised by Reich & Tang Asset
Management L.P. (the 'Manager'). The parent company of the Manager, New England
Investment Companies, L.P., is majority-owned by New England Mutual Life
Insurance Company, which proposes to merge with Metropolitan Life Insurance
Company sometime after the first quarter of 1996.
As a shareholder, you are invited to vote on a proposal in connection with this
merger. Specifically, you are being asked to approve or disapprove a new
management/investment advisory agreement with the Manager since the above
transaction, in accordance with applicable regulations, would automatically
terminate the existing management/investment advisory agreement between the
Manager and each Fund.
What does this mean to you as a shareholder?
It is important to note that the management fee and the management and
investment advisory services to be performed under the new agreement are the
same as those under the current agreement. The other terms of the agreement are
the same in all material respects to the existing agreement. There are not
changes contemplated in the objectives or policies of the Fund, the management
or operation of the Manager relating to the Funds, the personnel managing the
Funds or the shareholder or other business activities of the Funds.
The Board of Directors has determined that the new agreement would be in the
best interest of the Funds and their shareholders. Accordingly, the Board of
Directors of the Funds approved the new agreement and voted to recommend it to
shareholders for approval.
We encourage you to vote promptly no matter how many shares you own. Timely
votes save money and avoid follow-up mailings. Your cooperation as we go through
the process of the transition is greatly appreciated. We are confident that the
combining of these firms will result in a structure that will better service
your needs.
Thanking you, in advance, for your patience and support.
Very truly yours,
Tax Exempt Proceeds Fund, Inc.
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TAX EXEMPT PROCEEDS FUND, INC.
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
March 13, 1996
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600 Fifth Avenue
New York, New York 10020
(800) 676-6779
A Special Meeting of Shareholders of Tax Exempt Proceeds Fund, Inc. (the
'Corporation') will be held at 9:00 a.m. on March 13, 1996 at the offices of the
Corporation at 600 Fifth Avenue, New York, New York for the following purposes,
all of which are more fully described in the accompanying Proxy Statement dated
January 24, 1996.
1. To approve or disapprove a new Investment Management Contract to be
effective upon the merger of New England Mutual Life Insurance Company into
Metropolitan Life Insurance Company, such Contract to be identical to the
Investment Management Contract in effect for the Corporation immediately
prior to such merger (see page 6 of the attached Proxy Statement);
2. To transact such other business as may properly come before the meeting.
Only shareholders of record at the close of business on January 10, 1996 are
entitled to notice of, and to vote at, the meeting.
By Order of the Board of Directors
BERNADETTE N. FINN, Secretary
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YOUR VOTE IS IMPORTANT NO MATTER HOW MANY SHARES YOU OWNED ON THE RECORD DATE.
PLEASE INDICATE YOUR VOTING INSTRUCTIONS ON THE ENCLOSED PROXY BALLOT, DATE AND
SIGN IT, AND RETURN IT IN THE ENVELOPE PROVIDED, WHICH IS ADDRESSED FOR YOUR
CONVENIENCE AND NEEDS NO POSTAGE IF MAILED IN THE UNITED STATES. WE ASK FOR YOUR
COOPERATION IN MAILING YOUR PROXY PROMPTLY.
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<TABLE>
<CAPTION>
PROXY STATEMENT PAGE
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<S> <C>
Introduction.......................................................................... 4
Proposal: Approval or Disapproval of a New Investment Management
Contract to be Effective at the Time of the Merger....................... 6
Information Regarding the Manager..................................................... 8
Allocation of Portfolio Brokerage..................................................... 12
Other Matters......................................................................... 12
Exhibit A (Investment Management Contract between the Corporation and
Reich & Tang Asset Management, L.P.)..................................... 14
Exhibit B (Table of Fees for all Funds Advised by the Manager)..................... 18
</TABLE>
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TAX EXEMPT PROCEEDS FUND, INC.
600 FIFTH AVENUE
NEW YORK, NEW YORK 10020
PROXY STATEMENT
INTRODUCTION
This statement is furnished in connection with the solicitation of proxies by
the Board of Directors of Tax Exempt Proceeds Fund, Inc. (the 'Corporation') for
use at a Special Meeting of Shareholders to be held at the offices of the
Corporation at 600 Fifth Avenue, New York, New York on March 13, 1996 at 9 A.M.
Such solicitation will be made primarily by the mailing of this statement and
the materials accompanying it. Supplemental solicitations may be made by mail,
telephone, or personal interviews by officers and representatives of the
Corporation. The expenses in connection with preparing and mailing this
statement and the material accompanying it, and of such supplemental
solicitations, will be borne by The New England and Metropolitan Life (each as
hereinafter defined). This Proxy Statement and the accompanying Proxy are first
being sent to shareholders on or about January 24, 1996. The Corporation's most
recent annual and semi-annual reports are available upon request.
The outstanding voting stock of the Corporation as of the close of business on
January 10, 1996 consisted of 257,187,453 shares of Common Stock, each whole
share being entitled to one vote and each fraction of a share being entitled to
a proportionate fraction of a vote. Only shareholders of record at the close of
business on January 10, 1996 are entitled to vote at the meeting. Any
shareholder may revoke his proxy at any time prior to its exercise by a written
notification of such revocation, which must be signed, include the shareholder's
name and account number, be addressed to the Secretary of the Corporation at its
principal executive office, 600 Fifth Avenue, New York, New York 10020, and be
received prior to the meeting to be effective, or by signing another proxy of a
later date, or by personally casting his vote at the meeting of shareholders.
