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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:
  1633 Broadway, 41st Floor
 
  New York, NY 10019
 
    
Name and Address of Agent for Service:
  Lawrence G. Altadonna
 
  1633 Broadway, 41st Floor
 
  New York, NY 10019
 
    
Registrant’s telephone number, including area code:
  212-739-3371
 
    
Date of Fiscal Year End:
  September 30, 2011
 
    
Date of Reporting Period:
  June 30, 2011
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
June 30, 2011 (unaudited)
                         
Principal                  
Amount         Credit Rating        
(000s)         (Moody’s/S&P)     Value*  
MUNICIPAL BONDS & NOTES—96.7%                
       
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   $ 4,278,400  
  500    
Birmingham Special Care Facs. Financing Auth. Rev.,
                
       
Childrens Hospital, 6.00%, 6/1/39 (AGC)
   Aa3/AA+     529,605  
  1,500    
Colbert Cnty. Northwest Health Care Auth. Rev., 5.75%, 6/1/27
   Ba1/NR     1,395,015  
  1,000    
State Docks Department Rev., 6.00%, 10/1/40
   NR/BBB+     1,005,520  
       
 
              
       
 
             7,208,540  
       
 
              
       
 
                
       
Alaska—1.2%
                
       
Housing Finance Corp. Rev.,
                
  3,900    
5.00%, 12/1/33, Ser. A
   Aaa/AAA     3,904,134  
  1,000    
5.25%, 6/1/32, Ser. C (NPFGC)
   Aa2/AA+     1,003,160  
  3,100    
Northern Tobacco Securitization Corp. Rev., 5.00%, 6/1/46, Ser. A
   Baa3/NR     1,999,965  
       
 
              
       
 
             6,907,259  
       
 
              
       
 
                
       
Arizona—4.8%
                
       
Health Facs. Auth. Rev.,
                
       
Banner Health,
                
  1,250    
5.00%, 1/1/35, Ser. A
   NR/AA-     1,213,012  
  900    
5.50%, 1/1/38, Ser. D
   NR/AA-     912,222  
  2,250    
Beatitudes Campus Project, 5.20%, 10/1/37
   NR/NR     1,643,580  
       
Pima Cnty. Industrial Dev. Auth. Rev.,
                
  13,000    
5.00%, 9/1/39 (g)
   Aa2/AA     11,849,240  
  750    
Tuscon Electric Power Co., 5.25%, 10/1/40, Ser. A
   Baa3/BBB-     689,220  
  5,000    
Salt River Project Agricultural Improvement & Power Dist. Rev.,
                
       
5.00%, 1/1/39, Ser. A (g)
   Aa1/AA     5,115,900  
  5,600    
Salt Verde Financial Corp. Rev., 5.00%, 12/1/37
     A3/A       5,013,176  
       
 
              
       
 
             26,436,350  
       
 
              
       
 
                
       
California—14.0%
                
       
Bay Area Toll Auth. Rev., San Francisco Bay Area,
                
  1,500    
5.00%, 10/1/29
     A1/A+       1,498,110  
  500    
5.00%, 4/1/34, Ser. F-1
   Aa3/AA     505,660  
  3,260    
5.00%, 10/1/42
     A1/A+       3,031,539  
       
Golden State Tobacco Securitization Corp. Rev., Ser. A-1,
                
  2,000    
5.00%, 6/1/33
  Baa3/BB+     1,474,660  
  4,600    
5.125%, 6/1/47
   Baa3/BB+     3,030,250  
  2,120    
5.75%, 6/1/47
   Baa3/BB+     1,551,607  
       
Health Facs. Financing Auth. Rev.,
                
  2,500    
Catholic Healthcare West, 6.00%, 7/1/39, Ser. A
     A2/A       2,589,700  
       
Sutter Health,
                
  600    
5.00%, 11/15/42, Ser. A (IBC-NPFGC)
   Aa3/AA-     554,526  
  1,500    
6.00%, 8/15/42, Ser. B
   Aa3/AA-     1,591,680  
  3,350    
Indian Wells Redev. Agcy., Tax Allocation, Whitewater Project,
                
       
4.75%, 9/1/34, Ser. A (AMBAC)
     A2/A       2,669,850  
  130    
Los Angeles Unified School Dist., GO, 5.00%, 7/1/30, Ser. E (AMBAC)
   Aa2/AA-     132,015  
  1,660    
Municipal Finance Auth. Rev., Azusa Pacific Univ. Project,
                
       
7.75%, 4/1/31, Ser. B
   NR/NR     1,715,212  
  1,250    
Palomar Pomerado Health, CP, 6.75%, 11/1/39
   Baa3/NR     1,248,275  
  1,600    
San Marcos Unified School Dist., GO, 5.00%, 8/1/38, Ser. A (c)
   Aa2/AA-     1,553,728  
       
