N-CSR 1 dncsr.htm TAX EXEMPT PROCEEDS FUND, INC. Tax Exempt Proceeds Fund, Inc.

As filed with the Securities and Exchange Commission on August 12, 2011

Investment Company Act File Number 811-5698

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF

REGISTERED MANAGEMENT INVESTMENT COMPANIES

Tax Exempt Proceeds Fund, Inc.

(Exact name of registrant as specified in charter)

1411 Broadway, 28th Floor

New York, NY 10018

(Address of principal executive offices) (Zip code)

Christine Manna

c/o Reich & Tang Asset Management, LLC

1411 Broadway, 28th Floor

New York, New York 10018

(Name and address of agent for service)

Registrant’s telephone number, including area code: 212-830-5200

Date of fiscal year end: June 30

Date of reporting period: June 30, 2011

 

 

 

Item 1: Report to Stockholders

Tax Exempt Proceeds Fund, Inc.

Shareholder Letter

Dear Shareholder:

While the equity markets have improved over the past year, the level of cash accumulated by both retail and institutional investors suggests a hesitancy to take this “safe money” off the sidelines in favor of other longer-term investments. The surplus of cash in the short-term fixed income markets, including money market mutual funds, continues to grow despite a challenging rate environment, emphasizing investors’ disdain toward market risk, real or perceived. Perhaps the highest profile means to help allay investor concerns regarding risk is the heightened focus on money market mutual fund reform that has taken center stage by way of the President’s Working Group on Financial Markets. The proposals from this Working Group are aimed at creating viable solutions to reform, and avoiding situations that threaten a money fund’s ability to provide liquidity when needed.

It is clear that the scrutiny money funds are facing validates their importance to both businesses and individuals alike. We believe it will also place a renewed focus on what we have practiced in our funds since our inception in 1974, which is that the bias toward safety and liquidity over yield must be paramount. This tenet is the cornerstone of Reich & Tang’s investment philosophy and has served our clients and shareholders well historically and even more so since the credit crisis began in September 2008.

Our goals of safety and capital preservation, as well as our careful approach to risk management are driven by our belief that thorough, fundamental credit analysis is critical to the continued success of our company. Reich & Tang is proud to be part of Natixis Global Asset Management, one of the world’s largest money management organizations. Natixis brings together the expertise of multiple specialized investment managers based in the United States, Europe and Asia to offer a wide spectrum of equity, fixed income and alternative investment strategies. For more information on Natixis Global Asset Management, please visit us at www.globalam.natixis.com.

The effects from the financial crisis still linger. We are pleased to demonstrate, however, that our tested, uncompromising commitment to the highest standards in liquidity and short-term cash management has proven successful in 2010 and has us positioned well for the upcoming fiscal year. We find comfort in knowing that the guidelines the President’s Working Group on Financial Markets are looking to put in place are the principles that we have been practicing for nearly 40 years.

Thank you for your trust in Reich & Tang. We welcome any questions you may have about our funds or any of the investments within our portfolios.

Sincerely,

LOGO

Michael P. Lydon

President

 

1

Tax Exempt Proceeds Fund, Inc.

Expense Chart For The Six Months Ended June 30, 2011 (Unaudited)

As a shareholder of the Fund, you incur the following ongoing costs: management fees and other Fund expenses. You may also incur distribution and/or service (12b-1) fees. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period January 1, 2011 through June 30, 2011.

 

:  

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. You may use information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During the Period” to estimate the expenses you paid on your account during this period.

 

:  

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Funds’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees that you may incur in other mutual funds. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds.

 

     Beginning Account
Value 01/01/11		     Ending Account
Value 06/30/11		     Expenses Paid
During the Period*		     Annualized
Expense Ratio*		  

Actual

     $1,000.00        $1,000.00        $1.09        0.22%   

Hypothetical (5% return before expenses)

     $1,000.00        $1,023.70        $1.10        0.22%   

 

* Expenses are equal to the Fund’s annualized expense ratios multiplied by the average account value over the period (January 1, 2011 through June 30, 2011), multiplied by 181/365 (to reflect the most recent fiscal half-year).

 

2

Tax Exempt Proceeds Fund, Inc.

Schedule of Investments June 30, 2011

 

                              Rating (a)

Face Amount

          

Maturity
Date

   

Interest
Rate

    

Value
(Note 2)

     

Moody’s

   

Standard
& Poor’s

                
  TAX EXEMPT GENERAL OBLIGATION NOTES AND BONDS (6.81%)
$ 2,250,000       Deerfield Township, OH Various Purpose Park Acquisition BAN – Series 2010    11/08/11      0.65 %    $ 2,256,766       MIG-1   
  1,125,000       Town of Andover, MA GO BAN    02/24/12      0.60        1,129,737          SP-1+
  1,151,680       Town of Northborough, MA GO BAN    04/27/12      0.70        1,159,204       MIG-1   
  1,950,000       Town of South Windsor, CT GO BAN, Issue of 2011    02/21/12      0.60        1,958,107       MIG-1    SP-1+

 

 

             

 

 

        
  6,476,680       Total Tax Exempt General Obligation Notes and Bonds           6,503,814         

 

 

             

 

 

