BRIEFING BOOK

Data Information Knowledge WISDOM

JOHN ROGERS JR.

Location: Forbes, New York, New York

About John Rogers Jr. ........................................................................ 2

Debriefing Rogers .............................................................................. 3

Rogers in Forbes

"Separating Luck From Skill, 11/13/09 ... 5

"The Contrarian: Ariel Says Newspapers Are Poised For A
Year (At Least) Of Profits," 07/29/09.... 7
Outsourcing For Outsized Profits," 12/20/05 8
"The Style Mongers, 06/04/07.. 11

The Rogers Interview 13

 ABOUT JOHN ROGERS JR.
Intelligent Investing with Steve Forbes

John Rogers Jr. is chairman, chief executive officer and chief

investment officer of Ariel Investments.

Ariel Investments was founded to focus on small and medium-

sized companies. Before founding Ariel Investments, Rogers
was a stock broker at William Blair & Company, LLC.

Rogers is a board member of Aon Corporation, Exelon

Corporation and McDonald's Corporation. He is also chairman
of the Economic Club of Chicago and a board member of the
John S. and James L. Knight Foundation. Rogers chairs the foundation's investment
committee.

Rogers served on President Obama's Presidential Inaugural Committee in 2009.

He has a degree in economics from Princeton University. Rogers first became passionate
about investing when he was 12-years-old and began receiving stocks for his birthday and
Christmas from his father.

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 DEBRIEFING ROGERS
Intelligent Investing with Steve Forbes

Interview conducted by Alexandra Zendrian

May 7, 2010

Forbes: You said the following in a recent Forbes article: "Mauboussin, who happens to
be Legg Mason's chief investment strategist, puts Wall Street into perspective. He says
investing is not like playing chess, where a highly skilled player will beat a novice almost
every time, nor is it like playing a slot machine, where there is no skill involved. Rather it is
like poker, where a good player can lose if he gets dealt a bad hand." Can you explain this
a little more and is there a way to avoid being dealt a bad hand?

John Rogers Jr.: Investors should want a skillful manager, not a lucky one. But there are
only a small percentage of money managers who are truly skillful. There are a few people
who really rise to the top.

Being a skillful manager -- I think a lot of it is innate. It's the ability to see the future. It's a
gift. Some people have the ability to see how things will play out before they happen, like
great musicians, great artists and the best athletes.

How did you first get into investing and how did that shape your investing strategy?

The stock market was a hobby of mine when I was growing up. At 12-years-old, my dad
was buying me stocks for my birthday and Christmas. So I got comfortable with volatility
and the general ups and downs of the market early on.

I learned from a few of the stock brokers I was around in my younger years, so all those
things helped me to come up with the strategy I have.

How would you describe your investment strategy?

We try to invest like Warren Buffett. We try to buy cheap stocks and get them while out of
favor. We invest in small and mid-sized companies. We stay with industries we know well.
You need to stay within your circle of competence.

As a contrarian investor, where are you finding your investments now?

I continue to like the media names, in particular the television-oriented companies. CBS is
the favorite in the TV area. We also like Meredith and Gannett. It's a well-diversified
company. In the advertising area, we like IPG and Omnicom. The high-quality advertising
companies are necessary to determine where to place ads.

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In the financial services area, there are some companies that we continue to believe are
cheap. We've been investing in service-oriented financial services firms like T. Rowe Price
and Janus.

I noticed that you didn't mention NBC as a possible investment? Why is that?

NBC was owned by GE and now they're with Comcast. The GE ownership was
appropriate for a creative television station. The company needs to have a parent that
understands the media.

What advice do you have for investors looking at the markets now?

You have to stay within circle of competence and know the industry well. You want high-
quality companies. You want to look at the management team, visit with them, understand
their vision and their plans. You have to evaluate that management team.

You also want to look for companies with a moat around it, where there's less competition,
companies with high returns on capital, not too highly cyclical. You want some good,
consistent, growing companies.

Why is the management team so critical?

Management teams are particularly critical for value investors because the company may
be in trouble and that management team has to be able to get them back on track.

How often do you invest?

It depends on what's out there. There are times when you might not do anything for weeks
at a time. There have been years when we invested in five and six companies in a year.

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 ROGERS IN FORBES
Intelligent Investing with Steve Forbes

The Patient Investor

Separating Luck From Skill
John W. Rogers, 11.13.09, 02:40 AM EST
Forbes Magazine dated November 30, 2009
In companies and in portfolios, luck matters in the short term, but skill matters in the long term.

In normal times I read five hours or so each day. During the tumultuous past year I read more.
Noteworthy on my recent reading list: Michael Mauboussin's Think Twice: Harnessing the Power of
Counterintuition. Mauboussin looks into the tricky business of distinguishing luck from skill. In many
human endeavors it's hard to know which of the two explains a result--in the short term. But, he says,
"over time, skill shines through as luck evens out."

