Armada Funds
One Freedom Valley Drive
Oaks, Pennsylvania 19456

November 27, 2002

Jonathan G. Katz, Secretary
U.S. Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549

RE: Disclosure Concerning Audit Committee Financial Experts (File No. S7-40-02)

Dear Mr. Katz:

On behalf of the Board of Trustees of Armada Funds ("Armada Funds"), I am writing to comment on the proposed rules under the Sarbanes-Oxley Act of 2002 (the "Act") that define the term "financial expert" and require disclosure concerning financial experts on a company's audit committee (Release Nos. 33-8138; 34-46701; and IC-25775, October 18, 2002 (the "Release")).

The Armada Funds consist of 33 portfolios with total assets approximating $16 billion. Seven of the nine trustees are independent trustees. While the Release proposes new rules and rule amendments in a number of areas of interest to the Armada Funds, we are particularly concerned with the application of the financial expert requirements to investment companies. Our comments on this subject follow:

Definition of "Financial Expert" Not Appropriate for Investment Companies

Our Board believes that the Commission's proposed definition of "financial expert" is excessively rigid as it applies to investment companies. Many, if not most, investment companies' boards of directors and audit committees currently do not include any member who would qualify as a "financial expert" under the Commission's proposed definition. Investment company financial statements and accounting policies are relatively straightforward and more easily understood than those of operating companies. Consequently, boards of directors of investment companies have not typically focused on recruiting members with accounting and auditing experience. Instead, boards are generally made up of members with relevant investment company or other business experience, many of whom may have gained an understanding of generally accepted accounting principles, internal controls and audit committee functions through their education and experience. Despite having few, if any, members with experience in preparing and/or auditing financial statements, investment company boards and their audit committees have provided effective oversight of accounting and auditing processes, as evidenced by the lack of reported abuses involving investment company financial statements.

Our Board proposes that the Commission create a separate definition of "financial expert" that is more appropriate to investment companies. The attributes that require specific experience in (1) applying generally accepted accounting principles generally comparable to those used in the industry, and/or (2) preparing or auditing financial statements that present accounting issues generally comparable to those raised in the industry should be eliminated from the definition of "financial expert" for investment companies because they are not necessary to ensure the accuracy of investment company financial statements. If this proposed change were made, it is likely that more current investment company board and audit committee members may qualify as financial experts. Therefore, more investment companies would be able to avoid disclosure that might create unjustifiably negative perceptions. They also would not feel compelled to incur the time and expense in recruiting new board members with no real benefit to shareholders.

Our Board also believes that the focus on disclosure concerning individual financial experts on an audit committee ignores the collective and synergistic skills of audit committee members. We propose, therefore, that the Commission consider an alternative that would allow boards to evaluate the education and experience of the audit committee members in the aggregate to determine if they possess the requisite level of financial expertise and, if so, permit disclosure to that effect.

Use of Term "Financial Expert"

Whether or not the Commission modifies the definition as proposed above (or otherwise), the term "financial expert" should not be used to describe a person possessing the required attributes. Each of the five attributes listed in the proposed definition of "financial expert" addresses skills that are related to accounting or auditing expertise. Accordingly, if such a term must be used our Board favors the use of a different term, such as "auditing expert" or "accounting expert." We do understand that the Act uses the term "financial expert." However, we do not believe, that this precludes the Commission from defining the term "financial expert" to be an "auditing expert" or "accounting expert" who, through the appropriate education and experience stated in the Act, has acquired the attributes required by the proposed definition. The Commission has recognized that it has flexibility by soliciting in the Release public comment on whether a different term should be used, such as "audit committee financial expert." While that term would be preferable to "financial expert," we favor using a term that is more to the point and clearly understandable. Using the term "financial expert" by itself may lead issuers to include more elaborate disclosure so that investors will understand the meaning of the term than they would if a different, more expressive, term were used.

Disclosure of Names of Financial Experts

Our Board strongly opposes the Commission's proposed requirement for disclosure of the names of persons determined by a board of directors to be "financial experts." The Act requires only disclosure of whether an issuer's audit committee is comprised of at least one member who is a financial expert and, if not, why not. We would not object if the Commission's rules required disclosure of the exact number of audit committee members who are determined to be financial experts. Neither do we object to disclosing whether any financial expert is "independent." However, we believe that disclosing the names of persons determined to be financial experts will create a strong disincentive for qualified individuals to serve on audit committees and, perhaps, on boards of directors generally. Notwithstanding assurances in the Release to the contrary, at least until the new rules are in place for some time and experience shows their impact, many persons who possess the attributes that would qualify them as financial experts are likely to perceive that there would be a heavier burden on them with respect to the accuracy of financial statements than they might believe should be warranted. Even if they are willing to take on this perceived additional responsibility, we believe many would not do so if they were to be publicly named as financial experts. Given the circumstances which led to passage of the Act, we think that the Commission would want to encourage qualified individuals to serve in these important positions rather than discouraging them from doing so.

Our Board also objects to the proposed requirement to disclose the basis for a board determination that a person is a financial expert if it is based on a judgment by the board that the person acquired the required attributes through a position other than that of a public accountant or auditor or as a principal financial officer, controller or principal accounting officer of a public company. By definition, a person not having served in one of these positions must have had a position that required the performance of similar functions. If required to disclose the basis for the board's determination concerning such similarly qualified financial experts, we believe some investors may interpret such disclosure to be an indication that the person's qualifications are in some way inferior to a person who acquired the attributes through education and experience in one of the specifically named positions.

Excessive Emphasis on Role of Financial Expert

Finally, we'd like to express our concern about the seeming over-emphasis on the role of individual financial experts. First, an investor might infer that an audit committee lacking a financial expert is somehow deficient, notwithstanding that it may have carried out its responsibilities effectively for many years without a member who would qualify as a financial expert under the proposed definition. Second, emphasizing through disclosure whether or not a company has one or more "financial experts" on its audit committee ignores the synergies realized when audit committee members work effectively together, whether they have the attributes to be considered auditing or accounting experts or not. In addition, aside from the technical qualifications required of a "financial expert," audit committee members should possess other qualities, such as high ethical standards and an understanding of how to present financial information in a meaningful way to the general public that goes beyond compliance with generally accepted accounting principles. As one of our Board members insightfully stated, "The audit committee needs to serve as the Board's conscience in presenting financial information to the public." This mission is not fulfilled through technical expertise alone. Perhaps the Commission should require, or at least encourage, more disclosure about the overall qualifications of audit committee members.

* * * * *

In closing and on behalf of the Board, we would like to thank you for this opportunity to comment.

Sincerely yours,

/s/ Robert D. Neary

Robert D. Neary
Chairman of the Board and
Independent Trustee

cc: Other Trustees

John G. Breen
John F. Durkott
Robert J. Farling
Richard W. Furst
Gerald L. Gherlein
Herbert R. Martens, Jr.
Kathleen A. Obert
J. William Pullen