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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-Q
QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANY
     
Investment Company Act File Number:
   811-21187
 
    
Registrant Name:
   PIMCO Municipal Income Fund III
 
    
Address of Principal Executive Offices:
   1345 Avenue of the Americas, 
 
   New York, NY 10105
 
    
Name and Address of Agent for Service:
   Lawrence G. Altadonna
 
   1345 Avenue of the Americas, 
 
   New York, NY 10105
 
    
Registrant’s telephone number, including area code:
   212-739-3371 
 
    
Date of Fiscal Year End:
   September 30, 2009
 
    
Date of Reporting Period:
   June 30, 2009
Form N-Q is to be used by management investment companies, other than small business investment companies registered on Form N-5 (§§ 239.24 and 274.5 of this chapter), to file reports with the Commission, not later than 60 days after the close of the first and third fiscal quarters, pursuant to rule 30b1-5 under the Investment Company Act of 1940 (17 CFR 270.30b1-5). The Commission may use the information provided on Form N-Q in its regulatory, disclosure review, inspection, and policymaking roles.

A registrant is required to disclose the information specified by Form N-Q, and the Commission will make this information public. A registrant is not required to the collection of information contained in Form N-Q 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 the Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549-2001. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.
 
 

 

Item 1. Schedule of Investments
PIMCO Municipal Income Fund III Schedule of Investments
June 30, 2009 (unaudited)
                     
Principal                
Amount         Credit Rating      
(000)         (Moody’s/S&P)   Value*  
 
MUNICIPAL BONDS & NOTES—93.5%            
       
Alabama—0.9%
            
$ 5,000    
Birmingham Baptist Medical Centers Special Care Facs. Financing Auth. Rev., Baptist Health Systems, Inc., 5.00%, 11/15/30, Ser. A
   Baa2/NR   $ 3,725,750  
  1,500    
Colbert Cnty. Northwest Health Care Facs. Auth. Rev., 5.75%, 6/1/27
   Baa3/NR     1,284,285  
       
 
          
       
 
         5,010,035  
       
 
          
       
 
            
       
Alaska—1.2%
            
  3,100    
Northern Tobacco Securitization Corp. Rev., 5.00%, 6/1/46, Ser. A
   Baa3/NR     1,679,084  
       
State Housing Finance Corp. Rev.,
            
  3,900    
5.00%, 12/1/33, Ser. A
   Aaa/AAA     3,750,981  
  1,000    
5.25%, 6/1/32, Ser. C (NPFGC)
   Aa2/AA     979,080  
       
 
          
       
 
         6,409,145  
       
 
          
       
 
            
       
Arizona—4.9%
            
       
Health Facs. Auth. Rev.,
           
       
Banner Health,
            
  1,250    
5.00%, 1/1/35, Ser. A
   NR/A+     1,141,550  
  900    
5.50%, 1/1/38, Ser. D
   NR/A+     874,116  
  2,250    
Beatitudes Campus Project, 5.20%, 10/1/37
   NR/NR     1,381,860  
  1,500    
Maricopa Cnty. Pollution Control Corp. Rev., Palo Verde Project, 5.05%, 5/1/29, Ser. A (AMBAC)
   Baa2/A     1,216,020  
  13,000    
Pima Cnty. Industrial Dev. Auth. Rev., Correctional Facs., 5.00%, 9/1/39
   Aa2/AA     11,984,700  
  5,000    
Salt River Project Agricultural Improvement & Power Dist. Rev., 5.00%, 1/1/39, Ser. A (i)
   Aa1/AA     4,969,400  
  5,600    
Salt Verde Financial Corp. Rev., 5.00%, 12/1/37
   A3/A     4,136,664  
       
 
          
       
 
         25,704,310  
       
 
          
       
 
            
       
California—5.6%
            
  2,500    
Health Facs. Financing Auth. Rev., Catholic Healthcare West, 6.00%, 7/1/39, Ser. A
   A2/A     2,421,475  
       
State, GO,
            
  250    
5.00%, 11/1/37
   A2/A     209,983  
  5,300    
5.00%, 12/1/37
   A2/A     4,451,152  
  6,000    
6.00%, 4/1/38
   A2/A     6,008,100  
  3,060  
Statewide Communities Dev. Auth. Rev.,
  
       
Baptist Univ., 9.00%, 11/1/17, Ser. B (a)(c)
   NR/NR     2,553,325  
       
Methodist Hospital Project, (FHA),
            
  2,900    
6.625%, 8/1/29
   Aa2/AA     3,123,967  
  10,300    
6.75%, 2/1/38
   Aa2/AA     11,021,618  
       
 
          
       
 
         29,789,620  
       
 
          
       
 
            
       
