TAX EXEMPT PROCEEDS FUND INC, DEFS14A, 2000-08-24

TAX EXEMPT PROCEEDS FUND INC
DEFS14A, 2000-08-24

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Registration No. 33-25747

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [_]

Check the appropriate box:

[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))

[X] Definitive Proxy Statement

[_] Definitive Additional Materials

[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12

Tax Exempt Proceeds Fund, Inc.
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(Name of Registrant as Specified In Its Charter)

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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[_] No fee required

[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

(1) Title of each class of securities to which transaction applies:

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(2) Aggregate number of securities to which transaction applies:

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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):

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(4) Proposed maximum aggregate value of transaction:

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(5) Total fee paid:

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[_] Fee paid previously with preliminary materials.

[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

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(2) Form, Schedule or Registration Statement No.:

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(3) Filing Party:

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(4) Date Filed:

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Tax Exempt Proceeds Fund, Inc.

(the "Fund")

600 Fifth Avenue
New York, New York 10020

August 21, 2000

Dear Shareholder:

As we announced to you in July, the parent company of the Fund's manager has
entered into an agreement to be acquired by CDC Asset Management, a leading
French financial institution, as more fully described in the enclosed proxy
statement. As a result, we are soliciting your vote for approval of certain
items as described in the enclosed proxy statement. Reading this letter
completely may make your review of the proxy statement easier. We ask that you
review the proxy statement and vote your shares promptly. You can vote by
returning the enclosed card or following the instructions located on your
proxy card to vote via the Internet or touch-tone phone.

Q. What are the Proposals about?

Three proposals are described in the enclosed proxy statement.

The first proposal relates to the management agreement for the Fund. The
laws governing mutual funds generally require that when an investment manager
undergoes a change in ownership, the management agreement with the fund will
terminate. In order for the Fund to continue with Reich & Tang Asset
Management L.P. as the investment manager, shareholders must approve the new
form of agreement. The proposed new agreement is substantially the same as the
current agreement. Fees will not change and no changes are planned to the
portfolio managers of your Fund.

The second proposal relates to the ratification of the selection of Deloitte
& Touche LLP as the Fund's independent accountants.

The third proposal relates to the election of five directors of the Fund.

Q. How will the CDC transaction affect the Fund?

The transaction is not expected to affect the daily operations of the Fund
or the investment management activities of Reich & Tang Asset Management L.P.
Reich & Tang Asset Management L.P. and the Fund will continue to operate
autonomously, but will be part of a larger organization with the resources of
CDC Asset Management. We will continue to work to meet your expectations for
competitive performance and high quality customer service. The Fund's
investment objectives, strategies and portfolio managers are not expected to
change as a result of the transaction.
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Remember--Your Vote Counts!

Your vote is extremely important, even if you only own a few Fund shares.
Voting promptly is also important. If we do not receive enough votes, we will
have to resolicit shareholders, which can be time consuming and may delay the
meeting. You may receive a reminder call to return your proxy from D.F. King &
Company, a proxy solicitation firm.

Now you can use the Internet or your telephone, if you want to vote
electronically. Please see your proxy card for more information and the
instructions. If you do vote electronically, you do not need to mail your
proxy card. However, if you want to change your vote you may do so using the
proxy card, telephone or Internet.

Thank you for your cooperation in voting on these important proposals. If
you have questions, please call your financial representative. Or, if your
questions relate specifically to the proxy matters, please call our service
center representatives toll-free at 1-800-221-3079.

Sincerely,

/s/ Steven W. Duff
Steven W. Duff
President
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Tax Exempt Proceeds Fund, Inc.
(the "Fund")
600 Fifth Avenue
New York, New York 10020
(212) 830-5220

Notice of Special Meeting of Shareholders
October 10, 2000

A Special Meeting of the shareholders of the Fund will be held at 9:40 a.m.
at the offices of the Fund, 600 Fifth Avenue, New York, New York for these
purposes:

1. To approve a new Investment Management Contract with Reich & Tang
Asset Management L.P. for the Fund.

2. To ratify the selection of Deloitte & Touche LLP as independent
accountants of the Fund for its fiscal year ending June 30, 2001.

3. To elect five directors of the Fund, each to hold office until his or
her successor is duly elected and qualified.

4. To consider and act upon any other matters that properly come before
the meeting and any adjourned session of the meeting.

Shareholders of record at the close of business on August 15, 2000 are
entitled to notice of and to vote at the meeting and any adjourned session.

By order of the Board of
Directors

Bernadette N. Finn
Secretary of the Fund

August 21, 2000

Please respond. Your vote is important. Please complete, sign, date and
return the enclosed proxy card, whether or not you plan to attend the
meeting.
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PROXY STATEMENT

Tax Exempt Proceeds Fund, Inc.
(the "Fund")

600 Fifth Avenue
New York, New York 10020
(212) 830-5220

The Directors of Tax Exempt Proceeds Fund, Inc. are soliciting proxies from
the shareholders of the Fund in connection with a Special Meeting of
Shareholders of the Fund (the "Meeting"). The Meeting has been called to be
held on October 10, 2000 at 9:40 a.m. at the offices of the Fund, 600 Fifth
Avenue, New York, New York. The meeting notice, this Proxy Statement and proxy
cards are being sent to shareholders of record on August 15, 2000 (the "Record
Date") beginning on or about August 21, 2000.

The only items of business that the Directors expect will come before the
Meeting are (i) approval of a new Investment Management Contract for the Fund
(the Fund's "New Investment Management Contract") with Reich & Tang Asset
Management L.P. (the "Manager"), (ii) ratification of Deloitte & Touche LLP as
independent accountants for the Fund for its fiscal year ending June 30, 2001
and (iii) the election of directors. As explained below, the proposed New
Investment Management Contract for the Fund is identical (except for its date)
to the Investment Management Contract currently in effect for the Fund (the
Fund's "Current Investment Management Contract").

PROPOSAL 1 APPROVAL OF NEW INVESTMENT MANAGEMENT CONTRACT

The reason the Directors are proposing the New Investment Management
Contract for the Fund is that the Current Investment Management Contract will
terminate when the Manager's parent company, Nvest Companies, L.P. ("Nvest"),
is acquired by a new parent company, CDC Asset Management ("CDC AM"). (A
federal law, the Investment Company Act of 1940, as amended (the "Investment
Company Act"), provides generally that the investment management contracts of
mutual funds automatically terminate when the investment adviser or its parent
company undergo a significant change of ownership.) The Directors have
carefully considered the matter, and have concluded that it is appropriate to
enter into the New Investment Management Contract for the Fund, so that the
Manager can continue to manage the Fund on the same terms as are now in
effect, following the acquisition of Nvest by CDC AM.