        
  TAX EXEMPT VARIABLE RATE DEMAND INSTRUMENTS (b) (93.50%)
$ 3,000,000       City of Cohasset, MN RB (Minnesota Power & Light Company Project) – Series 1997A LOC LaSalle National Bank N.A.    06/01/20      0.09 %    $ 3,000,000          A-1+
  3,000,000       City of New York Fiscal 2004 Series H-4 LOC Bank of New York Mellon    03/01/34      0.03        3,000,000       VMIG-1    A-1+
  1,400,000       City of Newport, KY Kentucky League of Cities Funding Trust Lease Program RB – Series 2002 LOC US Bank, N.A.    04/01/32      0.11        1,400,000       VMIG-1   
  2,800,000       Colorado Health Facilities Authority HRB (Boulder Community Hospital Project) – Series 2000 LOC JPMorgan Chase Bank, N.A.    10/01/30      0.08        2,800,000       VMIG-1    A-1+
  3,400,000       Columbus, OH Regional Airport Authority Capital Funding RB (Oasbo Expanded Asset Pooled Financing Program) – Series 2006 LOC U.S. Bank N.A.    12/01/36      0.09        3,400,000       VMIG-1   
  1,745,000       Connecticut State Development Authority RB (Pierce Memorial Baptist Home, Inc. Project 1999 Refunding Series) LOC LaSalle National Bank N.A.    10/01/28      0.07        1,745,000          A-1+
  4,000,000       Dormitory Authority of the State of New York Blythedale Childrens HRB Series 2009 LOC TD Bank, N.A.    12/01/36      0.09        4,000,000       VMIG-1   
  1,775,000       East Baton Rouge Parish, LA PCRB (Exxon Mobile Project)    11/01/19      0.02        1,775,000       P-1    A-1+
  2,000,000       Florida Housing Finance Corporation Multifamily Housing Revenue Refunding Bonds (Charleston Landing Apartments) 2001 Series I-A Guaranteed by Federal Home Loan Mortgage Corporation    07/01/31      0.08        2,000,000          A-1+
  2,250,000       Florida Housing Finance Corporation Multifamily Housing Revenue Refunding Bonds (Island Club Apartments) 2001 Series J-A Guaranteed by Federal Home Loan Mortgage Corporation    07/01/31      0.08        2,250,000          A-1+

 

3

The accompanying notes are an integral part of these financial statements.

Tax Exempt Proceeds Fund, Inc.

Schedule of Investments June 30, 2011 (Continued)

 

                              Rating (a)

Face Amount

          

Maturity
Date

   

Interest
Rate

    

Value
(Note 2)

     

Moody’s

   

Standard
& Poor’s

                
  TAX EXEMPT VARIABLE RATE DEMAND INSTRUMENTS (b) (CONTINUED)
$ 1,425,000       HEFA of the State of Missouri Educational Facilities RB (Ranken Technical College) – Series 2007 LOC Northern Trust Company    11/15/31      0.08 %    $ 1,425,000          A-1+
  3,400,000       Illinois Development Finance Authority RB (Glenwood School for Boys) – Series 1998 LOC Harris Trust & Savings Bank    02/01/33      0.10        3,400,000          A-1+
  2,150,000       Illinois Finance Authority RB (Riverside Health System) - Series 2004 LOC JPMorgan Chase Bank, N.A.    11/15/29      0.08        2,150,000       VMIG-1    A-1+
  2,800,000       Iowa Higher Education Loan Authority Private College Facility RB (University of Dubuque Project) – Series 2007 LOC Northern Trust Company    04/01/35      0.08        2,800,000          A-1+
  2,000,000       Jackson County, MS Port Facility Refunding RB (Chevron U.S.A. Inc. Project) – Series 1993    06/01/23      0.02        2,000,000       P-1   
  1,100,000       Long Island Power Authority, NY (Electric System) - Series 1B LOC State Street Bank & Trust Company    05/01/33      0.03        1,100,000       VMIG-1    A-1+
  2,000,000       Marion County, FL IDA Multifamily Housing RRB (Chambrel at Pinecastle Project) – Series 2002 Guaranteed by Federal National Mortgage Association    11/15/32      0.09        2,000,000          A-1+
  6,000,000       Maryland Health and Higher Educational Facilities Authority RB (University of Maryland Medical System Issue) – Series 2007A LOC Wachovia Bank, N.A.    07/01/34      0.07        6,000,000       VMIG-1    A-1+
  3,000,000       Mississippi Business Finance Corporation Gult opportunity Zone IDRB (Chevron U.S.A. Inc. Project)    12/01/30      0.04        3,000,000       P-1    A-1+
  645,000       New Canaan, CT Housing Authority RB (The Village at Waveny Care Center Project) – Series 2002 LOC Bank of America, N.A.    01/01/22      0.09        645,000          A-1+
  1,800,000       New Jersey Health Care Facilities Financing Authority RB (Saint Barnabas Health Care System Issue) – Series 2001A LOC JP Morgan Chase Bank, N.A.    07/01/31      0.06        1,800,000       VMIG-1    A-1+
  900,000       New Ulm, MN Hospital Refunding RB (Health Central Systems Project) – Series 1985 LOC Wells Fargo Bank, N.A.    08/01/14      0.13        900,000          A-1+
  1,600,000       New York City, NY GO Bonds Fiscal 2004 Sub-Series H-7 LOC KBC Bank, N.A.    03/01/34      0.03        1,600,000       VMIG-1    A-1
  1,000,000       New York City, NY Series 1994 A-5 LOC KBC Bank, N.A.    08/01/16      0.03        1,000,000       VMIG-1    A-1+
  2,000,000       New York State HFA RB (Historic Front Street Housing RB) – Series 2003A LOC Landesbank Hessen Thuringen Girozentrale    11/01/36      0.07        2,000,000       VMIG-1   

 

The accompanying notes are an integral part of these financial statements.

 

4

Tax Exempt Proceeds Fund, Inc.

Schedule of Investments June 30, 2011 (Continued)

 

                             Rating (a)

Face Amount

          

Maturity
Date

   

Interest
Rate

    

Value
(Note 2)

    

Moody’s

   

