Edgar Filing: PIMCO MUNICIPAL INCOME FUND III

PIMCO Municipal Income Fund III

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-Q

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED

MANAGEMENT INVESTMENT COMPANY


Investment Company Act File Number:		811-21187

Registrant Name:		PIMCO Municipal Income Fund III

Address of Principal Executive Offices:		1633 Broadway
		New York, NY 10019

Name and Address of Agent for Service:		William G. Galipeau
		650 Newport Center Drive
		Newport Beach, CA 92660

Registrant’s telephone number, including area code:		(844) 337-4626

Date of Fiscal Year End:		December 31

Date of Reporting Period:		September 30, 2017

Item 1. Schedule of Investments

Schedule of Investments

PIMCO Municipal Income Fund III

September 30, 2017 (Unaudited)


	PRINCIPAL AMOUNT (000S)		MARKET VALUE (000S)
INVESTMENTS IN SECURITIES 163.3%
MUNICIPAL BONDS & NOTES 162.5%
ALABAMA 11.1%
Alabama Special Care Facilities Financing Authority-Birmingham, Alabama Revenue Bonds, (AGC Insured), Series 2009
6.000% due 06/01/2039	$	500	$	540
Alabama State Docks Department Revenue Bonds, Series 2010
6.000% due 10/01/2040		1,000		1,141
Black Belt Energy Gas District, Alabama Revenue Bonds, Series 2017
4.000% due 08/01/2047		6,500		7,131
Jefferson County, Alabama Sewer Revenue Bonds, Series 2013
0.000% due 10/01/2050 (d)		19,000		15,706
6.500% due 10/01/2053		7,500		9,012
Lower Alabama Gas District Revenue Bonds, Series 2016
5.000% due 09/01/2046		5,500		6,763

				40,293

ARIZONA 10.4%
Arizona Health Facilities Authority Revenue Bonds, Series 2007
5.200% due 10/01/2037		2,250		2,250
Arizona Health Facilities Authority Revenue Bonds, Series 2008
5.000% due 01/01/2035		1,250		1,262
5.500% due 01/01/2038		900		910
Pima County, Arizona Industrial Development Authority Revenue Bonds, Series 2008
5.000% due 09/01/2039 (e)		13,000		13,183
Pima County, Arizona Industrial Development Authority Revenue Bonds, Series 2010
5.250% due 10/01/2040		750		803
Salt River Project Agricultural Improvement & Power District, Arizona Revenue Bonds, Series 2009
5.000% due 01/01/2039 (e)		5,000		5,226
Salt Verde Financial Corp., Arizona Revenue Bonds, Series 2007
5.000% due 12/01/2037		11,600		14,177

				37,811

CALIFORNIA 23.8%
Bay Area Toll Authority, California Revenue Bonds, Series 2008
5.000% due 04/01/2034		500		510
Bay Area Toll Authority, California Revenue Bonds, Series 2010
5.000% due 10/01/2029		1,500		1,675
5.000% due 10/01/2042		3,260		3,640
Bay Area Toll Authority, California Revenue Bonds, Series 2013
5.250% due 04/01/2053		12,000		14,421
California Health Facilities Financing Authority Revenue Bonds, Series 2009
6.000% due 07/01/2039		2,500		2,716
California Health Facilities Financing Authority Revenue Bonds, Series 2011
6.000% due 08/15/2042		1,500		1,686
California Health Facilities Financing Authority Revenue Bonds, Series 2013
5.000% due 08/15/2052		2,015		2,256
California Health Facilities Financing Authority Revenue Bonds, Series 2017
5.000% due 11/15/2037		1,500		1,763
California Municipal Finance Authority Revenue Bonds, Series 2011
7.750% due 04/01/2031		1,260		1,492
California State General Obligation Bonds, Series 2007
5.000% due 12/01/2037		5,300		5,336
California State General Obligation Bonds, Series 2008
5.250% due 03/01/2038		1,350		1,374
California State General Obligation Bonds, Series 2009
5.750% due 04/01/2031		2,500		2,675
6.000% due 04/01/2038		5,000		5,356
California State General Obligation Bonds, Series 2010
5.250% due 11/01/2040		1,300		1,446
5.500% due 03/01/2040		3,200		3,514
California Statewide Communities Development Authority Revenue Bonds, (FHA Insured), Series 2009
6.625% due 08/01/2029		2,580		2,843
6.750% due 02/01/2038		9,200		10,157
California Statewide Communities Development Authority Revenue Bonds, Series 2010
6.250% due 10/01/2039		1,000		1,074
California Statewide Communities Development Authority Revenue Bonds, Series 2011
5.000% due 12/01/2041		3,000		3,344
California Statewide Communities Development Authority Revenue Notes, Series 2007
5.750% due 11/01/2017		405		406
Golden State, California Tobacco Securitization Corp. Revenue Bonds, Series 2007
5.125% due 06/01/2047		3,600		3,559
5.750% due 06/01/2047		1,055		1,057


