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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, 2006 and 2005, 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. The Plan is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Plan’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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, 2006 and 2005, 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 schedule listed in the Table of Contents is presented for the purpose of additional analysis and is not a required part of the basic financial statements, but is 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. This schedule is the responsibility of the Plan’s management. Such schedule has been subjected to the auditing procedures applied in our audit of the basic 2006 financial statements and, in our opinion, is 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 27, 2006

McKESSON CORPORATION PROFIT-SHARING INVESTMENT PLAN

STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS

MARCH 31, 2006 AND 2005 (IN THOUSANDS)


	2006						2005
	Participant		Non-Participant				Participant		Non-Participant
	Directed		Directed		Plan Total		Directed		Directed		Plan Total
ASSETS:
Cash and cash equivalents:
Allocated	$		$	2,997	$	2,997	$		$	922	$	922
Unallocated				117		117				184		184

Total cash and cash equivalents		—		3,114		3,114		—		1,106		1,106


Investments:
Mutual funds and brokerage link		550,418				550,418		392,079				392,079
Common/ collective trusts		220,347				220,347		211,360				211,360
Separately managed accounts		162,652				162,652		145,693				145,693
Funds held in insurance companies		113,602				113,602		111,371				111,371
Participant loans		19,786				19,786		18,268				18,268
McKesson Corporation common stock:
Allocated				437,711		437,711				336,090		336,090
Unallocated				95,754		95,754				103,631		103,631
Employee stock fund		53,253				53,253		36,354				36,354

Total investments		1,120,058		533,465		1,653,523		915,125		439,721		1,354,846


Receivables:
Contributions						—				3,064		3,064
Dividends and interest on:
Allocated				511		511				533		533
Unallocated				121		121				173		173
Due from broker for securities sold – allocated				132		132						—

Total receivables		—		764		764		—		3,770		3,770


Total assets		1,120,058		537,343		1,657,401		915,125		444,597		1,359,722


LIABILITIES:
Line of credit – on unallocated stock				3,600		3,600				3,600		3,600
ESOP promissory notes payable – on unallocated stock				20,983		20,983				32,544		32,544
Accrued interest expense – on unallocated stock				909		909				1,421		1,421
Accrued other				1,052		1,052				603		603

Total liabilities		—		26,544		26,544		—		38,168		38,168

NET ASSETS AVAILABLE FOR BENEFITS	$	1,120,058	$	510,799	$	1,630,857	$	915,125	$	406,429	$	1,321,554

See notes to financial statements.

McKESSON CORPORATION PROFIT-SHARING INVESTMENT PLAN

STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS

YEARS ENDED MARCH 31, 2006 AND 2005 (IN THOUSANDS)


	2006							2005
	Participant		Non-Participant					Participant		Non-Participant
	Directed		Directed			Plan Total		Directed		Directed			Plan Total
INVESTMENT INCOME:
Net appreciation in fair value of investments	$	106,303	$	156,742		$	263,045	$	45,572	$	89,887		$	135,459
Dividends and interest		32,589		3,284			35,873		16,563		3,172			19,735

Investment income		138,892		160,026			298,918		62,135		93,059			155,194


CONTRIBUTIONS:
Participants		96,508					96,508		74,290					74,290
Employer				14,261			14,261				23,899			23,899
ERISA litigation settlement proceeds		13,654					13,654							—

Total contributions		110,162		14,261			124,423		74,290		23,899			98,189


DEDUCTIONS:
Benefits paid to participants		83,254		26,923			110,177		69,784		20,530			90,314
Interest expense				2,850			2,850				4,896			4,896
Administrative fees		1,011					1,011		1,047					1,047

Total deductions		84,265		29,773			114,038		70,831		25,426			96,257


INCREASE IN NET ASSETS BEFORE INTERFUND TRANSFERS AND MERGERS		164,789		144,514			309,303		65,594		91,532			157,126
INTERFUND TRANSFERS		40,144		(40,144	)		—		24,318		(24,318	)		—
TRANSFER OF NET ASSETS FROM OTHER PLANS									10,583					10,583

INCREASE IN NET ASSETS		204,933		104,370			309,303		100,495		67,214			167,709
Net assets at beginning of year		915,125		406,429			1,321,554		814,630		339,215			1,153,845

Net assets at end of year	$	1,120,058		510,799			1,630,857	$	915,125	$	406,429		$	1,321,554

See notes to financial statements.

McKESSON CORPORATION PROFIT-SHARING INVESTMENT PLAN

NOTES TO FINANCIAL STATEMENTS

YEARS ENDED MARCH 31, 2006 AND 2005

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 employees 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”).

Fidelity Management Trust Company (“Fidelity”) is the trustee of the Plan.

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

A Participant Directed Investments

Contributions – Certain Plan provisions were amended to enable the Plan to qualify as a safe harbor plan as described in Internal Revenue Code sections 401(k) (12) and 401(m) (11). Effective April 1, 2005, participants may make pretax contributions from 1% to 20% of eligible pay, limited to $15,000 for calendar year 2006 and $14,000 for calendar year 2005. Total contributions are limited to the lesser of $44,000 for calendar year 2006 ($42,000 for calendar year 2005) or 100% of taxable compensation per calendar year. Participants 50 years of age or older may also elect to make pretax catch-up contributions of up to 67% of pay, limited to $5,000 for calendar year 2006 and $4,000 for calendar year 2005. Participants may also contribute amounts representing distributions from other qualified plans.

