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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

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FORM 10-K

|Annual Report
    Pursuant to Section 13 Or 15(d) of the Securities Exchange Act of 1934
|----------------------------------------------------------------------------------------
|For the fiscal year ended June 30, 2005                                                 

Or

|Transition Report
    Pursuant to Section 13 Or 15(d) of the Securities Exchange Act of 1934
|--------------------------------------------------------------------------------------------
|For the transition
    period from __________ to __________                                 

Commission
      File Number 1-4389

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Applera
      Corporation(Exact
name of registrant as specified in its charter)

|DELAWARE                                                                  | 06-1534213                              
|------------------------------------------------------------------------- | ----------------------------------------
|(State or other
    jurisdiction of                                       | (I.R.S. Employer
    Identification No.)
|incorporation
    or organization)                                        |                                         
|                                                                          |                                         
|301 Merritt 7,
    Norwalk, Connecticut                                   | 06851-1070                              
|(Address of principal
    executive offices)                              | (Zip Code)                              
|                                                                          |                                         
|Registrant's
          telephone number, including area code:203-840-2000
|                                                                          |                                         

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Securities registered pursuant to Section 12(b) of the Act:

|Title of Class                                                                                              | Name
    of Each Exchange
    on Which Registered   
|----------------------------------------------------------------------------------------------------------- | ----------------------------------------------------
|                                                                                                            |                                                     
|Applera Corporation-Applied
          Biosystems Group  
      Common Stock (par value $0.01
    per share) | New York Stock
    Exchange
    Pacific
    Exchange
|                                                                                                            |                                                     
|Rights to Purchase
    Series A Participating Junior
    Preferred
    Stock (par value $0.01 per share)    | New York Stock
    Exchange
    Pacific
    Exchange
|                                                                                                            |                                                     
|Applera Corporation-Celera
    Genomics Group Common
    Stock
    (par value $0.01 per share)              | New York Stock
    Exchange
    Pacific
    Exchange
|                                                                                                            |                                                     
|Rights to Purchase
    Series B Participating Junior
    Preferred
    Stock (par value $0.01 per share)    | New York Stock
    Exchange
    Pacific
    Exchange

Securities registered pursuant to Section 12(g) of the Act:

Title of Class: Class G Warrants

Indicate
      by check mark whether the registrant (1) has filed all reports required
      to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
      during the preceding 12 months (or for such shorter period that the registrant
      was required to file such reports), and (2) has been subject to such filing
      requirements for the past 90 days. Yes   No


Indicate by check
        mark if disclosure of delinquent filers pursuant to Item 405 of Regulation
        S-K is not contained herein, and will not be contained, to the best of
        registrant's knowledge, in definitive proxy or information statements
        incorporated by reference in Part III of this Form 10-K or any amendment
        to this Form 10-K.


Indicate by check mark whether the registrant is an accelerated filer (as
    defined in Rule 12b-2 of the Act). Yes   No


Indicate by check
        mark whether the registrant is a shell company (as defined in Rule 12b-2
        of
        the Act). Yes   No


As
      of December 31, 2004, the last business day of the registrants
    most recently completed second fiscal quarter, the aggregate market value
        of Applera Corporation-Applied Biosystems Group Common Stock (based upon
        the average
    of the high and low price) held by non-affiliates was $4,106,530,516, and
        the aggregate market value of Applera Corporation-Celera Genomics Group
        Common
        Stock (based upon the average of the high and low price) held by non-affiliates
        was
    $1,016,061,100. As of August 19, 2005, 195,335,563 shares of
	Applera Corporation-Applied Biosystems Group Common Stock and
    74,472,343 shares of Applera Corporation-Celera Genomics Group Common Stock were outstanding.


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DOCUMENTS
      INCORPORATED BY REFERENCEAnnual Report
to Stockholders for Fiscal Year ended June 30, 2005 - Parts I, II, and
IV.Proxy Statement
for 2005 Annual Meeting of Stockholders - Part III.

|
|
|
|





TABLE OF CONTENTS

|PART
    I   | 1                                                                                                                           
|------------ | ----------------------------------------------------------------------------------------------------------------------------
|Item
    1.  | Business                                                                                                                    
|             |                                                                                                                             
|             |                                                                                                                             
|             |                                                                                                                             
|             |                                                                                                                             
|             |                                                                                                                             
|             |                                                                                                                             
|             |                                                                                                                             
|             |                                                                                                                             
|             |                                                                                                                             
|             |                                                                                                                             
|Item
    2.  | Properties                                                                                                                  
|             |                                                                                                                             
|             |                                                                                                                             
|             |                                                                                                                             
|             |                                                                                                                             
|Item
    3.  | Legal
    Proceedings                                                                                                       
|             |                                                                                                                             
|             |                                                                                                                             
|             |                                                                                                                             
|Item
    4.  | Submission
    of Matters to a Vote of Security Holders                                                                     
|             |                                                                                                                             
|PART
    II  |                                                                                                                             
|Item
    5.  | Market
            for Registrants Common Equity, Related Stockholder Matters and
    Issuer Purchases of Equity Securities
|             |                                                                                                                             
|             |                                                                                                                             
|Item
    6.  | Selected
    Financial Data                                                                                                 
|Item
    7.  | Management's
            Discussion and Analysis of Financial Condition and Results
    of Operations                       
|Item
    7A. | Quantitative
    and Qualitative Disclosures about Market Risk                                                              
|Item
    8.  | Financial
    Statements and Supplementary Data                                                                             
|Item
    9.  | Changes
            in and Disagreements with Accountants on Accounting and Financial
    Disclosure                        
|Item
    9A. | Controls
    and Procedures                                                                                                 
|             |                                                                                                                             
|             |                                                                                                                             
|Item
    9B. | Other
    Information                                                                                                       
|             |                                                                                                                             
|PART
    III |                                                                                                                             
|Item
    10. | Directors
    and Executive Officers of the Registrant                                                                      
|             |                                                                                                                             
|             |                                                                                                                             
|             |                                                                                                                             
|             |                                                                                                                             
|             |                                                                                                                             
|             |                                                                                                                             
|             |                                                                                                                             
|             |                                                                                                                             

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|Item
    11.                           | Executive
    Compensation                                                                                      | 107                                                               
|-------------------------------------- | --------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------
|Item
    12.                           | Security
             Ownership of Certain Beneficial Owners and Management and Related
    Stockholder Matters | 108                                                               
|                                       |                                                                                                                 | Securities Authorized for Issuance Under Equity Compensation Plans
|                                       |                                                                                                                 | Security Ownership of Certain Beneficial Owners                   
|                                       |                                                                                                                 | Security Ownership of Management                                  
|                                       |                                                                                                                 | Changes in Control                                                
|Item
    13.                           | Certain
    Relationships and Related Transactions                                                              | 111                                                               
|Item
    14.                           | Principal
    Accountant Fees and Services                                                                      | 111                                                               
|                                       |                                                                                                                 |                                                                   
|PART
    IV                            |                                                                                                                 |                                                                   
|Item
    15.                           | Exhibits
    and Financial Statement Schedules                                                                  | 112                                                               
|                                       |                                                                                                                 | Financial Statements                                              
|                                       |                                                                                                                 | Financial Statement Schedule                                      
|                                       |                                                                                                                 | Exhibits                                                          
|                                       |                                                                                                                 |                                                                   
|SIGNATURES                             | 119                                                                                                            
|                                       |                                                                                                                 |                                                                   
|EXHIBITS,
    INCLUDING CERTIFICATIONS |                                                                                                                

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PART I

|Item
    1. | Business
|----------- | --------

Company Overview

Business
        Segments


Applera Corporation
      conducts business through three business segments, which are described
      below. Throughout this report, terms such as Applera, we, us, or our may
  be used to refer to Applera Corporation.


Applied
        Biosystems Group.Our
 	    Applied Biosystems Group, which we refer to as Applied Biosystems throughout
 	    this report, serves the life science industry and research community by
 	    developing and marketing instrument-based systems, consumables, software,
 	    and services. Its customers use these products and services to analyze
 	    nucleic acids (DNA and RNA), small molecules, and proteins to make scientific
 	    discoveries, develop new pharmaceuticals, and conduct standardized testing.
 	    Applied Biosystems products also serve the needs of some markets
 	    outside of life science research, which we refer to as applied markets, such
 	    as the fields of: forensic testing and human identification; biosecurity, which
 	    refers to products needed in response to the threat of biological terrorism
 	    and other malicious, accidental, and natural biological dangers; and food
 	    and environmental testing. A description of this business segment and developments
 	    during our 2005 fiscal year is set forth below in this Item 1 under the
 	    heading BusinessApplied
Biosystems Group Business.


Celera Genomics Group.Our
 	    Celera Genomics Group, which we refer to as Celera Genomics throughout this report, is engaged principally in the discovery and development of targeted therapeutics for cancer, autoimmune, and inflammatory diseases. Celera Genomics is leveraging its proteomic, bioinformatic, and genomic capabilities to identify and validate drug targets, and to discover and develop small molecule therapeutics. It is also seeking to advance therapeutic antibody and selected small molecule drug programs in collaboration with global technology and market leaders. A description of this business segment and developments during our 2005 fiscal year is set forth below in this Item 1 under the heading BusinessCelera
Genomics Group Business.


Celera Diagnostics, a 50/50 Joint Venture between Applied Biosystems and Celera Genomics.
 	    Celera Diagnostics, a joint venture formed by Applied Biosystems and
      Celera Genomics in April 2001, is focused on the discovery, development,
      and commercialization
 	    of diagnostic products. A description of this business segment and developments
 	    during our 2005 fiscal year is set forth below in this Item 1 under the
        heading BusinessCelera
 	    Diagnostics, a 50/50 Joint Venture between Applied Biosystems and Celera
Genomics.


Information about the
      risk factors associated with our business segments is set forth below in
      Item 5 of Part II of this report under the heading Market for Registrants
      Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
      SecuritiesForward-Looking
Statements and Risk Factors.


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We maintain a corporate
      staff to provide accounting, tax, treasury, legal, information technology,
      human resources, and other shared internal services for Applied Biosystems,
  Celera Genomics, and Celera Diagnostics.


Corporate History and Structure; Two Classes of Stock




Applera was incorporated
      in 1998 under the laws of the State of Delaware. Applera is the successor
      to The Perkin-Elmer Corporation, a corporation originally formed
      in 1939, as a result of a recapitalization completed in May 1999. As part
      of the 1999 recapitalization, Applera established the following two classes
      of common stock that were intended to reflect separately the relative performance
      of the businesses of Applied Biosystems and Celera Genomics, which are
      business units of Applera and are not
separate legal entities:


| | • | Applera Corporation-Applied
        Biosystems Group Common Stock, which we refer to in this report as Applera-Applied
    Biosystems stock; and
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                   
| | • | Applera Corporation-Celera
        Genomics Group Common Stock, which we refer to in this report as Applera-Celera
    Genomics stock.          

More information about
      Applera-Applied Biosystems stock and Applera-CeleraGenomics
      stock is set forth below in Item 5 of Part II of this report under the
      heading Market for Registrants Common Equity, Related Stockholder
      Matters and Issuer Purchases of Equity SecuritiesInformation about
      our Common Stock and its Holders. Also, information about the risk
      factors associated with our capital structure and our two classes of common
      stock is set forth below in Item 5 of Part II of this report under the
      heading Market for Registrants Common Equity, Related Stockholder
      Matters and Issuer Purchases of Equity SecuritiesForward-Looking
      Statements and Risk FactorsRisks Relating to a Capital Structure
	  with Two Separate Classes of Common Stock.


Available
        Information


Websites.We
        maintain Internet websites for Applera, Applied Biosystems, Celera Genomics,
        and Celera Diagnostics. All interested persons can access the following
        information on our Applera, Applied Biosystems, and Celera Genomics websites,
  free of charge:


| | • | our Annual Reports
        on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form
        8-K, and amendments to those reports filed with or furnished to the Securities
    and Exchange Commission;                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | • | Section 16 insider
        transaction reports, which include Forms 3, 4, and 5, filed by
    our officers and directors with the SEC; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | • | information relating
        to our corporate governance, including: our Corporate Governance Guidelines;
        our Code of Business Conduct and Ethics, which is applicable to our officers,
        directors, and employees; the charters for the Audit/Finance Committee,
        the Management Resources Committee, and the Nominating/Corporate Governance
        Committee of our Board of Directors; information on how to communicate
        with our Board of Directors, including our non-management directors;
        and information on how to report valid complaints to the Company regarding
    accounting and related matters.

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We make our SEC reports
    and the insider transaction reports available on our websites as soon as
    reasonably practicable after they are electronically filed with, or furnished
    to, the SEC.

The following table
      indicates how to access the documents described above on our Applera, Applied
      Biosystems, and Celera Genomics websites. In addition, you can obtain copies
      of these materials by calling our corporate Secretary at 203-840-2000 or
      by making a request in writing mailed to: Attention: Secretary, Applera
      Corporation, 301 Merritt 7, P.O. Box 5435, Norwalk, CT 06856-5435.


| | Website
    Addresses:                | www.applera.com                                                                                                                                                                                                                                                                               
| | ------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                       | www.appliedbiosystems.com                                                                                                                                                                                                                                                                     
| |                                       | www.celera.com                                                                                                                                                                                                                                                                                
| |                                       |                                                                                                                                                                                                                                                                                               
| | SEC Filings:                          | Click on the link
        to SEC Filings in the Investors & Media or
Investors section, as applicable, of the website, and then click
again on the link to SEC Filings.                                                                                                               
| |                                       |                                                                                                                                                                                                                                                                                               
| | Insider
    Transaction Reports:    | Click on the link
        to SEC Filings in the Investors & Media
or Investors section of the website, as applicable, and then click
again on the link to SEC Insider Filings.                                                                                                        
| |                                       |                                                                                                                                                                                                                                                                                               
| | Corporate Governance
    Information: | Click
          on the link to Corporate Governance in the Corporate
          section
    of the Applera website. Click on the link to CorporateGovernance in
    the Investors & Media or Investors section,
as applicable, of the Applied Biosystems or Celera Genomics websites.

Except for any documents
    on our websites that are expressly incorporated by reference into this report,
    the information contained on our websites is not incorporated by reference
    into this report and should not be considered to be a part of this report.
    This includes the websites referred to in the table above, as well as other
    websites that we refer to elsewhere in this report. All of these website
addresses are included in this document as inactive textual references only.

Information Incorporated by Reference.The
 	SEC allows us to incorporate by reference some information from
 	parts of other documents filed with the SEC, including:


| | • | our Annual Report to
        Stockholders for our 2005 fiscal year, which we refer to in this report
    as our 2005 Annual Report; and                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                               
| | • | our Proxy Statement
        relating to our Annual Meeting of Stockholders to be held on October
    20, 2005, which we refer to in this report as our 2005 Proxy Statement.

When we incorporate by reference, that means that we are referring
you to important information in other documents that have been filed with the
SEC rather than repeating that information in this report. We recommend that
you refer to the information that we indicate is contained in the other documents
and which is incorporated by reference into this report. The portions of our
2005 Annual Report that are incorporated by reference into this report are included
as Exhibit 13 to this report.


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Scientific Background

All living organisms
    contain biological molecules. The most numerous are in the categories of:
    nucleic acids, which include DNA and RNA; proteins; carbohydrates; and lipids.
    Biological molecules are typically much larger and more complex than common
    molecules, and there is a wide diversity in the types of biological molecules
    present in living organisms. Thesecharacteristics make the analysis of biological molecules significantly more complex than the analysis of smaller compounds. Key advances in therapeutics have often come from an understanding of either proteins or DNA.


DNA molecules provide instructions that ultimately control the synthesis of proteins
within a cell, a process referred to as gene expression. DNA molecules
consist of chemical subunits, called nucleotides, bound in two long strands formed
by a chemical backbone made up of sugar and phosphate molecules.
There are four nucleotides  adenine, cytosine, guanine, and thymine  often
abbreviated with their first letters A, C, G, and T and often referred to as bases. In
a DNA molecule, the nucleotides in the two strands are bound together in pairs
to form a structure that resembles a twisted ladder, which is often referred
to as a double helix. The bound pairs of nucleotides, which form
the rungs of the ladder, are often referred to as base
pairs.


Genes are individual segments of these DNA molecules that carry the specific
information necessary to construct particular proteins. Genes may contain from
several dozen to tens of thousands of nucleotides. The entire collection of DNA
in an organism, called the genome, may contain a wide range of nucleotides,
including as few as 4 million nucleotides in the case of simple bacteria and
3.1 billion base pairs of nucleotides in the case of human beings.


RNA molecules are similar to DNA in structure and are essential for biological
function through a number of biochemical activities within the human body. There
are different types of RNA molecules, each of which has a different function.
For example, messenger RNA, the most common form of RNA, acts as an intermediary
between DNA and protein, transcribing the genetic code from DNA into protein.


Principally
      driven by thebiotechnology
      revolutionand
      the increasing focus on DNA, researchers are developing a better understanding
      of DNA's role in human disease. An increased appreciation of how DNA ultimately
      determines the functions of living organisms has generated a worldwide
      effort to identify and sequence genes of many organisms, including the
      genes that make up the human genome. We believe the best scientific evidence
      to date indicates that the number of genes in the human genome that code
      for proteins is between 25,000 and 30,000. The study of genes and other
      genetic material of organisms is now commonly referred to as genomics.

The field of genomics
    research generally includes three broad categories of analysis, consisting
    of sequencing, genotyping, and gene expression studies:


| | • | Sequencing is performed
        to determine the exact order of the individual nucleotides in a DNA strand.
        Sequencing was used to identify the nucleotides in the entire human genome
        and other species. It has also been used to identify naturally occurring
        genetic variations in the human genome, which are referred to as single
        nucleotide polymorphisms, or SNPs. Scientists believe that SNPs can be
    correlated with, for
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| |   | example, susceptibility
        to disease, disease prognosis, therapeutic efficacy, and therapeutic
    toxicity, and therefore may have diagnostic or therapeutic utility.                                                                                                                                                                                                                                                                                                                                                                                                        
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | • | Genotyping is performed
        to determine a particular sequence variant of a gene and its particular
        association with an individuals DNA. Genotyping is not performed
        to determine the complete structure of the gene, but rather is performed
        to determine if the
        particular DNA sequence variant, typically a SNP, can be associated with,
        for example, susceptibility to a particular disease or response to a
    particular drug.                                                                                                  
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | • | Gene expression is
        performed to determine whether a particular gene is expressed, or present,
        and in some cases at what levels, in a relevant biological material.
        This analysis can be used, for example, to measure and compare gene activity
        in various biological samples, such as samples from populations of healthy
        and diseased individuals, or from populations at different stages of
        disease development. These types of studies may be useful in the development
        of diagnostic tests and therapeutic treatments.

As researchers learn more
    about DNA and genes, they are also developing a better understanding of the
    role of proteins in human disease through efforts in the field of proteomics, the
    study of proteins expressed, or coded, by genes. Proteins are the products
    of genes and, along with gene expression and modification, are believed to
    be key drivers and mediators of cellular function and biological system activity.
    The understanding and treatment of disease today involves the study of genes
    and the proteins they code for, and frequently involves the measurement of
    a drugs ability to bind to specific proteins in the body.