State, GO,
                
  2,500    
4.50%, 8/1/30
     A1/A-       2,287,650  

 

 

PIMCO Municipal Income Fund III Schedule of Investments
June 30, 2011 (unaudited)
                         
Principal                  
Amount         Credit Rating        
(000s)         (Moody’s/S&P)     Value*  
 
       
California (continued)
                
$ 3,000    
4.50%, 10/1/36
     A1/A-     $ 2,572,980  
  895    
4.50%, 12/1/36 (CIFG)
     A1/A-       767,480  
  3,000    
5.00%, 12/1/31 (NPFGC)
     A1/A-       3,012,720  
  5,000    
5.00%, 6/1/37
     A1/A-       4,817,000  
  250    
5.00%, 11/1/37
     A1/A-       240,775  
  5,300    
5.00%, 12/1/37
     A1/A-       5,104,271  
  1,350    
5.25%, 3/1/38
     A1/A-       1,336,527  
  1,300    
5.25%, 11/1/40
     A1/A-       1,282,658  
  3,200    
5.50%, 3/1/40
     A1/A-       3,290,656  
  2,500    
5.75%, 4/1/31
     A1/A-       2,635,250  
  6,000    
6.00%, 4/1/38
     A1/A-       6,372,600  
       
Statewide Communities Dev. Auth. Rev.,
                
  1,000    
American Baptist Homes West, 6.25%, 10/1/39
   NR/BBB     961,500  
  2,485    
California Baptist Univ., 9.00%, 11/1/17, Ser. B (a)(b)
   NR/NR     2,259,014  
       
Methodist Hospital Project (FHA),
                
  2,900    
6.625%, 8/1/29
   Aa2/NR     3,357,649  
  10,300    
6.75%, 2/1/38
   Aa2/NR     11,622,932  
  1,200    
Tobacco Securitization Auth. of Southern California Rev.,
                
       
5.00%, 6/1/37, Ser. A-1
   Baa3/BBB     835,536  
  1,500    
Torrance Rev., Memorial Medical Center, 5.00%, 9/1/40, Ser. A
     A2/A+       1,327,875  
  500    
Univ. Rev., 5.00%, 5/15/41, Ser. D (FGIC-NPFGC)
   Aa2/AA-     485,625  
       
 
              
       
 
             77,717,510  
       
 
              
       
 
                
       
Colorado—2.3%
                
  9,955    
Colorado Springs Utilities Rev., 5.00%, 11/15/30, Ser. B (g)
   Aa2/AA     10,053,355  
  500    
Confluence Metropolitan Dist. Rev., 5.45%, 12/1/34
   NR/NR     352,685  
  500    
Health Facs. Auth. Rev., Evangelical Lutheran, 6.125%, 6/1/38, Ser. A
     A3/A-       500,555  
  1,500    
Housing & Finance Auth. Rev.,
                
       
Evergreen Country Day School, Inc. Project, 5.875%, 6/1/37 (a)(b)
   NR/CCC     978,375  
  500    
Public Auth. for Colorado Energy Rev., 6.50%, 11/15/38
     A2/A       540,440  
  500    
Regional Transportation Dist. Rev., Denver Transportation Partners,
                
       
6.00%, 1/15/34
   Baa3/NR     503,100  
       
 
              
       
 
             12,928,510  
       
 
              
       
 
                
       
Connecticut—0.2%
                
  1,250    
Harbor Point Infrastructure Improvement Dist., Tax Allocation,
                
       
7.875%, 4/1/39, Ser. A
   NR/NR     1,344,725  
       
 
              
       
 
                
       
District of Columbia—2.0%
                
  10,000    
Water & Sewer Auth. Rev., 5.50%, 10/1/39, Ser. A (g)
   Aa2/AA     10,861,800  
       
 
              
       
 
                
       
Florida—3.5%
                
  3,480    
Brevard Cnty. Health Facs. Auth. Rev., Health First, Inc. Project,
                
       
5.00%, 4/1/34
     A3/A-       3,183,539  
  500    
Broward Cnty. Airport Rev., 5.375%, 10/1/29, Ser. O
     A1/A+       517,610  
  4,500    
Broward Cnty. Water & Sewer Rev., 5.25%, 10/1/34, Ser. A (g)
   Aa2/AA     4,711,815  
  350    
Development Finance Corp. Rev., Renaissance Charter School,
                
       
6.50%, 6/15/21, Ser. A
   NR/NR     346,958  
  2,500    
Hillsborough Cnty. Industrial Dev. Auth. Rev.,
                
       
Tampa General Hospital Project, 5.25%, 10/1/34, Ser. B
   A3/NR     2,240,625  

 

 

