Connolly Asset Management, LLC
8524 E. Kalil
Scottsdale, AZ 85260
(480) 675-7971
www.connollyassetmgmt.com
March 28, 2017


This Brochure provides information about the qualifications and business practices of Connolly Asset Management, LLC.  If you have any questions about the contents of this Brochure, please contact us at (480) 675-7971 or via email at dconnolly@connollyassetmgmt.com.  The information in this Brochure has not been approved or verified by the United States Securities and Exchange Commission (“SEC”) or by any state securities authority.


Connolly Asset Management, LLC (“CAM”) is a Registered Investment Adviser.  Registration of an Investment Adviser does not imply any level of skill or training.  The oral and written communications of an Adviser provide you with information that you may use to determine whether to hire or retain them. 


Additional information about CAM is also available via the SEC’s website www.adviserinfo.sec.gov.  You can search this site by using a unique identifying number, known as a CRD number.  The CRD number for CAM is 172095.  The SEC’s web site also provides information about any persons affiliated with CAM who are registered, or are required to be registered, as Investment Adviser Representatives of CAM.
    
 
Item 2 – Material Changes
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Since our last brochure filed on March 16, 2016, we have made the following material changes to our ADV Part 2:
•    Our address has changed to 8524 E. Kalil Dr. Scottsdale, AZ 85260
•    We have updated our Asset Management Fee Schedule under Item 5 - Fees and Compensation.
•    We have updated the language under Item 14 - Client Referrals and Other Compensation.
We will ensure that you receive a summary of any material changes to this and subsequent Brochures within 90 days of the close of our business’ fiscal year end which is December 31st.  We will provide other ongoing disclosure information about material changes as they occur.  We will also provide you with information on how to obtain the complete brochure.  Currently, our Brochure may be requested at any time, without charge, by contacting Douglas Connolly at (480) 675-7971. 
Additional information about CAM is also available via the SEC’s website www.adviserinfo.sec.gov.  You can search this site by using a unique identifying number, known as a CRD number.  The CRD number for CAM is 172095.  The SEC’s web site also provides information about any persons affiliated with CAM who are registered, or are required to be registered, as Investment Adviser Representatives of CAM. 
 
Item 3 – Table of Contents
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Item 2 – Material Changes    2
Item 3 – Table of Contents    3
Item 4 – Advisory Business Introduction    5
Services    5
1.    Financial Planning/Consulting    6
2.    Asset Management    6
3.    Other Services    8
Item 5 – Fees and Compensation    8
1.    Financial Planning/Consulting Fees    8
2.    Asset Management Fee Schedule    9
3.    Other Fees    10
Item 6 – Performance Based Fee and Side by Side Management    10
Item 7 – Types of Client(s)    10
Item 8 – Methods of Analysis, Investment Strategies and Risk of Loss    11
1.    Rules-Based Analysis    11
2.    Analysis of Third Party Research    11
3.    Risks    11
Item 9 – Disciplinary Information    15
Item 10 – Other Financial Industry Activities and Affiliations    15
1.    Insurance Agent    15
2.    Other Affiliations    15
Item 11 – Code of Ethics, Participation or Interest in Client Accounts and Personal Trading    16
1.    General Information    16
2.    Participation or Interest in Client Accounts    16
3.    Personal Trading    16
4.    Privacy Statement    17
5.    Conflicts of Interest    17
Item 12 – Brokerage Practices    17
1.    Soft Dollars    17
2.    Best Execution    18
3.    Brokerage for Client Referrals    18
4.    Directed Brokerage    18
5.    Trading    19
Item 13 – Review of Accounts    19
1.    Reviews    19
2.    Reports    19
Item 14 – Client Referrals and Other Compensation    19
Item 15 – Custody    20
Item 16 – Investment Discretion    20
Item 17 – Voting Client Securities    21
Item 18 – Financial Information    21
Item 19 – Requirements for State Registered Advisers    21
ADV Part 2B Brochure Supplement – Douglas Connolly    22
Item 1 – Cover Page    22
Item 2 – Educational Background and Business Experience    23
Item 3 – Disciplinary History    23
Item 4 – Other Business Activities    23
Item 5 – Additional Compensation    23
Item 6 – Supervision    24
Item 7 – Requirements for State-Registered Advisers    24

Item 4 – Advisory Business Introduction
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Connolly Asset Management, LLC (“CAM”) is a Registered Investment Adviser (“Adviser”) which offers investment advice, asset management, insurance products, and other financial services to clients.  We are a registered investment adviser in Arizona.


We provide investment advice through Investment Adviser Representatives (“Advisor”) associated with us.  These individuals are appropriately licensed, qualified, and authorized to provide advisory services on our behalf.  In addition, all advisors are required to have a college degree, professional designation, or equivalent professional experience.


CAM was founded in 2014 by Douglas Connolly who serves as Chief Compliance Officer and Managing Member, and is also the owner of Registered Investment Adviser CAM.  We provide portfolio management services to individuals, high net worth individuals, trusts, estates, charitable organizations, foundations, endowments, corporations, small businesses and churches.  We do not have a minimum account opening balance or minimum fee.  


We are committed to the precept that by placing the client’s interests first, we will add value to the asset management process and earn the client’s trust and respect.  We value long term relationships with our clients whom we regard as strategic partners in our business.  
Services.


