-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, M1xw6WBsT22ggM4cXwnER1wbSjQwOgZcaHbOHjXj/rVrcwGrbLJTu+MXRVkn11cV C+e33lMTjKmCgN3AW8v36Q== 0000950136-03-002974.txt : 20031203 0000950136-03-002974.hdr.sgml : 20031203 20031203083205 ACCESSION NUMBER: 0000950136-03-002974 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20030930 FILED AS OF DATE: 20031203 EFFECTIVENESS DATE: 20031203 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PIMCO CALIFORNIA MUNICIPAL INCOME FUND III CENTRAL INDEX KEY: 0001181504 IRS NUMBER: 161624050 STATE OF INCORPORATION: MA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-21188 FILM NUMBER: 031033859 BUSINESS ADDRESS: STREET 1: 1345 AVENUE OF THE AMERICAS, 47TH FL CITY: NEW YORK STATE: NY ZIP: 10105 BUSINESS PHONE: 2127393502 N-CSR 1 file001.txt ANNUAL REPORT Item 1. Report to Shareholders UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-21188 --------- PIMCO California Municipal Income Fund III -------------------------------------------------- (Exact name of registrant as specified in charter) 1345 Avenue of the Americas, New York, New York 10105 ----------------------------------------------------- (Address of principal executive offices) (Zip code) Brian S. Shlissel - 1345 Avenue of the Americas, New York, New York 10105 ------------------------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: 212-739-3369 ------------ Date of fiscal year end: September 30 ------------ Date of reporting period: September 30 ------------ 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. ANNUAL REPORT 9.30.03 PIMCO MUNICIPAL INCOME FUND III PIMCO CALIFORNIA MUNICIPAL INCOME FUND III PIMCO NEW YORK MUNICIPAL INCOME FUND III - -------------------------------------------------------------------------------- CONTENTS Letter to Shareholders ........................................................1 Performance Summary and Statistics ..........................................2-4 Schedules of Investments ...................................................5-22 Statements of Assets and Liabilities .........................................23 Statements of Operations .....................................................24 Statements of Changes in Net Assets ..........................................25 Notes to Financial Statements .............................................26-31 Financial Highlights .........................................................32 Report of Independent Auditors ...............................................33 Tax & Other Information ......................................................34 Dividend Reinvestment Plan ...................................................35 Board of Trustees ............................................................36 Privacy Policy ...............................................................37 PMX LISTED [THE NEW YORK STOCK EXCHANGE LOGO] THE NEW YORK STOCK EXCHANGE PZC LISTED [THE NEW YORK STOCK EXCHANGE LOGO] THE NEW YORK STOCK EXCHANGE PYN LISTED [THE NEW YORK STOCK EXCHANGE LOGO] THE NEW YORK STOCK EXCHANGE PIMCO ADVISORS PIMCO MUNICIPAL INCOME FUNDS III LETTER TO SHAREHOLDERS November 7, 2003 Dear Shareholder: We are pleased to provide you with this initial 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 fiscal year ended September 30, 2003. Please refer to the following pages for specific information for each of the Funds. If you have any questions regarding the information provided, please contact your financial advisor or call our shareholder services area at 1-800-331-1710. Please note that a wide range of information and resources can be accessed through our web site--www.pimcoadvisors.com. We at the Funds, together with PIMCO Advisors Fund Management LLC, the Funds' investment manager and Pacific Investment Management Co. LLC, the Funds' sub-adviser, thank you for investing with us. We remain dedicated to serving your investment needs. Sincerely, /s/ Stephen Treadway /s/ Brian S. Shlissel Stephen Treadway Brian S. Shlissel Chairman President, Chief Executive Officer 9.30.03 | PIMCO Municipal Income Funds III Annual Report 1 PIMCO MUNICIPAL INCOME FUND III PERFORMANCE SUMMARY AND STATISTICS September 30, 2003 (unaudited) - -------------------------------------------------------------------------------- SYMBOL: PMX OBJECTIVE: PIMCO Municipal Income Fund III seeks to provide income exempt from federal income tax. PRIMARY INVESTMENTS: Municipal fixed-income securities, the interest from which is exempt from federal income tax. FUND INCEPTION DATE: October 31, 2002 TOTAL NET ASSETS (1) : $705.2 million PORTFOLIO MANAGER: Mark McCray - -------------------------------------------------------------------------------- TOTAL RETURN (2): Market Price NAV - -------------------------------------------------------------------------------- Commencement of Operations (10/31/02) to 9/30/03 0.05% 3.63% WEEKLY COMMON SHARE PRICE PERFORMANCE: Commencement of Operations (10/31/02) to 9/30/03 o Market Price o NAV [CHART] PORTFOLIO STATISTICS: - ------------------------------ Market Price $14.20 - ------------------------------ Net Asset Value $14.05 - ------------------------------ Market Price Yield (3) 7.02% - ------------------------------ (1) Inclusive of net assets attributable to Preferred Shares outstanding. (2) PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Total return is determined by subtracting the initial investment from the redeemable value at the end of the period and dividing the remainder by the initial investment 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 investment return does not reflect broker commissions or sales charges. Total return for a period of less than one year is not annualized. An investment in the Fund involves risk, including the loss of principal. Investment 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, 2003. 2 PIMCO Municipal Income Funds III Annual Report | 9.30.03 PIMCO CALIFORNIA MUNICIPAL INCOME FUND III PERFORMANCE SUMMARY AND STATISTICS September 30, 2003 (unaudited) - -------------------------------------------------------------------------------- SYMBOL: PZC OBJECTIVE: PIMCO California Municipal Income Fund III seeks 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) : $470.3 million PORTFOLIO MANAGER: Mark McCray - -------------------------------------------------------------------------------- TOTAL RETURN (2): Market Price NAV - -------------------------------------------------------------------------------- Commencement of Operations (10/31/02) to 9/30/03 (4.10)% (1.05)% WEEKLY COMMON SHARE PRICE PERFORMANCE: Commencement of Operations (10/31/02) to 9/30/03 o Market Price o NAV [CHART] PORTFOLIO STATISTICS: - ------------------------------ Market Price $13.62 - ------------------------------ Net Asset Value $13.43 - ------------------------------ Market Price Yield (3) 7.04% - ------------------------------ (1) Inclusive of net assets attributable to Preferred Shares outstanding. (2) PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Total return is determined by subtracting the initial investment from the redeemable value at the end of the period and dividing the remainder by the initial investment and expressing the result as a percentage. The calculation assumes that all income dividends by the Fund have been reinvested at prices obtained under the Fund's dividend reinvestment plan. Total investment return does not reflect broker commissions or sales charges. Total return for a period of less than one year is not annualized. An investment in the Fund involves risk, including the loss of principal. Investment 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 per share dividend payable to common shareholders by the market price per common share at September 30, 2003. 9.30.03 | PIMCO Municipal Income Funds III Annual Report 3 PIMCO NEW YORK MUNICIPAL INCOME FUND III PERFORMANCE SUMMARY AND STATISTICS September 30, 2003 (unaudited) - -------------------------------------------------------------------------------- SYMBOL: PYN OBJECTIVE: PIMCO New York Municipal Income Fund III seeks 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) : $124.0 million PORTFOLIO MANAGER: Mark McCray - -------------------------------------------------------------------------------- TOTAL RETURN (2): Market Price NAV - -------------------------------------------------------------------------------- Commencement of Operations (10/31/02) to 9/30/03 (3.77)% 4.09% WEEKLY COMMON SHARE PRICE PERFORMANCE: Commencement of Operations (10/31/02) to 9/30/03 o at Market Price o at NAV [CHART] PORTFOLIO STATISTICS: - --------------------------------- Market Price $13.68 - --------------------------------- Net Asset Value $14.14 - --------------------------------- Market Price Yield (3) 7.02% - --------------------------------- (1) Inclusive of net assets attributable to Preferred Shares outstanding. (2) PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Total return is determined by subtracting the initial investment from the redeemable value at the end of the period and dividing the remainder by the initial investment and expressing the result as a percentage. The calculation assumes that all income dividends by the Fund have been reinvested at prices obtained under the Fund's dividend reinvestment plan. Total investment return does not reflect broker commissions or sales charges. Total return for a period of less than one year is not annualized. An investment in the Fund involves risk, including the loss of principal. Investment return, price, yield and net asset value will fluctuate with changes in market conditions. This data is provided for information only and is not intend-ed 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 per share dividend payable to common shareholders by the market price per common share. 4 PIMCO Municipal Income Funds III Annual Report | 9.30.03 PIMCO MUNICIPAL INCOME FUND III SCHEDULE OF INVESTMENTS September 30, 2003
Principal Amount Credit Rating (000) (Moody's/S&P)* Value** - -------------------------------------------------------------------------------------------------------------- MUNICIPAL BONDS & NOTES--89.0% - -------------------------------------------------------------------------------------------------------------- ALABAMA--1.6% $ 9,560 Birmingham, GO, 5.00%, 12/1/27-12/1/32, Ser. B, (AMBAC) Aaa/AAA $ 9,756,199 1,500 Colbert Cnty., Northwest Health Care Auth., Health Care Facs., 5.75%, 6/1/27 Baa3/NR 1,423,785 ----------- 11,179,984 ----------- ALASKA--1.8% State Housing Finance Corp., 11,400 5.00%, 12/1/33-12/1/39, Ser. A Aaa/AAA 11,464,284 1,000 5.25%, 6/1/32 Ser. C, (MBIA) Aaa/AAA 1,014,010 ----------- 12,478,294 ----------- ARIZONA--0.6% 2,200 Health Facs. Auth. Hospital Syst. Rev., 7.00%, 12/1/25 NR/BBB 2,383,260 1,500 Maricopa Cnty. Pollution Control Corp., Pollution Control Rev., 5.05%, 5/1/29 (AMBAC) Aaa/AAA 1,533,930 ----------- 3,917,190 ----------- CALIFORNIA--5.4% 42,700 Golden State Tobacco Securitization Corp., Tobacco Settlement Rev., 6.25%-6.75%, 6/1/33-6/1/39, Ser. 2003-A-1 Baa2/BBB 37,644,117 ----------- COLORADO--4.4% El Paso Cnty., CP, 4,555 5.00%, 12/1/23-12/1/27, Ser. A (AMBAC) Aaa/AAA 4,692,222 3,225 5.00%, 12/1/23-12/1/27, Ser. B (AMBAC) Aaa/AAA 3,327,781 1,500 Garfield Cnty. School Dist. Re-2, GO, 5.00%, 12/1/25 (FSA) Aaa/NR 1,542,090 3,000 La Plata Cnty. School Dist. No. 9-R, Durango, GO, 5.25%, 11/1/23-11/1/25 (MBIA) Aaa/NR 3,159,230 4,000 Saddle Rock Met. Dist., GO, 5.35%, 12/1/31 NR/AA 4,041,840 3,500 School Mines Aux. Facs. Rev., 5.00%, 12/1/37 (AMBAC) Aaa/AAA 3,558,975 9,955 Springs Utilities Rev., 5.00%, 11/15/30, Ser. B Aa2/AA 10,092,777 ----------- 30,414,915 ----------- FLORIDA--5.9% 8,000 Highlands Cnty., Health Facs. Auth. Rev., 5.25%, 11/15/23, Ser. B A3/A 8,092,000 2,500 Hillsborough Cnty. Industrial Dev. Auth. Hospital Rev., 5.25%, 10/1/34, Ser B Baa1/NR 2,436,525 1,485 Julington Creek Plantation Community Dev. Dist. Assessment Rev., 5.00%, 5/1/29 (MBIA) Aaa/AAA 1,509,814 1,000 Orange Cnty., Housing Finance Auth. Multifamily Rev., 5.25%, 1/1/28, Ser. G (FNMA) Aaa/NR 1,021,220 15,000 Pinellas Cnty., Health Facs. Auth. Rev., 5.50%, 11/15/33 A1/NR 15,256,650 7,500 South Miami Health Facs. Auth., Hospital Rev., 5.25%, 11/15/33 Aa3/A+ 7,598,775 5,615 Tampa, Water & Sewer Rev., 5.00%, 10/1/26, Ser. A Aa2/AA 5,712,645 ----------- 41,627,629 -----------
9.30.03 PIMCO Municipal Income Funds III Annual Report 5 PIMCO MUNICIPAL INCOME FUND III SCHEDULE OF INVESTMENTS September 30, 2003
Principal Amount Credit Rating (000) (Moody's/S&P)* Value** - ------------------------------------------------------------------------------------------------------------ GEORGIA--0.6% $ 4,000 Griffin Combined Public Utility Rev., 5.00%, 1/1/32 (AMBAC) Aaa/AAA $ 4,065,120 ----------- HAWAII--2.2% 13,780 State GO, 5.00%, 9/1/11 (MBIA) Aaa/AAA 15,449,998 ----------- IDAHO--1.0% 6,750 State Building Auth. Building Rev., 5.00%, 9/1/33-9/1/43, Ser. A, (XLCA) Aaa/AAA 6,883,222 ----------- ILLINOIS--8.1% Chicago Board of Education, GO, 500 zero coupon, 12/1/28, Ser. A (FGIC) Aaa/AAA 130,515 5,000 5.00%, 12/1/31, Ser. C (FSA) Aaa/AAA 5,063,200 2,250 Chicago, GO, 5.00%, 1/1/31, Ser. A (MBIA) Aaa/AAA 2,281,702 7,000 Chicago Motor Fuel Tax Rev., 5.00% 1/1/33, Ser. A (AMBAC) Aaa/AAA 7,101,990 4,000 Chicago Park Dist. GO, 5.00%, 1/1/29, Ser. D (FGIC) Aaa/AAA 4,056,120 5,056 Chicago, Special Assessment, 6.625%-6.75%, 12/1/22-12/1/32 NR/NR 5,150,806 2,500 Chicago Water Rev., 5.00% 11/1/31 (AMBAC) Aaa/AAA 2,531,375 2,500 Cook Cnty., GO, 5.125%, 11/15/26, Ser. A (FGIC) Aaa/AAA 2,549,600 9,325 Educational Facs. Auth. Rev., 5.00%-5.25%, 7/1/33-7/1/41, Ser. A Aa1/AA 9,426,142 1,175 Health Facs. Auth. Rev., Elmurst Memorial Healthcare, 5.50%, 1/1/22 A2/NR 1,190,181 325 Health Facs. Auth. Rev., Midwest Physician Group Ltd., 5.50%, 11/15/19 NR/BBB- 265,284 9,045 Metropolitan Pier & Exposition Auth. Dedicated State Tax Rev., 5.25%, 6/15/42 (MBIA) Aaa/AAA 9,328,742 4,300 Round Lake, Special Tax Rev., 6.70%, 3/1/33 NR/NR 4,524,030 3,050 University, Rev., 5.00%, 4/1/30, Ser. A (AMBAC) Aaa/AAA 3,091,846 ----------- 56,691,533 ----------- INDIANA--4.0% 8,035 Bond Bank, 5.00%, 2/1/33, Ser. A (FSA) NR/AAA 8,171,836 3,000 Brownsburg, 1999 School Building Corp., 5.25% 3/15/25, Ser. A (FSA) Aaa/AAA 3,142,020 1,375 Fort Wayne Pollution Control Rev., 6.20%, 10/15/25 Baa1/BBB 1,449,044 5,000 Indianapolis Local Public Improvement Board, Tax Allocation, 5.00%, 2/1/29, Ser. G (MBIA) Aaa/AAA 5,096,750 4,500 Michigan City Area Wide School Building Corp., Rev., zero coupon, 1/15/21-1/15/22 (FGIC) Aaa/AAA 1,840,890 1,000 Plainfield Parks Facs. Corp., Lease Rent Rev., 5.00%, 1/15/22 (AMBAC) Aaa/AAA 1,035,150 3,500 State Dev. Finance Auth. Pollution Control Rev., 5.00% 3/1/30 (AMBAC) Aaa/AAA 3,515,610 3,455 Valparaiso, Middle Schools Building Corp. Rev., 5.00%, 7/15/24 (MBIA) Aaa/AAA 3,539,855 ----------- 27,791,155 -----------
