UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Investment Company Act File Number:		811-21189
Registrant Name:		PIMCO New York Municipal Income Fund III
Address of Principal Executive Offices:		1633 Broadway, 41st Floor
		New York, NY 10019
Name and Address of Agent for Service:		Lawrence G. Altadonna
		1633 Broadway, 41st Floor
		New York, NY 10019
Registrant’s telephone number, including area code:		212-739-3371
Date of Fiscal Year End:		September 30, 2011
Date of Reporting Period:		June 30, 2011

Form N-Q is to be used by management investment companies, other than small business investment companies registered on Form N-5 (§§ 239.24 and 274.5 of this chapter), to file reports with the Commission, not later than 60 days after the close of the first and third fiscal quarters, pursuant to rule 30b1-5 under the Investment Company Act of 1940 (17 CFR 270.30b1-5). The Commission may use the information provided on Form N-Q in its regulatory, disclosure review, inspection, and policymaking roles.

A registrant is required to disclose the information specified by Form N-Q, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-Q unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to the Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549-2001. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.

 

 

Item 1. Schedule of Investments

PIMCO New York Municipal Income Fund III Schedule of Investments

June 30, 2011 (unaudited)

Principal
Amount							Credit Rating
(000s)							(Moody’s/S&P)			Value*
NEW YORK MUNICIPAL BONDS & NOTES—82.5%
$	1,000			Brooklyn Arena Local Dev. Corp. Rev., Barclays Center Project,
				6.375%, 7/15/43			Baa3/BBB-			$	1,025,390
	1,500			Chautauqua Cnty. Industrial Dev. Agcy. Rev., Dunkirk Power
				Project, 5.875%, 4/1/42			Baa3/BB+				1,453,230
	730			Dutchess Cnty. Industrial Dev. Agcy. Rev., Elant Fishkill, Inc.,
				5.25%, 1/1/37, Ser. A			NR/NR				492,100
	800			East Rochester Housing Auth. Rev., St. Mary’s Residence
				Project, 5.375%, 12/20/22, Ser. A (GNMA)			NR/NR				841,560
				Liberty Dev. Corp. Rev.,
	1,050			6.375%, 7/15/49			NR/BBB-				1,075,956
				Goldman Sachs Headquarters,
	1,810			5.25%, 10/1/35			A1/A				1,795,140
	2,400			5.50%, 10/1/37			A1/A				2,443,416
	1,500			Long Island Power Auth. Rev., 5.75%, 4/1/39, Ser. A			A3/A-				1,603,050
				Metropolitan Transportation Auth. Rev.,
	5,220			5.00%, 11/15/32, Ser. A (FGIC-NPFGC)			A2/A				5,192,543
	600			5.00%, 11/15/32, Ser. B-2			Aa3/AA				619,068
	500			5.00%, 11/15/34, Ser. B			NR/AA				508,510
	3,000			Monroe Cnty. Industrial Dev. Corp. Rev., Unity Hospital Rochester
				Project, 5.50%, 8/15/40 (FHA) (d)			Aa2/AA-				3,101,610
	200			Mortgage Agcy. Rev., 4.75%, 10/1/27, Ser. 128			Aa1/NR				200,034
	500			Nassau Cnty. Industrial Dev. Agcy. Rev., Amsterdam at Harborside,
				6.70%, 1/1/43, Ser. A			NR/NR				473,755
	2,695			New York City, GO, 5.00%, 3/1/33, Ser. I			Aa2/AA				2,715,212
				New York City Industrial Dev. Agcy. Rev. (AGC),
	600			Queens Baseball Stadium, 6.50%, 1/1/46			Aa3/AA+				615,696
	2,200			Yankee Stadium, 7.00%, 3/1/49			Aa3/AA+				2,425,302
				New York City Municipal Water Finance Auth. Water & Sewer Rev.,
				Second Generation Resolutions,
	5,000			4.75%, 6/15/35, Ser. DD (d)			Aa2/AA+				5,010,100
	1,500			5.00%, 6/15/39, Ser. GG-1			Aa2/AA+				1,530,495
	3,450			New York City Trust for Cultural Res. Rev., Wildlife Conservation
				Society, 5.00%, 2/1/34 (FGIC-NPFGC)			Aa3/AA-				3,466,388
	1,000			Niagara Falls Public Water Auth. Water & Sewer Rev.,
				5.00%, 7/15/34, Ser. A (NPFGC)			Baa1/BBB				959,070
	400			Onondaga Cnty. Rev., Syracuse Univ. Project, 5.00%, 12/1/36 (a)			Aa3/A+				410,096
	600			Port Auth. of New York & New Jersey Rev., JFK International Air
				Terminal, 6.00%, 12/1/36			Baa3/BBB-				616,440
	1,000			State Dormitory Auth. Rev.,			NR/AAA				1,026,900
				5.00%, 3/15/38, Ser. A
	2,250			Jewish Board Family & Children, 5.00%, 7/1/33 (AMBAC)			WR/BBB				2,048,715
	2,000			Kaleida Health Hospital, 5.05%, 2/15/25 (FHA)			NR/NR				2,051,940
	3,000			Lutheran Medical Hospital, 5.00%, 8/1/31 (FHA-NPFGC)			Baa1/BBB				2,932,980
	3,085			New York Univ., 5.25%, 7/1/48, Ser. A			Aa3/AA-				3,146,361
	2,750			North General Hospital, 5.00%, 2/15/25			NR/AA-				2,757,012
	700			North Shore-Long Island Jewish Health System,
				5.50%, 5/1/37, Ser. A			Baa1/A-				711,046
	250			NYU Hospitals Center, 6.00%, 7/1/40, Ser. A			Baa1/BBB+				260,025
	3,740			St. Barnabas Hospital, 5.00%, 2/1/31, Ser. A (AMBAC-FHA)			WR/NR				3,763,861
	1,200			Teachers College, 5.50%, 3/1/39			A1/NR				1,229,244
	500			The New School, 5.50%, 7/1/40			A3/A-				515,725

