OMB APPROVAL
	OMB Number: 3235-0578
	Expires: April 30, 2013
	Estimated average burden hours per response: 5.6

 

 

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, 2011
Date of Reporting Period:		December 31, 2010

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 respond 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

December 31, 2010 (unaudited)

Principal
Amount						Credit Rating
(000s)						(Moody’s/S&P)		Value*
MUNICIPAL BONDS & NOTES—97.9%
				Alabama—1.3%
$	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		$	4,329,950
	500			Birmingham Special Care Facs. Financing Auth. Rev., Childrens Hospital, 6.00%, 6/1/39 (AGC)		Aa3/AA+			523,465
	1,500			Colbert Cnty. Northwest Health Care Auth. Rev., 5.75%, 6/1/27		Ba1/NR			1,378,920
	1,000			State Docks Department Rev., 6.00%, 10/1/40		NR/BBB+			959,790
									7,192,125
				Alaska—1.2%
				Housing Finance Corp. Rev.,
	3,900			5.00%, 12/1/33, Ser. A		Aaa/AAA			3,809,364
	1,000			5.25%, 6/1/32, Ser. C (NPFGC)		Aa2/AA			993,590
	3,100			Northern Tobacco Securitization Corp. Rev., 5.00%, 6/1/46, Ser. A		Baa3/NR			1,856,900
									6,659,854
				Arizona—5.1%
				Health Facs. Auth. Rev.,
				Banner Health,
	1,250			5.00%, 1/1/35, Ser. A		NR/A+			1,161,000
	900			5.50%, 1/1/38, Ser. D		NR/A+			893,736
	2,250			Beatitudes Campus Project, 5.20%, 10/1/37		NR/NR			1,670,445
	1,500			Maricopa Cnty. Pollution Control Corp. Rev., Palo Verde Project, 5.05%, 5/1/29, Ser. A (AMBAC)		Baa2/BBB-			1,389,900
				Pima Cnty. Industrial Dev. Auth. Rev.,
	13,000			5.00%, 9/1/39 (e)		Aa2/AA			11,679,200
	750			Tuscon Electric Power Co., 5.25%, 10/1/40, Ser. A		Baa3/BBB-			653,708
	5,000			Salt River Project Agricultural Improvement & Power Dist. Rev., 5.00%, 1/1/39, Ser. A (e)		Aa1/AA			4,955,300
	5,600			Salt Verde Financial Corp. Rev., 5.00%, 12/1/37		A3/A			4,784,640
									27,187,929
				California—6.1%
	2,500			Health Facs. Financing Auth. Rev., Catholic Healthcare West, 6.00%, 7/1/39, Ser. A		A2/A			2,546,525
	1,250			Palomar Pomerado Health, CP, 6.75%, 11/1/39		Baa3/NR			1,268,062
				State, GO,
	250			5.00%, 11/1/37		A1/A-			224,813
	5,300			5.00%, 12/1/37		A1/A-			4,765,495
	6,000			6.00%, 4/1/38		A1/A-			6,120,360
				Statewide Communities Dev. Auth. Rev.,
	1,000			American Baptist Homes West, 6.25%, 10/1/39		NR/BBB-			951,350
	2,485			California Baptist Univ., 9.00%, 11/1/17, Ser. B (a)(b)		NR/NR			2,172,710
				Methodist Hospital Project, (FHA),
	2,900			6.625%, 8/1/29		Aa2/NR			3,176,457
	10,300			6.75%, 2/1/38		Aa2/NR			11,265,728
									32,491,500
				Colorado—2.4%
	9,955			Colorado Springs Utilities Rev., 5.00%, 11/15/30, Ser. B (e)		Aa2/AA			9,941,959
	500			Confluence Metropolitan Dist. Rev., 5.45%, 12/1/34		NR/NR			350,875

PIMCO Municipal Income Fund III Schedule of Investments

December 31, 2010 (unaudited)

