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 811-21189
                                   ---------

                    PIMCO New York Municipal Income Fund III
               --------------------------------------------------
               (Exact name of registrant as specified in charter)


          1345 Avenue of the Americas, New York, New York     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, 2005
                         ------------------

Date of reporting period: September 30, 2005
                          ------------------

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, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.



 

ITEM 1. REPORT TO SHAREHOLDERS

 

 

 

 

PIMCO Municipal Income Fund III
PIMCO California Municipal Income Fund III
PIMCO New York Municipal Income Fund III

 

 

 

 

 

 

 

Annual Report
September 30, 2005

 

 

 


 

 

 

Contents

 

 


 


 


 

Letter to Shareholders

 

1

 

 

Performance & Statistics

 

2-4

 

 

Schedules of Investments

 

5-23

 

 

Statements of Assets and Liabilities

 

24

 

 

Statements of Operations

 

25

 

 

Statements of Changes in Net Assets

 

26-27

 

 

Notes to Financial Statements

 

28-35

 

 

Financial Highlights

 

36-38

 

 

Report of Independent Registered Public Accounting Firm

 

39

 

 

Matters Relating to the Trustees Consideration of the Investment Management & Portfolio Management Agreements

 

40-41

 

 

Privacy Policy / Proxy Voting Policies & Procedures

 

42

 

 

Tax Information

 

43

 

 

Dividend Reinvestment Plan

 

44

 

 

Board of Trustees & Principal Officers

 

45-46

 

 


 



PIMCO Municipal Income Funds III Letter to Shareholders

 

 

November 18, 2005

 

 

 

Dear Shareholder:

We are pleased to provide you with the annual report for PIMCO Municipal Income Fund III, PIMCO California Municipal Income Fund III and PIMCO New York Municipal Income Fund III (“PIMCO Municipal Income Funds III” or the “Funds”) for the year ended September 30, 2005.

During the reporting period, interest rates on the short-end of the municipal yield curve rose as the Federal Reserve (the “Fed”) continued its interest rate tightening cycle. The Fed increased the federal funds rate by a total of two percentage points to 3.75% during the period. Yields on longer-term municipal bonds declined during the period, boosting their performance relative to short-term issues.

Please refer to the following pages for specific information for each of the PIMCO Municipal Income Funds III. If you have any questions regarding the information provided, we encourage you to contact your financial advisor or call the Funds’ transfer agent at (800) 331-1710. Also, note that a wide range of information and resources can be accessed through our web site—www.allianzinvestors.com.

Together with Allianz Global Investors Fund Management LLC, the Funds’ investment manager and Pacific Investment Management Company LLC, the Funds’ sub-adviser, we thank you for investing with us.

We remain dedicated to serving your investment needs.

 

 

Sincerely,

 


 


 

 

 

Robert E. Connor

 

Brian S. Shlissel

Chairman

 

President & Chief Executive Officer


 

9.30.05 | PIMCO Municipal Income Funds III Annual Report     1

 



PIMCO Municipal Income Fund III Performance & Statistics

September 30, 2005 (unaudited)

 

Symbol:
PMX

Objective:
To provide income exempt from
federal income tax.

 

Primary Investments:
Municipal fixed-income
securities, the interest from
which is exempt from federal
income tax.

 

Inception Date:
October 31, 2002

Total Net Assets(1):
$727.5 million

Portfolio Manager:
Mark McCray

 

 

Total Return(2):

 

 Market Price

 

Net Asset Value (“NAV”)

1 Year

 

15.95%

 

9.43%

Commencement of Operations (10/31/02) to 9/30/05

 

  8.06%

 

7.74%

 

Common Share Market Price / NAV Performance:

 

Market Price / NAV:

 

Commencement of Operations (10/31/02) to 9/30/05

 

Market Price

$15.49  

Market Price

 

NAV

$14.68

NAV

 

Premium to NAV

 5.52%

 

 

Market Price Yield(3)

 6.44%


 


 

(1)

Inclusive of net assets attributable to Preferred Shares outstanding.

(2)

Past performance is no guarantee of future results. Total return is calculated by subtracting the value of an investment in the Fund at the beginning of each specified period from the value at the end of the period and dividing the remainder by the value of the investment at the beginning of the period and expressing the result as a percentage. The calculation assumes that all income dividends have been reinvested at prices obtained under the Fund’s dividend reinvestment plan. Total return does not reflect broker commissions or sales charges. Total return for a period of more than one year represents the average annual total return.

An investment in the Fund involves risk, including the loss of principal. Total return, price, yield and net asset value will fluctuate with changes in market conditions. This data is provided for information only and is not intended for trading purposes. A portion of the income generated by the Fund may be subject to federal, state and local taxes, and may at times be subject to the alternative minimum tax. Closed-end funds, unlike open-end funds, are not continuously offered. There is a one-time public offering and once issued, shares of closed-end funds are sold in the open market through a stock exchange. Net asset value is total assets applicable to common shareholders less total liabilities divided by the number of common shares outstanding. Holdings are subject to change daily.

(3)

Market Price Yield is determined by dividing the annualized current monthly per share dividend to common shareholders by the market price per common share at September 30, 2005.

 

2     PIMCO Municipal Income Funds III Annual Report | 9.30.05

 



PIMCO California Municipal Income Fund III Performance & Statistics
September 30, 2005 (unaudited)

 

Symbol:
PZC

Objective:
To provide current income
exempt from federal and
California state income tax.

Primary Investments:
Municipal fixed-income
securities, the interest from
which is exempt from federal
and California state income
tax.

 

Inception Date:
October 31, 2002

Total Net Assets(1):
$501.0 million

Portfolio Manager:
Mark McCray

 

 

Total Return(2):

 

Market Price

 

Net Asset Value (“NAV”)

1 Year

 

17.48

%

 

11.94

%

Commencement of Operations (10/31/02) to 9/30/05

 

7.03

%

 

7.90

%

 

 

 

 

 

 

 

 

Common Share Market Price / NAV Performance:

 

Market Price / NAV:

 

Commencement of Operations (10/31/02) to 9/30/05

 

Market Price

$15.11

Market Price

 

NAV

$14.80

NAV

 

Premium to NAV

2.09%

 

 

Market Price Yield(3)

6.35%

 

 

 

 



 

(1)

Inclusive of net assets attributable to Preferred Shares outstanding.

(2)

Past performance is no guarantee of future results. Total return is calculated by subtracting the value of an investment in the Fund at the beginning of each specified period from the value at the end of the period and dividing the remainder by the value of the investment at the beginning of the period and expressing the result as a percentage. The calculation assumes that all income dividends have been reinvested at prices obtained under the Fund’s dividend reinvestment plan. Total return does not reflect broker commissions or sales charges. Total return for a period of more than one year represents the average annual total return.

An investment in the Fund involves risk, including the loss of principal. Total return, price, yield and net asset value will fluctuate with changes in market conditions. This data is provided for information only and is not intended for trading purposes. A portion of the income generated by the Fund may be subject to federal, state and local taxes, and may at times be subject to the alternative minimum tax. Closed-end funds, unlike open-end funds, are not continuously offered. There is a one-time public offering and once issued, shares of closed-end funds are sold in the open market through a stock exchange. Net asset value is total assets applicable to common shareholders less total liabilities divided by the number of common shares outstanding. Holdings are subject to change daily.

(3)

Market Price Yield is determined by dividing the annualized current monthly per share dividend to common shareholders by the market price per common share at September 30, 2005.

 

9.30.05 | PIMCO Municipal Income Funds III Annual Report     3

 



PIMCO New York Municipal Income Fund III Performance & Statistics
September 30, 2005 (unaudited)

 

Symbol:
PYN

Objective:
To provide current income
exempt from federal, New York
state and New York City income
tax.

Primary Investments:
Municipal fixed-income
securities, the interest from
which is exempt from federal,
New York state and New York
City income tax.

 

Inception Date:
October 31, 2002

Total Net Assets(1):
$129.0 million

Portfolio Manager:
Mark McCray

 

 

Total Return(2):

 

Market Price

 

Net Asset Value (“NAV”) 

1 Year

 

19.65%

 

11.25% 

Commencement of Operations (10/31/02) to 9/30/05

 

  9.08%

 

  8.29% 

 

Common Share Market Price / NAV Performance:

 

Market Price / NAV:

 

 

 

Commencement of Operations (10/31/02) to 9/30/05

 

Market Price

 

 

$16.04

Market Price

 

NAV

 

 

$15.03

NAV

 

Premium to NAV

 

 

6.72% 

 

 

Market Price Yield(3)

 

 

5.99% 


 


 

(1)

Inclusive of net assets attributable to Preferred Shares outstanding.

(2)

Past performance is no guarantee of future results. Total return is calculated by subtracting the value of an investment in the Fund at the beginning of each specified period from the value at the end of the period and dividing the remainder by the value of the investment at the beginning of the period and expressing the result as a percentage. The calculation assumes that all income dividends have been reinvested at prices obtained under the Fund’s dividend reinvestment plan. Total return does not reflect broker commissions or sales charges. Total return for a period of more than one year represents the average annual total return.

An investment in the Fund involves risk, including the loss of principal. Total return, price, yield and net asset value will fluctuate with changes in market conditions. This data is provided for information only and is not intended for trading purposes. A portion of the income generated by the Fund may be subject to federal, state and local taxes, and may at times be subject to the alternative minimum tax. Closed-end funds, unlike open-end funds, are not continuously offered. There is a one-time public offering and once issued, shares of closed-end funds are sold in the open market through a stock exchange. Net asset value is total assets applicable to common shareholders less total liabilities divided by the number of common shares outstanding. Holdings are subject to change daily.

(3)

Market Price Yield is determined by dividing the annualized current monthly per share dividend to common shareholders by the market price per common share at September 30, 2005.

 

4     PIMCO Municipal Income Funds III Annual Report | 9.30.05

 



PIMCO Municipal Income Fund III Schedule of Investments
September 30, 2005

Principal
Amount
(000)

 

 

 

Credit Rating
(Moody’s/S&P)*

 

Value

 

   MUNICIPAL BONDS & NOTES–92.2%

 

 

 

 

 

 

Alabama–0.7%

 

 

Birmingham, GO (AMBAC),

 

 

 

 

 

$  1,000

 

5.00%, 12/1/27, Ser. B

 

Aaa/AAA

 

$

 1,039,540

2,560

 

5.00%, 12/1/32, Ser. B

 

Aaa/AAA

 

 

2,645,325

1,500

 

Colbert Cnty. Northwest Health Care Auth., Health Care Facs. Rev., 5.75%, 6/1/27

 

Baa3/NR

 

 

1,514,115

 

 

 

 

 

 

 

5,198,980

Alaska–0.7%

 

 

State Housing Finance Corp. Rev.,

 

 

 

 

 

3,900

 

5.00%, 12/1/33, Ser. A

 

Aaa/AAA

 

 

3,985,293

1,000

 

5.25%, 6/1/32, Ser. C (MBIA)

 

Aaa/AAA

 

 

1,012,060

 

 

 

 

 

 

 

4,997,353

Arizona–0.5%

2,200

 

Health Facs. Auth. John C. Lincoln Health Network Rev., 7.00%, 12/1/25

 

NR/BBB

 

 

2,450,866

1,500

 

Maricopa Cnty. Pollution Control Corp., Pollution Control Rev., 5.05%, 5/1/29 (AMBAC)

 

Aaa/AAA

 

 

1,565,145

 

 

 

 

 

 

 

4,016,011

California–7.5%

1,000

 

Alameda Public Financing Auth. Rev., 7.00% 6/1/09

 

NR/NR

 

 

1,015,920

 

 

Golden State Tobacco Securitization Corp., Tobacco Settlement Rev.,

 

 

 

 

 

27,585

 

6.25%, 6/1/33, Ser. 2003-A-1

 

Baa3/BBB

 

 

30,642,521

21,000

 

6.75%, 6/1/39, Ser. 2003-A-1

 

Baa3/BBB

 

 

24,147,060

 

 

 

 

 

 

 

55,805,501

Colorado–2.7%

 

 

El Paso Cnty., CP (AMBAC),

 

 

 

 

 

1,735

 

5.00%, 12/1/23, Ser. A

 

Aaa/AAA

 

 

1,819,928

1,725

 

5.00%, 12/1/23, Ser. B

 

Aaa/AAA

 

 

1,809,439

2,820

 

5.00%, 12/1/27, Ser. A

 

Aaa/AAA

 

 

2,936,804

1,500

 

5.00%, 12/1/27, Ser. B

 

Aaa/AAA

 

 

1,562,130

1,500

 

Garfield Cnty. School Dist. Re-2, GO, 5.00%, 12/1/25 (FSA)

 

Aaa/NR

 

 

1,567,755

 

 

La Plata Cnty. School Dist. No. 9-R, Durango, GO (MBIA) (a),

 

 

 

 

 

1,000

 

5.25%, 11/1/23 (Pre-refunded note @ 100, 11/1/12)

 

Aaa/NR

 

 

1,106,130

2,000

 

5.25%, 11/1/25 (Pre-refunded note @ 100, 11/1/12)

 

Aaa/NR

 

 

2,212,260

4,000

 

Saddle Rock Met. Dist., GO, 5.35%, 12/1/31 (Radian)

 

NR/AA

 

 

4,122,240

2,500

 

School Mines Auxiliary Facs. Rev., 5.00%, 12/1/37 (AMBAC)

 

Aaa/AAA

 

 

2,580,225

 

 

 

 

 

 

 

19,716,911

Florida–5.8%

8,000

 

Highlands Cnty. Health Facs. Auth. Rev., Adventist Health System, 5.25%, 11/15/23, Ser. B

 

A2/A+

 

 

8,381,120

2,500

 

Hillsborough Cnty. Industrial Dev. Auth. Rev., Tampa General Hospital, 5.25%, 10/1/34, Ser. B

 

Baa1/NR

 

 

2,585,650

 

9.30.05 | PIMCO Municipal Income Funds III Annual Report   5

 


PIMCO Municipal Income Fund III Schedule of Investments
September 30, 2005

Principal
Amount
(000)

 

 

 

Credit Rating
(Moody’s/S&P)*

 

Value

 

Florida–(continued)

$

1,485

 

Julington Creek Plantation Community Dev. Dist., Special Assessment Rev., 5.00%, 5/1/29 (MBIA)

 

Aaa/AAA

 

$

1,551,528

 

 

1,000

 

Orange Cnty. Housing Finance Auth. Multifamily Rev., Palm Grove Gardens, 5.25%, 1/1/28, Ser. G

 

Aaa/NR

 

 

1,027,780

 

 

15,000

 

Pinellas Cnty. Health Facs. Auth. Rev., Baycare Health, 5.50%, 11/15/33

 

A1/NR

 

 

15,857,850

 

 

7,500

 

South Miami Health Facs. Auth., Hospital Rev., Baptist Health, 5.25%, 11/15/33

 

Aa3/AA–

 

 

7,794,900

 

 

5,615

 

Tampa, Water & Sewer Rev., 5.00%, 10/1/26, Ser. A

 

Aa2/AA

 

 

5,881,151

 

 

 

 

 

 

 

 

 

43,079,979

 

 

 

 

Georgia–0.6%

 

 

 

 

 

 

 

4,000

 

Griffin Combined Public Utility Rev., 5.00%, 1/1/32 (AMBAC)

 

Aaa/AAA

 

 

4,183,400

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Idaho–1.0%

 

 

 

 

 

 

 

 

 

State Building Auth. Building Rev. (XLCA),

 

 

 

 

 

 

 

1,000

 

5.00%, 9/1/33, Ser. A

 

Aaa/AAA

 

 

1,036,250

 

 

5,750

 

5.00%, 9/1/43, Ser. A

 

Aaa/AAA

 

 

5,958,438

 

 

 

 

 

 

 

 

 

6,994,688

 

 

 

 

Illinois–7.9%

 

 

 

 

 

 

 

2,250

 

Chicago, GO, 5.00%, 1/1/31, Ser. A (MBIA)

 

Aaa/AAA

 

 

2,321,573

 

 

 

 

Chicago, Lake Shore East, Special Assessment,

 

 

 

 

 

 

 

1,600

 

6.625%, 12/1/22

 

NR/NR

 

 

1,737,760

 

 

3,456

 

6.75%, 12/1/32

 

NR/NR

 

 

3,757,398

 

 

5,000

 

Chicago Board of Education, GO, 5.00%, 12/1/31, Ser. C (FSA) (Pre-refunded @ 100, 12/1/11) (a)

 

Aaa/AAA

 

 

5,429,150

 

 

500

 

Chicago Board of Education School Reform, GO, zero coupon, 12/1/28, Ser. A (FGIC)

 

Aaa/AAA

 

 

162,250

 

 

3,000

 

Chicago Kingsbury Redev. Project, Tax Allocation, 6.57%, 2/15/13, Ser. A

 

NR/NR

 

 

3,129,570

 

 

7,000

 

Chicago Motor Fuel Tax Rev., 5.00%, 1/1/33, Ser. A (AMBAC)

 

Aaa/AAA

 

 

7,244,650

 

 

4,000

 

Chicago Park Dist., GO, 5.00%, 1/1/29, Ser. D (FGIC)

 

Aaa/AAA

 

 

4,124,360

 

 

2,500

 

Chicago Water Rev., 5.00%, 11/1/31, (AMBAC) (Pre-refunded @ 100, 11/1/11) (a)

 

Aaa/AAA

 

 

2,712,025

 

 

 

 

Educational Facs. Auth. Rev., Univ. of Chicago,

 

 

 

 

 

 

 

4,780

 

5.00%, 7/1/33

 

Aa1/AA

 

 

4,943,858

 

 

220

 

5.00%, 7/1/33 (Pre-refunded @ $100, 7/1/13) (a)

 

Aa1/AA

 

 

240,009

 

 

165

 

5.25%, 7/1/41

 

Aa1/AA

 

 

173,877

 

 

4,160

 

5.25%, 7/1/41 (Pre-refunded @ $101, 7/1/11) (a)

 

Aa1/AA

 

 

4,585,539

 

 

9,045

 

Metropolitan Pier & Exposition Auth., Dedicated State Tax Rev., McCormick Place Expansion, 5.25%, 6/15/42 (MBIA)

 

Aaa/AAA

 

 

9,571,871

 

 

4,300

 

Round Lake, Special Tax Rev., 6.70%, 3/1/33

 

NR/NR

 

 

4,554,861

 

 

1,175

 

State Health Facs. Auth. Rev., Elmhurst Memorial Healthcare, 5.50%, 1/1/22

 

A2/NR

 

 

1,240,882

 

 

3,050

 

University, Rev., 5.00%, 4/1/30, Ser. A (AMBAC)

 

Aaa/AAA

 

 

3,138,359

 

 

 

 

 

 

 

 

 

59,067,992

 

 

6     PIMCO Municipal Income Funds III Annual Report | 9.30.05

 


PIMCO Municipal Income Fund III Schedule of Investments
September 30, 2005

Principal
Amount
(000)

 

 

 

Credit Rating
(Moody's/S&P)*

 

Value

 

 

 

 

Indiana–4.1%

 

 

 

 

 

 

$

7,535

 

Bond Bank Rev., 5.00%, 2/1/33, Ser. A (FSA)

 

Aaa/AAA

 

$

7,775,593

 

 

3,000

 

Brownsburg 1999 School Building Corp. Rev., 5.25%, 3/15/25,

 

 

 

 

 

 

 

 

 

Ser. A (FSA)

 

Aaa/AAA

 

 

3,212,940

 

 

1,375

 

Fort Wayne Pollution Control Rev., 6.20%, 10/15/25

 

Ba2/BB

 

 

1,377,475

 

 

5,000

 

Indianapolis Local Public Improvement Board, Tax Allocation, 5.00%, 2/1/29, Ser. G (MBIA)

 

Aaa/AAA

 

 

5,182,600

 

 

 

 

Michigan City Area Wide School Building Corp. Rev. (FGIC),

 

 

 

 

 

 

 

2,500

 

zero coupon, 1/15/21

 

Aaa/AAA

 

 

1,247,925

 

 

1,000

 

zero coupon, 7/15/21

 

Aaa/AAA

 

 

487,940

 

 

1,000

 

zero coupon, 1/15/22

 

Aaa/AAA

 

 

473,950

 

 

1,000

 

Plainfield Parks Facs. Corp. Lease Rent Rev., 5.00%, 1/15/22 (AMBAC)

 

Aaa/AAA

 

 

1,052,460

 

 

3,500

 

State Dev. Finance Auth. Pollution Control Rev., 5.00%, 3/1/30 (AMBAC)

 

Aaa/AAA

 

 

3,507,525

 

 

3,455

 

Valparaiso, Middle Schools Building Corp. Rev., 5.00%, 7/15/24 (MBIA)

 

Aaa/AAA

 

 

3,611,131

 

 

2,440

 

Zionsville Community Schools Building Corp. Rev., 5.00%, 7/15/27, Ser. A (FSA)

 

NR/AAA

 

 

2,563,074

 

 

 

 

 

 

 

 

 

30,492,613

 

 

 

 

Iowa–0.1%

 

 

 

 

 

 

 

1,000

 

Tobacco Settlement Auth., Tobacco Settlement Rev., 5.60%, 6/1/35, Ser. B

 

Baa3/BBB

 

 

1,030,690

 

 

 

 

Kentucky–0.8%

 

 

 

 

 

 

 

 

 

Economic Dev. Finance Auth. Hospital Facs. Rev.,

 

 

 

 

 

 

 

1,000

 

Catholic Healthcare Partners, 5.25%, 10/1/30

 

Aa3/AA–

 

 

1,040,290

 

 

4,600

 

St. Luke's Hospital, 6.00%, 10/1/19

 

A3/A

 

 

5,053,238

 

 

 

 

 

 

 

 

 

6,093,528

 

 

 

 

Louisiana–0.9%

 

 

 

 

 

 

 

5,000

 

Public Facs. Auth. Rev., Ochsner Clinic Foundation, 5.50%, 5/15/32, Ser. B

 

A3/NR

 

 

5,071,050

 

 

1,595

 

Tobacco Settlement Financing Corp. Rev., 5.875%, 5/15/39, Ser. 2001B

 

