PIMCO New York Municipal Income Fund III
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM N-CSR

 

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT

INVESTMENT COMPANIES

Investment Company Act file number: 811-21189

PIMCO New York Municipal Income Fund III

(Exact name of registrant as specified in charter)

1633 Broadway, New York, NY 10019

(Address of principal executive offices)

William G. Galipeau

Treasurer (Principal Financial & Accounting Officer)

650 Newport Center Drive

Newport Beach, CA 92660

(Name and address of agent for service)

Copies to:

David C. Sullivan

Ropes & Gray LLP

Prudential Tower

800 Boylston Street

Boston, MA 02199

  Registrant’s telephone number, including area code: (844) 337-4626

  Date of fiscal year end: September 30

  Date of reporting period: September 30, 2015

Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.

A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.


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Item 1. Reports to Shareholders.

The following is a copy of the report transmitted to shareholders pursuant to Rule 30e-1 under the Investment Company Act of 1940, as amended (the “1940 Act”) (17 CFR 270.30e-1).


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LOGO

 

Your Global Investment Authority

 

 

PIMCO Closed-End Funds

LOGO

 

Annual Report

September 30, 2015

 

PIMCO Municipal Income Fund III

 

PIMCO California Municipal Income Fund III

 

PIMCO New York Municipal Income Fund III

 

LOGO

 

LOGO


Table of Contents

Table of Contents

 

            Page  
     

Letter from the Chairman of the Board & President

        2   

Important Information About the Funds

        5   

Financial Highlights

        16   

Statements of Assets and Liabilities

        18   

Statements of Operations

        19   

Statements of Changes in Net Assets

        20   

Notes to Financial Statements

        36   

Report of Independent Registered Public Accounting Firm

        53   

Glossary

        54   

Shareholder Meeting Results

        55   

Changes to Portfolio Managers

        56   

Dividend Reinvestment Plan

        57   

Management of the Funds

        59   

Matters Relating to the Trustees’ Consideration of the Annual Renewal of the Investment Management Agreement

        62   

Privacy Policy

        70   
     

Fund

   Fund
Summary
     Schedule of
Investments
 
     

PIMCO Municipal Income Fund III

     10        
22
  

PIMCO California Municipal Income Fund III

     12         29   

PIMCO New York Municipal Income Fund III

    
14
  
    
33
  


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Letter from the Chairman of the Board & President

 

Dear Shareholder:

 

The financial markets experienced periods of volatility during the reporting period. Investor sentiment was challenged at times given mixed economic data, uncertainties surrounding future global monetary policy and geopolitical issues.

 

For the 12-month reporting period ended September 30, 2015

 

After expanding in the fourth quarter of 2014, economic growth in the U.S. moderated during the first quarter of 2015. Looking back, U.S. gross domestic product (“GDP”), which represents the value of goods and services produced in the country, the broadest measure of economic activity and the principal indicator of economic performance, expanded at a 2.1% annual pace during the fourth quarter of 2014. According to the Commerce Department, GDP grew at a tepid annual pace of 0.6% for the first quarter of 2015. This was attributed to contractions in net exports, nonresidential fixed investment (i.e., spending on plants and equipment) and state and local government spending. However, this appeared to be a temporary setback, as GDP grew at a 3.9% annual pace during the second quarter of 2015. Finally, the Commerce Department’s initial estimate — released after the reporting period had ended — showed that GDP grew at an annual pace of 1.5% for the third quarter of 2015.

 

Federal Reserve (“Fed”) monetary policy remained accommodative. However, the Fed appeared to be moving closer to raising interest rates for the first time since 2006. As expected, following its meeting in October 2014, the Fed announced that it had concluded its asset purchase program. At its March 2015 meeting, the Fed eliminated the word “patient” from its official statement regarding when it may start raising rates. At its meeting in July, the Fed said that it “…currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run.” Finally, at its meeting in September, the Fed kept rates on hold between 0% and 0.25%. In her press conference following the September meeting, Fed Chair Janet Yellen said that policy makers had decided to take “a little bit more time to evaluate the likely impacts” of recent market volatility on the U.S. before raising interest rates.

 

Despite periods of volatility, the municipal bond market generated a positive return during the 12-month reporting period ended September 30, 2015. The overall municipal market, as measured by the Barclays Municipal Bond Index, posted positive returns during five of the first six months of the reporting period. Supporting the municipal market were generally improving fundamentals, attractive valuations and falling longer-term interest rates. In addition, investor demand was largely solid. The municipal market then declined from April through June, as interest rates moved higher, investor demand waned and new supply was robust. However, the municipal market rallied over the last three months of the period due to several flights to quality

 

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which generally pushed interest rates lower. All told, the Barclays Municipal Bond Index gained 3.16% during the 12 months ended September 30, 2015. In comparison, the overall taxable fixed income market, as measured by the Barclays U.S. Aggregate Bond Index, gained 2.94%.

 

Outlook

 

PIMCO continues to see a multi-speed world of economies converging to modest trend growth rates. For the U.S., PIMCO’s baseline view is for economic growth in the range of 2.25% to 2.75% over the next year and Consumer Price Index inflation of 1.75% to 2.25%. This baseline represents a modest pickup in growth and inflation relative to the pace recorded in the first half of 2015, and it is slightly below the pace of GDP growth over the most recent four quarters. In PIMCO’s view, projected employment and labor income gains should support consumption, while historically low mortgage rates and a pent-up demand for housing should boost residential construction. In contrast to robust consumption and housing, business investment confronts the headwinds from low oil prices and cutbacks in drilling and exploration. In addition, PIMCO believes that exports will be challenged by the delayed effects of a stronger U.S. dollar and slower growth in emerging economies. It is PIMCO’s view that one consequence of the market’s summer sell-off has been to lower the odds of an overly aggressive policy mistake from the Fed. PIMCO also believes that the Fed is alert to the state of financial conditions and is inclined to go slow once it starts to raise rates to avoid tightening too much.

 

PIMCO’s outlook for the municipal market remains positive due to improving credit fundamentals and favorable pre-tax equivalent valuations. That being said, PIMCO acknowledges the potential for interest rate volatility, additional supply pressures, or negative credit headlines.

 

In the following pages of this PIMCO Closed-End Funds Annual Report, please find specific details regarding investment performance and a discussion of factors that most affected the Funds’ performance over the 12 months ended September 30, 2015.

 

Thank you for investing with us. We value your trust and will continue to work diligently to meet your investment needs. If you have questions regarding any of your PIMCO Closed-End Funds investments, please contact your financial advisor or call the Funds’ shareholder servicing agent at (844) 33-PIMCO or (844) 337-4626. We also invite you to visit our website at www.pimco.com to learn more about our views.

 

  ANNUAL REPORT   SEPTEMBER 30, 2015    3


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Letter from the Chairman of the Board & President (Cont.)

 

 

We remain dedicated to serving your investment needs.

 

Sincerely,

 

LOGO   LOGO
LOGO   LOGO
Hans W. Kertess   Peter G. Strelow
Chairman of the Board of Trustees   President

 

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Important Information About the Funds

 

We believe that bond funds have an important role to play in a well-diversified investment portfolio. It is important to note, however, that in an environment where interest rates trend upward, rising rates would negatively impact the performance of most bond funds, and fixed- income securities held by a Fund are likely to decrease in value. A number of factors can cause interest rates to rise (e.g., central bank monetary policies, inflation rates, general economic conditions, etc.). Accordingly, changes in interest rates can be sudden, and there is no guarantee that Fund Management will anticipate such movement.

 

As of the date of this report, interest rates in the U.S. are at or near historically low levels. As such, bond funds may currently face an increased exposure to the risks associated with rising interest rates. This is especially true since the Federal Reserve Board has concluded its quantitative easing program. Further, while the U.S. bond market has steadily grown over the past three decades, dealer inventories of corporate bonds have remained relatively stagnant. As a result, there has been a significant reduction in the ability of dealers to “make markets” in corporate bonds. All of the factors mentioned above, individually or collectively, could lead to increased volatility and/or lower liquidity in the fixed income markets, which could result in increased losses to a Fund. Bond funds and individual bonds with a longer duration (a measure of the sensitivity of a security’s price to changes in interest rates) tend to be more sensitive to changes in interest rates, usually making them more volatile than securities or funds with shorter durations. In addition, in the current low interest rate environment, the market price of the Funds’ common shares may be particularly sensitive to changes in interest rates or the perception that there will be a change in interest rates.

 

The use of derivatives may subject the Funds to greater volatility than investments in traditional securities. The Funds may use derivative instruments for hedging purposes or as part of an investment strategy. Use of these instruments may involve certain costs and risks such as liquidity risk, interest rate risk, market risk, call risk, credit risk, management risk and the risk that a Fund could not close out a position when it would be most advantageous to do so. Certain derivative transactions may have a leveraging effect on a Fund. For example, a small investment in a derivative instrument may have a significant impact on a Fund’s exposure to interest rates, currency exchange rates or other investments. As a result, a relatively small price movement in a derivative instrument may cause an immediate and substantial loss or gain, which translates into heightened volatility in a Fund’s net asset value (“NAV”). A Fund may engage in such transactions regardless of whether the Fund owns the asset, instrument or components of the index underlying a derivative instrument. A Fund may invest a significant portion of its assets in these types of instruments. If it does, a Fund’s investment exposure could far exceed the value of its portfolio securities and its investment performance could be primarily dependent upon securities it does not directly own.

 

A Fund’s use of leverage creates the opportunity for increased income for the Fund’s common shareholders, but also creates special risks. Leverage is a speculative technique that may expose a Fund to greater risk and increased costs. If shorter-term interest rates rise relative to the rate of return on a Fund’s portfolio, the interest and other costs to the Fund of leverage could exceed the rate of return on the debt obligations and other investments held by the Fund, thereby reducing return to the Fund’s common shareholders. In addition, fees and expenses of any form of leverage used by a Fund will be borne entirely by its common shareholders (and not by preferred shareholders, if any) and will reduce the investment return of the Fund’s common shares. There can be no assurance that a Fund’s use of leverage will result in a higher yield on its common shares, and it may result in losses. Leverage creates several major types of risks for a Fund’s common shareholders,

 

  ANNUAL REPORT   SEPTEMBER 30, 2015    5


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Important Information About the Funds (Cont.)

 

 

including: (1) the likelihood of greater volatility of net asset value and market price of the Fund’s common shares, and of the investment return to the Fund’s common shareholders, than a comparable portfolio without leverage; (2) the possibility either that the Fund’s common share dividends will fall if the interest and other costs of leverage rise, or that dividends paid on the Fund’s common shares will fluctuate because such costs vary over time; and (3) the effects of leverage in a declining market or a rising interest rate environment, as leverage is likely to cause a greater decline in the net asset value of the Fund’s common shares than if the Fund were not leveraged and may result in a greater decline in the market value of the Fund’s common shares.

