FORM N-Q
 
 
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)
     
522 Fifth Avenue, New York, New York
(Address of principal executive offices) 		  10036
(Zip code)
     
Randy Takian
522 Fifth Avenue, New York, New York 10036		    
(Name and address of agent for service)
Registrant’s telephone number, including area code: 212-296-6990
Date of fiscal year end: October 31, 2008
Date of reporting period: July 31, 2008
 
 
TABLE OF CONTENTS

Item 1. Schedule of Investments
Item 2. Controls and Procedures
Item 3. Exhibits
SIGNATURES
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, 2008 (unaudited)
                                 
PRINCIPAL                        
AMOUNT IN         COUPON     MATURITY        
THOUSANDS         RATE     DATE     VALUE  
       
Tax-Exempt Municipal Bonds (148.9%)
                        
       
Alabama (1.0%)
                        
$ 2,000    
Jefferson County, Alabama, School Ser 2004 A
     5.50 %     01/01/22     $ 1,903,320  
       
 
                      
       
 
                        
       
Alaska (1.1%)
                        
  3,000    
Northern Tobacco Securitization Corporation, Alaska, Asset Backed Ser 2006 A
     5.00       06/01/46       2,125,830  
       
 
                      
       
 
                        
       
Arizona (3.1%)
                        
  1,010    
Arizona, Ser 2008 A (FSA Insd)
     5.00       09/01/24       1,022,231  
  3,890    
Salt River Project Agricultural Improvement & Power District, Arizona, 2002 Ser B (a)
     5.00       01/01/22       3,948,049  
  1,000    
Surprise Municipal Property Corporation, Arizona, Ser 2007
     4.90       04/01/32       867,170  
       
 
                      
       
 
                     5,837,450  
       
 
                      
       
Arkansas (1.0%)
                        
  1,000    
Baxter County Regional Hospital Inc, Arkansas Ser 2007
     5.00       09/01/22       942,030  
  1,000    
Baxter County Regional Hospital Inc, Arkansas Ser 2007
     5.00       09/01/26       886,470  
       
 
                      
       
 
                     1,828,500  
       
 
                      
       
California (29.5%)
                        
  765    
Alvord Unified School District, California, Ser 2007 A (FSA Insd)
     5.00       08/01/24       794,284  
  900    
California Department of Water Reserve and Power Supply, Ser 2008 H (FSA Insd)
     5.00       05/01/22       932,265  
  5,000    
California Economic Recovery, Ser 2004 A (a)
     5.00       07/01/16       5,262,850  
  3,000    
California Health Facilities Financing Authority, Cedars-Sinai Medical Center Ser 2005
     5.00       11/15/34       2,836,320  
  5,000    
California Public Works Board, Mental Health 2004 Ser A
     5.00       06/01/24       5,019,750  
  3,000    
California, Various Purpose dtd 05/01/03
     5.00       02/01/32       2,951,130  
  5,000    
California, Various Purpose dtd 11/01/06
     4.50       10/01/36       4,431,200  
  2,000    
California, Various Purpose dtd 12/01/05
     5.00       03/01/27       2,003,660  
  4,000    
Golden State Tobacco Securitization Corporation, California, Asset Backed Ser 2007 A
     5.125       06/01/47       2,952,880  
  4,000    
Golden State Tobacco Securitization Corporation, California, Asset Backed Ser 2007 A
     5.75       06/01/47       3,285,200  
  2,000    
Golden State Tobacco Securitization Corporation, California, Asset Backed Ser 2005 A (AMBAC Insd)
     5.00       06/01/29       1,888,580  
  310    
Indio Redevelopment Agency, California, Ser A
     5.00       08/15/23       306,444  
  310    
Indio Redevelopment Agency, California, Ser A
     5.00       08/15/24       304,296  
  5,000    
Los Angeles Department of Water & Power, California, Water 2004 Ser C (MBIA Insd) (a)
     5.00       07/01/23       5,137,538  
  4,000    
Los Angeles, Community College District, California, 2003 Ser B (FSA Insd)
     5.00       08/01/27       4,067,160  
  3,040    
Milpitas Redevelopment Agency, Area #1 Ser 2003 (MBIA Insd)
     5.00       09/01/22       3,115,210  
  4,240    
San Diego County Water Authority, California, Ser 2004 A COPs (FSA Insd) (a)
     5.00       05/01/29       4,271,079  
  1,000    
San Diego County, Burnham Institute for Medical Research Ser 2006 COPs
     5.00       09/01/34       874,280  
  4,000    
San Francisco City & County, California, Laguna Honda Hospital Ser 2005 I (FSA Insd) (a)
     5.00       06/15/30       4,052,540  
  540    
San Francisco City & County, California, Laguna Honda Hospital Ser 2008 R3 (AGC Insd)
     5.00       06/15/28       545,600  
  2,000    
Tobacco Securitization Authority of Northern California, Sacramento County Tobacco Securitization Corporation Ser 2006 A-1
     5.00       06/01/37       1,485,440  
       