Among the purposes of this Special Meeting of the Shareholders of the
Corporation is the approval of the Merger (the 'Merger') of New England Mutual
Life Insurance Company ('The New England') into Metropolitan Life Insurance
Company ('Metropolitan Life'). The Merger is being treated, for purposes of the
Investment Company Act of 1940, as amended (the '1940 Act'), as a change of
control of New England Investment Companies, L.P. ('NEIC'), the limited partner
and owner of the 99.5% limited partnership interest in Reich & Tang Asset
Management L.P. (the Corporation's 'Manager'). Reich & Tang Asset Management,
Inc. (a wholly-owned subsidiary of NEIC) is the general partner and owner of the
remaining 0.5% interest of the Manager. Under the 1940 Act, such a change of
control constitutes an 'assignment' (as defined in the 1940 Act) of the
Investment Management Contract between the Manager and the Corporation, as well
as various other investment advisory agreements under which NEIC and its
subsidiary firms serve as advisers or sub-advisers to certain other mutual
funds, and results in the automatic termination of each of those agreements
including the Investment Management Contract between the Corporation and the
Manager, effective at the time of the Merger. The Directors have approved, and
recommend that the shareholders of the Corporation approve, a new investment
management contract. This proposed new contract will be in substance identical
to the contract in effect immediately prior to the Merger, and will take effect
at the time of the Merger. As a result, the Manager will continue to perform
investment management services for the Corporation after the Merger, on the same
terms as are in effect immediately before the Merger.
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One third of the outstanding shares of the Corporation, represented in person or
by proxy, shall be required to constitute a quorum at the meeting although more
than one third of the outstanding shares may be required to be present to
approve a particular issue.
Any signed proxy will be voted in favor of the proposals unless a choice is
indicated to vote against or to abstain from voting on that proposal. An
abstention on any proposal will have the same legal effect as a vote against
such proposal.
If a quorum is not present at the meeting, or if a quorum is present but
sufficient votes to approve any of the proposals are not received, the persons
named as proxies may propose one or more adjournments of the meeting to permit
further solicitation of proxies. In determining whether to adjourn the meeting,
the following factors may be considered: the nature of the proposals that are
the subject of the meeting, the percentage of votes actually cast, the
percentage of negative votes actually cast, the nature of any further
solicitation and the information to be provided to shareholders with respect to
the reasons for the solicitation. Any adjournment will require the affirmative
vote of a majority of those shares represented at the meeting in person or by
proxy. A shareholder vote may be taken on one or more of the proposals in this
proxy statement prior to any adjournment if sufficient votes have been received
for approval. The proposals are considered 'non-discretionary' and brokers that
are record or nominee holders of shares of the Corporation who have received no
instructions from their clients do not have discretion to vote on these matters.
Absent voting by the particular beneficial owners of such shares, such 'broker
non-voters' will not be considered as votes cast in determining the outcome of
the proposals.
As of December 29, 1995, the following persons or entities owned as much as 5%
of the Corporation's outstanding shares:
Nature of
Name & Address % of Class Ownership
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State of Connecticut 12.0838% Record
Inter-Agency/Intra-Agency GRTS 1169
55 Elm Street
Hartford, CT 06106-1773
State of Connecticut 11.6873% Record
Office of the Treasurer
Local Bridge Program #6301
55 Elm Street
Hartford, CT 06106-1773
State of Connecticut 6.8129% Record
G.O. March 1992/STF
Office of the Treasurer
55 Elm Street
Hartford, CT 06106
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Nature of
Name & Address % of Class Ownership
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State of Connecticut 6.5851% Record
Office of the Treasurer
G.O. March 1992/G.F.
55 Elm Street
Hartford, CT 06106
State of Connecticut 6.3580% Record
Office of the Treasurer
G.O. October 1995/G.F.
55 Elm Street
Hartford, CT 06106
As of December 29, 1995, the officers or directors of the Corporation,
collectively, beneficially owned, directly or indirectly (including the power to
vote or to dispose of any shares), less than 1% of the shares of the
Corporation's total outstanding shares.
PROPOSAL: APPROVAL OR DISAPPROVAL OF A NEW INVESTMENT MANAGEMENT CONTRACT TO
BE EFFECTIVE AT THE TIME OF THE MERGER
The Directors of the Corporation unanimously recommend that the shareholders
vote to approve a new investment management contract for the Corporation to be
effective at the time of the Merger. The new investment management contract will
be substantially identical to the existing investment management contract in
effect for the Corporation immediately prior to the time of the Merger. As
explained above, the Merger is being treated, for purposes of the 1940 Act, as a
change in control of NEIC and its subsidiary firms including the Manager, Reich
& Tang Asset Management L.P., that serve as advisers or sub-advisers to various
mutual funds including the Corporation. The 1940 Act provides that such a change
in control constitutes an 'assignment' of these advisory and sub-advisory
agreements under which NEIC, the Manager and these related subsidiary firms
provide advisory services to the various mutual funds including the Corporation.
The 1940 Act further provides that such an 'assignment' will result in the
automatic termination of each of those agreements, at the time of the Merger.
The Merger. In August of 1995, The New England and Metropolitan Life entered
into an agreement providing for the Merger of the two companies (the 'Merger
Agreement'). Metropolitan Life will be the surviving company following the
Merger. Both The New England and Metropolitan Life are mutual insurance
companies. The Merger will result in the insurance policyholders of The New
England becoming policyholders of Metropolitan Life. The policyholders of The
New England will not receive any other payment, property or consideration in
connection with the Merger. The Merger will not be effected unless it is
approved by the requisite vote of the policyholders of both The New England and
Metropolitan Life. The Merger also requires approval by various government
regulatory agencies. In addition, consummation of the Merger is subject to
fulfillment of a number of other conditions, although the parties may waive some
or all of these conditions. There is no assurance that the Merger will in fact
be consummated. In addition, because it is impossible to predict with certainty
when the necessary regulatory approvals will be obtained and the other
conditions to the Merger be fulfilled, it is not known, as of the date of this
Proxy Statement, when the Merger will occur. The parties currently expect,
however, that the Merger will not occur until after the first quarter of 1996.