Prior to April 1, 2005, participants were allowed 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 made basic contributions of 6% (4% for MIS and Medical Management Group participants) could elect to make supplemental contributions of up to an additional 14% of compensation (16% for MIS and Medical Management Group participants). Additional limits applied to individuals classified as highly compensated employees.

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 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 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.

•

MFS Institutional Large Cap Growth Fund invests primarily in common stocks, with a goal of long-term capital growth.

McKESSON CORPORATION PROFIT-SHARING INVESTMENT PLAN

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED MARCH 31, 2006 AND 2005

•

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

•

SSgA 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 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 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.

•

Mutual Fund Window provides access to approximately 260 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 transaction fees are charged to the participant’s account. Effective January 1, 2005, Fidelity waived the account maintenance 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 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 at the loan date plus 1%. Contractual interest rates ranged from 5% to 11% in fiscal 2006 and 2005. 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. Participant loans totaled $19,786,000 and $18,268,000 on March 31, 2006 and 2005.

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 Plan – In fiscal 2005, the net assets of the Moore Medical 401(k) Plan totaling $10,583,000 were merged into the Plan .

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 Plan (“ESOP”). In fiscal year 2006, employer contributions were funded with 908,000 shares from the ESOP. In fiscal 2005, employer contributions were funded with 822,000 shares from the ESOP and $3,064,000 in cash.

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. The loan was paid in full on August 29, 2004.

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,

McKESSON CORPORATION PROFIT-SHARING INVESTMENT PLAN

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED MARCH 31, 2006 AND 2005

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, participant accounts are credited with matching Company contributions, in the form of the Company’s common stock based on a percentage of the participants’ basic contributions. In fiscal 2005, employees were eligible for matching Company contributions of up to 3.6% of their eligible compensation. Effective April 1, 2005, the Plan provides for Company matching contributions to all participants who make elective deferrals in an amount equal to 100% of the employee’s deferral for the first 3% of pay deferred, and 50% of the employee’s deferral for the next 2% of pay deferred. An additional annual matching contribution may be granted at the discretion of the Company. For the plan year ended March 31, 2006, an additional match of $0.037 for every dollar contributed, up to the first 5% of pay contributed, was allocated to eligible plan participants.

The Internal Revenue Code requires that shares be released for employer contributions according to a formula based on debt service payments. In fiscal 2007, the Company identified certain errors in calculating the number of shares to be released which resulted in an over release for fiscal 2006. To correct this error, the Company intends, subject to the board of directors’ approval, to contribute 26,000 additional shares to the Plan in fiscal 2007.

Employer Contributions – Dividends on unallocated 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 the extent that the dividends are not sufficient to service the debt. To pay down such debt obligations, cash contributions amounted to $14,261,000 and $20,834,000 in the years ended March 31, 2006 and 2005.

Vesting – Employer contributions made on or after April 1, 2005, are 100% vested immediately. Employer contributions made before April 1, 2005 vest over 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, 2006 and 2005 were $1,272,000 and $1,289,000.

Diversification of Stock Fund – Effective April 1, 2005, participants may transfer Company contributions to other investment funds as soon as they are made. In addition, participants may diversify past Company contributions without restrictions. Prior to April 1, 2005, participants who completed five years of service could elect to transfer 50% of the Company contribution that was 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 could elect to transfer up to 75% of the portion of their account representing the Company contributions. Participants who reached age 50 and completed five years of service were allowed to transfer up to 100% of their balance related to the Company contributions, 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.

McKESSON CORPORATION PROFIT-SHARING INVESTMENT PLAN

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED MARCH 31, 2006 AND 2005

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):


	2006						2005
	Number of				Fair Value of		Number of				Fair Value of
	Shares		Cost Basis		Shares		Shares		Cost Basis		Shares

Allocated		8,397	$	242,395	$	437,711		8,903	$	236,838	$	336,090
Unallocated		1,837		34,606		95,754		2,745		51,719		103,631

Total		10,234	$	277,001	$	533,465		11,648	$	288,557	$	439,721

The per share fair market value of McKesson Corporation common stock at March 31, 2006 and 2005 was $52.13 and $37.75.

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):


	2006									2005
	Allocated			Unallocated			Total			Allocated			Unallocated			Total

Net Assets (beginning of year)	$	340,007		$	66,422		$	406,429		$	285,758		$	53,457		$	339,215
Net appreciation		122,410			34,332			156,742			70,292			19,595			89,887
Dividends and interest		2,737			547			3,284			2,359			813			3,172
Employer contributions					14,261			14,261						23,899			23,899
Benefits paid to participants		(26,923	)					(26,923	)		(20,530	)					(20,530	)
Interest expense					(2,850	)		(2,850	)					(4,896	)		(4,896	)
Allocation of 822 shares, at market											26,446			(26,446	)		—
Allocation of 908 shares, at market		42,213			(42,213	)		—
Transfers		(40,144	)					(40,144	)		(24,318	)					(24,318	)

Net Assets (end of year)	$	440,300		$	70,499		$	510,799		$	340,007		$	66,422		$	406,429

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 with remaining maturities of less than three months at the date of purchase 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.