PIMCO Municipal Income Fund III Schedule of Investments
June 30, 2011 (unaudited)
                         
Principal                  
Amount         Credit Rating        
(000s)         (Moody’s/S&P)     Value*  
 
       
Florida (continued)
                
$ 1,000    
Miami-Dade Cnty. Airport Rev., 5.50%, 10/1/36, Ser. A
     A2/A-     $ 1,003,850  
  3,895    
Sarasota Cnty. Health Facs. Auth. Rev., 5.75%, 7/1/45
   NR/NR     3,037,282  
  4,200    
State Board of Education, GO, 5.00%, 6/1/38, Ser. D (g)
   Aa1/AAA     4,307,268  
       
 
              
       
 
             19,348,947  
       
 
              
       
 
                
       
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     1,098,737  
  400    
Medical Center Hospital Auth. Rev.,
                
       
Spring Harbor Green Island Project, 5.25%, 7/1/37
   NR/NR     310,828  
       
 
              
       
 
             1,409,565  
       
 
              
       
 
                
       
Hawaii—0.2%
                
  1,500    
Hawaii Pacific Health Rev., 5.50%, 7/1/40, Ser. A
   A3/BBB+     1,353,915  
       
 
              
       
 
                
       
Illinois—8.0%
                
       
Chicago, GO,
                
  695    
5.00%, 1/1/31, Ser. A (NPFGC)
   Aa3/A+     673,955  
  5,000    
5.00%, 1/1/34, Ser. C (g)
   Aa3/A+     4,836,100  
  7,000    
Chicago Motor Fuel Tax Rev., 5.00%, 1/1/33, Ser. A (AMBAC)
   Aa3/AA+     7,077,700  
       
Finance Auth. Rev.,
                
  1,175    
Elmhurst Memorial Healthcare, 5.50%, 1/1/22
   Baa1/NR     1,171,287  
       
Leafs Hockey Club Project, Ser. A (i),
                
  1,000    
5.875%, 3/1/27
   NR/NR     254,650  
  625    
6.00%, 3/1/37
   NR/NR     156,344  
  400    
OSF Healthcare System, 7.125%, 11/15/37, Ser. A
     A3/A       431,200  
  12,795    
Peoples Gas Light & Coke Co., 5.00%, 2/1/33 (AMBAC)
     A1/A-       12,800,246  
  1,000    
Swedish Covenant Hospital, 6.00%, 8/15/38, Ser. A
   NR/BBB+     977,680  
       
Univ. of Chicago,
                
  165    
5.25%, 7/1/41, Ser. 05-A
   Aa1/AA     165,690  
  10,000    
5.50%, 7/1/37, Ser. B (g)
   Aa1/AA     10,489,900  
  5,000    
State Toll Highway Auth. Rev., 5.50%, 1/1/33, Ser. B
   Aa3/AA-     5,109,250  
       
 
              
       
 
             44,144,002  
       
 
              
       
 
                
       
Indiana—1.3%
                
  500    
Dev. Finance Auth. Rev., 5.00%, 3/1/30, Ser. B (AMBAC)
   A1/NR     480,040  
  2,000    
Finance Auth. Rev., U.S. Steel Corp., 6.00%, 12/1/26
   Ba2/BB     2,026,000  
       
Portage, Tax Allocation, Ameriplex Project,
                
  1,000    
5.00%, 7/15/23
   NR/A     959,820  
  775    
5.00%, 1/15/27
   NR/A     715,077  
  2,800    
Vigo Cnty. Hospital Auth. Rev., Union Hospital, Inc., 7.50%, 9/1/22
   NR/NR     3,044,496  
       
 
              
       
 
             7,225,433  
       
 
              
       
 
                
       
Iowa—1.7%
                
       
Finance Auth. Rev., Deerfield Retirement Community, Inc., Ser. A,
                
  120    
5.50%, 11/15/27
   NR/NR     87,390  
  575    
5.50%, 11/15/37
   NR/NR     379,903  
  11,010    
Tobacco Settlement Auth. Rev., 5.60%, 6/1/34, Ser. B
   Baa3/BBB     8,983,279  
       
 
              
       
 
             9,450,572  
       
 
              
       
 
                
       
Kentucky—0.8%
                
       
Economic Dev. Finance Auth. Rev.,
                
  1,000    
Catholic Healthcare Partners, 5.25%, 10/1/30
   A1/AA-     997,520  
  2,000    
Owensboro Medical Healthcare Systems, 6.375%, 6/1/40, Ser. A
   Baa2/NR     1,988,080  

 

 

PIMCO Municipal Income Fund III Schedule of Investments
June 30, 2011 (unaudited)
                         
Principal                  
Amount         Credit Rating        
(000s)         (Moody’s/S&P)     Value*  
 
       
Kentucky (continued)
                
