Edgar Filing: TORTOISE PIPELINE & ENERGY FUND, INC.

Tortoise
Pipeline & Energy Fund, Inc.

2014 1st Quarter Report • February 28, 2014

In today’s environment some investments
are more relevant than ever.

2014 1st Quarter Report

Company at a glance

Tortoise believes Tortoise Pipeline & Energy Fund, Inc. (NYSE: TTP) is the first closed-end fund that focuses particularly on the broader $400 billion+ North American pipeline universe.

Investment strategy

TTP seeks to provide stockholders with a high level of total return, with an emphasis on current distributions. Our fund focuses particularly on North American pipeline companies that transport natural gas, natural gas liquids, crude oil and refined products, and to a lesser extent, on other energy infrastructure companies.

Because of our traditional flow-through nature as a regulated investment company (RIC), we have the differentiated ability and flexibility to efficiently target and access traditional pipeline corporations alongside master limited partnerships (MLPs). Over 75 percent of our portfolio will generally be in companies structured as corporations or limited liability companies domiciled in the United States, Canada or United Kingdom with the remaining up to 25 percent in MLPs. We believe the broader North American pipeline universe offers strong business fundamentals and expanded growth opportunities.

We also write (sell) covered call options to seek to enhance long-term return potential across economic environments, increase current income and mitigate portfolio risk through option income. Our covered call strategy focuses on other energy infrastructure companies that we believe are integral links in the value chain for pipeline companies.

TTP seeks to provide:

Attractive total return potential with high current income in a defensive sector

Access to real, long-lived pipeline assets essential to the functioning of the US economy

Exposure to expanded energy infrastructure growth projects that connect new areas of supply with demand

Ability to efficiently invest across North American pipeline universe through traditional flow-through fund structure

Investor simplicity through one 1099, no K-1s, no unrelated business taxable income, IRA suitability

Expertise of Tortoise Capital Advisors, a leading and pioneering energy infrastructure investment firm

Portfolio statistics by ownership structure	Portfolio statistics by asset type

Tortoise Pipeline & Energy Fund, Inc.

www.tortoiseadvisors.com

2	2014 1st Quarter Report

March 24, 2014

Dear fellow stockholders,

The first fiscal quarter ending Feb. 28, 2014 was a solid one for North American pipeline companies, which continued to benefit from the infrastructure build-out underway to support robust North American oil and natural gas production. The quarter did provide a few headwinds, however, in the form of mixed earnings across the sector and some market volatility.

From a broader perspective, the equity market was uneven, with stocks recording strong gains in December following the Federal Reserve’s decision to begin tapering its asset purchases, but then falling sharply in January on concern of a slowdown in emerging markets. However, February saw equities back in positive territory as those concerns abated and U.S. companies delivered generally upbeat earnings reports.

Pipeline sector review and outlook

The Tortoise North American Pipeline Index^SM, with particular strength from the C-corporation component, posted a healthy 6.8 percent total return for the first fiscal quarter. Impressive production is driving the need for more and enhanced infrastructure, which continues to support pipeline companies. The Energy Information Administration (EIA) projects annual average domestic crude oil production will approach 8.4 million barrels per day (bbl/d) in 2014 and as much as 9.2 million bbl/d in 2015. Domestic natural gas production averaged 66.5 billion cubic feet per day in 2013,¹ although the sources of supply have shifted as lower natural gas prices have stalled drilling in some areas. To support this shifting production, there are many new projects on the horizon, including additional capital being allocated to the development of midstream infrastructure. These projects include new crude oil pipelines and rail and storage terminals, as well as natural gas and natural gas liquid infrastructure, including in the Marcellus where build-out needs are particularly critical as transportation capacity is having a hard time keeping up with production.

Although the pace of funding slowed in the first fiscal quarter of 2014 relative to the same quarter of 2013, capital markets continued to support sector strength, with MLP and pipeline companies raising approximately $6.1 billion in equity and $7.0 billion in debt offerings, including two MLP IPOs. MLP and pipeline company mergers and acquisitions totaling approximately $3.3 billion were announced during the quarter. The largest of these was a dropdown of multiple assets valued at $700 million by Phillips 66 to its MLP, Phillips 66 Partners.

Fund performance review

The fund’s total assets increased from approximately $392.8 million on Nov. 30, 2013, to $417.1 million on Feb. 28, 2014, primarily from net realized and unrealized gains on investments offset by a $2.8 million reduction in leverage. As fund assets increased, leverage (including bank debt, senior notes and preferred stock) decreased from 22.2 percent to 20.2 percent of total assets during the fiscal quarter.

At fiscal quarter end, the fund paid a distribution of $0.4075 per common share ($1.63 annualized) to stockholders. This distribution represented an annualized distribution rate of 5.6 percent based on the fund’s fiscal quarter closing price of $29.04.

For the fiscal quarter, the fund’s market-based total return was 4.8 percent and its NAV-based total return was 9.1 percent (both including the reinvestment of distributions). The difference between the market value total return and the NAV total return reflected a widening in the discount of the fund’s stock price relative to its NAV during the quarter. This was the case for many closed-end funds in recent months, as they came under pressure as the market continued to factor in concern over rising interest rates, with the average discount nearly doubling from last May through February.

Key performance drivers

Robust crude oil and natural gas production out of North American shale continued to be a catalyst for pipeline infrastructure expansion projects, which in turn supported the fund’s asset performance during the fiscal quarter.
Astute selection in natural gas pipeline companies, whose assets are located near the most productive wells that connect to areas of the greatest demand, contributed significantly. Gathering and processing pipeline company holdings that demonstrated solid fee-based growth profiles relating to the increasing demand for and production of natural gas liquids also contributed.

(unaudited)
Tortoise Pipeline & Energy Fund, Inc.	www.tortoiseadvisors.com

2014 1st Quarter Report

The fund’s stake in refined products pipelines was also helpful, as this group additionally benefited from recent dropdowns and anticipation of more dropdowns in the months ahead.
The fund’s covered call strategy, which focuses on independent/integrated energy companies that are key pipeline transporters, continued to provide current income. The notional amount of the fund’s covered calls averaged approximately 14 percent of total assets and their out-of-the money percentage averaged approximately 6.5 percent during the quarter. These companies also provided an additional boost to the fund’s overall absolute performance.

Additional information about the fund’s financial performance, distributions, and leverage is available in the Key Financial Data and Management’s Discussion sections of this report.

Concluding thoughts

We continue to believe that now is a great time to invest in North American energy. Production is growing at a healthy pace and driving the critical need for pipeline infrastructure expansion. In our view, the transformation underway in North America bodes well for the fund’s long-term investment strategy, U.S. security, our economy and our energy future.

Sincerely,
The Managing Directors
Tortoise Capital Advisors, L.L.C.
The adviser to Tortoise Pipeline & Energy Fund, Inc.

¹ Energy Information Administration
The Tortoise North American Pipeline Index^SM is a float-adjusted, capitalization-weighted index of energy pipeline companies domiciled in the United States and Canada. The S&P 500 Index^® is an unmanaged market-value-weighted index of stocks, which is widely regarded as the standard for measuring large-cap U.S. stock market performance.

(unaudited)
Tortoise Pipeline & Energy Fund, Inc.	www.tortoiseadvisors.com

4	2014 1st Quarter Report

Key Financial Data (supplemental unaudited information)
(dollar amounts in thousands unless otherwise indicated)

The information presented below regarding Distributable Cash Flow and Selected Financial Information is supplemental non-GAAP financial information, which we believe is meaningful to understanding our operating performance. The Distributable Cash Flow Ratios include the functional equivalent of EBITDA for non-investment companies, and we believe they are an important supplemental measure of performance and promote comparisons from period-to-period. This information is supplemental, is not inclusive of required financial disclosures (e.g. Total Expense Ratio), and should be read in conjunction with our full financial statements.