Risk and Uncertainties – The Plan utilizes various investment instruments, including mutual funds, common collective trusts, separately managed accounts 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 in mutual funds are stated at quoted market prices, which represent the net asset value of shares held by the Plan at year-end. Investments in the brokerage link are stated at quoted market prices. Investments in common collective trusts are stated at quoted redemption values. Interests in separately managed funds are valued based on the underlying net assets. Funds held in insurance companies are stated at contract value (or cost) plus accrued interest. Contract value represents contributions made under the contracts, plus earnings, less participant

McKESSON CORPORATION PROFIT-SHARING INVESTMENT PLAN

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED MARCH 31, 2006 AND 2005

withdrawals and administrative expenses. Participant loans are valued at the outstanding loan balance. Shares of McKesson Corporation common stock are valued at quoted market prices on March 31, 2006 and 2005. 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 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. 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.

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):


	2006		2005

McKesson Corporation Employer (Allocated and Unallocated) * and Employee Company Stock Funds	$	586,718	$	476,075
SSgA S&P 500 Index		159,392		155,948
Dodge & Cox Large Cap Value Fund		123,576		114,841
Standish Mellon StableValue Fund		113,602		111,371


*		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 $10,210,000 at March 31, 2006. The guaranteed rates range from 3.63% to 5.66% 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 $96,578,000 at March 31, 2006. 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 November 2011. 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 2006 and 2005, the Plan’s investments (including gains and losses on investments bought and sold, as well as held during the year) appreciated in value as follows (in thousands):


	2006		2005

Common collective trusts	$	20,862	$	11,774
Mutual funds		49,259		13,458
Separately Managed Accounts		21,999		12,423
McKesson Corporation Common Stock:
Employer Company Stock Fund (Allocated and Unallocated)*		156,742		89,887
Employee Company Stock Fund		14,183		7,917

Total	$	263,045	$	135,459


*		Non-Participant Directed

McKESSON CORPORATION PROFIT-SHARING INVESTMENT PLAN

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED MARCH 31, 2006 AND 2005

4. 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 2006 and 2005, 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, 2006 and 2005, interest rates were 4.28% and 2.50% on the outstanding balance totaling $3,600,000. At March 31, 2006 and 2005, the line of credit was collateralized by 225,874 unallocated shares of McKesson Corporation common stock.

5. ESOP PROMISSORY NOTES PAYABLE

The ESOP promissory note supporting the July 1986 stock purchase was payable to a bank in increasing annual installments (ranging from 2% to 3% of original principal) over an 18-year term that ended in fiscal 2005 (see Note 1, B). The interest rate was 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. The note was paid in full in August 2004 and all shares of McKesson common stock were released for employer contributions.

The ESOP promissory note supporting the June 1989 stock 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, 2006, the outstanding balance of the note was $20,983,000 ($32,544,000 at March 31, 2005). This note is collateralized by 1,610,955 unallocated shares of McKesson Corporation common stock (2,519,312 at March 31, 2005). In July 2005 and April 2004, additional principal payments of $6,000,000 and $9,000,000 were made to enable the release of additional shares for employer contributions, and each of the scheduled subsequent loan repayment installments was reduced. Future minimum principal payments required on this note (including a $5,000,000 additional payment in July 2006) are as follows (in thousands):


Fiscal year	Amount

2007	$	9,630
2008		4,257
2009		4,630
2010		2,466

Total	$	20,983

6. 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.

7. 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.

McKESSON CORPORATION PROFIT-SHARING INVESTMENT PLAN

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED MARCH 31, 2006 AND 2005

8. PENDING LITIGATION

The Plan’s report on Form 11-K for the year ended March 31, 2005, included a description of an action in the United States District Court for the Northern District of California captioned In re McKesson HBOC, Inc. ERISA Litigation (N.D. Cal. C-00-20030 RMW) (the “ERISA Action”). The ERISA Action was brought on behalf of two putative classes: an “HBOC Sub-Class,” and a “McKesson Sub-Class.” The HBOC Sub-Class included “all participants in the former HBO & Company Profit-Sharing and Savings Plan (the “HBOC Plan”) and their beneficiaries in the period from March 31, 1996 to April 1, 1999 (the date of the merger of the HBOC Plan into the Plan), for whose benefit the HBOC Plan held and acquired HBO & Company (“HBOC”) stock (and, after January 12, 1999, McKesson stock).” The McKesson Sub-Class included “all participants in the Plan (excluding employees of HBOC who became participants in the Plan by virtue of the merger of the HBOC Plan into the Plan on or about April 1, 1999) whose accounts were invested in McKesson stock at any time, who maintained an account balance under the Plan as of April 27, 1999, which included McKesson stock, and who had not received a distribution from the Plan as of April 27, 1999.”