Some outsiders seem to think that investing results simply reflect skill, so they see underperformance
over any time period as proof that a manager doesn't know what he's doing. Other people seem to see
investing as pure gambling. Occasionally you run into a hard-to-please character who holds
contradictory views: Poor returns suggest a lack of skill while good ones indicate dumb luck.

Mauboussin, who happens to be Legg Mason's chief investment strategist, puts Wall Street into
perspective. He says investing is not like playing chess, where a highly skilled player will beat a novice
almost every time, nor is it like playing a slot machine, where there is no skill involved. Rather, it is like
poker, where a good player can lose if he gets dealt a bad hand.

Mauboussin has a clever test of whether an activity involves skill: Ask if you can lose on purpose. A
grand master at chess could almost certainly play badly enough to lose to anyone, while with a slot
machine there's nothing you can do to try to lose. A poker superstar could try to lose to an amateur like
me, but in a single round he might get such good cards that he wins anyway.

We had some fun with this notion at Ariel this summer. I asked 71 of my associates to pick ten stocks
that would underperform the market in the second quarter. Only 19 of them succeeded, meaning 73%
of them tried to lose on purpose but couldn't. Indeed, the average return on the try-to-lose portfolios was
30%, double the market's return. The lesson: Short-term stock movements are more a function of luck
than skill.

At Michael Jordan's fantasy basketball camp I was the first person to beat Jordan in a one-on-one game
to three scores. Obviously a former Princeton basketball player is not remotely as skilled as the best
NBA player of all time. Had we played to 21 baskets I would have had zero chance of winning.

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Many people make a simple mistake when analyzing professional investors: They use one, three or five
years of results. That's like judging Michael Jordan on one game. Likewise when it comes to investment
performance longer time periods are more statistically significant.

The need to separate luck from skill applies not just to asset managers but also to the companies they
invest in. You have to figure out how much a company's results depend on internal excellence and how
much on external happenstance.

Consider T. Rowe Price (TROW, 49), an operator of mutual funds that has been in my portfolio on and
off since 1987. This Baltimore firm exhibits two lasting skills: patience in portfolio management and
operational dexterity in running 401(k) plans. In the short term the firm's profits (and, usually, its stock
price) are a function of the market's mood. When the Dow slumps, so does the net income of a money
manager. During a slump I ask myself whether T. Rowe Price will still be around in a decade and
whether the market will go back up over that period. The answers tend to be yes and yes. I think this
stock is a buy, especially if you are a patient investor. At its recent price it gives the company an
enterprise value (market value of common, plus debt, minus cash on hand) of $11 billion. That comes to
3% of assets under management, low for a money manager of its quality.

In the short term the profits of Carnival Cruise Lines operator Carnival Corp. (CCL, 30) are a function
of economic luck--recessions and oil prices. In the long term they are a function of how good the cruise
line is at figuring out how many ships to have, where to sail them and how to satisfy its customers. Right
now Carnival is a bargain, trading at 8 times my estimate of 2012 earnings and 12 times trailing
earnings.

Interface (IFSIA, 7.4) is a leader in carpet tiles, which businesses love for their flexibility. For instance,
Interface now produces brand-new tiles that look worn; this way, when a customer replaces a damaged
tile, the new one doesn't stand out. The recent recession has hit the company hard, and its stock is
down. I believe it's cheap now, trading for 7.5 times my estimate of 2011 earnings.

John W. Rogers Jr. is chairman and chief executive officer of Chicago-based Ariel Investments, LLC,
the adviser to the Ariel Mutual Funds. Visit his home page at www.forbes.com/rogers.

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PaidContent.org
The Contrarian: Ariel Says Newspapers Are Poised For A Year (At Least)
Of Profits
David Kaplan, 07.29.09, 10:50 PM EDT

While many observers argue that recent profit swings for Gannett, McClatchy and other newspaper
publishers will be short lived, Ariel Investments chief executive John Rogers Jr. is far more bullish.

Rogers tells Bloomberg that he expects the newspapers to defy analysts dour projections and post
profits for the next five or six quarters.

As one of the largest investors in Gannett and McClatchy, Rogers probably has good reason to cheer
the companies and on and hope the analysts are proven wrong.

He insists that despite the ad declines, aggressive cost-cutting will pay off even beyond the next year.

Over the next couple of years, people are going to be surprised by the earnings power of newspaper
publishers, said Rogers, who is also an investor in Lee Enterprises. They dont even have to get
anything near the revenue of three or four years ago.

Just before Gannetts Q1 earnings came out in April--its profits fell 60% compared to Q108--Ariel
boosted its stake to roughly 12.5% of Gannetts outstanding shares, more than doubling its previous
4.9% holding.

While Ariel is upbeat about its newspaper holdings in general, it seems to prefer Gannett over
McClatchy, since the former is much more diversified, with its TV stations and its digital properties,
including social-media tech provider Ripple6 and rich-media company PointRoll.

Rogers doesnt say in the interview whether he has any concerns about the companies ability to
manage their sizable debt, even if the ad market does pick up again.

