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Table of Contents

File No. 001-13252

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 11-K

(Mark One)

[ x ] ANNUAL REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES EXCHANGE ACT
OF 1934 (FEE REQUIRED)

For the plan year ended March 31, 2004

OR

[ _ ] TRANSITION REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (NO FEE REQUIRED)

For the transition period from ______ to ______

A. Full title of the plan and address of the plan, if different from that of the issuer named below:

McKesson Corporation Profit-Sharing Investment Plan

B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office:

McKesson Corporation
McKesson Plaza
One Post Street
San Francisco, CA 94104
(415) 983-8300

 


McKESSON CORPORATION
PROFIT-SHARING INVESTMENT PLAN

         
TABLE OF CONTENTS
  Page
    1  
FINANCIAL STATEMENTS as of and for the Years Ended March 31, 2004 and 2003:
       
    2  
    3  
    4-17  
SUPPLEMENTAL SCHEDULES as of and for the Year Ended March 31, 2004:
       
    18  
    19-22  
 EXHIBIT 23.1

All other schedules required by section 2520.103-10 of the Department of Labor’s Rules and Regulations for the Reporting and Disclosure under the Employee Retirement Income Security Act of 1974 have been omitted because they are not applicable.

EXHIBITS:

     23.1 Consent of Independent Registered Public Accounting Firm

 


Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

McKesson Corporation Profit-Sharing Investment Plan
San Francisco, California

We have audited the accompanying statements of net assets available for benefits of the McKesson Corporation Profit-Sharing Investment Plan (the “Plan”) as of March 31, 2004 and 2003, and the related statements of changes in net assets available for benefits for the years then ended. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement preparation. We believe our audits provide a reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material respects, the net assets available for benefits of the Plan as of March 31, 2004 and 2003, and the changes in net assets available for benefits for the years then ended in conformity with accounting principles generally accepted in the United States of America.

Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedules listed in the Table of Contents are presented for the purpose of additional analysis and are not a required part of the basic financial statements, but are supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. These schedules are the responsibility of the Plan’s management. Such schedules have been subjected to the auditing procedures applied in our audit of the basic 2004 financial statements and, in our opinion, are fairly stated in all material respects when considered in relation to the basic financial statements taken as a whole.

Deloitte & Touche LLP
San Francisco, California
September 9, 2004

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Table of Contents

McKESSON CORPORATION
PROFIT-SHARING INVESTMENT PLAN

STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
AS OF MARCH 31, 2004 AND 2003 (IN THOUSANDS)

                                                 
    2004
  2003
    Participant   Non-Participant   Plan   Participant   Non-Participant   Plan
    Directed
  Directed
  Total
  Directed
  Directed
  Total
ASSETS:
                                               
Cash and cash equivalents
                                               
Allocated
  $     $     $     $     $ 588     $ 588  
Unallocated
            464       464               413       413  
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Total cash and cash equivalents
          464       464             1,001       1,001  
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Investments:
                                               
Participant Directed Investments
    814,630               814,630                          
Interest in Master Trust (Note 4)
                            615,184               615,184  
McKesson Corporation common stock:
                                               
Allocated
            285,250       285,250               230,739       230,739  
Unallocated
            107,325       107,325               125,394       125,394  
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Total investments
    814,630       392,575       1,207,205       615,184       356,133       971,317  
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Receivables:
                                               
Dividends and interest on:
                                               
Allocated
            526       526               495       495  
Unallocated
            263       263               366       366  
Due from broker for securities sold - allocated
            446       446                          
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Total receivables
          1,235       1,235             861       861  
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Total assets
    814,630       394,274       1,208,904       615,184       357,995       973,179  
 
   
 
     
 
     
 
     
 
     
 
     
 
 
LIABILITIES:
                                               
Line of credit – On unallocated stock
            3,600       3,600               5,300       5,300  
ESOP promissory notes payable – On unallocated stock
            48,907       48,907               56,372       56,372  
Accrued interest expense – On unallocated stock
            2,088       2,088               2,359       2,359  
Accrued other
            464       464       2,283               2,283  
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Total liabilities
          55,059       55,059       2,283       64,031       66,314  
 
   
 
     
 
     
 
     
 
     
 
     
 
 
NET ASSETS AVAILABLE FOR BENEFITS
  $ 814,630     $ 339,215     $ 1,153,845     $ 612,901     $ 293,964     $ 906,865  
 
   
 
     
 
     
 
     
 
     
 
     
 
 

See notes to financial statements.

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Table of Contents

McKESSON CORPORATION
PROFIT-SHARING INVESTMENT PLAN

STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEARS ENDED MARCH 31, 2004 AND 2003 (IN THOUSANDS)

                                                 
    2004
  2003
            Non-                   Non-    
    Participant   Participant           Participant   Participant    
    Directed
  Directed
  Plan Total
  Directed
  Directed
  Plan Total
INVESTMENT INCOME (LOSS):
                                               
Net appreciation (depreciation) in fair value of investments
  $ 158,707     $ 74,268     $ 232,975     $ (127,865 )   $ (185,800 )   $ (313,665 )
Dividends and interest
    12,588       3,326       15,914       11,930       3,639       15,569  
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Net investment income (loss)
    171,295       77,594       248,889       (115,935 )     (182,161 )     (298,096 )
 
   
 
     
 
     
 
     
 
     
 
     
 
 
CONTRIBUTIONS:
                                               
Participants
    66,751               66,751       65,370               65,370  
Employer
            12,344       12,344               16,011       16,011  
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Total contributions
    66,751       12,344       79,095       65,370       16,011       81,381  
 
   
 
     
 
     
 
     
 
     
 
     
 
 
DEDUCTIONS:
                                               
Benefits paid to participants
    58,678       19,072       77,750       56,850       20,635       77,485  
Interest expense
            4,356       4,356               5,066       5,066  
Administrative fees
    631               631       887       75       962  
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Total deductions
    59,309       23,428       82,737       57,737       25,776       83,513  
 
   
 
     
 
     
 
     
 
     
 
     
 
 
INCREASE (DECREASE) IN NET ASSETS BEFORE INTERFUND TRANSFERS AND MERGERS
    178,737       66,510       245,247       (108,302 )     (191,926 )     (300,228 )
INTERFUND TRANSFERS
    21,259       (21,259 )           9,193       (9,193 )      
TRANSFER OF NET ASSETS FROM OTHER PLANS
    1,733               1,733       17,392               17,392  
 
   
 
     
 
     
 
     
 
     
 
     
 
 
INCREASE (DECREASE) IN NET ASSETS
    201,729       45,251       246,980       (81,717 )     (201,119 )     (282,836 )
Beginning of Year
    612,901       293,964       906,865       694,618       495,083       1,189,701  
 
   
 
     
 
     
 
     
 
     
 
     
 
 
End of Year
  $ 814,630     $ 339,215     $ 1,153,845     $ 612,901     $ 293,964     $ 906,865  
 
   
 
     
 
     
 
     
 
     
 
     
 
 

See notes to financial statements.

