UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


FORM N-Q
QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED MANAGEMENT INVESTMENT COMPANY




Investment Company Act file number 811-22585



Tortoise Pipeline & Energy Fund, Inc.
(Exact name of registrant as specified in charter)


11550 Ash Street, Suite 300, Leawood, KS 66211
(Address of principal executive offices) (Zip code)



Terry Matlack
Diane Bono
11550 Ash Street, Suite 300, Leawood, KS 66211

(Name and address of agent for service)



913-981-1020
Registrant's telephone number, including area code



Date of fiscal year end: November 30


Date of reporting period: August 31, 2017
Item 1. Schedule of Investments.
 
Tortoise Pipeline & Energy Fund, Inc.
            
SCHEDULE OF INVESTMENTS (Unaudited)
            
               
      
August 31, 2017    
 
Shares
    
Fair Value
  
Common Stock - 92.0%(1)
            
Crude Oil Pipelines - 35.0%(1)            
Canada - 21.2%(1)
            
Gibson Energy Inc
    
85,269
    
$
1,192,230
  
Enbridge Inc.
    
613,931
      
24,551,101
  
Inter Pipeline Ltd.
    
502,133
      
9,196,222
  
Pembina Pipeline Corporation
    
226,342
      
7,295,508
  
United States - 13.8%(1)
                
Plains GP Holdings, L.P.
    
913,432
      
20,533,951
  
SemGroup Corporation
    
273,746
      
7,035,272
  
               
69,804,284
  
Natural Gas Gathering/Processing - 15.4%(1)
                
United States - 15.4%(1)
                
EnLink Midstream, LLC
    
530,288
      
9,041,410
  
Targa Resources Corp.
    
263,924
      
11,763,093
  
The Williams Companies, Inc.
    
333,567
      
9,916,947
  
               
30,721,450
  
Natural Gas/Natural Gas Liquids Pipelines - 25.1%(1)
                
Canada - 12.0%(1)
                
Keyera Corp.
    
58,564
      
1,699,587
  
TransCanada Corporation
    
439,087
      
22,305,620
  
United States - 13.1%(1)
                
ONEOK, Inc.
    
335,302
      
18,159,956
  
Tallgrass Energy GP, LP
    
297,750
      
8,003,520
  
               
50,168,683
  
Oil and Gas Production - 11.5%(1)
                
United States - 11.5%(1)
                
Anadarko Petroleum Corporation(2)
    
9,400
      
384,742
  
Antero Resources Corporation(2)(3)
    
35,700
      
702,933
  
Cabot Oil & Gas Corporation(2)
    
112,800
      
2,882,040
  
Carrizo Oil & Gas, Inc.(2)(3)
    
36,600
      
491,904
  
Cimarex Energy Co.(2)
    
16,100
      
1,605,009
  
Concho Resources Inc.(2)(3)
    
24,400
      
2,707,668
  
Continental Resources, Inc.(2)(3)
    
24,300
      
824,256
  
Diamondback Energy, Inc.(2)(3)
    
9,700
      
880,663
  
EOG Resources, Inc.(2)
    
52,300
      
4,444,977
  
EQT Corporation(2)
    
8,000
      
498,720
  
Gulfport Energy Corporation(2)(3)
    
30,200
      
378,406
  
Hess Corporation(2)
    
7,400
      
287,860
  
Laredo Petroleum, Inc.(2)(3)
    
50,800
      
630,936
  
Newfield Exploration Company(2)(3)
    
27,200
      
710,736
  
Noble Energy, Inc.(2)
    
36,300
      
862,851
  
Occidental Petroleum Corporation(2)
    
7,200
      
429,840
  
PDC Energy, Inc.(2)(3)
    
6,246
      
245,655
  
Pioneer Natural Resources Company(2)
    
21,100
      
2,735,615
  
Range Resources Corporation(2)
    
31,800
      
552,048
  
RSP Permian, Inc.(2)(3)
    
23,100
      
724,878
  
               
22,981,737
  
Refined Product Pipelines - 5.0%(1)
                
United States - 5.0%(1)
                
VTTI Energy Partners LP
    
509,553
      
9,885,328
  
                   
Total Common Stock (Cost $201,861,611)
            
183,561,482
  
                   
Master Limited Partnerships and Related Companies - 37.8%(1)
                
Crude Oil Pipelines - 8.1%(1)
                
United States - 8.1%(1)
                
Andeavor Logistics LP
    
36,548
      
1,818,263
  
Enbridge Energy Management, L.L.C.(4)
    
777,698
      
11,206,630
  
Genesis Energy L.P.
    