6 PIMCO Municipal Income Funds III Annual Report 9.30.03 PIMCO MUNICIPAL INCOME FUND III SCHEDULE OF INVESTMENTS September 30, 2003
Principal Amount Credit Rating (000) (Moody's/S&P)* Value** - -------------------------------------------------------------------------------------------------------------- KENTUCKY--0.1% $ 1,000 Economic Dev. Finance Auth. Hospital Facs. Rev., 5.25%, 10/1/30 A1/AA- $ 1,015,030 ----------- LOUISIANA--0.9% 5,000 Public Facs. Auth. Rev., 5.50%, 5/15/32, Ser. B A3/NR 5,048,000 1,600 Tobacco Settlement Financing Corp., 5.875%, 5/15/39, Ser. 2001B Baa2/BBB 1,262,176 ----------- 6,310,176 ----------- MASSACHUSETTS--3.5% 1,000 State Dev. Finance Agcy. Rev., 5.75%, 7/1/33 NR/BBB 1,001,490 7,000 State Health & Educational Facs. Auth. Rev., 5.125%, 7/15/37, Ser. FF Aaa/AAA 7,181,160 4,910 State Housing Finance Agcy. Housing Rev., 5.125%, 6/1/43, Ser. H Aa3/AA- 4,961,162 3,225 State Water Pollution Abatement Trust, 5.00%, 8/1/32, Ser. B Aaa/AAA 3,266,119 8,055 State Water Resources Auth., 5.00%, 8/1/32 Ser. J (FSA) Aaa/AAA 8,128,864 ----------- 24,538,795 ----------- MICHIGAN--7.1% 3,000 Detroit City School District, 5.00%, 5/1/33, Ser. B (FGIC) Aaa/AAA 3,031,740 10,000 Detroit Water Supply Syst., 5.00%, 7/1/34, Ser. B (MBIA) Aaa/AAA 10,060,600 5,000 State Building Auth., Rev., 5.00%, 10/15/26, Ser. III (FSA) Aaa/AAA 5,076,200 175 State Hospital Finance Auth. Rev., Detroit Medical Center, 5.25%, 8/15/23 Ba3/B 100,361 4,000 State Hospital Finance Auth. Rev., Henry Ford Health Syst., 5.00%, 3/1/17 A1/A- 4,047,760 20,000 State Hospital Finance Auth. Rev., Trinity Health Credit, 5.375%, 12/1/30 Aa3/AA- 20,455,800 5,980 State Hospital Finance Auth. Rev., Oakwood Group, 5.75%-6.00%, 4/1/22-4/1/32, Ser. A A2/A 6,168,871 1,000 Technological University, 5.00%, 10/1/33 (XLCA) Aaa/AAA 1,009,030 ----------- 49,950,362 ----------- MINNESOTA--0.9% 2,400 Upsala Independent School Dist. No. 487, GO, 5.00%, 2/1/28 (FGIC) Aaa/AAA 2,444,640 4,000 Willmar, GO, 5.00%, 2/1/32 (FSA) Aaa/NR 4,071,360 ----------- 6,516,000 ----------- MISSISSIPPI--0.6% 4,250 Business Finance Corp., Pollution Control Rev., 5.875%-5.90%, 4/1/22-5/1/22 Ba1/BBB- 4,255,125 ----------- MISSOURI--3.0% 4,000 Bi State Dev. Agcy., Missouri Illinois Dist., 5.00%, 10/1/32 (FSA) Aaa/AAA 4,056,560 4,365 State Environmental Improvement & Energy Resources Auth. Water Pollution Control Rev., 5.00%, 7/1/23, Ser. B Aaa/NR 4,511,577
9.30.03 PIMCO Municipal Income Funds III Annual Report 7 PIMCO MUNICIPAL INCOME FUND III SCHEDULE OF INVESTMENTS September 30, 2003
Principal Amount Credit Rating (000) (Moody's/S&P)* Value** - ---------------------------------------------------------------------------------------------------- MISSOURI (CONCLUDED) $ 7,500 State Health & Educational Facs. Auth. Health Facs. Rev., 6.25%, 12/1/30 A2/A $ 7,935,900 1,350 St. Louis Industrial Dev. Auth. Housing Dev. Rev., 5.20%, 1/20/36 (GNMA) NR/AAA 1,370,331 3,000 St. Louis Industrial Dev. Auth. Rev., 5.125%, 12/20/29-12/20/30 (GNMA) NR/AAA 3,051,600 ----------- 20,925,968 ----------- MONTANA--1.6% 11,250 Forsyth Pollution Control Rev., 5.00%, 3/1/31 (AMBAC) Aaa/AAA 11,386,238 ----------- NEVADA--0.6% 3,355 Henderson Health Care Fac. Rev., 5.125%, 7/1/28 Baa2/BBB 2,944,684 1,000 Henderson Local Improvement Dist., 5.80%, 3/1/23 NR/NR 974,950 ----------- 3,919,634 ----------- NEW HAMSPHIRE--0.7%. 4,750 Manchester Water Works, 5.00%, 12/1/28-12/1/34 (FGIC) Aaa/AAA 4,800,413 ----------- NEW JERSEY--3.3% 1,540 Camden Cnty., Improvement Auth. Rev., 6.00%, 2/15/27 Ba2/NR 1,383,413 300 Economic Dev. Auth. Industrial Dev. Rev., 7.00%, 10/1/14 Ba3/NR 301,140 2,000 Health Care Facs. Financing Auth. Rev., 5.5%, 7/1/33 Baa2/NR 1,956,840 3,000 Health Care Facs. Financing Auth. Rev., 6.625%, 7/1/36 NR/BB+ 2,995,620 2,500 Middlesex Cnty. Polution Control Auth. Rev., 5.75%, 9/15/32 Baa3/BBB 2,540,100 2,000 South Port Corp., Rev., 5.10%, 1/1/33 NR/A 2,014,200 1,500 State Educational Fac. Auth. Rev., 6.00%, 7/1/25, Ser. D NR/NR 1,532,010 11,750 Tobacco Settlement Financing Corp., Rev., 6.125%-6.75%, 6/1/24-6/1/39 Baa2/BBB 10,610,850 ----------- 23,334,173 ----------- NEW MEXICO--0.1% 1,000 Farmington Pollution Control Rev., 5.80%, 4/1/22 Baa3/BBB- 992,160 ----------- NEW YORK--5.3% Metropolitan Transportation Auth. Rev., 5,000 5.00%, 11/15/32, Ser. A (FGIC) Aaa/AAA 5,062,750 10,000 5.25%, 11/15/32, Ser. B A2/A 10,268,000 3,800 State Dorm Auth. Rev., 5.00%, 3/12/32 NR/AA 3,825,498 11,590 State Dorm Auth. Rev., Memorial Sloan-Kettering Center, 5.00%, 7/1/34, Ser. 1 Aa2/AA 11,713,897 4,000 State Dorm Auth. Rev., St. Barnabas, 5.125%, 2/1/22, Ser. A (FHA) Aaa/AAA 4,171,320
8 PIMCO Municipal Income Funds III Annual Report 9.30.03 PIMCO MUNICIPAL INCOME FUND III SCHEDULE OF INVESTMENTS September 30, 2003
Principal Amount Credit Rating (000) (Moody's/S&P)* Value** - ----------------------------------------------------------------------------------------------------------- NEW YORK (CONCLUDED) $ 2,000 State Environmental Facs. Corp. Clean Water & Drinking Rev., 5.00%, 6/15/28 Aaa/AAA $ 2,038,360 ----------- 37,079,825 ----------- NORTH CAROLINA--1.4% 2,000 Charlotte-Mecklenberg Hospital Auth. Healthcare Syst. Rev., 5.00%, 1/15/33, Ser. A Aa3/AA 2,025,040 Eastern Municipal Power Agcy., Power Syst. Rev., 3,795 5.375%, 1/1/17, Ser. C Baa3/BBB 3,993,706 4,000 5.125%, 1/1/23-1/1/26, Ser. D Baa3/BBB 3,925,980 ----------- 9,944,726 ----------- OHIO--0.4% 2,500 Lorain Cnty., Hospital Rev., 5.375%, 10/1/30 A1/AA- 2,541,150 ----------- PENNSYLVANIA--2.7% 4,350 Allegeny Cnty. Hospital Dev. Auth. Rev., 9.25%, 11/15/30, Ser B B2/B 4,277,137 1,500 Cumberland Cnty. Muni. Auth. Retirement Community Rev., 7.25%, 1/1/35, Ser. A NR/NR 1,508,370 3,250 Delaware River Joint Toll Bridge, Commission Bridge Rev., 5.00%, 7/1/28 A2/A- 3,262,188 3,000 Lehigh Cnty. General Purpose Auth. Rev., 5.375% 8/15/33 Baa2/BBB 2,915,100 6,300 St. Mary Hospital Auth., Bucks Cnty., 5.00%, 12/1/28 Aa2/AA 6,572,412 ----------- 18,535,207 ----------- PUERTO RICO--0.3% 2,200 Electric Power Auth. Power Rev., 5.125%, 7/1/29, Ser. NN A3/A- 2,237,818 ----------- SOUTH CAROLINA--1.0% 6,700 Jobs Economic Dev. Auth. Economic Dev. Rev., 5.625%, 11/15/30 A3/A- 6,840,834 ----------- TENNESSEE--0.2% 1,250 Knox Cnty. Health Educational & Housing Facs. Board, Hospital Facs. Rev., 5.25%, 10/1/30 A1/AA- 1,276,038 ----------- TEXAS--12.1% 3,955 Caddo Mills Independent School Dist., GO, 5.25%, 8/15/39 (PSF) NR/AAA 4,077,645 4,135 Canyon Independent School Dist., GO, 5.00%, 2/15/28, Ser. A (PSF) NR/AAA 4,184,124 1,300 Comal Cnty Health Facs. Dev., 6.25%, 2/1/32 Baa2/BBB 1,318,187 Denton Independent School Dist. GO, 33,000 zero coupon, 8/15/26-8/15/31 (PSF) Aaa/AAA 7,790,550 10,115 5.00%, 8/15/33. Aaa/AAA 10,200,977 4,400 Harris Cnty., GO, 5.125%, 8/15/31 Aa1/AA+ 4,470,224 Harris Cnty. Health Facs. Dev. Corp. Rev., Ser. A, 2,750 5.375%, 2/15/26 NR/AA- 2,801,893 5,000 5.375%, 7/1/29 (MBIA) Aaa/AAA 5,151,950 19,500 Harris Cnty. Rev., 5.125% 8/15/32 (FSA) Aaa/AAA 19,797,375
9.30.03 PIMCO Municipal Income Funds III Annual Report 9 PIMCO MUNICIPAL INCOME FUND III SCHEDULE OF INVESTMENTS September 30, 2003
Principal Amount Credit Rating (000) (Moody's/S&P)* Value** - ---------------------------------------------------------------------------------------------------------- TEXAS (CONCLUDED) $ 4,005 Houston, GO, 5.00%, 3/1/25 (MBIA) Aaa/AAA $ 4,073,606 5,000 Houston Water & Sewer Syst. Rev., 5.00%, 12/1/30, Ser. A (FSA) Aaa/AAA 5,036,200 1,800 Irving Independent School Dist., GO, 5.00% 2/15/28-2/15/31 (PSF) Aaa/AAA 1,821,384 7,000 Judson Independent School Dist., GO, 5.00%, 2/1/30 (PSF) Aaa/AAA 7,080,850 415 Leander Independent School Dist., GO, 5.00%, 8/15/32 (PSF) Aaa/AAA 418,527 1,500 North Thruway Auth., Dallas North Thruway Syst. Rev., 5.00%, 1/1/33, Ser. A (AMBAC) Aaa/AAA 1,509,825 2,105 Northwest Harris Cnty. Muni Utility Dist., No. 16, GO, 5.30%, 10/1/29 (Radian Group, Inc.) NR/AA 2,136,912 2,500 San Antonio Water Rev., 5.00%, 5/15/32, Ser. A (FSA) Aaa/AAA 2,515,525 ------------- 84,385,754 ------------- UTAH--0.8% 4,100 Salt Lake Cnty. Hospital Rev., 5.125%, 2/15/33 (AMBAC) Aaa/AAA 4,156,826 1,750 Weber Cnty. Hospital Rev., 5.00%, 8/15/30 Aa2/AA+ 1,724,450 ------------- 5,881,276 ------------- WASHINGTON--6.8% 6,375 Chelan Cnty. Public Utility Dist. No. 001 Cons. Rev., 5.125%, 7/1/33, Ser. C (AMBAC) Aaa/AAA 6,471,008 15,000 King Cnty. Sewer Rev., 5.00%, 1/1/35, Ser. A (FSA) Aaa/AAA 15,079,350 3,000 Port Seattle, Rev., 5.00%, 9/1/24 (FGIC) Aaa/AAA 3,042,960 25,000 Tobacco Settlement Auth., Tobacco Settlement Rev., 6.50%, 6/1/26 A1/A 22,668,750 ------------- 47,262,068 ------------- Total Municipal Bonds & Notes (cost-$616,361,403) 622,071,927 ------------- - ---------------------------------------------------------------------------------------------------------- VARIABLE RATE NOTES (a)(b)(f)--3.6% - ---------------------------------------------------------------------------------------------------------- ILLINOIS--0.3% 1,990 Dev. Finance Auth. Gas Supply Rev., 24.75%, 2/1/11 (AMBAC) NR/NR 2,170,155 ------------- MICHIGAN--1.4% 4,990 Detroit Sewer Disposal Rev., 25.45%, 7/1/11 (FSA) NR/AAA 5,096,686 4,725 Detroit Water Supply Syst. Rev., 28.31%, 1/1/11 (MBIA) NR/AAA 4,937,105 ------------- 10,033,791 ------------- TEXAS--1.0% 2,450 Dallas Area Rapid Transit Rev., 20.62% 12/1/26 (FGIC) NR/NR 2,536,436 1,870 Mansfield Independent School Dist., GO, 24.61%, 2/15/23 (PSF) NR/NR 2,011,970 2,060 University Rev., 21.16%, 8/15/27 NR/NR 2,119,575 ------------- 6,667,981 -------------
10 PIMCO Municipal Income Funds III Annual Report 9.30.03 PIMCO MUNICIPAL INCOME FUND III SCHEDULE OF INVESTMENTS September 30, 2003
Principal Amount Credit Rating (000) (Moody's/S&P)* Value** - ------------------------------------------------------------------------------------------------------------- WASHINGTON--0.9% $ 1,520 King Cnty. Sewer Rev., 25.29%, 7/1/11 (FGIC) NR/NR $ 1,588,294 3,065 Port Tacoma, GO, 27.03%, 6/1/11 (AMBAC) NR/NR 3,217,882 1,510 Seattle Drain & Wastewater Rev., 25.45%, 7/1/10 (FGIC) NR/NR 1,572,605 ----------- Total Variable Rate Notes (cost-$26,113,372) 6,378,781 ----------- 25,250,708 ----------- - ------------------------------------------------------------------------------------------------------------- VARIABLE RATE DEMAND NOTES (c)--7.0% - ------------------------------------------------------------------------------------------------------------- ARIZONA--0.3% 2,000 Health Facs. Auth., Rev., 1.00%, 10/1/03, Ser C (AMBAC) Aaa/AAA 2,000,000 ----------- COLORADO--1.1% 7,500 Denver City & Cnty., CP, 1.05%, 10/1/03 (AMBAC) VMIG1/A-1+ 7,500,000 ----------- FLORIDA--0.1% 1,000 Palm Beach Cnty., School Board, CP, 1.05%, 10/2/03, Ser. B (AMBAC) VMIG1/A-1+ 1,000,000 ----------- GEORGIA--0.5% 3,115 Atlanta Water & Wastewater Rev., 1.20%, 10//1/03, Ser. C (FSA) VMIG1/A-1+ 3,115,000 ----------- MISSOURI--1.2% 2,000 Dev. Finance Board Cultural Facs. Rev., 1.22%, 10/1/03, Ser. B (MBIA) VMIG1/A-1+ 2,000,000 State Health & Educational Facs. Auth. Educational Facs. Rev., 5,000 1.18%, 10/1/03 Ser A VMIG1/A-1+ 5,000,000 1,600 1.22%, 10/1/03 Ser. B (J.P. Morgan Chase & Co.) VMIG1/A-1+ 1,600,000 ----------- 8,600,000 ----------- NEW YORK--1.3% New York City Municipal Water Finance Auth. Water & Sewer Syst. Rev., 2,750 1.15%, 10/1/03, Ser. C (FGIC) VMIG1/A-1+ 2,750,000 2,300 1.20%, 10/1/03, Ser. G (FGIC) VMIG1/A-1+ 2,300,000 4,100 State Dorm. Auth. Rev., 1.20%, 10/1/03, Ser. B (Morgan Guarantee Trust) VMIG1/A-1+ 4,100,000 ----------- 9,150,000 ----------- NORTH CAROLINA--0.4% 3,000 Mecklenburg Cnty., 1.10%, 10/1/03, Ser. C (Bank of America) VMIG1/A-1+ 3,000,000 ----------- OHIO--0.5% 3,200 Columbus, GO, 1.00%, 10/2/03, Ser. 1 (WestDeutsche LandesBank) VMIG1/A-1+ 3,200,000 ----------- TEXAS--1.1% 7,500 Humble Independent School Dist., GO, 1.06%, 10/2/03 (PSF) VMIG1/A-1+ 7,500,000 ----------- VIRGINIA--0.5% 3,800 Loudoun Cnty. Industrial Dev. Auth. Rev., 1.19%, 10/1/03, Ser. C VMIG1/A-1+ 3,800,000 ----------- Total Variable Rate Demand Notes (cost-$48,865,000) 48,865,000 -----------
9.30.03 PIMCO Municipal Income Funds III Annual Report 11 PIMCO MUNICIPAL INCOME FUND III SCHEDULE OF INVESTMENTS September 30, 2003