Colorado—3.0%
            
  9,955    
Colorado Springs Rev., 5.00%, 11/15/30, Ser. B (i)
   Aa2/AA     10,073,962  
  500    
Confluence Metropolitan Dist. Rev., 5.45%, 12/1/34
   NR/NR     312,195  
  500    
Health Facs. Auth. Rev., Evangelical Lutheran, 6.125%, 6/1/38, Ser. A
   A3/A-     494,290  
  1,500    
Housing & Finance Auth. Rev., Evergreen Country Day School, Inc. Project, 5.875%, 6/1/37 (a)(c)
   NR/BB     953,385  
  500    
Public Auth. for Colorado Energy Rev., 6.50%, 11/15/38
   A2/A     474,915  
  4,000    
Saddle Rock Metropolitan Dist., GO, 5.35%, 12/1/31, (Radian)
   NR/BBB-     3,418,600  
       
 
          
       
 
         15,727,347  
       
 
          
       
 
            
       
District of Columbia—1.9%
            
  10,000    
Dist. of Columbia Water & Sewer Auth. Rev., 5.50%, 10/1/39, Ser. A (i)
   Aa3/AA     10,320,600  
       
 
          

 

 

PIMCO Municipal Income Fund III Schedule of Investments
June 30, 2009 (unaudited)
                     
Principal                
Amount         Credit Rating      
(000)         (Moody’s/S&P)   Value*  
 
       
Florida—4.9%
            
$ 3,480    
Brevard Cnty. Health Facs. Auth. Rev., Health First, Inc. Project, 5.00%, 4/1/34
   A3/A-   $ 2,771,019  
  4,500    
Broward Cnty. Water & Sewer Utility Rev., 5.25%, 10/1/34, Ser. A (i)
   Aa3/AA     4,502,880  
  2,500    
Hillsborough Cnty. Industrial Dev. Auth. Rev., Tampa General Hospital Project, 5.25%, 10/1/34, Ser. B
   A3/NR     2,076,675  
  1,485    
Julington Creek Plantation Community Dev. Dist., Special Assessment, 5.00%, 5/1/29, (NPFGC)
   Baa1/A     1,156,340  
  1,000    
Miami-Dade Cnty. Rev., 5.50%, 10/1/36, Ser. A
   A2/A-     955,130  
  3,895    
Sarasota Cnty. Health Facs. Auth. Rev., 5.75%, 7/1/45
   NR/NR     2,672,710  
  4,200    
State Board of Education, GO, 5.00%, 6/1/38, Ser. D (i)
   Aa1/AAA     4,168,038  
  6,900    
State Board of Governors Rev., Florida Univ., 6.50%, 7/1/33
   Aa2/AA     7,565,229  
       
 
          
       
 
         25,868,021  
       
 
          
       
 
            
       
Georgia—0.2%
            
  1,750    
Fulton Cnty. Residential Care Facs. Rev., Lenbrook Project, 5.125%, 7/1/42, Ser. A
   NR/NR     1,050,892  
  400    
Medical Center Hospital Auth. Rev., Spring Harbor Green Island Project, 5.25%, 7/1/37
   NR/NR     273,204  
       
 
          
       
 
         1,324,096  
       
 
          
       
 
            
       
Idaho—1.2%
            
       
State Building Auth. Building Rev., Ser. A (XLCA),
            
  1,000    
5.00%, 9/1/33
   NR/AA-     977,980  
  5,750    
5.00%, 9/1/43
   NR/AA-     5,452,668  
       
 
          
       
 
         6,430,648  
       
 
          
       
 
            
       
Illinois—8.1%
            
  500    
Chicago Board of Education School Reform, GO, zero coupon, 12/1/28, Ser. A (FGIC-NPFGC)
   A1/AA-     151,480  
       
Chicago Motor Fuel Tax Rev.,
            
  7,000    
5.00%, 1/1/33, Ser. A (AMBAC)
   A1/AA+     6,820,590  
  500    
5.00%, 1/1/38, Ser. A
   Aa2/AAA     491,055  
       
Chicago, GO,
            
  720    
5.00%, 1/1/31, Ser. A (NPFGC)
   Aa3/AA-     706,975  
  5,000    
5.00%, 1/1/34, Ser. C (i)
   Aa3/AA-     4,835,500  
       
Educational Facs. Auth. Rev., Univ. of Chicago, Ser. A
            
  4,780    
5.00%, 7/1/33
   Aa1/AA     4,802,227  
  165    
5.25%, 7/1/41
   Aa1/AA     166,175  
       
