PFH Prudential Financial Inc

INVESTMENT MANAGEMENT

Morgan Stanley

Global Infrastructure Fund

Semiannual

Report

June 30, 2013

The performance of the Fund’s five share classes varies because each has different expenses. The Fund’s total returns assume the reinvestment of all distributions but do not reflect the deduction of any applicable sales charges. Such costs would lower performance. See Performance Summary for standardized performance and benchmark information.

Market Conditions

Infrastructure shares advanced 5.12 percent during the first half of 2013, as measured by the Dow Jones Brookfield Global Infrastructure Index ^SM (the “Index”), but underperformed global equities. Among the major infrastructure sectors, gas distribution utilities, gas midstream, and transmission and distribution exhibited relative outperformance, while pipeline companies, communications, toll roads, and European regulated utilities underperformed the Index.

Infrastructure performance was mixed in the first half of 2013, as strong sector performance through April gave way to a bout of selling toward the end of the period, brought on predominantly by investor concerns over rising interest rates – in particular in the U.S. – and the perceived impact on valuation and company cost of capital. Investor rotation out of some of the perceived more defensive areas of infrastructure into more cyclically leveraged names may also have had some negative impact; however, we would note that flows into the infrastructure asset class overall remain relatively resilient.

Within the individual sectors, we view the relative outperformance of companies in the gas distribution, gas midstream, and transmission and distribution sectors as a combination of strong cash flow growth brought on by robust capital programs (gas distribution in China, gas midstream in Canada and the U.S., gas distribution in the U.S., in particular for those companies leveraged to liquefied natural gas export development), favorable rate case developments (select U.S. utility companies), and the resolution of dividend tax policy concerns (for U.S. utilities). We attribute the underperformance of pipeline companies to near-term concerns over valuation and company-specific events (e.g., delay in Keystone XL pipeline approval for TransCanada), the underperformance of communications to the potential for a slowdown in leasing for wireless towers in the U.S. as well as concerns over the impact of “sequestration” on U.S. government contracts for fixed satellite services operators, and the underperformance of European regulated utilities to regulatory interference and the prospects for reduced returns on capital brought on by ongoing rate cases or rate cases resolved in the quarter. Foreign currency trends had a large negative impact on toll roads during the first half, with sector performance largely in line with the overall infrastructure universe on a local currency basis.

At a high level, the dominant investor theme for infrastructure in the first half of 2013 was rising interest rates and their potential to negatively impact valuation. To generally address this, it is important to note that some companies and sectors within infrastructure will be affected more than others. It is

4

also important to consider why rates are rising (i.e., if the economy is truly improving and improved operating fundamentals will offset rising rates). For many companies within the infrastructure universe, there is a self-correcting mechanism within the regulatory compact that will adjust for higher debt costs and rising interest rates such that the impact on a company is mitigated. Utilities or other regulatory asset based companies broadly fit within this category, as returns are adjusted through the rate case process. For example, in some U.S. jurisdictions such as California, the ability to pass through higher debt costs is formulaic and automatic if certain thresholds are met. For other companies that are not allowed higher returns on invested capital concurrent with rising interest rates, value should decline as rates rise, all else being equal.

While we understand that rising rates can have a negative near-term impact on certain companies within our portfolio, we continue to believe these companies reflect solid long-term investment value. Furthermore, despite the prospect for rising interest rates, we believe infrastructure as an asset class remains broadly appealing to public pension funds and other long-term institutional investors, with private market value continuing to exceed valuation levels in the public markets.

Performance Analysis

Morgan Stanley Global Infrastructure Fund Class A and Class I shares outperformed and Class B, Class L, and Class Q shares underperformed the Dow Jones Brookfield Global Infrastructure Index ^SM (the “Index”) and all share classes underperformed the S&P Global BMI Index for the six months ended June 30, 2013, assuming no deduction of applicable sales charges.

For the first half of 2013, the Fund realized favorable performance from bottom-up stock selection, partially offset by adverse top-down allocation. From a bottom-up perspective, the Fund benefited from stock selection in the gas distribution utilities, transmission and distribution, communications, and pipeline companies sectors, partially offset by unfavorable selection in the toll roads, European regulated utilities, and gas midstream sectors. From a top-down perspective, the Fund benefited from an overweight to the gas distribution utilities sector and an underweight to the European regulated utilities sector, but this was more than offset by adverse positioning in other sectors, most notably with the overweight to pipeline companies and the underweight to gas midstream.