Although DNA contains the code for proteins, scientists have discovered that
the body may modify proteins after they have been made in cells. These modifications,
referred to as post-translational modifications, can alter a proteins function,
leading to changes in the biological reactions that take place in cells, which
researchers refer to as biological pathways. These post-translational modifications
complicate the study of proteins, because scientists studying proteins and seeking
to understand their role in health and disease need a more thorough characterization
of proteins than simply knowing their genetic, or DNA, code.


We believe that gene and
    protein research will increase as companies in the pharmaceutical and biotechnology
    industries seek to improve their drug discovery and development efforts.
    We also believe that ongoing drug discovery and development efforts will
    increase research of cells as researchers seek to further understand how
    drugs work in the body.


The growth in DNA, protein,
    and other life science research has created the need for systems that facilitate
    the collection, organization, and analysis of the large amounts of data generated
    by this research. This demand has led to the development of the science of bioinformatics. The
    science of bioinformatics seeks to blend biology and computing to transform
    massive amounts of data into useful information.


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Applied Biosystems
  Group Business

Overview


Applied Biosystems serves
    the life science industry and research community by developing and marketing
    instrument-based systems, consumables, software, and services. Its customers
    use these products and services to analyze nucleic acids (DNA and RNA), small
    molecules, and proteins to make scientific discoveries, develop new pharmaceuticals,
    and conduct standardized testing. Applied Biosystems products and services
    are designed to address the demand for increased automation and efficiency
    in pharmaceutical and biotechnology laboratories by combining the detection
    capabilities of analytical instruments with advances in automation and laboratory
    work-flow design. The markets for Applied Biosystems products and services
    span the spectrum of the life sciences industry and research community, including:
    basic human disease research and genetic analysis performed by universities,
    government agencies, and other non-profit organizations; pharmaceutical drug
    discovery, development, and manufacturing; and agriculture research. Applied
    Biosystems products also serve the needs of some markets outside of
    life science research, which we refer to as applied markets, such
    as the fields of: forensic testing and human identification; biosecurity,
    which refers to products needed in response to the threat of biological terrorism
    and other malicious, accidental, and natural biological dangers; and food
  and environmental testing.


During our 2004 fiscal year,
 	Applied Biosystems engaged a leading strategy consulting firm to assist management
 	in an in-depth review of the groups entire product portfolio. The purpose of this review was to identify opportunities for growth, increased profitability, and shareholder value creation. The project, which was conducted in three phases, was completed during the first half of our 2005 fiscal year, and Applied Biosystems has been formally integrating the output from the review into its strategic and business development planning process. The first phase included a rigorous fact-based analysis of Applied Biosystems current product portfolio, and an evaluation of research and development investments in an attempt to achieve optimum alignment with future growth opportunities. This has led to changes in, and may in the future result in further changes in, Applied Biosystems product and business mix and research and development programs. The second phase included an examination of Applied Biosystems business
 	processes with a goal of improving operational efficiency and productivity.
 	As a result, Applied Biosystems implemented the organizational restructuring
 	described in the next paragraph. In the third phase, Applied Biosystems sought
 	to identify and analyze additional internal and external growth opportunities.


During the first half of our 2005 fiscal year, Applied Biosystems completed the
implementation of a new organization structure which resulted from the strategic
review described in the preceding paragraph. The new structure created the following
four business divisions, each led by a division President: Molecular Biology;
Proteomics and Small Molecules; Applied Markets; and Services and Solutions.
Applied Biosystems believes these integrated and fully-functioning divisions
have the resources necessary to execute their business plans, including strategic
planning, research and development, marketing, and sales professionals. The four
new business divisions are supported by several cross-divisional functions, including
units focused on Applied Biosystems strategic planning and business development,
investigation of advanced technologies, and incubation of new businesses
in new


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or underserved markets.
      Also, these operating activities will continue to be supported by a shared
      service organization responsible for functions such as human resources,
      finance, communications, legal, and intellectual property.

Subsequent to the implementation
      of this new organization structure, in June 2005, Applied Biosystems announced
      a reduction and rebalancing of its workforce. Applied Biosystems terminated
      about 250 positions, primarily in research and development, marketing,
      and operations. However, during our 2006 year, Applied Biosystems anticipates
      expanding personnel in other functional areas including field sales and
      support, manufacturing quality, and advanced research. Applied Biosystems
      took this action to better align its resources with the needs of its customers
      and to improve operational efficiency and quality.


Also, in August 2004,
    Michael W. Hunkapiller, Ph.D., retired as Senior Vice President and President,
    Applied Biosystems Group. At the same time, Catherine M. Burzik, formerly
    aVice President of Applera and Executive Vice President and Chief Operating Officer of Applied Biosystems, was promoted to the position left by Dr. Hunkapiller.


For information on revenues
    from instruments and consumables for our 2003, 2004, and 2005 fiscal years,
    refer to pages 36 and 38 of Managements Discussion and Analysis in
    our 2005 Annual Report, which pages are incorporated herein by reference.


Products for the Genomics Market


Customers in the genomics
    market use systems for the analysis of nucleic acids for: basic research;
    pharmaceutical and diagnostic discovery and development; biosecurity; food
    and environmental testing; analysis of infectious diseases; and human identification
    and forensic analysis. Applied Biosystems has developed technologies and
    products to support key applications in genomics research such as sequencing,
    genotyping, and gene expression studies. Applied Biosystems products
    for the genomics market are described in the following paragraphs.


PCR Instruments, including Thermal Cyclers and Real-Time PCR Systems, and Related Consumables.Polymerase
chain reaction, commonly referred to as PCR, is a process in which a short strand
of DNA is copied multiple times, or amplified, so that it can be more readily
detected and analyzed. Applied Biosystems PCR product line includes amplification
instruments, known as thermal cyclers, several combination thermal cyclers and
PCR detection systems, known as real-time PCR systems, and reagents, disposables,
and software necessary for the PCR amplification and detection process.


The following table lists the thermal cyclers offered by Applied Biosystems:


| | Instrument                              | Capacity                          
| | --------------------------------------- | ----------------------------------
| |                                         |                                   
| | 9800 Fast PCR System                    | 96 well                           
| | GeneAmp®PCR System 9700 Thermal Cyclers | 60, 96, Dual 96, and Dual 384 well
| | Applied Biosystems 2720 Thermal Cycler  | 96 well                           

Technologically, these instruments are distinguished primarily based on their
capacity for simultaneously processing multiple samples, determined based on
the number of consumable wells that can be accommodated, and the
speed at which the thermal cycling process is completed. The model 9800 instrument
is the most recent addition to this product line. Applied Biosystems began sales
and marketing of this instrument in October 2004. This instrument
is the


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most advanced thermal cycler offered by Applied Biosystems, and can complete
the thermal cycling process substantially faster than other instruments offered
by Applied Biosystems and other commercial vendors of these types of instruments.

Applied
      Biosystems real-time PCR systems, which it previously referred to
      as sequence detection systems, include the following instruments:


| | Instrument                                             |  | Capacity/Speed                                  
| | ------------------------------------------------------ |  | ------------------------------------------------
| |                                                        |  |                                                 
| | Applied Biosystems
        7900HT Real-Time PCR System |  | 96 or 384
        well/Available as Fast 96 well
| | Applied Biosystems
        7500 Real-Time PCR System   |  | 96 well/Available
        as Fast               
| | Applied Biosystems
        7300 Real-Time PCR System   |  | 96 well                                         
| | ABI PRISM 7000 Sequence
        Detection System       |  | Dual 384
        well                           

All
      of these real-time PCR instruments are enhanced versions of Applied Biosystems thermal
      cyclers, which are described above. However, unlike a general PCR instrument,
      which is used only to amplify a sample, these instruments are used to detect
      and for some applications quantify a sample during the PCR amplification
      process for purposes of conducting, for example, genotyping or gene expression
      analysis. Technologically, these instruments are distinguished based on
      their capacity for simultaneously processing multiple samples, determined
      based on the number of consumable wells that can be accommodated,
      the speed at which the detection and quantification process is completed
      and the level of automation, and the applications for which the instruments
      can be used. The model 7900HT Fast system and the model 7500 Fast system
      are the most recent additions to this product line. Applied Biosystems
      began sales and marketing of the model 7900HT Fast system in October 2004,
      and for the model 7500 Fast system in January 2005. These instruments are
      the most advanced real-time PCR systems offered by Applied Biosystems,
      and can complete the detection and quantification process substantially
      faster than other instruments offered by Applied Biosystems and other commercial
      vendors of these types of instruments. The model 7900HT systems incorporate
      robotics to enable large-scale gene expression and genotyping studies.


Generally,
      the PCR and real-time PCR product lines are designed to offer instruments
      suitable for use by a wide range of users, from the individual researchers
      to research laboratories conducting high-volume research. The suitability
      of any particular system for any researcher or research laboratory will
      depend on the nature of the work being performed and the capital budget
      of the researcher or research laboratory. The model 7000 Sequence Detection
      System is an older real-time PCR system that was the precursor to the model
      7300 and 7500 real-time PCR systems. Limited demand for this product is
      expected to continue because some research and applied markets applications
      require the use of a system such as the model 7000 system that has been
      previously validated, or demonstrated acceptable, by users for those applications.


Applied
      Biosystems PCR product line also includes reagents and disposables
      for use in the PCR process. PCR reagents include specialized enzymes to
      enable the PCR amplification process. Enzymes represent a class of proteins
      which activate biological processes. PCR enzymes are optimized to efficiently
      make copies of a segment of DNA while exposed to the high temperatures
      required by the PCR process. Applied Biosystems offers a range of products
      containing these PCR enzymes. These include products for use in general
      PCR, as well as special formulations designed for real-time PCR applications.
      Disposables include plastic devices which are used to hold DNA samples
      and PCR reagents throughout the PCR amplification process. A number of
      different disposable devices are available for use with the full range
      of PCR and real-time PCR instruments offered by Applied
Biosystems.


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Applied
      Biosystems real-time PCR systems enable TaqMan® chemistry,
      a unique PCR technology that can be used both for measurement of gene expression
      and for genotyping. TaqMan gene expression chemistry detects the product
      of PCR amplification and quantifies the amount of the target gene sequence
      present in the sample during the amplification process. This technique
      is referred to as quantitative real-time PCR. The real-time PCR systems
      analyze a sample by measuring fluorescence resulting from the reaction
      of the TaqMan chemistry and the sample. This product line has been widely
      accepted in the scientific research market.
Applied Biosystems TaqMan Gene Expression Assays and SNP Genotyping Assays
are TaqMan chemistry-based assays designed for use on Applied Biosystems real-time
PCR systems. These products are described below in Item 1 of this report under
the heading BusinessApplied Biosystems Group BusinessProducts
for the Genomics MarketGenomic
Assays.


Applied
      Biosystems real-time PCR systems product line also includes its ABI
      PRISM 6100 Nucleic Acid PrepStation for sample preparation. The ABI
      PRISM 6100 Nucleic Acid PrepStation extracts DNA and/or RNA from whole
      cells, blood, and other samples. This DNA or RNA, largely separated from
      the other molecules found in cells such as proteins, can then be analyzed
      in instruments largely without interference from those other molecules.
      The ABI PRISM 6100 Nucleic Acid PrepStation was designed to decrease the
      labor and cost involved in preparing DNA and RNA for analysis by automating
      some aspects of this key phase in the sample preparation process.


Applied
      Biosystems offers a proprietary TaqMan Low Density Array, which was jointly
      developed with 3M Company, and a modified version of its model 7900HT system
      to support the Low Density Arrays for gene expression analysis. The Low
      Density Arrays are consumable laminated plastic sheets containing 384 microscopic
      fluid channels and wells. They are designed for use instead of plastic
      trays with sample wells generically referred to as microtiter plates, which
      are used in many types of laboratory analyses, including gene expression
      or genotyping
studies on Applied Biosystems instruments. The microscopic fluid channel
design of the Low Density Arrays enables researchers to automatically route a
sample to the reaction wells rather than doing this by hand or using expensive
and complex robotics as is required when using microtiter plates. Applied Biosystems
is currently offering the Low Density Arrays pre-loaded with its human, mouse,
and rat TaqMan Gene Expression Assays, which are described below in Item 1 of
this report under the heading BusinessApplied Biosystems Group BusinessProducts
for the Genomics MarketGenomic Assays. Using an on-line ordering
system, customers can customize the cards by selecting the assays that are pre-loaded
onto the Low Density Arrays.


Genetic Analysis Instruments; Genotyping and Resequencing Systems.Applied Biosystems genetic
        analysis instruments, referred to as DNA or genetic analyzers or sequencers,
        can be used to perform both DNA sequencing and fragment analysis. DNA
        sequencing is used to determine the exact order of nucleotides in a strand
        of DNA. DNA fragment analysis is used to determine the size, quantity,
        or pattern of DNA in a strand of DNA. Genetic analysis instruments have
        been used extensively to obtain the DNA sequence of the human genome
        and the genomes of other species and to identify SNPs and other genetic
        mutations. With the completion of human genome sequencing and the completion
        of the sequencing of other important genomes, Applied Biosystems believes
        that researchers are transitioning to performing an increasing amount
        of resequencing, which is also referred to by
 some researchers as medical sequencing or directed resequencing. Resequencing
involves the sequencing of a selected segment or segments of a genome, such as
a pre-selected set of genes, in one or more organisms after a reference genome
for that organism has been determined. The DNA sequence information of these


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organisms
    is then compared to the known reference sequence to determine whether any
    genetic variations are present. Scientists may use this information to, for
    example, better understand the causes and prevention of disease, facilitate
    the development of better and more targeted therapies and diagnostics, and
    understand individual response to treatment. This may be particularly true
    with a disease such as cancer, which scientists are finding to be associated
    with a large number of unique DNA mutations that may not be identified using
    commercially-available genotyping tools, including those offered by Applied
Biosystems.

Applied
      Biosystems genetic analysis instruments use a process referred to
      as electrophoresis to analyze DNA molecules. During electrophoresis, the
      DNA molecules being analyzed are placed in a separation medium, usually
      a gel, and then subjected to an electric charge. The molecules will pass
      through the gel at different speeds because the molecules have different
      lengths and electrical charges. Typically, the molecules being analyzed
      are labeled, or chemically linked, with fluorescent tags before
      being subjected to electrophoresis, with each of the four different nucleotides
      of the DNA molecule  A, C, G, and T  being labeled with a different
      color tag. During electrophoresis, the genetic analysis instrument analyzes
      the molecules by directing a laser beam at them and then reading the
      fluorescent tags with an optical device that can detect the light that
      is emitted by the tags. Applied Biosystems offers several sequencing chemistries
      optimized for various customer requirements. Samples prepared using these
      chemistries are then analyzed on Applied Biosystems genetic analysis
      instruments.


All
      of Applied Biosystems genetic analysis instruments now use capillaries,
      which are tubes through which a DNA sample moves during electrophoresis.
      Capillary systems have higher throughput and greater automation than those
      based on slab-gels, an older and less efficient technology. Applied Biosystems
      offers
the following genetic analysis instruments:


| | Instrument                            |  | Capacity      
| | ------------------------------------- |  | --------------
| |                                       |  |               
| | Applied Biosystems 3730xlDNA Analyzer |  | 96 capillaries
| | Applied Biosystems 3730 DNA Analyzer  |  | 48 capillaries
| | ABI PRISM®3130xlGenetic Analyzer      |  | 16 capillaries
| | ABI PRISM®3130 Genetic Analyzer       |  | 4 capillaries 
| | ABI PRISM®310 Genetic Analyzer        |  | 1 capillary   

The model 3730xl,
    3730, 3130xl, and 3130 instruments all incorporate advanced sequencing
    technology that Applied Biosystems believes represents the leading industry
    standard for high-throughput sequencing. The model 3130xl and model
    3130 instruments are the most recent additions to this product line, and
    were introduced for use by low- to medium- throughput laboratories to supersede
    the previously-marketed ABI PRISM® 3100 Genetic Analyzer and
    ABI PRISM®3100-Avant Genetic Analyzer. Applied Biosystems
    began sales and marketing of these new instruments in November 2004. These
    instruments were designed to deliver enhanced automation, faster turnaround
    times, higher reliability, and higher data quality than previous generation
technologies incorporated in the predecessor instruments.

Applied
      Biosystems provides servicing and customer support for all of these instruments.
      Applied Biosystems also provides servicing and support for the model 3100
      and 3100-Avant instruments, which were phased out of production
      during our 2005 fiscal year with the introduction of the model 3130xl and
      3130 instruments, and also for the model 3700 DNA Analyzer and the ABI
      PRISM 377 DNA Sequencer, both of which were discontinued in prior fiscal
      years but which are still used by some researchers. The model 3700 DNA
      Analyzer was the precursor to the model 3730xl instrument. At the
      time of its introduction in 1999, the model


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3700 instrument represented
    a significant advance in DNA sequencing technology because it could perform
    high-throughput analysis of samples in unattended operation. The model 3700
    instrument was the principal instrument used by Celera Genomics for sequencing
    human and other genomes, and we believe the model 3700 instrument was also
    the principal instrument used by the Human Genome Project for its sequencing
    projects. The ABI PRISM 377 DNA Sequencer is the last of Applied
Biosystems instruments to use slab-gel
technology.

Applied
      Biosystems believes that the growing importance of DNA resequencing to
      disease research, as described above, will be a significant factor in the
      continuing demand for its sequencing instruments and consumable products.
      Applied Biosystems has therefore developed the VariantSEQr Resequencing
      System, a product for detecting variants in 274 human genes. Applied Biosystems
      believes that the VariantSEQr system enables scientists to perform resequencing
      studies that were previously impractical and too expensive to perform because
      of the amount of time, labor, and expertise needed for experiment setup.
      The VariantSEQr system integrates reagents and software for use on the
      Applied Biosystems 3730, 3730xl,3130, and 3130xl genetic
      analysis instruments.


Applied
      Biosystems also offers the SNPlex Genotyping System. The SNPlex system
      uses multiplexing, a scientific term that refers to multiple reactions
      in a single tube or well, to rapidly identify large numbers of target SNPs
      in a single biological sample. Using this system, which can be used with
      the Applied Biosystems 3730 and 3730xl DNA Analyzers, customers
      can perform studies based on their own customized set of reference SNPs.
      Applied Biosystems developed this system as an alternative to the PCR-based
      genotyping that can
be performed using Applied Biosystems real-time PCR instrument systems.
The suitability of this system for any particular researcher or research project
compared to PCR-based genotyping depends on several factors, including the type
of study being performed, scientific requirements, access to the needed instrumentation,
and cost considerations.


Genomic Assays. Our genomic assays
are chemical tests used to measure a DNA or RNA target. A genomic assay combines
a set of pre-selected oligonucleotides, sometimes referred to as oligos, which are synthetic single-stranded pieces of DNA, with other analytical reagents that allow a researcher to measure differences between samples of genetic material. For example, a gene expression assay is a chemical test to measure how much RNA is being produced from a specific gene in the cells of a tissue sample. A genotyping assay is a chemical test to measure the presence or absence of a specific genetic sequence variation or mutation among DNA samples from different populations that can be used to correlate genetic traits with physical traits such as disease susceptibility or drug response. Applied Biosystems genomic
assays include several products and services for both gene expression and genotyping,
which are described in the following table.