PIMCO New York Municipal Income Fund III Schedule of Investments

June 30, 2011 (unaudited)

Principal
Amount							Credit Rating
(000s)							(Moody’s/S&P)			Value*
$	620			Winthrop Univ. Hospital Assoc., 5.50%, 7/1/32, Ser. A			Baa1/NR			$	620,341
	2,500			Winthrop-Nassau Univ., 5.75%, 7/1/28			Baa1/NR				2,521,400
	750			State Environmental Facs. Corp. Rev., 4.75%, 6/15/32, Ser. B			Aa1/AA+				758,100
				State Urban Dev. Corp. Rev.,
	2,400			5.00%, 3/15/35, Ser. B			NR/AAA				2,447,592
	2,200			5.00%, 3/15/36, Ser. B-1 (d)			NR/AAA				2,263,492
	2,000			Triborough Bridge & Tunnel Auth. Rev., 5.25%, 11/15/34, Ser. A-2 (d)			Aa2/AA-				2,080,260
	1,100			TSACS, Inc. Rev., 5.125%, 6/1/42, Ser. 1			NR/BBB-				750,629
	2,000			Warren & Washington Cntys. Industrial Dev. Agcy. Rev.,
				Glens Falls Hospital Project, 5.00%, 12/1/35, Ser. A (AGM)			Aa3/AA+				2,001,700
	600			Westchester Cnty. Healthcare Corp. Rev., 6.125%, 11/1/37, Ser. C-2			A3/BBB				606,084
	100			Yonkers Economic Dev. Corp. Rev., 6.00%, 10/15/30, Ser. A			NR/BB+				93,394
				Total New York Municipal Bonds & Notes (cost—$70,883,610)							73,160,962
OTHER MUNICIPAL BONDS & NOTES—11.2%
				District of Columbia—0.2%
	175			Tobacco Settlement Financing Corp. Rev., 6.50%, 5/15/33			Baa3/BBB				174,174
				Ohio—1.0%
	1,250			Buckeye Tobacco Settlement Financing Auth. Rev.,
				5.875%, 6/1/47, Ser. A-2			Baa3/BB-				913,063
				Puerto Rico—8.7%
	580			Children’s Trust Fund Rev., 5.625%, 5/15/43			Baa3/BBB				461,007
	2,000			Electric Power Auth. Rev., 5.25%, 7/1/40, Ser. XX			A3/BBB+				1,900,200
				Sales Tax Financing Corp. Rev.,
	4,000			5.00%, 8/1/40, Ser. A (AGM) (d)			Aa3/AA+				3,886,440
	1,000			5.375%, 8/1/38, Ser. C			A1/A+				993,610
	500			5.75%, 8/1/37, Ser. A			A1/A+				511,305
											7,752,562
				South Carolina—0.5%
	370			Tobacco Settlement Rev. Management Auth. Rev.,
				6.375%, 5/15/30, Ser. B			WR/BBB				461,401
				U. S. Virgin Islands—0.6%
	500			Public Finance Auth. Rev., 6.00%, 10/1/39, Ser. A			Baa3/NR				502,200
				Washington—0.2%
	135			Tobacco Settlement Auth. Rev., 6.625%, 6/1/32			Baa3/BBB				135,933
				Total Other Municipal Bonds & Notes (cost—$9,839,754)							9,939,333
NEW YORK VARIABLE RATE NOTES (b)—5.7%
	5,000			State Dormitory Auth. Rev., Rockefeller Univ.,
				5.00%, 7/1/32, Ser. A-1 (cost—$4,334,234)			Aa1/AAA				5,033,900
SHORT-TERM INVESTMENTS—0.6%
				U.S. Treasury Obligations (c)(e)—0.6%
				U.S. Treasury Bills,
	540			0.07%, 9/15/11 (cost—$539,947)							539,947
				Total Investments (cost—$85,597,545) (f)—100.0%						$	88,674,142

