UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-Q QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED MANAGEMENT INVESTMENT COMPANY Investment Company Act file number: 811-07560 Morgan Stanley Quality Municipal Securities (Exact name of registrant as specified in charter) 1221 Avenue of the Americas, New York, New York 10020 (Address of principal executive offices) (Zip code) Ronald E. Robison 1221 Avenue of the Americas, New York, New York 10020 (Name and address of agent for service) Registrant's telephone number, including area code: 212-762-4000 Date of fiscal year end: October 31, 2006 Date of reporting period: July 31, 2006 ITEM 1. SCHEDULE OF INVESTMENTS. The Trust's schedule of investments as of the close of the reporting period prepared pursuant to Rule 12-12 of Regulation S-X is as follows:
MORGAN STANLEY QUALITY MUNICIPAL SECURITIES PORTFOLIO OF INVESTMENTS July 31, 2006 (unaudited) PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE --------- -------- -------- ----- TAX-EXEMPT MUNICIPAL BONDS (140.1%) General Obligation (14.7%) California, $2,000 Various Purpose dtd 12/01/05 5.00% 03/01/27 $2,062,140 3,000 Various Purpose dtd 05/01/03 5.00 02/01/32 3,053,700 4,000 Los Angeles, Community College District, California, 5.00 08/01/27 4,127,440 2003 Ser B (FSA) 2,000 Tobacco Securitization Authority of Northern California, 5.00 06/01/37 1,958,300 Ser 2005 A-1 4,000 Honolulu City & County, Hawaii, ROLS RRII R 237-1 (MBIA) 5.215## 03/01/24 4,487,920 3,600 Chicago Park District, Illinois, Harbor Ser A (Ambac) 5.00 01/01/27 3,702,924 New York City, New York, 2,000 2006 Ser F 5.00 09/01/23 2,065,520 1,000 2005 Ser G 5.00 12/01/23 1,030,510 1,000 Pennsylvania, RITES PA - 1112 B (MBIA) 5.244## 01/01/19 1,129,020 2,000 Charleston County School District, South Carolina, Ser 2004 A 5.00 02/01/22 2,084,380 5,000 Metropolitan Government of Nashville & Davidson County, 5.125 05/15/25 5,094,900 Tennessee, Refg Ser 1997 1,000 Tennessee Energy Acquisition, GAS Revenue Residuals Ser 47TP 6.494## 09/01/19 1,308,460 ----- --------- 30,600 32,105,214 ------ ---------- Educational Facilities Revenue (1.9%) 1,000 San Diego County, California, Burnham Institute for Medical 5.00 09/01/34 1,002,740 Research Ser 2006 COPs 1,000 Louisiana Public Facilities Authority, Pennington Medical 5.00 07/01/31 1,008,910 Foundation Ser 2006 2,000 New Jersey Educational Facilities Authority, Montclair State 5.00 07/01/34 2,063,220 ----- University Ser 2003 L (MBIA) --------- 4,000 4,074,870 ----- --------- Electric Revenue (13.8%) 3,890 Salt River Project Agricultural Improvement & Power District, 5.00 01/01/22 4,038,481 Arizona, 2002 Ser B 2,590 Arkansas River Power Authority, Colorado, Power Ser 2006 (XLCA) 5.25 10/01/40 2,713,517 2,000 Orlando Utilities Commission, Florida, Ser 2001 A 5.25 10/01/19 2,128,760 2,500 Wyandotte County/Kansas City, Kansas, Ser 2004 B (FSA) 5.00 09/01/28 2,584,675 Nebraska Public Power District, 5,000 2003 Ser A (Ambac) 5.00 01/01/35 5,133,550 3,000 Ser 2005 C (FGIC) 5.00 01/01/41 3,087,300 2,000 North Carolina Municipal Power Agency #1, Catawba Ser 1993 5.25 01/01/20 2,119,520 (MBIA) 4,000 South Carolina Public Service Authority, Ser 2003 A (Ambac) 5.00 01/01/27 4,121,200 2,500 Intermountain Power Agency, Utah, 2003 Ser A (FSA) 5.00 07/01/21 2,601,825 1,755 Grant County Public Utility District #2, Washington, Wanapum 5.00 01/01/34 1,799,156 ----- Hydroelectric 2005 Ser A (FGIC) --------- 29,235 30,327,984 ------ ---------- Hospital Revenue (17.6%) 3,000 California Health Facilities Financing Authority, Cedars-Sinai 