Baa3/BBB

 

 

1,690,604

 

 

 

 

 

 

 

 

 

6,761,654

 

 

 

 

Maryland–0.2%

 

 

 

 

 

 

 

1,500

 

State Health & Higher Educational Facs. Auth. Rev., Calvert Health Systems, 5.50%, 7/1/36

 

A2/NR

 

 

1,593,915

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Massachusetts–3.3%

 

 

 

 

 

 

 

1,000

 

State Dev. Finance Agcy. Rev., 5.75%, 7/1/33, Ser. C

 

Baa1/BBB

 

 

1,063,410

 

 

7,000

 

State Health & Educational Facs. Auth. Rev., Harvard Univ., 5.125%, 7/15/37, Ser. FF

 

Aaa/AAA

 

 

7,335,930

 

 

4,910

 

State Housing Finance Agcy., Housing Rev., 5.125%, 6/1/43, Ser. H

 

Aa3/AA–

 

 

4,990,180

 

 

3,225

 

State Water Pollution Abatement Trust, 5.00%, 8/1/32, Ser. 8

 

Aaa/AAA

 

 

3,349,324

 

 

7,555

 

State Water Resources Auth. Rev., 5.00%, 8/1/32, Ser. J (FSA)

 

Aaa/AAA

 

 

7,828,189

 

 

 

 

 

 

 

 

 

24,567,033

 


 

9.30.05 | PIMCO Municipal Income Funds III Annual Report     7

 



PIMCO Municipal Income Fund III Schedule of Investments
September 30, 2005

Principal
Amount
(000)

 

 

 

Credit Rating
(Moody's/S&P)*

 

Value

 

 

 

 

Michigan–6.8%

 

 

 

 

 

 

$

12,240

 

Detroit Water Supply System, 5.00%, 7/1/34, Ser. B (MBIA)

 

Aaa/AAA

 

$

12,740,861

 

 

5,000

 

State Building Auth. Rev., 5.00%, 10/15/26, Ser. III (FSA)

 

Aaa/AAA

 

 

5,225,700

 

 

 

 

State Hospital Finance Auth. Rev.,

 

 

 

 

 

 

 

175

 

Detroit Medical Center, 5.25%, 8/15/23

 

Ba3/BB–

 

 

161,803

 

 

4,000

 

Henry Ford Health System, 5.00%, 3/1/17

 

A1/A–

 

 

4,168,080

 

 

5,405

 

Oakwood Group, 5.75%, 4/1/32, Ser. A

 

A2/A

 

 

5,721,301

 

 

575

 

Oakwood Group, 6.00%, 4/1/22, Ser. A

 

A2/A

 

 

628,555

 

 

20,000

 

Trinity Health Credit, 5.375%, 12/1/30

 

Aa3/AA–

 

 

21,059,200

 

 

1,000

 

State Technical Univ., 5.00%, 10/1/33 (XLCA)

 

Aaa/AAA

 

 

1,033,410

 

 

 

 

 

 

 

 

 

50,738,910

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Minnesota–0.3%

 

 

 

 

 

 

 

2,400

 

Upsala Independent School Dist. No. 487, GO, 5.00%, 2/1/28 (FGIC)

 

Aaa/AAA

 

 

2,510,568

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mississippi–0.6%

 

 

 

 

 

 

 

 

 

Business Finance Corp., Pollution Control Rev.,

 

 

 

 

 

 

 

3,000

 

5.875%, 4/1/22

 

Ba1/BBB–

 

 

3,048,300

 

 

1,250

 

5.90%, 5/1/22

 

Ba1/BBB–

 

 

1,270,163

 

 

 

 

 

 

 

 

 

4,318,463

 

 

 

 

Missouri–2.9%

 

 

 

 

 

 

 

4,000

 

Bi-State Dev. Agcy., Missouri Illinois Met. Dist., 5.00%, 10/1/32 (FSA)

 

Aaa/AAA

 

 

4,160,160

 

 

1,350

 

St. Louis Cnty. Industrial Dev. Auth., Housing Dev. Rev., 5.20%, 1/20/36 (GNMA)

 

NR/AAA

 

 

1,379,065

 

 

 

 

St. Louis Industrial Dev. Auth. Rev. (GNMA),

 

 

 

 

 

 

 

1,500

 

5.125%, 12/20/29

 

NR/AAA

 

 

1,541,715

 

 

1,500

 

5.125%, 12/20/30

 

NR/AAA

 

 

1,532,505

 

 

4,365

 

State Environmental Impt. & Energy Resources Auth., Water

 

 

 

 

 

 

 

 

 

Pollution Control Rev., 5.00%, 7/1/23, Ser. B

 

Aaa/NR

 

 

4,622,666

 

 

7,500

 

State Health & Educational Facs. Auth., Health Facs.,

 

 

 

 

 

 

 

 

 

St. Anthony's Medical Center, 6.25%, 12/1/30

 

A2/A

 

 

8,204,100

 

 

 

 

 

 

 

 

 

21,440,211

 

 

 

 

Montana–1.6%

 

 

 

 

 

 

 

11,250

 

Forsyth Pollution Control Rev., Puget Sound Energy, 5.00%, 3/1/31 (AMBAC)

 

Aaa/AAA

 

 

11,735,663

 

 

 

 

Nevada–0.6%

 

 

 

 

 

 

 

3,355

 

Henderson Health Care Fac. Rev., Catholic Healthcare West, 5.125%, 7/1/28

 

A3/A–

 

 

3,379,424

 

 

980

 

Henderson Local Impt. Dists., Special Assessment, 5.80%, 3/1/23

 

NR/NR

 

 

1,012,448

 

 

 

 

 

 

 

 

 

4,391,872

 


 

8     PIMCO Municipal Income Funds III Annual Report | 9.30.05

 



PIMCO Municipal Income Fund III Schedule of Investments

September 30, 2005

Principal
Amount
(000)

 

 

 

Credit Rating  
(Moody’s/S&P)*

 

Value

 

 

 

 

New Hampshire–0.7%

 

 

 

 

 

 

 

 

 

Manchester Water Works Rev. (FGIC),

 

 

 

 

 

 

$

1,500

 

5.00%, 12/1/28

 

Aaa/AAA

 

$

1,570,455

 

 

3,250

 

5.00%, 12/1/34

 

Aaa/AAA

 

 

3,375,450

 

 

 

 

 

 

 

 

 

4,945,905

 

 

 

 

New Jersey–4.9%

 

 

 

 

 

 

 

1,540

 

Camden Cnty., Improvement Auth. Rev., 6.00%, 2/15/27

 

Baa3/BBB

 

 

1,571,724

 

 

4,500

 

Economic Dev. Auth., Economic Dev. Rev., Kapkowski Rd. Landfill, 6.50%, 4/1/28

 

Baa3/NR

 

 

5,248,395

 

 

300

 

Economic Dev. Auth., Industrial Dev. Rev., Newark Airport, 7.00%, 10/1/14

 

Ba3/NR

 

 

309,498

 

 

 

 

Health Care Facs. Financing Auth. Rev.,

 

 

 

 

 

 

 

3,000

 

Pascack Valley Hospital, 6.625%, 7/1/36

 

NR/B+

 

 

3,036,660

 

 

2,000

 

Somerset Medical Center, 5.50%, 7/1/33

 

Baa3/NR

 

 

2,042,760

 

 

2,500

 

Middlesex Cnty. Pollution Control Auth. Rev., 5.75%, 9/15/32

 

Ba1/BBB–

 

 

2,630,800

 

 

2,000

 

South Port Corp. Rev., 5.10%, 1/1/33

 

NR/A

 

 

2,069,300

 

 

 

 

State Educational Facs. Auth. Rev.,

 

 

 

 

 

 

 

1,500

 

Fairlegh Dickinson Univ., 6.00%, 7/1/25, Ser. D

 

NR/NR

 

 

1,605,075

 

 

3,000

 

Higher Educational Impt., 5.00%, 9/1/14, Ser. A (FSA)

 

Aaa/AAA

 

 

3,274,470

 

 

 

 

Tobacco Settlement Financing Corp. Rev.,

 

 

 

 

 

 

 

525

 

6.00%, 6/1/37

 

Baa3/BBB

 

 

561,414

 

 

1,000

 

6.125%, 6/1/24

 

Baa3/BBB

 

 

1,130,440

 

 

230

 

6.125%, 6/1/42

 

Baa3/BBB

 

 

247,577

 

 

350

 

6.25%, 6/1/43

 

Baa3/BBB

 

 

395,556

 

 

10,750

 

6.75%, 6/1/39

 

Baa3/BBB

 

 

12,512,785

 

 

 

 

 

 

 

 

 

36,636,454

 

 

 

 

New Mexico–0.1%

 

 

 

 

 

 

 

1,000

 

Farmington Pollution Control Rev., 5.80%, 4/1/22

 

Baa2/BBB

 

 

1,015,890

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New York–9.2%

 

 

 

 

 

 

 

23,300

 

Liberty Development Corp. Rev., 5.25%, 10/1/35 (c)

 

Aa3/A+

 

 

26,036,585

 

 

10,000

 

Metropolitan Transportation Auth. Rev., 5.25%, 11/15/32, Ser. B

 

A2/A

 

 

10,651,300

 

 

5,000

 

New York City Muni. Water Finance Auth., Water & Sewer System Rev., 5.00%,
6/15/35, Ser. C

 

Aa2/AA+

 

 

5,196,150

 

 

2,555

 

5.00%, 6/15/37, Ser. D

 

Aa2/AA+

 

 

2,658,375

 

 

1,500

 

5.00%, 6/15/39, Ser. A

 

Aa2/AA+

 

 

1,553,370

 

 

 

 

State Dorm Auth. Rev.,

 

 

 

 

 

 

 

4,000

 

St. Barnabas, 5.125%, 2/1/22, Ser. A (FHA-AMBAC)

 

Aaa/AAA

 

 

4,251,400

 

 

11,590

 

Sloan-Kettering Center Memorial, 5.00%, 7/1/34, Ser. 1

 

Aa2/AA

 

 

11,949,058

 

 

3,800

 

State Personal Income Tax, 5.00%, 3/15/32, (Pre-refunded @$100, 3/15/13) (a)

 

A1/AA

 

 

4,147,244

 

 

2,000

 

State Environmental Facs. Corp. Rev., 5.00%, 6/15/28

 

Aaa/AAA

 

 

2,090,760

 

 

 

 

 

 

 

 

 

68,534,242

 

 

9.30.05 | PIMCO Municipal Income Funds III Annual Report     9

 



PIMCO Municipal Income Fund III Schedule of Investments

September 30, 2005

Principal
Amount
(000)

 

 

 

Credit Rating  
(Moody’s/S&P)*

 

Value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North Carolina–1.6%

 

 

 

 

 

 

$

2,000

 

Charlotte-Mecklenburg Hospital Auth., Healthcare System Rev., 5.00%, 1/15/33, Ser. A

 

Aa3/AA

 

$

2,058,840

 

 

 

 

Eastern Municipal Power Agcy, Power System Rev.,

 

 

 

 

 

 

 

2,000

 

5.125%, 1/1/23, Ser. D

 

Baa2/BBB

 

 

2,057,680

 

 

2,000

 

5.125%, 1/1/26, Ser. D

 

Baa2/BBB

 

 

2,055,200

 

 

3,795

 

5.375%, 1/1/17, Ser. C

 

Baa2/BBB

 

 

4,012,340

 

 

1,500

 

Medical Care Commission, Health Care Facs. Rev., Cleveland Cnty., 5.00%, 7/1/35 (AMBAC)

 

Aaa/AAA

 

 

1,552,500

 

 

 

 

 

 

 

 

 

11,736,560

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ohio–1.0%

 

 

 

 

 

 

 

5,000

 

Air Quality Dev. Auth. Rev., Pollution Control, Dayton Power, 4.80%, 1/1/34 (FGIC)

 

Aaa/AAA

 

 

5,061,750

 

 

2,500

 

Lorain Cnty. Hospital Rev., Catholic Healthcare, 5.375%, 10/1/30

 

Aa3/AA–

 

 

2,611,625

 

 

 

 

 

 

 

 

 

7,673,375

 

 

 

 

Oklahoma–0.5%

 

 

 

 

 

 

 

3,500

 

Tulsa County Industrial Auth. Rev., Legacy Apartments, 4.90%, 11/20/46 (FHA-GNMA)

 

Aaa/NR

 

 

3,560,620

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pennsylvania–3.7%

 

 

 

 

 

 

 

4,350

 

Allegheny Cnty. Hospital Dev. Auth. Rev., 9.25%, 11/15/30, Ser. B

 

B1/B

 

 

5,193,595

 

 

1,500

 

Cumberland Cnty. Auth. Retirement Community Rev., Wesley Affiliated Services,
7.25%, 1/1/35, Ser. A

 

NR/NR

 

 

1,613,985

 

 

3,250

 

Delaware River Joint Toll Bridge, Commission Bridge Rev., 5.00%, 7/1/28

 

A2/A–

 

 

3,370,023

 

 

3,000
 

 

Lehigh Cnty. General Purpose Auth. Rev., St. Luke's Bethlehem Hospital, 5.375%,
8/15/33

 

Baa2/BBB

 

 

3,085,950

 

 

5,000

 

Philadelphia School Dist., GO, 5.125%, 6/1/34, Ser. D (FGIC)

 

Aaa/AAA

 

 

5,273,050

 

 

2,500

 

Radnor Township School Dist., GO, 5.00%, 2/15/35, Ser. B (FSA)

 

Aaa/NR

 

 

2,627,000

 

 

6,300

 

St. Mary Hospital Auth., Bucks Cnty. Rev., 5.00%, 12/1/28 (Partially pre-refunded
6/1/08 @ 101) (a)

 

Aa2/NR

 

 

6,321,609

 

 

 

 

 

 

 

 

 

27,485,212

 

 

 

 

Puerto Rico–0.3%

 

 

 

 

 

 

 

2,200

 

Electric Power Auth., Power Rev., 5.125%, 7/1/29, Ser. NN

 

A3/A–

 

 

2,300,562

 

 

 

 

South Carolina–2.0%

 

 

 

 

 

 

 

7,500

 

Florence Cnty. Rev., McLeod Regional Medical Center, 5.00%, 11/1/31, Ser. A (FSA)

 

Aaa/AAA

 

 

7,810,575

 

 

6,700

 

Jobs Economic Dev. Auth. Rev., Bon Secours Health System, 5.625%, 11/15/30

 

A3/A–

 

 

6,984,214

 

 

 

 

 

 

 

 

 

14,794,789

 

 

 

 

Tennessee–0.2%

 

 

 

 

 

 

 

1,250

 

Knox Cnty. Health Educational & Housing Facs., Board Hospital Facs. Rev., Catholic
Healthcare Partners, 5.25%, 10/1/30

 

Aa3/AA–

 

 

1,303,400

 

 

10    PIMCO Municipal Income Funds III Annual Report | 9.30.05

 



PIMCO Municipal Income Fund III Schedule of Investments
September 30, 2005

Principal
Amount
(000)

 

 

 

Credit Rating
(Moody’s/S&P)*

 

Value

 

 

 

 

Texas–10.6%

 

 

 

 

 

 

$

4,135

 

Canyon Independent School Dist., GO, 5.00%, 2/15/28, Ser. A (PSF-GTD)

 

NR/AAA

 

$

4,297,257

 

 

2,500

 

Columbia & Brazoria Independent School Dist., GO, 5.00%, 8/1/29 (PSF-GTD)

 

NR/AAA

 

 

2,599,900

 

 

1,300

 

Comal Cnty. Health Facs., McKenna Memorial Hospital Project Rev., 6.25%, 2/1/32

 

Baa3/BBB–

 

 

1,392,742

 

 

 

 

Denton Independent School Dist., GO,

 

 

 

 

 

 

 

6,000

 

zero coupon, 8/15/26 (PSF-GTD)

 

Aaa/AAA

 

 

1,990,980

 

 

6,000

 

zero coupon, 8/15/27 (PSF-GTD)

 

Aaa/AAA

 

 

1,872,000

 

 

5,000

 

zero coupon, 8/15/28 (PSF-GTD)

 

Aaa/AAA

 

 

1,467,500

 

 

6,000

 

zero coupon, 8/15/29 (PSF-GTD)

 

Aaa/AAA

 

 

1,657,320

 

 

2,000

 

zero coupon, 8/15/30 (PSF-GTD)

 

Aaa/AAA

 

 

519,840

 

 

8,000

 

zero coupon, 8/15/31 (PSF-GTD)

 

Aaa/AAA

 

 

1,956,240

 

 

4,400

 

Harris Cnty., GO, 5.125%, 8/15/31 (Pre-refunded @ $100, 8/15/12) (a)

 

Aa1/AA+

 

 

4,798,948

 

 

 

 

Harris Cnty Health Facs. Dev. Corp. Rev.,

 

 

 

 

 

 

 

5,000

 

Christus Health, 5.375%, 7/1/29, Ser. A (MBIA)

 

Aaa/AAA

 

 

5,284,700

 

 

2,750

 

St. Luke’s Episcopal Hospital, 5.375%, 2/15/26, Ser. A (Pre-refunded @ $100, 8/15/11) (a)

 

NR/AA–

 

 

3,039,382

 

 

19,500

 

Harris Cnty. Rev., 5.125%, 8/15/32 (FSA)

 

Aaa/AAA

 

 

20,304,960

 

 

4,005

 

Houston, GO, 5.00%, 3/1/25 (MBIA)

 

Aaa/AAA

 

 

4,167,203

 

 

5,000

 

Houston Water & Sewer System Rev., 5.00%, 12/1/30, Ser. A (FSA) (Pre-refunded @ 100, 12/1/12) (a)

 

Aaa/AAA

 

 

5,408,400

 

 

7,000

 

Judson Independent School Dist., GO, 5.00%, 2/1/30 (PSF-GTD)

 

Aaa/NR

 

 

7,193,620

 

 

415

 

Leander Independent School Dist., GO, 5.00%, 8/15/32 (PSF-GTD)

 

NR/AAA

 

 

428,346

 

 

 

 

Mesquite Independent School Dist. No. 1, GO,

 

 

 

 

 

 

 

3,825

 

zero coupon, 8/15/15, Ser. A (PSF-GTD)

 

NR/AAA

 

 

2,521,670

 

 

1,365

 

zero coupon, 8/15/16, Ser. A (PSF-GTD)

 

NR/AAA

 

 

834,343

 

 

1,000

 

zero coupon, 8/15/18, Ser. A (PSF-GTD)

 

NR/AAA

 

 

545,150

 

 

1,000

 

zero coupon, 8/15/19, Ser. A (PSF-GTD)

 

NR/AAA

 

 

512,660

 

 

1,000

 

zero coupon, 8/15/20, Ser. A (PSF-GTD)

 

NR/AAA

 

 

484,900

 

 

1,500

 

North Thruway Auth., Dallas North Thruway System Rev., 5.00%, 1/1/33, Ser. A (AMBAC)

 

Aaa/AAA

 

 

1,547,670

 

 

2,105

 

Northwest Harris Cnty. Municipal Utility Dist. No. 16, GO, 5.30%, 10/1/29 (Radian)

 

NR/AA

 

 

2,172,844

 

 

2,000

 

University of Texas, 5.00%, 7/1/26, Ser. B

 

Aaa/AAA

 

 

2,103,940

 

 

 

 

 

 

 

 

 

79,102,515

 

 

 

 

Utah–0.8%

 

 

 

 

 

 

 

1,750

 

County of Weber, IHC Health Services Rev., 5.00%, 8/15/30

 

Aa1/AA+

 

 

1,786,400

 

 

4,100

 

Salt Lake Cnty. Hospital Rev., IHC Health Services, 5.125%, 2/15/33 (AMBAC)

 

Aaa/AAA

 

 

4,253,914

 

 

 

 

 

 

 

 

 

6,040,314

 

 

9.30.05 | PIMCO Municipal Income Funds III Annual Report     11

 



PIMCO Municipal Income Fund III Schedule of Investments
September 30, 2005

Principal
Amount
(000)

 

 

 

Credit Rating
(Moody’s/S&P)*

 

 

Value

 

 

 

 

Washington–6.9%

 

 

 

 

 

 

$

6,375

 

Chelan Cnty. Public Utility Dist. Rev., 5.125%, 7/1/33, Ser. C (AMBAC)

 

Aaa/AAA

 

$

6,630,255

 

 

15,000

 

King Cnty. Sewer Rev., 5.00%, 1/1/35, Ser. A (FSA)

 

Aaa/AAA

 

 

15,419,400

 

 

3,000

 

Port Seattle Rev., 5.00%, 9/1/24 (FGIC)

 

Aaa/AAA

 

 

3,133,320

 

 

23,700

 

Tobacco Settlement Auth., Tobacco Settlement Rev., 6.50%, 6/1/26

 

Baa3/BBB

 

 

26,334,018

 

 

 

 

 

 

 

 

 

51,516,993

 

 

 

 

Wisconsin–0.1%

 

 

 

 

 

 

 

560

 

Badger Tobacco Asset Securitization Corp., 6.00%, 6/1/17

 

Baa3/BBB

 

 

597,856

 

 

 

 

Total Municipal Bonds & Notes (cost–$643,565,788)

 

 

 

 

685,980,622

 

 

VARIABLE RATE NOTES (b)(d)(e)–7.0%

 

 

 

 

 

 

 

 

 

Arizona–0.2%

 

 

 

 

 

 

 

1,000

 

Salt River Project Agricultural Impt. & Power Dist. Rev., 13.005%, 1/1/35, Ser. 1172

 

Aa2/NR

 

 

1,265,900

 

 

 

 

California–1.3%

 

 

 

 

 

 

 

7,000

 

State Economic Recovery, GO, 13.20%, 7/1/11, Ser. 930 (MBIA)

 

NR/AAA

 

 

9,887,640

 

 

 

 

Colorado–0.3%

 

 

 

 

 

 

 

1,994

 

Colorado Springs Utilities Rev., 12.992%, 11/15/30, Ser. 1141

 

Aa2/NR

 

 

2,416,082

 

 

 

 

Florida–0.4%

 

 

 

