MERCER FUNDS. Prospectus. July 31, 2014

Transcription

1 MERCER FUNDS Mercer US Large Cap Growth Equity Fund (Class Y-1: N/A) (Class Y-2: N/A) (Class Y-3: MLCGX) Mercer US Large Cap Value Equity Fund (Class Y-1: N/A) (Class Y-2: N/A) (Class Y-3: MLVCX) Mercer US Small/Mid Cap Growth Equity Fund (Class Y-1: N/A) (Class Y-2: N/A) (Class Y-3: MSCGX) Mercer US Small/Mid Cap Value Equity Fund (Class Y-1: N/A) (Class Y-2: N/A) (Class Y-3: MSMVX) Mercer Non-US Core Equity Fund (Class Y-1: N/A) (Class Y-2: N/A) (Class Y-3: MNCEX) Mercer Emerging Markets Equity Fund (Class Y-1: N/A) (Class Y-2: N/A) (Class Y-3: MEMQX) Mercer Global Low Volatility Equity Fund (Class Y-1: N/A) (Class Y-2: N/A) (Class Y-3: MGLVX) Mercer Core Fixed Income Fund (Class Y-1: N/A) (Class Y-2: N/A) (Class Y-3: MCFIX) Mercer Opportunistic Fixed Income Fund (Class Y-1: N/A) (Class Y-2: N/A) (Class Y-3: MOFIX) Prospectus July 31, 2014 This prospectus offers Class Y-1, Class Y-2, and Class Y-3 shares (together, the Class Y Shares ) in the nine series (each a Fund, and together, the Funds ) of the Mercer Funds (the Trust ). This prospectus contains information about the Class Y Shares of the Funds that you should read carefully before you invest. Neither the Securities and Exchange Commission ( SEC ) nor any state securities commission has approved or disapproved these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense. i

2 Contents Page Summary of the Funds... 1 Mercer US Large Cap Growth Equity Fund... 1 Mercer US Large Cap Value Equity Fund... 6 Mercer US Small/Mid Cap Growth Equity Fund Mercer US Small/Mid Cap Value Equity Fund Mercer Non-US Core Equity Fund Mercer Emerging Markets Equity Fund Mercer Global Low Volatility Equity Fund Mercer Core Fixed Income Fund Mercer Opportunistic Fixed Income Fund Important Additional Information Purchase and Sale of Fund Shares Payments to Broker/Dealers and Other Financial Intermediaries Details about the Funds The Manager of Managers Structure Investment Objectives and Principal Investment Strategies Domestic Equity Funds: Mercer US Large Cap Growth Equity Fund Mercer US Large Cap Value Equity Fund Mercer US Small/Mid Cap Growth Equity Fund Mercer US Small/Mid Cap Value Equity Fund Foreign Equity Funds: Mercer Non-US Core Equity Fund Mercer Emerging Markets Equity Fund Mercer Global Low Volatility Equity Fund Fixed Income Funds: Mercer Core Fixed Income Fund Mercer Opportunistic Fixed Income Fund Risks of the Funds Cash and Short-Term Investments Temporary Defensive Positions Selective Disclosure of Portfolio Holdings i

3 Additional Information Who Manages the Funds Investment Advisor and the Subadvisors Administrative Services Pricing of Fund Shares Purchasing and Selling Fund Shares Selecting an Appropriate Share Class Marketing and Shareholder Services (12b-1) Plan Purchasing Class Y Shares Purchasing Class Y-1 and Class Y-2 Shares Purchasing Class Y-3 Shares Customer Identification Selling Class Y Shares Payments by the Funds Redemptions by the Funds Exchanging Class Y Shares Frequent Trading of Fund Shares Fund Distributions and Taxes Dividends and Distributions Taxes Financial Highlights ii

4 Summary of the Funds Mercer US Large Cap Growth Equity Fund Investment Objective The investment objective of the Fund is to provide long-term total return, which includes capital appreciation and income. Fees and Expenses These tables summarize the fees and expenses that you may pay if you invest in the Class Y Shares of the Fund. Shareholder Fees (fees paid directly from your investment) Class Y-1 Class Y-2 Class Y-3 Redemption Fee on shares owned less than 30 days (as a % of total redemption proceeds) % 2.00% 2.00% Annual Fund Operating Expenses (expenses that you pay each year as a percentage of the value of your investment) Class Y-1 Class Y-2 Class Y-3 Management Fees 0.55% 0.55% 0.55% Distribution and/or Service (12b-1) Fees 0.25% None None Other Expenses (1) 0.28% 0.23% 0.08% Acquired Fund Fees and Expenses None None None Total Annual Fund Operating Expenses 1.08% 0.78% 0.63% (1) The Other Expenses shown for the Class Y-1 shares and Class Y-2 shares are based on estimated amounts for the Fund s current fiscal year, as the Class Y-1 shares and Class Y-2 shares had not commenced operations as of the date of this prospectus. Other Expenses include custodial, legal, audit, transfer agent and Trustees fees and expenses, a sub-transfer agent payment of 0.10% paid by the Class Y-1 and Class Y-2 shares of the Fund and an internal administrative fee of 0.10% and 0.05% paid by the Class Y-1 and Class Y-2 shares of the Fund, respectively, to Mercer Investment Management, Inc. (the Advisor ). Example The example below is intended to help you compare the costs of investing in the Class Y Shares of the Fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Class Y-1, Class Y-2, or Class Y-3 shares of the Fund for the time periods shown, that your investment has a 5% return each year, and that the Fund s operating expenses remain the same as shown above. Although your actual costs may be higher or lower, based on these assumptions, your costs would be: 1 year 3 years 5 years 10 years Class Y-1... $ 110 $343 $595 $ 1,317 Class Y-2... $ 80 $249 $433 $ 966 Class Y-3... $ 64 $202 $351 $ 786 Portfolio Turnover The Fund pays transaction costs, such as commissions, when it buys and sells securities (or turns over its portfolio). A higher portfolio turnover rate may increase transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in Annual Fund 1