We provide various asset management and financial planning and consulting services, with an emphasis on business and retirement asset management services.  Our focus is on helping you develop and execute asset management strategies that are designed to build and preserve your wealth. 


As of December 31, 2016, we managed assets totaling $695,297. All accounts are managed on a discretionary basis.


We do not participate in wrap fee programs.


We manage assets on a discretionary basis, which means you have given us the authority to determine the following without your consent:


•    Securities to be bought or sold for your account
•    Amount of securities to be bought or sold for your account
•    Broker-dealer to be used for a purchase or sale of securities for your account


Trading activity is generally limited to help minimize your trading costs.  Trading may be required to meet initial allocation targets, after substantial cash deposits that require investment allocation, and/or after a request for a withdrawal that requires liquidation of a position.  Additionally, your account may be rebalanced or reallocated periodically in order to reestablish the targeted percentages of your initial asset allocation.  This rebalancing or reallocation will occur on the schedule we have determined together.  You will be responsible for any and all tax consequences resulting from any rebalancing or reallocation of the account.  We are not tax professionals and do not give tax advice.  However, we will work with your tax professionals to assist you with tax planning.  You will have the opportunity to meet with us periodically to review the assets in your account.  


1.    Financial Planning/Consulting
We provide services such as comprehensive financial planning, estate planning, business planning and educational planning.  Fee based financial planning is a comprehensive relationship which incorporates many different aspects of your financial status into an overall plan that meets your goals and objectives.  The financial planning relationship consists of face-to-face meetings and ad hoc meetings with you and/or your other advisors (attorneys, accountants, etc.) as necessary.


In performing financial planning services, we typically examine and analyze your overall financial situation, which may include issues such as taxes, insurance needs, overall debt, credit, business planning, retirement savings and reviewing your current investment program.  Our services may focus on all or only one of these areas depending upon the scope of our engagement with you.  


It is essential that you provide the information and documentation we request regarding your income, investments, taxes, insurance, estate plan, etc.  We will discuss your investment objectives, needs and goals, but you are obligated to inform us of any changes.  We do not verify any information obtained from you, your attorney, accountant or other professionals.


If you engage us to perform these services, you will receive a written agreement detailing the services, fees, terms and conditions of the relationship.  You will also receive this Brochure.  You are under no obligation to implement recommendations through us.  You may implement your financial plan of financial consulting recommendations through any financial organization of your choice.


We obtain information from a wide variety of publicly available sources.  We do not have any inside private information about any investments that are recommended.  All recommendations developed by us are based upon our professional judgment.  We cannot guarantee the results of any of our recommendations.  Choosing which advice to follow is your decision.


2.    Asset Management
Asset management is the professional management of securities (stocks, bonds and other securities) and assets (e.g., real estate) in order to meet your specified investment goals.  With an Asset Management Account, you engage us to assist you in developing a personalized asset allocation program and custom-tailored portfolio designed to meet your unique investment objectives.  The investments in the portfolio account may include mutual funds, Exchange Traded Funds (ETFs), stocks, bonds, etc.  


We will meet with you to discuss your financial circumstances, investment goals and objectives, and to determine your risk tolerance.  We will ask you to provide statements summarizing current investments, income and other earnings, recent tax returns, retirement plan information, other assets and liabilities, wills and trusts, insurance policies, and other pertinent information.  

Based on the information you share with us, we will analyze your situation and recommend an appropriate asset allocation or investment strategy. You will be provided with a targeted strategic allocation of assets by class, as well as limited investment advice.  Our recommendations and ongoing management are based upon your investment goals and objectives, risk tolerance, and the investment portfolio you have selected.  We will monitor the account, trade as necessary, and communicate regularly with you.  Your circumstances shall be monitored in quarterly and annual account reviews.  These reviews will be conducted in person, by telephone conference, and/or via a written inquiry/questionnaire.  We will work with you on an ongoing basis to evaluate your asset allocation as well as rebalance your portfolio to keep it in line with your goals as necessary.  We will be reasonably available to help you with questions about your account.  You will also receive our Advisory Agreement which describes what services you will receive and what fees you will be charged.


We will:
•    Review your present financial situation
•    Monitor and track assets under management
•    Advise on asset selection
•    Determine market divisions through asset allocation models
•    Provide research and information on performance and fund management changes
•    Build a risk management profile for you
•    Assist you in setting and monitoring goals and objectives
•    Provide personal consultations as necessary upon your request or as needed.


You are obligated to notify us promptly when your financial situation, goals, objectives, or needs change. 


You shall have the ability to impose reasonable restrictions on the management of your account, including the ability to instruct us not to purchase certain mutual funds, stocks or other securities.  These restrictions may be a specific company security, industry sector, asset class, or any other restriction you request.


Under certain conditions, securities from outside accounts may be transferred into your advisory account; however, we may recommend that you sell any security if we believe that it is not suitable for the current recommended investment strategy.  You are responsible for any taxable events in these instances.  Certain assumptions may be made with respect to interest and inflation rates and the use of past trends and performance of the market and economy.  Past performance is not indicative of future results.