 

 

 

 

2,554

 

State Department of Transportation Turnpike Rev., 11.755%, 7/1/31, Ser. 1128

 

Aa2/NR

 

 

2,732,141

 

 

 

 

Illinois–0.3%

 

 

 

 

 

 

 

1,990

 

Dev. Finance Auth., Gas Supply Rev., 15.858%, 2/1/33 (AMBAC)

 

NR/NR

 

 

2,296,321

 

 

 

 

Michigan–1.8%

 

 

 

 

 

 

 

 

 

Detroit Water Supply System,

 

 

 

 

 

 

 

5,720

 

15.287%, 1/1/11 (MBIA)

 

NR/AAA

 

 

7,059,109

 

 

4,990

 

16.297%, 7/1/11 (FSA)

 

NR/AAA

 

 

6,254,117

 

 

 

 

 

 

 

 

 

13,313,226

 

 

 

 

New Mexico–0.1%

 

 

 

 

 

 

 

405

 

State Finance Auth., Transportation Rev., 12.996%, 6/15/12, Ser. 949 (AMBAC)

 

Aaa/NR

 

 

573,302

 

 

 

 

Texas–1.5%

 

 

 

 

 

 

 

1,365

 

Crowley Independent School Dist., GO, 11.736%, 8/1/35, Ser. 1171 (PSF–GTD)

 

Aaa/NR

 

 

1,439,229

 

 

2,450

 

Dallas Area Rapid Transit Rev., 13.589%, 12/1/32 (FGIC)

 

NR/NR

 

 

2,866,377

 

 

2,027

 

Denton Independent School Dist., GO, 12.983%, 8/15/33, Ser. 951(PSF–GTD)

 

Aaa/NR

 

 

2,346,730

 

 

1,870

 

Mansfield Independent School Dist., GO, 15.780%, 2/15/28 (PSF)

 

NR/NR

 

 

2,338,921

 

 

2,060

 

University of Texas Rev., 13.875%, 8/15/33

 

NR/NR

 

 

2,483,598

 

 

 

 

 

 

 

 

 

11,474,855

 

 

12    PIMCO Municipal Income Funds III Annual Report | 9.30.05

 



PIMCO Municipal Income Fund III Schedule of Investments

September 30, 2005

Principal
Amount
(000)

 

 

 

Credit Rating
(Moody’s/S&P)*

 

Value

 

 

 

 

Washington–1.1%

 

 

 

 

 

 

$

1,520

 

King Cnty. Sewer Rev., 16.157%, 7/1/11 (FGIC)

 

NR/NR

 

$

1,856,209

 

 

3,655

 

Port Tacoma, GO, 14.831%, 12/1/33 (AMBAC)

 

NR/NR

 

 

4,414,911

 

 

1,510

 

Seattle Drain & Wastewater Rev., 16.244%, 7/1/10 (FGIC)

 

NR/NR

 

 

1,814,793

 

 

 

 

 

 

 

 

 

8,085,913

 

 

 

 

Total Variable Rate Notes (cost–$47,326,631)

 

 

 

 

52,045,380

 

VARIABLE RATE DEMAND NOTES (e)(f)–0.5%

 

 

 

 

 

 

 

 

 

Missouri–0.4%

 

 

 

 

 

 

 

3,100

 

State Health & Educational Facs. Auth. Rev., Cox Health Systems, 2.95%, 10/3/05 (AMBAC)

 

VMIG1/A-1+

 

 

3,100,000

 

 

 

 

Pennsylvania–0.1%

 

 

 

 

 

 

 

600

 

Philadelphia Hospitals & Higher Education Facs. Auth. Rev., Children’s Hospital, 2.81%, 10/3/05 (MBIA)

 

VMIG1/A-1+

 

 

600,000

 

 

 

 

Utah–0.0%

 

 

 

 

 

 

 

300

 

County of Weber, IHC Health Services Rev., 2.81%, 10/3/05, Ser. B

 

VMIG1/A-1+

 

 

300,000

 

 

 

 

Total Variable Rate Demand Notes (cost–$4,000,000)

 

 

 

 

4,000,000

 

U.S. TREASURY BILLS (g)–0.4%

 

 

 

 

 

 

 

2,700

 

3.29%-3.43%, 12/1/05-12/15/05 (cost–$2,681,135)

 

 

 

 

2,681,135

 

 

 

 

Total Investments before options written (cost–$697,573,554)–100.1%

 

 

 

 

744,707,137

 

OPTIONS WRITTEN (h)–(0.1)%

 

 

 

 

 

 

Contracts

 

 

 

 

 

 

 

 

 

Call Options–(0.0)%

 

 

 

 

 

 

 

 

 

U.S. Treasury Notes 10 yr. Futures, Chicago Board of Trade,

 

 

 

 

 

 

 

446

 

strike price $112, expires 11/22/05

 

 

 

 

(69,688

)

 

597

 

strike price $113, expires 11/22/05

 

 

 

 

(37,312

)

 

 

 

 

 

 

 

 

(107,000

)

 

 

 

Put Options–(0.1)%

 

 

 

 

 

 

 

 

 

U.S. Treasury Notes 5 yr. Futures, Chicago Board of Trade,

 

 

 

 

 

 

 

789

 

strike price $105.50, expires 11/22/05

 

 

 

 

(98,624

)

 

662

 

strike price $106, expires 11/22/05

 

 

 

 

(144,813

)

 

 

 

 

 

 

 

 

(243,437

)

 

 

 

Total Options Written (premium received–$682,598)

 

 

 

 

(350,437

)

 

 

 

Total investments net of options written (cost–$696,890,956)–100.0%

 

 

 

$

744,356,700

 

 

 

See accompanying Notes to Financial Statements | 9.30.05 | PIMCO Municipal Income Funds III Annual Report     13

 



PIMCO California Municipal Income Fund III Schedule of Investments

September 30, 2005

Principal
Amount
(000)

 

 

 

Credit Rating
(Moody’s/S&P)*

 

Value

 

CALIFORNIA MUNICIPAL BONDS & NOTES–85.3%

 

 

 

 

 

 

$

1,000

 

Alameda Public Financing Auth. Rev., 7.00%, 6/1/09

 

NR/NR

 

$

1,015,920

 

 

 

 

Association of Bay Area Governments Finance Auth. Rev., Odd Fellows Home,

 

 

 

 

 

 

 

3,200

 

5.20%, 11/15/22

 

NR/A

 

 

3,332,896

 

 

11,725

 

5.35%, 11/15/32

 

NR/A

 

 

12,361,668

 

 

 

 

Burbank Public Finance Auth. Rev., San Fernando Redev. Project,

 

 

 

 

 

 

 

1,135

 

5.50%, 12/1/28

 

NR/BBB

 

 

1,167,949

 

 

1,000

 

5.50%, 12/1/33

 

NR/BBB

 

 

1,027,010

 

 

2,000

 

Butte-Glenn Community College, GO, 5.00%, 8/1/26, Ser. A (MBIA)

 

Aaa/NR

 

 

2,102,900

 

 

2,000

 

Capistrano Univ. School Dist., Community Fac. Dist., Special Tax,

 

 

 

 

 

 

 

 

 

6.00%, 9/1/32

 

NR/NR

 

 

2,103,840

 

 

1,000

 

Carlsbad Impt. Bond Act 1915, 6.00%, 9/2/34

 

NR/NR

 

 

1,030,670

 

 

1,000

 

Cathedral City Public Financing Auth., Rev., 5.00%, 8/1/33, Ser. A (MBIA)

 

Aaa/AAA

 

 

1,043,420

 

 

1,150

 

Ceres Redev. Agcy. Tax Allocation, 5.00%, 11/1/33 (MBIA)

 

Aaa/AAA

 

 

1,209,927

 

 

 

 

Ceres Unified School Dist., GO (FGIC)

 

 

 

 

 

 

 

2,825

 

zero coupon, 8/1/28

 

Aaa/AAA

 

 

794,870

 

 

2,940

 

zero coupon, 8/1/29

 

Aaa/AAA

 

 

778,306

 

 

1,600

 

Chula Vista Community Fac. Dist., McMillin-Otay Ranch, Special Tax, 5.75%, 9/1/33

 

NR/NR

 

 

1,622,256

 

 

 

 

Chula Vista, No. 06-1 Eastlake-Woods Area A, Special Tax,

 

 

 

 

 

 

 

675

 

6.15%, 9/1/26

 

NR/NR

 

 

705,861

 

 

1,620

 

6.20%, 9/1/33

 

NR/NR

 

 

1,696,043

 

 

8,000

 

Contra Costa Cnty. Public Financing Auth. Tax Allocation Rev.,

 

 

 

 

 

 

 

 

 

5.625%, 8/1/33, Ser. A

 

NR/BBB

 

 

8,377,760

 

 

3,775

 

Cucamonga School Dist., CP, 5.20%, 6/1/27

 

NR/A–

 

 

3,829,926

 

 

 

 

Eastern Muni. Water Dist. Community Facs., Special Tax,

 

 

 

 

 

 

 

425

 

5.75%, 9/1/33

 

NR/NR

 

 

431,362

 

 

1,500

 

5.95%, 9/1/33

 

NR/NR

 

 

1,531,230

 

 

1,745

 

6.05%, 9/1/27

 

NR/NR

 

 

1,781,732

 

 

1,535

 

6.10%, 9/1/33

 

NR/NR

 

 

1,567,358

 

 

 

 

Educational Fac. Auth. Rev.,

 

 

 

 

 

 

 

2,500

 

Institute of Technology, 5.00%, 10/1/32, Ser. A

 

Aaa/AAA

 

 

2,615,700

 

 

2,455

 

Loyola Marymount Univ., zero coupon, 10/1/34 (MBIA)

 

Aaa/NR

 

 

583,234

 

 

5,000

 

Pepperdine Univ., 5.00%, 9/1/33, Ser. A (FGIC)

 

Aaa/AAA

 

 

5,191,850

 

 

500

 

Franklin-McKinley School Dist., GO, 5.00%, 8/1/27, Ser. B (FSA)

 

Aaa/AAA

 

 

525,045

 

 

 

 

Fremont Community Facs. Dist. No. 1, Pacific Commons Special Tax,

 

 

 

 

 

 

 

1,250

 

5.30%, 9/1/30

 

NR/NR

 

 

1,259,513

 

 

5,000

 

6.30%, 9/1/31

 

NR/NR

 

 

5,148,800

 

 

9,500

 

Fresno School Unified Dist., GO, 6.00%, 8/1/26, Ser. A (MBIA)

 

Aaa/AAA

 

 

11,691,460

 

 

4,380

 

Glendale Electric Works Rev., 5.00%, 2/1/27 (MBIA)

 

Aaa/AAA

 

 

4,587,393

 

 

14     PIMCO Municipal Income Funds III Annual Report | 9.30.05

 



PIMCO California Municipal Income Fund III Schedule of Investments

September 30, 2005

 Principal
Amount
(000)

 

 

 

Credit Rating
(Moody’s/S&P)*

 

Value

 

 

 

 

Golden State Tobacco Securitization Corp., Tobacco Settlement Rev.,

 

 

 

 

 

 

18,000

 

6.25%, 6/1/33, Ser. 2003-A-1

 

Baa3/BBB

 

$

19,995,120

 

 

38,490

 

6.75%, 6/1/39, Ser. 2003-A-1

 

Baa3/BBB

 

 

44,258,111

 

 

 

 

Health Facs. Finance Auth. Rev.,

 

 

 

 

 

 

 

5,000

 

Adventist Health System, 5.00%, 3/1/33

 

NR/A

 

 

5,049,050

 

 

6,000

 

Cottage Health System, 5.00%, 11/1/33, Ser. B (MBIA)

 

Aaa/AAA

 

 

6,221,520

 

 

5,000

 

Kaiser Permanente, 5.00%, 10/1/18, Ser. B

 

A3/AAA

 

 

5,272,200

 

 

 

 

Paradise VY Estates,

 

 

 

 

 

 

 

2,000

 

5.125%, 1/1/22

 

NR/A

 

 

2,106,660

 

 

1,550

 

5.25%, 1/1/26

 

NR/A

 

 

1,624,943

 

 

2,000

 

Sutter Health, 6.25%, 8/15/35, Ser. A

 

A1/AA–

 

 

2,255,900

 

 

2,750

 

Infrastructure & Economic Dev. Bank Rev., Claremount Univ. Consortium, 5.25%, 10/1/33

 

Aa3/NR

 

 

2,916,457

 

 

 

 

Kaiser Assistance Corp.,

 

 

 

 

 

 

 

3,000

 

5.50%, 8/1/31, Ser. B

 

A2/A+

 

 

3,177,510

 

 

8,000

 

5.55%, 8/1/31, Ser. A

NR/A+

8,499,360

3,725

La Mesa-Spring Valley School Dist.,
GO, 5.00%, 8/1/26, Ser. A (FGIC) (Pre-refunded @ 100, 8/1/12) (a)

Aaa/AAA

4,080,253

 

1,400

 

La Quinta Redev. Agcy., Tax Allocation, 5.10%, 9/1/31 (AMBAC)

 

Aaa/AAA

 

 

1,460,984

 

 

20

 

Lancaster Financing Auth. Tax Allocation, 4.75%, 2/1/34 (MBIA)

 

Aaa/AAA

 

 

20,156

 

 

825

 

Lee Lake Water Dist. Community Facs. Dist., Montecito Ranch, Special Tax, 6.125%, 9/1/32

 

NR/NR

 

 

850,022

 

 

5,000

 

Long Beach Community College Dist., 5.00%, 5/1/28, Ser. A (MBIA)

 

Aaa/AAA 

 

 

5,237,200 

 

 

 

 

Los Angeles Unified School Dist., GO (MBIA),

 

 

 

 

 

 

 

7,650

 

5.00%, 1/1/28, Ser. A

 

Aaa/AAA

 

 

8,019,418

 

 

3,000

 

5.125%, 1/1/27, Ser. E

 

Aaa/AAA

 

 

3,188,340

 

 

1,000

 

Lynwood Unified School Dist., GO, 5.00%, 8/1/27, Ser. A (FSA)

 

Aaa/NR

 

 

1,050,090

 

 

5,280

 

Modesto Irrigation District, CP, 5.00%, 7/1/33, Ser. A (MBIA)

 

Aaa/AAA

 

 

5,503,133

 

 

2,180

 

Murrieta Valley Unified School Dist., Special Tax, 6.40%, 9/1/24

 

NR/NR

 

 

2,264,431

 

 

5,000

 

Oakland, GO, 5.00%, 1/15/33, Ser. A (MBIA)

 

Aaa/AAA

 

 

5,200,550

 

 

 

 

Oakland Redev. Agcy., Tax Allocation, Coliseum Area Redevelopment,

 

 

 

 

 

 

 

985

 

5.25%, 9/1/27

 

NR/A–

 

 

1,016,018

 

 

1,545

 

5.25%, 9/1/33

 

NR/A–

 

 

1,593,652

 

 

5,000

 

Orange Cnty. Community Facs. Dist., Special Tax, Ladera Ranch, 5.55%, 8/15/33, Ser. A

 

NR/NR

 

 

5,131,450

 

 

5,000

 

Orange Cnty. Unified School Dist., CP, 4.75%, 6/1/29 (MBIA)

 

Aaa/AAA

 

 

5,152,500

 

 

1,000

 

Orange Cnty. Water Dist. Rev., CP, 5.00%, 8/15/28, Ser. B (MBIA)

 

Aaa/AAA

 

 

1,042,160

 

 

2,000

 

Palm Desert Financing Auth., Tax Allocation, 5.00%, 4/1/25, Ser. A (MBIA)

 

Aaa/AAA

 

 

2,091,440

 


 

9.30.05 | PIMCO Municipal Income Funds III Annual Report     15

 



PIMCO California Municipal Income Fund III Schedule of Investments

September 30, 2005

 Principal
Amount
(000)

 

 

 

Credit Rating
(Moody’s/S&P)*

 

Value

 

$

1,410

 

Pomona Public Financing Auth. Rev., 5.00%, 12/1/37, Ser. AF (MBIA)

 

Aaa/AAA

 

$

1,461,366

 

 

 

 

Poway Unified School Dist., Special Tax, Community FACS District No. 6-Area-A,

 

 

 

 

 

 

 

1,285

 

6.05%, 9/1/25

 

NR/NR

 

 

1,333,252

 

 

2,100

 

6.125%, 9/1/33

 

NR/NR

 

 

2,158,905

 

 

5,000

 

Riverside, CP, 5.00%, 9/1/33 (AMBAC)

 

Aaa/AAA

 

 

5,198,300

 

 

500

 

Rocklin Unified School Dist. Community Facs., Special Tax, 5.00%, 9/1/29 (MBIA)

 

Aaa/AAA

 

 

522,545

 

 

7,680

 

Rowland Unified School Dist., GO, 5.00%, 8/1/28, Ser. B (FSA)

 

Aaa/AAA

 

 

8,054,246

 

 

1,435

 

Sacramento City Financing Auth. Rev., North Natomas CFD No. 2, 6.25%, 9/1/23, Ser. A

 

NR/NR

 

 

1,483,977

 

 

 

 

San Diego Unified School Dist., GO (FSA),

 

 

 

 

 

 

 

480

 

5.00%, 7/1/26, Ser. C

 

Aaa/AAA

 

 

524,458

 

 

11,000

 

5.00%, 7/1/26, Ser. E

 

Aaa/AAA

 

 

11,946,330

 

 

8,425

 

5.00%, 7/1/28, Ser. E

 

Aaa/AAA

 

 

9,149,803

 

 

1,500

 

San Diego Univ. Foundation Auxiliary Organization, Rev., 5.00%, 3/1/27, Ser. A (MBIA)

 

Aaa/AAA

 

 

1,559,040

 

 

3,000

 

San Jose, Libraries & Parks, GO, 5.125%, 9/1/31

 

Aa1/AA+

 

 

3,145,290

 

 

 

 

Santa Ana Unified School Dist., GO (FGIC),

 

 

 

 

 

 

 

2,515

 

zero coupon, 8/1/26, Ser. B

 

Aaa/AAA

 

 

934,800

 

 

3,520

 

zero coupon, 8/1/28, Ser. B

 

Aaa/AAA

 

 

1,168,675

 

 

2,500

 

zero coupon, 8/1/30, Ser. B

 

Aaa/AAA

 

 

740,925

 

 

3,780

 

zero coupon, 8/1/31, Ser. B

 

Aaa/AAA

 

 

1,061,348

 

 

3,770

 

zero coupon, 8/1/32, Ser. B

 

Aaa/AAA

 

 

999,842

 

 

1,250

 

Santa Clara Valley Transportation Auth., Sales Tax Rev.,
5.00%, 6/1/26, Ser. A (MBIA) (Pre-refunded @ 100, 6/1/11) (a)

 

Aaa/AAA

 

 

1,360,113

 

 

5,985

 

Santa Margarita Water Dist., Special Tax, Community Facilities District No. 99-1, 6.25%, 9/1/29

 

NR/NR

 

 

6,361,217

 

 

3,550

 

Santa Monica Community College Dist., GO, zero coupon, 8/1/27, Ser. C (MBIA)

 

Aaa/AAA

 

 

1,180,375

 

 

1,205

 

Sequoia Union High School Dist., GO, 5.00%, 7/1/23 (MBIA)

 

Aaa/NR

 

 

1,272,950

 

 

4,475

 

Simi Valley Community Dev. Agcy., Tax Allocation, Tapo Canyon and West End, 5.00%, 9/1/25 (FGIC)

 

Aaa/AAA

 

 

4,698,168

 

 

4,250

 

Sonoma Cnty. Jr. College Dist., 5.00%, 8/1/27, Ser. A (FSA)

 

Aaa/AAA

 

 

4,462,882

 

 

1,000

 

Sonoma Cnty. Water Agcy. Water Rev., 5.00%, 7/1/32, Ser. A (MBIA)

 

Aaa/AAA

 

 

1,042,050

 

 

 

 

South Tahoe Joint Powers Financing Auth. Rev.,

 

 

 

 

 

 

 

2,500

 

5.125%, 10/1/09

 

NR/NR

 

 

2,520,325

 

 

4,425

 

5.45%, 10/1/33

 

NR/BBB

 

 

4,572,441

 

 

12,200

 

Southern CA Public Power Auth., Power Project Rev., Magnolia Power, 5.00%, 7/1/33, Ser. A-2003-1 (AMBAC)

 

Aaa/AAA

 

 

12,748,146

 

 

600

 

State Dept. of Water Resources Rev., Central Valley Project, 5.00%, 12/1/25, Ser. AC (MBIA)

 

Aaa/AAA

 

 

633,804

 

 

4,095

 

State Dept. Veteran Affairs Home Purchase Rev., 5.35%, 12/1/27, Ser. A (AMBAC)

 

Aaa/AAA

 

 

4,315,352

 


 

16     PIMCO Municipal Income Funds III Annual Report | 9.30.05

 



PIMCO California Municipal Income Fund III Schedule of Investments
September 30, 2005

 Principal
Amount
(000)

 

 

 

 

Credit Rating
(Moody’s/S&P)*

 

 

Value

 

 

 

 

State Public Works Board Lease Rev.,

 

 

 

 

 

 

$

5,385

 

CA State Univ., 5.00%, 10/1/19

 

A2/A–

 

$

5,600,077

 

 

1,105

 

Patton, 5.375%, 4/1/28

 

A3/A–

 

 

1,175,996

 

 

4,600

 

Univ. CA, M.I.N.D. Inst., 5.00%, 4/1/28, Ser. A

 

Aa2/A+

 

 

4,786,346

 

 

 

 

Statewide Community Dev. Auth. Rev.,

 

 

 

 

 

 

 

2,500

 

Berkeley Montessori School, 7.25%, 10/1/33

 

NR/NR

 

 

2,601,000

 

 

7,300

 

Health Fac., Jewish Home, 5.50%, 11/15/33 (CA St Mtg.)

