Back to GetFilings.com

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

[ ü ] Annual Report Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

For the fiscal year ended December 31, 2002

or

[    ] Transition Report Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Commission File No. 1-7410

MELLON FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

One Mellon Center

Pittsburgh, Pennsylvania 15258-0001

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code - (412) 234-5000

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

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

None

(Title of Class)

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.    [ ü ] Yes [    ] 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.    [ ü ]

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

As of June 30, 2002, 431,507,769 shares of the registrant’s outstanding voting common stock, $0.50 par value per share, having a market value of $13,562,289,180, were held by nonaffiliates.

As of February 28, 2003, 431,627,527 shares of the registrant’s voting common stock, $0.50 par value per share, were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the following documents are incorporated by reference in the following parts of this Annual Report:

Mellon Financial Corporation 2003 Proxy Statement-Part III

Mellon Financial Corporation 2002 Financial Annual Report to Shareholders-Parts I, II and IV

Table of Contents

The Form 10-K filed with the Securities and Exchange Commission contains the Exhibits listed on the Index to Exhibits beginning on page 36, including the Financial Review, Financial Statements and Notes, and Corporate Information section from the Corporation’s 2002 Financial Annual Report to Shareholders. For a free copy of the Corporation’s 2002 Summary Annual Report to Shareholders, the 2002 Financial Annual Report to Shareholders, the Proxy Statement for its 2003 Annual Meeting, or a copy of the Corporation’s Management Report on Internal Controls, as filed with the appropriate regulatory agencies, please send a written request to the Secretary of the Corporation, Room 4826 One Mellon Center, Pittsburgh, PA 15258-0001. The Corporation’s 2002 Summary and Financial Annual Reports to Shareholders, and the Proxy Statement for its 2003 Annual Meeting are also available on the Corporation’s Internet site at www.mellon.com. The Corporation also makes available, free of charge, on its Internet site, the Corporation’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports as soon as reasonably practicable after it electronically files such materials with, or furnishes them to, the Securities and Exchange Commission. The contents of this Internet site are not part of this Annual Report on Form 10-K.

Cautionary Statement

See pages 30 through 32 of this report for the Cautionary Statement.

Table of Contents

MELLON FINANCIAL CORPORATION

Form 10-K Index

2

Table of Contents

PART I

ITEM 1.  BUSINESS

Description of Business

Mellon Financial Corporation (the “Corporation”) is a global financial services company incorporated under the laws of Pennsylvania in August 1971 and registered under the Federal Bank Holding Company Act of 1956, as amended. Founded in 1869, the Corporation today is one of the world’s leading providers of financial services to corporations, institutions and high net worth individuals. For corporations and institutions, the Corporation provides asset management; asset servicing, including trust and custody, performance analytics, securities lending, foreign exchange, defined contribution and defined benefit services, and fund administration; human resources consulting and outsourcing services; investor services; treasury services and capital markets services. For high net worth individuals, the Corporation provides private wealth management and private banking, mutual funds, separately managed accounts, annuities and brokerage accounts.

The Corporation’s asset management subsidiaries, which include The Dreyfus Corporation (“Dreyfus”), Newton Investment Management (“Newton”), Founders Asset Management, LLC (“Founders”) and Standish Mellon Asset Management Company LLC (“Standish Mellon”), as well as a number of additional investment management boutiques, provide investment products in many asset classes and investment styles. Dreyfus, headquartered in New York, New York, serves primarily as an investment adviser and manager of mutual funds. Newton is a leading U.K.-based investment manager that provides investment management services to institutional, private and retail clients. Founders, headquartered in Denver, Colorado, is a manager of growth-oriented equity mutual funds and other investment portfolios. Standish Mellon is a Boston-based provider of investment management services to institutional clients. The Corporation provides retirement and benefits consulting services through Buck Consultants, Inc. (“Buck”), which is headquartered in New York, New York, comprehensive human resources outsourcing and benefit plan administration services through Mellon HR Solutions, LLC, which is headquartered in Fort Lee, New Jersey, and shareholder and security transfer services through Mellon Investor Services, LLC, which is headquartered in Ridgefield Park, New Jersey.

Mellon Bank, N.A. (“Mellon Bank”), which has its executive offices in Pittsburgh, Pennsylvania, became a subsidiary of the Corporation in November 1972. With its predecessors, Mellon Bank has been in business since 1869. The Corporation’s banking subsidiaries include Boston Safe Deposit and Trust Company (headquartered in Boston) (“BSDT”), Mellon United National Bank (headquartered in Miami), Mellon Bank (DE) National Association (headquartered in Wilmington, DE) and Mellon 1st Business Bank (headquartered in Los Angeles), in addition to Mellon Bank. They engage in trust and custody, investment management services, commercial banking and various securities-related activities. The deposits of the banking subsidiaries are insured by the Federal Deposit Insurance Corporation (“FDIC”) to the extent provided by law.

The Corporation’s businesses are divided into two overall reportable groups — Asset Management and Corporate & Institutional Services. The Asset Management group is comprised of the Institutional Asset Management, Mutual Funds and Private Wealth Management sectors. The Corporate & Institutional Services group is comprised of the Asset Servicing, Human Resources Services and Treasury Services sectors.

Further information regarding the Corporation’s “Core” business sectors (as mentioned above), as well as “Other Activity” is presented in the Business Sectors section found on pages 19 through 34 of the Corporation’s 2002 Financial Annual Report to Shareholders, which pages are incorporated herein by reference. A brief discussion of the business sectors is presented on the following page. There is

3

Table of Contents

ITEM 1.  BUSINESS (continued)

Description of Business (continued)

considerable interrelationship among these sectors and among the customer segments grouped within these sectors. Information on international operations is presented in the Corporation’s 2002 Financial Annual Report to Shareholders in Note 33 of Notes to Financial Statements (Notes) on page 119 which note is incorporated herein by reference.

Institutional Asset Management

Institutional Asset Management is comprised of Mellon Institutional Asset Management, which consists of a number of individual asset management companies offering a broad range of equity, fixed income and liquidity management products; and Mellon Global Investments, which distributes investment management products internationally.

Mutual Funds

Mutual Funds consists of all the activities associated with the Dreyfus/Founders complex of mutual funds.

Private Wealth Management

Private Wealth Management consists of investment management, wealth management and private banking services for high net worth individuals, including the activities of Mellon United National Bank in Florida.

Asset Servicing

Asset Servicing includes institutional trust and custody, foreign exchange, securities lending, back office outsourcing for investment managers, and substantially all of the Corporation’s joint ventures.

Human Resources Services

Human Resources (HR) Services includes three lines of business: Buck Consultants, Mellon HR Solutions and Mellon Investor Services. The HR Services sector provides human resources consulting, outsourcing and administrative services that leverage technology to support client HR administration and employee benefit plan administration, as well as investor services such as shareholder and securities transfer services.

Treasury Services

Treasury Services includes global cash management, credit products for large corporations, insurance premium financing, commercial real estate lending, corporate finance and derivative products, securities underwriting and trading, and the activities of Mellon 1st Business Bank in California.

Other Activity

Other Activity includes results for large ticket leasing, which is in runoff mode, and certain lending relationships that are part of the Corporation’s business exits strategy; the results of Mellon Ventures, the Corporation’s venture capital group; and business activities or utilities, including Corporate Treasury, that are not separate lines of business or have not been fully allocated, for management reporting purposes, to the core business sectors.