Plaintiffs’ Consolidated Amended Complaint (the “CAC”), filed December 31, 2002, named as defendants HBOC, the HBOC Administrative Committee, certain members of the HBOC Administrative Committee, certain former officers, directors or employees of HBOC, the HBOC Board of Directors, the Company, certain current or former officers or directors of the Company and the Plan (as a nominal defendant only), and contained thirteen causes of action, referred to as “Counts.” Counts one through six were asserted on behalf of the HBOC Plan for the benefit of the HBOC Sub-Class and alleged that HBOC or alleged fiduciaries of the HBOC Plan breached their fiduciary duties and engaged in transactions prohibited by ERISA. Counts seven through thirteen were asserted on behalf of the Plan for the benefit of the McKesson Sub-Class and alleged that McKesson or alleged fiduciaries of the Plan breached their fiduciary duties by, among other things, (i) failing to adequately investigate the potential effects of the January 12, 1999, merger transaction with HBOC (the “Merger”) on the Plan, (ii) failing to adequately determine whether the Plan’s heavy concentration in McKesson stock was appropriate in light of the Merger, (iii) failing to diversify the Plan’s holding of McKesson stock in light of the Merger, (iv) placing themselves in a conflicted position which prevented them from acting with complete loyalty to the Plan, (v) failing to diversify the Plan’s McKesson stock in light of the Company’s announcement on April 28, 1999, that certain software sales transactions at its Information Technology Business Unit were improperly recorded as revenue because they were subject to contingencies and were reversed, and (vi) failing to contribute cash, as opposed to Company stock, to the Plan in the Company’s annual contribution for the Plan year ended March 31, 1999.

On May 6, 2005, the Company reached an agreement to settle all claims for the benefit of the HBOC Sub-Class for approximately $18.2 million, in exchange for releases in favor of all defendants, including releases of claims the HBOC Sub-Class might have under ERISA, the federal securities laws, or which relate to the holding, voting or acquisition of McKesson or HBOC securities. The Court granted final approval to that settlement on September 9, 2005, holding that it was fair, adequate and reasonable to the HBOC Sub-Class. In November 2005, the Plan received the ERISA Action settlement for the HBOC Sub-Class, less attorneys’ fees, totaling $13,654,000.

Also on September 9, 2005, the Court granted that portion of the Company’s previously-reported motion to dismiss, which related to the claims by the Plan for the benefit of the McKesson Sub-Class. The Court dismissed with prejudice all counts asserted for the benefit of the McKesson Sub-Class against the alleged fiduciaries of the Plan, including the Company, except the Court did not dismiss a portion of one of Plaintiffs’ counts that alleged the Company breached its fiduciary duties under ERISA to the Plan participants by contributing Company stock, as opposed to cash, to the Plan in the Company’s annual contribution for the Plan fiscal year ended March 31, 1999.

In March of 2006, the Company reached an agreement to settle that portion of the ERISA Action that purports to assert claims on behalf of the McKesson Sub-Class for $18.5 million, plus certain accrued interest, minus certain costs and expenses such as plaintiffs’ attorneys fees. The Court granted final approval to that settlement on September 1, 2006, holding that it was fair, adequate and reasonable to the McKesson Sub-Class. That settlement accomplishes the release of all remaining claims against all defendants in the ERISA Action.

McKESSON CORPORATION PROFIT-SHARING INVESTMENT PLAN

NOTES TO FINANCIAL STATEMENTS (CONCLUDED)

YEARS ENDED MARCH 31, 2006 AND 2005

9. RELATED-PARTY TRANSACTIONS

At March 31, 2006 and 2005, the Plan held approximately 11,243,000 and 12,603,000 common shares of McKesson Corporation, the Plan’s sponsor. The shares are held within the McKesson Corporation Employer and Employee Stock Funds and the Leveraged ESOP. At March 31, 2006 and 2005, the Employer Stock Funds held approximately 8,397,000 and 8,903,000 common shares and the Leveraged ESOP held 1,837,000 and 2,745,000 common shares as collateral for the ESOP loans. At March 31, 2006 and 2005, the Employee Stock Fund held approximately 1,009,000 and 955,000 shares.

McKesson Corporation declared dividends of $0.24 per share for both fiscal 2006 and 2005. During the years ended March 31, 2006 and 2005, the Employer Stock Funds recorded dividend income from McKesson Corporation common shares of approximately $3,156,000 and $3,172,000. During each of the years ended March 31, 2006 and 2005, the Employee Company Stock Fund recorded dividend income from McKesson Corporation common shares of approximately $238,000 and $246,000.

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.

10. SUBSEQUENT EVENTS:

In April 2006, changes to plan investment options were made. The Plan’s Mutual Fund Window offering was updated to mirror Fidelity’s Mutual Fund Window offering. Furthermore, Fidelity Magellan Fund was moved out of the core investment options group and into the Mutual Fund Window.

In July 2006, the net assets from the D&K Healthcare Resources, Inc. Profit Sharing Plan and Trust totaling $14,242,000 were merged into the Plan.