Finance Auth. Rev.,
            
       
Leafs Hockey Club Project, Ser. A
            
  1,000    
5.875%, 3/1/27
   NR/NR     400,010  
  625    
6.00%, 3/1/37 (e)
   NR/NR     249,631  
  400    
OSF Healthcare Systems, 7.125%, 11/15/37, Ser. A
   A2/A     417,648  
  12,795    
Peoples Gas Light & Coke, 5.00%, 2/1/33, (AMBAC)
   A2/A-     12,381,594  
  5,000    
Univ. of Chicago, 5.50%, 7/1/37, Ser. B (i)
   Aa1/AA     5,182,800  
  1,175    
Health Facs. Auth. Rev., Elmhurst Memorial Healthcare, 5.50%, 1/1/22
   Baa1/NR     1,054,210  
  5,000    
State Toll Highway Auth. Rev., 5.50%, 1/1/33, Ser. B
   Aa3/AA-     5,178,100  
       
 
          
       
 
         42,837,995  
       
 
          
       
 
            
       
Indiana—2.1%
            
  1,375    
Fort Wayne Pollution Control Rev., General Motors Corp. Project, 6.20%, 10/15/25 (e)
   Caa3/D     294,580  
  5,000    
Indianapolis Local Public Improvement Board, Tax Allocation, 5.00%, 2/1/29, Ser. G (NPFGC)
   Baa1/AA     5,046,950  
  1,000    
Plainfield Parks Facs. Corp. Lease Rent Rev., 5.00%, 1/15/22, (AMBAC)
   NR/A     1,015,200  

 

 

PIMCO Municipal Income Fund III Schedule of Investments
June 30, 2009 (unaudited)
                     
Principal                
Amount         Credit Rating      
(000)         (Moody’s/S&P)   Value*  
 
       
Indiana (continued)
            
       
Portage Industrial Economic Dev. Rev., Ameriplex Project, Tax Allocation,
            
$ 1,000    
5.00%, 7/15/23
   NR/BBB+   $ 823,900  
  775    
5.00%, 1/15/27
   NR/BBB+     607,383  
  3,500    
State Dev. Finance Auth. Pollution Control Rev., 5.00%, 3/1/30, Ser. B (AMBAC)
   Aaa/A     3,124,870  
       
 
          
       
 
         10,912,883  
       
 
          
       
 
            
       
Iowa—1.5%
            
       
Finance Auth. Rev., Deerfield Retirement Community, Inc., Ser. A,
            
  120    
5.50%, 11/15/27
   NR/NR     74,494  
  575    
5.50%, 11/15/37
   NR/NR     320,879  
  11,010    
Tobacco Settlement Auth. Rev., 5.60%, 6/1/34, Ser. B
   Baa3/BBB     7,393,435  
       
 
          
       
 
         7,788,808  
       
 
          
       
 
            
       
Kentucky—0.6%
            
       
Economic Dev. Finance Auth. Hospital Facs. Rev.,
           
       
Baptist Healthcare System, Ser. A,
            
  1,000    
5.375%, 8/15/24
   Aa3/NR     1,045,570  
  1,300    
5.625%, 8/15/27
   Aa3/NR     1,340,872  
  1,000    
Catholic Healthcare Partners, 5.25%, 10/1/30
   A1/AA-     916,980  
       
 
          
       
 
         3,303,422  
       
 
          
       
 
            
       
Louisiana—0.5%
            
  1,700    
Public Facs. Auth. Rev., Ochsner Clinic Foundation Project, 5.50%, 5/15/47, Ser. B
   A3/NR     1,330,590  
  1,595    
Tobacco Settlement Financing Corp. Rev., 5.875%, 5/15/39, Ser.2001- B
   Baa3/BBB     1,255,169  
       
 
          
       
 
         2,585,759  
       
 
          
       
 
            
       
Maryland—0.3%
            
  1,500    
Health & Higher Educational Facs. Auth. Rev., Calvert Health Systems, 5.50%, 7/1/36
   A2/NR     1,366,485  
       
 
          
       
 
            
       
Massachusetts—1.3%
            
  750    
Dev. Finance Agcy. Rev., Linden Ponds, Inc., 5.75%, 11/15/35, Ser. A
   NR/NR     453,660  
  1,600    
State College Building Auth. Rev., 5.50%, 5/1/39, Ser. A
   A1/A+     1,641,376  
  4,910    
State Housing Finance Agcy., Housing Rev., 5.125%, 6/1/43, Ser. H
   Aa3/AA-     4,722,880  
       
 
          
       
 
         6,817,916  
       
 
          
       
 
            
       
Michigan—14.2%
            
  500    
Conner Creek Academy East Rev., 5.25%, 11/1/36
   NR/BB+     327,300  
  9,320    
Detroit Sewer Disposal System Rev., 5.00%, 7/1/32, Ser. A (FSA)
   Aa3/AAA     8,673,938  
       