Principal Amount Credit Rating (000) (Moody's/S&P)* Value** - ---------------------------------------------------------------------------------------------------------------- U.S. TREASURY BILLS (d)--1.0% - ---------------------------------------------------------------------------------------------------------------- $ 7,200 0.94%-0.96%, 12/4/03 (cost-$7,188,151) Aaa/AAA $ 7,188,746 ------------ - ---------------------------------------------------------------------------------------------------------------- PUT OPTIONS PURCHASED (e)--0.0% - ---------------------------------------------------------------------------------------------------------------- Contracts U.S. Treasury Bonds Futures, Chicago Board of Trade 768 strike price $105, expires 11/21/03 (premiums paid-$1,346,880) 336,000 TOTAL INVESTMENTS, BEFORE CALL OPTIONS WRITTEN ------------ (cost--$699,874,806+)--100.6% 703,712,381 ------------ - ---------------------------------------------------------------------------------------------------------------- CALL OPTIONS WRITTEN (e)--(0.6)% - ---------------------------------------------------------------------------------------------------------------- U.S. Treasury Bond Futures, Chicago Board of Trade (1,358) strike price $112, expires 11/21/03 (3,352,563) (600) strike price $113, expires 11/21/03 (1,190,625) Total call options written (premiums received-$2,219,267) (4,543,188) ------------ TOTAL INVESTMENTS, NET OF CALL OPTIONS WRITTEN (cost-$697,655,539)--100% $699,169,193 ------------
- -------------------------------------------------------------------------------- + The cost of securities for federal income tax purposes is $699,874,806. Aggregate gross unrealized appreciation for securities in which there is an excess of value over tax cost is $14,026,584; aggregate gross unrealized depreciation for securities in which there is an excess of tax cost over value is $10,189,009; net unrealized appreciation for federal income tax purposes is $3,837,575. 12 PIMCO Municipal Income Funds III Annual Report 9.30.03 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS PIMCO CALIFORNIA MUNICIPAL INCOME FUND III SCHEDULE OF INVESTMENTS September 30, 2003
Principal Amount Credit Rating (000) (Moody's/S&P)* Value** - ------------------------------------------------------------------------------------------------------------------ CALIFORNIA MUNICIPAL BONDS & NOTES--84.1% - ------------------------------------------------------------------------------------------------------------------ $ 14,925 ABAG Fin. Auth. Rev., Odd Fellows Home, 5.20%-5.35%, 11/15/22-11/15/32 NR/BBB $14,956,108 17,100 Alameda Cnty. Tob. Securitization Agy., 5.875%-6.000%, 6/1/35-6/1/42 Baa2/NR 13,760,550 1,440 Bellflower Unified School Dist., CP, 5.00%, 8/1/28 (MBIA) Aaa/AAA 1,458,878 3,390 Burbank Fin. Auth. Rev., West Olive Redev. Proj., 5.00%, 12/1/26 (AMBAC) Aaa/AAA 3,437,053 2,135 Burbank Pub. Fin. Auth. Rev., San Fernando Redev., 5.50%, 12/1/28-12/1/33 NR/BBB 2,098,198 2,000 Butte-Glenn Community College GO, 5.00%, 8/1/26, Ser. A (MBIA) Aaa/NR 2,029,340 2,000 Capistrano Univ. School Dist., Community Fac. Dist., Special Tax, 6.00%, 9/1/32 NR/NR 2,013,220 1,000 Cathedral City Pub. Fin. Auth. Rev., 5.00%, 8/1/33, Ser. A (MBIA) Aaa/AAA 1,006,590 5,765 Ceres School Dist., GO, zero coupon, 8/1/28-8/1/29 (FGIC) Aaa/AAA 1,384,984 3,895 Chula Vista Community Fac. Dist., Special Tax, 5.75%-6.20%, 9/1/26-9/1/33 NR/NR 3,910,187 1,000 Chula Vista Improvement Board Act 1915, Special Assessment, 6.15%, 9/2/29 NR/NR 1,015,470 8,000 Contra Costa County Public Financing Auth. Tax Collection Rev., 5.625%, 8/1/33 NR/BBB 8,002,320 3,775 Cucamonga School Dist., CP, 5.20%, 6/1/27 NR/A- 3,714,147 1,925 Eastern California Community Fac. Dist., Special Tax, 5.75%-5.95%, 9/1/33 NR/NR 1,898,849 3,280 Eastern California Municipal Water Dist., Special Tax, 6.05%-6.10%, 9/1/27-9/1/33 NR/NR 3,249,954 500 Franklin-Mckinley School Dist., GO, 5.00%, 8/1/27, Ser. B (FSA) Aaa/AAA 506,945 5,000 Fremont Califonia Community Facilities Dist., Special Tax, 6.30%, 9/1/31 NR/NR 5,087,400 9,500 Fresno School Dist., GO, 6.00%, 8/1/26, Ser. A (MBIA) Aaa/AAA 11,202,210 9,380 Glendale Elec. Works Rev., 5.00%, 2/1/27-2/1/32 (MBIA) Aaa/AAA 9,486,335 56,490 Golden St. Tobacco Securitization Corp. Rev., 6.25%-6.75%, 6/1/33-6/1/39 Baa2/BBB 50,101,462 2,000 Health Facilities Financing Auth. Rev., 6.25%, 8/15/35, Ser A A1/A+ 2,167,600 10,000 Health Facilities Financing Auth. Rev., 5.00%, 3/1/33, Ser A NR/A 9,469,600 2,750 Infrastructure & Economic Development Bank Rev., 5.25%, 10/1/33 Aa3/NR 2,815,313 2,500 Institute of Technology Educational Fac. Auth. Rev., 5.00%, 10/1/32, Ser A Aaa/AAA 2,529,550
9.30.03 PIMCO Municipal Income Funds III Annual Report 13 PIMCO CALIFORNIA MUNICIPAL INCOME FUND III SCHEDULE OF INVESTMENTS September 30, 2003
Principal Amount Credit Rating (000) (Moody's/S&P)* Value** - ---------------------------------------------------------------------------------------------------------- Kaiser Assistance Corp., Infrastructure & Economic Dev. Rev., $ 8,000 5.55%, 8/1/31 Ser. A NR/A $8,206,480 3,000 5.50%, 8/1/31 Ser. B A2/A 3,086,940 5,000 Kaiser Permanente Health Facs. Fin. Auth. Rev., 5.00%, 10/1/18, Ser. B A3/A 5,106,450 3,725 La Mesa-Spring Valley School Dist. GO, 5.00%, 8/1/26, Ser. A (FGIC) Aaa/AAA 3,775,176 1,400 La Quinta California Redevelopment Agency, Tax Allocation, 5.10%, 9/1/31 (AMBAC) Aaa/AAA 1,426,124 9,070 Lancaster Financing Auth. Tax Allocation Rev., 4.75%, 8/1/33-2/1/34 (MBIA) Aaa/AAA 8,898,551 825 Lee Lake Water Dist. Community Facilities Dist., Special Tax, 6.125%, 9/1/32 NR/NR 839,933 Los Angeles Unified School Dist. GO, 7,650 5.00%, 1/1/28, Ser. A (MBIA) Aaa/AAA 7,761,461 3,000 5.125%, 1/1/27, Ser. E Aaa/AAA 3,079,530 5,000 Los Osos Community Wastewater Svcs., Dist. 1, 5.00%, 9/2/33 (MBIA) NR/AAA 5,048,400 2,455 Loyola-Marymount Educational Facs. Auth. Rev., zero coupon, 10/1/34 (MBIA) Aaa/NR 456,777 1,000 Lynwood Unified School Dist., 5.00%, 8/1/27 Ser. A, (FSA) Aaa/NR 1,013,890 2,180 Murrieta Valley Unified School Dist., Special Tax, 6.40%, 9/1/24 NR/NR 2,248,103 3,550 Northern California Ret. Officers, State Health Fac. Fin. Auth. Rev., 5.125%-5.250%, 1/1/22-1/1/26 NR/BBB 3,482,526 5,000 Oakland CA, GO, 5.00%, 1/15/33, Ser A (MBIA) Aaa/AAA 5,047,700 2,530 Oakland Redev. Agcy., Tax Allocation, 5.25%, 9/1/27-9/1/33 NR/A- 2,522,594 5,000 Orange Cnty. Community Facilities Dist., Special Tax, 5.55%, 8/15/33, Ser A NR/NR 4,887,500 5,000 Orange Cnty. Unified School Dist., CP, 4.75%, 6/1/29 Aaa/AAA 4,933,950 1,000 Orange Cnty. Water Dist., CP, 5.00%, 8/15/28 (MBIA) Aaa/AAA 1,013,160 2,000 Palm Desert Fin. Auth. Rev., Tax Allocation, 5.00%, 4/1/25, Ser. A (MBIA) Aaa/AAA 2,035,980 1,410 Ponoma Public Fin. Auth. Rev., 5.00%, 12/1/37 (MBIA) Aaa/AAA 1,422,281 3,385 Poway Unified School Dist., Special Tax, 6.05%-6.125%, 9/1/25-9/1/33 NR/NR 3,430,194 7,680 Rowland Unified School Dist., GO, 5.00%, 8/1/28, Ser. B (FSA) Aaa/AAA 7,780,685 1,500 Sacramento City Fin. Auth. Rev., 6.25%, 9/1/23, Ser. A NR/NR 1,543,740 480 San Diego Unified School Dist. GO, 5.00%, 7/1/26 Ser. C (FSA) Aaa/AAA 486,994 19,425 San Diego Unified School Dist. GO, 5.00%, 7/1/26-7/1/28, Ser. E (FSA) Aaa/AAA 19,716,291
14 PIMCO Municipal Income Funds III Annual Report 9.30.03 PIMCO CALIFORNIA MUNICIPAL INCOME FUND III SCHEDULE OF INVESTMENTS September 30, 2003
Principal Amount Credit Rating (000) (Moody's/S&P)* Value** - -------------------------------------------------------------------------------------------------------- $ 1,500 San Diego Univ. Aux. Foundation Organization, 5.00%, 3/1/27, Ser. A (MBIA) Aaa/AAA $1,518,420 3,000 San Jose Libraries & Parks Proj., GO, 5.125%, 9/1/31 Aa1/AA+ 3,051,570 4,225 San Mateo Cnty. Community College Dist., 5.00%, 9/1/26, Ser. A (FGIC) Aaa/AAA 4,282,460 16,085 Santa Ana School Dist. GO, zero coupon, 8/1/26-8/1/32, Ser. B (FGIC) Aaa/AAA 3,885,174 1,250 Santa Clara Valley Transportation Auth. Sales Tax Rev., 5.00%, 6/1/26, Ser. A (MBIA) Aaa/AAA 1,264,987 6,000 Santa Margarita Community Fac. Water Dist., Special Tax, 6.25%, 9/1/29 NR/NR 6,142,885 2,205 Sequoia Unified High School Dist., GO, 5.00%, 7/1/23-7/1/24 (MBIA) Aaa/NR 2,255,014 11,175 Simi Valley Community Dev. Agy., Tax Allocation 5.00%, 9/1/25-9/1/30 (FGIC) Aaa/AAA 11,329,846 4,250 Sonoma Cnty Jr. College Dist., 5.00%, 8/1/27, Ser. A (FSA) Aaa/AAA 4,309,032 1,000 Sonoma Cnty Water Agy. Rev., 5.00%, 7/1/32, Ser. A (MBIA) Aaa/AAA 1,010,700 South Tahoe Joint Powers Financing Auth., 2,500 5.125%, 10/1/09 NR 2,502,050 4,425 5.45%, 10/1/33 NR/BBB- 4,273,046 14,900 Southern CA. Public Power Auth., 5.00%, 7/1/33 (AMBAC) Aaa/AAA 15,047,808 4,095 State Dept. Vet. Affairs Home Purchase Rev., 5.35%, 12/1/27, Ser. A (AMBAC) Aaa/AAA 4,258,841 State Public Works Board Lease Rev., 5,385 5.00%, 10/1/19 A2/BBB- 5,496,416 4,600 5.00%, 4/1/28, Ser. A Aa2/AA- 4,603,450 1,105 5.375%, 4/1/28 Baa1/BBB-p 1,026,490 3,505 Statewide Community Dev. Auth. CP, Internext Group, 5.375%, 4/1/30 NR/BBB- 3,300,098 Statewide Community Dev. Auth. Rev., 15,000 5.50%, 10/1/33, Ser. A A3/A- 15,277,500 10,000 5.50% 8/15/34, Ser. B A1/A+ 10,231,700 2,500 7.25%, 10/1/33 NR/NR 2,538,475 1,795 Sunnyvale Water & Wastewater Rev., 5.00%, 10/1/26 (AMBAC) Aaa/AAA 1,817,402 2,000 Tamalpais Unified High School Dist. GO, 5.00%, 8/1/26 (MBIA) Aaa/AAA 2,026,940 2,000 Temecula Public Financing Auth., 6.00%, 9/1/33, Ser. A NR/NR 2,037,260 2,950 Torrance Memorial Med. Ctr. Hosp. Rev., 5.50%, 6/1/31 A1/A+ 3,008,794 4,000 Vernon Electric System Rev., 5.50%, 4/1/33 A2/BBB+ 4,012,600 2,500 William S Hart Union High School Dist., Special Tax, 6.00%, 9/1/33 NR/NR 2,527,750
9.30.03 PIMCO Municipal Income Funds III Annual Report 15 PIMCO CALIFORNIA MUNICIPAL INCOME FUND III SCHEDULE OF INVESTMENTS September 30, 2003
Principal Amount Credit Rating (000) (Moody's/S&P)* Value** - ------------------------------------------------------------------------------------------------------------ $ 2,750 Woodland Fin. Auth. Lease Rev., 5.00%, 3/1/32 Aaa/AAA $ 2,780,883 ----------- Total California Municipal Bonds & Notes (cost-$396,341,669) 392,371,264 ----------- - ------------------------------------------------------------------------------------------------------------ OTHER MUNICIPAL BONDS & NOTES--1.0% - ------------------------------------------------------------------------------------------------------------ PUERTO RICO--1.0% 1,800 Commonwealth Hwy. & Transmission Auth. Rev., 5.375%, 7/1/36, Ser. D Baa1/A 1,857,492 1,500 Electric Power Auth. Power Revenue, 5.125%, 7/1/29, Ser. NN A3/A- 1,525,785 1,080 Gov't Fac. Public Buildings Auth. Rev., 5.25%, 7/1/36, Ser. D Baa1/A- 1,101,146 ----------- Total Other Municipal Bonds & Notes (cost-$4,441,010) 4,484,423 ----------- - ------------------------------------------------------------------------------------------------------------ CALIFORNIA VARIABLE RATE NOTES (a)(b)(f)--5.9% - ------------------------------------------------------------------------------------------------------------ 1,465 California Infrastructure & Economic Development Bank Rev., 20.69%, 7/1/29 (AMBAC) NR/NR 1,535,833 Los Angeles Unified School Dist., GO, Rites, Clark Cnty. School Dist., 2,090 23.56%, 1/1/11 Ser. 1763-A (MBIA) NR/NR 3,281,196 1,745 21.09%, 1/1/23 Ser. 1763-B (MBIA) NR/NR 1,635,501 2,020 Los Angeles Water and Power Revenue, 19.37%, 1/1/25 NR/NR 2,057,491 800 Orange Cnty. Water Dist., CP, 26.60%, 1/1/25 (MBIA) NR/NR 855,416 710 Pajaro Valley Unified School Dist., GO 26.98%, 8/1/11 NR/NR 730,831 1,170 Pasadena Water Rev., 21.52%, 6/1/27 (FGIC) NR/NR 1,233,648 1,545 Sacramento Cnty. Water Financing Auth. Rev., 26.95%, 6/1/11 (AMBAC) NR/NR 1,651,682 1,150 Sacramento Municipal Utility Dist., 26.78%, 2/15/11 (MBIA) NR/NR 1,173,069 1,725 San Diego Community College Dist., 26.94%, 5/1/11 (FSA) NR/NR 1,769,402 2,260 San Marcos Public Facilities Auth. Tax Allocation Rev., 26.75%, 2/1/11-8/1/11 (FGIC) NR/NR 2,360,999 1,680 Southern CA. Public Power Auth., 28.14%, 7/1/11 (AMBAC) NR/NR 1,713,331 6,980 University of CA. Rev., 26.71%, 9/1/31-9/1/34 (FSA) NR/NR 7,484,926 ----------- Total California Variable Rate Notes (cost-$29,499,542) 27,483,325 -----------
16 PIMCO Municipal Income Funds III Annual Report 9.30.03 PIMCO CALIFORNIA MUNICIPAL INCOME FUND III SCHEDULE OF INVESTMENTS September 30, 2003
Principal Amount Credit Rating (000) (Moody's/S&P)* Value** - ------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------ CALIFORNIA VARIABLE RATE DEMAND NOTES (c)--8.4% - ------------------------------------------------------------------------------------------------------------ $ 3,000 Bay Area Toll Auth., Toll Bridge Rev., 1.00%, 10/2/03 (AMBAC) VMIG1/A-1+ $ 3,000,000 2,750 California Pollution Control Financing Auth., 1.00%, 10/1/03 VMIG1/A-1+ 2,750,000 4,000 East Bay Muni. Util. Dist. Water Syst. Rev., 1.05%, 10/1/03, Ser. A (FSA) VMIG1/A-1+ 4,000,000 1,800 Irvine Ranch Water Dist., 1.20%, 10/1/03 NR/A-1+ 1,800,000 3,750 Irvine Unified School Dist., Special Tax, 1.20%, 10/1/03 VMIG1/NR 3,750,000 2,000 Clark Cnty. School Dist., 1.11%, 6/15/21, Ser. B NR/NR 2,000,000 4,400 Los Angeles Water & Power Rev., 1.18%, 10/1/03 VMIG1/A-1+ 4,400,000 Metropolitan Water Dist., Southern CA. Waterworks Rev., 5,400 1.19%, 10/1/03 Ser. C-1 VMIG1/A-1+ 5,400,000 2,500 1.10%, 10/1/03 Ser. C-2 VMIG1/A-1+ 2,500,000 2,500 Orange Cnty. Sanitation Dist., CP, 1.20%, 10/1/03 (AMBAC) VMIG1/A-1+ 2,500,000 5,000 Sacramento Unified School Dist., CP, 1.05%, 10/2/03 (FSA) VMIG1/NR 5,000,000 2,200 Sutter Health Fac. Auth. Rev., 1.15%, 10/1/03, Ser. B (AMBAC) VMIG1/A-1+ 2,200,000 75 Watereuse Fin. Auth. Rev., 1.03% 10/1/03 (FSA) NR/A-1 75,000 ----------- Total California Variable Rate Demand Notes (cost-$39,375,000) 39,375,000 ----------- - ------------------------------------------------------------------------------------------------------------ U.S. TREASURY BILLS (d)--1.2% - ------------------------------------------------------------------------------------------------------------ 5,640 0.94%-0.97%, 12/4/03-12/18/03 Total US. Treasury Bills (cost-$5,630,238) Aaa/AAA 5,630,775 ----------- - ------------------------------------------------------------------------------------------------------------ PUT OPTIONS PURCHASED (e)--0.0% - ------------------------------------------------------------------------------------------------------------ Contracts U.S. Treasury Bond Futures, Chicago Board of Trade, 388 strike price $105, expires 11/21/03 Total put options purchased (cost-$680,455) 169,750 TOTAL INVESTMENTS BEFORE CALL OPTIONS WRITTEN ----------- (cost-$475,967,914++)--100.6% 469,514,537 -----------