5 Operating Expenses or in the example, affect the Fund s performance. During the most recent fiscal year, the Fund s portfolio turnover rate was 50% of the average value of its portfolio. Principal Investment Strategies The Fund invests principally in equity securities (such as common stock) issued by large capitalization U.S. companies. Under normal circumstances, the Fund will invest at least 80% of its net assets (plus borrowings for investment purposes, if any) in the equity securities of large capitalization U.S. companies. For purposes of the 80% test, equity securities include securities such as common stock, preferred stock, and other securities that are not debt securities, cash or cash equivalents. For purposes of this investment policy, the Fund considers large capitalization U.S. companies to be U.S. companies, at the time of investment, whose market capitalizations exceed the market capitalization of the smallest company included in the Russell 1000 Growth Index, as measured at the end of the preceding month (as of June 30, 2014, $52.8 million). (If the Fund changes this investment policy, the Fund will notify shareholders at least 60 days in advance of the change.) Generally, the Fund invests in companies that have higher earnings and/or revenue growth histories or expectations relative to the Russell 1000 Index. The Fund may invest in derivative instruments, such as exchange-listed equity futures contracts, to gain market exposure on cash balances or to reduce market exposure in anticipation of liquidity needs. Principal Risk Factors The principal risks that could adversely affect the value of the Fund s shares and the total return on your investment include the following, which appear in alphabetical order, not in order of importance or likelihood of occurrence. Loss of money is a risk of investing in the Fund. Custody Risk. There are risks involved in dealing with the custodians or brokers who settle Fund trades. Securities and other assets deposited with custodians or brokers may not be clearly or constantly identified as being assets of the Fund, and hence the Fund may be exposed to a credit risk with regard to such parties. In some jurisdictions, the Fund may only be an unsecured creditor of its broker in the event of bankruptcy or administration of such broker. Further, there may be practical or time problems associated with enforcing the Fund s rights to its assets in the case of an insolvency of any such party. Derivatives Risk. The Fund may invest in derivative instruments such as exchange-listed equity futures contracts. Derivatives are financial instruments, the value of which depends upon, or is derived from, the value of something else, such as one or more underlying investments, pools of investments, indices, or currencies. A subadvisor may use exchange-listed equity futures contracts to equitize cash held in the portfolio. Derivatives involve special risks and may result in losses. The successful use of derivatives depends on the ability of a subadvisor to manage these sophisticated instruments. The prices of derivatives may move in unexpected ways due to the use of leverage or other factors, especially in unusual market conditions, and may result in increased volatility. The possible lack of a liquid secondary market for derivatives and the resulting inability of the Fund to sell or otherwise close a derivatives position could expose the Fund to losses and could make derivatives more difficult for the Fund to value accurately. Derivatives are also subject to the risk that the other party in the transaction will not fulfill its contractual obligations. Equity Securities Risk. The value of a company s equity securities is subject to changes in the company s financial condition, and overall market and economic conditions. Growth Stock Risk. The value of a company s equity securities is subject to changes in the company s financial condition, and overall market and economic conditions. Companies with strong growth potential (both domestic and foreign) tend to have higher than average price-to-earnings ratios, meaning that these stocks are more expensive than average relative to the companies earnings. The market prices of equity securities of growth companies are often quite volatile, since the prices may be particularly sensitive to economic, market, or company developments and may present a greater degree of risk of loss. 2

6 Issuer Risk. The issuer of a security may perform poorly and the value of its stocks or bonds may decline as a result. An issuer of securities held by the Fund could become bankrupt or could default on its issued debt or have its credit rating downgraded. Large Capitalization Stock Risk. Large-capitalization stocks as a group could fall out of favor with the market, causing the Fund to underperform investments that focus on small- or medium-capitalization stocks. Larger, more established companies may be slow to respond to challenges and may grow more slowly than smaller companies. For purposes of the Fund s investment policies, the market capitalization of a company is based on its market capitalization at the time the Fund purchases the company s securities. Market capitalizations of companies change over time. Management Techniques Risk. The investment strategies, techniques, and risk analyses employed by the subadvisors, while designed to enhance potential returns, may not produce the desired results. The subadvisors may be incorrect in their assessments of the values of securities or their assessments of market trends, which can result in losses to the Fund. Market Risk. The risk that movements in financial markets will adversely affect the prices of the Fund s investments, regardless of how well the companies in which the Fund invests perform. The market as a whole may not favor the types of investments the Fund makes. Also, there is the risk that the price(s) of one or more of the securities or other instruments in the Fund s portfolio will fall, or will fail to rise. Many factors can adversely affect a security s performance, including both general financial market conditions and factors related to a specific company, government, industry, country, or geographic region. Portfolio Turnover Risk. Depending on market and other conditions, the Fund may experience high portfolio turnover, which may result in higher brokerage commissions and transaction costs (which could reduce investment returns) and capital gains. The Fund is not intended to serve as a complete investment program. Performance of the Fund The following bar chart and table give some indication of the risks of investing in the Fund by showing changes in the performance of the Fund s Class Y-3 shares from year to year and comparing the Fund s average annual returns over time with a broad measure of market performance. Class Y-1 shares and Class Y-2 shares of the Fund had not commenced operations as of the date of this prospectus. The returns of the Class Y-1 and Class Y-2 shares would have been substantially similar to the returns of Class Y-3 shares; however, because the Fund s Class Y-1 shares are subject to a 12b-1 fee and both Class Y-1 shares and Class Y-2 shares are subject to an internal administrative fee, while the Class Y-3 shares are not, the returns of the Class Y-1 shares and Class Y-2 shares would have been lower than those shown for Class Y-3 shares. The Fund s past performance, before and after taxes, is not necessarily an indication of how the Fund will perform in the future. 3