	2013												2014
	Q1⁽¹⁾			Q2⁽¹⁾			Q3⁽¹⁾			Q4⁽¹⁾			Q1⁽¹⁾
Total Income from Investments
Dividends and distributions received from investments	$	3,031		$	3,144		$	3,153		$	3,125		$	3,246
Less foreign withholding taxes		(49	)		(45	)		(42	)		(39	)		(38	)
Dividends paid in stock		570			616			631			649			663
Net premiums on options written		1,728			1,643			1,659			1,679			1,837
Total from investments		5,280			5,358			5,401			5,414			5,708
Operating Expenses Before Leverage Costs
Advisory fees, net of fees waived		759			854			862			872			925
Other operating expenses		146			137			132			134			152
		905			991			994			1,006			1,077
Distributable cash flow before leverage costs		4,375			4,367			4,407			4,408			4,631
Leverage costs⁽²⁾		625			629			628			630			637
Distributable Cash Flow⁽³⁾	$	3,750		$	3,738		$	3,779		$	3,778		$	3,994
Net realized gain on investments and
foreign currency translation, for the period	$	1,296		$	2,301		$	2,921		$	9,613		$	5,179
As a percent of average total assets⁽⁴⁾
Total from investments		6.13	%		5.65	%		5.64	%		5.56	%		5.69	%
Operating expenses before leverage costs		1.05	%		1.05	%		1.04	%		1.03	%		1.07	%
Distributable cash flow before leverage costs		5.08	%		4.60	%		4.60	%		4.53	%		4.62	%
As a percent of average net assets⁽⁴⁾
Total from investments		8.05	%		7.24	%		7.23	%		7.16	%		7.34	%
Operating expenses before leverage costs		1.38	%		1.34	%		1.33	%		1.33	%		1.39	%
Leverage costs and current taxes		0.95	%		0.85	%		0.84	%		0.83	%		0.82	%
Distributable cash flow		5.72	%		5.05	%		5.06	%		5.00	%		5.13	%
Selected Financial Information
Distributions paid on common stock	$	4,077		$	4,077		$	4,081		$	4,082		$	4,082
Distributions paid on common stock per share		0.4075			0.4075		0.4075				0.4075			0.4075
Total assets, end of period	361,540			372,498			380,701			392,764			417,127
Average total assets during period⁽⁵⁾	349,310			376,027			379,776			390,256			406,555
Leverage⁽⁶⁾		79,700			80,500		81,700				87,200			84,400
Leverage as a percent of total assets		22.0	%		21.6	%		21.5	%		22.2	%		20.2	%
Net unrealized appreciation, end of period		43,584			55,953			63,230			69,119			90,160
Net assets, end of period	276,211			286,167			292,958			303,797			326,739
Average net assets during period⁽⁷⁾	266,070			293,444			296,319			303,301			315,189
Net asset value per common share		27.61			28.60			29.25			30.33			32.62
Market value per common share		27.15			29.05			27.65			28.11			29.04
Shares outstanding (000’s)		10,004			10,004			10,016			10,016			10,016

(1)	Q1 is the period from December through February. Q2 is the period from March through May. Q3 is the period from June through August. Q4 is the period from September through November.
(2)	Leverage costs include interest expense, distributions to preferred stockholders and other recurring leverage expenses.
(3)	“Net investment income” on the Statement of Operations is adjusted as follows to reconcile to Distributable Cash Flow (DCF): increased by net premiums on options written, the return of capital on distributions, the value of paid-in-kind distributions, and amortization of debt issuance costs.
(4)	Annualized for periods less than one full year.
(5)	Computed by averaging month-end values within each period.
(6)	Leverage consists of long-term debt obligations, preferred stock and short-term borrowings.
(7)	Computed by averaging daily net assets within each period.

Tortoise Pipeline & Energy Fund, Inc.

www.tortoiseadvisors.com

2014 1st Quarter Report

Management’s Discussion (unaudited)

The information contained in this section should be read in conjunction with our Financial Statements and the Notes thereto. In addition, this report contains certain forward-looking statements. These statements include the plans and objectives of management for future operations and financial objectives and can be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “anticipate,” “estimate,” or “continue” or the negative thereof or other variations thereon or comparable terminology. These forward-looking statements are subject to the inherent uncertainties in predicting future results and conditions. Certain factors that could cause actual results and conditions to differ materially from those projected in these forward-looking statements are set forth in the “Risk Factors” section of our public filings with the SEC.

Overview

Tortoise Pipeline & Energy Fund, Inc.’s (“TTP”) primary investment objective is to provide a high level of total return, with an emphasis on current distributions. We seek to provide stockholders an efficient vehicle to invest in a portfolio consisting primarily of equity securities of pipeline and other energy infrastructure companies. We focus primarily on pipeline companies that engage in the business of transporting natural gas, natural gas liquids (“NGLs”), crude oil and refined petroleum products, and, to a lesser extent, on other energy infrastructure companies. Energy infrastructure companies own and operate a network of asset systems that transport, store, distribute, gather, process, explore, develop, manage or produce crude oil, refined petroleum products (including biodiesel and ethanol), natural gas or NGLs or that provide electrical power generation (including renewable energy), transmission and/or distribution. We also seek to provide current income from gains earned through a covered call option strategy, which consists of writing (selling) call options on selected equity securities in our portfolio.

TTP is a registered non-diversified, closed-end management investment company under the Investment Company Act of 1940, as amended (the “1940 Act”), and expects to qualify as a regulated investment company (“RIC”) under the U.S. Internal Revenue Code of 1986, as amended (the “Code”). Tortoise Capital Advisors, L.L.C. (the “Adviser”) serves as investment adviser.

Company update

Market values of our investments increased during the quarter, contributing to an increase in total assets of approximately $24.4 million since November 30, 2013. Distribution increases from our investments were in line with our expectations while an increase in average total assets during the quarter resulted in increased asset-based expenses. We maintained our quarterly distribution of $0.4075 per share. Additional information on these events and results of our operations are discussed below.

Critical accounting policies

The financial statements are based on the selection and application of critical accounting policies, which require management to make significant estimates and assumptions. Critical accounting policies are those that are both important to the presentation of our financial condition and results of operations and require management’s most difficult, complex, or subjective judgments. Our critical accounting policies are those applicable to the valuation of investments and certain revenue recognition matters as discussed in Note 2 in the Notes to Financial Statements.

Determining distributions to stockholders

We pay quarterly distributions based primarily upon our current and estimated future distributable cash flow (“DCF”). In addition, and to the extent that the sum of our net investment company taxable income and net realized gains from investments exceed our quarterly distributions, we intend to make an additional distribution to common stockholders in the last quarter of the calendar year in order to avoid being subject to U.S. federal income taxes. Our Board of Directors reviews the distribution rate quarterly and may adjust the quarterly distribution throughout the year.

Determining DCF

DCF is income from investments less expenses. Income from investments includes the amount we receive as cash or paid-in-kind distributions from common stock, master limited partnerships (“MLPs”), affiliates of MLPs, and pipeline and other energy companies in which we invest, and dividend payments on short-term investments we own. Income also includes the premiums received from sales of covered call options, net of amounts paid to buy back out of the money options. The total expenses include current or anticipated operating expenses and leverage costs. Each are summarized for you in the Key Financial Data table and are discussed in more detail below.

The Key Financial Data table discloses the calculation of DCF and should be read in conjunction with this discussion. The difference between income from investments in the DCF calculation and total investment income as reported in the Statement of Operations, is reconciled as follows:

Tortoise Pipeline & Energy Fund, Inc.

www.tortoiseadvisors.com

6	2014 1st Quarter Report

Management’s Discussion (unaudited)
(continued)

(1) the Statement of Operations, in conformity with U.S. generally accepted accounting principles (“GAAP”), recognizes distributions and dividend income from MLPs and common stock on their ex-dates, whereas the DCF calculation may reflect distributions and dividend income on their pay dates; (2) GAAP recognizes that a significant portion of the cash distributions received from MLPs are characterized as a return of capital and therefore excluded from investment income, whereas the DCF calculation includes the return of capital; (3) income from investments in the DCF calculation includes the value of dividends paid-in-kind (additional stock or units), whereas such amounts are not included as income for GAAP purposes; and (4) net premiums on options written (premiums received less amounts paid to buy back out of the money options) with expiration dates during our fiscal quarter are included in the DCF calculation, whereas GAAP recognizes the net effect of options written as realized and unrealized gains (losses). A reconciliation of Net Investment Income to DCF is included below.

Income from investments

We seek to achieve our investment objectives by investing in a portfolio consisting primarily of equity securities of pipeline and other energy infrastructure companies. We evaluate each holding based upon its contribution to our investment income and its risk relative to other potential investments.

We focus primarily on pipeline companies that engage in the business of transporting natural gas, NGLs, crude oil and refined products through pipelines, and, to a lesser extent, on other energy infrastructure companies. These pipeline companies own and operate long haul, gathering and local gas distribution pipelines.

We also seek to provide current income from gains earned through a covered call option strategy, which consists of writing (selling) call options on selected equity securities in our portfolio. We focus our covered call strategy on other energy infrastructure companies that we believe are integral links in the energy infrastructure value chain for pipeline companies. We typically aim to write call options that are approximately 5 to 15 percent out-of-the-money on approximately 20 percent of our portfolio, although we may adjust these targets depending on market volatility and other market conditions.

Total distributions received from our investments and option strategy for the 1st quarter 2014 were approximately $5.7 million, an increase of 8.1 percent as compared to 1st quarter 2013 and an increase of 5.4 percent as compared to 4th quarter 2013. This reflects earnings on our investments of $3.9 million and net premiums on options written of approximately $1.8 million. On an annualized basis, the total received from investments equates to 5.69 percent of our average total assets for the quarter.

Expenses

We incur two types of expenses: (1) operating expenses, consisting primarily of the advisory fee; and (2) leverage costs. On a percentage basis, operating expenses before leverage costs were an annualized 1.07 percent of average total assets for the 1st quarter 2014, an increase of 0.02 percent as compared to 1st quarter 2013 and an increase of 0.04 percent as compared to 4th quarter 2013. Advisory fees for the 1st quarter 2014 increased 6.1 percent from 4th quarter 2013 as a result of increased average managed assets for the quarter and the impact of the change in the advisory fee waiver. While the contractual advisory fee is 1.10 percent of average monthly managed assets, the Adviser waived an amount equal to 0.20 percent of average monthly managed assets for calendar year 2013, and has agreed to waive an amount equal to 0.15 percent of average monthly managed assets for calendar year 2014. Other operating expenses increased approximately $18,000 as compared to 4th quarter 2013, mainly due to an increase in professional and directors’ fees during the quarter.