4

Table of Contents

ITEM 1.  BUSINESS (continued)

Description of Business (continued)

Principal Entities

Exhibit 21.1 to this Annual Report on Form 10-K presents a list of the primary subsidiaries of the Corporation as of Dec. 31, 2002.

Discontinued operations

As discussed in Note 4 of the Corporation’s 2002 Financial Annual Report to Shareholders, the Corporation is reporting its results using the discontinued operations method of accounting. Accordingly, all information in this Annual Report on Form 10-K, including all supplemental information, reflects continuing operations unless otherwise noted.

Supervision and Regulation

The Corporation and its bank subsidiaries are subject to an extensive system of banking laws and regulations that are intended primarily for the protection of the customers and depositors of the Corporation’s bank subsidiaries rather than holders of the Corporation’s securities. These laws and regulations govern such areas as permissible activities, reserves, loans and investments, and rates of interest that can be charged on loans. Similarly, the Corporation’s subsidiaries engaged in investment advisory and other securities related activities are subject to various U.S. federal and state laws and regulations that are intended to benefit clients of investment advisors and shareholders in mutual funds rather than holders of the Corporation’s securities. In addition, the Corporation and its subsidiaries are subject to general U.S. federal laws and regulations and to the laws and regulations of the states or countries in which they conduct their businesses. Described below are the material elements of selected laws and regulations applicable to the Corporation and its subsidiaries. The descriptions are not intended to be complete and are qualified in their entirety by reference to the full text of the statutes and regulations described. Changes in applicable law or regulation, and in their application by regulatory agencies, cannot be predicted, but they may have a material effect on the business and results of the Corporation and its subsidiaries.

Regulated Entities of the Corporation

The Corporation is regulated as a bank holding company and a financial holding company under the Bank Holding Company Act of 1956, as amended by the 1999 financial modernization legislation known as the Gramm-Leach-Bliley Act (the “BHC Act”). As such it is subject to the supervision of the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”). In general, the BHC Act limits the business of bank holding companies that are financial holding companies to banking, managing or controlling banks, performing certain servicing activities for subsidiaries, and as a result of the Gramm-Leach-Bliley Act amendments to the BHC Act, engaging in any activity, or acquiring and retaining the shares of any company engaged in any activity, that is either (1) financial in nature or incidental to such financial activity (as determined by the Federal Reserve Board in consultation with the Office of the Comptroller of the Currency (the “OCC”)) or (2) complementary to a financial activity and does not pose a substantial risk to the safety and soundness of depository institutions or the financial system generally (as solely determined by the Federal Reserve Board). Activities that are financial in nature include securities underwriting and dealing, insurance underwriting and making merchant banking investments in commercial and financial companies. They also include activities that the Federal Reserve Board had determined, by order or regulation in effect prior to the enactment of the BHC Act, to be so closely related to banking or managing or controlling banks as to be a proper incident thereto.

5

Table of Contents

ITEM 1.  BUSINESS (continued)

Supervision and Regulation (continued)

In order for a bank holding company to engage in the broader range of activities that are permitted by the BHC Act for bank holding companies that are also financial holding companies, (1) all of its depository institutions must be well-capitalized and well-managed and (2) it must file a declaration with the Federal Reserve Board that it elects to be a “financial holding company”. In addition, to commence any new activity permitted by the BHC Act and to acquire any company engaged in any new activities permitted by the BHC Act, each insured depository institution of the financial holding company must have received at least a “satisfactory” rating in its most recent examination under the Community Reinvestment Act. On Jan. 24, 2000, the Corporation filed a notice with the Federal Reserve Bank of Cleveland that it elected to become a financial holding company. The election became effective on March 13, 2000.

The Corporation’s national bank subsidiaries are subject to primary supervision, regulation and examination by the OCC. BSDT, a Massachusetts chartered bank, is subject to supervision, regulation and examination by the Federal Reserve Board and the Commonwealth of Massachusetts Department of Banking. Mellon Securities Trust Company, The Dreyfus Trust Company and Mellon Trust of New York are New York trust companies and are supervised by the New York State Department of Banking. Mellon Trust of California is a California trust company and is supervised by the State of California Department of Financial Institutions. Mellon Trust of Washington is a Washington trust company and is supervised by the Division of Banks of the Washington State Department of Financial Institutions. Mellon Private Trust Company, National Association, located in Miami, Florida, is a limited purpose national bank supervised by the OCC. Mellon 1st Business Bank is a California non-member bank and is subject to supervision, regulation and examination by the FDIC and the State of California Department of Financial Institutions.

The Corporation’s non-bank subsidiaries engaged in securities related activities are regulated by the Securities and Exchange Commission (the “SEC”). The Corporation operates a number of broker-dealers that engage in securities underwriting and other broker-dealer activities. These companies are registered broker-dealers and members of the National Association of Securities Dealers, Inc., a securities industry self-regulatory organization.

Certain subsidiaries of the Corporation are registered investment advisors under the Investment Advisors Act of 1940 and, as such, are supervised by the SEC. They are also subject to various U.S. federal and state laws and regulations and to the laws of any countries in which they conduct business. These laws and regulations generally grant supervisory agencies broad administrative powers, including the power to limit or restrict the carrying on of business for failure to comply with such laws and regulations. Subsidiaries of the Corporation advise both public investment companies which are registered with the SEC under the Investment Company Act of 1940, including the Dreyfus/Founders family of mutual funds, and private investment companies which are not so registered. The shares of most investment companies advised by the Corporation’s subsidiaries are qualified for sale in all states in the United States and the District of Columbia, except for investment companies that offer products only to residents of a particular state or of a foreign country and except for certain investment companies which are exempt from such registration or qualification.

6

Table of Contents

ITEM 1.  BUSINESS (continued)

Supervision and Regulation (continued)

Certain of the Corporation’s United Kingdom incorporated subsidiaries are authorized to conduct investment business in the UK pursuant to the UK Financial Services and Markets Act 2000 (“FSMA 2000”). Their investment management advisory activities and their sale and marketing of retail investment products are regulated by the Financial Services Authority (“FSA”). In addition to broad supervisory powers, the FSA may discipline the businesses it regulates. Disciplinary powers include the power to temporarily or permanently revoke the authorization to carry on regulated business following a breach of FSMA 2000 and/or regulatory rules, the suspension of registered employees and censures and fines for both regulated businesses and their registered employees. Certain UK investment funds, including Newton Investment Funds, an open ended investment company with variable capital advised by UK regulated subsidiaries of the Corporation, are registered with the Financial Services Authority and are offered for retail sale in the UK.

Certain of the Corporation’s public finance activities are regulated by the Municipal Securities Rulemaking Board. Mellon Bank and certain of the Corporation’s other subsidiaries are registered with the Commodity Futures Trading Commission (the “CFTC”) as commodity pool operators or commodity trading advisors and, as such, are subject to CFTC regulation.

The types of activities in which the foreign branches of the Corporation’s banking subsidiaries and the international subsidiaries of the Corporation may engage are subject to various restrictions imposed by the Federal Reserve Board. Those foreign branches and international subsidiaries are also subject to the laws and regulatory authorities of the countries in which they operate.

