Table of Contents

File No. 001-13252

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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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, 2002

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

 

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INDEPENDENT AUDITORS’ REPORT
	STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
	STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
	NOTES TO FINANCIAL STATEMENTS
	SCHEDULE OF ASSETS HELD AT END OF YEAR
	SCHEDULE OF REPORTABLE TRANSACTIONS
	SCHEDULE OF NONEXEMPT TRANSACTIONS
SIGNATURE
EX-23.1

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Table of Contents

McKESSON CORPORATION
PROFIT-SHARING INVESTMENT PLAN

TABLE OF CONTENTS

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			Page
INDEPENDENT AUDITORS’ REPORT				1
FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED MARCH 31, 2002 AND 2001:
	Statements of Net Assets Available for Benefits			2
	Statements of Changes in Net Assets Available for Benefits			3
	Notes to Financial Statements			4-16
SUPPLEMENTAL SCHEDULES AS OF AND FOR THE YEAR ENDED MARCH 31, 2002:
	Schedule of Assets Held at End of Year			17
	Schedule of Reportable Transactions			18
	Schedule of Nonexempt Transactions			19
EXHIBIT:
	23.1 Independent Auditors’ Consent

 

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Table of Contents

INDEPENDENT AUDITORS’ REPORT

McKesson Corporation Profit-Sharing Investment Plan:

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, 2002 and 2001, 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 auditing standards generally accepted in the United States of America. 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 presentation. We believe that 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, 2002 and 2001, 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 2002 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.

September 20, 2002

 

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Table of Contents

MCKESSON CORPORATION
PROFIT-SHARING INVESTMENT PLAN

STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
AS OF MARCH 31, 2002 AND 2001 (IN THOUSANDS)

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						2002												2001
										Non-												Non-
						Participant				Participant								Participant				Participant
						Directed				Directed								Directed				Directed
						Plan's												Plan's
						Share of				Company								Share of				Company
						Master				Stock				Plan				Master				Stock				Plan
						Trust				Fund				Total				Trust				Fund				Total
ASSETS:
	Cash and cash equivalents
		Allocated				$	—			$	749			$	749			$	—			$	79			$	79
		Unallocated									611				611								329				329
	Investments:
		Interest in Master Trust					694,618								694,618				648,978								648,978
		McKesson Corporation common stock:
			Allocated stock								316,655				316,655								206,455				206,455
			Unallocated stock								252,786				252,786								227,970				227,970
				Total investments			694,618				569,441				1,264,059				648,978				434,425				1,083,403
	Receivables:
		Dividends and interest
			Allocated								465				465								448				448
			Unallocated								493				493								558				558
		Due from broker for securities sold — allocated									434				434								9,226				9,226
				Total receivables			—				1,392				1,392				—				10,232				10,232
				Total assets			694,618				572,193				1,266,811				648,978				445,065				1,094,043
LIABILITIES:
	Line of credit — Unallocated										5,300				5,300								8,000				8,000
	ESOP promissory notes payable — Unallocated										69,175				69,175								80,998				80,998
	Accrued interest expense — Unallocated										2,635				2,635								2,910				2,910
				Total liabilities			—				77,110				77,110				—				91,908				91,908
NET ASSETS AVAILABLE FOR BENEFITS						$	694,618			$	495,083			$	1,189,701			$	648,978			$	353,157			$	1,002,135

See notes to financial statements.

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MCKESSON CORPORATION
PROFIT-SHARING INVESTMENT PLAN

STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEARS ENDED MARCH 31, 2002 AND 2001 (IN THOUSANDS)

