PIMCO Municipal Income Fund III

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM N-Q

 

 

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED

MANAGEMENT INVESTMENT COMPANY

 

Investment Company Act File Number:    811-21187
Registrant Name:    PIMCO Municipal Income Fund III
Address of Principal Executive Offices:   

1633 Broadway

New York, NY 10019

Name and Address of Agent for Service:   

William G. Galipeau

650 Newport Center Drive

Newport Beach, CA 92660

Registrant’s telephone number, including area code:    (844) 337-4626
Date of Fiscal Year End:    September 30
Date of Reporting Period:    December 31, 2014

 

 

 

Item 1. Schedule of Investments

Schedule of Investments

PIMCO Municipal Income Fund III

December 31, 2014 (Unaudited)

 

                                         
  PRINCIPAL
AMOUNT
(000s)		   MARKET
VALUE
(000s)		  

INVESTMENTS IN SECURITIES 159.5%

MUNICIPAL BONDS & NOTES 155.5%

ALABAMA 16.1%

Alabama Docks Department State Revenue Bonds, Series 2010

6.000% due 10/01/2040

 $ 1,000    $ 1,149   

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

6.000% due 06/01/2039

   500      581   

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

5.000% due 11/15/2030

   9,000      9,259   

Jefferson County, Alabama Sewer Revenue Bonds, Series 2013

0.000% due 10/01/2050 (a)

   53,000      32,950   

6.500% due 10/01/2053

   12,000      13,753   
   

 

 

  
  57,692   
   

 

 

  

ARIZONA 10.7%

Arizona Health Facilities Authority Revenue Bonds, Series 2007

5.200% due 10/01/2037

   2,250      2,160   

Arizona Health Facilities Authority Revenue Bonds, Series 2008

5.000% due 01/01/2035

   1,250      1,340   

5.500% due 01/01/2038

   900      989   

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

5.000% due 09/01/2039 (b)

   13,000      14,049   

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

5.250% due 10/01/2040

   750      827   

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

5.000% due 01/01/2039 (b)

   5,000      5,556   

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

5.000% due 12/01/2037

   11,600      13,405   
   

 

 

  
  38,326   
   

 

 

  

CALIFORNIA 27.5%

Bay Area Toll Authority, California Revenue Bonds, Series 2008

5.000% due 04/01/2034

   500      566   

Bay Area Toll Authority, California Revenue Bonds, Series 2010

5.000% due 10/01/2029

   1,500      1,726   

5.000% due 10/01/2042

   3,260      3,549   

Bay Area Toll Authority, California Revenue Bonds, Series 2013

5.250% due 04/01/2053

   12,000      13,806   

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

5.000% due 11/15/2042

   600      640   

California Health Facilities Financing Authority Revenue Bonds, Series 2009

6.000% due 07/01/2039

   2,500      2,860   

California Health Facilities Financing Authority Revenue Bonds, Series 2011

6.000% due 08/15/2042

   1,500      1,806   

California Health Facilities Financing Authority Revenue Bonds, Series 2013

5.000% due 08/15/2052

   2,015      2,254   

California Municipal Finance Authority Revenue Bonds, Series 2011

7.750% due 04/01/2031

   1,445      1,773   

California State General Obligation Bonds, Series 2007

5.000% due 06/01/2037

   5,000      5,409   

5.000% due 12/01/2037

   5,300      5,821   

California State General Obligation Bonds, Series 2008

5.250% due 03/01/2038

   1,350      1,469   

California State General Obligation Bonds, Series 2009

5.750% due 04/01/2031

   2,500      2,938   

6.000% due 04/01/2038

   5,000      5,937   

California State General Obligation Bonds, Series 2010

5.250% due 11/01/2040

   1,300      1,499   

5.500% due 03/01/2040

   3,200      3,680   

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

6.625% due 08/01/2029

   2,580      3,150   

6.750% due 02/01/2038

   9,200      11,095   

California Statewide Communities Development Authority Revenue Bonds,
Series 2007

5.750% due 11/01/2017

   1,260      1,342   

California Statewide Communities Development Authority Revenue Bonds,
Series 2010

6.250% due 10/01/2039

   1,000      1,129   

California Statewide Communities Development Authority Revenue Bonds,
Series 2011