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Adviser Q&A
Outsourcing For Outsized Profits
Whitney Tilson and John Heins, Value Investor Insight 12.20.05, 12:00 PM ET

When John W. Rogers Jr. started Ariel Capital in 1983, there were plenty of managers pursuing
"value" strategies and many invested in small, fast-growing companies--but few were trying to do
both at the same time. "We were fairly early in combining a contrarian, value approach to smaller
companies," he says.

Having stayed true to Rogers' original philosophy, Ariel today manages more than $21 billion. The
flagship $4.8 billion Ariel Fund has returned 14.9% annually over the past ten years versus 11.6%
per year for the Russell 2500 index of smaller companies.

In this excerpt from a recent Value Investor Insight interview, available exclusively at Forbes.com,
Rogers and his vice chairman, Charles Bobinskoy, describe why theyre betting on the general
theme of outsourcing as well as on the specific ability of Pitney Bowes (nyse: PBI - news - people )
to capitalize on it.

Where do your best ideas come from?

John Rogers: Weve had good success in finding niche areas, like in office products or restaurant
equipment, where we can have an edge from being experts, and where we believe in the secular
trends driving growth. We believed in the trend that more people were going to eat out, for
example, so we spent a lot of time getting to know the restaurant-equipment industry. The nice
thing about the equipment business is that it didnt really matter which restaurants you were betting
on, they all needed to buy things like ice cream machines. It has been similar with office products.
The big trend is more and more people working in offices, so weve looked for companies for
which this is good news, companies like Sanford, for example, which makes markers and pens and
was sold to Newell Rubbermaid.

Any other themes you're currently pursuing?

John Rogers: Were making a very big bet right now on outsourcing. Whats nice about
outsourcing from an investment perspective is that it goes through up-and-down cycles of market
interest. Now people have generally soured on the idea, and many companies are trading at
discounts to their private-market values. But we dont think that view accurately reflects the
powerful secular growth were going to see as companies and individuals outsource more of their
day-to-day activities.

This is a broad theme that has many potential applications. We love Jones Lang LaSalle and their
international opportunities in real estate outsourcing. We own ServiceMaster, which is a leader in
landscaping, pest control and a variety of other home services. Were also bullish on Aramark,
which provides food services for everything from stadiums to jails to schools.

Let's talk about Pitney Bowes, one of your big investments under the outsourcing theme.

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John Rogers: Pitney Bowes is the dominant manufacturer and lessor of postal meters and has been
for a very long time. We love the sort of quasi-monopoly they have in the industry.

We believe we have some distinctive competence in understanding what has and will go on in the
modern office. Pitney Bowes strategy of adding more and more services to take over management
of a companys mailstream--creating more and more recurring revenue--just makes sense to us.

Charles Bobrinskoy: This is a case where our hands-on experience with the company has been a
big plus. Theyve worked with us in our own mailroom and keep taking on more and more
responsibility, not just for mail but for presentations and putting together and otherwise managing
documents. Theyve made niche, tuck-in acquisitions that have added a particular competency that
fits with what they do, which is what we like to see--as opposed to making big acquisitions that go
outside of their core business.

John Rogers: We also believe that the outsourcing of functions like this is a worldwide
phenomenon. The Pitney Bowes brand name and experience will allow them to grow very
effectively in rapidly developing economies like India and China. It hasnt been and wont be easy
to break through traditional ways of doing things or government bureaucracies, but international
expansion has tremendous potential for them over the next three to five years.

Isn't part of what's weighing on the stock a belief that traditional mail in the Internet age is
not going to be what it was?

Charles Bobrinskoy: The Internet has been around for quite a while now, and traditional mail not
only is not disappearing, its growing. Youre right, though, people are very nervous about this
macro trend, and what it means to Pitney Bowes. We look at it as a possible risk, but see it as one
thats overblown.

John Rogers: The increasing options for moving information may also be an opportunity. They are
the absolute pros of the mailroom, and theyre in the middle of trying to help companies transform
and send information from one place to another around the world. Theyre positioning themselves
as delivering solutions however people decide to get information from place to place.

Margins in add-on businesses are rarely as good as in the core business of a company like this.
Is that a problem?

Charles Bobrinskoy: The first year of outsourcing contracts often reduce margins as the companies
have to hire new people and add new equipment. The beauty of these contracts, though, is that they
lock in the customer over a long period, and in the remaining years you dont have those first-year
costs. This dynamic is another thing we think the market is missing. The market is overly focused
on the short-term impact of some new outsourcing contracts and not giving Pitney Bowes credit for
the second, third and fourth years of those contracts.

Currently at around $42, the stock has been mostly dead money for the past two years. How
are you looking at valuation?

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Charles Bobrinskoy: Two key metrics we look at are the discount to our private-market value and
the price-to-earnings to forward earnings. For Pitney Bowes, we believe the private-market value
per share is just under $58. We also think it will earn $2.94 next year, which gives a below-market
multiple of about 14 times earnings.