 

There is a risk that a Fund investing in a tender option bond program will not be considered the owner of a tender option bond for federal income tax purposes, and thus will not be entitled to treat such interest as exempt from federal income tax. Certain tender option bonds may be illiquid or may become illiquid as a result of, among other things, a credit rating downgrade, a payment default or a disqualification from tax-exempt status. Regulators recently finalized rules implementing Section 619 (the “Volcker Rule”) and Section 941 (the “Risk Retention Rules”) of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Both the Volcker Rule and the Risk Retention Rules apply to tender option bond programs and may require that such programs be restructured. At this time, the full impact of these rules is not certain, however, in response to these rules, industry participants have begun to explore various structuring alternatives for existing and new trusts. For example, under a new tender option bond structure, a Fund would structure and sponsor a tender option bond trust. As a result, a Fund would be required to assume certain responsibilities and risks as the sponsor of the tender option bond trust. Because of the important role that tender option bond programs play in the municipal bond market, it is possible that implementation of these rules and any resulting impact may adversely impact the municipal bond market and the Funds. For example, as a result of the implementation of these rules, the municipal bond market may experience reduced demand or liquidity and increased financing costs. A Fund’s investment in the securities issued by a tender option bond trust may involve greater risk and volatility than an investment in a fixed rate bond, and the value of such securities may decrease significantly when market interest rates increase. Tender option bond trusts could be terminated due to market, credit or other events beyond the Funds’ control, which could require the Funds to reduce leverage and dispose of portfolio investments at inopportune times and prices. A Fund may use a tender option bond program as a way of achieving leverage in its portfolio, in which case the Fund will be subject to leverage risk.

 

High-yield bonds (commonly referred to as “junk bonds”) typically have a lower credit rating than other bonds. Lower-rated bonds generally involve a greater risk to principal than higher-rated bonds. Further, markets for lower-rated bonds are typically less liquid than for higher-rated bonds, and public information is usually less abundant in such markets. Thus, high yield investments increase the chance that a Fund will lose money on its investment. The Funds may also invest in bonds and other instruments that are not rated, but which PIMCO considers to be equivalent to high-yield investments. The Funds may hold defaulted securities that may involve special considerations including bankruptcy proceedings, other regulatory and legal restrictions affecting the Funds’ ability to trade, and the availability of prices from independent pricing services or dealer quotations. Defaulted securities are often illiquid and may not be actively traded. Sale of securities in bankrupt companies at an acceptable price may be difficult and differences compared to the value of the securities used by the Funds could be material.

 

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Variable and floating rate securities generally are less sensitive to interest rate changes but may decline in value if their interest rates do not rise as much, or as quickly, as interest rates in general. Conversely floating rate securities will not generally increase in value if interest rates decline. Inverse floating rate securities may decrease in value if interest rates increase. Inverse floating rate securities may also exhibit greater price volatility than a fixed rate obligation with similar credit quality. When a Fund holds variable or floating rate securities, a decrease (or, in the case of inverse floating rate securities, an increase) in market interest rates will adversely affect the income received from such securities and the NAV of the Funds’ shares.

 

A Fund that concentrates its investments in California municipal bonds may be affected significantly by economic, regulatory or political developments affecting the ability of California issuers to pay interest or repay principal. Certain issuers of California municipal bonds have experienced serious financial difficulties in the past and reoccurrence of these difficulties may impair the ability of certain California issuers to pay principal or interest on their obligations. Provisions of the California Constitution and State statutes that limit the taxing and spending authority of California governmental entities may impair the ability of California issuers to pay principal and/or interest on their obligations. While California’s economy is broad, it does have major concentrations in high technology, aerospace and defense-related manufacturing, trade, entertainment, real estate and financial services, and may be sensitive to economic problems affecting those industries. Future California political and economic developments, constitutional amendments, legislative measures, executive orders, administrative regulations, litigation and voter initiatives could have an adverse effect on the debt obligations of California issuers.

 

A Fund that concentrates its investments in New York municipal bonds may be affected significantly by economic, regulatory or political developments affecting the ability of New York issuers to pay interest or repay principal. While New York’s economy is broad, it does have concentrations in the financial services industry, and may be sensitive to economic problems affecting that industry. Certain issuers of New York municipal bonds have experienced serious financial difficulties in the past and a reoccurrence of these difficulties may impair the ability of certain New York issuers to pay principal or interest on their obligations. The financial health of New York City affects that of the State, and when New York City experiences financial difficulty it may have an adverse effect on New York municipal bonds held by a Fund. The growth rate of New York has at times been somewhat slower than the nation overall. The economic and financial condition of New York also may be affected by various financial, social, economic and political factors.

 

The common shares of the Funds trade on the New York Stock Exchange. As with any stock, the price of a Fund’s common shares will fluctuate with market conditions and other factors. If you sell your common shares of a Fund, the price received may be more or less than your original investment. Shares of closed-end management investment companies frequently trade at a discount from their net asset value. The common shares of a Fund may trade at a price that is less than the initial offering price and/or the net asset value of such shares. Further, if a Fund’s shares trade at a price that is more than the initial offering price and/or the net asset value of such shares, including at a substantial premium and/or for an extended period of time, there is no assurance that any such premium will be sustained for any period of time and will not decrease, or that the shares will not trade at a discount to net asset value thereafter.

 

Income distributions and capital gain distributions are determined in accordance with income tax regulations which may differ from U.S. GAAP. Differences between tax regulations and U.S. GAAP

 

  ANNUAL REPORT   SEPTEMBER 30, 2015    7


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Important Information About the Funds (Cont.)

 

 

may cause timing differences between income and capital gain recognition. Further, the character of investment income and capital gains may be different for certain transactions under the two methods of accounting. As a result, income distributions and capital gain distributions declared during a fiscal period may differ significantly from the net investment income (loss) and realized gains (losses) reported on each Fund’s annual financial statements presented under U.S. GAAP.

 

The Funds may be subject to various risks in addition to those described above. Some of these risks may include, but are not limited to, the following: asset allocation risk, credit risk, stressed securities risk, distressed and defaulted securities risk, corporate bond risk, market risk, issuer risk, liquidity risk, equity securities and related market risk, mortgage-related and other asset-backed securities risk, extension risk, prepayment risk, privately issued mortgage-related securities risk, mortgage market/subprime risk, currency risk, redenomination risk, non-diversification risk, management risk, municipal bond risk, tender option bond risk, inflation-indexed security risk, senior debt risk, loans, participations and assignments risk, reinvestment risk, real estate risk, U.S. Government securities risk, foreign (non-U.S.) government securities risk, valuation risk, segregation and cover risk, focused investment risk, credit default swaps risk, event-linked securities risk, counterparty risk, preferred securities risk, confidential information access risk, other investment companies risk, private placements risk, inflation/deflation risk, regulatory risk, tax risk, recent economic conditions risk, market disruptions and geopolitical risk, potential conflicts of interest involving allocation of investment opportunities, repurchase agreements risk, securities lending risk, zero-coupon bond and payment-in-kind securities risk, portfolio turnover risk, smaller company risk, short sale risk and convertible securities risk. A description of certain of these risks is available in the Notes to Financial Statements of this Report.

 

On each Fund Summary page in this Shareholder Report, the Average Annual Total Return table measures performance assuming that all dividend and capital gain distributions were reinvested. Total return is calculated by determining the percentage change in NAV or market price (as applicable) in the specified period. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions. Total return for a period of more than one year represents the average annual total return. Performance at market price will differ from results at NAV. Although market price returns tend to reflect investment results over time, during shorter periods returns at market price can also be influenced by factors such as changing views about a Fund, market conditions, supply and demand for the Fund’s shares, or changes in the Fund’s dividends. Performance shown is net of fees and expenses.

 

The following table discloses the commencement of operations of each Fund:

 

Fund Name       Commencement
of Operations
 
PIMCO Municipal Income Fund III       10/31/2002   
PIMCO California Municipal Income Fund III       10/31/2002   
PIMCO New York Municipal Income Fund III       10/31/2002   

 

An investment in a Fund is not a deposit of a bank and is not guaranteed or insured by the Federal Deposit Insurance Corporation or any other government agency. It is possible to lose money on investments in the Funds.

 

PIMCO has adopted written proxy voting policies and procedures (“Proxy Policy”) as required by Rule 206(4)-6 under the Investment Advisers Act of 1940. The Proxy Policy has been adopted by the

 

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Funds as the policies and procedures that PIMCO will use when voting proxies on behalf of the Funds. A description of the policies and procedures that PIMCO uses to vote proxies relating to portfolio securities of each Fund, and information about how each Fund voted proxies relating to portfolio securities held during the most recent twelve-month period ended June 30, are available without charge, upon request, by calling the Funds at (844) 33-PIMCO (844-337-4626), on the Funds’ website at www.pimco.com, and on the Securities and Exchange Commission’s (“SEC”) website at http://www.sec.gov.

 

Each Fund files a complete schedule of its portfolio holdings with the SEC for the first and third quarters of its fiscal year on Form N-Q. A copy of each Fund’s Form N-Q is available on the SEC’s website at http://www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C., and is available without charge, upon request by calling the Funds at (844) 33-PIMCO (844-337-4626) and on the Funds’ website at www.pimco.com.

 

Updated portfolio holdings information about a Fund will be available at www.pimco.com approximately 15 calendar days after such Fund’s most recent fiscal quarter end, and will remain accessible until such Fund files a Form N-Q or a shareholder report for the period which includes the date of the information. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.

 

  ANNUAL REPORT   SEPTEMBER 30, 2015    9


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PIMCO Municipal Income Fund III    Symbol on NYSE -  PMX

 

Allocation Breakdown  
California      17.3%   
Alabama      11.2%   
Texas      10.5%   
New York      10.3%   
Ohio      7.0%   
Arizona      6.7%   
Illinois      5.1%   
Other      31.9%   

 

   

% of Investments, at value as of 09/30/15. Financial derivative instruments, if any, are excluded.

 

Fund Information (as of September 30, 2015)(1)  
Market Price      $10.97   
NAV      $10.88   
Premium/(Discount) to NAV      0.83%   
Market Price Distribution Yield (2)      6.81%   
NAV Distribution Yield (2)      6.87%   
Total Effective Leverage (3)      38%   
 

 

Average Annual Total Return (1) for the period ended September 30, 2015  
     1 Year      5 Year      10 Year      Commencement
of Operations
(10/31/02)
 
Market Price      9.65%         6.89%         3.91%         4.83%   
NAV      8.09%         9.51%         4.72%         5.39%   

 

All Fund returns are net of fees and expenses.

 

(1) 

Performance quoted represents past performance. Past performance is not a guarantee or a reliable indicator of future results. Current performance may be lower or higher than performance shown. Investment return and the principal value of an investment will fluctuate. Total return, market price, NAV, market price distribution yield, and NAV distribution yield will fluctuate with changes in market conditions. For performance current to the most recent month-end, visit www.pimco.com or call (844) 33-PIMCO.

(2) 

Distribution yields are not performance and are calculated by annualizing the most recent distribution per share and dividing by the NAV or Market Price, as applicable, as of the reported date. Distributions may be comprised of ordinary income, net capital gains, and/or a return of capital (ROC) of your investment in the Fund. Because the distribution rate may include a ROC, it should not be confused with yield or income. If the Fund estimates that a portion of its distribution may be comprised of amounts from sources other than net investment income, the Fund will notify shareholders of the estimated composition of such distribution through a Section 19 Notice. Please refer to the most recent Section 19 Notice, if applicable, for additional information regarding the composition of distributions. Please visit www.pimco.com for most recent Section 19 Notice, if applicable. Final determination of a distribution’s tax character will be made on Form 1099 DIV sent to shareholders each January.