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Table of Contents

McKESSON CORPORATION
PROFIT-SHARING INVESTMENT PLAN

NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2004 AND 2003

1.   PLAN DESCRIPTION

The following brief description of the McKesson Corporation Profit-Sharing Investment Plan (the “PSIP” or the “Plan”) is provided for general information purposes only. Participants should refer to the Plan document for more complete information. The PSIP is a defined contribution plan covering all persons who have completed two months of service and are regular or part-time employees, or are casual employees who have completed a year of service in which they worked at least 1,000 hours in a year, at McKesson Corporation (the “Company” or “McKesson”) or a participating subsidiary, except those covered by a collectively bargained pension plan. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). Certain administrative costs incurred by the PSIP are paid by the Company.

Prior to March 31, 2003, the Plan had an undivided interest in the McKesson Corporation Profit-Sharing Master Trust (the “Master Trust”) with several other McKesson-sponsored plans. During fiscal 2003, the other McKesson-sponsored plans were merged into the Plan (see Transfers from Other Qualified Plans, below). As a result of the mergers, the Plan owned 100% of the assets of the Master Trust at March 31, 2003. For the year ended March 31, 2003, the assets of the Master Trust and the Plan were held by JPMorgan Chase Bank. The Master Trust ceased to exist after March 31, 2003. Effective on April 1, 2003, Fidelity Management Trust Company (“Fidelity”) became the trustee of the Plan’s single trust.

The Plan is comprised of Participant Directed and Non-Participant Directed Investments, as described below:

  A.   Participant Directed Investments

Contributions – Participants may elect to make basic contributions ranging from 1%-4% of compensation for employees of McKesson Information Solutions LLC (“MIS”), a subsidiary of the Company and Medical Management Group employees, or 1%-6% for all other Company employees. Participants who make basic contributions of 6% (4% for MIS and Medical Management Group participants) may elect to make supplemental contributions of up to an additional 14% of compensation (16% for MIS and Medical Management Group participants). A participant’s pretax contributions generally are limited to $13,000 per year for calendar year 2004 and $12,000 for calendar year 2003. Total contributions are limited to the lesser of $41,000 for calendar year 2004 ($40,000 for calendar year 2003) or 100% of taxable compensation per calendar year. Participants 50 years of age or older may also elect to make catch-up contributions of 67% of pay (20% prior to Jan 1, 2004). Catch-up contributions are limited to $3,000 per year for calendar year 2004 and $2,000 for calendar year 2003. Additional limits may apply to individuals classified as highly compensated employees. Participants may also contribute amounts representing distributions from other qualified plans.

Participant Accounts – Individual accounts are maintained for each plan participant. Each participant’s account is credited with the participant’s contribution and an allocation of earnings, and charged with withdrawals and an allocation of losses and administrative expenses. Allocations are based on participant earnings, or account balances, as defined in the

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McKESSON CORPORATION
PROFIT-SHARING INVESTMENT PLAN

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED MARCH 31, 2004 AND 2003

Plan document. The participant is entitled to a benefit upon retirement or separation from employment based upon the vested portion of the participant’s account.

Vesting – Participant contributions and earnings thereon are 100% vested at all times.

Investment Options - Upon enrollment in the PSIP, a participant may direct contributions in 1% increments to any of the investments within the Plan. The following are descriptions from each fund’s prospectus or fund manager’s report:

Standish Mellon Stable Value Fund (formerly Certus Stable Value Fund) invests in fixed-income investments issued by life insurance companies and financial institutions. This is a separately managed account, not a mutual fund.

Dodge & Cox Large Cap Value Fund invests in the common stock of companies when the fund managers believe the long-term earnings prospects are not reflected in the current price. This is a separately managed account, not a mutual fund.

Fidelity Magellan Fund is a growth mutual fund that seeks capital appreciation and normally invests in common stocks.

Fidelity Diversified International Fund invests primarily in a diversified portfolio of equity securities of companies located outside of the United States. This fund replaced Putnam International Equity Fund Y on January 9, 2004.

MFS Institutional Large Cap Growth Fund invests primarily in common stocks, with a goal of long-term capital growth. This fund replaced Putnam Investors Fund Y on January 10, 2003.

SSgA Balanced Fund (formerly State Street Balanced Fund) is a custom mix of commingled pools that invests 60% in SSgA S&P 500 Index Fund and 40% in SSgA Bond Market Index Fund.

SSgA Bond Index Fund (formerly State Street Bond Index Fund) is a commingled pool that seeks to provide investment results that correspond to the total return of the bonds in the Lehman Brothers Aggregate Bond Index.

SSgA S&P 500 Index Fund (formerly State Street S&P 500 Index Fund) is a commingled pool that invests in stocks in the benchmark S&P 500 Index and attempts to duplicate the investment results of that index.

Wellington Management Small Cap Portfolio represents shares of a registered investment company that invests in stocks within the market capitalization range of the Russell 2000 Index. This is a separately managed account, not a mutual fund, which seeks long-term growth by investing in the stocks of small companies.

McKesson Corporation Employee Company Stock Fund (the “Employee Stock Fund”) represents shares invested in Company common stock.

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Table of Contents

McKESSON CORPORATION
PROFIT-SHARING INVESTMENT PLAN

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED MARCH 31, 2004 AND 2003

Mutual Fund Window provides access to approximately 170 mutual fund options from more than 20 investment companies.

Brokerage Link provides access to a discount brokerage account which allows participants to develop a self-directed brokerage option. Commissions and account fees as well as standard plan-related fees are charged to the participant’s account.

Loans – Participants may apply for a loan from the Plan. The total amount owed to the Plan by an individual participant cannot exceed the lowest of 50% of such participant’s vested account balance, $50,000 as adjusted for certain items specified in the Plan document, or the value of the participant’s account attributable to basic, supplemental catch-up and rollover contributions. The loans bear interest at the then current prime rate of interest plus 1%. Contractual interest rates ranged from 5% to 11% in fiscal 2004 and from 5.25% to 11% in fiscal 2003. Loans may be repaid over a period not to exceed 5 years, except for residential loans, which must not exceed a term of 10 years. Principal repayments and interest are paid through payroll deductions. For participants who have been terminated or are on leave and are no longer receiving a paycheck, loan repayments may be made via monthly coupon payments.

Payment of Benefits – Participants have the right to receive a total distribution of the value of their vested accounts from the PSIP at the time of retirement, death, disability or termination of employment. In general, benefit payments are made in a lump sum cash amount. Former employees may remain participants in the Plan.