 
                      
       
 
                     56,517,706  
       
 
                      
       
Colorado (2.2%)
                        
  2,590    
Arkansas River Power Authority, Colorado, Power Ser 2006 (XLCA Insd)
     5.25       10/01/40       2,231,958  
  2,000    
Colorado Health Facilities Authority, Adventist/Sunbelt Ser 2006 D
     5.25       11/15/35       1,902,520  
  165    
Public Authority For Colorado Energy Ser 2008
     6.25       11/15/28       161,274  
       
 
                      
       
 
                     4,295,752  
       
 
                      
       
Connecticut (0.7%)
                        
  1,500    
Mashantucket (Western) Pequot Tribe, Connecticut, 2006 Ser A
     5.50       09/01/36       1,264,365  
       
 
                      
       
 
                        
       
District of Columbia (1.4%)
                        
  2,000    
District of Columbia Ballpark, Ser 2006 B-1 (FGIC Insd)
     5.00       02/01/31       1,837,980  
  855    
District of Columbia Water & Sewer Authority, Ser 2008 A (AGC Insd)
     5.00       10/01/25       873,408  
       
 
                      
       
 
                     2,711,388  
       
 
                      
       
Florida (8.1%)
                        
  1,000    
Highlands County Health Facilities Authority, Florida, Adventist Health/Sunbelt Ser 2006 C
     5.25       11/15/36       954,600  
  1,000    
Lee County Industrial Development Authority, Florida, Shell Point Village/The Alliance Community for Retirement Living Inc, Ser 2006
     5.125       11/15/36       812,020  
  5,000    
Miami-Dade County, Florida, Miami Int’l Airport Ser 2000 A (AMT) (FGIC Insd)
     6.00       10/01/24       5,041,600  

 

 

                                 
PRINCIPAL                        
AMOUNT IN         COUPON     MATURITY        
THOUSANDS         RATE     DATE     VALUE  
  1,995    
Miami-Dade County, Florida, Ser 2005 A (MBIA Insd)
     0.00 (d)     10/01/30       1,440,669  
  4,000    
South Miami Health Facilities Authority, Florida, Baptist Health South Florida Ser 2007 (a)
     5.00       08/15/42       3,806,060  
  1,000    
St Johns County Industrial Development Authority, Florida, Glenmoor Ser 2006 A
     5.25       01/01/26       843,120  
  3,250    
St Johns, Florida, Industrial Development Authority, Glenmoor Refg 2006 Ser A
     5.375       01/01/40       2,535,065  
       
 
                      
       
 
                     15,433,134  
       
 
                      
       
Georgia (8.9%)
                        
  5,000    
Atlanta, Georgia, Airport Ser 2004 C (FSA Insd) (a)
     5.00       01/01/33       5,002,278  
  1,200    
De Kalb County, Georgia, Water & Sewer Ser 2003 A
     5.00       10/01/23       1,237,752  
  3,000    
Fulton County, Georgia, Water & Sewerage Ser 2004 (FGIC Insd)
     5.25       01/01/35       3,036,480  
  2,000    
Georgia Road & Tollway Authority, Ser 2001
     5.375       03/01/17       2,144,980  
  2,000    
Georgia Road & Tollway Authority, Ser 2004
     5.00       10/01/22       2,066,280  
  3,000    
Georgia Road & Tollway Authority, Ser 2004
     5.00       10/01/23       3,084,419  
  425    
Main Street Natural Gas Inc., Georgia, Gas Project Ser A
     6.25       07/15/28       396,589  
       
