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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended March 31, 2004

or

For the transition period from              to             

Commission File No. 1-8529

LEGG MASON, INC.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: (410) 539-0000

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: NONE

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).    Yes  x    No  ¨

As of September 30, 2003, the aggregate market value of the registrant’s voting stock, consisting of the registrant’s common stock and the exchangeable shares discussed below, held by non-affiliates was $4,417,879,301.

As of May 21, 2004, the number of shares outstanding of the registrant’s common stock was 66,804,704. In addition, on that date a subsidiary of the registrant had outstanding 1,931,667 exchangeable shares which are convertible on a one-for-one basis at any time into shares of common stock of the registrant.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive proxy statement for its Annual Meeting of Stockholders to be held on July 20, 2004 are incorporated by reference into Part III.

PART I

ITEM 1. BUSINESS.

General

We are a holding company that, through our subsidiaries, is principally engaged in providing the following services to individuals, institutions, corporations, governments and government agencies:

We currently operate through three business segments: Asset Management, Private Client and Capital Markets; however, in reporting our results, we include a fourth segment — Corporate.

In our asset management business, we provide investment advisory services to institutional and individual clients and company-sponsored investment funds. We classify our asset management business into three divisions: Mutual Funds, Institutional and Wealth Management.

In our Mutual Funds business, we sponsor domestic and international equity, fixed income and money market mutual and closed-end funds and other proprietary funds. We have two asset management subsidiaries that primarily focus on managing proprietary investment funds:

Our Institutional asset management subsidiaries provide a wide range of asset management services and products to domestic and international institutional clients. Our Institutional asset management subsidiaries are:

Our Wealth Management subsidiaries provide customized discretionary investment management services and products to high net worth individuals and families, endowments and foundations and institutions. Our Wealth Management subsidiaries are:

Our Private Client and Capital Markets business segment activities are primarily conducted through Legg Mason Wood Walker, Incorporated (“Legg Mason Wood Walker”), our principal broker-dealer subsidiary. Legg Mason Wood Walker is a full service broker-dealer, investment advisor and investment banking firm operating primarily in the Eastern and Southern regions of the United States.

Our Corporate business segment currently consists primarily of unallocated corporate revenues and expenses. Before the September 30, 2003 sale of the mortgage banking and servicing operations of Legg Mason Real Estate Services, Inc. (“LMRES”), our real estate finance and mortgage banking subsidiary, we included these unallocated corporate revenues and expenses in an Other business segment that consisted primarily of the operations of LMRES.

See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Fiscal 2004 Compared with Fiscal 2003 — Results by Segment” for the net revenues and pre-tax earnings of each of our business segments. See Note 18 of Notes to Consolidated Financial Statements in Item 8 of this Report for the net revenues and pre-tax earnings generated by Legg Mason in each of the four principal geographic areas in which we conduct business.

Legg Mason, Inc. was incorporated in Maryland in 1981 to serve as a holding company for Legg Mason Wood Walker and other subsidiaries. The predecessor company to Legg Mason Wood Walker was formed in 1970 under the name Legg Mason & Co., Inc. to combine the operations of Legg & Co., a Maryland-based broker-dealer formed in 1899, and Mason & Company, Inc., a Virginia-based broker-dealer formed in 1962. Our subsequent growth has occurred primarily through internal expansion and the acquisition of asset management and broker-dealer firms.

Additional information about Legg Mason is available on our website at http://www.leggmason.com. We make available, free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and our proxy statements. Investors can find this information under the “Inside Legg Mason-Investor Relations” section of our website. These reports are available through our website as soon as reasonably practicable after we electronically file the material with, or furnish it to, the Securities and Exchange Commission. In addition, the Legg Mason, Inc. Corporate Governance Principles, Code of Conduct for all employees and directors and charters for the committees of our Board of Directors are also available on our corporate website at http://www.leggmason.com under the “Inside Legg Mason-Investor Relations” section. A copy of any of these materials may also be obtained, free of charge, by sending a written request to Corporate Secretary, Legg Mason, Inc., 100 Light Street, Baltimore, Maryland 21202. Within the time frames required by the Securities and Exchange Commission or the New York Stock Exchange, we will post on our website any amendments to the Code of Conduct and any waiver of the Code of Conduct applicable to any executive officer, director, principal financial officer, principal accounting officer or controller. The information on our website is not incorporated by reference into this Report.

Unless the context otherwise requires, all references in this Report to “we,” “us,” “our” and “Legg Mason” include Legg Mason, Inc. and its predecessors and subsidiaries.