Transfers from Other Qualified Plans – In fiscal 2004 and 2003, the following net assets available for benefits were merged into the Plan (in thousands):

                 
    Effective Date
  Transferred Amount
Fiscal 2004:
               
SI/Baker 401(k) Plan
  February 2, 2004   $ 1,733  
 
           
 
 
Fiscal 2003:
               
Zee Medical Service 401(k) Plan
  May 1, 2002   $ 23  
FoxMeyer Employees’ Savings and Profit-Sharing Plan
  December 31, 2002     13,179  
Rawson Drug & Sundry Company Employees’ Trust
  March 31, 2003     1,359  
Spectro Industries, Inc. Trust
  March 31, 2003     2,831  
 
           
 
 
Total
          $ 17,392  
 
           
 
 

  B.   Non-Participant Directed Investments

General – The McKesson Corporation Employer Company Stock Funds (Allocated and Unallocated) (the “Employer Stock Funds”) consist of a leveraged Employee Stock Ownership

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McKESSON CORPORATION
PROFIT-SHARING INVESTMENT PLAN

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED MARCH 31, 2004 AND 2003

Plan (“ESOP”). In fiscal 2004 and 2003, shares from the ESOP were used to fund all employer contributions for the year.

ESOP I – In January 1985, the Company amended the Plan to add a leveraged ESOP for the benefit of persons eligible to participate in the PSIP. In July 1986, the PSIP purchased from the Company 2,000,000 shares of Company common stock, par value $0.01, for $30,250,000, originally financed by a ten-year term loan from a bank, guaranteed by the Company. Additionally, in connection with a fiscal 1995 transaction involving a reorganization and a sale of a business unit of the Company (the “PCS Transaction”), the ESOP purchased 1,087,754 additional common shares in fiscal 1996. In fiscal 1997, the Company extended the existing term of the outstanding loan balance from its original maturity to fiscal 2005.

ESOP II – In October 1987, the Company amended the Plan to provide for the purchase of shares of Company common stock by the ESOP. In conjunction with this amendment, the PSIP purchased from the Company 4,200,000 shares of Company common stock in 1987 for $54,900,000, financed by a fifteen-year term loan from the Company. Additionally, during fiscal 1996, in connection with the PCS Transaction, the ESOP purchased 3,036,484 additional shares of Company common stock. The loan was paid in full as of March 31, 2003.

ESOP III – In June 1989, the Company amended the Plan to add an additional leveraged ESOP. In June 1989, the Plan purchased from the Company 2,849,003 shares of McKesson Corporation Series B ESOP Convertible Preferred Stock ($43.875 stated value) for $125,000,000, financed by a twenty-year term loan from the Company. During fiscal 1995, in connection with the PCS Transaction, all shares of Series B ESOP Convertible Preferred Stock held by the Plan were converted into 5,440,914 shares of Company common stock. In fiscal 1996, in connection with the PCS Transaction, the ESOP purchased 6,259,080 additional shares of Company common stock.

Employer Matching Contributions and Participants Accounts – Effective the last business day of each month throughout the fiscal year, participants are credited with matching Company contributions, in the form of the Company’s common stock based on a percentage of their basic contributions. An additional annual matching contribution may be granted at the discretion of the Company. In fiscal 2004 and 2003, employees were eligible for matching Company contributions of up to 3.6% and 3.9% of their eligible compensation.

Retirement Share Plan Contribution – The Retirement Share Plan (“RSP”) provided for the contribution to each eligible participant a percentage of the participant’s compensation. Such percentage depended on the participant’s combined age and years of service, or RSP “points” as defined in the Plan document. Employees hired after December 31, 1999 were not eligible to participate in the RSP. At the Company’s election, this contribution may be in the form of cash or shares of Company common stock. This benefit was discontinued after March 31, 2004.

PSIP-PLUS Contribution – The “PSIP-PLUS contribution” was a per capita contribution of up to 30 shares of Company common stock per year made to certain employees who

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McKESSON CORPORATION
PROFIT-SHARING INVESTMENT PLAN

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED MARCH 31, 2004 AND 2003

contributed at least 2% of their total compensation to the PSIP. Employees hired after December 31, 1999 were not eligible for the PSIP-PLUS. This benefit was discontinued after March 31, 2004.

Employer Contributions – Dividends on unallocated ESOP I and II shares, and on allocated and unallocated ESOP III shares, of Company common stock, are used to pay the obligations under the ESOP loans. Under the terms of the loan agreements, the Company is required to make cash contributions to each ESOP to the extent that the dividends are not sufficient to service the debt. The cash contributions amounted to $12,344,000 and $16,011,000 for the years ended March 31, 2004 and 2003.

Vesting – Employees become vested in all employer contributions after five years of service (20% annually over five years). Generally, 100% vesting is provided upon retirement, disability, death, termination of the Plan, or a substantial reduction in work force initiated by the Company for affected participants. Dividends automatically reinvested in McKesson common stock on and after January 1, 2003 are also 100% vested at all times.

Forfeitures – A rehired employee who has met certain levels of service prior to termination may be entitled to have forfeited interests in the PSIP reinstated. Each plan year, forfeited interests are used to reinstate previously forfeited amounts of rehired employees and to pay other Plan expenses as appropriate. Forfeitures for the years ended March 31, 2004 and 2003 were $1,266,000 and $1,419,000.

Diversification of Stock Fund – Participants who have completed five years of service may elect to transfer 50% of the Company contribution that is invested in the McKesson Corporation Employer Company Stock Fund (Allocated) to one or more of the other investment funds offered. After ten years of service, participants may elect to transfer up to 75% of the portion of their account representing the Company contributions. Participants who have reached age 50 and completed five years of service may transfer up to 100% of their balance related to the Company contributions. Amounts may be transferred in one percent increments or in whole dollars.

Payment of Benefits – Distributions are made only upon participant retirement, death (in which case, payment shall be made to the participant’s beneficiary), or other termination of employment with the Company. Distributions are made in cash or, if a participant elects, in the form of Company common shares plus cash for any fractional share.

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McKESSON CORPORATION
PROFIT-SHARING INVESTMENT PLAN

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED MARCH 31, 2004 AND 2003

McKesson Corporation Employer Company Stock Funds (Allocated and Unallocated) – The following ESOP information regarding the shares of McKesson Corporation common stock held is as of March 31 (in thousands):

                                                 
    2004
  2003
    Number of   Cost   Fair Value   Number of   Cost   Fair Value
    Shares
  Basis
  of Shares
  Shares
  Basis
  of Shares
Allocated
    9,480     $ 245,701     $ 285,250       9,255     $ 238,699     $ 230,739  
Unallocated
    3,567       67,338       107,325       5,030       94,997       125,394  
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Total
    13,047     $ 313,039     $ 392,575       14,285     $ 333,696     $ 356,133  
 
   
 
     
 
     
 
     
 
     
 
     
 
 

The per share fair market value of McKesson Corporation common stock at March 31, 2004 and 2003 was $30.09 and $24.93.