5.000% due 12/01/2041

   3,000      3,332   

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

4.500% due 06/01/2027

   2,445      2,313   

5.125% due 06/01/2047

   3,600      2,717   

5.750% due 06/01/2047

   1,120      926   

                                         
         

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

4.750% due 09/01/2034

   3,350      3,426   

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

14.038% due 08/01/2033 (c)

   1,675      2,370   

Los Angeles Unified School District, California General Obligation Bonds, (AMBAC Insured), Series 2005

5.000% due 07/01/2030

   130      133   

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

6.500% due 11/01/2039

   2,000      2,720   

Palomar Health, California Certificates of Participation Bonds, Series 2009

6.750% due 11/01/2039

   1,250      1,339   

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

5.000% due 08/01/2038

   1,600      1,779   

Tobacco Securitization Authority of Southern California Revenue Bonds, Series 2006

5.000% due 06/01/2037

   6,200      5,035   
   

 

 

  
  98,539   
   

 

 

  

COLORADO 1.0%

Colorado Health Facilities Authority Revenue Bonds, Series 2010

5.000% due 01/01/2040

   2,000      2,202   

Public Authority for Colorado Energy Revenue Bonds, Series 2008

6.500% due 11/15/2038

   500      686   

Regional Transportation District, Colorado Revenue Bonds, Series 2010

6.000% due 01/15/2034

   500      568   
   

 

 

  
  3,456   
   

 

 

  

CONNECTICUT 0.4%

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

7.875% due 04/01/2039

   1,250      1,498   
   

 

 

  

DISTRICT OF COLUMBIA 3.2%

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

5.500% due 10/01/2039 (b)

   10,000      11,277   
   

 

 

  

FLORIDA 6.6%

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

5.000% due 04/01/2034

   3,480      3,675   

Broward County, Florida Airport System Revenue Bonds, Series 2009

5.375% due 10/01/2029

   500      578   

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

5.250% due 10/01/2034 (b)

   4,500      5,069   

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

5.000% due 10/01/2041

   3,000      3,332   

Florida Development Finance Corp. Revenue Notes, Series 2011

6.500% due 06/15/2021

   330      356   

Florida State General Obligation Bonds, Series 2009

5.000% due 06/01/2038 (b)

   4,200      4,677   

Greater Orlando Aviation Authority, Florida Revenue Bonds, Series 2010

9.549% due 10/01/2039 (c)

   5,000      5,929   
   

 

 

  
  23,616   
   

 

 

  

GEORGIA 0.6%

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

5.125% due 07/01/2042

   1,750      1,759   

Medical Center Hospital Authority, Georgia Revenue Bonds, Series 2007

5.250% due 07/01/2037

   400      404   
   

 

 

  
  2,163   
   

 

 

  

HAWAII 0.5%

Hawaii Pacific Health Revenue Bonds, Series 2010

5.500% due 07/01/2040

   1,500      1,681   
   

 

 

  

ILLINOIS 3.7%

Illinois Finance Authority Revenue Bonds, Series 2007

5.875% due 03/01/2027

   1,000      200   

6.000% due 03/01/2037 ^

   625      125   

Illinois Finance Authority Revenue Bonds, Series 2009

5.500% due 07/01/2037 (b)

   5,000      5,767   

7.125% due 11/15/2037

   400      482   

Illinois Finance Authority Revenue Bonds, Series 2010

6.000% due 08/15/2038

   1,000      1,116   

Illinois State Toll Highway Authority Revenue Bonds, Series 2008

5.500% due 01/01/2033

   5,000      5,576   
   

 

 

  
  13,266   
   

 

 

  

INDIANA 1.5%

Portage, Indiana Tax Allocation Bonds, Series 2006

5.000% due 07/15/2023

   1,000      1,030   

5.000% due 01/15/2027

   775      794   

                                         
         

Vigo County, Indiana Hospital Authority Revenue Bonds, Series 2011

7.500% due 09/01/2022

   2,800      3,437   
   

 

 

  
  5,261   
   

 

 

  