We remain committed to our core investment philosophy as an infrastructure value investor. As value-oriented, bottom-up driven investors, our investment perspective is that over the medium and long-term, the key factor in determining the performance of infrastructure securities will be underlying infrastructure asset values. Given the large and growing private infrastructure market, we believe that there are limits as to the level of premium or discount at which the public sector should trade relative to its underlying private infrastructure value. These limits can be viewed as the point at which the arbitrage opportunity between owning infrastructure in the private versus public markets becomes compelling. In aiming to achieve core infrastructure exposure in a cost effective manner, we invest in equity securities of publicly listed infrastructure companies we believe offer the best value relative to their underlying infrastructure value and Net Asset Value growth prospects.

5

Our research currently leads us to an overweighting in the Fund (amongst the largest sectors) to a group of companies in the pipeline companies, communications, and toll roads sectors, and an underweighting to companies in the transmission and distribution, gas midstream, gas distribution utilities, and European regulated utilities sectors. When compared to our year-end commentary, the primary changes from a sector perspective (resulting from shifts in company-specific investments) are a re-introduction of an overweight in the communications sector as well as a shift in gas distribution utilities from an overweight to an underweight, brought on primarily by the sale of outperforming Hong Kong-listed Chinese gas distribution utilities.

Looking forward, we continue to see good opportunities in sectors with secular growth themes, in particular energy infrastructure but also in communications. In addition, we believe we have a number of favorable company-specific positions across sectors with attractive total return prospects. These investments have been overlooked by the market during the first half of the year in large part, in our opinion, due to the short-term orientation of the market and a lack of near-term catalysts or the delay in catalyst realization. As long-term investors, we continue to see value in these companies and will wait patiently for these “value highlighting” opportunities to materialize.

There is no guarantee that any sectors mentioned will continue to perform as discussed herein or that securities in such sectors will be held by the Fund in the future.

Subject to change daily. Provided for informational purposes only and should not be deemed as a recommendation to buy or sell the securities mentioned above. Top 10 holdings and top five countries are as a percentage of net assets.

Morgan Stanley is a full-service securities firm engaged in securities trading and brokerage activities, investment banking, research and analysis, financing and financial advisory services.

6

Investment Strategy

The Fund will normally invest at least 80 percent of its assets in equity securities issued by companies located throughout the world that are engaged in the infrastructure business. A company will be considered to be in the infrastructure business if it derives at least 50 percent of its revenues or earnings from, or devotes at least 50 percent of its assets to, infrastructure-related activities. Infrastructure refers to the systems and networks of energy, transportation, communication and other services required for the normal function of society. Companies in the infrastructure business may be involved in a variety of areas, including, but not limited to, (i) the transmission, distribution, storage or transportation of electricity, oil and gas (and other bulk liquid products), water, and other natural resources used to produce energy, (ii) the construction and operation of renewable power facilities, (iii) the development, ownership, lease, concession, or management of highways, toll roads, tunnels, bridges, pipelines, airports, marine ports, refueling and related facilities, (iv) the provision of communications, including the development, lease, concession, or management of telephone, broadcast and mobile towers, fiber optic/copper cable, and satellite networks, (v) waste-water management and water purification/desalination and (vi) the construction or operation of essential public structures. The Fund’s equity investments may include convertible securities. The Fund’s investments may include securities of small and medium capitalization companies. The Fund may invest up to 100 percent of its net assets in foreign securities, which may include emerging market securities. Under normal market conditions, the Fund invests at least 40% of its assets in the securities of issuers located outside of the United States.

For More Information About Portfolio Holdings

Each Morgan Stanley fund provides a complete schedule of portfolio holdings in its semiannual and annual reports within 60 days of the end of the fund’s second and fourth fiscal quarters. The semiannual reports and the annual reports are filed electronically with the Securities and Exchange Commission (SEC) on Form N-CSRS and Form N-CSR, respectively. Morgan Stanley also delivers the semiannual and annual reports to fund shareholders and makes these reports available on its public web site, www.morganstanley.com. Each Morgan Stanley fund also files a complete schedule of portfolio holdings with the SEC for the fund’s first and third fiscal quarters on Form N-Q. Morgan Stanley does not deliver the reports for the first and third fiscal quarters to shareholders, nor are the reports posted to the Morgan Stanley public web site. You may, however, obtain the Form N-Q filings (as well as the Form N-CSR and N-CSRS filings) by accessing the SEC’s web site, http://www.sec.gov. You may also review and copy them at the SEC’s public reference room in Washington, DC. Information on the operation of the SEC’s public reference room may be obtained by calling the SEC at (800) SEC-0330. You can also request copies of these materials, upon payment of a duplicating fee, by electronic request at the SEC’s e-mail address (publicinfo@sec.gov) or by writing the public reference section of the SEC, Washington, DC 20549-1520.