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NEIC is organized as a limited partnership. NEIC's sole general partner, New
England Investment Companies, Inc. ('NEIC Inc.'), is a wholly-owned subsidiary
of The New England. As a result of the Merger, NEIC Inc. would become a direct
or indirect wholly-owned subsidiary of Metropolitan Life. The New England also
owns a majority of the outstanding limited partnership interests of NEIC. The
Merger would result in Metropolitan Life becoming the owner (directly or through
a wholly-owned subsidiary) of these limited partnership interests. The Merger
Agreement provides that, following the consummation of the Merger, Metropolitan
Life shall have the right to designate a majority of the board of directors of
NEIC Inc.
Under the Merger Agreement, The New England and Metropolitan Life agree that
they will use their best efforts to satisfy the conditions of Section 15(f) of
the 1940 Act. Section 15(f) provides that an investment adviser to a registered
investment company (such as the Corporation), and affiliated persons of such
investment adviser, may receive any amount or benefit in connection with the
sale of securities of, or a sale of any other interest in, such investment
adviser which results in an assignment of an investment advisory contract with
such investment company, if
1. for a period of 3 years after the time of such action, at least 75%
of the board of such investment company are not interested persons of
such company's investment adviser or predecessor investment adviser,
and
2. there is not imposed an unfair burden on such investment company as a
result of such transaction or any express or implied terms,
conditions, or understandings applicable thereto.
Satisfaction of condition (1) above is not expected to require any changes in
the current composition of the Corporation's Board of Directors.
Information About Metropolitan Life. Metropolitan Life was incorporated under
the laws of New York in 1866 and since 1868 has been engaged in the life
insurance business under its present name. By the early 1900s, it had become the
largest life insurance company in the United States and is currently the second
largest life insurance company in the United States in terms of total assets.
Metropolitan Life's assets as of June 30, 1995 were over $130 billion, and its
adjusted capital as of that date exceeded $8 billion. Subsidiaries of
Metropolitan Life manage over $25 billion of assets for mutual funds,
institutional and other investment advisory clients.
Directors' Recommendation. The Directors unanimously recommend that shareholders
approve the new investment management contract between the Manager and the
Corporation to be effective at the time of the Merger. The new investment
management contract will be substantially identical to the investment management
contract in effect immediately before the Merger which is described on page 10
of this Proxy Statement. (The only difference will be that the new investment
management contract will be dated the date of the Merger and will be in effect
initially for a period of two years and from year to year thereafter provided
that its continuance is approved in accordance with the terms of the contract
and the applicable provisions of the 1940 Act.)
In coming to the recommendation set forth above, the Directors reviewed
extensive information about the Corporation, the Manager, NEIC and Metropolitan
Life. The Directors noted that, for purposes of the 1940 Act, the Merger
constitutes a change in control of NEIC and the Manager as well as NEIC's other
subsidiaries that act as advisers or sub-advisers for various other mutual
funds. Although the Merger is being treated as a change in control of NEIC and
of the various advisers and sub-advisers that are affiliated with NEIC,
including the Manager, the Merger is not expected to result in any change in the
personnel, operations or financial
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condition of NEIC or of such advisers or sub-advisers, including the Manager.
NEIC has indicated that each adviser and sub-adviser affiliated with NEIC,
including the Manager, will continue to be independently managed, as has
historically been the case. Thus, the Merger is not expected to result in any
changes in the investment approaches or styles of the advisers and sub-advisers,
including the Manger.
The Directors accordingly concluded that it is appropriate and desirable for the
Corporation to continue, after the Merger, the same investment management
arrangements as is in effect immediately before the Merger. Under the 1940 Act,
such continuation requires, in the case of the Corporation, the approval of
shareholders, by vote of the lesser of (1) 67% of the shares represented at the
Meeting, if more than 50% of the shares are represented at the Meeting, or (2)
more than 50% of the outstanding shares.
In order that the Corporation may continue to receive investment management
services following the Merger, on the same basis as before the Merger, the
Directors unanimously recommend that shareholders vote in favor of the Proposal.
If the shareholders do not approve the Proposal, the investment management
contract will terminate at the time of the Merger although the Manager will
continue to manage the Corporation, and the Corporation will consider such
alternative actions as are in the best interest of the Corporation.
INFORMATION REGARDING THE MANAGER
The Manager for the Corporation is Reich & Tang Asset Management L.P., a
Delaware limited partnership with principal offices at 600 Fifth Avenue, New
York, New York 10020. The Manager was at August 31, 1995 manager, adviser or
supervisor with respect to assets aggregating approximately $7.9 billion. The
Manager acts as manager of fifteen other investment companies and also advises
pension trusts, profit sharing trusts and endowments. In addition to the
Corporation, the Manager's advisory clients include, among others, California
Daily Tax Free Income Fund, Inc., Connecticut Daily Tax Free Income Fund, Inc.,
Cortland Trust, Inc., Daily Tax Free Income Fund, Inc., Delafield Fund, Inc.,
Florida Daily Municipal Income Fund, Institutional Daily Income Fund, Michigan
Daily Tax Free Income Fund, Inc., New Jersey Daily Municipal Income Fund, Inc.,
New York Daily Tax Free Income Fund, Inc., North Carolina Daily Municipal Income
Fund, Inc., Pennsylvania Daily Municipal Income Fund, Reich & Tang Equity Fund,
Inc., Reich & Tang Government Securities Trust and Short Term Income Fund, Inc.
Attached as Exhibit B is a Table of Fees for all funds advised by the Manager.
The Manager also advises pension trusts, profit-sharing trusts and endowments.
Peter S. Voss (49), G. Neal Ryland (54), Steven W. Duff (42) and Richard E.
Smith, III (45) are directors of Reich & Tang Asset Management, Inc. the
general partner of the Manager. Mr. Voss is President of Reich & Tang Asset
Management, Inc. The address of Messrs. Voss and Ryland is 399 Boylston
Street, Boston Massachusetts 02116. Mr. Duff is President of the Mutual Fund
Group of the Manager. Mr. Smith is President of the Capital Management Group
of the Manager. Their address is 600 Fifth Avenue, New York, New York 10020.