IOWA 1.0%

Iowa Finance Authority Revenue Bonds, Series 2013

5.250% due 12/01/2025

   3,000      3,257   

Iowa Finance Authority Revenue Bonds, Series 2014

2.000% due 05/15/2056 ^

   76      1   

2.700% due 11/15/2046 ^

   403      165   
   

 

 

  
  3,423   
   

 

 

  

KENTUCKY 0.6%

Kentucky Economic Development Finance Authority Revenue Bonds, Series 2010

6.375% due 06/01/2040

   2,000      2,311   
   

 

 

  

LOUISIANA 2.1%

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

5.875% due 10/01/2040

   1,500      1,735   

6.000% due 10/01/2044

   1,000      1,162   

6.500% due 11/01/2035

   400      481   

Louisiana Public Facilities Authority Revenue Bonds, Series 2007

5.500% due 05/15/2047

   1,700      1,788   

Louisiana Public Facilities Authority Revenue Bonds, Series 2011

6.500% due 05/15/2037

   2,000      2,359   
   

 

 

  
  7,525   
   

 

 

  

MARYLAND 2.0%

Maryland Economic Development Corp. Revenue Bonds, Series 2010

5.750% due 06/01/2035

   1,000      1,074   

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

6.250% due 01/01/2041

   700      790   

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

6.000% due 07/01/2041

   1,000      1,169   

Maryland Health & Higher Educational Facilities Authority Revenue Bonds,
Series 2014

5.000% due 07/01/2039

   3,725      4,141   
   

 

 

  
  7,174   
   

 

 

  

MASSACHUSETTS 2.1%

Massachusetts Development Finance Agency Revenue Bonds, Series 2010

7.625% due 10/15/2037

   290      323   

Massachusetts Development Finance Agency Revenue Bonds, Series 2011

0.000% due 11/15/2056

   140      1   

6.250% due 11/15/2039

   529      453   

Massachusetts Housing Finance Agency Revenue Bonds, Series 2003

5.125% due 06/01/2043

   4,910      4,911   

Massachusetts State College Building Authority Revenue Bonds, Series 2009

5.500% due 05/01/2039

   1,600      1,843   
   

 

 

  
  7,531   
   

 

 

  

MICHIGAN 1.4%

Detroit, Michigan General Obligation Bonds, Series 2010

5.250% due 11/01/2035

   1,500      1,640   

Michigan State University Revenue Bonds, (BABs), Series 2010

6.173% due 02/15/2050

   1,300      1,577   

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

8.250% due 09/01/2039

   1,500      1,888   
   

 

 

  
  5,105   
   

 

 

  

MISSOURI 0.2%

Jennings, Missouri Revenue Bonds, Series 2006

5.000% due 11/01/2023

   250      248   

Manchester, Missouri Tax Allocation Bonds, Series 2010

6.875% due 11/01/2039

   500      533   
   

 

 

  
  781   
   

 

 

  

NEW HAMPSHIRE 0.6%

New Hampshire Business Finance Authority Revenue Bonds, Series 2009

6.125% due 10/01/2039

   2,000      2,263   
   

 

 

  

NEW JERSEY 5.5%

New Jersey Economic Development Authority Special Assessment Bonds,
Series 2002

6.500% due 04/01/2028

   4,500      5,605   

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

5.750% due 07/01/2037

   1,000      1,026   

                                         
         

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

5.500% due 07/01/2043

   2,000      2,338   

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

4.750% due 06/01/2034

   1,600      1,199   

5.000% due 06/01/2041

   12,745      9,620   
   

 

 

  
  19,788   
   

 

 

  

NEW MEXICO 0.3%

Farmington, New Mexico Revenue Bonds, Series 2010

5.900% due 06/01/2040

   1,000      1,115   
   

 

 

  

NEW YORK 20.2%

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

6.250% due 07/15/2040

   9,800      11,525   

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

5.750% due 02/15/2047

   5,000      5,780   

Metropolitan Transportation Authority, New York Revenue Bonds, Series 2011

5.000% due 11/15/2036

   3,000      3,375   

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

2.000% due 01/01/2049

   311      24   

6.700% due 01/01/2049

   863      872   

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

7.000% due 03/01/2049

   10,450      12,657   

New York City, New York Water & Sewer System Revenue Bonds, Series 2005

5.000% due 06/15/2037 (b)