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| | Gene
          Expression Assays                   |  | Description                                                       
| | -------------------------------------------------- |  | ------------------------------------------------------------------
| |                                                    |  |                                                                   
| | TaqMan®Gene
        Expression Assays              |  | Ready-made
        gene expression assays that can be ordered from
| |                                                    |  | Applied Biosystems inventory                                     
| |                                                    |  |                                                                   
| | TaqMan®Pre-Designed
        Gene Expression Assays |  | Pre-designed
        gene expression assays that can be made to   
| |                                                    |  | order                                                             
| |                                                    |  |                                                                   
| | Custom TaqMan®Gene
        Expression Assays       |  | Service for
        the manufacture of custom TaqMan chemistry-   
| |                                                    |  | based gene
        expression assays based on targets supplied by 
| |                                                    |  | researchers                                                       
| |                                                    |  |                                                                   
| | SNP
          Genotyping Assays                    |  | Description                                                       
| |                                                    |  |                                                                   
| | TaqMan®SNP
        Genotyping Assays               |  | Ready-made
        SNP genotyping assays that can be ordered from 
| |                                                    |  | Applied Biosystems inventory                                     
| |                                                    |  |                                                                   
| | TaqMan®Pre-Designed
        SNP Genotyping Assays  |  | Pre-designed
        SNP genotyping assays that can be made to    
| |                                                    |  | order                                                             
| |                                                    |  |                                                                   
| | TaqMan®Coding
        SNP Genotyping Assays        |  | Ready-made
        SNP genotyping assays within protein coding    
| |                                                    |  | regions of
        genes that can be ordered from Applied         
| |                                                    |  | Biosystems inventory                                             
| |                                                    |  |                                                                   
| | Custom TaqMan®SNP
        Genotyping Assays        |  | Service for
        the manufacture of custom TaqMan chemistry-   
| |                                                    |  | based SNP
        genotyping assays based on targets supplied by  
| |                                                    |  | researchers                                                       

Since
      the initial launch of its genomic assays in our 2002 fiscal year, Applied
      Biosystems has continued to increase the number of assays available and
      currently offers a large library of ready-made and pre-designed SNP genotyping
      and gene expression assays. This library includes approximately 2.3 million
      human SNP genotyping assays, 200,000 gene expression assays for the human
      genome, and 300,000 gene expression assays for the mouse and rat genomes.
      The ability to study the mouse and rat genomes is important to researchers
      involved in, for example, therapeutic research and development, because
      mice and rats have genes that are believed to correspond to human genes
      and the results of disease research or safety, toxicology, or other studies
      on mice or rats may therefore be correlated to humans with corresponding
      genetic characteristics. Also, in May 2005 Applied Biosystems expanded
      this product line and commenced sales and marketing of Pre-Designed TaqMan
      Gene Expression Assays for two additional scientifically important model
      organisms, the Arabidopsis plant and the Drosophila fruit fly. Arabidopsis
      is a standard model genome used in plant science and agricultural studies,
      and Drosophila is a model for studying developmental biology with numerous
      potential implications for human disease research. The new assays include
      approximately 38,000 gene expression assays for the Drosophila genome,
      and approximately 95,000 gene expression assays for the Arabidopsis genome.


Researchers
      traditionally have used home brew assays, which are assays
      that researchers both design and prepare themselves in their laboratories,
      a process that is relatively time consuming and expensive. Applied Biosystems
      believes that its ready-made and pre-designed genomic assays offer significant
      advantages to researchers compared with home brew assay design. These advantages
      include:


| | • | facilitation of experiments
    with many genes in parallel;
| | - | ------------------------------------------------------------
| |   |                                                             
| | • | substantial reduction
    in experiment setup time;         
| |   |                                                             
| | • | decreased assay cost;
    and                               

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| | • | creation of a set of
        standard and validated assays that enable comparisons of data between
    laboratories.
| | - | --------------------------------------------------------------------------------------------------------------------

Applied Biosystems SNP
    genotyping and gene expression assays are designed to be used with Applied
    Biosystems real-time PCR systems.


Microarrays.
      Applied Biosystems offers the Applied Biosystems Expression Array System
      for gene expression analysis of the human, mouse, and rat genomes. This
      system combines microarray technology and a proprietary chemiluminescence
      technology and was designed to detect the expression of a greater number
      of genes, with higher sensitivity and specificity, while using less biological
      sample, than other commercially-available microarray technologies. This
      system is highly sensitive because it can detect low levels of gene expression,
      and highly specific because of its accuracy in identifying the presence
      of expressed genes without falsely reading the presence of
      expression from other genes.


Microarray technology
    involves the miniaturization of reactions on a single consumable product
    to enable a large number of simultaneous reactions or analyses. Applied Biosystems microarrays
    are small, porous nylon plates that can be used to analyze the expression
    of a large number of genes in a sample in parallel. The microarrays are used
    in combination with the 1700 Chemiluminescent Microarray Analyzer, an instrument
    that measures gene expression by detecting chemiluminescence, which is the
    conversion of chemical energy stored within a molecule into light. DNA probes, which
    are single-stranded pieces of DNA, are chemically attached to the microarray
    and designed to cause a chemiluminescent reaction in the presence of expression
      targets. The DNA probes used for this application are approximately 60
      bases long. Applied Biosystems believes the use of chemiluminescence rather
      than fluorescence, and the use of longer probes, results in higher sensitivity
      and specificity compared to other commercially-available microarray systems.


In January 2005, Applied Biosystems released an updated version of its human
genome microarray for use with the Expression Array System. The updated human
genome microarray can be used to analyze the expression of approximately 29,000
genes, which Applied Biosystems believes includes more than 8,000 genes not covered
by any similar commercially-available gene expression microarray system. Also,
in December 2004, Applied Biosystems commenced commercial sales of whole genome
expression arrays for the rat genome, complementing the arrays for the mouse
genome that it had begun marketing during our 2004 fiscal year.


Applied Biosystems designed this system to complement the gene expression capabilities
of its TaqMan chemistry-based real-time PCR system products. Researchers performing
whole genome expression studies using the Expression Array System can validate
their results and perform further analysis on Applied Biosystems real-time
PCR systems using TaqMan® gene expression assays.


DNA Synthesis.DNA synthesizers produce synthetic single-stranded pieces of DNA for genetic analysis. These molecules, referred to as oligonucleotides or sometimes oligos, are an essential reagent for PCR and DNA sequencing and are also used in drug discovery applications. DNA synthesis is used both by companies performing high-throughput synthesis as a service as well as individual laboratories that synthesize DNA for their own use. Applied Biosystems offers several models of synthesizers and supporting reagents for the needs of its different


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customers. Applied Biosystems
    also provides custom synthesis, in which oligonucleotides are made to order
and shipped to customers.

PNA.Applied
        Biosystems has a license, which is exclusive for some applications, to
        manufacture and sell peptide nucleic acid within various markets including
        the molecular biology research market. Peptide nucleic acid, which is
        often referred to as PNA, resembles DNA in its chemical structure except
        that it has a neutral peptide-likebackbone,whereas
        DNA has a negatively charged sugar phosphate backbone. The unique chemical
        structure of PNA
        enhances its affinity and specificity as a DNA or RNA probe. Probes are
        used in various types of analysis, and are used to search for DNA and
        RNA sequences in a sample by binding to those sequences if they are present.
        PNA may be used in many areas, including basic research, pharmaceutical
        discovery, diagnostic development, and food and environmental testing.
        During our 2002 fiscal year, Applied Biosystems acquired additional rights
        to PNA technology, particularly exclusive rights in the field of diagnostics,
        through its acquisition of Boston Probes, Inc. and a party related to
        Boston Probes.
        During the fourth quarter of our 2004 fiscal year, Applied Biosystems
        recorded pre-tax charges of $14.9 million relating to Boston Probes.
        These charges are described in Note 2 to our fiscal 2005 Consolidated
        Financial Statements, which are incorporated by reference into Item 8
        of this report.


Products for
  the Proteomics Market


Genes code for proteins
      in biological organisms, and proteins are the key biological molecules
      that function in all aspects of living things such as growth, development,
      and reproduction. The body may also modify proteins after they are made
      in cells, and such modifications, referred to as post-translation modifications,
      often alter the function of the modified protein. These post-translational
      modifications are not encoded in the proteins genetic, or DNA, code.


Differences in the types or amounts of specific proteins in biological systems
are thought to be the primary differences between healthy and diseased systems
or organs. A majority of drugs to treat human disease bind to and affect proteins.
Proteins are large biological molecules made up of peptides, and peptides are
made up of amino acids chemically linked together in long chains and frequently
modified by the addition of chemical units such as carbohydrate chains or phosphate
groups. Customers in the proteomics research market need systems for the
analysis of proteins and peptides for the purpose of discovery of drug targets,
protein therapeutics, and diagnostics. Applied Biosystems has developed products
for the identification, characterization, and measurement of expression of proteins
and peptides. Applied Biosystems products for the proteomics market are
described in the following paragraphs.


Mass Spectrometry. Mass spectrometry has become very useful for the analysis of large molecules of biological importance such as proteins. Analysis of proteins and other molecules by mass spectrometry involves the very accurate measurement of the mass, or size, of components in a sample, such as the measurement of the multiple different peptides that make up a defective protein. The sensitive electronics of mass spectrometry instruments can measure fine differences in very small quantities of complex samples having multiple components. Mass spectrometry instruments incorporate the following key technological processes:


| |  | • | A unique sample preparation
        process called ionization to charge the molecules for analysis. Applied
        Biosystems sells instruments with ionization by either a laser based
    system called MALDI, which refers to matrix assisted laser desorption
| |  | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| |   | ionization, or a high
    voltage electric system called ESI, which refers to electrospray ionization.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | • | Mass analysis and detection,
        which involves the separation and electronic measurement of the mass
        of molecules and the measurement of the relative amounts present. Applied
        Biosystems has a variety of mass analysis technologies which separate
        and measure the mass of molecules in a sample. These include TOF, which
        refers to time of flight, which measures mass based on flight time in
        an electric field under vacuum; and quadrupole or quad, and linear ion
        trap, both of which measure mass using radio frequencies and electric
    charges though using related but different technologies.

Mass spectrometry instruments
      are often referred to or named based on their sample preparation and mass
      analysis technologies. For example, a MALDI TOF instrument
      is an instrument that uses MALDI to charge molecules for analysis and TOF
      for mass analysis. Also, mass spectrometry instruments are often referred
      to or named based on whether they are connected to liquid chromatography
      separation devices, which are used for sample preparation prior to analysis
      using mass spectrometry. For example, an LC/MS system is a
      liquid chromatography device connected directly to a mass spectrometry
      instrument, and an LC/MS/MS system is a liquid chromatography
      device coupled with tandem mass spectrometry instruments. Tandem mass spectrometry
      enables a more detailed and accurate analysis of the components of the
      molecules being studied.


The market for mass
      spectrometry is served by a wide range of instrument types, based on a
      variety of technologies for both ionization and mass analysis, which are
      combined together in different combinations in different instruments. The
      different instrument types, technologies, and combinations result in differing
      performance characteristics and price levels, and the suitability of any
      particular system for any researcher or research laboratory will depend
      on the nature of the work being performed and the capital budget of the
      researcher or research laboratory.


Applied Biosystems and Applied Biosystems/MDS SCIEX Instruments, a 50/50 joint
venture between Applied Biosystems and MDS Inc. of Canada, supply a broad family
of mass spectrometry products for the proteomics market that involve different
combinations of these technologies. Customers select from this range of product
types based on their budgets, workflows, sample types, preferences, and experience.
Under the terms of the joint venture agreement with MDS Inc., Applied Biosystems
has been the exclusive worldwide distributor of LC/MS systems manufactured for
the joint venture by the MDS SCIEX Division of MDS Inc. for the analytical instruments
market. During our 2005 fiscal year, Applied Biosystems and MDS Inc. expanded
the scope of their Applied Biosystems/MDS SCIEX Instruments joint venture. As
part of the transaction, which was completed in October 2004, Applied Biosystems
sold MDS a 50 percent interest in intellectual property assets related to Applied
Biosystems MALDI TOF mass spectrometry systems and next-generation products
then under development, together with a 100 percent interest in some MALDI TOF
product-related manufacturing and research and development assets. Subsequent
to the sale, the parties each contributed their MALDI TOF and related intellectual
property to the joint venture. In exchange, Applied Biosystems received $8 million
in cash and a $30 million promissory note, which is payable in five annual installments
beginning in October 2006. Applied Biosystems, as part of its responsibilities
to the joint venture, will continue to market, sell, service, support, and provide
research support for MALDI TOF products, and the joint venture agreement was
amended so that Applied Biosystems


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exclusive worldwide distribution
    rights now also include MALDI TOF products. MDS, through its MDS Sciex Division,
    as part of its responsibilities to the joint venture, has assumed substantially
    all research and development as well as primary manufacturing responsibility
for MALDI TOF product lines.

The following table
      summarizes the mass spectrometry instruments for the proteomics market
      offered by Applied Biosystems, which are manufactured through the Applied
      Biosystems/MDS SCIEX Instruments joint venture:


|Instrument
    Name                             |  | Ionization             |  | Mass
          Analyzer                                
|----------------------------------------------- |  | ---------------------- |  | -------------------------------------------------------
|                                                |  |                        |  |                                                        
|Voyager-DE
    PRO Biospectrometry Workstation |  | MALDI                  |  | TOF                                                    
|Voyager-DE
    STR Biospectrometry Workstation |  | MALDI                  |  | TOF                                                    
|4800 MALDI TOF/TOF Analyzer                    |  | MALDI                  |  | TOF/TOF Optics                                        
|4700 Proteomics Discovery
    System            |  | MALDI                  |  | TOF/TOF Optics                                        
|QSTAR®XL
    Hybrid LC/MS/MS System             |  | ESI
          or MALDI |  | Hybrid quad/TOF
        (often referred to as a Qq-TOF)
|4000 Q TRAP®LC/MS/MS
    System                 |  | ESI                    |  | Hybrid quad/linear
        ion trap                    
|3200 Q TRAP®LC/MS/MS
    System                 |  | ESI                    |  | Hybrid quad/linear
        ion trap                    

Technologically, these
      instruments are distinguished based on their: sensitivity, or ability to
      identify very small quantities of molecules within a sample; resolution,
      or ability to distinguish among several different types of molecules within
      a complex sample; mass accuracy, or ability to accurately quantify or determine
      the mass of the molecules being studied; and overall ease of use. The 4800
      MALDI TOF/TOF Analyzer and the 3200 Q TRAP LC/MS/MS System are the most
      recent additions to this product line. Applied Biosystems began sales and
      marketing of the 4800MALDI
      TOF/TOF Analyzer in May 2005, and for the 3200 Q TRAP LC/MS/MS Systems
      in April 2005. The 4800 MALDI TOF/TOF Analyzer is the first MALDI TOF instrument
      introduced under the Applied Biosystems/MDS Sciex Instruments joint venture
      subsequent to its expansion as described above. The 4800 MALDI TOF/TOF
      Analyzer includes innovative new optics and electronics that give the instrument
      10 times the sensitivity of the 4700 Proteomics Discovery System, which
      had previously been the most sensitive mass spectrometry TOF/TOF system
      offered for this market by Applied Biosystems. Applied Biosystems believes
      that this improved performance may enable the identification and quantification
      of low abundance proteins in complex samples that previously could not
      be identified and quantified. The 3200 Q TRAP system was introduced to
      replace the Q TRAP LC/MS/MS System, which was phased out of production
      during the 2005 fiscal year. The 3200 Q TRAP system offers improved sensitivity
      over its predecessor, and is marketed as a more affordable alternative
      to the more technologically advanced 4000 Q TRAP LC/MS/MS System.


In addition to the range of mass spectrometry instruments and software used to
operate those instruments, Applied Biosystems has developed and commercialized
reagents for quantifying, or measuring, levels of molecules in one or more samples,
including ICAT® and iTRAQ reagents.
Researchers use the ICAT chemistry to tag or affix a chemical marker
to a peptide containing a specific type of amino acid known as cysteine. This
process, when used with various mass spectrometry systems, enables the quantitation
and identification of proteins in experiments that compare normal and diseased
cells or samples. Researchers use the iTRAQ reagents to affix chemical markers
to all types of peptides within a protein-rich mixture, enabling the quantitation
of a greater number of proteins, including the ability to detect post-translational
modifications, and enabling the comparison of expression patterns within up to
four samples in


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the same experiment.
      Applied Biosystems believes the iTRAQ reagents complement the ICAT reagents
      because they enable experimentation that in many cases cannot be accomplished
      with the ICAT reagents. The ICAT and iTRAQ reagents offer laboratories
      a way of running protein experiments using mass spectrometry and are the
      foundation of an expanding family of Applied Biosystems consumables, software,
      and systems for proteomics. In June 2005, AppliedBiosystems
      entered into a marketing and sales alliance agreement with Invitrogen Corporation.
      Pursuant to the alliance agreement, the two companies agreed to jointly
      market a suite of labeling technologies offered by them, including the
      ICAT and iTRAQ reagents. Applied Biosystems believes that the broader marketing
      of the reagents resulting from the alliance may increase the use of ICAT
      and iTRAQ reagents.

Biochromatography.Biochromatography
        is an important step in both research applications and manufacturing
        of biopharmaceuticals, which refers to protein-based pharmaceutical
        products. Researchers studying complex protein samples through mass spectrometry
        must first prepare these samples and separate them into the components
        to be analyzed. A common and important technique for the separation,
        and in some cases purification, of biological molecules is generally
        referred to as biochromatography, a process by which molecules
        are separated according to one or more of their physical properties such
        as their size, shape, charge, or affinity to other molecules.


Applied Biosystems biochromatography
      media products are used in liquid chromatography. Liquid chromatography
      is a process that separates molecules by passing them, in a liquid, across
      a stationary or solid medium such as chemically modified plastic beads
      specially designed for this process. Separation occurs because different
      molecules, which have different affinities to the beads, will migrate,
      or pass, across the beads at different rates.


Applied Biosystems biochromatography media products such
as its POROS® beads are used in the proteomics discovery process
and in the development and manufacturing of biopharmaceuticals. Applied Biosystems
believes its biochromatography products offer productivity advantages, enabled
by high speed separation combined with high capacity and resolution, over competitive
product offerings.


Protein Sequencing and Synthesis.Proteins are large biological molecules and are made of peptides, and peptides are made of amino acids chemically linked together in long chains. Protein sequencers provide information about the sequence of amino acids that make up a given protein by chemically disassembling the protein and analyzing the amino acids. The Procise® Protein Sequencing systemuses a protein sequencing chemistry known as Edman chemistry to sequence a peptide, one amino acid at a time, and in turn to identify or characterize the protein that contains the peptide.


Synthetically produced peptides are used in understanding antibody reactions
and as potential drugs or drug analogs. The Applied Biosystems 433A Peptide Synthesis
system is designed for the quality synthesis of peptides, peptide analogs, and
small proteins. Applied Biosystems also manufactures and sells proprietary synthesis
reagents and chemicals for use with this and other products.