 
                      
       
 
                     16,968,778  
       
 
                      
       
Hawaii (11.2%)
                        
  10,000    
Hawaii Department of Budget & Finance, Hawaiian Electric Co Inc Ser 1993 (AMT) (MBIA Insd)
     5.45       11/01/23       10,088,200  
  3,000    
Hawaii, Airports Refg Ser 2000 B (AMT) (FGIC Insd)
     6.625       07/01/18       3,093,240  
  8,000    
Honolulu City & County, Hawaii, Ser 2003A (MBIA Insd) (a)
     5.25       03/01/24       8,287,640  
       
 
                      
       
 
                     21,469,080  
       
 
                      
       
Illinois (9.7%)
                        
  3,600    
Chicago Park District, Illinois, Harbor Ser A (AMBAC Insd)
     5.00       01/01/27       3,632,868  
  3,000    
Chicago, Illinois, O’Hare Int’l Airport 3rd Lien Ser 2005 A (MBIA Insd)
     5.25       01/01/26       2,996,460  
  3,000    
Chicago, Illinois, O’Hare Int’l Airport Passenger Fee Ser 2001 A (AMT) (AMBAC Insd)
     5.375       01/01/32       2,846,820  
  1,070    
Chicago, Illinois, Transit Authority Ser 2008 (AGC Insd)
     5.25       06/01/23       1,121,863  
  725    
De Kalb County, Illinois, Community Unit School District No. 428 (FSA Insd)
     5.00       01/01/23       749,737  
  2,780    
Kendall Kane & Will County, Illinois, Community Unit School District No. 308 (FSA Insd)
     0.00       02/01/20       1,594,441  
  8,480    
Metropolitan Pier & Exposition Authority, Illinois, McCormick Place Ser 2002 A (MBIA Insd)
     0.00 (e)     06/15/26       5,658,110  
       
 
                      
       
 
                     18,600,299  
       
 
                      
       
Indiana (1.5%)
                        
  3,000    
Indiana Health & Educational Facility Financing Authority, Clarian Health Ser 2006 A
     5.25       02/15/40       2,778,600  
       
 
                      
       
 
                        
       
Kansas (1.3%)
                        
  2,500    
Wyandotte County/Kansas City, Kansas, Ser 2004 B (FSA Insd)
     5.00       09/01/28       2,524,700  
       
 
                      
       
 
                        
       
Louisiana (0.5%)
                        
  1,000    
Louisiana Public Facilities Authority, Pennington Medical Foundation Ser 2006
     5.00       07/01/31       900,400  
       
 
                      
       
 
                        
       
Maine (0.0%)
                        
  60    
Maine Health & Higher Educational Facilities Authority, Ser 1993 D (FSA Insd)
     5.50       07/01/18       60,128  
       
 
                      
       
 
                        
       
Maryland (2.8%)
                        
  1,000    
Baltimore County, Maryland, Oak Crest Village Ser 2007 A
     5.00       01/01/37       893,010  
  1,500    
Maryland Health & Higher Educational Facilities Authority, King Farm Presbyterian Community 2006 Ser B
     5.00       01/01/17       1,409,010  
  3,000    
Northeast Maryland Waste Disposal Authority, Montgomery County Ser 2003 (AMT) (AMBAC Insd)
     5.50       04/01/16       3,076,320  
       
 
                      
       
 
                     5,378,340  
       
 
                      
       
Michigan (1.4%)
                        
  3,000    
Michigan Hospital Finance Authority, Henry Ford Health Refg Ser 2006 A
     5.25       11/15/46       2,708,220  
       
 
                      
       
 
                        
       
Missouri (2.3%)
                        
  4,000    
Missouri Health & Educational Facilities Authority, Barnes-Jewish/ Christian Health Ser 1993 A
     5.25       05/15/14       4,313,920  
       
 
                      
       
 
                        
       
Nebraska (2.5%)
                        
  5,000    
Nebraska Public Power District, 2003 Ser A (AMBAC Insd)
     5.00       01/01/35       4,857,000  
       
 
                      