   4,900      5,002   

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

4.750% due 06/15/2035 (b)

   4,000      4,278   

New York Liberty Development Corp. Revenue Bonds, Series 2007

5.500% due 10/01/2037

   1,700      2,110   

New York Liberty Development Corp. Revenue Bonds, Series 2011

5.000% due 12/15/2041

   10,000      11,211   

5.000% due 11/15/2044

   11,255      12,486   

New York Liberty Development Corp. Revenue Bonds, Series 2014

5.000% due 11/15/2044

   3,000      3,111   
   

 

 

  
  72,431   
   

 

 

  

NORTH CAROLINA 1.9%

New Hanover County, North Carolina Revenue Bonds, Series 2011

5.000% due 10/01/2028

   6,000      6,774   
   

 

 

  

OHIO 10.4%

Allen County, Ohio Revenue Bonds, Series 2010

5.000% due 06/01/2038

   500      547   

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

5.875% due 06/01/2047

   2,800      2,286   

6.500% due 06/01/2047

   30,350      26,673   

Hamilton County, Ohio Revenue Bonds, Series 2012

5.000% due 06/01/2042

   1,500      1,617   

Ohio Higher Educational Facility Commission Revenue Bonds, Series 2009

6.750% due 01/15/2039

   500      501   

Ohio State Turnpike Commission Revenue Bonds, Series 2013

5.000% due 02/15/2048

   5,000      5,522   
   

 

 

  
  37,146   
   

 

 

  

PENNSYLVANIA 6.5%

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

5.625% due 08/15/2039

   1,000      1,135   

Berks County, Pennsylvania Municipal Authority Revenue Bonds, Series 2012

5.000% due 11/01/2044

   6,600      7,230   

Capital Region Water, Pennsylvania Revenue Bonds, Series 2007

6.000% due 09/01/2036 ^

   1,250      596   

Cumberland County, Pennsylvania Municipal Authority Revenue Bonds, Series 2008

5.625% due 07/01/2028

   1,000      1,106   

6.000% due 07/01/2035

   670      736   

Dauphin County, Pennsylvania General Authority Revenue Bonds, Series 2009

6.000% due 06/01/2036

   1,000      1,181   

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

5.500% due 12/01/2039

   100      110   

Pennsylvania Turnpike Commission Revenue Bonds, Series 2009

5.125% due 12/01/2040

   3,000      3,297   

Pennsylvania Turnpike Commission Revenue Bonds, Series 2013

5.000% due 12/01/2043

   5,000      5,586   

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

5.625% due 07/01/2042

   1,645      1,757   

                                         
         

Philadelphia, Pennsylvania Water & Wastewater Revenue Bonds, Series 2009

5.250% due 01/01/2036

   500      555   
   

 

 

  
  23,289   
   

 

 

  

SOUTH CAROLINA 7.9%

Greenwood County, South Carolina Revenue Bonds, Series 2009

5.375% due 10/01/2039

   1,000      1,105   

South Carolina State Ports Authority Revenue Bonds, Series 2010

5.250% due 07/01/2040

   800      888   

South Carolina State Public Service Authority Revenue Bonds, Series 2013

5.125% due 12/01/2043

   5,000      5,649   

5.500% due 12/01/2053

   15,000      17,240   

South Carolina State Public Service Authority Revenue Bonds, Series 2014

5.500% due 12/01/2054

   3,000      3,433   
   

 

 

  
  28,315   
   

 

 

  

TENNESSEE 0.7%

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

6.625% due 10/01/2039

   1,250      1,386   

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

6.000% due 07/01/2038

   1,000      1,143   
   

 

 

  
  2,529   
   

 

 

  

TEXAS 17.3%

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

5.250% due 08/15/2038

   1,300      1,426   

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

5.000% due 04/01/2053

   4,500      4,983   

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

8.051% due 02/01/2017 (c)