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Products for the
  Small Molecule Analysis Market


Applied Biosystems has
    a number of mass spectrometry products that life science researchers use
    to analyze small molecules. Small molecules studied in life science research
    are typically smaller than peptides and include, for example:


| | • | some drugs;                                                                                                                                                                                                                                                                             
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                         
| | • | drug metabolites, the
        compounds resulting from the bodys acting upon a drug, and present
    in bodily fluids such as blood or urine;                                                                                                                                          
| |   |                                                                                                                                                                                                                                                                                         
| | • | other small biological
        molecules found naturally in the human body such as hormones, which affect
        physiological activity by sending signals to cells and organs, and cholesterol,
        which the body uses, for example, to build cells and produce hormones;
    and
| |   |                                                                                                                                                                                                                                                                                         
| | • | various trace contaminants
    in food, beverage, or environmental applications.                                                                                                                                                                                                        

Mass spectrometry instruments
    are especially important for pharmaceutical researchers studying pharmacokinetics,
    the measurement of the bodily absorption, distribution, metabolism, and excretion,
    or elimination, of drugs. The U.S. Food and Drug Administration and other
    regulatory agencies require pharmacokinetic information for the approval
    of drugs. This application requires instruments which have a high resolution,
    or the ability to distinguish among different molecules with similar masses,
    and high sensitivity, or the ability to identify very small quantities of
    molecules, because the amounts of the drugs and their metabolites are very
    low and the mixtures are very complex. Researchers can perform the required
    pharmacokinetic analysis with LC/MS/MS systems that have been developed and
    refined by Applied Biosystems/MDS SCIEX Instruments.


Mass spectrometry for studying small molecules is also important in the fields
of human forensic and toxicology testing. Forensic testing involves
the study of deceased individuals to determine their cause of death. The presence
or absence of particular molecules may be an indication of cause of death. Toxicology
testing involves the detection of substances such as drugs of abuse or
prescription drugs in samples. For
this application, laboratories need instruments that can be used to perform kinetic
testing, which is the measurement of the relative amounts of different molecules
in the body.


Also, mass spectrometry instruments are growing in importance in applications
such as food, beverage, and environmental testing. Various regulatory bodies
worldwide monitor quality of food, beverages, and water. For these applications,
we believe that speed of data acquisition, increased sensitivity, and high resolution
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The Applied Biosystems/MDS SCIEX Instruments joint venture offers the following
broad product line of mass spectrometry instruments for small molecule and pharmacokinetics
researchers, including for the applications described above:


|Instrument
    Name             |  | Ionization   |  | Mass Analyzer                                  
|------------------------------- |  | ------------ |  | -----------------------------------------------
|                                |  |              |  |                                                
|API
    5000 LC/MS/MS System   |  | ESI          |  | Triple quad                                    
|API
    4000 LC/MS/MS System   |  | ESI          |  | Triple quad                                    
|API
    3200 LC/MS/MS System   |  | ESI          |  | Triple quad                                    
|API
    2000 LC/MS/MS System   |  | ESI          |  | Triple quad                                    
|QSTAR®XL Hybrid LC/MS/MS System |  | ESI or MALDI |  | Hybrid quad/TOF (often referred to as a Qq-TOF)
|4000
    Q TRAP®LC/MS/MS System |  | ESI          |  | Hybrid quad/linear ion trap                    
|3200
    Q TRAP®LC/MS/MS System |  | ESI          |  | Hybrid quad/linear ion trap                    

Technologically, these instruments are distinguished based on their: sensitivity,
or ability to identify very small quantities of molecules within a sample; resolution,
or ability to distinguish among several different types of molecules within a
complex sample; mass accuracy, or ability to accurately quantify or determine
the mass of the molecules being studied; throughput; and overall ease of use.
General information about mass spectrometry instruments and the technologies
they incorporate, and also additional information about some of the instruments
referred to in the table above, is set forth above in Item 1 of this report under
the heading BusinessApplied Biosystems
Group BusinessProducts for the Proteomics MarketMass
Spectrometry.


The API 5000 system, API 3200 system, and 3200 Q TRAP system are the most recent
additions to this product line. Applied Biosystems began sales and marketing
of the API 5000 system in January 2005, and for the API 3200 and 3200 Q TRAP
systems in April 2005. The API product line instruments offer a range of sensitivity
at varying costs, the API 5000 system being the most sensitive. This product
line has been widely accepted by pharmaceutical researchers, and we believe the
API 5000 system is the most sensitive triple quad mass spectrometry instrument
currently available to this research market. The API 3200 system was introduced
to replace the API 3000 LC/MS/MS System, which Applied Biosystems expects to
phase out of production during the 2006 fiscal year. The API 3200 system offers
improved sensitivity for some applications over its predecessor in a smaller,
easier to use design. The 3200 Q TRAP system was introduced to replace the Q
TRAP LC/MS/MS System, which was phased out of production during the 2005 fiscal
year. The 3200 Q TRAP system offers improved sensitivity over its predecessor,
and is marketed as a more affordable alternative to the more technologically
advanced 4000 Q TRAP system.


Cell Biology and
  Functional Proteomics Products


Applied Biosystems
      has developed, and expects to continue developing, products used for the
      study of cell and biological molecule function. Applied Biosystems intends
      to market existing products and develop new products within this field.
      These products are intended for use by researchers studying the complex
      biological reactions that take place within and between cells, which researchers
      refer to as biological pathways, and how these pathways relate to human
      disease. These studies are needed in a variety of fields, including in
      particular drug discovery and development. Applied Biosystems currently
      offers the 8200 Cellular Detection System, which is used by researchers
      to study cellular function. The system uses proprietary scanning technology
      to rapidly detect and measure fluorescence associated with objects as small
      as a single cell. Applied Biosystems also markets a line of Tropix® chemiluminescent
      reagent


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products used by researchers
    studying cell function. Chemiluminescence is the conversion of chemical energy
    stored within a molecule into light, and the detection of chemiluminescence
    is another technology used to study cellular function. Applied Biosystems
    also licenses its chemiluminescence technology for adaptation for various
    types of diagnostic tests and drug discovery assays. These chemiluminescent-based
tests and assays can be used in combination with a variety of detection instruments.

During our 2002 fiscal year, Applied Biosystems entered into a licensing, supply,
and collaboration agreement with HTS Biosystems, Inc. to jointly develop and
commercialize a functional proteomics system based on HTS Biosystems surface
plasmon resonance and high-throughput affinity screening technologies.
Pursuant to this agreement, the parties developed, and Applied Biosystems began
marketing, a proteomics instrument referred to as the 8500 Affinity Chip Analyzer.
However, in June 2004 Applied Biosystems decided to exit this product line based
on a strategic analysis of various business and technology investments. Accordingly,
Applied Biosystems exercised its right to terminate the agreement with HTS Biosystems
and return rights to the product line and related technology to HTS Biosystems,
which was completed in September 2004.


Applied Genetic
        Analysis Products


During our 2005 fiscal year, Applied Biosystems established an Applied Markets
division focused exclusively on developing and marketing products for use in
some markets outside of life science research, which we refer
to as applied markets. This division is one of the four principal
integrated business divisions within Applied Biosystems that was formed as part
of a new organizational structure that was implemented during the 2005 fiscal
year. Applied Biosystems offers several products that it has designed for use
in specific applied markets. The current focus of these products, which are discussed
below in further detail, is in the areas of forensic testing and human identification,
biosecurity, and environmental and food testing. Applied Biosystems believes
that there is an opportunity to leverage its experience and success in forensic
testing and human identification into other applied markets. In addition, some
applied markets applications require instrument platforms such as Applied Biosystems real-time
PCR systems and mass spectrometry systems, and accordingly the marketing of these
systems for use in applied markets is within the focus of the Applied Markets
division.


Forensic Testing
        and Human Identification.Applied Biosystems
        develops systems that are used to identify individuals based on their
        DNA, commonly referred to as forensic analysis. Forensic analysis is
        often used, for example, in criminal investigations, to identify human
        remains, and for paternity testing. Applied Biosystems offers an extensive
        product line addressing key needs for this application, and the product
        line has been widely accepted by investigators and laboratories performing
        forensic analysis.


Applied Biosystems forensic
      analysis systems are used in criminal cases where DNA extracted from biological
      evidence found at the crime scene is compared with DNA from suspects or
      profiles stored in databases of potential suspects. The use of DNA in some
      criminal investigations has been shown to help solve crimes and reduce
      the cost of the investigation, and we believe there is a growing recognition
      of the validity of the use of DNA testing and DNA databases for this purpose.
      This is evidenced in particular by a growing number of governmental initiatives
      in the U.S. and abroad to finance the analysis of DNA from crime scenes,
      including the existing backlog of samples from past crimes, and build databases
      of potential suspects. Many jurisdictions in the U.S. and in Europe have
      passed legislation creating mandated DNA


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databasing of, for example,
  individuals that are arrested and/or convicted of crimes. The growing recognition
  of the validity of the use of DNA in criminal matters is also evidenced by
  the increasing use of DNA analysis to exonerate individuals previously convicted
  of crimes by
testing archived evidence.

Applied Biosystems forensic testing product line includes a system to increase
the efficiency and effectiveness of forensic analysis by providing a qualitative
and quantitative assessment of DNA in a sample prior to forensic analysis. This
assessment can be used by scientists and technicians performing forensic analysis
to facilitate proper sample preparation for analysis, which can reduce the risk
that analysis must be repeated, and Applied Biosystems believes its new system
provides more accurate and useful results than systems offered by other companies
that are used for forensic analysis.


In December 2004, Applied Biosystems began sales and marketing of
the AmpFLSTR®Yfiler PCR Amplification Kit, a new forensic
identification kit that enables forensic scientists to detect low levels of male
DNA in the presence of large amounts of female DNA, a situation routinely encountered
in cases of sexual assault. Identifying, segregating, and analyzing male DNA
in cases involving complex evidence containing mixtures of male and female DNA
has been a significant challenge for forensic analysts. The sensitivity and specificity
of this new kit provides an additional tool for the analysis of these types of
complex evidence.


Quality and Safety Testing. Applied Biosystems has developed technologies for bacterial and fungal detection, characterization, and identification. It offers the MicroSeq® Microbial Identification System to accurately identify microorganisms. It also offers TaqMan® Pathogen Detection Systems, which operate on real-time PCR systems instruments, to rapidly detect bacterial contamination and detect and analyze genetically modified organisms in foods.


Biosecurity.
 	Applied Biosystems believes the need for products in response to the threat
 	of biological terrorism and other malicious, accidental, and natural biological
 	dangers, often referred to as biothreat or biosecurity products,
 	represents a significant opportunity for the marketing of new products and
 	services for surveillance and detection of threats. Heightened awareness
 	of biological terrorism, combined with outbreaks of emerging infectious diseases,
 	have caused the U.S. government to substantially increase funding in this
 	area.
 	Applied Biosystems has entered into contracts to manufacture biosecurity
 	products which it believes have resulted from biothreat concerns and this
 	increased governmental funding. For example, through a collaboration with
 	Cepheid,	Applied
 	Biosystems provides reagents used in assays for the detection of several
 	infectious	diseases for use in U.S. Postal Service Biohazard Detection Systems.
 	Applied Biosystems intends to develop or manufacture other products for this
market using TaqMan ®-based real-time PCR technology.


Informatics Products
        and Services

Applied Biosystems
      develops, markets, and distributes informatics software and services used
      to integrate and automate research, development, and manufacturing laboratories
      with the goal of increasing their efficiency and effectiveness. Users of
      Applied Biosystems informatics products and services are typically
      involved in gene mapping, drug discovery, drug development, and drug manufacturing.
      Applied Biosystems offers various software products for laboratory information
      management systems, often referred to as LIMS. These products
      are designed to facilitate sample tracking, data collection, data analysis,
      and data mining, and are generally


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designed to assist researchers
  in transforming data into useful information. In September 2004, Applied Biosystems
  began sales and marketing of its LS*LIMS Software, a new workflow management
  and process automation solution designed to increase productivity, improve
  data quality, and integrate data from many different sources for genomics and
  proteomics laboratories. Also in September 2004, Applied Biosystems began sales
  and marketing of its SQL*LIMS 5, an enterprise software system for use in managing
  quality assurance and quality control by manufacturers of pharmaceuticals and
  related products, and for use by companies in other industries requiring systems
  for the management of process and control such as food and beverage manufacturing,
  water treatment, and nuclear waste management. In April 2005, Applied Biosystems
  announced the introduction of a Forensics Toolkit, a software product for the
  management of crime scene DNA evidence. The Toolkit, which has not yet been
  commercially launched, was designed for tracking DNA evidence through its chain
  of custody, from initial discovery at a crime scene to the laboratory, to enable
  law enforcement personnel to maintain and document the integrity of DNA evidence
  as is required
for admissibility in legal proceedings.

Applied Biosystems also
    offers informatics consulting services directly through its Professional
    Services Group and through alliances with other companies. These consulting
    services are designed for laboratories seeking greater automation and integration
    of lab processes. Applied Biosystems consultants principally provide installation
    and customization of Applied Biosystems LIMS software offerings, and
    also can assist customers in selecting and integrating technologies to streamline
  and accelerate their process-oriented activities.


Service and Support


Applied Biosystems provides
    warranties on all equipment at the time of sale, for periods of time ranging
    up to two years from the date of sale depending on the product subject to
    warranty. The warranties cover equipment installation, where required for
    the particular equipment, as well as customer training and application support.
    Applied Biosystems also offers service contracts to its customers that are
    generally one year after the original warranty period, but may range up to
    three years after the original warranty period. Applied Biosystems provides
    both repair services and routine maintenance services under these arrangements,
    and also offers repair and maintenance services on a time and material basis
    to customers that do not have service contracts. Service in the U.S. and
    major markets outside of the U.S. is provided by Applied Biosystems service
    staff. In some foreign countries, service is provided through distributorship
  arrangements.


Marketing and
Distribution


General.The
      markets for Applied Biosystems products and services span the spectrum
      of the life sciences industry and research community, including: basic
      human disease research and genetic analysis performed by universities,
      government agencies, and other non-profit organizations; pharmaceutical
      drug discovery, development, and manufacturing; and agriculture research.
      Applied Biosystems products also serve the needs of some markets outside
      of life science research, which we refer to as applied markets, such
      as the fields of: forensic testing and human identification; biosecurity,
      which refers to products needed in response to the threat of biological
      terrorism and other malicious, accidental, and natural biological dangers;
      and food and environmental testing. Each of these markets has unique requirements
      and expectations that Applied Biosystems seeks to address in its product
      and service offerings. Applied Biosystems customers are continually
      searching for processes and systems that can perform tests faster, more


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efficiently, and at a lower
    cost. Applied Biosystems believes that its focus on automated and high-throughput
systems enables it to respond to these needs.

The
        size and growth of Applied Biosystems markets are influenced by
      a number of factors, including but not limited to:


| | • | technological innovation
    in methods for analyzing biological data;                                                                                                                                                    
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                           
| | • | government funding
        for basic and disease-related research, such as in heart disease, AIDS,
    and cancer;                                                                                                        
| |   |                                                                                                                                                                                                                           
| | • | research and development
    spending by biotechnology and pharmaceutical companies;                                                                                                                                      
| |   |                                                                                                                                                                                                                           
| | • | awareness of biological
    contamination in food and the environment;                                                                                                                                                    
| |   |                                                                                                                                                                                                                           
| | • | governmental response
        to the threat of biological terrorism and other malicious, accidental,
        and natural biological dangers, including efforts to develop surveillance
    and detection capabilities; and
| |   |                                                                                                                                                                                                                           
| | • | application of biotechnology
    to basic agricultural processes.                                                                                                                                                         

In
        the U.S., Applied Biosystems markets almost all of its products and services
        directly through
      its own sales and distribution organizations, although some products and
      services are marketed through independent distributors. Similarly, in major
      markets outside of the U.S., Applied Biosystems generally markets its products
      and services directly through its own sales and distribution organizations,
      although some products and services are marketed through various representative
      and distributorship arrangements. Applied Biosystems owns or leases sales
      and service offices in the U.S. and in foreign countries through its foreign
      sales subsidiaries and distribution operations. None of Applied Biosystems products
      are distributed through retail outlets.


Applied Biosystems
        Portal.Applied Biosystems has established an
        electronic commerce, or e-commerce, Internet web site which
        Applied Biosystems refers to as the Applied Biosystems Portal. The
        Applied Biosystems Portal is located on the Internet at www.appliedbiosystems.com.
        Applied Biosystems uses the Portal to market its full range of products
        and services. Many products are also available for purchase online directly
        through the Portal, including TaqMan® Gene Expression and SNP Genotyping Assays, TaqMan® Low
Density Arrays, the SNPlex Genotyping System, the VariantSEQr Resequencing
System, and many other consumable products. Users of the Portal can access search
tools and graphical viewers intended to help scientists plan their experiments
and purchase corresponding Applied Biosystems products.


The Applied Biosystems Portal has become a growing source of direct
sales since our 2003 fiscal year, when Applied Biosystems made the decision to
use the Internet as a direct source of sales. However, during our 2005 fiscal
year, Applied Biosystems engaged an international consulting firm to develop
a new enhanced and redesigned Portal that would replace the existing Portal,
and to operate, maintain, and support the new Portal. Applied Biosystems believes
that the new Portal is necessary for the further growth of sales through the
Internet consistent with Applied Biosystems expectations. The first phase of the new Portal


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implementation
        is scheduled for completion during our 2006 fiscal year. Applied Biosystems
        expects that
      the new Portal, as compared to the existing Portal, will among other things:
      be easier to use because it will have an improved graphical interface;
      and have enhanced performance and less down time during which
      it will be unavailable to users as a result of upgraded infrastructure
      technology. Applied Biosystems may continue the engagement of the consulting
      firm to further develop its new Portal subsequent to the completion of
this first phase of the project.

Marketing and
          Distribution Agreement with Celera Genomics


In April 2002, Celera
      Genomics and Applied Biosystems entered into a ten-year marketing and distribution
      agreement pursuant to which Applied Biosystems became the exclusive distributor
      of Celera Genomics Celera Discovery System and related human
      genomic and other biological and medical information. As a result of this
      arrangement, Applied Biosystems integrated the Celera Discovery System
      and other genomic and biological information into its product offerings.


In exchange for the
      rights it acquired under the marketing and distribution agreement, Applied
      Biosystems agreed to pay royalties to Celera Genomics based on revenues
      generated by sales of some Applied Biosystems products from July 1, 2002,
      when exclusivity commenced under the agreement, through the end of our
      2012 fiscal year. The royalty rate, as originally approved by our Board
      of Directors, was progressive, up to a maximum of 5%, with the level of
      sales through our 2008 fiscal year. The royalty rate became a fixed percentage
      of sales starting in our 2009 fiscal year, and the rate declined each succeeding
      fiscal year through our 2012 fiscal year. For our 2005 fiscal year, the
      royalty rate was 3%. The products subject to the royalties generally include
      some reagents, referred to as probes and primers, and
      arrays developed with reference to the genomic and biological information
      accessed by Applied Biosystems under the marketing and distribution agreement.
      As a result, current products that generate royalties include Applied Biosystems TaqMan® assays,
      SNPlex Genotyping System probes, VariantSEQr Resequencing System,
      arrays used with the Expression Array System, and TaqMan Low Density Arrays.