9.30.03 PIMCO Municipal Income Funds III Annual Report 17 PIMCO CALIFORNIA MUNICIPAL INCOME FUND III SCHEDULE OF INVESTMENTS September 30, 2003
Contracts Value** - --------------------------------------------------------------------------------------------------- CALL OPTIONS WRITTEN (e)--(0.6)% U.S. Treasury Bond Futures, Chicago Board of Trade (761) strike price $112, expires 11/21/03 $ (1,878,719) (400) strike price $113, expires 11/21/03. (793,750) ------------ Total call options written (premiums received-$1,256,068) (2,672,469) ------------ TOTAL INVESTMENTS, NET OF CALL OPTIONS WRITTEN (cost-$474,711,846)--100% $466,842,068 ------------
- -------------------------------------------------------------------------------- ++ The cost of securities for federal income tax purposes is $475,970,782. Aggregate gross unrealized appreciation for securities in which there is an excess of value over tax cost is $5,026,976; aggregate gross unrealized depreciation for securities in which there is an excess of tax cost over value is $11,483,221; net unrealized depreciation for federal income tax purposes is $6,456,245. 18 PIMCO Municipal Income Funds III Annual Report 9.30.03 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS PIMCO NEW YORK MUNICIPAL INCOME FUND III SCHEDULE OF INVESTMENTS September 30, 2003
Principal Amount Credit Ratings (000) (Moody's/S&P)* Value** - -------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------- NEW YORK MUNICIPAL BONDS & NOTES--82.9% - -------------------------------------------------------------------------------------------------------------- $ 2,800 East Rochester Housing Auth. Rev., St. Mary's Residence Proj., 5.375%, 12/20/22 (GNMA) NR/AAA $ 2,960,552 1,000 Long Island Power Auth., Elec. Syst. Rev., 5.00%, 9/1/27, Ser. C Baa1/A- 998,570 5,000 Metropolitan Transportation Auth. Rev., 5.00%, 11/15/31, Ser F (MBIA) Aaa/AAA 5,058,150 1,000 Monroe Tobacco Securitization Corp., Tobacco Settlement Rev., 6.375%, 6/1/35 Baa2/BBB 1,004,390 2,000 Nassau Cnty. Tobacco Settlement Corp., 6.60%, 7/15/39 Baa2/BBB- 2,021,480 10,445 New York City GO, 5.00%-5.375%, 3/1/27-3/1/33, Ser. I A2/A 10,372,161 1,000 New York City Muni. Water Auth. Rev., 5.00%, 6/15/29, Ser. F Aa2/AA 1,008,190 5,000 New York City Muni. Water Fin. Auth., Water & Sewer Syst. Rev., 5.00%, 6/15/32, Ser. A Aa2/AA 5,034,600 1,000 Niagara Falls Public Water & Sewer Syst. Rev., 5.00%, 7/15/34, Ser. A (MBIA) Aaa/AAA 1,012,280 6,105 Sachem Central School Dist., GO, 5.00%, 6/15/29-6/15/30 (MBIA) Aaa/AAA 6,209,024 2,995 State Community Tobacco Settlement Trust, 5.625%, 6/1/35 Baa2/BBB 2,718,861 1,100 State Dormitory Auth. Lease Rev., Court Facs., Ser. A, 5.375%, 5/15/23 A3/A 1,155,990 2,000 State Dormitory Auth. Rev., Columbia Univ., 5.00%, 7/1/24, Ser. A Aaa/AAA 2,057,360 1,000 State Dormitory Auth. Rev., FHA-NY & Presbyterian Hospital, 4.75%, 8/1/27 (AMBAC) Aaa/AAA 987,290 3,615 State Dormitory Auth. Rev., Fordham Univ., 5.00%, 7/1/32 (FGIC) Aaa/AAA 3,655,560 2,250 State Dormitory Auth. Rev., Jewish Board Family & Children, 5.00%, 7/1/33 (AMBAC) NR/AAA 2,277,540 4,500 State Dormitory Auth. Rev., Lenox Hill Hospital, 5.50%, 7/1/30 A3/NR 4,650,975 6,040 State Dormitory Auth. Rev., Long Island Univ., 5.00%, 9/1/23-9/1/32, Ser. A (Radian Group Inc.) NR/AA 6,065,997 3,000 State Dormitory Auth. Rev., Lutheran Medical Hosp., 5.00%, 8/1/31 (MBIA) Aaa/AAA 3,037,740 3,750 State Dormitory Auth. Rev., Memorial Sloan-Kettering Center, 5.00%, 7/1/34, Ser. 1 Aa2/AA 3,790,088 4,000 State Dormitory Auth. Rev., Mount Saint Mary College, 5.00%, 7/1/27-7/1/32 (Radian Group Inc.) NR/AA 4,002,760 1,000 State Dormitory Auth. Rev., New York Univ., Ser. 2, 5.00%, 7/1/31 (AMBAC) Aaa/AAA 1,010,800 6,150 State Dormitory Auth. Rev., North General Hosp., 5.00%, 2/15/25 NR/AA- 6,209,225 1,000 State Dormitory Auth. Rev., North Shore L.I. Jewish Group, 5.50%, 5/1/33 A3/NR 1,023,120 3,600 State Dormitory Auth. Rev., Personal Income Tax, 5.00%, 3/15/32 NR/AA 3,624,156 3,740 State Dormitory Auth. Rev., Saint Barnabas, Ser. A, 5.00%, 2/1/31 (AMBAC) Aaa/AAA 3,784,992 1,000 State Dormitory Auth. Rev., School Dist. Financing, Ser. D, 5.00%, 10/1/30 (MBIA) Aaa/AAA 1,013,010 1,500 State Dormitory Auth. Rev., Teachers College, 5.00%, 7/1/32 (MBIA) Aaa/NR 1,516,830
9.30.03 PIMCO Municipal Income Funds III Annual Report 19 PIMCO NEW YORK MUNICIPAL INCOME FUND III SCHEDULE OF INVESTMENTS September 30, 2003
Principal Amount Credit Ratings (000) (Moody's/S&P)* Value** - -------------------------------------------------------------------------------------------------------------- $ 3,120 State Dormitory Auth. Revs., Winthrop Univ., Ser. A, 5.50%-5.75%, 7/1/28-7/1/32 Baa1/NR $ 3,224,291 1,900 State Urban Development Corp. Rev., Ser. C-1, 5.00%, 3/15/33, A1/AA 1,912,749 4,000 Triborough Bridge & Tunnel Auth. Rev., 5.00%, 11/15/32 (MBIA) Aaa/AAA 4,061,240 5,000 Triborough Bridge & Tunnel Auth. Rev., Ser. B, 5.00% 11/15/32 Aa3/AA- 5,039,800 2,000 Warren & Washington Cnty. Indl. Dev. Agy. Fac. Rev., Ser. A, 5.00%, 12/1/35 (FSA) Aaa/AAA 2,009,360 1,250 Westchester Cnty. Indl Dev. Agency. Continuing Care, 6.50%, 1/1/34 NR/NR 1,248,200 ------------ Total New York Municipal Bonds & Notes (cost-$104,552,072) 105,757,331 ------------ - -------------------------------------------------------------------------------------------------------------- OTHER MUNICIPAL BONDS & NOTES--6.7% - -------------------------------------------------------------------------------------------------------------- CALIFORNIA--3.9% 5,560 Golden St. Tobacco Securization Corp. Rev., Ser. 2003-A-1, 6.75%, 6/1/39 Baa2/BBB 4,980,870 ------------ DISTRICT OF COLUMBIA--0.1% 175 Tobacco Settlement Financing Corp., 6.50%, 5/15/33 Baa2/BBB 152,434 ------------ PUERTO RICO--2.3% 2,280 Children Trust Fund Puerto Rico Tobacco Settlement Rev., 5.50%-5.625%, 5/15/39-5/15/43 Baa2/BBB 1,976,396 1,000 Electric Power Auth. Rev., Ser. NN, 5.125%, 7/1/29 A3/A- 1,017,190 ------------ 2,993,586 ------------ SOUTH CAROLINA--0.3% 370 Tobacco Settlement Auth., Tobacco Settlement Rev., Ser. B, 6.375%, 5/15/30 Baa2/BBB 316,653 ------------ WASHINGTON--0.1% 135 Tobacco Settlement Auth., Tobacco Settlement Rev., 6.625%, 6/1/32 Baa2/BBB 118,997 ------------ Total Other Municipal Bonds & Notes (cost-$8,445,324) 8,562,540 ------------ - -------------------------------------------------------------------------------------------------------------- NEW YORK VARIABLE RATE NOTES (a)(b)(f)--5.8% - -------------------------------------------------------------------------------------------------------------- 1,555 Metropolitan Transportation Auth. Rev., RITES Ser. 862, 16.01%, 11/15/32 (FGIC) Aaa/NR 1,633,061 1,205 State Dormitory Auth. Revs., RITES, -- 22.67%, 7/1/26 Aaa/AAA 1,333,525 State Environmental Facs. Corp., State Clean Water & Drinking, 1,005 20.60%, 7/15/23 RITES-A-PA-1165 NR/AAA 1,004,608 1,560 20.60%, 7/15/27 RITES-B-PA-1165 NR/AAA 1,559,314 1,845 State Housing Fin. Agy., Personal Income Tax., Ser. 859, 16.00%, 3/15/33 NR/AA 1,845,000 ------------ Total New York Variable Rate Notes (cost-$6,891,880) 7,375,508 ------------
20 PIMCO Municipal Income Funds III Annual Report 9.30.03 PIMCO NEW YORK MUNICIPAL INCOME FUND III SCHEDULE OF INVESTMENTS September 30, 2003
Principal Amount Credit Ratings (000) (Moody's/S&P)* Value** - -------------------------------------------------------------------------------------------------------------- NEW YORK VARIABLE RATE DEMAND NOTES--(c) 1.2% - -------------------------------------------------------------------------------------------------------------- $1,100 New York City Transitional Fin. Auth. Rev., 1.15%, 10/1/03 Ser. C5, (LOC: Toronto Dominion) VMIG1/A-1+ $ 1,100,000 1.20%, 10/1/03 Ser. 3, (LOC: Bank of New York) VMIG1/A-1+ 400,000 ------------ 400 State Loc. Govt. Assistance Corp., Ser. B, 1.05%, 10/01/03 Total New York Short-Term Variable Rate Demand Notes (cost-$1,500,000) 1,500,000 ------------ - -------------------------------------------------------------------------------------------------------------- OTHER VARIABLE RATE DEMAND NOTES--(c) 2.3% - -------------------------------------------------------------------------------------------------------------- FLORIDA-1.2% 1,500 Orange Cnty. School Dist. CP, Ser. B, 1.20%, 10/1/03 (AMBAC) VMIG1/NR 1,500,000 GEORGIA-1.1% 1,450 Atlanta Water & Wastewater Rev., Ser. C, 1.20%, 10/1/03 (FSA) VMIG1/A-1+ 1,450,000 ------------ Total Other Variable Rate Demand Notes (cost-$2,950,000) 2,950,000 ------------ - -------------------------------------------------------------------------------------------------------------- U.S. TREASURY BILLS--(d) 1.6% - -------------------------------------------------------------------------------------------------------------- 2,050 0.88%-0.95% 12/14/03-12/18/03 Total U.S. Treasury Bills (cost-$2,046,178) Aaa/AAA 2,046,370 ------------ - -------------------------------------------------------------------------------------------------------------- PUT OPTIONS PURCHASED--(e) 0.0% - -------------------------------------------------------------------------------------------------------------- Contracts 35 U.S. Treasury Bond Futures, Chicago Board of Trade strike price $105, expires 11/21/03 Total put options purchased (cost-$61,381) 15,313 ------------ TOTAL INVESTMENTS, BEFORE CALL OPTIONS WRITTEN (cost-$126,446,835+++)--100.5% 128,207,062 ------------ - -------------------------------------------------------------------------------------------------------------- CALL OPTIONS WRITTEN (e)--(0.5)% - -------------------------------------------------------------------------------------------------------------- (274) U.S. Treasury Bond Futures, Chicago Board of Trade strike price $112, expires 11/21/03 Total call options written (premiums received-$221,207) (676,438) ------------ TOTAL INVESTMENTS, NET OF CALL OPTIONS WRITTEN (cost-$126,225,628)--100% $127,530,624 ------------
- -------------------------------------------------------------------------------- +++ The cost basis of securities for federal income tax purposes is $126,446,835. Aggregate gross unrealized appreciation for securities in which there is an excess of value over tax cost is $1,977,310; aggregate gross unrealized depreciation for securities in which there is an excess of tax cost over value is $217,083; net unrealized appreciation for federal income tax purposes is $1,760,227. 9.30.03 PIMCO Municipal Income Funds III Annual Report 21 PIMCO NEW YORK MUNICIPAL INCOME FUND III SCHEDULE OF INVESTMENTS September 30, 2003 - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS: * Unaudited ** Long-term debt securities are valued by an independent pricing service authorized by the Board of Trustees. (a) 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). (b) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, typically to qualified institutional investors. At September 30, 2003, these securities amounted to $25,250,708 or 3.6% of total investments, $27,483,325 or 5.9% of total investments and $7,375,508 or 5.8% of total investments, respectively, for Municipal III, California Municipal III and New York Municipal III. (c) Maturity date shown is date of next call. (d) All or partial principal amount segregated as initial margin on futures contracts. (e) Non-income producing security. (f) Residual Interest Municipal Bonds. The interest rate shown bears an inverse relationship to the interest rate on another security or the value of an index. - -------------------------------------------------------------------------------- GLOSSARY ABAG-Association of Bay Area Government 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. GO-General Obligation Bonds GNMA--Government National Mortgage Association LOC-Letter of Credit MBIA-insured by Municipal Bond Investors Assurance NR-Not Rated PSF--Public School Fund RITES-Residual Interest Tax Exempt Securities XLCA--insured by XL Capital Assurance 22 PIMCO Municipal Income Funds III Annual Report 9.30.03 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS PIMCO MUNICIPAL INCOME FUNDS III STATEMENTS OF ASSETS AND LIABILITIES September 30, 2003 - --------------------------------------------------------------------------------