   6,500      8,308   

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

5.250% due 12/15/2033

   5,500      6,126   

5.500% due 12/15/2038

   5,500      6,186   

North Texas Tollway Authority Revenue Bonds, Series 2008

5.625% due 01/01/2033

   10,800      11,854   

5.750% due 01/01/2033

   700      769   

North Texas Tollway Authority Revenue Bonds, Series 2011

5.000% due 01/01/2038

   3,000      3,268   

5.500% due 09/01/2041

   600      704   

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

6.250% due 11/15/2029

   3,000      3,512   

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

5.250% due 12/15/2026

   150      175   

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

6.250% due 12/15/2026

   9,600      11,956   

Texas Municipal Gas Acquisition & Supply Corp. Revenue Bonds, Series 2012

5.000% due 12/15/2026

   2,000      2,248   

Wise County, Texas Revenue Bonds, Series 2011

8.000% due 08/15/2034

   500      593   
   

 

 

  
  62,108   
   

 

 

  

VIRGINIA 0.5%

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

5.500% due 05/15/2035

   1,000      1,151   

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

2.000% due 10/01/2048 ^

   201      6   

6.000% due 06/01/2043

   621      591   
   

 

 

  
  1,748   
   

 

 

  

WASHINGTON 0.5%

Washington Health Care Facilities Authority Revenue Bonds, Series 2009

7.375% due 03/01/2038

   1,000      1,252   

Washington Health Care Facilities Authority Revenue Bonds, Series 2010

5.500% due 12/01/2039

   500      609   
   

 

 

  
  1,861   
   

 

 

  

WEST VIRGINIA 0.3%

West Virginia Hospital Finance Authority Revenue Bonds, Series 2011

9.125% due 10/01/2041

   975      1,081   
   

 

 

  

WISCONSIN 1.7%

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

5.000% due 04/01/2038

   3,500      3,928   

Wisconsin Health & Educational Facilities Authority Revenue Bonds, Series 2009

6.625% due 02/15/2039

   1,000      1,180   

                                         
         

Wisconsin Health & Educational Facilities Authority Revenue Bonds, Series 2010

5.625% due 04/15/2039

   1,000      1,117   
   

 

 

  
  6,225   
   

 

 

  

Total Municipal Bonds & Notes

(Cost $490,905)

   557,298   
   

 

 

  

SHORT-TERM INSTRUMENTS 4.0%

REPURCHASE AGREEMENTS (d) 0.8%

   2,800   
   

 

 

  

SHORT-TERM NOTES 3.2%

Fannie Mae

0.071% due 04/27/2015

   2,800      2,799   

0.107% due 03/16/2015

   2,500      2,499   

Federal Home Loan Bank

0.091% due 03/13/2015

   6,400      6,399   
   

 

 

  
  11,697   
   

 

 

  

Total Short-Term Instruments

(Cost $14,497)

   14,497   
   

 

 

  

Total Investments in Securities

(Cost $505,402)

   571,795   
   

 

 

  

Total Investments 159.5%

(Cost $505,402)

 $ 571,795   
Preferred Shares (52.7%)   (189,000 ) 
Other Assets and Liabilities, net (6.8%)   (24,324 ) 
   

 

 

  
Net Assets Applicable to Common Shareholders 100.0% $ 358,471   
   

 

 

  

 

Notes to Schedule of Investments (amounts in thousands*):

 

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

 

^ Security is in default.

 

(a) Security becomes interest bearing at a future date.

 

(b) 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.

 

(c) Inverse Floater - The interest rate shown bears an inverse relationship to the interest rate on another security or the value of an index. The interest rate disclosed reflects the rate in effect on December 31, 2014.

Borrowings and Other Financing Transactions

 

(d) Repurchase Agreements:

 

Counterparty Lending
Rate		 Settlement
Date		   Maturity
Date		   Principal
Amount		   Collateralized By Collateral
Received,
at Value		   Repurchase
Agreements,
at Value		   Repurchase
Agreement
Proceeds
to be
Received (1)		  
SAL 0.140%   12/31/2014      01/02/2015    $ 2,800   

U.S. Treasury Notes 2.500% due 05/15/2024

 $ (2,866 )  $ 2,800    $ 2,800   
           

 

 

    

 

 

    

 

 

  

Total Repurchase Agreements

 $ (2,866 )  $ 2,800    $ 2,800   
           

 

 

    

 

 

    

 

 

  

 

(1) Includes accrued interest.