7 (2006 is Class Y-3 s first full calendar year of operation) The Fund s calendar year-to-date return as of June 30, 2014 was 1.67%. The Fund s highest return for a quarter during the periods shown above was 18.17%, for the quarter ended March 31, The Fund s lowest return for a quarter during the periods shown above was %, for the quarter ended December 31, Average Annual Total Returns For the Periods Ended December 31, 2013 Life of Fund (Inception August 15, 2005) 1 Year 5 Years Mercer US Large Cap Growth Equity Fund Class Y-3 Shares Return Before Taxes 34.91% 20.46% 7.71% Return After Taxes on Distributions 27.49% 18.94% 6.76% Return After Taxes on Distributions and Sale of Fund Shares 24.85% 16.68% 6.14% Russell 1000 Growth Index (1) (reflects no deduction for fees, expenses, or taxes) 33.48% 20.39% 8.31% (1) The Russell 1000 Growth Index measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values. The index is unmanaged and cannot be invested in directly. After-tax returns are calculated using the historical highest individual federal marginal income tax rates in effect and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor s situation and may differ from those shown. In addition, the after-tax returns shown are not relevant to investors who hold Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. 4

8 Fund Management Investment Advisor: Mercer Investment Management, Inc. Subadvisors and Portfolio Managers: Columbia Management Investment Advisers, LLC ( Columbia ) Thomas Galvin, CFA, Senior Portfolio Manager and Head of Focused Large Cap Growth, joined Columbia in May Mr. Galvin began managing Columbia s allocated portion of the Fund s portfolio in April Richard Carter, Portfolio Manager, joined Columbia in May Mr. Carter began managing Columbia s allocated portion of the Fund s portfolio in April Todd Herget, Portfolio Manager, joined Columbia in May Mr. Herget began managing Columbia s allocated portion of the Fund s portfolio in April HS Management Partners, LLC ( HSMP ) Harry W. Segalas, Managing Partner & Chief Investment Officer, founded HS Management Partners in Mr. Segalas began managing HSMP s allocated portion of the Fund s portfolio in April SSgA Funds Management, Inc. ( SSgA FM ) Michael O. Martel, Vice President and Senior Portfolio Manager, joined State Street Global Advisors ( SSgA ) in Mr. Martel began managing SSgA FM s allocated portion of the Fund s portfolio in April Charles McGinn, Vice President and Senior Portfolio Manager, joined SSgA in Mr. McGinn began managing SSgA FM s allocated portion of the Fund s portfolio in April Tyhesha Harrington, Vice President and Senior Portfolio Manager, joined SSgA FM in Ms. Harrington began managing SSgA FM s allocated portion of the Fund s portfolio in April Sands Capital Management, LLC ( Sands Capital ) Frank M. Sands, CFA, Chief Executive Officer and Chief Investment Officer, joined Sands Capital in 2000, and began managing Sands Capital s allocated portion of the Fund s portfolio in Thomas M. Ricketts, CFA, Research Analyst and Senior Portfolio Manager, joined Sands Capital in 1994, and began managing Sands Capital s allocated portion of the Fund s portfolio in A. Michael Sramek, CFA, Research Analyst and Senior Portfolio Manager, joined Sands Capital in 2001, and began managing Sands Capital s allocated portion of the Fund s portfolio in Tax Information The Fund s distributions generally are taxable as ordinary income, capital gains, or some combination of both, unless you are investing through a tax-deferred arrangement, such as a 401(k) plan or an Individual Retirement Account, in which case you may be subject to federal income tax upon withdrawal from the tax-deferred account. For important information about purchase and sale of Fund shares and financial intermediary compensation, please turn to Important Additional Information on page 58 of this prospectus. 5