$ 1,250    
Ohio Cnty. Pollution Control Rev., Big Rivers Electric Corp.,
                
       
6.00%, 7/15/31, Ser. A
   Baa1/BBB-   $ 1,271,738  
       
 
              
       
 
             4,257,338  
       
 
              
       
 
                
       
Louisiana—1.4%
                
       
Local Gov’t Environmental Facs. & Community Dev. Auth. Rev.,
                
  400    
Westlake Chemical Corp., 6.50%, 11/1/35, Ser. A-2
   Ba2/BBB-     413,788  
       
Woman’s Hospital Foundation, Ser. A,
                
  1,500    
5.875%, 10/1/40
   A3/BBB+     1,446,150  
  1,000    
6.00%, 10/1/44
   A3/BBB+     975,990  
       
Public Facs. Auth. Rev., Ochsner Clinic Foundation Project,
                
  1,700    
5.50%, 5/15/47, Ser. B
   Baa1/NR     1,524,951  
  2,000    
6.50%, 5/15/37
   Baa1/NR     2,080,960  
  1,345    
Tobacco Settlement Financing Corp. Rev., 5.875%, 5/15/39, Ser. 2001-B
   Baa3/A-     1,299,337  
       
 
              
       
 
             7,741,176  
       
 
              
       
 
                
       
Maryland—0.8%
                
  1,000    
Economic Dev. Corp. Rev., 5.75%, 6/1/35, Ser. B
   Baa3/NR     975,840  
       
Health & Higher Educational Facs. Auth. Rev.,
                
  1,500    
Calvert Health System, 5.50%, 7/1/36
   A3/NR     1,513,935  
  700    
Charlestown Community, 6.25%, 1/1/41
   NR/NR     712,005  
  1,000    
Lifebridge Health, 6.00%, 7/1/41
   A2/A     1,019,540  
       
 
              
       
 
             4,221,320  
       
 
              
       
 
                
       
Massachusetts—1.3%
                
       
Dev. Finance Agcy. Rev.,
   NR/NR     300,834  
  300    
Adventcare Project, 7.625%, 10/15/37
                
  750    
Linden Ponds, Inc. Fac., 5.75%, 11/15/35, Ser. A
   NR/NR     412,500  
  4,910    
Housing Finance Agcy. Rev., 5.125%, 6/1/43, Ser. H
   Aa3/AA-     4,912,062  
  1,600    
State College Building Auth. Rev., 5.50%, 5/1/39, Ser. A
   Aa2/AA-     1,655,312  
       
 
              
       
 
             7,280,708  
       
 
              
       
 
                
       
Michigan—14.5%
                
  500    
Conner Creek Academy East Rev., 5.25%, 11/1/36
   NR/BB+     346,370  
  1,500    
Detroit, GO, 5.25%, 11/1/35
   Aa3/AA     1,515,300  
  9,320    
Detroit Sewer Rev., 5.00%, 7/1/32, Ser. A (AGM)
   Aa3/AA+     8,742,533  
       
Detroit Water Rev. (NPFGC),
                
  30,000    
5.00%, 7/1/34, Ser. A
   A1/A+     27,798,000  
  7,555    
5.00%, 7/1/34, Ser. B
     A2/A       6,740,118  
  1,500    
Royal Oak Hospital Finance Auth. Rev., William Beaumont Hospital,
                
       
8.25%, 9/1/39
   A1/A     1,724,805  
       
State Hospital Finance Auth. Rev.,
                
       
Oakwood Group, Ser. A,
                
  5,405    
5.75%, 4/1/32
   A2/A     5,365,651  
  575    
6.00%, 4/1/22
   A2/A     583,631  
  20,000    
Trinity Health Credit, 5.375%, 12/1/30, Ser. C
   Aa2/AA     20,040,400  
  10,000    
Tobacco Settlement Finance Auth. Rev., 6.00%, 6/1/48, Ser. A
   NR/BB     7,257,600  
       
 
              
       
 
             80,114,408  
       
 
              

 

 

PIMCO Municipal Income Fund III Schedule of Investments
June 30, 2011 (unaudited)
                         
Principal                  
Amount         Credit Rating        
(000s)         (Moody’s/S&P)     Value*  
 
       
Minnesota—0.0%
                
$ 125    
Duluth Housing & Redev. Auth. Rev., 5.875%, 11/1/40, Ser. A
   NR/BBB-   $ 110,951  
       
 
              
       
 
                
       
Mississippi—0.8%
                
       
Business Finance Corp. Rev., System Energy Res., Inc. Project,
                
  3,000    
5.875%, 4/1/22
   Ba1/BBB     3,005,730  
  1,250    
5.90%, 5/1/22
   Ba1/BBB     1,252,388  
       
 
              