The acquisition of Nvest by CDC AM will occur only if various conditions are
satisfied (or waived by the parties, if permitted by law). These conditions
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include, among others, certain government approvals of the acquisition and
approval of the acquisition by vote of the unitholders of Nvest and Nvest,
L.P. ("Nvest, L.P."), Nvest's advising general partner. Nvest currently
expects that the acquisition will occur during the fourth calendar quarter of
2000, but the acquisition could be delayed. If the acquisition does not occur,
the New Investment Management Contract would not be needed because the
automatic termination of the Current Investment Management Contract would not
occur.

Under the Investment Company Act, the Fund cannot enter into a New
Investment Management Contract unless the shareholders of the Fund vote to
approve the New Investment Management Contract. The Meeting is being held to
seek shareholder approval of the New Investment Management Contract. No change
in advisory fee rate is being proposed.

Each share is entitled to cast one vote, and fractional shares are entitled
to a proportionate fractional vote.

The Directors recommend that the shareholders of the Fund vote to approve
the New Investment Management Contract for the Fund.

Description of the New Investment Management Contract

The New Investment Management Contract for the Fund is identical to the
Current Investment Management Contract for the Fund, except that the date of
each New Investment Management Contract will be the date that CDC AM acquires
Nvest. Appendix A to this Proxy Statement sets forth information about the
Current Investment Management Contract, including the date of the Current
Investment Management Contract and the advisory fee rates under both the New
Investment Management Contract and the Current Investment Management Contract.
Appendix B to this Proxy Statement contains the form of the Investment
Management Contract. The Current Investment Management Contract and the New
Investment Management Contract match the form in Appendix B except for the
date of the agreements. The next several paragraphs briefly summarize some
important provisions of the New Investment Management Contract, but for a
complete understanding of the agreements you should read Appendices A and B.

The New Investment Management Contract essentially provides that the
Manager, under the Directors' general control and supervision, will manage the
Fund's portfolio of securities and make decisions with respect to the purchase
and sale of investments.

The New Investment Management Contract provides that it will continue in
effect for an initial period of two years (beginning on the date CDC AM
acquires

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Nvest). After that, it will continue in effect from year to year as long as
the continuation is approved at least annually (i) by the Directors or by vote
of a majority of the outstanding voting securities of the Fund, and (ii) by
vote of a majority of the Directors who are not "interested persons," as that
term is defined in the Investment Company Act, of the Fund or the Manager
(these Directors who are not "interested persons" are referred to below as the
"Independent Directors").

The New Investment Management Contract may be terminated without penalty by
vote of the Directors or by vote of a majority of the outstanding voting
securities of the Fund, on sixty days' written notice to the Manager, or by
the Manager upon sixty days' written notice to the Fund, and terminates
automatically in the event of its "assignment" as defined in the Investment
Company Act. The Investment Company Act defines "assignment" to include, in
general, transactions in which a significant change in the ownership of an
investment adviser or its parent company occur (such as the acquisition of
Nvest by CDC AM).

The New Investment Management Contract provides that the Manager will not be
liable to the Fund or its shareholders, except for liability arising from the
Manager's willful misfeasance, bad faith, gross negligence or reckless
disregard of duty.

Distribution and Service Plan. Pursuant to Rule 12b-1 under the Investment
Company 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 Fund's Board has adopted a distribution and service plan (the "Plan") and,
pursuant to the Plan, the Fund has entered into a Distribution Agreement with
Reich & Tang Distributors, Inc. (the "Distributor") as distributor of the
Fund's shares. Because the acquisition of Nvest by CDC AM will be considered
to result in the assignment of the Fund's Distribution Agreement with the
Distributor, causing the agreement to terminate upon the acquisition, the
Board of the Fund approved a new Distribution Agreement with Reich & Tang
Distributors, Inc. for the Fund to take effect if a New Investment Management
Agreement is approved by shareholders of the Fund and upon consummation of the
acquisition. The new agreement would replace the current agreement with the
Distributor and would be identical to that agreement, except for the dates of
execution and effectiveness. This new agreement does not require the approval
of the Fund's shareholders.

Basis for the Directors' Recommendation

The Directors determined, at a meeting held on July 31, 2000, to recommend
that the Fund's shareholders vote to approve the New Investment Management
Contract for the Fund.

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In coming to this recommendation, the Directors considered a wide range of
information of the type they regularly consider when determining whether to
continue the Fund's management contract in effect from year to year. The
Directors considered information about, among other things:

. the Manager and its personnel (including particularly those personnel
with responsibilities for providing services to the Fund), resources
and investment process;

. the terms of the investment management contract (in this case, the New
Investment Management Contract);

. the scope and quality of the services that the Manager has been
providing to the Fund;

. the investment performance of the Fund and of similar funds managed by
other advisers;

. the management fee rates payable to the Manager by the Fund and by
other funds and client accounts managed by the Manager, and payable by
similar funds managed by other advisers (Appendix C to this Proxy
Statement contains information comparing the Fund's management fee
schedule to the fee schedule for other funds managed by the Manager
that have investment objectives similar to the Fund's);

. the total expense ratios of the Fund and of similar funds managed by
other advisers;

. the Manager's practices regarding the selection and compensation of
brokers and dealers that execute portfolio transactions for the Fund,
and the brokers' and dealers' provision of brokerage and research
services to the Manager (see "Certain Brokerage Matters" below for
more information about these matters); and

. compensation payable by the Fund to affiliates of the Manager for
other services.