The officers of the Corporation are:
Steven W. Duff, 42, President of the Corporation and President of the Mutual
Funds Division of the Manager since September 1994. Mr. Duff was formerly
Director of Mutual Fund Administration of NationsBanc, with which he was
associated from 1981 to August 1994. Mr. Duff is also President and a Director
of California Daily Tax Free Income Fund, Inc., Connecticut Daily Tax Free
Income Fund, Inc., Daily Tax Free Income Fund, Inc., Michigan Daily Tax Free
Income Fund, Inc., New Jersey Daily Municipal Income Fund, Inc., New
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York Daily Tax Free Income Fund, Inc., North Carolina Daily Municipal Income
Fund, Inc., Reich & Tang Equity Fund, Inc. and Short Term Income Fund, Inc.;
President and Trustee of Florida Daily Municipal Income Fund, Institutional
Daily Income Fund, and Pennsylvania Daily Municipal Income Fund; President of
Cortland Trust, Inc., Reich & Tang Government Securities Trust and Tax Exempt
Proceeds Fund, Inc.; and Executive Vice President of Reich & Tang Equity Fund,
Inc.
Dana E. Messina, 38, Vice President of the Corporation. Ms. Messina is an
Executive Vice President of the Manager since January, 1995 and has been
associated with the Manager and its predecessors in various capacities since
December, 1980. She is also an officer of other investment companies advised
by the Manager.
Lesley M. Jones, 47, Vice President of the Corporation. Ms. Jones is a Senior
Vice President of the Manager since September, 1993 and has been associated
with the Manager and its predecessors in various capacities since April, 1973.
She is also an officer of other investment companies advised by the Manager.
Bernadette N. Finn, 48, Vice President and Secretary of the Corporation. Ms.
Finn is a Vice President of the Manager since September, 1993 and has been
associated with the Manager and its predecessors in various capacities since
September, 1970. She is also an officer of other investment companies advised
by the Manager.
Molly Flewharty, 44, Vice President of the Corporation. Ms. Flewharty is Vice
President of the Manager since September, 1993 and has been associated with
the Manager and its predecessors in various capacities since December, 1977.
She is also an officer of other investment companies advised by the Manager.
Richard De Sanctis, 39, Treasurer of the Corporation since October 1992. Mr.
De Sanctis is Treasurer of the Manager and its predecessors since December,
1990 and is an officer of other investment companies advised by the Manager.
NEIC Inc. is a holding company offering a broad array of investment styles
across a wide range of asset categories through ten investment
advisory/management affiliates and two distribution subsidiaries which include,
in addition to the Manager, Loomis, Sayles & Company, L.P., Copley Real Estate
Advisors, Inc., Back Bay Advisors, L.P., Marlborough Capital Advisors, L.P.,
Westpeak Investment Advisors, L.P., Draycott Partners, Ltd., TNE Investment
Services, L.P., New England Investment Associates, Inc., an affiliate, Capital
Growth Management Limited Partnership, and Harris Associates. These affiliates
in the aggregate are investment advisors or managers to over 42 other registered
investment companies.
Pursuant to the Investment Management Contract for each Portfolio, the Manager
manages each Portfolio's portfolio of securities and makes decisions with
respect to the purchase and sale of investments, subject to the general control
of the Board of Directors of the Corporation.
The Manager provides persons satisfactory to the Board of Directors of the
Corporation to serve as officers of the Corporation. Such officers, as well as
certain other employees and directors of the Corporation, may be directors or
officers of Reich & Tang Asset Management, Inc., the sole general partner of the
Manager, or employees of the Manager or its affiliates.
The Investment Management Contract with the Manager's predecessor was approved
by the Board of Directors, including a majority of the Directors who are not
interested persons (as defined in the Act) of the Corporation or the Manager and
by the shareholders at a special meeting of shareholders, effective September
15, 1993. The re-execution of the Investment Management Contract with the
Manager was
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approved by the Board of Directors, including a majority of the directors who
are not interested persons of the Corporation or Manager, effective October 1,
1994. The Investment Management Contract has a term which extends to August 31,
1996 and may be continued in force thereafter for successive twelve-month
periods beginning each September 1, provided that such continuance is
specifically approved annually by majority vote of the Corporation's outstanding
voting securities or by its Board of Directors, and in either case by a majority
of the Directors who are not parties to the Investment Management Contract or
interested persons of any such party, by votes cast in person at a meeting
called for the purpose of voting on such matter.
The Investment Management Contract is terminable without penalty on sixty days'
written notice when authorized either (1) by majority vote of its outstanding
voting shares or (2) by a vote of a majority of its Board of Directors or (3) by
the Manager on sixty days' written notice, and will automatically terminate in
the event of its assignment. The Investment Management Contract provides that in
the absence of willful misfeasance, bad faith or gross negligence on the part of
the Manager, or of reckless disregard of its obligations thereunder, the Manager
shall not be liable for any action or failure to act in accordance with its
duties thereunder.
Under the Investment Management Contract, the Corporation will pay an annual
management fee of .40% of the Corporation's average daily net assets not in
excess of $250 million, plus .35% of such assets in excess of $250 million but
not in excess of $500 million, plus .30% of such assets in excess of $500
million. The Manager, at its discretion, may voluntarily waive all or a portion
of the management fee. The fees are accrued daily and paid monthly. Any portion
of the total fees received by the Manager may be used by the Manager to provide
shareholder services and for distribution of the Corporation's shares.
The Manager at its discretion may waive its rights to any portion of the
management fee and may use any portion of the management fee for purposes of
shareholder services and distribution of the Corporation's shares. There can be
no assurance that such fees will be waived in the future.