Principal
Amount						Credit Rating
(000s)						(Moody’s/S&P)		Value*
				Colorado (continued)
$	500			Health Facs. Auth. Rev., Evangelical Lutheran, 6.125%, 6/1/38, Ser. A		A3/A-		$	503,695
	1,500			Housing & Finance Auth. Rev., Evergreen Country Day School, Inc. Project, 5.875%, 6/1/37 (a)(b)		NR/BB			973,995
	500			Public Auth. for Colorado Energy Rev., 6.50%, 11/15/38		A2/A			524,520
	500			Regional Transportation Dist. Rev., Denver Transportation Partners, 6.00%, 1/15/34		Baa3/NR			495,065
									12,790,109
				Connecticut—0.2%
	1,250			Harbor Point Infrastructure Improvement Dist., Tax Allocation, 7.875%, 4/1/39, Ser. A		NR/NR			1,283,125
				Delaware—0.3%
	1,500			State Economic Dev. Auth. Rev., Delmarva Power & Light Co., 5.40%, 2/1/31		Baa2/BBB+			1,469,355
				District of Columbia—2.0%
	10,000			Water & Sewer Auth. Rev., 5.50%, 10/1/39, Ser. A (e)		Aa2/AA			10,440,700
				Florida—4.9%
	3,480			Brevard Cnty. Health Facs. Auth. Rev., Health First, Inc. Project, 5.00%, 4/1/34		A3/A-			3,064,314
	500			Broward Cnty. Airport Rev., 5.375%, 10/1/29, Ser. O		A1/A+			502,900
	4,500			Broward Cnty. Water & Sewer Rev., 5.25%, 10/1/34, Ser. A (e)		Aa2/AA			4,594,275
	2,500			Hillsborough Cnty. Industrial Dev. Auth. Rev., Tampa General Hospital Project, 5.25%, 10/1/34, Ser. B		A3/NR			2,241,775
	1,000			Miami-Dade Cnty. Airport Rev., 5.50%, 10/1/36, Ser. A		A2/A-			974,390
	3,895			Sarasota Cnty. Health Facs. Auth. Rev., 5.75%, 7/1/45		NR/NR			3,000,202
	4,200			State Board of Education, GO, 5.00%, 6/1/38, Ser. D (e)		Aa1/AAA			4,168,836
	6,900			State Board of Governors Rev., Florida Univ., 6.50%, 7/1/33		Aa2/AA			7,646,787
									26,193,479
				Georgia—0.3%
	1,750			Fulton Cnty. Residential Care Facs. for the Elderly Auth. Rev., Lenbrook Project, 5.125%, 7/1/42, Ser. A		NR/NR			1,072,627
	400			Medical Center Hospital Auth. Rev., Spring Harbor Green Island Project, 5.25%, 7/1/37		NR/NR			306,764
									1,379,391
				Hawaii—0.3%
	1,500			Hawaii Pacific Health Rev., 5.50%, 7/1/40, Ser. A		A3/BBB+			1,371,810
				Idaho—1.2%
				State Building Auth. Rev., Ser. A (XLCA),
	1,000			5.00%, 9/1/33		WR/AA-			1,001,750
	5,750			5.00%, 9/1/43		WR/AA-			5,578,592
									6,580,342
				Illinois—8.5%
				Chicago, GO,
	720			5.00%, 1/1/31, Ser. A (NPFGC)		Aa3/A+			723,305
	5,000			5.00%, 1/1/34, Ser. C (e)		Aa3/A+			4,460,700

PIMCO Municipal Income Fund III Schedule of Investments

December 31, 2010 (unaudited)