Dividend Restrictions

The Corporation is a legal entity separate and distinct from its bank and other subsidiaries. Its principal sources of funds to pay dividends on its common and preferred (if any) stock and debt service on its debt are dividends and interest from its subsidiaries. Various federal and state statutes and regulations limit the amount of dividends that may be paid to the Corporation by its bank subsidiaries without regulatory approval. The Corporation’s principal bank subsidiary, Mellon Bank, is a national bank. A national bank must obtain the prior approval of the OCC to pay a dividend if the total of all dividends declared by the bank in any calendar year would exceed the bank’s net income for that year combined with its retained net income for the preceding two calendar years, less any required transfers to surplus or to fund the retirement of any preferred stock. In addition, a national bank may pay dividends only to the extent of its undivided profits. The Corporation’s state-chartered bank subsidiaries also are subject to dividend restrictions under applicable state law. Under the foregoing dividend restrictions, as of Dec. 31, 2002, the Corporation’s national and state member bank subsidiaries, without obtaining affirmative governmental approvals, could pay aggregate dividends of up to approximately $555 million, less any dividends declared and plus or minus net profits or losses, as defined, earned between Jan. 1, 2003, and the date of any dividend declaration. In 2002, the Corporation’s bank and non-bank subsidiaries declared $957 million in dividends.

If, in the opinion of the applicable federal regulatory agency, a depository institution under its jurisdiction is engaged in or is about to engage in an unsafe or unsound practice (which, depending on the financial condition of the bank, could include the payment of dividends), the regulator may require, after notice and hearing, that the bank cease and desist from such practice. The OCC and the FDIC have indicated that the payment of dividends would constitute an unsafe and unsound practice if the payment would deplete a depository institution’s capital base to an inadequate level. Moreover, under the Federal Deposit Insurance Act, as amended (the “FDI Act”), an insured depository institution may not pay any dividend if the institution is undercapitalized or if the payment of the dividend would cause the institution to become

7

Table of Contents

ITEM 1.  BUSINESS (continued)

Supervision and Regulation (continued)

undercapitalized. In addition, the federal bank regulatory agencies have issued policy statements which provide that FDIC-insured depository institutions and their holding companies should generally pay dividends only out of their current operating earnings.

The ability of the Corporation’s bank subsidiaries to pay dividends to the Corporation may also be affected by various minimum capital requirements for banking organizations, as described below. In addition, the right of the Corporation to participate in the assets or earnings of a subsidiary are subject to the prior claims of creditors of the subsidiary.

Transactions with Affiliates

There are certain restrictions on the ability of the Corporation and certain of its non-bank affiliates to borrow from, and engage in other transactions with, its bank subsidiaries and on the ability of such bank subsidiaries to pay dividends to the Corporation. In general, these restrictions require that any extensions of credit must be secured by designated amounts of specified collateral and are limited, as to any one of the Corporation or such non-bank affiliates, to 10% of the lending bank’s capital stock and surplus, and, as to the Corporation and all such non-bank affiliates in the aggregate, to 20% of such lending bank’s capital stock and surplus. As a result of the Gramm-Leach-Bliley Act amendments to the BHC Act, these restrictions, other than the 10% of capital limit on covered transactions with any one affiliate, are also applied to transactions between national banks and their financial subsidiaries. In addition, certain transactions with affiliates must be on terms and conditions, including credit standards, that are substantially the same, or at least as favorable to the institution, as those prevailing at the time for comparable transactions involving other non-affiliated companies or, in the absence of comparable transactions, on terms and conditions, including credit standards, that in good faith would be offered to, or would apply to, non-affiliated companies.

Unsafe and Unsound Practices

The OCC has authority under the Financial Institutions Supervisory Act to prohibit national banks from engaging in any activity which, in the OCC’s opinion, constitutes an unsafe or unsound practice in conducting their businesses. The Federal Reserve Board has similar authority with respect to the Corporation, BSDT and the Corporation’s non-bank subsidiaries, including Mellon Securities Trust Company, a member of the Federal Reserve System. The FDIC has similar authority with respect to Mellon 1st Business Bank.

Deposit Insurance

Substantially all of the deposits of the bank subsidiaries of the Corporation are insured up to applicable limits by the Bank Insurance Fund (“BIF”) of the FDIC and are subject to deposit insurance assessments to maintain the BIF. The FDIC utilizes a risk-based assessment system which imposes insurance premiums based upon a matrix that takes into account a bank’s capital level and supervisory rating. Such premiums now range from 0 cents for each $100 of domestically-held deposits for well-capitalized and well-managed banks to 27 cents for each $100 of domestically-held deposits for the weakest institutions. The Corporation’s bank subsidiaries currently are not required to pay insurance premiums to the FDIC. In addition, the Deposit Insurance Fund Act of 1996 authorizes the Financing Corporation (“FICO”) to impose assessments on BIF assessable deposits in order to service the interest on FICO’s bond obligations. The FICO current annual assessment on these deposits is approximately 1.68 cents for each $100 of domestically-held deposits. The FDIC is authorized to raise insurance premiums in certain circumstances.

8

Table of Contents

ITEM 1.  BUSINESS (continued)

Supervision and Regulation (continued)

Under the FDI Act, insurance of deposits may be terminated by the FDIC upon a finding that the institution has engaged in unsafe and unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by a bank’s federal regulatory agency.

Liability of Commonly Controlled Institutions and Related Matters

The FDI Act contains a “cross-guarantee” provision that could result in any insured depository institution owned by the Corporation being assessed for losses incurred by the FDIC in connection with assistance provided to, or the failure of, any other insured depository institution owned by the Corporation. Also, under the BHC Act and Federal Reserve Board policy, the Corporation is expected to act as a source of financial and managerial strength to each of its bank subsidiaries and to commit resources to support each such bank in circumstances where such bank might not be in a financial position to support itself.

Any capital loans by a bank holding company to any of its bank subsidiaries are subordinate in right of payment to deposits and to certain other indebtedness of such bank subsidiaries. In the event of a bank holding company’s bankruptcy, any commitment by the bank holding company to a federal bank regulatory agency to maintain the capital of a subsidiary bank will be assumed by the bankruptcy trustee and entitled to a priority of payment.

In addition, under the National Bank Act, if the capital stock of a national bank is impaired by losses or otherwise, the OCC is authorized to require payment of the deficiency by assessment upon the bank’s shareholders, pro rata, and to the extent necessary, if any such assessment is not paid by any shareholder after three months notice, to sell the stock of such shareholder to make good the deficiency.

Regulatory Capital

The Federal Reserve Board, the OCC and FDIC have substantially similar risk-based capital and leverage ratio guidelines for banking organizations. The guidelines are intended to ensure that banking organizations have adequate capital given the risk levels of their assets and off-balance sheet financial instruments.

The risk-based capital ratio is determined by classifying assets and certain off-balance sheet financial instruments into weighted categories, with higher levels of capital being required for those categories perceived as representing greater risk. Under the capital guidelines, a banking organization’s total capital is divided into tiers. “Tier I capital” consists of (1) common equity, (2) qualifying noncumulative perpetual preferred stock, (3) a limited amount of qualifying cumulative perpetual preferred stock and (4) minority interests in the equity accounts of consolidated subsidiaries (including trust-preferred securities), less goodwill and certain other intangible assets. Not more than 25% of qualifying Tier I capital may consist of trust-preferred securities. “Tier II capital” consists of hybrid capital instruments, perpetual debt, mandatory convertible debt securities, a limited amount of subordinated debt, preferred stock that does not qualify as Tier I capital, a limited amount of the allowance for loan and lease losses and a limited amount of unrealized holding gains on equity securities. “Tier III capital” consists of qualifying unsecured subordinated debt. The sum of Tier II and Tier III capital may not exceed the amount of Tier I capital.

