nvcsrs
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-21188
PIMCO California Municipal Income
Fund III
(Exact name of registrant as specified in charter)
     
1345 Avenue of the Americas, New York, NY   10105
 
(Address of principal executive offices)   (Zip code)
Lawrence G. Altadonna — 1345 Avenue of the Americas, New York, New York 10105
(Name and address of agent for service)
Registrant’s telephone number, including area code: 212-739-3371
Date of fiscal year end: September 30, 2010
Date of reporting period: March 31, 2010
Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 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.  REPORT TO SHAREHOLDERS
 
 
PIMCO Municipal Income Fund III
PIMCO California Municipal Income Fund III
PIMCO New York Municipal Income Fund III
 
 
Semi-Annual Report
March 31, 2010
 
         
Contents    
 
Letter to Shareholders
    1  
Fund Insights/Performance & Statistics
    3-5  
Schedules of Investments
    6-21  
Statements of Assets and Liabilities
    22  
Statements of Operations
    23  
Statements of Changes in Net Assets
    24-25  
Statements of Cash Flows
    26-27  
Notes to Financial Statements
    28-35  
Financial Highlights
    36-38  
Annual Shareholder Meeting Results/
Proxy Voting Policies & Procedures
    39  
 


 

 
PIMCO Municipal Income Funds III Letter to Shareholders
May 14, 2010
 
Dear Shareholder:
 
Please find enclosed the semi-annual report for the PIMCO Municipal Income Fund III, PIMCO California Municipal Income Fund III and PIMCO New York Municipal Income Fund III (the “Funds”) for the fiscal six-month period ended March 31, 2010 (“the period”).
 
The U.S. bond market delivered relatively flat returns during the period. Municipal and high-quality corporate bonds outperformed U.S. government-issued securities as signs of economic recovery prompted investors to favor less-defensive, higher-yielding securities. In this environment, the Barclays Capital Municipal Bond Index returned a tax-advantaged 0.28% for the period, outperforming U.S. Treasury Bonds, which returned, on average, -2.01%. The broad, taxable bond market, as represented by the Barclays Capital U.S. Aggregate Index, advanced 1.99% for the reporting period.
 
The U.S. Federal Reserve (the “Fed”) continued its accommodative monetary policy during the period, holding the benchmark rate on loans between member banks at the historic low target-rate of 0% to 0.25%. The Fed announced that it was concluding purchases of approximately $1.25 trillion of Agency mortgage-backed securities and about $175 billion of Agency debt from banks, a policy intended to add to the supply of cash available for lending. Noting that bank lending continues to contract, the Fed stated that it would monitor conditions and employ the policy tools necessary for economic recovery and price stability.
 
For specific information on the Funds and their performance, please review the following pages. If you have any questions regarding the information provided, we encourage you to contact your financial advisor or call the Fund’s shareholder servicing agent at (800) 254-5197. In addition, a wide range of information and resources is available on our website, www.allianzinvestors.com/closedendfunds.
 
Together with Allianz Global Investors Fund Management LLC, the Funds’ investment manager, and Pacific Investment Management Company LLC (“PIMCO”), the Funds’ sub-adviser, we thank you for investing with us.
 
We remain dedicated to serving your investment needs.
 
Sincerely,
 
     
 
Hans W. Kertess   Brian S. Shlissel
Chairman   President & Chief Executive Officer
 
 
3.31.10   PIMCO Municipal Income Funds III Semi-Annual Report 1


 

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2 PIMCO Municipal Income Funds III Semi-Annual Report   3.31.10


 

PIMCO Municipal Income Funds III Fund Insights
March 31, 2010 (unaudited)
 
•  For the fiscal six-month period ended March 31, 2010, PIMCO Municipal Income Fund III declined 0.72% on net asset value (“NAV”) and returned 0.62% on market price, compared to a decrease of 0.49% and a rise of 4.59%, respectively, for the Lipper Analytical General Municipal Debt Funds (Leveraged) average.
 
•  For the fiscal six-month period ended March 31, 2010, PIMCO California Municipal Income Fund III declined 2.24% on NAV and 4.52% on market price, compared to declines of 0.74% and 0.15%, respectively, for the Lipper Analytical California Municipal Debt Funds average.
 
•  For the fiscal six-month period ended March 31, 2010, PIMCO New York Municipal Income Fund III advanced 1.45% on NAV and declined 0.15% on market price, compared to increases of 1.18% and 2.42%, respectively, for the Lipper Analytical New York Municipal Debt Funds average.
 
•  High-quality municipal bond yields moved higher across the curve during the period, which was in line with Treasury yields.
 
•  Municipal-to-U.S. Treasury yield ratio movement was mixed across the curve. The 10-year ratio increased to 80.72% and the 30-year ratio decreased to 88%; still at or below historical normal levels.
 
•  Tobacco securitization exposure contributed to returns during the six-month period, as the sector posted positive performance with investors looking for higher yields in lower quality sectors helping this sector to outperform.
 
•  Exposures to corporate backed municipals detracted from performance as the sector underperformed, while exposure to the water & sewer sector was also negative for performance.
 
•  Significant exposure to the health care sector benefitted returns, as the sector outperformed the general municipal market during the period.
 
•  Exposure to longer maturity zero-coupon municipals detracted from returns, as the longer durations of these bonds led to underperformance due to the upward movement in yields. The Barclay’s Capital Zero Coupon Index declined 2.52% for the fiscal six-month period.
 
Municipal III:
 
•  The municipal yield curve was slightly steeper as investors continued to step out of money market securities, moving slightly further out on the curve, which helped minimize the yield movement higher into shorter maturities. The 30-year maturity AAA General Obligation yields increased 36 basis points while the 2-year yield increased 15 basis points during the same period. Significant exposure in longer maturity municipals detracted from performance, as this portion of the curve underperformed due to its longer duration.
 
•  Long municipals slightly outperformed the broader long-taxable market as the Barclays Capital Long Municipal Bond Index declined 0.43%, while the Barclays Capital Long Government/Credit and the Barclays Capital Long US Treasury Indices declined 1.13% and 4.46%, respectively.
 
•  For 2009, municipal bond issuance exceeded $400 billion. During the first quarter of 2010, issuance kept pace lead by significant Build America Bond issuance, as issuers took advantage of the interest cost subsidy.
 
California Municipal Income III:
 
•  Municipal bonds within California underperformed the national index decreasing 0.55% versus a rise of 0.28% for the Municipal Bond index during the reporting period. The state continued to experience volatility due to the uncertainty related to their budget deficit situation. In 2009 California led all other states with over $72 billion in total issuance. It continued to lead through the first quarter of 2010 with in excess of $15 billion in total issuance.
 
•  Long California municipals underperformed the long national index decreasing 2.28% versus 0.43% during the six-month period. The California municipal curve steepened notably with 30-year yields increasing 60 basis points, while two-year yields increased only 10 basis points. Significant exposure to longer maturities detracted from performance, as longer durations underperformed.
 
New York Municipal III:
 
•  Municipal bonds within New York outperformed the municipal bond index during the period, returning 0.59% versus 0.28%. In 2009, issuers in New York State issued $44 billion in bonds ranking it second in the U.S. For the first quarter of 2010, New York’s issuance has been rather low at $7 billion.
 
•  Long New York municipals outperformed the long municipal bond index during the period, returning 0.52% versus -0.43%. The New York yield curve steepened during the period, with 30-year yields increasing by 38 basis points while two-year yields decreased by 1 basis point. New York municipal funds also had significant positions in the longer portions of the curve, which benefitted performance as the longer maturity holdings outperformed in New York.
 
 
3.31.10   PIMCO Municipal Income Funds III Semi-Annual Report 3


 

PIMCO Municipal Income Funds III Performance & Statistics
March 31, 2010 (unaudited)
Municipal III:
 
                 
Total Return(1):   Market Price     NAV  
   
Six Month
    0.62 %     (0.72)%  
 
 
1 Year
    36.68 %     34.92%  
 
 
5 Year
    1.52 %     (1.24)%  
 
 
Commencement of Operations (10/31/02) to 3/31/10
    2.57 %     1.61%  
 
 
 

 
Market Price/NAV Performance:
Commencement of Operations (10/31/02) to 3/31/10
 

     
Market Price/NAV:
   
 
 
Market Price
  $10.90
 
 
NAV
  $9.66
 
 
Premium to NAV
  12.84%
 
 
Market Price Yield (2)
  7.71%
 
 
Moody’s Ratings
(as a % of total investments)
 


 
 
California Municipal III:
 
                 
Total Return(1):   Market Price     NAV  
   
Six Month
    (4.52 )%     (2.24)%  
 
 
1 Year
    29.57 %     31.96%  
 
 
5 Year
    (1.86 )%     (2.94)%  
 
 
Commencement of Operations (10/31/02) to 3/31/10
    0.06 %     0.35%  
 
 
 

 
Market Price/NAV Performance:
Commencement of Operations (10/31/02) to 3/31/10
 

     
Market Price/NAV:
   
 
 
Market Price
  $9.20
 
 
NAV
  $8.97
 
 
Premium to NAV
  2.56%
 
 
Market Price Yield (2)
  7.83%
 
 
Moody’s Ratings
(as a % of total investments)
 


 
 
 
4 PIMCO Municipal Income Funds III Semi-Annual Report   3.31.10


 

PIMCO Municipal Income Funds III Performance & Statistics
March 31, 2010 (unaudited) (continued)
 
New York Municipal III:
 
                 
Total Return(1):   Market Price     NAV  
   
Six Month
    (0.15 )%     1.45%  
 
 
1 Year
    27.03 %     23.77%  
 
 
5 Year
    (2.32 )%     (4.45)%  
 
 
Commencement of Operations (10/31/02) to 3/31/10
    (0.26 )%     (0.31)%  
 
 
 

 
Market Price/NAV Performance:
Commencement of Operations (10/31/02) to 3/31/10
 

     
Market Price/NAV:
   
 
 
Market Price
  $9.30
 
 
NAV
  $8.91
 
 
Premium to NAV
  4.38%
 
 
Market Price Yield (2)
  6.77%
 
 
 
Moody’s Ratings
(as a % of total investments)
 


 
 
(1)  Past performance is no guarantee of future results. Total return is calculated by determining the percentage change in net asset value (“NAV”) or market price (as applicable) in the specified period. The calculation assumes that all income dividends and capital gain distributions if any, have been reinvested. Total return does not reflect broker commissions or sales charges. Total return for a period of less than one year is not annualized. Total return for a period of more than one year represents the average annual total return.
 
Performance at market price will differ from its results at NAV. Although market price returns typically reflect investment results over time, during shorter periods returns at market price can also be influenced by factors such as changing views about the Funds, market conditions, supply and demand for the Funds’ shares, or changes in the Funds’ dividends.
 
An investment in the Funds involves risk, including the loss of principal. Total return, market price, market yield and NAV will fluctuate with changes in market conditions. This data is provided for information purposes only and is not intended for trading purposes. Closed-end funds, unlike open-end funds, are not continuously offered. There is a onetime public offering and once issued, shares of closed-end funds are traded in the open market on a stock exchange. NAV is equal to total assets attributable to common shareholders less total liabilities divided by the number of common shares outstanding. Holdings are subject to change daily.
 
(2)  Market Price Yield is determined by dividing the annualized current monthly per share dividend (comprised of net investment income) payable to common shareholders by the market price per common share at March 31, 2010.
 
 
3.31.10   PIMCO Municipal Income Funds III Semi-Annual Report 5


 

 
PIMCO Municipal Income Fund III Schedule of Investments
March 31, 2010 (unaudited)

 
                     
Principal
               
Amount
        Credit Rating
     
(000s)         (Moody’s/S&P)   Value  
   
 
MUNICIPAL BONDS & NOTES–97.4%
        Alabama–1.1%            
$ 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   $ 4,312,100  
  500    
Birmingham Special Care Facs. Financing Auth. Rev.,
Childrens Hospital, 6.00%, 6/1/39 (AGC)
  Aa3/AAA     538,610  
  1,500     Colbert Cnty. Northwest Health Care Auth. Rev., 5.75%, 6/1/27   Baa3/NR     1,438,350  
                     
                  6,289,060  
                     
        Alaska–1.2%            
        Housing Finance Corp. Rev.,            
  3,900    
5.00%, 12/1/33, Ser. A
  Aaa/AAA     3,922,659  
  1,000    
5.25%, 6/1/32, Ser. C (NPFGC)
  Aa2/AA     1,006,560  
  3,100     Northern Tobacco Securitization Corp. Rev., 5.00%, 6/1/46, Ser. A   Baa3/NR     1,958,518  
                     
                  6,887,737  
                     
        Arizona–5.0%            
        Health Facs. Auth. Rev.,            
       
Banner Health,
           
  1,250    
5.00%, 1/1/35, Ser. A
  NR/A+     1,211,938  
  900    
5.50%, 1/1/38, Ser. D
  NR/A+     915,795  
  2,250    
Beatitudes Campus Project, 5.20%, 10/1/37
  NR/NR     1,701,450  
  1,500    
Maricopa Cnty. Pollution Control Corp. Rev., Palo Verde Project,
5.05%, 5/1/29, Ser. A (AMBAC)
  Baa2/BBB−     1,414,065  
  13,000     Pima Cnty. Industrial Dev. Auth. Rev., 5.00%, 9/1/39 (i)   Aa2/AA     12,609,870  
  5,000    
Salt River Project Agricultural Improvement & Power Dist. Rev.,
5.00%, 1/1/39, Ser. A (i)
  Aa1/AA     5,215,300  
  5,600     Salt Verde Financial Corp. Rev., 5.00%, 12/1/37   A3/A     4,839,968  
                     
                  27,908,386  
                     
        California–6.1%            
  2,500    
Health Facs. Financing Auth. Rev., Catholic Healthcare West,
6.00%, 7/1/39, Ser. A
  A2/A     2,658,175  
  1,250     Palomar Pomerado Health, CP, 6.75%, 11/1/39   Baa2/NR     1,288,988  
        State, GO,            
  250    
5.00%, 11/1/37
  Baa1/A−     231,355  
  5,300    
5.00%, 12/1/37
  Baa1/A−     4,975,322  
  6,000    
6.00%, 4/1/38
  Baa1/A−     6,323,460  
        Statewide Communities Dev. Auth. Rev.,            
  1,000    
American Baptist Homes West, 6.25%, 10/1/39
  NR/BBB−     981,510  
  2,800    
Baptist Univ., 9.00%, 11/1/17, Ser. B (a)(c)
  NR/NR     2,355,080  
       
Methodist Hospital Project (FHA),
           
  2,900    
6.625%, 8/1/29
  Aa2/AA     3,291,355  
  10,300    
6.75%, 2/1/38
  Aa2/AA     11,620,563  
                     
                  33,725,808  
                     
 
 
6 PIMCO Municipal Income Funds III Semi-Annual Report   3.31.10


 

 
PIMCO Municipal Income Fund III Schedule of Investments
March 31, 2010 (unaudited)

 
                     