In addition to reviewing these kinds of information, which the Directors
regularly consider on an annual or more frequent basis, the Directors gave
particular consideration to matters relating to the possible effects on the
Manager and the Fund of the acquisition of Nvest by CDC AM. Among other
things, the Directors considered:

. the stated intention of Nvest and CDC AM that the Manager will
continue to have a high degree of managerial autonomy from its parent
organizations and from other subsidiaries of Nvest;

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. the stated intention of Nvest, CDC AM and the Manager that the
acquisition not change the investment approach or process used by the
Manager in managing the Fund;

. representations of senior executives of the Manager and the portfolio
managers of the Fund that they have no intention of terminating their
employment with the Manager as a result of CDC AM's acquisition of
Nvest, and representations of the Manager, Nvest and CDC AM that they
have no intention of terminating the employment of these executives or
portfolio managers as a result of the acquisition;

. certain actions taken by CDC AM, Nvest and the Manager to help retain
and incent key personnel of Nvest and the Manager;

. assurances from the Manager that it has no plans, as a result of or in
connection with CDC AM's acquisition of Nvest, to change or
discontinue existing arrangements under which it waives fees or bears
expenses of the Fund;

. the general reputation and the financial resources of CDC AM and its
parent organizations; and

. the fact that affiliates of the Manager who currently provide transfer
agency and distribution services to the Fund are willing to continue
to do so following the acquisition, and that the compensation rates
payable by the Fund for these services are not expected to change as a
result of the acquisition.

In addition, the Directors considered that the agreement relating to the
acquisition of Nvest by CDC AM provides that CDC AM and its immediate parent
company will (subject to certain qualifications) use their reasonable best
efforts to assure compliance with Section 15(f) of the Investment Company Act.
Section 15(f) provides that a mutual fund investment adviser or its affiliates
can receive benefit or compensation in connection with a change of control of
the investment adviser (such as CDC AM's acquisition of the Manager's parent,
Nvest) if two conditions are satisfied. First, for three years after the
change of control, at least 75% of the members of the board of any registered
investment company advised by the adviser must consist of persons who are not
"interested persons," as defined in the Investment Company Act, of the
adviser. (No changes in the current composition of the Directors are required
to satisfy this condition.) Second, no "unfair burden" may be imposed on any
such registered investment company as a result of the change of control
transaction or any express or implied terms, conditions or understandings
applicable to the transaction. "Unfair burden" means any arrangement, during
the two years after the transaction, by which the

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investment adviser or any "interested person" of the adviser receives or is
entitled to receive any compensation, directly or indirectly, from such
investment company or its security holders (other than fees for bona fide
investment advisory or other services) or from any other person in connection
with the purchase or sale of securities or other property to, from or on
behalf of such investment company.

After carefully considering the information summarized above, the Directors,
including the Independent Directors, unanimously voted to approve the New
Investment Management Contract for the Fund and to recommend that the Fund's
shareholders vote to approve the New Investment Management Contract for the
Fund.

Information About the Ownership of the Manager and the CDC AM/Nvest
Transaction

The Manager is a limited partnership which has one general partner, Reich &
Tang Asset Management, Inc. (the "Manager General Partner"). Mr. Steven W.
Duff is principal executive officer of the Manager's Mutual Funds Division.
His principal occupation is his position with the Manager's Mutual Funds
Division. The address of the Manager, the Manager General Partner and Mr. Duff
is 600 Fifth Avenue, New York, New York 10020. The Manager also advises
pension trusts, profit-sharing trusts and endowments. The Manager General
Partner is a direct wholly-owned subsidiary of Nvest Holdings, Inc. ("Nvest
Holdings"), which in turn is a direct wholly-owned subsidiary of Nvest.
Nvest's managing general partner, Nvest Corporation, is a direct wholly-owned
subsidiary of MetLife New England Holdings, Inc. MetLife New England Holdings,
Inc. is a direct wholly-owned subsidiary of Metropolitan Life Insurance
Company ("MetLife"). Nvest Corporation is also the sole general partner of
Nvest, L.P. Nvest, L.P., Nvest's advising general partner, is a publicly
traded company listed on the New York Stock Exchange. In addition to owning
Nvest Corporation, MetLife owns, directly or indirectly, approximately a 48%
limited partnership interest in Nvest. Nvest, L.P. owns approximately 15% of
Nvest. (These percentages, which are as of June 30, 2000, do not reflect the
vesting and exercise, described below, of various options held by personnel of
Nvest and of its affiliates, including the Manager, to acquire limited
partnership units of Nvest, L.P.) If the proposed acquisition is completed,
Nvest Corporation will cease to be the managing general partner of Nvest and
the general partner of Nvest, L.P., and MetLife will cease to own any
partnership interest in Nvest. MetLife is a wholly-owned subsidiary of
MetLife, Inc., a publicly traded company listed on the New York Stock
Exchange. The address of Nvest, Nvest Corporation, Nvest Holdings and Nvest,
L.P. is 399 Boylston Street, Boston, Massachusetts 02116. The address of
MetLife New England Holdings, Inc., MetLife and MetLife, Inc. is One Madison
Avenue, New York, New York 10010.

On June 16, 2000, Nvest and CDC AM announced that they and certain of their
respective affiliated companies had entered into an Agreement and Plan of

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Merger (the "Merger Agreement"). Under the Merger Agreement, CDC AM would
acquire all of the outstanding units of partnership interest in both Nvest and
Nvest, L.P., at a price of $40 per unit. This price is subject to reduction
(but not below $34 per unit) based in part on a formula that takes into
account the investment advisory fees payable to the Manager and other Nvest
affiliates by their mutual fund and other investment advisory clients that
have consented to the transaction. Under this formula, the price per unit that
CDC AM will pay to acquire Nvest, including the price it will pay to those
Fund directors and officers who hold or have been granted options to acquire
units (see below), could be reduced if the Fund's shareholders do not approve
the New Investment Management Contract. Assuming a transaction price of $40
per unit, and the number of units and options outstanding as of June 30, 2000,
the aggregate price payable by CDC AM to acquire all of the units of Nvest
will be approximately $1.5 billion, and the aggregate price payable by CDC AM
to acquire all of the units of Nvest, L.P. (including payments with respect to
units subject to options) will be approximately $375 million.

The transaction will not occur unless various conditions are satisfied (or
waived by the parties, if permitted by law). One of these conditions is
obtaining approval or consent from investment advisory clients of the Manager
and other Nvest affiliates (including mutual fund clients) whose advisory fees
represent a specified percentage of the total advisory fee revenues of the
Nvest organization. Because of this condition, approval or disapproval by the
Fund's shareholders of a New Investment Management Contract, taken together
with other clients' consents or approvals, could affect whether or not the
transaction occurs. As described below, certain directors and officers of the
Fund will receive certain material payments or benefits if the transaction
occurs. The transaction will result in the automatic termination of the
Current Investment Management Contract. If for some reason the transaction
does not occur, the automatic termination of the Current Investment Management
Contract will not occur, and the New Investment Management Contract will not
be entered into, even if it has been approved by the Fund's shareholders.