(3) 

Represents total effective leverage outstanding, as a percentage of total managed assets. Total effective leverage consists of preferred shares, reverse repurchase agreements and other borrowings, credit default swap notional and floating rate notes issued in tender option bond transactions, as applicable (collectively “Total Effective Leverage”). The Fund may engage in other transactions not included in Total Effective Leverage disclosed above that may give rise to a form of leverage, including certain derivative transactions. For the purpose of calculating Total Effective Leverage outstanding as a percentage of total managed assets, total managed assets refer to total assets (including assets attributable to Total Effective Leverage that may be outstanding) minus accrued liabilities (other than liabilities representing Total Effective Leverage).

 

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Investment Objective and Strategy Overview

 

»  

PIMCO Municipal Income Fund III’s primary investment objective is to seek current income exempt from federal income tax.

 

Fund Insights

 

»  

The Fund’s long effective duration (or sensitivity to changes in market interest rates) exposure contributed to performance, as longer-maturity municipal yields declined during the reporting period.

 

»  

An overweight to the revenue-backed sector contributed to performance, as the sector outperformed the general municipal bond market during the reporting period.

 

»  

An overweight to the high yield tobacco sector contributed to performance, as the sector outperformed the general municipal bond market during the reporting period.

 

»  

Underweights to the transportation and education sectors detracted from performance, as the sectors outperformed the general municipal bond market during the reporting period.

 

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PIMCO California Municipal Income Fund III    Symbol on NYSE -  PZC

 

Allocation Breakdown  
California      93.0%   
Short-Term Instruments      2.9%   
Illinois      2.5%   
Indiana      1.4%   
New Jersey      0.2%   

 

   

% of Investments, at value as of 09/30/15. Financial derivative instruments, if any, are excluded.

Fund Information (as of September 30, 2015)(1)  
Market Price      $10.94   
NAV      $10.08   
Premium/(Discount) to NAV      8.53%   
Market Price Distribution Yield (2)      6.58%   
NAV Distribution Yield (2)      7.14%   
Total Effective Leverage (3)      41%   
 

 

Average Annual Total Return (1) for the period ended September 30, 2015  
     1 Year      5 Year      10 Year      Commencement
of Operations
(10/31/02)
 
Market Price      12.80%         8.76%         3.92%         4.62%   
NAV      8.03%         8.81%         3.45%         4.44%   

 

All Fund returns are net of fees and expenses.

 

(1) 

Performance quoted represents past performance. Past performance is not a guarantee or a reliable indicator of future results. Current performance may be lower or higher than performance shown. Investment return and the principal value of an investment will fluctuate. Total return, market price, NAV, market price distribution yield, and NAV distribution yield will fluctuate with changes in market conditions. For performance current to the most recent month-end, visit www.pimco.com or call (844) 33-PIMCO.

(2) 

Distribution yields are not performance and are calculated by annualizing the most recent distribution per share and dividing by the NAV or Market Price, as applicable, as of the reported date. Distributions may be comprised of ordinary income, net capital gains, and/or a return of capital (ROC) of your investment in the Fund. Because the distribution rate may include a ROC, it should not be confused with yield or income. If the Fund estimates that a portion of its distribution may be comprised of amounts from sources other than net investment income, the Fund will notify shareholders of the estimated composition of such distribution through a Section 19 Notice. Please refer to the most recent Section 19 Notice, if applicable, for additional information regarding the composition of distributions. Please visit www.pimco.com for most recent Section 19 Notice, if applicable. Final determination of a distribution’s tax character will be made on Form 1099 DIV sent to shareholders each January.

(3) 

Represents total effective leverage outstanding, as a percentage of total managed assets. Total effective leverage consists of preferred shares, reverse repurchase agreements and other borrowings, credit default swap notional and floating rate notes issued in tender option bond transactions, as applicable (collectively “Total Effective Leverage”). The Fund may engage in other transactions not included in Total Effective Leverage disclosed above that may give rise to a form of leverage, including certain derivative transactions. For the purpose of calculating Total Effective Leverage outstanding as a percentage of total managed assets, total managed assets refer to total assets (including assets attributable to Total Effective Leverage that may be outstanding) minus accrued liabilities (other than liabilities representing Total Effective Leverage).

 

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Investment Objective and Strategy Overview

 

»  

PIMCO California Municipal Income Fund III’s primary investment objective is to seek current income exempt from federal and California income tax.

 

Fund Insights

 

»  

The Fund’s long effective duration (or sensitivity to changes in market interest rates) exposure contributed to performance, as longer-maturity municipal yields declined during the reporting period.

 

»  

An overweight to the revenue-backed sector contributed to performance, as the sector outperformed the general municipal bond market during the reporting period.

 

»  

An overweight to the high yield tobacco sector contributed to performance, as the sector outperformed the general municipal bond market during the reporting period.

 

»  

An overweight to the health care sector contributed to performance, as the sector outperformed the general municipal bond market during the reporting period.

 

»  

An underweight to the transportation sector detracted from performance, as the sector outperformed the general municipal bond market during the reporting period.

 

»  

Exposure to the lease-backed sector detracted from performance, as the sector underperformed the general municipal bond market during the reporting period.

 

  ANNUAL REPORT   SEPTEMBER 30, 2015    13


Table of Contents
PIMCO New York Municipal Income Fund III    Symbol on NYSE -  PYN

 

Allocation Breakdown  
New York      93.2%   
Illinois      2.1%   
Short-Term Instruments      2.1%   
Ohio      2.0%   
U.S. Virgin Islands      0.6%   

 

   

% of Investments, at value as of 09/30/15. Financial derivative instruments, if any, are excluded.

 

Fund Information (as of September 30, 2015)(1)  
Market Price      $9.87   
NAV      $9.42   
Premium/(Discount) to NAV      4.78%   
Market Price Distribution Yield (2)      6.38%   
NAV Distribution Yield (2)      6.69%   
Total Effective Leverage (3)      41%   
 

 

Average Annual Total Return (1) for the period ended September 30, 2015  
     1 Year      5 Year      10 Year      Commencement
of Operations
(10/31/02)
 
Market Price      11.09%         7.20%         1.63%         3.27%   
NAV      6.76%         7.31%         1.85%         3.27%   

 

All Fund returns are net of fees and expenses.

 

(1) 

Performance quoted represents past performance. Past performance is not a guarantee or a reliable indicator of future results. Current performance may be lower or higher than performance shown. Investment return and the principal value of an investment will fluctuate. Total return, market price, NAV, market price distribution yield, and NAV distribution yield will fluctuate with changes in market conditions. For performance current to the most recent month-end, visit www.pimco.com or call (844) 33-PIMCO.

(2) 

Distribution yields are not performance and are calculated by annualizing the most recent distribution per share and dividing by the NAV or Market Price, as applicable, as of the reported date. Distributions may be comprised of ordinary income, net capital gains, and/or a return of capital (ROC) of your investment in the Fund. Because the distribution rate may include a ROC, it should not be confused with yield or income. If the Fund estimates that a portion of its distribution may be comprised of amounts from sources other than net investment income, the Fund will notify shareholders of the estimated composition of such distribution through a Section 19 Notice. Please refer to the most recent Section 19 Notice, if applicable, for additional information regarding the composition of distributions. Please visit www.pimco.com for most recent Section 19 Notice, if applicable. Final determination of a distribution’s tax character will be made on Form 1099 DIV sent to shareholders each January.

(3) 

Represents total effective leverage outstanding, as a percentage of total managed assets. Total effective leverage consists of preferred shares, reverse repurchase agreements and other borrowings, credit default swap notional and floating rate notes issued in tender option bond transactions, as applicable (collectively “Total Effective Leverage”). The Fund may engage in other transactions not included in Total Effective Leverage disclosed above that may give rise to a form of leverage, including certain derivative transactions. For the purpose of calculating Total Effective Leverage outstanding as a percentage of total managed assets, total managed assets refer to total assets (including assets attributable to Total Effective Leverage that may be outstanding) minus accrued liabilities (other than liabilities representing Total Effective Leverage).

 

14   PIMCO CLOSED-END FUNDS    


Table of Contents

Investment Objective and Strategy Overview

 

»  

PIMCO New York Municipal Income Fund III’s primary investment objective is to seek current income exempt from federal, New York State and New York City income tax.

 

Fund Insights

 

»  

The Fund’s long effective duration (or sensitivity to changes in market interest rates) exposure contributed to performance, as longer-maturity municipal yields declined during the reporting period.

 

»  

An overweight to the revenue-backed sector contributed to performance, as it outperformed the general municipal bond market during the reporting period.

 

»  

An overweight to the high yield tobacco sector contributed to performance, as the sector outperformed the general municipal bond market during the reporting period.

 

»  

An overweight to the industrial revenue sector contributed to performance, as the sector outperformed the general municipal bond market during the reporting period.

 

»  

An underweight to the water/sewer utility sector detracted from performance, as the sector outperformed the general municipal bond market during the reporting period.

 

»  

An underweight to the transportation sector detracted from performance, as the sector outperformed the general municipal bond market during the reporting period.

 

  ANNUAL REPORT   SEPTEMBER 30, 2015    15


Table of Contents

Financial Highlights

 

Selected Per Common Share
Data for the Year Ended:
 

Net Asset

Value

Beginning

of Year

   

Net

Investment

Income (a)

   

Net Realized/

Unrealized

Gain (Loss)

   

Total from

Investment

Operations

   

Distributions

on Preferred

Shares

from Net

Investment

Income

   

Net Increase

(Decrease) in

Net Assets

Applicable

to Common

Shareholders

Resulting from

Investment

Operations

   

Distributions

to Common

Shareholders

from Net

Investment

Income

 

PIMCO Municipal
Income Fund III

             

09/30/2015

  $ 10.78      $ 0.78      $ 0.08      $ 0.86      $ (0.01   $ 0.85      $ (0.75

09/30/2014

    9.58        0.75        1.25        2.00        (0.01     1.99        (0.79

09/30/2013

    11.02        0.75        (1.34     (0.59     (0.01     (0.60     (0.84

09/30/2012

    9.69        0.83        1.35        2.18        (0.01     2.17        (0.84

09/30/2011

    10.29        0.87        (0.61     0.26        (0.02     0.24        (0.84

PIMCO California
Municipal
Income Fund III

             

09/30/2015

  $  10.02      $  0.68      $ 0.11      $ 0.79      $  (0.01   $ 0.78      $  (0.72

09/30/2014

    9.09        0.69        0.97        1.66        (0.01     1.65        (0.72

09/30/2013

    10.23        0.79         (1.20      (0.41     (0.01      (0.42     (0.72

09/30/2012

    9.08        0.81        1.07        1.88        (0.01     1.87        (0.72

09/30/2011

    9.65        0.77        (0.60     0.17        (0.02     0.15        (0.72

PIMCO New York
Municipal
Income Fund III

             

09/30/2015

  $ 9.43      $ 0.57      $ 0.06      $ 0.63      $ (0.01   $ 0.62      $ (0.63

09/30/2014

    8.51        0.56        1.00        1.56        (0.01     1.55        (0.63

09/30/2013

    9.65        0.62        (1.12     (0.50     (0.01     (0.51     (0.63

09/30/2012

    8.82        0.77        0.70        1.47        (0.01     1.46        (0.63

09/30/2011

    9.38        0.69        (0.60     0.09        (0.02     0.07        (0.63

 

(a) 

Per share amounts based on average number of common shares outstanding during the year.