9 Mercer US Large Cap Value Equity Fund Investment Objective The investment objective of the Fund is to provide long-term total return, which includes capital appreciation and income. Fees and Expenses These tables summarize the fees and expenses that you may pay if you invest in the Class Y Shares of the Fund. Shareholder Fees (fees paid directly from your investment) Class Y-1 Class Y-2 Class Y-3 Redemption Fee on shares owned less than 30 days (as a % of total redemption proceeds) % 2.00% 2.00% Annual Fund Operating Expenses (expenses that you pay each year as a percentage of the value of your investment) Class Y-1 Class Y-2 Class Y-3 Management Fees 0.53% 0.53% 0.53% Distribution and/or Service (12b-1) Fees 0.25% None None Other Expenses (1) 0.28% 0.23% 0.08% Acquired Fund Fees and Expenses None None None Total Annual Fund Operating Expenses 1.06% 0.76% 0.61% (1) The Other Expenses shown for the Class Y-1 shares and Class Y-2 shares are based on estimated amounts for the Fund s current fiscal year, as the Class Y-1 shares and Class Y-2 shares had not commenced operations as of the date of this prospectus. Other Expenses include custodial, legal, audit, transfer agent and Trustees fees and expenses, a sub-transfer agent payment of 0.10% paid by the Class Y-1 and Class Y-2 shares of the Fund and an internal administrative fee of 0.10% and 0.05% paid by the Class Y-1 and Class Y-2 shares of the Fund, respectively, to the Advisor. Example The example below is intended to help you compare the costs of investing in the Class Y Shares of the Fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Class Y-1, Class Y-2, or Class Y-3 shares of the Fund for the time periods shown, that your investment has a 5% return each year, and that the Fund s operating expenses remain the same as shown above. Although your actual costs may be higher or lower, based on these assumptions, your costs would be: 1 year 3 years 5 years 10 years Class Y-1... $ 108 $337 $585 $ 1,294 Class Y-2... $ 78 $243 $422 $ 942 Class Y-3... $ 62 $195 $340 $ 762 Portfolio Turnover The Fund pays transaction costs, such as commissions, when it buys and sells securities (or turns over its portfolio). A higher portfolio turnover rate may increase transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in Annual Fund 6

10 Operating Expenses or in the example, affect the Fund s performance. During the most recent fiscal year, the Fund s portfolio turnover rate was 45% of the average value of its portfolio. Principal Investment Strategies The Fund invests principally in equity securities (such as common stock) issued by large capitalization U.S. companies. Under normal circumstances, the Fund will invest at least 80% of its net assets (plus borrowings for investment purposes, if any) in the equity securities of large capitalization U.S. companies. For purposes of the 80% test, equity securities include securities such as common stock, preferred stock, and other securities that are not debt securities, cash or cash equivalents. For purposes of this investment policy, the Fund considers large capitalization U.S. companies to be companies, at the time of investment, whose market capitalizations exceed the market capitalization of the smallest company included in the Russell 1000 Value Index, as measured at the end of the preceding month (as of June 30, 2014, $58 million). Generally, the Fund invests in stocks that appear to be undervalued based on the stocks intrinsic values relative to their current market prices. The Fund may invest in derivative instruments, such as exchange-listed equity futures contracts, to gain market exposure on cash balances or to reduce market exposure in anticipation of liquidity needs. Principal Risk Factors The principal risks that could adversely affect the value of the Fund s shares and the total return on your investment include the following, which appear in alphabetical order, not in order of importance or likelihood of occurrence. Loss of money is a risk of investing in the Fund. Custody Risk. There are risks involved in dealing with the custodians or brokers who settle Fund trades. Securities and other assets deposited with custodians or brokers may not be clearly or constantly identified as being assets of the Fund, and hence the Fund may be exposed to a credit risk with regard to such parties. In some jurisdictions, the Fund may only be an unsecured creditor of its broker in the event of bankruptcy or administration of such broker. Further, there may be practical or time problems associated with enforcing the Fund s rights to its assets in the case of an insolvency of any such party. Derivatives Risk. The Fund may invest in derivative instruments such as exchange-listed equity futures contracts. Derivatives are financial instruments, the value of which depends upon, or is derived from, the value of something else, such as one or more underlying investments, pools of investments, indices, or currencies. A subadvisor may use exchange-listed equity futures contracts to equitize cash held in the portfolio. Derivatives involve special risks and may result in losses. The successful use of derivatives depends on the ability of a subadvisor to manage these sophisticated instruments. The prices of derivatives may move in unexpected ways due to the use of leverage or other factors, especially in unusual market conditions, and may result in increased volatility. The possible lack of a liquid secondary market for derivatives and the resulting inability of the Fund to sell or otherwise close a derivatives position could expose the Fund to losses and could make derivatives more difficult for the Fund to value accurately. Derivatives are also subject to the risk that the other party in the transaction will not fulfill its contractual obligations. Equity Securities Risk. The value of a company s equity securities is subject to changes in the company s financial condition, and overall market and economic conditions. Issuer Risk. The issuer of a security may perform poorly and the value of its stocks or bonds may decline as a result. An issuer of securities held by the Fund could become bankrupt or could default on its issued debt or have its credit rating downgraded. Large Capitalization Stock Risk. Large-capitalization stocks as a group could fall out of favor with the market, causing the Fund to underperform investments that focus on small- or medium-capitalization stocks. Larger, more established companies may be slow to respond to challenges and may grow more slowly than smaller companies. For purposes of the Fund s investment policies, the market capitalization 7