In January 2002, the U.S. federal bank regulators adopted rules, effective April 1, 2002, governing the regulatory capital treatment of equity investments in nonfinancial companies. The rules require a series of marginal capital charges on covered equity investments that increase with the level of those investments as a

9

Table of Contents

ITEM 1.  BUSINESS (continued)

Supervision and Regulation (continued)

percentage of Tier I capital. With certain exceptions, including investments grandfathered under the rules, the rules require that the Corporation and its bank subsidiaries deduct from Tier I capital the appropriate percentage set out below:

The new rules did not have a material effect on the Corporation or its banking subsidiaries’ capital requirements.

The risk-based capital requirements identify concentration of credit risk and certain risks arising from non-traditional activities, and the management of those risks, as important factors to consider in assessing an institution’s overall capital adequacy. In addition, the risk-based capital rules incorporate a measure for market risk in foreign exchange and commodity activities and in the trading of debt and equity instruments. The market risk-based capital rules require banking organizations with large trading activities to maintain capital for market risk in an amount calculated by using the banking organizations’ own internal value-at-risk models, subject to parameters set by the regulators.

Under the Federal Reserve Board’s risk-based capital guidelines for bank holding companies, the required minimum ratio of “Total capital” (the sum of Tier I, Tier II and Tier III capital) to risk-adjusted assets (including certain off-balance sheet items, such as standby letters of credit) is currently 8%. The required minimum ratio of Tier I capital to risk-adjusted assets is 4%. At Dec. 31, 2002, the Corporation’s Total capital and Tier I capital to risk-adjusted assets ratios were 12.48% and 7.87%, respectively.

The U.S. federal bank regulatory agencies’ risk-capital guidelines are based upon the 1988 capital accord of the Basel Committee on Banking Supervision (the “BIS”). The BIS is a committee of central banks and bank supervisors/regulators from the major industrialized countries that develops broad policy guidelines that each country’s supervisors can use to determine the supervisory policies they apply. In January 2001, the BIS released a proposal to replace the 1988 capital accord with a new capital accord that would set capital requirements for operational risk and refine the existing capital requirements for credit risk and market risk exposures. Operational risk is defined to mean the risk of direct or indirect loss resulting from inadequate or failed internal processes, people and systems or from external events. The 1988 capital accord does not include separate capital requirements for operational risk. The BIS proposal outlines several alternatives for capital assessment of operational risks, including two standardized approaches (the “Basic Indicator Approach” and the “Standardized Approach”) and an “advanced measurement approach” tailored to individual institutions’ circumstances. The BIS has stated that its objective is to finalize a new capital accord in the fourth quarter of 2003 and for member countries to implement the new accord at year-end 2006. The ultimate timing for a new accord, and the specifics of capital assessments for addressing operational risk, are uncertain. However, the Corporation expects that a new capital accord addressing operational risk will eventually be adopted by the BIS and implemented by the U.S. federal bank regulatory agencies. Because of the uncertainty as to the final requirements for addressing this risk, the Corporation

10

Table of Contents

ITEM 1.  BUSINESS (continued)

Supervision and Regulation (continued)

cannot, at this time, determine with certainty if future capital requirements will be higher or lower, but as presently proposed, the requirements would lead to an increase in required capital.

The Federal Reserve Board also requires bank holding companies to comply with minimum Leverage ratio guidelines. The Leverage ratio is the ratio of a bank holding company’s Tier I capital to its total consolidated quarterly average assets (as defined for regulatory purposes), net of the loan loss reserve, goodwill and certain other intangible assets. The guidelines require a minimum Leverage ratio of 3% for bank holding companies that either have the highest supervisory rating or have implemented the Federal Reserve Board’s risk-adjusted measure for market risk. All other bank holding companies are required to maintain a minimum Leverage ratio of 4%. The Federal Reserve Board has not advised the Corporation of any specific minimum Leverage ratio applicable to it. At Dec. 31, 2002, the Corporation’s Leverage ratio was 6.55%.

The Federal Reserve Board’s capital guidelines provide that banking organizations experiencing internal growth or making acquisitions are expected to maintain strong capital positions substantially above the minimum supervisory levels, without significant reliance on intangible assets. Also, the guidelines indicate that the Federal Reserve Board will consider a “tangible Tier I leverage ratio” in evaluating proposals for expansion or new activities. The tangible Tier I leverage ratio is the ratio of a banking organization’s Tier I capital (excluding intangibles) to total assets (excluding intangibles).

The Corporation’s bank subsidiaries are subject to similar risk-based and leverage capital guidelines adopted by the OCC or the FDIC.

Prompt Corrective Action

The FDI Act requires federal banking regulators to take prompt corrective action with respect to depository institutions that do not meet minimum capital requirements. The FDI Act identifies the following capital tiers for financial institutions: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized.

Rules adopted by the federal banking agencies provide that an institution is deemed to be: “well capitalized” if the institution has a Total risk-based capital ratio of 10.0% or greater, a Tier I risk-based capital ratio of 6.0% or greater, and a Leverage ratio of 5.0% or greater, and the institution is not subject to an order, written agreement, capital directive, or prompt corrective action directive to meet and maintain a specific level for any capital measure; “adequately capitalized” if the institution has a Total risk-based capital ratio of 8.0% or greater, a Tier I risk-based capital ratio of 4.0% or greater, and a Leverage ratio of 4.0% or greater (or a Leverage ratio of 3.0% or greater if the institution is rated composite 1 in its most recent report of examination, subject to appropriate Federal banking agency guidelines), and the institution does not meet the definition of a well capitalized institution; “undercapitalized” if the institution has a Total risk-based capital ratio that is less than 8.0%, a Tier I risk-based capital ratio that is less than 4.0% or a Leverage ratio that is less than 4.0% (or a Leverage ratio that is less than 3.0% if the institution is rated composite 1 in its most recent report of examination, subject to appropriate Federal banking agency guidelines) and the institution does not meet the definition of a significantly undercapitalized or critically undercapitalized institution; “significantly undercapitalized” if the institution has a Total risk-based capital ratio that is less than 6.0%, a Tier I risk-based capital ratio that is less than 3.0%, or a Leverage ratio that is less than 3.0% and the institution does not meet the definition of a critically undercapitalized institution; and “critically

11

Table of Contents

ITEM 1.  BUSINESS (continued)

Supervision and Regulation (continued)

undercapitalized” if the institution has a ratio of tangible equity to total assets that is equal to or less than 2.0%. The FDI Act imposes progressively more restrictive constraints on operations, management and capital distributions, depending on the capital category in which an institution is classified.

At Dec. 31, 2002, all of the Corporation’s bank subsidiaries were well capitalized based on the ratios and guidelines noted previously. A bank’s capital category, however, is determined solely for the purpose of applying the prompt corrective action rules and may not constitute an accurate representation of the bank’s overall financial condition or prospects.

The appropriate federal banking agency may, under certain circumstances, reclassify a well capitalized insured depository institution as adequately capitalized. The appropriate agency is also permitted to require an adequately capitalized or undercapitalized institution to comply with the supervisory provisions as if the institution were in the next lower category (but not treat a significantly undercapitalized institution as critically undercapitalized) based on supervisory information other than the capital levels of the institution.

The FDI Act provides that an institution may be reclassified if the appropriate federal banking agency determines (after notice and opportunity for hearing) that the institution is in an unsafe or unsound condition or deems the institution to be engaging in an unsafe or unsound practice.