If you decide to implement our recommendations, we will help you open a custodial account(s).  The funds in your account will generally be held in a separate account, in your name, at an independent custodian, and not with us.  We recommend using Shareholders Service Group (SSG); however, you may use any custodian you wish.  The identity of your custodian will be communicated to you before the account is opened.  
You will enter into a separate custodial agreement with the custodian.  This agreement, among other things, authorizes the custodian to take instructions from us regarding all investment decisions for your account.  We will select the securities bought and sold and the amount to be bought and sold, within the parameters of the objectives and risk tolerance of your account.  The custodian will effect transactions, deliver securities, make payments and do what we instruct.  You are notified of any purchases or sales through trade confirmations and quarterly statements that are provided by the custodian.  These statements list the total value at the start of the quarter, itemize all transaction activity during the quarter, and list the types, amounts, and total value of securities held as of the end of the quarter.  Your statement may be in either printed or electronic form based upon your preferences.  You will at all times maintain full and complete ownership rights to all assets held in your account, including the right to withdraw securities or cash, proxy voting and receiving transaction confirmations.  
We are available during normal business hours either by telephone, fax, email, or in person by appointment to answer your questions.


3.    Other Services
We may recommend and sell life, disability, health, and long-term care insurance.  We will receive the usual and customary commissions associated with these sales from the insurance company.  You will not pay a separate fee for these and your advisory fee will not be reduced by any payments we receive from these sales.
Item 5 – Fees and Compensation
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We provide asset management and financial planning and consulting services for a fee.  Our fees do not include brokerage commissions, transaction fees, and other related costs and expenses.  You may incur certain charges imposed by custodians, third party investment companies and other third parties.  These include fees charged by managers, custodial fees, deferred sales charges, odd-lot differentials, transfer taxes, wire transfer and electronic fund fees, and other fees and taxes on brokerage accounts and securities transactions.  Mutual funds and ETFs also charge internal management fees, which are disclosed in the fund’s prospectus.  These fees may include, but are not limited to, a management fee, upfront sales charges, and other fund expenses.  We do not receive any compensation from these fees.  All of these fees are in addition to the management fee you pay us.  You should review all fees charged to fully understand the total amount of fees you will pay.  Services similar to those offered by us may be available elsewhere for more or less than the amounts we charge.
You could invest in a mutual fund directly, without our services.  In that case, you would not receive the services provided by us which are designed, among other things, to assist you in determining which mutual fund or funds are most appropriate to your financial condition and objectives.  Our Advisory-Agreement defines what fees are charged and their frequency.  


1.    Financial Planning/Consulting Fees
You may want us to create a financial plan for you.  We will work with you to create the plan.  We can provide analysis and recommendations for retirement needs, estate planning needs, income tax planning, life and disability insurance needs, investment needs, and college education planning.  You can have us create a full financial plan or select any of the individual modules.  


Based upon your needs, we may also provide consultations throughout the year to advise and counsel you about other financial issues.  We can help you with transition planning, coordinated with cash flow needs, and major transaction analysis.  CAM can charge hourly fees for the development of wealth management plans, written financial plans, or consultations at an hourly rate not to exceed $175. For our financial planning and/or consulting services, we charge $175 an hour.  Prior to entering the contract, we provide you with an estimate of the amount of time needed to complete the scope of work.  The CAM hourly fee may be negotiable depending upon the nature and complexity of your circumstances.  An estimate for total hours will be determined at the start of the advisory relationship.  Consultation services without a financial plan require no minimum net worth, and financial planning services require no minimum net worth.  


The Advisory Agreement will show the fee you will pay.  In the event that you cancel the Advisory Agreement, you will be responsible for the actual hours spent preparing the financial plan or consulting services, up to the cancellation date, at the agreed upon hourly rate.  Our fee is due upon presentation of an investment plan, or the rendering of consulting services as stated in our scope of work.  Investment plans will be presented to you within 90 days of the contract date, provided that all information needed to prepare the investment plan has been promptly provided to us.  The Advisory Agreement will terminate once you receive the final plan or completion of consulting services.


Either party may terminate the consulting/planning relationship with a written notice.  Any fees that are due, but have not been paid, will be billed to you and are due immediately.


If the plan or consulting advice is implemented through us, we may receive compensation from the sale of insurance products or advisory services recommended in the financial plan.  This compensation would be in addition to the financial planning/consulting fee you pay.  The fees and expenses you pay for the purchase of these products may be more or less than the expenses you would pay should you decide to implement our recommendations through another investment advisory firm or broker-dealer and are typically determined by the broker-dealer or investment company sponsoring the product.  Therefore, a conflict of interest may exist between our interests and your interests since we may recommend products that pay us compensation.  We may have an incentive to recommend particular products based upon the potential compensation rather than your needs.  This potential conflict is addressed in our Code of Ethics. 


All recommendations developed by us are based upon our professional judgment.  We cannot guarantee the results of any of our recommendations.  


2.    Asset Management Fee Schedule
We do not have a minimum account opening balance or minimum fee.  The fee charged is based upon the amount of money you invest.  Multiple accounts of immediately-related family members, at the same mailing address, may be considered one consolidated account for billing purposes.  The quarterly fee will be charged for the total of all of the accounts comprising the consolidated account.  Payments are due and will be assessed on the last day of each quarter, based on the ending balance of the account under management for the preceding quarter and will be calculated as follows:

Percentage    Portfolio Size (AUM)
1.0%    All Sizes
The fees shown above are annual fees and are paid quarterly in arrears.  No increase in the annual fee shall be effective without prior written notification to you.  We believe our advisory fee is reasonable considering the fees charged by other investment advisers offering similar services/programs.


In certain circumstances, advisory fees may be negotiable based upon prior relationships as well as related account holdings.  Our fees will not be based upon a share of capital gains or capital appreciation of the funds or any portion of your funds. 


