Item 8.01 Other Events.
Investment Guideline Change
Effective as of the date hereof, the PIMCO Municipal Income Fund III (the
"Fund") is permitted to, as a principal investment strategy, invest in and/or
originate loans, including, without limitation, to, on behalf of, authorized by,
sponsored by, and/or in connection with a project for which authority and
responsibility lies with one or more U.S. states or territories, cities in a
U.S. state or territory, or political subdivisions, agencies, authorities or
instrumentalities of such states, territories or cities, which may be in the
form of whole loans, assignments, participations, secured and unsecured notes,
senior and second lien loans, mezzanine loans, bridge loans or similar
investments, including to borrowers that are unrated or have credit ratings that
are determined by one or more nationally recognized statistical rating
organizations ("NRSROs") and/or Pacific Investment Management Company LLC
("PIMCO") to be below investment grade. This may include loans to public or
private firms or individuals, such as in connection with housing development
projects. The loans the Fund invests in or originates may vary in maturity
and/or duration. The Fund is not limited in the amount, size or type of loans it
may invest in and/or originate, including with respect to a single borrower or
with respect to borrowers that are determined to be below investment grade,
other than pursuant to any applicable law. The Fund's investment in or
origination of loans may also be limited by the requirements the Fund intends to
observe under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"), in order to qualify as a regulated investment company ("RIC"). The
loans acquired by the Fund may be "Municipal Bonds" (including of a particular
state) for purposes of the Fund's investment policies or may be loans that
produce income that is subject to applicable regular income tax, subject to the
Fund's investment limits.
The disclosure change will be reflected in the Fund's shareholder reports
beginning with the Fund's annual shareholder report on Form N-CSR for the
12-month reporting period ended December 31, 2023.
Principal Risk Factors
The following is an additional principal risk factor in connection with the
above-referenced investment guideline changes:
Loan Origination Risk
The Fund may invest in and/or originate loans, including, without limitation,
to, on behalf of, authorized by, sponsored by, and/or in connection with a
project for which authority and responsibility lies with one or more U.S. states
or territories, cities in a U.S. state or territory, or political subdivisions,
agencies, authorities or instrumentalities of such states, territories or
cities, which may be in the form of whole loans, assignments, participations,
secured and unsecured notes, senior and second lien loans, mezzanine loans,
bridge loans or similar investments, including to borrowers that are unrated or
have credit ratings that are determined by one or more NRSROs and/ or PIMCO to
be below investment grade. This may include loans to public or private firms or
individuals, such as in connection with housing development projects. The loans
the Fund invests in or originates may vary in maturity and/or duration. The Fund
is not limited in the amount, size or type of loans it may invest in and/or
originate, including with respect to a single borrower or with respect to
borrowers that are determined to be below investment grade, other than pursuant
to any applicable law. The Fund's investment in or origination of loans may also
be limited by the requirements the Fund intends to observe under Subchapter M of
the Code, in order to qualify as a RIC. The Fund may subsequently offer such
investments for sale to third parties; provided, that there is no assurance that
the Fund will complete the sale of such an investment. If a Fund is unable to
sell, assign or successfully close transactions for the loans that it
originates, the Fund will be forced to hold its interest in such loans for an
indeterminate period of time. This could result in the Fund's investments having
high exposure to certain borrowers. The Fund will be responsible for the
expenses associated with originating a loan (whether or not consummated). This
may include significant legal and due diligence expenses, which will be borne by
the Fund and common shareholders.
Bridge loans are generally made with the expectation that the borrower will be
able to obtain permanent financing in the near future. Any delay in obtaining
permanent financing subjects the bridge loan investor to increased risk. A
borrower's use of bridge loans also involves the risk that the borrower may be
unable to locate permanent financing to replace the bridge loan, which may
impair the borrower's perceived creditworthiness.
Loan origination and servicing companies are routinely involved in legal
proceedings concerning matters that arise in the ordinary course of their
business. In addition, a number of participants in the loan origination and
servicing industry (including control persons of industry participants) have
been the subject of regulatory actions by state regulators, including state
attorneys general, and by the federal
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government. Governmental investigations, examinations or regulatory actions, or
private lawsuits, including purported class action lawsuits, may adversely
affect such companies' financial results. To the extent the Fund engages in
origination and/or servicing directly, or has a financial interest in, or is
otherwise affiliated with, an origination or servicing company, the Fund will be
subject to enhanced risks of litigation, regulatory actions and other
proceedings. As a result, the Fund may be required to pay legal fees, settlement
costs, damages, penalties or other charges, any or all of which could materially
adversely affect the Fund and its holdings.
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