Principal
Amount						Credit Rating
(000s)						(Moody’s/S&P)		Value*
				Illinois (continued)
$	500			Chicago Board of Education School Reform, GO, zero coupon, 12/1/28, Ser. A (FGIC-NPFGC)		Aa2/AA-		$	149,805
	7,000			Chicago Motor Fuel Tax Rev., 5.00%, 1/1/33, Ser. A (AMBAC)		Aa3/AA+			6,659,380
				Finance Auth. Rev.,
	1,175			Elmhurst Memorial Healthcare, 5.50%, 1/1/22		Baa1/NR			1,141,994
				Leafs Hockey Club Project, Ser. A (f),
	1,000			5.875%, 3/1/27		NR/NR			252,260
	625			6.00%, 3/1/37		NR/NR			156,062
	400			OSF Healthcare System, 7.125%, 11/15/37, Ser. A		A3/A			419,036
	12,795			Peoples Gas Light & Coke Co., 5.00%, 2/1/33 (AMBAC)		A1/A-			11,982,518
	1,000			Swedish Covenant Hospital, 6.00%, 8/15/38, Ser. A		NR/BBB+			962,150
				Univ. of Chicago,
	3,000			5.00%, 7/1/33, Ser. A		Aa1/AA			2,952,210
	165			5.25%, 7/1/41, Ser. 05-A		Aa1/AA			165,069
	10,000			5.50%, 7/1/37, Ser. B (e)		Aa1/AA			10,271,400
	5,000			State Toll Highway Auth. Rev., 5.50%, 1/1/33, Ser. B		Aa3/AA-			5,034,550
									45,330,439
				Indiana—0.8%
	500			Dev. Finance Auth. Rev., 5.00%, 3/1/30, Ser. B (AMBAC)		A2/NR			479,730
	2,000			Finance Auth. Rev., U.S. Steel Corp., 6.00%, 12/1/26		Ba2/BB			1,918,820
				Portage, Tax Allocation, Ameriplex Project,
	1,000			5.00%, 7/15/23		NR/A			921,060
	775			5.00%, 1/15/27		NR/A			686,402
									4,006,012
				Iowa—1.7%
				Finance Auth. Rev., Deerfield Retirement Community, Inc., Ser. A,
	120			5.50%, 11/15/27		NR/NR			85,355
	575			5.50%, 11/15/37		NR/NR			370,950
	11,010			Tobacco Settlement Auth. Rev., 5.60%, 6/1/34, Ser. B		Baa3/BBB			8,768,584
									9,224,889
				Kentucky—1.2%
				Economic Dev. Finance Auth. Rev.,
				Baptist Healthcare Systems, Ser. A,
	1,000			5.375%, 8/15/24		Aa3/NR			1,048,020
	1,300			5.625%, 8/15/27		Aa3/NR			1,348,841
	1,000			Catholic Healthcare Partners, 5.25%, 10/1/30		A1/AA-			965,360
	2,000			Owensboro Medical Healthcare Systems, 6.375%, 6/1/40, Ser. A		Baa2/NR			1,990,640
	1,250			Ohio Cnty. Pollution Control Rev., Big Rivers Electric Corp., 6.00%, 7/15/31, Ser. A		Baa1/BBB-			1,220,312
									6,573,173
				Louisiana—1.0%
				Local Gov’t Environmental Facs. & Community Dev. Auth. Rev.,
	400			Westlake Chemical Corp., 6.50%, 11/1/35, Ser. A-2		Ba2/BBB-			388,924
				Woman’s Hospital Foundation, Ser. A,
	1,500			5.875%, 10/1/40		A3/BBB+			1,395,675
	1,000			6.00%, 10/1/44		A3/BBB+			938,310

PIMCO Municipal Income Fund III Schedule of Investments

December 31, 2010 (unaudited)

