<PAGE>
- -------------------------------------------------------------------------------
TAX EXEMPT
PROCEEDS
FUND, INC.
Semi-Annual Report
December 31, 1996
(Unaudited)
- -------------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
TAX EXEMPT PROCEEDS FUND, INC.
STATEMENT OF NET ASSETS
DECEMBER 31, 1996
(UNAUDITED)
===============================================================================
<TABLE>
<CAPTION>
Ratings (a)
----------------
Face Maturity Value Standard
Amount Date Yield (Note 1) Moody's & Poor's
------ ---- ----- -------- ------- ------
Other Tax Exempt Investments (11.59%)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 3,000,000 Jefferson County, KY (Board of Education) RAN 06/30/97 3.90% $ 3,000,269 SP-1+
5,000,000 Michigan Municipal Bond Authority RN - Series 1996A 07/03/97 3.85 5,014,386 SP-1+
3,000,000 San Bernadino, CA TRAN
LOC Toronto-Dominion 06/30/97 3.82 3,008,852 MIG-1 SP-1+
5,000,000 State of Maine GO TAN 06/27/97 3.82 5,014,496 MIG-1 SP-1+
5,000,000 State of Texas TRAN 08/29/97 3.85 5,026,756 MIG-1 SP-1+
5,000,000 State of Texas TRAN 08/29/97 3.90 5,025,098 MIG-1 SP-1+
2,000,000 Wisconsin State Operating Notes 06/16/97 3.50 2,008,160 MIG-1 SP-1+
- ----------- ------------
28,000,000 Total Other Tax Exempt Investments 28,098,017
- ----------- ------------
<CAPTION>
Other Variable Rate Demand Instruments (b) (51.72%)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 3,870,000 Alabama HFA (Windscape Project)
LOC Amsouth Bank N.A. 12/01/03 4.30% $ 3,870,000 VMIG-1
4,200,000 Bexar County, TX HFDC (Air Force Village II) - Series 1985B
LOC Rabobank Nederland 03/01/12 4.00 4,200,000 A1+
1,570,000 Bloomington Normal Airport Authority - Series 1995A 01/01/13 4.25 1,570,000 VMIG-1
100,000 Burke County, GA Development Authority PCRB
(Georgia Power Co. Vogtle Proj.) 09/01/26 5.00 100,000 P1 A1
2,900,000 Charlotte, NC Airport RB
MBIA Insured 07/01/16 4.00 2,900,000 VMIG-1 A1+
3,650,000 City & County of Denver, CO Refunding MHRB
(Cotton Wood Creek Project)
LOC General Electric Capital Corporation 04/15/14 3.75 3,650,000 A1+
6,000,000 City of Baltimore, MD (HM Investments, Ltd.) - Series 1993
LOC Barclays Bank PLC 02/01/00 4.10 6,000,000 A1+
2,000,000 City of Detroit, MI Water Supply System RB
Second Lien Bonds - Series 1995 07/01/25 4.15 2,000,000 A1+
2,000,000 Clayton County, GA MHRB (Rainwood Development Project)
LOC Bankers Trust Company 05/01/06 4.13 2,000,000 A1+
3,000,000 Connecticut State Development Authority
(CT Light & Power Co. Project) - Series 1993A
LOC Deutsche Bank A.G. 09/01/28 4.15 3,000,000 VMIG-1 A1+
4,700,000 Connecticut State Special Tax Obligation RB
(Second Lien Transportation Infrastructure)
LOC Commerzbank A.G. 12/01/10 4.00 4,700,000 VMIG-1 A1+
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- -------------------------------------------------------------------------------
TAX EXEMPT PROCEEDS FUND, INC.