Leverage costs consist of two major components: (1) the direct interest expense on our senior notes and short-term credit facility, and (2) distributions to preferred stockholders. Other leverage expenses include rating agency fees and commitment fees. Total leverage costs for DCF purposes were approximately $0.6 million for the 1st quarter 2014, relatively unchanged as compared to 4th quarter 2014.

The weighted average annual rate of our leverage at February 28, 2014 was 2.89 percent including balances on our bank credit facility which accrue interest at a variable rate equal to one-month LIBOR plus 1.125 percent. Our weighted average rate may vary in future periods as a result of changes in LIBOR, the utilization of our credit facility, and as our leverage matures or is redeemed. Additional information on our leverage is included in the Liquidity and Capital Resources discussion below.

Distributable cash flow and capital gains

For 1st quarter 2014, our DCF was approximately $4.0 million, an increase of 5.7 percent as compared to 4th quarter 2013. This is the net result of the changes in income and expenses as described above. This equates to an annualized rate of 4.62 percent of average total assets for the quarter and 5.13 percent of average net assets for the quarter. In addition, we had net realized gains on

Tortoise Pipeline & Energy Fund, Inc.

www.tortoiseadvisors.com

2014 1st Quarter Report

Management’s Discussion (unaudited)
(continued)

investments of approximately $5.2 million during the quarter.

We paid a distribution of approximately $4.1 million, or $0.4075 per share, during the quarter, unchanged from the 4th quarter 2013.

Net Investment Income on the Statement of Operations is adjusted as follows to reconcile to DCF for 1st quarter 2014 (in thousands):

	1st Qtr 2014
Net Investment Income	$	323
Adjustments to reconcile to DCF:
Net premiums on options written		1,837
Distributions characterized as return of capital		1,143
Dividends paid in stock		663
Amortization of debt issuance costs		28
DCF	$	3,994

Liquidity and capital resources

We had total assets of $417.1 million at quarter-end. Our total assets reflect the value of our investments, which are itemized in the Schedule of Investments. It also reflects cash, interest and dividends receivable and any expenses that may have been prepaid. During the 1st quarter 2014, total assets increased approximately $24.4 million. This change was primarily the result of a $25.2 million increase in the value of our investments as reflected by the change in realized and unrealized gains on investments (excluding return of capital on distributions), an increase in purchases pending settlement of $3.8 million and a reduction in leverage outstanding.

Total leverage outstanding at February 28, 2014 was $84.4 million, a decrease of $2.8 million as compared to November 30, 2013. Outstanding leverage is comprised of $49 million in senior notes, $16 million in preferred shares and $19.4 million outstanding under the credit facility, with approximately 65 percent of leverage with fixed rates and a weighted average maturity of 3.3 years. Total leverage represented 20.2 percent of total assets at February 28, 2014, as compared to 22.2 percent as of November 30, 2013 and 22.0 percent as of February 28, 2013. This is below our long-term target level of 25 percent of total assets, allowing the opportunity to add leverage when compelling investment opportunities arise. Temporary increases to up to 30 percent of our total assets may be permitted, provided that such leverage is consistent with the limits set forth in the 1940 Act, and that such leverage is expected to be reduced over time in an orderly fashion to reach our long-term target. Our leverage ratio is impacted by increases or decreases in investment values, issuance of equity and/or the sale of securities where proceeds are used to reduce leverage.

Our longer-term leverage (excluding our bank credit facility) of $65 million is comprised of 75 percent private placement debt and 25 percent private placement preferred equity with a weighted average fixed rate of 3.34 percent and remaining weighted average laddered maturity of approximately 4.2 years.

We use leverage to acquire equity investments consistent with our investment philosophy. The terms of our leverage are governed by regulatory and contractual asset coverage requirements that arise from the use of leverage. Additional information on our leverage and asset coverage requirements is discussed in Notes 9, 10 and 11 in the Notes to Financial Statements. Our coverage ratios are updated each week on our Web site at www.tortoiseadvisors.com.

Taxation of our distributions

We expect that distributions paid on common shares will generally consist of: (i) investment company taxable income (“ICTI”) which includes ordinary income net of deductions plus any short-term capital gains in excess of net long-term capital losses (under current law, distributions of ICTI may be designated as qualified dividend income (“QDI”) to the extent of any QDI received from our investment in common stocks); (ii) long-term capital gain (net gain from the sale of a capital asset held longer than 12 months over net short-term capital losses) and (iii) return of capital. The QDI and long-term capital gain tax rates are variable based on the taxpayer’s taxable income.

We may designate a portion of our quarterly distributions as capital gains and we may also distribute additional capital gains in the last calendar quarter if necessary to meet minimum distribution requirements and to avoid being subject to excise taxes. If, however, we elect to retain any capital gains, we will be subject to U.S. capital gains taxes. The payment of those taxes will flow-through to stockholders as a tax credit to apply against their U.S. income tax payable on the deemed distribution of the retained capital gain.

For tax purposes, distributions paid to common stockholders for the calendar year ended December 31, 2013 were approximately 41 percent QDI, 25 percent ordinary dividend income, 32 percent long-term capital gain, and 2 percent return of capital. A holder of our common stock would reduce their cost basis for income tax purposes by the amount designated as return of capital. This information is reported to stockholders on Form 1099-DIV and is available on our Web site at www.tortoiseadvisors.com.

Tortoise Pipeline & Energy Fund, Inc.

www.tortoiseadvisors.com

8	2014 1st Quarter Report

Schedule of Investments (unaudited)
February 28, 2014

	Shares	Fair Value
Common Stock — 85.5%⁽¹⁾
Crude/Refined Products Pipelines — 6.9%⁽¹⁾
Canada — 5.7%⁽¹⁾
Enbridge Inc.	268,300	$	11,346,407
Pembina Pipeline Corporation	199,200		7,179,691
United States — 1.2%⁽¹⁾
Plains GP Holdings, L.P.	139,677		3,910,956
			22,437,054
Local Distribution Companies — 11.8%⁽¹⁾
United States — 11.8%⁽¹⁾
CenterPoint Energy, Inc.	758,400		17,936,160
NiSource Inc.	593,500		20,665,670
			38,601,830
Marine Transportation — 2.3%⁽¹⁾
Republic of the Marshall Islands — 2.3%⁽¹⁾
Teekay Offshore Partners L.P.	223,330		7,316,291
Natural Gas Gathering Pipelines — 4.9%⁽¹⁾
United States — 4.9%⁽¹⁾
Targa Resources Corp.	166,600		16,120,216
Natural Gas Pipelines — 39.6%⁽¹⁾
Canada — 2.9%⁽¹⁾
Keyera Corp.	17,550		1,058,579
TransCanada Corporation	187,700		8,264,431
United States — 36.7%⁽¹⁾
Kinder Morgan, Inc.	138,500		4,411,225
ONEOK, Inc.	625,754		37,007,092
Spectra Energy Corp.	1,074,900		40,072,272
Williams Companies, Inc.	932,500		38,512,250
			129,325,849
Oil and Gas Production — 18.3%⁽¹⁾
United States — 18.3%⁽¹⁾
Anadarko Petroleum Corporation⁽²⁾	46,900		3,947,104
Antero Resources Corporation⁽²⁾⁽³⁾	26,500		1,599,010
Apache Corporation⁽²⁾	53,000		4,202,370
Cabot Oil & Gas Corporation⁽²⁾	113,000		3,955,000
Chesapeake Energy Corporation⁽²⁾	67,200		1,741,152
Concho Resources Inc.⁽²⁾⁽³⁾	18,400		2,228,792
Continental Resources, Inc.⁽²⁾⁽³⁾	42,800		5,115,456
EOG Resources, Inc.⁽²⁾	29,200		5,531,064
Hess Corporation⁽²⁾	38,300		3,065,149
Marathon Oil Corporation⁽²⁾	132,700		4,445,450
Newfield Exploration Company⁽²⁾⁽³⁾	43,500		1,226,265
Noble Energy, Inc.⁽²⁾	72,300		4,971,348
Occidental Petroleum Corporation⁽²⁾	49,700		4,797,044
Pioneer Natural Resources Company⁽²⁾	30,900		6,216,462
Range Resources Corporation⁽²⁾	50,200		4,319,710
Rice Energy Inc.⁽²⁾⁽³⁾	38,520		924,480
Whiting Petroleum Corporation⁽²⁾⁽³⁾	23,700		1,628,427
			59,914,283
Power/Utility — 1.7%⁽¹⁾
United States — 1.7%⁽¹⁾
NRG Yield, Inc.	145,100		5,539,918
Total Common Stock
(Cost $216,129,733)			279,255,441
Master Limited Partnerships
and Related Companies — 41.7%⁽¹⁾

Crude/Refined Products Pipelines — 17.1%⁽¹⁾
United States — 17.1%⁽¹⁾
Buckeye Partners, L.P.	83,000		6,078,090
Enbridge Energy Management, L.L.C.⁽⁴⁾	568,347		15,203,295
Genesis Energy L.P.	18,700		1,028,500
Magellan Midstream Partners, L.P.	93,000		6,293,310
MPLX LP	102,268		4,991,701
Phillips 66 Partners LP	59,100		2,707,962
Plains All American Pipeline, L.P.	194,400		10,530,648
Rose Rock Midstream, L.P.	28,714		1,117,549
Sunoco Logistics Partners L.P.	74,400		6,155,856
Tesoro Logistics LP	16,700		1,005,340
Valero Energy Partners LP	23,059		852,952
			55,965,203

See accompanying Notes to Financial Statements.