       
 
             4,258,118  
       
 
              
       
 
                
       
Missouri—0.1%
                
  250    
Jennings Rev., Northland Redev. Area Project, 5.00%, 11/1/23
   NR/NR     219,718  
  500    
Manchester, Tax Allocation, Highway 141/Manchester Road Project,
                
       
6.875%, 11/1/39
   NR/NR     504,815  
       
 
              
       
 
             724,533  
       
 
              
       
 
                
       
New Hampshire—0.4%
                
  2,000    
Business Finance Auth. Rev., Elliot Hospital, 6.125%, 10/1/39, Ser. A
   Baa1/BBB+     1,993,100  
       
 
              
       
 
                
       
New Jersey—4.4%
                
  1,000    
Camden Cnty. Improvement Auth. Rev., Cooper Health Systems Group,
                
       
5.00%, 2/15/35, Ser. A
   Baa3/BBB     810,860  
  300    
Economic Dev. Auth. Rev., Newark Airport Marriott Hotel,
                
       
7.00%, 10/1/14
   Ba1/NR     300,693  
  4,500    
Economic Dev. Auth., Special Assessment, Kapkowski Road
                
       
Landfill Project, 6.50%, 4/1/28
   Ba2/NR     4,667,895  
       
Health Care Facs. Financing Auth. Rev.,
                
  1,000    
St. Peters Univ. Hospital, 5.75%, 7/1/37
   Baa3/BBB-     882,660  
  1,150    
Trinitas Hospital, 5.25%, 7/1/30, Ser. A
   Baa3/BBB-     1,038,554  
       
Tobacco Settlement Financing Corp. Rev., Ser. 1-A,
                
  1,600    
4.75%, 6/1/34
   Baa3/BB+     1,111,232  
  22,645    
5.00%, 6/1/41
   Baa3/BB-     15,493,256  
       
 
              
       
 
             24,305,150  
       
 
              
       
 
                
       
New Mexico—0.2%
                
  1,000    
Farmington Pollution Control Rev., 5.90%, 6/1/40, Ser. D
   Baa3/BB+     983,590  
       
 
              
       
 
                
       
New York—4.2%
                
  1,700    
Liberty Dev. Corp. Rev., Goldman Sachs Headquarters, 5.50%, 10/1/37
     A1/A       1,730,753  
  1,150    
Nassau Cnty. Industrial Dev. Agcy. Rev., Amsterdam at Harborside,
                
       
6.70%, 1/1/43, Ser. A
   NR/NR     1,089,637  
  10,450    
New York City Industrial Dev. Agcy. Rev., Yankee Stadium,
                
       
7.00%, 3/1/49 (AGC)
   Aa3/AA+     11,520,184  
       
New York City Municipal Water Finance Auth. Water & Sewer Rev. (g),
                
  4,900    
5.00%, 6/15/37, Ser. D
   Aa1/AAA     4,994,521  
  4,000    
Second Generation Resolutions, 4.75%, 6/15/35, Ser. DD
   Aa2/AA+     4,008,080  
       
 
              
       
 
             23,343,175  
       
 
              
       
 
                
       
North Carolina—0.2%
                
  1,500    
Medical Care Commission Rev., Cleveland Cnty. Healthcare,
                
       
5.00%, 7/1/35, Ser. A (AMBAC)
   WR/A     1,353,870  
       
 
              

 

 

PIMCO Municipal Income Fund III Schedule of Investments
June 30, 2011 (unaudited)
                         
Principal                  
Amount         Credit Rating        
(000s)         (Moody’s/S&P)     Value*  
 
       
Ohio—4.5%
                
$ 15,375    
Air Quality Dev. Auth. Pollution Control Rev., Dayton Power,
                
       
4.80%, 1/1/34, Ser. B (FGIC)
   Aa3/A   $ 14,781,833  
  500    
Allen Cnty. Catholic Healthcare Rev., Allen Hospital,
                
       
5.00%, 6/1/38, Ser. A
   A1/AA-     473,805  
       
Buckeye Tobacco Settlement Financing Auth. Rev., Ser. A-2,
                
  2,400    
5.875%, 6/1/30
   Baa3/BB-     1,905,048  
  5,650    
5.875%, 6/1/47
   Baa3/BB-     4,127,042  
  500    
Higher Educational Fac. Commission Rev.,
                
       
Univ. Hospital Health Systems, 6.75%, 1/15/39, Ser. 2009-A
     A2/A       520,580  
  2,500    
Lorain Cnty. Hospital Rev., Catholic Healthcare, 5.375%, 10/1/30
   A1/AA-     2,510,600  
  500    
Montgomery Cnty. Rev., Miami Valley Hospital, 6.25%, 11/15/39, Ser. A
   Aa3/NR     514,400  
  250    
State Rev., Ashland Univ. Project, 6.25%, 9/1/24
   Ba1/NR     250,148  
       