McKESSON CORPORATION PROFIT-SHARING INVESTMENT PLAN

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

MARCH 31, 2006


Investment/Fund Name	Cost Basis		Shares/Units		Fair Value

BROKERAGELINK	$	10,008,665		16,473,739	$	11,339,981
SSGA BOND INDEX		12,532,666		1,003,114		16,350,755
SSGA BALANCED		37,744,489		3,792,888		44,604,365
WELLNGTON MGMT SMCAP		23,962,376		2,167,407		39,076,189
SSGA S&P 500 INDEX		106,978,131		8,153,057		159,392,265
DODGE & COX LARGE CAP VALUE FUND		77,005,521		6,827,415		123,576,219
PIMCO TOT RETURN ADM		5,760,616		539,925		5,577,428
TMPL FOREIGN SM CO A		387,449		20,712		464,353
ABF BALANCED PA		806,499		60,785		844,302
ABF LARGE CAP VAL PA		2,295,962		120,395		2,511,446
ABF INTL EQUITY PA		201,473		10,349		232,343
ABF SH TERM BOND PA		97,299		10,603		92,456
MUTUAL DISCOVERY A		1,069,932		47,098		1,347,008
BARON GROWTH		9,539,633		233,400		11,786,683
BARON ASSET FUND		794,704		14,374		884,588
MSI US LG CAP GRTH B		113,128		6,949		134,116
CALV NEWVIS SM CP A		38,989		2,206		39,523
CALVERT SIF BALNCD A		42,434		1,612		46,803
CALVERT SIF:EQUITY A		21		1		21
CALVERT CAP ACC A		36,578		1,653		43,051
CALVERT INTL EQTY A		24,358		1,308		30,012
FMA SMALL COMPANY IS		391,690		19,717		441,063
FPA CRESCENT		3,505,357		156,777		4,149,900
RHJ MICRO CAP		1,647,295		82,202		1,745,979
LOOMIS SM CAP VAL R		168,367		6,341		178,932
OLDMUT EMRG GROWTH Z		140,046		11,270		178,397
ARIEL FUND		5,762,070		122,793		6,646,786
ARIEL APPRECIATION		3,804,985		90,519		4,307,821
LB CORE BOND NB INV		308,917		29,967		290,378
ALGER CAP APPREC I		444,568		37,846		568,449
ALGER MIDCAP GRTH I		2,240,790		145,855		2,642,885
ALGER SMALL CAP I		456,642		25,827		612,874
FKLN SMMIDCAP GRTH A		525,761		17,458		707,752
DREY FNDRS BALNCED F		73,694		9,103		80,654
DREY FNDRS EQ GRTH F		75,293		16,165		87,779
DREY FNDRS GROWTH F		93,068		9,483		109,056
DREY FNDRS MC GRTH F		205,699		52,039		284,132
DREY FNDRS WW GRTH F		20,526		1,614		24,759
OLDMUT GROWTH Z		154,573		8,202		190,373
AIM DYNAMICS INV		166,423		11,696		236,139
AIM SM CO GRTH INV		156,627		12,597		188,068
TEMPLETON FOREIGN A		5,880,052		554,679		7,488,172
JANUS FLEXIBLE BOND		1,234,296		128,477		1,196,122
DREY FNDRS DISCVRY F		234,794		9,192		295,433
MSI INTL MAGNUM B		21,115		1,856		26,096
MUTUAL SHARES CL A		1,460,990		65,673		1,662,179
MANAGERS SPECIAL EQ		44,979		497		47,580
MSI GLOBAL VAL EQ B		36,482		2,321		43,004
MSIFT BALANCED ADV		36,086		3,284		40,656
MSIFT CP FX INC ADV		424,085		36,649		418,167
MSIFT HIGH YIELD ADV		18,182		3,433		18,196
MSIFT MIDCAP GTH ADV		416,513		21,721		574,085
MSIFT VALUE ADVISER		281,794		17,944		315,453
MSI SM CO GROWTH B		167,990		14,467		200,217