Standard
& Poor’s

               
  TAX EXEMPT VARIABLE RATE DEMAND INSTRUMENTS (b) (CONTINUED)
$ 5,000,000       Regents of the University of Michigan Hospital RRB Series 1998 A-2    12/01/24      0.03 %    $ 5,000,000      VMIG-1    A-1+
  5,000,000       State of California GO Bond (Kindergarten University Public Education Facilities RB) – Series 2004 B2 LOC Citibank, N.A.    05/01/34      0.03        5,000,000      VMIG-1    A-1+
  2,400,000       State of California GO Bond (Kindergarten University Public Education Facilities RB) – Series 2004 B3 LOC Citibank, N.A.    05/01/34      0.03        2,400,000      VMIG-1    A-1+
  150,000       State of Connecticut HEFA RB (Charlotte Hungerford Hospital Issue) – Series 1998C LOC Bank of America, N.A.    07/01/13      0.10        150,000      VMIG-1   
  2,300,000       State of Connecticut HEFA RB (Yale University Issue) – Series Y-2    07/01/35      0.02        2,300,000      VMIG-1    A-1+
  1,500,000       State of Connecticut HEFA RB (Yale University Issue) – Series Y-3    07/01/35      0.02        1,500,000      VMIG-1    A-1+
  1,000,000       State of Connecticut HEFA RB (Yale-New Haven Hospital Issue) – Series K-2 LOC JPMorgan Chase Bank, N.A.    07/01/25      0.05        1,000,000      VMIG-1    A-1+
  300,000       State of Connecticut HEFA RB Mulberry Gardens Issue, Series E LOC Bank of America, N.A.    07/01/36      0.10        300,000         A-1+
  2,700,000       Sublette County, WY PCRB (Exxon Project) – Series 1984    11/01/14      0.02        2,700,000      P-1    A-1+
  2,000,000       The City of New York GO Fiscal 1994 Sub series E-4 LOC BNP Paribas    08/01/21      0.05        2,000,000      VMIG-1    A-1+
  1,800,000       The City of New York GO Fiscal 1994 Sub series E-4 LOC BNP Paribas    08/01/22      0.05        1,800,000      VMIG-1    A-1+
  4,000,000       The City of New York GO Fiscal 2004 Sub series A-3 LOC Morgan Stanley Bank    08/01/31      0.05        4,000,000      VMIG-1    A-1+
  1,000,000       Triborough Bridge and Tunnel Authority RB (MTA Bridges and Tunnels) – Series 2001B LOC State Street Bank & Trust Company    01/01/32      0.04        1,000,000      VMIG-1    A-1+
  3,000,000       Turlock Irrigation District, CA COP (Capital Improvements and Refunding Project) 2001 Series A LOC Societe Generale    01/01/31      0.03        3,000,000         A-1+

 

 

             

 

 

       
  89,340,000       Total Tax Exempt Variable Rate Demand Instruments           89,340,000        

 

 

             

 

 

       
   Total Investments (100.31%)
(Cost $95,843,814†)		         $ 95,843,814        
   Liabilities in Excess of Cash and Other Assets (-0.31%)        (298,783 )      
          

 

 

       
   Net Assets (100.00%)         $ 95,545,031        
          

 

 

       
  

†     Aggregate cost for federal income tax purposes is identical. All securities are valued at amortized cost and as a result, there is no unrealized appreciation and depreciation.

 

The accompanying notes are an integral part of these financial statements.

 

5

Tax Exempt Proceeds Fund, Inc.

Schedule of Investments June 30, 2011 (Continued)

 

FOOTNOTES:

 

  (a) Unless the securities are assigned their own ratings, the ratings are those 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. Ratings are unaudited. In addition, certain issuers may have either a line of credit, a liquidity facility, a standby purchase agreement or some other financing mechanism to ensure the remarketing of the securities. This is not a guarantee and does not serve to insure or collateralize the issue. Ratings have not been audited by Sanville & Company.

 

  (b) Securities payable on demand at par including accrued interest (usually with seven days’ notice) and, if indicated, unconditionally secured as to principal and interest by a bank letter of credit. The interest rates are adjustable and are based on bank prime rates or other interest rate adjustment indices. The rate shown is the rate in effect at the date of this statement.

KEY:

 

BAN   =  Bond Anticipation Note   IDRB   =  Industrial Development Revenue Bond
COP   =  Certificate of Participation   LOC   =  Letter of Credit
GO   =  General Obligation   MTA   =  Metropolitan Transportation Authority
HEFA   =  Health and Educational Facilities Authority   PCRB   =  Pollution Control Revenue Bond
HFA   =  Housing Finance Authority   RB   =  Revenue Bond
HRB   =  Hospital Revenue Bond   RRB   =  Revenue Refunding Bond
IDA   =  Industrial Development Authority    

BREAKDOWN OF PORTFOLIO HOLDINGS BY MATURITY (Unaudited)

 

Securities Maturing in    Value      % of Portfolio  

Less than 31 Days

    $ 89,340,000         93.21 % 

31 through 60 Days

      —         —   

61 through 90 Days

      —         —   

91 through 120 Days

      —         —   

121 through 180 Days

      2,256,766         2.36   

Over 180 Days

      4,247,048         4.43   

Total

    $ 95,843,814         100.00 % 

 

The accompanying notes are an integral part of these financial statements.

 

6

Tax Exempt Proceeds Fund, Inc.

Schedule of Investments June 30, 2011 (Continued)

 

BREAKDOWN OF PORTFOLIO HOLDINGS BY STATE (Unaudited)

 

States    Value      % of Portfolio  

California

    $ 10,400,000         10.85 % 

Colorado

      2,800,000         2.92 % 

Connecticut

      9,598,107         10.01 % 

Florida

      6,250,000         6.52 % 

Illinois

      5,550,000         5.79 % 

Iowa

      2,800,000         2.92 % 

Kentucky

      1,400,000         1.46 % 

Louisiana

      1,775,000         1.85 % 

Maryland

      6,000,000         6.26 % 

Massachusetts

      2,288,941         2.39 % 

Michigan

      5,000,000         5.22 % 

Minnesota

      3,900,000         4.07 % 

Mississippi

      5,000,000         5.22 % 

Missouri

      1,425,000         1.49 % 

New Jersey

      1,800,000         1.88 % 

New York

      21,500,000         22.43 % 

Ohio

      5,656,766         5.90 % 

Wyoming

      2,700,000         2.82 % 

Total

    $ 95,843,814         100.00 % 

 

 

The accompanying notes are an integral part of these financial statements.

 

7

Tax Exempt Proceeds Fund, Inc.