11 of a company is based on its market capitalization at the time the Fund purchases the company s securities. Market capitalizations of companies change over time. Management Techniques Risk. The investment strategies, techniques, and risk analyses employed by the subadvisors, while designed to enhance potential returns, may not produce the desired results. The subadvisors may be incorrect in their assessments of the values of securities or their assessments of market trends, which can result in losses to the Fund. Market Risk. The risk that movements in financial markets will adversely affect the prices of the Fund s investments, regardless of how well the companies in which the Fund invests perform. The market as a whole may not favor the types of investments the Fund makes. Also, there is the risk that the price(s) of one or more of the securities or other instruments in the Fund s portfolio will fall, or will fail to rise. Many factors can adversely affect a security s performance, including both general financial market conditions and factors related to a specific company, government, industry, country, or geographic region. Portfolio Turnover Risk. Depending on market and other conditions, the Fund may experience high portfolio turnover, which may result in higher brokerage commissions and transaction costs (which could reduce investment returns) and capital gains. Value Stock Risk. The value of a company s equity securities is subject to changes in the company s financial condition, and overall market and economic conditions. Value stocks represent companies that tend to have lower than average price to earnings ratios and are therefore cheaper than average relative to the companies earnings. These companies may have relatively weak balance sheets and, during economic downturns, these companies may have insufficient cash flow to pay their debt obligations and difficulty finding additional financing needed for their operations. A particular value stock may not increase in price, as anticipated by a subadvisor, if other investors fail to recognize the stock s value or the catalyst that the subadvisor believes will increase the price of the stock does not affect the price of the stock in the manner or to the degree that the subadvisor anticipates. Also, cyclical stocks tend to increase in value more quickly during economic upturns than non-cyclical stocks, but also tend to lose value more quickly in economic downturns. The Fund is not intended to serve as a complete investment program. Performance of the Fund The following bar chart and table give some indication of the risks of investing in the Fund by showing changes in the performance of the Fund s Class Y-3 shares from year to year and comparing the Fund s average annual returns over time with a broad measure of market performance. Class Y-1 shares and Class Y-2 shares of the Fund had not commenced operations as of the date of this prospectus. The returns of the Class Y-1 and Class Y-2 shares would have been substantially similar to the returns of Class Y-3 shares; however, because the Fund s Class Y-1 shares are subject to a 12b-1 fee and both Class Y-1 shares and Class Y-2 shares are subject to an internal administrative fee, while the Class Y-3 shares are not, the returns of the Class Y-1 shares and Class Y-2 shares would have been lower than those shown for Class Y-3 shares. The Fund s past performance, before and after taxes, is not necessarily an indication of how the Fund will perform in the future. 8

12 (2006 is Class Y-3 s first full calendar year of operation) The Fund s calendar year-to-date return as of June 30, 2014 was 6.75%. The Fund s highest return for a quarter during the periods shown above was 16.39%, for the quarter ended September 30, The Fund s lowest return for a quarter during the periods shown above was %, for the quarter ended December 31, Average Annual Total Returns For the Periods Ended December 31, 2013 Life of Fund (Inception August 15, 2005) 1 Year 5 Years Mercer US Large Cap Value Equity Fund Class Y-3 Shares Return Before Taxes 40.44% 17.41% 5.35% Return After Taxes on Distributions 39.84% 17.06% 4.85% Return After Taxes on Distributions and Sale of Fund Shares 23.36% 14.17% 4.26% Russell 1000 Value Index (1) (reflects no deduction for fees, expenses, or taxes) 32.53% 16.67% 6.56% (1) The Russell 1000 Value Index measures the performance of those Russell 1000 companies with lower priceto-book ratios and lower forecasted growth values. The index is unmanaged and cannot be invested in directly. After-tax returns are calculated using the historical highest individual federal marginal income tax rates in effect and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor s situation and may differ from those shown. In addition, the after-tax returns shown are not relevant to investors who hold Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. 9

13 Fund Management Investment Advisor: Mercer Investment Management, Inc. Subadvisors and Portfolio Managers: Brandywine Global Investment Management, LLC ( Brandywine ) Brandywine s allocated portion of the Fund s portfolio is managed by the following members of the firm s Large Cap Value Equity Team: Patrick Kaser, Portfolio Manager and lead of the Large Cap Value Equity Team, joined Brandywine in Mr. Kaser began managing Brandywine s allocated portion of the Fund s portfolio in James Clarke, Portfolio Manager and back-up portfolio manager of the Large Cap Value Equity Team, rejoined the Firm in Mr. Clarke began managing Brandywine s allocated portion of the Fund s portfolio in O Shaughnessy Asset Management, LLC ( O Shaughnessy ) James O Shaughnessy, Chief Executive Officer, Chief Investment Officer, and Chairman of O Shaughnessy since Mr. O Shaughnessy began managing O Shaughnessy s allocated portion of the Fund s portfolio in Christopher Meredith, Senior Portfolio Manager and Director of Portfolio Management and Research of O Shaughnessy since Mr. Meredith began managing O Shaughnessy s allocated portion of the Fund s portfolio in Robeco Investment Management, Inc. ( RIM ) Mark Donovan, CFA, Co-Chief Executive Officer, head of the large cap equity team and a senior portfolio manager, joined RIM in 1995, and began managing RIM s allocated portion of the Fund s portfolio in David Pyle, CFA, Managing Director, joined RIM in 2000, and began managing RIM s allocated portion of the Fund s portfolio in SSgA Funds Management, Inc. ( SSgA FM ) Michael O. Martel, Vice President and Senior Portfolio Manager, joined State Street Global Advisors ( SSgA ) in Mr. Martel began managing SSgA FM s allocated portion of the Fund s portfolio in April Charles McGinn, Vice President and Senior Portfolio Manager, joined SSgA in Mr. McGinn began managing SSgA FM s allocated portion of the Fund s portfolio in April Tyhesha Harrington, Vice President and Senior Portfolio Manager, joined SSgA FM in Ms. Harrington began managing SSgA FM s allocated portion of the Fund s portfolio in April The Boston Company Asset Management, LLC ( TBCAM ) TBCAM s allocated portion of the Fund s portfolio is managed by the following members of the firm s Large Cap Value Equity Team: Brian Ferguson, Senior Managing Director, joined TBCAM in June 1997, and began managing TBCAM s allocated portion of the Fund s portfolio in John Bailer, Managing Director, joined TBCAM in November 1994, and began managing TBCAM s allocated portion of the Fund s portfolio in Tax Information The Fund s distributions generally are taxable as ordinary income, capital gains, or some combination of both, unless you are investing through a tax-deferred arrangement, such as a 401(k) plan or an Individual 10