 

NR/A

 

 

7,842,463

 

 

15,000

 

Health Fac., Memorial Health Services, 5.50%, 10/1/33, Ser. A

 

A3/A

 

 

15,856,800

 

 

10,000

 

Sutter Health, 5.50%, 8/15/34, Ser. B

 

A1/AA–

 

 

10,523,800

 

 

3,505

 

Statewide Community Dev. Auth., CP, Internext Group, 5.375%, 4/1/30

 

NR/BBB

 

 

3,532,269

 

 

1,795

 

Sunnyvale Financing Auth., Water & Wastewater Rev., 5.00%, 10/1/26 (AMBAC)

 

Aaa/AAA

 

 

1,863,587

 

 

2,000

 

Tamalpais Union High School Dist., GO, 5.00%, 8/1/26 (MBIA)

 

Aaa/AAA

 

 

2,097,560

 

 

2,000

 

Temecula Public Financing Auth., Crowne Hill, Special Tax, 6.00%, 9/1/33, Ser. A

 

NR/NR

 

 

2,073,140

 

 

 

 

Tobacco Securitization Agcy. Rev., Alameda County,

 

 

 

 

 

 

 

8,100

 

5.875%, 6/1/35

 

Baa3/NR

 

 

8,604,711

 

 

7,000

 

6.00%, 6/1/42

 

Baa3/NR

 

 

7,452,690

 

 

2,000

 

Kern County, 6.125%, 6/1/43, Ser. A

 

NR/BBB

 

 

2,143,420

 

 

2,950

 

Torrance Medical Center Rev., 5.50%, 6/1/31, Ser. A

 

A1/A+

 

 

3,086,762

 

 

4,000

 

Vernon Electric System Rev., Malburg Generating Station,
5.50%, 4/1/33, (Pre-refunded @ $100, 4/1/08) (a)

 

Aaa/NR

 

 

4,246,000

 

 

1,000

 

West Basin Municipal Water Dist. Rev., CP, 5.00%, 8/1/30, Ser. A (MBIA)

 

Aaa/AAA

 

 

1,044,000

 

 

2,500

 

William S. Hart Union High School Dist., Special Tax, 6.00%, 9/1/33

 

NR/NR

 

 

2,556,625

 

 

2,750

 

Woodland Finance Auth. Lease Rev., 5.00%, 3/1/32 (XLCA)

 

Aaa/AAA

 

 

2,875,868

 

 

 

 

Total California Municipal Bonds & Notes (cost–$392,220,895)

 

 

 

 

421,968,566

 

 

 

 

 

 

 

 

 

 

 

  OTHER MUNICIPAL BONDS & NOTES–2.1%

 

 

 

 

 

 

 

 

 

New York–0.6%

 

 

 

 

 

 

 

2,500

 

State Dormitory Auth. Rev., 6.25%, 8/15/15 (FHA)

 

Aa2/AAA

 

 

2,894,525

 

 

 

 

Puerto Rico–1.5%

 

 

 

 

 

 

 

1,500

 

Electric Power Auth., Power Rev., 5.125%, 7/1/29, Ser. NN
Public Buildings Auth. Rev.

 

A3/A–

 

 

1,568,565

 

 

290

 

5.25%, 7/1/36, Ser. D

 

Baa2/BBB

 

 

302,844

 

 

790

 

5.25%, 7/1/36, Ser. D (Pre-refunded @ 100, 7/1/12) (a)

 

Baa2/A–

 

 

866,346

 

 

4,420

 

Government Facilities, 5.00%, 7/1/36, Ser. I (GTD)

 

Baa2/BBB

 

 

4,552,158

 

 

 

 

 

 

 

 

 

7,289,913

 

 

 

 

Total Other Municipal Bonds & Notes (cost–$9,495,113)

 

 

 

 

10,184,438

 


 

9.30.05 | PIMCO Municipal Income Funds III Annual Report     17

 



PIMCO California Municipal Income Fund III Schedule of Investments
September 30, 2005

Principal
Amount
(000)

 

 

 

 

Credit Rating
(Moody’s/S&P)*

 

 

Value

 

  CALIFORNIA VARIABLE RATE NOTES (b) (d) (e)–7.9%

$

1,465

 

Infrastructure & Economic Dev. Bank Rev., 13.662%, 7/1/36 (AMBAC)

 

NR/NR

 

$

1,813,201

 

 

 

 

Los Angeles Unified School Dist., GO (MBIA)

 

 

 

 

 

 

 

1,745

 

12.473%, 1/1/23

 

NR/NR

 

 

1,924,526

 

 

2,090

 

15.363%, 1/1/11

 

NR/NR

 

 

3,257,119

 

 

2,020

 

Los Angeles Water & Power Rev., 12.898%, 7/1/30

 

NR/NR

 

 

2,422,606

 

 

950

 

Orange Cnty. Water Dist. Rev., CP, 14.725%, 2/15/11 (MBIA)

 

NR/NR

 

 

1,168,025

 

 

710

 

Pajaro Valley Unified School Dist., GO, 17.144%, 8/1/11

 

NR/NR

 

 

1,204,756

 

 

1,170

 

PasadenaWater Rev., 14.121%, 6/1/33 (FGIC)

 

NR/NR

 

 

1,440,340

 

 

1,785

 

Sacramento Cnty. Water Financing Auth. Rev., 15.222%, 6/1/11 (AMBAC)

 

NR/NR

 

 

2,238,140

 

 

1,150

 

Sacramento Muni Utility Dist., Electric Rev., 17.030%, 2/15/11 (MBIA)

 

NR/NR

 

 

1,492,642

 

 

1,725

 

San Diego Community College Dist., GO, 17.118%, 5/1/11 (FSA)

 

NR/NR

 

 

2,297,838

 

 

 

 

San Marcos Public Facs. Auth. Tax Allocation (FGIC),

 

 

 

 

 

 

 

1,340

 

14.810%, 2/1/11

 

NR/NR

 

 

1,648,428

 

 

1,340

 

14.810%, 8/1/11

 

NR/NR

 

 

1,648,428

 

 

 

 

Southern CA Public Power Auth., Power Project Rev. (AMBAC),

 

 

 

 

 

 

 

1,350

 

7.04%, 7/1/33, Ser. 1045

 

NR/NR

 

 

1,471,311

 

 

2,065

 

15.019%, 7/1/11

 

NR/NR

 

 

2,618,090

 

 

4,520

 

State Economic Recovery, GO, 13.20%, 7/1/12, Ser. 956 (MBIA) (b)

 

NR/NR

 

 

6,580,668

 

 

 

 

University of CA Rev. (FSA),

 

 

 

 

 

 

 

1,375

 

10.15%, 5/15/35, Ser. 1119

 

NR/NR

 

 

1,448,480

 

 

3,095

 

16.786%, 9/1/33

 

NR/NR

 

 

4,078,777

 

 

340

 

16.786%, 9/1/34

 

NR/NR

 

 

449,674

 

 

 

 

Total California Variable Rate Notes (cost–$34,132,940)

 

 

 

 

39,203,049

 

 

 

 

 

 

 

 

 

 

 

  OTHER VARIABLE RATE NOTES (b) (d)–1.6%

 

 

 

Puerto Rico–1.6%

 

 

 

 

 

 

 

3,500

 

Commonwealth of Puerto Rico, GO, 5.00%, 7/1/30, Ser. A

 

Baa2/BBB

 

 

3,700,515

 

 

3,800

 

Public Finance Corp. Rev., 5.75%, 8/1/27, Ser. A

 

Baa3/BBB

 

 

4,154,692

 

 

 

 

Total Other Variable Rate Notes (cost–$7,726,198)

 

 

 

 

7,855,207

 

 

 

 

 

 

 

 

 

 

 

  CALIFORNIA VARIABLE RATE DEMAND NOTES (e) (f)–2.6%

 

 

 

East Bay Muni. Utility Dist. Rev. (XLCA),

 

 

 

 

 

 

 

1,000

 

2.70%, 10/5/05, Ser. B–2

 

VMIG1/A-1+

 

 

1,000,000

 

 

3,750

 

2.71%, 10/5/05, Ser. 2

 

VMIG1/A-1+

 

 

3,750,000

 

 

500

 

Health Facs. Financing Auth. Rev., Adventist Hospital, 2.76%, 10/3/05 (MBIA)

 

VMIG1/A-1+

 

 

500,000

 

 

300

 

Metropolitan Water Dist. of Southern California Rev., 2.67%, 10/6/05, Ser. C

 

VMIG1/A-1+

 

 

300,000

 

 

300

 

Pasadena Parking Impt. Rev., CP, 2.70%, 10/6/05 (AMBAC)

 

VMIG1/NR

 

 

300,000

 


 

18     PIMCO Municipal Income Funds III Annual Report | 9.30.05

 



PIMCO California Municipal Income Fund III Schedule of Investments
September 30, 2005

 Principal
Amount
(000)

 

 

 

Credit Rating
(Moody’s/S&P)*

 

Value

 

$

1,300

 

Pollution Control Financing Auth. Rev., Exxon Mobil Project, 2.72%, 10/3/05

 

VMIG1/A-1+

 

$

1,300,000

 

 

 

 

State Dept. of Water Resources Rev.,

 

 

 

 

 

 

 

1,625

 

2.66%, 10/6/05, Ser. C-6 (AMBAC)

 

VMIG1/A-1+

 

 

1,625,000

 

 

1,300

 

2.78%, 10/3/05, Ser. B-4

 

VMIG1/A-1+

 

 

1,300,000

 

 

900

 

State of California, Daily Kindergarden Univ., GO, 2.95%, 10/3/05

 

VMIG1/A-1+

 

 

900,000

 

 

1,750

 

Statewide Communities Dev. Auth. Rev., Chevron USA, Inc. Proj., 2.74%, 10/3/05

 

P-1/A-1+

 

 

1,750,000

 

 

 

 

Total California Variable Rate Demand Notes (cost–$12,725,000)

 

 

 

 

12,725,000

 

  OTHER VARIABLE RATE DEMAND NOTES (e)(f)–0.2%

 

 

 

 

 

 

 

 

 

New York–0.2%

 

 

 

 

 

 

 

1,100

 

City of New York, GO, 2.75%, 10/6/05, Ser. C-3 (CIFG) (cost–$1,100,000)

 

VMIG1/A-1+

 

1,100,000

 

  U.S. TREASURY BILLS (g)–0.4%

 

 

 

 

 

 

 

2,225

 

3.375%-3.43%, 12/1/05-12/15/05 (cost–$2,209,413)

 

 

 

 

2,209,413

 

 

 

 

Total investments before options written (cost–$459,609,559)–100.1%

 

 

 

 

495,245,673

 

  OPTIONS WRITTEN (h)–(0.1)%

 

 

 

 

 

 

Contracts

 

 

 

 

 

 

 

 

 

 

 

Call Options–(0.0)%

 

 

 

 

 

 

 

 

 

U.S. Treasury Notes 10 yr. Futures, Chicago Board of Trade,

 

 

 

 

 

 

 

380

 

strike price $112, expires 11/22/05

 

 

 

 

(59,375

)

 

509

 

strike price $113, expires 11/22/05

 

 

 

 

(31,813

)

 

 

 

 

 

 

 

 

(91,188

)

 

 

 

Put Options–(0.1)%

 

 

 

 

 

 

 

 

 

U.S. Treasury Notes 5 yr. Futures, Chicago Board of Trade,

 

 

 

 

 

 

 

673

 

strike price $105.50, expires 11/22/05

 

 

 

 

(84,125

)

 

563

 

strike price $106, expires 11/22/05

 

 

 

 

(123,156

)

 

 

 

 

 

 

 

 

(207,281

)

 

 

 

Total Options Written (premiums received–$578,422)

 

 

 

 

(298,469

)

 

 

 

Total Investments net of options written (cost–$459,031,137)–100.0%

 

 

 

$

494,947,205

 


 

See accompanying Notes to Financial Statements | 9.30.05 | PIMCO Municipal Income Funds III Annual Report     19

 



PIMCO New York Municipal Income Fund III Schedule of Investments
September 30, 2005

Principal
Amount
(000)

 

 

 

Credit Rating
(Moody’s/S&P)*

 

Value

 

 

 

 

 

 

 

  NEW YORK MUNICIPAL BONDS & NOTES–76.9%

 

 

 

 

 

$

1,000

 

City of Yonkers, GO, 5.00%, 8/1/30, Ser. B (MBIA)

 

Aaa/AAA

$

1,048,190

 

 

2,800

 

East Rochester Housing Auth. Rev., St. Mary's Residence Project, 5.375%, 12/20/22 (GNMA)

 

NR/AAA

 

3,039,176

 

 

1,550

 

Liberty Development Corp. Rev., 5.25%, 10/1/35 (c)

 

Aa3/A+

 

1,732,047

 

 

1,000

 

Long Island Power Auth., Electric System Rev., 5.00%, 9/1/27, Ser. C

 

A3/A–

 

1,043,050

 

 

1,000

 

Madison County Industrial Dev. Agcy, Colgate Univ. Rev., 5.00%, 7/1/35, Ser. A (AMBAC)

 

Aaa/AAA

 

1,050,280

 

 

5,000

 

Metropolitan Transportation Auth. Rev., 5.00%, 11/15/31, Ser. F (MBIA)

 

Aaa/AAA

 

5,196,750

 

 

1,000

 

Monroe Tobacco Asset Securitization Corp. Tobacco Settlement Rev., 6.375%, 6/1/35, (Pre-refunded @ 101, 6/1/10) (a)

 

Ba1/BBB

 

1,138,840

 

 

2,000

 

Nassau Cnty. Tobacco Settlement Corp., Rev., 6.60%, 7/15/39

 

Ba1/BBB-

 

2,143,860

 

 

7,195

 

New York City, GO, 5.00%, 3/1/33, Ser. I

 

A1/A+

 

7,391,783

 

 

5,000

 

New York City Muni. Water Finance Auth., Water & Sewer System Rev., 5.00%, 6/15/32, Ser. A

 

Aa2/AA+

 

5,151,900

 

 

1,750

 

New York City Transitional Finance Auth., GO, 5.375%, 3/1/27, Ser. 1

 

A1/A+

 

1,880,795

 

 

2,995

 

New York Counties Tobacco Settlement Trust Rev., 5.625%, 6/1/35

 

Ba1/BBB

 

3,142,833

 

 

1,000

 

Niagara Falls Public Water Auth., Water & Sewer System Rev., 5.00%, 7/15/34, Ser. A (MBIA)

 

Aaa/AAA

 

1,041,100

 

 

1,855

 

Sachem Central School Dist., GO, 5.00%, 6/15/30 (MBIA)

 

Aaa/AAA

 

1,940,423

 

 

 

 

State Dormitory Auth. Rev., 1,400

 

 

 

 

 

 

1,400

 

Catholic Health of Long Island, 5.10%, 7/1/34

 

Baa1/BBB

 

1,433,600

 

 

2,000

 

Columbia Univ., 5.00%, 7/1/24, Ser.A

 

Aaa/AAA

 

2,127,760

 

 

2,250

 

Jewish Board Family & Children, 5.00%, 7/1/33 (AMBAC)

 

Aaa/AAA

 

2,342,070

 

 

2,000

 

Kaleida Health Hospital, 5.05%, 2/15/25 (FHA)

 

NR/AAA

 

2,117,280

 

 

4,500

 

Lenox Hill Hospital, 5.50%, 7/1/30

 

Ba2/NR

 

4,663,440

 

 

2,040

 

Long Island Univ. 5.00%, 9/1/23, Ser. A (Radian)

 

Baa3/AA

 

2,117,051

 

 

4,000

 

Long Island Univ. 5.00%, 9/1/32, Ser. A (Radian)

 

Baa3/AA

 

4,115,040

 

 

3,000

 

Lutheran Medical Hospital, 5.00%, 8/1/31 (MBIA-FHA)

 

Aaa/AAA

 

3,111,450

 

 

2,000

 

Mount St. Mary College 5.00%, 7/1/27 (Radian)

 

NR/AA

 

2,077,860

 

 

2,000

 

Mount St. Mary College 5.00%, 7/1/32 (Radian)

 

NR/AA

 

2,063,280

 

 

1,000

 

New York Univ., 5.00%, 7/1/31, Ser. 2 (AMBAC)

 

Aaa/AAA

 

1,035,200

 

 

6,150

 

North General Hospital, 5.00%, 2/15/25

 

NR/AA–

 

6,367,833

 

 

1,000

 

North Shore L.I. Jewish Group, 5.50%, 5/1/33

 

A3/NR

 

1,063,530

 

 

1,000

 

NY & Presbyterian Hospital Rev., 4.75%, 8/1/27 (AMBAC-FHA)

 

Aaa/AAA

 

1,012,800

 

 

3,740

 

Saint Barnabas Hospital, 5.00%, 2/1/31, Ser. A (AMBAC-FHA)

 

Aaa/AAA

 

3,870,788

 

 

1,000

 

School Dist. Financing, 5.00%, 10/1/30, Ser. D (MBIA)

 

Aaa/AAA

 

1,043,090

 

 

1,250

 

Skidmore College, 5.00%, 7/1/28 (FGIC)

 

Aaa/NR

 

1,314,963

 

 

2,500

 

Sloan-Kettering Center Memorial, 5.00%, 7/1/34, Ser. 1

 

Aa2/AA

 

2,577,450

 

 

3,600

 

State Personal Income Tax, 5.00%, 3/15/32, (Pre-refunded @ $100, 3/15/13) (a)

 

A1/AA

 

3,928,968

 


 

20     PIMCO Municipal Income Funds III Annual Report | 9.30.05

 



PIMCO New York Municipal Income Fund III Schedule of Investments

September 30, 2005

Principal
Amount
(000)

 

 

 

Credit Rating
(Moody’s/S&P)*

 

Value

 

$

1,250

 

Student Housing Corp., 5.125%, 7/1/34 (FGIC)

 

Aaa/AAA

 

$

1,325,313

 

 

1,500

 

Teachers College, 5.00%, 7/1/32 (MBIA)

 

Aaa/NR

 

 

1,559,880

 

 

620

 

Winthrop Univ., Hospital Association, 5.50%, 7/1/32, Ser. A

 

Baa1/NR

 

 

650,591

 

 

2,500

 

Winthrop-Nassau Univ., 5.75%, 7/1/28

 

Baa1/NR

 

 

2,663,450

 

 

2,000

 

Yeshiva Univ., 5.125%, 7/1/34 (AMBAC)

 

Aaa/NR

 

 

2,120,500

 

 

1,900

 

State Urban Dev. Corp. Personal Income Tax Rev.,
5.00%, 3/15/33, Ser. C-1 (Pre-refunded @ $100, 3/15/13) (a)

 

A1/AA

 

 

2,073,622

 

 

2,000

 

Warren & Washington Counties Industrial Dev. Agcy. Fac. Rev.,
Glens Falls Hospital, 5.00%, 12/1/35, Ser. A (FSA)

 

Aaa/AAA

 

 

2,078,600

 

 

1,250

 

Westchester Cnty. Industrial Dev. Agcy. Continuing Care
Retirement Rev., Kendal on Hudson, 6.50%, 1/1/34

 

NR/NR

 

 

1,300,987

 

 

 

 

Total New York Municipal Bonds & Notes (cost–$94,244,900)

 

 

 

 

99,097,423

 

 

 

 

 

 

 

 

 

 

 

 

OTHER MUNICIPAL BONDS & NOTES11.8%

 

 

 

 

 

 

 

 

 

California5.0%

 

 

 

 

 

 

 

5,560

 

Golden State Tobacco Securitization Corp. Tobacco Settlement Rev., 6.75%, 6/1/39, Ser. 2003-A-1

 

Baa3/BBB

 

 

6,393,221

 

 

 

 

District Of Columbia0.2%

 

 

 

 

 

 

 

175

 

Tobacco Settlement Financing Corp. Rev., 6.50%, 5/15/33

 

Baa3/BBB

 

 

205,263

 

 

 

 

Puerto Rico5.8%

 

 

 

 

 

 

 

 

 

Children’s Trust Fund, Tobacco Settlement Rev.,

 

 

 

 

 

 

 

1,700

 

5.50%, 5/15/39

 

Baa3/BBB

 

 

1,761,761

 

 

580

 

5.625%, 5/15/43

 

Baa3/BBB

 

 

603,467

 

 

1,000

 

Electric Power Auth., Power Rev., 5.125%, 7/1/29, Ser. NN

 

A3/A–

 

 

1,045,710

 

 

4,000

 

Public Building Auth. Rev., Government Facilities, 5.00%, 7/1/36, Ser. I (GTD)

 

Baa2/BBB

 

 

4,119,600

 

 

 

 

 

 

 

 

 

7,530,538

 

 

 

 

Rhode Island–0.4%

 

 

 

 

 

 

 

500

 

Tobacco Settlement Financing Corp. Rev., 6.125%, 6/1/32, Ser. A

 

Baa3/BBB

 

 

530,895

 

 

 

 

South Carolina–0.3%

 

 

 

 

 

 

 

370

 

Tobacco Settlement Rev. Management Auth., 6.375%, 5/15/30, Ser. B

 

Baa3/BBB

 

 

423,195

 

 

 

 

Washington–0.1%

 

 

 

 

 

 

 

135

 

Tobacco Settlement Auth., Tobacco Settlement Rev., 6.625%,
6/1/32

 

Baa3/BBB

 

 

149,980

 

 

 

 

Total Other Municipal Bonds & Notes (cost–$12,650,031)

 

 

 

 

15,233,092

 

 

 

 

 

 

 

 

 

 

 

 

NEW YORK VARIABLE RATE NOTES (b)(d)(e) –8.9%

 

 

 

 

 

 

 

1,555

 

Metropolitan Transportation Auth. Rev., 11.06%, 11/15/32, Ser. 862 (FGIC)

 

Aaa/NR

 

 

1,824,264

 

 

1,000

 

New York City Trust for Cultural Resources Rev.,13.09%, 2/1/34, Ser. 950 (FGIC)

 

Aaa/NR

 

 

1,217,500

 

 

1,205

 

State Dormitory Auth. Rev., 14.664%, 7/1/32

 

NR/NR

 

 

1,513,552

 


 

9.30.05 | PIMCO Municipal Income Funds III Annual Report     21

 



PIMCO New York Municipal Income Fund III Schedule of Investments

September 30, 2005

Principal
Amount
(000)

 

 