Los Angeles Community College District, California General Obligation Bonds, Series 2009
11.942% due 08/01/2033 (f)	1,675	1,839
M-S-R Energy Authority, California Revenue Bonds, Series 2009
6.500% due 11/01/2039	2,000	2,859
Palomar Health, California Certificates of Participation Bonds, Series 2009
6.750% due 11/01/2039	1,250	1,397
San Marcos Unified School District, California General Obligation Bonds, Series 2011
5.000% due 08/01/2038	1,600	1,795
Tobacco Securitization Authority of Southern California Revenue Bonds, Series 2006
5.000% due 06/01/2037	6,200	6,217

		86,407

COLORADO 0.9%
Colorado Health Facilities Authority Revenue Bonds, Series 2010
5.000% due 01/01/2040	2,000	2,124
Public Authority for Colorado Energy Revenue Bonds, Series 2008
6.500% due 11/15/2038	500	709
Regional Transportation District, Colorado Revenue Bonds, Series 2010
6.000% due 01/15/2034	500	552

		3,385

CONNECTICUT 0.4%
Harbor Point Infrastructure Improvement District, Connecticut Tax Allocation Bonds, Series 2010
7.875% due 04/01/2039	1,250	1,367

DISTRICT OF COLUMBIA 2.9%
District of Columbia Water & Sewer Authority Revenue Bonds, Series 2009
5.500% due 10/01/2039 (e)	10,000	10,450

		10,450

FLORIDA 5.3%
Broward County, Florida Airport System Revenue Bonds, Series 2009
5.375% due 10/01/2029	500	539
Broward County, Florida Water & Sewer Utility Revenue Bonds, Series 2009
5.250% due 10/01/2034 (e)	4,500	4,689
Cape Coral, Florida Water & Sewer Revenue Bonds, (AGM Insured), Series 2011
5.000% due 10/01/2041	3,000	3,319
Florida Development Finance Corp. Revenue Notes, Series 2011
6.500% due 06/15/2021	220	234
Florida State General Obligation Bonds, Series 2009
5.000% due 06/01/2038 (e)	4,200	4,340
Greater Orlando Aviation Authority, Florida Revenue Bonds, Series 2010
8.492% due 10/01/2039 (f)	5,000	5,959

		19,080

GEORGIA 4.8%
Atlanta Development Authority, Georgia Revenue Bonds, Series 2017
6.750% due 01/01/2035	3,600	3,691
Medical Center Hospital Authority, Georgia Revenue Bonds, Series 2007
5.250% due 07/01/2037	400	400
Municipal Electric Authority of Georgia Revenue Bonds, Series 2015
5.000% due 07/01/2060	10,000	10,745
Private Colleges & Universities Authority of Georgia Revenue Bonds, Series 2016
4.000% due 10/01/2038 (e)	2,500	2,669

		17,505

HAWAII 1.6%
Hawaii Pacific Health Revenue Bonds, Series 2010
5.500% due 07/01/2040	1,500	1,606
Hawaii State General Obligation Bonds, Series 2016
4.000% due 10/01/2035 (e)	2,135	2,311
4.000% due 10/01/2036 (e)	1,755	1,892

		5,809

ILLINOIS 12.0%
Chicago O’Hare International Airport, Illinois Revenue Bonds, Series 2017
5.000% due 01/01/2039	7,000	8,019
Chicago, Illinois General Obligation Bonds, Series 2007
5.500% due 01/01/2035	400	437
5.500% due 01/01/2042	1,000	1,078
Chicago, Illinois General Obligation Bonds, Series 2015
5.375% due 01/01/2029	7,200	7,921
5.500% due 01/01/2034	2,665	2,921