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					2002												2001
									Non-																Non-
					Participant				Participant								Participant								Participant
					Directed				Directed								Directed								Directed
					Plan's																Plan's
					Share of				Company								HBOC				Share of				Company				Company
					Master				Stock				Plan				Fund				Master				Stock				Investment				Plan
					Trust				Fund				Total				Group				Trust				Fund				Fund				Total
ADDITIONS:
Investment income (loss):
	Net appreciation (depreciation) in fair value of investments				$	24,446			$	168,437			$	192,883			$	(48	)		$	(67,484	)		$	91,392			$	(9,665	)		$	14,195
	Dividends and interest					12,794				3,997				16,791				13,628				9,635				4,132								27,395
			Total investment income (loss)			37,240				172,434				209,674				13,580				(57,849	)			95,524				(9,665	)			41,590
Contributions:
		Participants				63,902								63,902				18,506				37,097												55,603
		Employer								18,863				18,863				5,584								10,021								15,605
			Total additions			101,142				191,297				292,439				37,670				(20,752	)			105,545				(9,665	)			112,798
DEDUCTIONS:
	Benefits paid to participants					70,103				33,833				103,936				16,224				74,002				46,579				41,370				178,175
	Interest expense									5,881				5,881												7,410								7,410
	Administrative fees					4,115				38				4,153				155				3,543				2								3,700
			Total deductions			74,218				39,752				113,970				16,379				77,545				53,991				41,370				189,285
NET INCREASE (DECREASE) IN NET ASSETS AVAILABLE FOR BENEFITS BEFORE INTERFUND TRANSFERS AND MERGERS						26,924				151,545				178,469				21,291				(98,297	)			51,554				(51,035	)			(76,487	)
INTERFUND TRANSFERS						9,619				(9,619	)			—				(260,577	)			345,644				20,654				(105,721	)			—
MERGER OF NET ASSETS AVAILABLE FOR BENEFITS FROM OTHER PLANS						9,097								9,097																				—
NET INCREASE (DECREASE) IN NET ASSETS AVAILABLE FOR BENEFITS						45,640				141,926				187,566				(239,286	)			247,347				72,208				(156,756	)			(76,487	)
	Beginning of Year					648,978				353,157				1,002,135				239,286				401,631				280,949				156,756				1,078,622
	End of Year				$	694,618			$	495,083			$	1,189,701			$	—			$	648,978			$	353,157			$	—			$	1,002,135

See notes to financial statements.

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Table of Contents

MCKESSON CORPORATION
PROFIT-SHARING INVESTMENT PLAN

NOTES TO FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 2002 AND 2001

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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 two months of service and are regular or part-time employees, or are casual employees working 1,000 hours in a year, of McKesson Corporation, (the “Company” or “McKesson”) or a participating subsidiary, except those covered by a collectively bargained pension plan. It 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.
		A portion of the Plan’s investments is in the McKesson Corporation Profit-Sharing Master Trust (the “Master Trust”), which was established for the investment of assets of the Plan, and several other McKesson-sponsored plans. Each participating plan has an undivided interest in the Master Trust. The assets of the Master Trust are held by JPMorgan Chase Bank (“Plan trustee”).
		The Plan is comprised of the following:

	A.		Profit-Sharing Investment Plan
			Transfers from Other Qualified Plans - Effective January 31, 2002, the net assets available for benefits of the McKesson/APS 401(k) Plan (totaling $1,518,000), the MedManagement Employee Savings Plan (totaling $6,126,000), and the Prospective Health, Inc. Savings and Retirement Plan (totaling $424,000) were merged into the Plan. Effective February 28, 2002, the net assets available for benefits of the Hawkeye Medical Supply, Inc. Profit Sharing Plan (totaling $1,029,000) were merged into the Plan.
			In fiscal 2000, the net assets available for benefits of the HBO & Company (“HBOC”, subsequently renamed McKesson Information Solutions, Inc. or “MIS”) Profit Sharing and Savings Plan were merged into the PSIP.
			Contributions - Participants may elect to make basic contributions ranging from 1%-6% of compensation, 1%-4% for employees of MIS. Participants who make basic contributions of 6% (4% for MIS participants) may elect to make supplemental contributions of up to an additional 10% of compensation (12% for MIS participants). A participant’s pretax contributions are limited to $11,000 per year for calendar year 2002 and $10,500 for calendar year 2001. Total contributions are limited to the lesser of $30,000 or 25% of taxable compensation per fiscal year. Additional limits may apply to individuals classified as highly compensated employees.