Statement of Assets and Liabilities June 30, 2011

 

:Assets

     

Investments in securities, at amortized cost (Note 2)

      $ 95,843,814   

Receivable for shares sold

        62,035   

Accrued interest receivable

        44,570   
    

 

 

  

Total assets

        95,950,419   
    

 

 

  

:Liabilities

     

Due to custodian

        395,838   

Payable to affiliate (Note 3)

        9,548   

Dividends payable

        2   
    

 

 

  

Total liabilities

        405,388   
    

 

 

  
Net assets      $ 95,545,031   
    

 

 

  

:Sources of Net Assets

     

Net capital paid in on shares of capital stock (Note 5)

      $ 95,545,031   

Accumulated net realized gain (losses)

        —   
    

 

 

  
Net assets      $ 95,545,031   
    

 

 

  
NET ASSET VALUE, PER SHARE (applicable to 95,547,034 shares outstanding) (NOTE 5)      $ 1.00   
    

 

 

  

 

The accompanying notes are an integral part of these financial statements.

 

8

Tax Exempt Proceeds Fund, Inc.

Statement of Operations For Year Ended June 30, 2011

 

:Investment Income

     
INCOME:     

Interest

      $ 269,297   
          
EXPENSES: (NOTE 3)     

Investment management fee

        396,908   

Less: Fees waived (Note 3)

        (131,171 ) 
          
       265,737   
          

Net investment income

        3,560   
          

:Realized Gain (Loss) on Investments

     

Net realized gain (loss) on investments

        -0-   
          

Increase in net assets resulting from operations

      $ 3,560   
          

 

The accompanying notes are an integral part of these financial statements.

 

9

Tax Exempt Proceeds Fund, Inc.

Statements of Changes in Net Assets Years Ended June 30, 2011 and 2010

 

       2011      2010  
       

:Increase (Decrease) in Net Assets From:

        
OPERATIONS:        

Net investment income

      $ 3,560       $ 2,777   

Net realized gain on investments

        -0-         -0-   
    

 

 

     

 

 

  

Increase in net assets resulting from operations

        3,560         2,777   
    

 

 

     

 

 

  
DIVIDENDS TO SHAREHOLDERS FROM NET INVESTMENT INCOME*:        (3,560 )       (2,777 ) 
CAPITAL SHARE TRANSACTIONS (NOTE 5):        (29,613,940 )       (7,018,649 ) 
    

 

 

     

 

 

  

Total increase/(decrease)

        (29,613,940 )       (7,018,649 ) 
NET ASSETS:        

Beginning of year

        125,158,971         132,177,620   
    

 

 

     

 

 

  

End of year

      $ 95,545,031       $ 125,158,971   
    

 

 

     

 

 

  
UNDISTRIBUTED NET INVESTMENT INCOME:      $ -0-       $ -0-   
    

 

 

     

 

 

  

 

* Designated as exempt-interest dividends for federal income tax purposes.

 

The accompanying notes are an integral part of these financial statements.

 

10

Tax Exempt Proceeds Fund, Inc.

Financial Highlights

 

     Years Ended June 30,  
     2011     2010     2009      2008      2007  
PER SHARE OPERATING PERFORMANCE             

(for a share outstanding throughout the year)

             

Net asset value, beginning of year

    $ 1.00      $ 1.00      $ 1.00       $ 1.00       $ 1.00   
                                          

Income from investment operations:

             

Net investment income

      0.000        0.000        0.011         0.026         0.032   

Less distributions from:

             

Dividends from net investment income

      (0.000)  (a)      (0.000)  (a)      (0.011)         (0.026)         (0.032)   
                                          

Net asset value, end of year

    $ 1.00      $ 1.00      $ 1.00       $ 1.00       $ 1.00   
                                          
TOTAL RETURN      0.00%        0.00%        1.10%         2.68%         3.27%   
RATIO/SUPPLEMENTAL DATA             

Net assets, end of year (000’s)

    $ 95,545      $ 125,159      $ 132,178       $ 174,431       $ 189,080   

Ratio to average net assets:

             

Net investment income

      0.00%        0.00%        1.14%         2.67%         3.23%   

Expenses (net of fees waived)

      0.27%        0.27%        0.40%         0.40%         0.40%   

Management fees waived

      0.13%        0.13%        —         —         —   

 

(a) Distribution resulted in less than $0.01 per share.

 

The accompanying notes are an integral part of these financial statements.

 

11

Tax Exempt Proceeds Fund, Inc.

Notes to the Financial Statements June 30, 2011

1: Organization

Tax Exempt Proceeds Fund, Inc. (“Fund”) is a no-load, diversified, open-end management investment company registered under the Investment Company Act of 1940 (the “1940 Act”). The Fund is a short term, tax exempt money market fund whose objective is to seek as high a level of current interest income exempt from federal income taxes as is believed to be consistent with the preservation of capital, maintenance of liquidity and stability of principal.

2: Summary of Significant Accounting Policies

VALUATION OF SECURITIES

Investments are recorded on the basis of amortized cost, which approximates value, as permitted by Rule 2a-7 under the 1940 Act. Under this 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. See Note 7 for additional disclosure on valuation of securities.

SECURITIES TRANSACTIONS AND INVESTMENT INCOME

Securities transactions are recorded on a trade date basis. Interest income, adjusted for accretion of discount and amortization of premium, is recorded on the accrual basis from settlement date. Realized gains and losses on sales are computed on the basis of specific identification of the securities sold.

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 (if any) income to its shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income tax is required in the financial statements. The Fund recognizes interest and penalties, if any, related to uncertain tax positions as income tax expense in the Statement of Operations.

In addition, GAAP requires management of the Fund to analyze all open tax years, fiscal years 2008-2011, as defined by IRS statute of limitations for all major jurisdictions, including federal tax authorities and certain state tax authorities. As of and during the year ended June 30, 2011, the Fund did not have a liability for any unrecognized tax benefits. The Fund has no examination in progress and is not aware of any tax positions for which it is reasonably possible that the total tax amounts of unrecognized tax benefits will significantly change in the next twelve months.

DIVIDENDS AND DISTRIBUTIONS

Dividends from net investment income (excluding capital gains and losses, if any, and amortization of market discount) are declared daily and paid monthly. Net realized capital gains, if any, are distributed at least annually and in no event later than 60 days after the end of the Fund’s fiscal year.

ACCOUNTING ESTIMATES

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect 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.