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Revenues by Source ⁽¹⁾

LEGG MASON, INC. AND SUBSIDIARIES

Asset Management Business Segment

Our Asset Management business segment provides investment advisory services to institutional and individual clients and company-sponsored investment funds. Operating in offices primarily located in the United States, and also located in the United Kingdom, Canada and Singapore, our asset management subsidiaries provide a broad array of investment management products and services. Our investment products include proprietary mutual funds ranging from money market and fixed income funds to equity funds managed in a wide variety of investing styles, domestic and offshore funds and certain unregistered, alternative investment products.

In our asset management business, our subsidiaries primarily earn revenues by charging fees for managing the investment assets of clients. Fees are typically calculated as a percentage of the value of assets under

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management and vary with the type of account managed, the asset manager and the type of client. Our asset management subsidiaries also may earn performance fees from certain accounts if the investment performance of the assets in the account exceeds a specified benchmark during a measurement period. Accordingly, the fee income of each of our asset management subsidiaries will typically increase or decrease as its average assets under management increases or decreases. Increases in assets under management generally result from appreciation in the value of client assets and from inflows of additional assets from new and existing clients. Conversely, decreases in assets under management generally result from asset value depreciation and from client redemptions and withdrawals.

As of March 31 of each of the last three years, our subsidiaries had the following aggregate assets under management:

Our asset management business has had steady growth over the last ten years, both in absolute terms and in terms of the percentage of our revenues and profits that it generates. During that period, our assets under management have grown from $16.7 billion to $286.4 billion and our investment advisory and related fee revenues, which include distribution fees that are included in the Private Client business segment, have grown from $96.9 million to $1.2 billion. This growth in our asset management business has occurred through both internal growth and strategic acquisitions of asset management businesses. More recently, we have sought to grow our asset management business internationally, and, as a result, $48.5 billion of our assets under management are either in offshore funds or are managed by our non-U.S.-based subsidiaries. It is our strategy to continue to grow our asset management business, both in absolute terms and as percentages of our total revenues and profits.

We believe that market conditions and the investment performance of our asset management subsidiaries will be critical elements in our attempts to grow our assets under management and asset management business. When securities markets are strong, our assets under management will tend to increase because of market growth, resulting in increased asset management revenues. Similarly, if our asset management subsidiaries can produce strong investment results relative to those of other investment managers, our assets under management will tend to increase as a result of the investment performance. In addition, strong market conditions or strong relative investment performance can result in increased inflows in assets from existing and new clients. Conversely, in periods when securities markets are weak or declining, or when our asset management subsidiaries have not produced strong relative performance, it is likely to be more difficult to grow our assets under management and asset management business and, in such periods, our assets under management and asset management business are more likely to decline.

Our asset management subsidiaries manage the accounts of their clients pursuant to written investment management contracts between the client and the subsidiary. These contracts generally specify the management fees to be paid by the client and the investment strategy for the account, and are generally terminable by either party on relatively short notice. Investment management contracts may not be assigned (including as a result of transactions, such as a direct or indirect change of control of the asset management subsidiary, that would constitute an assignment under the Investment Advisers Act of 1940) without the prior consent of the client. When the asset management client is a registered mutual fund or closed-end fund (whether or not a Legg Mason subsidiary has sponsored the fund), the fund’s board of directors must annually approve the investment management contract, and any material changes to the contract or assignment of the contract (including as a

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result of transactions, such as a direct or indirect change of control of the asset management subsidiary, that would constitute an assignment under the Investment Company Act of 1940) must be approved by the investors in the fund.

We conduct our asset management business primarily through 15 subsidiaries. Each of these subsidiaries generally focuses on a different aspect of the asset management business in terms of the types of assets managed (primarily equity or fixed income), the types of products and services offered, the investment styles utilized, the distribution channels used and the types and geographic locations of its clients. These subsidiaries are generally operated as individual businesses, in many cases with certain administrative functions being provided by the parent company and other affiliates, that market their products and services under their own brand names. Consistent with this approach, we have in place revenue sharing agreements with Legg Mason Funds Management and Legg Mason Capital Management, Royce & Associates, Western Asset Management Company and Western Asset Management Company Limited, Brandywine Asset Management, Batterymarch Financial Management, Private Capital Management, Bartlett & Co., Barrett Associates and Berkshire Asset Management and/or certain of their key officers. Pursuant to these revenue sharing agreements, a specified percentage of the subsidiary’s revenues is required to be distributed to us, and the balance of the revenues is retained to pay operating expenses, including salaries and bonuses, with specific expense and compensation allocations being determined, subject to our approval, by the subsidiary’s management.