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MCKESSON CORPORATION
PROFIT-SHARING INVESTMENT PLAN

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED MARCH 31, 2002 AND 2001

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			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, par value $.01 (“Company common stock”), based on a percentage of their basic contributions. An additional annual matching contribution may be granted at the discretion of the Company. For the fiscal year 2002, the total matching percentage for the monthly match and for the annual match combined was 78% of contributed amounts up to the first 6% of contributions for all eligible employees of McKesson divisions and subsidiaries, except MIS. MIS employees received a total of 117% of contributed amounts up to the first 4% of contributions for eligible employees.
			In fiscal 2001, the total matching percentage for eligible McKesson employees was 70% of contributed amounts, up to 6% contributed. For MIS participants, the Company matched 105% of contributed amounts up to the first 4% contributed.
			Participant Accounts — Each participant’s account is credited with the participant’s contribution and an allocation of the Company’s contribution and Plan earnings. Allocations are based on participant earnings, or account balances, as defined in the Plan document. The participant is entitled to a benefit upon retirement and 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. Effective January 1, 2001, the record keeper was changed to Fidelity Investments and investment options were expanded to include a mutual fund window and a brokerage window. The following are descriptions from each fund’s prospectus or fund manager’s report:

			Certus Stable Value Fund invests in low-risk, high-quality fixed-income investments issued by credit-worthy 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 well-established companies when the fund managers believe the long-term earnings prospects are not reflected in the current price.
			Fidelity Magellan Fund is a growth mutual fund that seeks capital appreciation and normally invests in common stocks.
			Putnam International Growth Fund Y invests primarily in a diversified portfolio of equity securities of companies located outside of the U.S.
			Putnam Investors Fund Y invests primarily in common stocks, with a goal of long term capital growth.

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MCKESSON CORPORATION
PROFIT-SHARING INVESTMENT PLAN

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED MARCH 31, 2002 AND 2001

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			State Street Balanced Fund is a custom mix of commingled pools that invests 60% in State Street Global Advisors S&P 500 Index Fund, 37% in State Street Global Advisors Bond Market Index Fund and 3% in short term investments.
			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.
			State Street S&P 500 Index Fund is a commingled pool that invests in stocks in the benchmark S&P 500 Index in order to duplicate the investment results of that fund.
			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 fund seeks long term growth by investing in the stocks of small companies.
			McKesson Corporation Employee Company Stock Fund represents shares invested in Company common stock.
			Mutual Fund Window provides access to approximately 170 mutual fund options from more than 20 investment companies.
			Brokerage Window provides access to a discount brokerage account which allows participants to develop a self-directed brokerage option. Commissions and account fees are charged to the participant’s account as well as standard plan-related fees.

			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 balances, $50,000 as adjusted for certain items specified in the Plan document, or the value of the participant’s accounts attributable to basic, supplemental and rollover contributions. The loans bear interest at the then current prime rate of interest plus 1%. Contractual interest rates ranged from 5.75% to 11.00% in 2002 and from 6.50% to 11% in 2001. 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.
			Payment of Benefits - Participants have the right to withdraw 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 cash lump sum. Former employees may remain participants in the Participant Directed Funds by electing to receive installment payments or deferring withdrawal until a later date.

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MCKESSON CORPORATION
PROFIT-SHARING INVESTMENT PLAN

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED MARCH 31, 2002 AND 2001

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	B.		Employee Stock Ownership Plans
			General - The Company Stock Fund consists of a leveraged Employee Stock Ownership Plan (“ESOP”). In fiscal 2002 and 2001, shares from ESOP I, II and III were used to fund all employer allocations 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 for $30,250,000, financed by a ten-year term loan from a bank, guaranteed by the Company. Additionally, in connection with a transaction involving a reorganization and a sale of a business unit of the Company completed on November 21, 1994 (the “PCS Transaction”), the ESOP purchased 1,087,754 additional shares in fiscal 1996. The Company extended the existing term of the outstanding loan balance from its original maturity to 2005 in fiscal 1997.
			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.
			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. The ESOP purchased 6,259,080 additional shares of Company common stock in fiscal 1996.

			Retirement Share Plan Allocation - Employees hired after December 31, 1999 are not eligible to participate in the Retirement Share Plan (“RSP”). The RSP provides for an allocation, which, at the Company’s election, may be in cash or shares of Company common stock. The RSP allocation formula allocates to each eligible participant a percentage of the participant’s compensation. Such percentage depends on the participant’s combined age and years of service, or RSP “points” as defined in the Plan document.
			PSIP-PLUS Allocation - Certain persons who are contributing at least 2% of their total compensation to the PSIP are eligible to participate in a per capita allocation of up to 30 shares of Company common stock (the “PSIP-PLUS allocation”) for a period of twenty years through fiscal 2010. Employees hired after December 31, 1999, are not eligible for the PSIP-PLUS.