Detroit Water Supply System Rev., (NPFGC),
            
  30,000    
5.00%, 7/1/34, Ser. A
   A2/A+     26,458,200  
  7,555    
5.00%, 7/1/34, Ser. B
   A3/A     6,591,284  
  1,500    
Royal Oak Hospital Finance Auth. Rev., William Beaumont Hospital, 8.25%, 9/1/39
   A1/A     1,698,690  
       
State Hospital Finance Auth. Rev.,
            
  175    
Detroit Medical Center, 5.25%, 8/15/23, Ser. A
   Ba3/BB-     132,167  
       
Oakwood Group, Ser. A,
            
  5,405    
5.75%, 4/1/32
   A2/A     4,643,057  
  575    
6.00%, 4/1/22
   A2/A     548,567  
  20,000    
Trinity Health Credit, 5.375%, 12/1/30, Ser. C
   Aa2/AA     19,686,600  
  10,000    
Tobacco Settlement Finance Auth. Rev., 6.00%, 6/1/48, Ser. A
   NR/BBB     5,967,100  
       
 
          
       
 
         74,726,903  
       
 
          

 

 

PIMCO Municipal Income Fund III Schedule of Investments
June 30, 2009 (unaudited)
                     
Principal                
Amount         Credit Rating      
(000)         (Moody’s/S&P)   Value*  
 
       
Mississippi—0.7%
            
       
Business Finance Corp. Pollution Control Rev., System Energy Resources, Inc. Project,
            
$ 3,000    
5.875%, 4/1/22
   Ba1/BBB   $ 2,763,270  
  1,250    
5.90%, 5/1/22
   Ba1/BBB     1,140,650  
       
 
          
       
 
         3,903,920  
       
 
          
       
 
            
       
Missouri—0.3%
            
  1,350    
St. Louis Cnty. Industrial Dev. Auth. Housing Dev. Rev., 5.20%, 1/20/36, Ser. A (GNMA)
   NR/AAA     1,327,077  
  250    
Township of Jennings Rev., Northland Redev. Area Project, 5.00%, 11/1/23
   NR/NR     186,190  
       
 
          
       
 
         1,513,267  
       
 
          
       
 
            
       
Montana—1.6%
            
  11,250    
Forsyth Pollution Control Rev., Puget Sound Energy, 5.00%, 3/1/31, Ser. A (AMBAC)
   Baa2/A-     8,622,225  
       
 
          
 
       
Nevada—0.7%
            
  4,000    
Clark Cnty., GO, 4.75%, 6/1/30, (FSA)
   Aa1/AAA     3,582,840  
       
 
          
       
 
            
       
New Jersey—3.9%
            
  1,000    
Camden Cnty. Improvement Auth. Rev., Cooper Health Systems Group, 5.00%, 2/15/35, Ser. A
   Baa3/BBB     681,680  
       
Economic Dev. Auth. Rev.,
            
  4,500    
Kapkowski Road Landfill Project, Special Assessment, 6.50%, 4/1/28
   Baa3/NR     3,803,580  
  300    
Newark Airport, 7.00%, 10/1/14
   Ba1/NR     290,328  
       
Health Care Facs. Financing Auth. Rev.,
            
  1,085    
Pascack Valley Hospital Assoc., 6.625%, 7/1/36 (e)
   NR/D     27,113  
  1,000    
St. Peters Univ. Hospital, 5.75%, 7/1/37
   Baa2/BBB-     819,250  
  1,150    
Trinitas Hospital, 5.25%, 7/1/30, Ser. A
   Baa3/BBB-     854,232  
  2,000    
State Turnpike Auth. Rev., 5.25%, 1/1/40, Ser. E
   A3/A+     2,001,460  
  22,645    
Tobacco Settlement Financing Corp. Rev., 5.00%, 6/1/41, Ser. 1A
   Baa3/BBB     12,270,646  
       
 
          
       
 
         20,748,289  
       
 
          
       
 
            
       
New Mexico—0.2%
            
  1,000    
Farmington Pollution Control Rev., 5.80%, 4/1/22
   Baa3/BB+     925,190  
       
 
          
       
 
            
       
New York—4.5%
            
  1,700    
Liberty Dev. Corp. Rev., Goldman Sachs Headquarters, 5.50%, 10/1/37
   A1/A     1,600,227  
  1,250    
Metropolitan Transportation Auth. Rev., 5.00%, 11/15/34, Ser. B
   NR/AA     1,228,750  
  1,150    
Nassau Cnty. Industrial Dev. Agcy. Rev., Amsterdam at Harborside, 6.70%, 1/1/43, Ser. A
   NR/NR     872,459  
  10,450    
New York City Industrial Dev. Agcy. Rev., Yankee Stadium, 7.00%, 3/1/49
   Aa2/AAA     11,333,756  
       