The following is a reconciliation of the allocated and unallocated net assets of the Non-Participant Directed Investments at fair value for the years ended March 31 (in thousands):

                                                 
    2004
  2003
    Allocated
  Unallocated
  Total
  Allocated
  Unallocated
  Total
Net Assets (beginning of year)
  $ 231,822     $ 62,142     $ 293,964     $ 318,304     $ 176,779     $ 495,083  
Net Appreciation (Depreciation)
    47,639       26,629       74,268       (104,398 )     (81,402 )     (185,800 )
Dividends and Interest
    1,932       1,394       3,326       2,002       1,637       3,639  
Employer Contributions
            12,344       12,344               16,011       16,011  
Benefits Paid to Participants
    (19,072 )             (19,072 )     (20,635 )             (20,635 )
Interest Expense
            (4,356 )     (4,356 )             (5,066 )     (5,066 )
Administrative Fees
                            (74 )     (1 )     (75 )
Allocation of 1,724 shares, at market
                            45,816       (45,816 )      
Allocation of 1,463 shares, at market
    44,696       (44,696 )                              
Transfers
    (21,259 )             (21,259 )     (9,193 )             (9,193 )
 
   
 
     
 
     
 
     
 
     
 
     
 
 
Net Assets (end of year)
  $ 285,758     $ 53,457     $ 339,215     $ 231,822     $ 62,142     $ 293,964  
 
   
 
     
 
     
 
     
 
     
 
     
 
 

9


Table of Contents

McKESSON CORPORATION
PROFIT-SHARING INVESTMENT PLAN

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED MARCH 31, 2004 AND 2003

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting – The financial statements of the Plan are prepared in accordance with accounting principles generally accepted in the United States of America.

Cash Equivalents – The Plan considers all highly liquid debt instruments purchased with remaining maturities of less than three months to be cash equivalents.

Use of Estimates – The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires Plan management to make estimates and assumptions that affect the reported amount of net assets available for benefits and changes therein. Actual results could differ from those estimates. The Plan utilizes various investment instruments, including mutual funds and investment contracts. Investment securities, in general, are exposed to various risks, such as interest rate, credit, and overall market volatility. Due to the level of risk associated with certain investment securities, it is reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect the amounts reported in the financial statements.

Investment Valuation and Income Recognition – Investments are stated at fair value which is based on independent valuations or publicly quoted market prices, except for investments in the Standish Mellon Stable Value Fund which are stated at contract value (or cost) plus accrued interest. Contract value represents contributions made under the contracts, plus earnings, less participant withdrawals and administrative expenses. Shares of registered investment companies are valued at quoted market prices, which represent the net asset value of shares held by the Plan at year-end. Shares of McKesson Corporation common stock are valued at quoted market prices on March 31, 2004 and 2003. Certain administrative expenses are allocated to the individual funds based upon daily balances invested in each fund and are reflected as a reduction of net appreciation (depreciation) in fair market value of investments and are not separately reflected. Consequently, these management fees and operating expenses are reflected as a reduction of investment return for such investments. All other activity is recorded in the Plan based on the elections of the individual participants in the Plan. Participant loans are valued at the outstanding loan balance. Purchases and sales of securities are recorded on a trade-date basis. Realized gains and losses from security transactions are reported on the average cost method. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date.

Administrative Fees – Administrative fees of the Plan are paid by either McKesson or the Plan, as provided by the Plan document.

Benefits – Benefits are recorded when paid.

10


Table of Contents

McKESSON CORPORATION
PROFIT-SHARING INVESTMENT PLAN

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED MARCH 31, 2004 AND 2003

3.   INVESTMENTS
 
    The recorded values of individual investments that represent 5% or more of the Plan’s net assets at March 31 were as follows (in thousands):
                 
    2004
  2003
McKesson Corporation Employer Company Stock Funds (Allocated and Unallocated) *
  $ 392,575     $ 356,133  
Interest in Master Trust (see Note 4)
            615,184  
SSgA S&P500 Index
    156,534          
Dodge & Cox Large Cap Value Fund
    104,453          
Standish Mellon Stable Value Fund
    106,819          

    * Non-Participant Directed

    The Standish Mellon Stable Value Fund contains benefit-responsive guaranteed investment contracts with several insurance companies carried at contract value plus accrued interest totaling $17,554,000 at March 31, 2004. The guaranteed rates range from 3.63% to 7.72% and the contracts mature at various dates through April 2008. The Standish Mellon Stable Value Fund also includes synthetic investment contracts that are benefit-responsive and are carried at contract value plus accrued interest totaling $83,311,000 at March 31, 2004. There are no reserves against these contract values for credit risk of the contract issuer or otherwise. Certain of the contracts contain limitations on contract value guarantees for liquidation other than to pay benefits. The contracts mature at various dates through June 2010. The Plan’s investment guidelines require these contracts to be with companies rated AA- or better, with no more than 10% of the pool invested with one traditional Guaranteed Income Contract issuer and no more than 40% invested with any one synthetic wrap provider.
 
    During fiscal 2004 and 2003, the Plan’s investments (including gains and losses on investments bought and sold, as well as held during the year) appreciated/(depreciated) in value as follows (in thousands):
                 
    2004
  2003
Institutional Commingled Funds
  $ 48,547          
Registered Investment Funds
    60,969          
Separately Managed Accounts
    42,873          
Interest in Master Trust (see Note 4)
          $ (127,865 )
McKesson Corporation Common Stock:
               
Employer Company Stock Funds (Allocated and Unallocated)*
    74,268       (185,800 )
Employee Company Stock Fund
    6,318          
 
   
 
     
 
 
Total
  $ 232,975     $ (313,665 )
 
   
 
     
 
 

    * Non-Participant Directed

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Table of Contents

McKESSON CORPORATION
PROFIT-SHARING INVESTMENT PLAN

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED MARCH 31, 2004 AND 2003

4.   INTEREST IN McKESSON CORPORATION PROFIT-SHARING MASTER TRUST
 
    As discussed in Note 1 to the financial statements, the Master Trust ceased to exist after March 31, 2003. The Master Trust investments consisted of the following at March 31, 2003 (in thousands):
                 
            Plan’s
    Amount
  Ownership
Institutional commingled funds, at fair value:
               
State Street Balanced Fund
  $ 29,587       100 %
State Street Bond Index Fund
    18,338       100  
State Street S&P500 Index Fund
    117,726       100  
 
   
 
         
 
    165,651          
 
   
 
         
Registered investment funds, at fair value:
               
Putnam International Growth Fund Y
    9,292       100  
Fidelity Magellan Fund
    40,606       100  
Mutual Fund Window
    152,470       100  
MFS Institutional Large Cap Growth Fund
    1,766       100  
 
   
 
         
 
    204,134          
 
   
 
         
Investments, at contract value:
               
Certus Stable Value Fund
    102,126       100  
 
   
 
         
 
    102,126          
 
   
 
         
Other investments, at fair value:
               
Certus Stable Value Fund
    7,982       100  
Dodge & Cox Large Cap Value Fund
    68,393       100  
Wellington Management Small Cap Portfolio
    16,549       100  
McKesson Corporation Employee Company Stock Fund
    30,951       100  
Participant Loans
    15,103       100  
Brokerage Link
    2,664       100  
Cash and cash equivalents
    1,631       100  
 
   
 
         
 
    143,273          
 
   
 
         
Total Master Trust Investments
  $ 615,184       100 %
 
   
 
         

12


Table of Contents

McKESSON CORPORATION
PROFIT-SHARING INVESTMENT PLAN

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED MARCH 31, 2004 AND 2003

    Investment income and administrative expenses related to the Master Trust were allocated to the individual plans based on daily balances invested in each plan prior to their merger into the McKesson PSIP. Short-term investments earned interest at a current short-term rate. The Certus Stable Value Fund contained benefit-responsive guaranteed investment contracts with several insurance companies carried at contract value plus accrued interest totaling $24,512,000 at March 31, 2003. The guaranteed rates ranged from 3.78% to 7.72%. The Certus Stable Value Fund also included synthetic investment contracts that are benefit-responsive and were carried at contract value plus accrued interest totaling $77,614,000 at March 31, 2003. Certain of the contracts contained limitations on contract value guarantees for liquidation other than to pay benefits. In fiscal 2004, the Certus Stable Value Fund was replaced with the Standish Mellon Stable Value Fund (see Note 3).