 
              
       
 
             25,083,456  
       
 
              
       
 
                
       
Pennsylvania—2.7%
                
       
Allegheny Cnty. Hospital Dev. Auth. Rev.,
                
  1,000    
Univ. of Pittsburgh Medical Center, 5.625%, 8/15/39
   Aa3/A+     1,008,670  
  1,000    
West Penn Allegheny Health System, 5.375%, 11/15/40, Ser. A
     B2/B+       840,760  
       
Cumberland Cnty. Municipal Auth. Rev., Messiah Village Project, Ser. A,
                
  750    
5.625%, 7/1/28
   NR/BBB-     673,845  
  670    
6.00%, 7/1/35
   NR/BBB-     597,620  
  1,000    
Dauphin Cnty. General Auth. Rev., Pinnacle Health System Project,
                
       
6.00%, 6/1/36, Ser. A
     A2/A       1,001,800  
  1,250    
Harrisburg Auth. Rev., Harrisburg Univ. of Science,
                
       
6.00%, 9/1/36, Ser. B
   NR/NR     1,066,462  
  100    
Luzerne Cnty. Industrial Dev. Auth. Rev., Pennsylvania American
                
       
Water Co., 5.50%, 12/1/39
     A2/A       101,540  
  6,200    
Philadelphia Hospitals & Higher Education Facs. Auth. Rev.,
                
       
Temple Univ. Hospital, 6.625%, 11/15/23, Ser. A
   Baa3/BBB     6,176,068  
  500    
Philadelphia Water Rev., 5.25%, 1/1/36, Ser. A
     A1/A       501,220  
  3,000    
Turnpike Commission Rev., 5.125%, 12/1/40, Ser. D
     A3/A-       2,930,790  
       
 
              
       
 
             14,898,775  
       
 
              
       
 
                
       
Puerto Rico—1.1%
                
       
Sales Tax Financing Corp. Rev.,
                
  2,400    
5.00%, 8/1/40, Ser. A (AGM) (g)
   Aa3/AA+     2,331,864  
  3,000    
5.375%, 8/1/38, Ser. C
     A1/A+       2,980,830  
  600    
5.50%, 8/1/42, Ser. A
     A1/A+       600,786  
       
 
              
       
 
             5,913,480  
       
 
              
       
 
                
       
South Carolina—1.3%
                
  1,000    
Greenwood Cnty. Rev., Self Regional Healthcare, 5.375%, 10/1/39
     A2/A+       975,100  
  5,305    
Jobs-Economic Dev. Auth. Rev., Bon Secours Health System,
                
       
5.625%, 11/15/30, Ser. B
     A3/A-       5,282,931  
  800    
State Ports Auth. Rev., 5.25%, 7/1/40
     A1/A+       808,560  
       
 
              
       
 
             7,066,591  
       
 
              
       
 
                
       
Tennessee—0.7%
                
  1,250    
Claiborne Cnty. Industrial Dev. Board Rev.,
                
       
Lincoln Memorial Univ. Project, 6.625%, 10/1/39
   NR/NR     1,295,113  
  1,000    
Johnson City Health & Educational Facs. Board Rev.,
                
       
Mountain States Health Alliance, 6.00%, 7/1/38
   Baa1/BBB+     963,810  

 

 

PIMCO Municipal Income Fund III Schedule of Investments
June 30, 2011 (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/B   $ 1,208,364  
  365    
5.25%, 9/1/22
   Ba3/B     363,452  
       
 
              
       
 
             3,830,739  
       
 
              
       
 
                
       
Texas—9.1%
                
  1,300    
Dallas Rev., Dallas Civic Center, 5.25%, 8/15/38 (AGC)
   Aa3/AA+     1,322,243  
  10,115    
Denton Independent School Dist., GO, 5.00%, 8/15/33 (PSF-GTD) (g)
   Aaa/AAA     10,242,955  
  150    
Municipal Gas Acquisition & Supply Corp. I Rev.,
                
       
5.25%, 12/15/26, Ser. A
     A2/A       140,914  
       
North Harris Cnty. Regional Water Auth. Rev.,
                
  5,500    
5.25%, 12/15/33
     A1/A+       5,649,710  
  5,500    
5.50%, 12/15/38
     A1/A+       5,689,695  
       
North Texas Tollway Auth. Rev.,
                
  600    
5.50%, 9/1/41, Ser. A
   NR/AA     630,444  
  10,800    
5.625%, 1/1/33, Ser. A
     A2/A-       11,037,924  
  700    
5.75%, 1/1/33, Ser. F
   A3/BBB+     703,374  
  2,000    
6.25%, 1/1/39, Ser. A
     A2/A-       2,067,480  
  2,000    
Sabine River Auth. Pollution Control Rev., 5.20%, 5/1/28, Ser. C
   Ca/NR     669,580  
  3,000    
Tarrant Cnty. Cultural Education Facs. Finance Corp. Rev.,
                