Principal
               
Amount
        Credit Rating
     
(000s)         (Moody’s/S&P)   Value  
   
        Colorado–2.9%            
$ 9,955     Colorado Springs Utilities Rev., 5.00%, 11/15/30, Ser. B (i)   Aa2/AA   $ 10,241,107  
  500     Confluence Metropolitan Dist. Rev., 5.45%, 12/1/34   NR/NR     342,315  
  500     Health Facs. Auth. Rev., Evangelical Lutheran, 6.125%, 6/1/38, Ser. A   A3/A−     501,855  
  1,500    
Housing & Finance Auth. Rev., Evergreen Country Day School,
Inc. Project, 5.875%, 6/1/37 (a)(c)
  NR/BB     1,040,160  
  500     Public Auth. for Colorado Energy Rev., 6.50%, 11/15/38   A2/A     553,805  
  4,000     Saddle Rock Metropolitan Dist., GO, 5.35%, 12/1/31 (Radian)   NR/NR     3,415,480  
                     
                  16,094,722  
                     
        Connecticut–0.2%            
  1,250    
Harbor Point Infrastructure Improvement Dist., Tax Allocation,
7.875%, 4/1/39, Ser. A
  NR/NR     1,286,050  
                     
        Delaware–0.4%            
  2,000    
State Economic Dev. Auth. Rev.,
Delmarva Power & Light Co., 5.40%, 2/1/31 (d)
  Baa2/BBB     2,017,160  
                     
        District of Columbia–1.9%            
  10,000     Water & Sewer Auth. Rev., 5.50%, 10/1/39, Ser. A (i)   Aa3/AA     10,735,300  
                     
        Florida–5.1%            
  3,480    
Brevard Cnty. Health Facs. Auth. Rev.,
Health First, Inc. Project, 5.00%, 4/1/34
  A3/A−     3,163,250  
  500     Broward Cnty. Airport Rev., 5.375%, 10/1/29, Ser. O   A1/A+     517,460  
  4,500     Broward Cnty. Water & Sewer Rev., 5.257%, 10/1/34, Ser. A (i)   Aa3/AA     4,668,345  
  2,500    
Hillsborough Cnty. Industrial Dev. Auth. Rev.,
Tampa General Hospital Project, 5.25%, 10/1/34, Ser. B
  A3/NR     2,393,750  
  1,485    
Julington Creek Plantation Community Dev. Dist.,
Special Assessment, 5.00%, 5/1/29 (NPFGC)
  Baa1/A     1,402,939  
  1,000     Miami-Dade Cnty. Airport Rev., 5.50%, 10/1/36, Ser. A   A2/A−     1,012,520  
  3,895     Sarasota Cnty. Health Facs. Auth. Rev., 5.75%, 7/1/45   NR/NR     2,917,978  
  4,200     State Board of Education, GO, 5.00%, 6/1/38, Ser. D (i)   Aa1/AAA     4,320,918  
  6,900     State Board of Governors Rev., Florida Univ., 6.50%, 7/1/33   Aa2/AA     7,857,582  
                     
                  28,254,742  
                     
        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     1,159,568  
  400    
Medical Center Hospital Auth. Rev., Spring Harbor Green Island
Project, 5.25%, 7/1/37
  NR/NR     314,504  
                     
                  1,474,072  
                     
        Idaho–1.2%            
        State Building Auth. Rev., Ser. A (XLCA),            
  1,000    
5.00%, 9/1/33
  WR/AA−     1,009,360  
  5,750    
5.00%, 9/1/43
  WR/AA−     5,782,085  
                     
                  6,791,445  
                     
 
 
3.31.10   PIMCO Municipal Income Funds III Semi-Annual Report 7


 

 
PIMCO Municipal Income Fund III Schedule of Investments
March 31, 2010 (unaudited)

 
                     
Principal
               
Amount
        Credit Rating
     
(000s)         (Moody’s/S&P)   Value  
   
        Illinois–8.0%            
$ 500    
Chicago Board of Education School Reform, GO, zero coupon,
12/1/28, Ser. A (FGIC-NPFGC)
  A1/AA−   $ 179,770  
        Chicago, GO,            
  720    
5.00%, 1/1/31, Ser. A (NPFGC)
  Aa3/AA−     732,276  
  5,000    
5.00%, 1/1/34, Ser. C (i)
  Aa3/AA−     5,027,750  
  7,000     Chicago Motor Fuel Tax Rev., 5.00%, 1/1/33, Ser. A (AMBAC)   A1/AA+     7,076,510  
        Finance Auth. Rev.,            
  1,175    
Elmhurst Memorial Healthcare, 5.50%, 1/1/22
  Baa1/NR     1,171,874  
       
Leafs Hockey Club Project, Ser. A (b)(e),
           
  1,000    
5.875%, 3/1/27
  NR/NR     250,060  
  625    
6.00%, 3/1/37
  NR/NR     156,206  
  400    
OSF Healthcare System, 7.125%, 11/15/37, Ser. A
  A2/A     446,356  
  12,795    
Peoples Gas Light & Coke Co., 5.00%, 2/1/33 (AMBAC)
  A2/A−     12,554,966  
  1,000    
Swedish Covenant Hospital, 6.00%, 8/15/38, Ser. A
  NR/BBB+     990,490  
       
Univ. of Chicago,
           
  4,780    
5.00%, 7/1/33, Ser. A
  Aa1/AA     4,887,024  
  165    
5.25%, 7/1/41, Ser. A
  Aa1/AA     167,769  
  5,000    
5.50%, 7/1/37, Ser. B (i)
  Aa1/AA     5,521,550  
  5,000     State Toll Highway Auth. Rev., 5.50%, 1/1/33, Ser. B   Aa3/AA−     5,323,250  
                     
                  44,485,851  
                     
        Indiana–1.2%            
  3,500     Dev. Finance Auth. Rev., 5.00%, 3/1/30, Ser. B (AMBAC)   A2/NR     3,473,680  
  1,375    
Fort Wayne Pollution Control Rev.,
General Motors Corp. Project, 6.20%, 10/15/25 (e)
  WR/NR     440,000  
  1,000     Plainfield Parks Facs. Corp. Rev., 5.00%, 1/15/22 (AMBAC)   WR/A+     1,011,960  
        Portage, Tax Allocation, Ameriplex Project,            
  1,000    
5.00%, 7/15/23
  NR/BBB+     924,810  
  775    
5.00%, 1/15/27
  NR/BBB+     690,664  
                     
                  6,541,114  
                     
        Iowa–1.8%            
        Finance Auth. Rev., Deerfield Retirement Community, Inc., Ser. A,            
  120    
5.50%, 11/15/27
  NR/NR     88,642  
  575    
5.50%, 11/15/37
  NR/NR     389,712  
  11,010     Tobacco Settlement Auth. Rev., 5.60%, 6/1/34, Ser. B   Baa3/BBB     9,314,790  
                     
                  9,793,144  
                     
        Kentucky–1.0%            
        Economic Dev. Finance Auth. Rev.,            
       
Baptist Healthcare Systems, Ser. A,
           
  1,000    
5.375%, 8/15/24
  Aa3/NR     1,075,660  
  1,300    
5.625%, 8/15/27
  Aa3/NR     1,397,253  
 
 
8 PIMCO Municipal Income Funds III Semi-Annual Report   3.31.10


 

 
PIMCO Municipal Income Fund III Schedule of Investments
March 31, 2010 (unaudited)

 
                     
Principal
               
Amount
        Credit Rating
     
(000s)         (Moody’s/S&P)   Value  
   
        Kentucky (continued)            
$ 1,000     Catholic Healthcare Partners, 5.25%, 10/1/30   A1/AA−   $ 1,005,540  
  2,000     Owensboro Healthcare Systems, 6.375%, 6/1/40, Ser. A   Baa2/NR     1,990,500  
                     
                  5,468,953  
                     
        Louisiana–1.0%            
       
Local Gov’t Environmental Facs. & Community Dev. Auth. Rev.,
Woman’s Hospital Foundation, Ser. A,
           
  1,500    
5.875%, 10/1/40
  A3/BBB+     1,447,485  
  1,000    
6.00%, 10/1/44
  A3/BBB+     980,020  
  1,700    
Public Facs. Auth. Rev., Ochsner Clinic Foundation Project,
5.50%, 5/15/47, Ser. B
  Baa1/NR     1,507,815  
  1,595     Tobacco Settlement Financing Corp. Rev., 5.875%, 5/15/39, Ser. 2001-B   Baa3/BBB     1,486,923  
                     
                  5,422,243  
                     
        Maryland–0.5%            
  1,000     Economic Dev. Corp. Rev., 5.75%, 6/1/35, Ser. B   Baa3/NR     1,017,610  
  1,500    
Health & Higher Educational Facs. Auth. Rev.,
Calvert Health System, 5.50%, 7/1/36
  A2/NR     1,521,900  
                     
                  2,539,510  
                     
        Massachusetts–1.3%            
  750    
Dev. Finance Agcy. Rev., Linden Ponds, Inc. Fac.,
5.75%, 11/15/35, Ser. A
  NR/NR     546,982  
  4,910     Housing Finance Agcy. Rev., 5.125%, 6/1/43, Ser. H   Aa3/AA−     4,923,552  
  1,600     State College Building Auth. Rev., 5.50%, 5/1/39, Ser. A   Aa3/AA−     1,727,920  
                     
                  7,198,454  
                     
        Michigan–14.7%            
  500     Conner Creek Academy East Rev., 5.25%, 11/1/36   NR/BB+     362,690  
  1,500     Detroit, GO, 5.25%, 11/1/35   A1/AA−     1,481,220  
  9,320     Detroit Sewer Rev., 5.00%, 7/1/32, Ser. A (AGC)   Aa3/AAA     9,051,304  
        Detroit Water Rev. (NPFGC),            
  30,000    
5.00%, 7/1/34, Ser. A
  A2/A+     28,193,400  
  7,555    
5.00%, 7/1/34, Ser. B
  A3/A     6,980,367  
  1,500    
Royal Oak Hospital Finance Auth. Rev., William Beaumont Hospital,
8.25%, 9/1/39
  A1/A     1,777,800  
        State Hospital Finance Auth. Rev.,            
  175    
Detroit Medical Center, 5.25%, 8/15/23, Ser. A
  Ba3/BB−     147,206  
       
Oakwood Group, Ser. A,
           
  5,405    
5.75%, 4/1/32
  A2/A     5,315,763  
  575    
6.00%, 4/1/22
  A2/A     583,286  
  20,000    
Trinity Health Credit, 5.375%, 12/1/30, Ser. C
  Aa2/AA     19,862,800  
 
 
3.31.10   PIMCO Municipal Income Funds III Semi-Annual Report 9


 

 
PIMCO Municipal Income Fund III Schedule of Investments
March 31, 2010 (unaudited)

 
                     
Principal
               
Amount
        Credit Rating
     
(000s)         (Moody’s/S&P)   Value  
   
        Michigan (continued)            
$ 10,000     Tobacco Settlement Finance Auth. Rev., 6.00%, 6/1/48, Ser. A   NR/BBB   $ 7,805,900  
                     
                  81,561,736  
                     
        Mississippi–0.8%            
        Business Finance Corp. Rev., System Energy Res., Inc. Project,            
  3,000    
5.875%, 4/1/22
  Ba1/BBB     2,988,000  
  1,250    
5.90%, 5/1/22
  Ba1/BBB     1,244,925  
                     
                  4,232,925  
                     
        Missouri–0.1%            
  250     Jennings Rev., Northland Redev. Area Project, 5.00%, 11/1/23   NR/NR     219,802  
  500    
Manchester, Tax Allocation, Highway141/Manchester Road Project,
6.875%, 11/1/39
  NR/NR     492,205  
                     
                  712,007  
                     
        Montana–0.4%            
  2,200    
Forsyth Pollution Control Rev.,
Puget Sound Energy, 5.00%, 3/1/31, Ser. A (AMBAC)
  Baa1/A−     2,171,818  
                     
        Nevada–0.7%            
  4,000     Clark Cnty., GO, 4.75%, 6/1/30 (AGM)   Aa1/AAA     3,984,360  
                     
        New Hampshire–0.4%            
  2,000     Business Finance Auth. Rev., Elliot Hospital, 6.125%, 10/1/39, Ser. A   Baa1/BBB+     2,013,560  
                     
        New Jersey–4.5%            
  1,000    
Camden Cnty. Improvement Auth. Rev.,
Cooper Health Systems Group, 5.00%, 2/15/35, Ser. A
  Baa3/BBB     801,620  
  300    
Economic Dev. Auth. Rev., Newark Airport Marriott Hotel,
7.00%, 10/1/14
  Ba1/NR     302,628  
  4,500    
Economic Dev. Auth., Special Assessment,
Kapkowski Road Landfill Project, 6.50%, 4/1/28
  Baa3/NR     4,880,475  
        Health Care Facs. Financing Auth. Rev.,            
  1,070    
Pascack Valley Hospital Assoc., 6.625%, 7/1/36 (e)
  NR/NR     16,044  
  1,000    
St. Peters Univ. Hospital, 5.75%, 7/1/37
  Baa2/BBB−     1,001,200  
  1,150    
Trinitas Hospital, 5.25%, 7/1/30, Ser. A
  Baa3/BBB−     974,464  
  2,000     State Turnpike Auth. Rev., 5.25%, 1/1/40, Ser. E   A3/A+     2,092,520  
  22,645     Tobacco Settlement Financing Corp. Rev., 5.00%, 6/1/41, Ser. 1-A   Baa3/BBB     14,634,784  
                     
                  24,703,735  
                     
        New Mexico–0.2%            
  1,000     Farmington Pollution Control Rev., 5.80%, 4/1/22, Ser. A   Baa3/BB+     1,004,390  
                     
        New York–4.3%            
  1,700    
Liberty Dev. Corp. Rev., Goldman Sachs Headquarters,
5.50%, 10/1/37
  A1/A     1,741,429  
  1,150    
Nassau Cnty. Industrial Dev. Agcy. Rev., Amsterdam at Harborside,
6.70%, 1/1/43, Ser. A
  NR/NR     1,073,767  
 
 
10 PIMCO Municipal Income Funds III Semi-Annual Report   3.31.10


 

 
PIMCO Municipal Income Fund III Schedule of Investments
March 31, 2010 (unaudited)

 
                     
Principal
               
Amount
        Credit Rating
     
(000s)         (Moody’s/S&P)   Value  
   
        New York (continued)            
$ 10,450    
New York City Industrial Dev. Agcy. Rev., Yankee Stadium,
7.00%, 3/1/49 (AGC)
  Aa3/AAA   $ 11,879,978  
       
New York City Municipal Water Finance Auth.
Water & Sewer Rev. (i),
           
  4,900    
5.00%, 6/15/37, Ser. D
  Aa2/AAA     5,037,102  
  4,000    
Second Generation Resolutions, 4.75%, 6/15/35, Ser. DD
  Aa3/AA+     4,038,560  
                     
                  23,770,836  
                     
        North Carolina–1.1%            
        Eastern Municipal Power Agcy. Rev.,            
  2,000    
5.125%, 1/1/23, Ser. D
  Baa1/A−     2,042,020  
  2,000    
5.125%, 1/1/26, Ser. D
  Baa1/A−     2,030,680  
  795    
5.375%, 1/1/17, Ser. C
  Baa1/A−     844,632  
  1,500    
Medical Care Commission Rev., Cleveland Cnty. Healthcare,
5.00%, 7/1/35, Ser. A (AMBAC)
  WR/A     1,336,515  
                     
