OMB APPROVAL ------------ OMB Number: 3235-0578 Expires: February 28, 2006 Estimated average burden hours per response: 20.0 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM N-Q QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED MANAGEMENT INVESTMENT COMPANY -------------------------------------------------------------------------------- Investment Company Act File Number: 811-21187 Registrant Name: PIMCO MUNICIPAL INCOME FUND III Address of Principal Executive Offices: 1345 Avenue of the Americas New York, New York 10105 Name and Address of Agent for Service: Lawrence G. Altadonna - 1345 Avenue of the Americas New York, New York 10105 Registrant's telephone number, including area code: 212-739-3371 Date of Fiscal Year End: 9/30 Date of Reporting Period: 12/31 Form N-Q is to be used by the registered management investment company, other than a small business investment company registered on Form N-5 (ss.ss. 239.24 and 274.5 of this chapter), to file reports with the Commission, not later than 60 days after the close of the first and third fiscal quarters, pursuant to rule 30b1-5 under the Investment Company Act of 1940 (17 CFR 270.30b1-5). The Commission may use the information provided on Form N-Q in its regulatory, disclosure review, inspection, and policymaking roles. A registrant is required to disclose the information specified by Form N-Q, and the Commission will make this information public. A registrant is not required to the collection of information contained in Form N-Q unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to the Secretary, Securities and Exchange Commission, 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. SCHEDULE OF INVESTMENTS PIMCO MUNICIPAL INCOME FUND III SCHEDULE OF INVESTMENTS DECEMBER 31, 2004 (UNAUDITED) PRINCIPAL AMOUNT CREDIT RATINGS (000) (MOODY'S/ S&P) VALUE* ------------------------------------------------------------------------------------------------------------------------------------ MUNICIPAL BONDS & NOTES - 90.6% ALABAMA-0.7% $ 3,560 Birmingham, GO, 5.00%, 12/1/27-12/1/32, Ser. B (AMBAC)........................ Aaa/AAA $ 3,656,603 1,500 Colbert Cnty., Northwest Health Care Auth., Health Care Facs., 5.75%, 6/1/27.. Baa3/NR 1,500,990 --------------- 5,157,593 --------------- ALASKA-0.7% State Housing Finance Corp., 3,900 5.00%, 12/1/33, Ser. A................................................... Aaa/AAA 3,924,570 1,000 5.25%, 6/1/32, Ser C. (MBIA)............................................. Aaa/AAA 1,012,460 --------------- 4,937,030 --------------- ARIZONA-0.6% 2,200 Health Facs. Auth. Hospital Syst. Rev., 7.00%, 12/1/25........................ NR/BBB 2,449,348 1,500 Maricopa Cnty. Pollution Control Corp., Pollution Control Rev., 5.05%, 5/1/29 (AMBAC)................................................... Aaa/AAA 1,542,840 --------------- 3,992,188 --------------- CALIFORNIA-7.0% 1,000 Alameda Public Financing Auth. Rev., 7.00%, 6/1/09 .......................... NR/NR 1,012,330 48,585 Golden State Tobacco Securitization Corp., Tobacco Settlement Rev., 6.25%-6.75%, 6/1/33-6/1/39, Ser. 2003-A-1.............................. Baa3/BBB 48,746,074 --------------- 49,758,404 --------------- COLORADO-4.2% El Paso Cnty., CP, 4,555 5.00%, 12/1/23-12/1/27, Ser. A (AMBAC) .................................. Aaa/AAA 4,741,712 3,225 5.00%, 12/1/23-12/1/27, Ser. B (AMBAC) .................................. Aaa/AAA 3,365,969 1,500 Garfield Cnty. School Dist. Re-2, GO, 5.00%, 12/1/25 (FSA).................... Aaa/NR 1,565,595 3,000 La Plata Cnty. School Dist. No. 9-R, Durango, GO, 5.25%, 11/1/23-11/1/25 (MBIA) ........................................... Aaa/NR 3,218,360 4,000 Saddle Rock Met. Dist., GO, 5.35%, 12/1/31 (Radian).......................... NR/AA 4,106,560 2,500 School Mines Auxilary Facs. Rev., 5.00%, 12/1/37 (AMBAC)...................... Aaa/AAA 2,553,900 9,955 Springs Utilities Rev., 5.00%, 11/15/30, Ser. B Aa2/AA 10,201,386 --------------- 29,753,482 --------------- FLORIDA-6.4% 8,000 Highlands Cnty., Health Facs. Auth., Rev., 5.25%, 11/15/23, Ser. B ........... A2/A 8,254,080 2,500 Hillsborough Cnty. Industrial Dev. Auth., Hospital Rev., 5.25%, 10/1/34, Ser. B................................................................... Baa1/NR 2,518,950 1,485 Julington Creek Plantation Community Dev. Dist., Assessment Rev., 5.00%, 5/1/29 (MBIA) ................................................... Aaa/AAA 1,530,768 1,000 Orange Cnty., Housing Finance Auth. Multifamily Rev., 5.25%, 1/1/28, Ser. G (FNMA) .......................................... Aaa/NR 1,026,230 15,000 Pinellas Cnty., Health Facs. Auth. Rev., 5.50%, 11/15/33 ..................... A1/NR 15,641,700 7,500 South Miami Health Facs. Auth., Hospital Rev., 5.25%, 11/15/33 .............. Aa3/AA- 7,683,000 2,500 State Board Public Education, GO., 5.00%, 6/1/13 (MBIA) ...................... Aaa/AAA 2,774,800 5,615 Tampa, Water & Sewer Rev., 5.00%, 10/1/26, Ser. A............................. Aa2/AA 5,829,830 --------------- 45,259,358 --------------- GEORGIA-1.0% 4,000 Griffin Combined Public Utility Rev., 5.00%, 1/1/32 (AMBAC) ................. Aaa/AAA 4,120,520 2,805 State GO, 5.50%, 7/1/13, Ser. C .............................................. Aaa/AAA 3,231,725 --------------- 7,352,245 --------------- IDAHO-1.0% 6,750 State Building Auth. Building Rev., 5.00%, 9/1/33-9/1/43, Ser. A (XLCA) ...... Aaa/AAA 6,924,310 --------------- ILLINOIS-8.3% Chicago Board of Education, GO, 500 zero coupon, 12/1/28, Ser. A (FGIC)..................................... Aaa/AAA 141,525 5,000 5.00%, 12/1/31, Ser. C (FSA) ........................................... Aaa/AAA 5,108,050 2,250 Chicago, GO, 5.00%, 1/1/31, Ser. A (MBIA) ................................... Aaa/AAA 2,299,208 3,000 Chicago Kingsbury Redev. Project, Tax Allocation, 6.57%, 2/15/13, Ser. A ..... NR/NR 3,154,800 7,000 Chicago Motor Fuel Tax Rev., 5.00% 1/1/33, Ser. A (AMBAC)..................... Aaa/AAA 7,165,270 4,000 Chicago Park Dist., GO, 5.00%, 1/1/29, Ser. D (FGIC) ......................... Aaa/AAA 4,088,880 5,056 Chicago, Special Assessment, 6.625%-6.75%, 12/1/22-12/1/32.................... NR/NR 5,303,117 2,500 Chicago Water Rev., 5.00% 11/1/31 (AMBAC)..................................... Aaa/AAA 2,788,325 PIMCO MUNICIPAL INCOME FUND III SCHEDULE OF INVESTMENTS DECEMBER 31, 2004 (UNAUDITED) (CONTINUED) PRINCIPAL AMOUNT CREDIT RATINGS (000) (MOODY'S/ S&P) VALUE* ------------------------------------------------------------------------------------------------------------------------------------ MUNICIPAL BONDS & NOTES (CONTINUED) ILLINOIS (CONTINUED) $9,325 Educational Facs. Auth. Rev., 5.00%-5.25%, 7/1/33-7/1/41, Ser. A .................. Aa1/AA $9,966,659 9,045 Metropolitan Pier & Exposition Auth., Dedicated State Tax Rev., 5.25%, 6/15/42 (MBIA) ....................................................... Aaa/AAA 9,426,609 4,300 Round Lake, Special Tax Rev., 6.70%, 3/1/33 ...................................... NR/NR 4,509,324 1,175 State Health Facs. Auth. Rev., 5.50%, 1/1/22 ...................................... A2/NR 1,229,837 3,050 University, Rev., 5.00%, 4/1/30, Ser. A (AMBAC) ................................... Aaa/AAA 3,111,976 --------------- 58,293,580 --------------- INDIANA-3.9% 7,535 Bond Bank, 5.00%, 2/1/33, Ser. A (FSA) ............................................ Aaa/AAA 7,687,358 3,000 Brownsburg, 1999 School Building Corp., 5.25%, 3/15/25, Ser. A (FSA) .............. Aaa/AAA 3,218,220 1,375 Fort Wayne Pollution Control Rev., 6.20%, 10/15/25 ............................... Baa2/BBB- 1,455,864 5,000 Indianapolis Local Public Improvement Board, Tax Allocation, 5.00%, 2/1/29, Ser. G (MBIA) ................................................ Aaa/AAA 5,126,650 4,500 Michigan City Area Wide School Building Corp., Rev., zero coupon, 1/15/21-1/15/22 (FGIC) .......................................... Aaa/AAA 2,066,195 1,000 Plainfield Parks Facs. Corp. Lease Rent Rev., 5.00%, 1/15/22 (AMBAC) ............. Aaa/AAA 1,048,070 3,500 State Dev. Finance Auth. Pollution Control Rev., 5.00%, 3/1/30 (AMBAC) ............ Aaa/AAA 3,513,790 3,455 Valparaiso, Middle Schools Building Corp. Rev., 5.00%, 7/15/24 (MBIA) ............ Aaa/AAA 3,608,126 --------------- 27,724,273 --------------- IOWA-0.1% 1,000 Tobacco Settlement Auth., Tobacco Settlement Rev., 5.60%, 6/1/35, Ser. B .......... Baa3/BBB 863,640 --------------- KENTUCKY-0.9% 4,805 Dev. Finance Auth. Hospital Rev., 6.00%, 10/1/19 .................................. A3/A 5,379,726 1,000 Economic Dev. Finance Auth. Hospital Facs. Rev., 5.25%, 10/1/30 ................... A1/AA- 1,027,430 --------------- 6,407,156 --------------- LOUISIANA-0.9% 5,000 Public Facs. Auth. Rev., 5.50%, 5/15/32, Ser. B ................................... A3/NR 5,155,000 1,595 Tobacco Settlement Financing Corp., Rev., 5.875%, 5/15/39, Ser. 2001B ............. Baa3/BBB 1,442,438 --------------- 6,597,438 --------------- MARYLAND-0.2% 1,500 State Health & Higher Eduational Facs. Auth. Rev., 5.50%, 7/1/36 .................. A2/NR 1,558,410 --------------- MASSACHUSETTS-3.5% 1,000 State Dev. Finance Agcy. Rev., 5.75%, 7/1/33 ...................................... NR/BBB 1,043,820 7,000 State Health & Educational Facs. Auth. Rev., 5.125%, 7/15/37, Ser FF .............. Aaa/AAA 7,299,320 4,910 State Housing Finance Agcy., Housing Rev., 5.125%, 6/1/43, Ser. H ................. Aa3/AA- 4,990,770 3,225 State Water Pollution Abatement Trust, 5.00%, 8/1/32, Ser. 8 ...................... Aaa/AAA 3,308,656 7,555 State Water Resources Auth., 5.00%, 8/1/32, Ser. J (FSA) .......................... Aaa/AAA 7,750,977 --------------- 24,393,543 --------------- MICHIGAN-7.1% 12,240 Detroit Water Supply Syst., 5.00%, 7/1/34, Ser. B, (MBIA) ......................... Aaa/AAA 12,546,245 5,000 State Building Auth., Rev., 5.00%, 10/15/26, Ser. III (FSA) ....................... Aaa/AAA 5,188,800 175 State Hospital Finance Auth. Rev., Detroit Medical Center, 5.25%, 8/15/23 .............................................................. Ba3/B 148,717 4,000 State Hospital Finance Auth. Rev., Henry Ford Health Syst., 5.00%, 3/1/17 ............................................................... A1/A- 4,154,400 5,980 State Hospital Finance Auth. Rev., Oakwood Group, Ser. A 5.75%-6.00%, 4/1/22-4/1/32 .................................................. A2/A 6,270,964 20,000 State Hospital Finance Auth. Rev. Ser. A, Trinity Health Credit, 5.375%, 12/1//30 ............................................................ Aa3/AA- 20,801,600 1,000 Technological University, 5.00%, 10/1/33 (XLCA) ................................... AAa/AAA 1,022,970 --------------- 50,133,696 --------------- MINNESOTA-0.4% 2,400 Upsala Independent School Dist. No. 487, GO, 5.00%, 2/1/28 (FGIC) ........................................................ Aaa/AAa 2,486,976 --------------- PIMCO MUNICIPAL INCOME FUND III SCHEDULE OF INVESTMENTS DECEMBER 31, 2004 (UNAUDITED) (CONTINUED) PRINCIPAL AMOUNT CREDIT RATINGS (000) (MOODY'S/ S&P) VALUE* ------------------------------------------------------------------------------------------------------------------------------------ MUNICIPAL BONDS & NOTES (CONTINUED) MISSISSIPPI-0.6% $4,250 Business Finance Corp., Pollution Control Rev., 5.875%-5.90%, 4/1/22-5/1/22 .................................................. Ba1/BBB $4,281,517 --------------- MISSOURI-3.0% 4,000 Bi-State Dev. Agcy., Missouri Illinois Met. Dist., 5.00%, 10/1/32 (FSA) ............ Aaa/AAA 4,128,320 4,365 State Environmental Improvement & Energy Resources Auth., Water Pollution Control Rev., 5.00%, 7/1/23, Ser. B ......................................... Aaa/NR 4,602,936 7,500 State Health & Educational Facs. Auth., Health Facs. Rev., 6.25%, 12/1/30 .......... A2/A 8,025,900 1,350 St. Louis Cnty. Industrial Dev. Auth., Housing Dev. Rev., 5.20%, 1/20/36 (GNMA) ....................................................... NR/AAA 1,379,268 3,000 St. Louis Industrial Dev. Auth. Rev., 5.125%, 12/20/29-12/20/30 (GNMA) ............................................ NR/AAA 3,067,815 --------------- 21,204,239 --------------- MONTONA-1.6% 11,250 Forsyth Pollution Control Rev., 5.00%, 3/1/31 (AMBAC) .............................. Aaa/AAA 11,565,562 --------------- NEVADA-0.6% 3,355 Henderson Health Care Fac. Rev., 5.125%, 7/1/28 .................................... Baa1/BBB+ 3,289,879 1,000 Henderson Local Improvement Dists., Special Assessment, 5.80%, 3/1/23 .............. NR/NR 1,030,230 --------------- 4,320,109 --------------- NEW HAMSPHIRE-0.7%. 4,750 Manchester Water Works, 5.00%, 12/1/28-12/1/34 (FGIC) .............................. Aaa/AAA 4,891,610 --------------- NEW JERSEY-4.4% 1,540 Camden Cnty., Improvement Auth. Rev., 6.00%, 2/15/27 ............................... Baa3/BBB 1,563,932 4,500 Economic Dev. Auth. Economic Dev. Rev., 6.50%, 4/1/28 .............................. Baa3/NR 5,189,805 300 Economic Dev. Auth. Industrial Dev. Rev., 7.00%, 10/1/14 .......................... Ba3/NR 312,801 3,000 Health Care Facs. Financing Auth. Rev., Pascack Valley Hospital, 6.625%, 7/1/36 .... NR/B+ 2,890,800 2,000 Health Care Facs. Financing Auth. Rev., Somerset Medical Center, 5.50%, 7/1/33 ..... Baa2/NR 2,032,520 2,500 Middlesex Cnty. Polution Control Auth. Rev., 5.75%, 9/15/32 ........................ Ba1/BBB- 2,622,725 2,000 South Port Corp., Rev., 5.10%, 1/1/33 .............................................. NR/A- 2,043,140 1,500 State Educational Facs. Auth. Rev., 6.00%, 7/1/25, Ser. D .......................... NR/NR 1,609,155 Tobacco Settlement Financing Corp., Rev., 12,855 6.00%-6.75%, 6/1/24-6/1/43 ................................................... Baa3/BBB 12,782,485 --------------- 31,047,363 --------------- NEW MEXICO-0.1% 1,000 Farmington Pollution Control Rev., 5.80%, 4/1/22 ................................... Baa2/BBB 1,016,520 --------------- NEW YORK-5.6% 10,000 Metropolitan