Fair Value Measurements

The following is a summary of the fair valuations according to the inputs used as of December 31, 2014 in valuing the Fund’s assets and liabilities:

 

Category and Subcategory Level 1 Level 2   Level 3   Fair Value
at 12/31/2014		  

Investments in Securities, at Value

Municipal Bonds & Notes

Alabama

 $0 $ 57,692    $ 0    $ 57,692   

Arizona

 0   38,326      0      38,326   

California

 0   98,539      0      98,539   

Colorado

 0   3,456      0      3,456   

Connecticut

 0   1,498      0      1,498   

District of Columbia

 0   11,277      0      11,277   

Florida

 0   23,616      0      23,616   

Georgia

 0   2,163      0      2,163   

Hawaii

 0   1,681      0      1,681   

Illinois

 0   13,266      0      13,266   

Indiana

 0   5,261      0      5,261   

Iowa

 0   3,423      0      3,423   

Kentucky

 0   2,311      0      2,311   

Louisiana

 0   7,525      0      7,525   

Maryland

 0   7,174      0      7,174   

Massachusetts

 0   7,531      0      7,531   

Michigan

 0   5,105      0      5,105   

Missouri

 0   781      0      781   

New Hampshire

 0   2,263      0      2,263   

New Jersey

 0   19,788      0      19,788   

New Mexico

 0   1,115      0      1,115   

New York

 0   72,407      24      72,431   

North Carolina

 0   6,774      0      6,774   

Ohio

 0   37,146      0      37,146   

Pennsylvania

 0   23,289      0      23,289   

South Carolina

 0   28,315      0      28,315   

Tennessee

 0   2,529      0      2,529   

Texas

 0   62,108      0      62,108   

Virginia

 0   1,748      0      1,748   

Washington

 0   1,861      0      1,861   

West Virginia

 0   1,081      0      1,081   

Wisconsin

 0   6,225      0      6,225   

Short-Term Instruments

Repurchase Agreements

 0   2,800      0      2,800   

Short-Term Notes

 0   11,697      0      11,697   

Total Investments

 $  0 $   571,771    $   24    $   571,795   

There were no significant transfers between Level 1, 2, and 3 during the period ended December 31, 2014.

See Accompanying Notes

Notes to Financial Statements

1. INVESTMENT VALUATION AND FAIR VALUE MEASUREMENTS

(a) Investment Valuation Policies The Net Asset Value (“NAV”) of the Fund’s shares is valued as of the close of regular trading (normally 4:00 p.m., Eastern time) (the “NYSE Close”) on each day that the New York Stock Exchange (“NYSE”) is open (each a “Business Day”). Information that becomes known to the Fund or its agents after the NAV has been calculated on a particular day will not generally be used to retroactively adjust the price of a security or the NAV determined earlier that day.

For purposes of calculating the NAV, portfolio securities and other financial derivative instruments are valued on each Business Day using valuation methods as adopted by the Board of Trustees (the “Board”) of the Fund. The Board has formed a Valuation Committee whose function is to monitor the valuation of portfolio securities and other financial derivative instruments and, as required by the Fund’s valuation policies, determine in good faith the fair value of portfolio holdings after consideration of all relevant factors, including recommendations provided by the investment manager (the “Manager”). The Board has delegated responsibility for applying the valuation methods to the Manager. The Manager monitors the continual appropriateness of methods applied and determines if adjustments should be made in light of market factor changes and events affecting issuers.

Where market quotes are readily available, fair market value is generally determined on the basis of official closing prices or the last reported sales prices, or if no sales are reported, based on quotes obtained from a quotation reporting system, established market makers, or pricing services. Where market quotes are not readily available, portfolio securities and other financial derivative instruments are valued at fair value, as determined in good faith by the Board, its Valuation Committee, or the Manager pursuant to instructions from the Board or its Valuation Committee. Market quotes are considered not readily available in circumstances where there is an absence of current or reliable market-based data (e.g., trade information, bid/ask information, or broker quotes), including where events occur after the close of the relevant market, but prior to the NYSE Close, that materially affect the values of the Fund’s securities or financial derivative instruments. In addition, market quotes are considered not readily available when, due to extraordinary circumstances, the exchanges or markets on which securities trade do not open for trading for the entire day and no other market prices are available. The Board has delegated to the Manager, PIMCO, the responsibility for monitoring significant events that may materially affect the values of the Fund’s securities or financial derivative instruments and for determining whether the value of the applicable securities or financial derivative instruments should be re-evaluated in light of such significant events.