    The Master Trust’s investment income (loss) for the year ended March 31, 2003 was as follows (in thousands):
                 
    Net Appreciation    
    (Depreciation) in   Dividends
    Fair Value of   & Interest
    Investments
  Income
Certus Stable Value Fund
  $ (199 )   $ 6,134  
Dodge & Cox Large Cap Value Fund
    (18,856 )     1,648  
Fidelity Magellan Fund
    (13,614 )     336  
Putnam International Growth Fund Y
    (3,271 )     48  
Putnam Investors Fund Y
    (359 )      
State Street Balanced Fund
    (3,760 )     15  
State Street Bond Index Fund
    2,056        
State Street S&P 500 Index Fund
    (40,647 )      
Wellington Management Small Cap Portfolio
    (6,064 )     226  
Mutual Fund Window
    (30,199 )     2,277  
Brokerage Link
    (977 )      
MFS Institutional Large Cap Growth Fund
    (147 )      
McKesson Corporation Employee Company Stock Fund
    (15,093 )     296  
Participant Loans
    38       1,033  
Cash and Cash Equivalents
    7       34  
 
   
 
     
 
 
Total
  $ (131,085 )   $ 12,047  
 
   
 
     
 
 

13


Table of Contents

McKESSON CORPORATION
PROFIT-SHARING INVESTMENT PLAN

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED MARCH 31, 2004 AND 2003

5.   LINE OF CREDIT
 
    In fiscal 1998, the Plan obtained a $35 million line of credit with ABN AMRO Bank N.V. in order to refinance a portion of the principal payable under the ESOP loans and reduce the number of shares that would be released to fund the employee benefits. In fiscal 2004 and 2003, the Plan released only the shares required to fund the annual ESOP benefits. The line of credit bears interest at London Interbank Offered Rate (“LIBOR”) multiplied by the applicable LIBOR adjustment. The line of credit matures on June 1, 2009. On March 31, 2004 and 2003, interest rates ranged from 0.978% to 0.980% and from 1.19% to 1.21% on the outstanding balances totaling $3,600,000 and $5,300,000. At March 31, 2004, the line of credit is collateralized by 225,874 (475,086 at March 31, 2003) unallocated shares of McKesson Corporation common stock.
 
6.   ESOP PROMISSORY NOTES PAYABLE
 
    The ESOP I promissory note supporting the July 1986 stock purchase is payable to Wells Fargo Bank in increasing annual installments (ranging from 2% to 3% of original principal) over an 18-year term ending in fiscal 2005 (see Note 1, B). The interest rate is LIBOR plus 0.4%, with an option to the Plan to fix the LIBOR rate for a period ranging from 1 month to 1 year. On March 31, 2004, the interest rate was 1.53%, and the outstanding balance was $949,000 ($1,839,000 at March 31, 2003). The note is guaranteed by the Company, without recourse to the participants’ accounts and is collateralized by 129,385 unallocated shares of McKesson Corporation common stock at March 31, 2004 (251,258 unallocated shares at March 31, 2003).
 
    The ESOP II promissory note was payable to the Company in increasing annual installments (ranging from 4% to 11% of original principal) over a fifteen-year term ending in fiscal 2003. The interest rate was 77.5% of the prime rate or 89.08% of LIBOR, with an option to the borrower to fix the LIBOR rate for a period ranging from 1 month to 1 year. The note was paid in full in March 2003 and all shares of McKesson Corporation common stock released.
 
    The ESOP III promissory note supporting the ESOP III purchase is payable to the Company in annual installments plus interest at 8.6% over a twenty-year term ending in fiscal 2010. On March 31, 2004, the outstanding balance of the note was $47,958,000 ($54,533,000 at March 31, 2003). This note is collateralized by 3,211,021 unallocated shares of McKesson Corporation common stock (3,715,960 at March 31, 2003). On April 1, 2004, an additional $9,000,000 principal payment was made to enable the release of additional shares for employer contributions, and each of the scheduled subsequent loan repayment installments were reduced.

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Table of Contents

McKESSON CORPORATION
PROFIT-SHARING INVESTMENT PLAN

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED MARCH 31, 2004 AND 2003

    Future minimum principal payments required on the ESOP notes are as follows (in thousands):
         
Fiscal Year
  Amount
2005
  $ 16,363  
2006
    6,206  
2007
    6,750  
2008
    7,344  
2009
    7,990  
Thereafter
    7,854  
 
   
 
 
Total
  $ 52,507  
 
   
 
 

7.   FEDERAL INCOME TAX STATUS
 
    The Internal Revenue Service (“IRS”) has determined and informed the Company by letter dated January 21, 2004 that the Plan is qualified and the trust established under the Plan is tax-exempt, in accordance with the applicable sections of the Internal Revenue Code. This was in response to the Plan’s sponsor’s request for an updated determination letter to incorporate certain regulatory changes to the Plan as required by the Uruguay Round Agreements Act, the Uniformed Services Employment and Reemployment Rights Act of 1994, the Small Business Job Protection Act of 1996, the Taxpayer Relief Act of 1997, the IRS Restructuring and Reform Act of 1998, and the Community Renewal Tax Relief Act of 2000 (collectively referred to as “GUST”). The Company and the Plan administrator believe that the Plan is currently designed and operated in compliance with the applicable requirements of the Internal Revenue Code and the Plan and related trust continue to be tax-exempt. Therefore no provision for income taxes has been included in the Plan’s financial statements.
 
    During fiscal year 2002, the Department of Labor (the “DOL”) initiated a review of the Plan’s operations. The DOL has not issued any report on its findings. The Plan’s sponsor is cooperating with the DOL and will address matters, if any, requiring corrective action.
 
8.   PLAN TERMINATION
 
    The Company’s Board of Directors reserves the right to terminate the Plan. If termination should occur, all participant accounts will immediately vest and each account would receive a distribution equal to the vested account balance. In addition, the unallocated common stock would be liquidated to repay the ESOP promissory notes payable. If the stock liquidation is insufficient to satisfy the notes payable, the Company is obligated to fund the difference.