76,499
      
2,042,523
  
Plains All American Pipeline, L.P.
    
6,525
      
141,332
  
Shell Midstream Partners, L.P.
    
34,724
      
960,813
  
               
16,169,561
  
Natural Gas/Natural Gas Liquids Pipelines - 10.5%(1)
                
United States - 10.5%(1)
                
Energy Transfer Equity, L.P.
    
43,645
      
758,114
  
Energy Transfer Partners, L.P.
    
655,206
      
12,455,466
  
Enterprise Products Partners L.P.
    
174,456
      
4,548,068
  
EQT Midstream Partners, LP
    
20,323
      
1,552,068
  
Tallgrass Energy Partners, LP
    
35,125
      
1,660,359
  
               
20,974,075
  
Natural Gas Gathering/Processing - 10.1%(1)
                
United States - 10.1%(1)
                
DCP Midstream, LP
    
58,115
      
1,866,073
  
EnLink Midstream Partners, LP
    
69,184
      
1,122,856
  
MPLX LP
    
245,647
      
8,430,605
  
Noble Midstream Partners LP
    
24,185
      
1,164,992
  
Rice Midstream Partners LP
    
182,372
      
3,784,219
  
Western Gas Partners, LP
    
50,531
      
2,581,123
  
Williams Partners L.P.
    
29,581
      
1,165,491
  
               
20,115,359
  
Refined Product Pipelines - 9.1%(1)
                
United States - 9.1%(1)
                
Buckeye Partners, L.P.
    
71,433
      
4,085,253
  
Holly Energy Partners, L.P.
    
96,994
      
3,165,884
  
Magellan Midstream Partners, L.P.
    
35,211
      
2,372,869
  
NuStar Energy L.P.
    
133,420
      
5,402,176
  
Phillips 66 Partners LP
    
36,049
      
1,722,421
  
Valero Energy Partners LP
    
31,129
      
1,355,668
  
               
18,104,271
  
                   
Total Master Limited Partnerships and Related Companies (Cost $78,155,047)
      
75,363,266
  
                   
Preferred Stock - 3.4%(1)
                
Natural Gas Gathering/Processing - 1.2%(1)
                
United States - 1.2%(1)
                
Targa Resources Corp., 9.500%(5)(6)
    
2,108
      
2,293,725
  
                   
Oil and Gas Production - 2.2%(1)
                
United States - 2.2%(1)
                
Anadarko Petroleum Corporation, 7.500%, 06/07/2018
    
39,500
      
1,461,500
  
Hess Corporation, 8.000%, 02/01/2019
    
60,000
      
2,997,000
  
               
4,458,500
  
                   
Total Preferred Stock (Cost $7,040,512)
            
6,752,225
  
                   
Short-Term Investment - 0.0%(1)
                
United States Investment Company - 0.0%(1)
                
Government & Agency Portfolio - Institutional Class, 0.93%(7) (Cost $135,898)
    
135,898
      
135,898
  
                   
Total Investments - 133.2%(1) (Cost $287,193,068)
            
265,812,871
  
Total Value of Options Written (Premiums received $338,186) - (0.1)%(1)
      
(238,266
)
Other Assets and Liabilities - 1.0%(1)
            
1,928,760
  
Credit Facility Borrowings - (9.0)%(1)
            
(18,000,000
)
Senior Notes - (17.1)%(1)
            
(34,000,000
)
Mandatory Redeemable Preferred Stock at Liquidation Value - (8.0)%(1)
      
(16,000,000
)
Total Net Assets Applicable to Common Stockholders - 100.0%(1)
          
$
199,503,365
  
                   
                   
(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.  Rate determined by dividing the cash value of a distribution declared by Enbridge Energy Partners, L.P. by the average closing price of Enbridge Energy Management, L.L.C. shares for the ten consecutive trading days prior to the ex-dividend date.
                