Certain strategies offered by us involve investment in mutual funds.  Load and no load mutual funds may pay annual distribution charges, sometimes referred to as “12(b)(1) fees”.  These 12(b)(1) fees come from fund assets, and thus indirectly from clients’ assets.  We do not receive any compensation from these fees.  The 12(b)(1) fee, deferred sales charges and other fee arrangements will be disclosed upon your request and are typically described in the applicable fund’s prospectus. 


Your account at the custodian may also be charged for certain additional assets managed for you by us but not held by the custodian (i.e. variable annuities, mutual funds, 401(k)s).  


The fees we charge can be deducted directly from your account at the custodian.  We will instruct the custodian to deduct the fees from your account at the end of the quarter.  This fee will show up as a deduction on your following quarterly account statement from the custodian.
Either party may terminate the relationship with a thirty (30) day written notice.  Upon termination of any account, any prepaid fees that are in excess of the management services performed will be promptly refunded to you.  Any fees that are due, but have not been paid, will be billed to you and are due immediately.


3.    Other Fees
Our Advisors may recommend and sell life, disability, health, and long-term care insurance and will receive the usual and customary commissions in addition to any agreed upon advisory fee.


Item 6 – Performance Based Fee and Side by Side Management
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We do not charge any performance-based fees.  These are fees based on a share of capital gains on or capital appreciation of the assets of a client.
Item 7 – Types of Client(s) 
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We provide portfolio management services to individuals, high net worth individuals, trusts, estates, charitable organizations, foundations, endowments, corporations, small businesses and churches. 
We have no minimum account opening balance or minimum fee.


Item 8 – Methods of Analysis, Investment Strategies and Risk of Loss
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The investment strategies we use to implement any investment advice given to you include, but are not limited to long term purchases (securities held at least a year), and short term purchases (securities sold within a year).  
We use Rules-Based Analysis as part of our overall investment management discipline; the implementation of these analyses as part of our investment advisory services to you may include any, all or a combination of the following:


1.    Rules-Based Analysis
Although we attempt to not be too rigid, when analyzing which methods and products to invest in, we favor approaches based on rules and systems.  In particular, we like to use pre-set asset allocation targets and/or set buy/sell rules and position sizing to help us formulate and manage your portfolio.  This analysis helps us identify changes in sectors of the financial markets and, theoretically, to avoid bear markets.  But, most importantly, it attempts to minimize the effects of adviser/investor emotion.  We say this knowing that emotion and discretion can never fully be eliminated, as at some point, the investor and adviser must make some determinations on asset allocation and strategy choice based on individual circumstances and risk tolerance.


We favor momentum, asset allocation, and other quantifiable strategies. We then make strategic adjustments when necessary to maintain portfolio target percentages.  We do not attempt to anticipate short-term market activity or predict future economic events; rather, we diversify portfolios in an attempt to minimize asset class correlation.  


As with other types of analysis, the year-to-year results of rules-based analysis can vary greatly; models and rules are often modified and updated as new patterns and behaviors develop.  Past performance is not an indicator of future returns.


2.    Analysis of Third Party Research
On momentum, CAM has relied on the research of others, particularly, that of Gary Antonacci and Mebane Faber. CAM is also exploring using Dimensional Fund Advisors and their factor investing methods.
Additionally, CAM relies on theories of asset allocation, such as the Permanent Portfolio method.
CAM does not limit itself to these methods and reserves the right to add or subtract methods as research and circumstances dictate.


3.    Risks
We cannot guarantee our analysis methods and investment strategies will yield a return.  In fact, a loss of principal is always a risk.  Investing in securities involves a risk of loss that you should be prepared to handle.  You need to understand that investment decisions made for your account by us are subject to various market, currency, economic, political and business risks.  The investment decisions we make for you will not always be profitable nor can we guarantee any level of performance.  


A list of all risks associated with the strategies, products and methodology we offer are listed below: 


1.    Bond Fund Risk
Bond funds generally have higher risks than money market funds, largely because they typically pursue strategies aimed at producing higher yields of the risks associated with bond funds include:


•    Call Risk - The possibility that falling interest rates will cause a bond issuer to redeem—or call—its high-yielding bond before the bond's maturity date. 


•    Credit Risk — the possibility that companies or other issuers whose bonds are owned by the fund may fail to pay their debts (including the debt owed to holders of their bonds).  Credit risk is less of a factor for bond funds that invest in insured bonds or U.S. Treasury bonds.  By contrast, those that invest in the bonds of companies with poor credit ratings generally will be subject to higher risk.


•    Interest Rate Risk — the risk that the market value of the bonds will go down when interest rates go up.  Because of this, you can lose money in any bond fund, including those that invest only in insured bonds or Treasury bonds.


•    Prepayment Risk — the chance that a bond will be paid off early.  For example, if interest rates fall, a bond issuer may decide to pay off (or "retire") its debt and issue new bonds that pay a lower rate.  When this happens, the fund may not be able to reinvest the proceeds in an investment with as high a return or yield.


2.    Rules-Based Analysis Risk
•    Rules-Based Analysis is derived from the study of market participant behavior and its efficacy is a matter of controversy.
•    Methods vary greatly and can be highly subjective; as different analysts can sometimes make contradictory predictions from the same data.
•    Models and rules analysis can incur sufficiently high transaction costs.