Transportation Auth. Rev., 5.25%, 11/15/32, Ser. B ...................................................... A2/A 10,445,900 New York City Muni. Water Fin. Auth., Water & Sewer Syst. Rev., 5,000 5.00%, 6/15/35, Ser. C ....................................................... Aa2/AA+ 5,105,550 1,500 5.00%, 6/15/39, Ser. A ....................................................... Aa2/AA+ 1,527,090 3,800 State Dorm Auth. Rev., 5.00%, 3/15/32 .............................................. A1/AA 3,868,780 11,590 State Dorm Auth. Rev., Memorial Sloan-Kettering Center, 5.00%, 7/1/34, Ser. 1 ........................................................ Aa2/AA 11,879,982 4,000 State Dorm Auth. Rev., St. Barnabas, 5.125%, 2/1/22, Ser. A (FHA) ................................................. Aaa/AAA 4,272,520 2,000 State Environmental Facs. Corp., Clean Water & Drinking Rev., 5.00%, 6/15/28 ............................................................... Aaa/AAA 2,075,260 --------------- 39,175,082 --------------- NORTH CAROLINA-1.7% 2,000 Charlotte-Mecklenberg Hospital Auth., Healthcare Syst. Rev., 5.00%, 1/15/33, Ser. A ....................................................... Aa3/AA 2,045,080 Eastern Municipal Power Agcy, Power Syst. Rev., 4,000 5.125%, 1/1/23-1/1/26, Ser. D ................................................ Baa2/BBB 4,070,840 3,795 5.375%, 1/1/17, Ser. C ....................................................... Baa2/BBB 4,047,216 1,500 Medical Care Commission, Health Care Facs. Rev., 5.00%, 7/1/35 (AMBAC) ............. Aaa/AAA 1,534,125 --------------- 11,697,261 --------------- PIMCO MUNICIPAL INCOME FUND III SCHEDULE OF INVESTMENTS DECEMBER 31, 2004 (UNAUDITED) (CONTINUED) PRINCIPAL AMOUNT CREDIT RATINGS (000) (MOODY'S/ S&P) VALUE* ------------------------------------------------------------------------------------------------------------------------------------ MUNICIPAL BONDS & NOTES (CONTINUED) OHIO-0.4% $2,500 Lorian Cnty. Hospital Rev., 5.375%, 10/1/30 ........................................ A1/AA- $2,572,275 --------------- PENNSYLVANIA-3.5% 4,350 Allegeny Cnty. Hospital Dev. Auth. Rev., 9.25%, 11/15/30, Ser. B ................... B1/B 5,065,662 1,500 Cumberland Cnty. Muni. Auth. Retirement Community Rev., 7.25%, 1/1/35, Ser. A ........................................................ NR/NR 1,584,225 3,250 Delaware River Joint Toll Bridge, Commission Bridge Rev., 5.00%, 7/1/28 ................................................................ A2/A- 3,306,192 3,000 Lehigh Cnty. General Purpose Auth. Rev., 5.375% 8/15/33 ............................ Baa2/BBB 3,023,460 5,000 Philadelphia School Dist., GO, 5.125%, 6/1/34, Ser. D (FGIC) ....................... Aaa/AAA 5,241,200 6,300 St. Mary Hospital Auth., Bucks Cnty., 5.00%, 12/1/28 (Partially pre-refunded 6/1/08 @ 101) (a) .................................... Aa2/NR 6,453,972 --------------- 24,674,711 --------------- PUERTO RICO-0.3% 2,200 Electric Power Auth., Power Rev., 5.125%, 7/1/29, Ser. NN .......................... A3/A- 2,271,038 --------------- SOUTH CAROLINA-2.1% 7,500 Florence Cnty. Hospital Rev., 5.00%, 11/1/31, Ser. A (FSA) ......................... Aaa/AAA 7,710,600 6,700 Jobs Economic Dev. Auth. Economic Dev. Rev., 5.625%, 11/15/30 ...................... A3/A- 6,916,276 --------------- 14,626,876 --------------- TENNESSEE-0.7% 1,250 Knox Cnty. Health Educational & Housing Facs. Board, Hospital Facs. Rev., 5.25%, 10/1/30 ............................................................... A1/AA- 1,288,350 3,500 Memphis Electric Syst. Rev., 5.00%, 12/1/12, Ser. A. (MBIA) ........................ Aaa/AAA 3,877,580 --------------- 5,165,930 --------------- TEXAS-10.4% 4,135 Canyon Independent School Dist., GO, 5.00%, 2/15/28, Ser. A (PSF) ................................................. Aaa/AAA 4,254,171 2,500 Columbia & Brazoria Independent School Dist., GO, 5.00%, 8/1/29 (PSF) .............. NR/AAA 2,570,100 1,300 Comal Cnty. Health Facs. Dev., Healthcare Syst. Rev., 6.25%, 2/1/32 ................ Baa2/BBB 1,337,219 33,000 Denton Independent School Dist., GO, zero coupon, 8/15/26-8/15/31 (PSF) ........................................... Aaa/AAA 8,661,060 Harris Cnty. Health Facs. Dev. Corp. Rev., Ser. A, 2,750 5.375%, 2/15/26 .............................................................. NR/AA- 2,832,252 5,000 5.375%, 7/1/29 (MBIA) ........................................................ Aaa/AAA 5,213,150 Harris Cnty., GO, 4,400 5.125% 8/15/31 ............................................................... Aa1/AA+ 4,952,200 19,500 5.125% 8/15/32 (FSA) ......................................................... Aaa/AAA 20,213,505 4,005 Houston, GO, 5.00%, 3/1/25 (MBIA) .................................................. Aaa/AAA 4,168,364 5,000 Houston Water & Sewer Syst. Rev., 5.00%, 12/1/30, Ser. A (FSA) (Pre-refunded @ 100, 12/1/12) (a) ............... Aaa/AAA 5,590,750 7,000 Judson Independent School Dist., GO, 5.00%, 2/1/30 (PSF) ........................... Aaa/NR 7,139,230 415 Leander Independent School Dist., GO, 5.00%, 8/15/32 (PSF) ......................... NR/AAA 424,466 1,500 North Thruway Auth., Dallas North Thruway Syst. Rev., 5.00%, 1/1/33, Ser. A (AMBAC) ................................................ Aaa/AAA 1,533,690 2,105 Northwest Harris Cnty. Muni Utility Dist. No. 16, GO, 5.30%, 10/1/29 (Radian) ...................................................... NR/AA 2,163,456 2,000 University Texas 5.00%, 7/1/26, Ser. B ............................................. Aaa/AAA 2,078,100 --------------- 73,131,713 --------------- UTAH-0.9% 4,100 Salt Lake Cnty Hospital Rev., 5.125%, 2/15/33 (AMBAC) .............................. Aaa/AAA 4,236,612 1,750 Weber Cnty., Hospital Rev., 5.00%, 8/15/30 ......................................... Aa1/AA+ 1,764,612 --------------- 6,001,224 --------------- WASHINGTON-7.0% 6,375 Chelan Cnty. Public Utility Dist. Rev., No. 001, 5.125%, 7/1/33, Ser. C (AMBAC) ............................................... Aaa/AAA 6,601,312 15,000 King Cnty. Sewer Rev., 5.00%, 1/1/35, Ser. A (FSA) ................................. Aaa/AAA 15,301,200 3,000 Port Seattle, Rev., 5.00%, 9/1/24 (FGIC) ........................................... Aaa/AAA 3,111,810 24,215 Tobacco Settlement Auth., Tobacco Settlement Rev., 6.50%, 6/1/26 ................................................................ Baa3/BBB 24,321,788 --------------- 49,336,110 --------------- WISCONSIN-0.1% 560 Badger Tobacco Asset Securitization Corp., 6.00%, 6/1/17 ................................................................ Baa3/BBB 560,630 --------------- Total Municipal Bonds & Notes (cost-$613,180,190) .................................. 639,133,092 --------------- PIMCO MUNICIPAL INCOME FUND III SCHEDULE OF INVESTMENTS DECEMBER 31, 2004 (UNAUDITED) (CONTINUED) PRINCIPAL AMOUNT CREDIT RATINGS (000) (MOODY'S/ S&P) VALUE* ------------------------------------------------------------------------------------------------------------------------------------ VARIABLE RATE NOTES (b) (c) (d)-6.6% CALIFORNIA-1.5% $7,000 State Economic Recovery 16.045%, 7/1/11, Ser. 930 (MBIA) ............................ NR/AAA $10,792,880 --------------- ILLINOIS-0.3% 1,990 Dev. Finance Auth., Gas Supply Rev., 20.28%, 2/1/11 (AMBAC) ........................................................ NR/NR 2,236,302 --------------- MICHIGAN-1.7% 4,990 Detroit Sewer Disposal Rev., 20.88%, 7/1/11 (FSA) ................................... NR/AAA 5,839,797 5,720 Detroit Water Supply Syst. Rev., 19.46%, 1/1/11 (MBIA) .............................. NR/AAA 6,595,675 --------------- 12,435,472 --------------- NEW MEXICO-0.2% 1,005 State Auth. Transit Rev., 7.74%, 6/15/12, Ser. 949 (AMBAC) .......................... Aaa/NR 1,217,698 --------------- TEXAS-1.8% 2,450 Dallas Area Rapid Transit Rev., 17.09%, 12/1/26 (FGIC) .............................. NR/NR 2,748,949 5,058 Denton Independent School Dist., GO, 7.74%, 8/15/33 (PSF) ........................... Aaa/NR 5,281,750 1,870 Mansfield Independent School Dist., GO, 20.17%, 2/15/23 (PSF) ....................... NR/NR 2,214,398 2,060 University Rev., 17.46%, 8/15/27 .................................................... NR/NR 2,301,308 --------------- 12,546,405 --------------- WASHINGTON-1.1% 1,520 King Cnty Sewer Rev., 20.70%, 7/1/11 (FGIC) ......................................... NR/NR 1,735,004 3,655 Port Tacoma, GO, 18.84%, 6/1/11 (AMBAC) ............................................. NR/NR 4,185,048 1,510 Seattle Drain & Wastewater Rev., 20.83%, 7/1/10 (FGIC) ............................. NR/NR 1,729,207 --------------- 7,649,259 --------------- Total Variable Rate Notes (cost-$43,277,424) ........................................ 46,878,016 --------------- VARIABLE RATE DEMAND NOTES (c) (e)-2.0% ILLINOIS-0.3% 2,500 State Fin. Auth. Rev., 1.97%, 1/5/05, Ser B. ........................................ VMIG1/A-1+ 2,500,000 --------------- INDIANA-0.5% 3,700 Indianapolis Local Public Improvement Board, Tax Allocation, 1.96%, 1/5/05, Ser. F-2 (MBIA) ...................................................... Aaa/AAA 3,700,000 --------------- TEXAS-1.0% 2,000 Gulf Coast Waste Disp. Auth. Pollution Control Rev., 1.82%, 1/3/05 .................. VMIG1/A-1+ 2,000,000 5,000 Lower Neches Valley Industrial Dev. Corp., Exempt Facs. Rev., 2.10%, 1/3/05, Ser. A . VMIG1/A-1+ 5,000,000 --------------- 7,000,000 --------------- VIRGINIA-0.2% 1,150 Loudoun Cnty. Indl. Dev. Auth. Rev., Howard Hughes Med. Ctr., 2.25%, 1/3/05, Ser. C . VMIG1/A-1+ 1,150,000 --------------- Total Variable Rate Notes Demand Notes (cost-$14,350,000) ........................... 14,350,000 --------------- U.S. TREASURY BILLS (f)-1.2% 8,515 2.06%-2.10%, 3/3/05-3/17/05 (cost-$8,479,201) ................................ 8,481,986 --------------- Total Investments, before call options written (cost-$679,286,815)-100.4% ........... 708,843,091 --------------- CALL OPTIONS WRITTEN (g)-(0.4)% Contracts U.S. Treasury Notes Futures, Chicago Board of Trade --------- (192) Strike Price $106, expires 2/18/05 ................................................ (1,146,000) (360) Strike Price $113, expires 2/18/05 ................................................ (180,000) (250) Strike Price $114, expires 2/18/05 ................................................ (58,594) --------------- (1,384,594) --------------- U.S. Treasury Bonds Futures, Chicago Board of Trade (204) Strike Price $106, expires 2/18/05 ................................................ (1,348,312) (333) Strike Price $114, expires 2/18/05 ................................................ (286,172) --------------- (1,634,484) --------------- Total call options written (premiums received-$2,942,823) ........................... (3,019,078) --------------- Total Investments, net of call options written (cost-$676,343,992)-100.0% ........... $ 705,824,013 --------------- Other Investments: Futures contracts outstanding at December 31, 2004: Notional Amount Expiration Unrealized Type (000) Date Depreciation ------------------------------------------------------------------------------------------------------- Long: 90 Day Eurodollar Futures 1,063 9/19/2005 $ 1,259,000 Short: U.S. Treasury Bond Futures 2,248 3/21/2005 446,110 -------------- $ 1,705,110 -------------- Notes to Schedule 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 impact the value of the security may be fair-valued in good faith pursuant to guidelines established by the Board of Trustees. The Fund's investments are valued daily by an independent pricing service. Prices obtained from an independent pricing service use information provided by market makers or estimates of market value obtained from yield data relating to investments or securities with similar characteristics. 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. Exchange traded options, futures, and options on futures are valued at the settlement price determined by the relevant exchange. The prices used by the Fund to value securities may differ from the value that would be realized if the securities were sold. The Fund's net asset value is determined daily at the close of regular trading (normally, 4:00 p.m. Eastern time) on the New York Stock Exchange. (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 investors. (c) 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). (d) Residual Interest Municipal Bonds/Residual Interest Tax Exempt Bonds - The interest rate shown bears an inverse relationship to the interest rate on another security or the value of an index. (e) Maturity date shown is date of next call. (f) All or partial principal amount segregated as initial margin on futures contracts. (g) Non-income producing security. Glossary: AMBAC-insured by American Municipal Bond Assurance Corp. CP-Certificates of Participation FGIC-Insured by insured Financial Guaranty Insurance Co. FHA-insured by Federal Housing Administration FNMA-Federal National Mortgage Association FSA-insured by Financial Security Assurance, Inc. GNMA-Government National Mortgage Association GO-General Obligation Bonds 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
ITEM 2. 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 3. EXHIBITS (a) Exhibit 99.302 Cert. - Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 SIGNATURES -------------------------------------------------------------------------------- Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Registrant: PIMCO Municipal Income Fund III By /s/ Brian S. Shlissel President & Chief Executive Officer Date: February 24, 2005 By /s/ Lawrence G. Altadonna Treasurer, Principal Financial & Accounting Officer Date: February 24, 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 dated indicated. By /s/ Brian S. Shlissel President & Chief Executive Officer Date: February 24, 2005 By /s/ Lawrence G. Altadonna Treasurer, Principal Financial & Accounting Officer Date: February 24, 2005