Based upon review by
      our Board of Directors of past performance, current business conditions,
      and future expectations with respect to the marketing and distribution
      agreement, as compared to original expectations, the Board approved the
      following amendments to the agreement, effective February 4, 2005. The
      Board took this action consistent with its authority under the agreement
      and its responsibility to monitor the performance of the groups thereunder.


| | • | The term of the agreement
        was extended from ten to 15 years, so that the term now runs through
      the end of our 2017 fiscal year.                                                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                  
| | • | The royalty rate was
        modified such that (i) for prior fiscal years and our 2005 fiscal year,
        the rate applied was as described above, but (ii) beginning in our 2006
        fiscal year, the royalty rate will be fixed at 4% through the remaining
      term of the agreement.

In April 2005, Celera Genomics announced its intention to substantially
discontinue the operations of its information products and services business,
including the Celera Discovery System, effective June 30, 2005, concurrent with
the expiration of substantially all of its outstanding contractual obligations
to its customers of these products and services. Pursuant to


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the
        marketing and distribution agreement, Celera Genomics has been responsible
        for the performance
  of its obligations under all contracts relating to its information products and
  services existing on June 30, 2002 (including some renewals of these contracts)
  and was entitled to receive all revenues and other benefits under, and was responsible
  for all costs and expenses associated with, those contracts. In July 2005, some
  of Celera Genomics biological data, including some data previously available
  only to subscribers of the Celera Discovery System, was deposited into public
  data repositories. The deposited data included substantially all of Celera Genomics raw
  genomic sequence information for human, mouse, and rat, and also human and mouse
  SNP data, but did not include any of the data described below in Item 1 of this
  report under the heading BusinessApplera
  Genomics Initiative.

Applied Biosystems agreed, subject to some conditions specified in the marketing
 	      and distribution agreement, to reimburse Celera Genomics for any shortfall
 	      in earnings before interest, taxes, depreciation, and amortization from
 	      the contracts described in the immediately preceding paragraph during
 	      the four fiscal years ending with our 2006 fiscal year below $62.5 million.
 	      As of the end of our 2005 fiscal year, the obligations under this reimbursement
 	      provision had been fully satisfied. Celera Genomics will continue to
 	      receive royalties on sales of some products sold by Applied Biosystems
 	      under the marketing and distribution agreement as described above, but
 	      otherwise does not expect to receive any further significant revenue
 	      from its discontinued products and services business. Under the marketing
 	      and distribution agreement, Celera Discovery System database subscriptions
 	      were covered by the royalty provisions, but Applied Biosystems discontinued
 	      this product as of the end of our 2005 fiscal year.


Raw Materials


There
        are no specialized raw materials that are particularly essential to the
        operation of Applied Biosystems business. Applied Biosystems manufacturing
 	operations require a wide variety of raw materials, electronic and mechanical
 	components, chemical and biochemical materials, and other supplies, some
        of which are occasionally found to be in short supply. Applied Biosystems
        has
 	multiple commercial sources for most components and supplies, but it is dependent
 	on single sources for a limited number of such items, in which case Applied
 	Biosystems normally secures long-term supply contracts. In some cases, if
        a supplier discontinues a product, it could temporarily interrupt the
        business
of Applied Biosystems.


Patents, Licenses, and Franchises


General.Applied Biosystems products are based on complex, rapidly developing technologies. Some of these technologies are covered by patents owned by Applied Biosystems, and others are owned by third parties and are used by Applied Biosystems under license. Applied Biosystems has pursued a policy of seeking patent protection in the U.S. and other countries for developments, improvements, and inventions originating within its organization that are incorporated into Applied Biosystems products or that fall within its fields of interest. Applied Biosystems business
  depends on its ability to continue developing new technologies which can be patented,
  or licensing new technologies from third parties that own patents in desired
  technologies. The rights that Applied Biosystems considers most important to
  its current business are described below.


Applied
      Biosystems is currently, and could in the future be, subject to lawsuits,
      arbitrations, investigations, and other legal actions with private parties
      and governmental entities, particularly involving claims for infringement
      of patents and other intellectual property rights.


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From time
      to time, Applied Biosystems has asserted that various competitors and others
      are infringing its patents; and similarly, from time to time, others have
      asserted that Applied Biosystems was or is infringing patents owned by them.
      These claims are sometimes settled by mutual agreement on a satisfactory
      basis and result in the granting of licenses by or to Applied Biosystems.
      However, we cannot make any assurances as to the outcome of any pending or
      future claims. More information about the risk factors associated with Applied
      Biosystems reliance on intellectual property is set forth below in
      Item 5 of Part II of this report under the heading Market for Registrants
      Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
      SecuritiesForward-Looking Statements and Risk FactorsFactors
  Relating to Applied Biosystems.

PCR
        and Real-Time PCR Reagents; PCR and Real-Time PCR Methods. Applied
        Biosystems derives some rights to PCR technology under a series of agreements
        with Hoffmann-La Roche Inc. and its affiliates, which we refer to below
        collectively as Roche, which owns some of the patents covering
        the PCR process. Applied Biosystems receives royalties from third-party
        sales of products incorporating this technology through a series of licensing
        programs that it has established for industry access to some of its intellectual
        property. The first of these patents expired in March 2005 in the U.S.,
        and will expire in March 2006 in Europe and some other jurisdictions.
        As further discussed in the following paragraph, Applied Biosystems believes
        that reduced PCR royalties resulting from the expiration of these patents
        should be offset to a substantial degree by income from real-time PCR
        and other PCR-related technologies that it owns or licenses.


The agreements
      with Roche, and Applied Biosystems and Roches rights to and
      commercialization of PCR technology, were previously the subject of litigation
      and arbitration proceedings. In May 2005, Applied Biosystems reached definitive
      agreement with Roche to settle all of these outstanding legal proceedings,
      as described below in Item 3 of this report under the heading Legal
      ProceedingsSettled Roche Legal Proceedings. The parties subsequently
      sought and received dismissal of the litigation and arbitration proceedings.
      In connection with the settlement, the parties amended some licenses granted
      by each party to the other in the research, applied, and diagnostic fields,
      worldwide. In addition, Applera has become the exclusive licensor of some
      Roche patents covering reagents, kits, and methods for practicing PCR and
      real-time PCR in the research and applied fields. This will allow Applied
      Biosystems to expand the existing PCR licensing program to include PCR
      and real-time PCR patents notpreviously part of its licensing program. Applied Biosystems believes that, if
        successful, the expanded licensing program should generate significant
        income that should substantially offset income lost from the patent expirations.
        The settlement also releases Applied Biosystems, beginning in May 2007,
        from its obligations to purchase some enzymes and other PCR-related reagent
        products from Roche under pre-existing supply agreements.


During our 2005 fiscal year, the following additional developments
  relating to Applied Biosystems real-time PCR technology occurred:


| | • | In November 2004, the
        U.S. Patent & Trademark Office granted Applera a fundamental patent,
        U.S. Patent No. 6,814,934, pertaining to real-time instrumentation. Upon
        issuance of this patent, Applied Biosystems initiated a patent infringement
        lawsuit against Bio-Rad Laboratories, Inc., MJ Research, Inc., and Stratagene
        Corporation for infringement of this patent. More information about this
        lawsuit, and counterclaims that were subsequently filed against us, is
    set forth below
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| |   | in Item 3 of this
    report under the heading Legal ProceedingsCommercial Litigation.                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | • | In December 2004, the
        European Patent Office, or EPO, revoked Appleras European Patent
        No. 872562, covering real-time PCR thermal cycler technology. Applied
        Biosystems is seeking to overturn this decision through the appeal process.
        Following this decision of the EPO, the Duesseldorf District Court in
        Germany suspended
        injunctions that had been in force against Bio-Rad and MJ Research
since May 2004, pending the outcome of our appeal of the EPO decision.
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | • | In March 2005, the
        Japanese Patent Office, or JPO, held invalid Appleras Japanese Patent No.
        3136129 covering real-time PCR thermal cycler technology. We have appealed
    the decision. Following this decision of the JPO, in June 2005 the Japanese IP
	High Court suspended an injunction that had been in force against Bio-Rad.                                                                                                                                                                    

California
        Institute of Technology License. Applied Biosystems also licenses
        rights under some patents owned by the California Institute of Technology
        relating to DNA sequencing instruments. These patents expire between
        2009 and 2018 in the U.S., and have already expired in the rest of the
        world.


Backlog


Applied
      Biosystems total recorded backlog at June 30, 2004, was $237.9 million,
      which included $1.5 million of orders from Celera Genomics and $1.8 million
      of orders from Celera Diagnostics. Applied Biosystems total recorded
      backlog at June 30, 2005, was $244.8 million, which included $0.1 million
      of orders from Celera Genomics and $1.0 million of orders from Celera Diagnostics.
      Recorded backlog may not result in sales because of cancellation or other
      factors. It is anticipated that most of the orders included in backlog
      at June 30, 2005, will be delivered before the close of our 2006 fiscal
      year.


Competition


While the
    absence of reliable statistics makes it difficult to determine Applied Biosystems relative
      market position in its industry segments, Applied Biosystems believes it
      is one of the principal suppliers in its fields, marketing a broad line
      of life science systems, consumables, software, and services. However,
      the markets for these products and services are highly
      competitive and are characterized by the application of advanced technology.
      Competition is intensified by the ever-changing nature
    of the technologies used in these markets. New technologies in life sciences
    could make Applied Biosystems products and services obsolete unless
    it continues to develop new and improved products and services and pursue
    new market opportunities. Given the breadth of Applied Biosystems product
    and service offerings, Applied Biosystems competition
    comes from a wide array of competitors with a high degree of technical proficiency,
    ranging from specialized companies that have strengths in narrow segments
    of the life science markets to well known manufacturers offering a broad
    array
    of biotechnology products and services. Applied Biosystems competes principally
    in terms of the technology incorporated into its products and services, the
    breadth and quality of its product and service offerings, and its service
    and distribution capabilities.


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Research, Development, and Engineering


Applied Biosystems
    is actively engaged in basic and applied research, development, and engineering
    programs designed to develop new products and to improve existing products.
    Research, development, and engineering expenses for Applied Biosystems totaled
    $221.2 million in our 2003 fiscal year, $214.2 million in our 2004 fiscal
    year, and $192.2 million in our 2005 fiscal year. Applera expensed $381.3
    million in our 2003 fiscal year, $354.2 million in our 2004 fiscal year,
    and $330.7 million in our 2005 fiscal year for Applera research, development,
    and engineering activities. The numbers reported in this paragraph for our
    2003 and 2004 fiscal years reflect reclassifications, for comparative purposes,
    of some patent-related costs from research and development expenses to selling,
    general, and administrative expenses.


Applied Biosystems new
    products generally originate from four sources: internal research and development
    programs; external collaborative efforts with technology companies and individuals
    in academic institutions; devices or techniques that are generated in customers'
    laboratories; and business and technology acquisitions.


Environmental
        Matters


Applied Biosystems
    is subject to federal, state, and local laws and regulations regulating the
    discharge of materials into the environment, or otherwise relating to the
    protection of the environment, in those jurisdictions where Applied Biosystems
    operates or maintains facilities. Applied Biosystems does not believe that
    any liability arising under, or compliance with, environmental laws or regulations
    will have a material effect on its business, and no material capital expenditures
    are expected for environmental control.




Celera Genomics Group
      Business

Overview


Celera Genomics is engaged
    principally in the discovery and development of targeted therapeutics for
    cancer, autoimmune, and inflammatory diseases. Celera Genomics is leveraging
    its proteomic, bioinformatic, and genomic capabilities to identify and validate
    drug targets, and to discover and develop small molecule therapeutics. Celera
    Genomics expects to use thesecapabilities,
    along with its molecular and cell biology, medicinal and computational chemistry,
    pharmacology, and other drug development technologies to optimize the potency,
    selectivity, and physical properties of new drug candidates. Celera Genomics
    is also seeking to advance therapeutic antibody and selected small molecule
    drug programs in collaboration with global technology and market leaders.


Celera Genomics and Celera
    Diagnostics are pursuing, in cooperation with each other, a strategy that
    we refer to as targeted medicine. This strategy is based on the
    belief that a better understanding of the genetic basis of biology and disease
    is key to improved diagnosis and treatment of many common complex diseases.
    Celera Genomics and Celera Diagnostics are applying research and development
    tools and methods to analyze biological information,


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including genetic variations
    discovered through the Applera Genomics Initiative, in an attempt to discover
    associations between genes and diseases. The Applera Genomics Initiative
    is described below in Item 1 of this report under the heading BusinessApplera
    Genomics Initiative. Celera Genomics has been using this information
    to select and validate therapeutic targets for new drugs, and may use this
    information to stratify patient populations in clinical trials to increase
    the proportion of patients who have an efficacious response to drug treatment.
    Celera Diagnostics intends to develop new diagnostic tests based on known
    and newly-identified genetic and proteomic markers to help physicians predict
    an individuals predisposition to, better characterize, monitor progression
    of, and select appropriate therapy for, common complex diseases. The ultimate
    goal of this targeted medicine approach is to:

| | • | identify new and improved
    targets for drug discovery and development;                                                                         
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                   
| | • | facilitate more efficient
    clinical trials of new therapeutics;                                                                                
| |   |                                                                                                                                                   
| | • | develop diagnostic
        tests that address unmet medical needs in predicting, detecting, characterizing,
    and monitoring diseases; and      
| |   |                                                                                                                                                   
| | • | use diagnostics to
        select a form of therapy that is likely to be more effective and possibly
    safer in a particular patient population.

Celera Genomics may pursue
    both antibody and small molecule therapeutics. Antibodies
    are proteins produced by the human immune system that bind to potentially
    harmful substances, such as viruses and bacteria, in order to disable and
    eliminate them. Antibody therapeutics are protein-based biological compounds
    that are designed to similarly bind to and interfere with the activities
    of a particular target. Celera Genomics has initially chosen to focus on
    the discovery of proteins found primarily on the surface of tumor cells as
    potential targets for antibody therapeutics. Small molecule therapeutics
    are generally low molecular weight, synthetically derived chemical compounds
    designed to bind to and interfere with the activities of particular targets,
    such as proteins, DNA, or RNA.


Development of Therapeutics Business


Overview.During our 2001 fiscal year, Celera Genomics expanded its operations to include therapeutics discovery and development, and since then it has established the therapeutics business as its primary focus and has continued to develop this business. Its scientists have advanced several small molecule therapeutic programs, including its histone deacetylase, or HDAC, program for cancer. Also, Celera Genomics has made significant progress in its proteomic studies of pancreatic, lung, colon, and breast cancer, and during our 2005 fiscal yearinitiated
      studies of additional cancers including kidney and gastric cancer. Additional
      information about these programs and studies is set forth below in this
      description of the Celera Genomics business.


Celera
Genomics was originally formed for the purpose of generating and commercializing
information to accelerate the understanding of biological processes and to assist
the research endeavors of pharmaceutical, biotechnology, and life science research
entities. In furtherance of this purpose, Celera Genomics developed an information
products and services business, and a key component of this business was the
Celera Discovery System, an online information and discovery system used
to access Celera Genomics genomic and related biological and medical information.
In 2002, Applied Biosystems became the exclusive


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distributor of Celera
    Genomics proprietary human genomic and other biological and medical
    information, including the Celera Discovery System, pursuant to a marketing
    and distribution agreement between Celera Genomics and Applied Biosystems.
    This agreement enabled Celera Genomics executive team to focus on developing
    its new business operations in therapeutics discovery and development. Consistent
    with the intent of the agreement, Celera Genomics substantially discontinued
    the operations of its information products and services business during our
    2005 fiscal year concurrent with the expiration of substantially all of its
    outstanding contractual obligations to its customers of its information products
    and services. Under the marketing and distribution agreement, Celera Genomics
    continues to have access to proprietary information covered by the agreement
    for its therapeutic programs. Celera Genomics expects that such data and
    intellectual property may have a significant role in its drug discovery and
    development efforts. More information about the marketing and distribution
    agreement, including amendments made during our 2005 fiscal year, and Celera
    Genomics decision to substantially discontinue its operations relating
    to its information products and services business, is set forth above in
    Item 1 of this report under the heading BusinessApplied Biosystems
    Group BusinessMarketing and Distribution Agreement with Celera Genomics. Important
    information about this agreement also appears later in Item 5 of Part II
    of this report under the heading Market for Registrants Common
    Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesForward-Looking
    Statements and Risk FactorsFactors Relating to Celera Genomics.

During and subsequent
      to the end of our 2005 fiscal year, Celera Genomics announced several important
      developments in its business, including several new collaborations and
      several developments in its therapeutics programs. These developments are
      described below.


Abbott Collaboration.In July 2004, Celera Genomics announced the
    formation of a strategic collaboration with Abbott Laboratories to jointly
    discover, develop, and commercialize targeted therapies for cancer. The collaboration
    will encompass the development of various therapeutic approaches, including
    antibodies and small molecule drugs targeted against differentially-expressed
    cell-surface proteins that have been associated with cancer and validated
    as therapeutic targets through Celera Genomics proteomics research.
    In April 2005, Celera Genomics announced that two of its protein targets
    had been selected for further investigation by Abbott Laboratories for possible
    therapeutic development. These are the first targets to be selected for advancement
    pursuant to this collaboration.


GE Collaboration.Also in July 2004, Celera Genomics announced,
    along with Celera Diagnostics, a joint research collaboration with General
    Electric Company intended to accelerate the discovery and development of
    new products for personalized, or targeted, medicine. The parties will seek
    to understand and differentiate disease at the molecular level, which is
    expected to lead to new diagnostics and treatments that are tailored for
    a specific disease or patient population.
    In the first project under this collaboration, General Electric is pursuing
    the development of novel in vivoimaging agents targeted to cell surface
    proteins that Celera Genomics has identified to be associated with cancer. In
    vivo refers to testing performed in the living body, in contrast with in
    vitro, which refers to testing performed outside the living body. The
    companies had originally agreed to this project in 2004, but they amended
    the project in July 2005 and work was not commenced until after the amendment
    was entered into.


Merck Collaboration.Also in July 2004, Celera Genomics announced
    receipt of a milestone payment from Merck & Co. Inc. under the cathepsin
    K inhibitor collaboration agreement between the companies. This payment recognizes
    Mercks advancement of a


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cathepsin K inhibitor into Phase I clinical
    trials as a potential treatment for osteoporosis. If this compound or others developed
    under the cathepsin K collaboration are successfully developed and advanced
    toward commercialization, which requires several other clinical trials if
    Phase I trials are successful, Celera Genomics will receive additional milestone
    payments and royalties on	net sales from Merck.

Seattle Genetics Collaboration.Also in July 2004, Celera Genomics
    announced a strategic collaboration with Seattle Genetics, Inc. to jointly
    discover, develop, and commercialize antibody-based therapies for cancer.
    Pursuant to the collaboration, the parties will jointly designate a number
    of cell-surface proteins discovered and validated through Celera Genomics proteomics
    research as targets. Seattle Genetics will carry out initial screening to
    generate and select the appropriate corresponding antibodies for joint development
    and commercialization. Antibodies developed under this collaboration may
    include Seattle Genetics proprietary antibody-drug conjugates, which
    are antibodies carrying cell-killing drugs. These antibodies alone may not
    be potent enough to kill cancer cells but they can target cancer cells and
    deliver the cell-killing, or cytotoxic, drugs. In August 2005, Celera Genomics
    announced that one of its protein targets had been selected for further investigation
    by Seattle Genetics for possible therapeutic development. This is the first
    target to be selected for advancement pursuant to this collaboration.