*		Portfolio securities and other financial instruments for which market quotations are readily available are stated at market value. Market value is generally determined on the basis of last reported sales prices, or if no sales are reported, on the basis of quotes obtained from a quotation reporting system, established market makers, or independent pricing services.
		Portfolio securities and other financial instruments for which market quotations are not readily available or for which a development/event occurs that may significantly impact the value of a security, are fair-valued, in good faith, pursuant to procedures established by the Board of Trustees, or persons acting at their discretion pursuant to procedures established by the Board of Trustees. The Fund’s investments are valued daily using prices supplied by an independent pricing service or dealer quotations, or by using the last sale price on the exchange that is the primary market for such securities, or the mean between the last quoted bid and ask price. Independent pricing services use information provided by market makers or estimates of market values obtained from yield data relating to investments or securities with similar characteristics. Securities purchased on a when-issued basis are marked to market daily until settlement at the forward settlement date. Short-term securities maturing in 60 days or less are valued at amortized cost, if their original term to maturity was 60 days or less, or by amortizing their value on the 61st day prior to maturity, if the original term to maturity exceeded 60 days.
		The prices used by the Fund to value securities may differ from the value that would be realized if the securities were sold and these differences could be material. The Fund’s net asset value (“NAV”) is normally determined as of the close of regular trading (normally, 4:00 p.m. Eastern time) on the New York Stock Exchange (“NYSE”) on each day the NYSE is open for business.
(a)		When-issued. To be settled after June 30, 2011.
(b)		Variable Rate Notes—Instruments whose interest rates change on specified date (such as a coupon date or interest payment date) and/or whose interest rates vary with changes in a designated base rate (such as the prime interest rate). The interest rate disclosed reflects the rate in effect on June 30, 2011.
(c)		All or partial amount segregated for the benefit of the counterparty as collateral for derivatives.
(d)		Residual Interest Bonds held in Trust—Securities represent underlying bonds transferred to a separate securitization trust established in a tender option bond transaction in which the Fund acquired the residual interest certificates. These securities serve as collateral in a financing transaction.
(e)		Rates reflect the effective yields at purchase date.
(f)		At June 30, 2011, the cost basis of portfolio securities for federal income tax purposes was $76,667,693. Gross unrealized appreciation was $4,005,642, aggregate gross unrealized depreciation was $942,102 and net unrealized appreciation was $3,063,540. The difference between book and tax cost was attributable to inverse floater transactions.

Glossary:

AGC—insured by Assured Guaranty Corp.
AGM—insured by Assured Guaranty Municipal Corp.
AMBAC—insured by American Municipal Bond Assurance Corp.
FGIC—insured by Financial Guaranty Insurance Co.
FHA—insured by Federal Housing Administration
GNMA—insured by Government National Mortgage Association
GO—General Obligation Bond
NPFGC—insured by National Public Finance Guarantee Corp.
NR—Not Rated
WR—Withdrawn Rating

Other Investments:

Interest rate swap agreements outstanding at June 30, 2011:

										Rate Type												Upfront
		Notional Amount				Termination				Payments				Payments				Market				Premiums				Unrealized
Swap Counterparty		(000s)				Date				Made				Received				Value				Paid(Received)				Depreciation
Bank of America		$	3,200				6/20/42				4.75	%		3-Month USD-LIBOR				$	(253,188	)		$	(30,020	)		$	(223,168	)
Citigroup			3,400				6/20/42				4.75	%		3-Month USD-LIBOR					(269,012	)			(70,800	)			(198,212	)
Goldman Sachs			200				6/20/42				4.75	%		3-Month USD-LIBOR					(15,824	)			1,580				(17,404	)
JPMorgan Chase			1,000				6/20/42				4.75	%		3-Month USD-LIBOR					(79,121	)			(9,220	)			(69,901	)
																		$	(617,145	)		$	(108,460	)		$	(508,685	)