                  6,253,847  
                     
        Ohio–4.1%            
  15,375    
Air Quality Dev. Auth. Pollution Control Rev., Dayton Power,
4.80%, 1/1/34, Ser. B (FGIC)
  Aa3/A     15,615,773  
  5,000    
Buckeye Tobacco Settlement Financing Auth. Rev.,
5.875%, 6/1/47, Ser. A-2
  Baa3/BBB     3,641,450  
  2,500    
Lorain Cnty. Hospital Rev., Catholic Healthcare,
5.375%, 10/1/30
  A1/AA−     2,521,050  
  500    
Montgomery Cnty. Rev., Miami Valley Hospital,
6.25%, 11/15/39, Ser. A
  Aa3/NR     522,275  
  500    
State Higher Educational Fac. Commission Rev.,
Univ. Hospital Health Systems, 6.75%, 1/15/39, Ser. A
  A2/A     531,915  
                     
                  22,832,463  
                     
        Oregon–0.2%            
  1,000     Medford Hospital Facs. Auth. Rev., 5.00%, 8/15/40, Ser. A (AGM)   NR/AAA     983,060  
                     
        Pennsylvania–2.7%            
        Allegheny Cnty. Hospital Dev. Auth. Rev.,            
  1,000    
Univ. of Pittsburgh Medical Center, 5.625%, 8/15/39
  Aa3/A+     1,029,610  
  1,000    
West Penn Allegheny Health System, 5.375%, 11/15/40, Ser. A
  Ba3/BB     766,580  
        Cumberland Cnty. Municipal Auth. Rev., Messiah Village Project, Ser. A,            
  750    
5.625%, 7/1/28
  NR/BBB−     644,595  
  670    
6.00%, 7/1/35
  NR/BBB−     586,779  
  1,000    
Dauphin Cnty. General Auth. Rev., Pinnacle Health System Project,
6.00%, 6/1/36, Ser. A
  A2/A     1,031,140  
  1,250    
Harrisburg Auth. Rev., Harrisburg Univ. of Science,
6.00%, 9/1/36, Ser. B
  NR/NR     1,096,300  
  100    
Luzerne Cnty. Industrial Dev. Auth. Rev.,
Pennsylvania American Water Co., 5.50%, 12/1/39
  A2/A     101,715  
 
 
3.31.10   PIMCO Municipal Income Funds III Semi-Annual Report 11


 

 
PIMCO Municipal Income Fund III Schedule of Investments
March 31, 2010 (unaudited)

 
                     
Principal
               
Amount
        Credit Rating
     
(000s)         (Moody’s/S&P)   Value  
   
        Pennsylvania (continued)            
$ 6,200    
Philadelphia Hospitals & Higher Education Facs. Auth. Rev.,
Temple Univ. Hospital, 6.625%, 11/15/23, Ser. A
  Baa3/BBB   $ 6,200,868  
  500     Philadelphia Water Rev., 5.25%, 1/1/36, Ser. A   A3/A     511,205  
  3,000     Turnpike Commission Rev., 5.125%, 12/1/40, Ser. D   A2/A−     3,023,670  
                     
                  14,992,462  
                     
        Puerto Rico–0.6%
        Sales Tax Financing Corp. Rev., Ser. A,            
  2,400    
5.00%, 8/1/40 (AGM) (i)
  Aa3/AAA     2,416,512  
  1,000    
5.50%, 8/1/42
  A2/A+     1,027,410  
                     
                  3,443,922  
                     
        South Carolina–1.1%            
  1,000     Greenwood Cnty. Rev., Self Regional Healthcare, 5.375%, 10/1/39   A2/A     993,400  
  5,305     Jobs-Economic Dev. Auth. Rev.,            
       
Bon Secours Health System, 5.625%, 11/15/30, Ser. B
  A3/A−     5,282,242  
                     
                  6,275,642  
                     
        Tennessee–0.5%            
  1,250    
Claiborne Cnty. Industrial Dev. Board Rev.,
Lincoln Memorial Univ. Project, 6.625%, 10/1/39
  NR/NR     1,254,775  
        Tennessee Energy Acquisition Corp. Rev., Ser. A,            
  1,200    
5.25%, 9/1/21
  Ba3/BB+     1,214,316  
  365    
5.25%, 9/1/22
  Ba3/BB+     367,632  
                     
                  2,836,723  
                     
        Texas–10.4%            
  6,810     Crowley Independent School Dist., GO, 4.75%, 8/1/35 (PSF-GTD)   Aaa/AAA     6,908,609  
  1,300     Dallas Civic Center Rev., 5.25%, 8/15/38 (AGC)   Aa3/AAA     1,328,847  
  10,115     Denton Independent School Dist., GO, 5.00%, 8/15/33 (PSF-GTD) (i)   Aaa/AAA     10,319,424  
  465     Judson Independent School Dist., GO, 5.00%, 2/1/30 (PSF-GTD)   Aaa/NR     469,585  
        Municipal Gas Acquisition & Supply Corp. I Rev.,            
  150    
5.25%, 12/15/26, Ser. A
  A2/A     145,447  
  8,100    
6.25%, 12/15/26, Ser. D
  A2/A     8,775,702  
        North Harris Cnty. Regional Water Auth. Rev.,            
  5,500    
5.25%, 12/15/33
  A3/A+     5,611,100  
  5,500    
5.50%, 12/15/38
  A3/A+     5,652,460  
        North Texas Tollway Auth. Rev.,            
  10,800    
5.625%, 1/1/33, Ser. A
  A2/A−     11,220,768  
  700    
5.75%, 1/1/33, Ser. F
  A3/BBB+     722,855  
  2,000    
6.25%, 1/1/39, Ser. A
  A2/A−     2,166,180  
  2,000     Sabine River Auth. Pollution Control Rev., 5.20%, 5/1/28, Ser. C   Caa3/CCC     1,063,560  
 
 
12 PIMCO Municipal Income Funds III Semi-Annual Report   3.31.10


 

 
PIMCO Municipal Income Fund III Schedule of Investments
March 31, 2010 (unaudited)

 
                     
Principal
               
Amount
        Credit Rating
     
(000s)         (Moody’s/S&P)   Value  
   
        Texas (continued)            
$ 3,000    
Tarrant Cnty. Cultural Education Facs. Finance Corp. Rev.,
Baylor Health Care Systems Project, 6.25%, 11/15/29
  Aa2/AA−   $ 3,231,270  
                     
                  57,615,807  
                     
        Virginia–0.3%            
  1,000    
Fairfax Cnty. Industrial Dev. Auth. Rev.,
Inova Health Systems, 5.50%, 5/15/35, Ser. A
  Aa2/AA+     1,054,120  
  1,000    
James City Cnty. Economic Dev. Auth. Rev.,
United Methodist Homes, 5.50%, 7/1/37, Ser. A
  NR/NR     589,180  
                     
                  1,643,300  
                     
        Washington–7.8%            
  6,375    
Chelan Cnty. Public Utility Dist. No. 1 Rev.,
Chelan Hyrdo Systems, 5.125%, 7/1/33, Ser. C (AMBAC)
  Aa2/AA     6,471,964  
  1,000    
Health Care Facs. Auth. Rev., Seattle Cancer Care Alliance,
7.375%, 3/1/38
  A3/NR     1,108,980  
  15,000     King Cnty. Sewer Rev., 5.00%, 1/1/35, Ser. A (AGM) (i)   Aa3/AAA     15,165,300  
  20,005     Tobacco Settlement Auth. Rev., 6.50%, 6/1/26   Baa3/BBB     20,522,729  
                     
                  43,268,973  
                     
        Wisconsin–2.3%
        Health & Educational Facs. Auth. Rev.,            
  1,000    
Aurora Health Care, Inc., 5.625%, 4/15/39, Ser. A
  A3/NR     986,600  
  1,000    
Prohealth Care, Inc., 6.625%, 2/15/39
  A1/A+     1,076,510  
  10,000     State Rev., 6.00%, 5/1/36, Ser. A   A1/AA−     10,889,000  
                     
                  12,952,110  
                     
        Total Municipal Bonds & Notes (cost–$534,867,231)         540,167,427  
                     
 
VARIABLE RATE NOTES (a)(c)(g)–1.6%
        California–0.3%            
  1,675    
Los Angeles Community College Dist., GO,
11.43%, 8/1/33, Ser. 3096 (f)
  NR/AA     1,742,117  
                     
        Texas–1.3%            
  6,500    
JPMorgan Chase Putters/Drivers Trust, GO,
7.814%, 2/1/17, Ser. 3480
  NR/AA+     7,088,055  
                     
        Total Variable Rate Notes (cost–$8,139,427)         8,830,172  
                     
 
 
3.31.10   PIMCO Municipal Income Funds III Semi-Annual Report 13


 

 
PIMCO Municipal Income Fund III Schedule of Investments
March 31, 2010 (unaudited)

 
                     
Principal
               
Amount
        Credit Rating
     
(000s)         (Moody’s/S&P)   Value  
   
 
SHORT-TERM INVESTMENTS (h)–1.0%
Corporate Notes–1.0%
           
        Financial Services–1.0%            
$ 700     International Lease Finance Corp., 0.472%, 5/24/10, FRN   B1/BB+   $ 700,022  
  5,000     SLM Corp., 0.409%, 7/26/10, FRN   Ba1/BBB−     4,932,295  
                     
        Total Corporate Notes (cost–$5,540,878)         5,632,317  
                     
        Total Investments (cost–$548,547,536)–100.0%       $ 554,629,916  
                     
 
 
14 PIMCO Municipal Income Funds III Semi-Annual Report   3.31.10


 

PIMCO California Municipal Income Fund III Schedule of Investments
March 31, 2010 (unaudited)

 
                     
Principal
               
Amount
        Credit Rating
     
(000s)         (Moody’s/S&P)   Value  
   
 
CALIFORNIA MUNICIPAL BONDS & NOTES–94.0%
        Assoc. of Bay Area Gov’t Finance Auth. for Nonprofit Corps. Rev.,            
       
Odd Fellows Home of California, Ser. A (CA Mtg. Ins.),
           
$ 3,200    
5.20%, 11/15/22
  NR/A−   $ 3,225,408  
  11,725    
5.35%, 11/15/32
  NR/A−     11,633,193  
  1,000    
Cathedral City Public Financing Auth., Tax Allocation,
5.00%, 8/1/33, Ser. A (NPFGC)
  Baa1/A     861,960  
  1,150    
Ceres Redev. Agcy., Tax Allocation, Project Area No. 1,
5.00%, 11/1/33 (NPFGC)
  Baa1/A     967,449  
  2,000     Chula Vista Rev., San Diego Gas & Electric, 5.875%, 2/15/34, Ser. B   Aa3/A+     2,199,580  
  550    
City & Cnty. of San Francisco, Capital Improvement Projects, CP,
5.25%, 4/1/31, Ser. A
  A1/AA−     557,865  
  1,415    
Contra Costa Cnty. Public Financing Auth., Tax Allocation,
5.625%, 8/1/33, Ser. A
  NR/BBB     1,360,721  
  3,775     Cucamonga School Dist., CP, 5.20%, 6/1/27   NR/A−     3,486,326  
        Educational Facs. Auth. Rev.,            
  9,800    
Claremont McKenna College, 5.00%, 1/1/39 (i)
  Aa2/NR     10,114,286  
  3,300    
Pepperdine Univ., 5.00%, 9/1/33, Ser. A (FGIC-NPFGC)
  Aa3/A     3,277,329  
  10,000    
Univ. of Southern California, 5.00%, 10/1/39, Ser. A (i)
  Aa1/AA+     10,421,000  
  1,695    
El Dorado Irrigation Dist. & El Dorado Water Agcy., CP,
5.75%, 8/1/39, Ser. A (AGC)
  Aa3/AAA     1,763,715  
        Golden State Tobacco Securitization Corp. Rev.,            
  11,000    
5.00%, 6/1/45 (AMBAC-TCRS)
  Baa2/A−     9,479,470  
  4,000    
5.00%, 6/1/45, Ser. A (FGIC-TCRS)
  Baa2/A−     3,394,960  
  500     Hartnell Community College Dist., GO, zero coupon, 8/1/34, Ser. D (j)   A1/AA−     229,555  
       
Health Facs. Financing Auth. Rev.,
Adventist Health System, Ser. A,
           
  500    
5.00%, 3/1/33
  NR/A     464,680  
  4,000    
5.75%, 9/1/39
  NR/A     4,049,000  
       
Catholic Healthcare West, Ser. A,
           
  1,935    
6.00%, 7/1/34
  A2/A     2,039,548  
  4,000    
6.00%, 7/1/39
  A2/A     4,253,080  
  500    
Children’s Hospital of Orange Cnty., 6.50%, 11/1/38, Ser. A
  NR/A     532,200  
  6,000    
Cottage Health System, 5.00%, 11/1/33, Ser. B (NPFGC)
  Baa1/A+     5,403,300  
       
Paradise VY Estates, (CA Mtg. Ins.),
           
  2,000    
5.125%, 1/1/22
  NR/A−     1,983,320  
  1,550    
5.25%, 1/1/26
  NR/A−     1,492,046  
  1,300    
Scripps Health, 5.00%, 11/15/36, Ser. A
  A1/AA−     1,262,274  
        Infrastructure & Economic Dev. Bank Rev., Kaiser Hospital Assistance,            
  3,000    
5.50%, 8/1/31, Ser. B
  WR/A     3,015,990  
  8,000    
5.55%, 8/1/31, Ser. A
  NR/A+     8,115,360  
  20     Lancaster Financing Auth., Tax Allocation, 4.75%, 2/1/34 (NPFGC)   Baa1/A     16,322  
  500     Lancaster Redev. Agcy., Tax Allocation, 6.875%, 8/1/39   NR/A     539,715  
 
 
3.31.10   PIMCO Municipal Income Funds III Semi-Annual Report 15


 

 
PIMCO California Municipal Income Fund III Schedule of Investments
March 31, 2010 (unaudited)

 
                     