Principal
Amount						Credit Rating
(000s)						(Moody’s/S&P)		Value*
				Louisiana (continued)
$	1,700			Public Facs. Auth. Rev., Ochsner Clinic Foundation Project, 5.50%, 5/15/47, Ser. B		Baa1/NR		$	1,449,369
	1,345			Tobacco Settlement Financing Corp. Rev., 5.875%, 5/15/39, Ser. 2001-B		Baa3/BBB			1,286,856
									5,459,134
				Maryland—0.6%
	1,000			Economic Dev. Corp. Rev., 5.75%, 6/1/35, Ser. B		Baa3/NR			943,710
				Health & Higher Educational Facs. Auth. Rev.,
	1,500			Calvert Health System, 5.50%, 7/1/36		A3/NR			1,500,930
	700			Charlestown Community, 6.25%, 1/1/41		NR/NR			686,980
									3,131,620
				Massachusetts—1.4%
				Dev. Finance Agcy. Rev.,
	300			Adventcare Project, 7.625%, 10/15/37		NR/NR			293,424
	750			Linden Ponds, Inc. Fac., 5.75%, 11/15/35, Ser. A		NR/NR			521,647
	4,910			Housing Finance Agcy. Rev., 5.125%, 6/1/43, Ser. H		Aa3/AA-			4,769,967
	1,600			State College Building Auth. Rev., 5.50%, 5/1/39, Ser. A		Aa2/AA-			1,661,520
									7,246,558
				Michigan—14.8%
	500			Conner Creek Academy East Rev., 5.25%, 11/1/36		NR/BB+			374,170
	1,500			Detroit, GO, 5.25%, 11/1/35		Aa3/AA			1,352,415
	9,320			Detroit Sewer Rev., 5.00%, 7/1/32, Ser. A (AGM)		Aa3/AA+			8,447,368
				Detroit Water Rev., (NPFGC),
	30,000			5.00%, 7/1/34, Ser. A		A1/A+			27,553,800
	7,555			5.00%, 7/1/34, Ser. B		A2/A			6,679,073
	1,500			Royal Oak Hospital Finance Auth. Rev., William Beaumont Hospital, 8.25%, 9/1/39		A1/A			1,721,415
				State Hospital Finance Auth. Rev.,
	175			Detroit Medical Center, 5.25%, 8/15/23, Ser. A		Ba3/BB-			168,324
				Oakwood Group, Ser. A,
	5,405			5.75%, 4/1/32		A2/A			5,205,718
	575			6.00%, 4/1/22		A2/A			582,855
	20,000			Trinity Health Credit, 5.375%, 12/1/30, Ser. C		Aa2/AA			19,698,600
	10,000			Tobacco Settlement Finance Auth. Rev., 6.00%, 6/1/48, Ser. A		NR/BB			6,812,300
									78,596,038
				Minnesota—0.0%
	125			Duluth Housing & Redev. Auth. Rev., 5.875%, 11/1/40, Ser. A		NR/BBB-			112,341
				Mississippi—0.8%
				Business Finance Corp. Rev., System Energy Res., Inc. Project,
	3,000			5.875%, 4/1/22		Ba1/BBB			2,945,340
	1,250			5.90%, 5/1/22		Ba1/BBB			1,229,650
									4,174,990
				Missouri—0.1%
	250			Jennings Rev., Northland Redev. Area Project, 5.00%, 11/1/23		NR/NR			218,125
	500			Manchester, Tax Allocation, Highway141/Manchester Road Project, 6.875%, 11/1/39		NR/NR			486,210
									704,335

PIMCO Municipal Income Fund III Schedule of Investments

December 31, 2010 (unaudited)