Expense Limitation. The Manager has agreed, pursuant to the Investment
Management Contract, to reimburse the Corporation for its expenses (exclusive of
interest, taxes, brokerage and extraordinary expenses) which in any year exceed
the limits on investment company expenses prescribed by any state in which the
Corporation's shares are qualified for sale. For the purpose of this obligation
to reimburse expenses, the Corporation's annual expenses are estimated and
accrued daily, and any appropriate estimated payments are made to it on a
monthly basis. Subject to the obligations of the Manager to reimburse the
Corporation for its excess expenses as described above, the Corporation has,
under the Investment Management Contract, confirmed its obligation for payment
of all its other expenses, including all operating expenses, taxes, brokerage
fees and commissions, commitment fees, certain insurance premiums, interest
charges and expenses of the custodian, transfer agent and dividend disbursing
agent's fees, telecommunications expenses, auditing and legal expenses,
bookkeeping agent fees, costs of forming the corporation and maintaining
corporate existence, compensation of Directors, officers and employees of the
Corporation and costs of other personnel performing services for the Corporation
who are not officers of the Manager or its affiliates, costs of investor
services, shareholders' reports and corporate meetings, Securities and Exchange
Commission registration fees and expenses, state securities laws registration
fees and expenses, expenses of preparing and printing the Corporation's
prospectus for delivery to existing shareholders and of printing application
forms for shareholder accounts, and the fees and reimbursements payable to the
Manager under the Investment Management Contract and the Administrative Services
Contract and the Distributor under the Shareholder Servicing Agreement.
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The Corporation may from time to time hire its own employees or contract to have
management services performed by third parties (including Participating
Organizations) as discussed herein, and the management of the Corporation
intends to do so whenever it appears advantageous to the Corporation. The
Corporation's expenses for employees and for such services are among the
expenses subject to the expense limitation described above.
The following fees were paid to the predecessor investment managers under the
previous Investment Management Contracts or the Manager under the current
Investment Management Contract. For the Corporation's fiscal year ended June 30,
1993, Reich & Tang L.P. received investment management fees of $532,528. For the
Corporation's fiscal year ended June 30, 1994, Reich & Tang L.P. and its
successor, NEIC, received in the aggregate investment management fees totaling
$529,837. For the Fund's fiscal year ended June 30, 1995, NEIC and the Manager
received in the aggregate investment management fees totaling $652,164. No
reimbursements were payable to the Corporation by the predecessor managers
pursuant to the expense limitation described above with respect to the fiscal
years ended June 30, 1993, 1994 and 1995.
The Manager now acts as investment manager or adviser for other persons and
entities and may under the Investment Management Contract act as investment
manager or adviser to other registered investment companies. At present, the
Manager is investment manager to fifteen registered investment companies.
Distribution and Service Plan. Pursuant to Rule 12b-1 under the Act, the
Securities and Exchange Commission has required that an investment company which
bears any direct or indirect expense of distributing its shares must do so only
in accordance with a plan permitted by the Rule. The Corporation's Board of
Directors has adopted a distribution and service plan (the 'Plan') and, pursuant
to the Plan, the Corporation and the Manager have entered into a Distribution
Agreement and a Shareholder Servicing Agreement with Reich & Tang Distributors
L.P. (the 'Distributor') as distributor of the Corporation's shares. Because the
Merger will be considered to result in the assignment of the Corporation's
Distribution Agreement with the Distributor, causing those agreements to
terminate upon the Merger, the Board of Directors of the Corporation approved a
new Distribution Agreement with Reich & Tang Distributors L.P. for the
Corporation to take effect if a new Investment Management Agreement is approved
by shareholders of the Corporation and upon consummation of the Merger. The new
Distribution Agreement would replace the current Distribution Agreement with the
Distributor and would be identical to those agreements, except for the dates of
execution and effectiveness.
Reich & Tang Asset Management, Inc. serves as the sole general partner for both
Reich & Tang Asset Management L.P. and Reich & Tang Distributors L.P. Reich &
Tang Asset Management L.P. serves as the sole limited partner of the
Distributor. The Distributor's address is 600 Fifth Avenue, New York, New York
10020. Under the Distribution Agreement, the Distributor, for nominal
consideration and as agent for the Corporation, will solicit orders for the
purchase of the Corporation's shares, provided that any subscriptions and orders
will not be binding on the Corporation until accepted by the Corporation as
principal.
The Plan provides that the Manager may make payments from time to time from its
own resources, which may include the management fee and past profits for the
following purposes: (i) to defray the costs of, and to compensate others,
including Participating Organizations with whom the Distributor has entered into
written agreements for performing shareholder servicing and related
administrative functions on behalf of the Corporation; (ii) to compensate
certain Participating Organizations for providing assistance in distributing the
Corporation's shares; and (iii) to pay the costs of printing and distributing
the Corporation's prospectus to prospective investors, and to defray the cost of
the preparation and printing of brochures and other
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promotional materials, mailings to prospective stockholders, advertising, and
other promotional activities, including the salaries and/or commissions of sales
personnel in connection with the distribution of the Corporation's shares. The
Distributor may also make payments from time to time from its own resources,
which may include the Service Fee and past profits for the purpose enumerated in
(i) above. The Distributor will determine the amount of such payments made
pursuant to the Plan, provided that such payments will not increase the amount
the Corporation is required to pay to the Manager and the Distributor for any
fiscal year under either the Investment Management Contract in effect for that
year, the Administrative Services Contract in effect for that year or under the
Shareholder Servicing Agreement in effect for that year.
For the fiscal year ended June 30, 1995, the Manager and Distributor made
payments pursuant to the Plan of $41,060 for the cost of sales personnel and
related expenses and for the printing of the Fund's prospectus and application
forms.