CALIFORNIA NEW YORK MUNICIPAL III MUNICIPAL III MUNICIPAL III --------------- --------------- --------------- ASSETS: Investments, at value (cost-$699,874,806, $475,967,914 and $126,446,835, respectively) $703,712,381 $ 469,514,537 $128,207,062 - --------------------------------------------------------- ------------ ------------- ------------ Cash 284,133 163,481 81,031 - --------------------------------------------------------- ------------ ------------- ------------ Interest receivable 10,443,777 6,951,985 1,774,421 - --------------------------------------------------------- ------------ ------------- ------------ Prepaid expenses 24,316 18,910 10,278 - --------------------------------------------------------- ------------ ------------- ------------ Total Assets 714,464,607 476,648,913 130,072,792 - --------------------------------------------------------- ------------ ------------- ------------ LIABILITIES: Options written, at value (premiums received-$2,219,267, $1,256,068, $221,207, respectively) $ 4,543,188 $ 2,672,469 $ 676,438 - --------------------------------------------------------- ------------ ------------- ------------ Payable for investments purchased -- -- 4,216,223 - --------------------------------------------------------- ------------ ------------- ------------ Dividends payable to common and preferred shareholders 3,890,359 2,575,533 654,297 - --------------------------------------------------------- ------------ ------------- ------------ Payable for variation margin on futures contracts 453,125 837,376 436,812 - --------------------------------------------------------- ------------ ------------- ------------ Investment management fees payable 285,331 190,472 50,274 - --------------------------------------------------------- ------------ ------------- ------------ Accrued expenses 123,368 93,607 64,091 - --------------------------------------------------------- ------------ ------------- ------------ Total Liabilities 9,295,371 6,369,457 6,098,135 - --------------------------------------------------------- ------------ ------------- ------------ 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 $435,169,236 $ 285,279,456 $ 76,974,657 - --------------------------------------------------------- ------------ ------------- ------------ COMPOSITION OF NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS: Common Stock: Par value $0.00001 per share $ 310 $ 212 $ 54 - --------------------------------------------------------- ------------ ------------- ------------ Paid-in capital in excess of par 439,839,497 301,503,763 77,161,822 - --------------------------------------------------------- ------------ ------------- ------------ Dividends in excess of net investment income (2,238,543) (2,329,413) (628,641) - --------------------------------------------------------- ------------ ------------- ------------ Net realized gain (loss) (2,398,807) (2,719,141) 861,082 - --------------------------------------------------------- ------------ ------------- ------------ Net unrealized depreciation of investments, futures contracts, and options written (33,221) (11,175,965) (419,660) - --------------------------------------------------------- ------------ ------------- ------------ NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS $435,169,236 $ 285,279,456 $ 76,974,657 - --------------------------------------------------------- ------------ ------------- ------------ Common Shares Outstanding 30,980,720 21,242,084 5,442,280 - --------------------------------------------------------- ------------ ------------- ------------ NET ASSET VALUE PER COMMON SHARE $ 14.05 $ 13.43 $ 14.14 - --------------------------------------------------------- ------------ ------------- ------------
9.30.03 | PIMCO Municipal Income Funds III Annual Report 23 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS PIMCO MUNICIPAL INCOME FUNDS III STATEMENTS OF OPERATIONS For the period October 31, 2002* through September 30, 2003 - --------------------------------------------------------------------------------
CALIFORNIA NEW YORK MUNICIPAL III MUNICIPAL III MUNICIPAL III --------------- --------------- --------------- INTEREST INCOME: Interest $ 28,081,835 $ 17,725,247 $ 4,610,315 - -------------------------------------------------------- ------------ ------------- ------------ EXPENSES: Investment management fees 3,965,536 2,678,536 692,973 - -------------------------------------------------------- ------------ ------------- ------------ Auction agent fees and commissions 529,723 357,422 93,405 - -------------------------------------------------------- ------------ ------------- ------------ Custodian and accounting agent fees 122,714 95,262 58,177 - -------------------------------------------------------- ------------ ------------- ------------ Audit and tax services 66,313 50,356 30,872 - -------------------------------------------------------- ------------ ------------- ------------ New York Stock Exchange listing fees 33,272 32,401 21,270 - -------------------------------------------------------- ------------ ------------- ------------ Trustees' fees and expenses 28,662 20,497 7,489 - -------------------------------------------------------- ------------ ------------- ------------ Reports to shareholders 28,517 17,448 9,388 - -------------------------------------------------------- ------------ ------------- ------------ Transfer agent fees 26,242 24,915 24,471 - -------------------------------------------------------- ------------ ------------- ------------ Legal fees 17,747 13,155 6,380 - -------------------------------------------------------- ------------ ------------- ------------ Investor relations 16,841 8,947 6,244 - -------------------------------------------------------- ------------ ------------- ------------ Organizational expenses 15,000 -- -- - -------------------------------------------------------- ------------ ------------- ------------ Insurance expense 7,817 5,921 2,395 - -------------------------------------------------------- ------------ ------------- ------------ Miscellaneous 10,527 6,994 3,634 - -------------------------------------------------------- ------------ ------------- ------------ Total expenses 4,868,911 3,311,854 956,698 - -------------------------------------------------------- ------------ ------------- ------------ Less: investment management fees waived (915,124) (618,124) (159,917) - -------------------------------------------------------- ------------ ------------- ------------ custody credits earned on cash balances (63,084) (61,282) (17,715) - -------------------------------------------------------- ------------ ------------- ------------ Net expenses 3,890,703 2,632,448 779,066 - -------------------------------------------------------- ------------ ------------- ------------ NET INVESTMENT INCOME 24,191,132 15,092,799 3,831,249 - -------------------------------------------------------- ------------- -------------- ------------- REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: - -------------------------------------------------------- Investments (2,656,705) (8,056,003) (2,347,320) - -------------------------------------------------------- ------------- -------------- ------------- Options 2,321,006 975,300 578,669 - -------------------------------------------------------- ------------- -------------- ------------- Futures contracts (2,063,108) 4,361,562 2,629,733 - -------------------------------------------------------- ------------- -------------- ------------- Net unrealized depreciation of investments, future contracts and options written (33,221) (11,175,965) (419,660) - -------------------------------------------------------- ------------- -------------- ------------- Net realized and unrealized gain (loss) on investments, futures contracts and options written (2,432,028) (13,895,106) 441,422 - -------------------------------------------------------- ------------- -------------- ------------- NET INCREASE IN NET ASSETS RESULTING FROM INVESTMENT OPERATIONS 21,759,104 1,197,693 4,272,671 - -------------------------------------------------------- ------------- -------------- ------------- DIVIDENDS ON PREFERRED SHARES FROM NET INVESTMENT INCOME (2,035,317) (1,326,256) (330,543) - -------------------------------------------------------- ------------- -------------- ------------- NET INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS RESULTING FROM INVESTMENT OPERATIONS $ 19,723,787 $ (128,563) $ 3,942,128 - -------------------------------------------------------- ------------- -------------- -------------
* Commencement of operations 24 PIMCO Municipal Income Funds III Annual Report 9.30.03 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS PIMCO MUNICIPAL INCOME FUNDS III STATEMENTS OF CHANGES IN NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS For the period October 31, 2002* through September 30, 2003 - --------------------------------------------------------------------------------
CALIFORNIA NEW YORK MUNICIPAL III MUNICIPAL III MUNICIPAL III --------------- --------------- --------------- INVESTMENT OPERATIONS: Net investment income $ 24,191,132 $ 15,092,799 $ 3,831,249 - ----------------------------------------------------------- ------------- ------------- ------------ Net realized gain (loss) on investments, futures contracts and options written (2,398,807) (2,719,141) 861,082 - ----------------------------------------------------------- ------------- ------------- ------------ Net unrealized depreciation of investments, futures contracts and options written (33,221) (11,175,965) (419,660) - ----------------------------------------------------------- ------------- ------------- ------------ Net increase in net assets resulting from investment operations 21,759,104 1,197,693 4,272,671 - ----------------------------------------------------------- ------------- ------------- ------------ DIVIDENDS ON PREFERRED SHARES FROM NET INVESTMENT INCOME (2,035,317) (1,326,256) (330,543) - ----------------------------------------------------------- ------------- ------------- ------------ Net increase (decrease) in net assets applicable to common shareholders resulting from investment operations 19,723,787 (128,563) 3,942,128 - ----------------------------------------------------------- ------------- ------------- ------------ DIVIDENDS TO COMMON SHAREHOLDERS FROM NET INVESTMENT INCOME (24,409,358) (16,095,956) (4,129,347) - ----------------------------------------------------------- ------------- ------------- ------------ CAPITAL SHARE TRANSACTIONS: Net proceeds from the sale of common stock 441,625,425 302,744,550 77,698,800 - ----------------------------------------------------------- ------------- ------------- ------------ Preferred shares underwriting discount charged to paid-in capital in excess of par (2,700,000) (1,850,000) (470,000) - ----------------------------------------------------------- ------------- ------------- ------------ Common stock and preferred shares offering costs charged to paid-in capital in excess of par (1,208,944) (897,594) (323,602) - ----------------------------------------------------------- ------------- ------------- ------------ Reinvestment of dividends 2,038,323 1,407,016 156,675 - ----------------------------------------------------------- ------------- ------------- ------------ Net increase from capital share transactions 439,754,804 301,403,972 77,061,873 - ----------------------------------------------------------- ------------- ------------- ------------ Total increase in net assets applicable to common shareholders 435,069,233 285,179,453 76,874,654 - ----------------------------------------------------------- ------------- ------------- ------------ NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS: Beginning of period 100,003 100,003 100,003 - ----------------------------------------------------------- ------------- ------------- ------------ End of period (including dividends in excess of net investment income of $2,238,543, $2,329,413 and $628,641, respectively) $ 435,169,236 $ 285,279,456 $ 76,974,657 - ----------------------------------------------------------- ------------- ------------- ------------ COMMON SHARES ISSUED AND REINVESTED: Issued 30,829,000 21,134,000 5,424,000 - ----------------------------------------------------------- ------------- ------------- ------------ Issued in reinvestment of dividends 144,739 101,103 11,299 - ----------------------------------------------------------- ------------- ------------- ------------ NET INCREASE 30,973,739 21,235,103 5,435,299 - ----------------------------------------------------------- ------------- ------------- ------------
* Commencement of operations 9.30.03 PIMCO Municipal Income Funds III Annual Report 25 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS PIMCO MUNICIPAL INCOME FUNDS III NOTES TO FINANCIAL STATEMENTS September 30, 2003 - -------------------------------------------------------------------------------- 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES PIMCO Municipal Income Fund III ("Municipal III"), PIMCO California Municipal Income Fund III ("California Municipal III") and PIMCO New York Municipal Income Fund III ("New York Municipal III"), collectively referred to as the "Funds", or "PIMCO Municipal Income Funds III" were organized as Massachusetts business trusts on August 20, 2002. Prior to commencing operations on October 31, 2002, the Funds had no operations other than matters relating to their organization and registration as closed-end management investment companies registered under the Investment Company Act of 1940 and the rules and regulations thereunder, as amended, and the sale and issuance of 6,981 shares of beneficial interest of each Fund at an aggregate purchase price of $100,003 per Fund to Allianz Dresdner Asset Management of America L.P. ("ADAM"). PIMCO Advisors Fund Management LLC (the "Investment Manager"), serves as the Fund's Investment Manager and is an indirect, wholly-owned subsidiary of ADAM. ADAM is an indirect, majority-owned subsidiary of Allianz AG. The Funds each have 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. Municipal III, California Municipal III and New York Municipal III issued 28,850,000, 19,500,000 and 5,000,000 shares of common stock, respectively, in their initial public offerings. An additional 1,979,000, 1,634,000 and 424,000 shares of Municipal III, California Municipal III and New York Municipal III, respectively, were issued in connection with the exercise of the underwriters' over-allotment option on December 13, 2002. These shares were all issued at $15.00 per share before an underwriting discount of $0.675 per share. The Investment Manager agreed to reimburse the amount by which the aggregate of each Fund's organizational and common offering costs (other than the sales load) exceeded $0.03 per share. Common offering costs of $873,326, $634,020 and $162,720 (representing $0.03 per share for each Fund), were offset against the proceeds of the offerings and have been charged to paid-in capital in excess of par. For Municipal III, aggregate common offering costs and organizational expenses were less than $0.03 per common share. Consequently, organizational expenses of $15,000 were expensed in the current period. For California Municipal III and New York Municipal III, aggregate offering costs and organizational expenses exceeded $0.03 per common share, as a result, all organizational expenses and offering costs exceeding $0.03 per common share were reimbursed by the Investment Manager. In addition, the underwriters commission and offering costs associated with the Funds' issuance of Preferred Shares in the amounts of $2,700,000 and $335,618, $1,850,000 and $263,574 and $470,000 and $160,882, for Municipal III, California Municipal III and New York Municipal III, respectively, have been charged to paid-in capital in excess of par. 