 

Credit Rating
(Moody’s/S&P)*

 

Value

 

 

 

 

State Environmental Facs. Corp. State Clean Water & Drinking Rev.,

 

 

 

 

 

$

1,775

 

12.122%, 7/15/27

 

NR/AAA

 

$    1,976,729

 

 

1,005

 

12.122%, 7/15/28

 

NR/AAA

 

1,127,097

 

 

1,845

 

State Housing Finance Agcy. State Personal Income Tax Rev., 11.05%, 3/15/33, Ser. 859

 

NR/AA

 

2,719,438

 

 

1,000

 

Triborough Bridge & Tunnel Auth. Rev., 11.06%, 11/15/32, Ser. 912 (MBIA)

 

NR/NR

 

1,167,320

 

 

 

 

Total New York Variable Rate Notes (cost–$9,197,700)

 

 

 

11,545,900

 

 

 

 

 

 

 

 

 

 

 

OTHER VARIABLE RATE NOTES (b)(d)(e)–1.1%

 

 

 

 

 

 

 

 

California–1.1%

 

 

 

 

 

 

960

 

State Economic Recovery, GO, 14.46%, 1/1/10, Ser. 935 (cost–$1,264,551)

 

Aa3/NR

 

1,352,880

 

 

 

 

 

 

 

 

 

 

 

NEW YORK VARIABLE RATE DEMAND NOTES (e)(f)–0.9%

 

 

 

 

 

 

100

 

City of New York, GO, 2.80%, 10/3/05

 

VMIG1/A-1+

 

100,000

 

 

850

 

State Dormitory Auth., Cornell Univ. Rev., 2.79%, 10/3/05, Ser. B

 

VMIG1/A-1+

 

850,000

 

 

200

 

State Energy Research & Dev. Auth. Rev., 2.76%, 10/5/05, Ser. A-2

 

VMIG1/A-1+

 

200,000

 

 

 

 

Total New York Variable Rate Demand Notes (cost–$1,150,000)

 

 

 

1,150,000

 

 

 

 

 

 

 

 

 

 

 

U.S. TREASURY BILLS (g)–0.4%

 

 

 

 

 

 

530

 

3.29%-3.43%,12/15/05 (cost–$526,218)

 

 

 

526,218

 

 

 

 

Total Investments before options written (cost–$119,033,400)–100.0%

 

 

 

128,905,513

 

 

 

 

 

 

 

 

 

 

 

OPTIONS WRITTEN (h)–(0.0)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contracts

 

 

 

 

 

 

 

 

 

 

Call Options–(0.0)%

 

 

 

 

 

 

 

 

U.S. Treasury Notes 10 yr. Futures, Chicago Board of Trade,

 

 

 

 

 

 

80

 

strike price $112, expires 11/22/05

 

 

 

(12,500

)

 

107

 

strike price $113, expires 11/22/05

 

 

 

(6,688

)

 

 

 

 

 

 

 

(19,188

)

 

 

 

Put Options–(0.0)%

 

 

 

 

 

 

 

 

U.S. Treasury Notes 5 yr. Futures, Chicago Board of Trade,

 

 

 

 

 

 

141

 

strike price $105.50, expires 11/22/05

 

 

 

(17,625

)

 

118

 

strike price $106, expires 11/22/05

 

 

 

(25,812

)

 

 

 

 

 

 

 

(43,437

)

 

 

 

Total Options Written (premiums received–$121,472)

 

 

 

(62,625

)

 

 

 

Total Investments net of options written (cost–$118,911,928)–100.0%

 

 

 

$128,842,888

 


 

22     PIMCO Municipal Income Funds III Annual Report | 9.30.05

 



PIMCO New York Municipal Income Fund III Schedule of Investments
September 30, 2005

Notes to Schedule of Investments:

*        Unaudited

(a)      Pre-refunded bonds are collateralized by U.S. Government or other eligible securities which are held in escrow and used to pay principal and interest and retire the bonds at the earliest refunding date.

(b)      144A Security – Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, typically only to qualified institutional buyers. Unless otherwise indicated, these securities are not considered to be illiquid.

(c)      When-Issued or delayed-delivery security. To be settled/delivered after September 30, 2005.

(d)      Residual Interest/Tax Exempt Municipal Bonds – The interest rate shown bears an inverse relationship to the interest rate on another security or the value of an index

(e)      Variable Rate Notes – instruments whose interest rates change on specified date (such as a coupon date or interest payment date) and/or whose interest rates vary with changes in a designated base rate (such as the prime interest rate). The rate shown is the rate in effect at September 30, 2005.

(f)       Maturity date shown is date of next call.

(g)      All or partial amount segregated as initial margin on futures contracts.

(h)      Non-income producing.

Glossary:

AMBAC – insured by American Municipal Bond Assurance Corp.

CA St. Mtg. – insured by California State Mortgage

CIFG – insured by CDC IXIS Financial Guaranty Services, Inc.

CP – Certificates of Participation

FGIC – insured by Financial Guaranty Insurance Co.

FHA – insured by Federal Housing Administration

FSA – insured by Financial Security Assurance, Inc.

GNMA – insured by Government National Mortgage Association

GO – General Obligation Bond

GTD – Guaranteed.

MBIA – insured by Municipal Bond Investors Assurance

NR – Not Rated

PSF – Public School Fund

Radian – insured by Radian Guaranty, Inc.

XLCA – insured by XL Capital Assurance


 

See accompanying Notes to Financial Statements | 9.30.05 | PIMCO Municipal Income Funds III Annual Report     23

 



PIMCO Municipal Income Fund III Statements of Assets and Liabilities
September 30, 2005

 

 

Municipal III

 

California
Municipal III

 

New York  
Municipal III  

Assets:

 

 

 

 

 

 

 

 

 

Investments, at value (cost–$697,573,554, $459,609,559 and $119,033,400, respectively)

 

$744,707,137

 

 

$495,245,673

 

 

$128,905,513

 

Cash

 

450,930

 

 

711,287

 

 

843,217

 

Interest receivable

 

11,207,708

 

 

7,186,017

 

 

1,589,568

 

Receivable for variation margin on futures contracts

 

391,359

 

 

147,094

 

 

43,734

 

Receivable for investments sold

 

205,000

 

 

 

 

 

Prepaid expenses

 

28,587

 

 

20,581

 

 

12,171

 

Total Assets

 

756,990,721

 

 

503,310,652

 

 

131,394,203

 

Liabilities:

 

 

 

 

 

 

 

 

 

Payable for investments purchased

 

26,076,661

 

 

 

 

1,715,648

 

Dividends payable to common and preferred shareholders

 

2,641,622

 

 

1,732,884

 

 

450,183

 

Options written, at value (premiums received–$682,598, $578,422, and $121,472)

 

350,437

 

 

298,469

 

 

62,625

 

Investment management fees payable

 

300,739

 

 

207,210

 

 

53,403

 

Accrued expenses

 

133,896

 

 

109,507

 

 

69,736

 

Total Liabilities

 

29,503,355

 

 

2,348,070

 

 

2,351,595

 

Preferred shares ($25,000 net asset and liquidation value per share applicable to an aggregate of 10,800, 7,400 and 1,880 shares issued and outstanding, respectively)

 

270,000,000

 

 

185,000,000

 

 

47,000,000

 

Net Assets Applicable to Common Shareholders

 

$457,487,366

 

 

$315,962,582

 

 

$82,042,608

 

Composition of Net Assets Applicable to Common Shareholders:

 

 

 

 

 

 

 

 

 

Common Stock:

 

 

 

 

 

 

 

 

 

Par value ($0.00001 per share)

 

$312

 

 

$213

 

 

$55

 

Paid-in-capital in excess of par

 

442,373,653

 

 

302,986,671

 

 

77,425,271

 

Undistributed (dividends in excess of) net investment income

 

(466,693

)

 

2,145,768

 

 

189,610

 

Accumulated net realized loss on investments

 

(34,035,509

)

 

(26,526,434

)

 

(5,993,554

)

Net unrealized appreciation of investments, futures contracts and options written

 

49,615,603

 

 

37,356,364

 

 

10,421,226

 

Net Assets Applicable to Common Shareholders

 

$457,487,366

 

 

$315,962,582

 

 

$82,042,608

 

Common Shares Outstanding

 

31,154,801

 

 

21,346,804

 

 

5,459,884

 

Net Asset Value Per Common Share

 

$14.68

 

 

$14.80

 

 

$15.03

 


 

24  PIMCO Municipal Income Funds III Annual Report | 9.30.05 | See accompanying Notes to Financial Statements

 



PIMCO Municipal Income Funds III Statements of Operations

For the year ended September 30, 2005

 

 

Municipal III

 

    California
Municipal III

 

    New York
Municipal III

Investment Income:

 

 

 

 

 

 

 

 

 

 

 

 

Interest

 

$39,965,247

 

 

$27,670,827

 

 

$7,139,280

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Investment management fees

 

 

4,713,391

 

 

 

3,226,071

 

 

 

833,680

 

Auction agent fees and commissions

 

 

701,569

 

 

 

473,420

 

 

 

123,593

 

Reports and notices to shareholders

 

 

87,783

 

 

 

65,450

 

 

 

21,712

 

Custodian and accounting agent fees

 

 

117,102

 

 

 

105,689

 

 

 

99,437

 

Audit and tax services

 

 

56,769

 

 

 

48,600

 

 

 

33,417

 

Trustees' fees and expenses

 

 

49,224

 

 

 

39,740

 

 

 

17,140

 

Transfer agent fees

 

 

35,100

 

 

 

34,350

 

 

 

34,250

 

New York Stock Exchange listing fees

 

 

28,498

 

 

 

23,452

 

 

 

24,399

 

Legal fees

 

 

19,969

 

 

 

15,620

 

 

 

1,680

 

Investor relations

 

 

15,249

 

 

 

9,660

 

 

 

2,634

 

Insurance expense

 

 

14,134

 

 

 

10,850

 

 

 

4,180

 

Miscellaneous

 

 

10,988

 

 

 

10,095

 

 

 

7,924

 

Total expenses

 

 

5,849,776

 

 

 

4,062,997

 

 

 

1,204,046

 

Less: investment management fees waived

 

 

(1,087,705

)

 

 

(744,478

)

 

 

(192,387

)

 custody credits earned on cash balances

 

 

(52,892

)

 

 

(45,074

)

 

 

(5,299

)

Net expenses

 

 

4,709,179

 

 

 

3,273,445

 

 

 

1,006,360

 

Net Investment Income

 

 

35,256,068

 

 

 

24,397,382

 

 

 

6,132,920

 

Realized and Change in Unrealized Gain (Loss):

 

 

 

 

 

 

 

 

 

 

 

 

Net realized gain (loss) on:

 

 

 

 

 

 

 

 

 

 

 

 

Investments

 

 

349,222

 

 

 

(1,711,556

)

 

 

53,147

 

Futures contracts

 

 

(27,873,617

)

 

 

(18,863,236

)

 

 

(4,982,640

)

Options written

 

 

5,372,472

 

 

 

4,086,169

 

 

 

1,252,551

 

Net change in unrealized appreciation/depreciation on:

 

 

 

 

 

 

 

 

 

 

 

 

Investments

 

 

26,912,125

 

 

 

26,068,304

 

 

 

5,959,874

 

Futures contracts

 

 

5,768,665

 

 

 

3,620,811

 

 

 

924,682

 

Options written

 

 

725,066

 

 

 

547,433

 

 

 

122,856

 

Net realized and change in unrealized gain on investments, futures contracts and options written

 

 

11,253,933

 

 

 

13,747,925

 

 

 

3,330,470

 

Net Increase In Net Assets Resulting From Investment Operations

 

 

46,510,001

 

 

 

38,145,307

 

 

 

9,463,390

 

Dividends on Preferred Shares from Net Investment Income

 

 

(5,463,958

)

 

 

(3,236,012

)

 

 

(861,214

)

Net Increase in Net Assets Applicable to Common Shareholders Resulting from Investment Operations

 

$41,046,043

 

 

$34,909,295

 

 

$8,602,176

 


 

See accompanying Notes to Financial Statements | 9.30.05 | PIMCO Municipal Income Funds III Annual Report     25

 



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

 

 

 

Municipal III

 

 

Year ended
September 30,
2005

 

 

Year ended
September 30,
2004

 

Investment Operations:

 

 

 

 

 

 

 

Net investment income

$35,256,068

$36,644,049

 

Net realized loss on investments, futures contracts and options written

 

 

(22,151,923

)

 

 

(9,484,779

)

Net change in unrealized appreciation/depreciation of investments, futures contracts and options written

 

 

33,405,856

 

 

 

16,242,968

 

Net increase in net assets resulting from investment operations

 

 

46,510,001

 

 

 

43,402,238

 

Dividends on Preferred Shares from Net Investment Income

 

 

(5,463,958

)

 

 

(2,729,318

)

Net increase in net assets applicable to common shareholders resulting from investment operations

 

 

41,046,043

 

 

 

40,672,920

 

Dividends to Common Shareholders from Net Investment Income

 

 

(30,996,914

)

 

 

(30,938,077

)

Capital Share Transactions:

 

 

 

 

 

 

 

 

Reinvestment of dividends

 

 

1,759,714

 

 

 

774,444

 

Total increase in net assets applicable to common shareholders

 

 

11,808,843

 

 

 

10,509,287

 

Net Assets Applicable to Common Shareholders:

 

 

 

 

 

 

 

 

Beginning of year

 

 

445,678,523

 

 

 

435,169,236

 

End of year (including undistributed (dividends in excess of) net investment income of $(466,693) and $738,111; $2,145,768 and $1,444,173; $189,610 and $150,878; respectively)

 

$457,487,366

 

 

$445,678,523

 

Common Shares Issued in Reinvestment of Dividends:

 

 

119,628

 

 

 

54,453

 


 

26      PIMCO Municipal Income Funds III Annual Report | 9.30.05 | See accompanying Notes to Financial Statements

 



 

California Municipal III

 

New York Municipal III

 

Year ended
September 30,
2005

 

 

Year ended
September 30,
2004

 

 

Year ended
September 30,
2005

 

 

Year ended
September 30,
2004

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$24,397,382

 

 

$26,077,373

 

 

$6,132,920

 

 

$6,452,854

 

 

 

(16,488,623

)

 

 

(7,318,670

)

 

 

(3,676,942

)

 

 

(3,177,694

)

 

 

30,236,548

 

 

 

18,295,781

 

 

 

7,007,412

 

 

 

3,833,474

 

 

 

38,145,307

 

 

 

37,054,484

 

 

 

9,463,390

 

 

 

7,108,634

 

 

 

(3,236,012

)

 

 

(1,861,708

)

 

 

(861,214

)

 

 

(447,012

)

 

 

34,909,295

 

 

 

35,192,776

 

 

 

8,602,176

 

 

 

6,661,622

 

 

 

(20,459,775

)

 

 

(20,442,079

)

 

 

(5,233,023

)

 

 

(5,226,323

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

652,960

 

 

 

829,949

 

 

 

208,100

 

 

 

55,399

 

 

 

15,102,480

 

 

 

15,580,646

 

 

 

3,577,253

 

 

 

1,490,698

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

300,860,102

 

 

 

285,279,456

 

 

 

78,465,355

 

 

 

76,974,657

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$315,962,582

 

 

$300,860,102

 

 

$82,042,608

 

 

$78,465,355

 

 

 

43,899

 

 

 

60,821

 

 

 

13,815

 

 

 

3,789

 


 

See accompanying Notes to Financial Statements | 9.30.05 | PIMCO Municipal Income Funds III Annual Report     27



PIMCO Municipal Income Funds III Notes to Financial Statements
September 30, 2005

1. Organization and Significant Accounting Policies

PIMCO Municipal Income Fund IIII ("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 closed-end management investment companies registered under the Investment Company Act of 1940 and the rules and regulations there under, as amended. Allianz Global Investors Fund Management LLC (the "Investment Manager"), serves as the Funds' Investment Manager and is an indirect wholly-owned subsidiary of Allianz Global Investors of America L.P. ("Allianz Global"). Allianz Global is an indirect, majority-owned subsidiary of Allianz AG. The Fund has an unlimited amount of $0.00001 par value common stock authorized.

Municipal III invests substantially all of its assets in a portfolio of municipal bonds, the interest from which is exempt from federal income taxes. 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. 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 seek to avoid 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.

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 financial statements. Actual results could differ from those estimates.

In the normal course of business, the Funds enter into contracts that contain a variety of representations which 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 based upon events that have not yet been asserted. However, the Funds expect the risk of any loss to be remote.

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. Portfolio securities and other financial instruments for which market quotations are not readily available or if a development/event occurs that may significantly impact the value of a security may be fair-valued, in good faith, pursuant to guidelines established by the Board of Trustees. The Funds' investments are valued daily by an independent pricing service. The independent pricing service uses information provided by market makers or estimates of market values obtained from yield data relating to investments or securities with similar characteristics. Exchange traded options and futures are valued at the settlement price determined by the relevant exchange. Short-term investments maturing in 60 days or less are valued at amortized cost, if their original 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. Securities purchased on a when-issued or delayed-delivery basis are marked to market daily until settlement at the forward settlement value. The prices used by the Funds to value securities may differ from the value that would be realized if the securities were sold and the differences could be material to the financial statements. The Funds' net asset values are determined daily at the close of regular trading (normally 4:00 p.m. Eastern time) on the New York Stock Exchange.

(b) Investment Transactions and Investment Income

Investment transactions are accounted for on the trade date. Realized gains and losses on investments are determined on the identified cost basis. Interest income is recorded on an accrual basis. Original issue discounts or premiums on debt securities purchased are accreted or amortized daily to non-taxable interest income. Market discount, if any, is accreted daily to taxable income.

(c) 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. In addition, by distributing substantially all of their taxable ordinary income and long-term capital gains, if any, during each calendar year, the Funds intend not to be subject to U.S. federal excise tax.


 

28     PIMCO Municipal Income Funds III Annual Report | 9.30.05

 



PIMCO Municipal Income Funds III Notes to Financial Statements
September 30, 2005

1. Organization and Significant Accounting Policies (continued)

(d) 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. Each Fund records dividends and distributions to its 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.

(e) Futures Contracts

A futures contract is an agreement between two parties to buy and sell a financial instrument at a set price on a future date. Upon entering into such a contract, the Funds are required to pledge to the broker an amount of cash or securities, equal to the minimum "initial margin" requirements of the exchange. Pursuant to the contracts, the Funds agree to receive from or pay to the broker an amount of cash or securities equal to the daily fluctuation in the value of the contracts. Such receipts or payments are known as "variation margin" and are recorded by the Funds as unrealized appreciation or depreciation. When the contracts are closed, the Funds record a realized gain or loss equal to the difference between the value of the contracts at the time they were opened and the value at the time they were closed. Any unrealized appreciation or depreciation recorded is simultaneously reversed. The use of futures transactions involves the risk of an imperfect correlation in the movements in the price of futures contracts, interest rates and the underlying hedged assets, and the possible inability of counterparties to meet the terms of their contracts.

(f) Option Transactions

The Funds may purchase and write (sell) put and call options for hedging purposes, risk management purposes or as part of its investment strategy. The risk associated with purchasing an option is that the Funds pay a premium whether or not the option is exercised. Additionally, the Funds bear the risk of loss of premium and change in market value should the counterparty not perform under the contract. Put and call options purchased are accounted for in the same manner as portfolio securities. The cost of securities acquired through the exercise of call options is increased by the premiums paid. The proceeds from securities sold through the exercise of put options is decreased by the premiums paid.

When an option is written, the premium received is recorded as an asset with an equal liability and is subsequently marked to market to reflect the current market value of the option written. These liabilities are reflected as options written in the Statement of Assets and Liabilities. Premiums received from writing options which expire unexercised are recorded on the expiration date as a realized gain. The difference between the premium received and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain, or if the premium is less than the amount paid for the closing purchase transaction, as a realized loss. If a call option is exercised, the premium is added to the proceeds from the sale of the underlying security in determining whether there has been a realized gain or loss. If a put option is exercised, the premium reduces the cost basis of the security. In writing an option, the Funds bear the market risk of an unfavorable change in the price of the security underlying the written option. Exercise of a written option could result in the Funds purchasing a security at a price different from the current market.

(g) Residual Interest Municipal Bonds ("Ribs")/Residual Interest Tax Exempt Bonds ("RITES")

The Funds invest in RIBS and RITES whose interest rates bear an inverse relationship to the interest rate on another security or the value of an index. RIBS and RITES 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 normally every seven 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 interest rates result in lower income for the longer-term portion, and visa versa. The longer-term bonds may be more volatile and less liquid than other municipal bonds of comparable maturity. Investments in RIBS and RITES typically will involve greater risk than an investment in a fixed-rate bond.

(h) When-Issued/Delayed-Delivery Transactions

The Funds may purchase or sell securities on a when-issued or delayed-delivery basis. The transactions involve a commitment to purchase or sell securities for a predetermined price or yield, with payment and delivery taking place


 

9.30.05 | PIMCO Municipal Income Funds III Annual Report     29

 



PIMCO Municipal Income Funds III Notes to Financial Statements
September 30, 2005

1. Organization and Significant Accounting Policies (continued)

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, and takes such fluctuations into account when determining its 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 on a delayed-delivery basis is sold, the Fund do not participate in future gains and losses with respect to the security.

(i) Custody Credits Earned 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.

2. Investment Manager/Sub-Adviser

Each Fund has entered into an Investment Management Agreement (the “Agreements”) with the Investment Manager. Subject to the supervision by each Fund’s 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 monthly, at the 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 has contractually agreed to waive a portion of its investment management fee for each Fund at the annual rate of 0.15% of each Fund’s average daily net assets, including net assets attributable to any preferred shares that may be outstanding, from the commencement of operations through October 31, 2007, and for a declining amount thereafter through October 31, 2009.