We classify our asset management business into three divisions: Mutual Funds, Institutional and Wealth Management. Mutual Funds encompasses the subsidiaries that are primarily engaged in providing investment advisory services to proprietary mutual and closed-end funds and the proprietary funds operations of our other asset managers. Our Institutional managers are subsidiaries that focus on providing asset management services for institutional clients. Our Wealth Managers are subsidiaries that primarily focus on providing asset management services for high net worth individuals and family groups and endowments. There is overlap among the three groups of subsidiaries as many of our Institutional subsidiaries and Wealth Managers also manage investment funds that are part of the Mutual Funds division and each subsidiary may provide asset management services to other types of clients. Our asset management divisions are described in more detail below.

Our assets under management by division (in billions) as of March 31 of each of the three years indicated below was as follows:

Mutual Funds includes all assets in our proprietary investment funds and all separate accounts managed by our Mutual Funds subsidiaries. Institutional includes all non-proprietary investment fund assets managed by our Institutional managers. Wealth Management includes all non-proprietary investment fund assets managed by our Wealth Managers. In addition, assets managed by other subsidiaries that are not part of our Asset Management business segment are included in Institutional or Wealth Management as appropriate.

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For the fiscal years ended March 31, 2004, 2003 and 2002, our Asset Management segment produced aggregate net revenues of $969.3 million, $648.1 million and $557.9 million, respectively. Our net revenues by division (in millions) within our Asset Management segment for each of those fiscal years was as follows:

We calculate our net revenues by Asset Management division in a different manner from the way we calculate our assets under management by Asset Management division. In reporting our net revenues by Asset Management division, we include in each division all revenues of the subsidiaries within the division, including revenues earned for providing investment advisory services to proprietary funds, rather than crediting revenues from proprietary funds to the Mutual Funds division. Revenues for the Mutual Funds division also include revenues for certain administrative, marketing, sales and distribution services (excluding those distribution and service fee revenues that are included in our Private Client business segment) provided to proprietary mutual funds. Revenues for the Institutional division also include revenues for certain administrative, marketing, sales and distribution services provided to proprietary offshore funds.

Mutual Funds

In our Mutual Funds division, we sponsor domestic and international equity, fixed income and money market mutual funds, closed-end funds and other proprietary funds. As of March 31, 2004 and 2003 our Mutual Funds division managed assets with value of $64.3 billion and $35.9 billion, respectively. Approximately 47% of the growth in assets managed by this division during the fiscal year resulted from positive net client cash flows, and almost all of the remainder of the growth resulted from asset appreciation. Our mutual funds business primarily consists of two families of proprietary mutual and closed-end funds, the Legg Mason Funds and the Royce Funds. The Legg Mason Funds invest in a wide range of domestic and international equity and fixed income securities utilizing a number of different investment styles. The Royce Funds invest primarily in small-cap domestic company stocks using a value investment approach. Of our $64.3 billion in Mutual Funds assets as of March 31, 2004, $43.5 billion were in these two proprietary fund families.

The Legg Mason Funds consist of 22 separate mutual funds. Of these funds, three are money market funds, eight invest primarily in taxable or tax-free fixed income securities, nine invest primarily in domestic equity securities and two invest primarily in international equity securities. Investment objectives for the Legg Mason Funds range from capital appreciation to current income. Equity investment strategies may emphasize large-cap, mid-cap or small-cap investing. The largest of the Legg Mason Funds is Legg Mason Value Trust, Inc., which had $14.2 billion in assets as of March 31, 2004 and has received recognition for its investment performance over the last 13 calendar years.

Legg Mason Funds Management, Inc. is the primary equity investment advisor to the Legg Mason Funds. Legg Mason Funds Management serves as investment advisor to four of the equity funds in the Legg Mason Funds family, including Legg Mason Value Trust, Inc. Legg Mason Funds Management also sub-advises the mutual fund managed by the joint venture described below and investment products sponsored by Legg Mason Canada and Legg Mason Investments. Legg Mason Funds Management’s investment process uses a variety of techniques to develop an estimate of the worth of a business over the long term. The objective is to identify companies where the intrinsic value of the business is significantly higher than the current market value.

We and one of our employees each own 50% of a joint venture subsidiary that serves as investment manager of one equity fund, Legg Mason Opportunity Trust, within the Legg Mason Funds family. All of the assets managed by this joint venture, $3.2 billion at March 31, 2004, are included in our assets under management.

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In addition to Legg Mason Funds Management and the joint venture, a number of our other subsidiaries manage Legg Mason Funds. Western Asset Management Company serves as investment advisor to five taxable fixed income funds and two taxable money market funds; Legg Mason Trust, fsb serves as investment advisor to three tax-exempt fixed income funds and one tax-exempt money market fund; Batterymarch Financial Management serves as investment advisor to two international equity funds; Brandywine Asset Management serves as investment advisor to two equity funds; and Bartlett & Co. and Barrett Associates each serve as investment advisor to one equity fund.