Principal
Amount						Credit Rating
(000s)						(Moody’s/S&P)		Value*
				Nevada—0.7%
$	4,000			Clark Cnty., GO, 4.75%, 6/1/30 (AGM)		Aa1/AA+		$	3,701,840
				New Hampshire—0.4%
	2,000			Business Finance Auth. Rev., Elliot Hospital, 6.125%, 10/1/39, Ser. A		Baa1/BBB+			1,969,220
				New Jersey—4.5%
	1,000			Camden Cnty. Improvement Auth. Rev., Cooper Health Systems Group, 5.00%, 2/15/35, Ser. A		Baa3/BBB			840,920
	300			Economic Dev. Auth. Rev., Newark Airport Marriott Hotel, 7.00%, 10/1/14		Ba1/NR			299,970
	4,500			Economic Dev. Auth., Special Assessment, Kapkowski Road Landfill Project, 6.50%, 4/1/28		Ba2/NR			4,636,845
				Health Care Facs. Financing Auth. Rev.,
	1,000			St. Peters Univ. Hospital, 5.75%, 7/1/37		Baa3/BBB-			943,050
	1,150			Trinitas Hospital, 5.25%, 7/1/30, Ser. A		Baa3/BBB-			1,019,072
	2,000			State Turnpike Auth. Rev., 5.25%, 1/1/40, Ser. E		A3/A+			2,011,640
				Tobacco Settlement Financing Corp. Rev., Ser. 1-A,
	1,600			4.75%, 6/1/34		Baa3/BB+			972,416
	22,645			5.00%, 6/1/41		Baa3/BB-			13,499,817
									24,223,730
				New Mexico—0.2%
	1,000			Farmington Pollution Control Rev., 5.90%, 6/1/40, Ser. D		Baa3/BB+			975,410
				New York—4.3%
	1,700			Liberty Dev. Corp. Rev., Goldman Sachs Headquarters, 5.50%, 10/1/37		A1/A			1,681,062
	1,150			Nassau Cnty. Industrial Dev. Agcy. Rev., Amsterdam at Harborside, 6.70%, 1/1/43, Ser. A		NR/NR			1,058,391
	10,450			New York City Industrial Dev. Agcy. Rev., Yankee Stadium, 7.00%, 3/1/49 (AGC)		Aa3/AA+			11,511,302
				New York City Municipal Water Finance Auth. Water & Sewer Rev. (e),
	4,900			5.00%, 6/15/37, Ser. D		Aa1/AAA			4,850,216
	4,000			Second Generation Resolutions, 4.75%, 6/15/35, Ser. DD		Aa2/AA+			3,865,160
									22,966,131
				North Carolina—0.5%
	1,700			Capital Facs. Finance Agcy. Rev., Duke Energy, 4.625%, 11/1/40, Ser. A		A1/A			1,526,532
	1,500			Medical Care Commission Rev., Cleveland Cnty. Healthcare, 5.00%, 7/1/35, Ser. A (AMBAC)		WR/A			1,327,290
									2,853,822
				Ohio—4.0%
	15,375			Air Quality Dev. Auth. Pollution Control Rev., Dayton Power, 4.80%, 1/1/34, Ser. B (FGIC)		Aa3/A			13,524,465
	500			Allen Cnty. Catholic Healthcare Rev., Allen Hospital, 5.00%, 6/1/38, Ser. A		A1/AA-			466,805

PIMCO Municipal Income Fund III Schedule of Investments

December 31, 2010 (unaudited)