(b) 

Determined in accordance with federal income tax regulations, see Note 2(b) in the Notes to Financial Statements for more information.

(c) 

Total investment return is calculated assuming a purchase of a common share at the market price on the first day and a sale of a common share at the market price on the last day of each year reported. Dividends and distributions, if any, are assumed, for purposes of this calculation, to be reinvested at prices obtained under the Funds’ dividend reinvestment plan. Total investment return does not reflect brokerage commissions in connection with the purchase or sale of Fund shares.

(d) 

Calculated on the basis of income and expenses applicable to both common and preferred shares relative to the average net assets of common shareholders.

(e) 

Interest expense primarily relates to participation in borrowing and financing transactions. See Note 5 in the Notes to Financial Statements for more information.

 

16   PIMCO CLOSED-END FUNDS     See Accompanying Notes


Table of Contents
Total
Distri
butions
to
Common
Share
holders (b)
    Net
Asset
Value
End
of Year
    Market
Price
End
of Year
    Total
Invest
ment
Return (c)
    Net
Assets
Appli
cable
to
Common
Share
holders
End  of
Year
(000s)
    Ratio
of
Expenses
to
Average
Net
Assets
(d)(e)
    Ratio
of
Expenses
to
Average
Net
Assets
Excluding
Waivers
(d)(e)
    Ratio
of
Expenses
to
Average
Net
Assets
Excluding
Interest
Expense (d)
    Ratio  of
Expenses
to
Average
Net
Assets
Excluding
Interest
Expense
and
Waivers (d)
    Ratio
of Net
Invest
ment
Income
to
Average
Net
Assets
    Preferred
Shares
Asset
Coverage
Per
Share
    Portfolio
Turnover
Rate
 
                     
$ (0.75   $ 10.88      $ 10.97        9.65   $ 355,368        1.23     1.23     1.17     1.17     7.14   $ 72,006        5
  (0.79     10.78        10.71        10.69        351,139        1.29        1.29        1.23        1.23        7.47        71,447        15   
  (0.84     9.58        10.45        (15.39     311,231        1.27        1.27        1.20        1.20        7.04        66,168        20   
  (0.84     11.02        13.31        33.20        357,139        1.27        1.33        1.17        1.23        8.00        72,239        25   
  (0.84     9.69        10.75        2.01        313,021        1.44        1.46        1.28        1.30        9.39        66,404        14   
                     
$ (0.72   $  10.08      $  10.94        12.80   $  223,030        1.30     1.30     1.21     1.21     6.68   $  69,605        24
  (0.72     10.02        10.40        19.73        221,415        1.37        1.37        1.26        1.26        7.29        69,282        11   
  (0.72     9.09        9.36        (13.98     200,245        1.35        1.35        1.25        1.25        7.93        65,409        25   
  (0.72     10.23        11.68        31.62        224,596        1.34        1.40        1.20        1.26        8.40        69,918        10   
  (0.72     9.08        9.53        (0.47     198,748        1.48        1.50        1.32        1.34        9.01        64,749        11   
                     
$  (0.63   $ 9.42      $ 9.87        11.09   $ 53,458        1.55     1.55     1.49     1.49     6.04   $ 66,764        13
  (0.63     9.43        9.49        9.47        53,369        1.66        1.66        1.60        1.60        6.31        66,695        24   
  (0.63     8.51        9.30        (6.83     48,007        1.65        1.65        1.56        1.56        6.72        62,505        17   
  (0.63     9.65        10.66        26.56        54,327        1.64        1.70        1.50        1.56        8.42        67,441        16   
  (0.63     8.82        9.00        (1.27     49,490        1.73        1.75        1.58        1.60        8.07        63,663        9   

 

  ANNUAL REPORT   SEPTEMBER 30, 2015    17


Table of Contents

Statements of Assets and Liabilities

 

     September 30, 2015

 

(Amounts in thousands, except per share amounts)    PIMCO
Municipal
Income Fund III
     PIMCO
California
Municipal
Income Fund III
     PIMCO
New York
Municipal
Income Fund III
 

Assets:

        

Investments, at value

                          

Investments in securities*

   $ 563,741       $ 373,779       $ 89,131   

Cash

     569         518         557   

Receivable for investments sold

     25         0         0   

Interest receivable

     8,762         5,178         1,144   

Other assets

     5         3         0   

Total Assets

       573,102         379,478         90,832   

Liabilities:

        

Borrowings & Other Financing Transactions

                          

Payable for tender option bond floating rate certificates

   $ 26,156       $ 28,288       $ 4,942   

Payable for investments purchased

     0         1,411         0   

Distributions payable to common shareholders

     2,035         1,328         298   

Distributions payable to preferred shareholders

     3         2         0   

Accrued management fees

     313         203         60   

Other liabilities

     227         216         74   

Total Liabilities

     28,734         31,448         5,374   

Preferred Shares ($0.00001 par value and $25,000 liquidation preference per share applicable to an aggregate of 7,560, 5,000 and 1,280 shares issued and outstanding, respectively)

     189,000         125,000         32,000   

Net Assets Applicable to Common Shareholders

   $ 355,368       $ 223,030       $ 53,458   

Composition of Net Assets Applicable to Common Shareholders:

        

Common Shares:

                          

Par value ($0.00001 per share)

   $ 0       $ 0       $ 0   

Paid in capital in excess of par

     436,235         291,012         75,890   

Undistributed (overdistributed) net investment income

     (201      5,160         1,007   

Accumulated undistributed net realized (loss)

       (141,461        (107,147        (30,825

Net unrealized appreciation

     60,795         34,005         7,386   
     $ 355,368       $ 223,030       $ 53,458   

Common Shares Issued and Outstanding

     32,658         22,134         5,677   

Net Asset Value Per Common Share

   $ 10.88       $ 10.08       $ 9.42   

Cost of Investments in securities

   $ 502,956       $ 339,711       $ 81,728   

* Includes repurchase agreements of:

   $ 0       $ 10,600       $ 0   

 

 

A zero balance may reflect actual amounts rounding to less than one thousand.

 

18   PIMCO CLOSED-END FUNDS     See Accompanying Notes


Table of Contents

Statements of Operations

 

 

Year Ended September 30, 2015                     
(Amounts in thousands)    PIMCO
Municipal
Income Fund III
     PIMCO
California
Municipal
Income Fund III
     PIMCO
New York
Municipal
Income Fund III
 

Investment Income:

        

Interest

   $   29,850       $   17,854       $   4,082   

Total Income

     29,850         17,854         4,082   

Expenses:

        

Management fees

     3,843         2,492         737   

Auction agent fees and commissions

     285         190         48   

Trustee fees and related expenses

     42         24         8   

Interest expense

     200         203         32   

Auction rate preferred shares related expenses

     11         11         11   

Total Expenses

     4,381         2,920         836   

Net Investment Income

     25,469         14,934         3,246   

Net Realized Gain:

        

Investments in securities

     1,031         4,105         106   

Net Realized Gain

     1,031         4,105         106   

Net Change in Unrealized Appreciation (Depreciation):

        

Investments in securities

     1,472         (1,806      158   

Net Change in Unrealized Appreciation (Depreciation)

     1,472         (1,806      158   

Net Increase in Net Assets Resulting from Operations

     27,972         17,233         3,510   

Distributions on Preferred Shares from Net Investment Income

     (242      (160      (41

Net Increase in Net Assets Applicable to Common Shareholders Resulting from Operations

   $ 27,730       $ 17,073       $ 3,469   

 

  ANNUAL REPORT   SEPTEMBER 30, 2015    19


Table of Contents

Statements of Changes in Net Assets

 

 

    PIMCO
Municipal Income Fund III
 
(Amounts in thousands)   Year Ended
September 30, 2015
    Year Ended
September 30, 2014
 

Increase in Net Assets from:

   

Operations:

   

Net investment income

  $ 25,469      $ 24,526   

Net realized gain (loss)

    1,031        (2,929

Net change in unrealized appreciation (depreciation)

    1,472        43,465   

Net increase in net assets resulting from operations

    27,972        65,062   

Distributions on preferred shares from net investment income

    (242     (212

Net Increase in Net Assets Applicable to Common Shareholders Resulting from Operations

    27,730        64,850   

Distributions to Common Shareholders**:

   

From net investment income

    (24,386     (25,829

Total Distributions to Common Shareholders (a)

    (24,386     (25,829

Common Share Transactions**:

   

Issued as reinvestment of distributions

    885        887   

Total Increase in Net Assets

    4,229        39,908   

Net Assets Applicable to Common Shareholders:

   

Beginning of year

    351,139        311,231   

End of year*

  $   355,368      $   351,139   

* Including undistributed (overdistributed) net investment income of:

  $ (201   $ (945

** Common Share Transactions:

   

Shares issued as reinvestment of distributions

    81        87   

 

 

A zero balance may reflect actual amounts rounding to less than one thousand.

(a) 

Determined in accordance with federal income tax regulations, see Note 2(b) in the Notes to Financial Statements for more information.

 

20   PIMCO CLOSED-END FUNDS     See Accompanying Notes


Table of Contents

 

PIMCO
California Municipal Income Fund III
    PIMCO
New York Municipal Income Fund III
 
Year Ended
September 30, 2015
    Year Ended
September 30, 2014
    Year Ended
September 30, 2015
    Year Ended
September 30, 2014
 
     
     
$ 14,934      $ 15,281      $ 3,246      $ 3,160   
  4,105        (1,900     106        192   
  (1,806     23,299        158        5,481   
  17,233        36,680        3,510        8,833   
  (160     (144     (41     (37
  17,073        36,536        3,469        8,796   
     
  (15,922     (15,888     (3,571     (3,560
  (15,922     (15,888     (3,571     (3,560
     
  464        522        191        126   
  1,615        21,170        89        5,362   
     
  221,415        200,245        53,369        48,007   
$   223,030      $   221,415      $   53,458      $   53,369   
$ 5,160      $ 6,342      $ 1,007      $ 1,386   
     
  45        55        20        14   

 

  ANNUAL REPORT   SEPTEMBER 30, 2015    21


Table of Contents

Schedule of Investments PIMCO Municipal Income Fund III

 

 

 

        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 
INVESTMENTS IN SECURITIES 158.6%   
       
MUNICIPAL BONDS & NOTES 158.0%   
       
ALABAMA 17.7%   

Alabama Docks Department State Revenue Bonds, Series 2010

   

6.000% due 10/01/2040

  $     1,000      $     1,156   

Birmingham, Alabama Special Care Facilities Financing Authority Revenue Bonds, (AGC Insured), Series 2009

    

6.000% due 06/01/2039

      500          585   

Birmingham-Baptist Medical Centers Special Care Facilities Financing Authority, Alabama Revenue Bonds, Series 2005