STATEMENT OF NET ASSETS (CONTINUED)
DECEMBER 31, 1996
(UNAUDITED)
===============================================================================
<TABLE>
<CAPTION>
Ratings (a)
----------------
Face Maturity Value Standard
Amount Date Yield (Note 1) Moody's & Poor's
------ ---- ----- -------- ------- ------
Other Variable Rate Demand Instruments (b) (Continued)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 2,800,000 County of Franklin, OH Hospital Facilities
(Lutheran Senior City, Inc.) RB - Series 1994
LOC First National Bank of Chicago 05/01/15 4.25% $ 2,800,000 VMIG-1
7,150,000 DeKalb County, GA Refunding MHRB - Series 1988
(Wood Hills Apartment Project)
LOC Bank of Montreal 12/01/07 4.15 7,150,000 A1+
4,000,000 Delaware County, PA IDA PCR RB
(Philadelphia Electric Co.) - Series A
LOC Toronto-Dominion Bank 08/01/16 4.95 4,000,000 P1 A1+
1,500,000 Georgetown, KY Educational Institution Improvement
(Georgetown College)
LOC PNC Bank 06/01/04 4.10 1,500,000 VMIG-1
1,100,000 Greensboro, NC (Greensboro Coliseum) - Series A 12/01/15 4.00 1,100,000 A1+
1,750,000 Greensboro, NC Public Improvement - Series B 04/01/11 4.05 1,750,000 VMIG-1 A1+
1,950,000 Greensboro, NC Public Improvement - Series B 04/01/13 4.05 1,950,000 VMIG-1 A1+
7,800,000 Harris County, TX HFDC (Methodist Hospital) 12/01/25 5.00 7,800,000 A1+
5,000,000 Harris County, TX Toll Road - Series H 08/01/20 4.00 5,000,000 VMIG-1 A1+
8,800,000 Idaho HEFA (Holy Cross Health System) 12/01/23 4.10 8,800,000 VMIG-1 A1+
3,300,000 Illinois Educational Facilities Authority
(Chicago Children's Museum) - Series 1994
LOC First National Bank of Chicago 02/01/28 4.20 3,300,000 VMIG-1 A1+
1,500,000 Illinois HFA RB (Northwestern Memorial Department) -
Series 1995 08/15/25 4.90 1,500,000 VMIG-1 A1+
2,500,000 Indiana HEFA (Rehabilitation Hospital of Indiana)
LOC First National Bank of Chicago 11/01/20 4.10 2,500,000 VMIG-1
3,100,000 Jacksonville, FL IDRB
(University of Florida Health Science Center) - Series 1989
LOC Barnett Bank of Jacksonville 07/01/19 4.25 3,100,000 VMIG-1
2,500,000 Maryland State IDA Economic Development RB
(Johnson Control Incorporation)
LOC Johnson Control 12/01/03 4.40 2,500,000 VMIG-1 A1
6,950,000 Michigan State Hospital Financial Authority Revenue
(Chelsea Community Hospital)
LOC Comerica Bank 11/15/19 4.15 6,950,000 VMIG-1
3,500,000 Monroe County, MI EDC (Detroit Edison) - Series CC
LOC Barclays Bank PLC 10/01/24 4.90 3,500,000 P1
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- -------------------------------------------------------------------------------
===============================================================================
<TABLE>
<CAPTION>
Ratings (a)
----------------
Face Maturity Value Standard
Amount Date Yield (Note 1) Moody's & Poor's
------ ---- ----- -------- ------- ------
Other Variable Rate Demand Instruments (b) (Continued)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 4,420,000 Montgomery County MD, Housing Opportunities Commission MHRB
LOC General Electric Capital Corporation 11/01/07 4.30% $ 4,420,000 A1+
4,285,000 New Hampshire Education & Health Facility Hospital RB -
Series 1995
LOC Bank of Ireland 09/01/05 4.40 4,285,000 VMIG-1
2,200,000 New Hampshire HEFA RB (Alice Peck Day Memorial Hospital)
LOC Corestates Bank, N.A 11/01/05 4.25 2,200,000 VMIG-1
2,000,000 New Jersey State Turnpike Authority - Series A
FGIC Insured 01/01/18 3.75 2,000,000 VMIG-1 A1+
5,000,000 Pennsylvania HEFA (Carnegie Mellon University) - Series 1995C 11/01/24 5.00 5,000,000 A1+
1,500,000 Pitkin County, CO IDRB
(Aspen Skiing Company Project) - Series B
LOC First National Bank of Chicago 04/01/16 5.00 1,500,000 A1+
1,000,000 Port of Portland PCRB (Reynolds Metals Project)
LOC Bank of Nova Scotia 12/01/09 4.95 1,000,000 P1
3,800,000 Union County, NJ PCFA (Exxon Project) - Series 1994 07/01/33 4.80 3,800,000 P1 A1+