Principal
               
Amount
        Credit Rating
     
(000s)         (Moody’s/S&P)   Value  
   
$ 5,600    
Long Beach Bond Finance Auth. Rev., Long Beach Natural Gas,
5.50%, 11/15/37, Ser. A
  A2/A   $ 5,384,624  
  5,000     Long Beach Unified School Dist., GO, 5.75%, 8/1/33, Ser. A   Aa3/AA−     5,372,600  
        Los Angeles Department of Water & Power Rev. (i),            
  6,000    
4.75%, 7/1/30, Ser. A-2 (AGM)
  Aa3/AAA     6,102,480  
  10,000    
5.00%, 7/1/39, Ser. A
  Aa3/AA−     10,284,400  
        Los Angeles Unified School Dist., GO,            
  9,580    
4.75%, 1/1/28, Ser. A (NPFGC)
  Aa3/AA−     9,466,190  
  10,000    
5.00%, 1/1/34, Ser. I (i)
  Aa3/AA−     10,117,300  
  550     Malibu, City Hall Project, CP, 5.00%, 7/1/39, Ser. A   NR/AA+     554,004  
  1,000     Manteca Financing Auth. Sewer Rev., 5.75%, 12/1/36   A2/NR     1,059,940  
  5,000    
Metropolitan Water Dist. of Southern California Rev.,
5.00%, 7/1/37, Ser. A (i)
  Aa2/AAA     5,190,150  
  5,280    
Modesto Irrigation Dist., Capital Improvement Projects, CP,
5.00%, 7/1/33, Ser. A (NPFGC)
  A1/A+     5,103,542  
  3,000     Montebello Unified School Dist., GO, 5.00%, 8/1/33 (AGM)   Aa3/AAA     3,009,930  
  200     M-S-R Energy Auth. Rev., 6.50%, 11/1/39, Ser. B   NR/A     213,464  
  5,000     Oakland, GO, 5.00%, 1/15/33, Ser. A (NPFGC)   A1/AA−     4,802,550  
  5,000     Orange Cnty. Unified School Dist., CP, 4.75%, 6/1/29 (NPFGC)   A1/A+     5,113,750  
        Orange Cnty. Water Dist. Rev., CP, Ser. B (NPFGC),            
  4,560    
5.00%, 8/15/34
  Aa2/AAA     4,624,387  
  965    
5.00%, 8/15/34
  WR/AAA     1,072,250  
  2,000    
Palm Desert Financing Auth., Tax Allocation,
5.00%, 4/1/25, Ser. A (NPFGC)
  Baa1/A     1,807,060  
  1,250     Peralta Community College Dist., GO, 5.00%, 8/1/39, Ser. C   NR/AA−     1,231,000  
  1,950     Poway Unified School Dist., Special Tax, 5.125%, 9/1/28   NR/BBB     1,777,523  
  5,000     Riverside, CP, 5.00%, 9/1/33 (AMBAC)   WR/A+     4,767,700  
  500    
Rocklin Unified School Dist. Community Facs. Dist., Special Tax,
5.00%, 9/1/29 (NPFGC)
  Baa1/A     452,870  
  3,250     Sacramento Municipal Utility Dist. Rev., 5.00%, 8/15/33, Ser. R (NPFGC)   A1/A+     3,249,805  
  6,250     San Diego Cnty. Water Auth., CP, 5.00%, 5/1/38, Ser. A (AGM)   Aa3/AAA     6,315,938  
  12,075    
San Diego Community College Dist., GO, 5.00%, 5/1/28,
Ser. A (AGM)
  Aa2/AAA     12,508,492  
  2,000     San Diego Public Facs. Financing Auth. Rev., 5.25%, 5/15/39, Ser. A   A2/A+     2,088,180  
  2,200    
San Diego Regional Building Auth. Rev., Cnty. Operations Center &
Annex, 5.375%, 2/1/36, Ser. A
  A1/AA+     2,264,416  
  1,500     San Diego State Univ. Foundation Rev., 5.00%, 3/1/27, Ser. A (NPFGC)   Baa1/A     1,494,840  
  2,000     San Jose, Libraries & Parks Project, GO, 5.125%, 9/1/31   Aa1/AAA     2,027,580  
  13,200    
San Marcos Public Facs. Auth., Tax Allocation,
5.00%, 8/1/33, Ser. A (FGIC-NPFGC)
  A3/A     11,474,364  
  500     Santa Clara Cnty. Financing Auth. Rev., 5.75%, 2/1/41, Ser. A (AMBAC)   A1/A+     522,400  
  1,200    
Santa Cruz Cnty. Redev. Agcy., Tax Allocation, Live Oak/Soquel
Community, 7.00%, 9/1/36, Ser. A
  A2/A     1,298,628  
 
 
16 PIMCO Municipal Income Funds III Semi-Annual Report   3.31.10


 

 
PIMCO California Municipal Income Fund III Schedule of Investments
March 31, 2010 (unaudited)

 
                     
Principal
               
Amount
        Credit Rating
     
(000s)         (Moody’s/S&P)   Value  
   
$ 4,425    
South Tahoe JT Powers Financing Auth. Rev., South Tahoe Redev.
Project, 5.45%, 10/1/33, Ser. 1-A
  NR/BBB+   $ 3,958,472  
  7,300     State, GO, 6.00%, 4/1/38   Baa1/A−     7,693,543  
  4,095     State Department Veteran Affairs Rev., 5.35%, 12/1/27, Ser. A (AMBAC)   Aa2/AA−     4,105,278  
        State Public Works Board Rev.,            
  2,000    
California State Univ., 6.00%, 11/1/34, Ser. J
  A1/BBB+     2,061,540  
  2,600    
Univ. CA M.I.N.D. Inst., 5.00%, 4/1/28, Ser. A
  Aa2/AA−     2,628,678  
        Statewide Communities Dev. Auth. Rev.,            
  500    
American Baptist Homes West, 6.25%, 10/1/39
  NR/BBB−     490,755  
       
Catholic Healthcare West,
           
  1,200    
5.50%, 7/1/31, Ser. D
  A2/A     1,217,040  
  1,200    
5.50%, 7/1/31, Ser. E
  A2/A     1,217,040  
  1,000    
Lancer Student Housing Project, 7.50%, 6/1/42
  NR/NR     1,005,760  
  7,300    
Los Angeles Jewish Home, 5.50%, 11/15/33 (CA St. Mtg.)
  NR/A−     6,798,344  
  15,000    
Memorial Health Services, 5.50%, 10/1/33, Ser. A
  WR/AA−     15,189,000  
       
Methodist Hospital Project, (FHA),
           
  2,000    
6.625%, 8/1/29
  Aa2/AA     2,269,900  
  7,200    
6.75%, 2/1/38
  Aa2/AA     8,123,112  
  3,100    
St. Joseph, 5.75%, 7/1/47, Ser. A (FGIC)
  A1/AA−     3,181,437  
  10,000    
Sutter Health, 5.50%, 8/15/34, Ser. B
  Aa3/A+     10,034,300  
  3,505    
The Internext Group, CP, 5.375%, 4/1/30
  NR/BBB     3,209,949  
        Tobacco Securitization Agcy. Rev., Alameda Cnty.,            
  8,100    
5.875%, 6/1/35
  Baa3/NR     6,960,087  
  7,000    
6.00%, 6/1/42
  Baa3/NR     5,673,500  
  2,000     Tobacco Securitization Agcy. Rev., Kern Cnty., 6.125%, 6/1/43, Ser. A   NR/BBB     1,648,440  
  5,000    
Tobacco Securitization Auth. of Southern California Rev.,
5.00%, 6/1/37, Ser. A-1
  Baa3/BBB     3,519,050  
  2,950    
Torrance Rev., Torrance Memorial Medical Center,
5.50%, 6/1/31, Ser. A
  A1/A+     2,972,951  
  1,000     West Basin Municipal Water Dist., CP, 5.00%, 8/1/30, Ser. A (NPFGC)   Aa3/AA−     1,017,350  
  2,000    
Western Municipal Water Dist. Facs. Auth. Rev.,
5.00%, 10/1/39, Ser. B
  NR/AA+     2,037,820  
  1,000     Westlake Village, CP, 5.00%, 6/1/39   NR/AA+     1,015,810  
  2,500    
William S. Hart Union High School Dist., Special Tax,
6.00%, 9/1/33, Ser. 2002-1
  NR/NR     2,319,450  
  2,750     Woodland Finance Auth. Rev., 5.00%, 3/1/32 (XLCA)   A3/NR     2,778,435  
                     
        Total California Municipal Bonds & Notes (cost–$322,669,909)         330,019,050  
                     
OTHER MUNICIPAL BONDS & NOTES–5.5%
        Indiana–1.2%            
  5,000     Vigo Cnty. Hospital Auth. Rev., Union Hospital, Inc., 5.75%, 9/1/42 (a)(c)   NR/NR     4,230,650  
                     
 
 
3.31.10   PIMCO Municipal Income Funds III Semi-Annual Report 17


 

 
PIMCO California Municipal Income Fund III Schedule of Investments
March 31, 2010 (unaudited)

 
                     
Principal
               
Amount
        Credit Rating
     
(000s)         (Moody’s/S&P)   Value  
   
        New York–1.0%            
$ 3,300    
New York City Municipal Water Finance Auth. Water & Sewer Rev.,
5.00%, 6/15/37, Ser. D (i)
  Aa2/AAA   $ 3,392,334  
                     
        Puerto Rico–2.9%            
  1,000     Electric Power Auth. Rev., 5.25%, 7/1/40, Ser. XX (d)   A3/BBB+     987,960  
  4,420     Public Buildings Auth. Gov’t Facs. Rev., 5.00%, 7/1/36, Ser. I (GTD)   Baa3/BBB−     4,012,211  
        Sales Tax Financing Corp. Rev., Ser. A,            
  23,200    
zero coupon, 8/1/47, (AMBAC)
  Aa3/AA−     2,210,264  
  29,200    
zero coupon, 8/1/54, (AMBAC)
  Aa3/AA−     1,692,724  
  26,300    
zero coupon, 8/1/56
  Aa3/AA−     1,340,774  
                     
                  10,243,933  
                     
        South Dakota–0.4%            
  2,000     Minnehaha Cnty. Rev., Bethany Lutheran, 5.50%, 12/1/35   NR/NR     1,588,880  
                     
        Total Other Municipal Bonds & Notes (cost–$21,684,008)         19,455,797  
                     
CALIFORNIA VARIABLE RATE NOTES (a)(c)(f)(g)–0.3%
  1,000    
Los Angeles Community College Dist., GO,
11.43%, 8/1/33, Ser. 3096 (cost–$996,612)
  NR/AA     1,040,070  
                     
SHORT-TERM INVESTMENTS (h)–0.2%
Corporate Notes–0.2%
           
        Financial Services–0.2%            
  500    
International Lease Finance Corp.,
0.472%, 5/24/10, FRN (cost–$487,354)
  B1/BB+     500,016  
                     
        Total Investments (cost–$345,837,883)–100.0%       $ 351,014,933  
                     
 
 
18 PIMCO Municipal Income Funds III Semi-Annual Report   3.31.10


 

PIMCO New York Municipal Income Fund III Schedule of Investments
March 31, 2010 (unaudited)

 
                     
Principal
               
Amount
        Credit Rating
     
(000s)         (Moody’s/S&P)   Value  
   
NEW YORK MUNICIPAL BONDS & NOTES–84.6%
$ 1,000    
Brooklyn Arena Local Dev. Corp. Rev., Barclays Center Project,
6.375%, 7/15/43
  Baa3/BBB−   $ 1,034,170  
  1,500    
Chautauqua Cnty. Industrial Dev. Agcy. Rev., Dunkirk Power Project,
5.875%, 4/1/42
  Baa3/BB+     1,516,020  
  755    
Dutchess Cnty. Industrial Dev. Agcy. Rev., Elant Fishkill, Inc.,
5.25%, 1/1/37, Ser. A
  NR/NR     488,976  
  800    
East Rochester Housing Auth. Rev., St. Mary’s Residence Project,
5.375%, 12/20/22, Ser. A (GNMA)
  NR/AAA     852,664  
        Liberty Dev. Corp. Rev., Goldman Sachs Headquarters,            
  1,810    
5.25%, 10/1/35
  A1/A     1,830,362  
  2,400    
5.50%, 10/1/37
  A1/A     2,458,488  
        Long Island Power Auth. Rev.,            
  1,000    
5.00%, 9/1/27, Ser. C
  A3/A−     1,015,890  
  1,500    
5.75%, 4/1/39, Ser. A
  A3/A−     1,624,635  
        Metropolitan Transportation Auth. Rev.,            
  6,220    
5.00%, 11/15/32, Ser. A (FGIC-NPFGC)
  A3/A     6,276,851  
  500    
5.00%, 11/15/34, Ser. B
  NR/AA     519,305  
  200     Mortgage Agcy. Rev., 4.75%, 10/1/27, Ser. 128   Aa1/NR     200,854  
        New York City Industrial Dev. Agcy. Rev.,            
  600    
Queens Baseball Stadium, 6.50%, 1/1/46 (AGC)
  Aa3/AAA     660,342  
       
Yankee Stadium,
           
  200    
5.00%, 3/1/36 (NPFGC)
  Baa1/A     189,434  
  2,200    
7.00%, 3/1/49 (AGC)
  Aa3/AAA     2,501,048  
        New York City Municipal Water Finance Auth. Water & Sewer Rev.,            
       
Second Generation Resolutions,
           
  5,000    
4.75%, 6/15/35, Ser. DD (i)
  Aa3/AA+     5,048,200  
  1,500    
5.00%, 6/15/39, Ser. GG-1
  Aa3/AA+     1,560,435  
  4,000    
New York City Trust for Cultural Res. Rev., Wildlife Conservation Society,
5.00%, 2/1/34 (FGIC-NPFGC)
  Aa3/AA−     4,090,360  
  2,695     New York City, GO, 5.00%, 3/1/33, Ser. I   Aa3/AA     2,734,832  
  1,000    
Niagara Falls Public Water Auth. Water & Sewer Rev.,
5.00%, 7/15/34, Ser. A (NPFGC)
  Baa1/A     1,014,390  
        State Dormitory Auth. Rev.,            
  1,000    
5.00%, 3/15/38, Ser. A
  NR/AAA     1,040,180  
  2,250    
Jewish Board Family & Children, 5.00%, 7/1/33 (AMBAC)
  WR/BBB     2,019,015  
  2,000    
Kaleida Health Hospital, 5.05%, 2/15/25 (FHA)
  NR/NR     2,032,780  
       
Long Island Univ., Ser. A (Radian),
           
  1,040    
5.00%, 9/1/23
  Baa3/NR     1,043,453  
  2,000    
5.00%, 9/1/32
  Baa3/NR     1,965,520  
  3,000    
Lutheran Medical Hospital, 5.00%, 8/1/31 (FHA-NPFGC)
  Baa1/A     3,007,590  
  3,085    
New York Univ., 5.25%, 7/1/48, Ser. A
  Aa3/AA−     3,216,668  
  2,750    
North General Hospital, 5.00%, 2/15/25
  NR/AA−     2,790,755  
  700    
North Shore-Long Island Jewish Health System, 5.50%, 5/1/37, Ser. A
  Baa1/A−     712,621  
  1,000    
School Dist. Financing, 5.00%, 10/1/30, Ser. D (NPFGC)
  A2/A+     1,027,250  
  1,250    
Skidmore College, 5.00%, 7/1/28 (FGIC-NPFGC)
  A1/NR     1,291,787  
 
 
3.31.10   PIMCO Municipal Income Funds III Semi-Annual Report 19


 

 
PIMCO New York Municipal Income Fund III Schedule of Investments
March 31, 2010 (unaudited)

 
                     
Principal
               
Amount
        Credit Rating
     
(000s)         (Moody’s/S&P)   Value  
   
$ 3,740    
St. Barnabas Hospital, 5.00%, 2/1/31, Ser. A (AMBAC-FHA)
  WR/NR   $ 3,747,854  
  1,200    
Teachers College, 5.50%, 3/1/39
  A1/NR     1,250,508  
  620    
Winthrop Univ. Hospital Assoc., 5.50%, 7/1/32, Ser. A
  Baa1/NR     608,251  
  2,500    
Winthrop-Nassau Univ., 5.75%, 7/1/28
  Baa1/NR     2,517,325  
  2,000     State Environmental Facs. Corp. Rev., 4.75%, 6/15/32, Ser. B   Aa1/AA+     2,071,320  
        State Urban Dev. Corp. Rev.,            
  2,200    
5.00%, 3/1/28, Ser. B-1 (i)
  NR/AAA     2,301,618  
  3,350    
5.00%, 3/15/35, Ser. B
  NR/AAA     3,432,343  
  2,000     Triborough Bridge & Tunnel Auth. Rev., 5.25%, 11/15/34, Ser. A-2 (i)   Aa2/AA−     2,142,840  
  2,000    
Warren & Washington Cntys. Industrial Dev. Agcy. Rev.,
Glens Falls Hospital Project, 5.00%, 12/1/35, Ser. A (AGM)
  Aa3/AAA     2,011,140  
                     