As a result of the acquisition, Nvest and Nvest, L.P. would become indirect
wholly-owned subsidiaries of CDC AM, which in turn is 60% owned by CDC
Finance, a wholly-owned subsidiary of Caisse des depots et Consignations
("CDC"). Founded in 1816, CDC is a major diversified financial institution
with a strong global presence in the banking, insurance, investment banking,
asset management and global custody industries. In addition to its 60%
ownership of CDC AM through CDC Finance, CDC owns 40% of CNP Assurances, the
leading French insurance company, which itself owns 20% of CDC AM. CDC also
owns 35% of Caisse National des Caisses d'Epargne, which also owns 20% of CDC
AM. CDC is 100% owned by the French state. The main place of business of CDC
AM

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is 7, place des Cinq Martyrs du Lycee Buffon, 75015 Paris, France. The
registered address of CDC Finance is 56, rue de Lille, 75007 Paris, France.
The registered address of CDC is 56, rue de Lille, 75007 Paris, France. The
registered address of CNP Assurances is 4, place Raoul Dautry, 75015 Paris,
France. The registered address of Caisse National des Caisses d'Epargne is 5,
rue Masseran, 75007 Paris, France. Following the acquisition, it is expected
that Nvest will be renamed CDC Asset Management-North America.

Various personnel of Nvest and of its affiliates, including the Manager,
have previously been granted options to purchase limited partnership units of
Nvest, L.P. ("Nvest L.P. Units"). The Merger Agreement provides that these
options will vest and become fully exercisable immediately before CDC AM's
acquisition of Nvest and Nvest, L.P., even though some of these options would
not otherwise have vested or been exercisable at that time. Each option will
be converted into the right to receive cash from Nvest in an amount equal to
the difference between the option's exercise price and the transaction price
of $40 per unit (subject to reduction, but not below $34 per unit, as
explained above).

Certain Relationships and Interests of Fund Directors and Officers

Steven W. Duff, the President and Chief Executive Officer of the Fund, and
the following persons who are officers of the Fund are also officers or
employees of the Manager or directors of the Manager General Partner: Richard
De Sanctis, Molly Flewharty, Bernadette N. Finn and Roseanne Holtzer
(collectively, the "Manager Affiliates"). Some of the Manager Affiliates,
including Mr. Duff, own partnership units in Nvest or Nvest, L.P. or have the
right to acquire partnership units under options and, upon completion of CDC
AM's acquisition of Nvest, will receive the consideration provided in the
Merger Agreement for the partnership units they own or have the right to
acquire under options. Depending on the number of units a Manager Affiliate
owns or has the right to acquire, the amount of consideration he or she
receives could be substantial. Also, in connection with CDC AM's acquisition
of Nvest, CDC AM will establish a retention program under which certain
Manager Affiliates, including Mr. Duff, may receive cash retention awards
payable over one to three years. To receive these awards, which are in
addition to regular salary and bonus payments and in some cases may be
substantial in amount, an eligible Manager Affiliate must remain employed by
the Manager and must agree to refrain from competing with the Manager and
soliciting clients of the Manager.

Certain Brokerage Matters

In their consideration of the New Investment Management Contract, the
Directors took account of the Manager's practices regarding the selection and
compensation of brokers and dealers that execute portfolio transactions for
the Fund, and the brokers' and dealers' provision of brokerage and research
services to

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the Manager. The Manager has informed the Directors that it does not expect to
change these practices as a result of CDC AM's acquisition of Nvest. The
following is a summary of these practices:

The Fund's purchases and sales of portfolio securities are usually principal
transactions. Portfolio securities are generally purchased directly from the
issuer, from banks and financial institutions or from an underwriter or market
maker for the securities. There usually are no brokerage commissions paid for
such purchases. The Fund has paid no brokerage commissions since its
formation. Any transaction for which the Fund pays a brokerage commission will
be effected at the best price and execution available. Thus, the Fund will
select a broker for such a transaction based upon which broker can effect the
trade at the best price and execution available. 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. The Fund purchases
participation certificates in variable rate Municipal Obligations with a
demand feature from banks or other financial institutions at a negotiated
yield to the Fund based on the applicable interest rate adjustment index for
the security. The interest received by the Fund is net of a fee charged by the
issuing institution for servicing the underlying obligation and issuing the
participation certificate, letter of credit, guarantee or insurance and
providing the demand repurchase feature.

No portfolio transactions are executed with the Manager, or its affiliates
acting as principal.

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 Fund rather than by any formula. The
primary consideration is prompt execution of orders in an effective manner at
the most favorable price.

Investment decisions for the Fund are made independently from those for any
other accounts or investment companies that may be or become managed by the
Manager or its affiliates. If, however, the Fund and other investment
companies or accounts managed by the Manager are simultaneously 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 Fund or the size of
the position obtainable for the Fund. In addition, when purchases or sales of
the same security for the Fund 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.

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PROPOSAL 2 RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS

The Directors recommend that the shareholders ratify the selection of
Deloitte & Touche LLP, independent public accountants, to audit the accounts
of the Fund for the fiscal year ending June 30, 2001. Deloitte & Touche LLP
performed the audit for the Fund's fiscal years ended June 30, 1999 and June
30, 2000. The accounting firm of McGradrey & Pullen LLP had audited the Fund's
accounts for the fiscal year ended June 30, 1998. In 1999, McGladrey & Pullen
LLP resigned as the Fund's independent accountants because its Investment
Company Group had joined PricewaterhouseCoopers LLP. At that time, Deloitte &
Touche LLP was recommended to the Board by the Audit Committee and appointed
as independent accountants by the Board of Directors. From inception to fiscal
year ended June 30, 1997, Coopers & Lybrand L.L.P. were the auditors for the
Fund. Deloitte & Touche LLP does not have any direct financial interest or any
material indirect financial interest in the Fund.

A representative of Deloitte & Touche LLP is not expected to be present at
the shareholders' meeting. If the shareholders do not ratify the Directors'
recommendation, the Directors will submit another proposal to the shareholders
with a recommendation for independent public accountants.