2,000,000 York County, PA IDA PCRB (Philadelphia Electric Company)
LOC Toronto-Dominion Bank 08/01/16 4.95 2,000,000 P1 A1+
------------ ------------
125,395,000 Total Other Variable Rate Demand Instruments 125,395,000
------------ ------------
<CAPTION>
Put Bonds (8.63%)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 7,500,000 Connecticut State Special Assessment Unemployment
Compensation Advance Fund RB - Series 93C
FGIC Insured 07/01/97 3.90% $ 7,500,000 VMIG-1 A1+
2,360,000 Illinois Housing Development Authority
GIC - Morgan Stanley
Homeowner Mortgage RB 1996 - Subseries F-1 12/18/97 3.65 2,360,000 VMIG-1 A1+
5,000,000 Intermountain Power Agency RB - Series 1985F
LOC Morgan Guaranty Trust Company 06/16/97 3.93 5,000,000 VMIG-1 A1+
6,060,000 Vermont State Educational & Health Building Finance Agency
(Middlebury College) 11/01/97 3.75 6,060,000 A1+
----------- -----------
20,920,000 Total Put Bonds 20,920,000
----------- -----------
<CAPTION>
Tax Exempt Commercial Paper (27.27%)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 5,000,000 Burke County, GA (Oglethorpe Power Corporation)
LOC Credit Suisse 01/23/97 3.70% $ 5,000,000 P1 A1+
5,100,000 Burke County, GA (Oglethorpe Power Corporation)
LOC Credit Suisse 02/05/97 3.70 5,100,000 P1 A1+
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- -------------------------------------------------------------------------------
TAX EXEMPT PROCEEDS FUND, INC.
STATEMENT OF NET ASSETS (CONTINUED)
DECEMBER 31, 1996
(UNAUDITED)
===============================================================================
<TABLE>
<CAPTION>
Ratings (a)
----------------
Face Maturity Value Standard
Amount Date Yield (Note 1) Moody's & Poor's
------ ---- ----- -------- ------- ------
Tax Exempt Commercial Paper (Continued)
- ---------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
$ 5,300,000 City of Burlington, KS PCRB
(Kansas City Power & Light Company) - Series 1987A
LOC Toronto-Dominion Bank 03/04/97 3.35% $ 5,300,000 A1+
2,800,000 City of Burlington, KS PCRB
(Kansas City Power & Light Company) - Series B
LOC Deutsche Bank A.G. 01/15/97 3.50 2,800,000 P1 A1+
3,000,000 Connecticut HEFA (Yale University) - Series M 01/06/97 3.40 3,000,000 VMIG-1 A1+
5,000,000 City of New York, NY GO Bonds - Series J-2
LOC Commerzbank A.G. 02/12/97 3.70 5,000,000 P1 A1+
10,000,000 Intermountain Power Agency (Power Supply) - Series F2
LOC Swiss Bank Corp. 02/12/97 3.60 10,000,000 VMIG-1 A1+
3,000,000 Intermountain Power Agency Supply Refunding RB - Series 1985-F2
LOC Swiss Bank Corp. 01/10/97 3.65 3,000,000 VMIG-1 A1+
5,000,000 Maricopa County, AZ PCRB Southern California Edison
(Palo Verde Project) - Series 1985C 03/04/97 3.35 5,000,000 P1 A1
1,500,000 Mashantucket (Western) Pequot Tribe - Series 1996
LOC Bank of America 01/14/97 3.55 1,500,000 P1 A1+
5,000,000 North Carolina Eastern Municipal Power Agency
LOC Canadian Imperial Bank of Commerce 03/11/97 3.50 5,000,000 P1 A1+
3,400,000 Rochester, MINN Health Care Mayo Foundation
(Mayo Medical Center) - Series C 03/10/97 3.50 3,400,000 A1+
7,000,000 Sunshine State Government Financing Commission RB - Series 1986
LOC U.B. of Switz./Morgan Guaranty/National Westminster 02/19/97 3.45 7,000,000 VMIG-1
5,000,000 The Board of Regents of Texas
A&M University System - Series 1993B 01/09/97 3.60 5,000,000 P1 A1+
----------- -----------
66,100,000 Total Tax Exempt Commercial Paper 66,100,000
----------- -----------
Total Investments (99.21%)(Cost $240,513,017+) 240,513,017
Cash and Other Assets in Excess of Liabilities (0.79%) 1,917,677
-----------
Net Assets (100.00%) 242,433,940 Shares Outstanding (Note 3) $242,430,694
===========
Net Asset Value, offering and redemption price per share $ 1.00
===========
+ Aggregate cost for federal income tax purposes is identical.