3.    Third Party Research and Algorithm Based Research
Third party research and computer algorithm based research provide insights regarding possible beneficial investments, and involve various risks.  The possibility exists that the research provider will fail to execute the algorithm process properly or err in interpreting data which then results in erroneous research and advice.  Methods vary greatly and can be highly subjective; as different research analysts can sometimes make contradictory predictions from the same data.  Algorithms, models and rules analysis can incur sufficiently high transaction costs.  


4.    Program/Systematic Trading
The Advisor may utilize a method of trading in which computer generated signals are given by a third party research company to determine trade execution.  If the Advisor is incorrect in the interpretation of this information, Client accounts can suffer losses. Trading decisions made by the Advisor on behalf of participating customers are based primarily on Rules-Based Analysis. However, its trading decisions do not adhere rigidly to any particular trading formula or system.


5.    Insurance Product Risk
The rate of return on variable insurance products is not stable, but varies with the stock, bond and money market subaccounts that you choose as investment options.  There is no guarantee that you will earn any return on your investment and there is a risk that you will lose money.  Before you consider purchasing a variable product, make sure you fully understand all of its terms.  Carefully read the prospectus.  Some of the major risks include:


•    Liquidity and Early Withdrawal Risk – There may be a surrender charges for withdrawals within a specified period, which can be as long as six to eight years.  Any withdrawals before a client reaches the age of 59 ½ are generally subject to a 10 percent income tax penalty in addition to any gain being taxed as ordinary income.


•    Sales and Surrender Charges – Asset-based sales charges or surrender charges.  These charges normally decline and eventually are eliminated the longer you hold your shares.  For example, a surrender charge could start at 7 percent in the first year and decline by 1 percent per year until it reaches zero.


•    Fees and Expenses – There are a variety of fees and expenses which can reach 2% and more such as:
o    Mortality and expense risk charges
o    Administrative fees
o    Underlying fund expenses
o    Charges for any special features or riders.


•    Bonus Credits – Some products offer bonus credits that can add a specified percentage to the amount invested ranging from 1 percent to 5 percent for each premium payment.  Bonus credits, however, are usually not free.  In order to fund them, insurance companies typically impose high mortality and expense charges and lengthy surrender charge periods. 


•    Guarantees – Insurance companies provide a number of specific guarantees.  For example, they may guarantee a death benefit or an annuity payout option that can provide income for life.  These guarantees are only as good as the insurance company that gives them. 


•    Market Risk – The possibility that stock fund or bond fund prices overall will decline over short or even extended periods.  Stock and bond markets tend to move in cycles, with periods when prices rise and other periods when prices fall. 
•    Principal Risk – The possibility that an investment will go down in value, or "lose money," from the original or invested amount.


6.    Mutual Funds Risk
The following is a list of some general risks associated with investing in mutual funds.


•    Country Risk - The possibility that political events (a war, national elections), financial problems (rising inflation, government default), or natural disasters (an earthquake, a poor harvest) will weaken a country's economy and cause investments in that country to decline. 


•    Currency Risk -The possibility that returns could be reduced for Americans investing in foreign securities because of a rise in the value of the U.S. dollar against foreign currencies.  Also called exchange-rate risk. 


•    Income Risk - The possibility that a fixed-income fund's dividends will decline as a result of falling overall interest rates. 


•    Industry Risk - The possibility that a group of stocks in a single industry will decline in price due to developments in that industry. 


•    Inflation Risk - The possibility that increases in the cost of living will reduce or eliminate a fund's real inflation-adjusted returns. 


•    Manager Risk -The possibility that an actively managed mutual fund's investment adviser will fail to execute the fund's investment strategy effectively resulting in the failure of stated objectives. 


•    Market Risk -The possibility that stock fund or bond fund prices overall will decline over short or even extended periods.  Stock and bond markets tend to move in cycles, with periods when prices rise and other periods when prices fall. 


•    Principal Risk -The possibility that an investment will go down in value, or "lose money," from the original or invested amount. 


7.    Overall Risks


•    Clients need to remember that past performance is no guarantee of future results.  All funds carry some level of risk.  You may lose some or all of the money you invest, including your principal, because the securities held by a fund goes up and down in value.  Dividend or interest payments may also fluctuate, or stop completely, as market conditions change.


•    Before you invest, be sure to read a fund's prospectus and shareholder reports to learn about its investment strategy and the potential risks.  Funds with higher rates of return may take risks that are beyond your comfort level and are inconsistent with your financial goals.


•    While past performance does not necessarily predict future returns, it can tell you how volatile (or stable) a fund has been over a period of time.  Generally, the more volatile a fund, the higher the investment risk.  If you'll need your money to meet a financial goal in the near-term, you probably can't afford the risk of investing in a fund with a volatile history because you will not have enough time to ride out any declines in the stock market.


8.    Stock Fund Risk


Overall "market risk" poses the greatest potential danger for investors in stocks funds.  Stock prices can fluctuate for a broad range of reasons, such as the overall strength of the economy or demand for particular products or services.


Item 9 – Disciplinary Information
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Registered Investment Advisers are required to disclose all material facts regarding any legal or disciplinary events that would be material to your evaluation of us or the integrity of our management.  We do not have any information to disclose concerning CAM or any of our investment advisors.  We adhere to high ethical standards for all advisors and associates.  We strive to do what is in your best interests. 