PROPOSAL 3 ELECTION OF DIRECTORS

At the meeting five directors are to be elected, each to hold office until
his successor has been elected and has qualified. Ms. Chertow and Messrs.
Richmond and Klocko were elected to the Board and the Audit and Nominating
Committees. Ms. Chertow and Mr. Richmond have served as directors since
inception of the Fund in 1989. Mr. Klocko has served as a director since
February 1990. Ms. Catherine S. Boone and Mr. Howard G. Rifkin are being
nominated as directors. All such persons have consented to be named in this
Proxy Statement and to serve as directors of the Fund if elected. The Board of
Directors, which met four times during the Fund's fiscal year ended June 30,
2000, has no compensation committee. Each director attended at least 75% of
the board meetings held. The Fund has an Audit Committee of the Board of
Directors, comprised of Ms. Chertow and Messrs. Klocko and Richmond. Ms.
Chertow and Messrs. Klocko and Richmond are not "interested persons" of the
Fund within the meaning of Section 2(a)(19) of the Investment Company Act. Ms.
Boone and Mr. Rifkin are "interested persons" of the Fund as defined in the
Investment Company Act. The Audit Committee meets annually to review the
Fund's financial statements with the independent accountants and to report on
its findings to the Board of Directors. In addition, pursuant to a
Distribution and Service Plan adopted by the Fund in accordance with the
provisions of Rule 12b-1 under the Investment Company Act of 1940, the Fund
has a Nominating Committee of the Board of Directors comprised of Ms. Chertow
and Messrs. Klocko and Richmond, to whose discretion

10
<PAGE>

the selection and nomination of directors who are not "interested persons" of
the Fund is committed. The Nominating Committee did not meet during the fiscal
year ending June 30, 2000; and has met once thus far during the current fiscal
year, regarding the nomination of Ms. Boone and Mr. Rifkin. The Nominating
Committee currently does not consider nominees recommended by shareholders.
The election of each director requires the approval of a majority present at
the meeting in person or by proxy.

The following is a list of the members of the Board of Directors, any other
positions each may now hold with the Fund, the principal occupation of each
Director during the past five years and the nature, amount and percentage of
shares held by each in the Fund.

<TABLE>
<CAPTION>
Amount and
Nature of
Principal Occupation Beneficial
During Preceding Five Ownership % of
Name and Age Years at 7/31/00 Shares
------------ ------------------------ ---------- ------
<C> <S> <C> <C>
Marian R. Chertow 44 Director of the Fund, is -0- -0-
Director, Industrial
Governmental Management
Program, School of
Forestry and
Environmental Studies at
Yale University since
July 1991.

John C. Richmond 75 Director of the Fund, -0- -0-
was Deputy Treasurer--
Debt Management for the
State of Connecticut
from March 1975 until
his retirement in June
1987.

Glenn S. Klocko 44 Director of the Fund, -0- -0-
Comptroller, City of
Bristol, Connecticut
Director since May 1998.
Formerly Director of
Finance, Town of Avon,
Connecticut from May
1988 to May 1998. Mr.
Klocko was Deputy
Controller, Town of
Wallingford, Connecticut
from 1985 to 1988.

Catherine S. Boone 56 Deputy Assistant -0- -0-
Treasurer, State of
Connecticut, Office of
the Treasurer since
March 1995 to present.
Interim Assistant
Treasurer, State of
Connecticut, Office of
the Treasurer from
January 1995 to March
1995.
</TABLE>

11
<PAGE>

<TABLE>
<CAPTION>
Amount and
Nature of
Principal Occupation Beneficial
During Preceding Five Ownership % of
Name and Age Years at 7/31/00 Shares
------------ ------------------------ ---------- ------
<S> <C> <C> <C>
Howard G. Rifkin 50 Deputy Treasurer, State -0- -0-
of Connecticut, Office
of the Treasurer since
January 1999. Deputy
Secretary, State of
Connecticut, Office of
the Treasurer from
January 1997 to January
1999. Associate
Professor and Director,
Institute of Public
Service, University of
Connecticut from 1995 to
1997.
</TABLE>

The address of each director and officer of the Fund is 600 Fifth Avenue,
New York, New York 10020.

The officers of the Fund are:

Steven W. Duff, 46--President and Chief Executive Officer of the Fund, has
been President of the Mutual Funds Division of the Manager since September
1994. Mr. Duff was formerly Director of Mutual Fund Administration at
NationsBank which he was associated with from June 1981 to August 1994. Mr.
Duff is also President and a Director/Trustee of 14 other funds in the Reich &
Tang Fund Complex, Director of Pax World Money Market Fund, Inc., President of
Back Bay Funds, Inc and Executive Vice President of Delafield Fund, Inc.

Molly Flewharty, 49--Vice President of the Fund, has been Vice President of
the Mutual Funds Division of the Manager since September 1993. Ms. Flewharty
was formerly Vice President of Reich & Tang, Inc. which she was associated
with from December 1977 to September 1993. Ms. Flewharty is also Vice
President of 18 other funds in the Reich & Tang Fund Complex.

Bernadette N. Finn, 52--Secretary of the Fund, has been Vice President of
the Mutual Funds Division of the Manager since September 1993. Ms. Finn was
formerly Vice President and Assistant Secretary of Reich & Tang, Inc. which
she was associated with from September 1970 to September 1993. Ms. Finn is
also Secretary of 13 other funds in the Reich & Tang Fund Complex, and a Vice
President and Secretary of 4 funds in the Reich & Tang Fund Complex.

Richard De Sanctis, 43--Treasurer of the Fund, has been Treasurer of the
Mutual Funds Division of the Manager, since September 1993. Mr. De Sanctis was
formerly Controller of Reich & Tang, Inc., from January 1991 to September 1993

12
<PAGE>

and Vice President and Treasurer of Cortland Financial Group, Inc. and Vice
President of Cortland Distributors, Inc. from 1989 to December 1990. Mr. De
Sanctis is also Treasurer of 16 other funds in the Reich & Tang Fund Complex
and is Vice President and Treasurer of Cortland Trust, Inc.

Rosanne Holtzer, 35--Assistant Treasurer of the Fund, has been Vice
President of the Mutual Funds division of the Manager since December 1997. Ms.
Holtzer was formerly Manager of Fund Accounting for the Manager with which she
was associated with from June 1986. Ms. Holtzer is also Assistant Treasurer of
17 other funds in the Reich & Tang Fund Complex.