    

5.000% due 11/15/2030

      9,000          9,033   

Jefferson County, Alabama Sewer Revenue Bonds, Series 2013

   

0.000% due 10/01/2050 (c)

      53,000          34,864   

6.500% due 10/01/2053

      15,000          17,178   
       

 

 

 
          62,816   
       

 

 

 
       
ARIZONA 10.6%   

Arizona Health Facilities Authority Revenue Bonds, Series 2007

   

5.200% due 10/01/2037

      2,250          2,211   

Arizona Health Facilities Authority Revenue Bonds, Series 2008

   

5.000% due 01/01/2035

      1,250          1,327   

5.500% due 01/01/2038

      900          968   

Industrial Development Authority of the County, Arizona of Pima Revenue Bonds, Series 2010

   

5.250% due 10/01/2040

      750          822   

Pima County, Arizona Industrial Development Authority Revenue Bonds, Series 2008

   

5.000% due 09/01/2039 (d)

      13,000          13,956   

Salt River Project Agricultural Improvement & Power District, Arizona Revenue Bonds, Series 2009

   

5.000% due 01/01/2039 (d)

      5,000          5,503   

Salt Verde Financial Corp., Arizona Revenue Bonds, Series 2007

   

5.000% due 12/01/2037

      11,600          12,876   
       

 

 

 
            37,663   
       

 

 

 
       
CALIFORNIA 27.5%   

Bay Area Toll Authority, California Revenue Bonds, Series 2008

   

5.000% due 04/01/2034

      500          552   

Bay Area Toll Authority, California Revenue Bonds, Series 2010

   

5.000% due 10/01/2029

      1,500          1,724   

5.000% due 10/01/2042

      3,260          3,635   
        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 

Bay Area Toll Authority, California Revenue Bonds, Series 2013

   

5.250% due 04/01/2053

  $     12,000      $       13,415   

California Health Facilities Financing Authority Revenue Bonds, (IBC/NPFGC Insured), Series 2007

   

5.000% due 11/15/2042

      600          621   

California Health Facilities Financing Authority Revenue Bonds, Series 2009

   

6.000% due 07/01/2039

      2,500          2,852   

California Health Facilities Financing Authority Revenue Bonds, Series 2011

   

6.000% due 08/15/2042

      1,500          1,753   

California Health Facilities Financing Authority Revenue Bonds, Series 2013

   

5.000% due 08/15/2052

      2,015          2,191   

California Municipal Finance Authority Revenue Bonds, Series 2011

   

7.750% due 04/01/2031

      1,385          1,757   

California State General Obligation Bonds, Series 2007

   

5.000% due 06/01/2037

      5,000          5,309   

5.000% due 12/01/2037

      5,300          5,725   

California State General Obligation Bonds, Series 2008

   

5.250% due 03/01/2038

      1,350          1,471   

California State General Obligation Bonds, Series 2009

   

5.750% due 04/01/2031

      2,500          2,890   

6.000% due 04/01/2038

      5,000          5,831   

California State General Obligation Bonds, Series 2010

   

5.250% due 11/01/2040

      1,300          1,497   

5.500% due 03/01/2040

      3,200          3,704   

California Statewide Communities Development Authority Revenue Bonds, (FHA Insured), Series 2009

    

6.625% due 08/01/2029

      2,580          3,056   

6.750% due 02/01/2038

      9,200          10,830   

California Statewide Communities Development Authority Revenue Bonds, Series 2007

   

5.750% due 11/01/2017

      1,260          1,312   

California Statewide Communities Development Authority Revenue Bonds, Series 2010

   

6.250% due 10/01/2039

      1,000          1,128   

California Statewide Communities Development Authority Revenue Bonds, Series 2011

   

5.000% due 12/01/2041

      3,000          3,266   

Golden State, California Tobacco Securitization Corp. Revenue Bonds, Series 2007

   

4.500% due 06/01/2027

      2,445          2,350   

5.125% due 06/01/2047

      3,600          2,967   

5.750% due 06/01/2047

      1,120          999   
 

 

22   PIMCO CLOSED-END FUNDS     See Accompanying Notes


Table of Contents

September 30, 2015

 

 

        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 

Indian Wells Redevelopment Agency, California Tax Allocation Bonds, (AMBAC Insured), Series 2006

   

4.750% due 09/01/2034

  $     3,350      $     3,387   

Los Angeles Community College District, California General Obligation Bonds, Series 2009

   

13.838% due 08/01/2033 (e)

      1,675          2,260   

M-S-R Energy Authority, California Revenue Bonds, Series 2009

   

6.500% due 11/01/2039

      2,000          2,645   

Palomar Health, California Certificates of Participation Bonds, Series 2009

   

6.750% due 11/01/2039

      1,250          1,386   

San Marcos Unified School District, California General Obligation Bonds, Series 2011

   

5.000% due 08/01/2038

      1,600          1,785   

Tobacco Securitization Authority of Southern California Revenue Bonds, Series 2006

   

5.000% due 06/01/2037

      6,200          5,440   
       

 

 

 
            97,738   
       

 

 

 
       
COLORADO 1.0%   

Colorado Health Facilities Authority Revenue Bonds, Series 2010

   

5.000% due 01/01/2040

      2,000          2,171   

Public Authority for Colorado Energy Revenue Bonds, Series 2008

   

6.500% due 11/15/2038

      500          658   

Regional Transportation District, Colorado Revenue Bonds, Series 2010

   

6.000% due 01/15/2034

      500          562   
       

 

 

 
          3,391   
       

 

 

 
       
CONNECTICUT 0.4%   

Harbor Point Infrastructure Improvement District, Connecticut Tax Allocation Bonds, Series 2010

   

7.875% due 04/01/2039

      1,250          1,454   
       

 

 

 
       
DISTRICT OF COLUMBIA 3.1%   

District of Columbia Water & Sewer Authority Revenue Bonds, Series 2009

   

5.500% due 10/01/2039 (d)

      10,000          11,159   
       

 

 

 
       
FLORIDA 6.6%   

Brevard County, Florida Health Facilities Authority Revenue Bonds, Series 2005

   

5.000% due 04/01/2034

      3,480          3,562   

Broward County, Florida Airport System Revenue Bonds, Series 2009

   

5.375% due 10/01/2029

      500          568   

Broward County, Florida Water & Sewer Utility Revenue Bonds, Series 2009

   

5.250% due 10/01/2034 (d)

      4,500          5,093   
        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 

Cape Coral, Florida Water & Sewer Revenue Bonds, (AGM Insured), Series 2011

   

5.000% due 10/01/2041

  $     3,000      $     3,335   

Florida Development Finance Corp. Revenue Notes, Series 2011

   

6.500% due 06/15/2021

      310          345   

Florida State General Obligation Bonds, Series 2009

  

5.000% due 06/01/2038 (d)

      4,200          4,596   

Greater Orlando Aviation Authority, Florida Revenue Bonds, Series 2010

   

9.449% due 10/01/2039 (e)

      5,000          5,846   
       

 

 

 
            23,345   
       

 

 

 
       
GEORGIA 3.5%   

Fulton County, Georgia Residential Care Facilities for the Elderly Authority Revenue Bonds, Series 2006

   

5.125% due 07/01/2042

      1,750          1,752   

Medical Center Hospital Authority, Georgia Revenue Bonds, Series 2007

   

5.250% due 07/01/2037

      400          402   

Municipal Electric Authority of Georgia Revenue Bonds, Series 2015

   

5.000% due 07/01/2060

      10,000          10,432   
       

 

 

 
          12,586   
       

 

 

 
       
HAWAII 0.5%   

Hawaii Pacific Health Revenue Bonds, Series 2010

  

5.500% due 07/01/2040

      1,500          1,664   
       

 

 

 
       
ILLINOIS 8.2%   

Chicago, Illinois General Obligation Bonds, Series 2007

   

5.500% due 01/01/2035

      2,400          2,392   

5.500% due 01/01/2042

      1,000          974   

Chicago, Illinois General Obligation Bonds, Series 2015

   

5.375% due 01/01/2029

      7,200          7,196   

5.500% due 01/01/2034

      2,500          2,500   

Chicago, Illinois Revenue Bonds, Series 2002

  

5.000% due 01/01/2027

      1,750          1,815   

Illinois Finance Authority Revenue Bonds, Series 2007

   

5.875% due 03/01/2027 ^

      1,000          250   

6.000% due 03/01/2037 ^

      625          156   

Illinois Finance Authority Revenue Bonds, Series 2009

   

5.500% due 07/01/2037 (d)

      5,000          5,631   

7.125% due 11/15/2037

      400          488   

Illinois Finance Authority Revenue Bonds, Series 2010

   

6.000% due 08/15/2038

      1,000          1,097   
 

 

See Accompanying Notes   ANNUAL REPORT   SEPTEMBER 30, 2015    23


Table of Contents

Schedule of Investments PIMCO Municipal Income Fund III (Cont.)

 

 

 

        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 

Illinois State Toll Highway Authority Revenue Bonds, Series 2008

   

5.500% due 01/01/2033

  $     5,000      $     5,440   

Metropolitan Pier & Exposition Authority, Illinois Revenue Bonds, Series 2015

   

5.000% due 06/15/2052

      1,000          1,020   
       

 

 

 
            28,959   
       

 

 

 
       
INDIANA 1.4%   

Portage, Indiana Tax Allocation Bonds, Series 2006

  

5.000% due 07/15/2023

      1,000          1,037   

5.000% due 01/15/2027

      775          803   

Vigo County, Indiana Hospital Authority Revenue Bonds, Series 2011

   

7.500% due 09/01/2022

      2,535          2,985   
       

 

 

 
          4,825   
       

 

 

 
       
IOWA 1.0%   

Iowa Finance Authority Revenue Bonds, Series 2013

  

5.250% due 12/01/2025

      3,000          3,259   

Iowa Finance Authority Revenue Bonds, Series 2014

  

2.000% due 05/15/2056 ^

      76          0   

2.700% due 11/15/2046 ^

      403          361   
       

 

 

 
          3,620   
       

 

 

 
       
KENTUCKY 0.6%   

Kentucky Economic Development Finance Authority Revenue Bonds, Series 2010

   

6.375% due 06/01/2040

      2,000          2,253   
       

 

 

 
       
LOUISIANA 2.1%   

Louisiana Local Government Environmental Facilities & Community Development Authority Revenue Bonds, Series 2010

    

5.875% due 10/01/2040

      1,500          1,743   

6.000% due 10/01/2044

      1,000          1,165   

6.500% due 11/01/2035

      400          472   

Louisiana Public Facilities Authority Revenue Bonds, Series 2007

   

5.500% due 05/15/2047

      1,700          1,791   

Louisiana Public Facilities Authority Revenue Bonds, Series 2011

   

6.500% due 05/15/2037

      2,000          2,348   
       

 

 

 
          7,519   
       

 

 

 
       
MARYLAND 0.9%   

Maryland Economic Development Corp. Revenue Bonds, Series 2010

   

5.750% due 06/01/2035

      1,000          1,090   
        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 

Maryland Health & Higher Educational Facilities Authority Revenue Bonds, Series 2010