REPRESENTATIONS AND INDEMNIFICATIONS

In the normal course of business the Fund enters into contracts that contain a variety of representations and warranties which provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. However, based on experience, the Fund expects the risk of loss to be remote.

 

12

Tax Exempt Proceeds Fund, Inc.

Notes to the Financial Statements (Continued)

 

2: Summary of Significant Accounting Policies (Continued)

 

RISKS

The effect on performance from investing in securities issued or guaranteed by companies in the banking and financial services industries will depend to a greater extent on the overall condition of those industries. Financial services companies are highly dependent on the supply of short-term financing. The value of securities of issuers in the banking and financial services industry can be sensitive to changes in government regulation and interest rates and to economic downturns in the United States and abroad.

The value of, payment of interest on, repayment of principal for and the ability to sell a municipal security may be affected by constitutional amendments, legislative enactments, executive orders, administrative regulations, voter initiatives and the economics of the regions in which the issuers are located.

Since many municipal securities are issued to finance similar projects, especially those relating to education, housing, health care, transportation and utilities, conditions in those sectors can affect the overall municipal securities market and a Portfolio’s investment in municipal securities.

There is some risk that a portion or all of the interest received from certain tax-free municipal securities could become taxable as a result of determinations by the Internal Revenue Service.

3: Investment Management Fees and Other Transactions with Affiliates

Under the Investment Management Contract, the Fund pays an investment management fee to the Manager at the annual rate of 0.40 of 1% per annum of the Fund’s average daily net assets up to $250 million; 0.35 of 1% per annum of the average daily net assets between $250 million and $500 million; and 0.30 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 all other expenses of the Fund. Therefore, the fee payable under the Management Contract will be the only expense of the Fund. At June 30, 2011, the Fund owed $9,548 to the Manager for these services, which is included in Payable to Affiliates on the Statement of Assets and Liabilities. For the year ended June 30, 2011, the Manager waived $131,171 of investment management fee.

In a low interest rate environment, such as the environment that existed at June 30, 2011, Reich & Tang Asset Management LLC (“the “Manager”) has historically waived their fees to maintain a minimum non-negative yield for the Fund. The Manager is under no contractual obligation to continue such waiver in the future.

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.

Directors of the Fund not affiliated with the Manager receive from the Fund (fee is paid by the Manager from its management fee) an annual retainer of $1,250 and a fee of $450 for each Board of Directors meeting attended and are reimbursed for all out-of-pocket expenses relating to attendance at such meeting.

As of June 30, 2011, no Directors, Officers or affiliated entities had investments in the Fund.

 

13

Tax Exempt Proceeds Fund, Inc.

Notes to the Financial Statements (Continued)

 

4: Security Transactions with Affiliated Funds

The Fund is permitted to purchase or sell securities from or to certain other Reich & Tang Funds under specified conditions outlined in procedures adopted by the Board of Directors of the Fund. The procedures have been designed to ensure that any purchase or sale of securities of the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment advisor (or affiliated investment advisors), common Directors and/or common Officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures, each transaction is effected at the current market price. For the year ended June 30, 2011, the Fund engaged in purchases and sales with affiliates, none of which resulted in any gains or losses, which amounted to:

 

Transaction Type

    Amount  

Purchases

    $ 124,870,000   

Sales

      115,370,000   

Gains/(Losses)

      -0-   

5: Capital Stock

At June 30, 2011, 20,000,000,000 shares of $.001 par value stock were authorized. Transactions in capital stock, all at $1.00 per share, were as follows:

 

     Year Ended
June 30, 2011		     Year Ended
June 30, 2010		  
      Net Assets     Shares     Net Assets     Shares  

Sold

    $ 667,966,242        667,966,242      $ 767,955,845        767,955,845   

Issued on reinvestment of dividends

      3,546        3,546        3,012        3,012   

Redeemed

      (697,583,728 )      (697,583,728 )      (774,977,506 )      (774,977,506 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease)

    $ (29,613,940 )      (29,613,940 )    $ (7,018,649 )      (7,018,649 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

6: Tax Information

The tax character of distributions paid during the years ended June 30, 2011 and 2010 was as follows:

 

     2011        2010  

Tax-exempt income

    $ 3,560         $ 2,777   

7: Additional Valuation Information

Under the provisions of GAAP, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods giving the highest priority to readily available unadjusted quotes prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3) generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investment’s assigned level:

 

Level 1 – prices are determined using quoted prices in an active market for identical assets.

 

Level 2 – prices are determined using other significant observable inputs. Observable inputs are inputs that the other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk and others.

 

14

Tax Exempt Proceeds Fund, Inc.

Notes to the Financial Statements (Continued)

 

7: Additional Valuation Information (Continued)

 

Level 3 – prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information.

The following is a summary of the tiered valuation input levels, as of the end of the reporting period, June 30, 2011. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Money market securities may be valued using amortized cost, in accordance with the 1940 Act. Generally, amortized cost approximates the current fair value of a security, but as the value is not obtained from a quoted price in an active market, such securities are reflected as a Level 2.

The following table summarizes the inputs used to value the Fund’s investments as of June 30, 2011:

 

Description

    Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)		      Significant Other
Observable
Inputs
(Level 2)		      Significant
Unobservable
Inputs
(Level 3)		  

Debt securities issued by states of the United States and political subdivisions of the states

    $ -0-       $ 95,843,814       $ -0-   
  

 

 

     

 

 

     

 

 

  

Total

    $ -0-       $ 95,843,814       $ -0-   
  

 

 

     

 

 

     

 

 

  

For the year ended June 30, 2011, there was no Level 1 or 3 investments.

8: Subsequent Events

Management has evaluated the impact of all subsequent events through the date the financial statements were issued and has determined that there were no subsequent events requiring recognition of disclosure in the financial statements.

 

15

Tax Exempt Proceeds Fund, Inc.

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholder of

Tax Exempt Proceeds Fund, Inc.

We have audited the accompanying statement of assets and liabilities of Tax Exempt Proceeds Fund, Inc. (the “Fund”) including the schedule of investments, as of June 30, 2011 and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of June 30, 2011 by correspondence with the Fund’s custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Tax Exempt Proceeds Fund, Inc. as of June 30, 2011, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.