USA PATRIOT Act

On Oct. 26, 2001, the President signed into law comprehensive anti-terrorism legislation known as the USA PATRIOT Act of 2001 (the “USA Patriot Act”). Title III of the USA PATRIOT Act substantially broadened the scope of the U.S. anti-money laundering laws and regulations by imposing significant new compliance and due diligence obligations, creating new crimes and penalties and expanding the extra-territorial jurisdiction of the United States. The U.S. Treasury Department (“Treasury”) has issued a number of implementing regulations which apply various requirements of the USA PATRIOT Act to financial institutions such as the Corporation’s bank and broker-dealer subsidiaries and mutual funds and private investment companies advised or sponsored by the Corporations’ subsidiaries. Those regulations impose new obligations on financial institutions to maintain appropriate policies, procedures and controls to detect, prevent and report money laundering and terrorist financing. Treasury is expected to issue a number of additional regulations which will further clarify the USA PATRIOT Act’s requirements.

Failure of a financial institution to comply with the USA PATRIOT Act’s requirements could have serious legal and reputational consequences for the institution. The Corporation has adopted appropriate policies, procedures and controls to address compliance with the requirements of the USA PATRIOT Act under the existing regulations and will continue to revise and update its policies, procedures and controls to reflect changes required by the Act and the Treasury’s regulations.

Depositor Preference Statute

Under federal law, depositors and certain claims for administrative expenses and employee compensation against an insured depository institution would be afforded a priority over other general unsecured claims against such an institution, including federal funds and letters of credit, in the “liquidation or other resolution” of such an institution by any receiver.

12

Table of Contents

ITEM 1.  BUSINESS (continued)

Supervision and Regulation (continued)

Privacy

The BHC Act modified laws related to financial privacy. The new financial privacy provisions generally prohibit financial institutions, including the Corporation, from disclosing nonpublic personal financial information to third parties unless customers have the opportunity to “opt out” of the disclosure.

Community Reinvestment Act

The Community Reinvestment Act requires banks to help serve the credit needs of their communities, including credit to low and moderate income individuals and geographies. Should the Corporation or its bank subsidiaries fail to adequately serve the community, potential penalties are regulatory denials to expand branches, relocate, add subsidiaries and affiliates, expand into new financial activities and merge with or purchase other financial institutions.

Legislative Initiatives

Various legislative initiatives are from time to time introduced in Congress. The Corporation cannot determine the ultimate effect that any such potential legislation, if enacted, would have upon its financial condition or operations.

Competition

The Corporation and its subsidiaries continue to be subject to intense competition in all aspects and areas of their businesses. The Corporation’s Asset Management Group experiences competition from investment management firms; mutual funds; investment banking companies and bank holding companies and banks, including trust banks; brokerage firms and insurance companies. In its Corporate & Institutional Services Group, the Corporation competes with domestic and foreign banks offering institutional trust and custody products and cash management products, benefit consultants and a wide range of technologically capable service providers, such as data processing, shareholder services and outsourcing firms. Many of the Corporation’s competitors, with the particular exception of bank holding companies and banks, are not subject to regulation as extensive as that described under the “Supervision and Regulation” section and, as a result, may have a competitive advantage over the Corporation in certain respects.

As part of its business strategy, the Corporation seeks to distinguish itself from its competitors by the level of service delivered to its clients. The Corporation also believes that technological innovation is an important competitive factor and for this reason has made and continues to make substantial investments in this area. Since the events of Sept. 11, 2001, the ability to recover quickly from unexpected events is an increasing competitive factor, and the Corporation has devoted significant resources to this.

Employees

At Dec. 31, 2002, the Corporation and its subsidiaries employed approximately 22,500 persons.

13

Table of Contents

ITEM 1.  BUSINESS (continued)

Statistical Disclosure by Bank Holding Companies

The Securities Act of 1933 Industry Guide 3 and the Securities Exchange Act of 1934 Industry Guide 3 (together “Guide 3”), require that the following statistical disclosures be made in Annual Reports on Form 10-K filed by bank holding companies.

I.   Distribution of Assets, Liabilities and Stockholders’ Equity; Interest Rates and Interest Differential

Information required by this section of Guide 3 is presented in the Rate/Volume Variance Analysis on the following page. Required information is also presented in the Corporation’s 2002 Financial Annual Report to Shareholders in the Consolidated Balance Sheet — Average Balances and Interest Yields/Rates on pages 14 and 15, and in Net Interest Revenue, on page 13, which are incorporated herein by reference.

14

Table of Contents

ITEM 1.  BUSINESS (continued)

Statistical Disclosure by Bank Holding Companies (continued)

Note:  Amounts are calculated on a taxable equivalent basis where applicable, at a tax rate approximating 35%. Amounts also exclude any adjustments to fair value required by FAS No. 115. Changes in interest revenue or interest expense arising from the combination of rate and volume variances are allocated proportionally to rate and volume based on their relative absolute magnitudes.

15

Table of Contents

ITEM 1.  BUSINESS (continued)

Statistical Disclosure by Bank Holding Companies (continued)

II.  Securities Portfolio

A.  Carrying values of securities

Information required by this section of Guide 3 is presented in the Corporation’s 2002 Financial Annual Report to Shareholders in Note 6 on pages 83 through 85, which note is incorporated herein by reference.

B.  Maturity Distribution of Securities

Information required by this section of Guide 3 is presented in the Corporation’s 2002 Financial Annual Report to Shareholders in Note 6 on pages 83 through 85, which note is incorporated herein by reference.

III.  Loan Portfolio

A.  Types of Loans

Information required by this section of Guide 3 is presented below and on the following page. Further information is included in the Corporate Risk section of the Corporation’s 2002 Financial Annual Report to Shareholders on pages 46 through 59, which portions are incorporated herein by reference.

16

Table of Contents

ITEM 1.  BUSINESS (continued)

Statistical Disclosure by Bank Holding Companies (continued)

III.  Loan Portfolio (continued)

B.  Maturities and Sensitivities of Loans to Changes in Interest Rates

Note:  Maturity distributions are based on remaining contractual maturities.

Note:  Maturity distributions are based on remaining contractual maturities.

C.  Risk Elements

Information required by this section of Guide 3 is included in the Corporate Risk section of the Corporation’s 2002 Financial Annual Report to Shareholders on pages 46 through 59, which portions are incorporated herein by reference.

17

Table of Contents

ITEM 1.  BUSINESS (continued)

Statistical Disclosure by Bank Holding Companies (continued)

IV.  Summary of Loan Loss Experience

Information required by this section of Guide 3 is included in the Provision and Reserve for Credit Exposure section of the Corporation’s 2002 Financial Annual Report to Shareholders on pages 54 through 59, which is incorporated herein by reference, and below.

When losses on specific loans are identified, management charges off the portion deemed uncollectible. The allocation of the Corporation’s reserve for loan losses is presented below as required by Guide 3.

Further information on the Corporation’s credit policies, the factors that influenced management’s judgment in determining the level of the reserve for credit exposure, and the analyses of the reserve for credit exposure for the years 1998-2002 are set forth in the Corporation’s 2002 Financial Annual Report to Shareholders in the Credit Risk section on pages 46 and 47, the Provision and Reserve for Credit Exposure section on pages 54 through 59, in Note 1 under Reserve for Loan Losses and Reserve for Unfunded Commitments on page 72 and in Note 8 on page 89 which portions are incorporated herein by reference.

