T. Rowe Price's largest revenue component, investment-advisory fees, rose 25% to $369.8 million, while operating expenses jumped by 22% to $253.1 million, mostly because of higher compensation costs for employees. George Roche, T. Rowe's chairman and president, noted that "increasing stock market volatility" that may not be over. "Although investors' appetite for risk has certainly been diminished and there are several headwinds, such as increased tension in the Middle East and rising global interest rates that could create a more challenging investment environment moving forward, we are optimistic about the rest of 2006 ... nevertheless, equity investing in the near-term may be less rewarding than investors had become accustomed to in recent years," Roche said. As for Janus, second-quarter earnings dropped to $31.1 million, or 15 cents a share, from $35.3 million, or 17 cents a share, a year earlier. Analysts expected earnings of 16 cents a share. Assets under management hit $153.4 billion, little changed year over year and down from the $158.1 billion at the end of the first quarter. The lower assets at the end of the second quarter reflect long-term net outflows of $400 million, money market net inflows of $1.2 billion and $5.5 billion in market depreciation and fund performance. "Despite the downturn in the market and this quarter's flows, Janus has come a long way," chief executive Gary Black said in a statement. "If we keep delivering consistently strong performance, I'm confident our investments in expanding our distribution will pay off." Janus shares recently were off 34 cents, or 2%, to $16.60. JPMorgan analyst Ken Worthington warned in a research note before the earnings report that Janus would be particularly exposed to the recent market downturn "since it has little flexibility to lower costs and its core growth franchise continues to experience net redemptions."