5.00 11/15/34 3,033,330 Medical Center Ser 2005 5,000 Colorado Health Facilities Authority, Catholic Health 5.25 09/01/24 5,158,200 Initiatives Ser 2001 A 1,000 Highlands Health Facility Authority, Hospital Adventist Ser C 5.25 11/15/36 1,034,980 3,000 Indiana Health & Educational Facility Financing Authority, 5.25 02/15/40 3,094,170 Clarian Health Ser 2006 A 60 Maine Health & Higher Educational Facilities Authority, 5.50 07/01/18 60,071 Ser 1993 D (FSA) 2,000 Maryland Health & Higher Educational Facilities Authority, 5.25 07/01/34 2,043,740 University of Maryland Medical Ser 2001 3,000 Michigan Hospital Finance Authority, Henry Ford System 5.25 11/15/46 3,091,920 Refg Ser A 4,000 Missouri Health & Educational Facilities Authority, 5.25 05/15/14 4,273,560 Barnes-Jewish /Christian Health Ser 1993 A 5,000 Cuyahoga County, Ohio, Cleveland Clinic Health Ser 2003 A 6.00 01/01/32 5,475,500 525 South Carolina Jobs - Economic Development Authority, Palmetto 6.875 08/01/27 600,689 Health Alliance Refg Ser 2003 C 10,000 Fairfax County Industrial Development Authority, Virginia, 5.25 08/15/19 10,738,600 ------ Inova Health Refg Ser 1993 A ---------- 36,585 38,604,760 ------ ---------- Industrial Development/Pollution Control Revenue (14.4%) 10,000 Hawaii Department of Budget & Finance, Hawaiian Electric Co Inc 5.45 11/01/23 10,053,600 Ser 1993 (AMT) (MBIA) 3,000 Nassau County Tobacco Settlement Corporation, New York, Ser 2006 5.125 06/01/46 2,967,090 2,000 Alliance Airport Authority, Texas, Federal Express Corp Refg Ser 4.85 04/01/21 1,986,180 2006 (AMT) 2,000 Brazos River Authority, Texas, TXU Electric Co Ser 1999 C (AMT) 7.70 03/01/32 2,332,000 3,000 Sabine River Authority, Texas, TXU Electric Co Refg Ser 2001 B 5.75 05/01/30 3,173,670 (AMT) (Mandatory Tender 11/01/11) 1,000 Tobacco Settlement Financing Corporation, Virginia, Ser 2005 5.625 06/01/37 1,038,540 10,000 Weston, Wisconsin, Wisconsin Public Service Co Refg Ser 1993 A 6.90 02/01/13 10,021,900 ------ ---------- 31,000 31,572,980 ------ ---------- Mortgage Revenue - Single Family (1.0%) 2,120 Alaska Housing Finance Corporation, 1997 Ser A (MBIA) 6.00 06/01/27 2,169,459 ----- --------- Public Facilities Revenue (10.3%) 2,000 Jefferson County, Alabama, School Ser 2004 A 5.50 01/01/22 2,137,200 5,000 California Public Works Board, Mental Health 2004 Ser A 5.00 06/01/24 5,134,950 2,000 District of Columbia Ballpark, Ser B-1 5.00 02/01/31 2,057,140 3,000 Miami-Dade County School Board, Florida, 2003 Ser A (FGIC) 5.00 08/01/29 3,073,830 1,500 Baltimore, Maryland, Convention Center Hotel Ser 2006 A (XLCA) 5.25 09/01/39 1,583,475 3,300 Newark Housing Authority, New Jersey, Port Authority-Port 5.00 01/01/34 3,391,410 Newark Marine Terminal Ser 2004 (MBIA) 3,000 Pennsylvania Public School Building Authority, Philadelphia 5.00 06/01/33 3,066,840 School District Ser 2003 (FSA) 2,000 Charleston Educational Excellence Financing Corporation, 5.25 12/01/29 2,092,200 ----- South Carolina, Charleston County School District Ser 2005 --------- 21,800 22,537,045 ------ ---------- Recreational Facilities Revenue (3.0%) 1,995 Miami-Dade County, Florida, Ser 2005 A (MBIA) 0.00 ++ 10/01/30 1,413,737 8,480 Metropolitan Pier & Exposition Authority, Illinois, McCormick 0.00 +++ 06/15/26 5,283,125 ----- Place Ser 2002 A (MBIA) --------- 10,475 6,696,862 ------ --------- Resource Recovery Revenue (1.5%) 3,000 Northeast Maryland Waste Disposal Authority, Montgomery County 5.50 04/01/16 3,201,720 ----- Ser 2003 (AMT) (Ambac) --------- Tax Allocation Revenue (1.4%) 3,040 Milpitas Redevelopment Agency, California, Area #1 Ser 2003 5.00 09/01/22 3,148,923 ----- (MBIA) --------- Transportation Facilities Revenue (25.2%) Arizona Transportation Board, 1,000 Ser 2003 5.00 07/01/21 1,040,730 1,000 Ser 2003 5.00 07/01/22 1,039,100 3,150 Orange County Transportation Authority, California, Toll Road 5.00 08/15/18 3,327,093 Refg Ser 2003 A (Ambac) 5,000 Miami-Dade County, Florida, Miami Int'l Airport Ser 2000 A (AMT) 6.00 10/01/24 5,409,350 (FGIC) 5,000 Atlanta, Georgia, Airport Ser 2004 C (FSA) 5.00 01/01/33 5,122,900 Georgia Road & Tollway Authority, 2,000 Ser 2001 5.375 03/01/17 2,138,900 2,000 Ser 2004 5.00 10/01/22 2,092,980 3,000 Ser 2004 5.00 10/01/23 3,134,010 3,000 Hawaii, Airports Refg Ser 2000 B (AMT) (FGIC) 6.625 07/01/18 3,297,570 Chicago, Illinois, 3,000 O'Hare Int'l Airport 3rd Lien Ser 2005 A (MBIA) 5.25 01/01/26 3,181,680 3,000 O'Hare Int'l Airport Passenger Fee Ser 2001 A (AMT) (Ambac) 5.375 01/01/32 3,087,630 3,000 Illinois Toll Highway Authority, Priority Refg 1998 Ser A (FSA) 5.50 01/01/15 3,308,640 4,000 Missouri Highways & Transportation Commission, Ser A 2001 5.125 02/01/18 4,211,120 3,000 Clark County, Nevada, Airport SubLien Ser 2004 A (AMT) (FGIC) 5.50 07/01/20 3,205,050 5,000 Metropolitan Transportation Authority, New York, Transportation 5.25 11/15/22 5,334,450 Ser 2003 B (MBIA) Triborough Bridge & Tunnel Authority, New York, 3,000 Refg Ser 2002 B 5.25 11/15/19 3,207,360 390 Ser 2001 A 5.00 01/01/32 397,110 1,500 Rhode Island Economic Development Corporation, Airport 5.00 07/01/21 1,537,875 Refg Ser 2004 A (AMT) (FSA) 1,000 Harris County, Texas, Toll Road Sr Lien Ser 2005 A (FSA) 5.25 08/15/35 1,037,110 ----- --------- 52,040 55,110,658 ------ ---------- Water & Sewer Revenue (24.9%) 5,000 Los Angeles Department of Water & Power, California, Water 5.00 07/01/23 5,210,400 2004 Ser C (MBIA) 4,240 San Diego County Water Authority, California, Ser 2004 A COPs 5.00 05/01/29 4,374,620 (FSA) De Kalb County, Georgia, 1,000 Water & Sewer Ser A 5.00 10/01/21 1,043,040 1,200 Water & Sewer Ser A 5.00 10/01/23 1,247,136 3,000 Fulton County, Georgia, Water & Sewerage Ser 2004 (FGIC) 5.25 01/01/35 3,151,050 3,000 Manchester, New Hampshire, Water Works Ser 2003 (FGIC) 5.00 12/01/34 3,072,840 3,000 New York City Municipal Water Finance Authority, New York, 5.00 06/15/28 3,104,580 2005 Ser B (Ambac) 4,565 Grand Strand Water & Sewer Authority, South Carolina, 5.375 06/01/19 4,879,848 Refg Ser 2002 (FSA) Houston, Texas, 5,000 Water & Sewer Jr Lien Refg Ser 2001 A (FSA) 5.50 12/01/16 5,384,600 5,000 Combined Utility First Lien Refg 2004 Ser A (MBIA) 5.25 05/15/25 5,302,050 4,000 Tarrant County Regional Water District, Texas, Refg & Impr 5.25 03/01/17 4,252,240 Ser 2002 (FSA) 1,000 Austin Texas Water & Sewer Authority, ROLS RRII R-574 6.135## 05/15/27 1,100,800 3,000 West Harris County Regional Water Authority, Texas, Water 5.00 12/15/24 3,106,710 Ser 2005 (FSA) 4,000 Norfolk, Virginia, Water Ser 1993 (Ambac) 5.375 11/01/23 4,004,600 Prince William County Service Authority, Virginia, 3,000 Water & Sewer Refg Ser 2003 5.00 07/01/19 3,168,870 2,000 Water & Sewer Refg Ser 2003 5.00 07/01/21 2,104,980 ----- --------- 52,005 54,508,364 ------ ---------- Other Revenue (8.4%) 5,000 California Economic Recovery Ser 2004 A 5.00 07/01/16 5,268,900 2,000 Golden State, Tobacco Securitization Corporation, California, 5.00 06/01/29 2,042,960 Enhanced Asset Backed Ser 2005 A (Ambac) 1,500 Mashantucket Western Pequot Tribe 2006 Ser A 5.50 09/01/36 1,550,355 3,000 New Jersey Economic Development Authority, Cigarette Tax 5.75 06/15/29 3,179,970 Ser 2004 # 6,000 Tobacco Settlement Financing Corporation, New York, State 5.50 06/01/21 6,416,520 ----- Contingency Ser 2003 C-1 --------- 17,500 18,458,705 ------ ---------- Refunded (2.0%) 4,000 Truckee Meadows Water Authority, Nevada, Ser 2001 A (FSA) 5.50 07/01/11+ 4,305,000 ------- --------- 297,400 TOTAL TAX-EXEMPT MUNICIPAL BONDS (Cost $297,250,246) 306,822,544 ------- ----------- SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS (2.6%) 1,800 Indiana Health Facility Financing Authority, Clarian Health 3.70 * 03/01/30 1,800,000 Obligated Group Ser 2000 B (Demand 08/01/06) 3,930 Roanoke Industrial Development Authority, Virginia, Carilion 3.68 * 07/01/27 3,930,000 ----- Health System Ser 1997 A (Demand 08/01/06) --------- 5,730 TOTAL SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS 5,730,000 ----- (Cost $5,730,000) --------- $303,130 TOTAL INVESTMENTS (Cost $302,980,246)(a)(b) 142.7% 312,552,544 ======== OTHER ASSETS IN EXCESS OF LIABILITIES 1.6 3,453,100 PREFERRED SHARES OF BENEFICIAL INTEREST (44.3) (97,044,471) ------ ------------ NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS 100.0% $218,961,173 ====== ============ ------------- Note: The categories of investments are shown as a percentage of net assets applicable to common shareholders. AMT Alternative Minimum Tax. COPs Certificates of Participation. RITES Residual Interest Tax-Exempt Securities (Illiquid securities). ROLS Reset Option Longs (Illiquid securities). # A portion of this security has been physically segregated in connection with open futures contracts in the amount of $72,500. ## Current coupon rate for inverse floating rate municipal obligation. This rate resets periodically as the auction rate on the related security changes. Positions in inverse floating rate municipal obligations have a total value of $8,026,200 which represents 3.7% of net assets applicable to common shareholders. + Prerefunded to call date shown. ++ Currently a zero coupon security; will convert to 5.00% on October 1, 2013. +++ Currently a zero coupon security; will convert to 5.75% on June 15, 2017. * Current coupon of variable rate demand obligation. (a) Securities have been designated as collateral in an amount equal to $15,579,063 in connection with open futures contracts. (b) The aggregate cost for federal income tax purposes approximates the aggregate cost for book purposes. The aggregate gross unrealized appreciation is $9,823,031 and the aggregate gross unrealized depreciation is $250,733, resulting in net unrealized appreciation of $9,572,298. 4 Bond Insurance: ------------- Ambac Ambac Assurance Corporation. FGIC Financial Guaranty Insurance Company. FSA Financial Security Assurance Inc. MBIA Municipal Bond Investors Assurance Corporation. XLCA XL Capital Assurance Inc. FUTURES CONTRACTS OPEN AT JULY 31, 2006: NUMBER OF DESCRIPTION, DELIVERY UNDERLYING FACE UNREALIZED CONTRACTS LONG/SHORT MONTH AND YEAR AMOUNT AT VALUE DEPRECIATION ----------------- ---------------- ---------------------------------- -------------------- ---------------- 50 Short U.S. Treasury Notes 10 year $(5,301,563) $(39,981) September 2006 100 Short U.S. Treasury Notes 5 year (10,421,875) (32,306) September 2006 --------------- Total Unrealized Depreciation..................... $(72,287) ================ Geographic Summary of Investments Based on Market Value as a Percent of Total Investments Alabama 0.7% Hawaii 5.7% Nebraska 2.6% South Carolina 4.4% Alaska 0.7 Illinois 5.9 Nevada 2.4 Tennessee 2.0 Arizona 2.0 Indiana 1.6 New Hampshire 1.0 Texas 8.9 California 14.0 Kansas 0.8 New Jersey 2.8 Utah 0.8 Colorado 2.5 Louisiana 0.3 New York 7.8 Virginia 8.0 Connecticut 0.5 Maine 0.0 North Carolina 0.7 Washington 0.6 District of Columbia 0.7 Maryland 2.2 Ohio 1.8 Wisconsin 3.2 --------- Florida 4.2 Michigan 1.0 Pennsylvania 1.3 Georgia 5.7 Missouri 2.7 Rhode Island 0.5 Total+ 100.0% --------- + Does not include open short futures contracts with an underlying face amount of $15,723,438 with unrealized depreciation of $72,287.