Chicago, Illinois General Obligation Bonds, Series 2017
6.000% due 01/01/2038	3,000	3,482
Chicago, Illinois Revenue Bonds, Series 2002
5.000% due 01/01/2027	1,750	1,947
Chicago, Illinois Waterworks Revenue Bonds, (AGM Insured), Series 2017
5.250% due 11/01/2034	3,730	4,395
Illinois Finance Authority Revenue Bonds, Series 2007
5.875% due 03/01/2027 ^(b)	1,000	265
6.000% due 03/01/2037 ^(b)	625	166
Illinois Finance Authority Revenue Bonds, Series 2009
5.500% due 07/01/2037 (e)	5,000	5,167
7.125% due 11/15/2037	400	439
Illinois Finance Authority Revenue Bonds, Series 2010
6.000% due 08/15/2038	1,000	1,114
Illinois Finance Authority Revenue Bonds, Series 2017
5.250% due 12/01/2052	1,250	1,273
Illinois State Toll Highway Authority Revenue Bonds, Series 2008
5.500% due 01/01/2033	5,000	5,056

		43,680

INDIANA 0.6%
Vigo County, Indiana Hospital Authority Revenue Bonds, Series 2011
7.500% due 09/01/2022	1,975	2,278

IOWA 0.1%
Iowa Finance Authority Revenue Bonds, Series 2014
2.000% due 05/15/2056 ^	76	1
5.400% due 11/15/2046 ^	403	441

		442

KENTUCKY 1.5%
Kentucky Economic Development Finance Authority Revenue Bonds, Series 2010
6.375% due 06/01/2040	2,000	2,272
Kentucky Economic Development Finance Authority Revenue Bonds, Series 2017
5.000% due 08/15/2046	3,000	3,253

		5,525

LOUISIANA 2.7%
Louisiana Gasoline & Fuels Tax State Revenue Bonds, Series 2017
4.000% due 05/01/2045 (e)	4,000	4,193
Louisiana Local Government Environmental Facilities & Community Development Authority Revenue Bonds, Series 2010
5.875% due 10/01/2040	1,500	1,706
6.000% due 10/01/2044	1,000	1,141
6.500% due 11/01/2035	400	452
Louisiana Public Facilities Authority Revenue Bonds, Series 2011
6.500% due 05/15/2037	2,000	2,373

		9,865

MARYLAND 0.8%
Maryland Economic Development Corp. Revenue Bonds, Series 2010
5.750% due 06/01/2035	1,000	1,069
Maryland Health & Higher Educational Facilities Authority Revenue Bonds, Series 2010
6.250% due 01/01/2041	700	812
Maryland Health & Higher Educational Facilities Authority Revenue Bonds, Series 2011
6.000% due 07/01/2041	1,000	1,174

		3,055

MASSACHUSETTS 2.6%
Massachusetts Development Finance Agency Revenue Bonds, Series 2010
7.625% due 10/15/2037	280	301
Massachusetts Development Finance Agency Revenue Bonds, Series 2011
0.000% due 11/15/2056 (c)(g)	140	4
6.250% due 11/15/2039	529	547
Massachusetts Development Finance Agency Revenue Bonds, Series 2016
4.000% due 10/01/2046 (e)	2,500	2,596
5.000% due 01/01/2047	1,000	1,122
Massachusetts Housing Finance Agency Revenue Bonds, Series 2003
5.125% due 06/01/2043	3,185	3,189
Massachusetts State College Building Authority Revenue Bonds, Series 2009
5.500% due 05/01/2039	1,600	1,713

		9,472

MICHIGAN 4.1%
Michigan Finance Authority Revenue Bonds, Series 2017
5.000% due 12/01/2031 (e)	1,200	1,415
5.000% due 12/01/2046 (e)	2,500	2,816


Michigan State Building Authority Revenue Bonds, Series 2016
5.000% due 10/15/2046 (e)	1,500	1,718
5.000% due 10/15/2051 (e)	1,500	1,712
Michigan State Hospital Finance Authority Revenue Bonds, Series 2016
4.000% due 11/15/2047 (e)	5,000	5,111
Michigan Tobacco Settlement Finance Authority Revenue Bonds, Series 2008
0.000% due 06/01/2058 (c)	12,500	315
Royal Oak Hospital Finance Authority, Michigan Revenue Bonds, Series 2009
8.250% due 09/01/2039	1,500	1,599

		14,686

MISSOURI 0.2%
Jennings, Missouri Revenue Bonds, Series 2006
5.000% due 11/01/2023	220	207
Manchester, Missouri Tax Allocation Bonds, Series 2010
6.875% due 11/01/2039	500	512