The Investment Manager has retained its affiliate, Pacific Investment Management Company LLC (the “Sub-Adviser”) to manage each Fund’s investments. Subject to the supervision of the Investment Manager, the Sub-Adviser makes all investment decisions for the Funds. The Investment Manager, not the Funds, pays a portion of the fees it receives to the Sub-Adviser in return for its services, at the maximum annual rate of 0.50% of each Funds average daily net assets, inclusive of net assets attributable to any preferred shares that may be outstanding. The Sub-Adviser has contractually agreed to waive a portion of the fees it is entitled to receive from the Investment Manager, such that the Sub-Adviser will receive 0.26% of each Fund’s average daily net assets, including net assets attributable to any preferred shares that may be outstanding, from the commencement of the Funds’ operations through October 31, 2007, and will receive an increasing amount not to exceed 0.50% of each Fund’s average daily net assets, including net assets attributable to any preferred shares that may be outstanding thereafter through October 31, 2009. The Investment Manager informed the Funds that it paid the Sub-Adviser $1,885,356, $1,290,428 and $333,472 in connection with sub-advisory services for Municipal III, California Municipal III, and New York Municipal III, respectively, for the year ended September 30, 2005.

3. Investments in Securities

(a)

For the year ended September 30, 2005, purchases and sales of investments, other than short-term securities, were:

 

 

 

Municipal III

 

California
Municipal III

 

New York
Municipal III

Purchases

 

$92,150,991

 

$38,721,308

 

$7,793,970

Sales

 

60,196,793

 

41,590,825

 

6,494,263


 

30     PIMCO Municipal Income Funds III Annual Report | 9.30.05

 



PIMCO Municipal Income Funds III Notes to Financial Statements
September 30, 2005

3. Investments in Securities (continued)

(b) Futures contracts outstanding at September 30, 2005:

 

Fund

 

Type

 

Notional
Amount
(000)

 

Expiration
Date

 

Unrealized
Appreciation
(Depreciation)

Municipal III

 

Long:

U.S. Treasury Notes 5 yr. Futures

 

$39,600

 

12/20/05

 

 

$ (142,313

)

 

 

Short:

U.S. Treasury Notes 10 yr. Futures

 

 

(17,900

)

12/20/05

 

 

253,766

 

 

 

 

U.S. Treasury Bond Futures

 

 

(115,100

)

12/20/05

 

 

2,038,406

 

 

 

 

 

 

 

 

 

 

 

 

$2,149,859

 

California Municipal III

 

Long:

U.S. Treasury Notes 5 yr. Futures

 

$35,400

 

12/20/05

 

 

$ (127,219

)

 

 

Short:

U.S. Treasury Notes 10 yr. Futures

 

 

(16,600

)

12/20/05

 

 

235,110

 

 

 

 

U.S. Treasury Bond Futures

 

 

(48,300

)

12/20/05

 

 

1,332,406

 

 

 

 

 

 

 

 

 

 

 

 

$1,440,297

 

New York Municipal III

 

Long:

U.S. Treasury Notes 5 yr. Futures

 

$14,700

 

12/20/05

 

 

$ (52,828

)

 

 

Short:

U.S. Treasury Notes 10 yr. Futures

 

 

(8,300

)

12/20/05

 

 

117,094

 

 

 

 

U.S. Treasury Bond Futures

 

 

(14,200

)

12/20/05

 

 

426,000

 

 

 

 

 

 

 

 

 

 

 

 

$490,266

 

(c) Transactions in options written for the year ended September 30, 2005:

 

 

 

Contracts

 

Premiums

 

Municipal III:

 

 

 

 

 

 

Options outstanding, September 30, 2004

 

1,541

 

 

$2,562,908

 

Options written

 

12,256

 

 

11,403,013

 

Options expired

 

(4,156

)

 

(3,024,195

)

Options terminated in closing purchase transactions

 

(7,147

)

 

(10,259,128

)

Options outstanding, September 30, 2005

 

2,494

 

 

$682,598

 

 

 

 

 

 

 

 

California Municipal III:

 

 

 

 

 

 

Options outstanding, September 30, 2004

 

1,010

 

 

$1,708,832

 

Options written

 

10,334

 

 

10,249,640

 

Options expired

 

(2,344

)

 

(1,739,986

)

Options terminated in closing purchase transactions

 

(6,875

)

 

(9,640,064

)

Options outstanding, September 30, 2005

 

2,125

 

 

$578,422

 

 

 

 

 

 

 

 

New York Municipal III:

 

 

 

 

 

 

Options outstanding, September 30, 2004

 

315

 

 

$477,084

 

Options written

 

2,869

 

 

2,552,414

 

Options expired

 

(918

)

 

(637,680

)

Options terminated in closing purchase transactions

 

(1,820

)

 

(2,270,346

)

Options outstanding, September 30, 2005

 

446

 

 

$121,472

 

4. Income Tax Information

Municipal III:

The tax character of dividends paid was:

 

 

Year ended
September 30, 2005

 

Year ended
September 30, 2004

Ordinary Income

 

 $823,483

 

 

 $682,286

 

Tax Exempt Income

 

$35,637,389

 

 

$32,985,109

 

At September 30, 2005, Municipal III did not have any distributable earnings.


 

9.30.05 | PIMCO Municipal Income Funds III Annual Report     31

 



PIMCO Municipal Income Funds III Notes to Financial Statements
September 30, 2005

 

4. Income Tax Information (continued)

At September 30, 2005, Municipal III had a capital loss carryforward of $19,523,357, ($2,344,397 of which will expire in 2012 and $17,178,960 which will expire in 2013), available as a reduction, to the extent provided in the regulations, of any future net realized capital gains. To the extent that these losses are used to offset future realized capital gains, such gains will not be distributed.

In accordance with U.S. Treasury regulations, Municipal III elected to defer realized capital losses arising after October 31, 2004 of $12,030,128. Such losses are treated for tax purposes as arising on October 1, 2005.

 

California Municipal III:

 

 

 

 

The tax character of dividends paid was:

 

 

 

 

 

 

Year ended
September 30, 2005

 

Year ended
September 30, 2004

Ordinary Income

 

$482,924

 

 

$365,952

 

Tax Exempt Income

 

$23,212,863

 

 

$21,937,835

 


At September 30, 2005, the tax character of distributable earnings of $2,145,768 was comprised entirely of tax exempt income.

At September 30, 2005, California Municipal III had a capital loss carryforward of $15,461,366 ($3,952,407 of which will expire in 2012 and $11,508,959 of which will expire in 2013), available as a reduction, to the extent provided in the regulations, of any future net realized capital gains. To the extent that these losses are used to offset future realized capital gains, such gains will not be distributed.

In accordance with U.S. Treasury regulations, California Municipal III elected to defer realized capital losses arising after October 31, 2004 of $9,344,818. Such losses are treated for tax purposes as arising on October 1, 2005.

 

New York Municipal III:

 

 

 

 

The tax character of dividends paid was:

 

 

 

 

 

 

Year ended
September 30, 2005

 

Year ended
September 30, 2004

Ordinary Income

 

$65,871

 

 

$36,347

 

Tax Exempt Income

 

$6,028,366

 

 

$5,636,988

 


At September 30, 2005, the tax character of distributable earnings of $189,610 was comprised entirely of tax exempt income.

At September 30, 2005, New York Municipal III had a capital loss carryforward of $3,540,491 ($5,578 of which will expire in 2012 and $3,534,913 of which will expire in 2013), available as a reduction, to the extent provided in the regulations, of any future net realized capital gains. To the extent that these losses are used to offset future realized capital gains, such gains will not be distributed.

In accordance with U.S. Treasury regulations, New York Municipal III elected to defer realized capital losses arising after October 31, 2004 of $1,903,950. Such losses are treated for tax purposes as arising on October 1, 2005.

The cost of investments for federal income tax purposes and gross unrealized appreciation and gross unrealized depreciation of investments at September 30, 2005 were:

 

 

 

Cost of
Investments

 

Gross
Unrealized
Appreciation

 

Gross
Unrealized
Depreciation

 

Net
Unrealized
Appreciation

Municipal III

 

$697,573,559

 

 

$47,970,769

 

 

 

$(837,191)

 

 

$47,133,578

 

California Municipal III

 

 

459,609,559

 

 

 

36,076,567

 

 

 

(440,453)

 

 

 

35,636,114

 

New York Municipal III

 

 

119,033,400

 

 

 

9,903,372

 

 

 

(31,259)

 

 

 

9,872,113

 


The difference, if any, between book and tax basis unrealized appreciation/depreciation is attributable to wash sales.

5. Auction Preferred Shares

Municipal III has issued 2,160 shares of Preferred Shares Series A, 2,160 shares of Preferred Shares Series B, 2,160 shares of Preferred Shares Series C, 2,160 shares of Preferred Shares Series D and 2,160 shares of Preferred Shares Series E, each with a net asset and liquidation value of $25,000 per share plus accrued dividends.

 

32     PIMCO Municipal Income Funds III Annual Report | 9.30.05

 



PIMCO Municipal Income Funds III Notes to Financial Statements
September 30, 2005

5. Auction Preferred Shares (continued)

California Municipal III has issued 3,700 shares of Preferred Shares Series A, 3,700 shares of Preferred Shares Series B each with a net asset and liquidation value of $25,000 per share plus accrued dividends.

New York Municipal III has issued 1,880 shares of Preferred Shares Series A with a net asset and liquidation value of $25,000 per share plus accrued dividends.

Dividends are accumulated daily at an annual rate set through auction procedures. Distributions of net realized capital gains, if any, are paid annually.

For the year ended September 30, 2005, the annualized dividend rates ranged from:

 

    High     Low     At September 30, 2005

Municipal III:

 

 

 

 

 

 

 

 

Series A

 

2.80

%

 

1.47

%

 

2.51%

Series B

 

2.80

%

 

1.39

%

 

2.49%

Series C

 

2.70

%

 

1.50

%

 

2.20%

Series D

 

2.75

%

 

1.20

%

 

2.25%

Series E

 

2.85

%

 

1.20

%

 

2.25%

California Municipal III:

 

 

 

 

 

 

 

 

Series A

 

2.60

%

 

0.95

%

 

2.60%

Series B

 

2.55

%

 

0.80

%

 

2.12%

New York Municipal III:

 

 

 

 

 

 

 

 

Series A

 

2.75

%

 

1.15

%

 

2.60%


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 triggering the mandatory redemption of Preferred Shares at their liquidation value.

Preferred Shares, which are entitled to one vote per share, generally vote separately as a class to elect two Trustees and on any matters affecting the rights of the Preferred Shares.

6. Subsequent Common Dividend Declarations

On October 3, 2005, the following dividends were declared to common shareholders payable November 1, 2005 to shareholders of record on October 21, 2005:

 

Municipal III

 

$0.0831 per common share

 

California Municipal III

 

$0.08 per common share

 

New York Municipal III

 

$0.08 per common share

 


On November 1, 2005, the following dividends were declared to common shareholders payable December 1, 2005 to shareholders of record on November 18, 2005:

 

Municipal III

 

$0.0831 per common share

 

California Municipal III

 

$0.08 per common share

 

New York Municipal III

 

$0.08 per common share

 


7. Legal Proceedings

On September 13, 2004, the Securities and Exchange Commission (“SEC”) announced that Allianz Global Investors Fund Management LLC (the “Investment Manager”) and certain of its affiliates (the “Affiliates”) had agreed to a settlement of charges that they and certain of their officers had, among other things, violated various antifraud provisions of the federal securities laws in connection with an alleged market-timing arrangement involving trading of shares of certain open-end investment companies (“open-end funds”) advised or distributed by these certain affiliates. In their settlement with the SEC, the Affiliates consented to the entry of an order by the SEC and, without admitting or denying the findings contained in the order, agreed to implement certain compliance and governance changes and consented to cease-and-desist orders and censures. In addition, the Affiliates agreed to pay civil money


 

9.30.05 | PIMCO Municipal Income Funds III Annual Report     33

 



PIMCO Municipal Income Funds III Notes to Financial Statements
September 30, 2005

7. Legal Proceedings (continued)

penalties in the aggregate amount of $40 million and to pay disgorgement in the amount of $10 million, for an aggregate payment of $50 million. In connection with the settlement, the Affiliates have been dismissed from the related complaint the SEC filed on May 6, 2004 in the U.S. District Court in the Southern District of New York. Neither the complaint nor the order alleges any inappropriate activity took place with respect to the Fund.

In a related action on June 1, 2004, the Attorney General of the State of New Jersey (“NJAG”) announced that it had entered into a settlement agreement with Allianz Global Investors of America L.P. (formerly, Allianz Dresdner Asset Management of America L.P.) (“AGI”), an indirect parent of the Investment Manager and the Affiliates, in connection with a complaint filed by the NJAG on February 17, 2004. In the settlement, AGI and other named affiliates neither admitted nor denied the allegations or conclusions of law, but did agree to pay New Jersey a civil fine of $15 million and $3 million for investigative costs and further potential enforcement initiatives against unrelated parties. They also undertook to implement certain governance changes. The complaint relating to the settlement contained allegations arising out of the same matters that were the subject of the SEC order regarding market-timing described above and does not allege any inappropriate activity took place with respect to the Fund.

On September 15, 2004, the SEC announced that the Affiliates had agreed to settle an enforcement action in connection with charges that they violated various antifraud and other provisions of federal securities laws as a result of, among other things, their failure to disclose to the board of trustees and shareholders of various open-end funds advised or distributed by the Affiliates material facts and conflicts of interest that arose from their use of brokerage commissions on portfolio transactions to pay for so-called “shelf space” arrangements with certain broker-dealers. In their settlement with the SEC, the Affiliates consented to the entry of an order by the SEC without admitting or denying the findings contained in the order. In connection with the settlement, the Affiliates agreed to undertake certain compliance and disclosure reforms and consented to cease-and-desist orders and censures. In addition, the Affiliates agreed to pay a civil money penalty of $5 million and to pay disgorgement of approximately $6.6 million based upon the aggregate amount of brokerage commissions alleged to have been paid by such open-end funds in connection with these shelf-space arrangements (and related interest). In a related action, the California Attorney General announced on September 15, 2004 that it had entered into an agreement with an affiliate of the Investment Manager in resolution of an investigation into matters that are similar to those discussed in the SEC order. The settlement agreement resolves matters described in a complaint filed contemporaneously by the California Attorney General in the Superior Court of the State of California alleging, among other things that this affiliate violated certain antifraud provisions of California law by failing to disclose matters related to the shelf-space arrangements described above. In the settlement agreement, the affiliate did not admit to any liability but agreed to pay $5 million in civil penalties and $4 million in recognition of the California Attorney General’s fees and costs associated with the investigation and related matters. Neither the SEC order nor the California Attorney General’s complaint alleges any inappropriate activity took place with respect to the Fund.

On April 11, 2005, the Attorney General of the State of West Virginia filed a complaint in the Circuit Court of Marshall County, West Virginia (the “West Virginia Complaint”) against the Investment Manager and certain of its Affiliates based on the same circumstances as those cited in the 2004 settlements with the SEC and NJAG involving alleged “market timing” activities described above. The West Virginia Complaint alleges, among other things, that the Investment Manager and certain of its Affiliates improperly allowed broker-dealers, hedge funds and investment advisers to engage in frequent trading of various open-end funds advised or distributed by the Affiliates in violation of the funds’ stated restrictions on “market timing.” The West Virginia Complaint also names numerous other defendants unaffiliated with the Affiliates in separate claims alleging improper market timing and/or late trading of open-end investment companies advised or distributed by such other defendants. The Investment Manager, its Affiliates and the unaffiliated mutual fund defendants removed the proceeding to federal court and are seeking to transfer the action to the Multi-District Litigation currently pending in the U.S. District Court for the District of Maryland, which is described below. The West Virginia Complaint seeks injunctive relief, civil monetary penalties, investigative costs and attorney’s fees. The West Virginia Complaint does not allege that any inappropriate activity took place with respect to the Fund.

Since February 2004, certain of the Affiliates and their employees have been named as defendants in a total of 14 lawsuits filed in one of the following: U.S. District Court in the Southern District of New York, the Central District of California and the Districts of New Jersey and Connecticut. Ten of those lawsuits concern “market timing,” and they have been transferred to and consolidated for pre-trial proceedings in a Multi-District Litigation in the U.S. District Court for the District of Maryland; the remaining four lawsuits concern “revenue sharing” with brokers offering “shelf space” and have been consolidated into a single action in the U.S. District Court for the District of Connecticut. The lawsuits have been commenced as putative class actions on behalf of investors who purchased, held or redeemed shares of affiliated funds during specified periods or as derivative actions on behalf of the funds.


 

34    PIMCO Municipal Income Funds III Annual Report | 9.30.05

 



PIMCO Municipal Income Funds III Notes to Financial Statements
September 30, 2005

7. Legal Proceedings (continued)

The lawsuits generally relate to the same facts that are the subject of the regulatory proceedings discussed above. The lawsuits seek, among other things, unspecified compensatory damages plus interest and, in some cases, punitive damages, the rescission of investment advisory contracts, the return of fees paid under those contracts and restitution. The Investment Manager believes that other similar lawsuits may be filed in federal or state courts naming as defendants the Investment Manager, the Affiliates, AGI, the Fund, other open- and closed-end funds advised or distributed by the Investment Manager and/or its affiliates, the boards of trustees of those funds, and/or other affiliates and their employees. Under Section 9(a) of the 1940 Act, if any of the various regulatory proceedings or lawsuits were to result in a court injunction against the Investment Manager, AGI and/or their affiliates, they and their affiliates would, in the absence of exemptive relief granted by the SEC, be barred from serving as an investment manager/sub-adviser or principal underwriter for any registered investment company, including the Fund. In connection with an inquiry from the SEC concerning the status of the New Jersey settlement described above under Section 9(a), the Investment Manager and certain of its affiliates (together, the “Applicants”) have sought exemptive relief from the SEC under Section 9(c) of the 1940 Act.

The SEC has granted the Applicants a temporary exemption from the provisions of Section 9(a) with respect to the New Jersey settlement until the earlier of (i) September 13, 2006 and (ii) the date on which the SEC takes final action on their application for a permanent order. There is no assurance that the SEC will issue a permanent order. If the West Virginia Attorney General were to obtain a court injunction against the Investment Manager or the Affiliates, the Investment Manager or the Affiliates would, in turn, seek exemptive relief under Section 9(c) with respect to that matter, although there is no assurance that such exemptive relief would be granted.

A putative class action lawsuit captioned Charles Mutchka et al. v. Brent R. Harris, et al., was filed in January 2005 by and on behalf of individual shareholders of certain open-end funds that hold equity securities and that are sponsored by the Investment Manager and the Affiliates. The U.S. District court for the Central District of California dismissed the action with prejudice on June 10, 2005. The plaintiffs alleged that fund trustees, investment manager and affiliates breached fiduciary duties and duties of care by failing to ensure that the open-end funds participated in securities class action settlements for which those funds were eligible. The plaintiffs claimed as damages disgorgement of fees paid to the investment manager, compensatory damages and punitive damages.

The foregoing speaks only as of the date hereof. There may be additional litigation or regulatory developments in connection with the matters discussed above.


 

9.30.05 | PIMCO Municipal Income Funds III Annual Report   35

 



PIMCO Municipal Income Funds III Financial Highlights
For a share of common stock outstanding throughout each period:

 

 

Municipal III

 

 


Year Ended

 

For the period
October 31, 2002*
through
September 30,
2003

 

 

September 30,
2005

 

September 30,
2004

 

Net asset value, beginning of period

$14.36

$14.05

$14.33

**

Investment Operations:

 

 

 

 

 

 

Net investment income

 

1.14

 

1.18

 

0.78

Net realized and unrealized gain (loss) on investments, futures contracts and options written

 

0.36

 

0.22

 

(0.08

)

Total from investment operations

 

1.50

 

1.40

 

0.70

Dividends on Preferred Shares from Net Investment Income:

 

(0.18

)

 

(0.09

)

 

(0.06

)

Net increase in net assets applicable to common shareholders resulting from investment operations

 

1.32

 

1.31

 

0.64

Dividends to Common Shareholders from Net Investment Income:

 

(1.00

)

 

(1.00

)

 

(0.79

)

Capital Share Transactions:

 

 

 

 

 

 

Common stock offering costs charged to paid-in capital in excess of par

 

 

 

(0.03

)

Preferred shares offering costs/underwriting discounts charged to paid-in capital in excess of par

 

 

 

(0.10

)

Total capital share transactions

 

 

 

(0.13

)

Net asset value, end of period

$14.68

$14.36

$14.05

Market price, end of period

$15.49

$14.30

$14.20

Total Investment Return (1)

 

15.95

%

 

8.10

%

 

0.05

%

RATIOS/SUPPLEMENTAL DATA:

 

 

 

 

 

 

Net assets applicable to common shareholders, end of period (000)

$457,487

$445,679

$435,169

Ratio of expenses to average net assets (2)(3)(5)

 

1.03

%

 

1.05

%

 

0.99

%(4)

Ratio of net investment income to average net assets (2)(5)

 

7.74

%

 

8.25

%

 

6.05

%(4)

Preferred shares asset coverage per share

$67,352

$66,261

$65,284

Portfolio turnover

 

9

%

 

20

%

 

62

%

*

Commencement of operations.

**

Initial public offering price of $15.00 per share less underwriting discount of $0.675 per share.

(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 are assumed, for purposes of this calculation, to be reinvested at prices obtained under the Fund'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)

Annualized.

(5)

During the periods indicated above, the Investment manager waived a portion of its investment management fee. If such a waiver had not been in effect, the ratio of expenses to average net assets and the ratio of net investment income to average net assets would have been 1.27% and 7.50%, respectively for the year ended September 30, 2005, 1.29% and 8.01%, respectively for the year ended September 30, 2004 and 1.22% (annualized) and 5.82% (annualized), respectively for the period October 31, 2002 (commencement of operations) through September 30, 2003.