       
 
                        
       
Nevada (2.0%)
                        
  3,000    
Clark County, Nevada, Airport SubLien Ser 2004 (AMT) (FGIC Insd)
     5.50       07/01/20       2,886,990  
  1,000    
Reno, Nevada, Renown Regional Medical Center Ser 2007 A
     5.25       06/01/37       918,100  
       
 
                      
       
 
                     3,805,090  
       
 
                      
       
New Hampshire (1.5%)
                        
  3,000    
Manchester, New Hampshire, Water Works Ser 2003 (FGIC Insd)
     5.00       12/01/34       2,952,300  
       
 
                      
       
 
                        
       
New Jersey (3.5%)
                        
  3,000    
New Jersey Economic Development Authority, Cigarette Tax Ser 2004 (b)
     5.75       06/15/29       2,819,520  
  1,500    
New Jersey Economic Development Authority, Seabrook Village Inc Ser 2006
     5.25       11/15/36       1,215,075  

 

 

                                 
PRINCIPAL                        
AMOUNT IN         COUPON     MATURITY        
THOUSANDS         RATE     DATE     VALUE  
  3,000    
Tobacco Settlement Financing Corporation, New Jersey, Ser 2007-1A
     4.625       06/01/26       2,462,940  
  3,000    
Tobacco Settlement Financing Corporation, New Jersey, Ser 2007-1B
     0.00       06/01/41       222,660  
       
 
                      
       
 
                     6,720,195  
       
 
                      
       
New Mexico (0.5%)
                        
  940    
New Mexico Finance Authority, Ser A
     5.00       06/01/27       963,434  
       
 
                      
       
 
                        
       
New York (10.2%)
                        
  5,000    
Metropolitan Transportation Authority, New York, Transportation Ser 2003 B (MBIA Insd)
     5.25       11/15/22       5,179,900  
  3,000    
Nassau County Tobacco Settlement Corporation, New York, Ser 2006 A-3
     5.125       06/01/46       2,469,900  
  465    
New York City, New York, Subser L-1
     5.00       04/01/26       474,984  
  1,950    
New York City Trust for Cultural Resources, Museum of Modern Art Refg Ser 2008 1A (a)
     5.00       04/01/27       2,026,145  
  6,000    
Tobacco Settlement Financing Corporation, New York, State Contingency Ser 2003 B-1C
     5.50       06/01/21       6,225,960  
  3,000    
Triborough Bridge & Tunnel Authority, New York, Refg Ser 2002 B
     5.25       11/15/19       3,171,090  
       
 
                      
       
 
                     19,547,979  
       
 
                      
       
North Carolina (1.1%)
                        
  2,000    
North Carolina Municipal Power Agency #1, Catawba Ser 1993 (MBIA Insd)
     5.25       01/01/20       2,044,940  
       
 
                      
       
 
                        
       
Ohio (2.7%)
                        
  1,000    
American Municipal Power — Ohio, Inc. Ser 2008 A (AGC Insd) (a)
     5.25       02/15/33       1,008,190  
  5,000    
Cuyahoga County, Ohio, Cleveland Clinic Ser 2003 A
     6.00       01/01/32       5,210,900  
       
 
                      
       
 
                     6,219,090  
       
 
                      
       
Pennsylvania (2.0%)
                        
  665    
Allegheny County Redevelopment Authority, Pennsylvania, West Penn Allegheny Health Ser 2007 A (a)
     5.375       11/15/40       1,596,451  
  2,000    
Pennsylvania, First Ser 2003 (MBIA Insd) (a)
     5.00       01/01/13 (c)     2,159,530  
       
 
                      
       
 
                     3,755,981  
       
 
                      
       
Rhode Island (0.8%)
                        
  1,500    
Rhode Island Economic Development Corporation, Airport Refg Ser 2004 A (AMT) (FSA Insd)
     5.00       07/01/21       1,440,600  
       
 
                      
       
 
                        
       
South Carolina (5.8%)
                        