   

6.250% due 01/01/2041

  $     700      $     775   

Maryland Health & Higher Educational Facilities Authority Revenue Bonds, Series 2011

   

6.000% due 07/01/2041

      1,000          1,177   
       

 

 

 
          3,042   
       

 

 

 
       
MASSACHUSETTS 2.1%   

Massachusetts Development Finance Agency Revenue Bonds, Series 2010

   

7.625% due 10/15/2037

      285          312   

Massachusetts Development Finance Agency Revenue Bonds, Series 2011

   

0.000% due 11/15/2056 (b)

      140          1   

6.250% due 11/15/2039

      529          499   

Massachusetts Housing Finance Agency Revenue Bonds, Series 2003

   

5.125% due 06/01/2043

      4,910          4,911   

Massachusetts State College Building Authority Revenue Bonds, Series 2009

   

5.500% due 05/01/2039

      1,600          1,819   
       

 

 

 
            7,542   
       

 

 

 
       
MICHIGAN 1.0%   

Detroit, Michigan General Obligation Bonds, Series 2010

   

5.250% due 11/01/2035

      1,500          1,623   

Royal Oak Hospital Finance Authority, Michigan Revenue Bonds, Series 2009

   

8.250% due 09/01/2039

      1,500          1,816   
       

 

 

 
          3,439   
       

 

 

 
       
MISSOURI 0.2%   

Jennings, Missouri Revenue Bonds, Series 2006

  

5.000% due 11/01/2023

      250          245   

Manchester, Missouri Tax Allocation Bonds, Series 2010

   

6.875% due 11/01/2039

      500          514   
       

 

 

 
          759   
       

 

 

 
       
NEW HAMPSHIRE 0.6%   

New Hampshire Business Finance Authority Revenue Bonds, Series 2009

   

6.125% due 10/01/2039

      2,000          2,218   
       

 

 

 
       
NEW JERSEY 5.7%   

New Jersey Economic Development Authority Special Assessment Bonds, Series 2002

   

6.500% due 04/01/2028

      4,500          5,476   
 

 

24   PIMCO CLOSED-END FUNDS     See Accompanying Notes


Table of Contents

September 30, 2015

 

 

        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 

New Jersey Health Care Facilities Financing Authority Revenue Bonds, Series 2007

   

5.750% due 07/01/2037

  $     1,000      $     1,035   

New Jersey Health Care Facilities Financing Authority Revenue Bonds, Series 2013

   

5.500% due 07/01/2043

      2,000          2,284   

Tobacco Settlement Financing Corp., New Jersey Revenue Bonds, Series 2007

   

4.750% due 06/01/2034

      1,600          1,240   

5.000% due 06/01/2041

      12,745          10,041   
       

 

 

 
          20,076   
       

 

 

 
       
NEW MEXICO 0.3%   

Farmington, New Mexico Revenue Bonds, Series 2010

   

5.900% due 06/01/2040

      1,000          1,098   
       

 

 

 
       
NEW YORK 16.4%   

Brooklyn Arena Local Development Corp., New York Revenue Bonds, Series 2009

   

6.250% due 07/15/2040

      9,800          11,175   

Hudson Yards Infrastructure Corp., New York Revenue Bonds, Series 2011

   

5.750% due 02/15/2047

      5,000          5,708   

Metropolitan Transportation Authority, New York Revenue Bonds, Series 2011

   

5.000% due 11/15/2036

      3,000          3,350   

Nassau County, New York Industrial Development Agency Revenue Bonds, Series 2014

   

2.000% due 01/01/2049 ^

      311          37   

6.700% due 01/01/2049

      863          846   

New York City, New York Industrial Development Agency Revenue Bonds, (AGC Insured), Series 2009

    

7.000% due 03/01/2049

      10,450          12,317   

New York City, New York Water & Sewer System Revenue Bonds, Series 2007

   

4.750% due 06/15/2035 (d)

      4,000          4,234   

New York Liberty Development Corp. Revenue Bonds, Series 2007

   

5.500% due 10/01/2037

      1,700          2,073   

New York Liberty Development Corp. Revenue Bonds, Series 2011

   

5.000% due 12/15/2041

      3,000          3,366   

5.000% due 11/15/2044

      11,000          12,021   

New York Liberty Development Corp. Revenue Bonds, Series 2014

   

5.000% due 11/15/2044

      3,000          3,033   
       

 

 

 
            58,160   
       

 

 

 
       
        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 
NORTH CAROLINA 1.9%   

New Hanover County, North Carolina Revenue Bonds, Series 2011

   

5.000% due 10/01/2028

  $     6,000      $     6,869   
       

 

 

 
       
OHIO 11.1%   

Allen County, Ohio Revenue Bonds, Series 2010

  

5.000% due 06/01/2038

      500          548   

Buckeye Tobacco Settlement Financing Authority, Ohio Revenue Bonds, Series 2007

   

5.125% due 06/01/2024

      1,000          858   

5.875% due 06/01/2047

      4,800          3,974   

6.500% due 06/01/2047

      30,350          27,194   

Hamilton County, Ohio Revenue Bonds, Series 2012

  

5.000% due 06/01/2042

      1,500          1,600   

Ohio State Turnpike Commission Revenue Bonds, Series 2013

   

5.000% due 02/15/2048

      5,000          5,432   
       

 

 

 
            39,606   
       

 

 

 
       
PENNSYLVANIA 6.5%   

Allegheny County, Pennsylvania Hospital Development Authority Revenue Bonds, Series 2009

    

5.625% due 08/15/2039

      1,000          1,126   

Berks County, Pennsylvania Municipal Authority Revenue Bonds, Series 2012

   

5.000% due 11/01/2044

      6,600          7,112   

Capital Region Water, Pennsylvania Revenue Bonds, Series 2007

   

6.000% due 09/01/2036 ^

      1,225          927   

Cumberland County, Pennsylvania Municipal Authority Revenue Bonds, Series 2008

   

5.625% due 07/01/2028

      1,000          1,071   

6.000% due 07/01/2035

      670          718   

Dauphin County, Pennsylvania General Authority Revenue Bonds, Series 2009

   

6.000% due 06/01/2036

      1,000          1,144   

Luzerne County, Pennsylvania Industrial Development Authority Revenue Bonds, Series 2009

    

5.500% due 12/01/2039

      100          113   

Pennsylvania Turnpike Commission Revenue Bonds, Series 2009

   

5.125% due 12/01/2040

      3,000          3,241   

Pennsylvania Turnpike Commission Revenue Bonds, Series 2013

   

5.000% due 12/01/2043

      5,000          5,487   

Philadelphia Hospitals & Higher Education Facilities Authority, Pennsylvania Revenue Bonds, Series 2012

    

5.625% due 07/01/2042

      1,645          1,732   
 

 

See Accompanying Notes   ANNUAL REPORT   SEPTEMBER 30, 2015    25


Table of Contents

Schedule of Investments PIMCO Municipal Income Fund III (Cont.)

 

 

 

        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 

Philadelphia, Pennsylvania Water & Wastewater Revenue Bonds, Series 2009

   

5.250% due 01/01/2036

  $     500      $     547   
       

 

 

 
            23,218   
       

 

 

 
       
SOUTH CAROLINA 6.8%   

Greenwood County, South Carolina Revenue Bonds, Series 2009

   

5.375% due 10/01/2039

      1,000          1,113   

South Carolina State Ports Authority Revenue Bonds, Series 2010

   

5.250% due 07/01/2040

      800          885   

South Carolina State Public Service Authority Revenue Bonds, Series 2013

   

5.125% due 12/01/2043

      5,000          5,490   

5.500% due 12/01/2053

      15,000          16,673   
       

 

 

 
          24,161   
       

 

 

 
       
TENNESSEE 0.7%   

Claiborne County, Tennessee Industrial Development Board Revenue Bonds, Series 2009

   

6.625% due 10/01/2039

      1,250          1,397   

Johnson City Health & Educational Facilities Board, Tennessee Revenue Bonds, Series 2010

   

6.000% due 07/01/2038

      1,000          1,121   
       

 

 

 
          2,518   
       

 

 

 
       
TEXAS 16.6%   

Dallas, Texas Revenue Bonds, (AGC Insured), Series 2009

   

5.250% due 08/15/2038

      1,300          1,455   

Grand Parkway Transportation Corp., Texas Revenue Bonds, Series 2013

   

5.000% due 04/01/2053

      4,500          4,905   

JPMorgan Chase Putters/Drivers Trust, Texas General Obligation Notes, Series 2009

   

9.520% due 02/01/2017 (e)

      6,500          8,057   

North Harris County, Texas Regional Water Authority Revenue Bonds, Series 2008

   

5.250% due 12/15/2033

      5,500          6,126   

5.500% due 12/15/2038

      5,500          6,191   

North Texas Tollway Authority Revenue Bonds, Series 2008

   

5.625% due 01/01/2033

      10,800          11,770   

5.750% due 01/01/2033

      700          778   

North Texas Tollway Authority Revenue Bonds, Series 2011

   

5.000% due 01/01/2038

      3,000          3,211   

5.500% due 09/01/2041

      600          703   

Tarrant County, Texas Cultural Education Facilities Finance Corp. Revenue Bonds, Series 2009

   

6.250% due 11/15/2029

      3,000          3,483   
        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 

Texas Municipal Gas Acquisition & Supply Corp. Revenue Bonds, Series 2006

   

5.250% due 12/15/2026

  $     150      $     172   

Texas Municipal Gas Acquisition & Supply Corp. Revenue Bonds, Series 2008

   

6.250% due 12/15/2026

      9,600          11,591   

Wise County, Texas Revenue Bonds, Series 2011

  

8.000% due 08/15/2034

      500          581   
       

 

 

 
          59,023   
       

 

 

 
       
VIRGINIA 0.5%   

Fairfax County, Virginia Industrial Development Authority Revenue Bonds, Series 2009

   

5.500% due 05/15/2035

      1,000          1,127   

James City County, Virginia Economic Development Authority Revenue Bonds, Series 2013

   

2.000% due 10/01/2048 ^

      201          7   

6.000% due 06/01/2043

      621          580   
       

 

 

 
          1,714   
       

 

 

 
       
WASHINGTON 0.5%   

Washington Health Care Facilities Authority Revenue Bonds, Series 2009

   

7.375% due 03/01/2038

      1,000          1,211   

Washington Health Care Facilities Authority Revenue Bonds, Series 2010

   

5.500% due 12/01/2039

      500          602   
       

 

 

 
          1,813   
       

 

 

 
       
WEST VIRGINIA 0.3%   

West Virginia Hospital Finance Authority Revenue Bonds, Series 2011

   

9.125% due 10/01/2041

      955          1,037   
       

 

 

 
       
WISCONSIN 1.7%   

University of Wisconsin Hospitals & Clinics Authority Revenue Bonds, Series 2013

   

5.000% due 04/01/2038

      3,500          3,838   

Wisconsin Health & Educational Facilities Authority Revenue Bonds, Series 2009

   

6.625% due 02/15/2039

      1,000          1,185   

Wisconsin Health & Educational Facilities Authority Revenue Bonds, Series 2010

   