 

36     PIMCO Municipal Income Funds III Annual Report | 9.30.05 | See accompanying Notes to Financial Statements

 



PIMCO Municipal Income Funds III Financial Highlights
For a share of common stock outstanding throughout each period:

 

 

California Municipal III

 

 


Year Ended

 

For the period
October 31, 2002*
through
September 30,
2003

 

 

September 30, 2005

 

September 30, 2004

 

Net asset value, beginning of period

 

 

$14.12

 

 

 

$13.43

 

 

 

$14.33

**

Investment Operations:

 

 

 

 

 

 

Net investment income

 

1.14

 

 

1.23

 

 

0.71

 

Net realized and unrealized gain (loss) on investments, futures contracts and options written

 

0.65

 

 

0.51

 

 

(0.66

)

Total from investment operations

 

1.79

 

 

1.74

 

 

0.05

 

Dividends and Distributions On Preferred Shares from Net Investment Income:

 

(0.15

)

 

(0.09

)

 

(0.06

)

Net increase (decrease) in net assets applicable to common shareholders resulting from investment operations

 

1.64

 

 

1.65

 

 

(0.01

)

Dividends to Common Shareholders from:
Net Investment Income

 

(0.96

)

 

(0.96

)

 

(0.76

)

Capital Share Transactions:

 

 

 

 

 

 

Common stock offering costs charged to paid-in capital in excess of par

 

 

 

 

 

(0.03

)

Preferred shares offering costs/underwriting discounts charged to paid-in capital in excess of par

 

 

 

 

 

(0.10

)

Total capital share transactions

 

 

 

 

 

(0.13

)

Net asset value, end of period

 

 

$14.80

 

 

 

$14.12

 

 

 

$13.43

 

Market price, end of period

 

 

$15.11

 

 

 

$13.74

 

 

 

$13.62

 

Total Investment Return (1)

 

17.48

%

 

8.22

%

 

(4.10

)%

RATIOS/SUPPLEMENTAL DATA:

 

 

 

 

 

 

Net assets applicable to common shareholders, end of period (000)

 

 

$315,963

 

 

 

$300,860

 

 

 

$285,279

 

Ratio of expenses to average net assets (2)(3)(5)

 

1.05

%

 

1.08

%

 

1.01

%(4)

Ratio of net investment income to average net assets (2)(5)

 

7.82

%

 

8.79

%

 

5.63

%(4)

Preferred shares asset coverage per share

 

 

$67,692

 

 

 

$65,650

 

 

 

$63,539

 

Portfolio turnover

 

8

%

 

39

%

 

123

%

*

Commencement of operations.

**

Initial public offering price of $15.00 per share less underwriting discount of $0.675 per share.

(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 are assumed, for purposes of this calculation, to be reinvested at prices obtained under the Fund'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)

Annualized.

(5)

During the periods indicated above, the Investment manager waived a portion of its investment management fee. If such a waiver had not been in effect, the ratio of expenses to average net assets and the ratio of net investment income to average net assets would have been 1.29% and 7.58%, respectively for the year ended September 30, 2005, 1.32% and 8.55%, respectively for the year ended September 30, 2004 and 1.24% (annualized) and 5.40% (annualized), respectively for the period October 31, 2002 (commencement of operations) through September 30, 2003.


 

See accompanying Notes to Financial Statements | 9.30.05 | PIMCO Municipal Income Funds III Annual Report     37

 



PIMCO Municipal Income Fund III Financial Highlights
For a share of common stock outstanding throughout each period:

 

 

New York Municipal III



Year Ended

For the period
October 31, 2002*
through
September 30,
2003

 

 

September 30,
2005

 

September 30,
2004

 

Net asset value, beginning of period

 

$14.41

 

 

$14.14

 

 

$14.33

**

Investment Operations:

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income

 

 

1.13

 

 

 

1.19

 

 

 

0.70

 

Net realized and unrealized gain on investments, futures contracts and options written

 

 

0.61

 

 

 

0.12

 

 

 

0.08

 

Total from investment operations

 

 

1.74

 

 

 

1.31

 

 

 

0.78

 

Dividends On Preferred Shares from Net Investment Income:

 

 

(0.16

)

 

 

(0.08

)

 

 

(0.06

)

Net increase in net assets applicable to common shareholders resulting from investment operations

 

 

1.58

 

 

 

1.23

 

 

 

0.72

 

Dividends to Common Shareholders : from Net Investment Income:

 

 

(0.96

)

 

 

(0.96

)

 

 

(0.76

)

Capital Share Transactions:

 

 

 

 

 

 

 

 

 

 

 

 

Common stock offering costs charged to paid-in capital in excess of par

 

 

 

 

 

 

 

 

(0.03

)

Preferred shares offering costs/underwriting discounts charged to paid-in capital in excess of par

 

 

 

 

 

 

 

 

(0.12

)

Total capital share transactions

 

 

 

 

 

 

 

 

(0.15

)

Net asset value, end of period

 

$15.03

 

 

$14.41

 

 

$14.14

 

Market price, end of period

 

$16.04

 

 

$14.30

 

 

$13.68

 

Total Investment Return (1)

 

 

19.65

%

 

 

11.93

%

 

 

(3.77

)%

RATIOS/SUPPLEMENTAL DATA:

 

 

 

 

 

 

 

 

 

 

 

 

Net assets applicable to common shareholders, end of period (000)

 

$82,043

 

 

$78,465

 

 

$76,975

 

Ratio of expenses to average net assets (2)(3)(5)

 

 

1.24

%

 

 

1.19

%

 

 

1.14

%(4)

Ratio of net investment income to average net assets (2)(5)

 

 

7.54

%

 

 

8.23

%

 

 

5.47

%(4)

Preferred shares asset coverage per share

 

$68,627

 

 

$66,732

 

 

$65,942

 

Portfolio turnover

 

 

5

%

 

 

16

%

 

 

217

%

*

Commencement of operations.

**

Initial public offering price of $15.00 per share less underwriting discount of $0.675 per share.

(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 are assumed, for purposes of this calculation, to be reinvested at prices obtained under the Fund'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)

Annualized.

(5)

During the periods indicated above, the Investment manager waived a portion of its investment management fee. If such a waiver had not been in effect, the ratio of expenses to average net assets and the ratio of net investment income to average net assets would have been 1.48% and 7.30%, respectively for the year ended September 30, 2005, 1.43% and 7.99%, respectively for the year ended September 30, 2004 and 1.37% (annualized) and 5.24% (annualized), respectively for the period October 31, 2002 (commencement of operations) through September 30, 2003.


 

38    PIMCO Municipal Income Funds III Annual Report | 9.30.05 | See accompanying Notes to Financial Statements

 



PIMCO Municipal Income Fund III Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of

Trustees of PIMCO Municipal Income Fund III, PIMCO California Municipal Income Fund III and

PIMCO New York Municipal Income Fund III

In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, and the related statements of operations, of changes in net assets applicable to common shareholders and the financial highlights present fairly, in all material respects, the financial position of PIMCO Municipal Income Fund III, PIMCO California Municipal Income Fund III and PIMCO New York Municipal Income Fund III (collectively hereafter referred to as the "Funds") at September 30, 2005, the results of each of their operations for the year ended, the changes in each of their net assets applicable to common shareholders for each of the two years in the period then ended and the financial highlights for each of the two years in the period then ended and for the period October 31, 2002 (commencement of operations) through September 30, 2003, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at September 30, 2005 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

New York, New York

November 18, 2005

 

9.30.05 | PIMCO Municipal Income Funds III Annual Report    39

 



PIMCO Municipal Income Funds III

 

Matters Relating to the Trustees Consideration of the Investment Management and Portfolio Management Agreements

(unaudited)

The Investment Company Act of 1940 requires that both the full Board of Trustees (the “Trustees”) and a majority of the non-interested (“independent”) Trustees, voting separately, annually approve the continuation of the Funds’ Investment Management Agreements with the Investment Manager and Portfolio Management Agreements between the Investment Manager and the Sub-Adviser (together, the “Agreements”). The Trustees consider matters bearing on the Funds and its investment management arrangements at their meetings throughout the year, including a review of performance data at each regular meeting. In addition, the Trustees met on June 15 and 16, 2005 (the “contract review meeting”) for the specific purpose of considering whether to approve the continuation of the Agreements. The independent Trustees were assisted in their evaluation of the Agreements by independent legal counsel, from whom they received separate legal advice and with whom they met separately from the Funds’ management during the contract review meeting.

Based on their evaluation of factors that they deemed to be material, including those factors described below, the Board of Trustees, including a majority of the independent Trustees, unanimously concluded that the Agreements should be continued for an additional one-year period.

In connection with their deliberations regarding the continuation of the Agreements, the Trustees, including the independent Trustees, considered such information and factors as they believed, in light of the legal advice furnished to them and their own business judgment, to be relevant. As described below, the Trustees considered the nature, quality, and extent of the various investment management, administrative and other services performed by the Investment Manager and the Sub-Adviser under the Agreements.

In connection with their contract review meeting, the Trustees received and relied upon materials provided by the Investment Manager which included, among other items: (i) information provided by Lipper Inc. on the total return investment performance (based on net assets) of each Fund for various time periods and the investment performance of a group of funds with substantially similar investment classifications/objectives, (ii) information provided by Lipper Inc. on the Funds’ management fees and other expenses and the management fees and other expenses of comparable funds identified by Lipper, (iii) information regarding the investment performance and management fees of comparable portfolios of other clients of the Sub-Adviser, including institutional separate account and other clients, (iv) an estimate of the profitability to the Investment Manager from its relationship with the Funds for the twelve months ended March 31, 2005, (vi) descriptions of various functions performed by the Investment Manager and the Sub-Adviser for the Funds, such as compliance monitoring and portfolio trading practices, and (vii) information regarding the overall organization of the Investment Manager and the Sub-Adviser, including information regarding senior management, portfolio managers and other personnel providing investment management, administrative and other services to the Funds.

The Trustees’ conclusions as to the continuation of the Agreements were based on a comprehensive consideration of all information provided to the Trustees and not the result of any single factor. Some of the factors that figured particularly in the Trustees’ deliberations are described below, although individual Trustees may have evaluated the information presented differently from one another, giving different weights to various factors.

As part of their review, the Trustees examined the Investment Manager’s and the Sub-Adviser’s abilities to provide high quality investment management and other services to the Funds. The Trustees considered the investment philosophy and research and decision-making processes of the Sub-Adviser; the experience of key advisory personnel of the Sub-Adviser responsible for portfolio management of the Funds; the ability of the Investment Manager and Sub-Adviser to attract and retain capable personnel; the capability and integrity of the senior management and staff of the Investment Manager and Sub-Adviser; and the level of skill required to manage the Funds. In addition, the Trustees reviewed the quality of the Investment Manager’s and Sub-Adviser’s services with respect to regulatory compliance and compliance with the investment policies of the Funds; the nature and quality of certain administrative services the Investment Manager is responsible for providing to the Funds; and conditions that might affect the Investment Manager’s or Sub-Adviser’s ability to provide high quality services to the Funds in the future under the Agreements, including each organization’s respective business reputation, financial condition and operational stability. Based on the foregoing, the Trustees concluded that the Sub-Adviser’s investment process, research capabilities and philosophy were well suited to the Funds given their investment objectives and policies, and that the Investment Manager and Sub-Adviser would be able to meet any reasonably foreseeable obligations under the Agreements.

 

40     PIMCO Municipal Income Funds III Annual Report | 9.30.05

 



PIMCO Municipal Income Funds III

 

Matters Relating to the Trustees Consideration of the Investment Management and Portfolio Management Agreements

(unaudited)

Based on information provided by Lipper Inc., the Trustees also reviewed the Funds’ total return investment performance as well as the performance of comparable funds identified by Lipper Inc. In the course of their deliberations, the Trustees took into account information provided by the Manager in connection with the contract review meeting, as well as during investment review meetings conducted with portfolio management personnel during the course of the year regarding the Funds’ performance. After reviewing these and related factors, the Trustees concluded, within the context of their overall conclusions regarding the Agreements, that they were satisfied with the Investment Manager’s and Sub-Adviser’s responses and efforts relating to investment performance.

In assessing the reasonableness of the Funds’ fees under the Agreements, the Trustees considered, among other information, the Funds’ management fee and the total expense ratio as a percentage of average net assets attributable to common shares and the management fee and total expense ratios of comparable funds identified by Lipper Inc.

The Trustees also considered the management fees charged by the Sub-Adviser to other clients, including institutional separate accounts with investment strategies similar to those of the Funds. They noted that the management fees paid by the Funds are generally higher than the fees paid by these clients of the Sub-Adviser, but that the administrative burden for the Investment Manager and the Sub-Adviser with respect to the Funds are also relatively higher, due in part to the more extensive regulatory regime to which the Funds are subject in comparison to institutional separate accounts. The Trustees noted that the management fee paid by the Funds are generally higher than the fees paid by the open-end Funds but were advised that there are additional portfolio management challenges in managing the Funds such as the use of leverage and meeting a regular dividend. The Trustees noted that PIMCO Municipal Income Fund III’s performance was average for the one-year and year-to-date periods ended May 31, 2005 in total return. The Trustees also noted that PIMCO Municipal Income Fund III’s expense ratio (after taking into account waivers) was below the median and average for its peer group. The Trustees noted that PIMCO California Municipal Income Fund III significantly outperformed its peer group for the one-year and year-to-date periods ended May 31, 2005 in total return. The Trustees also noted that PIMCO California Municipal Income Fund III’s expense ratio was below the average and slightly above the median expense ratio for its peer group. The Trustees noted that PIMCO New York Municipal Income Fund III significantly outperformed its peer group for the one-year and year-to-date periods ended May 31, 2005 in total return. The Trustees also noted that PIMCO New York Municipal Income Fund III’s expense ratio was just above the average and median for its peer group.

The Trustees also took into account that the Funds have preferred shares outstanding, which increases the amount of fees received by the Investment Manager and Sub-Adviser under the Agreements (because the fees are calculated based on the Funds’ total managed assets, including assets attributable to preferred shares and other forms of leverage outstanding). In this regard, the Trustees took into account that the Investment Manager and Sub-Adviser have a financial incentive for the Funds to continue to have preferred shares outstanding, which may create a conflict of interest between the Investment Manager and Sub-Adviser, on one hand, and the Funds’ common shareholders, on the other. In this regard, the Trustees considered information provided by the Sub-Adviser indicating that the Funds’ use of leverage through preferred shares continues to be appropriate and in the interests of the Fund’s common shareholders.

Based on a profitability analysis provided by the Investment Manager, the Trustees also considered the estimated profitability of the Investment Manager from its relationship with the Funds and determined that such profitability was not excessive.

The Trustees also took into account that, as a closed-end investment companies, the Funds do not currently intend to raise additional assets, so the assets of the Funds will grow (if at all) only through the investment performance of the Funds. Therefore, the Trustees did not consider potential economies of scale as a principal factor in assessing the fee rates payable under the Agreements.

Additionally, the Trustees considered so-called “fall-out benefits” to the Investment Manager and Sub-Adviser, such as reputational value derived from serving as investment manager and sub-adviser to the Funds.

After reviewing these and other factors described herein, the Trustees concluded, within the context of their overall conclusions regarding the Agreements, that the fees payable under the Agreements represent reasonable compensation in light of the nature and quality of the services being provided by the Investment Manager and Sub-Adviser to the Funds.


 

9.30.05 | PIMCO Municipal Income Funds III Annual Report     41

 



PIMCO Municipal Income Funds III Privacy Policy/Proxy Voting Policies & Procedures (unaudited)

Privacy Policy:

Our Commitment to You

We consider customer privacy to be a fundamental aspect of our relationship with clients. We are committed to maintaining the confidentiality, integrity, and security of our current, prospective and former clients' personal information. We have developed policies designed to protect this confidentiality, while allowing client needs to be served.

Obtaining Personal Information

In the course of providing you with products and services, we may obtain non-public personal information about you. This information may come from sources such as account applications and other forms, from other written, electronic or verbal correspondence, from your transactions, from your brokerage or financial advisory firm, financial adviser or consultant, and/or from information captured on our internet web sites.

Respecting Your Privacy

We do not disclose any personal or account information provided by you or gathered by us to non-affiliated third parties, except as required or permitted by law. As is common in the industry, non-affiliated companies may from time to time be used to provide certain services, such as preparing and mailing prospectuses, reports, account statements and other information, conducting research on client satisfaction, and gathering shareholder proxies. We may also retain non-affiliated companies to market our products and enter in joint marketing agreements with other companies. These companies may have access to your personal and account information, but are permitted to use the information solely to provide the specific service or as otherwise permitted by law. We may also provide your personal and account information to your brokerage or financial advisory firm and/or to your financial adviser or consultant.

Sharing Information with Third Parties

We do reserve the right to disclose or report personal information to non-affiliated third parties in limited circumstances where we believe in good faith that disclosure is required under law, to cooperate with regulators or law enforcement authorities, to protect our rights or property, or upon reasonable request by any mutual fund in which you have chosen to invest. In addition, we may disclose information about you or your accounts to a non-affiliated third party at your request or if you consent in writing to the disclosure.

Sharing Information with Affiliates

We may share client information with our affiliates in connection with servicing your account or to provide you with information about products and services that we believe may be of interest to you. The information we share may include, for example, your participation in our mutual funds or other investment programs, your ownership of certain types of accounts (such as IRAs), or other data about your accounts. Our affiliates, in turn, are not permitted to share your information with non-affiliated entities, except as required or permitted by law.

Implementation of Procedures

We take seriously the obligation to safeguard your non-public personal information. We have implemented procedures designed to restrict access to your non-public personal information to our personnel who need to know that information to provide products or services to you. To guard your non-public personal information, physical, electronic, and procedural safeguards are in place.

 

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 twelve months ended June 30, 2005 is available: (i) without charge, upon request, by calling the Funds' transfer agent at (800) 331-1710; (ii) on the Funds' website at www.allianzinvestors.com; and (iii) on the Securities and Exchange Commission's website at www. sec.gov.


 

42   PIMCO Municipal Income Funds III Annual Report | 9.30.05

 



PIMCO Municipal Income Funds III Tax Information (unaudited)

Subchapter M of the Internal Revenue Code of 1986, as amended, requires the Funds to advise shareholders within 60 days of the Funds' tax year-end (September 30, 2005) as to the federal tax status of dividends and distributions received by shareholders during such tax period. Accordingly, please note that substantially all dividends paid from net investment income from the Funds during the tax period ended September 30, 2005 were federally exempt interest dividends. The Funds, however, invested in municipal bonds containing market discount, the accretion on which, is taxable. Accordingly, the percentage of dividends paid from net investment income during the tax period which are taxable were:

 

Municipal III

2.26%

California Municipal III

2.04%

New York Municipal III

1.08%

Since the Funds' fiscal year is not the calendar year, another notification will be sent with respect to calendar year 2005. In January 2006, shareholders will be advised on IRS Form 1099 DIV as to the federal tax status of the dividends and distributions received during calendar 2005. The amount that will be reported will be the amount to use on your 2005 federal income tax return and may differ from the amount which must be reported in connection with each Funds' tax year ended September 30, 2005. Shareholders are advised to consult their tax advisers as to the federal, state and local tax status of the income received from the Funds. In January 2006, an allocation of interest income by state will be provided which may be of value in reducing a shareholder's state and local tax liability, if any.


 

9.30.05 | PIMCO Municipal Income Funds III Annual Report     43

 



PIMCO Municipal Income Fund III Dividend Reinvestment Plan (unaudited)

Pursuant to the Funds’ Dividend Reinvestment Plan (the “Plan”), all Common Shareholders whose shares are registered in their own names will have all dividends, including any capital gain dividends, reinvested automatically in additional Common Shares by PFPC Inc., as agent for the Common Shareholders (the “Plan Agent”), unless the shareholder elects to receive cash. An election to receive cash may be revoked or reinstated at the option of the shareholder. In the case of record shareholders such as banks, brokers or other nominees that hold Common Shares for others who are the beneficial owners, the Plan Agent will administer the Plan on the basis of the number of Common Shares certified from time to time by the record shareholder as representing the total amount registered in such shareholder’s name and held for the account of beneficial owners who are to participate in the Plan. Shareholders whose shares are held in the name of a bank, broker or nominee should contact the bank, broker or nominee for details. All distributions to investors who elect not to participate in the Plan (or whose broker or nominee elects not to participate on the investor’s behalf), will be paid cash by check mailed, in the case of direct shareholder, to the record holder by PFPC Inc., as the Funds’ dividend disbursement agent.

Unless you (or your broker or nominee) elect not to participate in the Plan, the number of Common Shares you will receive will be determined as follows:

(1)

If Common Shares are trading at or above net asset value on the payment date, the Funds will issue new shares at the greater of (i) the net asset value per Common Share on the payment date or (ii) 95% of the market price per Common Share on the payment date; or

(2)

If Common Shares are trading below net asset value (minus estimated brokerage commissions that would be incurred upon the purchase of Common Shares on the open market) on the payment date, the Plan Agent will receive the dividend or distribution in cash and will purchase Common Shares in the open market, on the New York Stock Exchange or elsewhere, for the participants’ accounts. It is possible that the market price for the Common Shares may increase before the Plan Agent has completed its purchases. Therefore, the average purchase price per share paid by the Plan Agent may exceed the market price on the payment date, resulting in the purchase of fewer shares than if the dividend or distribution had been paid in Common Shares issued by the Funds. The Plan Agent will use all dividends and distributions received in cash to purchase Common Shares in the open market on or shortly after the payment date, but in no event later than the ex-dividend date for the next distribution. Interest will not be paid on any uninvested cash payments.

You may withdraw from the Plan at any time by giving notice to the Plan Agent. If you withdraw or the Plan is terminated, you will receive a certificate for each whole share in your account under the Plan and you will receive a cash payment for any fraction of a share in your account. If you wish, the Plan Agent will sell your shares and send you the proceeds, minus brokerage commissions.

The Plan Agent maintains all shareholders’ accounts in the Plan and gives written confirmation of all transactions in the accounts, including information you may need for tax records. The Plan Agent will also furnish each person who buys Common Shares with written instructions detailing the procedures for electing not to participate in the Plan and to instead receive distributions in cash. Common Shares in your account will be held by the Plan Agent in non-certificated form. Any proxy you receive will include all Common Shares you have received under the Plan.

There is no brokerage charge for reinvestment of your dividends or distributions in Common Shares. However, all participants will pay a pro rata share of brokerage commissions incurred by the Plan Agent when it makes open market purchases.

Automatically reinvested dividends and distributions are taxed in the same manner as cash dividends and distributions.