(5)
Restricted securities have a total fair value of $2,293,725, which represents 1.2% of net assets.
 
(6)
Securities have been valued by using significant unobservable inputs in accordance with fair value procedures.
  
(7)
Rate indicated is the current yield as of August 31, 2017.
                
 
 
 
 

 
Tortoise Pipeline & Energy Fund, Inc.
                    
SCHEDULE OF OPTIONS WRITTEN (Unaudited)
              
August 31, 2017
                          
                           
Call Options Written
Expiration
Date
  
Strike Price
    
Contracts
    
Notional Value
    
Fair Value
  
Anadarko Petroleum Corporation
September 2017
  
$
44.50
      
94
    
$
418,300
    
$
(1,128
)
Antero Resources Corporation
September 2017
    
19.50
      
357
      
696,150
      
(19,863
)
Cabot Oil & Gas Corporation
September 2017
    
26.00
      
1,128
      
2,932,800
      
(39,480
)
Carrizo Oil & Gas, Inc.
September 2017
    
14.25
      
366
      
521,550
      
(12,321
)
Cimarex Energy Co.
September 2017
    
103.00
      
161
      
1,658,300
      
(15,646
)
Concho Resources Inc.
September 2017
    
122.75
      
244
      
2,995,100
      
(1,012
)
Continental Resources, Inc.
September 2017
    
34.00
      
243
      
826,200
      
(23,571
)
Diamondback Energy, Inc.
September 2017
    
90.75
      
97
      
880,275
      
(22,902
)
EOG Resources, Inc.
September 2017
    
94.00
      
523
      
4,916,200
      
(1,569
)
EQT Corporation
September 2017
    
64.00
      
80
      
512,000
      
(6,799
)
Gulfport Energy Corporation
September 2017
    
12.25
      
302
      
369,950
      
(19,504
)
Hess Corporation
September 2017
    
41.60
      
74
      
307,840
      
(1,202
)
Laredo Petroleum, Inc.
September 2017
    
12.55
      
508
      
637,540
      
(17,892
)
Newfield Exploration Company
September 2017
    
26.50
      
272
      
720,800
      
(15,856
)
Noble Energy, Inc.
September 2017
    
26.25
      
363
      
952,875
      
(1,419
)
Occidental Petroleum Corporation
September 2017
    
61.75
      
72
      
444,600
      
(557
)
PDC Energy, Inc.
September 2017
    
38.75
      
62
      
240,250
      
(9,794
)
Pioneer Natural Resources Company
September 2017
    
140.00
      
211
      
2,954,000
      
(7,385
)
Range Resources Corporation
September 2017
    
18.35
      
318
      
583,530
      
(7,889
)
RSP Permian, Inc.
September 2017
    
32.35
      
231
      
747,285
      
(12,477
)
Total Value of Call Options Written (Premiums received $338,186)
    
$
24,315,545
    
$
(238,266
)
                                   
 
 
 

 

Various inputs are used in determining the fair value of the Company’s investments and 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 assets and liabilities by level within the fair value hierarchy as of August 31, 2017.  These assets and liabilities are measured on a recurring basis.

 
Description
  
Level 1
    
Level 2
    
Level 3
    
Total
  
Assets
                        
Investments:
                        
Common Stock(a)
  
$
183,561,482
    
$
-
    
$
-
    
$
183,561,482
  
Master Limited Partnerships and Related Companies(a)
    
75,363,266
      
-
      
-
      
75,363,266
  
Preferred Stock(a)
    
4,458,500
      
-
      
2,293,725
      
6,752,225
  
Short-Term Investment(b)
    
135,898
      
-
      
-
      
135,898
  
Total Assets
  
$
263,519,146
    
$
-
    
$
2,293,725
    
$
265,812,871
  
Liabilities
                                
Written Call Options
  
$
73,133
    
$
165,133
    
$
-
    
$
238,266
  
 
(a)  
All other industry classifications are identified in the Schedule of Investments.
(b)  
Short-term investment is a sweep investment for cash balances.

The Company utilizes the beginning of reporting period method for determining transfers between levels.  During the period ended August 31, 2017, Rice Midstream Partners LP common units held by the Company, in the amount of $2,844,385 were transferred from Level 2 to Level 1 when they converted into registered and unrestricted common units of Rice Midstream Partners LP.  There were no other transfers between levels for the Company during the period ended August 31, 2017.