		719

NEW HAMPSHIRE 0.6%
New Hampshire Business Finance Authority Revenue Bonds, Series 2009
6.125% due 10/01/2039	2,000	2,200

NEW JERSEY 7.5%
New Jersey Economic Development Authority Revenue Bonds, Series 2016
5.000% due 06/15/2041	5,000	5,350
New Jersey Economic Development Authority Special Assessment Bonds, Series 2002
6.500% due 04/01/2028	4,500	5,356
New Jersey Health Care Facilities Financing Authority Revenue Bonds, Series 2007
5.750% due 07/01/2037	1,000	1,022
New Jersey Health Care Facilities Financing Authority Revenue Bonds, Series 2013
5.500% due 07/01/2043	2,000	2,261
New Jersey Transportation Trust Fund Authority Revenue Bonds, (AGM Insured), Series 2006
0.000% due 12/15/2034 (c)	3,200	1,603
Tobacco Settlement Financing Corp., New Jersey Revenue Bonds, Series 2007
4.750% due 06/01/2034	1,600	1,571
5.000% due 06/01/2029	1,500	1,502
5.000% due 06/01/2041	8,745	8,508

		27,173

NEW MEXICO 0.3%
Farmington, New Mexico Revenue Bonds, Series 2010
5.900% due 06/01/2040	1,000	1,093

NEW YORK 13.4%
Brooklyn Arena Local Development Corp., New York Revenue Bonds, Series 2009
6.250% due 07/15/2040	9,800	10,963
Hudson Yards Infrastructure Corp., New York Revenue Bonds, Series 2011
5.750% due 02/15/2047	5,000	5,729
Metropolitan Transportation Authority, New York Revenue Bonds, Series 2011
5.000% due 11/15/2036	3,000	3,383
Nassau County, New York Industrial Development Agency Revenue Bonds, Series 2014
2.000% due 01/01/2049 ^(b)	311	53
6.700% due 01/01/2049	863	873
New York City Industrial Development Agency, New York Revenue Bonds, (AGC Insured), Series 2009
7.000% due 03/01/2049	10,450	11,305
New York City Transitional Finance Authority Future Tax Secured, New York Revenue Bonds, Series 2017
4.000% due 08/01/2042 (e)	2,000	2,132
New York Liberty Development Corp. Revenue Bonds, Series 2007
5.500% due 10/01/2037	1,700	2,203
New York Liberty Development Corp. Revenue Bonds, Series 2011
5.000% due 11/15/2044	11,000	12,178

		48,819

NORTH CAROLINA 2.5%
New Hanover County, North Carolina Revenue Bonds, Series 2011
5.000% due 10/01/2028	6,000	6,654
University of North Carolina Hospitals at Chapel Hill Revenue Bonds, Series 2016
4.000% due 02/01/2046	2,500	2,575

		9,229

OHIO 14.3%
Allen County, Ohio Revenue Bonds, Series 2010
5.000% due 06/01/2038	500	528


Buckeye Tobacco Settlement Financing Authority, Ohio Revenue Bonds, Series 2007
5.125% due 06/01/2024	1,000	949
5.875% due 06/01/2047	8,400	8,053
6.250% due 06/01/2037	5,000	4,977
6.500% due 06/01/2047	30,350	30,382
Hamilton County, Ohio Revenue Bonds, Series 2012
5.000% due 06/01/2042	1,500	1,627
Ohio State Turnpike Commission Revenue Bonds, Series 2013
5.000% due 02/15/2048	5,000	5,508

		52,024

PENNSYLVANIA 7.5%
Allegheny County, Pennsylvania Hospital Development Authority Revenue Bonds, Series 2009
5.625% due 08/15/2039	1,000	1,079
Berks County, Pennsylvania Municipal Authority Revenue Bonds, Series 2012
5.000% due 11/01/2044	6,600	7,149
Cumberland County, Pennsylvania Municipal Authority Revenue Bonds, Series 2008
5.625% due 07/01/2028	1,000	1,026
6.000% due 07/01/2035	670	688
Dauphin County, Pennsylvania General Authority Revenue Bonds, Series 2009
6.000% due 06/01/2036	1,000	1,079
Geisinger Authority, Pennsylvania Revenue Bonds, Series 2017
4.000% due 02/15/2047 (e)	5,000	5,118
Luzerne County, Pennsylvania Industrial Development Authority Revenue Bonds, Series 2009
5.500% due 12/01/2039	100	108
Pennsylvania Turnpike Commission Revenue Bonds, Series 2009
5.125% due 12/01/2040	3,000	3,256
Pennsylvania Turnpike Commission Revenue Bonds, Series 2013
5.000% due 12/01/2043	5,000	5,532
Philadelphia Hospitals & Higher Education Facilities Authority, Pennsylvania Revenue Bonds, Series 2012
5.625% due 07/01/2042	1,645	1,803
Philadelphia, Pennsylvania Water & Wastewater Revenue Bonds, Series 2009
5.250% due 01/01/2036	500	526