The Fund/1/ paid an aggregate remuneration of $7,500 to its directors and to
certain employees of the Manager with respect to its fiscal year ended June
30, 2000, consisting of $7,500 in aggregate directors' fees to the three
disinterested directors, and salaries and benefits aggregating $0 paid to
certain employees of the Manager pursuant to the terms of the Investment
Management Contract.
-----------
/1/ The Directors are paid by the Manager from its Management Fee.

<TABLE>
<CAPTION>
Total
Compensation
Pension or From Fund
Retirement and Fund
Aggregate Benefits Accrued Estimated Annual Complex Paid
Name of Person, Compensation As Part of Fund Benefits Upon to
Position From Fund Expenses Retirement Directors*
--------------- ------------ ---------------- ---------------- ------------
<S> <C> <C> <C> <C>
Marian R. Chertow, $2,875 0 0 $2,875
Director (1 Fund)

John C. Richmond, $2,875 0 0 $2,875
Director (1 Fund)

Glenn S. Klocko, $ 0 0 0 $0
Director (1 Fund)
</TABLE>
-----------
* The total compensation paid to such persons by the Fund and Fund Complex
for the fiscal year ending June 30, 2000. The parenthetical number
represents the number of investment companies (including the Fund) from
which such person receives compensation that are considered part of the
same Fund Complex because, among other things, they have a common
investment adviser.

Other Information

Principal Distributor's Address. The address of the Fund's principal
distributor, Reich & Tang Distributors, Inc., is 600 Fifth Avenue, New York,
New York, 10020.

Fund Annual and Semi-Annual Reports. The Fund has previously sent its Annual
and Semi-Annual Reports to its shareholders for the periods ended June 30,
1999 and December 31, 1999, respectively. You can obtain copies of these
Reports without charge by writing to the Fund at 600 Fifth Avenue, New York,
New York 10020 or by calling 1-800-221-3079.

13
<PAGE>

Certain Purchases and Sales of Securities of the Manager, Nvest, Nvest, L.P.
and MetLife, Inc. No Board Member had any purchases or sales of any securities
of the Manager, Nvest, Nvest, L.P. or MetLife, Inc. since the beginning of the
Fund's most recently completed fiscal year, except purchases or sales that
represented one percent or less of the outstanding securities of any class of
those companies.

Outstanding Shares and Significant Shareholders. Appendix D to this Proxy
Statement lists for the Fund the total number of shares outstanding as of July
31, 2000. It also identifies holders of more than 5% of any class of shares of
the Fund, and contains information about the shareholdings in the Fund of the
Directors and the executive officers of the Fund. Only shareholders of record
at the close of business on August 15, 2000 are entitled to vote at the
Meeting.

Information About Proxies and the Conduct of the Meeting

Solicitation of Proxies. Proxies will be solicited primarily by mailing this
Proxy Statement and its enclosures, but proxies may also be solicited through
further mailings, telephone calls, personal interviews or e-mail by officers
of the Fund or by employees or agents of the Manager or of Nvest and its
affiliated companies. In addition, D. F. King & Co., Inc. has been engaged to
assist in the solicitation of proxies, at an estimated cost of $1,500.

Costs of Solicitation. All of the costs of the Meeting, including the costs
of soliciting proxies, will be paid by the Manager, Nvest and/or CDC AM. None
of these costs will be borne by the Fund.

Voting and Tabulation of Proxies. Shares represented by duly executed
proxies will be voted as instructed on the proxy. If no instructions are
given, the proxy will be voted in favor of the proposals. You may vote by any
one of the three following methods: (1) by mailing the enclosed proxy card,
(2) through use of the internet or (3) by telephone. If you mail the enclosed
proxy and no choice is indicated for a proposal listed in the attached Notice
of Meeting, your proxy will be voted in favor of that proposal. Votes made
through use of the internet or by telephone must have an indicated choice in
order to be accepted. At any time before it has been voted, your proxy may be
revoked in one of the following ways: (i) by sending a signed, written letter
of revocation to the Secretary of the Fund, (ii) by properly executing a
later-dated proxy (by the methods of voting described above), or (iii) by
attending the Meeting, requesting return of any previously delivered proxy and
voting in person.

Votes cast in person or by proxy at the Meeting will be counted by persons
appointed by the Fund as tellers for the Meeting (the "Tellers"). One-third of
the shares of the Fund outstanding on the record date, present in person or
represented

14
<PAGE>

by proxy, constitutes a quorum for the transaction of business by the
shareholders of the Fund at the Meeting. In determining whether a quorum is
present, the Tellers will count shares represented by proxies that reflect
abstentions, and "broker non-votes," as shares that are present and entitled
to vote. Since these shares will be counted as present, but not as voting in
favor of any proposal, these shares will have the same effect as if they cast
votes against the proposal. "Broker non-votes" are shares held by brokers or
nominees as to which (i) the broker or nominee does not have discretionary
voting power and (ii) the broker or nominee has not received instructions from
the beneficial owner or other person who is entitled to instruct how the
shares will be voted.

Required Vote. The vote required to approve the New Investment Management
Contract is the lesser of (1) 67% of the shares of the Fund that are present
at the Meeting, if the holders of more than 50% of the shares of the Fund
outstanding as of the record date are present or represented by proxy at the
Meeting, or (2) more than 50% of the shares of the Fund outstanding on the
record date. If the required vote is not obtained, the Directors will consider
what other actions to take in the best interests of the Fund. The vote
required to elect the directors and the vote required to ratify the selection
of Deloitte & Touche LLP as independent accountants is a majority of the
shares of the Fund present at the Meeting in person or by proxy.

Adjournments; Other Business. 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 Meeting has been called to transact any business that properly comes
before it. The only business that management of the Fund intends to present or
knows that others will present is (i) the approval of the New Investment
Management Contract, (ii) the ratification of Deloitte & Touche LLP as
independent accountants for the Fund for its fiscal year ending June 30, 2001
and (iii) the election of directors. If any other matters properly come before
the

15
<PAGE>

Meeting, and on all matters incidental to the conduct of the Meeting, the
persons named as proxies intend to vote the proxies in accordance with their
judgment, unless the Secretary of the Fund has previously received written
contrary instructions from the shareholder entitled to vote the shares.