Principal
Amount						Credit Rating
(000s)						(Moody’s/S&P)		Value*
				Ohio (continued)
$	5,650			Buckeye Tobacco Settlement Financing Auth. Rev., 5.875%, 6/1/47, Ser. A-2		Baa3/BB-		$	3,725,554
	500			Higher Educational Fac. Commission Rev., Univ. Hospital Health Systems, 6.75%, 1/15/39, Ser. 2009-A		A2/A			519,190
	2,500			Lorain Cnty. Hospital Rev., Catholic Healthcare, 5.375%, 10/1/30		A1/AA-			2,503,275
	500			Montgomery Cnty. Rev., Miami Valley Hospital, 6.25%, 11/15/39, Ser. A		Aa3/NR			512,495
	250			State Rev., Ashland Univ. Project, 6.25%, 9/1/24		Ba1/NR			248,952
									21,500,736
				Oregon—0.2%
	1,000			Medford Hospital Facs. Auth. Rev., Asante Health Systems, 5.00%, 8/15/40, Ser. A (AGM)		Aa3/AA+			916,370
				Pennsylvania—2.8%
				Allegheny Cnty. Hospital Dev. Auth. Rev.,
	1,000			Univ. of Pittsburgh Medical Center, 5.625%, 8/15/39		Aa3/A+			1,009,780
	1,000			West Penn Allegheny Health System, 5.375%, 11/15/40, Ser. A		B1/BB-			669,060
				Cumberland Cnty. Municipal Auth. Rev., Messiah Village Project, Ser. A,
	750			5.625%, 7/1/28		NR/BBB-			666,247
	670			6.00%, 7/1/35		NR/BBB-			590,612
	1,000			Dauphin Cnty. General Auth. Rev., Pinnacle Health System Project, 6.00%, 6/1/36, Ser. A		A2/A			1,004,510
	1,250			Harrisburg Auth. Rev., Harrisburg Univ. of Science, 6.00%, 9/1/36, Ser. B		NR/NR			1,071,588
	100			Luzerne Cnty. Industrial Dev. Auth. Rev., Pennsylvania American Water Co., 5.50%, 12/1/39		A2/A			96,083
	6,200			Philadelphia Hospitals & Higher Education Facs. Auth. Rev., Temple Univ. Hospital, 6.625%, 11/15/23, Ser. A		Baa3/BBB			6,200,930
	500			Philadelphia Water Rev., 5.25%, 1/1/36, Ser. A		A1/A			486,435
	3,000			Turnpike Commission Rev., 5.125%, 12/1/40, Ser. D		A3/A-			2,869,560
									14,664,805
				Puerto Rico—1.1%
				Sales Tax Financing Corp. Rev.,
	2,400			5.00%, 8/1/40, Ser. A (AGM) (e)		Aa3/AA+			2,275,848
	3,000			5.375%, 8/1/38, Ser. C		A1/A+			2,837,280
	1,000			5.50%, 8/1/42, Ser. A		A1/A+			973,670
									6,086,798
				South Carolina—1.3%
	1,000			Greenwood Cnty. Rev., Self Regional Healthcare, 5.375%, 10/1/39		A2/A+			944,800
	5,305			Jobs-Economic Dev. Auth. Rev., Bon Secours Health System, 5.625%, 11/15/30, Ser. B		A3/A-			5,208,184
	800			State Ports Auth. Rev., 5.25%, 7/1/40		A1/A+			752,128
									6,905,112
				Tennessee—0.7%
	1,250			Claiborne Cnty. Industrial Dev. Board Rev., Lincoln Memorial Univ. Project, 6.625%, 10/1/39		NR/NR			1,265,113
	1,000			Johnson City Health & Educational Facs. Board Rev., Mountain States Health Alliance, 6.00%, 7/1/38		Baa1/BBB+			946,090

PIMCO Municipal Income Fund III Schedule of Investments

December 31, 2010 (unaudited)