		27,364

SOUTH CAROLINA 6.7%
Greenwood County, South Carolina Revenue Bonds, Series 2009
5.375% due 10/01/2039	1,000	1,062
South Carolina Ports Authority Revenue Bonds, Series 2010
5.250% due 07/01/2040	800	873
South Carolina State Public Service Authority Revenue Bonds, Series 2013
5.125% due 12/01/2043	5,000	5,502
5.500% due 12/01/2053	15,000	16,834

		24,271

TENNESSEE 1.7%
Bristol Industrial Development Board, Tennessee Revenue Bonds, Series 2016
5.125% due 12/01/2042	2,500	2,456
Bristol Industrial Development Board, Tennessee Revenue Notes, Series 2016
0.000% due 12/01/2025 (c)	1,000	674
0.000% due 12/01/2026 (c)	1,000	636
Claiborne County, Tennessee Industrial Development Board Revenue Bonds, Series 2009
6.625% due 10/01/2039	1,250	1,338
Johnson City Health & Educational Facilities Board, Tennessee Revenue Bonds, Series 2010
6.000% due 07/01/2038	1,000	1,079

		6,183

TEXAS 18.6%
Dallas, Texas Civic Center Revenue Bonds, (AGC Insured), Series 2009
5.250% due 08/15/2038	1,300	1,384
Grand Parkway Transportation Corp., Texas Revenue Bonds, Series 2013
5.000% due 04/01/2053	4,500	5,109
North Harris County, Texas Regional Water Authority Revenue Bonds, Series 2008
5.250% due 12/15/2033	5,500	5,779
5.500% due 12/15/2038	5,500	5,795
North Texas Tollway Authority Revenue Bonds, Series 2008
5.625% due 01/01/2033	10,800	10,922
5.750% due 01/01/2033	700	708
North Texas Tollway Authority Revenue Bonds, Series 2011
5.000% due 01/01/2038	3,000	3,217
5.500% due 09/01/2041	600	689
San Antonio Public Facilities Corp., Texas Revenue Bonds, Series 2012
4.000% due 09/15/2042	10,000	10,443
Tarrant County, Texas Cultural Education Facilities Finance Corp. Revenue Bonds, Series 2009
6.250% due 11/15/2029	3,000	3,173
Tarrant County, Texas Cultural Education Facilities Finance Corp. Revenue Bonds, Series 2017
6.750% due 11/15/2047	500	545
Tender Option Bond Trust Receipts/Certificates, Texas General Obligation Bonds, Series 2009
8.500% due 08/01/2039 (f)	6,500	7,330


Texas Municipal Gas Acquisition & Supply Corp. Revenue Bonds, Series 2006
5.250% due 12/15/2026	150		179
Texas Municipal Gas Acquisition & Supply Corp. Revenue Bonds, Series 2008
6.250% due 12/15/2026	9,600		11,737
Wise County, Texas Revenue Bonds, Series 2011
8.000% due 08/15/2034	500		552

			67,562

U.S. VIRGIN ISLANDS 0.6%
Virgin Islands Public Finance Authority, U.S. Virgin Islands Revenue Bonds, Series 2009
6.625% due 10/01/2029	1,335		870
6.750% due 10/01/2037	1,165		760
Virgin Islands Public Finance Authority, U.S. Virgin Islands Revenue Bonds, Series 2010
5.250% due 10/01/2029	1,000		661

			2,291

VIRGINIA 0.5%
Fairfax County, Virginia Industrial Development Authority Revenue Bonds, Series 2009
5.500% due 05/15/2035	1,000		1,067
James City County, Virginia Economic Development Authority Revenue Bonds, Series 2013
2.000% due 10/01/2048 ^(b)	201		15
6.000% due 06/01/2043	619		612