Shareholder Proposals at Future Meetings. The Fund does not hold annual or
other regular meetings of shareholders. Shareholder proposals to be presented
at any future meeting of shareholders of the Fund must be received by the Fund
in writing a reasonable amount of time before the Fund solicits proxies for
that meeting, in order to be considered for inclusion in the proxy materials
for that meeting.

16
<PAGE>

Appendix A

<TABLE>
<CAPTION>
Description
of Board
Member
Action Date of Last
Regarding Submission
Current of Current
Investment Investment
Management Management
Date of Contract Contract for
Current Since Shareholder
Management Investment Beginning of Approval and
Advisory Fee Fee Paid Management Fund's Last Reason for
Name of Fund Rate Schedule to Manager* Contract Fiscal Year Submission
------------ ------------- ----------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Tax Exempt .40% of $833,233 August 30, Continuance March 13,
Proceeds average 1996 approved 1996**
Fund, Inc. daily net July 31, 2000
assets up
to $250
million,
plus .35%
of
average
daily net
assets
between
$250 and
$500
million
and .30%
per annum
of the
average
daily net
assets
over $500
million
</TABLE>
-----------
* Pursuant to the terms of the Investment Management Contract, the Manager
has contractually agreed to bear or reimburse all expenses of this Fund
(other than the Management Fee) for the term of such contract. Therefore,
the fee payable under the investment management contract is the only
expense of the Fund.
** In 1996, the merger of New England Mutual Life Insurance Company into
Metropolitan Life Insurance Company was treated as a change of control of
New England Investment Companies, L.P., the limited partner and owner of
the 99.5% limited partnership interest in the Manager. Such a change of
control resulted in the assignment and automatic termination of the
investment management Contract. Therefore, shareholders were asked to
approve new investment management Contract.

A-1
<PAGE>

Appendix B

FORM OF INVESTMENT MANAGEMENT CONTRACT

TAX EXEMPT PROCEEDS FUND, INC.
(the "Fund")

New York, New York

, 2000

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

B-1
<PAGE>

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 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

B-2
<PAGE>

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 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.

B-3
<PAGE>

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.

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.

B-4
<PAGE>

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: _____________________________________
Name:
Title:

ACCEPTED: , 2000

REICH & TANG ASSET MANAGEMENT L.P.

By: REICH & TANG ASSET MANAGEMENT, INC.,
General Partner

By: _______________________________________________
Name:
Title:

B-5
<PAGE>

Appendix C

CERTAIN OTHER MUTUAL FUNDS ADVISED BY THE MANAGER

The Manager acts as investment adviser or sub-adviser to the following other
mutual funds that have investment objectives similar to the Fund, for
compensation at the annual percentage rates of the corresponding average net
asset levels of those funds set forth below.

California Daily Tax Free 385,720,218 .30% per annum of Manager
Income Fund, Inc. average daily net
assets

Connecticut Daily Tax 189,697,692 .30% per annum of Manager
Free Income Fund, Inc. average daily net
assets

Cortland Trust, Inc. 2,307,202,110 0.80% of the first Manager
$500 million of the
Trust's average daily
net assets, 0.775% of
the average daily net
assets of the Trust
inexcess of $500
million but less than
$1 billion, 0.75% of
the average daily net
assets of the Trust
in excess of $1
billion but less than
$1.5 billion, plus
0.725% of the Trust's
average daily net
assets in excess of
$1.5 billion.

Daily Tax Free Income 725,922,546 .325% average daily Manager
Fund, Inc. net assets not in
excess of $750
million, plus .30% of
average daily net
assets in excess of
$750 million
</TABLE>
-----------
(1) No fee waivers or reductions in place.

C-1
<PAGE>

Georgia Daily Municipal 12,093,579 .40% per annum of Manager
Income Fund, Inc. average daily net
assets

Institutional Daily 1,356,847,939 .12% per annum of Manager
Income Fund average daily net
assets

Michigan Daily Tax Free 14,788,365 .30% per annum of Manager
Income Fund, Inc. average daily net
assets

New Jersey Daily 147,469,750 .30% per annum of Manager
Municipal Income Fund, average daily net
Inc. assets

New York Daily Tax Free 428,583,548 .30% per annum of Manager
Income Fund, Inc. average daily net
assets

North Carolina Daily 250,604,096 .40% per annum of Manager
Municipal Income average daily net
Fund, Inc. assets

Pax World Money Market 125,687,035 .15% per annum of Sub-Adviser
Fund, Inc. average daily net
assets

Pennsylvania Daily 7,722,720 .40% per annum of Manager
Municipal Income Fund average daily net
assets

Short Term Income Fund, 1,259,022,443 .30% of average daily Manager
Inc. net assets not in
excess of $750
Money Market Portfolio million, plus .29% of
average daily net
assets in excess of
$750 million but not
in excess of $1
billion, plus .28% of
such assets in excess
of $1 billion but not
in excess of $1.5
billion, plus .27% of
such assets in excess
of $1.5 billion

Short Term Income Fund, 615,730,987 .275% of average Manager
Inc. daily net assets not
in excess of $250
U.S. Government Portfolio million, plus .25% of
such assets in excess
of $250 million
</TABLE>
-----------
(1) .02% Investment Management fee waived for Florida, .40% waived for
Georgia, .30% waived for Michigan, .40% waived for Pennsylvania,

C-2
<PAGE>

<TABLE>
<CAPTION>
Manager's
Relationship
Net Assets of to Fund
Other Fund(s) with Other Funds (Manager or
Similar Objectives at June 30, 2000 Fee Rate(1) Sub-Adviser)
------------------ ---------------- --------------------- ------------
<S> <C> <C> <C>
The Valiant Fund $1,004,730,241 .06% of the first Sub-Adviser
$500 million of the
Fund's average daily
net assets, plus .05%
of average daily net
assets in excess of
$500 million but less
than $1 billion, plus
.04% of such assets
in excess of $1
billion but less than
$1.5 billion, plus
.035% of such assets
in excess of $2
billion.