New York City Municipal Water Finance Auth. Rev. (i),
            
  4,900    
5.00%, 6/15/37, Ser. D
   Aa2/AAA     4,848,893  
  4,000    
Second Gen. Resolution, 4.75%, 6/15/35, Ser. DD
   Aa3/AA+     3,777,720  
       
 
          
       
 
         23,661,805  
       
 
          
       
 
            
       
North Carolina—1.7%
            
       
Eastern Municipal Power Agcy. Power System Rev.,
            
  2,000    
5.125%, 1/1/23, Ser. D
   Baa1/BBB+     2,007,260  
  2,000    
5.125%, 1/1/26, Ser. D
   Baa1/BBB+     1,959,680  
  3,795    
5.375%, 1/1/17, Ser. C
   Baa1/BBB+     3,953,176  
  1,500    
Medical Care Commission Rev., Cleveland Cnty. Healthcare, 5.00%, 7/1/35, Ser. A (AMBAC)
   NR/A     1,168,170  
       
 
          
       
 
         9,088,286  
       
 
          

 

 

PIMCO Municipal Income Fund III Schedule of Investments
June 30, 2009 (unaudited)
                     
Principal                
Amount         Credit Rating      
(000)         (Moody’s/S&P)   Value*  
 
       
Ohio—3.9%
            
$ 15,375    
Air Quality Dev. Auth. Pollution Control Rev., Dayton Power, 4.80%, 1/1/34, Ser. B (FGIC)
   A2/A   $ 14,106,255  
  5,000    
Buckeye Tobacco Settlement Financing Auth. Rev., 5.875%, 6/1/47, Ser. A-2
   Baa3/BBB     2,828,750  
  500    
Cnty. of Montgomery Rev., Miami Valley Hospital, 6.25%, 11/15/39, Ser. A
   Aa3/AA-     518,860  
  2,500    
Lorain Cnty. Hospital Rev., Catholic Healthcare, 5.375%, 10/1/30
   A1/AA-     2,347,700  
  500    
State Higher Educational Fac. Commission Rev., Univ. Hospital Health Systems, 6.75%, 1/15/39, Ser. A
   A2/A     525,000  
       
 
          
       
 
         20,326,565  
       
 
          
       
 
            
       
Pennsylvania—2.0%
            
  1,000    
Allegheny Cnty. Hospital Dev. Auth. Rev., Univ. of Pittsburgh Medical Center, 5.625%, 8/15/39
   Aa3/A+     977,100  
       
Cumberland Cnty. Auth. Retirement Community Rev., Messiah Village Project, Ser. A,
            
  750    
5.625%, 7/1/28
   NR/BBB-     576,345  
  670    
6.00%, 7/1/35
   NR/BBB-     516,583  
  1,000    
Dauphin Cnty. General Auth. Rev., Pinnacle Health Systems Project, 6.00%, 6/1/36, Ser. A
   A2/A     960,740  
  1,250    
Harrisburg Auth. Rev., Harrisburg Univ. of Science, 6.00%, 9/1/36, Ser. B
   NR/NR     1,014,150  
  6,200    
Philadelphia Hospitals & Higher Education Facs. Auth. Rev., Temple Univ. Hospital, 6.625%, 11/15/23, Ser. A
   Baa3/BBB     5,958,324  
  500    
Philadelphia Water Rev., 5.25%, 1/1/36, Ser. A
   A3/A     484,700  
       
 
          
       
 
         10,487,942  
       
 
          
 
       
South Carolina—0.9%
            
  5,305    
Jobs-Economic Dev. Auth. Rev., Bon Secours, 5.625%, 11/15/30, Ser. B
   A3/A-     4,849,778  
       
 
          
       
 
            
       
Tennessee—0.3%
            
       
State Energy Acquisition Corp. Rev., Ser. A,
            
  1,200    
5.25%, 9/1/21
   Ba1/BBB     1,043,772  
  365    
5.25%, 9/1/22
   Ba1/BBB     312,258  
       
 
          
       
 
         1,356,030  
       
 
          
       
 
            
       
Texas—9.9%
            
  6,810    
Crowley Independent School Dist., GO, 4.75%, 8/1/35, (PSF-GTD)
   Aaa/AAA     6,630,965  
  1,300    
Dallas Water Rev., 5.25%, 8/15/38
   Aa2/AAA     1,284,634  
  10,115    
Denton Independent School Dist., GO, 5.00%, 8/15/33, (PSF-GTD) (i)
   Aaa/AA     10,186,816  
  465    
Judson Independent School Dist., GO, 5.00%, 2/1/30, (PSF-GTD)
   Aaa/NR     467,911  
       