Genentech Collaboration.In September 2004, Celera Genomics announced
    a collaboration with Genentech to discover and develop targeted therapies
    for cancer. Pursuant to the collaboration, Celera Genomics will nominate
    cell-surface proteins discovered and validated through Celera Genomics proteomics
    research as targets. Genentech may then designate these targets for further
    validation and research to identify therapeutics for subsequent development
    and commercialization solely by Genentech. However, if Genentech pursues
    the development of any products, Genentech would have to make progress payments
    to Celera Genomics based on agreed milestones and would also have to pay
    Celera Genomics a royalty based on sales of each commercialized product.


Sale of Rockville Facility. In April 2005, Celera Genomics sold
    its Rockville, Maryland facility and received net proceeds of $42.4 million.
    Celera Genomics is leasing back a portion of the facility pursuant to a five
    year lease that includes two renewal options of five years each.


Small Molecule Program Developments.In May 2005, Celera Genomics
    announced that it had submitted an Investigational New Drug, or IND, application
    to the U.S. Food and Drug Administration for a novel histone deacetylase,
    or HDAC, inhibitor as a cancer therapeutic. In July 2005, Celera Genomics
    reported the initiation of Phase I clinical testing for this compound in
    patients with refractory solid cancers, which refers to non-leukemia cancers
    that do not respond to currently available treatments. Celera Genomics believes
    that its small molecule capability and pipeline
    of compounds is now sufficiently mature to seek partners to maximize the
    value of its programs in the most cost effective manner.


In July 2005 Celera
      Genomics announced that it had advanced a cathepsin S inhibitor into late
      preclinical development for the treatment of psoriasis. This compound was
      developed by Celera Genomics as part of a proprietary non-partnered program
      to develop inhibitors of cathepsin S. Cathepsin S was also the focus of
      a collaboration between Celera Genomics and sanofi-aventis, formerly Aventis
      Pharmaceuticals. However, sanofi-aventis informed Celera Genomics in July
      2005 that it had terminated this collaborative cathepsin S program.


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In January 2005, Celera
      Genomics announced that it had initiated two new small molecule research
      programs, one for the possible treatment of cancer and one for an autoimmune
      disease. The cancer program is Celera Genomics first small molecule
      program based on a target arising from its proteomics research, and the
      autoimmune program is Celera Genomics first small molecule program
      based on a target arising from the gene-disease association studies conducted
      at Celera Diagnostics.


In May 2005, Celera
      Genomics announced that one of its small molecule compounds, a tryptase
      inhibitor, showed efficacy in treating allergic asthma in mice.


Target Discovery
          Programs; Proteomics and Genomics Research


Overview. Therapeutic target discovery, including identification
    and validation, continues to be an important part of Celera Genomics business,
    although it has directed its resources primarily to small molecule therapeutics
    research and development. Therapeutic targets are biological points of intervention for
    a therapeutic designed to affect a particular disease or medical condition.
    Validation refers to the process whereby the biological relevance of a particular
    target, and, therefore, its potential therapeutic relevance, is confirmed
    by conducting additional complementary testing or analysis. Celera Genomics
    is focusing its target discovery research efforts in two areas: proteomics
    studies, which are described further below under the heading Proteomics
    Studies, and analysis of the results of Celera Diagnostics gene-disease
    association studies, which are described below in Item 1 of this report under
    the heading BusinessCelera Diagnostics, a 50/50 Joint Venture
    between Applied Biosystems and Celera GenomicsLarge Scale Studies.


Currently, the primary
      purpose of our target discovery efforts is to identify and validate targets for
      antibody therapeutics and small molecule therapeutics. Celera Genomics
      has entered into collaborations to advance therapeutic development efforts
	  arising from our validated targets, including
      antibody and small molecule therapeutic collaborations with Abbott Laboratories
      and Genentech, and an antibody therapeutic collaboration with Seattle Genetics.
      These collaborations are for development of therapeutics targeted
      to cell-surface proteins associated with cancer. They are
      described above in Item 1 of this report under the heading BusinessCelera
      Genomics Group BusinessDevelopment of Therapeutics Business. Celera
      Genomics believes it will likely collaborate with other companies on most
      or all antibody therapeutics that it may pursue as it is not currently
      seeking to build the infrastructure needed for their internal development.
      Celera Genomics has been developing internal capabilities for the advancement
      of its small molecule program, but it is currently seeking partners to
      maximize the value of its programs in the most cost effective manner. Celera
      Genomics development capabilities are described
      below in Item 1 of this report under the heading BusinessCelera
      Genomics Group BusinessSmall Molecule Drug Programs.


Validated targets discovered
      through Celera Genomics research may be useful as in vitroor in
      vivo diagnostics, whether or not they result in efficacious therapeutics.
      In July 2004, Celera Genomics and Celera Diagnostics announced a collaboration
      with General Electric Company pursuant to which General Electric may develop
      novel in vivo imaging agents targeted to cell surface proteins that
      Celera Genomics has identified to be associated with cancer. This collaboration
      is described above in Item 1 of this report under the heading BusinessCelera
      Genomics Group BusinessDevelopment of Therapeutics Business. Celera
      Genomics expects that any in vitro diagnostics derived from Celera
      Genomics research would be commercialized,


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if at all, through Celera
    Diagnostics because these types of diagnostics are currently within Celera
    Diagnostics field of business.

Also, Celera Genomics
      is seeking to incorporate biomarkers into the design of clinical studies.
      In this context, a biomarker refers to a biological characteristic
      that can be objectively measured and which is an indicator of potential
      response to a therapy. Celera Genomics believes that its biomarker research,
      which includes its proteomics studies, its analysis of the results of Celera
      Diagnostics gene-disease association studies, and other internal
      research, may generate information that is useful in stratifying patient
      populations to improve drug treatment.


Proteomics Studies. Celera Genomics uses proteomics to identify
    proteins that are associated with disease. These proteins may be targets
    for therapeutic intervention. Celera Genomics current proteomics efforts
    are focused on analyzing proteins on the surface of cells from both healthy
    and diseased individuals, seeking to identify proteins that are associated
    with particular diseases such as cancer. These cell surface proteins, which
    are referred to as differentially-expressed cell-surface proteins, are
    the class of proteins believed to represent the most promising targets for
    near-term drug candidates in the form of therapeutic antibodies. However,
    Celera Genomics is also studying proteins that are shed from
    cancer cells within the body, as it believes this class of proteins could
    also result in drug targets or diagnostic tests. The diseases that Celera
    Genomics has initially selected for proteomics study are various forms of
    cancer. Celera Genomics conducts its proteomics research at its own proteomics
    facility, which became fully operational during our 2003 fiscal year.


During our 2005 fiscal
      year, Celera Genomics made significant progress in its proteomic studies
      of pancreatic, lung, colon, and breast cancer and initiated studies of
      additional cancers including kidney and gastric cancer. As a result of
      these studies, Celera Genomics has identified differentially-expressed
      proteins on the surface of cancer cells, some of which its scientists have
      further analyzed through extensive validation studies to determine their
      potential as therapeutic targets for cancer. Celera Genomics has offered
      some of the resulting validated targets for further investigation by collaborators,
      including Abbott Laboratories, Seattle Genetics, and Genentech, to meet
      its responsibilities under its collaboration agreements with these companies.


In order to identify
      differentially expressed cell-surface proteins, Celera Genomics has designed
      advanced methods to separate cellular and subcellular components of biological
      samples. Celera Genomics uses advanced mass spectrometry systems that can
      perform quantitation and identification of proteins from separated biological
      samples. Celera Genomics is also using human genomic information and proprietary
      software and algorithms to identify proteins associated with diseases.


For target validation,
      Celera Genomics uses a variety of methodologies, including immunohistochemistry,
      or the identification of proteins in tissues and cells using antibodies,
      to refine its understanding of therapeutic targets of interest and, for
      example, to identify protein expression profiles that would support or
      preclude meaningful progression of the drug targets. For targets of interest,
      Celera Genomics is performing tests to determine their relevance across
      a broad range of normal and diseased tissues.


Bioinformatics.Celera Genomics is using bioinformatics to develop
    the capability to perform simulated, computer-based experimentation. Celera
    Genomics believes this capability will reduce the need to perform more labor-intensive
    experiments in the laboratory. Also, Celera


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Genomics is developing proprietary algorithms for use in its
    large scale computing infrastructure for the extraction of data from proteomics
    experiments. This data is integrated with genome, gene expression,
    and protein characterization information, scientific literature, and the
    patent status of possible targets. Celera Genomics believes the application
    of these algorithms to this data is useful to facilitate the identification
    of targets.

Genomics Studies.Celera Genomics is using genomics capabilities from its discontinued information products and services business, as a complementary approach to the proteomics methods and the gene-disease association studies described above, in its efforts to identify and validate therapeutic targets. Celera Genomics is further characterizing recently discovered genes, including those for which we have been issued patents or for which we have filed patent applications, by conducting in vitro cell studies and in vivoanimal studies. Celera Genomics is incorporating its bioinformatics capabilities into this process. After the functions of genes are determined, Celera Genomics establishes the priorities of these genes or their gene products as targets based on the families of proteins they encode, the association of the expression of these genes with specific diseases, and the
 functional importance of the gene products to cells.


Small Molecule Drug Programs


Celera Genomics has a
    small molecule drug discovery and development facility in South San Francisco,
    California. At this facility, Celera Genomics is performing
research to identify and validate potential small molecule therapeutic targets
and discover and develop small molecule therapeutic compounds. Celera Genomics
originally acquired some of these capabilities with its acquisition of Axys Pharmaceuticals,
Inc. in November 2001. Since the acquisition, Celera Genomics has developed additional
capabilities, particularly by expanding its small molecule drug pre-clinical
and clinical development capabilities. Celera
Genomics small molecule drug research and development expertise and programs
are described below. Celera Genomics believes that its small molecule capability
and pipeline of compounds is now sufficiently mature to seek partners to maximize
the value of its programs in the most cost effective manner.


Scientific Expertise For Lead Compound Identification.
      Celera Genomics has a range of chemistry and biology capabilities which
      have been used primarily for therapeutic compound discovery and development.
      To date, a primary focus of Celera Genomics chemists and biologists has been lead compound discovery and development using a variety of methods. Lead compounds are those within a series of related compounds that we believe are the most promising and which we would seek to move into preclinical and clinical development. Currently, Celera Genomics lead compound discovery and development efforts are focused on both structure-based drug design and high-throughput screening. These
      methods are generally described as follows:


| | • | Structure-based
              Drug Design.Structure-based drug design
              is a process whereby medicinal chemists attempt to develop compounds
              that will bind to a therapeutic target based on the physical 3-dimensional
              structure of the target molecule. Our medicinal chemists obtain
              this information by analyzing images of the molecule taken using
              X-ray crystallography and also by performing molecular modeling
    based on the known properties of the target molecule.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | • | High-Throughput
              Screening. High-throughput screening
              involves the screening of thousands of compounds against a disease
    target, usually a protein, to determine                                                                                                                                                                                                                                                                                                                                                       

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| |  | whether and how any
        of them bind to the target. Axys developed and purchased compound libraries
        for these studies and Celera Genomics has continued to diversify and
        enhance its compound libraries through the purchase of additional compound
        collections.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Compound Development Programs Generally.
 	Celera Genomics has several internal small molecule development programs
      and	one that is partnered with a major pharmaceutical company. Celera
      Genomics most advanced programs include its histone deacetylase,
      cathepsin K, and cathepsin S programs. Other therapeutic programs include Factor VIIa
      and tryptase. Some of Celera Genomics existing programs were
	  acquired with Axys Pharmaceuticals and advanced since then by Celera Genomics.
	  During our 2005 fiscal year, Celera Genomics initiated new small molecule
	  research programs. These programs include a cancer program, which is Celera
	  Genomics first small molecule program based on a target arising from its
	  proteomics research, and an autoimmune disease program, which is Celera Genomics first
 	small molecule program based on a target arising from the gene-disease association
 	studies conducted at Celera Diagnostics.


Celera Genomics has
    developed a general expertise in discovering and developing potential therapeutic
    compounds that target proteases. Several of Celera Genomics programs,
    including its Factor VIIa, cathepsin K, cathepsin S, and tryptase programs,
    but not its histone deacetylase program, are for compounds that target proteases.
    Proteases are enzymes that break down chemical bonds in proteins.
    Proteases are known to be a druggable class of proteins, which means that
    some proteins within this class have in the past been shown to be effective
    drug targets. Proteases are generally classified by how they break down a
    proteins chemical bonds. Cysteine and serine proteases are two classes
    of these enzymes. Celera Genomics has discovered inhibitors of
    some of the proteases that it has studied. Inhibitors are natural or synthetic
    compounds that can bind to the protein molecule and change the way it will
    perform in the body, and in particular, can prevent the function of the target
    protease that is causing or contributing to a particular disease or condition.


Histone Deacetylase Program.Celera
Genomics most advanced internal program is for the development of inhibitors
of histone deacetylase, or HDAC. HDAC is an enzyme that is involved in the regulation
of histone acetylation, a biological process that influences gene expression.
Inhibition of HDAC leads to an increase in gene expression in a number of genes,
some of which are related to cell cycle arrest and cell death. Medicinal chemists
at Celera Genomics have applied structure-based drug design to generate compounds
that possess potent in vitro inhibition of HDAC activity. In April 2005,
Celera Genomics scientists presented data at the American Association for Cancer
Research demonstrating that an HDAC inhibitor exhibited significant in vivo efficacy
against cancer in animal studies. In May 2005, Celera Genomics announced that
it had submitted an Investigational New Drug, or IND, application to the U.S.
Food and Drug Administration for a novel HDAC inhibitor as a cancer therapeutic.
In July 2005, Celera
Genomics reported the initiation of Phase I clinical testing for this compound
in patients with refractory solid cancers, which refers to non-leukemia cancers
that do not respond to currently available treatments. Cathepsin K
	          and Cathepsin S Programs.Celera Genomics
	          has a collaboration with Merck & Co. Inc., which it acquired with
	          Axys Pharmaceuticals, to develop small molecule inhibitors of cathepsin
	          K, a cysteine protease, for the treatment of osteoporosis. Osteoporosis
	          is a major risk factor for bone fractures and associated disability
	          that affects over 10 million Americans, especially post-menopausal
	          women. In July 2004, Celera Genomics announced


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receipt of a milestone
  payment from Merck & Co. Inc. under the cathepsin K program. This payment
  recognized Mercks advancement of a cathepsin K inhibitor into Phase I
  clinical trials as a potential treatment for osteoporosis. Under U.S. Food
  and Drug Administration regulations, if these trials are successful, several
  other clinical trials would be required before the compound could be commercialized.
  This collaboration remains active. Celera Genomics portion of this program
  was completed prior to our 2005 fiscal year, and further development under
  this collaboration has since then been the responsibility of Merck, which will
make all clinical development decisions.

Celera Genomics also had a second collaboration which was acquired with Axys
Pharmaceuticals. This collaboration was with sanofi-aventis, formerly Aventis
Pharmaceuticals, to develop inhibitors of cathepsin S, another type of cysteine
protease. In July 2005, sanofi-aventis informed Celera Genomics that it had terminated
this collaborative cathepsin S inhibitor program. During our 2005 fiscal year,
Celera Genomics independently progressed an internal program for the development
of inhibitors of cathepsin S. The primary indication for this non-partnered program is treatment
of psoriasis, and other immune-mediated diseases are under consideration. Celera
Genomics has advanced a cathepsin S inhibitor into late preclinical development
for the treatment of psoriasis.


Other Programs. Celera Genomics has an internal program to develop inhibitors of Factor VIIa, a serine protease, as an anticoagulant for the treatment of indications such as deep vein thrombosis, with the goal of improved balance between prolonged bleeding time and therapeutic efficacy compared to existing therapies. Celera Genomics has identified a lead compound and has advanced its Factor VIIa program to a stage where it is seeking a partner for its further development.


Celera Genomics also has an internal program to develop inhibitors of tryptase,
a serine protease, for the treatment of asthma. Celera Genomics previously had
a tryptase collaboration with Bayer AG but during the 2003 fiscal year purchased
all rights to the compounds subject to the collaboration. Since then, Celera
Genomics discontinued its development of the lead compound series that had been
acquired from Bayer and shifted its efforts in this program to new proprietary
compounds developed using, in part, technology and expertise obtained from the
Bayer collaboration and the purchase of rights from Bayer. In May 2005, Celera
Genomics announced that one of its tryptase inhibitors showed efficacy in treating
allergic asthma in mice.


Development of
Preclinical and Clinical Resources and Expertise.Celera Genomics
    has established therapeutic development capabilities for both preclinical and clinical
 	activities, and it may continue to increase these capabilities
	so that its most promising therapeutic programs can be advanced
 	through one or more phases of clinical trials without having to
	partner with other companies. At Celera
 	Genomics, a compound is considered to be in preclinical development when
 	it	has been identified
 	as a lead compound within a series of compounds and Celera Genomics begins
 	its efforts to assess and enable the effectiveness of the compound within
 	the human body; and is considered to be in clinical development when clinical
 	trials begin. Celera Genomics clinical and preclinical programs are described above.
	 Celera Genomics currently has one non-partnered compound, HDAC, in clinical development.


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When acquired by Celera Genomics, Axys had some preclinical development capabilities,
particularly in the scientific area of pharmacokinetics, and no significant clinical
development capabilities. Since the Axys acquisition, Celera Genomics has substantially
increased its scientific personnel to support preclinical and clinical activities,
particularly the following:


| | • | drug metabolism, pharmacokinetics,
        and other personnel to evaluate how a compound is: absorbed into the
        body; distributed within the body; metabolized, or broken down, once
    introduced into the body; and excreted, or eliminated, by the body;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                     
| | • | toxicology personnel
    to perform studies to determine the safety of compounds; and                                                                                                                                                                               
| |   |                                                                                                                                                                                                                                                                     
| | • | pharmaceutical sciences
        personnel to focus on the conversion of a compound into an acceptable
        physical form for administration to animals or humans, for example an
    injection in the skin or a pill or liquid taken orally.                     

In addition to the
    areas of scientific expertise described above, Celera Genomics has hired
    a limited number of personnel in other areas that are important for drug
    development, including: clinical sciences personnel, who are involved in
    the overall direction and management of clinical development and the execution
    of clinical trials; and project management personnel, who help integrate
    the different drug development project teams and facilitate communications
    among these different teams.


Regulation of
    Therapeutic Products


In the U.S., therapeutic products are subject to regulation by the U.S. Food
and Drug Administration, which administers requirements covering the testing,
safety, effectiveness, manufacturing, labeling, marketing, advertising and post-marketing
surveillance of pharmaceutical products. Generally, a therapeutic cannot be marketed
in the U.S. until, among other things, it is shown through pre-clinical research
and testing and controlled clinical human testing that the therapeutic is safe
and effective. Therapeutic products are subject to similar regulation by foreign
governments.