JR: This is a good example of a larger-cap company not getting its due. While were in this hot
market for small-cap value stocks, you have this extraordinary larger mid-cap stock thats selling
for only 14 times next years earnings.

This excerpt is from an original interview published in the Nov. 30, 2005 issue of Value Investor
Insight newsletter.

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The Patient Investor
The Style Mongers
John W. Rogers Jr. 06.04.07, 12:00 AM ET

When it comes to investing, the end of the quarter is often a time when people reassess and
rebalance their portfolios. From mutual funds to pensions, making changes to an investment plan is
relatively easy, sometimes as simple as a click of the mouse. The good news is, when considering
what you own or what you might want to buy, there are many fine tools in the investment world,
including the performance grades that FORBES awards in its fund guides and on its Web site. And
a lot of consultants are there to help individual investors and pension plans with their selections.

Many of these people turn to style guidelines, under designer labels like Russell, Wilshire,
Morningstar or others. These systems place each mutual fund into a category. In my view, too often
many well-meaning financial consultants are overly dependent on such artificial constructs, to their
clients' detriment. They often ax good funds that don't adhere to the tyranny of style boxes. As a
result long-term absolute returns may suffer.

With the Fourth of July coming soon I'm reminded that the leaders who founded this country were
elected representatives. While I don't mean to inflate the practice of style-pigeonholing into a
cosmic issue, nobody elected the category kings. In fairness, even Donald Phillips, the Morningstar
managing director who helped mastermind his service's style boxes, argues that the boxes should be
descriptive, not restrictive.

Certainly I have a vested interest in this topic, since I manage funds. Morningstar characterizes my
flagship, Ariel Fund, as a "midcap blend," with "blend" meaning a mixture of value and growth. I
do indeed prefer small and midcaps, because I believe they are more likely to be inefficiently
priced. But I don't know about blend. I'm just looking for value. Any successful manager will
pounce on a good opportunity, regardless of whether the style police say he shouldn't.

When a portfolio manager moves outside the guidelines, though, he is scolded for "style drift," as if
he had broken some rule of nature. Yet style drift can occur naturally when a manager sees small-
and midcap stocks outgrow their categories, just as children move up a size in clothes. What
intelligent investor wants to stunt a portfolio's growth just to fit it into a category? Further, value
often can be found right next door to a manager's core category. The important factors in assessing a
possible stock purchase are valuation and a company's underlying business fundamentals.

The early pioneers who shaped the mutual fund world--Sir John Templeton, Peter Lynch, John
Neff, William Ruane, Ralph Wanger--searched for value wherever they could find it. They weren't
investing for their critics. In my view, independent-minded investors can do well buying stocks like
the following, which defy easy characterization:

USG (49, USG), North America's largest producer of gypsum wallboard, has led a wild life. The
company spent five years in bankruptcy, attributable to asbestos litigation. USG exited Chapter 11
last summer, is profitable and has earned an investment-grade credit rating. True, the revenues are
off and the stock has tumbled 42% in the last 12 months as the housing market has weakened. But

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USG has first-rate management, steeled by adversity. Once housing bounces back, so should
demand for USG's Sheetrock. That's why I've recently bought this stock. Shares trade at a 27%
discount to my $67 estimate of their private market value.

Office furniture manufacturer Herman Miller (37, MLHR) thought outside the box and created the
office cubicle. It also makes ergonomic seating and the iconic Aeron chair, showcased in New
York's Museum of Modern Art. Sales tanked in the last recession but now are gaining at a double-
digit clip with a big order backlog. The company is branching further into furniture for education
and health care. It trades at a 10% discount to my $41 estimate of intrinsic worth.

I also like Bio-Rad Laboratories (69, BIO), which makes products for medical research and
diagnostics. Its testing devices are used for food pathogens, mad cow disease, blood viruses and
genetic disorders. Since only one Wall Street analyst follows it, you may not know much about Bio-
Rad. Management refuses to conduct business for the short term, and I admire their conviction. This
market-leading firm announced that 2007 earnings would be depressed because of investments in
recent acquisitions. Meanwhile, annual revenues are increasing nicely. Shares change hands at 20%
off my $86 estimation of private market value.

John W. Rogers Jr. is chairman and chief executive officer of Chicago-based Ariel Capital
Management, LLC, the adviser to the Ariel Mutual Funds. Visit his home page at
www.forbes.com/rogers.

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 THE ROGERS INTERVIEW
Intelligent Investing with Steve Forbes

Value Investing

Steve Forbes: John, thank you for coming with us. You describe yourself as a value
investor, which is an overused term, but you actually practice it. What is your definition of
value?

John Rogers, Jr.: Well, for us, value investing means buying really great companies
while they're out of favor, while there's something going on, whether there's a cloud over
that company, and it makes the stock price, we think, cheap relative to underlying value.
So for us, we want to find stocks that are selling at about a 40% discount to that underlying
value. And we think if we can get a 40% discount, that really defines it as a value stock to
us.