Item 10 – Other Financial Industry Activities and Affiliations
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1.    Insurance Agent
Douglas Connolly, the Managing Member and Chief Compliance Officer for CAM, is a licensed insurance agent/broker with various companies.  In Texas Mr. Connolly is licensed for life, accident, and health.  In the State of Arizona Mr. Connolly is licensed for accident/health, life, variable life / variable annuities.  The sale of these products accounts for approximately 33% of his time.
Douglas Connolly may recommend insurance products and may also, as independent insurance agents, sell those recommended insurance products to Clients.  When such recommendations or sales are made, a conflict of interest exists as the Insurance licensed Investment Adviser Reps earn insurance commissions for the sale of those products, which may create an incentive to recommend such products.  We require that all Investment Adviser Reps disclose this conflict of interest when such recommendations are made.  Also, we require Investment Adviser Reps to disclose that Clients may purchase recommended insurance products from other insurance agents not affiliated with us.
2.    Other Affiliations  
Douglas Connolly owns the limited liability company Boyd LaRosa, LLC through which he provides passive management of real estate, and approximately 5% of his time in this capacity. 


Item 11 – Code of Ethics, Participation or Interest in Client Accounts and Personal Trading
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1.    General Information  
We have adopted a Code of Ethics for all supervised persons of the firm describing its high standards of business conduct, and fiduciary duty to you, our client.  The Code of Ethics includes provisions relating to the confidentiality of client information, a prohibition on insider trading, a prohibition of rumor mongering, restrictions on the acceptance of significant gifts, the reporting of certain gifts and business entertainment items, and personal securities trading procedures.  All of our supervised persons must acknowledge the terms of the Code of Ethics annually, or as amended.


2.    Participation or Interest in Client Accounts
Our Compliance policies and procedures prohibit anyone associated with CAM from having an interest in a client account or participating in the profits of a client’s account without the approval of the CCO. 


We may recommend securities to you that we have purchased for our own accounts.  We may trade securities in our account that we have recommended to you as long as we place our orders after your Orders.  This policy is meant to prevent us from benefiting as a result of transactions placed on behalf of advisory accounts.


The following acts are prohibited: 
•    Employing any device, scheme or artifice to defraud
•    Making any untrue statement of a material fact
•    Omitting to state a material fact necessary in order to make a statement, in light of the circumstances under which it is made, not misleading
•    Engaging in any fraudulent or deceitful act, practice or course of business
•    Engaging in any manipulative practices
You may request a copy of the firm's Code of Ethics by contacting Douglas Connolly.


3.    Personal Trading
We may recommend securities to you that we will purchase for our own accounts.  We may trade securities in our account that we have recommended to you as long as we place our orders after your orders.  This policy is meant to prevent us from benefiting as a result of transactions placed on behalf of advisory accounts.  


We have established the following restrictions in order to ensure our fiduciary responsibilities to you are met:


•    No securities for our personal portfolio(s) shall be bought or sold where this decision is substantially derived, in whole or in part, from the role of Investment Advisory Representative(s) of CAM, unless the information is also available to the investing public on reasonable inquiry.  In no case, shall we put our own interests ahead of yours. 


However, some securities trade in sufficiently broad markets to permit transactions by clients to be completed without an appreciable impact on the markets of the securities.  Under certain circumstances, exceptions may be made to the policies stated above.  Records of these trades, including the reasons for the exceptions, will be maintained with our records as required.


Certain affiliated accounts may trade in the same securities with your accounts on an aggregated basis when consistent with our obligation of best execution.  When trades are aggregated, all parties will share the costs in proportion to their investment.  We will retain records of the trade Order (specifying each participating account) and its allocation.  Completed Orders will be allocated as specified in the initial trade order.  Partially filled Orders will be allocated on a pro rata basis.  Any exceptions will be explained on the Order.


4.    Privacy Statement


We are committed to safeguarding your confidential information and hold all personal information provided to us in the strictest confidence.  These records include all personal information that we collect from you or receive from other firms in connection with any of the financial services they provide.  We also require other firms with whom we deal with to restrict the use of your information.  Our Privacy Policy is available upon request.


5.    Conflicts of Interest


 CAM’s advisors may employ the same strategy for their personal investment accounts as it does for its clients.  However, advisors may not place their orders in a way to benefit from the purchase or sale of a security.


We act in a fiduciary capacity.  If a conflict of interest arises between us and you, we shall make every effort to resolve the conflict in your favor.  Conflicts of interest may also arise in the allocation of investment opportunities among the accounts that we advise.  We will seek to allocate investment opportunities according to what we believe is appropriate for each account.  We strive to do what is equitable and in the best interests of all the accounts we advise.


Item 12 – Brokerage Practices
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1.    Soft Dollars
Soft dollar benefits may be proportionally allocated to any accounts that may generate different amounts of the soft dollar benefits.
SSG may provide us with certain brokerage and research products and services that qualify as "brokerage or research services" under the rules.  These research products and/or services will assist the Advisor in its investment decision making process.  Such research generally will be used to service all of the Advisor’s clients, but brokerage commissions paid by the client may be used to pay for research that is not used in managing the client’s account.  The account may pay to a broker-dealer a commission greater than another qualified broker-dealer might charge to effect the same transaction where the Advisor determines in good faith that the commission is reasonable in relation to the value of the brokerage and research services received.