18

Table of Contents

ITEM 1.  BUSINESS (continued)

Statistical Disclosure by Bank Holding Companies (continued)

For each category on the previous page, the ratio of loans to consolidated total loans is as follows:

V.  Deposits

The majority of deposits in foreign offices of approximately $3.9 billion at Dec. 31, 2002, were in amounts in excess of $100,000, and were primarily foreign demand deposits. Additional information required by this section of Guide 3 is set forth in the Corporation’s 2002 Financial Annual Report to Shareholders in the Consolidated Balance Sheet — Average Balances and Interest Yields/Rates on pages 14 and 15, which pages are incorporated herein by reference.

19

Table of Contents

ITEM 1.  BUSINESS (continued)

Statistical Disclosure by Bank Holding Companies (continued)

VI.  Return on Equity and Assets

VII.  Short-Term Borrowings

Federal funds purchased and securities sold under agreements to repurchase represent funds acquired for securities transactions and other funding requirements. Federal funds purchased mature on the business day after execution. Selected balances and rates are as follows:

ITEM 2.   PROPERTIES

The following is a description of the Corporation’s principal properties:

Pittsburgh properties

In 1983, the Corporation entered into a long-term lease of One Mellon Center, a 54-story office building in Pittsburgh, Pennsylvania. The current term of this lease is scheduled to expire in November 2008. At Dec. 31, 2002, the Corporation occupied approximately 81% of this building’s approximately 1,525,000 square feet of rentable space and subleased substantially all of the remaining space to third parties.

In 1984, the Corporation entered into a sale/leaseback arrangement of the Union Trust Building, also known as Two Mellon Center, in Pittsburgh, Pennsylvania, while retaining title to the land thereunder. The term of this lease is scheduled to expire in May 2006. At Dec. 31, 2002, the Corporation occupied approximately 76% of this building’s approximately 595,000 square feet of rentable space and subleased substantially all of the remaining space to third parties.

20

Table of Contents

ITEM 2.  PROPERTIES (continued)

The Corporation owns the 41-story office building in Pittsburgh, Pennsylvania known as Three Mellon Center or 525 William Penn Place. At Dec. 31, 2002, the Corporation occupied approximately 75% of this building’s approximately 943,000 square feet of rentable space, and leased substantially all of the remaining space to third parties.

The Corporation owns the 14-story office building in Pittsburgh, Pennsylvania known as the Mellon Client Service Center. At Dec. 31, 2002, the Corporation occupied 100% of this building’s approximately 667,000 square feet of rentable space.

The Pittsburgh properties are utilized by each of the Corporation’s six core business sectors.

Philadelphia properties

The Corporation leases a building in Philadelphia, Pennsylvania known as Mellon Independence Center. The term of this lease is scheduled to expire in December 2015. At Dec. 31, 2002, the Corporation occupied approximately 51% of this building’s approximately 807,000 square feet of rentable space, with the remainder of the space in the building subleased to third parties.

The Corporation leases approximately 231,000 square feet of rentable space in a 53-story office building known as Mellon Center in Philadelphia, Pennsylvania. The current term of this lease is scheduled to expire in September 2015. At Dec. 31, 2002, the Corporation occupied approximately 72% of the 231,000 square feet of rentable space, with the remainder subleased to third parties.

The Philadelphia properties are utilized by each of the Corporation’s six core business sectors other than Institutional Asset Management.

Boston properties

The Corporation leases approximately 282,000 square feet of rentable space in a 41-story downtown Boston, Massachusetts office building known as Mellon Financial Center. The current term of this lease is scheduled to expire in December 2013. At Dec. 31, 2002, the Corporation occupied 100% of this space.

The Corporation leases a three-story office building located in Everett, Massachusetts. The current term of this lease is scheduled to expire in April 2019. At Dec. 31, 2002, the Corporation occupied 100% of this building’s approximately 376,000 square feet of rentable space.

The Boston properties are utilized by each of the Corporation’s six core business sectors other than Mutual Funds.

New York properties

The Corporation leases approximately 290,000 square feet of rentable space at 200 Park Avenue in New York City. The current term of this lease is scheduled to expire in March 2005. At Dec. 31, 2002, the Corporation occupied approximately 95% of this space, with the remainder subleased to a third party. The Corporation leases approximately 169,000 square feet of rentable space in EAB Plaza in Uniondale, New York. The term of this lease is scheduled to expire in January 2005. At Dec. 31, 2002, the Corporation occupied 100% of this space.

The New York properties are utilized by each of the Corporation’s six core business sectors.

New Jersey properties

The Corporation leases an aggregate of approximately 288,000 square feet of rentable space in three buildings in Ridgefield Park, New Jersey located at 65 Challenger Road, 85 Challenger Road and

21

Table of Contents

ITEM 2.  PROPERTIES (continued)

105 Challenger Road. The current terms of these three leases are scheduled to expire in January 2006, October 2005 and January 2006, respectively. At Dec. 31, 2002, the Corporation occupied 100% of this space.

The Corporation leases an aggregate of approximately 194,000 square feet of rentable space in two buildings in Ft. Lee, New Jersey located at 2100 North Central Road and One Bridge Plaza. The current terms of these leases are scheduled to expire in January 2010 and January 2006, respectively. At Dec. 31, 2002, the Corporation occupied 100% of this space.

The Corporation leases approximately 158,000 square feet of rentable space at 500 Plaza Drive, Secaucus, New Jersey. The current term of this lease is scheduled to expire in June 2006. At Dec. 31, 2002, the Corporation occupied 100% of this space.

The New Jersey properties are utilized by the Corporation’s Human Resources Services business sector.

Other properties

The Corporation also owns and leases additional space for its operations at locations both within and outside the United States. See “Description of Business” on pages 3 through 5 for information as to where certain of the Corporation’s operations are conducted. In 2001, the Corporation entered into an agreement for lease covering approximately 232,000 square feet of space in a building under construction at 160-162 Queen Victoria Street in London which will be utilized as the Corporation’s European headquarters when the building is completed and the Corporation relocates to it, currently expected to be in the second quarter of 2004.

The Corporation believes that its owned and leased facilities are suitable and adequate for its business needs.

For additional information on the Corporation’s premises and equipment, see Note 9 on page 89 of the Corporation’s 2002 Financial Annual Report to Shareholders, which note is incorporated herein by reference.

ITEM 3.  LEGAL PROCEEDINGS

Various legal actions and proceedings are pending or are threatened against the Corporation and its subsidiaries, some of which seek relief or damages in amounts that are substantial. These actions and proceedings arise in the ordinary course of the Corporation’s businesses and operations and include suits relating to its lending, collections, servicing, investment, mutual fund, advisory, trust, custody, benefits consulting, shareholder services, cash management and other activities and operations. Because of the complex nature of some of these actions and proceedings, it may be a number of years before such matters ultimately are resolved. After consultation with legal counsel, management believes that the aggregate liability, if any, resulting from such pending and threatened actions and proceedings will not have a material adverse effect on the Corporation’s financial condition, results of operations and cash flows.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to security holders for vote during the fourth quarter of 2002.

22

Table of Contents

PART II

ITEM 5.  MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The information required by this Item is set forth in the Corporation’s 2002 Financial Annual Report to Shareholders in Liquidity and Dividends on pages 39 through 41, in Fourth Quarter 2002 Review on page 61, in Selected Quarterly Data on pages 62 and 63, in Note 25 on page 106 and in Corporate Information on page 121, which portions are incorporated herein by reference.

In October 1996, the board of directors declared a dividend, paid Oct. 31, 1996, of one right (a “Right”) issued pursuant to the Shareholder Protection Rights Agreement, dated as of Oct. 15, 1996 (the “Rights Agreement”), for each outstanding share of the Corporation’s Common Stock (the “Common Stock”). On Oct. 19, 1999, the Corporation amended and restated the Rights Agreement.