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. The Company primarily owns securities that are listed on a securities exchange or are traded in the 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 are 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 is valued at the mean between the last bid price and last ask price on such day. These securities are categorized as Level 1 in the fair value hierarchy.
 
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 private placement securities and other securities for which market quotations are not readily available are valued in good faith by using certain fair value procedures. 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 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 are generally priced using fair value procedures.

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 liquidity and 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. 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. 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.
 
Unobservable inputs shall be used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity.  Unobservable inputs shall reflect the Company’s own beliefs about the assumptions that market participants would use in pricing the asset or liability (including assumptions about risk). Unobservable inputs shall be developed based on the best information available in the circumstances, which might include the Company’s own data. The Company’s own data shall be adjusted if information is reasonably available without undue cost and effort that indicates that market participants would use different assumptions.  Due to the inherent uncertaintly of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed.
 
Exchange-traded options are valued at the last reported sale price on any exchange on which they trade. If no sales are reported on any exchange on the measurement date, exchange-traded options are valued at the mean between the last highest bid and last lowest asked prices obtained as of the closing of the exchanges on which the option is traded. The value of Flexible Exchange Options (FLEX Options) are determined (i) by an evaluated price as determined by a third-party valuation service; or (ii) by using a quotation provided by a broker-dealer.

The Company generally values debt securities at evaluated bid prices obtained from an independent third-party valuation service that utilizes a pricing matrix based upon yield data for securities with similar characteristics, or based on a direct written broker-dealer quotation from a dealer who has made a market in the security. Debt securities with 60 days or less to maturity at time of purchase are valued on the basis of amortized cost, which approximates market value.
 
The following table presents the Company’s assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the period ended August 31, 2017.
 
   
Preferred Stock
    
Warrants
  
Balance – beginning of period
  
$
2,177,797
    
$
1,420,555
  
Purchases
    
-
      
-
  
Return of capital
    
-
      
-
  
Sales
    
-
      
(1,528,735
)
Total realized gains
    
-
      
1,224,001
  
Change in unrealized gains
    
115,928
      
(61,115,821
)
Balance – end of period
  
$
2,293,725
    
$
-
  

$115,928 of unrealized gains relate to investments that are still held at the end of the reporting period.

Certain of the Company’s investments are restricted and are valued as determined in accordance with fair value procedures.  The following table shows the shares, acquisition date, acquisition cost, fair value and the percent of net assets which the securities comprise at August 31, 2017.
 
Investment Security
 
 
 
Investment Type
  
Shares
  
Acquisition Date
  
Acquisition Cost
    
Fair Value
    
Fair Value as Percent of Net Assets
  
Targa Resources Corp., 9.500%
Preferred Stock
    
2,108
  
03/16/16
  
$
1,866,506
    
$
2,293,725
      
1.2
%
 
 
 
 
As of August 31, 2017, the aggregate cost of securities for federal income tax purposes was $285,192,858. The aggregate gross unrealized appreciation for all securities in which there was an excess of fair value over tax cost was $17,211,345, the aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over fair value was $36,829,598 and the net unrealized depreciation was $19,618,253.


Item 2. Controls and Procedures.
(a)  
The registrant’s
Chief Executive Officer, Principal Financial Officer and Treasurer has concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the “1940 Act”)) are effective as of a date within 90 days of the filing date of this report, based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act and Rule 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended.

(b)  
There was no change in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the registrant's last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.

Item 3. Exhibits.
Separate certifications for each principal executive officer and principal financial officer of the registrant as required by Rule 30a-2(a) under the 1940 Act (17 CFR 270.30a-2(a)) are filed herewith.


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.


 
Tortoise Pipeline & Energy Fund, Inc.
  
       
Date: October 30, 2017
By:
/s/ P. Bradley Adams  
    P. Bradley Adams  
   
Chief Executive Officer, Principal Financial Officer and Treasurer
  
       



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.

 
Tortoise Pipeline & Energy Fund, Inc.
  
       
Date: October 30, 2017
By:
/s/ P. Bradley Adams  
    P. Bradley Adams  
   
Chief Executive Officer, Principal Financial Officer and Treasurer