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MCKESSON CORPORATION
PROFIT-SHARING INVESTMENT PLAN

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED MARCH 31, 2002 AND 2001

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			Contributions and Participants’ Accounts - Dividends on unallocated ESOP I and II shares of Company common stock, plus the Company’s cash contributions to the ESOP, are used to pay the obligations under the ESOP I and II loans. For the ESOP III loan, dividends on all shares of Company common stock (allocated to PSIP-PLUS and unallocated) plus the Company’s cash contributions to ESOP III are used to pay the obligations under the loan. 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 $18,863,466 and $15,604,705 for the years ended March 31, 2002 and 2001.
			Vesting - Employees become vested in all PSIP allocations after five years of service (20% annually over five years). Employees hired on or before December 31, 1996 become vested in PSIP matching contributions and PSIP-PLUS after three years of service. Generally, 100% vesting is provided upon retirement, disability, death, termination of the Plan, or a substantial reduction in work force initiated by the Company.
			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, 2002 and 2001 were $2,462,223 and $2,154,460.
			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 Employer Stock Fund 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 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)
YEARS ENDED MARCH 31, 2002 AND 2001

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Investments - The following ESOP information regarding the shares of McKesson Corporation common stock held is as of March 31 (in thousands):

		2002												2001
		Number of				Cost				Fair Value				Number of				Cost				Fair Value
		Shares				Basis				of Shares				Shares				Basis				of Shares
Allocated			8,460			$	198,929			$	316,655				7,718			$	190,053			$	206,455
Unallocated			6,754				127,481				252,786				8,522				160,820				227,970
Total			15,214			$	326,410			$	569,441				16,240			$	350,873			$	434,425

     The following is a reconciliation of the allocated and unallocated shares of the Company Stock Fund at fair value for the years ended March 31 (in thousands):

			2002												2001
			Allocated				Unallocated				Total				Allocated				Unallocated				Total
Net Assets (Beginning of Year)			$	193,152			$	160,005			$	353,157			$	174,699			$	106,250			$	280,949
	Net Appreciation (Depreciation)			104,515				63,922				168,437				4,967				86,425				91,392
	Dividends and Interest			2,124				1,873				3,997				1,698				2,434				4,132
	Employer Contributions			—				18,863				18,863				—				10,021				10,021
	Benefits Paid to Participants			(33,833	)			—				(33,833	)			(46,579	)							(46,579	)
	Interest Expense							(5,881	)			(5,881	)							(7,410	)			(7,410	)
	Administrative Expense			(37	)			(1	)			(38	)			(2	)			—				(2	)
	Allocation of 1,768,679 shares, at market			62,002				(62,002	)			—				—				—				—
	Allocation of 1,562,802 shares, at market			—				—								37,715				(37,715	)			—
	Transfers			(9,619	)			—				(9,619	)			20,654				—				20,654
Net Assets (End of Year)			$	318,304			$	176,779			$	495,083			$	193,152			$	160,005			$	353,157

2.		SIGNIFICANT ACCOUNTING POLICIES
		Basis of Accounting - The financial statements of the Plan are prepared under the accrual method of accounting.
		Cash Equivalents - The Plan considers all highly liquid debt instruments purchased with remaining maturities of less than three months to be cash equivalents.

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MCKESSON CORPORATION
PROFIT-SHARING INVESTMENT PLAN

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED MARCH 31, 2002 AND 2001

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		Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates.
		Investment Valuation and Income Recognition - Investments in the Master Trust are stated at fair value which is based on independent valuations or publicly quoted market prices, except for investments in the Stable Value Fund which are stated at contract value (or cost), plus accrued interest. 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, 2002 and March 31, 2001 which represent the net asset value of shares held by the Plan at year-end. Investment income and certain administrative expenses are allocated on to the individual plans based upon daily balances invested in each plan. All other activity is recorded in the Plan based on the elections of the individual participants in the Plan. Participant loans are valued at cost, which approximates fair value. 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 declaration date.
		Plan Expenses - Expenses incurred by the Trustee, in connection with the purchase and sale of common stock, are paid from the appropriate investment fund. Other Plan expenses are paid by either McKesson or the Plan, as provided by the Plan document.
		Benefits - Benefits are recorded when paid.
		Reclassifications - Certain reclassifications were made to the prior year financial statements to conform to current financial statement presentation.
3.		INTEREST IN McKESSON CORPORATION PROFIT-SHARING MASTER TRUST
		The assets of the Master Trust are held by JPMorgan Chase Bank (“The Trustee”). Short-term investments included in the Master Trust earn interest at a current short-term market rate. At March 31, 2002 and 2001, the Plan’s ownership interest in the Master Trust overall was 97.08% and 96.78%.