Tortoise Pipeline & Energy Fund, Inc.

www.tortoiseadvisors.com

2014 1st Quarter Report

Schedule of Investments (unaudited) (continued)
February 28, 2014

	Shares	Fair Value
Natural Gas/Natural Gas Liquids Pipelines — 16.7%⁽¹⁾
United States — 16.7%⁽¹⁾
Crestwood Midstream Partners LP	165,333	$	3,701,806
Energy Transfer Partners, L.P.	177,700		9,867,681
Enterprise Products Partners L.P.	163,200		10,952,352
Kinder Morgan Management, LLC⁽⁴⁾	269,779		18,830,595
ONEOK Partners, L.P.	48,900		2,597,079
Regency Energy Partners LP	189,149		4,965,161
Williams Partners L.P.	75,200		3,730,672
			54,645,346
Natural Gas Gathering/Processing — 7.9%⁽¹⁾
United States — 7.9%⁽¹⁾
Access Midstream Partners, L.P.	107,900		6,090,955
Crosstex Energy, L.P.	36,800		1,136,752
DCP Midstream Partners, LP	97,900		4,777,520
MarkWest Energy Partners, L.P.	87,300		5,574,105
Targa Resources Partners LP	70,000		3,758,300
Western Gas Equity Partners, LP	46,500		1,998,570
Western Gas Partners LP	36,300		2,297,427
			25,633,629
Total Master Limited Partnerships
and Related Companies (Cost $109,043,803)			136,244,178

Short-Term Investment — 0.1%⁽¹⁾
United States Investment Company — 0.1%⁽¹⁾
Fidelity Institutional Money Market Portfolio —
Class I, 0.04%⁽⁵⁾ (Cost $364,196)	364,196		364,196

Total Investments — 127.3%⁽¹⁾
(Cost $325,537,732)			415,863,815
Long-Term Debt Obligations — (15.0%)⁽¹⁾			(49,000,000	)
Mandatory Redeemable Preferred Stock
at Liquidation Value — (4.9%)⁽¹⁾			(16,000,000	)
Total Value of Options Written
(Premiums received $659,073) — (0.3%)⁽¹⁾			(824,988	)
Other Assets and Liabilities — (7.1%)⁽¹⁾			(23,299,682	)

Total Net Assets Applicable to
Common Stockholders — 100.0%⁽¹⁾		$	326,739,145

(1)	Calculated as a percentage of net assets applicable to common stockholders.
(2)	All or a portion of the security represents cover for outstanding call option contracts written.
(3)	Non-income producing security.
(4)	Security distributions are paid-in-kind.
(5)	Rate indicated is the current yield as of February 28, 2014.

See accompanying Notes to Financial Statements.

Tortoise Pipeline & Energy Fund, Inc.

www.tortoiseadvisors.com

10	2014 1st Quarter Report

Schedule of Options Written (unaudited)
February 28, 2014

	Expiration	Strike			Fair
Call Options Written	Date	Price		Contracts	Value
Anadarko Petroleum Corporation	March 2014	$	87.50	469	$	(34,706	)
Antero Resources Corporation	March 2014		60.00	265		(51,675	)
Apache Corporation	March 2014		87.50	530		(4,770	)
Cabot Oil & Gas Corporation	March 2014		37.50	1,130		(28,250	)
Chesapeake Energy Corporation	March 2014		27.00	672		(20,832	)
Concho Resources Inc.	March 2014		125.00	184		(31,464	)
Continental Resources, Inc.	March 2014		125.00	428		(62,060	)
EOG Resources, Inc.	March 2014		190.00	292		(105,412	)
Hess Corporation	March 2014		85.00	383		(6,511	)
Marathon Oil Corporation	March 2014		35.00	1,327		(18,578	)
Newfield Exploration Company	March 2014		27.00	435		(68,295	)
Noble Energy, Inc.	March 2014		70.00	723		(56,394	)
Occidental Petroleum Corporation	March 2014		100.00	497		(14,910	)
Pioneer Natural Resources Company	March 2014		200.00	309		(212,901	)
Range Resources Corporation	March 2014		92.50	502		(22,088	)
Rice Energy Inc.	March 2014		25.00	385		(23,100	)
Whiting Petroleum Corporation	March 2014		67.50	237		(63,042	)
Total Value of Call Options Written
(Premiums received $659,073)					$	(824,988	)

See accompanying Notes to Financial Statements.

Tortoise Pipeline & Energy Fund, Inc.

www.tortoiseadvisors.com

2014 1st Quarter Report

Statement of Assets & Liabilities (unaudited)
February 28, 2014

Assets
Investments at fair value (cost $325,537,732)	$	415,863,815
Receivable for Adviser fee waiver		98,962
Dividends receivable		709,500
Prepaid expenses and other assets		455,211
Total assets		417,127,488
Liabilities
Options written, at fair value
(premiums received $659,073)		824,988
Payable to Adviser		725,721
Payable for investments purchased		3,816,280
Accrued expenses and other liabilities		621,354
Short-term borrowings		19,400,000
Long-term debt obligations		49,000,000
Mandatory redeemable preferred stock
($25.00 liquidation value per share;
640,000 shares outstanding)		16,000,000
Total liabilities		90,388,343
Net assets applicable to
common stockholders	$	326,739,145
Net Assets Applicable to Common Stockholders
Consist of:
Capital stock, $0.001 par value;
10,016,413 shares issued and outstanding
(100,000,000 shares authorized)	$	10,016
Additional paid-in capital		235,133,074
Undistributed net investment income		330,886
Undistributed net realized gain		1,105,367
Net unrealized appreciation		90,159,802
Net assets applicable to
common stockholders	$	326,739,145
Net Asset Value per common share outstanding
(net assets applicable to common stock,
divided by common shares outstanding)	$	32.62

Statement of Operations (unaudited)
Period from December 1, 2013 through
February 28, 2014

Investment Income
Dividends and distributions from common stock
(net of foreign taxes withheld of $37,792)	$	1,972,424
Distributions from master limited partnerships		1,235,353
Less return of capital on distributions		(1,142,959	)
Net dividends and distributions from investments		2,064,818
Dividends from money market mutual funds		21
Total Investment Income		2,064,839
Operating Expenses
Advisory fees		1,090,361
Administrator fees		39,903
Professional fees		35,034
Directors’ fees		21,792
Stockholder communication expenses		15,788
Fund accounting fees		13,288
Custodian fees and expenses		6,332
Registration fees		6,020
Stock transfer agent fees		3,024
Other operating expenses		11,247
Total Operating Expenses		1,242,789
Leverage Expenses
Interest expense		444,779
Distributions to mandatory redeemable
preferred stockholders		171,600
Amortization of debt issuance costs		27,373
Other leverage expenses		20,271
Total Leverage Expenses		664,023
Total Expenses		1,906,812
Less fees waived by Adviser		(165,260	)
Net Expenses		1,741,552
Net Investment Income		323,287
Realized and Unrealized Gains (Losses)
Net realized gain on investments, including
foreign currency gain (loss)		4,874,633
Net realized gain on options		790,093
Net realized loss on foreign currency
and translation of other assets and
liabilities denominated in foreign currency		(4,635	)
Net realized gain		5,660,091
Net unrealized appreciation of investments,
including foreign currency gain (loss)		21,456,310
Net unrealized depreciation of options		(416,871	)
Net unrealized appreciation of other assets and
liabilities due to foreign currency translation		958
Net unrealized appreciation		21,040,397
Net Realized and Unrealized Gains		26,700,488
Net Increase in Net Assets Applicable
to Common Stockholders Resulting
from Operations	$	27,023,775

See accompanying Notes to Financial Statements.

Tortoise Pipeline & Energy Fund, Inc.

www.tortoiseadvisors.com

12	2014 1st Quarter Report

Statement of Changes in Net Assets

	Period from December 1, 2013 through February 28, 2014				Year Ended November 30, 2013
	(unaudited)
Operations
Net investment income		$	323,287			$	999,346
Net realized gain			5,660,091				14,046,374
Net unrealized appreciation			21,040,397				52,210,779
Net increase in net assets applicable to common stockholders resulting from operations			27,023,775				67,256,499
Distributions to Common Stockholders
Net investment income			(4,081,688	)			(5,763,083	)
Net realized gain			—				(10,291,818	)
Return of capital			—				(261,899	)
Total distributions to common stockholders			(4,081,688	)			(16,316,800	)
Capital Stock Transactions
Issuance of 12,213 common shares from reinvestment of distributions to stockholders			—				349,292
Total increase in net assets applicable to common stockholders			22,942,087				51,288,991
Net Assets
Beginning of period			303,797,058				252,508,067
End of period		$	326,739,145			$	303,797,058
Undistributed net investment income, end of period		$	330,886			$	4,089,287

See accompanying Notes to Financial Statements.