  2,000    
Charleston Educational Excellence Financing Corporation, South Carolina, Charleston County School District Ser 2005
     5.25       12/01/29       2,019,240  
  4,565    
Grand Strand Water & Sewer Authority, South Carolina, Refg Ser 2002 (FSA Insd)
     5.375       06/01/19       4,833,194  
  40    
Lexington County, South Carolina, Health Services District, Lexmed Inc, Ser 2007 A
     5.00       11/01/16       40,618  
  210    
Richland County Environmental Improvement Revenue, South Carolina, International Paper Company Ser 2007 A
     4.60       09/01/12       203,946  
  4,000    
South Carolina Public Service Authority, Santee Cooper Ser 2003 A (AMBAC Insd) (a)
     5.00       01/01/27       4,056,930  
       
 
                      
       
 
                     11,153,928  
       
 
                      
       
Tennessee (2.0%)
                        
  4,000    
Tennessee Energy Acquisition Corporation, Ser 2006 A (a)
     5.25       09/01/19       3,897,240  
       
 
                      
       
 
                        
       
Texas (12.3%)
                        
  2,000    
Alliance Airport Authority, Texas, Federal Express Corp Refg Ser 2006 (AMT)
     4.85       04/01/21       1,739,520  
  1,000    
Austin, Texas, Water & Wastewater ROLS RR II R - 574 (FSA Insd)
     9.00 (f)     05/15/27       1,035,340  
  1,000    
Board of Regents of the University of Houston System Ser 2008 (a)
     5.00       02/15/33       1,012,468  
  575    
Friendswood, Texas, Independent School District (PSF Insd)
     5.00       02/15/25       590,353  
  1,360    
Harris County, Texas, Health Facilities Development Corp.
     5.25       11/15/23       1,419,242  
  2,350    
Houston, Texas, Hotel Occupancy Ser B
     0.00       09/01/25       939,413  
  1,460    
Houston, Texas, Independent School District
     5.00       02/15/28       1,478,191  
  5,000    
Houston, Texas, Combined Utility First Lien Refg 2004 Ser A (MBIA Insd)
     5.25       05/15/25       5,102,051  
  5,200    
North Texas Tollway Authority, Ser D
     0.00       01/01/28       1,668,784  
  1,000    
Tarrant County Cultural Educational Facilities Finance Corp,
     5.125       05/15/37       875,730  
  4,000    
Tarrant County Regional Water District, Texas, Refg & Impr Ser 2002 (FSA Insd)
     5.25       03/01/17       4,283,439  
  325    
Taxas Municipal Gas Acquisition and Supply Corp. Ser 2008 D
     6.25       12/15/26       308,331  
  3,000    
West Harris County Regional Water Authority, Texas, Water Ser 2005 (FSA Insd)
     5.00       12/15/24       3,065,460  
       
 
                      
       
 
                     23,518,322  
       
 
                      
       
Utah (1.3%)
                        
  2,500    
Intermountain Power Agency, Utah, 2003 Ser A (FSA Insd)
     5.00       07/01/21       2,571,700  
       
 
                      
       
 
                        
       
Virginia (9.4%)
                        
  1,250    
Fairfax County Economic Development Authority, Virginia, Goodwin House Inc Ser 2007
     5.125       10/01/42       1,075,738  
  10,000    
Fairfax County Industrial Development Authority, Virginia, Inova Health Refg Ser 1993 A
     5.25       08/15/19       10,786,701  
  4,000    
Norfolk, Virginia, Water Ser 1993 (AMBAC Insd)
     5.375       11/01/23       4,006,160  
  2,000    
Prince William County Service Authority, Virginia, Water & Sewer Refg Ser 2003
     5.00       07/01/21       2,099,400  
       
 
                      
       
 
                     17,967,999  
       
 
                      

 

 

                                 
PRINCIPAL                        
AMOUNT IN         COUPON     MATURITY        
THOUSANDS         RATE     DATE     VALUE  
       
Washington (3.0%)
                        
  1,705    
Grant County Public Utility District #2, Washington, Wanapum Hydroelectric 2005 Ser A (FGIC Insd)
     5.00       01/01/34       1,647,797  
  4,010    
Port of Seattle, Washington, Passenger Facility Ser 1998 A (MBIA Insd) (a)
     5.00       12/01/23       4,020,226  
       
 
                      
       
 
                     5,668,023  
       
 
                      
       
 
                        
       