The Royce Funds consist of 18 mutual funds and three closed-end funds that invest primarily in small-cap domestic company stocks. The investment objective of each of these funds is long-term appreciation of capital using a value approach. The funds differ in their approaches to investing in small or micro-cap companies and the universe of securities from which they can select. Further, two of the funds are used as funding vehicles for insurance products.

Royce & Associates, LLC is investment advisor to all of the Royce Funds. In addition, Royce & Associates also manages other accounts that invest primarily in small-cap domestic company stocks, using a value approach. Royce & Associates’ stock selection process seeks to identify companies with strong balance sheets and the ability to generate free cash flow. Royce & Associates pursues securities that are priced below their estimate of current worth.

Our proprietary mutual funds are distributed through a number of channels. Legg Mason Wood Walker is the principal underwriter for the Legg Mason Funds, which are primarily distributed to retail investors through our Private Client Group financial advisors and through our funds marketing departments. The Royce Funds are primarily distributed through non-affiliated funds supermarkets, non-affiliated wrap programs, direct distribution and our Private Client Group financial advisors. In addition, two of the portfolios in the Royce Funds are distributed only through insurance companies. For the fiscal years ended March 31, 2004, 2003 and 2002, we received from our proprietary mutual funds and offshore investment funds approximately $190.1 million, $137.0 million and $160.0 million, respectively, in asset-based distribution and service fees, of which $147.9 million, $112.7 million and $132.5 million, respectively, are included in the Private Client business segment.

Our Mutual Funds division also includes the Western Asset Funds, a proprietary family of mutual funds that are marketed primarily to institutional investors. Western Asset Management Company sponsors these funds and manages them using a team approach under the supervision of Western Asset’s investment committee. The funds primarily invest in fixed income securities. Western Asset also manages four closed-end funds. The Western Asset Funds, and the institutional and financial intermediary classes of the Legg Mason Funds, are marketed to institutional investors primarily through our institutional funds marketing department.

Our Mutual Funds division also includes seven groups of proprietary funds that are sponsored and managed by our Institutional managers, Mutual Funds managers and Private Capital Management and are offered and sold only outside of the United States to non-U.S. persons. Domiciled in Ireland, the Legg Mason Global Funds plc is a family of 14 funds managed by Western Asset Management Company, Legg Mason Funds Management, Batterymarch Financial Management, Brandywine Asset Management, and Royce & Associates. The U.S. Select Value Fund, a sub-fund of the Legg Mason Select Funds plc, is also an Ireland domiciled fund that is managed by Private Capital Management. Western Asset Management Company Limited sponsors and manages the Western Asset Funds plc, another Ireland domiciled funds family that consists of 41 fixed income funds. The Legg Mason Worldwide family of funds consists of two funds domiciled in Luxembourg that are managed by Batterymarch Financial Management. Legg Mason Canada manages a group of 17 Canadian funds that are sold in Canada. Legg Mason Investments sponsors a group of ten funds domiciled in the United Kingdom. Finally, Legg Mason Asset Management (Asia) Pte Ltd manages and sponsors a family of seven unit trusts domiciled in Singapore.

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Institutional

Our Institutional managers provide a wide range of asset management services and products to domestic and international institutional clients. These subsidiaries manage a range of domestic, international and global equity, balanced, fixed income and cash management portfolios for their institutional clients. Our domestic and international institutional clients include pension and other retirement funds, corporations, insurance companies, endowments and foundations and governments. Our seven primary Institutional asset management subsidiaries are described below.

As of March 31, 2004 and 2003, our Institutional asset management subsidiaries managed assets with a value of $186.3 billion and $135.8 billion, respectively (excluding assets with a value of $18.7 billion and $13.2 billion, respectively, in proprietary funds managed by these subsidiaries). These amounts also exclude $0.7 billion and $1.0 billion, respectively, of institutional assets managed by subsidiaries, primarily LMRES, outside of our Asset Management business segment. Over 75% of the assets managed by our Institutional managers (excluding assets in proprietary funds managed by these subsidiaries) are in fixed income assets managed by Western Asset and Western Asset Limited. Similarly, over 70% of the growth in assets managed by our Institutional managers during the fiscal year (excluding assets in proprietary funds managed by these subsidiaries) resulted from growth in fixed income assets managed by Western Asset and Western Asset Limited, supplemented by growth in assets managed by Brandywine, Batterymarch, and Legg Mason Capital Management. Approximately 53% of the growth in assets managed by the subsidiaries in this division during the fiscal year (excluding assets in proprietary funds managed by these subsidiaries) resulted from positive net client cash flows, and almost all of the remainder of the growth resulted from asset appreciation.