Municipal Gas Acquisition & Supply Corp. I Rev.,
            
  150    
5.25%, 12/15/26, Ser. A
   A2/A     123,425  
  8,100    
6.25%, 12/15/26, Ser. D
   A2/A     7,601,445  
       
North Harris Cnty. Regional Water Auth. Rev.,
            
  5,500    
5.25%, 12/15/33
   A3/A+     5,238,145  
  5,500    
5.50%, 12/15/38
   A3/A+     5,351,335  
       
North Texas Tollway Auth. Rev.,
            
  10,800    
5.625%, 1/1/33, Ser. A
   A2/A-     10,545,552  
  700    
5.75%, 1/1/33, Ser. F
   A3/BBB+     681,534  
  2,000    
Sabine River Auth. Rev., 5.20%, 5/1/28, Ser. C
   Caa2/CCC     983,040  
  3,000    
Tarrant Cnty. Cultural Education Facs. Finance Corp. Rev., Baylor Health Care Systems Project, 6.25%, 11/15/29
   Aa2/AA-     3,223,710  
       
 
          
       
 
         52,318,512  
       
 
          

 

 

PIMCO Municipal Income Fund III Schedule of Investments
June 30, 2009 (unaudited)
                     
Principal                
Amount         Credit Rating      
(000)         (Moody’s/S&P)   Value*  
 
       
Virginia—0.3%
            
$ 1,000    
Fairfax Cnty. Industrial Dev. Auth. Rev., Inova Health Systems, 5.50%, 5/15/35, Ser. A
   Aa2/AA+   $ 1,015,130  
  1,000    
James City Cnty. Economic Dev. Auth. Rev., United Methodist Homes, 5.50%, 7/1/37, Ser. A
   NR/NR     484,190  
       
 
          
       
 
         1,499,320  
       
 
          
       
 
            
       
Washington—8.0%
            
  6,375    
Chelan Cnty. Public Utility Dist. Rev., 5.125%, 7/1/33, Ser. C (AMBAC)
   Aa2/AA     6,428,423  
  1,000    
Health Care Facs. Auth. Rev., Seattle Cancer Care Alliance, 7.375%, 3/1/38
   A3/NR     1,054,560  
  15,000    
King Cnty. Sewer Rev., 5.00%, 1/1/35, Ser. A (FSA) (i)
   Aa3/AAA     15,048,450  
  20,015    
Tobacco Settlement Auth. Rev., 6.50%, 6/1/26
   Baa3/BBB     19,514,625  
       
 
          
       
 
         42,046,058  
       
 
          
       
 
            
       
Wisconsin—2.2%
            
  1,000    
Health & Educational Facs. Auth. Rev., Prohealth Care, Inc., 6.625%, 2/15/39
   A1/A+     1,020,910  
  10,000    
State Rev., 6.00%, 5/1/36, Ser. A
   A1/AA-     10,436,200  
       
 
          
       
 
         11,457,110  
       
 
          
       
Total Municipal Bonds & Notes (cost—$525,507,189)
         493,311,130  
       
 
          
       
 
            
CORPORATE BONDS & NOTES (h)—1.6%            
  5,500    
CIT Group, Inc., 5.80%, 7/28/11
   Ba2/BB-     4,123,636  
  5,000    
SLM Corp., 1.252%, 7/26/10, FRN
   Ba1/BBB-     4,538,265  
       
 
          
       
Total Corporate Bonds & Notes (cost—$8,776,325)
         8,661,901  
       
 
          
       
 
            
VARIABLE RATE NOTES (a)(b)(c)(d)(f)—1.2%            
       
Texas—1.2%
            
  6,500    
JP Morgan Chase Putters/Drivers Trust, GO, 9.317%, 2/1/17, Ser. 3480 (cost—$6,467,825)
   NR/AA     6,522,620  
       
 
          
       
 
            
SHORT-TERM INVESTMENTS—3.7%            
Corporate Notes—2.9%            
  1,900    
American General Finance Corp., 1.542%, 10/2/09, FRN (h)
   Baa2/BB+     1,621,445  
       
CIT Group, Inc. (h),
            
  1,200    
0.974%, 8/17/09, FRN
   Ba2/BB-     1,166,255  
  5,785    
4.125%, 11/3/09
   Ba2/BB-     5,483,706  
  1,800    
Goldman Sachs Group, Inc., 0.934%, 11/16/09, FRN
   A1/A     1,798,360  
       
International Lease Finance Corp. (h),
            
  700    
0.881%, 5/24/10, FRN
   Baa2/BBB+     638,432  
  600    
1.531%, 1/15/10, FRN
   Baa2/BBB+     557,456  
  4,000    
4.75%, 7/1/09
   Baa2/BBB+     4,000,000  
       