Tortoise Pipeline & Energy Fund, Inc.

www.tortoiseadvisors.com

2014 1st Quarter Report

Statement of Cash Flows (unaudited)
Period from December 1, 2013 through February 28, 2014

Cash Flows From Operating Activities
Dividends and distributions received from common stock and money market mutual funds	$	1,957,126
Distributions received from master limited partnerships		1,235,353
Purchases of long-term investments		(20,502,232	)
Proceeds from sales of long-term investments		25,422,504
Purchases of short-term investments, net		(293,736	)
Call options written, net		797,631
Interest expense paid		(444,431	)
Other leverage expenses paid		(2,275	)
Distributions to mandatory redeemable preferred stockholders		(171,600	)
Operating expenses paid		(1,116,652	)
Net cash provided by operating activities		6,881,688
Cash Flows From Financing Activities
Advances from revolving line of credit		10,100,000
Repayments on revolving line of credit		(12,900,000	)
Distributions paid to common stockholders		(4,081,688	)
Net cash used in financing activities		(6,881,688	)
Net change in cash		—
Cash — beginning of period		—
Cash — end of period	$	—

Reconciliation of net increase in net assets applicable to common stockholders
resulting from operations to net cash provided by operating activities
Net increase in net assets applicable to common stockholders resulting from operations	$	27,023,775
Adjustments to reconcile net increase in net assets applicable to common stockholders
resulting from operations to net cash provided by operating activities:
Purchases of long-term investments		(24,318,512	)
Proceeds from sales of long-term investments		25,422,504
Purchases of short-term investments, net		(293,736	)
Call options written, net		797,631
Return of capital on distributions received		1,142,959
Net unrealized appreciation		(21,040,397	)
Net realized gain		(5,660,091	)
Amortization of debt issuance costs		27,373
Changes in operating assets and liabilities:
Increase in dividends receivable		(15,319	)
Increase in prepaid expenses and other assets		(33,913	)
Increase in payable for investments purchased		3,816,280
Increase in payable to Adviser, net of fee waiver		36,237
Decrease in accrued expenses and other liabilities		(23,103	)
Total adjustments		(20,142,087	)
Net cash provided by operating activities	$	6,881,688

See accompanying Notes to Financial Statements.

Tortoise Pipeline & Energy Fund, Inc.		www.tortoiseadvisors.com

14	2014 1st Quarter Report

Financial Highlights

	Period from									Period from
	December 1, 2013									October 31, 2011⁽¹⁾
	through			Year Ended			Year Ended			through
	February 28, 2014			November 30, 2013			November 30, 2012			November 30, 2011
	(unaudited)
Per Common Share Data⁽²⁾
Net Asset Value, beginning of period	$	30.33		$	25.24		$	24.42		$	—
Public offering price		—			—			—			25.00
Income from Investment Operations
Net investment income (loss)⁽³⁾		0.03			0.10			0.12			(0.02	)
Net realized and unrealized gains⁽³⁾		2.67			6.62			2.33			0.61
Total income from investment operations		2.70			6.72			2.45			0.59
Distributions to Common Stockholders
Net investment income		(0.41	)		(0.57	)		(0.24	)		—
Net realized gain		—			(1.03	)		(1.07	)		—
Return of capital		—			(0.03	)		(0.32	)		—
Total distributions to common stockholders		(0.41	)		(1.63	)		(1.63	)		—
Underwriting discounts and offering costs on
issuance of common stock⁽⁴⁾		—			—			—			(1.17	)
Net Asset Value, end of period	$	32.62		$	30.33		$	25.24		$	24.42
Per common share market value, end of period	$	29.04		$	28.11		$	24.15		$	25.01
Total Investment Return Based on Market Value⁽⁵⁾⁽⁶⁾		4.76	%		23.44	%		3.18	%		0.04	%
Supplemental Data and Ratios
Net assets applicable to common stockholders,
end of period (000’s)	$	326,739		$	303,797		$	252,508		$	244,264
Average net assets (000’s)	$	315,189		$	289,876		$	253,815		$	237,454
Ratio of Expenses to Average Net Assets⁽⁷⁾
Advisory fees		1.40	%		1.42	%		1.44	%		1.17	%
Other operating expenses		0.20			0.19			0.21			0.56
Total operating expenses, before fee waiver		1.60			1.61			1.65			1.73
Fee waiver		(0.21	)		(0.26	)		(0.33	)		(0.27	)
Total operating expenses		1.39			1.35			1.32			1.46
Leverage expenses		0.85			0.90			1.03			0.31
Total expenses		2.24	%		2.25	%		2.35	%		1.77	%

See accompanying Notes to Financial Statements.

Tortoise Pipeline & Energy Fund, Inc.		www.tortoiseadvisors.com

2014 1st Quarter Report

Financial Highlights (continued)

	Period from									Period from
	December 1, 2013									October 31, 2011⁽¹⁾
	through			Year Ended			Year Ended			through
	February 28, 2014			November 30, 2013			November 30, 2012			November 30, 2011
	(unaudited)
Ratio of net investment income (loss) to average net assets
before fee waiver⁽⁷⁾		0.20	%		0.08	%		0.16	%		(1.12	)%
Ratio of net investment income (loss) to average net assets
after fee waiver⁽⁷⁾		0.41	%		0.34	%		0.49	%		(0.85	)%
Portfolio turnover rate⁽⁵⁾		5.99	%		31.43	%		34.65	%		1.68	%
Short-term borrowings, end of period (000’s)	$	19,400		$	22,200		$	16,600			—
Long-term debt obligations, end of period (000’s)	$	49,000		$	49,000		$	49,000		$	24,500
Preferred stock, end of period (000’s)	$	16,000		$	16,000		$	16,000		$	8,000
Per common share amount of long-term debt obligations
outstanding, end of period	$	4.89		$	4.89		$	4.90		$	2.45
Per common share amount of net assets, excluding
long-term debt obligations, end of period	$	37.51		$	35.22		$	30.14		$	26.87
Asset coverage, per $1,000 of principal amount of
long-term debt obligations and short-term borrowings⁽⁸⁾	$	6,011		$	5,492		$	5,093		$	11,296
Asset coverage ratio of long-term debt obligations and
short-term borrowings⁽⁸⁾		601	%		549	%		509	%		1,130	%
Asset coverage, per $25 liquidation value per share
of mandatory redeemable preferred stock⁽⁹⁾	$	122		$	112		$	102		$	213
Asset coverage ratio of preferred stock⁽⁹⁾		487	%		448	%		409	%		852	%

(1)	Commencement of Operations.
(2)	Information presented relates to a share of common stock outstanding for the entire period.
(3)	The per common share data for the year ended November 30, 2012 and the period from October 31, 2011 through November 30, 2011 do not reflect the change in estimate of investment income and return of capital. See Note 2C to the financial statements for further disclosure.
(4)	Represents the dilution per common share from underwriting and other offering costs for the period from October 31, 2011 through November 30, 2011.
(5)	Not annualized for periods less than one full year.
(6)	Total investment return is calculated assuming a purchase of common stock at the beginning of the period (or initial public offering price) and a sale at the closing price on the last day of the period reported (excluding brokerage commissions). The calculation also assumes reinvestment of distributions at actual prices pursuant to the Company’s dividend reinvestment plan.
(7)	Annualized for periods less than one full year.
(8)	Represents value of total assets less all liabilities and indebtedness not represented by long-term debt obligations, short-term borrowings and preferred stock at the end of the period divided by long-term debt obligations and short-term borrowings outstanding at the end of the period.
(9)	Represents value of total assets less all liabilities and indebtedness not represented by long-term debt obligations, short-term borrowings and preferred stock at the end of the period divided by long-term debt obligations, short-term borrowings and preferred stock outstanding at the end of the period.


See accompanying Notes to Financial Statements.

Tortoise Pipeline & Energy Fund, Inc.		www.tortoiseadvisors.com

16	2014 1st Quarter Report

Notes to Financial Statements (unaudited)
February 28, 2014

1. Organization

Tortoise Pipeline & Energy Fund, Inc. (the “Company”) was organized as a Maryland corporation on July 19, 2011, and is a non-diversified, closed-end management investment company under the Investment Company Act of 1940, as amended (the “1940 Act”). The Company’s primary investment objective is to provide a high level of total return, with an emphasis on current distributions. The Company seeks to provide its stockholders an efficient vehicle to invest in a portfolio consisting primarily of equity securities of pipeline and other energy infrastructure companies. The Company commenced operations on October 31, 2011. The Company’s stock is listed on the New York Stock Exchange under the symbol “TTP.”

2. Significant accounting policies

A. Use of estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, recognition of distribution income and disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates.