			1,694

WASHINGTON 0.5%
Washington Health Care Facilities Authority Revenue Bonds, Series 2009
7.375% due 03/01/2038	1,000		1,089
Washington Health Care Facilities Authority Revenue Bonds, Series 2010
5.500% due 12/01/2039	500		566

			1,655

WEST VIRGINIA 0.3%
Monongalia County, West Virginia Commission Special District Revenue Bonds, Series 2017
5.000% due 06/01/2037 (a)	1,000		1,007

WISCONSIN 1.7%
University of Wisconsin Hospitals & Clinics Authority Revenue Bonds, Series 2013
5.000% due 04/01/2038	3,500		3,897
Wisconsin Health & Educational Facilities Authority Revenue Bonds, Series 2009
6.625% due 02/15/2039	1,000		1,075
Wisconsin Health & Educational Facilities Authority Revenue Bonds, Series 2010
5.625% due 04/15/2039	1,000		1,082

			6,054

Total Municipal Bonds & Notes (Cost $534,132)			590,448

SHORT-TERM INSTRUMENTS 0.8%
REPURCHASE AGREEMENTS (h) 0.8%			2,800

Total Short-Term Instruments (Cost $2,800)			2,800

Total Investments in Securities (Cost $536,932)			593,248

Total Investments 163.3% (Cost $536,932)		$	593,248
Preferred Shares (52.0)%			(189,000	)
Other Assets and Liabilities, net (11.3)%			(41,068	)

Net Assets Applicable to Common Shareholders 100.0%		$	363,180

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

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

^	Security is in default.

(a)

When-issued security.

(b)

Security is not accruing income as of the date of this report.

(c)

Zero coupon security.

(d)

Security becomes interest bearing at a future date.

(e)

Represents an underlying municipal bond transferred to a tender option bond trust established in a tender option bond transaction in which the Fund sold, or caused the sale of, the underlying municipal bond and purchased the residual interest certificate. The security serves as collateral in a financing transaction.

(f)

Represents an investment in a tender option bond residual interest certificate purchased in a secondary market transaction. The interest rate shown bears an inverse relationship to the interest rate on a tender option bond floating rate certificate. The interest rate disclosed reflects the rate in effect on September 30, 2017.

(g)

Restricted Securities:

Issuer Description

Coupon

Maturity
Date

Acquisition Date

Cost

Market
Value

Market Value
as Percentage
of Net Assets

Massachusetts Development Finance Agency Revenue Bonds, Series 2011

0.000%

11/15/2056

07/20/2007

0.00%

Borrowings and Other Financing Transactions

(h)

Repurchase Agreements:


Counterparty	Lending Rate			Settlement Date		Maturity Date		Principal Amount		Collateralized By	Collateral (Received)			Repurchase Agreements, at Value		Repurchase Agreement Proceeds to be Received⁽¹⁾
SAL		1.220	%		09/29/2017		10/02/2017	$	2,800	U.S. Treasury Notes 1.125% due 02/28/2021	$	(2,856	)	$	2,800	$	2,800

Total Repurchase Agreements											$	(2,856	)	$	2,800	$	2,800

⁽¹⁾	Includes accrued interest.

Fair Value Measurements

The following is a summary of the fair valuations according to the inputs used as of September 30, 2017 in valuing the Fund’s assets and liabilities:


Category and Subcategory	Level 1		Level 2		Level 3		Fair Value at 09/30/2017
Investments in Securities, at Value
Municipal Bonds & Notes
Alabama	$	0	$	40,293	$	0	$	40,293
Arizona		0		37,811		0		37,811
California		0		86,407		0		86,407
Colorado		0		3,385		0		3,385
Connecticut		0		1,367		0		1,367
District of Columbia		0		10,450		0		10,450
Florida		0		19,080		0		19,080
Georgia		0		17,505		0		17,505
Hawaii		0		5,809		0		5,809
Illinois		0		43,680		0		43,680
Indiana		0		2,278		0		2,278
Iowa		0		442		0		442
Kentucky		0		5,525		0		5,525
Louisiana		0		9,865		0		9,865
Maryland		0		3,055		0		3,055
Massachusetts		0		9,472		0		9,472
Michigan		0		14,686		0		14,686
Missouri		0		719		0		719
New Hampshire		0		2,200		0		2,200
New Jersey		0		27,173		0		27,173
New Mexico		0		1,093		0		1,093
New York		0		48,819		0		48,819
North Carolina		0		9,229		0		9,229
Ohio		0		52,024		0		52,024
Pennsylvania		0		27,364		0		27,364
South Carolina		0		24,271		0		24,271
Tennessee		0		6,183		0		6,183
Texas		0		67,562		0		67,562
U.S. Virgin Islands		0		2,291		0		2,291
Virginia		0		1,694		0		1,694
Washington		0		1,655		0		1,655
West Virginia		0		1,007		0		1,007
Wisconsin		0		6,054		0		6,054
Short-Term Instruments
Repurchase Agreements		0		2,800		0		2,800