        Total New York Municipal Bonds & Notes (cost–$72,323,955)         75,848,074  
                     
OTHER MUNICIPAL BONDS & NOTES–9.6%
        District of Columbia–0.2%            
  175     Tobacco Settlement Financing Corp. Rev., 6.50%, 5/15/33   Baa3/BBB     170,300  
                     
        Puerto Rico–8.2%            
  580     Children’s Trust Fund Rev., 5.625%, 5/15/43   Baa3/BBB     502,181  
  2,000     Electric Power Auth. Rev., 5.25%, 7/1/40, Ser. XX (d)   A3/BBB+     1,975,920  
        Sales Tax Financing Corp. Rev., Ser. A,            
  5,000    
zero coupon, 8/1/54 (AMBAC)
  Aa3/AA−     289,850  
  4,000    
5.00%, 8/1/40 (AGM) (i)
  Aa3/AAA     4,027,520  
  500    
5.75%, 8/1/37
  A2/A+     531,455  
                     
                  7,326,926  
                     
        South Carolina–0.5%            
  370    
Tobacco Settlement Rev. Management Auth. Rev.,
6.375%, 5/15/30, Ser. B
  Baa3/BBB     462,940  
                     
        U.S. Virgin Islands–0.6%            
  500     Public Finance Auth. Rev., 6.00%, 10/1/39, Ser. A   Baa3/NR     514,930  
                     
        Washington–0.1%            
  135     Tobacco Settlement Auth. Rev., 6.625%, 6/1/32   Baa3/BBB     135,878  
                     
        Total Other Municipal Bonds & Notes (cost–$8,434,557)         8,610,974  
                     
NEW YORK VARIABLE RATE NOTES (g)–5.7%
  5,000    
State Dormitory Auth. Rev., Rockefeller Univ.,
5.00%, 7/1/32, Ser. A-1 (cost–$4,314,983)
  Aa1/AAA     5,103,500  
                     
SHORT-TERM INVESTMENTS (h)–0.1%
Corporate Notes–0.1%
           
        Financial Services–0.1%            
  100    
International Lease Finance Corp.,
0.472%, 5/24/10, FRN (cost–$97,471)
  B1/BB+     100,003  
                     
        Total Investments (cost–$85,170,966)–100.0%       $ 89,662,551  
                     
 
 
20 PIMCO Municipal Income Funds III Semi-Annual Report   3.31.10


 

PIMCO Municipal Income Funds III Notes to Schedules of Investments
March 31, 2010 (unaudited)

 
(a) Private Placement – Restricted as to resale and may not have a readily available market. Securities with an aggregate value of $12,225,412, representing 2.2% of total investments in Municipal III and $5,270,720, representing 1.5% of total investments in California Municipal III.
(b) Illiquid.
(c) 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.
(d) When-issued. To be settled after March 31, 2010.
(e) In default.
(f) 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 March 31, 2010.
(g) 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 March 31, 2010.
(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.
(j) Step Bond – Coupon is a fixed rate for an initial period then resets at a specific date and rate.
 
Glossary:
AGC – insured by Assured Guaranty Corp.
AGM – insured by Assured Guaranty Municipal Corp.
AMBAC – insured by American Municipal Bond Assurance Corp.
CA Mtg. Ins. – insured by California Mortgage Insurance
CA St. Mtg. – insured by California State Mortgage
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 March 31, 2010.
GNMA – insured by Government National Mortgage Association
GO – General Obligation Bond
GTD – Guaranteed
NPFGC – insured by National Public Finance Guarantee Corp.
NR – Not Rated
PSF – Public School Fund
Radian – insured by Radian Guaranty, Inc.
TCRS – Temporary Custodian Receipts
WR – Withdrawn Rating
XLCA – insured by XL Capital Assurance
 
 
See accompanying Notes to Financial Statements   3.31.10   PIMCO Municipal Income Funds III Semi-Annual Report 21


 

PIMCO Municipal Income Funds III Statements of Assets and Liabilities
March 31, 2010 (unaudited)
 
                             
        California 
    New York 
        Municipal III        Municipal III          Municipal III 
Assets:
                           
Investments, at value (cost–$548,547,536, $345,837,883 and $85,170,966, respectively)
    $554,629,916         $351,014,933         $89,662,551  
                             
Interest receivable
    8,829,334         5,363,326         1,047,256  
                             
Receivable for investments sold
    1,820,851                  
                             
Prepaid expenses and other assets
    73,752         43,749         32,101  
                             
Total Assets
    565,353,853         356,422,008         90,741,908  
                             
                             
Liabilities:
                           
Payable for floating rate notes issued
    56,536,724         33,623,688         6,933,000  
                             
Payable for reverse repurchase agreements
    5,310,000         445,000         89,000  
                             
Payable for investments purchased
    2,000,000         977,680         1,955,360  
                             
Payable to custodian for cash overdraft
    1,952,434         958,222         8,161  
                             
Investment management fees payable
    276,262         176,866         45,056  
                             
Interest payable
    107,326         68,448         14,353  
                             
Dividends payable to preferred shareholders
    8,947         5,461         783  
                             
Interest payable for reverse repurchase agreements
    1,978         185         44  
                             
Accrued expenses and other liabilities
    214,005         201,063         75,041  
                             
Total Liabilities
    66,407,676         36,456,613         9,120,798  
                             
Preferred Shares ($0.00001 par value and $25,000 liquidation preference per share applicable to an aggregate of 7,560, 5,000 and 1,280 shares issued and outstanding, respectively)
    189,000,000         125,000,000         32,000,000  
                             
Net Assets Applicable to Common Shareholders
    $309,946,177         $194,965,395         $49,621,110  
                             
                             
Composition of Net Assets Applicable to Common Shareholders:
                           
Common Stock:
                           
Par value ($0.00001 per share)
    $321         $217         $56  
                             
Paid-in-capital in excess of par
    453,928,832         307,452,764         78,625,376  
                             
Undistributed net investment income
    4,259,309         3,176,133         951,899  
                             
Accumulated net realized loss
    (154,328,640       (120,830,134       (34,447,227
                             
Net unrealized appreciation of investments
    6,086,355         5,166,415         4,491,006  
                             
Net Assets Applicable to Common Shareholders
    $309,946,177         $194,965,395         $49,621,110  
                             
Common Shares Issued and Outstanding
    32,074,841         21,740,409         5,569,346  
                             
Net Asset Value Per Common Share
    $9.66         $8.97         $8.91  
                             
 
 
22 PIMCO Municipal Income Funds III Semi-Annual Report   3.31.10   See accompanying Notes to Financial Statements


 

PIMCO Municipal Income Funds III Statements of Operations
Six Months ended March 31, 2010 (unaudited)
 
                           
        California 
    New York 
        Municipal III        Municipal III          Municipal III 
Investment Income:
                         
Interest
    $15,876,624       $9,753,143         $2,231,756  
                           
                           
Expenses:
                         
Investment management fees
    1,617,578       1,036,500         263,204  
                           
Interest expense
    174,798       121,090         18,684  
                           
Auction agent fees and commissions
    152,362       98,363         26,550  
                           
Custodian and accounting agent fees
    53,850       48,261         25,144  
                           
Audit and tax services
    37,492       30,576         21,112  
                           
Shareholder communications
    35,920       25,948         14,954  
                           
Legal fees
    30,030       22,932         5,460  
                           
Trustees’ fees and expenses
    27,690       18,050         4,860  
                           
Transfer agent fees
    17,406       16,878         16,890  
                           
New York Stock Exchange listing fees
    10,361       8,623         8,535  
                           
Insurance expense
    8,893       5,860         1,771  
                           
Miscellaneous
    4,994       4,448         3,902  
                           
Total expenses
    2,171,374       1,437,529         411,066  
                           
Less: investment management fees waived
    (21,511 )     (13,861 )       (3,465 )
                           
   custody credits earned on cash balances
    (160 )     (57 )       (54 )
                           
Net expenses
    2,149,703       1,423,611         407,547  
                           
                           
Net Investment Income
    13,726,921       8,329,532         1,824,209  
                           
                           
Realized and Change In Unrealized Gain (Loss):
                         
Net realized gain (loss) on investments
    709,214       (72,303 )       29,814  
                           
Net change in unrealized appreciation/depreciation of investments
    (16,540,741 )     (12,890,282 )       (1,100,487 )
                           
Net realized and change in unrealized loss on investments
    (15,831,527 )     (12,962,585 )       (1,070,673 )
                           
Net Increase (Decrease) in Net Assets Resulting from Investment Operations
    (2,104,606     (4,633,053       753,536  
                           
Dividends on Preferred Shares from Net Investment Income
    (390,848 )     (255,306 )       (67,924
                           
Net Increase (Decrease) in Net Assets Applicable to Common Shareholders Resulting from Investment Operations
    $(2,495,454 )     $(4,888,359 )       $685,612  
                           
 
 
See accompanying Notes to Financial Statements   3.31.10   PIMCO Municipal Income Funds III Semi-Annual Report 23


 

PIMCO Municipal Income Funds III Statements of Changes in Net Assets
                                 Applicable to Common Shareholders

 
                 
    Municipal III
    Six Months 
   
    ended 
   
               March 31, 2010 
  Year ended 
    (unaudited)    September 30, 2009  
Investment Operations:
               
Net investment income
    $13,726,921       $30,476,003  
                 
Net realized gain (loss) on investments, futures contracts and swaps
    709,214        (119,164,941
                 
Net change in unrealized appreciation/depreciation of investments, futures contracts and swaps
    (16,540,741 )     98,353,898  
                 
Net increase (decrease) in net assets resulting from investment operations
    (2,104,606 )     9,664,960  
                 
                 
Dividends on Preferred Shares from
Net Investment Income
    (390,848 )     (3,168,279 )
                 
Net increase (decrease) in net assets applicable to common shareholders resulting from investment operations
    (2,495,454 )     6,496,681  
                 
                 
Dividends to Common Shareholders from
Net Investment Income
    (13,448,833 )     (26,754,995 )
                 
Capital Share Transactions:
               
Reinvestment of dividends
    969,139       2,254,067  
                 
Total decrease in net assets applicable to common shareholders
    (14,975,148     (18,004,247
                 
                 
Net Assets Applicable to Common Shareholders:
               
Beginning of period
    324,921,325       342,925,572  
                 
End of period (including undistributed net investment income of $4,259,309 and $4,372,069; $3,176,133 and $2,916,964; $951,899 and $946,705; respectively)
    $309,946,177       $324,921,325  
                 
                 
Common Shares Issued in Reinvestment of Dividends
    95,724       250,003  
                 
 
 
24 PIMCO Municipal Income Funds III Semi-Annual Report   3.31.10   See accompanying Notes to Financial Statements


 

PIMCO Municipal Income Funds III Statements of Changes in Net Assets
                                 Applicable to Common Shareholders
(continued)

 
                             
California Municipal III   New York Municipal III
Six Months 
      Six Months 
   
ended 
      ended 
   
March 31, 2010 
  Year ended 
  March 31, 2010 
  Year ended 
(unaudited)    September 30, 2009    (unaudited)    September 30, 2009 
  $8,329,532       $18,933,752       $1,824,209       $4,316,704  
                             
 
(72,303
    (89,968,659     29,814        (27,031,363
                             
 
(12,890,282
)     54,718,046       (1,100,487 )     13,850,740  
                             
 
(4,633,053
)     (16,316,861 )     753,536       (8,863,919 )
                             
                             
  (255,306 )     (2,138,774 )     (67,924 )     (552,741 )
                             
 
(4,888,359
)     (18,455,635 )     685,612       (9,416,660 )
                             
                             
                             
  (7,815,057 )     (15,572,754 )     (1,751,091     (3,483,636 )
                             
                             
  496,185       765,116       159,016       276,538  
                             
  (12,207,231 )     (33,263,273 )     (906,463 )     (12,623,758 )
                             
                             
                             
  207,172,626       240,435,899       50,527,573       63,151,331  
                             
 

$194,965,395
      $207,172,626       $49,621,110       $50,527,573  
                             
                             
  55,521       89,708       17,957       33,756  
                             
 
 
See accompanying Notes to Financial Statements   3.31.10   PIMCO Municipal Income Funds III Semi-Annual Report 25


 

PIMCO Municipal Income Funds III Statements of Cash Flows
Six Months ended March 31, 2010 (unaudited)
 
         
         Municipal III 
Increase in Cash from:
       
Cash Flows provided by Operating Activities:
       
Net decrease in net assets resulting from investment operations
    $(2,104,606
         
Adjustments to Reconcile Net Decrease in Net Assets Resulting from Investment Operations to Net Cash provided by Operating Activities:
       
Purchases of long-term investments
    (25,965,461 )
         
Proceeds from sales of long-term investments
    17,588,207  
         
Sales of short-term portfolio investments, net
    2,500,000  
         
Net change in unrealized appreciation/depreciation of investments
    15,801,072  
         
Net realized loss on investments
    25,197  
         
Net amortization on investments
    (449,546 )
         
Increase in receivable for investments sold
    (1,820,851 )
         
Increase in interest receivable
    (90,777 )
         
Increase in prepaid expenses and other assets
    (33,326 )
         
Increase in payable for investments purchased
    2,000,000  
         
Increase in investment management fees payable
    30,039  
         
Decrease in interest payable for reverse repurchase agreements
    (1,577 )
         
Decrease in accrued expenses and other liabilities
    (917 )
         
Net cash provided by operating activities*
    7,477,454  
         
         
Cash Flows used for Financing Activities:
       
Decrease in payable for reverse repurchase agreements
    (1,243,000 )
         
Cash dividends paid (excluding reinvestment of dividends of $969,139)
    (12,872,520 )
         
Cash receipts on issuance of floating rate notes
    7,700,000  
         
Decrease in payable to custodian for cash overdraft
    (1,061,934 )
         
Net cash used for financing activities
    (7,477,454 )
         
         
Net increase in cash
     
         
Cash at beginning of year
     
         
Cash at end of period
    $—  
         
 
* Included in operating expenses is cash paid by Municipal III for interest on reverse repurchase agreements of $19,474.
 