14 Retirement Account, in which case you may be subject to federal income tax upon withdrawal from the tax-deferred account. For important information about purchase and sale of Fund shares and financial intermediary compensation, please turn to Important Additional Information on page 58 of this prospectus. 11

15 Mercer US Small/Mid Cap Growth Equity Fund Investment Objective The investment objective of the Fund is to provide long-term total return, comprised primarily of capital appreciation. Fees and Expenses These tables summarize the fees and expenses that you may pay if you invest in the Class Y Shares of the Fund. Shareholder Fees (fees paid directly from your investment) Class Y-1 Class Y-2 Class Y-3 Redemption Fee on shares owned less than 30 days (as a % of total redemption proceeds) % 2.00% 2.00% Annual Fund Operating Expenses (expenses that you pay each year as a percentage of the value of your investment) Class Y-1 Class Y-2 Class Y-3 Management Fees 0.90% 0.90% 0.90% Distribution and/or Service (12b-1) Fees 0.25% None None Other Expenses (1) 0.29% 0.24% 0.09% Acquired Fund Fees and Expenses None None None Total Annual Fund Operating Expenses 1.44% 1.14% 0.99% (1) The Other Expenses shown for the Class Y-1 shares and Class Y-2 shares are based on estimated amounts for the Fund s current fiscal year, as the Class Y-1 shares and Class Y-2 shares had not commenced operations as of the date of this prospectus. Other Expenses include custodial, legal, audit, transfer agent and Trustees fees and expenses, a sub-transfer agent payment of 0.10% paid by the Class Y-1 and Class Y-2 shares of the Fund and an internal administrative fee of 0.10% and 0.05% paid by the Class Y-1 and Class Y-2 shares of the Fund, respectively, to the Advisor. Example The example below is intended to help you compare the costs of investing in the Class Y Shares of the Fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Class Y-1, Class Y-2, or Class Y-3 shares of the Fund for the time periods shown, that your investment has a 5% return each year, and that the Fund s operating expenses remain the same as shown above. Although your actual costs may be higher or lower, based on these assumptions, your costs would be: 1 year 3 years 5 years 10 years Class Y-1... $ 147 $456 $787 $ 1,724 Class Y-2... $ 116 $362 $628 $ 1,386 Class Y-3... $ 101 $315 $547 $ 1,213 Portfolio Turnover The Fund pays transaction costs, such as commissions, when it buys and sells securities (or turns over its portfolio). A higher portfolio turnover rate may increase transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in Annual Fund Operating Expenses or in the example, affect the Fund s performance. During the most recent fiscal year, the Fund s portfolio turnover rate was 67% of the average value of its portfolio. 12