Total Investments	$	0	$	593,248	$	0	$	593,248

There were no significant transfers among Levels 1, 2, or 3 during the period ended September 30, 2017.

See Accompanying Notes

Notes to Financial Statements

1. INVESTMENT VALUATION AND FAIR VALUE MEASUREMENTS

(a) Investment Valuation Policies The net asset value (“NAV”) of the Fund’s shares is determined by dividing the total value of portfolio investments and other assets attributable to that Fund less any liabilities by the total number of shares outstanding of the Fund.

On each day that the New York Stock Exchange (“NYSE”) is open, Fund shares are ordinarily valued as of the close of regular trading (“NYSE Close”). Information that becomes known to the Fund or its agents after the time as of which NAV has been calculated on a particular day will not generally be used to retroactively adjust the price of a security or the NAV determined earlier that day. The Fund reserves the right to change the time as of which its NAV is calculated if the Fund closes earlier, or as permitted by the U.S. Securities and Exchange Commission (the “SEC”).

For purposes of calculating a NAV, portfolio securities and other assets for which market quotes are readily available are valued at market value. Market value is generally determined on the basis of official closing prices or the last reported sales prices, or if no sales are reported, based on quotes obtained from established market makers or prices (including evaluated prices) supplied by the Fund’s approved pricing services, quotation reporting systems and other third-party sources (together, “Pricing Services”). The Fund will normally use pricing data for domestic equity securities received shortly after the NYSE Close and does not normally take into account trading, clearances or settlements that take place after the NYSE Close. If market value pricing is used, a foreign (non-U.S.) equity security traded on a foreign exchange or on more than one exchange is typically valued using pricing information from the exchange considered by Pacific Investment Management Company LLC (“PIMCO” or the “Manager”) to be the primary exchange. A foreign (non-U.S.) equity security will be valued as of the close of trading on the foreign exchange, or the NYSE Close, if the NYSE Close occurs before the end of trading on the foreign exchange. Domestic and foreign (non-U.S.) fixed income securities, non-exchange traded derivatives, and equity options are normally valued on the basis of quotes obtained from brokers and dealers or Pricing Services using data reflecting the earlier closing of the principal markets for those securities. Prices obtained from Pricing Services may be based on, among other things, information provided by market makers or estimates of market values obtained from yield data relating to investments or securities with similar characteristics. Certain fixed income securities purchased on a delayed-delivery basis are marked to market daily until settlement at the forward settlement date. Exchange-traded options, except equity options, futures and options on futures are valued at the settlement price determined by the relevant exchange. Swap agreements are valued on the basis of bid quotes obtained from brokers and dealers or market-based prices supplied by Pricing Services. The Fund’s investments in open-end management investment companies, other than exchange-traded funds (“ETFs”), are valued at the NAVs of such investments. Open-end management investment companies may include affiliated funds.

Investments for which market quotes or market based valuations are not readily available are valued at fair value as determined in good faith by the Board or persons acting at their direction. The Board has adopted methods for valuing securities and other assets in circumstances where market quotes are not readily available, and has delegated to PIMCO the responsibility for applying the fair valuation methods. In the event that market quotes or market based valuations are not readily available, and the security or asset cannot be valued pursuant to a Board approved valuation method, the value of the security or asset will be determined in good faith by the Valuation Oversight Committee of the Board (“Valuation Oversight Committee”), generally based on recommendations provided by the Manager. Market quotes are considered not readily available in circumstances where there is an absence of current or reliable market-based data (e.g., trade information, bid/ask information, indicative market quotations (“Broker Quotes”), Pricing Services’ prices), including where events occur after the close of the relevant market, but prior to the NYSE Close, that materially affect the values of the Fund’s securities or assets. In addition, market quotes are considered not readily available when, due to extraordinary circumstances, the exchanges or markets on which the securities trade do not open for trading for the entire day and no other market prices are available. The Board has delegated to the Manager the responsibility for monitoring significant events that may materially affect the values of the Fund’s securities or assets and for determining whether the value of the applicable securities or assets should be reevaluated in light of such significant events.