Forbes: What are the metrics used in your own shop to find what is true value? In other
words, what's a dog that's out of favor versus just a dog dog?

Rogers: Well, from a valuation standpoint, you know, the low P/E multiples, much the
kind of work that David Dreman made famous with contrarian investment strategy. We
love low P/Es. We also want to do the discounted cash flow analysis that most business
school students learn to be able to look to the future and see the cash flows and discount
them back. And then we look at transactions that have occurred in that specific industry,
what companies have been sold for either in the private equity market or to strategic
buyers.

And you've got to make sure, though, that even though the stock's cheap, that it really is a
wonderful business, where there really are barriers to entry, a real moat around the
company which makes it hard for new people to come in and compete.

Forbes: A couple of examples.

Rogers: Well, some of our favorite, you know, companies where we think have a real
moat, we think companies like in the real estate services industry, companies like CB
Richard Ellis and Jones Lang LaSalle, they are by far the two giants when it comes to real
estate services, leasing, transactions, when it comes to outsourcing, they have the global
scale to do it really, really well and have all the synergies between the various aspects of
all their operations.

Those would be some of the favorites for us. Also, we love other professional services
companies. Some of the big companies like Hewitt and Accenture. When it comes to
human resources consulting, Hewitt has a great moat. When it comes to technology
outsourcing and things like that, Accenture has a great moat. So those are two of our
favorites.

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Forbes: You also like to get to know companies management.

Rogers: That's true.

Forbes: And you've obviously had experience in it, when you become a CEO, especially
of a publicly-held company, you're good at sales. I mean, you know, part of your task is
going out and projecting a positive image. How have you learned to distinguish between
the real substance and somebody's who's just good out in the public square?

Rogers: Well, you try to build a relationship over time. So once you've gone to visit the
company, you maybe next time try to visit with the management team when they're in
Chicago and go out and have a drink with them after work, get them when they're a little
more relaxed, when maybe their guard's down a little bit, and you build a relationship.

And then, if you call them consistently every quarter, you can determine whether their
moods are up or they're down and you can really check what they're saying today versus
what they said six months ago or nine months ago, see the veracity of whether they've
been able to follow through and get the job done. And really, but it's more of an art than a
science. You have to read people, look them in the eye and determine whether you really
believe. And of course, finally, you want to get a sense of the quality of the team around
them. Have they been able to attract talented people and keep them in place?

Forbes: Do they have a bench?

Rogers: That's really important. That ability to have a bench and to have people have
career paths and identify who's going to step up next if someone does leave, that's a rare
skill. And you know, I happen to be on the board of McDonald's where we've done that
extraordinarily well. Where Andy McKenna, the chairman of the board, has created the
right kind of a structure where you've got succession planning in place.

Turning McDonald's Around

Forbes: Let me ask on McDonald's, because that's a classic example of talk about value
investing, 10 years ago, the company seemed to be floundering, didn't know where it was
going, trying things, failing. What did you learn from looking at it, being part of the board of
directors in terms of how you turn something like that around without losing the essence of
what made it great in the first place?

Rogers: I think there's a couple of things. One, there was a great legacy there that Ray
Kroc and Fred Turner had created.

Forbes: Right.

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Rogers: And it was, you know, they always talked about Q, S, C and V -- quality, service,
cleanliness and value. And things had gotten off-track for a little bit, and Jim Cantalupo
came back and took over a CEO several years ago.

Forbes: Off-track, they just sized instead of what made the size worthwhile?

Rogers: Well, that's what Jim Cantalupo came back and said. He said, "It's not about just
how fast we grow, it's about the quality of the food."

And we're going to make sure that people have a great experience when they come into
McDonald's. And that was something that growth wasn't the end all and be all. The way
that you were going to grow over time was to give the excellent value, excellent service,
and again extraordinarily good food for the customer. And that focus that Jim brought, I
think has really helped us as we'd been able to build the company over the last seven or
eight years and moved out of those doldrums.

Forbes: And in terms of the stocks you buy, take your flagship fund, the Ariel fund, what
kind of turnover do you have?

Rogers: We've typically had about a 20 to 25% turnover, but we have had a little more
lately. Because of all the volatility over the markets, we've been up more around 30%
turnover.

Forbes: Still low by mutual fund standards.

Rogers: Yeah, we love to find a great business and own it for 10, 15, 20 years or more.
That's kind of our dream.

Staying The Course

Forbes: Now, everyone talks about discipline in investing and everyone is very disciplined
until the market goes down. Then, my God, is it too late to get out? And then, if the
market gets frothy, is it too late to get in? You took a real hit in 2008, 2009, but yet as the
paper showed recently, you've been up in the last 12 months, year-over-year, up over 70%
with the Ariel fund at a time when markets, S&P 500, 25, 26%. Tell us about what
happened in '08 and '09, and how did you stay the course.