McKESSON CORPORATION PROFIT-SHARING INVESTMENT PLAN

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

MARCH 31, 2006


Investment/Fund Name	Cost Basis		Shares/Units		Fair Value

MSI ACTIVE INTL B		50,330		4,682		64,664
MSI EMERGING MKTS B		547,241		24,683		706,927
NB FOCUS TRUST		163,605		6,482		170,081
NB GENESIS — TR CL		6,838,434		166,535		8,609,839
NB MANHATTAN TRUST		61,654		6,312		85,021
NB PARTNERS TRUST		845,435		39,585		898,982
NB SOCIALLY RESP TR		318,137		21,916		355,704
OAKMARK FUND I		591,786		14,377		610,143
ALLNZ CCM CAP AP ADM		369,712		23,181		476,823
ALLNZ CCM MID CP ADM		451,030		20,224		583,454
PIM GLBBND AD UNHDGD		534,973		53,362		506,942
PIMCO HIGH YIELD ADM		1,366,184		140,808		1,375,693
PIMCO LOW DUR ADM		389,134		38,256		378,735
PIMCO LT US GOVT ADM		1,099,716		100,542		1,053,679
WFA ULTRA ST INC INV		111,497		12,080		110,168
WFA SHRTTERM BND INV		106,559		11,904		101,068
WFA DISCOVERY INV		402,953		20,192		455,536
WFA GROWTH INV		342,530		19,576		450,842
WFA COMMON STOCK Z		255,765		11,973		281,843
WFA OPPORTUNITY INV		558,165		14,110		664,581
WFA LG CAP GRTH INV		180,037		8,432		212,570
WFA GOVT SECURTY INV		726,666		67,056		688,670
TEMPLETON DEV MKTS A		1,255,251		63,876		1,655,024
TEMPLETON GROWTH A		2,049,378		96,363		2,332,957
TMPL GLOBAL BOND A		1,613,849		156,326		1,647,677
TEMPLETON WORLD A		1,225,799		72,657		1,359,414
USAA CORNERSTONE		172,546		6,708		180,171
USAA GNMA TRUST		197,373		19,898		188,235
USAA INCOME FUND		1,027,100		83,252		998,186
USAA INCOME STOCK		307,243		19,283		307,367
USAA INTERNATIONAL		152,170		7,250		185,819
USAA GROWTH FUND		104,708		8,093		125,679
USAA EMERGING MKTS		210,739		23,257		408,162
AIM CONSTELLATION A		21,716		945		24,796
CS CAP APPREC COM		92,400		5,472		96,695
CS MID CAP GRTH COM		89,984		3,727		131,380
RS EMERGING GROWTH		38,171		1,275		46,226
ARTISAN INTL		710,668		29,590		828,528
MSI INTL EQUITY B		43,374		2,070		44,812
NB GUARDIAN TRUST		28,837		2,409		35,004
DWS INTERNATIONAL S		51,521		1,079		60,311
DOMINI SOCIAL EQUITY		163,395		5,904		182,552
DWS GLOBAL OPPS S		71,776		1,884		82,127
AM CENT ULTRA INV		37,101		1,276		38,503
TCW SM CAP GRTH N		37,464		2,253		44,812
TCW AGGR GRTH EQ N		2,408		198		2,771
MSI LGCP REL VAL B		31,726		2,827		32,254
AIM GBL AGGR GRTH A		27,382		1,393		33,632
MANAGERS BOND FUND		380,588		15,630		373,255
MANAGERS CAP APPREC		84		3		92
MANAGERS VALUE		22,312		749		21,939
RS SMALLER CO GROWTH		74,048		3,399		79,169
TCW SELECT EQUITY N		240,783		12,869		250,815
CS LARGE CAP VALUE A		26,307		1,334		26,520
AIM BASIC VALUE A		12,245		376		13,508

McKESSON CORPORATION PROFIT-SHARING INVESTMENT PLAN

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

MARCH 31, 2006


Investment/Fund Name	Cost Basis		Shares/Units		Fair Value

GRTMORE MDCPGR LDR A		21,758		1,612		24,473
GARTMORE VAL OPPS A		3,535		240		3,735
LM VALUE TRUST FI CL		457,929		6,630		497,708
ARTISAN MID CAP INV		311,334		10,409		345,682
CS SMALL CAP VAL COM		831,875		38,992		935,806
OAKMARK EQ & INC I		1,087,292		44,894		1,143,900
ROYCE LOW PR STK SER		504,205		31,732		570,215
VK GROWTH & INCOME A		769,777		36,984		767,410
DWS/D HIGH RTN EQ A		613,399		13,908		646,708
AIM MIDCAP CORE EQ A		95,799		3,246		97,355
WEST ASSET CORE FI		27,764		2,444		27,011
MFS INST LG CAP GRTH		2,807,430		483,250		3,189,449
ALLNZ NFJ SMCPVAL AD		1,088,100		35,622		1,125,997
LD ABBETT MIDCPVAL P		469,227		21,320		469,458
COL/ACORN SELECT Z		858,867		38,916		955,381
COL CONS HIGH YLD Z		11,720		1,367		11,562
CRM MID CAP VAL INV		491,424		18,503		532,320
ABF SM CAP VAL PA		675,040		33,565		732,061
AM CEN LG CO VAL INV		20,662		3,198		21,490
STANDISH MELLON STABLEVALUE FUND		113,601,904		112,980,805		113,601,904
* MCKESSON EE STK FUND		34,896,711		1,496,233		53,253,828
* MCKESSON ER STK FUND (allocated)		242,395,167		8,396,522		437,710,708
* MCKESSON ER STK FUND (unallocated)		34,605,858		1,836,829		95,753,896
* FID FIDELITY		1,121,375		40,033		1,337,097
* FID PURITAN		2,250,548		123,647		2,393,797
* FID TREND		172,640		3,448		206,563
* FID SEL COMPUTERS		635		17		637
* FID SEL ELECTRONICS		50,364		1,076		49,838
* FID SEL FOOD & AG		34,006		667		35,440
* FID VALUE STRATEGIES		97,935		2,880		95,774
* FID GINNIE MAE		1,854,498		167,686		1,790,887
* FIDELITY MAGELLAN		57,365,145		531,687		59,974,295
* FID CONTRAFUND		5,302,537		86,249		5,738,999
* FID EQUITY INCOME		2,752,208		55,300		3,024,378
* FID GROWTH COMPANY		3,103,538		59,255		4,028,775
* FIDELITY INVST GR BD		907,382		121,536		883,565
* FID GROWTH & INCOME		49,821,385		1,281,881		45,865,718
* FID SEL SOFTWARE		38,754		758		42,884
* FID INTERMED BOND		6,594,116		639,271		6,494,992
* FID SEL AIR TRANSPRT		10,889		289		13,277
* FID CAPITAL & INCOME		2,642,678		321,873		2,748,797
* FID VALUE		8,127,083		121,078		9,795,184
* FID MORTGAGE SEC		162,759		14,609		159,535
* FID SEL GOLD		739,092		22,013		858,280
* FID SEL BIOTECH		396,386		6,460		429,597
* FID SEL ENERGY SVCS		2,566,266		38,132		2,817,179
* FID SEL INSURANCE		65,184		1,004		68,646
* FID SEL RETAILING		11,444		221		11,563
* FIDELITY US GOVT RES		1,896,807		1,896,807		1,896,807
* FIDELITY GOVT INCOME		1,098,402		107,121		1,065,854
* FIDELITY CASH RESRVE		6,521,516		6,521,516		6,521,516
* FID SEL ENERGY		3,958,631		91,261		4,766,545
* FID SEL LEISURE		31,062		409		35,272
* FID SEL HEALTHCARE		657,725		4,801		665,282
* FID SEL TECHNOLOGY		314,056		4,958		330,603