The Rights are not currently exercisable and trade only with the Common Stock (and are currently evidenced only in connection with the Common Stock). The Rights would separate from the Common Stock and become exercisable only when a person or group acquires 15% or more of the Common Stock or ten days after a person or group commences a tender offer that would result in ownership of 15% or more of the Common Stock. At that time, each Right would entitle the holder to purchase for $135 (the “exercise price”) one one-hundredth of a share of participating preferred stock, which is designed to have economic and voting rights generally equivalent to one share of common stock. Should a person or group actually acquire 15% or more of the Common Stock, each Right held by the acquiring person or group (or their transferees) would become void and each Right held by the Corporation’s other shareholders would entitle those holders to purchase for the exercise price a number of shares of the Common Stock having a market value of twice the exercise price. Should the Corporation, at any time after a person or group has become a 15% beneficial owner and acquired control of the Corporation’s board of directors, be involved in a merger or similar transaction with any person or group or sell assets to any person or group, each outstanding Right would then entitle its holder to purchase for the exercise price a number of shares of such other company having a market value of twice the exercise price. In addition, if any person or group acquires 15% or more of the Common Stock, the Corporation may, at its option and to the fullest extent permitted by law, exchange one share of Common Stock for each outstanding Right. The Rights are not exercisable until the above events occur and will expire on Oct. 31, 2006, unless earlier exchanged or redeemed by the Corporation. The Corporation may redeem the Rights for one cent per Right under certain circumstances.

The foregoing description is not intended to be complete and is qualified in its entirety by reference to the Amended and Restated Shareholder Protection Rights Agreement, which is an exhibit to this Report.

ITEM 6.  SELECTED FINANCIAL DATA

The information required by this Item is set forth in the Corporation’s 2002 Financial Annual Report to Shareholders in the Financial Summary table on page 2, in Significant Financial Events on pages 3 and 4, in the Summary of Financial Results on page 5, in the Consolidated Balance Sheet — Average Balances and Interest Yields/Rates on pages 14 and 15, and in Note 1 on pages 69 through 77, which portions are incorporated herein by reference.

23

Table of Contents

ITEM 7.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF                 OPERATIONS

The information required by this Item is set forth in the Corporation’s 2002 Financial Annual Report to Shareholders in the Financial Review on pages 3 through 63 and in Note 25 on page 106, which portions are incorporated herein by reference.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information required by this Item is set forth in the Corporation’s 2002 Financial Annual Report to Shareholders in the Interest Rate Sensitivity Analysis on pages 42 through 46, in Note 1 under “Derivative instruments used for risk management purposes” and “Derivative instruments used for trading activities” on pages 74 and 75 and in Note 27 and Note 28 on pages 107 through 113, which portions are incorporated herein by reference.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Reference is made to Item 15 on page 28 hereof for a detailed listing of the items under Financial Statements, Financial Statement Schedules, and Other Financial Data, which are incorporated herein by reference.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL

                DISCLOSURE

NONE.

PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by this Item is included in the Corporation’s proxy statement for its 2003 Annual Meeting of Shareholders (the “2003 Proxy Statement”) in the Election of Directors-Biographical Summaries of Nominees and Directors section on pages 3 through 5, in the Executive Compensation - Employment Agreements with Named Executive Officers section on pages 19 through 22 and in the Section 16(a) Beneficial Ownership Reporting Compliance section on page 30, each of which sections is incorporated herein by reference, and in the following section “Executive Officers of the Registrant.”

24

Table of Contents

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (continued)

EXECUTIVE OFFICERS OF THE REGISTRANT

The name and age of, and the positions and offices held by, each executive officer of the Corporation as of March 1, 2003, together with the offices held by each such person during the last five years, are listed below and on the following pages. Messrs. McGuinn, Elliott, Canter, Lamere and O’Hanley have executed employment contracts with the Corporation. All other executive officers serve at the pleasure of their appointing authority. No executive officer has a family relationship to any other listed executive officer.

25

Table of Contents

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (continued)

26

Table of Contents

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (continued )

ITEM 11.  EXECUTIVE COMPENSATION

The information required by this Item is included in the 2003 Proxy Statement in the Directors’ Compensation section on pages 8 and 9 and in the Executive Compensation section on pages 15 through 23, and is incorporated herein by reference. The Performance Graph on page 14 and the Compensation Committee Report on pages 24 through 26 are not incorporated herein by reference.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED

                  STOCKHOLDER MATTERS

See Note 24 to the Corporation’s 2002 Financial Annual Report to Shareholders for a narrative description of each of the equity compensation plans included in the following table. Equity compensation plans described in Note 24 that have not received shareholder approval are the Corporation’s ShareSuccess Plan, Stock Option Plan for the Mellon Financial Group West Coast Board of Directors, Stock Option Plan for Affiliate Boards of Directors and Dreyfus Stock Option Plan. Additional annual grants under the ShareSuccess Plan are not anticipated in the near-term. No further grants will be made under the Dreyfus Stock Option Plan.

Additional information required by this Item is included in the 2003 Proxy Statement in the Beneficial Ownership of Stock section on pages 12 and 13 and is incorporated herein by reference.

27

Table of Contents

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this Item is included in the 2003 Proxy Statement in the Business Relationships and Related Transactions section on page 10, and is incorporated herein by reference.

ITEM 14.  CONTROLS AND PROCEDURES

The Corporation’s principal executive officer and principal financial officer have evaluated the effectiveness of the Corporation’s “disclosure controls and procedures,” as such term is defined in Rule 13a-14(c) of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) within 90 days of the filing date of this Annual Report on Form 10-K. Based upon their evaluation, the principal executive officer and principal financial officer concluded that the Corporation’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Corporation in the reports filed or submitted by it under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and include controls and procedures designed to ensure that information required to be disclosed by the Corporation in such reports is accumulated and communicated to the Corporation’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

There were no significant changes in the Corporation’s internal controls or in other factors that could significantly affect these controls subsequent to the date of such evaluation.

PART IV

ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

28

Table of Contents

ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (continued)

The exhibits listed on the Index to Exhibits on pages 36 through 41 hereof are incorporated by reference or filed herewith in response to this Item.

29

Table of Contents

Cautionary Statement

This Annual Report on Form 10-K contains and incorporates by reference statements relating to future results of the Corporation that are considered “forward-looking statements.” These statements, which may be expressed in a variety of ways, including the use of future or present tense language, relate to, among other things: future capital requirements; plans for joint ventures; reduction of positions and related expense savings; expected revenue enhancements and expense savings related to the Corporation’s LEAP program (Lifting Earnings and Performance); the impact on investment management fees of changes in the Standard & Poor’s 500 Index; the potential impact on revenue of the Corporation’s stated intention to reduce credit availability to the corporate and institutional marketplace; potential future venture capital losses and possible changes in the value of the portfolio; expected increases in health care and other benefits expense and insurance expense; lower assumptions for the expected return on pension plan assets and the discount rate on plan liabilities and rate of compensation increase and sensitivities to changes in those rates; levels of and expected significant reductions in pension credits; the impact of expensing stock options and intentions as to future grants; usage of accrued expenses; effective tax rates; intentions as to capital ratios of the Corporation and its banking subsidiaries and maintaining a minimum tangible shareholders’ equity to assets ratio; levels of common stock repurchases; uses of internal capital generation; the Corporation’s liquidity management objective and results of liquidity simulations; maturities of debt and derivative instruments; simulation of changes in interest rates; reclassification of items to interest expense; the value-at-risk for trading activities; credit exposure reserve appropriateness; the effects of recent accounting changes; possible consolidation of Three Rivers Funding Corp. and certain venture capital investments; amounts of contingent consideration payable for acquisitions; expected amortization expense; values of retained interests in securitizations and expected losses on securitized loans; 401(k) Plan contribution rates; and litigation results.