LOGO

Sanville & Company

New York, New York

July 28, 2011

 

16

Tax Exempt Proceeds Fund, Inc.

Additional Information (Unaudited)

 

:  

Additional Information About Portfolio Holdings

The Fund is required to file its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) on Form N-Q for its first and third fiscal quarters. The Fund’s Form N-Q is available without charge on the SEC’s website (http://www.sec.gov) or by calling the Fund toll free at (800) 433-1918. You can also obtain copies of the Fund’s Form N-Q by visiting the SEC’s Public Reference Room in Washington, DC (please call the SEC at (800) 732-0330 for information on the operation of the Public Reference Room).

 

:  

Information About Proxy Voting

Information regarding the Fund’s proxy voting record for the 12 month period ending June 30 of each year is filed with the SEC on Form N-PX no later than August 31 of each year. The Fund’s Form N-PX is available without charge, upon request, by calling the Fund at (800) 433-1918 and on the SEC’s website (http//www.sec.gov). The Fund does not presently invest in voting securities and has therefore not adopted proxy voting policies and procedures.

 

:  

Tax-Exempt Income Distributed

For the fiscal year ended June 30, 2011, the Fund paid tax-exempt distribution in the amount of $3,560.

 

17

Tax Exempt Proceeds Fund, Inc.

Directors and Officers Information (Unaudited)

 

:  

Directors and Officers Information

June 30, 2011†

 

Name, Address1,

and Year of Birth

   Position(s)
Held with
Fund		   Term of
Office and
Length of
Time Served2		   Principal Occupation(s)
During Past 5 Years		   Number of
Portfolios in
Fund Complex
Overseen by
Director		   Other
Directorships
held by Director

Disinterested Directors:

                    

Catherine Boone,

1944

   Director   2000   Retired. Chief Financial Officer, Connecticut Valley Girl Scout Council, January 2007. Assistant Treasurer, State of Connecticut, 2000 to 2007.   One portfolio   N/A

Marian Chertow, PhD.,

1955

   Director   1989   Director, Industrial Environmental Management Program, School of Forestry and Environmental Studies at Yale University since July 1991.   One portfolio   N/A

Glenn Klocko,

1955

   Director   1990   Comptroller, City of Bristol, Connecticut since May 1998.   One portfolio   N/A

Interested Directors:

                    

Sarah Sanders,

1957

   Director3   2007   Assistant Treasurer, Debt Management, State of Connecticut, since June 2007. Principal Debt Management Specialist, State of Connecticut from July 2001 to June 2007.   One portfolio   Connecticut Higher Education Student Loan Authority; The Connecticut Student Loan Foundation and The Connecticut Higher Education and Health Facilities Authority

 

18

Tax Exempt Proceeds Fund, Inc.

Directors and Officers Information (Unaudited) (Continued)

 

Name, Address1,

and Year of Birth

   Position(s)
Held with
Fund		   Term of
Office and
Length of
Time Served2		   Principal Occupation(s)
During Past 5 Years

Interested Officers:

        

Michael P. Lydon,

1963

  

President & Chief Executive Officer

Vice
President

  

Since 2007

2005-2007

   President, Chief Executive Officer and Manager of RTAM, LLC. Associated with RTAM, LLC since January 2005. Mr. Lydon is also President and Director/Trustee of one other fund in the Reich & Tang Fund Complex, and President to New York Daily Tax Free Income Fund, Inc. Mr. Lydon serves as Member and Chief Executive Officer of Reich & Tang Deposit Solutions, LLC, Director and Executive Vice President of Reich & Tang Distributors, Inc., Director, President and Chief Executive Officer of Reich & Tang Services, Inc. and Member, President, and Chief Executive Officer of Stable Custody Group LLC and Stable Custody Group II LLC.

Christopher Brancazio,

1965

   Chief Compliance Officer and AML Officer   Since 2007   Senior Vice President, Chief Compliance Officer, AML Officer and Secretary of RTAM, LLC. Mr. Brancazio has been associated with RTAM LLC since September 2007. Mr. Brancazio is also Chief Compliance Officer and AML Officer of three other funds in the Reich & Tang Fund Complex. Mr. Brancazio also serves as Senior Vice President, Chief Compliance Officer and Secretary of Reich & Tang Deposit Solutions, LLC and Senior Vice President, Chief Compliance Officer and AML Officer of Reich & Tang Distributors, Inc., Reich & Tang Services, Inc., Stable Custody Group LLC and Stable Custody Group II LLC. From February 2007 to August 2007, Mr. Brancazio was a Compliance Officer at Bank of New York Asset Management. From March 2002 to February 2007. Mr. Brancazio served as Vice President, Chief Compliance Officer, and AML Officer of Trainer Wortham & Co. Inc., and the Trainer Wortham Mutual Funds.

Esther Cheung,

1980

   Treasurer
and
Assistant Secretary		   Since 2010   Head of Fund Accounting for RTAM, LLC. Ms. Cheung is Treasurer and Assistant Secretary for one other fund and Vice President/Assistant Treasurer of tow other funds in the Reich & Tang Complex. Ms. Cheung has been associated with RTAM, LLC since June 2010. From February 2004 to May 2010, Ms. Cheung was an audit manager at KPMG, LLP.

Richard De Sanctis,

1956

  

Vice
President

Treasurer
and
Assistant Secretary

  

Since 2005

1992 to 2004

   Executive Vice President and Chief Operating Officer of RTAM, LLC. Associated with the Manager since 1990. Mr. De Sanctis is also Vice President of three other funds in the Reich & Tang Fund Complex. Mr. De Sanctis also serves as Member, Executive Vice President, and Chief Operating Officer of Reich & Tang Deposit Solutions, LLC, Stable Custody Group LLC and Stable Custody Group II LLC, and Director, Executive Vice President and Chief Operating Officer of Reich & Tang Distributors, Inc. and Reich & Tang Services, Inc.