McKESSON CORPORATION PROFIT-SHARING INVESTMENT PLAN

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

MARCH 31, 2006


Investment/Fund Name	Cost Basis		Shares/Units		Fair Value

* FID SEL UTILITIES GR		76,288		1,785		83,448
* FID SEL FINANCIAL		119,041		1,019		123,057
* FID SEL DEFENSE		976,941		13,401		1,109,615
* FID SEL BROKERAGE		651,629		9,119		704,108
* FID SEL CHEMICAL		162,185		2,405		170,589
* FID INDEPENDENCE		270,366		16,009		339,390
* FID OTC PORTFOLIO		234,269		7,386		295,442
* FID OVERSEAS		570,158		15,975		714,544
* FID SEL TELECOMM		16,370		389		17,246
* FID SEL HOME FINANCE		17,819		325		16,924
* FID LEVERAGED CO STK		2,621,210		106,462		3,038,437
* FID EUROPE		826,808		25,885		1,033,599
* FID PACIFIC BASIN		517,561		22,735		633,621
* FID REAL ESTATE INVS		7,759,496		287,998		10,180,722
* FID BALANCED		8,740,599		511,586		10,027,086
* FID INTL DISCOVERY		4,013,134		154,573		5,371,424
* FID CAP APPRECIATION		3,629,446		146,099		3,991,416
* FID CONVERTIBLE SEC		885,892		43,293		1,039,034
* FID CANADA		5,381,859		148,394		6,827,628
* FIDELITY UTILITIES		429,655		33,396		523,315
* FID BLUE CHIP GROWTH		29,223,520		660,514		29,174,886
* FID ASSET MANAGER		8,121,983		503,429		8,306,571
* FID DISCIPLINED EQTY		424,851		16,426		476,179
* FIDELITY LOW PR STK		14,147,470		410,294		18,200,624
* FID WORLDWIDE		210,002		12,095		250,132
* FID EQUITY INCOME II		15,185,205		667,933		15,830,005
* FID STOCK SELECTOR		63,286		2,832		73,732
* FID ASSET MGR GRTH		580,062		40,874		640,092
* FIDELITY EMERG MRKTS		2,570,873		152,828		3,224,676
* FIDELITY AGGR GROWTH		1,693,075		106,879		2,023,217
* FID DIVERSIFIED INTL		30,273,240		1,111,757		39,667,497
* FID ASSET MGR INCOME		558,093		45,301		592,081
* FID DIVIDEND GROWTH		5,270,886		195,718		5,902,870
* FID NEW MARKETS INC		4,116,958		295,126		4,326,554
* FID EXP & MULTINATL		2,964,015		151,276		3,317,478
* FID FOCUSED STOCK		323,084		31,853		390,522
* FID GLOBAL BALANCED		344,153		17,209		379,972
* FID AGGRESSIVE INTL		454,565		29,430		526,499
* FID SM CAP INDEPEND		775,255		39,834		903,026
* FID MID CAP STOCK		5,505,808		244,322		7,361,409
* FID LARGE CAP STOCK		495,611		35,666		584,926
* FID DISCOVERY		473,404		46,729		571,497
* FID SMALL CAP STOCK		2,867,568		171,929		3,589,875
* FID EUROPE CAP APP		444,068		22,063		564,590
* FIDELITY NORDIC		390,618		13,929		481,257
* FID ASSET MGR AGGR		537,270		50,766		639,651
* FID LATIN AMERICA		4,845,916		171,447		6,454,985
* FID JAPAN		1,579,360		101,532		1,908,796
* FID SOUTHEAST ASIA		683,720		35,719		836,902
* FID CHINA REGION		1,070,925		63,028		1,312,870
* FID SEL BUS SV & OUT		11,401		767		13,606
* FID SEL MED EQ & SYS		423,791		17,317		423,397
* FID FOUR IN ONE IDX		492,339		20,431		565,334
* FID JAPAN SMALLER CO		1,757,180		125,259		2,037,970
* FID GROWTH & INC II		550,936		59,248		630,399