Principal
Amount						Credit Rating
(000s)						(Moody’s/S&P)		Value*
				Tennessee (continued)
				Tennessee Energy Acquisition Corp. Rev., Ser. A,
$	1,200			5.25%, 9/1/21		Ba3/BB+		$	1,186,428
	365			5.25%, 9/1/22		Ba3/BB+			359,043
									3,756,674
				Texas—10.3%
	6,810			Crowley Independent School Dist., GO, 4.75%, 8/1/35 (PSF-GTD)		Aaa/AAA			6,674,277
	1,300			Dallas Rev., Dallas Civic Center, 5.25%, 8/15/38 (AGC)		Aa3/AA+			1,239,862
	10,115			Denton Independent School Dist., GO, 5.00%, 8/15/33 (PSF-GTD) (e)		Aaa/AAA			10,223,635
	465			Judson Independent School Dist., GO, 5.00%, 2/1/30 (PSF-GTD)		Aaa/NR			465,195
				Municipal Gas Acquisition & Supply Corp. I Rev.,
	150			5.25%, 12/15/26, Ser. A		A2/A			139,244
	8,100			6.25%, 12/15/26, Ser. D		A2/A			8,475,516
				North Harris Cnty. Regional Water Auth. Rev.,
	5,500			5.25%, 12/15/33		A1/A+			5,321,800
	5,500			5.50%, 12/15/38		A1/A+			5,407,325
				North Texas Tollway Auth. Rev.,
	10,800			5.625%, 1/1/33, Ser. A		A2/A-			10,372,536
	700			5.75%, 1/1/33, Ser. F		A3/BBB+			660,856
	2,000			6.25%, 1/1/39, Ser. A		A2/A-			2,031,340
	2,000			Sabine River Auth. Pollution Control Rev., 5.20%, 5/1/28, Ser. C		Ca/NR			539,780
	3,000			Tarrant Cnty. Cultural Education Facs. Finance Corp. Rev., Baylor Health Care Systems Project, 6.25%, 11/15/29		Aa2/AA-			3,216,900
									54,768,266
				Virginia—0.3%
	1,000			Fairfax Cnty. Industrial Dev. Auth. Rev., Inova Health Systems, 5.50%, 5/15/35, Ser. A		Aa2/AA+			1,033,070
	1,000			James City Cnty. Economic Dev. Auth. Rev., United Methodist Homes, 5.50%, 7/1/37, Ser. A		NR/NR			582,730
									1,615,800
				Washington—8.0%
	6,375			Chelan Cnty. Public Utility Dist. No. 1 Rev., Chelan Hyrdo Systems, 5.125%, 7/1/33, Ser. C (AMBAC)		Aa2/AA			6,403,496
				Health Care Facs. Auth. Rev.,
	500			Kadlec Regional Medical Center, 5.50%, 12/1/39		Baa2/NR			431,680
	1,000			Seattle Cancer Care Alliance, 7.375%, 3/1/38		A3/NR			1,078,190
	15,000			King Cnty. Sewer Rev., 5.00%, 1/1/35, Ser. A (AGM) (e)		Aa2/AA+			15,007,050
	19,260			Tobacco Settlement Auth. Rev., 6.50%, 6/1/26		Baa3/BBB			19,471,282
									42,391,698
				Wisconsin—2.4%
				Health & Educational Facs. Auth. Rev.,
	1,000			Aurora Health Care, Inc., 5.625%, 4/15/39, Ser. A		A3/NR			957,000
	1,000			Prohealth Care, Inc., 6.625%, 2/15/39		A1/A+			1,048,090
	10,000			State Rev., 6.00%, 5/1/36, Ser. A		Aa3/AA-			10,694,200
									12,699,290
				Total Municipal Bonds & Notes (cost—$535,943,293)					521,594,950

PIMCO Municipal Income Fund III Schedule of Investments

December 31, 2010 (unaudited)

Principal
Amount						Credit Rating
(000s)						(Moody’s/S&P)		Value*
VARIABLE RATE NOTES (a)(b)(c)(d)—2.1%
				California—0.3%
$	1,675			Los Angeles Community College Dist., GO, 11.33%, 8/1/33, Ser. 3096		NR/AA		$	1,496,914
				Florida—0.5%
	3,335			Greater Orlando Aviation Auth. Rev., 11.30%, 10/1/39, Ser. 3174		NR/NR			2,851,592
				Texas—1.3%
	6,500			JPMorgan Chase Putters/Drivers Trust, GO, 7.764%, 2/1/17, Ser. 3480		NR/AA+			6,651,645
				Total Variable Rate Notes (cost—$11,406,541)					11,000,151
				Total Investments (cost—$547,349,834)(g)—100.0%				$	532,595,101