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 such exposure would involve claims that may be made against the Funds based upon events that have not yet occurred. However, the Funds expect the risk of any loss to be remote. The following is a summary of significant accounting policies followed by the Funds: (a) VALUATION OF INVESTMENTS Debt securities are valued daily by an independent pricing service approved by the Boards of Trustees. Any security or other asset for which market quotations are not readily available is valued at fair value as determined in good faith under procedures established by the Boards of Trustees. (b) 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 26 PIMCO Municipal Income Funds III Annual Report 9.30.03 PIMCO MUNICIPAL INCOME FUNDS III NOTES TO FINANCIAL STATEMENTS September 30, 2003 - -------------------------------------------------------------------------------- 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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. (c) 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. (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) 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 expenses. Had these cash balances been invested in income producing securities, they would have generated income for the Funds. (f) 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 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. (g) OPTION TRANSACTIONS For hedging purposes, the Funds may purchase and write (sell) put and call options on municipal bonds, U.S. government securities, swap agreements, indexes or futures contracts which are standardized and traded on a U.S. or other exchange, boards of trade, or similar entity, or quoted on an automated quotation system. 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 the 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 which is subsequently adjusted to the current market value of the option written. 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 transactions, 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 9.30.03 PIMCO Municipal Income Funds III Annual Report 27 PIMCO MUNICIPAL INCOME FUNDS III NOTES TO FINANCIAL STATEMENTS September 30, 2003 - -------------------------------------------------------------------------------- 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONCLUDED) of an unfavorable change in the price of the security underlying the written option. Exercise of an option written could result in the Funds purchasing a security at price different from the current market price. (h) RESIDUAL INTEREST MUNICIPAL BONDS (RIBS) The Funds invest in residual interest Municipal Bond ("RIBS") whose interest rates bear an inverse relationship to the interest rate on another security or the value of an index. RIBS 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 vice versa. The longer-term bonds may be more volatile and less liquid than other Municipal Bonds of comparable maturity. An investment in RIBS typically will involve greater risk than an investment in a fixed rate bond. 2. INVESTMENT MANAGER AND SUB-ADVISER Each Fund has entered into an Investment Management Agreement (the "Agreements") with the Investment Manager to serve as Investment Manager to each Fund. Subject to the supervision of each Fund's Board of Trustees, the Investment Manager is responsible for managing, either directly or through others selected by it, the investment activities of the Fund and the Fund's business affairs and other administrative matters. Pursuant to the Agreements, the Investment Manager will receive an annual fee, payable monthly, at the annual rate of 0.65% of each Fund's average daily net assets (including net assets attributable to any preferred shares that may be outstanding). In order to reduce Fund 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 Fund's average daily net assets (including 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 $1,586,214, $1,071,414 and $277,189 in connection with sub-advisory services for Municipal III, California Municipal III and New York Municipal III, respectively, for the period ended September 30, 2003. 3. INVESTMENTS IN SECURITIES For the period ended September 30, 2003, purchases and sales of investments, other than short-term securities, were: California New York Municipal III Municipal III Municipal III - ---------------------------------------------------------------- Purchases $998,708,416 $751,091,839 $302,048,057 Sales 322,574,594 342,653,835 189,321,845
Futures contracts outstanding at September 30, 2003 were as follows: # of Expiration Unrealized Fund Type Contracts Date Depreciation - ------------------------------------------------------------------------------------------------------------ Municipal III Short: U.S. Treasury 30 Year Bond 250 12/19/03 $ 1,546,875 California Municipal III Short: U.S. Treasury 30 Year Bond 462 12/19/03 3,306,187 New York Municipal III Short: U.S. Treasury 30 Year Bond 241 12/19/03 1,724,656
28 PIMCO Municipal Income Funds III Annual Report 9.30.03 PIMCO MUNICIPAL INCOME FUNDS III NOTES TO FINANCIAL STATEMENTS September 30, 2003 - -------------------------------------------------------------------------------- 3. INVESTMENTS IN SECURITIES (CONCLUDED) Transactions in options written for the period ended September 30, 2003 were: Contracts Premiums - ----------------------------------------------------------------------------------- Municipal III: - -------------- Options outstanding, beginning of period -- -- Options written 6,188 $ 5,561,313 Options expired (1,680) (964,950) Option terminated in closing purchase transactions (1,630) (1,537,794) Options exercised (920) (839,302) -------- ------------ Options outstanding, September 30, 2003 1,958 $ 2,219,267 ======== ============ California Municipal III: - ------------------------- Options outstanding, beginning of period -- -- Options written 3,081 $ 2,973,291 Option expired (480) (598,200) Options terminated in closing purchase transactions (720) (492,300) Options exercised (720) (626,723) -------- ------------ Options outstanding, September 30, 2003 1,161 $ 1,256,068 ======== ============ New York Municipal III: - ----------------------- Options outstanding, beginning of period -- -- Options written 1,214 $ 1,008,787 Options expired (390) (338,381) Options terminated in closing purchase transactions (430) (326,981) Options exercised (120) (122,218) -------- ------------ Options outstanding, September 30, 2003 274 $ 221,207 ======== ============
4. INCOME TAX INFORMATION Municipal III: The tax character of dividends paid for the period October 31, 2002 (commencement of operations) through September 30, 2003 were: Ordinary Income 452,320 Tax Exempt Income 25,992,355 At September 30, 2003, the tax basis earnings were comprised entirely of undistributed tax exempt income of $1,651,816 and a current year dividend payable of $3,890,359. In accordance with U.S. Treasury regulations, Municipal III elected to defer realized capital losses of $7,280,483, arising after October 31, 2002. Such losses are treated for tax purposes as arising on October 1, 2003. California Municipal III: The tax character of dividends paid for the period October 31, 2002 (commencement of operations) through September 30, 2003 were: Ordinary Income 244,881 Tax Exempt Income 17,177,331 9.30.03 PIMCO Municipal Income Funds III Annual Report 29 PIMCO MUNICIPAL INCOME FUNDS III NOTES TO FINANCIAL STATEMENTS September 30, 2003 - -------------------------------------------------------------------------------- 4. INCOME TAX INFORMATION (CONCLUDED) At September 30, 2003, the tax basis earnings were comprised entirely of undistributed tax exempt income of $246,120 and a current year dividend payable of $2,575,533. In accordance with U.S. Treasury regulations, California Municipal III elected to defer realized capital losses of $7,949,566, arising after October 31, 2002. Such losses are treated for tax purposes as arising on October 1, 2003. New York Municipal III: The tax character of dividends paid for the period October 31, 2002 (commencement of operations) through September 30, 2003 were: Ordinary Income 11,559 Tax Exempt Income 4,448,331 At September 30, 2003, the tax basis earnings were comprised entirely of undistributed tax exempt income of $25,656 and a current year dividend payable of $654,297. In accordance with U.S. Treasury regulations, New York Municipal III elected to defer realized capital losses of $1,364,874, arising after October 31, 2002. Such losses are treated for tax purposes as arising on October 31, 2003. 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. California Municipal III has issued 3,700 shares of Preferred Shares Series A and 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 period ended September 30, 2003, the annualized dividend rates ranged from:
High Low At 9/30/03 ---- --- ---------- Municipal III: Series A 1.25% 0.73% 0.99% Series B 1.25% 0.65% 0.90% Series C 1.25% 0.68% 0.90% Series D 1.25% 0.45% 0.95% Series E 1.25% 0.55% 0.95% California Municipal III: Series A 1.15% 0.40% 0.85% Series B 1.15% 0.65% 0.90% New York Municipal III: Series A 1.20% 0.40% 0.95%
The Funds are subject to certain limitations and restrictions while Preferred Shares are outstanding. Failure to comply with these limitations and restrictions could preclude the Funds from declaring any dividends or distributions to common shareholders or repurchasing common shares and/or could trigger the mandatory redemption of Preferred Shares at their liquidation value. Preferred Shares, which are entitled to one vote per share, generally vote with the common stock but vote separately as a class to elect two Trustees and on any matters affecting the rights of the Preferred Shares. 30 PIMCO Municipal Income Funds III Annual Report 9.30.03 PIMCO MUNICIPAL INCOME FUNDS III NOTES TO FINANCIAL STATEMENTS September 30, 2003 - -------------------------------------------------------------------------------- 6. SUBSEQUENT COMMON DIVIDEND DECLARATIONS On October 1, 2003, the following dividends were declared to common shareholders payable November 3, 2003 to shareholders of record on October 10, 2003: 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 3, 2003, the following dividends were declared to common shareholders payable December 1, 2003 to shareholders of record on November 14, 2003: Municipal III $0.0831 per common share California Municipal III $0.08 per common share New York Municipal III $0.08 per common share
9.30.03 PIMCO Municipal Income Funds III Annual Report 31 PIMCO MUNICIPAL INCOME FUNDS III FINANCIAL HIGHLIGHTS For a share of common stock outstanding for the period October 31, 2002* through September 30, 2003: - --------------------------------------------------------------------------------
CALIFORNIA NEW YORK MUNICIPAL III MUNICIPAL III MUNICIPAL III ------------- ------------- ------------- Net asset value, beginning of period $ 14.33** $ 14.33** $ 14.33** - ------------------------------------------------------------- ---------- ---------- ---------- INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.78 0.71 0.70 - ------------------------------------------------------------- ---------- ---------- ---------- Net realized and unrealized gain (loss) on investments, future contracts and options written (0.08) (0.66) 0.08 - ------------------------------------------------------------- ---------- ---------- ---------- Total from investment operations 0.70 0.05 0.78 - ------------------------------------------------------------- ---------- ---------- ---------- DIVIDENDS ON PREFERRED SHARES FROM NET INVESTMENT INCOME (0.06) (0.06) (0.06) - ------------------------------------------------------------- ---------- ---------- ---------- Net increase (decrease) in net assets applicable to common shares resulting from investment operations 0.64 (0.01) 0.72 - ------------------------------------------------------------- ---------- ---------- ---------- DIVIDENDS TO COMMON SHAREHOLDERS FROM NET INVESTMENT INCOME (0.79) (0.76) (0.76) - ------------------------------------------------------------- ---------- ---------- ---------- CAPITAL SHARE TRANSACTIONS: Common stock offering costs charged to paid-in capital in excess of par (0.03) (0.03) (0.03) - ------------------------------------------------------------- ---------- ---------- ---------- Preferred shares offering costs/underwriting commissions charged to paid-in capital in excess of par (0.10) (0.10) (0.12) - ------------------------------------------------------------- ---------- ---------- ---------- Total capital share transactions (0.13) (0.13) (0.15) - ------------------------------------------------------------- ---------- ---------- ---------- Net asset value, end of period $ 14.05 $ 13.43 $ 14.14 - ------------------------------------------------------------- ---------- ---------- ---------- Market price, end of period $ 14.20 $ 13.62 $ 13.68 - ------------------------------------------------------------- ---------- ---------- ---------- TOTAL INVESTMENT RETURN (1) 0.05% (4.10)% (3.77)% - ------------------------------------------------------------- ---------- ---------- ---------- RATIOS/SUPPLEMENTAL DATA: Net assets applicable to common shareholders, end of period (000) $ 435,169 $ 285,279 $ 76,975 - ------------------------------------------------------------- ---------- ---------- ---------- Ratio of expenses to average net assets (2)(3)(4) 0.99%(5) 1.01%(6) 1.14%(7) - ------------------------------------------------------------- ---------- ---------- ---------- Ratio of net investment income to average net assets (2)(4) 6.05%(5) 5.63%(6) 5.47%(7) - ------------------------------------------------------------- ---------- ---------- ---------- Preferred shares asset coverage per share $ 65,284 $ 63,539 $ 65,942 - ------------------------------------------------------------- ---------- ---------- ---------- Portfolio turnover 62% 123% 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 common stock at the current market price on the first day and a sale at the current market price on the last day for the period reported. Dividends are assumed, for purposes of this calculation, to be reinvested at prices obtained under the Funds' 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.