ITEM 2. CONTROLS AND PROCEDURES. (a) The Trust's principal executive officer and principal financial officer have concluded that the Trust's disclosure controls and procedures are sufficient to ensure that information required to be disclosed by the Trust in this Form N-Q was recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, based upon such officers' evaluation of these controls and procedures as of a date within 90 days of the filing date of the report. (b) There were no changes in the Trust's internal control over financial reporting that occurred during the registrant's fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Trust's internal control over financial reporting. ITEM 3. EXHIBITS. (a) A separate certification for each principal executive officer and principal financial officer of the registrant are attached hereto. 2 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. Morgan Stanley Quality Municipal Securities /s/ Ronald E. Robison Ronald E. Robison Principal Executive Officer September 21, 2006 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated. /s/ Ronald E. Robison Ronald E. Robison Principal Executive Officer September 21, 2006 /s/ Francis Smith Francis Smith Principal Financial Officer September 21, 2006 3 EXHIBIT 3 A1 CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER I, Ronald E. Robison, certify that: 1. I have reviewed this report on Form N-Q of Morgan Stanley Quality Municipal Securities; 2. Based on my knowledge, this 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 this report; 3. Based on my knowledge, the schedules of investments included in this report fairly present in all material respects the investments of the registrant as of the end of the fiscal quarter for which the report is filed; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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) Omitted; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report, based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed 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 and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: September 21, 2006 /s/ Ronald E. Robison Ronald E. Robison Principal Executive Officer 4 EXHIBIT 3 A2 CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER I, Francis Smith, certify that: 1. I have reviewed this report on Form N-Q of Morgan Stanley Quality Municipal Securities; 2. Based on my knowledge, this 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 this report; 3. Based on my knowledge, the schedules of investments included in this report fairly present in all material respects the investments of the registrant as of the end of the fiscal quarter for which the report is filed; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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) Omitted; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report, based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed 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 and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: September 21, 2006 /s/ Francis Smith Francis Smith Principal Financial Officer 5