Proxy Voting Policy and Procedures and Proxy Voting Record

You may obtain a copy of the Fund’s Proxy Voting Policy and Procedures without charge, upon request, by calling toll free (800) 869-NEWS or by visiting the Mutual Fund Center on our web site at www.morganstanley.com. It is also available on the SEC’s web site at http://www.sec.gov.

7

You may obtain information regarding how the Fund voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 without charge by visiting the Mutual Fund Center on our web site at www.morganstanley.com. This information is also available on the SEC’s web site at http://www.sec.gov.

Householding Notice

To reduce printing and mailing costs, the Fund attempts to eliminate duplicate mailings to the same address. The Fund delivers a single copy of certain shareholder documents, including shareholder reports, prospectuses and proxy materials, to investors with the same last name who reside at the same address. Your participation in this program will continue for an unlimited period of time unless you instruct us otherwise. You can request multiple copies of these documents by calling (800) 869-NEWS, 8:00 a.m. to 8:00 p.m., ET. Once our Customer Service Center has received your instructions, we will begin sending individual copies for each account within 30 days.

8

Performance Summary  (unaudited)

Performance data quoted represents past performance, which is no guarantee of future results and current performance may be lower or higher than the figures shown. For most recent month-end performance figures, please visit www.morganstanley.com/im or speak with your Financial Advisor. Investment returns and principal value will fluctuate and fund shares, when redeemed, may be worth more or less than their original cost. The table does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Performance for Class A, Class B, Class L, Class I, and Class Q shares will vary due to differences in sales charges and expenses. See the Fund’s current prospectus for complete details on fees and sales charges. Expenses are as of each Fund’s fiscal year end as outlined in the Fund’s current prospectus.

9

10

Expense Example (unaudited)

As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and (2) ongoing costs, including advisory fees, administration fees; distribution and shareholder services (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

This example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period 01/01/13 – 06/30/13.

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing cost of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line of the table is useful in comparing ongoing costs, and will not help you determine the relative total cost of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

11

Investment Advisory Agreement Approval (unaudited)

Nature, Extent and Quality of Services

The Board reviewed and considered the nature and extent of the investment advisory services provided by the Investment Adviser (as defined herein) under the advisory agreement, including portfolio management, investment research and equity and fixed income securities trading. The Board reviewed similar information and factors regarding the Sub-Advisers (as defined herein), to the extent applicable. The Board also reviewed and considered the nature and extent of the non-advisory, administrative services provided by the Fund’s Administrator (as defined herein) under the administration agreement, including accounting, clerical, bookkeeping, compliance, business management and planning, and the provision of supplies, office space and utilities at the Investment Adviser’s expense. (The Investment Adviser, Sub-Advisers and Administrator together are referred to as the “Adviser” and the advisory, sub-advisory and administration agreements together are referred to as the “Management Agreement.”) The Board also compared the nature of the services provided by the Adviser with similar services provided by non-affiliated advisers as reported to the Board by Lipper, Inc. (“Lipper”).

The Board reviewed and considered the qualifications of the portfolio managers, the senior administrative managers and other key personnel of the Adviser who provide the administrative and advisory services to the Fund. The Board determined that the Adviser’s portfolio managers and key personnel are well qualified by education and/or training and experience to perform the services in an efficient and professional manner. The Board concluded that the nature and extent of the advisory and administrative services provided were necessary and appropriate for the conduct of the business and investment activities of the Fund and supported its decision to approve the Management Agreement.