</TABLE>
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See Notes to Financial Statements.
<PAGE>
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===============================================================================
FOOTNOTES:
(a) Unless the variable rate demand instruments are assigned their own ratings,
the ratings are those of the holding company of the bank whose letter of
credit guarantees the issue or the insurance company who insures the issue.
All letters of credit and insurance are irrevocable and direct pay covering
both principal and interest.
(b) Interest rates are adjustable on a daily, weekly, or monthly basis. The
rate shown is the rate in effect at the date of this statement.
<TABLE>
<CAPTION>
KEY:
<S> <C> <C> <C> <C> <C>
GO = General Obligation PCFA = Pollution Control Finance Authority
HEFA = Health and Education Facilities Authority PCR = Pollution Control Revenue
HFA = Housing Finance Authority PCRB = Pollution Control Revenue Bond
HFDC = Health Facilities Development Corporation RAN = Revenue Anticipation Note
IDA = Industrial Development Authority RB = Revenue Bond
IDRB = Industrial Development Revenue Bond RN = Revenue Note
LOC = Letter of Credit SBPA = Standby Purchase Agreement
MBIA = Municipal Bond Insurance Association TAN = Tax Anticipation Note
MHRB = Multifamily Housing Revenue Bond TRAN = Tax and Revenue Anticipation Note
</TABLE>
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
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TAX EXEMPT PROCEEDS FUND, INC.
STATEMENT OF OPERATIONS
SIX MONTHS ENDED DECEMBER 31, 1996
(UNAUDITED)
===============================================================================
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME
Interest income............................................................................. $ 4,223,173
Expenses (Note 2)........................................................................... ( 479,321)
--------------
Net investment income....................................................................... 3,743,852
--------------
<CAPTION>
<S> <C>
REALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on investments..................................................... ( 1,065)
--------------
Net increase in net assets from operations.................................................. $ 3,742,787
==============
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
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TAX EXEMPT PROCEEDS FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
================================================================================
<TABLE>
<CAPTION>
Six Months
Ended Year
December 31, 1996 Ended
(Unaudited) June 30, 1996
----------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income.......................................... $ 3,743,852 $ 7,736,883
Net realized gain (loss) on investments........................ ( 1,065) -0-
-------------- ------------
Net increase in net assets from operations..................... 3,742,787 7,736,883
Dividends to shareholders from net investment income............... ( 3,743,852) ( 7,736,883)
Net increase (decrease) from capital share transactions (Note 3)... ( 11,819,438) 41,118,888
-------------- ------------
Total increase (decrease) in net assets.................... ( 11,820,503) 41,118,888
Net assets:
Beginning of period............................................ 254,251,197 213,132,309
-------------- ------------
End of period.................................................. $242,430,694 $254,251,197
============== ============
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
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TAX EXEMPT PROCEEDS FUND, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
===============================================================================
1. Summary of Accounting Policies.
Tax Exempt Proceeds Fund, Inc. is a no-load, diversified, open-end management
investment company registered under the Investment Company Act of 1940. This
Fund is a short term, tax exempt money market fund. Its financial statements are
prepared in accordance with generally accepted accounting principles for
investment companies as follows:
a) Valuation of Securities -
Investments are valued at amortized cost. Under this valuation method, a
portfolio instrument is valued at cost and any discount or premium is
amortized on a constant basis to the maturity of the instrument. The
maturity of variable rate demand instruments is deemed to be the longer of
the period required before the Fund is entitled to receive payment of the
principal amount or the period remaining until the next interest rate
adjustment.
b) Federal Income Taxes -
It is the Fund's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
all of its tax exempt and taxable income, if any, to its shareholders.
Therefore, no provision for federal income tax is required. At December 31,
1996, the Fund had a capital loss carryforward of $2,181 available to
offset future capital gains expiring through June 30, 2001.
c) Dividends and Distributions -
Dividends from investment income (excluding capital gains and losses, if
any, and amortization of market discount) are declared daily and paid
monthly. Distributions of net capital gains, if any, realized on sales of
investments are made after the close of the Fund's fiscal year, as declared
by the Fund's Board of Directors.
d) Use of Estimates -
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of increases and decreases in
net assets from operations during the reporting period. Actual results
could differ from those estimates.
e) General -
Securities transactions are recorded on a trade date basis. Interest income
is accrued as earned. Realized gains and losses from securities
transactions are recorded on the identified cost basis.
