By Ross Kerber Jan 31 Asset manager Legg Mason Inc on Friday reported a profit in the year-end quarter but also gave a mixed picture of flows to its funds, highlighting the task its new chief executive Joseph Sullivan still faces to turn the company around. The results sent shares down 2 percent in morning trading to $42.42, slightly more than other asset managers. Still, Legg Mason has far outperformed peers over the twelve months ended January 30, a period its shares were up 56 percent. With $679.5 billion under management at the end of 2013 Legg Mason remains among the largest fund firms but lost ground during the financial crisis. The chief issue now is its ability to attract cash from investors. For the three months ended December 31 Legg Mason reported a net inflow of $9.9 billion, reflecting money put into its money-market funds. During the quarter, investors also added $700 million to its bond funds, but withdrew $700 million from Legg Mason's equity products. The results came as investors are returning to stock funds that should favor some of the company's equity-heavy divisions. Until Legg Mason can step up its flows, its valuation is likely to lag peers, wrote Sandler O'Neill analyst Michael Kim in a note to investors. He is maintaining his "Hold" rating on the stock. Others said the company deserves more credit considering other factors like better margins and buybacks that have reduced the number of Legg Mason shares outstanding. "Margin Expansion, Lower Sharecount & Flattish Flows is a Victory" was the headline on a note to investors from International Strategy & Investment Group analyst Glenn Schorr. Sullivan was named Legg Mason's chief executive in February of 2013 and since then he has wound down or sold smaller businesses, pushed for new products, and moved to renegotiate financial arrangements with some of its investment units. Among its units are the big Western Asset Management bond division and its ClearBridge equity shop. In an interview on Friday, Sullivan said his work is showing results, especially compared to past quarters in which Legg Mason reported steep outflows. "We're clearly making progress in our flow trajectory, there's no doubt about that," he said. "It's a significant improvement over the past year." For its fiscal third quarter ended Dec. 31, Legg Mason reported net income of $81.7 million, or 67 cents per share, compared with a net loss of $453.9 million, or $3.45 per share, in the same period a year ago, when it took impairment charges. Analysts surveyed by Thomson Reuters I/B/E/S, on average, expected earnings of 66 cents per share in the most recent quarter. Assets under management of $679.5 billion were up from $656 billion at September 30, driven by $13.6 billion in market gains and foreign exchange factors, and net inflows of $9.9 billion.