Rogers: Well, it was tough. I have to say, you know, I've been an entrepreneur for 27
years, and 2008 was, by far, the worst year. And a lot of it was because of our consumer-
oriented companies and in particular our media stocks. We had a large exposure to
newspapers, magazines, advertising agencies, television stations. And there was
competitive issues that went on, but of course, the economic downturn slowed the
advertising revenue substantially. What helped us come back was we ended up buying
more of our favorite stocks as they got cheaper and cheaper and cheaper, we stayed the
course. And as some of those companies got to be at one, two and three times earning,
even with the competitive threats from the Internet and some of the problems that are out

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there, we thought the stocks were too cheap and we had to buy more. And as the
economic recovery came, people started to spend again, people started to advertise again
and all of our media stocks came roaring back and that's helped us so much.

Value In Media Companies

Forbes: Well, you take a company like Gannett, went down to what, five dollars a share
or something and what's it's now, $15, $18 a share?

Rogers: Well, I think it actually got under two dollars. I think it got to about $1.70. About
one times earnings, which made no sense to us when you looked at --

Forbes: Is that how you lost your hair?

Rogers: Yeah, right. It was a scary time. When you looked at all the things that were
going on there, but we looked at all the things they had -- television stations,
CareerBuilder, Captivate in the elevators, as well as the small town newspapers that go
along with USA Today, and it got all the way back to $17 from $1.70. You know, I've never
had a stock go up 10-fold in sort of roughly a year's time period. But it meant you had to
know that management team well. You had to know the story well and understand that it
wasn't a lot more downside there if you really had done your homework.

Forbes: Talk about being contrarian. You say media, most people think oh my God,
where are the exits. Yet, you're still enamored with the media.

Why and how do you see it vis-a-vis the Web? Is it just these things got knocked down too
low or do you think that there's real durability here?

Rogers: Well, I still think there's real value there. And I think most of the media
companies have diversified into the Web, and when you talk to management teams like
Gannett, they say they're kind of agnostic of whether the revenue comes in over the Web
or through traditional print. But also, I think so many of our management teams, we've
been talking to them a lot lately, and they are all very much excited about the new iPad.
Some of the new technology, they think that's going to really cut down on distribution costs
substantially. You know, if you're a newspaper, you're not going to have to have as many
trucks, not have all the issues of distributing those papers around the city and you'll be
able to do it through the iPad.

And as you know, the new technology's going to have great color, so you'll be able to have
great graphics for the advertisers. You'll be able to check and see how people are
responding to your ads. And so, I've just noticed these management teams have gotten
really thrilled about the opportunity that's going to come to media because of the iPad.

Forbes: And what do you see on the advertising side in media, now obviously, we have a
very selfish interest in this, but what do you see on the Web in terms of the impact of
things like ad networks and ad exchanges and the like?

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Rogers: Well, I think that the dollars are coming back. I think we're getting, you know,
sort of, a little bit of an equilibrium too, between the Web and traditional print. I think that,
you know, people have realized it's not the end all and be all to have all the money go to
the Web. There's certain things that you need to have traditional print where you can do
the kind of advertising that will get people to respond the way you hope the consumers will.
And I think as the dollars grow because of the economic recovery, I think traditional
media's going to do better than people have anticipated.

Financial Finds

Forbes: As you look around now, you mentioned media. Do you still like financial stocks
or what are the areas you find attractive now?

Rogers: Well, some of the financial stocks we still think are very well positioned. We
talked about earlier some of the real estate services companies, we like those. We also
like the mutual fund companies. So we've had long time holdings with T. Rowe Price, I
think we've owned actually since they went public, roughly 20 years ago. We own Franklin
Resources that has the Templeton Funds, that is terrific.
And of course, we own Janus that's had its ups and downs and its problems, but we think
they're getting back on track. They have a new CEO, they've had very good performance
in the Janus funds. And we like the recurring revenue from the mutual fund industry. We
think that they're very well positioned. As the economy recovers, more people will be
putting money away into the stock market again and using mutual funds to do so.

People Still Matter

Forbes: What do you see the impact of ETFs, exchange-traded funds and traditional
mutual funds in these companies?

Rogers: I think ETFs are going to, you know, be there permanently, they have a place,
but I still think that people like the actively traded funds that are run by active managers
somewhat. And I think the kind of old days of the John Neff, Peter Lynch, John Templeton
types of personalities are going to start to come back.

People are going to realize in this volatile economy, you need money managers with
experience who can make the right choices at the right time and use their experience to
have great performance. And I think some of the ETFs that are more index-like, I think,
maybe will not be as popular as we go forward, but they'll always have a permanent place
in the marketplace.

Forbes: What about actively managed ETFs?

Rogers: I know that's the newest thing, people are talking about that.

Forbes: So we have to ask.