       
Baylor Health Care Systems Project, 6.25%, 11/15/29
   Aa2/AA-     3,260,970  
  8,100    
Texas Municipal Gas Acquisition & Supply Corp. I Rev.,
                
       
6.25%, 12/15/26, Ser. D
     A2/A       8,656,470  
  500    
Wise Cnty. Rev., Parker Cnty Junior College Dist., 8.00%, 8/15/34
   NR/NR     509,990  
       
 
              
       
 
             50,581,749  
       
 
              
       
 
                
       
Virginia—0.3%
                
  1,000    
Fairfax Cnty. Industrial Dev. Auth. Rev., Inova Health Systems,
                
       
5.50%, 5/15/35, Ser. A
   Aa2/AA+     1,023,610  
  1,000    
James City Cnty. Economic Dev. Auth. Rev., United Methodist Homes,
                
       
5.50%, 7/1/37, Ser. A
   NR/NR     578,560  
       
 
              
       
 
             1,602,170  
       
 
              
       
 
                
       
Washington—6.5%
                
       
Health Care Facs. Auth. Rev.,
                
  500    
Kadlec Regional Medical Center, 5.50%, 12/1/39
   Baa2/NR     449,805  
  1,000    
Seattle Cancer Care Alliance, 7.375%, 3/1/38
   A3/NR     1,089,040  
  15,000    
King Cnty. Sewer Rev., 5.00%, 1/1/35, Ser. A (AGM) (g)
   Aa2/AA+     15,027,600  
  19,005    
Tobacco Settlement Auth. Rev., 6.50%, 6/1/26
   Baa3/BBB     19,298,057  
       
 
              
       
 
             35,864,502  
       
 
              
       
 
                
       
West Virginia—0.2%
                
  1,000    
Hospital Finance Auth. Rev., Highland Hospital, 9.125%, 10/1/41
   NR/NR     1,027,240  
       
 
              
       
 
                
       
Wisconsin—0.4%
                
       
Health & Educational Facs. Auth. Rev.,
                
  1,000    
Aurora Health Care, Inc., 5.625%, 4/15/39, Ser. A
   A3/NR     973,200  
  1,000    
Prohealth Care, Inc., 6.625%, 2/15/39
     A1/A+       1,059,550  
       
 
              
       
 
             2,032,750  
       
 
              
       
Total Municipal Bonds & Notes (cost—$533,567,966)
             534,926,017  
       
 
              

 

 

PIMCO Municipal Income Fund III Schedule of Investments
June 30, 2011 (unaudited)
                         
Principal                  
Amount         Credit Rating        
(000s)         (Moody’s/S&P)     Value*  
 
VARIABLE RATE NOTES (a)(b)(d)(e)—2.5%                
       
California—0.3%
                
$ 1,675    
Los Angeles Community College Dist., GO, 13.96%, 8/1/33, Ser. 3096
   NR/AA   $ 1,823,807  
       
 
              
       
 
                
       
Florida—0.9%
                
  5,000    
Greater Orlando Aviation Auth. Rev., 9.50%, 10/1/39, Ser. 3174
   NR/NR     5,041,900  
       
 
              
       
 
                
       
Texas—1.3%
                
  6,500    
JPMorgan Chase Putters/Drivers Trust, GO, 9.44%, 2/1/17, Ser. 3480
   NR/AA+     6,986,135  
       
 
              
       
Total Variable Rate Notes (cost—$13,073,385)
             13,851,842  
       
 
              
       
 
                
SHORT-TERM INVESTMENTS—0.8%                
  U.S. Treasury Obligations (f)(h)—0.8%                
       
U.S. Treasury Bills,
                
  4,442    
0.01%-0.098%, 8/11/11-10/13/11 (cost—$4,441,464)
             4,441,464  
       
 
              
       
 
                
       
Total Investments (cost—$551,082,815) (j)—100.0%
           $ 553,219,323  
       
 
              

 

 

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. Securities purchased on a when-issued basis are marked to market daily until settlement at the forward settlement date. 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 (“NAV”) 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 $17,089,231 representing 3.1% 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)   When-issued. To be settled after June 30, 2011.
 
(d)   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 June 30, 2011.
 
(e)   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, 2011.
 
(f)   All or partial amount segregated for the benefit of the counterparty as collateral for derivatives.
 
(g)   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.
 
(h)   Rates reflect the effective yields at purchase date.
 
(i)   In default.
 