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MCKESSON CORPORATION
PROFIT-SHARING INVESTMENT PLAN

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED MARCH 31, 2002 AND 2001

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Investment income and administrative expenses relating to the Master Trust are allocated to the individual plans based on daily balances invested in each plan. The Master Trust assets consisted of the following at March 31 (in thousands):

			2002								2001
							Plan's								Plan's
			Amount				Ownership %				Amount				Ownership %
Certus Stable Value Fund			$	104,028				93.52	%		$	102,166				92.87	%
Dodge & Cox Large Cap Value Fund				89,540				92.91				87,079				92.49
Fidelity Magellan Fund				53,774				99.57				50,100				99.90
Putnam International Growth Fund Y				12,287				97.26				12,859				97.06
Putnam Investors Fund Y				2,120				97.22				116				100.00
State Street Balanced Fund				32,868				97.67				29,993				98.01
State Street Bond Index Fund				18,953				99.83				21,136				100.00
State Street S&P 500 Index Fund				167,075				97.23				195,701				97.08
Wellington Management Small Cap Portfolio				21,935				97.04				19,463				96.92
Mutual Fund Window				154,131				99.55				104,989				100.00
Brokerage Window				2,134				100.00				—				—
McKesson Corporation Employee Company Stock Fund				45,439				99.84				33,106				100.00
Participant Loans				13,664				96.93				11,630				96.26
Cash & Cash Equivalents				829				100.00				2,208				100.00
	Total Master Trust Assets		$	718,777				97.08	%		$	670,546				96.78	%

The Certus Stable Value Fund contains benefit-responsive guaranteed investment contracts with several insurance companies carried at contract value plus accrued interest totaling $24,743,758 and $25,744,928 at March 31, 2002 and 2001. The guaranteed rates range from 4.40% to 7.72% and the contracts mature at various dates through June 2006. The Certus Stable Value Fund also includes synthetic investment contracts that are benefit-responsive and are carried at contract value plus accrued interest totaling $73,986,867 and $64,153,634 at March 31, 2002 and 2001. Contract crediting rates ranged from 5.21% to 7.14% at March 31, 2002. There are no reserves against contract value 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 August 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.

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MCKESSON CORPORATION
PROFIT-SHARING INVESTMENT PLAN

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED MARCH 31, 2002 AND 2001

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The Master Trust’s investment income for the years ended March 31, was as follows (in thousands):

		2002								2001
		Net Appreciation				Dividends &				Net Appreciation				Dividends &
		(Depreciation) in fair				Interest				(Depreciation) in fair				Interest
		value of Investments				Income				value of Investments				Income
Certus Stable Value Fund		$	(154	)		$	6,176			$	(20	)		$	5,795
Dodge & Cox Large Cap Value Fund			9,533				1,744				12,403				3,103
Fidelity Magellan Fund			(1,153	)			620				(7,093	)			—
Putnam International Growth Fund Y			(492	)			—				(4,000	)			10
Putnam Investors Fund Y			(53	)			—				(3	)			—
State Street Balanced Fund			791				25				(2,344	)			—
State Street Bond Index Fund			1,079				—				443				—
State Street S&P 500 Index Fund			577				1				(42,456	)			—
Wellington Management Small Cap Portfolio			3,194				260				(1,798	)			242
Mutual Fund Window			(59	)			3,122				(12,445	)			295
Brokerage Window			(265	)			—				—				—
McKesson Corporation Employee Company Stock Fund			12,347				343				(10,845	)			167
Participant Loans			—				1,285				—				430
Cash and Cash Equivalents			(6	)			68				—				—
Total		$	25,339			$	13,644			$	(68,158	)		$	10,042

Effective January 1, 2001, the HBO Fund Group, which was participant-directed, merged with the Master Trust. Non-participant directed amounts were merged into the Company Stock Fund. The Company Investment Fund investments became participant directed effective January 1, 2001 and are now included in the Master Trust.