ALLOCATION OF PORTFOLIO BROKERAGE
The Corporation's purchases and sales of securities usually are principal
transactions. Portfolio securities are generally purchased directly from the
issuer or from an underwriter or market maker for the securities. There usually
are no brokerage commissions paid for such purchases and the Corporation at
present does not anticipate paying brokerage commissions. Should the Corporation
pay a brokerage commission on a particular transaction, the Corporation would
seek to effect the transaction at the most favorable available combination of
best execution and lowest commission. Purchases from underwriters of portfolio
securities include a commission or concession paid by the issuer to the
underwriter, and purchases from dealers serving as market makers include the
spread between the bid and asked price.
No portfolio transactions are executed with the Manager, or with an affiliate of
the Manager, acting either as principal or as paid broker.
The frequency of transactions and their allocation to various dealers is
determined by the Manager in its best judgment and in a manner deemed in the
best interest of shareholders of the Corporation. The primary consideration is
prompt execution of orders in an effective manner at the most favorable price.
Investment decisions for the Corporation will be made independently from those
for any other accounts or investment companies that may be or become advised or
managed by the Manager or its affiliates. If, however, the Corporation and other
investment companies or accounts advised or managed by the Manager are
contemporaneously engaged in the purchase or sale of the same security, the
transactions may be averaged as to price and allocated equitably to each
account. In some cases, this policy might adversely affect the price paid or
received by the Corporation or the size of the position obtainable for the
Corporation. In addition, when purchases or sales of the same security for the
Corporation and for other investment companies managed by the Manager occur
contemporaneously, the purchase or sale orders may be aggregated in order to
obtain any price advantages available to large denomination purchasers or
sellers.
OTHER MATTERS
As a Maryland corporation, the Corporation is not required, and does not intend,
to hold regular annual meetings. Shareholders who wish to present proposals at
any future shareholder meeting must present such proposals to the Board at a
reasonable time prior to the solicitation of any shareholder proxy.
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The management does not know of any matters to be present at this Special
Meeting of Shareholders other than those mentioned in this Proxy Statement. If
any of the persons listed above is unavailable for election as a director, an
event not now anticipated, or if any other matters properly come before the
meeting, the shares represented by proxies will be voted with respect thereto in
accordance with the best judgment of the person or persons voting the proxies.
By Order of
the Board of Directors
BERNADETTE N. FINN,
Secretary
January 24, 1996
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EXHIBIT A (INVESTMENT MANAGEMENT CONTRACT BETWEEN THE CORPORATION AND REICH &
TANG ASSET MANAGEMENT, L.P.)
INVESTMENT MANAGEMENT CONTRACT
TAX EXEMPT PROCEEDS FUND, INC.
New York, New York
___________________ 1996
Reich & Tang Asset Management L.P.
600 Fifth Avenue
New York, New York 10022
Gentlemen:
We herewith confirm our agreement with you as follows:
1. We propose to engage in the business of investing and reinvesting our
assets in securities of the type, and in accordance with the limitations,
specified in our Articles of Incorporation, By-Laws and Registration
Statement filed with the Securities and Exchange Commission under the
Investment Company Act of 1940 (the '1940 Act') and the Securities Act of
1933, including the Prospectus forming a part thereof (the 'Registration
Statement'), all as from time to time in effect, and in such manner and to
such extent as may from time to time be authorized by our Board of
Directors. We enclose copies of the documents listed above and will
furnish you such amendments thereto as may be made from time to time.
2. (a) We hereby employ you to manage the investment and reinvestment of our
assets as above specified, and, without limiting the generality of the
foregoing, to provide the management and other services specified below.
(b) Subject to the general control of our Board of Directors, you will make
decisions with respect to all purchases and sales of our portfolio
securities. To carry out such decisions, you are hereby authorized, as our
agent and attorney-in-fact, for our account and at our risk and in our name,
to place orders for the investment and reinvestment of our assets. In all
purchases, sales and other transactions in our portfolio securities you are
authorized to exercise full discretion and act for us in the same manner and
with the same force and effect as our corporation itself might or could do
with respect to such purchases, sales or other transactions, as well as with
respect to all other things necessary or incidental to the furtherance or
conduct of such purchases, sales or other transactions.
(c) You will report to our Board of Directors at each meeting thereof all
changes in our portfolio since your prior report, and will also keep us in
touch with important developments affecting our portfolio and, on your own
initiative, will furnish us from time to time with such information as you
may believe appropriate for this purpose, whether concerning the individual
entities whose securities are
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included in our portfolio, the activities in which such entities engage,
Federal income tax policies applicable to our investments, or the conditions
prevailing in the money market or the economy generally. You will also
furnish us with such statistical and analytical information with respect to
our portfolio securities as you may believe appropriate or as we may
reasonably request. In making such purchases and sales of our portfolio
securities, you will comply with the policies set from time to time by our
Board of Directors as well as the limitations imposed by our Articles of
Incorporation and by the provisions of the Internal Revenue Code of 1986 and
the 1940 Act relating to regulated investment companies and the limitations
contained in the Registration Statement.
(d) It is understood that you will from time to time employ, subcontract
with or otherwise associate with yourself, entirely at your expense, such
persons as you believe to be particularly fitted to assist you in the
execution of your duties hereunder. While this Agreement is in effect, you
or persons affiliated with you, other than us ('your affiliates'), will
provide persons satisfactory to our Board of Directors to be elected or
appointed officers or employees of our corporation. These shall be a
president, a secretary, a treasurer, and such additional officers and
employees as may reasonably be necessary for the conduct of our business.
(e) You or your affiliates will also provide persons, entirely at your
expense, who may be our officers, to render accounting and related services,
calculate net asset value and yield, prepare reports to and filings with
regulatory authorities, and to perform such clerical, accounting and other
office and shareholder services to us as we may from time to time request of
you. Such personnel may be your employees or employees of your affiliates or
of other organizations.