2. Investment Management Fees and Other Transactions with Affiliates.
Under the Investment Management Contract, the Fund pays an investment management
fee to Reich & Tang Asset Management, L.P. (the Manager) at the annual rate of
.40 of 1% per annum of the Fund's average daily net assets up to $250 million;
.35 of 1% per annum of the average daily net assets between $250 million and
$500 million; and .30 of 1% per annum of the average daily net assets over $500
million. The Management Contract also provides that the Manager will bear the
cost of, or reimburse the Fund for, all other expenses of the Fund. Therefore,
the fee payable under the Management Contract will be the only expense of the
Fund.
- --------------------------------------------------------------------------------
<PAGE>
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===============================================================================
2. Investment Management Fees and Other Transactions with Affiliates.(Continued)
Pursuant to a Distribution Plan adopted under Securities and Exchange Commission
Rule 12b-1, the Fund and the Manager have entered into a Distribution Agreement.
The Fund's Board of Directors has adopted the plan in case certain expenses of
the Fund are deemed to constitute indirect payments by the Fund for distribution
expenses.
3. Capital Stock.
At December 31, 1996, 20,000,000,000 shares of $.001 par value stock were
authorized and capital paid in amounted to $242,433,940. Transactions in capital
stock, all at $1.00 per share, were as follows:
<TABLE>
<CAPTION>
Six Months Year
Ended Ended
December 31, 1996 June 30, 1996
---------------- --------------
<S> <C> <C>
Sold.................................... 220,210,521 524,691,635
Issued on reinvestment of dividends..... 1,130,445 2,123,017
Redeemed................................ ( 233,160,404) ( 485,695,764)
---------------- ----------------
Net increase (decrease)................. ( 11,819,438) 41,118,888
================ ================
</TABLE>
At December 31, 1996, the Fund had an accumulated net realized loss of $3,246.
4. Liabilities.
At December 31, 1996, the Fund had the following liabilities:
<TABLE>
<CAPTION>
<S> <C>
Accrued management fee.................. $ 83,918
Dividends payable....................... 453,701
---------------
Total liabilities...................... $ 537,619
===============
</TABLE>
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<PAGE>
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TAX EXEMPT PROCEEDS FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
===============================================================================
5. Financial Highlights.
<TABLE>
<CAPTION>
Six Months Year Ended June 30,
Ended ----------------------------------------------------------------------
December 31, 1996 1996 1995 1994 1993 1992
---------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
(for a share outstanding throughout the period)
Net asset value, beginning of period........ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- ------- ------- ------- ------- --------
Income from investment operations:
Net investment income................... 0.016 0.033 0.032 0.021 0.022 0.035
Less distributions:
Dividends from net investment income 0.016 0.033 0.032 0.021 0.022 0.035
-------- ------- ------- ------- ------- --------
Net asset value, end of period.............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======= ======= ======= ======= ========
Total Return................................ 3.17%* 3.31% 3.22% 2.14% 2.27% 3.52%
Ratios/Supplemental Data
Net assets, end of period (000)............. $242,431 $254,251 $213,134 $133,927 $133,230 $135,123
Ratios to average net assets:
Expenses................................ 0.40%* 0.40% 0.40% 0.40% 0.40% 0.40%
Net investment income................... 3.11%* 3.26% 3.22% 2.13% 2.25% 3.48%
</TABLE>
* Annualized
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<PAGE>
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This report is submitted for the general information of the shareholders of the
Fund. It is not authorized for distribution to prospective investors in the Fund
unless preceded or accompanied by an effective prospectus, which includes
information regarding the Fund's objectives and policies, experience of its
management, marketability of shares, and other information.
- --------------------------------------------------------------------------------
Tax Exempt Proceeds Fund, Inc.
600 Fifth Avenue
New York, New York 10020
Manager
Reich & Tang Asset Management L.P.
600 Fifth Avenue
New York, New York 10020
Custodian
Investors Fiduciary Trust Company
127 West 10th Street
Kansas City, Missouri 64105
Transfer Agent &
Dividend Disbursing Agent
Reich & Tang Services L.P.
600 Fifth Avenue
New York, New York 10020
- -------------------------------------------------------------------------------
<PAGE>