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Table of Contents

McKESSON CORPORATION
PROFIT-SHARING INVESTMENT PLAN

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED MARCH 31, 2004 AND 2003

9.   PENDING LITIGATION
 
    On November 24, 1999, an action was filed in the United States District Court for the Northern District of California captioned Chang v. McKesson HBOC, Inc., et al., (Case No. C-00-20030 RMW) (“Chang”). On June 28, 2001, plaintiffs filed an amended class action complaint against McKesson, HBO & Company (“HBOC”, now known as MIS), and the Chase Manhattan Bank. The amended complaint in Chang generally alleged that the defendants breached their fiduciary duties under ERISA in connection with administering the Plan and the HBO & Company Profit Sharing and Savings Plan (the “HBOC Plan”). Plaintiffs in Chang are alleged former employees of McKesson and participants in the Plan, and purportedly seek relief under sections 404-405, 409 and 502 of ERISA on behalf of a class defined to include participants in the Plan, including participants under the HBOC Plan, who maintained an account balance under the Plan as of April 27, 1999, who had not received a distribution from the Plan as of April 17, 1999, and who suffered losses as a result of the alleged breach of duty. On October 12, 2001, the Company, HBOC and Chase moved to dismiss the Chang action. The outcome of that motion is discussed below.
 
    On February 7, 2002, a related ERISA class action was filed in the United States District Court for the Northern District of California captioned Adams v. McKesson Information Solutions, Inc. et al., (Case No. C02-06 85 JCS) (“Adams”). Plaintiff in Adams filed a first amended complaint on March 15, 2002, against MIS, McKesson, the HBOC Board of Directors, HBOC Plan Administrative Committee, HBOC Plan Investment Committee, the Plan (as a nominal defendant only), and certain current or former officers, directors or employees of McKesson or HBOC. Plaintiff alleges that he was a participant in the HBOC Plan and generally alleges that McKesson and HBOC breached their ERISA fiduciary duties to the HBOC Plan and its participants or engaged in transactions prohibited by ERISA. Plaintiff asserts his claims on behalf of a putative class defined to include all participants in the HBOC Plan and their beneficiaries for whose benefit the HBOC Plan acquired HBOC stock from March 31, 1996 to April 1, 1999. Plaintiff seeks (i) a judgment that McKesson and HBOC breached their fiduciary duties, (ii) an order requiring defendants to restore to the plan all losses caused by these purported breaches of fiduciary duty, and (iii) reasonable attorneys’ fees, costs and expenses.
 
    On June 3, 2002, the Honorable Ronald M. Whyte of the Northern District of California consolidated the Adams ERISA class action with the Chang ERISA class action. By order dated September 30, 2002, Judge Whyte dismissed the First Amended Complaint in the Chang action. Judge Whyte granted plaintiffs in Chang and Adams 30 days leave to file a consolidated and amended complaint under the caption In re McKesson HBOC, Inc. ERISA Litigation (N.D. Cal. No. C-02-0685 RMW) (the “ERISA Action”). On December 31, 2002, plaintiffs filed a consolidated amended complaint (the “CAC”) in the ERISA Action. The CAC generally alleges that McKesson and HBOC breached their fiduciary duties under ERISA, and that HBOC engaged in transactions prohibited by ERISA. Plaintiffs further allege that McKesson and HBOC are liable under principles of respondeat superior and agency for alleged breaches of fiduciary duties by other defendants. The CAC seeks to have the defendants restore to the HBOC Plan and McKesson Plan losses allegedly caused by their alleged breaches of fiduciary duty, equitable relief, attorneys’ fees, costs and expenses. On February 28, 2003, McKesson filed a motion to dismiss the CAC and HBOC filed motions to dismiss portions of the CAC, which were argued before Judge Whyte on August 29, 2003. Judge Whyte has not yet issued a ruling on those motions.

16


Table of Contents

McKESSON CORPORATION
PROFIT-SHARING INVESTMENT PLAN

NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
FOR THE YEARS ENDED MARCH 31, 2004 AND 2003

    The Company does not believe it is feasible to determine the outcome or resolution of these proceedings or the effect, if any, on the Plan.
 
10.   RELATED-PARTY TRANSACTIONS
 
    At March 31, 2004 and 2003, the Plan held approximately 14,164,000 and 15,527,000 common shares of McKesson Corporation, the Plan’s sponsor. The shares are held within the McKesson Corporation Employer and Employee Stock Funds. At March 31, 2004 and 2003, the Employer Stock Funds held approximately 13,047,000 and 14,285,000 common shares. At March 31, 2004 and 2003, the Employee Stock Fund held approximately 1,117,000 and 1,242,000 shares.
 
    McKesson Corporation declared dividends of $0.24 per share for both fiscal 2004 and 2003. During the years ended March 31,2004 and 2003, the Employer Stock Funds recorded dividend income from McKesson Corporation common shares of approximately $3,326,000 and $3,639,000. During each of the years ended March 31, 2004 and 2003, the Employee Company Stock Fund recorded dividend income from McKesson Corporation common shares of approximately $291,000.
 
    Certain investment options are managed by Fidelity, which also serves as the Plan’s record-keeper and trustee. Therefore, these transactions qualify as party-in-interest transactions. Fees for investment management services are allocated to the participants with balances in those funds
 
11.   NON-EXEMPT PARTY-IN-INTEREST TRANSACTIONS
 
    During Fiscal 2004, employee withholdings of $27,389 deducted from participants’ pay checks were not remitted to the Plan’s trust within the timeframe required by the DOL regulations. This constitutes a prohibited transaction. In June 2004, the Plan’s sponsor made corrective payments to the Plan of amounts attributable to the late deposit of participant contributions. Also, the Plan’s sponsor will file a return with the IRS and pay the excise tax attributable to this transaction.

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Table of Contents

McKESSON CORPORATION
PROFIT-SHARING INVESTMENT PLAN

FORM 5500, SCHEDULE G, PART III
SCHEDULE OF NONEXEMPT TRANSACTIONS
MARCH 31, 2004

                 
Identity of       Amount   Date Remitted to
Party Involved
  Description of Transaction
  Loaned
  Trust
*McKesson Corporation  
Late employee withholdings not timely remitted to the trust, for the November 2003 payroll
  $ 27,389     June 3, 2004

*Represents a party-in-interest.