In the U.S., testing of compounds as possible therapeutics cannot move into the
human clinical testing phase until the process is cleared by the FDA. The FDA
approval process begins with the filing of an Investigational New Drug, or IND,
application.


Once a compounds
    IND application is cleared by the FDA, it generally undergoes three phases
    of clinical testing to determine human safety and efficacy. The
clinical testing begins with Phase I studies which are used to determine that
the compound is safe in humans. Phase I studies are concerned with detecting
adverse effects and usually do not provide data on the efficacy of the compound
to treat the targeted medical condition. If Phase I studies do
not identify human tolerability problems,
    the compound may then enter Phase II, during which the compound is studied
    in patients with the disease that the compound is being studied
to treat. Phase II dose and efficacy trials are commenced to determine the appropriate
dosing for the compound, to confirm the compounds efficacy, and to determine
whether any adverse effects will limit the compounds usefulness. If the
results from the Phase II trials are satisfactory, Phase III trials may commence
to confirm the compounds efficacy and safety in a larger patient population.
Upon completion of those trials, if satisfactory, regulatory filings may be submitted
with the


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appropriate regulatory
  agencies around the world to have the product
candidate approved for
marketing.

Clinical trials can take
    several years, can be expensive, and are subject to many risks and uncertainties
    that may cause them to fail. More information about these risks and uncertainties
    is set forth below in item 5 of Part II of this report under the heading Market
    for Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity SecuritiesForward-Looking Statements and Risk
FactorsFactors Relating to Celera Genomics.


Raw Materials


Celera Genomics operations
    require a variety of raw materials, such as chemical and biochemical materials
    and other supplies, some of which are occasionally found to be in short supply.
    Any interruption in the availability of these materials could adversely affect
    Celera Genomics operations. In particular, Celera Genomics relies on
    other companies to manufacture compounds that will be tested in Celera Genomics'
    clinical trials. These manufacturers need raw materials to manufacture those
    compounds, and Celera Genomics is responsible for obtaining some of these
    raw materials from suppliers. Suppliers may not sell these materials at the
    time when they are needed or on commercially reasonable terms. If it becomes
    necessary to change suppliers for any of these materials or if any suppliers
    of these materials experience a shutdown or disruption in their facilities
    used to produce these materials, due to technical, regulatory, or other problems,
    it could adversely affect a manufacturers ability to manufacture adequate
    quantities of Celera Genomics' compounds. If Celera Genomics or its manufacturers
    are unable to obtain the materials needed for the manufacture of compounds
    used in Celera Genomics' clinical trials, product testing and potential regulatory
    approval could be delayed, adversely impacting Celera Genomics' ability to
    develop the product candidates.


In addition, for its
    research and product development, Celera Genomics needs access to human and
    other tissue samples from diseased and healthy individuals, other biological
    materials, and related clinical and other information, which may be in limited
    supply. Celera Genomics may not be able to obtain or maintain access to these
    materials and information on acceptable terms, or may not be able to obtain
    needed consents from individuals providing tissue or other samples. In addition,
    government regulation in the U.S. and foreign countries could result in restricted
    access to, or use of, human and other tissue samples. If Celera Genomics
    loses access to sufficient numbers or sources of tissue samples or other
    required biological materials, or if tighter restrictions are imposed on
    its use of related clinical or other information or the information generated
    from tissue samples or other biological materials, its business may be harmed.


Patents, Licenses,
        Franchises and other Intellectual Property


Through its internal
    research programs and collaborative programs, Celera Genomics has developed
    and anticipates that it will further develop an increasing portfolio of intellectual
    property. Celera Genomics may use this intellectual property in its internal
developmentprograms or may license such intellectual property to third party collaborators, customers, or others for some combination of license fees, milestone payments, and royalty payments.


Celera Genomics ability
    to compete and to achieve and maintain profitability depends, in part, on
    its ability to protect its proprietary discoveries and technologies through
    obtaining and enforcing patent rights, obtaining copyright protection, maintaining
  its trade secrets, and


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operating without infringing
    the intellectual property rights of others. Celera Genomics ability
    to obtain patent protection for its inventions is uncertain. Celera Genomics
    may infringe the intellectual property rights of third parties, and may become
    involved in expensive intellectual property legal proceedings to determine
    the scope and validity of its patent rights with respect to third parties.
    To avoid infringing the intellectual property rights of others, Celera Genomics
    may need to obtain intellectual property licenses from them, but Celera Genomics
    may not be able to obtain these licenses on commercially acceptable terms,
    or at all. More information about the risk factors associated with Celera
    Genomics reliance on intellectual property is set forth below in Item
    5 of Part II of this report under the heading Market for Registrants
    Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
    SecuritiesForward-Looking Statements and Risk FactorsFactors
    Relating to Celera Genomics.

Celera Genomics has filed for patent protection in the U.S. and in some cases
worldwide for inventions relating to its discoveries. This includes patent applications
for genomics discoveries arising from its discontinued information products and
services business, which have resulted in some issued patents, as well as applications
for discoveries relating to existing therapeutics programs. Celera Genomics expects
to continue seeking patent protection for inventions relating to its DNA, including
SNP, protein, therapeutic, and diagnostic discoveries. These inventions may be
for novel pharmaceuticals and novel formulations or methods of manufacture thereof,
or novel methods of treating and diagnosing disease.
Celera Genomics current strategy is to continue prosecuting patent applications
already filed for these types of inventions, and to apply for patent protection
for inventions that are subsequently made, in all cases subject to an ongoing
case-by-case assessment of the potential value of those inventions consistent
with Celera Genomics business and scientific plan. Celera Genomics failure
to receive patent protection for its therapeutic inventions could adversely affect
the commercial value of these discoveries and could adversely affect its business.
Obtaining patent protection for other types of inventions such as those relating
to its genomics discoveries might enhance Celera Genomics business, but
Celera Genomics does not believe that its commercial success will be materially
dependent on its ability to do so.


Backlog


Celera Genomics total
    recorded backlog at June 30, 2004, was $25.2 million. Celera Genomics total
    recorded backlog at June 30, 2005, was $1.6 million. Recorded backlog may
    not result in sales because of cancellation or other factors. It is anticipated
    that most of the orders included in backlog at June 30, 2005, will be delivered
    before the close of our 2006 fiscal year.


Competition


The pharmaceutical industry
    is competitive and evolving.There is intense competition among pharmaceutical
    and biotechnology companies attempting to discover candidates for potential
    new therapeutic products. Celera Genomics is aware of products in research
    or development by its competitors that address the diseases Celera Genomics
    is targeting. These companies may:


| | • | develop new therapeutic
    products in advance of Celera Genomics or its collaborators;                                                              
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                       
| | • | develop therapeutic
        products which are more effective or more cost-effective than those developed
    by Celera Genomics or its collaborators;

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| | • | obtain regulatory
          approvals of their therapeutic products more rapidly than Celera Genomics
      or its collaborators; or                                                                            
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                 
| | • | obtain patent protection
          or other intellectual property rights that would limit the ability
          of Celera Genomics or its collaborators to develop and commercialize
      therapeutic products.

Research and Development


Celera Genomics is actively
    engaged in basic and applied research and development programs designed to
    develop new therapeutic products, and previously was also engaged in research
    and development to support commitments under contracts relating to its former
    information products and services business. Research and development expenses for Celera
    Genomics totaled $117.8 million in our 2003 fiscal year, $101.4 million in
    our 2004 fiscal year, and $103.5 million in our 2005 fiscal year. Applera
    expensed $381.3 million in our 2003 fiscal year, $354.2 million in our 2004
    fiscal year, and $330.7 million in our 2005 fiscal year for Applera research,
    development, and engineering activities. Celera Genomics new products
    are expected to originate from three sources: internal research and development
    programs, external collaborative efforts or alliances, and business and technology
    acquisitions. The numbers reported in this paragraph for our 2003 and 2004
    fiscal years reflect reclassifications, for comparative purposes, of some
    patent-related costs from research and development expenses to selling, general,
    and administrative expenses.


Environmental
        Matters


Celera Genomics is
    subject to federal, state, and local laws and regulations regulating the
    discharge of materials into the environment, or otherwise relating to the
    protection of the environment, in those jurisdictions where Celera Genomics
    operates or maintains facilities. Celera Genomics does not believe that any
    liability arising under, or compliance with, environmental laws or regulations
    will have a material effect on its business, and no material capital expenditures
    are expected for environmental control.




Celera Diagnostics, a 50/50 Joint Venture between Applied Biosystems and Celera
Genomics

Overview


Celera Diagnostics
      is engaged principally in the discovery, development, and commercialization
      of diagnostic products. In particular, Celera Diagnostics is studying SNPs
      and gene expression patterns in human biological tissues and blood samples
      and their association withspecific
      common, complex diseases. These SNPs and gene expression patterns are often
      referred to as genetic markers. Celera Diagnostics gene-disease association
      studies are currently focused on the following disease areas: heart disease;
      breast cancer; Alzheimers disease; autoimmune and inflammatory diseases,
      including rheumatoid arthritis; liver disease; and


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diabetes. In addition,
    Celera Diagnostics is conducting host response studies to identify genetic
    associations with patient response to treatments. Specifically, Celera Diagnostics
    is conducting these types of studies in patients infected with the Hepatitis
    C virus to identify patients who respond to interferon treatment, in breast
    cancer patients to identify patients who respond to hormonal therapy, and
    in heart disease patients to identify patients who respond to various types
    of treatment for that disease. Celera Diagnostics plans to conduct similar
    studies of this type in the future for other treatments and diseases. Celera
    Diagnostics expects that the discoveries resulting from its research will
    provide genetic information which may lead to earlier and more effective
    diagnosis and treatment of disease. Celera Diagnostics expects that the primary
    end-users of its products will be reference laboratories, hospitals, and
    medical clinics worldwide that perform diagnostic testing for human healthcare.

Celera Diagnostics and
    Celera Genomics are pursuing, in cooperation with each other, a strategy
    that we refer to as targeted medicine. This strategy is based
    on the belief that a better understanding of the genetic basis of biology
    and disease is key to improved diagnosis and treatment of many common complex
    diseases. Celera Diagnostics and Celera Genomics are applying research and
    development tools and methods to analyze biological information, including
    genetic variations discovered through the Applera Genomics Initiative, in
    an attempt to discover associations between genes and diseases. The Applera
    Genomics Initiative is described below in Item 1 of this report under the
    heading BusinessApplera Genomics Initiative. Celera Diagnostics
    intends to develop new diagnostic tests based on known and newly-identified
    genetic and proteomic markers to help physicians predict an individuals
    predisposition to, better characterize, monitor progression of, and select
    appropriate therapy for, common complex diseases. Celera Genomics has been
    using this information to select and validate therapeutic targets for new
    drugs, and may use this information to stratify patient populations in clinical
    trials to increase the proportion of patients who have an efficacious response
    to drug treatment. The ultimate goal of this targeted medicine approach is
    to:


| | • | identify new and improved
    targets for drug discovery and development;                                                                         
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                   
| | • | facilitate more efficient
    clinical trials of new therapeutics;                                                                                
| |   |                                                                                                                                                   
| | • | develop diagnostic
        tests that address unmet medical needs in predicting, detecting, characterizing,
    and monitoring diseases; and      
| |   |                                                                                                                                                   
| | • | use diagnostics to
        select a form of therapy that is likely to be more effective and possibly
    safer in a particular patient population.

Development of Diagnostics Business


Celera
      Diagnostics was formed during our 2001 fiscal year pursuant to a joint
      venture agreement between Applied Biosystems and Celera Genomics. A description
      of that agreement is set forth below in Item 1 of this report under the
      heading BusinessCelera Diagnostics, a 50/50 Joint Venture between
      Applied Biosystems and Celera GenomicsSummary of Joint Venture Agreement. Since
      its formation, Celera Diagnostics has achieved a number of important milestones
      in the development of its business including, among others: establishment
      ofheadquarters
      in Alameda, California; hiring of key personnel in areas of discovery research,
      product development, manufacturing, quality assurance, regulatory affairs,
      and marketing; construction of discovery laboratories and manufacturing
      facilities; commencement of large-scale study programs; formation of several
      important alliances, collaborations, and other third


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party relationships
      to support its research, development, and commercialization of products,
      including particularly its strategic alliance with Abbott Laboratories;
    and receipt of
      several marketing clearances for its ViroSeq HIV-1 Genotyping System
      from the U.S. Food and Drug Administration for sales and marketing in the
      U.S. and also CE mark registration, which is needed for sales and marketing
      in the
      European Union. Key developments during our 2005 fiscal year included the
      following:

| | • | In July 2004, Celera
        Diagnostics, with Celera Genomics, entered into a joint research collaboration
        with General Electric Company intended to accelerate the discovery and
    development of new products for personalized, or targeted medicine.                                                                                                                      
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                         
| | • | Also in July 2004,
        Celera Diagnostics entered into collaboration with Merck & Co., Inc.,
        to identify novel drug targets and diagnostic markers related to Alzheimers
        disease. During our 2005 fiscal year, Celera Diagnostics fulfilled its
        obligations pursuant to this collaboration and received all research
    milestone payments due from Merck.
| |   |                                                                                                                                                                                                                                                                                                                                                                                         
| | • | In November 2004, Celera
        Diagnostics met the self-certifying requirements to CE mark its cystic
        fibrosis product for sales and marketing as a diagnostic kit in the European
        Union, and Celera Diagnostics then began marketing this diagnostic product
    in the EU.                                                                                          
| |   |                                                                                                                                                                                                                                                                                                                                                                                         
| | • | In addition to its
        large-scale disease association studies, Celera Diagnostics commenced
        new product development programs for Fragile X disease and human papillomavirus,
    or HPV.                                                                                                                                                                                   

Also, in June and July
    2005, two Abbott Laboratories viral load assay products received CE mark
    certification for use on the Abbott m2000 system. Receipt of these
    certifications enabled Abbott to commence marketing these diagnostic products
    in the EU. The products are included within Celera Diagnostics strategic
    alliance with Abbott, and are currently expected to be the most significant
    products contributed to the alliance by Abbott.


Additional information
    about these matters is set forth below in this description of the Celera
    Diagnostics business.


Summary of Joint
        Venture Agreement


Celera Diagnostics was formed during our 2001 fiscal year as a
joint venture between Applied Biosystems and Celera Genomics. In connection with
the formation of Celera Diagnostics, Applied Biosystems contributed, among other
things, its then-existing molecular diagnostics business to Celera Diagnostics,
and Celera Genomics contributed, among other things, access to its genome databases.
Also, Celera Genomics agreed to fund all of the cash operating losses of Celera
Diagnostics up to a maximum of $300 million (initial losses), after
which, operating losses, if any, will be shared equally by Applied Biosystems
and Celera Genomics. Celera Diagnostics profits,
if any, will be shared in the ratio of 65 percent to Celera Genomics and 35 percent
to Applied Biosystems until such time as Celera Genomics is reimbursed for any
 excess funding of initial losses after consideration of tax reimbursements received
from
Applied Biosystems, which are described below. Once the excess funding
is reimbursed, profits and losses and cash flows would
be shared equally between Applied Biosystems and Celera Genomics. Applied Biosystems
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Celera Diagnostics capital expenditures and working
capital requirements equally. Applied Biosystems reimburses Celera Genomics for
all tax benefits generated by Celera Diagnostics to the extent such tax benefits are utilized
by Applied Biosystems. In the event of liquidation of the assets attributable
to Celera Diagnostics, including sale of these assets, the proceeds upon liquidation
would be distributed to Applied Biosystems and Celera Genomics based on a proportion
similar to their relative investment accounts. If the proceeds upon liquidation
are in excess of the groups combined investment accounts, the excess liquidation
proceeds would be shared in the ratio of 65 percent to Celera Genomics and 35
percent to Applied Biosystems until Celera Genomics has been reimbursed for its
excess funding of initial losses after consideration of tax reimbursements. Any additional
liquidation proceeds would be allocated equally to Celera Genomics and Applied
Biosystems.

Abbott
          Laboratories Strategic Alliance


In
      June 2002, Celera Diagnostics announced a long-term strategic alliance
      with Abbott Laboratories, one of the worlds largest diagnostics companies,
      to discover, develop and commercialize a broad range of in vitro diagnostic
      products for disease detection, prediction of disease predisposition, disease
      progression monitoring, and therapy selection. In vitro diagnostic
      products are diagnostic products that are used for testing outside of the
      living body. The agreement with Abbott is limited to diagnostic products
      that detect nucleic acids, for example DNA or RNA. Under the agreement,
      Abbott and Celera Diagnostics are obligated to work exclusively with each
      other in the commercialization of nucleic acid diagnostic products, except
      for specific products that the parties mutually agree to exclude from the
      alliance, if any. Development of diagnostic products based on the detection
      of proteins, rather than nucleic acids, is another potential business area
      for Celera Diagnostics but is not a part of the agreement with Abbott.


Under
      the Abbott Laboratories agreement, Celera Diagnostics and Abbott jointly
      fund their separate but coordinated research and development activities
      that are within the scope of the alliance. Generally, Abbott markets products
      developed and manufactured by the parties that are covered by the alliance.
      Celera Diagnostics believes that Abbotts expertise in the diagnostics
      industry and its global distribution system enhances Celera Diagnostics ability
      to bring products to market. Celera Diagnostics alliance with Abbott,
      including the economic arrangements, covers all nucleic acid diagnostic
      products marketed by Abbott, including any of those products manufactured
      by other companies.


Celera
      Diagnostics expects to rely substantially on its alliance with Abbott Laboratories
      for the success of its business strategy for the foreseeable future. Although
      this is a long-term alliance, the alliance agreement contains provisions
      that could result in early termination for reasons that include the following:
      breach by either company; a change in control of either company; either
      companys dissatisfaction with the performance of the alliance according
      to specific timelines for these judgments set forth in the alliance agreement;
      or by either company if the other party fails to meet performance criteria
      applicable to the other party set forth in the alliance agreement. Also,
      Celera Diagnostics cannot ensure that Abbott will perform its obligations
      as expected. If Abbott terminates the alliance or otherwise fails to conduct
      its collaborative activities in a timely manner, Celera Diagnostics development
      or commercialization of diagnostic products may be delayed or otherwise
      adversely affected. 43   Back to Contents


Information
      about the marketing and distribution aspects of this strategic alliance
      is described below in Item 1 of this report under the heading BusinessCelera
      Diagnostics, a 50/50 Joint Venture between Applied Biosystems and Celera
      GenomicsMarketing and Distribution.


Research
          and Development


During
      our 2002 fiscal year, Celera Diagnostics first full fiscal year of
      operations, Celera Diagnostics focused its activities on staffing and completing
      its high-volume discovery laboratories, and then began research and development
      for products that detect infectious diseases and human genetic disorders.
      Since then, Celera Diagnostics has substantially expanded its research
      and development efforts, and it is currently conducting several large scale
      disease studies, which are described below. In performing these studies,
      Celera Diagnostics is seeking to leverage its genotyping and gene expression
      capabilities with the SNP data from the Applera Genomics Initiative. SNPs,
      or single nucleotide polymorphisms, are naturally occurring genetic variations
      in the human genome. Scientists believe that some SNPs can be correlated
      with, for example, susceptibility to disease, disease prognosis, therapeutic
      efficacy, and therapeutic toxicity, and therefore may have diagnostic or
      therapeutic utility.