Total Tax-Exempt Municipal Bonds
(Cost $290,197,666)
                     284,703,731  
       
 
                      
                 
NUMBER OF              
SHARES (000)              
       
Short-Term Investment (h) (9.5%)
        
       
Investment Company
        
  16,106    
Morgan Stanley Institutional Liquidity Tax-Exempt Portfolio — Institutional
Class (Cost $16,105,566)
     16,105,566  
       
 
      
       
 
        
       
Total Investments
        
       
(Cost $306,303,232)
     300,809,297  
       
 
      
                         
PRINCIPAL                      
AMOUNT IN                      
THOUSANDS                      
       
Floating Rate Note and Dealer Trusts Obligations Related to Securities Held (-19.2%)
                
  (36,705 )  
Notes with interest rates ranging from 2.23% to 2.50% at July 31, 2008 and contractual maturities of collateral ranging from 01/01/13 to 08/15/42 (g)
(Cost ($36,704,540))
             (36,704,540 )
       
 
              
       
 
                
       
Total Net Investments
     138.1 %     264,104,757  
       
(Cost $269,598,692) (i) (j)
                
       
Other Assets in Excess of Liabilities
     1.5       2,820,099  
       
 
                
       
Preferred Shares of Beneficial Interest
     (39.6 )     (75,650,000 )
       
 
            
       
 
                
       
Net Assets Applicable to Common Shareholders
     100.0 %   $ 191,274,856  
       
 
            
 
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.
 
ROLS   Reset Option Longs.
 
(a)   Underlying security related to inverse floater entered into by the Fund.
 
(b)   A portion of this security has been physically segregated in connection with open futures contracts in the amount of $400,042.
 
(c)   Prerefunded to call date shown.
 
(d)   Currently a zero coupon security, will convert to 5.00% on October 1, 2013.
 
(e)   Currently a zero coupon security, will convert to 5.75% on June 15, 2017.
 
(f)   Current coupon rate for inverse floating rate municipal obligations. This rate resets periodically as the auction rate on the related security changes. Position in inverse floating rate municipal obligations have a total value of $1,035,340 which represents 0.6% of net assets applicable to common shareholders.
 
(g)   Floating rate note obligations related to securities held — The Fund enters into transactions in which it transfers to Dealer Trusts (“Dealer Trusts”), fixed rate bonds in exchange for cash and residual interests in the Dealer Trusts’ assets and cash flows, which are in the form of inverse floating rate investments. The Dealer Trusts fund the purchases of the fixed rate bonds by issuing floating rate notes to third parties and allowing the Fund to retain residual interest in the bonds. The Fund enters into shortfall agreements with the Dealer Trusts which commit the Fund to pay the Dealer Trusts, in certain circumstances, the difference between the liquidation value of the fixed rate bonds held by the Dealer Trusts and the liquidation value of the floating rate notes held by third parties, as well as any shortfalls in interest cash flows. The residual interests held by the Fund (inverse floating rate investments) include the right of the Fund (1) to cause the holders of the floating rate notes to tender their notes at par at the next interest rate reset date, and (2) to transfer the municipal bond from the Dealer Trusts to the Fund, thereby collapsing the Dealer Trusts. The Fund accounts for the transfer of bonds to the Dealer Trusts as secured borrowings, with the securities transferred remaining in the Fund’s investment assets, and the related floating rate notes reflected as Fund liabilities. The notes issued by the Dealer Trusts have interest rates that reset weekly and the floating rate note holders have the option to tender their notes to the Dealer Trusts for redemption at par at each reset date. At July 31, 2008, Fund investments with a value of $51,627,748 are held by the Dealer Trusts and serve as collateral for the $36,704,540 in floating rate note obligations outstanding at that date.
 
(h)   The Fund invests in Morgan Stanley Institutional Liquidity Tax-Exempt Portfolio — Institutional Class, an open-end management investment company managed by the Investment Adviser. Investment Advisory fees paid by the Fund are reduced by an amount equal to the advisory and administrative service fees paid by Morgan Stanley Institutional Liquidity Tax-Exempt Portfolio — Institutional Class with respect to assets invested by the Fund in Morgan Stanley Institutional Liquidity Tax-Exempt Portfolio — Institutional Class .
 