5.625% due 04/15/2039

      1,000          1,133   
       

 

 

 
          6,156   
       

 

 

 

Total Municipal Bonds & Notes (Cost $500,657)

      561,441   
       

 

 

 
       
 

 

26   PIMCO CLOSED-END FUNDS     See Accompanying Notes


Table of Contents

September 30, 2015

 

 

        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 
SHORT-TERM INSTRUMENTS 0.6%   
       
U.S. TREASURY BILLS 0.6%   

0.164% due 01/21/2016 - 02/18/2016 (a)

  $     2,300      $     2,300   
       

 

 

 
Total Short-Term Instruments
(Cost $2,299)
    2,300   
       

 

 

 
Total Investments in Securities (Cost $502,956)     563,741   
       

 

 

 
Total Investments 158.6% (Cost $502,956)       $     563,741   
Preferred Shares (53.2%)     (189,000
Other Assets and Liabilities, net (5.4%)           (19,373
       

 

 

 
Net Assets Applicable to Common Shareholders 100.0%       $       355,368   
       

 

 

 
 

NOTES TO SCHEDULE OF INVESTMENTS (AMOUNTS IN THOUSANDS*):

 

* A zero balance may reflect actual amounts rounding to less than one thousand.
^ Security is in default.
(a) Coupon represents a weighted average yield to maturity.
(b) Zero coupon bond.
(c) Security becomes interest bearing at a future date.
(d) Represents an underlying municipal bond transferred to a tender option bond trust established in a tender option bond transaction in which the Fund sold, or caused the sale of, the underlying municipal bond and purchased the residual interest certificate. The security serves as collateral in a financing transaction. See Note 5(b) in the Notes to Financial Statements for more information.
(e) Represents an investment in a tender option bond residual interest certificate purchased in a secondary market transaction. The interest rate shown bears an inverse relationship to the interest rate on a tender option bond floating rate certificate. The interest rate disclosed reflects the rate in effect on September 30, 2015.

 

FAIR VALUE MEASUREMENTS

 

The following is a summary of the fair valuations according to the inputs used as of September 30, 2015 in valuing the Fund’s assets and liabilities:

 

Category and Subcategory   Level 1     Level 2     Level 3     Fair
Value at
09/30/2015
 

Investments in Securities, at Value

       

Municipal Bonds & Notes

       

Alabama

  $ 0      $ 62,816      $ 0      $ 62,816   

Arizona

    0        37,663        0        37,663   

California

    0        97,738        0        97,738   

Colorado

    0        3,391        0        3,391   

Connecticut

    0        1,454        0        1,454   

District of Columbia

    0        11,159        0        11,159   

Florida

    0        23,345        0        23,345   

Georgia

        0            12,586            0            12,586   

 

See Accompanying Notes   ANNUAL REPORT   SEPTEMBER 30, 2015    27


Table of Contents

Schedule of Investments PIMCO Municipal Income Fund III (Cont.)

 

September 30, 2015

 

 

Category and Subcategory   Level 1     Level 2     Level 3     Fair
Value at
09/30/2015
 

Hawaii

  $ 0      $ 1,664      $ 0      $ 1,664   

Illinois

    0        28,959        0        28,959   

Indiana

    0        4,825        0        4,825   

Iowa

    0        3,620        0        3,620   

Kentucky

    0        2,253        0        2,253   

Louisiana

    0        7,519        0        7,519   

Maryland

    0        3,042        0        3,042   

Massachusetts

    0        7,542        0        7,542   

Michigan

    0        3,439        0        3,439   

Missouri

    0        759        0        759   

New Hampshire

    0        2,218        0        2,218   

New Jersey

    0        20,076        0        20,076   

New Mexico

    0        1,098        0        1,098   

New York

    0        58,160        0        58,160   

North Carolina

    0        6,869        0        6,869   

Ohio

    0        39,606        0        39,606   

Pennsylvania

    0        23,218        0        23,218   

South Carolina

    0        24,161        0        24,161   

Tennessee

    0        2,518        0        2,518   

Texas

    0        59,023        0        59,023   

Virginia

    0        1,714        0        1,714   

Washington

    0        1,813        0        1,813   

West Virginia

    0        1,037        0        1,037   

Wisconsin

    0        6,156        0        6,156   

Short-Term Instruments

       

U.S. Treasury Bills

    0        2,300        0        2,300   

Total Investments

  $     0      $     563,741      $     0      $     563,741   

 

There were no significant transfers between Levels 1, 2, or 3 during the period ended September 30, 2015.

 

28   PIMCO CLOSED-END FUNDS     See Accompanying Notes


Table of Contents

Schedule of Investments PIMCO California Municipal Income Fund III

 

September 30, 2015

 

 

        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 
INVESTMENTS IN SECURITIES 167.6%   
       
MUNICIPAL BONDS & NOTES 162.7%   
       
CALIFORNIA 155.9%   

Bay Area Toll Authority, California Revenue Bonds, Series 2008

   

5.000% due 04/01/2034

  $     1,250      $     1,380   

Bay Area Toll Authority, California Revenue Bonds, Series 2013

   

5.250% due 04/01/2048

      8,000          8,966   

California County Tobacco Securitization Agency Revenue Bonds, Series 2002

   

5.875% due 06/01/2035

      8,100          8,100   

6.000% due 06/01/2042

      7,000          7,159   

California County Tobacco Securitization Agency Revenue Bonds, Series 2006

   

5.600% due 06/01/2036

      2,000          1,897   

California Educational Facilities Authority Revenue Bonds, Series 2009

   

5.000% due 01/01/2039 (a)

      9,800            10,798   

5.000% due 10/01/2039 (a)

      10,000          11,060   

California Health Facilities Financing Authority Revenue Bonds, (IBC/NPFGC Insured), Series 2007

   

5.000% due 11/15/2042

      500          518   

California Health Facilities Financing Authority Revenue Bonds, Series 2008

   

5.000% due 08/15/2038

      5,000          5,453   

5.250% due 11/15/2040

      4,550          5,275   

California Health Facilities Financing Authority Revenue Bonds, Series 2009

   

5.750% due 09/01/2039

      4,000          4,546   

6.000% due 07/01/2039

      4,000          4,563   

6.500% due 11/01/2038

      500          592   

California Health Facilities Financing Authority Revenue Bonds, Series 2010

   

5.000% due 11/15/2036

      1,300          1,457   

California Health Facilities Financing Authority Revenue Bonds, Series 2011

   

5.000% due 08/15/2035

      1,000          1,133   

6.000% due 08/15/2042

      1,200          1,403   

California Health Facilities Financing Authority Revenue Bonds, Series 2012

   

5.000% due 08/15/2051

      8,305          8,990   

California Health Facilities Financing Authority Revenue Bonds, Series 2015

   

5.000% due 08/15/2054

      3,000          3,317   

California Infrastructure & Economic Development Bank Revenue Bonds, Series 2013

   

5.000% due 02/01/2039

      10,000          11,104   

California Municipal Finance Authority Revenue Bonds, Series 2011

   

7.750% due 04/01/2031

      835          1,060   
        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 

California Pollution Control Financing Authority Revenue Bonds, Series 2010

   

5.250% due 08/01/2040

  $     1,250      $     1,328   

California State General Obligation Bonds, Series 2009

   

6.000% due 04/01/2038

      7,300          8,513   

California State General Obligation Bonds, Series 2013

   

5.000% due 11/01/2043

      5,000          5,655   

California State Public Works Board Revenue Bonds, Series 2009

   

6.000% due 11/01/2034

      2,000          2,366   

California State Public Works Board Revenue Bonds, Series 2013

   

5.000% due 03/01/2038

      2,500          2,812   

California State University Revenue Bonds, Series 2011

   

5.000% due 11/01/2042

      9,200          10,252   

California State University Revenue Bonds, Series 2015

   

5.000% due 11/01/2047

      12,750          14,501   

California Statewide Communities Development Authority Certificates of Participation Bonds, Series 1999

    

5.375% due 04/01/2030

      945          948   

California Statewide Communities Development Authority Revenue Bonds, (FGIC Insured), Series 2007

    

5.750% due 07/01/2047

      3,100          3,412   

California Statewide Communities Development Authority Revenue Bonds, (FHA Insured), Series 2009

    

6.625% due 08/01/2029

      1,780          2,108   

6.750% due 02/01/2038

      6,430          7,569   

California Statewide Communities Development Authority Revenue Bonds, Series 2006

   

5.000% due 03/01/2041

      4,500          4,561   

California Statewide Communities Development Authority Revenue Bonds, Series 2007

   

5.500% due 11/01/2038

      1,300          1,310   

California Statewide Communities Development Authority Revenue Bonds, Series 2008

   

5.500% due 07/01/2031

      2,030          2,171   

California Statewide Communities Development Authority Revenue Bonds, Series 2010

   

6.250% due 10/01/2039

      500          564   

7.500% due 06/01/2042

      990          1,080   

California Statewide Communities Development Authority Revenue Bonds, Series 2011

   

5.000% due 12/01/2041

      11,000            11,976   

6.000% due 08/15/2042

      1,800          2,104   

6.500% due 11/01/2021

      365          399   
 

 

See Accompanying Notes   ANNUAL REPORT   SEPTEMBER 30, 2015    29


Table of Contents

Schedule of Investments PIMCO California Municipal Income Fund III (Cont.)

 

 

 

        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 

California Statewide Communities Development Authority Revenue Bonds, Series 2012

   

5.000% due 04/01/2042

  $     11,220      $       12,319   

5.375% due 05/15/2038

      2,000          2,199   

California Statewide Communities Development Authority Revenue Bonds, Series 2014

   

5.500% due 12/01/2054

      2,500          2,630   

Chula Vista, California Revenue Bonds, Series 2004

  

5.875% due 02/15/2034

      2,000          2,300   

Contra Costa County, California Public Financing Authority Tax Allocation Bonds, Series 2003

   

5.625% due 08/01/2033

      1,415          1,415   

Fremont Community Facilities District No. 1, California Special Tax Bonds, Series 2015

   

5.000% due 09/01/2045

      1,400          1,517   

Golden State, California Tobacco Securitization Corp. Revenue Bonds, Series 2007

   

5.750% due 06/01/2047

      22,240          19,848   

Hayward Unified School District, California General Obligation Bonds, Series 2015

   

5.000% due 08/01/2038

      5,000          5,485   

JPMorgan Chase Putters/Drivers Trust, California Revenue Bonds, Series 2009

   

5.000% due 07/01/2037 (a)

      5,000          5,327   

Lancaster Redevelopment Agency, California Tax Allocation Bonds, Series 2009

   

6.875% due 08/01/2039

      500          595   

Long Beach Unified School District, California General Obligation Bonds, Series 2009

   

5.750% due 08/01/2033

      5,000          5,788   

Long Beach, California Airport System Revenue Bonds, Series 2010

   

5.000% due 06/01/2040

      2,120          2,338   

Los Angeles Community College District, California General Obligation Bonds, Series 2009

   

13.838% due 08/01/2033 (b)

      1,000          1,349   

Los Angeles Department of Water & Power, California Revenue Bonds, Series 2009

   

5.000% due 07/01/2039 (a)