B. Investment valuation
The Company primarily owns securities that are listed on a securities exchange or over-the-counter market. The Company values those securities at their last sale price on that exchange or over-the-counter market on the valuation date. If the security is listed on more than one exchange, the Company uses the price from the exchange that it considers to be the principal exchange on which the security is traded. Securities listed on the NASDAQ will be valued at the NASDAQ Official Closing Price, which may not necessarily represent the last sale price. If there has been no sale on such exchange or over-the-counter market on such day, the security will be valued at the mean between the last bid price and last ask price on such day.

The Company may invest up to 30 percent of its total assets in unregistered or otherwise restricted securities. Restricted securities are subject to statutory or contractual restrictions on their public resale, which may make it more difficult to obtain a valuation and may limit the Company’s ability to dispose of them. Investments in restricted securities and other securities for which market quotations are not readily available will be valued in good faith by using fair value procedures approved by the Board of Directors. Such fair value procedures consider factors such as discounts to publicly traded issues, time until conversion date, securities with similar yields, quality, type of issue, coupon, duration and rating. If events occur that will affect the value of the Company’s portfolio securities before the net asset value has been calculated (a “significant event”), the portfolio securities so affected will generally be priced using fair value procedures. The Company did not hold any restricted securities at February 28, 2014.

An equity security of a publicly traded company acquired in a direct placement transaction may be subject to restrictions on resale that can affect the security’s liquidity and fair value. Such securities that are convertible or otherwise will become freely tradable will be valued based on the market value of the freely tradable security less an applicable discount. Generally, the discount will initially be equal to the discount at which the Company purchased the securities. To the extent that such securities are convertible or otherwise become freely tradable within a time frame that may be reasonably determined, an amortization schedule may be used to determine the discount.

Exchange-traded options are valued at the mean of the highest bid and lowest asked prices across all option exchanges.

The Company generally values debt securities at prices based on market quotations for such securities, except those securities purchased with 60 days or less to maturity are valued on the basis of amortized cost, which approximates market value.

C. Security transactions and investment income
Security transactions are accounted for on the date the securities are purchased or sold (trade date). Realized gains and losses are reported on an identified cost basis. Interest income is recognized on the accrual basis, including amortization of premiums and accretion of discounts. Dividend income and distributions are recorded on the ex-dividend date. Distributions received from investments generally are comprised of ordinary income and return of capital. The Company allocates distributions between investment income and return of capital based on estimates made at the time such distributions are received. Such estimates are based on information provided by each portfolio company and other industry sources. These estimates may subsequently be revised based on actual allocations received from the portfolio companies after their tax reporting periods are concluded, as the actual character of these distributions is not known until after the fiscal year end of the Company.

For the period from December 1, 2013 through February 28, 2014, the Company estimated the allocation of investment income and return of capital for dividends and distributions received from investments within the Statement of Operations. For this period, the Company has estimated

Tortoise Pipeline & Energy Fund, Inc.

www.tortoiseadvisors.com

2014 1st Quarter Report

Notes to Financial Statements (unaudited) (continued)

approximately 64 percent as investment income and 36 percent as return of capital.

In addition, the Company may be subject to withholding taxes on foreign-sourced income. The Company accrues such taxes when the related income is earned.

D. Foreign currency translation
For foreign currency, investments in foreign securities, and other assets and liabilities denominated in a foreign currency, the Company translates these amounts into U.S. dollars on the following basis: (i) market value of investment securities, assets and liabilities at the current rate of exchange on the valuation date, and (ii) purchases and sales of investment securities, income and expenses at the relevant rates of exchange on the respective dates of such transactions. The Company does not isolate that portion of gains and losses on investments that is due to changes in the foreign exchange rates from that which is due to changes in market prices of equity securities.

E. Distributions to stockholders
Distributions to common stockholders are recorded on the ex-dividend date. The Company intends to make quarterly cash distributions of its investment company taxable income to common stockholders. In addition, on an annual basis, the Company may distribute additional capital gains in the last calendar quarter if necessary to meet minimum distribution requirements and thus avoid being subject to excise taxes. The amount of any distributions will be determined by the Board of Directors. The character of distributions to common stockholders made during the year may differ from their ultimate characterization for federal income tax purposes. Distributions paid to stockholders in excess of investment company taxable income and net realized gains will be treated as return of capital to stockholders.

For the year ended November 30, 2013, the Company’s distributions to common stockholders for tax purposes were comprised of 66 percent dividend income, 32 percent long-term capital gain, and 2 percent return of capital. The tax character of distributions paid to common stockholders for the current year will be determined subsequent to November 30, 2014.

Distributions to mandatory redeemable preferred (“MRP”) stockholders are accrued daily and paid quarterly based on a fixed annual rate. The Company may not declare or pay distributions to its preferred stockholders if it does not meet a 200 percent asset coverage ratio for its debt or the rating agency basic maintenance amount for the debt following such distribution. The character of distributions to MRP stockholders made during the year may differ from their ultimate characterization for federal income tax purposes. Distributions paid to stockholders in excess of investment company taxable income and net realized gains will be treated as return of capital to stockholders.

F. Federal income taxation
The Company qualifies as a regulated investment company (“RIC”) under the U.S. Internal Revenue Code of 1986, as amended (the “Code”). As a result, the Company generally will not be subject to U.S. federal income tax on income and gains that it distributes each taxable year to stockholders if it meets certain minimum distribution requirements. The Company is required to distribute substantially all of its income, in addition to other asset diversification requirements. The Company is subject to a 4 percent non-deductible U.S. federal excise tax on certain undistributed income unless the Company makes sufficient distributions to satisfy the excise tax avoidance requirement. The Company invests in MLPs, which generally are treated as partnerships for federal income tax purposes. As a limited partner in the MLPs, the Company reports its allocable share of the MLP’s taxable income in computing its own taxable income.

The Company recognizes the tax benefits of uncertain tax positions only when the position is “more likely than not” to be sustained upon examination by the tax authorities based on the technical merits of the tax position. The Company’s policy is to record interest and penalties on uncertain tax positions as part of tax expense. The Company has reviewed all open tax years and major jurisdictions and concluded that there is no tax liability resulting from unrecognized tax benefits relating to uncertain income tax positions taken or expected to be taken on a tax return. All tax years since inception remain open to examination by federal and state tax authorities.

G. Offering and debt issuance costs
Offering costs related to the issuance of common stock are charged to additional paid-in capital when the stock is issued. Debt issuance costs related to long-term debt obligations and MRP Stock are capitalized and amortized over the period the debt and MRP Stock is outstanding.

H. Derivative financial instruments
The Company seeks to provide current income from gains earned through an option strategy which will normally consist of writing (selling) call options on selected equity securities in the portfolio (“covered calls”). The premium received on a written call option will initially be recorded as a liability and subsequently adjusted to the then current fair value of the option written. Premiums received from writing call options that expire unexercised will be recorded as a realized gain on the expiration date. Premiums received

Tortoise Pipeline & Energy Fund, Inc.

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18	2014 1st Quarter Report

Notes to Financial Statements (unaudited) (continued)

from writing call options that are exercised will be added to the proceeds from the sale of the underlying security to calculate the realized gain (loss). If a written call option is repurchased prior to its exercise, the realized gain (loss) will be the difference between the premium received and the amount paid to repurchase the option.

I. Indemnifications
Under the Company’s organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Company. In addition, in the normal course of business, the Company may enter into contracts that provide general indemnification to other parties. The Company’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Company that have not yet occurred, and may not occur. However, the Company has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.

3. Concentration risk

Under normal circumstances, the Company will have at least 80 percent of its total assets (including any assets obtained through leverage) in equity securities of pipeline and other energy infrastructure companies. Energy infrastructure companies own and operate a network of asset systems that transport, store, distribute, gather and/or process, explore, develop, manage or produce crude oil, refined petroleum products (including biodiesel and ethanol), natural gas or natural gas liquids (“NGLs”) or that provide electric power generation (including renewable energy), transmission and/or distribution. The Company may invest up to 30 percent of its total assets in restricted securities, primarily through direct investments in securities of listed companies. The Company may also invest up to 25 percent of its total assets in securities of MLPs. The Company will not invest in privately-held companies.

4. Agreements

The Company has entered into an Investment Advisory Agreement with the Adviser. Under the terms of the Agreement, the Company pays the Adviser a fee equal to an annual rate of 1.10 percent of the Company’s average monthly total assets (including any assets attributable to leverage) minus accrued liabilities (other than debt entered into for purposes of leverage and the aggregate liquidation preference of outstanding preferred stock) (“Managed Assets”), in exchange for the investment advisory services provided. The Adviser waived fees in an amount equal to an annual rate of 0.20 percent of average monthly Managed Assets for the period from January 1, 2013 through December 31, 2013 and has contractually agreed to waive fees in an amount equal to 0.15 percent of average monthly Managed Assets for the period from January 1, 2014 through December 31, 2014. The waived fees are not subject to recapture by the Adviser.

U.S. Bancorp Fund Services, LLC serves as the Company’s administrator. The Company pays the administrator a monthly fee computed at an annual rate of 0.04 percent of the first $1,000,000,000 of the Company’s Managed Assets, 0.01 percent on the next $500,000,000 of Managed Assets and 0.005 percent on the balance of the Company’s Managed Assets.