The Board has adopted methods for valuing securities and other financial derivative instruments that may require fair valuation under particular circumstances. The Manger monitors the continual appropriateness of fair valuation methods applied and determines if adjustments should be made in light of market changes, events affecting the issuer, or other factors. If the Manager determines that a fair valuation method may no longer be appropriate, another valuation method may be selected, or the Valuation Committee will take any appropriate action in accordance with procedures set forth by the Board. The Board reviews the appropriateness of the valuation methods from time to time and these methods may be amended or supplemented from time to time by the Valuation Committee.

In circumstances in which daily market quotes are not readily available, investments may be valued pursuant to guidelines established by the Board. In the event that the security or asset cannot be valued pursuant to the established guidelines, the value of the security or other financial derivative instrument will be determined in good faith by the Valuation Committee of the Board, generally based upon recommendations provided by PIMCO. These methods may require subjective determinations about the value of a security. While the Fund’s policy is intended to result in a calculation of the Fund’s NAV that fairly reflects security values as of the time of pricing, the Fund cannot guarantee that values determined by the Board or persons acting at their direction would accurately reflect the price that the Fund could obtain for a security if it were to dispose of that security as of the time of pricing (for instance, in a forced or distressed sale). The prices used by the Fund may differ from the value that would be realized if the securities were sold.

(b) Fair Value Hierarchy U.S. GAAP describes fair market value as the price that the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. It establishes a fair value hierarchy that prioritizes inputs to valuation methods and requires disclosure of the fair value hierarchy, separately for each major category of assets and liabilities, that segregates fair value measurements into levels (Level 1, 2, and 3). The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. Levels 1, 2, and 3 of the fair value hierarchy are defined as follows:

 

•   Level 1—Inputs using (unadjusted) quoted prices in active markets or exchanges for identical assets and liabilities.

 

•   Level 2—Significant other observable inputs, which may include, but are not limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market corroborated inputs.

 

•   Level 3—Significant unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available, which may include assumptions made by the Board or persons acting at their direction that are used in determining the fair value of investments.

Assets or liabilities categorized as Level 2 or 3 as of period end have been transferred between Levels 2 and 3 since the prior period due to changes in the valuation method utilized in valuing the investments. Transfers from Level 3 to Level 2 are a result of the availability of current and reliable market-based data provided by third-party pricing services or other valuation techniques which utilize significant observable inputs. In accordance with the requirements of U.S. GAAP, the amounts of transfers between Levels 1 and 2 and transfers in and out of Level 3, if material, are disclosed in the Notes to Schedule of Investments for the Fund.

In accordance with the requirements of U.S. GAAP, the amounts of transfers between Levels 1 and 2 and transfers in and out of Level 3, if material, are disclosed in the Notes to Schedule of Investments for the Fund.

For fair valuations using significant unobservable inputs, U.S. GAAP requires a reconciliation of the beginning to ending balances for reported fair values that presents changes attributable to total realized and unrealized gains or losses, purchases and sales, and transfers in or out of the Level 3 category during the period. The end of period timing recognition is used for the transfers between Levels of the Fund’s assets and liabilities. Additionally, U.S. GAAP requires quantitative information regarding the significant unobservable inputs used in the determination of fair value of assets or liabilities categorized as Level 3 in the fair value hierarchy. In accordance with the requirements of U.S. GAAP, a fair value hierarchy, and if material, a Level 3 reconciliation and details of significant unobservable inputs, have been included in the Notes to Schedule of Investments for the Fund.