Chris Gill,

1964

   Vice
President		   Since 2008   Senior Vice President and Assistant Secretary of RTAM LLC. Mr. Gill has been associated with RTAM LLC and its predecessor since February 1994. Mr. Gill is also Vice President of three other funds in the Reich & Tang Complex. Mr. Gill also serves as Senior Vice President and Director of Reich & Tang Deposit Solutions, LLC, Reich & Tang Distributors, Inc. and Reich & Tang, Services Inc., and Senior Vice President of Stable Custody Group LLC and Stable Custody Group II LLC.

 

19

Tax Exempt Proceeds Fund, Inc.

Directors and Officers Information (Unaudited) (Continued)

 

Name, Address1,

and Year of Birth

   Position(s)
Held with
Fund		   Term of
Office and
Length of
Time Served2		   Principal Occupation(s)
During Past 5 Years

Interested Officers: (continued)

        

Joseph Jerkovich,

1968

  

Vice

President

Treasurer

and

Assistant

Secretary

Vice

President

  

Since 2010

2008 to 2010

2007 to 2008

   Senior Vice President and Chief Financial Officer of RTAM, LLC, Reich & Tang Deposit Solutions, LLC and Reich & Tang Services, Inc. Associated with RTAM, LLC since September 2004. Mr. Jerkovich is Treasurer and Assistant Secretary of three other funds in the Reich & Tang Fund Complex. Mr. Jerkovich is a Member, Senior Vice President and Chief Financial Officer of Reich & Tang Deposit Solutions, LLC, Senior Vice President and Chief Financial Officer of Reich & Tang Distributors, Inc., Director, Senior Vice President and Chief Financial Officer of Reich & Tang Services, Inc., and Member, Senior Vice President, Chief Financial Officer and Treasurer of Stable Custody Group LLC and Stable Custody Group II LLC.

Christine Manna,

1970

   Secretary   Since 2007   Vice President and Secretary of RTAM, LLC. Ms. Manna is also Secretary of three other funds in the Reich & Tang Complex. Ms. Manna has been associated with RTAM, LLC and its predecessors since June 1995. Ms. Manna is also a Vice President and Assistant Secretary of Reich & Tang Deposit Solutions, LLC, Reich & Tang Distributors, Inc. Reich & Tang Services, Inc., Stable Custody Group LLC and Stable Custody Group II, LLC.

Robert Rickard,

1969

   Vice President   Since 2007   Senior Vice President of RTAM LLC and Reich & Tang Distributors, Inc. Associated with RTAM, LLC since December 1991. Mr. Rickard is also Vice President of three other funds in the Reich & Tang Fund Complex.

 

† 

The Statement of Additional Information includes additional information about Tax Exempt Proceeds Fund, Inc. (the “Fund”) directors and is available, without charge, upon request by calling the Fund’s transfer agent at (212) 830-5200.

1 

The address for each of the above directors/officers of the Fund is Reich & Tang Asset Management, LLC, 1411 Broadway, New York, NY 10018.

2 

Each Director will hold office for an indefinite term until the earliest of (i) the next meeting of shareholders, if any, called for the purpose of considering the election or re-election of such Director and until the election and qualification of his or her successor, if any, elected at such meeting, or (ii) the date a Director resigns or retires, or a Director is removed by the Board of Directors or shareholders, in accordance with the Fund’s Articles of Incorporation, as amended, and Amended and Restated By-Laws. Each officer will hold office for an indefinite term until the date he or she resigns or retires or until his/her successor is elected and qualifies.

3 

Sarah Sanders is deemed interested person of the Fund due to other affiliation with the State of Connecticut.

 

20

Protecting Your Privacy at Reich & Tang

This policy applies to Reich & Tang Asset Management, LLC (“RTAM”), its subsidiaries Reich & Tang Distributors, Inc. (“RTD”) and Reich & Tang Services, Inc. (“RTS”), RTS affiliate Reich & Tang Deposit Solutions, LLC (“RTDS”) and RTDS subsidiaries Stable Custody Group LLC, and Stable Custody Group II, LLC (collectively “Reich & Tang”), along with all mutual funds or other funds managed or advised by Reich & Tang Asset Management, LLC.

 

:  

Who is covered by our Privacy Policy

This Privacy Policy applies to all current and former Reich & Tang customers. New customers receive our Privacy Policy when an account is opened and annually thereafter. You will be notified of any major change to the Privacy Policy.

 

:  

Protecting customer information

Keeping your personal information secure is important to us at Reich & Tang. This Privacy Policy explains how we protect your privacy, when we collect and use information about you in order to administer your account, and the measures we take to safeguard that information. All personal information provided by our customers is used exclusively to administer our business and related services in a manner consistent with all applicable laws and regulations. It is kept confidential and not sold to third parties for use in marketing or solicitation. We maintain your personal information according to strict confidentiality and security standards.

 

:  

Types of information we collect from our customers

 

•  

Information from applications, incoming phone calls, online registrations or other forms (such as your name, address, e-mail address, social security number, tax identification number and income).

 

•  

Information about your account, account transactions (e.g., account number, history, use of online products and services) and other transactions with Reich & Tang.

 

•  

Information obtained in connection with our efforts to protect against fraudulent or unauthorized use of your account(s).

 

•  

If you visit our website, we use software to collect anonymous data to better understand website usage and to improve our website. The information is stored in log files and is used for aggregated and statistical reporting. This log information is not linked to personally identifiable information gathered elsewhere on the site. Please refer to the Disclosure section found on our website at www.reichandtang.com for more information.

 

:  

Use of information

When we collect personal information from you, we will reference this policy or otherwise explain to you how we intend to use the information. We limit the collection and use of personal information to what is necessary to administer our business. We may disclose personal information as required by law, and where we believe in good faith that disclosure is required under law, to cooperate with regulators or law enforcement authorities, to process and service your account(s), to protect against fraud, to protect the security of our records, to protect our rights or property, or upon your written request.

In order to service your account and effect your transactions, we provide your nonpublic personal information to our affiliates and to third-party service providers to effect or process transactions for you or to assist us in servicing your account. We may also disclose nonpublic personal information about you to other service providers who agree to protect the confidentiality of your information and to use the information only for the purpose for which the disclosure is made. They are required to keep this information confidential and not use it for any other purpose than to carry out the services they are performing for Reich & Tang, such as printing statements, checks, etc.