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MCKESSON CORPORATION
PROFIT-SHARING INVESTMENT PLAN

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED MARCH 31, 2002 AND 2001

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4.		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):

		2002				2001
Interest in Master Trust		$	694,618			$	648,978
McKesson Corporation stock			569,441				434,425

5.		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 beginning in fiscal 1987 through fiscal 2005 (see Note 1, B). The interest rate is the London Interbank Offered Rate (“LIBOR”) plus .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, 2002, the interest rate was 2.4%, and the outstanding balance was $2,673,881 ($3,456,408 at March 31, 2001). The note is guaranteed by the Company, without recourse to the participants’ accounts, and is collateralized by 368,951 unallocated shares of McKesson Corporation common stock remaining from 3,087,754 shares.
		The ESOP II promissory note is payable to the Company in increasing annual installments (ranging from 4% to 11% of original principal) over a fifteen-year term beginning in fiscal 1988 through fiscal 2003. The interest rate is 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. On March 31, 2002, the interest rate was 1.70%, and the outstanding balance was $5,923,710 ($11,408,220 at March 31, 2001). This note is collateralized by 844,433 unallocated shares of McKesson Corporation common stock remaining from 7,236,484 shares.
		The ESOP promissory note supporting the ESOP III purchase is payable to the Company in increasing annual installments (ranging from 3% to 8% of original principal) plus interest at 8.6% over a twenty-year term beginning in fiscal 1990 through fiscal 2010. On March 31, 2002, the outstanding balance of the note was $60,577,447 ($66,133,526 at March 31, 2001). This note is collateralized by 5,065,092 unallocated shares of McKesson Corporation common stock remaining from 11,699,994 shares.

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MCKESSON CORPORATION
PROFIT-SHARING INVESTMENT PLAN

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED MARCH 31, 2002 AND 2001

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Future minimum principal payments required on the ESOP notes are as follows (in thousands):

2003		$	12,802
2004			7,465
2005			8,102
2006			7,781
2007			8,465
Thereafter			24,560
Total		$	69,175

6.		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. The line of credit was obtained in order to reduce the number of shares necessary to fund the employee benefits. The Plan released only the shares required to fund the annual ESOP benefits. The interest rate is the LIBOR rate multiplied by the applicable LIBOR adjustment. The loans mature on June 1, 2009. At March 31, 2002 and 2001, interest rates ranged from 1.63% to 4.73% and from 4.50% to 4.73% on the outstanding balance of $5,300,000 and $8,000,000. The loans are collateralized by 475,086 unallocated shares of McKesson Corporation common stock.
		The Internal Revenue Service (“IRS”) has indicated it is currently unable to issue a ruling in regard to the refinancing agreement. If the IRS does not approve the refinancing, the Plan sponsor will take appropriate action.
7.		TAX STATUS
		The IRS has determined and informed the Company by letter dated October 27, 1998, that the Plan is qualified and the trust established under the Plan is tax-exempt, under the appropriate sections of the Internal Revenue Code. The Plan document has been restated (effective April 1, 1999 and January 1, 2001) since receiving the determination letter. However, the Plan administrator believes that the Plan is currently designed and being operated in compliance with the applicable requirements of the Code. Therefore, the Plan administrator believes that the Plan was qualified and the related trust was tax-exempt as of the financial statement date.
		A request for an updated determination letter was filed in March 2002 as a result of certain changes to the Plan 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”).

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MCKESSON CORPORATION
PROFIT-SHARING INVESTMENT PLAN

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED MARCH 31, 2002 AND 2001

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		Pursuant to an operational audit of the Plan conducted by the Plan sponsor in 2001 and in 2002, the Plan sponsor in September 2002 made corrective payments to the Plan of amounts attributable to the late deposit of 401(k) contributions and to certain administrative expenses erroneously paid by the Plan. These amounts are not material individually or in the aggregate. During the plan year the Department of Labor (the “Department”) initiated a review of the Plan’s operations. The Department has not issued any report on its findings. The Plan sponsor is cooperating with the Department and will address any matters requiring corrective action.
8.		PLAN TERMINATION
		The Company’s Board of Directors reserves the right to terminate the Plan. If termination should occur, all participants will immediately vest and each would receive a distribution equal to his or her vested account balance, and 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.
9.		PENDING LITIGATION
		On November 24, 1999, an action entitled Chang v. McKesson HBOC, Inc., et al., (Case No. C-00-20030 RMW) (“Chang”), was filed in the U.S. District Court for the Northern District of California. By order dated February 7, 2000, Judge Whyte coordinated Chang with the more than 50 related purported class actions pending in the United States District Court for the Northern District of California. On June 28, 2001, plaintiffs filed a First Amended Complaint naming as defendants the Company, HBOC, certain current or former officers or directors of the Company or HBOC, and the Chase Manhattan Bank. The Amended Complaint is purportedly brought on behalf of participants in the McKesson Corporation Profit Sharing Investment Plan and the former HBO & Company Profit Sharing and Savings Plan. Plaintiffs allege that defendants breached their fiduciary duties and violated sections of the Employee Retirement Income Security Act of 1974, causing damages to class members in connection with the decline in the Company’s stock price following the April 28, 1999 announcement regarding accounting improprieties at HBOC. In October 2001, McKesson, HBOC, Chase and other defendants moved to dismiss the Chang action. These motions were heard on May 17, 2002. The court has not ruled on the motions to dismiss the Chang action.

