Yes, the formula needs to be mixed with water as per the instructions. Obviously it is great to give as much breastmilk as you can to your baby too - but what you need to do is feed the breastmilk first and then give a supplement of formula which has been made up with hot water.
Two reasons for this
1) The formula needs hot water to kill off any potential germs. Unlike breastmilk, formula is not sterile (unless you are using cartons which have already been heat treated)
2) Making up formula using milk instead of water will result in a drink that is too rich for your baby and lacking in water - could result in overfeeding and constipation.
I would use two separate bottles if I was doing this. Give the breastmilk bottle first because if you mix them together and it isn't finished, some of your breastmilk is wasted which is a shame if you have gone to the trouble to pump it and it doesn't get eaten.