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     Director Stock Awards. All of our directors were reelected to the Board at the 2004 Annual Meeting. In connection with their reelection, on October 21, 2004, the Management Resources Committee of the Board (the “MRC”) approved the grant to each director of an award of 1,300 shares of Applera-Applied Biosystems stock pursuant to the Applera-Applied Biosystems Plan and 500 shares of Applera-Celera stock pursuant to the Applera-Celera Genomics Plan. Each of these awards will vest on the date immediately preceding the Applera 2005 Annual Meeting of Stockholders and will be forfeited by a director, subject to certain exceptions, if the director ceases to serve as a member of the Board prior to that date. Prior to vesting, a director has the right to receive cash dividends and to vote but may not transfer or otherwise dispose of the shares. The form of agreements under which these and future director share awards are expected to be issued are included as Exhibits 10.4 and 10.5 to this report.

     Director Stock Options. In connection with the reelection of our directors at the 2004 Annual Meeting, on October 21, 2004, the MRC approved the grant to each director of stock options for 9,200 shares of Applera-Applied Biosystems stock pursuant to the Applera-Applied Biosystems Plan and 3,400 shares of Applera-Celera stock pursuant to the Applera-Celera Genomics Plan. The options become exercisable in four equal annual installments commencing on October 21, 2005, and have a term of ten years. The exercise price for the Applera-Applied Biosystems stock options is $18.905 per share, which was the fair market value of a share of Applera-Applied Biosystems stock on the grant date, as determined in accordance with the Applera-Applied Biosystems Plan. The exercise price for the Applera-Celera stock options is $12.005 per share, which was the fair market value of a share of Applera-Celera stock on the grant date, as determined in accordance with the Applera-Celera Genomics Plan. The form of agreements under which these and future director stock options are expected to be issued are included as Exhibits 10.6 and 10.7 to this report.

     Incentive Compensation Program. Most Applera employees not compensated on a commission basis, including Applera’s executive officers, participate in Applera’s Incentive Compensation Program. The MRC uses specific performance objectives for each business unit as a basis on which to measure the performance of Applera’s employees under this program. For the Applied Biosystems Group, the MRC uses EBIT (earnings before interest and taxes), revenue, cash flow, EPS (earnings per share), and the achievement of specific business goals. For the Celera Genomics Group, the MRC uses EBIT, cash flow, and the achievement of specific business goals. For Celera Diagnostics, a joint venture between the Applied Biosystems Group and the Celera Genomics Group, the MRC uses EBIT, revenue, cash flow, and the achievement of specific business goals. For corporate employees (including Applera’s Chief Executive Officer and certain other executive officers), the MRC uses a combination of the performance results for the Applied Biosystems Group and the Celera Genomics Group. At a meeting of the MRC held on October 21, 2004, the MRC approved the specific performance objectives applicable to the Incentive Compensation Program for Applera’s 2005 fiscal year.