Because soft dollar benefits could be considered to provide a benefit to the adviser that might cause the client to pay more than the lowest available commission without receiving the most benefit, they are considered a conflict of interest in recommending or directing custodial and third party managerial services.  CAM mitigates these conflicts of interest through strong oversight of soft-dollar arrangements by the Chief Compliance Officer, in order to assure the soft dollar benefits serve the best interests of the client.


There may other benefits from recommending SSG or other third party managers such as software and other technology that (i) provide access to client account data (such as trade confirmations and account statements); (ii) facilitate trade execution and allocate aggregated trade orders for multiple client accounts; (iii) provide research, pricing and other market data; (iv) facilitate payment of fees from its clients' accounts; and (v) assist with back-office functions, recordkeeping and client reporting. 


Other services may include, but are not limited to, performance reporting, financial planning, contact management systems, third party research, publications, access to educational conferences, roundtables and webinars, practice management resources, access to consultants and other third party service providers who provide a wide array of business related services and technology with whom CAM may contract directly.  CAM may receive seminar expense reimbursements from product sponsors which may be based on the sales of products to their clients.  CAM advisors could also receive 12(b) (1) fees as a result of placing clients with mutual funds.  Clients will receive full disclosure regarding 12(b) (1) fees prior to such a sale.


2.    Best Execution
We have an obligation to seek best execution for you.  In seeking best execution, the determinative factor is not the lowest possible commission cost but whether the transaction represents the best qualitative execution, taking into consideration the full range of a broker-dealer’s services, including the value of research provided, execution capability, commission rates, reputation and responsiveness.  Therefore, we will seek competitive commission rates, but we may not obtain the lowest possible commission rates for account transactions.


3.    Brokerage for Client Referrals
We may receive additional compensation for sales of insurance products only.


4.    Directed Brokerage
Not all advisory firms require you to direct brokerage to a specific broker-dealer or custodian.  We have an obligation to seek best execution for you.  In seeking best execution, the determinative factor is not the lowest possible commission cost but whether the transaction represents the best qualitative execution, taking into consideration the full range of a broker-dealer’s services, including the value of research provided, execution capability, commission rates, and responsiveness.  Therefore, we will seek competitive commission rates, but we may not obtain the lowest possible commission rates for account transactions.


By directing brokerage to SSG, you may pay higher fees or transaction costs than those obtainable by other broker-dealers or custodians.  In most cases, we believe you are paying a discounted and reasonable rate.  


If you elect to select your own broker-dealer or custodian and direct us to use them, you may pay higher or lower fees than what is available through our relationships.  Generally, we will not negotiate lower rates below the rates established by the executing broker-dealer or custodian for this type of directed brokerage account, unless we believe that such rate is unfair or unreasonable for the size and type of transaction.  


5.    Trading
Transactions for each client account generally will be effected independently, unless we decide to purchase or sell the same securities for several clients at approximately the same time.  We may (but are not obligated to) combine or “batch” such Orders to obtain best execution, to negotiate more favorable commission rates or to allocate equitably among our clients’ differences in prices and commission or other transaction costs.  Under this procedure, transactions will be price-averaged and allocated among our clients in proportion to the purchase and sale orders placed for each client account on any given day.


Item 13 – Review of Accounts
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1.    Reviews
Reviews are conducted at least quarterly or as agreed to by us.  Reviews will be conducted by our Chief Compliance Officer and Managing Member Douglas Connolly.  You may request more frequent reviews and may set thresholds for triggering events that would cause a review to take place.  Generally, we will monitor for changes and shifts in the economy, changes to the management and structure of a mutual fund or company in which client assets are invested, and market shifts and corrections.

 
2.    Reports
We do not provide any other statements except the one provided by your custodian, along with an invoice copy. 


Item 14 – Client Referrals and Other Compensation
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Pursuant to a written referral agreement between Connolly Asset Management and unaffiliated individuals and other parties (collectively “Solicitors”), Solicitors agree to refer prospective clients to Connolly Asset Management to participate in our investment management programs.  The written agreement will identify the roles and responsibilities of the solicitor and Connolly Asset Management and the specific amount of the annual advisory fee to be paid to the solicitor.  This fee compensates the Solicitor for referring clients to us, assisting in the enrollment of clients for participation in our programs, and facilitating communication between us and clients.  The annual advisory fee charged to the client will not be affected if the client was introduced or referred by a solicitor.  Through the Solicitors Written Disclosure Document, each client is made aware of the referral agreement prior to or at the time of entering into an advisory contract and acknowledges receipt of a current Connolly Asset Management Form ADV Part 2A.  The advisory fee will be paid quarterly for so long as the client maintains an Investment Management Agreement with Connolly Asset Management and the solicitor’s agreement remains in-force. If at any time either agreement is terminated, the advisory fee payments to the solicitor will cease.


Douglas Connolly receives additional compensation for insurance sales.  
Item 15 – Custody
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We do not have physical custody of any accounts or assets.  However, we may be deemed to have custody of your account(s) if we have the ability to deduct your quarterly fees from the custodian.  We use SSG as the custodian and/or broker-dealer for all your accounts.  You should receive at least quarterly statements from the broker-dealer or custodian that holds and maintains your investment assets.  We urge you to carefully review such statements and compare this official custodial record to the account statements that we may provide to you.  Our statements may vary from custodial statements based on accounting procedures, reporting dates, or valuation methodologies of certain securities.  If you notice any discrepancies, please contact CAM. 