(f) You or your affiliates will also furnish us without charge such
additional administrative and management supervision and such office
facilities as you may believe appropriate or as we may reasonably request
subject to the requirements of any regulatory authority to which you may be
subject. You or your affiliates will also pay the expenses of promoting and
advertising the sale of our shares and of printing and distributing the
Fund's Prospectus to prospective investors. To the extent that you or your
affiliates may make payments to securities dealers and other third parties
who engage in the sale of our shares or who render shareholder support
services, and that such payments may be deemed indirect financing of an
activity primarily intended to result in the sale of shares of the Fund
within the context of Rule 12b-1 under the 1940 Act (the 'Rule'), then such
payments by you shall be deemed to be authorized under the Fund's
Distribution Plan adopted pursuant to the Rule. You will, in your sole
discretion, determine the amount of such payments and may from time to time
in your sole discretion increase or decrease the amount of such payments;
provided, however, that no such payment will increase the amount the Fund is
required to pay you under this Agreement or any agreement. Any payments made
by you for the purpose of distributing shares of the Fund are subject to
compliance with the terms of written agreements in a form satisfactory to
the Fund's Board of Directors to be entered into by you and the
participating organization.
3. You agree to be responsible for, and hereby assume the obligation for
payment of, or shall reimburse us for, all our expenses (except for the
fees payable to you hereunder) including without limitation: (a) brokerage
and commission expenses; (b) Federal, state or local taxes, including
issue and transfer taxes incurred by or levied on us; (c) commitment fees
and certain insurance premiums and membership fees and dues in investment
company organizations; (d) interest charges on borrowings; (e) charges and
expenses of our custodian; (f) charges and expenses relating to the
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issuance, redemption, transfer and dividend disbursing functions for us; (g)
telecommunications expenses; (h) recurring and non-recurring legal and
accounting expenses; (i) costs of organizing and maintaining our existence
as a corporation; (j) compensation, including directors' fees, of any of our
directors, officers or employees and costs of other personnel providing
services to us, as provided in subparagraph 2(e) above; (k) costs of
stockholders' services; (l) costs of stockholders' reports, proxy
solicitations, and corporate meetings; (m) fees and expenses of registering
our shares under the appropriate Federal securities laws and of qualifying
our shares under applicable state securities laws, including expenses
attendant upon the initial registration and qualification of our shares and
attendant upon renewals of, or amendment to, those registrations and
qualifications; and (n) expenses of preparing, printing and delivering our
prospectus to our existing shareholders and of printing shareholder
application forms for shareholder accounts. In addition, while this
Agreement is in effect, you will be responsible for any amount by which our
annual operating expenses (excluding taxes, brokerage, interest and
extraordinary expenses) exceed the limits on investment company expenses
prescribed by any state in which the Fund's shares are qualified for sale.
4. We will expect of you, and you will give us the benefit of, your best
judgment and efforts in rendering these services to us, and we agree as an
inducement to your undertaking these services that you will not be liable
hereunder for any mistake of judgment or for any other cause, provided
that nothing herein shall protect you against any liability to us or to
our security holders by reason of willful misfeasance, bad faith or gross
negligence in the performance of your duties hereunder, or by reason of
your reckless disregard of your obligations and duties hereunder.
5. In consideration of the foregoing we will pay you a fee at the annual rate
of .40 of 1% per annum of our average daily net assets up to $250 million;
.35 of 1% per annum of our average daily net assets between $250 million
and $500 million and .30 of 1% per annum of our average daily net assets
over $500 million. Your fee will be accrued by us daily, and will be
payable on the last day of each calendar month for services performed
hereunder during that month or on such other schedule as you shall request
of us in writing. You may waive your right to any fee to which you are
entitled hereunder, provided such waiver is delivered to us in writing.
6. This Agreement will become effective on the date hereof and shall remain
in effect until the first meeting of our shareholders, annual or special,
held after such date, and, if approved by the vote of a majority of our
outstanding voting securities, as defined in the 1940 Act, at such
meeting, shall continue in effect until __________________ and thereafter
for successive twelve-month periods (computed from each
__________________), provided that such continuation is specifically
approved at least annually by our Board of Directors or by a majority vote
of the holders of our outstanding voting securities, as defined in the
1940 Act, and, in either case, by a majority of those of our directors who
are neither party to this Agreement nor, other than by their service as
directors of the corporation, interested persons, as defined in the 1940
Act, of any such person who is party to this Agreement. Upon the
effectiveness of this Agreement, it shall supersede all previous
Agreements between us covering the subject matter hereof. This Agreement
may be terminated at any time, without the payment of any penalty, by vote
of a majority of our outstanding voting securities, as defined in the 1940
Act, or by a vote of a majority of our entire Board of Directors, on sixty
days' written notice to you, or by you on sixty days' written notice to
us.
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7. This Agreement may not be transferred, assigned, sold or in any manner
hypothecated or pledged by you and this Agreement shall terminate
automatically in the event of any such transfer, assignment, sale,
hypothecation or pledge by you. The terms 'transfer', 'assignment' and
'sale' as used in this paragraph shall have the meanings ascribed thereto by
governing laws and in applicable rules or regulations of the Securities and
Exchange Commission.
8. Except to the extent necessary to perform your obligations hereunder,
nothing herein shall be deemed to limit or restrict your right, or the
right of any of your employees or the officers and directors of Reich &
Tang Asset Management, Inc., your general partner, who may also be a
director, officer or employee of ours, or of a person affiliated with us,
as defined in the Act, to engage in any other business or to devote time
and attention to the management or other aspects of any other business,
whether of a similar or dissimilar nature, or to render services of any
kind to any other corporation, firm, individual or association.
If the foregoing is in accordance with your understanding, will you kindly so
indicate by signing and returning to us the enclosed copy hereof.
Very truly yours,
TAX EXEMPT PROCEEDS FUND, INC.
By: ___________________________
ACCEPTED: , 1996
REICH & TANG ASSET MANAGEMENT L.P.