      10,000          11,012   

Los Angeles Department of Water & Power, California Revenue Bonds, Series 2012

   

5.000% due 07/01/2037

      2,000          2,271   

5.000% due 07/01/2043

      2,115          2,375   

Los Angeles Department of Water & Power, California Revenue Bonds, Series 2014

   

5.000% due 07/01/2043

      3,000          3,372   

Los Angeles Unified School District, California General Obligation Bonds, Series 2009

   

5.000% due 01/01/2034 (a)

      10,000          11,291   

M-S-R Energy Authority, California Revenue Bonds, Series 2009

   

6.500% due 11/01/2039

      10,825          14,315   

7.000% due 11/01/2034

      2,285          3,156   
        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 

Malibu, California Certificates of Participation Bonds, Series 2009

   

5.000% due 07/01/2039

  $     550      $     599   

Manteca Financing Authority, California Revenue Bonds, Series 2009

   

5.750% due 12/01/2036

      1,000          1,177   

Montebello Unified School District, California General Obligation Bonds, (AGM Insured), Series 2008

    

5.000% due 08/01/2033

      3,000          3,357   

Oakland Redevelopment Agency Successor Agency, California Tax Allocation Bonds, (AGM Insured), Series 2015

    

5.000% due 09/01/2036

      800          895   

Peralta Community College District, California General Obligation Bonds, Series 2009

   

5.000% due 08/01/2039

      1,250          1,397   

Regents of the University of California Medical Center Pooled Revenue Bonds, Series 2013

   

5.000% due 05/15/2043

      5,000          5,532   

River Islands Public Financing Authority, California Special Tax Bonds, Series 2015

   

5.500% due 09/01/2045

      3,000          3,113   

Rocklin Unified School District Community Facilities District, California Special Tax Bonds, (NPFGC Insured), Series 2004

    

5.000% due 09/01/2029

      500          501   

Sacramento Municipal Utility District, California Revenue Bonds, Series 2013

   

5.000% due 08/15/2037

      3,000          3,382   

San Diego County, California Regional Airport Authority Revenue Bonds, Series 2013

   

5.000% due 07/01/2043

      1,325          1,455   

San Diego County, California Water Authority Certificates of Participation Bonds, (AGM Insured), Series 2008

    

5.000% due 05/01/2038

      6,250          6,780   

San Diego Public Facilities Financing Authority Sewer, California Revenue Bonds, Series 2009

   

5.250% due 05/15/2039

      4,000            4,534   

San Diego Regional Building Authority, California Revenue Bonds, Series 2009

   

5.375% due 02/01/2036

      2,200          2,459   

San Francisco, California City & County Certificates of Participation Bonds, Series 2009

   

5.250% due 04/01/2031

      550          619   

San Francisco, California City & County Redevelopment Agency Special Tax Bonds, Series 2013

    

5.000% due 08/01/2028

      1,505          1,663   

San Joaquin Hills Transportation Corridor Agency, California Revenue Bonds, Series 2014

   

5.000% due 01/15/2050

      2,000          2,101   
 

 

30   PIMCO CLOSED-END FUNDS     See Accompanying Notes


Table of Contents

September 30, 2015

 

 

        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 

San Jose, California Hotel Tax Revenue Bonds, Series 2011

   

6.500% due 05/01/2036

  $     1,500      $     1,809   

San Marcos Redevelopment Agency Successor Agency, California Tax Allocation Bonds, Series 2015

    

5.000% due 10/01/2034

      885          1,014   

San Marcos Unified School District, California General Obligation Bonds, Series 2011

   

5.000% due 08/01/2038

      1,000          1,116   

Santa Clara County, California Financing Authority Revenue Bonds, (AMBAC Insured), Series 2007

   

5.750% due 02/01/2041

      500          548   

Santa Cruz County, California Redevelopment Agency Tax Allocation Bonds, Series 2009

   

7.000% due 09/01/2036

      1,200          1,369   

Torrance, California Revenue Bonds, Series 2001

  

5.500% due 06/01/2031

      2,950          3,001   

Washington Township Health Care District, California General Obligation Bonds, Series 2013

   

5.000% due 08/01/2043

      2,500          2,766   

Western Municipal Water District Facilities Authority, California Revenue Bonds, Series 2009

   

5.000% due 10/01/2039

      2,000          2,248   

Westlake Village, California Certificates of Participation Bonds, Series 2009

   

5.000% due 06/01/2039

      1,000          1,031   
       

 

 

 
            347,768   
       

 

 

 
       
ILLINOIS 4.1%   

Chicago, Illinois General Obligation Bonds, Series 2007

   

5.500% due 01/01/2035

      3,000          2,989   

Chicago, Illinois General Obligation Bonds, Series 2015

   

5.250% due 01/01/2028

      3,700          3,680   

5.500% due 01/01/2033

      2,500          2,500   
       

 

 

 
          9,169   
       

 

 

 
        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 
INDIANA 2.3%   

Vigo County, Indiana Hospital Authority Revenue Bonds, Series 2007

   

5.750% due 09/01/2042

  $     5,000      $     5,167   
       

 

 

 
       
NEW JERSEY 0.4%   

Tobacco Settlement Financing Corp., New Jersey Revenue Bonds, Series 2007

   

4.750% due 06/01/2034

      1,000          775   
       

 

 

 

Total Municipal Bonds & Notes (Cost $328,811)

      362,879   
       

 

 

 
       
SHORT-TERM INSTRUMENTS 4.9%   
REPURCHASE AGREEMENTS (c) 4.8%  
          10,600   
       

 

 

 
       
U.S. TREASURY BILLS 0.1%  

0.150% due 01/14/2016

      300          300   
       

 

 

 
Total Short-Term Instruments (Cost $10,900)     10,900   
       

 

 

 
Total Investments in Securities (Cost $339,711)     373,779   
       

 

 

 
Total Investments 167.6% (Cost $339,711)       $     373,779   
       
Preferred Shares (56.0%)     (125,000
       
Other Assets and Liabilities, net (11.6%)     (25,749
       

 

 

 
Net Assets Applicable to Common Shareholders 100.0%       $       223,030   
       

 

 

 
 

NOTES TO SCHEDULE OF INVESTMENTS (AMOUNTS IN THOUSANDS*):

 

* A zero balance may reflect actual amounts rounding to less than one thousand.
(a) Represents an underlying municipal bond transferred to a tender option bond trust established in a tender option bond transaction in which the Fund sold, or caused the sale of, the underlying municipal bond and purchased the residual interest certificate. The security serves as collateral in a financing transaction. See Note 5(b) in the Notes to Financial Statements for more information.
(b) Represents an investment in a tender option bond residual interest certificate purchased in a secondary market transaction. The interest rate shown bears an inverse relationship to the interest rate on a tender option bond floating rate certificate. The interest rate disclosed reflects the rate in effect on September 30, 2015.

 

See Accompanying Notes   ANNUAL REPORT   SEPTEMBER 30, 2015    31


Table of Contents

Schedule of Investments PIMCO California Municipal Income Fund III (Cont.)

 

September 30, 2015

 

 

 

BORROWINGS AND OTHER FINANCING TRANSACTIONS

 

(c)  REPURCHASE AGREEMENTS:

 

Counterparty   Lending
Rate
  Settlement
Date
    Maturity
Date
    Principal
Amount
    Collateralized By   Collateral
Received,
at Value
    Repurchase
Agreements,
at Value
    Repurchase
Agreement
Proceeds
to be
Received (1)
 

SAL

  0.280%     09/30/2015        10/01/2015      $   10,600      U.S. Treasury Notes 2.125% due 12/31/2021   $ (10,833   $ 10,600      $ 10,600   
           

 

 

   

 

 

   

 

 

 

Total Repurchase Agreements

  $   (10,833   $   10,600      $   10,600   
           

 

 

   

 

 

   

 

 

 

 

(1)

Includes accrued interest.

 

BORROWINGS AND OTHER FINANCING TRANSACTIONS SUMMARY

 

The following is a summary by counterparty of the market value of Borrowings and Other Financing Transactions and collateral (received)/pledged as of September 30, 2015:

 

Counterparty   Repurchase
Agreement
Proceeds
to be
Received
    Payable for
Reverse
Repurchase
Agreements
    Payable for
Sale-Buyback
Transactions
    Total
Borrowings and
Other Financing
Transactions
    Collateral
Received
    Net Exposure  (2)  

Global/Master Repurchase Agreement

           

SAL

  $ 10,600      $ 0      $ 0      $   10,600      $   (10,833   $   (233
 

 

 

   

 

 

   

 

 

       

Total Borrowings and Other Financing Transactions

  $   10,600      $   0      $   0         
 

 

 

   

 

 

   

 

 

       

 

(2) 

Net Exposure represents the net receivable/(payable) that would be due from/to the counterparty in the event of default. Exposure from borrowings and other financing transactions can only be netted across transactions governed under the same master agreement with the same legal entity. See Note 6, Principal Risks, in the Notes to Financial Statements for more information regarding master netting arrangements.

 

FAIR VALUE MEASUREMENTS

 

The following is a summary of the fair valuations according to the inputs used as of September 30, 2015 in valuing the Fund’s assets and liabilities:

 

Category and Subcategory   Level 1     Level 2     Level 3     Fair
Value at
09/30/2015
 

Investments in Securities, at Value

       

Municipal Bonds & Notes

       

California

  $ 0      $ 347,768      $ 0      $ 347,768   

Illinois

    0        9,169        0        9,169   

Indiana

    0        5,167        0        5,167   

New Jersey

    0        775        0        775   

Short-Term Instruments

       

Repurchase Agreements

    0        10,600        0        10,600   

U.S. Treasury Bills

    0        300        0        300   

Total Investments

  $   0      $   373,779      $   0      $   373,779   

 

There were no significant transfers between Levels 1, 2, or 3 during the period ended September 30, 2015.

 

32   PIMCO CLOSED-END FUNDS     See Accompanying Notes


Table of Contents

Schedule of Investments PIMCO New York Municipal Income Fund III

 

September 30, 2015

 

 

        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 
INVESTMENTS IN SECURITIES 166.7%   
       
MUNICIPAL BONDS & NOTES 163.2%   
       
ILLINOIS 3.5%   

Chicago, Illinois General Obligation Bonds, Series 2015

   

5.250% due 01/01/2028

  $     1,900      $       1,890   
       

 

 

 
       
NEW YORK 155.3%   

Brooklyn Arena Local Development Corp., New York Revenue Bonds, Series 2009

   

6.375% due 07/15/2043

      1,000          1,145   

Chautauqua Industrial Development Agency, New York Revenue Bonds, Series 2009

   

5.875% due 04/01/2042

      1,500          1,583   

Dutchess County, New York Industrial Development Agency Revenue Bonds, Series 2007

   

5.250% due 01/01/2037

      695          642   

Hudson Yards Infrastructure Corp., New York Revenue Bonds, Series 2011

   

5.750% due 02/15/2047

      4,000          4,566   

Long Island Power Authority, New York Revenue Bonds, Series 2009

   

5.750% due 04/01/2039

      1,500          1,698   

Metropolitan Transportation Authority, New York Revenue Bonds, Series 2009

   

5.000% due 11/1