Virginia Daily Municipal 3,964,767 .40% per annum of Manager
Income Fund, Inc. average daily net
assets
</TABLE>
-----------
(1) .40% Investment Management Fee waived for Virginia

C-3
<PAGE>

Appendix D

Shares Outstanding

The number of shares of the Fund outstanding as of July 31, 2000 was as
follows:

<TABLE>
<CAPTION>
Name of Fund Number of Shares
------------ ----------------
<S> <C>
Tax Exempt Proceeds Fund, Inc. ................................ 218,761,390
</TABLE>

Ownership of Shares

As of July 31, 2000, the Fund believes that the Directors and officers of
the Fund, as a group, owned less than one percent of the shares of the Fund.
As of July 31, 2000, the following persons owned beneficially 5% or more of
the shares of the Fund:

<TABLE>
<CAPTION>
Shares Percentage of
Beneficially Outstanding
Name and Address Owned Shares Owned
---------------- ------------ -------------
<S> <C> <C>
State of Connecticut
Inter-Agency/Intra-Agency GRTS 1169
55 Elm Street
Hartford, CT 06106 36,195,010 16.55%
State of CT, Office of the Treasurer
Local Bridge Program #6301
55 Elm Street
Hartford, CT 06106 26,507,867 12.12%
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D-1
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TEPPX00
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600 FIFTH AVENUE
NEW YORK, NEW YORK 10020

PLEASE VOTE YOUR PROXY TODAY

Prompt response will save the expense of additional solicitations

CHOOSE THE VOTING METHOD THAT IS MOST CONVENIENT FOR YOU.

1. VOTE BY MAIL: Sign and date your proxy card and return it in the enclosed
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postage paid envelope. NOTE: Your proxy is not valid unless it is signed.
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2. VOTE BY TOUCH-TONE PHONE: Dial 1-800-690-6903, enter the CONTROL NUMBER
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printed in the right-hand column and follow the simple instructions.
Telephone voting is available 24 hours a day, 7 days a week. THE CALL IS
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TOLL-FREE. If you received more than one proxy card, you can vote each card
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during the call. Each card has a different control number.

3. VOTE VIA THE INTERNET: Log on to www.proxyvote.com, enter the CONTROL
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NUMBER printed in the right-hand column and follow the instructions on the
screen. If you received more than one proxy card, you may vote them all
during the same session. Each card has a different control number.

IF YOU VOTE BY PHONE OR INTERNET,
PLEASE DO NOT RETURN YOUR PROXY CARD.

VOTE TODAY BY MAIL,
TOUCH-TONE PHONE OR THE INTERNET
CALL TOLL-FREE 1-800-690-6903
OR LOG ON TO www.proxyvote.com

TAX EXEMPT PROCEEDS FUND, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
SPECIAL MEETING OF SHAREHOLDERS--OCTOBER 10, 2000

THE UNDERSIGNED SHAREHOLDER OF TAX EXEMPT PROCEEDS FUND, INC. (THE "FUND")
HEREBY APPOINTS RICHARD DE SANCTIS AND BERNADETTE N. FINN, AND EACH OF THEM, AS
ATTORNEYS AND PROXIES OF THE UNDERSIGNED, WITH POWER OF SUBSTITUTION, TO VOTE
ALL OF THE SHARES OF COMMON STOCK OF THE FUND STANDING IN THE NAME OF THE
UNDERSIGNED AT THE CLOSE OF BUSINESS ON AUGUST 15, 2000 AT THE SPECIAL MEETING
OF SHAREHOLDERS OF THE FUND TO BE HELD AT THE OFFICES OF THE FUND AT 600 FIFTH
AVENUE, NEW YORK, NY 10020 AT 9:40 ON OCTOBER 10, 2000, AND AT ALL ADJOURNMENTS
THEREOF, WITH ALL OF THE POWERS THE UNDERSIGNED WOULD POSSESS IF THEN AND THERE
PERSONALLY PRESENT AND ESPECIALLY (BUT WITHOUT LIMITING THE GENERAL
AUTHORIZATION AND POWER THEREBY GIVEN) TO VOTE AS INDICATED ON THE PROPOSALS, AS
MORE FULLY DESCRIBED IN THE PROXY STATEMENT FOR THE MEETING AND VOTE AND ACT ON
ANY OTHER MATTER WHICH MAY PROPERLY COME BEFORE THE MEETING.

THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS AND WILL BE VOTED "FOR"
THE PROPOSALS LISTED BELOW UNLESS OTHERWISE INDICATED.

BY SIGNING AND DATING THE LOWER PORTION OF THIS CARD, YOU AUTHORIZE THE
PROXIES TO VOTE EACH PROPOSAL AS MARKED, OR, IF NOT MARKED TO VOTE, "FOR" EACH
PROPOSAL AND TO USE THEIR DISCRETION TO VOTE ANY OTHER MATTER AS MAY PROPERLY
COME BEFORE THE MEETING. IF YOU DO NOT INTEND TO PERSONALLY ATTEND THE
MEETING, PLEASE COMPLETE, DETACH AND MAIL THE LOWER PORTION OF THIS CARD AT
ONCE IN THE ENCLOSED ENVELOPE.

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TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS [X] TEPFUN KEEP THIS PORTION FOR YOUR RECORDS
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(DETACH HERE AND RETURN THIS PORTION ONLY)
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
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TAX EXEMPT PROCEEDS FUND, INC.
<S> <C> <C>
Vote on directors

3. ELECT THE FOLLOWING NOMINEES FOR DIRECTORS. For Withhold for All To withhold authority to vote,
01) MARIAN R. CHERTOW, 02) JOHN C. RICHMOND, All All Except mark "For All Except" and write
03) GLENN S. KLOCKO, 04) CATHERINE S. BOONE, the nominated number on the line
05) HOWARD G. RIFKIN [_] [_] [_] below.

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Vote On Proposals For Against Abstain

1. TO APPROVE A NEW INVESTMENT MANAGEMENT CONTRACT [_] [_] [_]

2. TO RATIFY THE SELECTION OF DELOITTE & TOUCHE LLP AS INDEPENDENT ACCOUNTANTS
OF THE FUND FOR ITS FISCAL YEAR ENDING JUNE 30, 2001 [_] [_] [_]

PLEASE SIGN NAME OR NAMES AS PRINTED ABOVE TO AUTHORIZE THE VOTING OF YOUR
SHARES AS INDICATED ABOVE. WHERE SHARES ARE REGISTERED WITH JOINT OWNERS, ALL
JOINT OWNERS SHOULD SIGN. PERSONS SIGNING AS EXECUTORS, ADMINISTRATORS,
TRUSTEES, ETC. SHOULD SO INDICATE.

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Signature (PLEASE SIGN WITHIN BOX) DATE Signature (Joint Owners) Date
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