EXHIBIT 2
DECLASSIFICATION PROPOSAL LETTER
March 17, 2023
Via Electronic Mail and Courier
Ms. Diane Bono, Secretary
c/o Tortoise Midstream Energy Fund, Inc.
6363 College Boulevard, Suite 100A
Overland Park, KS 66211
Re: Tortoise Midstream Energy Fund, Inc. (the "Fund")
Dear Ms. Bono,
Saba Capital Management, L.P. (the "Proponent" or "Saba") is the investment adviser to Saba Capital Master Fund, Ltd., the owner of 168,072 shares of common stock, par value $0.001 per share of the Fund (the "Common Shares"), which has held continuously for more than one year shares representing a market value of $25,000 or more prior to and including the date hereof.
In accordance with Rule 14a-8 promulgated under the Securities and Exchange Act of 1934, as amended (the "Exchange Act"), the Proponent submits the following proposal for presentation to the Fund's stockholders at the Fund's 2024 annual meeting of stockholders, including any postponement or adjournment or special meeting held in lieu thereof (the "Meeting").
The Proponent's proposal pursuant to Rule 14a-8 of the Exchange Act (the "Proposal") is as follows:
PROPOSAL
RESOLVED, that the shareholders of Tortoise Midstream Energy Fund, Inc. (the "Fund") request that the Board of Directors of the Fund (the "Board") take all necessary steps in its power to declassify the Board so that all directors are elected on an annual basis starting at the next annual meeting of shareholders. Such declassification shall be completed in a manner that does not affect the unexpired terms of the previously elected directors.
SUPPORTING STATEMENT
Saba believes that the annual election of all directors encourages board accountability to a company's shareholders which, in turn, boosts a board's performance thereby creating greater value for the shareholders it serves. This view is shared by many, if not the overwhelming majority of, proxy advisory firms, institutional investors and large shareholders. Companies that are attentive to their shareholder base and care about good governance have taken note, with ~90% of the S&P 500 and ~73% of the S&P 1,500 electing all of their board members annually.1
Saba is committed to improving the corporate governance of the Fund for the benefit of all shareholders. Currently, the Board is divided into three classes serving staggered three-year terms. A classified board protects the incumbents and leads to entrenchment, which in turn limits accountability to shareholders and makes the board less responsive to shareholder concerns. Empirical studies have found a statistically significant correlation between the presence of a classified board structure and a decline in firm value, with the effect even more pronounced where board classification is enshrined in a company's charter, as is the case with the Fund.2
Saba's proposal to declassify the Board is geared toward encouraging the Board to take positive steps towards the implementation of good governance and productive shareholder engagement, the totality of which, Saba believes, will allow the Fund to achieve its optimal valuation and unlock value for the Fund's shareholders.
For a greater voice in the Fund's corporate governance and to increase the accountability of the Board to shareholders, Saba urges you to vote FOR this proposal.
END OF PROPOSAL
Saba hereby represents that Saba has continuously and beneficially owned Common Shares with a market value of not less than $25,000 for at least one year prior to the date of the submission of Proposal, and intends to continue to hold the requisite number of Common Shares through the date of the Meeting. Pursuant to Rule 14a-8(b)(2)(ii)(B) of the Exchange Act, copies of the Schedule 13G/A filed with the Securities and Exchange Commission on each of February 14, 2022 and December 6, 2022 confirming the above ownership are attached as Exhibit A hereto.
In accordance with Rule 14a-8(b)(1)(iii) of the Exchange Act, the Proponent represents that its representatives are able to meet with the Fund via teleconference no less than 10 calendar days, nor more than 30 calendar days, after submission of the Proposal. The Proponent will assume that the regular business hours of the Fund's principal executive offices, which are located in Kansas, are between 9:00 a.m. and 5:30 p.m. CDT, unless otherwise notified by the Fund. To that end, certain representatives of the Proponent are available to discuss the Proposal during the following business days and at the following times by teleconference:
_________________________________________
1 Additionally, ~60% of the companies in the Russell 3,000 elect all their board members annually. See Matteo Tonello et al., Corporate Board Practices in the Russell 3000, S&P 500 and S&P Mid-Cap 400 (Nov. 2022) and Ernst & Young, EY Center for Board Matters: Corporate Governance by the Numbers (Mar. 2022).
2 See generally Lucian A. Bebchuk and Alma Cohen, The Costs Of Entrenched Boards (2005), Journal of Financial Economics, v78, 409-433 and Lucian Bebchuk, Alma Cohen and Charles C.Y. Wang, Staggered Boards and the Wealth of Shareholders: Evidence from a Natural Experiment (2010), available at http://ssrn.com/abstract=1706806.
- April 11, 2023, between 10:00 a.m. and 2:00 p.m. EST
- April 12, 2023, between 10:00 a.m. and 2:00 p.m. EST
- April 13, 2023, between 2:00 p.m. and 4:00 p.m. EST
The Proponent's contact information is as follows:
c/o Saba Capital Management, L.P.
405 Lexington Avenue, 58th Floor
New York, New York 10174
Attn: Michael D'Angelo
Email: Michael.Dangelo@sabacapital.com
In addition, Saba would appreciate that copies of all written notices and other written or electronic communications (which shall not constitute notice) be sent to:
Schulte Roth & Zabel LLP
919 Third Avenue, Suite 2300
New York, New York 10022
Attn: Eleazer Klein
Email: Eleazer.Klein@srz.com
Please notify us as soon as possible if you would like any further information or if you believe this notice is deficient in any way or if additional information is required so that the Proponent may promptly provide it to you in order to cure any deficiency.
Thank you for your time and consideration.
| | Sincerely, |
| | | |
| | | |
| | By: | Saba Capital Management, L.P. |
| | | |
| | | /s/ Michael D'Angelo |
| | | Name: Michael D'Angelo
Title: Chief Operating Officer and General Counsel |
cc: The Board of Directors of the Fund