When the Fund uses fair valuation to determine the value of a portfolio security or other asset for purposes of calculating its NAV, such investments will not be priced on the basis of quotes from the primary market in which they are traded, but rather may be priced by another method that the Board or persons acting at their direction believe reflects fair value. Fair valuation may require subjective determinations about the value of a security. While the Fund’s policy is intended to result in a calculation of the Fund’s NAV that fairly reflects security values as of the time of pricing, the Fund cannot ensure that fair values determined by the Board or persons acting at their direction would accurately reflect the price that the Fund could obtain for a security if it were to dispose of that security as of the time of pricing (for instance, in a forced or distressed sale). The prices used by the Fund may differ from the value that would be realized if the securities were sold.

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

•

Level 1—Quoted prices in active markets or exchanges for identical assets and liabilities.

•

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

•

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

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

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

(c) Valuation Techniques and the Fair Value Hierarchy

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

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

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

Short-term debt instruments (such as commercial paper) having a remaining maturity of 60 days or less may be valued at amortized cost, so long as the amortized cost value of such short-term debt instruments is approximately the same as the fair value of the instrument as determined without the use of amortized cost valuation. These securities are categorized as Level 2 or Level 3 of the fair value hierarchy depending on the source of the base price.

2. FEDERAL INCOME TAX MATTERS

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

The Fund may be subject to local withholding taxes, including those imposed on realized capital gains. Any applicable foreign capital gains tax is accrued daily based upon net unrealized gains, and may be payable following the sale of any applicable investments.

In accordance with U.S. GAAP, the Manager has reviewed the Fund’s tax positions for all open tax years. As of September 30, 2017, the Fund has recorded no liability for net unrecognized tax benefits relating to uncertain income tax positions it has taken or expects to take in future tax returns.

The Fund files U.S. federal, state, and local tax returns as required. The Fund’s tax returns are subject to examination by relevant tax authorities until expiration of the applicable statute of limitations, which is generally three years after the filing of the tax return but which can be extended to six years in certain circumstances. Tax returns for open years have incorporated no uncertain tax positions that require a provision for income taxes.

As of September 30, 2017, the aggregate cost and the net unrealized appreciation (depreciation) of investments for Federal income tax purposes are as follows (amounts in thousands):

Federal

Tax Cost

Aggregate Gross

Unrealized

Appreciation

Aggregate Gross

Unrealized

(Depreciation)

Net Unrealized

Appreciation/

(Depreciation)⁽¹⁾

$536,932

$60,094

$(3,778)

$56,316

⁽¹⁾	Primary differences, if any, between book and tax net unrealized appreciation (depreciation) are attributable to wash sale loss deferrals for Federal income tax purposes.


GLOSSARY: (abbreviations that may be used in the preceding statements)					(Unaudited)

Counterparty Abbreviations:
SAL	Citigroup Global Markets, Inc.

Currency Abbreviations:
USD (or $)	United States Dollar

Municipal Bond or Agency Abbreviations:
AGC	Assured Guaranty Corp.	AGM	Assured Guaranty Municipal	FHA	Federal Housing Administration

Other Abbreviations:
TBA	To-Be-Announced

Item 2. Controls and Procedures

(a) The principal executive officer and principal financial & accounting officer have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”) (17 CFR 270.30a-3(c))), are effective based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this report.

(b) There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d))) that occurred during the registrant’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.

Item 3. Exhibits

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

Signatures

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

PIMCO Municipal Income Fund III

By: /s/ Peter G. Strelow

Peter G. Strelow

President (Principal Executive Officer)

Date: November 27, 2017

By: /s/ William G. Galipeau

William G. Galipeau

Treasurer (Principal Financial & Accounting Officer)

Date: November 27, 2017

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By: /s/ Peter G. Strelow

Peter G. Strelow

President (Principal Executive Officer)

Date: November 27, 2017

By: /s/ William G. Galipeau

William G. Galipeau

Treasurer (Principal Financial & Accounting Officer)

Date: November 27, 2017