 
26 PIMCO Municipal Income Funds III Semi-Annual Report   3.31.10   See accompanying Notes to Financial Statements


 

PIMCO Municipal Income Funds III Statements of Cash Flows
Six Months ended March 31, 2010 (unaudited) (continued)

 
                 
     
    California 
  New York 
        Municipal III        Municipal III 
Increase in Cash from:
               
Cash Flows provided by Operating Activities:
               
Net increase (decrease) in net assets resulting from investment operations
    $(4,633,053     $753,536  
                 
Adjustments to Reconcile Net Decrease in Net Assets Resulting from Investment Operations to Net Cash provided by Operating Activities:
               
Purchases of long-term investments
    (5,722,020 )     (9,620,794
                 
Proceeds from sales of long-term investments
    7,330,737       6,274,432  
                 
Sales of short-term portfolio investment, net
          500,160  
                 
Net change in unrealized appreciation/depreciation of investments
    12,888,787       1,100,487  
                 
Net realized (gain) loss on investments
    72,303       (29,814 )
                 
Net amortization on investments
    (357,659 )     (53,085 )
                 
Increase in interest receivable
    (62,115 )     (54,271 )
                 
Increase in prepaid expenses and other assets
    (21,779 )     (21,857 )
                 
Increase in payable for investments purchased
    977,680       1,955,360  
                 
Increase in investment management fees payable
    18,055       5,083  
                 
Decrease in interest payable for reverse repurchase agreements
    (749 )     (208 )
                 
Increase (decrease) in accrued expenses and other liabilities
    8,475       (807 )
                 
Net cash provided by operating activities*
    10,498,662       808,222  
                 
                 
Cash Flows used for Financing Activities:
               
Decrease in payable for reverse repurchase agreements
    (1,377,000 )     (775,000 )
                 
Cash dividends paid (excluding reinvestment of dividends of $496,185 and $159,016, respectively)
    (7,575,371 )     (1,660,128 )
                 
Cash receipts on issuance of floating rate notes
          2,000,000  
                 
Decrease in payable to custodian for cash overdraft
    (1,546,291 )     (373,094 )
                 
Net cash used for financing activities
    (10,498,662 )     (808,222 )
                 
                 
Net increase in cash
           
                 
Cash at beginning of year
           
                 
Cash at end of period
    $—       $—  
                 
 
* Included in operating expenses is cash paid by California Municipal III and New York Municipal III for interest on reverse repurchase agreements of $2,559 and $768, respectively.
 
 
See accompanying Notes to Financial Statements   3.31.10   PIMCO Municipal Income Funds III Semi-Annual Report 27


 

PIMCO Municipal Income Funds III Notes to Financial Statements
March 31, 2010 (unaudited)

 
1. Organization and Significant Accounting Policies
PIMCO Municipal Income Fund III (“Municipal III”), PIMCO California Municipal Income Fund III (“California Municipal III”) and PIMCO New York Municipal Income Fund III (“New York Municipal III”), collectively referred to as the “Funds” or “PIMCO Municipal Income Funds III”, were organized as Massachusetts business trusts on August 20, 2002. Prior to commencing operations on October 31, 2002, the Funds had no operations other than matters relating to their organization and registration as non-diversified, closed-end management investment companies registered under the Investment Company Act of 1940 and the rules and regulations thereunder, as amended. Allianz Global Investors Fund Management LLC (the “Investment Manager”) serves as the Investment Manager and is an indirect, wholly-owned subsidiary of Allianz Global Investors of America L.P. (“Allianz Global”). Allianz Global is an indirect, wholly-owned subsidiary of Allianz SE, a publicly traded European insurance and financial services company. Each Fund has an unlimited amount of $0.00001 par value per share of common stock authorized.
 
Under normal market conditions, Municipal III invests substantially all of its assets in a portfolio of municipal bonds, the interest from which is exempt from federal income taxes. Under normal market conditions, California Municipal III invests substantially all of its assets in municipal bonds which pay interest that is exempt from federal and California state income taxes. Under normal market conditions, New York Municipal III invests substantially all of its assets in municipal bonds which pay interest that is exempt from federal, New York State and New York City income taxes. The Funds will generally seek to avoid investing in bonds generating interest income which could potentially subject individuals to alternative minimum tax. The issuers’ abilities to meet their obligations may be affected by economic and political developments in a specific state or region. There is no guarantee that the Funds will meet their stated objectives.
 
The preparation of the financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures in the Funds’ financial statements. Actual results could differ from those estimated.
 
In the normal course of business, the Funds enter into contracts that contain a variety of representations that provide general indemnifications. The Funds’ maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Funds that have not yet occurred.
 
The following is a summary of significant accounting policies consistently followed by the Funds:
 
(a) Valuation 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 Funds’ 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 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 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 Funds to value securities may differ from the value that would be realized if the securities were sold and these differences could be material to the Funds’ financial statements. Each 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.
 
 
28 PIMCO Municipal Income Funds III Semi-Annual Report   3.31.10


 

 
PIMCO Municipal Income Funds III Notes to Financial Statements
March 31, 2010 (unaudited)

 
1. Organization and Significant Accounting Policies (continued)
 
(b) 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 Funds have 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 Funds’ 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 Funds to measure fair value during the six months ended March 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.
 
A summary of the inputs used at March 31, 2010 in valuing each Fund’s assets and liabilities is listed below:
 
Municipal III:
 
                         
        Level 2 -
    Level 3 -
     
        Other Significant
    Significant
     
    Level 1 -
  Observable
    Unobservable
  Value at
 
    Quoted Prices   Inputs     Inputs   3/31/10  
   
 
Investments in Securities – Assets
                       
Municipal Bonds & Notes
    $ 540,167,427       $ 540,167,427  
Variable Rate Notes
      8,830,172         8,830,172  
Short-Term Investments
      5,632,317         5,632,317  
 
 
Total Investments in Securities
    $ 554,629,916       $ 554,629,916  
 
 
 
California Municipal III:
 
                         
        Level 2 -
    Level 3 -
     
        Other Significant
    Significant
     
    Level 1 -
  Observable
    Unobservable
  Value at
 
    Quoted Prices   Inputs     Inputs   3/31/10  
   
 
Investments in Securities – Assets
                       
California Municipal Bonds & Notes
    $ 330,019,050       $ 330,019,050  
Other Municipal Bonds & Notes
      19,455,797         19,455,797  
California Variable Rate Notes
      1,040,070         1,040,070  
Short-Term Investments
      500,016         500,016  
 
 
Total Investments in Securities
    $ 351,014,933       $ 351,014,933  
 
 
 
 
3.31.10   PIMCO Municipal Income Funds III Semi-Annual Report 29


 

 
PIMCO Municipal Income Funds III Notes to Financial Statements
March 31, 2010 (unaudited)

 
1. Organization and Significant Accounting Policies (continued)
 
New York Municipal III:
 
                         
        Level 2 -
    Level 3 -
     
        Other Significant
    Significant
     
    Level 1 -
  Observable
    Unobservable
  Value at
 
    Quoted Prices   Inputs     Inputs   3/31/10  
   
 
Investments in Securities – Assets
                       
New York Municipal Bonds & Notes
    $ 75,848,074       $ 75,848,074  
Other Municipal Bonds & Notes
      8,610,974         8,610,974  
New York Variable Rate Notes
      5,103,500         5,103,500  
Short-Term Investments
      100,003         100,003  
 
 
Total Investments in Securities
    $ 89,662,551       $ 89,662,551  
 
 
 
In January 2010, the Financial Accounting Standards Board released ASU 2010-06, “Improving Disclosures about Fair Value Measurements”. ASU 2010-06 is effective for annual and interim reporting periods beginning after December 15, 2009. The Funds’ management is in the process of reviewing ASU 2010-06 to determine future applicability.
 
(c) Investment Transactions and Investment Income
Investment transactions are accounted for on the trade date. Securities purchased and sold on a when-issued basis may be settled a month or more after the trade date. Realized gains and losses on investments are determined on an identified cost basis. Interest income adjusted for the accretion of discounts and amortization of premiums is recorded on an accrual basis. Discounts or premiums on debt securities purchased are accreted or amortized, respectively, to interest income over the lives of the respective securities.
 
(d) Federal Income Taxes
The Funds intend to distribute all of their taxable income and to comply with the other requirements of the U.S. Internal Revenue Code of 1986, as amended, applicable to regulated investment companies. Accordingly, no provision for U.S. federal income taxes is required. The Funds may become subject to excise tax to the extent of distributions to shareholders.
 
Accounting for uncertainty in income taxes establishes for all entities, including pass-through entities such as the Funds, a minimum threshold for financial statement recognition of the benefit of positions taken in filing tax returns (including whether an entity is taxable in a particular jurisdiction), and requires certain expanded tax disclosures. The Funds’ management has determined that its evaluation has resulted in no material impact to the Funds’ financial statements at March 31, 2010. The Funds’ federal tax returns for the prior three fiscal years remain subject to examination by the Internal Revenue Service.
 
(e) Dividends and Distributions – Common Stock
The Funds declare dividends from net investment income monthly to common shareholders. Distributions of net realized capital gains, if any, are paid at least annually. The Funds record dividends and distributions to their shareholders on the ex-dividend date. The amount of dividends and distributions from net investment income and net realized capital gains are determined in accordance with federal income tax regulations, which may differ from generally accepted accounting principles. These “book-tax” differences are considered either temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within the capital accounts based on their federal income tax treatment. Temporary differences do not require reclassification. To the extent dividends and/or distributions exceed current and accumulated earnings and profits for federal income tax purposes, they are reported as dividends and/or distributions of paid-in-capital in excess of par.
 
(f) Reverse Repurchase Agreements
In a reverse repurchase agreement, the Funds sell securities to a bank or broker-dealer and agree to repurchase the securities at a mutually agreed upon date and price. Generally, the effect of such a transaction is that the Funds can recover and reinvest all or most of the cash invested in portfolio securities involved during the term of the reverse repurchase agreement and still be entitled to the returns associated with those portfolio securities. Such transactions are advantageous if the interest cost to the Funds of the reverse repurchase transaction is less than the returns they obtain on investments purchased with the cash. To the extent a Fund does not cover its positions in reverse repurchase
 
 
30 PIMCO Municipal Income Funds III Semi-Annual Report   3.31.10


 

 
PIMCO Municipal Income Funds III Notes to Financial Statements
March 31, 2010 (unaudited)

 
1. Organization and Significant Accounting Policies (continued)
 
agreements (by segregating liquid assets at least equal in amount to the forward purchase commitment), the Fund’s uncovered obligations under the agreements will be subject to the Fund’s limitations on borrowings. Reverse repurchase agreements involve leverage risk and also the risk that the market value of the securities that the Funds are obligated to repurchase under an agreement may decline below the repurchase price. In the event the buyer of securities under a reverse repurchase agreement files for bankruptcy or becomes insolvent, the Funds’ use of the proceeds of the agreement may be restricted pending determination by the other party, or their trustee or receiver, whether to enforce the Funds’ obligation to repurchase the securities.
 
(g) Inverse Floating Rate Transactions — Residual Interest Municipal Bonds (“RIBs”)/Residual Interest Tax Exempt Bonds (“RITEs”)
The Funds invest in interest rates of RIBs and RITEs, (“Inverse Floaters”) whose interest rates bear an inverse relationship to the interest rate on another security or the value of an index. In inverse floating rate transactions, the Funds sell a fixed rate municipal bond (“Fixed Rate Bond”) to a broker who places the Fixed Rate Bond in a special purpose trust (“Trust”) from which floating rate bonds (“Floating Rate Notes”) and Inverse Floaters are issued. The Funds simultaneously or within a short period of time, purchase the Inverse Floaters from the broker. The Inverse Floaters held by the Funds provide the Funds with the right to: (1) cause the holders of the Floating Rate Notes to tender their notes at par, and (2) cause the broker to transfer the Fixed-Rate Bond held by the Trust to the Funds, thereby collapsing the Trust. The Funds account for the transaction described above as a secured borrowing by including the Fixed Rate Bond in their Schedules of Investments, and account for the Floating Rate Notes as a liability under the caption ”Payable for floating rate notes issued” in the Funds’ Statements of Assets and Liabilities. The Floating Rate Notes have interest rates that generally reset weekly and their holders have the option to tender their notes to the broker for redemption at par at each reset date.
 
The Funds also invest in Inverse Floaters without transferring a fixed rate municipal bond into a special purpose trust, which are not accounted for as secured borrowings.
 
The Inverse Floaters are created by dividing the income stream provided by the underlying bonds to create two securities, one short-term and one long-term. The interest rate on the short-term component is reset by an index or auction process typically every 7 to 35 days. After income is paid on the short-term securities at current rates, the residual income from the underlying bond(s) goes to the long-term securities. Therefore, rising short-term rates result in lower income for the long-term component and vice versa. The longer-term bonds may be more volatile and less liquid than other municipal bonds of comparable maturity. Investments in Inverse Floaters typically will involve greater risk than investments in Fixed Rate Bonds. The Funds may also invest in Inverse Floaters for the purpose of increasing leverage.
 
The Funds’ restrictions on borrowings do not apply to the secured borrowings deemed to have occurred for accounting purposes. Inverse Floaters held by the Funds are exempt from registration under Rule 144A of the Securities Act of 1933.
 
In addition to general market risks, the Funds’ investments in Inverse Floaters may involve greater risk and volatility than an investment in a fixed rate bond, and the value of Inverse Floaters may decrease significantly when market interest rates increase. Inverse Floaters have varying degrees of liquidity, and the market for these securities may be volatile. These securities tend to underperform the market for fixed rate bonds in a rising interest rate environment, but tend to outperform the market for fixed rate bonds when interest rates decline or remain relatively stable. Although volatile, Inverse Floaters typically offer the potential for yields exceeding the yields available on fixed rate bonds with comparable credit quality, coupon, call provisions and maturity. Trusts in which Inverse Floaters may be held could be terminated due to market, credit or other events beyond the Funds’ control, which could require the Funds to reduce leverage and dispose of portfolio investments at inopportune times and prices.
 
(h) When-Issued/Delayed-Delivery Transactions
When-issued or delayed-delivery transactions involve a commitment to purchase or sell securities for a predetermined price or yield, with payment and delivery taking place beyond the customary settlement period. When delayed-delivery purchases are outstanding, the Funds will set aside and maintain until the settlement date in a designated account, liquid assets in an amount sufficient to meet the purchase price. When purchasing a security on a delayed-delivery basis, the Funds assume the rights and risks of ownership of the security, including the risk of price and yield fluctuations; consequently, such fluctuations are taken into account when determining the net asset value. The Funds may dispose of or renegotiate a delayed-delivery transaction after it is entered into, and may sell when-issued securities before they are delivered, which may result in a realized gain or loss. When a security is sold on a delayed-delivery basis, the Funds do not participate in future gains and losses with respect to the security.
 
 
3.31.10   PIMCO Municipal Income Funds III Semi-Annual Report 31


 

 
PIMCO Municipal Income Funds III Notes to Financial Statements
March 31, 2010 (unaudited)

 
1. Organization and Significant Accounting Policies (continued)
 
(i) Custody Credits on Cash Balances
The Funds benefit from an expense offset arrangement with their custodian bank, whereby uninvested cash balances earn credits which reduce monthly custodian and accounting agent expenses. Had these cash balances been invested in income-producing securities, they would have generated income for the Funds.
 
(j) Interest Expense
Interest expense relates primarily to the Funds’ liability in connection with floating rate notes held by third parties in conjunction with Inverse Floater transactions and reverse repurchase agreements. Interest expense on reverse repurchase agreements is recorded as it is incurred.
 
2. Principal Risks
In the normal course of business, the Funds trade financial instruments and enter into financial transactions where risk of potential loss exists due to, among other things, changes in the market (market risk) or failure of the other party to a transaction to perform counterparty risk. The Funds are exposed to various risks such as, but not limited to, interest rate and credit risks.
 