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 mean between the last quoted bid and ask price. 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. Short-term secuirities 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 $14,146,856, representing 2.7% of total investments.
(b)		144A—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.
(c)		Inverse Floater—The interest rate shown bears an inverse relationship to the interest rate on another security or the value of an index. The interest rate disclosed reflects the rate in effect on December 31, 2010.
(d)		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 December 31, 2010.
(e)		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.
(f)		In default.
(g)		At December 31, 2010, the cost basis of investments for federal income tax purposes was $486,943,207. Aggregate gross unrealized appreciation for securities in which there was an excess value over tax cost was $16,946,737; aggregate gross unrealized depreciation for securities in which there was an excess of tax cost over value was $31,187,915; and net unrealized depreciation for federal income tax purposes was $14,241,178. The difference between book and tax cost was attributable to inverse floater transactions.

Glossary:

AGC—insured by Assured Guaranty Corp.
AGM—insured by Assured Guaranty Municipal Corp.
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
GO—General Obligation Bond
GTD—Guaranteed
NPFGC—insured by National Public Finance Guarantee Corp.
NR—Not Rated
PSF—Public School Fund
WR—Withdrawn Rating
XLCA—insured by XL Capital Assurance

Fair Value Measurements

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. The three levels of the fair value hierarchy 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)

An investment asset’s or liability’s level within the fair value hierarchy is based on the lowest level input, individually or in aggregate, that is significant to fair value measurement. The objective of fair value measurement remains the same even when there is a significant decrease in the volume and level of activity for an asset or liability and regardless of the valuation technique used.

The valuation techniques used by the Fund to measure fair value during the three months ended December 31, 2010 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. The following are certain inputs and techniques that the Fund generally uses to evaluate how to classify each major category of assets and liabilities for Level 2 and Level 3, in accordance with Generally Accepted Accounting Principles.

Municipal Bonds and Variable Rate Notes — Municipal bonds and variable rate notes are valued by independent pricing services based on pricing models that take into account, among other factors, information received from market makers and broker-dealers, current trades, bid-want lists, offerings, market movements, the callability of the bond, state of issuance, benchmark yield curves, and bond insurance. To the extent that these inputs are observable, the values of municipal bonds are categorized as Level 2. To the extent that these inputs are unobservable the values are categorized as Level 3.

The Fund’s policy is to recognize transfers between levels at the end of the reporting period.

A summary of the inputs used at December 31, 2010 in valuing the Fund’s assets and liabilities is listed below:

						Level 2 -				Level 3 -
						Other Significant				Significant
		Level 1 -				Observable				Unobservable				Value at
		Quoted Prices				Inputs				Inputs				12/31/10
Investments in Securities — Assets
Municipal Bonds & Notes			—			$	521,594,950				—			$	521,594,950
Variable Rate Notes			—				11,000,151				—				11,000,151
Total Investments			—			$	532,595,101				—			$	532,595,101

There were no significant transfers between Levels 1 and 2 during the three months ended December 31, 2010.

A roll forward of fair value measurements using significant unobservable inputs (Level 3) for the three months ended December 31, 2010, was as follows:

																		Net Change
		Beginning				Net				Accrued								in Unrealized
		Balance				Purchases(Sales)				Discounts				Net Realized				Appreciation/				Transfers into				Transfers out				Ending Balance
		9/30/10				and Settlements				(Premiums)				Gain(Loss)				Depreciation				Level 3				of Level 3				12/31/10
Investments in Securities — Assets
Municipal Bonds & Notes: New Jersey		$	16,045				—				—			$	(1,036,209	)(a)		$	1,020,164	(a)			—				—				—
Total Investments		$	16,045				—				—			$	(1,036,209	)(a)		$	1,020,164	(a)			—				—				—

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: February 23, 2011
By		/s/ Lawrence G. Altadonna
Treasurer, Principal Financial & Accounting Officer
Date: February 23, 2011

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: February 23, 2011
By		/s/ Lawrence G. Altadonna
Treasurer, Principal Financial & Accounting Officer
Date: February 23, 2011