We do not debit the client fees directly from your advisory account.  We send information to your custodian to debit your fees and to pay them to us. You authorized the custodian to pay us directly at the onset of the relationship.  


Item 16 – Investment Discretion
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We usually receive discretionary authority from you at the beginning of an advisory relationship to select the identity and amount of securities to be bought or sold.  This information is described in the Advisory Agreement you sign with us.  In all cases, however, this discretion is exercised in a manner consistent with your stated investment objectives for your account.
When selecting securities and determining amounts, we observe the investment policies, limitations and restrictions you have set.  For registered investment companies, our authority to trade securities may also be limited by certain federal securities and tax laws that require diversification of investments and favor the holding of investments once made.
We require that any investment guidelines and/or restrictions be provided to us in writing. 


Item 17 – Voting Client Securities
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As a matter of firm policy and practice, we do not have any authority to and do not vote proxies on behalf of advisory clients.  You retain the responsibility for receiving and voting proxies for any and all securities maintained in your portfolios.  We may provide advice to you regarding your voting of proxies.  We are authorized to instruct the custodian to forward you copies of all proxies and shareholder communications relating to your account assets. 


Item 18 – Financial Information
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We are required to provide you with certain financial information or disclosures about our financial condition.  We have no financial commitment that would impair our ability to meet any contractual and fiduciary commitments to you, our client.  We have not been the subject of any bankruptcy proceedings. In no event shall we charge advisory fees that are both in excess of five hundred dollars and more than six months in advance of advisory services rendered.


Item 19 – Requirements for State Registered Advisers
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Part A
Please refer to the Part 2B attached.
Part B
Please refer to the Part 2B attached.
Part C
Please refer to the Part 2B attached.
Part D
Please refer to the Part 2B attached.
Part E
Please refer to the Part 2B attached.
There is one principal of CAM, Douglas Connolly.  He is the Chief Compliance Officer and was born in 1975.  His information is as follows:
 
ADV Part 2B Brochure Supplement – Douglas Connolly
Item 1 – Cover Page
Douglas Connolly
CRD # 4219721
Connolly Asset Management, LLC
8524 E. Kalil Dr.
Scottsdale, AZ 85260
www.connollyassetmgmt.com
(480) 675-7971
This Brochure supplement provides information about Douglas Connolly and supplements the Connolly Asset Management, LLC (“CAM”) Brochure.  You should have received a copy of that Brochure.  Please contact Douglas Connolly if you did not receive the Brochure or if you have any questions about the contents of this supplement.
Additional information about CAM and Douglas Connolly is available on the SEC’s website at www.adviserinfo.sec.gov. 
Item 2 – Educational Background and Business Experience
Full Legal Name: Douglas Edward Connolly    Year of Birth: 1975

Education
Bachelors in Math     2004
University of Texas; Austin, Texas
Bachelors in Economics     1999
University of Texas; Austin, Texas
Business History
June 2014 – Present     CCO and Managing Member at Connolly Asset Management, LLC
June 2013 – June 2014    Registered Representative at WRP Investments Inc.
November 2010 – June 2013    Flood Map Analyst at Bank of America
January 2010 – October 2010    Customer Service Representative at Crate and Barrel
March 2010 – June 2010    Tutor at Huntington Learning Center
January 2008 – December 2009    Assistant Children’s Director at Lake Hills Church
Item 3 – Disciplinary History
Neither CAM nor Douglas Connolly has any disciplinary history to disclose.


Item 4 – Other Business Activities
As noted in item 10 “Other Financial Industry Activities and Affiliations” above, Douglas Connolly has the following outside business activities and/or affiliations to disclose.


Douglas Connolly may recommend insurance products and may also, as independent insurance agents, sell those recommended insurance products to Clients.  The sale of these products accounts for approximately 15% of his time.  In Texas, Mr. Connolly is licensed for life, accident, health, and HMO.  In the State of Arizona, Mr. Connolly is licensed for accident/health, life, variable life / variable annuities.  When such recommendations or sales are made, a conflict of interest exists as the Insurance licensed Investment Adviser Representative earns insurance commissions for the sale of those products, which may create an incentive to recommend such products.  We require that all Investment Adviser Reps disclose this conflict of interest when such recommendations are made.  Also, we require Investment Adviser Reps to disclose that Clients may purchase recommended insurance products from other insurance agents not affiliated with us.


Douglas Connolly owns the limited liability company Boyd LaRosa, LLC through which he provides passive management of real estate, and approximately 5% of his time in this capacity. 


Item 5 – Additional Compensation
Douglas Connolly may receive additional compensation for sales of insurance products.  Douglas Connolly is eligible to receive incentive awards (including prizes such as trips or bonuses) for recommending certain types of insurance policies or other investment products that he recommends.

While Douglas Connolly endeavors at all times to put the interest of our clients first as part of our fiduciary duty, the possibility of receiving incentive awards creates a conflict of interest, and may affect his judgment when making recommendations.    


Item 6 – Supervision


Douglas Connolly is the Chief Compliance Officer and Managing Member and performs all supervisory duties for his firm. 


Item 7 – Requirements for State-Registered Advisers


Douglas Connolly has no reportable events to disclose here.


Performance Fees


We do not charge a performance-based fee (fees based on a share of capital gains on, or capital appreciation of, the assets of a client) for our normal asset management accounts.  

Other Relationships


Neither the firm nor Douglas Connolly has any relationship with any issuer of securities.