16 Principal Investment Strategies The Fund invests principally in equity securities (such as common stock) issued by small-to-medium capitalization U.S. companies. Under normal circumstances, the Fund will invest at least 80% of its net assets (plus borrowings for investment purposes, if any) in the equity securities of small-to-medium capitalization U.S. companies. For purposes of the 80% test, equity securities include securities such as common stock, preferred stock, and other securities that are not debt securities, cash or cash equivalents. For purposes of this investment policy, the Fund considers small-to-medium capitalization U.S. companies to be companies with market capitalizations between $25 million and the largest company included in the Russell 2500 Index (as of June 30, 2014, $9.9 billion). Generally, the Fund invests in companies that have higher earnings and/or revenue growth histories or expectations relative to the Russell 2500 Index. The Fund may invest in derivative instruments, such as exchange-listed equity futures contracts, to gain market exposure on cash balances or to reduce market exposure in anticipation of liquidity needs. Principal Risk Factors The principal risks that could adversely affect the value of the Fund s shares and the total return on your investment include the following, which appear in alphabetical order, not in order of importance or likelihood of occurrence. Loss of money is a risk of investing in the Fund. Custody Risk. There are risks involved in dealing with the custodians or brokers who settle Fund trades. Securities and other assets deposited with custodians or brokers may not be clearly or constantly identified as being assets of the Fund, and hence the Fund may be exposed to a credit risk with regard to such parties. In some jurisdictions, the Fund may only be an unsecured creditor of its broker in the event of bankruptcy or administration of such broker. Further, there may be practical or time problems associated with enforcing the Fund s rights to its assets in the case of an insolvency of any such party. Derivatives Risk. The Fund may invest in derivative instruments such as exchange-listed equity futures contracts. Derivatives are financial instruments, the value of which depends upon, or is derived from, the value of something else, such as one or more underlying investments, pools of investments, indices, or currencies. A subadvisor may use exchange-listed equity futures contracts to equitize cash held in the portfolio. Derivatives involve special risks and may result in losses. The successful use of derivatives depends on the ability of a subadvisor to manage these sophisticated instruments. The prices of derivatives may move in unexpected ways due to the use of leverage or other factors, especially in unusual market conditions, and may result in increased volatility. The possible lack of a liquid secondary market for derivatives and the resulting inability of the Fund to sell or otherwise close a derivatives position could expose the Fund to losses and could make derivatives more difficult for the Fund to value accurately. Derivatives are also subject to the risk that the other party in the transaction will not fulfill its contractual obligations. Equity Securities Risk. The value of a company s equity securities is subject to changes in the company s financial condition, and overall market and economic conditions. Growth Stock Risk. The value of a company s equity securities is subject to changes in the company s financial condition, and overall market and economic conditions. Companies with strong growth potential (both domestic and foreign) tend to have higher than average price-to-earnings ratios, meaning that these stocks are more expensive than average relative to the companies earnings. The market prices of equity securities of growth companies are often quite volatile, since the prices may be particularly sensitive to economic, market, or company developments and may present a greater degree of risk of loss. Issuer Risk. The issuer of a security may perform poorly and the value of its stocks or bonds may decline as a result. An issuer of securities held by the Fund could become bankrupt or could default on its issued debt or have its credit rating downgraded. 13

17 Management Techniques Risk. The investment strategies, techniques, and risk analyses employed by the subadvisors, while designed to enhance potential returns, may not produce the desired results. The subadvisors may be incorrect in their assessments of the values of securities or their assessments of market trends, which can result in losses to the Fund. Market Risk. The risk that movements in financial markets will adversely affect the prices of the Fund s investments, regardless of how well the companies in which the Fund invests perform. The market as a whole may not favor the types of investments the Fund makes. Also, there is the risk that the price(s) of one or more of the securities or other instruments in the Fund s portfolio will fall, or will fail to rise. Many factors can adversely affect a security s performance, including both general financial market conditions and factors related to a specific company, government, industry, country, or geographic region. Portfolio Turnover Risk. Depending on market and other conditions, the Fund may experience high portfolio turnover, which may result in higher brokerage commissions and transaction costs (which could reduce investment returns) and capital gains. Small and Medium Capitalization Stock Risk. The securities of companies with small and medium capitalizations may involve greater investment risks than securities of companies with large capitalizations. Small and medium capitalization companies may have an unproven or narrow technological base and limited product lines, distribution channels, and market and financial resources, and the small and medium capitalization companies also may be dependent on entrepreneurial management, making the companies more susceptible to certain setbacks and reversals. As a result, the prices of securities of small and medium capitalization companies may be subject to more abrupt or erratic movements than securities of larger companies, may have limited marketability, and may be less liquid than securities of companies with larger capitalizations. Securities of small and medium capitalization companies also may pay no, or only small, dividends. For purposes of the Fund s investment policies, the market capitalization of a company is based on its market capitalization at the time the Fund purchases the company s securities. Market capitalizations of companies change over time. The Fund is not intended to serve as a complete investment program. Performance of the Fund The following bar chart and table give some indication of the risks of investing in the Fund by showing changes in the performance of the Fund s Class Y-3 shares from year to year and comparing the Fund s average annual returns over time with a broad measure of market performance. Class Y-1 shares and Class Y-2 shares of the Fund had not commenced operations as of the date of this prospectus. The returns of the Class Y-1 and Class Y-2 shares would have been substantially similar to the returns of Class Y-3 shares; however, because the Fund s Class Y-1 shares are subject to a 12b-1 fee and both Class Y-1 shares and Class Y-2 shares are subject to an internal administrative fee, while the Class Y-3 shares are not, the returns of the Class Y-1 shares and Class Y-2 shares would have been lower than those shown for Class Y-3 shares. The Fund s past performance, before and after taxes, is not necessarily an indication of how the Fund will perform in the future. 14

18 (2006 is Class Y-3 s first full calendar year of operation) The Fund s calendar year-to-date return as of June 30, 2014 was 0.72%. The Fund s highest return for a quarter during the periods shown above was 17.29%, for the quarter ended June 30, The Fund s lowest return for a quarter during the periods shown above was %, for the quarter ended December 31, Average Annual Total Returns For the Periods Ended December 31, 2013 Life of Fund (Inception August 15, 2005) 1 Year 5 Years Mercer US Small/Mid Cap Growth Equity Fund Class Y-3 Shares Return Before Taxes 37.04% 23.08% 9.03% Return After Taxes on Distributions 31.35% 21.22% 7.58% Return After Taxes on Distributions and Sale of Fund Shares 23.89% 18.78% 7.03% Russell 2500 Growth Index (1) (reflects no deduction for fees, expenses, or taxes) 40.65% 24.03% 9.89% (1) The Russell 2500 Growth Index measures the performance of those Russell 2500 companies with higher price-to-book ratios and higher forecasted growth values. The index is unmanaged and cannot be invested in directly. After-tax returns are calculated using the historical highest individual federal marginal income tax rates in effect and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor s situation and may differ from those shown. In addition, the after-tax returns shown are not relevant to investors who hold Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. 15