(e) in Notes to Financial Statements). (4) Annualized. (5) During the period indicated above, the Investment Manager waived a portion of its investment management fee. If such 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 1.22% (annualized) and 5.82% (annualized), respectively. (6) During the period indicated above, the Investment Manager waived a portion of its investment management fee. If such 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 1.24% (annualized) and 5.40% (annualized), respectively. (7) During the period indicated above, the Investment Manager waived a portion of its investment management fee. If such 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 1.37% (annualized) and 5.24% (annualized), respectively. 32 PIMCO Municipal Income Funds III Annual Report 9.30.03 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS PIMCO MUNICIPAL INCOME FUNDS III REPORT OF INDEPENDENT AUDITORS - -------------------------------------------------------------------------------- To the Shareholders and 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 and of changes in net assets applicable to common shareholders and the financial highlights present fairly, in all material respects, the financial position of each 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, 2003, and the results of each of their operations, the changes in each of their net assets applicable to common shareholders and the financial highlights 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 auditing standards generally accepted in the United States of America, which 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, 2003 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP New York, New York November 20, 2003 9.30.03 PIMCO Municipal Income Funds III Annual Report 33 PIMCO MUNICIPAL INCOME FUNDS III TAX & OTHER INFORMATION - -------------------------------------------------------------------------------- TAX INFORMATION (unaudited) Subchapter M of the Internal Revenue Code of 1986, as amended, required the Funds to advise shareholders within 60 days of the Funds' tax year-end (September 30, 2003) as to the federal tax status of dividends and distributions received by shareholders during such tax year. Accordingly, please note that substantially all dividends paid from net investment income from the Funds during the tax period ended September 30, 2003 were federally exempt interest dividends. However, the Funds invested in municipal bonds containing market discount, whose accretion is taxable. Accordingly, the percentage of dividends paid from net investment income during the tax period which are taxable were: Municipal III 1.71% California Municipal III 1.41% New York Municipal III 0.26%
Since the Funds' fiscal year is not the calendar year, another notification will be sent with respect to calendar year 2003. In January 2004, you will be advised on IRS Form 1099 DIV as to the federal tax status of the dividends and distributions received during calendar year 2003. The amount that will be reported, will be the amount to use on your 2003 federal income tax return and may differ from the amount which must be reported in connection with each Fund's tax year ended September 30, 2003. Shareholders are advised to consult with their tax advisors as to the federal, state and local tax status of the income received from the Funds. In January 2004, an allocation of interest by state will be provided which may be of value in reducing a shareholder's state or local tax liability, if any. - -------------------------------------------------------------------------------- OTHER INFORMATION Since the Funds' inception on October 31, 2002, there has been no: (i) material changes in the Funds' investment objectives or policies; (ii) changes to the Funds' charter or by-laws (other than those included in each Fund's registration statement on Form N-2 effective December 17, 2002); (iii) material changes in the principal risk factors associated with investment in the Funds; or (iv) change in the person primarily responsible for the day-to-day management of each Fund's portfolio. 34 PIMCO Municipal Income Funds III Annual Report 9.30.03 PIMCO MUNICIPAL INCOME FUNDS III DIVIDEND REINVESTMENT PLAN - -------------------------------------------------------------------------------- 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, whose broker or nominee elects not to participate on the investor's behalf), will be paid in 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) elects 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 Fund 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 purposes. 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, Rhode Island 02940-3027, telephone number 1-800-331-1710. 9.30.03 PIMCO Municipal Income Funds III Annual Report 35 PIMCO MUNICIPAL INCOME FUNDS III BOARD OF TRUSTEES - -------------------------------------------------------------------------------- PAUL BELICA 1345 Avenue of the Americas New York, NY 10105 Age: 82 Trustee since: 2002 Term of office: After initial term, expected to stand for re-election at 2006 annual meeting of shareholders. Trustee of 16 funds in Fund Complex Trustee of 2 funds outside of Fund Complex Principal Occupation(s) During Past 5 Years: Trustee of fifteen open and closed-end management investment companies affiliated with Allianz Dresdner Asset Management of America L.P.; Manager, Stratigos Fund, L.L.C., Whistler Fund, L.L.C., Xanthus Fund, L.L.C., and Wynstone Fund, L.L.C.; Director, Student Loan Finance Corp., Education Loans, Inc., Goal Funding, Inc., Surety Loan Funding, Inc.; Formerly, Advisor, Salomon Smith Barney, Inc.; Director, The Central European Value Fund, Inc.; Deck House Inc. ROBERT E. CONNOR 1345 Avenue of the Americas New York, NY 10105 Age: 68 Trustee since: 2002 Term of office: After initial term, expected to stand for re-election at 2004 annual meeting of shareholders. Trustee/Director of 18 funds in Fund Complex Trustee/Director of no funds outside of Fund Complex Principal Occupation(s) During Past 5 Years: Director/Trustee of seventeen open and closed-end management investment companies affiliated with Allianz Dresdner Asset Management of America L.P.; Corporate Affairs Consultant; Formerly, Senior Vice President, Corporate Office, Salomon Smith Barney Inc. JOHN J. DALESSANDRO II 1345 Avenue of the Americas New York, NY 10105 Age: 65 Trustee since: 2002 Term of office: After initial term, expected to stand for re-election at 2005 annual meeting of shareholders. Trustee of 15 funds in Fund Complex Trustee of no funds outside of Fund complex Principal Occupation(s) During Past 5 Years: President and Director, J.J. Dalessandro II Ltd., registered broker-dealer and member of the New York Stock Exchange; Trustee of fifteen closed-end management investment companies affiliated with Allianz Dresdner Asset Management of America L.P. HANS W. KERTESS 1345 Avenue of the Americas, New York, NY 10105 Age: 63 Trustee since: 2003 Term of office: After initial term, expected to stand for re-election at 2004 annual meeting of shareholders. Trustee of 14 Funds in Fund Complex; Trustee of no funds outside of Fund Complex Principal Occupation(s) During Past 5 Years: President, H Kertess & Co.; Trustee of fourteen closed-end management investment companies affiliated with Allianz Dresdner Asset Management of America L.P. Formerly, Managing Director, Royal Bank of Canada Capital Markets. 36 PIMCO Municipal Income Funds III Annual Report 9.30.03 PIMCO MUNICIPAL INCOME FUNDS III 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 client's 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. 9.30.03 PIMCO Municipal Income Funds III Annual Report 37 This page intentionally left blank. 38 PIMCO Municipal Income Funds III Annual Report 9.30.03 This page intentionally left blank. 9.30.03 PIMCO Municipal Income Funds III Annual Report 39 This page intentionally left blank. 40 PIMCO Municipal Income Funds III Annual Report 9.30.03 TRUSTEES AND PRINCIPAL OFFICERS Stephen J. Treadway Chairman Paul Belica Trustee Robert E. Connor Trustee John J. Dalessandro II Trustee Hans W. Kertess Trustee Brian S. Shlissel President & Chief Executive Officer Newton B. Schott, Jr. Executive Vice President & Secretary Mark V. McCray Vice President Lawrence G. Altadonna Treasurer, Principal Financial & Accounting Officer INVESTMENT MANAGER PIMCO Advisors 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 TRANSFER AGENT, DIVIDEND PAYING AGENT AND REGISTRAR PFPC Inc. P.O. Box 43027 Providence, RI 02940-3027 INDEPENDENT AUDITORS PricewaterhouseCoopers LLP 1177 Avenue of the Americas New York, NY 10036 LEGAL COUNSEL Ropes & Gray 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. Daily information on the Funds is available at www.pimcoadvisors.com or by calling 1-800-331-1710 ITEM 2. CODE OF ETHICS 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; the registrant's 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. 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 Disclosure requirement not currently effective ITEM 5. [RESERVED] ITEM 6. [RESERVED] ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES Not applicable to this registrant ITEM 8. [RESERVED] ITEM 9. 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 10. EXHIBITS (a) Exhibit 99.a -- Code of Ethics (b) Exhibit 99.Cert -- Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (c) Exhibit 99.906 Cert -- Certification pursuant to Section 906 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. PIMCO California Municipal Income Fund III By /s/ Brian S. Shlissel Brian S. Shlissel, President & Chief Executive Officer Date: December 3, 2003 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 3, 2003 By /s/ Lawrence G. Altadonna Lawrence G. Altadonna, Treasurer Date: December 3, 2003 EX-99.A 3 file002.txt CODE OF ETHICS CODE OF ETHICS PURSUANT TO SECTION 406 OF THE SARBANES-OXLEY ACT OF 2002 FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICERS SEPTEMBER 16, 2003 I. COVERED OFFICERS/PURPOSE OF THE CODE This Code of Ethics (this "Code") pursuant to Section 406 of the Sarbanes-Oxley Act of 2002 has been adopted by the registered investment companies (each a "Fund" and, collectively, the "Funds") listed on Exhibit A and applies to each Fund's Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer (the "Covered Officers" each of whom is identified in Exhibit B) for the purpose of promoting: o honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; o full, fair, accurate, timely and understandable disclosure in reports and documents that a Fund files with, or submits to, the Securities and Exchange Commission ("SEC") and in other public communications made by a Fund; o compliance with applicable laws and governmental rules and regulations; o the prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and o accountability for adherence to the Code. Each Covered Officer should adhere to a high standard of business ethics and should be sensitive to situations that may give rise to conflicts of interest. II. COVERED OFFICERS SHOULD HANDLE ETHICALLY ANY ACTUAL OR APPARENT CONFLICTS OF INTEREST OVERVIEW. A "conflict of interest" occurs when a Covered Officer's private interest interferes with the interests of, or his service to, the relevant Fund. For example, a conflict of interest would arise if a Covered Officer, or a member of the Covered Officer's family, receives improper personal benefits as a result of the Covered Officer's position with the relevant Fund. Certain conflicts of interest arise out of the relationships between Covered Officers and the relevant Fund and already are subject to conflict of interest provisions and procedures in the Investment Company Act of 1940 (including the regulations thereunder, the "1940 Act") and the Investment Advisers Act of 1940 (including the regulations thereunder, the "Investment Advisers Act"). Indeed, conflicts of interest are endemic for certain registered management investment companies and those conflicts are both substantially and procedurally dealt with under the 1940 Act. For example, Covered Officers may not engage in certain transactions with a Fund because of their status as "affiliated persons" of such Fund. The compliance program of each Fund and the compliance programs of its investment advisers (including sub-advisers), principal underwriter and administrator or sub-administrator (each a "Service Provider" and, collectively, the "Service Providers") are reasonably designed to prevent, or identify and correct, violations of many of those provisions, although they are not designed to provide absolute assurance as to those matters. This Code does not, and is not intended to, repeat or replace these programs and procedures, and such conflicts fall outside of the parameters of this Code. See also Section V of this Code. Although typically not presenting an opportunity for improper personal benefit, conflicts arise from, or as a