McKESSON CORPORATION PROFIT-SHARING INVESTMENT PLAN

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

MARCH 31, 2006


Investment/Fund Name	Cost Basis		Shares/Units		Fair Value

* FID STRATEGIC INCOME		1,805,592		172,528		1,799,464
* FID FREEDOM INCOME		249,525		23,035		264,677
* FID FREEDOM 2000		91,442		7,707		95,566
* FID FREEDOM 2010		2,963,816		223,303		3,231,197
* FID FREEDOM 2020		4,765,408		352,946		5,424,773
* FID FREEDOM 2030		2,315,043		169,050		2,674,372
* FID SM CAP RTMT		830,224		59,290		1,058,918
SPTN TOTAL MKT INDEX		2,830,657		89,358		3,266,038
SPTN EXTND MKT INDEX		632,093		20,682		787,166
SPARTAN INTL INDEX		911,849		27,949		1,090,006
* FID SHORT TERM BOND		946,762		106,134		936,101
* FID INTM GOVT INCOME		298,237		29,397		291,327
* FID HIGH INCOME		927,042		105,784		939,358
* FID FIFTY		1,349,326		68,792		1,671,650
* FID SEL AUTOMOTIVE		402		12		422
* FID SEL MULTIMEDIA		868		18		893
* FID SEL MEDICAL DEL		2,070,242		41,073		2,247,490
* FID SEL PAPER&FOREST		26,536		930		29,743
* FID SEL BANKING		105,951		2,885		106,436
* FID SEL INDUST MATER		12,261		276		13,397
* FID SEL INDUST EQUIP		32,080		1,135		34,479
* FID SEL CONSTR/HOUSE		346,013		7,566		380,942
* FID SEL TRANSPORT		79,292		1,689		88,243
* FID SEL NATURAL GAS		2,205,878		60,562		2,489,098
* FID SEL NATURAL RES		904,437		38,317		1,057,549
* FID SEL CYCLICAL IND		51,970		2,529		55,458
* FID SEL ENVIRONMENT		30,431		1,824		33,598
* FID SEL CONSUMER IND		5,208		200		5,242
* FID SEL DEVELOP COMM		57,552		2,640		61,218
* FID SEL PHARMACEUTCL		58,154		6,126		64,997
* FIDELITY RETIRE MMKT		11,140,632		11,140,632		11,140,632
* FIDELITY RET GOVT MM		5,532,925		5,532,925		5,532,925
SPARTAN US EQ INDEX		4,268,162		104,963		4,829,365
* FIDELITY US BD INDEX		2,152,404		194,478		2,084,807
* FID INST SH INT GOVT		143,404		15,015		141,743
* FID LARGE CAP VALUE		131,821		10,176		139,214
* FID FREEDOM 2040		1,140,419		136,434		1,272,933
* FID MID CAP VALUE		639,406		42,100		658,017
* FID LARGE CAP GROWTH		459,047		40,916		478,311
* FID MID CAP GROWTH		411,644		30,578		437,884
* FID INFLAT PROT BOND		349,106		31,049		332,530
* FID ULTRASHORT BOND		131,605		13,114		131,405
* FID FLOAT RT HI INC		219,942		22,056		220,119
* FID INTL SMALL CAP		2,259,066		84,821		2,592,129
* FID TOTAL BOND		57,872		5,488		56,471
* FID VALUE DISCOVERY		455,931		29,241		490,369
* FID REAL ESTATE INC		125,253		10,667		125,447
* FID SEL NET & INFSTR		45,692		18,805		52,277
* FID SEL WIRELESS		231,047		35,359		262,720
* FID BLUE CHIP VALUE		61,641		4,662		66,432
* FID NASDAQ COMP INDX		157,933		5,504		173,707
* FID FREEDOM 2005		31,481		2,877		32,911
* FID FREEDOM 2015		934,846		81,062		971,120
* FID FREEDOM 2025		492,550		42,901		537,125
* FID FREEDOM 2035		280,163		23,953		308,754


Item	Page

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM		1

FINANCIAL STATEMENTS as of and for the Years Ended March 31, 2006 and 2005:

Statements of Net Assets Available for Benefits		2

Statements of Changes in Net Assets Available for Benefits		3

Notes to Financial Statements		4-11

SUPPLEMENTAL SCHEDULE AS OF MARCH 31, 2006:

Form 5500, Schedule H, Part IV, Line 4i – Schedule of Assets (Held at End of Year)		12-17

EXHIBITS:

23.1 Consent of Independent Registered Public Accounting Firm
EXHIBIT 23.1


Investment/Fund Name	Cost Basis		Shares/Units		Fair Value

* FID STRAT DIV & INC		78,377		6,763		87,104
* FID FOCUSED HIGH INC		2,244		224		2,243
* FID INTL REAL ESTATE		298,806		22,840		336,433
* OUTSTANDING LOAN BALANCE						19,785,551

Total	$	1,180,655,411			$	1,653,522,651


Dated: September 27, 2006	/s/ Jeffrey C. Campbell
	Jeffrey C. Campbell
	Executive Vice President and Chief Financial Officer


	/s/ Paul E. Kirincic
	Paul E. Kirincic
	Executive Vice President Human Resources


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


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)


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


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


*		Party-in-interest