LIBOR — London Inter-bank Offered Rate

Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e. the “exit price”) in an orderly transaction between market participants. The three levels of the fair value hierarchy are described below:

	•		Level 1 — quoted prices in active markets for identical investments that the Fund has the ability to access
	•		Level 2 — valuations based on other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.) or quotes from inactive exchanges
	•		Level 3 — valuations based on significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments)

An investment asset’s or liability’s level within the fair value hierarchy is based on the lowest level input, individually or in the aggregate, that is significant to fair value measurement. The objective of fair value measurement remains the same even when there is a significant decrease in the volume and level of activity for an asset or liability and regardless of the valuation technique used.

The valuation techniques used by the Fund to measure fair value during the nine months ended June 30, 2011 maximized the use of observable inputs and minimized the use of unobservable inputs.

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The following are certain inputs and techniques that the Fund generally uses to evaluate how to classify each major category of assets and liabilities for Level 2 and Level 3, in accordance with Generally Accepted Accounting Principles.

Municipal Bonds & Notes and Variable Rate Notes — Municipal bonds and notes and variable rate notes are valued by independent pricing services based on pricing models that take into account, among other factors, information received from market makers and broker-dealers, current trades, bid-want lists, offerings, market movements, the callability of the bond or note, state of issuance, benchmark yield curves, and bond or note insurance. To the extent that these inputs are observable, the values of municipal bonds and notes are categorized as Level 2. To the extent that these inputs are unobservable, the values are categorized as Level 3.

U.S. Treasury Obligations — U.S. Treasury obligations are valued by independent pricing services based on pricing models that evaluate the mean between the most recently quoted bid and ask price. The models also take into consideration data received from active market makers and broker-dealers, yield curves, and the spread over comparable U.S. Treasury issues. The spreads change daily in response to market conditions and are generally obtained from the new issue market and broker-dealer sources. To the extent that these inputs are observable, the values of U.S. Treasury obligations are categorized as Level 2. To the extent that these inputs are unobservable, the values are categorized as Level 3.

Interest Rate Swaps — Interest rate swaps are valued by independent pricing services using pricing models that are based on real-time intraday snapshots of relevant interest rate curves that are built using the most actively traded securities for a given maturity. The pricing models also incorporate cash and money market rates. In addition, market data pertaining to interest rate swaps is monitored regularly to ensure that interest rates are properly depicting the current market rate. To the extent that these inputs are observable, the values of interest rate swaps are categorized as Level 2. To the extent that these inputs are unobservable, the values are categorized as Level 3.

The Fund’s policy is to recognize transfers between levels at the end of the reporting period.

A summary of the inputs used at June 30, 2011 in valuing the Fund’s assets and liabilities is listed below:

						Level 2 -				Level 3 -
						Other Significant				Significant
		Level 1 -				Observable				Unobservable				Value at
		Quoted Prices				Inputs				Inputs				6/30/11
Investments in Securities — Assets
New York Municipal Bonds & Notes			—			$	73,160,962				—			$	73,160,962
Other Municipal Bonds & Notes			—				9,939,333				—				9,939,333
New York Variable Rate Notes			—				5,033,900				—				5,033,900
Short-Term Investments			—				539,947				—				539,947
Total Investments in Securities — Assets			—			$	88,674,142				—			$	88,674,142
Other Financial Instruments* — Liabilities
Interest Rate Contracts			—			$	(508,685	)			—			$	(508,685	)
Total Investments			—			$	88,165,457				—			$	88,165,457

There were no significant transfers between Levels 1 and 2 during the nine months ended June 30, 2011.

Item 2. Controls and Procedures

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

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

Item 3. Exhibits

     (a) Exhibit 99.302 Cert. — Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

SIGNATURES

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

Registrant: PIMCO New York Municipal Income Fund III
By		/s/ Brian S. Shlissel
President & Chief Executive Officer
Date: August 23, 2011
By		/s/ Lawrence G. Altadonna
Treasurer, Principal Financial & Accounting Officer
Date: August 23, 2011

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
President & Chief Executive Officer
Date: August 23, 2011
By		/s/ Lawrence G. Altadonna
Treasurer, Principal Financial & Accounting Officer
Date: August 23, 2011