The Funds and the Plan Agent reserve the right to amend or terminate the Plan. There is no direct service charge to participants in the Plan; however, the Funds reserve the right to amend the Plan to include a service charge payable by the participants. Additional information about the Plan may be obtained from the Funds’ transfer agent, PFPC Inc., P.O. Box 43027, Providence, RI 02940-3027, telephone number (800) 331-1710.


 

44     PIMCO Municipal Income Funds III Annual Report | 9.30.05

 



PIMCO Municipal Income Fund III Board of Trustees (unaudited)

Name, Age, Position(s) Held With Funds,
Length of Service, Other
Trusteeships/Directorships Held by Trustee;
Number of Portfolios in Fund Complex/Outside
Fund Complexes Currently Overseen by Trustee

 

Principal Occupation(s) During Past 5 Years:

The address of each trustee is 1345 Avenue of
the Americas, New York, NY 10105

 

 

 

 

 

Robert E. Connor
Date of Birth: 9/17/34

 

Corporate Affairs Consultant; Formerly, Senior Vice President,
Corporate Office, Smith Barney Inc.

Chairman of the Board of Trustees since: 2004
Trustee since: 2002

 

 

Term of office: Expected to stand for re-election at 2006 annual meeting of shareholders.

 

 

Trustee/Director of 24 funds in Fund Complex

 

 

Trustee/Director of no funds outside of Fund
Complex

 

 

Paul Belica
Date of Birth: 9/27/21
Trustee since: 2002

 

Director, Student Loan Finance Corp., Education Loans, Inc., Goal Funding I, Goal Funding II, Inc. and Surety Loan Funding, Inc.; Formerly senior executive and member of the Board of Smith Barney, Harris Upham & Co. and CEO of five State of New York Agencies Inc.

Term of office: Expected to stand for re-election at 2005 annual meeting of shareholders.

Trustee/Director of 20 funds in Fund Complex

 

 

Trustee/Director of no funds outside of Fund Complex

 

 

 

 

 

John J. Dalessandro II
Date of Birth: 7/26/37
Trustee since: 2002

 

Formerly, President and Director, J.J. Dalessandro II Ltd, registered broker-dealer and member of the New York Stock Exchange.

Term of office: Expected to stand for re-election at 2007 annual meeting of shareholders.

 

 

Trustee of 23 funds in Fund Complex
Trustee of no funds outside of Fund complex

 

 

 

 

 

David C. Flattum
Date of Birth: 8/27/64
Trustee since: 2004

 

Managing Director, Chief Operating Officer, General Counsel and member of Management Board, Allianz Global Investors of America, L.P.; Formerly, Partner, Latham & Watkins LLP (1998-2001).

Term of office: Expected to stand for election at 2005 annual meeting of shareholders.

 

 

Trustee of 54 funds in Fund Complex
Trustee of no funds outside of Fund Complex

 

 

 

 

 

Hans W. Kertess
Date of Birth: 7/12/39
Trustee since: 2002

 

President, H Kertess & Co., L.P. Formerly, Managing Director, Royal Bank of Canada Capital Markets.

Term of office: Expected to stand for re-election at 2006 annual meeting of shareholders.

 

 

Trustee of 23 Funds in Fund Complex;
Trustee of no funds outside of Fund Complex

 

 

 

 

 

R. Peter Sullivan III
Date of Birth: 9/4/41
Trustee since: 2002

 

Formerly, Managing Partner, Bear Wagner Specialists LLC (formerly, Wagner Stott Mercator LLC), specialist firm on the New York Stock Exchange.

Term of office: Expected to stand for re-election at 2007 annual meeting of shareholders.

 

 

Trustee of 19 funds in Fund Complex
Trustee of no funds outside of Fund Complex

 

 

 

 

Mr. Flattum is an “interested person” of the Fund due to his affiliation with Allianz Global Investors of America L.P. and the Manager. In addition to Mr. Flattum’s positions with affiliated persons of the funds set forth in the trade above, he holds the following positions with affiliated persons: Director, PIMCO Global Advisors (Resources) Limited; Managing Director, Allianz Dresdner Asset Management U.S. Equities LLC, Allianz Hedge Fund Partners Holdings L.P., Allianz Pac-Life Partners LLC, PA Holdings LLC; Director and Chief Executive Officer, Oppenheimer Group, Inc.

Further information about Funds’ Trustees is available in the Funds’ Statement of Additional Information, dated August 26, 2003, which can be obtained upon request, without charge, by calling the Funds’ transfer agent at (800) 331-1710.


 

9.30.05 | PIMCO Municipal Income Funds III Annual Report     45

 



PIMCO Municipal Income Fund III Principal Officers (unaudited)

Name, Age, Position(s) Held with Funds.

 

Principal Occupation(s) During Past 5 Years:

Brian S. Shlissel
Date of Birth: 11/14/64
President & Chief Executive Officer since: 2002

 

Executive Vice President, Allianz Global Investors Fund Management LLC; President and Chief Executive Officer of 32 funds in the Fund Complex; Treasurer; Principal Financial and Accounting Officer of 31 funds in the Fund Complex; Trustee of 8 funds in the Fund Complex.

Lawrence G. Altadonna
Date of Birth: 3/10/66
Treasurer, Principal/Financial and Accounting Officer since: 2002

 

 

Senior Vice President, Allianz Global Investors Fund Management LLC; Treasurer, Principal Financial and Accounting officer of 32 funds in the Fund Complex; Assistant Treasurer of 31 funds in the Fund Complex.

 

Mark McCray
Date of Birth: 4/11/66
Vice President since: 2000

 

Executive Vice President and portfolio manager responsible for the firm’s Municipal Bond Funds. He joined PIMCO in 2000, from Goldman, Sachs & Co. in New York, where he was Vice President and co-head of municipal bond trading, with primary responsibility for the firm’s proprietary municipal trading. Mr. McCray has seventeen years of investment experience and holds a bachelor’s degree from Temple University and an MBA from The Wharton School of the University of Pennsylvania, with concentrations in finance, accounting, and strategic management.

Newton B. Schott, Jr.
Date of Birth: 7/14/42
Vice President since: 2002

 

Managing Director, Chief Administrative Officer, General Counsel and Secretary, Allianz Global Investors Distributors LLC; Managing Director, Chief Legal Officer and Secretary, Allianz Global Investors Fund Management LLC; Vice President of 63 funds in the Fund Complex; Secretary of 33 funds in the Fund Complex.

Thomas J. Fuccillo
Date of Birth: 3/22/68
Secretary since: 2004

 

Vice President, Senior Fund Attorney, Allianz Global Investors of America L.P., Secretary of 32 funds in the Fund Complex.

Youse Guia
Date of Birth: 9/3/72
Chief Compliance Officer since: 2004

 

Senior Vice President, Group Compliance Manager, Allianz Global Investors of America L.P., Chief Compliance Officer of 63 funds in the Fund Complex.

Jennifer Patula
Date of Birth: 5/8/78
Assistant Secretary since: 2004

 

Assistant Secretary of 32 funds in the Fund Complex.

Officers hold office at the pleasure of the Board and until their successors are appointed and qualified or until their earlier resignation or removal.


 

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48     PIMCO Municipal Income Funds III Annual Report | 9.30.05

 



Trustees and Principal Officers

Robert E. Connor

Trustee, Chairman of the Board of Trustees

Paul Belica

Trustee

John J. Dalessandro II

Trustee

David C. Flattum

Trustee

Hans W. Kertess

Trustee

R. Peter Sullivan III

Trustee

Brian S. Shlissel

President & Chief Executive Officer

Newton B. Schott, Jr.

Vice President

Mark V. McCray

Vice President

Lawrence G. Altadonna

Treasurer, Principal Financial & Accounting Officer

Thomas J. Fuccillo

Secretary

Youse Guia

Chief Compliance Officer

Jennifer A. Patula

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.

801 Pennsylvania

Kansas City, MO 64105-1307

Transfer Agent, Dividend Paying Agent and Registrar

PFPC Inc.

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 02210-2624

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 Municipal 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.

Notice is hereby given in accordance with Section 23(c) of the Investment Company Act of 1940, as amended, that from time to time each Fund may purchase shares of its common stock in the open market.

The Funds file their complete schedules of portfolio holdings with the Securities and Exchange Commission ("SEC") for the first and third quarters of its fiscal year on Form N-Q. The Funds' Forms 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, DC. Information on the operation of the Public Reference Room may be obtained by calling (800) SEC-0330. The information on the Form N-Q is also available on the Fund's website at www.allianzinvestors.com.

On January 24, 2005, the Funds submitted a CEO annual certification to the New York Stock Exchange ("NYSE") on which each Funds' principal executive officer certified that he was not aware, as of that date, of any violation by the Funds of the NYSE's Corporate Governance listing standards. In addition, as required by Section 302 of the Sarbanes-Oxley Act of 2002 and related SEC rules, each Fund's principal executive and principal financial officer made quarterly certifications, included in filings with the SEC on Forms N-CSR and N-Q relating to, among other things, the Funds' disclosure controls and procedures and internal control over financial reporting, as applicable.

Information on the Funds is available at www.allianzinvestors.com or by calling the Funds' transfer agent (800) 331-1710.

 

 




 

 





ITEM 2. CODE OF ETHICS

     (a)  As of the end of the period covered by this report, the registrant has
          adopted a code of ethics (the "Section 406 Standards for Investment
          Companies - Ethical Standards for Principal Executive and Financial
          Officers") that applies to the registrant's Principal Executive
          Officer and Principal Financial Officer also serves as the Principal
          Accounting Officer. The registrant undertakes to provide a copy of
          such code of ethics to any person upon request, without charge, by
          calling 1-800-331-1710.

     (b)  During the period covered by this report, there were not any
          amendments to a provision of the code of ethics adopted in 2 (a)
          above.

     (c)  During the period covered by this report, there were not any waivers
          or implicit waivers to a provision of the code of ethics adopted in 2
          (a) above.

ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT

     The registrant's Board has determined that Mr. Paul Belica, a member of the
Board's Audit Oversight Committee is an "audit committee financial expert," and
that he is "independent," for purposes of this Item.

ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES

     a)   Audit fees. The aggregate fees billed for each of the last two fiscal
          years (the "reporting periods") for professional services rendered by
          the Registrant's principal accountant (the "Auditor") for the audit of
          the Registrant's annual financial statements, or services that are
          normally provided by the Auditor in connection with the statutory and
          regulatory filings or engagements for the Reporting Periods, were
          $17,117 in 2004 and $19,808 in 2005.

     b)   Audit-Related Fees. The aggregate fees billed in the Reporting Periods
          for assurance and related services by the principal accountant that
          are reasonably related to the performance of the audit registrant's
          financial statements and are not reported under paragraph (e) of this
          Item were $7,662 in 2004 and $4,711 in 2005. These services consist of
          accounting consultations, agreed upon procedure reports (inclusive of
          annual review of basic maintenance testing associated with the
          Preferred Shares), attestation reports and comfort letters.

     c)   Tax Fees. The aggregate fees billed in the Reporting Periods for
          professional services rendered by the Auditor for tax compliance, tax
          service and tax planning ("Tax Services") were $8,000 in 2004 and
          $8,500 in 2005. These services consisted of review or preparation of
          U. S. federal, state, local and excise tax returns.

     d)   All Other Fees. There were no other fees billed in the Reporting
          Periods for products and services provided by the Auditor to the
          Registrant.

     e)   Audit Committee Pre-Approval Policies and Procedures. The Registrant's
          Audit Committee has established policies and procedures for
          pre-approval of all audit and permissible non-audit services by the
          Auditor for the Registrant, as well as the Auditor's engagements
          related directly to the operations and financial reporting of the
          Registrant. The Registrant's policy is stated below.





                 PIMCO Municipal Income Funds III (THE "FUNDS")

AUDIT OVERSIGHT COMMITTEE POLICY FOR PRE-APPROVAL OF SERVICES PROVIDED BY THE
INDEPENDENT ACCOUNTANTS

The Funds' Audit Oversight Committee ("Committee") is charged with the oversight
of the Funds' financial reporting policies and practices and their internal
controls. As part of this responsibility, the Committee must pre-approve any
independent accounting firm's engagement to render audit and/or permissible
non-audit services, as required by law. In evaluating a proposed engagement by
the independent accountants, the Committee will assess the effect that the
engagement might reasonably be expected to have on the accountant's
independence. The Committee's evaluation will be based on:

     a review of the nature of the professional services expected to be
     provided,

     the fees to be charged in connection with the services expected to be
     provided,

     a review of the safeguards put into place by the accounting firm to
     safeguard independence, and

     periodic meetings with the accounting firm.

POLICY FOR AUDIT AND NON-AUDIT SERVICES TO BE PROVIDED TO THE FUNDS

On an annual basis, the Funds' Committee will review and pre-approve the scope
of the audits of the Funds and proposed audit fees and permitted non-audit
(including audit-related) services that may be performed by the Funds'
independent accountants. At least annually, the Committee will receive a report
of all audit and non-audit services that were rendered in the previous calendar
year pursuant to this Policy. In addition to the Committee's pre-approval of
services pursuant to this Policy, the engagement of the independent accounting
firm for any permitted non-audit service provided to the Funds will also require
the separate written pre-approval of the President of the Funds, who will
confirm, independently, that the accounting firm's engagement will not adversely
affect the firm's independence. All non-audit services performed by the
independent accounting firm will be disclosed, as required, in filings with the
Securities and Exchange Commission.

AUDIT SERVICES

The categories of audit services and related fees to be reviewed and
pre-approved annually by the Committee are:

     Annual Fund financial statement audits
     Seed audits (related to new product filings, as required)
     SEC and regulatory filings and consents
     Semiannual financial statement reviews

AUDIT-RELATED SERVICES

The following categories of audit-related services are considered to be
consistent with the role of the Fund's independent accountants and services
falling under one of these categories will be pre-approved by the Committee on
an annual basis if the Committee deems those services to be consistent with the
accounting firm's independence:

     Accounting consultations
     Fund merger support services
     Agreed upon procedure reports (inclusive of quarterly review of Basic
        Maintenance testing associated with issuance of Preferred Shares and 
        semiannual report review)
     Other attestation reports
     Comfort letters
     Other internal control reports

Individual audit-related services that fall within one of these categories and
are not presented to the Committee as part of the annual pre-approval process
described above, may be pre-approved, if deemed consistent with the accounting
firm's independence, by the Committee Chair (or any other Committee member who
is a disinterested trustee under the Investment Company Act to whom this
responsibility has been delegated) so long as the estimated fee for those
services does not exceed $75,000. Any such pre-approval shall be reported to the
full Committee at its next regularly scheduled meeting.

TAX SERVICES

The following categories of tax services are considered to be consistent with 
the role of the Funds' independent accountants and services falling under one of
these categories will be pre-approved by the Committee on an annual basis if the
Committee deems those services to be consistent with the accounting firm's
independence:

     Tax compliance services related to the filing or amendment of the
     following:

          Federal, state and local income tax compliance; and, sales and use tax
          compliance
          Timely RIC qualification reviews
          Tax distribution analysis and planning
          Tax authority examination services
          Tax appeals support services
          Accounting methods studies
          Fund merger support service
          Other tax consulting services and related projects

Individual tax services that fall within one of these categories and are not
presented to the Committee as part of the annual pre-approval process described
above, may be pre-approved, if deemed consistent with the accounting firm's
independence, by the Committee Chairman (or any other Committee member who is a
disinterested trustee under the Investment Company Act to whom this
responsibility has been delegated) so long as the estimated fee for those
services does not exceed $100,000. Any such pre-approval shall be reported to
the full Committee at its next regularly scheduled meeting.

PROSCRIBED SERVICES

The Funds' independent accountants will not render services in the following
categories of non-audit services:

     Bookkeeping or other services related to the accounting records or
     financial statements of the Funds
     Financial information systems design and implementation
     Appraisal or valuation services, fairness opinions, or contribution-in-kind
     reports
     Actuarial services Internal audit outsourcing services
     Management functions or human resources
     Broker or dealer, investment adviser or investment banking services
     Legal services and expert services unrelated to the audit
     Any other service that the Public Company Accounting Oversight Board
     determines, by regulation, is impermissible

PRE-APPROVAL OF NON-AUDIT SERVICES PROVIDED TO OTHER ENTITIES WITHIN THE FUND
COMPLEX

The Committee will pre-approve annually any permitted non-audit services to be
provided to Allianz Global Investors Fund Management LLC (Formerly, PA Fund
Management LLC) or any other investment manager to the Funds (but not including
any sub-adviser whose role is primarily portfolio management and is
sub-contracted by the investment manager) (the "Investment Manager") and any
entity controlling, controlled by, or under common control with the Investment
Manager that provides ongoing services to the Funds (including affiliated
sub-advisers to the Funds), provided, in each case, that the engagement relates
directly to the operations and financial reporting of the Funds (such entities,
including the Investment Manager, shall be referred to herein as the "Accounting
Affiliates"). Individual projects that are not presented to the Committee as
part of the annual pre-approval process, may be pre-approved, if deemed
consistent with the accounting firm's independence, by the Committee Chairman
(or any other Committee member who is a disinterested trustee under the
Investment Company Act to whom this responsibility has been delegated) so long
as the estimated fee for those services does not exceed $100,000. Any such
pre-approval shall be reported to the full Committee at its next regularly
scheduled meeting.

Although the Committee will not pre-approve all services provided to the
Investment Manager and its affiliates, the Committee will receive an annual
report from the Funds' independent accounting firm showing the aggregate fees
for all services provided to the Investment Manager and its affiliates.

DE MINIMUS EXCEPTION TO REQUIREMENT OF PRE-APPROVAL OF NON-AUDIT SERVICES

With respect to the provision of permitted non-audit services to a Fund or
Accounting Affiliates, the pre-approval requirement is waived if:

     (1)  The aggregate amount of all such permitted non-audit services provided
          constitutes no more than (i) with respect to such services provided to
          the Fund, five percent (5%) of the total amount of revenues paid by
          the Fund to its independent accountant during the fiscal year in which
          the services are provided, and (ii) with respect to such services
          provided to Accounting Affiliates, five percent (5%) of the total
          amount of revenues paid to the Fund's independent accountant by the
          Fund and the Accounting Affiliates during the fiscal year in which the
          services are provided;

     (2)  Such services were not recognized by the Fund at the time of the
          engagement for such services to be non-audit services; and

     (3)  Such services are promptly brought to the attention of the Committee
          and approved prior to the completion of the audit by the Committee or
          by the Committee Chairman (or any other Committee member who is a
          disinterested trustee under the Investment Company Act to whom this
          Committee Chairman or other delegate shall be reported to the full
          Committee at its next regularly scheduled meeting.

          e) 2. No services were approved pursuant to the procedures contained
     in paragraph (C) (7) (i) (C) of Rule 2-01 of Registration S-X.

          f) Not applicable

          g) Non-audit fees. The aggregate non-audit fees billed by the Auditor
     for services rendered to the Registrant, and rendered to the Adviser, for
     the 2004 Reporting Period was $2,820,207 and the 2005 Reporting Period was
     $3,231,387.

          h) Auditor Independence. The Registrant's Audit Oversight Committee
     has considered whether the provision of non-audit services that were
     rendered to the Adviser which were not pre-approved is compatible with
     maintaining the Auditor's independence.





ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANT

     The Fund has a separately designated standing audit committee established
in accordance with Section 3 (a) (58) (A) of the Securities Exchange Act of
1934. The audit committee of the Fund is comprised of Robert E. Connor, Paul
Belica, John J. Dalessandro II, Hans W. Kertess and R. Peter Sullivan III.

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

     The registrant has delegated the voting of proxies relating to its voting
securities to its sub-adviser, Pacific Investment Management Co. (the
"Sub-Adviser"). The Proxy voting Policies and Procedures of the Sub-Adviser are
included as an Exhibit 99 PROXYPOL hereto.

ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES

     Not effective at the time of this filing

Item 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED COMPANIES



                                                             TOTAL NUMBER              
                                                             OF SHARES PURCHASED       MAXIMUM NUMBER OF
                           TOTAL NUMBER      AVERAGE         AS PART OF PUBLICLY       SHARES THAT MAY YET BE
                           OF SHARES         PRICE PAID      ANNOUNCED PLANS OR        PURCHASED UNDER THE PLANS
              PERIOD       PURCHASED         PER SHARE       PROGRAMS                  OR PROGRAMS
                                                                                                          
October 2004                   N/A               N/A             N/A                       N/A
November 2004                  N/A              14.59           3,562                      N/A
December 2004                  N/A               N/A             N/A                       N/A
January 2005                   N/A               N/A             N/A                       N/A
February 2005                  N/A               N/A             N/A                       N/A
March 2005                     N/A               N/A             N/A                       N/A
April 2005                     N/A               N/A             N/A                       N/A
May 2005                       N/A               N/A             N/A                       N/A
June 2005                      N/A               N/A             N/A                       N/A
July 2005                      N/A              15.16           3,470                      N/A
August 2005                    N/A              15.191          3,579                      N/A
September 2005                 N/A              15.34           3,204                      N/A
                                                                                   



NEW YORK MUNICIPAL III

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 Principal
Financial Officer have concluded that the registrant's disclosure controls and
procedures (as defined in Rule 30a-2(c) under the Investment Company Act of
1940, 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 or
in factors that could affect these controls subsequent to the date of their
evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.



ITEM 12. EXHIBITS

(a)(1)      Exhibit 99.CODE ETH - Code of Ethics

(a)(2)      Exhibit 99.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

(c)         Exhibit 99.Proxy - Proxy Voting Policy and Procedures

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.

PIMCO New York Municipal Income Fund III

By /s/ Brian S. Shlissel
------------------------
Brian S. Shlissel, President & Chief Executive Officer

Date: December 5, 2005

By /s/ Lawrence G. Altadonna
----------------------------
Lawrence G. Altadonna, Treasurer, Principal Financial & Accounting Officer

Date: December 5, 2005

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
------------------------
Brian S. Shlissel, President & Chief Executive Officer

Date: December 5, 2005

By /s/ Lawrence G. Altadonna
----------------------------
Lawrence G. Altadonna, Treasurer, Principal Financial & Accounting Officer

Date: December 5, 2005