Computershare Trust Company, N.A. serves as the Company’s transfer agent and registrar and Computershare Inc. serves as the Company’s dividend paying agent and agent for the automatic dividend reinvestment plan.

U.S. Bank, N.A. serves as the Company’s custodian. The Company pays the custodian a monthly fee computed at an annual rate of 0.004 percent of the average daily market value of the Company’s domestic assets and 0.015 percent of the average daily market value of the Company’s Canadian Dollar-denominated assets, plus portfolio transaction fees.

5. Income taxes

It is the Company’s intention to continue to qualify as a regulated investment company under Subchapter M of the Code and distribute all of its taxable income. Accordingly, no provision for federal income taxes is required in the financial statements.

The amount and character of income and capital gain distributions to be paid, if any, are determined in accordance with federal income tax regulations, which may differ from U.S. generally accepted accounting principles. These differences are primarily due to differences in the timing of recognition of gains or losses on investments. Permanent book and tax basis differences, if any, may result in reclassifications to undistributed net investment income (loss), undistributed net realized gain (loss) and additional paid-in capital.

As of November 30, 2013, the components of accumulated earnings on a tax basis were as follows:

Unrealized appreciation	$	73,235,114
Other temporary differences*		(4,581,146	)
Accumulated earnings	$	68,653,968

*	Other temporary differences primarily relate to losses deferred under straddle regulations per IRC Code Sec. 1092.

Tortoise Pipeline & Energy Fund, Inc.

www.tortoiseadvisors.com

2014 1st Quarter Report

Notes to Financial Statements (unaudited) (continued)

As of February 28, 2014, the aggregate cost of securities for federal income tax purposes was $317,895,694. The aggregate gross unrealized appreciation for all securities in which there was an excess of fair value over tax cost was $99,371,147, the aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over fair value was $1,403,026 and the net unrealized appreciation was $97,968,121.

6. Fair value of financial instruments

Various inputs are used in determining the fair value of the Company’s financial instruments. These inputs are summarized in the three broad levels listed below:

	Level 1 —	quoted prices in active markets for identical investments

	Level 2 —	other significant observable inputs (including quoted prices for similar investments, market corroborated inputs, etc.)

	Level 3 —	significant unobservable inputs (including the Company’s own assumptions in determining the fair value of investments)

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

The following table provides the fair value measurements of applicable Company assets and liabilities by level within the fair value hierarchy as of February 28, 2014. These assets and liabilities are measured on a recurring basis.

	Fair Value
	at February 28,
Description	2014		Level 1		Level 2		Level 3
Assets
Equity Securities:
Common Stock^(a)	$	279,255,441	$	279,255,441	$	—	$	—
Master Limited Partnerships
and Related Companies^(a)		136,244,178		136,244,178		—		—
Total Equity Securities		415,499,619		415,499,619		—		—
Other Securities:
Short-Term Investment^(b)		364,196		364,196		—		—
Total Assets	$	415,863,815	$	415,863,815	$	—	$	—

Liabilities
Written Call Options	$	824,988	$	824,988	$	—	$	—

(a)	All other industry classifications are identified in the Schedule of Investments.
(b)	Short-term investment is a sweep investment for cash balances in the Company at February 28, 2014.

The Company did not hold any Level 3 securities during the period ended February 28, 2014. The Company utilizes the beginning of reporting period method for determining transfers between levels. There were no transfers between levels during the period ended February 28, 2014.

Valuation techniques
In general, and where applicable, the Company uses readily available market quotations based upon the last updated sales price from the principal market to determine fair value. This pricing methodology applies to the Company’s Level 1 investments and liabilities.

An equity security of a publicly traded company acquired in a private placement transaction without registration under the Securities Act of 1933, as amended (the “1933 Act”), is subject to restrictions on resale that can affect the security’s fair value. If such a security is convertible into publicly-traded common shares, the security generally will be valued at the common share market price adjusted by a percentage discount due to the restrictions and categorized as Level 2 in the fair value hierarchy. If the security has characteristics that are dissimilar to the class of security that trades on the open market, the security will generally be valued and categorized as Level 3 in the fair value hierarchy.

7. Derivative financial instruments

The Company has adopted the disclosure provisions of FASB Accounting Standard Codification 815, Derivatives and Hedging (“ASC 815”). ASC 815 requires enhanced disclosures about the Company’s use of and accounting for derivative instruments and the effect of derivative instruments on the Company’s results of operations and financial position. Tabular disclosure regarding derivative fair value and gain/loss by contract type (e.g., interest rate contracts, foreign exchange contracts, credit contracts, etc.) is required and derivatives accounted for as hedging instruments under ASC 815 must be disclosed separately from those that do not qualify for hedge accounting. Even though the Company may use derivatives in an attempt to achieve an economic hedge, the Company’s derivatives are not accounted for as hedging instruments under ASC 815 because investment companies account for their derivatives at fair value and record any changes in fair value in current period earnings.

Transactions in written option contracts for the period from December 1, 2013 through February 28, 2014, are as follows:

	Number of
	Contracts		Premium
Options outstanding at November 30, 2013	8,720		$	651,535
Options written	25,832			2,020,571
Options closed	(24,120	)		(1,894,495	)
Options exercised	(269	)		(31,878	)
Options expired	(1,395	)		(86,660	)
Options outstanding at February 28, 2014	8,768		$	659,073

Tortoise Pipeline & Energy Fund, Inc.

www.tortoiseadvisors.com

20	2014 1st Quarter Report

Notes to Financial Statements (unaudited) (continued)

The following table presents the types and fair value of derivatives by location as presented on the Statement of Assets and Liabilities at February 28, 2014:

	Liabilities
Derivatives not accounted for as
hedging instruments under ASC 815	Location	Fair Value
Written equity call options	Options written, at fair value	$824,988

The following table presents the effect of derivatives on the Statement of Operations for the period ended February 28, 2014:

	Location of Gains (Losses) on Derivatives
		Net Unrealized
Derivatives not accounted for as	Net Realized Gain	Depreciation
hedging instruments under ASC 815	on Options	of Options
Written equity call options	$480,827	$(416,871)

8. Investment transactions

For the period from December 1, 2013 through February 28, 2014, the Company purchased (at cost) and sold securities (proceeds received) in the amount of $24,318,512 and $25,422,504 (excluding short-term debt securities), respectively.

9. Long-term debt obligations

The Company has $49,000,000 aggregate principal amount of private senior notes (collectively, the “Notes”) outstanding. The Notes are unsecured obligations of the Company and, upon liquidation, dissolution or winding up of the Company, will rank: (1) senior to all of the Company’s outstanding preferred shares; (2) senior to all of the Company’s outstanding common shares; (3) on parity with any unsecured creditors of the Company and any unsecured senior securities representing indebtedness of the Company and (4) junior to any secured creditors of the Company. Holders of the Notes are entitled to receive periodic cash interest payments each quarter until maturity. The Notes are not listed on any exchange or automated quotation system.

The Notes are redeemable in certain circumstances at the option of the Company. The Notes are also subject to a mandatory redemption if the Company fails to meet asset coverage ratios required under the 1940 Act or the rating agency guidelines if such failure is not waived or cured. At February 28, 2014, the Company was in compliance with asset coverage covenants and basic maintenance covenants for its senior notes.

The estimated fair value of each series of fixed-rate Notes was calculated, for disclosure purposes, by discounting future cash flows by a rate equal to the current U.S. Treasury rate with an equivalent maturity date, plus either 1) the spread between the interest rate on recently issued debt and the U.S. Treasury rate with a similar maturity date or 2) if there has not been a recent debt issuance, the spread between the AAA corporate finance debt rate and the U.S. Treasury rate with an equivalent maturity date plus the spread between the fixed rates of the Notes and the AAA corporate finance debt rate. The estimated fair value of the Series A Notes approximates the carrying amount because the interest rate fluctuates with changes in interest rates available in the current market. The estimated fair values in the table below are Level 2 valuations within the fair value hierarchy. The following table shows the maturity date, interest rate, payment frequency, notional/carrying amount and estimated fair value for each series of Notes outstanding at February 28, 2014.

					Notional/
	Maturity	Interest		Payment	Carrying		Estimated
Series	Date	Rate		Frequency	Amount		Fair Value
Series A	December 15, 2016	1.99	%⁽¹⁾	Quarterly	$	10,000,000	$	10,000,000
Series B	December 15, 2014	2.50	%	Quarterly		17,000,000		17,209,824
Series C	December 15, 2018	3.49	%	Quarterly		6,000,000		6,216,860
Series D	December 15, 2021	4.08	%	Quarterly		16,000,000		16,636,882
					$	49,000,000	$	50,063,566

(1)

Floating rate resets each quarter based on 3-month LIBOR plus 1.75 percent. The current rate is effective for the period from December 15, 2013 through March 15, 2014. The weighted-average interest rate for the period from December 1, 2013 through February 28, 2014 was 1.99 percent.