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MCKESSON CORPORATION
PROFIT-SHARING INVESTMENT PLAN

NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
YEARS ENDED MARCH 31, 2002 AND 2001

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		On February 7, 2002, an action was filed in the United States District Court for the Northern District of California captioned Adams v. McKesson Information Solutions, Inc. et al., No. C-02-06 85 JCS (“Adams”). Plaintiff in Adams filed a First Amended Complaint on March 15, 2002, naming as defendants McKesson Information Solutions, Inc., McKesson, certain current or former officers, directors or employees of McKesson or HBOC, and other defendants. Plaintiff alleges that he was a participant in the former HBO & Company Profit Sharing and Savings Plan which merged into the Plan and generally alleges that McKesson and HBOC breached their fiduciary duties to the HBOC Plan and its participants and engaged in transactions prohibited by ERISA. Plaintiff purports to bring 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, Judge Whyte consolidated the Chang action with the Adams action. The defendants in Adams currently have no obligation to respond to the separate complaint in the Adams action.
		Plan management does not believe it is feasible to determine the outcome or resolution of these proceedings.
10.		RELATED-PARTY TRANSACTIONS
		Certain investment options within the Master Trust are managed by Fidelity Investments, which also serves as the Plan’s record-keeper. Therefore, these transactions qualify as party-in-interest transactions. Fees for investment management services are allocated to the participants with balances in those funds.

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MCKESSON CORPORATION
PROFIT-SHARING INVESTMENT PLAN

SCHEDULE OF ASSETS HELD AT END OF YEAR
MARCH 31, 2002 (IN THOUSANDS)

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Investment		Cost Basis				Units				Fair Value
McKesson Corporation Common Stock		$	326,410				15,214			$	569,441

Note:

In addition, McKesson Corporation common stock is held in the Master Trust and disclosed in the Form 5500.

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McKESSON CORPORATION
PROFIT-SHARING INVESTMENT PLAN

SCHEDULE OF REPORTABLE TRANSACTIONS
YEAR ENDED MARCH 31, 2002 (IN THOUSANDS)

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			Purchases								Sales/Dispositions
																			Gain/
Identity of Issue			Number				Amount				Number				Amount				(Loss)
SERIES OF TRANSACTIONS
JP Morgan Domestic Liquidity Monthly Variable Master Notes/Pooled Funds				55			$	37,145				196			$	36,536			$	—
McKesson Corporation Common Stock				5				13,198				45				35,826				12,239

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MCKESSON CORPORATION
PROFIT-SHARING INVESTMENT PLAN

SCHEDULE OF NONEXEMPT TRANSACTIONS
YEAR ENDED MARCH 31, 2002 (IN THOUSANDS)

---

Description of

transactions

including

maturity date,

Relationship

rate of

Expenses

to plan,

interest,

incurred in

Identity of

employer or

collateral, par

connection

Current

Net gain

party

other party-

or maturity

Purchase

Selling

with

Cost of

value

(loss) on each

involved

in-interest

value

price

price

Lease rental

transaction

asset

of asset

transaction

McKesson Corporation

Plan sponsor

Interest on late deposits of employee contributions*

$

332

McKesson Corporation

Plan sponsor

Reimbursement of administrative fees charged in error to Plan*

$

55

McKesson Corporation

Plan sponsor

Interest on administrative fees charged in error to Plan*

$

9

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*

Payment made to Plan trustee in September 2002

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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
By:	/s/ Paul E. Kirincic
Paul E. Kirincic Senior Vice President Human Resources

Date: September 24, 2002

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