We do not otherwise provide nonpublic personal information about you to outside firms, organizations or individuals except as permitted by law. We restrict access to nonpublic personal information about you to those employees who need to know that information to provide products or services to you. We maintain physical, electronic and procedural safeguards that comply with federal standards to guard your personal information.

 

:  

Questions

If you have any questions, please call our Client Services Department at 800-433-1918 between the hours of 8:30a.m. and 5:00p.m. Eastern Time, send a letter to Reich & Tang, Attn: Client Services, 1411 Broadway, 28th Floor, New York, NY 10018-3450, or Email: info@rnt.com.

 

THIS IS NOT PART OF THE SHAREHOLDER REPORT

[This Page Intentionally Left Blank.]

 

 

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.

1411 Broadway, 28th Floor

New York, New York 10018

Manager

Reich & Tang Asset Management, LLC

1411 Broadway, 28th Floor

New York, New York 10018

Custodian

The Bank of New York Mellon

2 Hanson Place, 7th Floor

Brooklyn, New York 11217

Transfer Agent & Dividend Disbursing Agent

Reich & Tang Services, Inc.

1411 Broadway, 28th Floor

New York, New York 10018

Distributor

Reich & Tang Distributors, Inc.

1411 Broadway, 28th Floor

New York, New York 10018

TEP6/11A

 

Tax Exempt

Proceeds Fund, Inc.

The Notice of the Reich & Tang Privacy policy is included with this Shareholder Report but is not part of the Shareholder Report

Annual Report

June 30, 2011

 

 

Item 2: Code of Ethics

The registrant has adopted a Code of Ethics applicable to its Principal Executive and Senior Financial Officers. Please note that this Code was last updated on March 3, 2011 to reflect a change in the Principal Financial Officer of the Fund. To date there have been no waivers granted from a provision of the Code of Ethics for a key officer.

 

Item 3: Audit Committee Financial Expert

The registrant’s Board of Directors has determined that there is an audit committee financial expert serving on its audit committee, Glenn S. Klocko, who is “independent,” as defined in the instructions to this Item.

 

Item 4: Principal Accountant Fees and Services
      FYE 6/30/2010      FYE 6/30/2009  

4(a) Audit Fees

    $ 20,500       $ 20,500   

4(b) Audit Related Fees

    $ 0       $ 0   

4(c) Tax Fees

    $ 1,800       $ 1,800   

4(d) All Other Fees

    $ 0       $ 0   

4(e)(1) The registrant’s audit committee is required to pre-approve (i) all audit and non-audit services performed by the independent registered public accounting firm (“accountants”) for the registrant and (ii) any non-audit services performed by the accountants for the registrant’s investment adviser and control persons of the adviser that provide ongoing services to the registrant (“Service Affiliates”) if the services relate directly to the operations and financial reporting of the registrant. The audit committee has not presently established any pre-approval policies and procedures that permit the pre-approval of the above services other than by the full audit committee. Certain de minimis exceptions are allowed for non-audit services in accordance with Rule 2-01(c)(7)(i)(C) of Regulation S-X as set forth in the registrant’s audit committee charter.

4(e)(2) None

4(f) Not applicable.

4(g) $1,800 and $15,500, respectively, were the amount of non-audit fees that were billed by the registrant’s accountant for services rendered to (i) the registrant, and (ii) the registrant’s investment adviser and any control person of the adviser that provides ongoing services to the registrant for the fiscal year ended June 30, 2011. $1,800 and $79,000, respectively, were the amount of non-audit fees that were billed by the registrant’s accountant for services rendered to (i) the registrant, and (ii) the registrant’s investment adviser and any control person of the adviser that provides ongoing services to the registrant for the fiscal year ended June 30, 2010.

4(h) The registrant’s audit committee has considered whether its principal accountant’s provision of non-audit services that were rendered to the registrant’s investment adviser, and any control persons of the investment adviser that provides ongoing services to the registrant, that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X, is compatible with maintaining the principal accountant’s independence.

Item 5: Audit Committee of Listed Registrants

Not applicable.

 

Item 6: Schedule of Investments

Schedule of Investments in securities of unaffiliated issuers is included under Item 1.

 

Item 7: Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies

Not applicable.

 

Item 8: Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers

Not applicable.

 

Item 9: Submission of Matters to a Vote of Security Holders

There were no material changes to the procedures by which shareholders may recommend nominees to the registrant’s board of directors that were implemented after the registrant last provided disclosure in response to the requirements of Item 7(d)(2)(ii)(G) of Schedule 14A, or this Item 9.

 

Item 10: Controls and Procedures

 

(a) The registrant’s Principal Executive Officer and Principal Financial Officer have evaluated the design and operation of the registrant’s disclosure controls and procedures within 90 days of this filing and have concluded that the registrant’s disclosure controls and procedures were effective in ensuring that information required to be disclosed by the registrant in this Form N-CSR was recorded, processed, summarized and reported on a timely basis.

 

(b) There were no changes in the registrant’s internal controls over financial reporting that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to affect, the registrant’s internal controls over financial reporting.

 

Item 11: Exhibits

 

(a)(1) Code of Ethics. (a)(2) Certifications of Principal Executive Officer and Principal Financial Officer, under Rule 30a-2 of the Investment Company Act of 1940.

 

(a)(3) Not applicable.

 

(b) Certifications of Principal Executive Officer and Principal Financial Officer, under Section 906 of the Sarbanes-Oxley Act of 2002 and 18 U.S.C. §1350.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

(Registrant) Tax Exempt Proceeds Fund, Inc.

 

By (Signature and Title)*       /s/ Christine Manna
    Christine Manna, Secretary

Date: August 12, 2011

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

By (Signature and Title)*       /s/ Michael P. Lydon
    Michael P. Lydon, President

Date: August 12, 2011

 

By (Signature and Title)*       /s/ Esther Cheung
    Esther Cheung, Treasurer and Assistant Secretary

Date: August 12, 2011

 

* Print the name and title of each signing officer under his or her signature.