By: REICH & TANG ASSET MANAGEMENT, INC.,
General Partner
By: ____________________________________
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<TABLE>
<CAPTION>
EXHIBIT B (TABLE OF FEES FOR ALL FUNDS ADVISED BY THE MANAGER)
FUND NAME FEES NET ASSETS (IN
MILLIONS) AT
11-30-95
<S> <C> <C>
SHORT TERM INCOME FUND,
INC.
Management Fee
.30% of average daily net assets up to $750
million
.29% of average daily net assets in excess of $750
Money Market Portfolio million up to $1 billion 895.3
.28% of average daily net assets in excess of $1
billion up to $1.5 billion
.27% of average daily net assets in excess of $1.5
billion
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Management Fee
.275% of average daily net assets up to $250
U.S. Government Portfolio million 610.4
.25% of average daily net assets in excess of $250
million
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Administrative Services Fee
.21% of average daily net assets up to $1.25
billion
.20% of average daily net assets in excess of STIF 895.3
$1.25 billion up to $1.5 billion STIG 610.4
Each Portfolio .19% of average daily net assets in excess of $1.5
billion STIF (A) 671.3
STIF (A) 504.4
Shareholder Servicing and Distribution Plan Fee
(Class A only)
.25% of average daily net assets
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Management Fee
.325% of average daily net assets up to $750
million
.30% of average daily net assets in excess of $750
million 626.7
DAILY TAX FREE INCOME FUND, Administrative Services Fee
INC. .21% of average daily net assets up to $1.25 626.7
million
.20% of average daily net assets in excess of
$1.25 million up to $1.5 billion .19% in excess of
$1.5 billion _______________________ Class A 453.4
Shareholder Servicing and Distribution Plan Fee
(Class A Only)
.25% of average daily net assets
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Management Fee
REICH & TANG EQUITY FUND, .80% of average daily net assets 109.5
INC. Administrative Services Fee
.20% of average daily net assets
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Management Fee
.80% of average daily net assets
DELAFIELD FUND, INC. Administrative Services Fee 44.0
.21% of average daily net assets
Shareholder Servicing and Distribution Plan Fee
.25% of average daily net assets
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EXHIBIT B (TABLE OF FEES FOR ALL FUNDS ADVISED BY THE MANAGER) (CONTINUED)
Management Fee
.30% of average daily net assets
CONNECTICUT DAILY TAX FREE Administrative Services Fee 103.2
INCOME FUND, INC. .21% of average daily net assets
Shareholder Servicing and Distribution Plan Fee
.20% of average daily net assets
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Management Fee
.30% of average daily net assets
NEW YORK DAILY TAX FREE
INCOME FUND, INC. Administrative Services Fee 263.1
.21% of average daily net assets
Shareholder Servicing and Distribution Plan Fee
.20% of average daily net assets
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Management Fee
.35% of average daily net assets
REICH & TANG GOVERNMENT Administrative Services Fee .7
SECURITIES TRUST .21% of average daily net assets
Shareholder Servicing and Distribution Plan Fee
.25% of average daily net assets
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Management Fee
.30% of average daily net assets
CALIFORNIA DAILY TAX FREE Administrative Services Fee 159.3
INCOME FUND, INC. .21% of average daily net assets
Shareholder Servicing and Distribution Plan Fee
.20% of average daily net assets
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Management Fee
.30% of average daily net assets
MICHIGAN DAILY TAX FREE Administrative Services Fee 59.7
INCOME FUND, INC. .21% of average daily net assets
Shareholder Servicing and Distribution Plan Fee
.20% of average daily net assets
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All Inclusive Management Fee*
.40% of average daily net assets up to $250
TAX EXEMPT PROCEEDS FUND, million
INC. .35% of average daily net assets in excess of $250 265.4
million up to $500 million
.30% of average daily net assets in excess of $500
million
- ----------------------------
* Management Contract requires the Manager, not the Fund to bear all other fund
expenses; therefore, the fee payable under the Management Contract is the only
expense of the Fund.
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EXHIBIT B (TABLE OF FEES FOR ALL FUNDS ADVISED BY THE MANAGER) (CONTINUED)
Management Fee
.30% of average daily net assets
NEW JERSEY DAILY MUNICIPAL Administrative Services Fee 135.1
INCOME FUND, INC. .21% of average daily net assets
Shareholder Servicing and Distribution Plan Fee
.20% of average daily net assets
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All Inclusive Management Fee .80% of the first
$500 million .775% of the next $500 million
.75% of the next $500 million 1,884.4
CORTLAND TRUST, INC. .735% in excess of $1.5 billion
All Portfolios
Distribution Fee
.25% of average daily net assets 1,503.3
Distribution Fee (Live Oak Shares) 381.1
.20% of average daily net assets
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Management Fee
.40% of average daily net assets
NORTH CAROLINA DAILY Administrative Services Fee 171.8
MUNICIPAL INCOME FUND, INC. .21% of average daily net assets
Shareholder Servicing and Distribution Plan Fee
.25% of average daily net assets
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Management Fee .40% of average daily net assets
Administrative Services Fee .21% of average daily
net assets up to $1.25
PENNSYLVANIA DAILY billion
MUNICIPAL INCOME FUND .20% of average daily net assets in excess of 41.0
$1.25 billion up to 1.5 billion
.19% of average daily net assets in excess of $1.5
billion
Shareholder Servicing and Distribution Plan Fee
.25% of average daily net assets
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Management Fee
.40% of average daily net assets
FLORIDA DAILY MUNICIPAL Administrative Services Fee 40.6
FUND .21% of average daily net assets
Shareholder Servicing and Distribution Plan Fee
Class A 19.9 (Class A Only) .25% of average daily
net assets
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Investment Management Fee
.08% of average daily net assets
INSTITUTIONAL DAILY INCOME Administrative Services Fee 350.8
FUND .05% of average daily net assets
All Portfolios
Shareholder Servicing and Distribution Plan Fee
Class A 271.7 (Class A Only) .25% of average daily
net assets
PH4
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</TABLE>