Performance, Fees and Expenses of the Fund

The Board reviewed the performance, fees and expenses of the Fund compared to its peers, as determined by Lipper, and to appropriate benchmarks where applicable. The Board discussed with the Adviser the performance goals and the actual results achieved in managing the Fund. When considering a fund’s performance, the Board and the Adviser place emphasis on trends and longer-term returns (focusing on one-year, three-year and five-year performance, as of December 31, 2012, or since inception, as applicable). When a fund underperforms its benchmark and/or its peer group average, the Board and the Adviser discuss the causes of such underperformance and, where necessary, they discuss specific changes to investment strategy or investment personnel. The Board noted that the Fund’s performance was better than its peer group average for the one-, three- and five-year periods. The Board discussed with the Adviser the level of the advisory and administration fees (together, the “management fee”) for this Fund relative to comparable funds and/or other accounts advised by the Adviser and/or compared to its peers as determined by Lipper. In

12

addition to the management fee, the Board also reviewed the Fund’s total expense ratio. The Board noted that both the Fund’s management fee and total expense ratio were lower than its peer group averages. After discussion, the Board concluded that the Fund’s performance, management fee and total expense ratio were competitive with its peer group averages.

Economies of Scale

The Board considered the size and growth prospects of the Fund and how that relates to the Fund’s total expense ratio and particularly the Fund’s management fee rate, which includes breakpoints. In conjunction with its review of the Adviser’s profitability, the Board discussed with the Adviser how a change in assets can affect the efficiency or effectiveness of managing the Fund and whether the management fee level is appropriate relative to current and projected asset levels and/or whether the management fee structure reflects economies of scale as asset levels change. The Board has determined that its review of the actual and potential economies of scale of the Fund supports its decision to approve the Management Agreement.

Profitability of the Adviser and Affiliates

The Board considered information concerning the costs incurred and profits realized by the Adviser and its affiliates during the last year from their relationship with the Fund and during the last two years from their relationship with the Morgan Stanley Fund Complex and reviewed with the Adviser the cost allocation methodology used to determine the profitability of the Adviser and affiliates. The Board has determined that its review of the analysis of the Adviser’s expenses and profitability supports its decision to approve the Management Agreement.

Other Benefits of the Relationship

The Board considered other benefits to the Adviser and its affiliates derived from their relationship with the Fund and other funds advised by the Adviser. These benefits may include, among other things, “float” benefits derived from handling of checks for purchases and sales, research received by the Adviser generated from commission dollars spent on funds’ portfolio trading and fees for distribution and/or shareholder servicing. The Board reviewed with the Adviser each of these arrangements and the reasonableness of the Adviser’s costs relative to the services performed. The Board has determined that its review of the other benefits received by the Adviser or its affiliates supports its decision to approve the Management Agreement.

Resources of the Adviser and Historical Relationship Between the Fund and the Adviser

The Board considered whether the Adviser is financially sound and has the resources necessary to perform its obligations under the Management Agreement. The Board also reviewed and considered the historical

13

relationship between the Fund and the Adviser, including the organizational structure of the Adviser, the policies and procedures formulated and adopted by the Adviser for managing the Fund’s operations and the Board’s confidence in the competence and integrity of the senior managers and key personnel of the Adviser. The Board concluded that the Adviser has the financial resources necessary to fulfill its obligations under the Management Agreement and that it is beneficial for the Fund to continue its relationship with the Adviser.

Other Factors and Current Trends

The Board considered the controls and procedures adopted and implemented by the Adviser and monitored by the Fund’s Chief Compliance Officer and concluded that the conduct of business by the Adviser indicates a good faith effort on its part to adhere to high ethical standards in the conduct of the Fund’s business.

General Conclusion

After considering and weighing all of the above factors, the Board concluded that it would be in the best interest of the Fund and its shareholders to approve renewal of the Management Agreement for another year. In reaching this conclusion the Board did not give particular weight to any single factor referenced above. The Board considered these factors over the course of numerous meetings, some of which were in executive session with only the independent Board members and their counsel present. It is possible that individual Board members may have weighed these factors differently in reaching their individual decisions to approve the Management Agreement.

14

Morgan Stanley Global Infrastructure Fund

Portfolio of Investments ⁿ June 30, 2013 (unaudited)

See Notes to Financial Statements

15

See Notes to Financial Statements

16

Morgan Stanley Global Infrastructure Fund

Portfolio of Investments ⁿ June 30, 2013 (unaudited)   continued

See Notes to Financial Statements

17

Morgan Stanley Global Infrastructure Fund