(c) Valuation Techniques and the Fair Value Hierarchy

Level 1 and Level 2 trading assets and trading liabilities, at fair market value The valuation methods (or “techniques”) and significant inputs used in determining the fair market values of portfolio securities or financial derivative instruments categorized as Level 1 and Level 2 of the fair value hierarchy are as follows:

Fixed income securities including corporate, convertible and municipal bonds and notes, U.S. government agencies, U.S. treasury obligations, sovereign issues, bank loans, convertible preferred securities and non-U.S. bonds are normally valued by pricing service providers that use broker-dealer quotations, reported trades or valuation estimates from their internal pricing models. The service providers’ internal models use inputs that are observable such as issuer details, interest rates, yield curves, prepayment speeds, credit risks/spreads, default rates and quoted prices for similar assets. Securities that use similar valuation techniques and inputs as described above are categorized as Level 2 of the fair value hierarchy.

 

Short-term investments having a maturity of 60 days or less and repurchase agreements are generally valued at amortized cost which approximates fair market value. These investments are categorized as Level 2 of the fair value hierarchy.

Level 3 trading assets and trading liabilities, at fair value When a fair valuation method is applied by PIMCO that uses significant unobservable inputs, securities will be priced by a method that the Board or persons acting at their direction believe reflects fair value and are categorized as Level 3 of the fair value hierarchy.

2. FEDERAL INCOME TAX MATTERS

The Fund intends to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code (the “Code”) and distribute all of its taxable income and net realized gains, if applicable, to shareholders. Accordingly, no provision for Federal income taxes has been made.

In accordance with U.S. GAAP, the Manager has reviewed the Fund’s tax positions for all open tax years. As of December 31, 2014, the Fund has recorded no liability for net unrecognized tax benefits relating to uncertain income tax positions it has taken or expects to take in future tax returns.

The Fund files U.S. tax returns. While the statute of limitations remains open to examine the Fund’s U.S. tax returns filed for the fiscal years from 2011-2013, no examinations are in progress or anticipated at this time. The Fund is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.

As of December 31, 2014, the aggregate cost and the net unrealized appreciation/(depreciation) of investments for federal income tax purposes are as follows (amounts in thousands):

 

                                                              

Federal

Tax Cost

     Aggregate Gross
Unrealized
Appreciation		     Aggregate Gross
Unrealized
(Depreciation)		     Net Unrealized
Appreciation/
Appreciation  (1)		  
  $  505,402      $ 69,861      $ (3,468 )    $ 66,393   

 

(1) Primary differences, if any, between book and tax net unrealized appreciation/(depreciation) are typically attributable to wash sale loss deferrals, straddle loss deferrals, swap contracts, sale-buyback transactions, and accelerated recognition of unrealized gain on certain futures and forward contracts for federal income tax purposes.

 

Glossary: (abbreviations that may be used in the preceding statements) (Unaudited)
Counterparty Abbreviations:    
SAL Citigroup Global Markets, Inc.
Currency Abbreviations:        
USD (or $) United States Dollar
Municipal Bond or Agency Abbreviations:        
AGC Assured Guaranty Corp. AMBAC American Municipal Bond Assurance Corp. IBC Insured Bond Certificate
AGM Assured Guaranty Municipal FHA Federal Housing Administration NPFGC National Public Finance Guarantee Corp.
Other Abbreviations:        
BABs Build America Bonds

 

Item 2. Controls and Procedures

(a) The registrant’s President, Principal Executive Officer and Treasurer, Principal Financial & Accounting Officer have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Act (17 CFR 270.30a-3(c))), are effective based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this document.

(b) There were no significant changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR 270.30a-3(d))) that occurred during the registrant’s last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

Item 3. Exhibits

A separate certification for each principal executive officer and principal financial & accounting officer of the registrant as required by Rule 30a-2 under the 1940 Act is attached as Exhibit 99.CERT.

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

PIMCO Municipal Income Fund III

 

By:   /s/ Peter G. Strelow                                                                                                        
  Peter G. Strelow
  President, Principal Executive Officer
Date:   February 27, 2015

 

By:   /s/ William G. Galipeau                                                                                                        
  William G. Galipeau, Treasurer,
  Principal Financial & Accounting Officer
Date:   February 27, 2015

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/ Peter G. Strelow                                                                                                                
  Peter G. Strelow,
  President, Principal Executive Officer
Date:   February 27, 2015

 

By:   /s/ William G. Galipeau                                                                                                        
  William G. Galipeau, Treasurer,
  Principal Financial & Accounting Officer
Date:   February 27, 2015