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Rogers: I know, but you know, I don't think it's the end all and be all and I think it's not
that much different from the way that some of the, in the old days, used to have a closed-
end, active equity funds. And people fell in love with those for a while, they were very
popular, and they've sort of drifted down into a sort of significant niche for certain types of
customers. I still think the traditional funds, you know, as we talk to the management
teams of all these places, you know, they talk about ETFs, but they don't seem to feel that
it's going to really change the game in the long run.

Tough To Underperform

Forbes: Now, mentioning index funds, what's the case for managed funds. I'd love the
experiment you did about a year ago, you asked your associates to pick 10 stocks to
underperform. Pick actual dogs with fleas and shedding skin and all that kind of thing and
they couldn't do it.

Rogers: Right. It is very hard to underperform even if you're working at it, which actually
makes the cases hard to outperform when you're working at it. I think the markets are
extraordinarily efficient.

And if you don't have the time and energy to read up and study the markets and figure out
which money managers to hire, it makes sense to stay in an index and pay the low fees,
and you'll do fine until you find someone that you're confident that can add value. And
there's not that many active managers out there that have proven over time they can
outperform. But those that are out there, those rare gems, I think are worth the fees that
they charge.

Forbes: In terms of equity funds, do you find investors are nibbling again or is this a case
where they can't quite climb that wall of worry?

Rogers: I think I've been surprised that it's taken a little longer for people to come back
into the markets. We've been have people slowly but surely coming back into Ariel funds
the last year because of our good performance, but broadly speaking, you know, people
have still been more in fixed income. And I think it's because we had these two bear
markets within 10 years. It's really rare to have these two severe downturns back to back.
And I think it's just going to take people a while to get their sea legs again and feel
confident. But I think as you start to look out over the next six to 12 months, individuals will
be back into equity mutual funds full force.

Forbes: Now, overseas, are you pushing more overseas or you just find the stocks where
you find them?

Rogers: We're domestic stock pickers because we want to get to know the management
teams, as we talked about earlier, you know, see them face to face, build those
relationships, and it's harder for us to get all around the world and do that. We would love,

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someday, to be able to find some terrifically talented experts in foreign investing and bring
them on board, but that's sort of a long-term dream of ours.

Temporary Commodities

Forbes: Right. Now in terms of in this environment, people are looking at commodities.
What do you think of commodities as an investment class? Is that just because of the
weak dollar or is something that's going to become more and more permanent?

Rogers: I think a temporary kind of a thing. People are now rushing into gold. People are
very concerned. But I remember when I first got out of Princeton, it was back at the time
when the Hunt Brothers are on the cover of all the magazines and people were making so
much money in silver and gold back then. Oil and gas was booming, but then, inevitably, it
shifted.

And once it went from a boom, it went to a bust. I think commodities, inevitably, have
these big ups and these big downs, and it's very, very difficult to predict when they're going
to shift and where they're going to go to. I'm sure there are certain people who know how
to do that, but I don't think I'm one of them.

Forbes: It's good to know your limitations. So you would advise against corporations
making that or specifying commodities as investment class?

Rogers: Yeah, I've noticed, you know, more and more endowments are putting money
into these commodity investment classes.

I think it's a mistake unless you happen to have a true expertise or true feel for it, because
otherwise, you're going to do it again, you're going to do it at all the wrong times. I've been
on some investment committees that inevitably have done this exactly at the top. You
know, they'll get all excited about commodities and they'll buy them. And sure enough,
that's almost a sign of the top when everybody's getting excited about a certain sector and
talking it up.

Forbes: Talking about an area where people would think even though the economy's
recovering, you should be very careful of, are luxury goods. You have an affinity for luxury
goods, like at Sotheby's and Tiffany's. Do you think we're going to see more and more
people saying, okay, if I have my job, the world's not coming to an end, I can spend again.

Rogers: I think that's what's happening. People realize the economy's recovering, they're
not going to lose their job if they have one, their 40(k) plans are building and they have
some wealth again. And so, I think Tiffany's well positioned around the world to do great.
Just last week, I went to the Sotheby's auction, their impressionist auction, and it was
packed. You know, there was people, you know, standing room only. The energy was
there. And of course, the prices were higher than people had anticipated. And then, this
week, the auctions have again but very, very strong. And so, it's given us more and more
confidence in Sotheby's that they're going to do really, really well. But it's just interesting

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to see these wealthy people regaining their confidence when a year go, they weren't there,
the buzz was really down, people weren't buying and it was just sort of a sad place to be.
Now it's a fun place to be again.

Dont Beat Up Little Guys

Forbes: Now, one of the challenges, especially with small companies is they can get mis-
treated more easily than big ones. Your Ariel fund has been big, I think, in a company
called Private Bancorp. And then, I think you were very upset with JPMorgan dumping
stock at what you felt was just absolutely the wrong time.

Rogers: Well what was written about in Crane's Chicago Business was that there was a
lot of shareholders who were unhappy with the investment banking advice that
PrivateBank got because PrivateBank announced an earnings disappointment and at the
same time a stock offering. And the stock price cratered.