Interest rate risk is the risk that fixed income securities will decline in value because of changes in interest rates. As nominal interest rates rise, the value of certain fixed income securities held by the Funds is likely to decrease. A nominal interest rate can be described as the sum of a real interest rate and an expected inflation rate. Fixed income securities with longer durations tend to be more sensitive to changes in interest rates, usually making them more volatile than securities with shorter durations. Duration is used primarily as a measure of the sensitivity of a fixed income security’s market price to interest rate (i.e. yield) movements.
 
The Funds are exposed to credit risk, which is the risk of losing money if the issuer or guarantor of a fixed income security is unable or unwilling, or is perceived (whether by market participants, ratings agencies, pricing services or otherwise) as unable or unwilling, to make timely principal and/or interest payments, or to otherwise honor its obligations. Securities are subject to varying degrees of credit risk, which are often reflected in credit ratings.
 
Similar to credit risk, the Funds are exposed to counterparty risk, or the risk that an institution or other entity with which the Funds have unsettled or open transactions will default. The potential loss to the Funds could exceed the value of the financial assets recorded in the Funds’ financial statements. Financial assets, which potentially expose the Funds to counterparty risk, consist principally of cash due from counterparties and investments. The Funds’ sub-adviser, Pacific Investment Management Company LLC (the “Sub-Adviser”), an affiliate of the Investment Manager, seeks to minimize the Funds’ counterparty risk by performing reviews of each counterparty and by minimizing concentrations of credit risk by undertaking transactions with a large number of customers and counterparties on recognized and reputable exchanges. Delivery of securities sold is only made once the Funds have received payment. Payment is made on a purchase once the securities have been delivered by the counterparty. The trade will fail if either party fails to meet its obligation.
 
3. Investment Manager/Sub-Adviser
Each Fund has an Investment Management Agreement (each an “Agreement”) with the Investment Manager. Subject to the supervision of the Funds’ Board of Trustees, the Investment Manager is responsible for managing, either directly or through others selected by it, each Fund’s investment activities, business affairs and administrative matters. Pursuant to the Agreements, the Investment Manager receives an annual fee, payable on a monthly basis, at an annual rate of 0.65% of each Fund’s average daily net assets, inclusive of net assets attributable to any Preferred Shares that may be outstanding. In order to reduce each Fund’s expenses, the Investment Manager had contractually agreed to waive a portion of its investment management fees for each Fund at the annual rate of 0.05% of each Fund’s average daily net assets, inclusive of net assets attributable to any Preferred Shares that may be outstanding, through October 31, 2009. For the six months ended March 31, 2010, each Fund paid investment management fees at an annualized effective rate of 0.64% of each Fund’s average daily net assets, inclusive of net assets attributable to any Preferred Shares that may be outstanding.
 
The Investment Manager has retained the Sub-Adviser to manage each Fund’s investments. Subject to the supervision of the Investment Manager, the Sub-Adviser is responsible for making all of the Funds’ investment decisions. The Investment Manager, and not the Funds, pays a portion of the fees it receives as Investment Manager to the Sub-Adviser in return for its services.
 
 
32 PIMCO Municipal Income Funds III Semi-Annual Report   3.31.10


 

 
PIMCO Municipal Income Funds III Notes to Financial Statements
March 31, 2010 (unaudited)

 
4. Investments in Securities
Purchases and sales of investments, other than short-term securities and U.S. Government obligations for the six months ended March 31, 2010, were:
 
             
        California
  New York
    Municipal III   Municipal III   Municipal III
 
 
Purchases
  $25,965,461   $5,722,020   $9,620,794
Sales
  17,582,415   7,330,737   6,274,432
 
(a) Open reverse repurchase agreements at March 31, 2010 were:
 
Municipal III:
 
                         
            Maturity
  Principal &
   
Counterparty   Rate   Trade Date   Date   Interest   Principal
 
 
                         
Barclays Capital
  0.55%   3/5/10   4/7/10   $4,689,719     $4,688,000  
                         
    0.75%   3/11/10   4/12/10   622,259     622,000  
                         
                         
                      $5,310,000  
                         
 
California Municipal III:
 
                         
            Maturity
  Principal &
   
Counterparty   Rate   Trade Date   Date   Interest   Principal
 
 
                         
Barclays Capital
  0.75%   3/11/10   4/12/10   $445,185     $445,000  
                         
 
New York Municipal III:
 
                         
            Maturity
  Principal &
   
Counterparty   Rate   Trade Date   Date   Interest   Principal
 
 
                         
Barclays Capital
  0.75%   3/5/10   4/7/10   $89,044     $89,000  
                         
 
The weighted average daily balance of reverse repurchase agreements outstanding during the six months ended March 31, 2010 for Municipal III, California Municipal III and New York Municipal III was $5,350,808, $571,571 and $161,346 at a weighted average interest rate of 0.66%, 0.63% and 0.69%, respectively. The total market value of underlying collateral (refer to the Schedules of Investments for positions segregated as collateral for reverse repurchase agreements) for open reverse repurchase agreements at March 31, 2010 was $5,632,317, $500,016 and $100,003 for Municipal III, California Municipal III and New York Municipal III, respectively.
 
5. Income Tax Information
The cost of investments for federal income tax purposes and gross unrealized appreciation and gross unrealized depreciation of investments at March 31, 2010 were:
 
                 
        Gross
  Gross
   
    Cost of
  Unrealized
  Unrealized
  Net Unrealized
    Investments   Appreciation   Depreciation   Appreciation
 
 
Municipal III
  $491,467,149   $29,643,398   $23,071,221   $6,572,177
California Municipal III
  312,188,461   17,361,276   12,233,301   5,127,975
New York Municipal III
  78,236,174   5,337,806   857,314   4,480,492
 
The difference between book and tax appreciation is attributable to inverse floater transactions.
 
 
3.31.10   PIMCO Municipal Income Funds III Semi-Annual Report 33


 

 
PIMCO Municipal Income Funds III Notes to Financial Statements
March 31, 2010 (unaudited)

 
6. Auction-Rate Preferred Shares
Municipal III has outstanding 1,512 shares of Preferred Shares Series A, 1,512 shares of Preferred Shares Series B, 1,512 shares of Preferred Shares Series C, 1,512 shares of Preferred Shares Series D and 1,512 shares of Preferred Shares Series E, each with a liquidation preference of $25,000 per share plus any accumulated, unpaid dividends.
 
California Municipal III has issued 2,500 shares of Preferred Shares Series A and 2,500 shares of Preferred Shares Series B, each with a liquidation preference of $25,000 per share plus any accumulated, unpaid dividends.
 
New York Municipal III has issued 1,280 shares of Preferred Shares Series A with a liquidation preference of $25,000 per share plus any accumulated, unpaid dividends.
 
Dividends are accumulated daily at an annual rate (typically re-set every seven days) through auction procedures. Distributions of net realized capital gains, if any, are paid annually.
 
For the six months ended March 31, 2010, the annualized dividend rates for each Fund ranged from:
 
             
    High   Low   At March 31, 2010
 
 
Municipal III:
           
Series A
  0.64%   0.27%   0.44%
Series B
  0.67%   0.27%   0.44%
Series C
  0.69%   0.26%   0.46%
Series D
  0.69%   0.26%   0.46%
Series E
  0.69%   0.27%   0.46%
California Municipal III:
           
Series A
  0.67%   0.27%   0.44%
Series B
  0.69%   0.26%   0.46%
New York Municipal III:
           
Series A
  0.64%   0.27%   0.44%
 
The Funds are subject to certain limitations and restrictions while Preferred Shares are outstanding. Failure to comply with these limitations and restrictions could preclude the Funds from declaring any dividends or distributions to common shareholders or repurchasing common shares and/or could trigger the mandatory redemption of Preferred Shares at their liquidation preference.
 
Preferred shareholders, who are entitled to one vote per share, generally vote with the common shareholders but vote separately as a class to elect two Trustees and on any matters affecting the rights of the preferred shareholders.
 
Since mid-February 2008, holders of auction-rate preferred shares (“ARPS”) issued by the Funds have been directly impacted by an unprecedented lack of liquidity, which has similarly affected ARPS holders in many of the nation’s closed-end funds. Since then, regularly scheduled auctions for ARPS issued by the Funds have consistently “failed” because of insufficient demand (bids to buy shares) to meet the supply (shares offered for sale) at each auction. In a failed auction, ARPS holders cannot sell all, and may not be able to sell any, of their shares tendered for sale. While repeated auction failures have affected the liquidity holders have continued to receive dividends at the defined “maximum rate” the higher of the 30-day “AA” Composite Commercial Paper Rate multiplied by 110% or the Taxable Equivalent of the Short-Term Municipal Obligations Rate-defined as 90% of the quotient of (A) the per annum rate expressed on an interest equivalent basis equal to the Kenny S&P 30-day High Grade Index divided by (B) 1.00 minus the Marginal Tax Rate (expressed as a decimal) multiplied by 110% (which is a function of short-term interest rates and typically higher than the rate that would have otherwise been set through a successful auction). If the Funds’ ARPS auctions continue to fail and the “maximum rate” payable on the ARPS rises as a result of changes in short-term interest rates, returns for the Funds’ common shareholders could be adversely affected.
 
 
34 PIMCO Municipal Income Funds III Semi-Annual Report   3.31.10


 

 
PIMCO Municipal Income Funds III Notes to Financial Statements
March 31, 2010 (unaudited)

 
7. Legal Proceedings
In June and September 2004, the Investment Manager and certain of its affiliates (including PEA Capital LLC (“PEA”), Allianz Global Investors Distributors LLC and Allianz Global Investors of America, L.P.), agreed to settle, without admitting or denying the allegations, claims brought by the Securities and Exchange Commission (“SEC”) and the New Jersey Attorney General alleging violations of federal and state securities laws with respect to certain open-end funds for which the Investment Manager serves as investment adviser. The settlements related to an alleged “market timing” arrangement in certain open-end funds formerly sub-advised by PEA. The Investment Manager and its affiliates agreed to pay a total of $68 million to settle the claims. In addition to monetary payments, the settling parties agreed to undertake certain corporate governance, compliance and disclosure reforms related to market timing, and consented to cease and desist orders and censures. Subsequent to these events, PEA deregistered as an investment adviser and dissolved. None of the settlements alleged that any inappropriate activity took place with respect to the Funds.
 
Since February 2004, the Investment Manager, and certain of its affiliates and their employees have been named as defendants in a number of pending lawsuits concerning “market timing,” which allege the same or similar conduct underlying the regulatory settlements discussed above. The market timing lawsuits have been consolidated in a multi-district litigation proceeding in the U.S. District Court for the District of Maryland. Any potential resolution of these matters may include, but not be limited to, judgments or settlements for damages against the Investment Manager or its affiliates or related injunctions.
 
In addition, the Sub-Adviser is the subject of a lawsuit in the Northern District of Illinois Eastern Division in which the complaint alleges that plaintiffs each purchased and sold a 10-year Treasury note futures contract and suffered damages from an alleged shortage when the Sub-Adviser held both physical and futures positions in 10-year Treasury notes for its client accounts. In July 2007, the court granted class certification of a class consisting of those persons who purchased futures contracts to offset short positions between May 9, 2005 and June 30, 2005. The Sub-Adviser currently believes that the complaint is without merit and the Sub-Adviser intends to vigorously defend against this action.
 
The Investment Manager and the Sub-Adviser believe that these matters are not likely to have a material adverse effect on the Funds or on their ability to perform their respective investment advisory activities relating to the Funds.
 
8. Subsequent Events
On April 1, 2010, the following dividends were declared to common shareholders payable May 3, 2010 to shareholders of record on April 12, 2010:
 
     
Municipal III
  $0.07 per common share
California Municipal III
  $0.06 per common share
New York Municipal III
  $0.0525 per common share
 
On May 3, 2010, the following dividends were declared to common shareholders payable June 1, 2010 to shareholders of record on May 13, 2010:
 
     
Municipal III
  $0.07 per common share
California Municipal III
  $0.06 per common share
New York Municipal III
  $0.0525 per common share
 
 
3.31.10   PIMCO Municipal Income Funds III Semi-Annual Report 35


 

PIMCO Municipal Income Fund III Financial Highlights
For a share of common stock outstanding throughout each period:
 
                                                           
    Six Months
                             
    ended
                             
    March 31,
                             
    2010
    Year ended September 30,
    (unaudited)     2009     2008     2007     2006     2005 
Net asset value, beginning of period
    $10.16         $10.81         $14.53         $14.90         $14.68         $14.36  
                                                           
Investment Operations:
                                                         
Net investment income
    0.43         0.96         1.29         1.17         1.12         1.14  
                                                           
Net realized and change in unrealized gain (loss) on investments, futures contracts, options written and swaps
    (0.50 )       (0.67 )       (3.87 )       (0.40 )       0.26         0.36  
                                                           
Total from investment operations
    (0.07 )       0.29         (2.58 )       0.77         1.38         1.50  
                                                           
Dividends on Preferred Shares from Net Investment Income
    (0.01 )       (0.10 )       (0.30 )       (0.30 )       (0.27 )       (0.18 )
                                                           
Net increase (decrease) in net assets applicable to common shareholders resulting from investment operations
    (0.08 )       0.19         (2.88 )       0.47         1.11         1.32  
                                                           
Dividends to Common Shareholders from Net Investment Income
    (0.42 )       (0.84 )       (0.84 )       (0.84 )       (0.89 )       (1.00 )
                                                           
Net asset value, end of period
    $9.66         $10.16         $10.81         $14.53         $14.90         $14.68  
                                                           
Market price, end of period
    $10.90         $11.29         $11.17         $15.05         $15.70         $15.49  
                                                           
Total Investment Return (1)
    0.62 %       11.02 %       (21.07 )%       1.38 %       7.69 %       15.95 %
                                                           
RATIOS/SUPPLEMENTAL DATA:
                                                         
Net assets applicable to common shareholders, end of period (000s)
    $309,946         $324,921         $342,926         $457,914         $466,511         $457,487  
                                                           
Ratio of expenses to average net assets, including interest expense (2)(3)(4)(5)
    1.40 %*       1.92 %       2.48 %       2.73 %       2.71 %       1.97 %
                                                           
Ratio of expenses to average net assets, excluding interest expense (2)(3)(5)
    1.28 %*       1.44 %       1.23 %       1.10 %       1.06 %       1.03 %
                                                           
Ratio of net investment income to average net assets (2)(5)
    8.87 %*       11.23 %       9.39 %       7.90 %       7.71 %       7.74 %
                                                           
Preferred shares asset coverage per share
    $65,996         $67,977         $56,709         $67,378         $68,179         $67,352  
                                                           
Portfolio turnover
    3 %       58 %       17 %       10 %       15 %       3 %
                                                           
* Annualized.
 
(1) Total investment return is calculated assuming a purchase of a share of common stock at the current market price on the first day of each period and a sale of a share of common stock at the current market price on the last day of each period reported. Dividends and distributions are assumed, for purposes of this calculation, to be reinvested at prices obtained under Municipal III’s dividend reinvestment plan. Total investment return does not reflect brokerage commissions or sales charges. Total investment return for a period of less than one year is not annualized.
 
(2) Calculated on the basis of income and expenses applicable to both common and preferred shares relative to the average net assets of common shareholders.
 