(j)   At June 30, 2011, the cost basis of portfolio securities for federal income tax purposes was $490,676,188. Gross unrealized appreciation was $25,457,041, gross unrealized depreciation was $22,824,472 and net unrealized appreciation was $2,632,569. 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.
CIFG—insured by CDC IXIS Financial Guaranty Services, Inc.
CP—Certificates of Participation
FGIC—insured by Financial Guaranty Insurance Co.
FHA—insured by Federal Housing Administration
GO—General Obligation Bond
GTD—Guaranteed
IBC—Insurance Bond Certificate
NPFGC—insured by National Public Finance Guarantee Corp.
NR—Not Rated
PSF—Public School Fund
WR—Withdrawn Rating

 

 

Other Investments:
Interest rate swap agreements outstanding at June 30, 2011:
                                                         
                    Rate Type             Upfront        
    Notional Amount     Termination     Payments     Payments     Market     Premiums     Unrealized  
Swap Counterparty   (000s)     Date     Made     Received     Value     Paid(Received)     Depreciation  
 
Bank of America
   $ 16,500       6/20/42       4.75 %     3-Month USD-LIBOR    $ (1,305,500 )   $ (152,850 )   $ (1,152,650 )
Citigroup
     17,900       6/20/42       4.75 %     3-Month USD-LIBOR      (1,416,270 )     (326,400 )     (1,089,870 )
Goldman Sachs
     3,600       6/20/42       4.75 %     3-Month USD-LIBOR      (284,836 )     28,440       (313,276 )
                                     
 
                                   $ (3,006,606 )   $ (450,810 )   $ (2,555,796 )
                                     
 
LIBOR — London Inter-Bank Offered Rate    

 

 

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 the 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 nine months ended June 30, 2011 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 & Notes and Variable Rate Notes — Municipal bonds and notes 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 or note, state of issuance, benchmark yield curves, and bond or note insurance. To the extent that these inputs are observable, the values of municipal bonds and notes are categorized as Level 2. To the extent that these inputs are unobservable, the values are categorized as Level 3.
U.S. Treasury Obligations — U.S. Treasury obligations are valued by independent pricing services based on pricing models that evaluate the mean between the most recently quoted bid and ask price. The models also take into consideration data received from active market makers and broker-dealers, yield curves, and the spread over comparable U.S. Treasury issues. The spreads change daily in response to market conditions and are generally obtained from the new issue market and broker-dealer sources. To the extent that these inputs are observable, the values of U.S. Treasury obligations are categorized as Level 2. To the extent that these inputs are unobservable, the values are categorized as Level 3.
Interest Rate Swaps — Interest rate swaps are valued by independent pricing services using pricing models that are based on real-time intraday snapshots of relevant interest rate curves that are built using the most actively traded securities for a given maturity. The pricing models also incorporate cash and money market rates. In addition, market data pertaining to interest rate swaps is monitored regularly to ensure that interest rates are properly depicting the current market rate. To the extent that these inputs are observable, the values of interest rate swaps 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 June 30, 2011 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     6/30/11  
 
Investments in Securities — Assets
                                
Municipal Bonds & Notes
     —     $ 534,926,017       —     $ 534,926,017  
Variable Rate Notes
     —       13,851,842       —       13,851,842  
Short-Term Investments
     —       4,441,464       —       4,441,464  
 
Total Investments in Securities — Assets
     —     $ 553,219,323       —     $ 553,219,323  
 
Other Financial Instruments* — Liabilities
                                
Interest Rate Contracts
     —     $ (2,555,796 )     —     $ (2,555,796 )
 
Total Investments
     —     $ 550,663,527       —     $ 550,663,527  
 
 
*   Other financial instruments are derivatives not reflected in the Schedule of Investments, such as swap agreements, which are valued at the unrealized appreciation (depreciation) of the instrument.
There were no significant transfers between Levels 1 and 2 during the nine months ended June 30, 2011.
A roll forward of fair value measurements using significant unobservable inputs (Level 3) for the nine months ended June 30, 2011, was as follows:
                                                                 
            Net                     Net Change                    
    Beginning     Purchases     Accrued     Net     in Unrealized     Transfers     Transfers     Ending  
    Balance     (Sales) and     Discounts     Realized     Appreciation/     into     out of     Balance  
    9/30/10     Settlements     (Premiums)     Gain (Loss)     Depreciation     Level 3     Level 3     6/30/11  
 
Investments in Securities — Assets
                                                                
Municipal Bonds & Notes:
                                                                
New Jersey
   $ 16,045       —       —     $ (1,036,209) *   $ 1,020,164 *     —       —       —  
 
Total Investments
   $ 16,045       —       —     $ (1,036,209) *   $ 1,020,164 *     —       —       —  
 
 
*   Security deemed worthless and removed from the Schedule of Investments.

 

 

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