And we talked to a lot of experts on the Street and around Chicago, people said they just
didn't get good investor relations advice and didn't get good investment banking advice in
this particular situation. But we do believe that in the long run, PrivateBank's going to
come back and do fine and the stock price got way too cheap from where it should have
been.

Forbes: Now, is that kind of mistake an anomaly, or do small companies, are they prey to
where they don't have the heft to say, "Hey, hold off for six months, we think this is going
to come back."

Rogers: Well, I think, you know, what happens with smaller companies, sometimes they
don't have the best investor relations advice.

Forbes: Right.

Rogers: And then, as you know, there's been so much of a cutback on Wall Street in
analysts and the quality of the analytical work is less than ever before. And so, therefore,
the information on the companies is not as readily available. And sometimes, the stocks
are not as efficiently priced and they don't trade as well because there's not as much
coverage from the Street. And so, smaller companies suffer from that, I think. And at the
end of the day, if they make a mistake, it really hurts them a lot, much more than a bigger
company.

Forbes: This gets to the question on IPOs. Even though larger companies maybe doing
more and more IPOs, what happens to the companies, the small ones like $25 million, $50
million, $75 million, is there a market for that anymore? Is there coverage to make that
happen, and what does that mean for the country if these smaller ones can't do what they
were able to do 20 years ago?

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Rogers: Well, I do worry that there is not nearly as much of the really good quality
research left of these tiny companies. And so, therefore, a lot of them go public, and then,
they become orphaned. And there's not any research, and the stocks just sort of drag
along. We actually have a micro cap product now to take advantage of those opportunities
of some of those tiny companies that might not be trading at the appropriate price.

But I think it's really a problem now that, you know, just because of what's happened on
Wall Street, because the recession, some of the downside of one of the things that Spitzer
was responsible for, the quality of the research is just not there. There are a few firms that
do great job, William Blair in Chicago does a great job. Morningstar does a wonderful job.
But again, there's a dearth of quality research, which means these companies can get left
out and not trade well.

Forbes: I have to ask you -- flash crash. Not what do you think happened, although you
can offer an opinion on it, but what kind of reform should there be?

As you know, the last time big reforms were done was after the crash of 1987 and the New
York Stock Exchange had 80% of the share, the world was very different now with BATS
and these electronic firms, exchanges. What do you think should be done to update the
rules of the road?

Rogers: Well, it was unimaginable what occurred. You know, and I did live through the
'87 crash and remember the fear that we had then. I think that you have to get human
beings back into the game on a more regular basis. I think that's the bottom line. You
can't have the machines just doing everything and not having the kind of seasoned pros
that were on the floor of the New York Stock Exchange in the past and helped to mitigate
the inevitable ups and downs in the market.

There was a real role for those market makers. And I think just getting more human
beings in the process and being able to slow things down will be really healthy and helpful.

Forbes: And how do you do that? What reforms would you suggest to get flesh and
blood back into these things?

Rogers: Well, I think that's a little bit outside of my circle of competence, I think, to be an
expert on --

Forbes: Well, clearly the regulators, too.

Rogers: I know. But you worry about them making -- that's my big worry, is that some of
the regulators are going to make decisions too quickly in response to this without having a
chance to get all the seasoned advice that they need to get. And I hope they have a
chance to talk to the pros and talk to the people who have been around for a while. I do
think there's always no substitute for experience, my father used to always say. And
you've got to make sure you're talking to those experienced traders and not get swept up
with the emotion of the moment.

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Forbes: Question on financial reforms. Where do you think that should head as this
sausage factory works in Washington?

Rogers: Well, as you know, running a publicly-traded mutual fund like we have now for,
you know, almost 25 years, the amount of added regulatory scrutiny that we're under has
just grown and grown and grown and grown. And for a small entrepreneurial firm, we have
more lawyers and compliance officials and support staff to make sure that everything is
done perfectly. And so, I think this industry's already extraordinarily regulated for the most
part. The one place that I sometimes think that can be more regulations is around hedge
funds. I think that there, you know, some of them, as you know, have been accused if you
read Hank Paulson's book, and you see some of the CEOs from Bear Stearns and
Lehman Brothers and some of the banks being concerned that some of the hedge funds
were creating the climate to force those stocks down and to cause the run on the bank that
actually occurred.

I think that's a real worry we have in our society where you feel like a few people can gang
up on a great company and help send it into the ground. I think we need to find some
reforms in things like that to try to make sure that those kind of problems don't happen
again.

Forbes: So on something like credit default swaps, do you think they should, perhaps, go
through clearinghouses so people can see what's actually out there and not have these
wild rumors?

Rogers: Exactly. I think the more transparency that you have, the more regulations, I
think if you just have them have to do the same kind of things that publicly-traded mutual
funds have to go through, have the hedge funds go through the same kind of scrutiny.
And then, as you've talked about, having these credit default swaps on exchanges, I think
all those things are very, very healthy.

Forbes: John, thank you very much.

Rogers: Well it's great to be here.

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