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Table of Contents

McKESSON CORPORATION
PROFIT-SHARING INVESTMENT PLAN

FORM 5500, SCHEDULE H, PART IV, LINE 4i
SCHEDULE OF ASSETS (HELD AT YEAR END)
MARCH 31, 2004

                         
Investment/Fund Name
  Cost Basis
  Shares/Units
  Fair Value
BROKERAGELINK
  $ 4,900,184       4,900,184     $ 4,900,184  
SSGA BOND INDEX
    11,658,518       1,022,156       16,160,288  
SSGA BALANCED
    34,165,204       3,641,148       38,085,411  
WELLNGTON MGMT SMCAP
    20,163,063       2,093,099       27,928,217  
SSGA S&P500 INDEX
    116,295,724       9,521,555       156,534,359  
DODGE & COX LG VAL
    75,328,523       7,414,291       104,452,529  
PIMCO TOT RETURN ADM
    3,149,964       294,000       3,216,362  
TMPL FOREIGN SM CO A
    165,944       10,181       195,574  
AMR BALANCED PA
    263,037       22,474       297,110  
AMR LARGE CAP VAL PA
    142,543       9,578       160,423  
AMR INTL EQUITY PA
    20,808       1,391       23,964  
AMR SH TERM BOND PA
    89,735       9,516       88,685  
MUTUAL DISCOVERY A
    506,115       27,237       585,041  
BARON GROWTH
    3,462,820       109,377       4,158,505  
UBS GLOBAL EQ Y
    349       32       340  
MSI EQUITY GROWTH B
    54,872       3,872       60,630  
CALVERT NEWVIS SM CP
    43,201       2,718       54,842  
CALVERT SIF BALNCD A
    21,815       911       24,049  
CALVERT CAP ACC A
    21,949       1,034       23,347  
CALVERT INTL EQTY A
    5,181       373       6,341  
FMA SMALL COMPANY IS
    231,445       12,880       287,357  
FPA CRESCENT
    2,044,679       104,213       2,369,814  
RHJ MICRO CAP
    817,464       43,324       921,076  
PBHG EMERGING GROWTH
    109,825       8,775       111,085  
ARIEL FUND
    3,833,982       97,330       4,687,410  
ARIEL APPRECIATION
    3,635,971       95,064       4,269,333  
ARIEL PREM BOND INV
    271,985       26,065       275,247  
ALGER CAP APPREC I
    413,548       36,878       430,366  
ALGER MIDCAP GRTH I
    1,455,549       104,866       1,673,669  
ALGER SMALL CAP I
    215,719       14,662       245,584  
FKLN SMMIDCAP GRTH A
    439,194       15,692       484,896  
DREY FNDRS BALNCED F
    30,233       4,107       32,531  
DREY FNDRS G & I F
    84,899       19,007       87,432  
DREY FNDRS GROWTH F
    159,135       16,808       165,391  
DREY FNDRS MC GRTH F
    98,521       29,757       112,482  
DREY FNDRS WW GRTH F
    5,636       514       6,025  
PBHG GROWTH FUND
    145,306       7,778       142,656  
INVESCO DYNAMICS
    141,009       10,494       159,085  
INVESCO SM CO GROWTH
    87,373       8,139       93,848  
TEMPLETON FOREIGN A
    5,050,428       517,933       5,733,523  
JANUS FLEX INCOME
    1,000,358       103,882       1,033,625  
DREY FNDRS DISCVRY F
    193,745       7,999       215,650  
MSI INTL MAGNUM B
    11,167       1,260       13,393  
MUTUAL SHARES CL A
    602,411       30,885       665,886  
MSI GLOBAL VAL EQ B
    50,101       3,818       61,617  

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McKESSON CORPORATION
PROFIT-SHARING INVESTMENT PLAN

FORM 5500, SCHEDULE H, PART IV, LINE 4i
SCHEDULE OF ASSETS (HELD AT YEAR END)
MARCH 31, 2004

                         
Investment/Fund Name
  Cost Basis
  Shares/Units
  Fair Value
MSIFT BALANCED ADV
    23,259       2,268       24,974  
MSIFT CP FX INC ADV
    176,161       15,136       177,998  
MSIFT HIGH YIELD ADV
    17,258       3,275       17,947  
MSIFT MIDCAP GTH ADV
    268,683       16,650       296,206  
MSIFT VALUE ADVISER
    150,490       10,810       172,318  
MSI SM CO GROWTH B
    67,213       7,443       81,206  
MSI ACTIVE INTL B
    1,729       215       2,163  
MSI EMERGING MKTS B
    70,496       4,892       83,456  
NB FOCUS TRUST
    377,255       15,085       433,244  
NB GENESIS TRUST
    2,257,890       71,149       2,770,530  
NB MANHATTAN TRUST
    43,189       4,697       44,481  
NB PARTNERS TRUST
    25,416       1,677       28,959  
NB SOCIALLY RESP TR
    125,747       9,677       134,024  
PIMCO CCM CAP AP ADM
    216,997       15,455       253,313  
PIMCO CCM MID CP ADM
    133,983       7,481       159,876  
PIM GLBBND AD UNHDGD
    612,058       61,555       645,098  
PIMCO HIGH YIELD ADM
    812,701       87,270       845,647  
PIMCO LOW DUR ADM
    681,820       66,915       689,889  
PIMCO LT US GOVT ADM
    971,480       88,314       1,002,369  
STRONG ULTRA SHORT
    28,443       3,025       28,193  
STRONG SHORTTERM BND
    137,150       15,162       135,241  
STRONG DISCOVERY
    145,939       8,152       168,503  
STRONG GROWTH FUND
    295,825       18,445       323,891  
STRONG ADV COM STK Z
    160,163       8,078       184,090  
STRONG OPPORTUNITY
    621,211       17,303       716,504  
STRONG LG CAP GROWTH
    139,559       6,989       147,188  
STRONG GOVT SECURITY
    468,372       42,102       466,912  
TEMPLETON DEV MKTS A
    140,516       10,399       164,619  
TEMPLETON GROWTH A
    666,120       36,956       787,153  
TMPL GLOBAL BOND A
    472,699       49,648       510,386  
TEMPLETON WORLD A
    399,126       25,957       456,071  
USAA CORNERSTONE
    65,494       2,801       72,902  
USAA GNMA TRUST
    191,284       18,899       188,614  
USAA INCOME FUND
    542,997       43,867       553,601  
USAA INCOME STOCK
    144,288       9,923       155,699  
USAA INTERNATIONAL
    28,465       1,697       34,816  
USAA GROWTH FUND
    76,281       6,086       75,592  
USAA EMERGING MKTS
    148,398       19,777       215,574  
CS CAP APPREC COM
    55,787       3,183       49,305  
CS MID CAP GRTH COM
    111,740       4,579       136,454  
INVESCO TOTAL RETURN
    67,626       2,901       69,481  
NB GUARDIAN TRUST
    17,448       1,793       20,741  
ALGER CAP APPREC I
    150       11       126  
DOMINI SOCIAL EQUITY
    62,930       2,580       71,759  
INVESCO CORE EQUITY
    195,642       17,042       192,914  