10. Preferred stock

The Company has 10,000,000 shares of preferred stock authorized. Of that amount, the Company has 640,000 shares of Series A Mandatory Redeemable Preferred (“MRP”) Stock authorized and 640,000 shares are outstanding at February 28, 2014. The MRP Stock has a liquidation value of $25.00 per share plus any accumulated but unpaid distributions, whether or not declared. Holders of the MRP Stock are entitled to receive cash interest payments each quarter at a fixed rate until maturity. The MRP Stock is not listed on any exchange or automated quotation system.

The MRP Stock has rights determined by the Board of Directors. Except as otherwise indicated in the Company’s Charter or Bylaws, or as otherwise required by law, the holders of MRP Stock have voting rights equal to the holders of common stock (one vote per MRP share) and will vote together with the holders of shares of common stock as a single class except on matters affecting only the holders of preferred stock or the holders of common stock. The 1940 Act requires that the holders of any preferred

Tortoise Pipeline & Energy Fund, Inc.

www.tortoiseadvisors.com

2014 1st Quarter Report

Notes to Financial Statements (unaudited) (continued)

stock (including MRP Stock), voting separately as a single class, have the right to elect at least two directors at all times.

The estimated fair value of MRP Stock was calculated, for disclosure purposes, by discounting future cash flows by a rate equal to the current U.S. Treasury rate with an equivalent maturity date, plus either 1) the spread between the interest rate on recently issued preferred stock and the U.S. Treasury rate with a similar maturity date or 2) if there has not been a recent preferred stock issuance, the spread between the AA corporate finance debt rate and the U.S. Treasury rate with an equivalent maturity date plus the spread between the fixed rates of the MRP Stock and the AA corporate finance debt rate. The estimated fair value in the table below is a Level 2 valuation within the fair value hierarchy. The following table shows the mandatory redemption date, fixed rate, number of shares outstanding, aggregate liquidation preference and estimated fair value as of February 28, 2014.

	Mandatory			Aggregate
	Redemption		Shares	Liquidation	Estimated
Series	Date	Fixed Rate	Outstanding	Preference	Fair Value
Series A	December 15, 2018	4.29%	640,000	$16,000,000	$16,604,092

The MRP Stock is redeemable in certain circumstances at the option of the Company. Under the Investment Company Act of 1940, the Company may not declare dividends or make other distributions on shares of common stock or purchases of such shares if, at the time of the declaration, distribution or purchase, asset coverage with respect to the outstanding MRP Stock would be less than 200 percent. The MRP Stock is also subject to a mandatory redemption if the Company fails to meet an asset coverage ratio of at least 225 percent as determined in accordance with the 1940 Act or a rating agency basic maintenance amount if such failure is not waived or cured. At February 28, 2014, the Company was in compliance with asset coverage covenants and basic maintenance covenants for its MRP Stock.

11. Credit facility

As of February 28, 2014, the Company has a $30,000,000 unsecured credit facility that matures on June 16, 2014. The Bank of Nova Scotia serves as a lender and the lending syndicate agent on behalf of other lenders participating in the facility. Outstanding balances generally accrue interest at a variable annual rate equal to one-month LIBOR plus 1.125 percent and unused portions of the credit facility accrue a non-usage fee equal to an annual rate of 0.15 percent.

The average principal balance and interest rate for the period during which the credit facility was utilized during the period ended February 28, 2014 was approximately $21,800,000 and 1.29 percent, respectively. At February 28, 2014, the principal balance outstanding was $19,400,000 at an interest rate of 1.28 percent.

Under the terms of the credit facility, the Company must maintain asset coverage required under the 1940 Act. If the Company fails to maintain the required coverage, it may be required to repay a portion of an outstanding balance until the coverage requirement has been met. At February 28, 2014, the Company was in compliance with the terms of the credit facility.

12. Common stock

The Company has 100,000,000 shares of capital stock authorized and 10,016,413 shares outstanding at February 28, 2014 and November 30, 2013.

13. Subsequent events

The Company has performed an evaluation of subsequent events through the date the financial statements were issued and has determined that no items require recognition or disclosure.

Tortoise Pipeline & Energy Fund, Inc.

www.tortoiseadvisors.com

22	2014 1st Quarter Report

Additional Information (unaudited)

Director and officer compensation

The Company does not compensate any of its directors who are “interested persons,” as defined in Section 2(a)(19) of the 1940 Act, nor any of its officers. For the period ended February 28, 2014, the aggregate compensation paid by the Company to the independent directors was $25,500. The Company did not pay any special compensation to any of its directors or officers.

Forward-looking statements

This report contains “forward-looking statements” within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. By their nature, all forward-looking statements involve risks and uncertainties, and actual results could differ materially from those contemplated by the forward-looking statements. Several factors that could materially affect the Company’s actual results are the performance of the portfolio of investments held by it, the conditions in the U.S. and international financial, petroleum and other markets, the price at which shares of the Company will trade in the public markets and other factors discussed in filings with the SEC.

Proxy voting policies

A description of the policies and procedures that the Company uses to determine how to vote proxies relating to portfolio securities owned by the Company and information regarding how the Company voted proxies relating to the portfolio of securities during the 12-month period ended June 30, 2013 are available to stockholders (i) without charge, upon request by calling the Company at (913) 981-1020 or toll-free at (866) 362-9331 and on the Company’s Web site at www.tortoiseadvisors.com; and (ii) on the SEC’s Web site at www.sec.gov.

Form N-Q

The Company files its complete schedule of portfolio holdings for the first and third quarters of each fiscal year with the SEC on Form N-Q. The Company’s Form N-Q is available without charge upon request by calling the Company at (866) 362-9331 or by visiting the SEC’s Web site at www.sec.gov. In addition, you may review and copy the Company’s Form N-Q at the SEC’s Public Reference Room in Washington D.C. You may obtain information on the operation of the Public Reference Room by calling (800) SEC-0330.

The Company’s Form N-Qs are also available on the Company’s Web site at www.tortoiseadvisors.com.

Statement of additional information

The Statement of Additional Information (“SAI”) includes additional information about the Company’s directors and is available upon request without charge by calling the Company at (866) 362-9331 or by visiting the SEC’s Web site at www.sec.gov.

Certifications

The Company’s Chief Executive Officer submitted to the New York Stock Exchange the annual CEO certification in 2012 as required by Section 303A.12(a) of the NYSE Listed Company Manual.

The Company has filed with the SEC, as an exhibit to its most recently filed Form N-CSR, the certification of its Chief Executive Officer and Chief Financial Officer required by Section 302 of the Sarbanes-Oxley Act.

Privacy policy

In order to conduct its business, the Company collects and maintains certain nonpublic personal information about its stockholders of record with respect to their transactions in shares of the Company’s securities. This information includes the stockholder’s address, tax identification or Social Security number, share balances, and distribution elections. We do not collect or maintain personal information about stockholders whose share balances of our securities are held in “street name” by a financial institution such as a bank or broker.

We do not disclose any nonpublic personal information about you, the Company’s other stockholders or the Company’s former stockholders to third parties unless necessary to process a transaction, service an account, or as otherwise permitted by law.

To protect your personal information internally, we restrict access to nonpublic personal information about the Company’s stockholders to those employees who need to know that information to provide services to our stockholders. We also maintain certain other safeguards to protect your nonpublic personal information.

Tortoise Pipeline & Energy Fund, Inc.

www.tortoiseadvisors.com

2014 1st Quarter Report

Office of the Company

and of the Investment Adviser

Tortoise Capital Advisors, L.L.C.

11550 Ash Street, Suite 300

Leawood, Kan. 66211

(913) 981-1020

(913) 981-1021 (fax)

www.tortoiseadvisors.com

Board of Directors of

Tortoise Pipeline & Energy Fund, Inc.

H. Kevin Birzer, Chairman

Tortoise Capital Advisors, L.L.C.

Terry Matlack

Tortoise Capital Advisors, L.L.C.

Rand C. Berney

Independent

Conrad S. Ciccotello

Independent

Charles E. Heath

Independent

Administrator

U.S. Bancorp Fund Services, LLC

615 East Michigan St.

Milwaukee, Wis. 53202

Custodian

U.S. Bank, N.A.

1555 North Rivercenter Drive, Suite 302

Milwaukee, Wis. 53212

Transfer, Dividend Disbursing

and Reinvestment Agent

Computershare Trust Company, N.A. /

Computershare Inc.

P.O. Box 30170

College Station, Tex. 77842-3170

(800) 426-5523

www.computershare.com

Legal Counsel

Husch Blackwell LLP

4801 Main St.

Kansas City, Mo. 64112

Investor Relations

(866) 362-9331

info@tortoiseadvisors.com

Stock Symbol

Listed NYSE Symbol: TTP

This report is for stockholder information. This is not a prospectus intended for use in the purchase or sale of fund shares. Past performance is no guarantee of future results and your investment may be worth more or less at the time you sell.

Tortoise Capital Advisors’ Closed-end Funds

Pureplay MLP Funds

Broader Funds

Name

Ticker

Focus

Total Assets⁽¹⁾
($ in millions)

Name

Ticker

Focus

Total Assets⁽¹⁾
($ in millions)

Tortoise Energy
Infrastructure Corp.