(3) Inclusive of expenses offset by custody credits earned on cash balances at the custodian bank. (See Note 1(i) in Notes to Financial Statements).
 
(4) Interest expense relates to the liability for floating rate notes issued in connection with inverse floater transactions and reverse repurchase agreement transactions.
 
(5) During the periods indicated above, the Investment Manager waived a portion of its investment management fee. (See Note 3 in Notes to Financial Statements). The effect of such waiver relative to the average net assets of common shareholders was 0.01%, 0.10%, 0.17%, 0.24%, 0.24% and 0.24%, for the six months ended March 31, 2010 and the years ended September 30, 2009, September 30, 2008, September 30, 2007, September 30, 2006 and September 30, 2005, respectively.
 
 
36 PIMCO Municipal Income Funds III Semi-Annual Report   3.31.10   See accompanying Notes to Financial Statements


 

PIMCO California Municipal Income Fund III Financial Highlights
For a share of common stock outstanding throughout each period:
 
                                                           
    Six Months
                             
    ended
                             
    March 31,
                             
    2010
    Year ended September 30,
    (unaudited)     2009     2008     2007     2006     2005 
Net asset value, beginning of period
    $9.55         $11.13         $14.48         $14.83         $14.80         $14.12  
                                                           
Investment Operations:
                                                         
Net investment income
    0.38         0.88         1.15         1.07         1.11         1.14  
                                                           
Net realized and change in unrealized gain (loss) on investments, futures contracts, options written and swaps
    (0.59 )       (1.64 )       (3.49 )       (0.26 )       0.13         0.65  
                                                           
Total from investment operations
    (0.21 )       (0.76 )       (2.34 )       0.81         1.24         1.79  
                                                           
Dividends on Preferred Shares from Net Investment Income
    (0.01 )       (0.10 )       (0.29 )       (0.29 )       (0.25 )       (0.15 )
                                                           
Net increase (decrease) in net assets applicable to common shareholders resulting from investment operations
    (0.22 )       (0.86 )       (2.63 )       0.52         0.99         1.64  
                                                           
Dividends to Common Shareholders from Net Investment Income
    (0.36 )       (0.72 )       (0.72 )       (0.87 )       (0.96 )       (0.96 )
                                                           
Net asset value, end of period
    $8.97         $9.55         $11.13         $14.48         $14.83         $14.80  
                                                           
Market price, end of period
    $9.20         $10.03         $10.54         $14.20         $16.94         $15.11  
                                                           
Total Investment Return (1)
    (4.52 )%       3.95 %       (21.60 )%       (11.38 )%       19.43 %       17.48 %
                                                           
RATIOS/SUPPLEMENTAL DATA:
                                                         
Net assets applicable to common shareholders, end of period (000s)
    $194,965         $207,173         $240,436         $311,958         $318,236         $315,963  
                                                           
Ratio of expenses to average net assets, including interest expense (2)(3)(4)(5)
    1.47 %*       1.77 %       2.75 %       2.94 %       2.69 %       1.94 %
                                                           
Ratio of expenses to average net assets, excluding interest expense (2)(3)(5)
    1.35 %*       1.48 %       1.21 %       1.16 %       1.06 %       1.05 %
                                                           
Ratio of net investment income to average net assets (2)(5)
    8.57 %*       10.82 %       8.53 %       7.26 %       7.56 %       7.82 %
                                                           
Preferred shares asset coverage per share
    $63,991         $66,432         $57,426         $67,140         $67,993         $67,692  
                                                           
Portfolio turnover
    2 %       48 %       8 %       7 %       7 %       5 %
                                                           
* Annualized.
 
(1) Total investment return is calculated assuming a purchase of a share of common stock at the current market price on the first day of each period and a sale of a share of common stock at the current market price on the last day of each period reported. Dividends and distributions are assumed, for purposes of this calculation, to be reinvested at prices obtained under California Municipal III’s dividend reinvestment plan. Total investment return does not reflect brokerage commissions or sales charges. Total investment return for a period of less than one year is not annualized.
 
(2) Calculated on the basis of income and expenses applicable to both common and preferred shares relative to the average net assets of common shareholders.
 
(3) Inclusive of expenses offset by custody credits earned on cash balances at the custodian bank. (See Note 1(i) in Notes to Financial Statements).
 
(4) Interest expense relates to the liability for floating rate notes issued in connection with inverse floater transactions and reverse repurchase agreement transactions.
 
(5) During the periods indicated above, the Investment Manager waived a portion of its investment management fee. (See Note 3 in Notes to Financial Statements). The effect of such waiver relative to the average net assets of common shareholders was 0.01%, 0.10%, 0.17%, 0.24%, 0.24% and 0.24%, for the six months ended March 31, 2010 and the years ended September 30, 2009, September 30, 2008, September 30, 2007, September 30, 2006 and September 30, 2005, respectively.
 
 
See accompanying Notes to Financial Statements   3.31.10   PIMCO Municipal Income Funds III Semi-Annual Report 37


 

PIMCO New York Municipal Income Fund III Financial Highlights
For a share of common stock outstanding throughout each period:
 
                                                           
    Six Months
                             
    ended
                             
    March 31,
                             
    2010
    Year ended September 30,
    (unaudited)     2009     2008     2007     2006     2005 
Net asset value, beginning of period
    $9.10         $11.45         $14.57         $15.09         $15.03         $14.41  
                                                           
Investment Operations:
                                                         
Net investment income
    0.33         0.78         1.11         1.03         1.07         1.13  
                                                           
Net realized and change in unrealized gain (loss) on investments, futures contracts, options written and swaps
    (0.19 )       (2.40 )       (3.30 )       (0.48 )       0.13         0.61  
                                                           
Total from investment operations
    0.14         (1.62 )       (2.19 )       0.55         1.20         1.74  
                                                           
Dividends on Preferred Shares from Net Investment Income
    (0.01 )       (0.10 )       (0.30 )       (0.29 )       (0.26 )       (0.16 )
                                                           
Net increase (decrease) in net assets applicable to common shareholders resulting from investment operations
    0.13         (1.72 )       (2.49 )       0.26         0.94         1.58  
                                                           
Dividends to Common Shareholders from Net Investment Income
    (0.32 )       (0.63 )       (0.63 )       (0.78 )       (0.88 )       (0.96 )
                                                           
Net asset value, end of period
    $8.91         $9.10         $11.45         $14.57         $15.09         $15.03  
                                                           
Market price, end of period
    $9.30         $9.65         $10.00         $13.57         $16.45         $16.04  
                                                           
Total Investment Return (1)
    (0.15 )%       4.19 %       (22.55 )%       (13.12 )%       8.73 %       19.65 %
                                                           
RATIOS/SUPPLEMENTAL DATA:
                                                         
Net assets applicable to common shareholders, end of period (000s)
    $49,621         $50,528         $63,151         $80,417         $82,836         $82,043  
                                                           
Ratio of expenses to average net assets, including interest expense (2)(3)(4)(5)
    1.68 %*       2.30 %       3.02 %       3.18 %       2.89 %       2.36 %
                                                           
Ratio of expenses to average net assets, excluding interest expense (2)(3)(5)
    1.59 %*       1.74 %       1.34 %       1.31 %       1.16 %       1.24 %
                                                           
Ratio of net investment income to average net assets (2)(5)
    7.43 %*       9.42 %       8.04 %       6.89 %       7.23 %       7.54 %
                                                           
Preferred shares asset coverage per share
    $63,766         $64,474         $58,583         $67,749         $69,042         $68,627  
                                                           
Portfolio turnover
    7 %       33 %       7 %       12 %       8 %       4 %
                                                           
* Annualized.
 
(1) Total investment return is calculated assuming a purchase of a share of common stock at the current market price on the first day of each period and a sale of a share of common stock at the current market price on the last day of each period reported. Dividends and distributions are assumed, for purposes of this calculation, to be reinvested at prices obtained under New York Municipal III’s dividend reinvestment plan. Total investment return does not reflect brokerage commissions or sales charges. Total investment return for a period of less than one year is not annualized.
 
(2) Calculated on the basis of income and expenses applicable to both common and preferred shares relative to the average net assets of common shareholders.
 
(3) Inclusive of expenses offset by custody credits earned on cash balances at the custodian bank. (See Note 1(i) in Notes to Financial Statements).
 
(4) Interest expense relates to the liability for floating rate notes issued in connection with inverse floater transactions and reverse repurchase agreement transactions.
 
(5) During the periods indicated above, the Investment Manager waived a portion of its investment management fee. (See Note 3 in Notes to Financial Statements). The effect of such waiver relative to the average net assets of common shareholders was 0.01%, 0.10%, 0.17%, 0.24%, 0.24% and 0.24%, for the six months ended March 31, 2010 and the years ended September 30, 2009, September 30, 2008, September 30, 2007, September 30, 2006 and September 30, 2005, respectively.
 
 
38 PIMCO Municipal Income Funds III Semi-Annual Report   3.31.10   See accompanying Notes to Financial Statements


 

PIMCO Municipal Income Funds III
Annual Shareholder Meeting Results/Proxy Voting Policies & Procedures
(unaudited)

 
Annual Shareholder Meeting Results:
 
The Funds held their joint annual meeting of shareholders on December 18, 2009. Common/Preferred shareholders voted as indicated below:
 
         
        Withheld
    Affirmative   Authority
 
Municipal III:
       
Re-election of Robert E. Connor*-Class I to serve until 2012
  6,024  
Re-election of William B. Ogden, IV – Class I to serve until 2012
  27,871,398   1,079,062
Re-election of Hans W. Kertess – Class I to serve until 2012
  27,860,507   1,089,953
         
California Municipal III:
       
Re-election of Robert E. Connor*-Class I to serve until 2012
  3,668   5
Re-election of William B. Ogden, IV – Class I to serve until 2012
  19,784,081   336,637
Re-election of Hans W. Kertess – Class I to serve until 2012
  19,779,369   341,349
         
New York Municipal III:
       
Re-election of Robert E. Connor*-Class I to serve until 2012
  1,152  
Re-election of William B. Ogden, IV – Class I to serve until 2012
  4,934,693   313,103
Re-election of Hans W. Kertess – Class I to serve until 2012
  4,903,884   343,912
 
Messrs. Paul Belica, James A. Jacobson*††, John C. Maney† and R. Peter Sullivan, III continue to serve as Trustees of the Funds.
 
Mr. Robert E. Connor served as a Trustee of the Funds until his death on April 8, 2010.
 
 
* Preferred Shares Trustee
 
†† Mr. Jacobson joined the Board of Trustees on December 14, 2009.
 
Interested Trustee
 
 
Proxy Voting Policies & Procedures:
 
A description of the policies and procedures that the Funds have adopted to determine how to vote proxies relating to portfolio securities and information about how the Funds voted proxies relating to portfolio securities held during the most recent twelve month period ended June 30 is available (i) without charge, upon request, by calling the Funds’ shareholder servicing agent at (800) 254-5197; (ii) on the Funds’ website at www.allianzinvestors.com/closedendfunds; and (iii) on the Securities and Exchange Commission website at www.sec.gov
 
 
3.31.10   PIMCO Municipal Income Funds III Semi-Annual Report 39


 

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Trustees                                  Fund Officers
 
     
Hans W. Kertess
  Chairman of the Board of Trustees
Paul Belica
Robert E. Connor
James A. Jacobson
John C. Maney
William B. Ogden, IV
R. Peter Sullivan, III
  Brian S. Shlissel
  President & Chief Executive Officer
Lawrence G. Altadonna
  Treasurer, Principal Financial & Accounting Officer
Thomas J. Fuccillo
  Vice President, Secretary & Chief Legal Officer
Scott Whisten
  Assistant Treasurer
Richard J. Cochran
  Assistant Treasurer
Youse E. Guia
  Chief Compliance Officer
Kathleen A. Chapman
  Assistant Secretary
    Lagan Srivastava
  Assistant Secretary
 
Investment Manager
 
Allianz Global Investors Fund Management LLC
1345 Avenue of the Americas
New York, NY 10105
 
Sub-Adviser
 
Pacific Investment Management Company LLC
840 Newport Center Drive
Newport Beach, CA 92660
 
Custodian & Accounting Agent
 
State Street Bank & Trust Co.
225 Franklin Street
Boston, MA 02110
 
Transfer Agent, Dividend Paying Agent and Registrar
 
PNC Global Investment Servicing
P.O. Box 43027
Providence, RI 02940-3027
 
Independent Registered Public Accounting Firm
 
PricewaterhouseCoopers LLP
300 Madison Avenue
New York, NY 10017
 
Legal Counsel
 
Ropes & Gray LLP
One International Place
Boston, MA 02110-2624
 
This report, including the financial information herein, is transmitted to the shareholders of PIMCO Municipal Income Fund III, PIMCO California Municipal Income Fund III and PIMCO New York Income Fund III for their information. It is not a prospectus, circular or representation intended for use in the purchase of shares of the Funds or any securities mentioned in this report.
 
The financial information included herein is taken from the records of the Funds without examination by an independent registered public accounting firm, who did not express an opinion herein.
 
Notice is hereby given in accordance with Section 23(c) of the Investment Company Act of 1940, as amended, that from time to time the Funds may purchase shares of their common stock in the open market.
 
The Funds file their complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of their fiscal year on Form N-Q. The Funds’ Form N-Q are available on the SEC’s website at www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling (800) SEC-0330. The information on Form N-Q is also available on the Funds’ website at www.allianzinvestors.com/closedendfunds.
 
Information on the Funds is available at www.allianzinvestors.com/closedendfunds or by calling the Funds’ shareholder servicing agent at (800) 254-5197.


 

(ALLIANG LOGO)
 
 
Receive this report electronically and eliminate paper mailings.
To enroll, go to www.allianzinvestors.com/edelivery.
 


 

ITEM 2. CODE OF ETHICS
Not required in this filing.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT
Not required in this filing.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Not required in this filing
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANT
Not required in this filing
ITEM 6. SCHEDULE OF INVESTMENTS
Schedule of Investments is included as part of the Report to Shareholders filed under Item 1 of this form.
ITEM 7.   DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES
Not required in this filing
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES
Not required in this filing
ITEM 9.   PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED COMPANIES: NONE

 


 

ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There have been no material changes to the procedures by which shareholders may recommend nominees to the Fund’s Board of Trustees since the Fund last provided disclosure in response to this item.
ITEM 11. CONTROLS AND PROCEDURES
(a) The registrant’s President and Chief Executive Officer and Treasurer, Principal Financial & Accounting Officer have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-2(c) under the Act (17 CFR 270.30a-3(c))), as amended 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 second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrants control over financial reporting.
ITEM 12. EXHIBITS
(a) Exhibit 99.302 Cert. — Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
(b) Exhibit 99.906 Cert. — Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 


 

Signature
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 California Municipal Income Fund III    
 
       
By
  /s/ Brian S. Shlissel
 
President & Chief Executive Officer
   
Date June 3, 2010
         
By
  /s/ Lawrence G. Altadonna
 
Treasurer, Principal Financial & Accounting Officer
   
Date June 3, 2010
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 June 3, 2010
         
By
  /s/ Lawrence G. Altadonna
 
Treasurer, Principal Financial & Accounting Officer
   
Date June 3, 2010