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McKESSON CORPORATION
PROFIT-SHARING INVESTMENT PLAN

FORM 5500, SCHEDULE H, PART IV, LINE 4i
SCHEDULE OF ASSETS (HELD AT YEAR END)
MARCH 31, 2004

                         
Investment/Fund Name
  Cost Basis
  Shares/Units
  Fair Value
CS SMALL CAP VAL COM
    454,986       22,914       491,729  
MFS INST LG CAP GRTH
    2,172,136       415,249       2,462,424  
STANDISH STABLEVALUE
    102,087,835       8,938,280       106,818,787  
MCKESSON EMPLOYEE STK
    35,502,809       1,117,000       33,607,433  
MCKESSON EMPLOYER STK (ALLOCATED)
    245,701,000       9,479,898       285,250,131  
MCKESSON EMPLOYER STK (UNALLOCATED)
    67,338,000       3,566,812       107,325,373  
FIDELITY FUND
    664,091       25,811       730,955  
FIDELITY PURITAN
    1,097,899       63,468       1,190,030  
FIDELITY TREND
    102,962       2,274       113,185  
FIDELITY GINNIE MAE
    1,617,356       145,461       1,623,344  
FIDELITY MAGELLAN
    60,798,813       558,684       55,382,315  
FIDELITY EQUITY INC
    2,078,467       44,240       2,208,914  
FIDELITY GROWTH CO
    1,795,462       38,865       2,005,445  
FIDELITY INVST GR BD
    743,422       98,897       759,530  
FIDELITY GROW & INC
    47,413,675       1,191,059       42,890,050  
FIDELITY INTER BOND
    6,356,757       617,560       6,682,001  
FIDELITY CAP & INC
    745,745       99,510       800,060  
FIDELITY VALUE
    3,041,487       56,325       3,669,550  
FIDELITY US GOVT RES
    1,215,419       1,215,419       1,215,419  
FIDELITY GOVT INCOME
    809,413       78,274       816,397  
FIDELITY CASH RESRVE
    4,493,179       4,493,179       4,493,179  
FID INDEPENDENCE FD
    263,694       15,283       250,189  
FIDELITY OTC PORT
    183,431       6,279       207,285  
FIDELITY OVERSEAS
    250,968       8,898       295,941  
FIDELITY EUROPE
    217,605       9,066       254,768  
FIDELITY PAC BASIN
    53,878       3,128       60,595  
FID REAL ESTATE INVS
    3,023,822       145,690       3,808,333  
FIDELITY BALANCED
    3,250,933       213,265       3,678,823  
FIDELITY INTL GR&INC
    2,178,237       98,104       2,466,338  
FIDELITY CAP APPREC
    1,626,716       69,027       1,762,955  
FIDELITY CONV SEC
    531,828       28,297       581,228  
FIDELITY CANADA
    773,203       31,256       895,488  
FIDELITY UTILITIES
    182,747       16,359       189,433  
FIDELITY BLUE CHIP
    30,978,751       686,562       27,476,197  
FID ASSET MANAGER
    8,795,770       544,926       8,680,679  
FIDELITY DISC EQUITY
    80,514       3,897       90,872  
FIDELITY LOW PR STK
    9,246,317       310,297       11,490,302  
FIDELITY WORLDWIDE
    88,013       6,190       104,727  
FIDELITY EQ INC II
    13,747,677       612,176       13,871,906  
FIDELITY STK SELECTR
    27,707       1,451       30,946  
FID ASSET MGR GROWTH
    348,927       25,536       370,266  
FIDELITY EMERG MRKTS
    215,359       21,422       249,995  
FIDELITY AGGR GROWTH
    1,435,635       92,787       1,453,041  
FIDELITY DIVERS INTL
    16,918,916       691,434       17,797,524  
FID ASSET MGR INCOME
    293,190       25,106       310,809  

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McKESSON CORPORATION
PROFIT-SHARING INVESTMENT PLAN

FORM 5500, SCHEDULE H, PART IV, LINE 4i
SCHEDULE OF ASSETS (HELD AT YEAR END)
MARCH 31, 2004

                         
Investment/Fund Name
  Cost Basis
  Shares/Units
  Fair Value
FIDELITY DIVD GROWTH
    4,670,242       178,267       4,934,432  
FIDELITY NEW MKT INC
    2,044,847       156,455       2,188,810  
FIDELITY EXP & MULTI
    817,827       50,171       927,667  
FID FOCUSED STOCK
    57,261       6,606       59,124  
FIDELITY GLOBAL BAL
    74,304       4,382       85,668  
FID AGGRESSIVE INT’L
    201,256       15,290       244,030  
FID SM CAP INDEPEND
    185,818       11,491       215,448  
FIDELITY MID-CAP STK
    3,165,897       155,743       3,465,288  
FIDELITY LG-CAP STK
    428,085       33,192       466,020  
FIDELITY DISCOVERY
    505,306       52,277       537,930  
FIDELITY SM CAP STK
    1,989,248       130,119       2,334,344  
FIDELITY EUR CAP APP
    167,136       9,720       189,838  
FIDELITY NORDIC
    48,922       2,485       56,840  
FID ASSET MGR AGGRES
    314,463       32,664       347,218  
FIDELITY LATIN AMER
    97,817       6,514       107,609  
FIDELITY JAPAN
    206,341       20,200       264,213  
FIDELITY SE ASIA
    72,059       5,993       93,971  
FIDELITY CHINA RGN
    670,370       46,219       741,359  
FID FOUR IN ONE IDX
    229,983       10,464       245,484  
FIDELITY JAPAN SM CO
    349,113       37,097       451,094  
FIDELITY GR & INC II
    332,337       38,545       358,465  
FIDELITY STRAT INC
    763,620       74,131       782,084  
FID FREEDOM INCOME
    209,347       19,567       219,932  
FID FREEDOM 2000
    159,199       14,056       168,249  
FID FREEDOM 2010
    1,253,912       101,673       1,353,261  
FID FREEDOM 2020
    1,448,814       119,114       1,588,985  
FID FREEDOM 2030
    1,063,758       85,813       1,138,738  
FID SMALL CAP RETIRE
    539,294       44,507       642,240  
SPTN TOTAL MKT INDEX
    885,702       31,717       972,763  
SPTN EXTND MKT INDEX
    254,939       10,231       295,464  
SPARTAN INTL INDEX
    97,600       3,955       112,593  
FIDELITY SH TERM BD
    478,989       53,578       488,096  
FIDELITY INT GOV INC
    179,167       17,546       183,351  
FIDELITY HIGH INCOME
    460,348       53,955       480,743  
FIDELITY FIFTY
    986,637       56,953       1,114,004  
FIDELITY RETIRE MMKT
    5,490,817       5,490,801       5,490,801  
FIDELITY RET GOVT MM
    1,630,707       1,630,707       1,630,707  
SPARTAN US EQ INDEX
    1,759,275       47,196       1,884,084  
FIDELITY US BD INDEX
    1,294,308       116,349       1,324,053  
FID INST SH-INT GOVT
    203,784       21,014       206,986  
FID FREEDOM 2040
    171,174       23,678       183,508  
OUTSTANDING LOAN BALANCE
                    16,689,246  
 
   
 
             
 
 
TOTAL
  $ 1,016,011,297             $ 1,207,204,836  
 
   
 
             
 
 

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Plan administrator has duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.

McKesson Corporation Profit-Sharing Investment Plan

 
/s/ Paul E. Kirincic

Paul E. Kirincic
Executive Vice President
Human Resources

Date: September 27, 2004

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