 
          
       
Total Corporate Notes (cost—$15,395,482)
         15,265,654  
       
 
          
       
 
            
Variable Rate Demand Notes (f)(g)—0.8%            
       
Colorado—0.5%
            
  2,300    
Denver City & Cnty., CP, 0.20%, 7/1/09, Ser. A2
   VMIG1/NR     2,300,000  
       
 
          
 
       
Missouri—0.2%
            
  1,100    
State Health & Educational Facs. Auth. Rev., 0.20%, 7/1/09, Ser. B-1
   VMIG1/A-1     1,100,000  
       
 
          
 
       
New York—0.1%
            
  600    
New York City Transitional Finance Auth., 0.27%, 7/1/09, Ser. 1
   VMIG1/A-1+     600,000  
       
 
          
       
Total Variable Rate Demand Notes (cost—$4,000,000)
         4,000,000  
       
 
          
 
       
Total Short-Term Investments (cost—$19,395,482)
         19,265,654  
       
 
          
 
       
Total Investments (cost—$560,146,821)—100.0%
       $ 527,761,305  
       
 
          

 

 

 
Notes to Schedule of Investments:
 
*   Portfolio securities and other financial instruments for which market quotations are readily available are stated at market value. Market value is generally determined on the basis of last reported sales prices, or if no sales are reported, on the basis of quotes obtained from a quotation reporting system, established market makers, or independent pricing services.
 
    Portfolio securities and other financial instruments for which market quotations are not readily available or for which a development/event occurs that may significantly impact the value of a security, are fair-valued, in good faith, pursuant to procedures established by the Board of Trustees, or persons acting at their discretion pursuant to procedures established by the Board of Trustees. The Fund’s investments are valued daily using prices supplied by an independent pricing service or dealer quotations, or by using the last sale price on the exchange that is the primary market for such securities, or the last quoted mean price for those securities for which the over-the-counter market is the primary market or for listed securities in which there were no sales. Independent pricing services use information provided by market makers or estimates of market values obtained from yield data relating to investments or securities with similar characteristics. Securities purchased on a when-issued or delayed-delivery basis are marked to market daily until settlement at the forward settlement value. Short-term securities maturing in 60 days or less are valued at amortized cost, if their original term to maturity was 60 days or less, or by amortizing their value on the 61st day prior to maturity, if the original term to maturity exceeded 60 days.
 
    The prices used by the Fund to value securities may differ from the value that would be realized if the securities were sold and these differences could be material. The Fund’s net asset value is normally determined as of the close of regular trading (normally, 4:00 p.m. Eastern time) on the New York Stock Exchange (“NYSE”) on each day the NYSE is open for business.
 
(a)   Private Placement—Restricted as to resale and may not have a readily available market. Securities with an aggregate value of $10,029,330, representing 1.9% of total investments.
 
(b)   Illiquid security.
 
(c)   144A Security—Exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, typically only to qualified institutional buyers. Unless otherwise indicated, these securities are not considered to be illiquid.
 
(d)   When-issued or delayed-delivery security. To be settled/delivered after June 30, 2009.
 
(e)   In default.
 
(f)   Variable Rate Notes—Instruments whose interest rates change on specified date (such as a coupon date or interest payment date) and/or whose interest rates vary with changes in a designated base rate (such as the prime interest rate). The interest rate disclosed reflects the rate in effect on June 30, 2009.
 
(g)   Maturity date shown is date of next put.
 
(h)   All or partial amount segregated as collateral for reverse repurchase agreements.
 
(i)   Residual Interest Bonds held in Trust—Securities represent underlying bonds transferred to a separate securitization trust established in a tender option bond transaction in which the Fund acquired the residual interest certificates. These securities serve as collateral in a financing transaction.
Glossary:
AMBAC—insured by American Municipal Bond Assurance Corp.
CP—Certificates of Participation
FGIC—insured by Financial Guaranty Insurance Co.
FHA—insured by Federal Housing Administration
FRN—Floating Rate Note. The interest rate disclosed reflects the rate in effect on June 30, 2009.
FSA—insured by Financial Security Assurance, Inc.
GNMA—insured by Government National Mortgage Association
GO—General Obligation Bond
GTD—Guaranteed
NPFGC—insured by National Public Finance Guarantee Corporation
NR—Not Rated
PSF—Public School Fund
Radian—insured by Radian Guaranty, Inc.
XLCA—insured by XL Capital Assurance

 

 