(i)   Securities have been designated as collateral in an amount equal to $70,105,724 in connection with open futures and swap contracts.
 
(j)   The aggregate cost for federal income tax purposes approximates the aggregate cost for book purposes.
 
     

 

 

     
Bond Insurance:    
AGC
   Assured Guaranty Corporation.
AMBAC
   AMBAC Assurance Corporation.
FGIC
   Financial Guaranty Insurance Company.
FSA
   Financial Security Assurance Inc.
MBIA
   Municipal Bond Investors Assurance Corporation.
PSF
   Texas Permanent School Fund Guarantee Program.
XLCA
   XL Capital Assurance Inc.

 

 

Futures Contracts Open at July 31, 2008:
                         
            UNREALIZED  
NUMBER OF       DESCRIPTION, DELIVERY   UNDERLYING FACE     APPRECIATION  
CONTRACTS   LONG/SHORT   MONTH AND YEAR   AMOUNT AT VALUE     (DEPRECIATION)  
49   Long  
U.S. Treasury Notes 2 Year,
September 2008
   $ 10,388,000     $ 71,093  
       
 
                
59   Long  
U.S. Treasury Notes 10 Year,
September 2008
     6,774,860       113,930  
       
 
                
305   Long  
Treasury Swap 5 Year,
September 2008
     32,897,111       113,357  
       
 
                
221   Short  
U.S. Treasury Notes 5 Year,
September 2008
     (24,605,243 )     (108,714 )
       
 
                
88   Short  
U.S. Treasury Notes 20 Year,
September 2008
     (10,164,000 )     (69,096 )
       
 
                
161   Short  
Treasury Swap 10 Year,
September 2008
     (17,725,094 )     (102,579 )
       
 
              
       
 
                
       
Net Unrealized Appreciation
           $ 17,990  
       
 
              

 

 

Interest Rate Swap Contracts Open at July 31, 2008:
                             
                        UNREALIZED  
    NOTIONAL     PAYMENTS   PAYMENTS   TERMINATION   APPRECIATION  
COUNTERPARTY   AMOUNT (000)     RECEIVED BY FUND   MADE BY FUND   DATE   (DEPRECIATION)  
Bank of America N.A.
   $ 3,118     Fixed Rate 5.58   Floating Rate 0.00 @   February 28, 2018   $ 34,672  
 
                            
Bank of America N.A.
     3,775     Fixed Rate 5.070   Floating Rate 0.00 @   April 14, 2018     (29,634 )
 
                            
Bank of America N.A.
     3,600     Fixed Rate 4.982   Floating Rate 0.00 @   April 15, 2018     (39,528 )
 
                            
Bank of America N.A.
     3,925     Floating Rate 0.00 @   Fixed Rate 5.99   February 28, 2023     (50,005 )
 
                            
Bank of America N.A.
     4,835     Floating Rate 0.00 @   Fixed Rate 5.47   April 14, 2023     7,446  
 
                            
Bank of America N.A.
     4,405     Floating Rate 0.00 @   Fixed Rate 5.38   April 15, 2023     17,620  
 
                            
JPMorgan Chase Bank N.A.
     13,410     Fixed Rate 5.385%   Floating Rate 0.00% @   February 14, 2018     57,127  
 
                            
JPMorgan Chase Bank N.A.
     17,090     Floating Rate 0.00 @   Fixed Rate 5.831   February 14, 2023     (143,043 )
 
                            
Merrill Lynch & Co.
     4,800     Fixed Rate 5.00   Floating Rate 0.00 @   April 15, 2018     (49,728 )
 
                            
Merrill Lynch & Co.
     6,185     Floating Rate 0.00 @   Fixed Rate 5.395   April 15, 2023     22,204  
 
                          
 
                            
            Net unrealized depreciation       $ (172,869 )
 
                          
 
@   Floating rate represents USD-3 months LIBOR.

 

 

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.

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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/ Randy Takian
Randy Takian
Principal Executive Officer
September 18, 2008
     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/ Randy Takian
Randy Takian
Principal Executive Officer
September 18, 2008
/s/ Francis Smith
Francis Smith
Principal Financial Officer
September 18, 2008

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