19 Fund Management Investment Advisor: Mercer Investment Management, Inc. Subadvisors and Portfolio Managers: Jackson Square Partners, LLC ( Jackson Square ) Christopher J. Bonavico, CFA, Portfolio Manager, Equity Analyst, joined Jackson Square at its inception in May Mr. Bonavico began managing an allocated portion of the Fund s portfolio in 2011 while employed with a previous subadvisor to the Fund. Kenneth F. Broad, CFA, Portfolio Manager, Equity Analyst, joined Jackson Square at its inception in May Mr. Broad began managing an allocated portion of the Fund s portfolio in 2011 while employed with a previous subadvisor to the Fund. Palisade Capital Management, L.L.C. ( Palisade ) Sammy Oh, Managing Director and Senior Portfolio Manager, joined Palisade in Mr. Oh began managing Palisade s allocated portion of the Fund s portfolio in SSgA Funds Management, Inc. ( SSgA FM ) Michael O. Martel, Vice President and Senior Portfolio Manager, joined State Street Global Advisors ( SSgA ) in Mr. Martel began managing SSgA FM s allocated portion of the Fund s portfolio in April Charles McGinn, Vice President and Senior Portfolio Manager, joined SSgA in Mr. McGinn began managing SSgA FM s allocated portion of the Fund s portfolio in April Tyhesha Harrington, Vice President and Senior Portfolio Manager, joined SSgA FM in Ms. Harrington began managing SSgA FM s allocated portion of the Fund s portfolio in April Westfield Capital Management Company, L.P. ( Westfield ) William A. Muggia, Chief Executive Officer, Chief Investment Officer, President, and Managing Partner, joined Westfield in 1994, and has been managing Westfield s allocated portion of the Fund s portfolio since inception in Ethan J. Meyers, CFA, Managing Partner, joined Westfield in 1999 and has been managing Westfield s allocated portion of the Fund s portfolio since inception in John M. Montgomery, Managing Partner and Portfolio Strategist, joined Westfield in 2006 and began managing Westfield s allocated portion of the Fund s portfolio in Hamlen Thompson, Managing Partner, joined Westfield in 2003 and has been managing Westfield s allocated portion of the Fund s portfolio since inception in Bruce N. Jacobs, CFA, Managing Partner, joined Westfield in 2003 and has been managing Westfield s allocated portion of the Fund s portfolio since inception in Tax Information The Fund s distributions generally are taxable as ordinary income, capital gains, or some combination of both, unless you are investing through a tax-deferred arrangement, such as a 401(k) plan or an Individual Retirement Account, in which case you may be subject to federal income tax upon withdrawal from the tax-deferred account. For important information about purchase and sale of Fund shares and financial intermediary compensation, please turn to Important Additional Information on page 58 of this prospectus. 16

20 Mercer US Small/Mid Cap Value Equity Fund Investment Objective The investment objective of the Fund is to provide long-term total return, comprised primarily of capital appreciation. Fees and Expenses These tables summarize the fees and expenses that you may pay if you invest in the Class Y Shares of the Fund. Shareholder Fees (fees paid directly from your investment) Class Y-1 Class Y-2 Class Y-3 Redemption Fee on shares owned less than 30 days (as a % of total redemption proceeds) % 2.00% 2.00% Annual Fund Operating Expenses (expenses that you pay each year as a percentage of the value of your investment) Class Y-1 Class Y-2 Class Y-3 Management Fees 0.90% 0.90% 0.90% Distribution and/or Service (12b-1) Fees 0.25% None None Other Expenses (1) 0.30% 0.25% 0.10% Acquired Fund Fees and Expenses 0.04% 0.04% 0.04% Total Annual Fund Operating Expenses 1.49% 1.19% 1.04% (1) The Other Expenses shown for the Class Y-1 shares and Class Y-2 shares are based on estimated amounts for the Fund s current fiscal year, as the Class Y-1 shares and Class Y-2 shares had not commenced operations as of the date of this prospectus. Other Expenses include custodial, legal, audit, transfer agent and Trustees fees and expenses, a sub-transfer agent payment of 0.10% paid by the Class Y-1 and Class Y-2 shares of the Fund and an internal administrative fee of 0.10% and 0.05% paid by the Class Y-1 and Class Y-2 shares of the Fund, respectively, to the Advisor. Example The example below is intended to help you compare the costs of investing in the Class Y Shares of the Fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Class Y-1, Class Y-2, or Class Y-3 shares of the Fund for the time periods shown, that your investment has a 5% return each year, and that the Fund s operating expenses remain the same as shown above. Although your actual costs may be higher or lower, based on these assumptions, your costs would be: 1 year 3 years 5 years 10 years Class Y-1... $ 152 $471 $813 $ 1,779 Class Y-2... $ 121 $378 $654 $ 1,443 Class Y-3... $ 106 $331 $574 $ 1,271 Portfolio Turnover The Fund pays transaction costs, such as commissions, when it buys and sells securities (or turns over its portfolio). A higher portfolio turnover rate may increase transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in Annual Fund 17