These forward-looking statements, and other forward-looking statements contained in other public disclosures of the Corporation which make reference to the cautionary factors contained in this Report, are based on assumptions that involve risks and uncertainties and that are subject to change based on various important factors (some of which are beyond the Corporation’s control). Actual results may differ materially from those expressed or implied as a result of these risks and uncertainties, including, but not limited to:

Changes in political and economic conditions.  Changes in political and economic conditions can affect the Corporation’s opportunities to sell its products and services. If conditions cause customers to become more cautious, the Corporation’s revenues could be adversely affected. Conversely, the Corporation will likely have greater opportunities during periods of economic growth and political optimism.

Equity and fixed-income market fluctuations.  As price levels in the equity and fixed-income markets increase or decrease, the Corporation’s opportunities to sell its products and services, to invest and to manage financial assets may change. Because certain of the Corporation’s fee revenue is based on the value of assets under management or custody, fluctuations in market valuations will affect revenue. Because management fees can vary by asset class, revenues can be affected by the types of assets that at a given time are most attractive to customers.

The effects of the adoption of new accounting standards.  The adoption of new accounting standards could affect the Corporation’s income statement, balance sheet, statement of cash flows or statement of changes in shareholders’ equity. New standards could cause reported amounts to increase or decrease or impact the comparability of current and prior period results.

Corporate and personal customers’ bankruptcies.  An increase in corporate and personal customers’ bankruptcies can require higher credit loss provisions and higher charges against the credit loss reserve negatively impacting net income and various capital ratios.

30

Table of Contents

Cautionary Statement (continued)

Operational risk.  Operational risk is the risk of (direct or indirect) loss resulting from inadequate or failed internal processes, people and systems, or from external events. It is the potential for loss that arises from problems with operating processes, human error or omission, breaches in internal controls, fraud or unforeseen catastrophes.

Inflation.  Inflation, disinflation or deflation can impact a variety of economic measures and market values that are important to the Corporation’s financial performance including interest rates, equity and fixed-income market values, the Corporation’s expense levels and prices for the Corporation’s products and services.

Levels of tax free income.  The level of the Corporation’s tax-exempt income can affect the Corporation’s effective tax rate.

Technological change.  Technology is a very important component of many of the Corporation’s products and services as well as being critically important to the Corporation’s internal operating processes. A faster rate of technological change can require the Corporation to invest more in technology to remain competitive and thus lead to higher expenses. On the other hand, technological change creates the opportunity for product differentiation and higher revenues as well as reduced costs. There is a risk to the Corporation if its competitors are able to use technology to develop more marketable products and/or services at lower prices than the Corporation can offer.

Success in the timely development of new products and services.  The Corporation operates in a highly competitive environment in all of the markets it serves. The timely development of new products and services can represent a competitive advantage leading to increased revenues while the inability to do so can have the opposite effect.

Competitive product and pricing pressures within the Corporation’s markets.  Competitive product and pricing pressures can affect the Corporation’s ability to sell its products and services and can impact the prices the Corporation is able to charge. Demand for the Corporation’s products and services, price levels and activities of competitors will affect the Corporation’s revenues.

Consumer spending and saving habits.  The Corporation benefits from the savings of consumers that are invested in mutual funds, defined contribution plans and other products offered or serviced by the Corporation. Changes in the rate of savings or preferred investment styles may affect the Corporation’s revenues.

Interest rate fluctuations.  Interest rate fluctuations, the levels of market interest rates, the shape of the yield curve, the direction of interest rate changes and fluctuations in the interest rate spreads between different fixed income investments can affect both the Corporation’s cost of funds, its net interest revenue and any other revenue that has a sensitivity to interest rates. Interest rate fluctuations can also impact the demand for different investment products offered by the Corporation. In general, the Corporation attempts to mitigate the effects of either significant increases or decreases in interest rates on its income statement.

Monetary fluctuations.  Changes in monetary and credit conditions and their effect on the economy and the financial markets may impact the Corporation in a variety of ways.

31

Table of Contents

Cautionary Statement (continued)

Acquisitions and integrations of acquired businesses.  Acquisitions of businesses or lines of business are an active part of the Corporation’s business strategy and use of excess capital. Any acquisition presents execution risk. There can be no assurance that the operational or financial performance of an acquired business will be as expected, that any desired synergies will occur or that an acquired business will be successfully assimilated into the Corporation.

Changes in law.  The Corporation operates in a highly regulated environment. Many laws and many regulatory agencies, both domestic and foreign, impact its operations. Changes in law could affect the competitive environment in which the Corporation operates, broaden or narrow the scope of permitted activities of it and its competitors, facilitate or retard consolidation, impose higher costs or operating burdens and challenge the Corporation to adapt quickly and effectively to such changes.

Changes in fiscal, monetary, regulatory, trade and tax polices and laws.  Changes in these policies and laws could affect the products and services the Corporation offers and therefore its revenues as well as impose additional costs and expenses, such as higher taxes. Also, any significant changes will challenge the Corporation to adapt quickly and effectively.

Success in gaining regulatory approvals when required.  The Corporation operates in a highly regulated environment, both within and outside the United States. If regulatory approval is required for an activity, product, service, acquisition or disposition and approval can not be obtained on a timely basis, the Corporation could miss the opportunity and the particular benefits it presented.

The uncertainties inherent in the litigation process.  At any given time, the Corporation is subject to various pending and threatened legal actions and proceedings. The Corporation evaluates the risks of these actions and proceedings within the context of current judicial decisions and legislative and regulatory interpretations. A trier of fact, either a judge or jury, could decide a case contrary to the Corporation’s evaluation of the relevant facts or law, and a court or regulatory agency could act to change existing law on a particular issue.

The effects of recent and any further terrorist acts and the results of the war on terrorism.  Terrorist acts could have a significant impact on economic activity and could cause the Corporation’s customers not to purchase, or delay purchasing, the Corporation’s products and services. In addition, the Corporation has in place business continuity and disaster recovery plans. Terrorists acts could, however, cause damage to the Corporation’s facilities or could cause delays or disruptions to its operations. The Corporation’s vendors and counterparties could be similarly affected.

The ability to achieve, and the value of, the revenue enhancements and expense savings anticipated by management.  If the Corporation were not able to achieve the revenue enhancements or expense savings in the amounts anticipated by management, revenues and expenses could each be adversely affected.

as well as other risks and uncertainties detailed elsewhere or incorporated by reference in this Annual Report on Form 10-K. Such forward-looking statements speak only as of the date on which such statements are made, and the Corporation undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events.

32

Table of Contents

SIGNATURE

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Corporation has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized.

Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report has been signed below by the following persons on behalf of the Corporation and in the capacities and on the date indicated.

33

Table of Contents

CERTIFICATION

I, Martin G. McGuinn, certify that:

Date:  March 14, 2003

34

Table of Contents

CERTIFICATION

I, Michael A. Bryson, certify that:

Date: March 14, 2003

35

Table of Contents

Index to Exhibits