result of, the contractual relationship between a Fund and its Service Providers of which the Covered Officers are also officers or employees. As a result, this Code recognizes that the Covered Officers will, in the normal course of their duties (whether for the Funds or for a Service Provider, or for both), be involved in establishing policies and implementing decisions that will have different effects on the Service Providers and the Funds. The participation of the Covered Officers in such activities is inherent in the contractual relationships between the Funds and their Service Providers and is consistent with the performance by the Covered Officers of their duties as officers of the relevant Fund. Thus, if performed in conformity with the provisions of the 1940 Act, the Investment Advisers Act, other applicable law and the relevant Fund's constitutional documents, such activities will be deemed to have been handled ethically. Frequently, the 1940 Act establishes, as a mechanism for dealing with conflicts, disclosure to and approval by the Directors/Trustees of a Fund who are not "interested persons" of such Fund under the 1940 Act. In addition, it is recognized by the Funds' Boards of Directors/Trustees ("Boards") that the Covered Officers may also be officers or employees of one or more other investment companies covered by this or other codes and that such service, by itself, does not give rise to a conflict of interest. Other conflicts of interest are covered by the Code, even if such conflicts of interest are not the subject of provisions of the 1940 Act and the Investment Advisers Act. The following list provides examples of conflicts of interest under the Code, but Covered Officers should bear in mind that these examples are not exhaustive. The overarching principle is that the personal interest of a Covered Officer should not be placed improperly before the interest of the relevant Fund, unless the personal interest has been disclosed to and approved by other officers of such Fund or such Fund's Board or a committee of such Fund's Board that has no such personal interest. Each Covered Officer must not: o use his personal influence or personal relationships improperly to influence investment decisions or financial reporting by the relevant Fund whereby the Covered Officer would benefit personally to the detriment of such Fund; o cause the relevant Fund to take action, or fail to take action, for the individual personal benefit of the Covered Officer rather than the benefit such Fund; or o retaliate against any other Covered Officer or any employee of the Funds or their Service Providers for reports of potential violations that are made in good faith. There are some conflict of interest situations that should always be approved by the President of the relevant Fund (or, with respect to activities of the President, by the Chairman of the relevant Fund). These conflict of interest situations are listed below: o service on the board of directors or governing board of a publicly traded entity; o acceptance of any investment opportunity or of any material gift or gratuity from any person or entity that does business, or desires to do business, with the relevant Fund. For these purposes, material gifts do not include (i) gifts from a single giver so long as their aggregate annual value does not exceed the equivalent of $100.00 or (ii) attending business meals, business related conferences, sporting events and other entertainment events at the expense of a giver, so long as the expense is reasonable and both the Covered Person and the giver are present.(1) o any ownership interest in, or any consulting or employment relationship with, any entities doing business with the relevant Fund, other than a Service Provider or an affiliate of a Service Provider. This restriction shall not apply to or otherwise limit the ownership of publicly traded securities so long as the Covered Person's ownership does not exceed more than 2% of the outstanding securities of the relevant class. o a direct or indirect financial interest in commissions, transaction charges or spreads paid by the relevant Fund for effecting portfolio transactions or for selling or redeeming shares other than an interest arising from the Covered Officer's employment with a Service Provider or its affiliate. This restriction shall not apply to or otherwise limit the ownership of publicly traded securities so long as the Covered Person's ownership does not exceed more than 2% of the particular class of security outstanding. III. DISCLOSURE AND COMPLIANCE o no Covered Officer should knowingly misrepresent, or cause others to misrepresent, facts about the relevant Fund to others, whether within or outside such Fund, including to such Fund's Board and auditors, and to governmental regulators and self-regulatory organizations; o each Covered Officer should, to the extent appropriate within his area of responsibility, consult with other officers and employees of the Funds and the Service Providers or with counsel to the Funds with the goal of promoting full, fair, accurate, timely and understandable disclosure in the registration statements or periodic reports that the Funds file with, or submit to, the SEC (which, for sake of clarity, does not include any sales literature, omitting prospectuses, or "tombstone" advertising prepared by the relevant Fund's principal underwriter(s)); and o it is the responsibility of each Covered Officer to promote compliance with the standards and restrictions imposed by applicable laws, rules and regulations. IV. REPORTING AND ACCOUNTABILITY Each Covered Officer must: - ------------------------ (1) The $100.00 threshold was taken from the ADAMA Code of Ethics. o upon adoption of the Code (or thereafter as applicable, upon becoming a Covered Officer), affirm in writing to the relevant Fund that he has received, read, and understands the Code; o provide full and fair responses to all questions asked in any Trustee and Officer Questionnaire provided by the relevant Fund as well as with respect to any supplemental request for information; and o notify the President of the relevant Fund promptly if he is convinced to a moral certainty that there has been a material violation of this Code (with respect to violations by a President, the Covered Officer shall report to the Chairman of the relevant Fund). The President of each Fund is responsible for applying this Code to specific situations in which questions are presented under it and has the authority to interpret this Code in any particular situation. However, any approvals or waivers sought by the President will be considered by the Chairman of the relevant Fund. The Funds will follow these procedures in investigating and enforcing this Code: o the President will take all appropriate action to investigate any potential material violations reported to him, which actions may include the use of internal or external counsel, accountants or other personnel; o if, after such investigation, the President believes that no material violation has occurred, the President is not required to take any further action; o any matter that the President believes is a material violation will be reported to the Committee; o if the Committee concurs that a material violation has occurred, it will inform and make a recommendation to the Board, which will consider appropriate action, which may include review of, and appropriate modifications to applicable policies and procedures; notification to appropriate personnel of a Service Provider or its board; or a recommendation to dismiss the Covered Officer; o the Committee will be authorized to grant waivers, as it deems appropriate; and o any changes to or waivers of this Code will, to the extent required, be disclosed as provided by SEC rules. V. OTHER POLICIES AND PROCEDURES This Code shall be the sole code of ethics adopted by the Funds for purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms applicable to registered investment companies thereunder. Insofar as other policies or procedures of the Funds or the Funds' Service Providers govern or purport to govern the behavior or activities of the Covered Officers who are subject to this Code, they are superseded by this Code to the extent that they conflict with the provisions of this Code. The Funds' and their Service Providers's codes of ethics under Rule 17j-1 under the 1940 Act and the Service Providers's more detailed compliance policies and procedures are separate requirements applying to the Covered Officers and others, and are not part of this Code. VI. AMENDMENTS Any material amendments to this Code, other than amendments to Exhibit A, must be approved or ratified by a majority vote of the Board. VII. CONFIDENTIALITY All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone except as permitted by the Board. VIII. INTERNAL USE The Code is intended solely for the internal use by the Funds and does not constitute an admission, by or on behalf of any Fund, as to any fact, circumstance, or legal conclusion. Date: September 16, 2003 EXHIBIT A Registered Investment Companies PIMCO Municipal Income Fund I/II/III PIMCO California Municipal Income Fund I/II/III PIMCO New York Municipal Income Fund I/II/III PIMCO Corporate Income Fund PIMCO Corporate Opportunity Fund Nicholas-Applegate Convertible & Income Fund PIMCO High Income Fund Nicholas-Applegate Convertible & Income Fund II PIMCO Floating Rate Income Fund Municipal Advantage Fund Inc. Fixed Income SHares EXHIBIT B Persons Covered by this Code of Ethics
--------------------------------- ------------------------------- --------------------------------- PRINCIPAL EXECUTIVE OFFICER PRINCIPAL FINANCIAL OFFICER PRINCIPAL ACCOUNTING OFFICER --------------------------------- ------------------------------- --------------------------------- --------------------------------- ------------------------------- --------------------------------- Brian S. Shlissel Lawrence G. Altadonna Lawrence G. Altadonna --------------------------------- ------------------------------- ---------------------------------
Note that the listed officers are "Covered Officers" of each of the Funds listed on Exhibit A. EX-99.CERT 4 file003.txt CERTIFICATIONS EX-99 cert FORM N-CSR CERTIFICATION I, Brian S. Shlissel, certify that: 1. I have reviewed this report on the Form N-CSR of the PIMCO California Municipal Income Fund III 2. Based on my knowledge, the report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by the report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods in the report: 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-2(c) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared: (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this report (the "Evaluation Date"); and (c) Presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize, and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Dated: December 3, 2003 /s/ Brian S. Shlissel - --------------------- Brian S. Shlissel President & Chief Executive Officer FORM N-CSR CERTIFICATION I, Lawrence G. Altadonna, certify that: 1. I have reviewed this report on the Form N-CSR of the PIMCO California Municipal Income Fund III. 2. Based on my knowledge, the report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by the report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods in the report: 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-2(c) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared: (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this report (the "Evaluation Date"); and (c) Presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize, and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Dated: December 3, 2003 /s/ Lawrence G. Altadonna - ------------------------- Lawrence G. Altadonna Treasurer EX-99.906CERT 5 file004.txt CERTIFICATIONS EX-99.906CERT Pursuant to 18 U.S.C ss. 1350, the undersigned officer of PIMCO California Municipal Income Fund III (the "Registrant"), hereby certifies, to the best of his knowledge, that the Registrant's report on Form N-CSR for the period ended September 30, 2003 (the "Report") fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended, and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Dated: December 3, 2003 /s/ Brian S. Shlissel - --------------------- Brian S. Shlissel President & Chief Executive Officer A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the version of this written statement required by Section 906, has been provided to PIMCO California Municipal Income Fund III, and will be retained by PIMCO California Municipal Income Fund III, and furnished to the Securities and Exchange Commission or its staff upon request. This certification is being furnished solely pursuant to 18 U.S.C. ss 1350 and is not being filed as part of the Report or as a separate disclosure document. Pursuant to 18 U.S.C ss. 1350, the undersigned officer of PIMCO California Municipal Income Fund III (the "Registrant"), hereby certifies, to the best of his knowledge, that the Registrant's report on Form N-CSR for the period ended September 30, 2003 (the "Report") fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended, and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Dated: December 3, 2003 /s/ Lawrence G. Altadonna - ------------------------- Lawrence G. Altadonna Treasurer A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the version of this written statement required by Section 906, has been provided to PIMCO California Municipal Income Fund III, and will be retained by PIMCO California Municipal Income Fund III, and furnished to the Securities and Exchange Commission or its staff upon request. This certification is being furnished solely pursuant to 18 U.S.C. ss 1350 and is not being filed as part of the Report or as a separate disclosure document. -----END PRIVACY-ENHANCED MESSAGE-----