Reverse Repurchase Agreements:
The weighted average daily balance of reverse repurchase agreements outstanding during the nine months ended June 30, 2009 was $18,350,214 at a weighted average interest rate of 0.96%. The total market value of underlying collateral (refer to the Schedule of Investments for positions segregated as collateral for reverse repurchase agreements) for open reverse repurchase agreements was $22,129,195. Open reverse repurchase agreements at June 30, 2009:
                                         
Counterparty   Rate   Trade Date   Maturity Date   Principal & Interest   Principal
 
Barclays Bank:
     0.80 %     6/2/09       7/1/09     $ 3,348,082     $  3,346,000  
 
     0.80 %     6/2/09       7/2/09       7,751,820     7,747,000  
 
     0.80 %     6/4/09       7/6/09       7,062,078     7,058,000  
Credit Suisse
     0.80 %     6/10/09       7/10/09       1,036,460     1,036,000  
    $19,187,000  
Fair Value Measurements—The Fund has adopted the Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (“FAS 157”). FAS 157 clarifies the definition of fair value for financial reporting, establishes a framework for measuring fair value and requires additional disclosures about the use of the fair value measurements. Under this standard, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e. the “exit price”) in an orderly transaction between market participants at the measurement date. The three levels of the fair value hierarchy under FAS 157 are described below:
  •   Level 1 — quoted prices in active markets for identical investments that the Fund has the ability to access
 
  •   Level 2 — valuations based on other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.), or quotes from inactive exchanges
 
  •   Level 3 — valuations based on significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments)
The Fund has adopted FASB Staff Position No. 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability have Significantly Decreased and Identifying Transactions that are not Orderly” (“FAS-157-4”).
FAS 157-4 provides guidance on determining when there has been a significant decrease in the volume and level of activity for an asset or liability, when a transaction is not orderly, and how that information must be incorporated into a fair value measurement. FAS 157-4 emphasizes that even if there has been a significant decrease in volume and level of activity for the asset or liability and regardless of the valuation techniques used, the objective of a fair value measurement remains the same.
An investment asset or liability’s level within the fair value hierarchy is based on the lowest level input, individually or in the aggregate, that is significant to fair value measurement.
The valuation techniques used by the Fund to measure fair value during the nine months ended June 30, 2009 maximized the use of observable inputs and minimized the use of unobservable inputs.
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
A summary of the inputs used as of June 30, 2009, in valuing the Fund’s assets and liabilities is listed below by investment type for more detail on the Total Investments in Securities, please refer to the Fund’s Schedule of Investments:
                                 
            Level 2 -   Level 3 -    
            Other Significant   Significant    
    Level 1 -   Observable   Unobservable   Value at
    Quoted Prices   Inputs   Inputs   6/30/09
 
Investments in Securities — Assets
                                
Municipal Bonds & Notes     —     $ 493,311,130       —     $ 493,311,130  
Corporate Bonds & Notes     —       8,661,901       —       8,661,901  
Variable Rate Notes     —       6,522,620       —       6,522,620  
Short-Term Investments
     —       19,265,654       —       19,265,654  
 
Total Investments in Securities
     —     $ 527,761,305       —     $ 527,761,305  
 
A roll forward of fair value measurements using significant unobservable inputs (Level 3) as of June 30, 2009, were as follows:
                                                         
    Beginning           Accrued       Total Chance   Transfer in    
    Balance   Net   Discounts   Total Realized   in Unrealized   and/or out   Ending Balance
    9/30/08   Paydowns   (Premiums)   Gain(Loss)   Gain(Loss)   of Level 3   6/30/09
 
Investments in Securities — Assets
    
Municipal Bonds & Notes
   $ 149,999     $ (74,760 )     —     $ 2,337     $ (50,463 )   $ (27,113 )   $ —  
 

 

 

Item 2. Controls and Procedures
(a) The registrant’s President & Chief Executive Officer and Treasurer, Principal Financial & Accounting Officer have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Act (17 CFR 270.30a -3(c))), are effective based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this document.
(b) There were no significant changes in the registrant’s internal controls over financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR 270.30a -3(d))) that occurred during the registrant’s last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 3. Exhibits
     (a) Exhibit 99.302 Cert. — Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

 

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
         
Registrant: PIMCO Municipal Income Fund III    
 
        
By
   /s/ Brian S. Shlissel    
President & Chief Executive Officer    
Date: August 25, 2009    
 
        
By
   /s/ Lawrence G. Altadonna    
Treasurer, Principal Financial & Accounting Officer    
Date: August 25, 2009    
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
         
By
   /s/ Brian S. Shlissel    
President & Chief Executive Officer    
Date: August 25, 2009    
 
        
By
   /s/ Lawrence G. Altadonna
 
    
Treasurer, Principal Financial & Accounting Officer    
Date: August 25, 2009