Pursuant
      to their strategic alliance, Celera Diagnostics and Abbott Laboratories
      maintain separate research and development organizations and each is pursuing
      the development of molecular diagnostic products to be manufactured and
      marketed by their alliance. However, they coordinate their ongoing research
      and development activities, which coordination includes the sharing of
      scientific results and collaboration regarding the technology and instrumentation
      that their alliance products will use. The alliance agreement with Abbott
      Laboratories permits Celera Diagnostics to form collaborations and relationships
      with other companies to support its research activities.


Research
      and development expenses for Celera Diagnostics totaled $49.0 million in
      our 2003 fiscal year, $43.8 million in our 2004 fiscal year, and $37.9
      million in our 2005 fiscal year. Applera expensed $381.3 million in our
      2003 fiscal year, $354.2 million in our 2004 fiscal year, and $330.7 million
      in our 2005 fiscal year for Applera research, development, and engineering
      activities.


Large
          Scale Studies


Celera
      Diagnostics is currently conducting large-scale gene-disease association
      studies in the following areas: Alzheimers disease; autoimmune and
      inflammatory diseases, including rheumatoid arthritis; breast cancer; cardiovascular,
      or heart, disease; liver disease; and diabetes. Most of these studies involve
      the analysis of large numbers of samples from healthy and diseased individuals,
      while a smaller number of these studies involve analysis of large numbers
      of samples from only diseased individuals. The
      goal of most of these studies is to identify SNPs that serve as genetic
      markers for a specific disease. In the breast cancer study, the goal is
      to identify gene expression patterns associated with breast cancer metastasis,
      which refers to the transmission of cancer cells from their original site
      to other sites within the body. A second aspect of the breast cancer study
      is to identify gene expression patterns that could predict a patients
      likelihood to respond to hormonal therapy of the cancer. In addition, Celera
      Diagnostics is conducting host response studies analyzing SNPs or gene
      expression patterns, or both, in cells from patients infected with the
      Hepatitis C virus and patients with heart disease. The goal of these studies
      is to identify genetic markers that will indicate an individuals
      likelihood of response to one or more forms of treatment.


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During our 2005 fiscal
      year, Celera Diagnostics continued to advance its large-scale studies.
      They are all ongoing and are at different stages of progression. A key
      aspect of Celera Diagnostics disease study program is to seek validation
      of results through replication by repeating its analysis on multiple populations
      of human tissue and blood samples after the initial analysis is completed.
      In several studies, Celera Diagnostics has replicated results for particular
      markers associated with increased risk for disease that it had previously
      identified. Celera Diagnostics, working in cooperation with Celera Genomics,
      is evaluating the diagnostic and therapeutic value of the novel markers
      and potential therapeutic targets found, and is discussing the findings
      with collaborators, preparing product plans, and making patent filings
  to seek legal protection for its rights in the new information it has discovered.


Further
      detail regarding important developments in several of Celera Diagnostics large
      scale studies is set forth below.


Cardiovascular
        Disease. In March 2005, Celera Diagnostics and
        its collaborators reported findings related to studies of cardiovascular
        disease. In a discovery and replicated study of SNPs that are associated
        with myocardial infarction, commonly known as heart attack, a variant
        in a gene that is a member of a family of targets for drug therapies
        was identified that conferred approximately twice the risk for myocardial
        infarction. These results broaden the understanding of the genetic risk
        for myocardial infarction, and may have implications for therapeutic
        development. Previously Celera Diagnostics had disclosed other key scientific
        findings. For example, between September 2003 and June 2004, Celera Diagnostics
        announced the discovery of, and publicly identified, a total of six genes
        that are markers associated with an increased risk for myocardial infarction.
        None of these genes were in previously recognized disease pathways associated
        with myocardial infarction.


Liver Disease.
      In April and May 2005, Celera Diagnostics reported that it found two SNPs
      associated with risk for Non-Alcoholic Steatohepatitis, or NASH, a common
      progressive liver disease that often leads to cirrhosis of the liver. Liver
      cirrhosis is a medical condition that refers to progressive liver damage
      which ultimately causes the liver to fail to function. Celera Diagnostics
      also found one of these SNPs to be associated with the progression of liver
      disease resulting from Hepatitis C virus infection. Celera Diagnostics
      is now seeking to determine if the other SNP and other genetic markers
      can be used as a predictor of the progression of liver disease resulting
      from causes other than NASH, such as Hepatitis C virus infection. Celera
      Diagnostics believes that this information may lead to new tests for detecting
      liver disease and determining the best treatment, which may help prevent
      irreversible liver damage, and may be used to enable more rapid demonstration
      of efficacy of new drug therapies for treatment of liver cirrhosis.


Alzheimers
        Disease.Some of Celera Diagnostics Alzheimers
        work has been funded pursuant to a collaboration with Merck & Co.,
        Inc. entered into in July 2004. Prior to entering into this collaboration,
        Celera Diagnostics had conducted its own gene-disease association study
        for this disease and had identified some SNPs associated with the disease,
        including two associated with late-onset Alzheimers disease that
        were reported by Celera Diagnostics during our 2005 fiscal year. The
        Merck collaboration was entered into for the purpose of identifying novel
        drug targets and diagnostic markers related to Alzheimers disease.
        Merck has the therapeutic rights to targets identified for the treatment
        of Alzheimers disease and some other neurological disorders, and Celera Diagnostics has the rights
    to all diagnostic applications for markers identified. During our 2005 fiscal
    year, Celera Diagnostics fulfilled its obligations pursuant to this collaboration
    and received all research milestone payments due from Merck.


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Celera Diagnostics review and analysis of the diagnostic potential of the
results of the completed research is ongoing. In July 2005, the two companies
extended this collaboration to study additional genes. Merck is obligated to
make additional research milestone payments to Celera Diagnostics in connection
with this additional work, which is being performed primarily for the purpose
of supporting Mercks therapeutic efforts.

Other Large Scale
        Studies.Celera Diagnostics has previously disclosed
        key scientific findings from some of its other large scale disease association
        studies. In November and December, 2003, at scientific meetings Celera
        Diagnostics and its collaborators presented selected results from three
        genomic studies, including preliminary findings regarding risk of distant
        metastasis in breast cancer and interferon responsiveness in hepatitis
        C patients. In June 2004, Celera Diagnostics reported discovery of a
        SNP in a gene that is a marker associated with an increased risk for
        rheumatoid arthritis and also reported its potential use as a new drug
        target.


Other
          Product Development Programs


In
      January 2005, Celera Diagnostics announced the initiation of two product
      development programs, independent of its large-scale disease association
      studies. One is for Fragile X, the leading cause of inherited mental retardation,
      and a second is for the detection and genotyping of the human papillomavirus,
      or HPV, which has been linked to the development of cervical cancer in
      women. In both of these programs, Celera Diagnostics is seeking to develop
      diagnostic tests, substantially based on publicly-available biological
      information, which are better than other commercially available tests.
      Celera Diagnostics is collaborating with several major clinical reference
      laboratories to develop testing procedures for Fragile X. In April2005,
      Celera Diagnostics disclosed the results of a study of a prototype assay
      for detection of high risk HPV strains that are associated with cervical
      cancer. The study demonstrated the potential of the Celera Diagnostics prototype
      assay to detect high risk HPV in samples that were inconclusive when typed
      by a commercially available HPV diagnostic test.


Collaborations
          and Other Relationships Supporting Research


Celera
      Diagnostics has entered into several research collaboration agreements
      to support its large-scale research programs, including agreements with
      Merck & Co., Inc. and General Electric Company. A research collaboration
      with Merck was entered into for the purpose of identifying and validating
      genetic markers useful in Celera Diagnostics development of diagnostic
      tests and Mercks development of therapeutics for selected cancers.
      Pursuant to this collaboration agreement, the parties have agreed to share
      data and other intellectual property for use in their separate research
      and development efforts. This collaboration is initially focused on breast
      cancer but may be expanded to other cancers by mutual consent. Celera Diagnostics
      has another research collaboration with Merck relating to Alzheimers
      disease, which is described above under the heading BusinessCelera
      Diagnostics, a 50/50 Joint Venture between Applied Biosystems and Celera
      GenomicsLarge Scale Studies.


The
      General Electric collaboration agreement was entered into for the purpose
      of accelerating the discovery and development of new products for personalized,
      or targeted, medicine. Pursuant this collaboration, the parties intend
      to seek an understanding of, and to differentiate, disease at the molecular
      level, which is expected to lead to new diagnostics and treatments that
      are tailored for a specific disease or patient population. In the first
      project under this collaboration, General Electric is pursuing the development
      of novel in vivo imaging agents targeted to cell surface proteins
      that Celera Genomics has identified to be associated with cancer.


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In vivo refers
    to testing performed in the living body, in contrast with in vitro,
    which refers to testing performed outside the living body. The companies
    had originally agreed to this project in 2004, but they amended the project
    in July 2005, and work was not commenced until after the amendment was entered
    into. Celera Diagnostics expects that any in vitro diagnostics derived
    from this collaboration would be commercialized, if at all, through Celera
    Diagnostics because these types of diagnostics are currently within Celera
Diagnostics field of business.

Also,
      Celera Diagnostics has entered into collaboration, research, and material
      transfer agreements with more than 30 other companies and academic institutions
      to support its large-scale gene-disease association and host response studies,
      including ongoing studies as well as studies Celera Diagnostics plans to
      conduct in the future. Through these relationships, Celera Diagnostics
      has gained access to over 70,000 samples from human subjects. Following
      is a description of these relationships that Celera Diagnostics has publicly
      announced:


| | • | an agreement with Bristol-Myers
        Squibb Company to study genes that may be useful in the diagnosis and
    treatment of heart disease and diabetes;                                                          
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                     
| | • | a research initiative
        with the University of California, San Francisco, Comprehensive Cancer
    Center to develop new diagnostic tools for breast cancer; and                                              
| |   |                                                                                                                                                                                                                     
| | • | an agreement with SeraCare
        Life Sciences, Inc., formerly Genomics Collaborative, Inc., to support
        Celera Diagnostics efforts to identify genetic patterns associated
    with rheumatoid arthritis.

Product Development
          Collaborations


If
      Celera Diagnostics gene-disease association studies are successful,
      Celera Diagnostics expects to develop and market reagents that detect the
      newly discovered genetic markers. Celera Diagnostics has entered into the
      following research collaborations to support its efforts to develop these
      products:


| | • | a collaboration with
        Quest Diagnostics Incorporated to establish the clinical utility of laboratory
        tests based on novel diagnostic markers for heart disease and diabetes;
    and                                     
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                         
| | • | a collaboration with
        Laboratory Corporation of America Holdings to establish the clinical
        utility of laboratory tests based on novel diagnostic markers for Alzheimers
    disease, breast cancer, and prostate cancer.

During
      our 2005 fiscal year, Celera Diagnostics began transferring information
      to Laboratory Corporation of America relating to breast cancer metastasis
      for analysis by Laboratory Corporation of America pursuant to the collaboration
      with them described above. Although not covered by the existing collaboration
      agreement, Celera Diagnostics has also transferred information to Laboratory
      Corporation of America relating to breast cancer patients responsiveness
      to hormonal therapy for analysis. Celera Diagnostics believes that multiple
      test procedures for predicting the risk of breast cancer metastasis and/or
      the likelihood of a patients response to hormonal therapy could result
      from this work.


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Celera Diagnostics Products


Celera
      Diagnostics plans to develop products that provide useful genetic information
      to facilitate disease detection, prediction of disease predisposition,
      monitoring of disease progression, and disease severity, and determination
      of patient responsiveness to treatments. These products are expected to
      include in vitro diagnostic test kits, which may be labeled for
      use in diagnosing specific diseases or other conditions, as well as products
      referred to as analyte specific reagents, which may be used
      by appropriately-licensed clinical laboratories for clinical laboratory
      testing after they independently establish the performance characteristics
      of the reagents but which may not be labeled by Celera Diagnostics for
      use in diagnosing any specific disease or condition.


While
      the sale of in vitro diagnostic test kits requires clearance or
      approval by the U.S. Food and Drug Administration, analyte specific reagents
      are a class of products defined by the agencys regulations which
      may be sold without any regulatory submission. However, analyte specific
      reagents must be manufactured and marketed in compliance with the requirements
      of the agencys Quality System Regulations, such as Good Manufacturing
      Practices, and must be sold in compliance with FDA regulations regarding
      their sale, distribution, and use. These FDA regulations are intended to
      ensure, among other things, that purchasers are aware that the utilities
      and performance characteristics of these products have not been established.
      Because analyte specific reagents are not subject to FDA clearance or approval,
      Celera Diagnostics believes they can generally be commercialized sooner
      than diagnostic test kits. However, the regulatory restrictions on the
      marketing, distribution, and sale of analyte specific reagents, and on
      its customers use of these products would likely affect their marketing
      and distribution and market acceptance.


Celera Diagnostics
      is currently manufacturing four products that are sold through its alliance
      with Abbott Laboratories, including its ViroSeq HIV-1 Genotyping
      System, a cystic fibrosis product, and two types of Hepatitis C virus analyte
      specific reagents. Celera Diagnostics also derives revenue from other products
      that it does not manufacture but which are sold through its alliance with
      Abbott, which is described above in Item 1 of this report
      under the heading BusinessCelera Diagnostics, a 50/50 Joint
      Venture between Applied Biosystems and Celera GenomicsAbbott Laboratories
      Strategic Alliance and below in Item 1 of this report under the heading BusinessCelera
      Diagnostics, a 50/50 Joint Venture between Applied Biosystems and Celera
      GenomicsMarketing and Distribution. These products are described
      below.


ViroSeq HIV-1
        Genotyping System.The genome of human immunodeficiency
        virus, commonly known as HIV, undergoes mutations in an infected patient,
        especially in response to anti-viral drug treatment. Some of the mutations
        have been shown to render the virus resistant to the action of some drugs,
        thereby diminishing the effectiveness of the treatment. Therefore, the
        detection of mutations in HIV that correlate with drug resistance provides
        useful information to physicians in monitoring the course of treatment
        and selecting the most effective regimen for each individual HIV-infected
        patient.


Celera Diagnostics ViroSeq
      HIV-1 Genotyping System was developed as an aid to physicians in monitoring
      and treating HIV-1 infection. HIV-1 is one of the most prevalent strains
      of HIV. This system is for use in testing human blood samples and was designed
      to detect specific mutations in the HIV-1 genome that correlate with drug
      resistance. The product includes reagents for identifying key mutations
      of the HIV-1 genome designed for use on an


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Applied Biosystems automated
    DNA sequencing instrument in conjunction with Celera DiagnosticsViroSeq® HIV-1
    Genotyping System Software. The ViroSeq HIV-1 Genotyping System can be used
    to test for resistance to up to 19 drugs used to treat HIV-1 infected patients,
    including the four drugs covered by the February 2004 FDA clearance described
in the following paragraph.

Through its alliance
      with Abbott Laboratories, Celera Diagnostics is marketing the system in
      the U.S. and the European Union. During our 2002 and 2003 fiscal years,
      Celera Diagnostics submitted three 510(k) filings to the FDA for the ViroSeq
      HIV-1 Genotyping System. A 510(k) filing is a pre-market notification to
      the FDA that Celera Diagnostics intends to market this product as an in
      vitrodiagnostic test kit. The product could not be marketed in the
      U.S. until the FDA provided clearance. During our 2003 fiscal year, the
      FDA granted marketing clearances for the system for use on the Applied
      Biosystems ABI PRISM® 377 DNA Sequencer, 3100 Genetic Analyzer,
      and 3700 DNA Analyzer. In February 2004, the FDA granted a clearance for
      expanded claims, clearing the use of the system on the 3100 Genetic Analyzer
      and the 3700 DNA Analyzer to test for resistance to four additional drugs
      used to treat HIV-1 infected patients. The model 377, 3100, and 3700 instruments
      are discussed above in Item 1 of this report under the heading BusinessApplied
      Biosystems Group BusinessProducts for the Genomics MarketGenetic
      Analysis Instruments; Genotyping and Resequencing Systems. During
      our 2004 fiscal year, Celera Diagnostics received its CE mark registration
      of the ViroSeq HIV-1 Genotyping System for use on the ABI PRISM 3100 Genetic
      Analyzer for marketing in the European Union. Additional information regarding
      the regulation of Celera Diagnostics products is set forth below
      in Item 1 of this report under the heading BusinessCelera Diagnostics,
      a 50/50 Joint Venture between Applied Biosystems and Celera GenomicsRegulation
      of Diagnostic Products.


Cystic Fibrosis
        Products.Cystic fibrosis is an inherited genetic disorder that affects
        children and young adults. It is caused by a number of mutations in the
        cystic fibrosis gene. The American College of Obstetricians and Gynecologists
        currently recommends that couples planning a pregnancy or seeking prenatal
        care be screened for cystic fibrosis gene mutations to help them make
        informed reproductive decisions. Celera Diagnostics manufactures analyte
        specific reagents that can be used by appropriately licensed clinical
        laboratories in the U.S. to identify mutations in the cystic fibrosis
        gene. Laboratories using the reagents for this purpose must first independently
        establish the performance characteristics of any test they develop using
        Celera Diagnostics analyte specific reagents. Until our 2005 fiscal
        year, these reagents were marketed primarily as analyte specific reagents
        in the U.S. However, in November 2004, Celera Diagnostics met the self-certifying
        requirements to CE mark its cystic fibrosis product for sales and marketing
        as a diagnostic kit in the European Union, and Celera Diagnostics then
        began marketing this diagnostic product in the EU. Additional information
        regarding the regulation of Celera Diagnostics products is set
        forth below in Item 1 of this report under the heading BusinessCelera
        Diagnostics, a 50/50 Joint Venture between Applied Biosystems and Celera
        GenomicsRegulation of Diagnostic Products.


Hepatitis C Virus
        Analyte Specific Reagents. Hepatitis C virus causes a chronic liver
        disease. Hepatitis C virus, or HCV, infection is currently the leading
        reason that patients need liver transplants. There are several distinct
        strains of HCV having different genotypes, and some of these genotypes
        are more susceptible to currently-available treatments than others. Celera
        Diagnostics manufactures two analyte specific reagent products for Abbott
        Laboratories for HCV. One of these products can be used to measure viral
        load, which refers to the quantity of the virus found in a tissue
        sample. The other product can be used to identify the genotypes of the


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different strains of the
    HCV. Only appropriately-licensed clinical laboratories can use these analyte
    specific reagents for these purposes after they independently establish the
performance characteristics
of any test they develop using Celera Diagnostics analyte specific reagents.
These reagents are marketed primarily in the U.S.

Abbott Products.Abbott
      Laboratories is currently marketing several other nucleic acid diagnostic
      products that are being manufactured by Abbott and other companies. Celera
      Diagnostics does not include these products in its product portfolio. However,
      because Celera Diagnostics alliance with Abbott covers all nucleic
      acid diagnostic products marketed by Abbott, including these products,
      Celera Diagnostics shares in the revenues generated through the sale of
      these products.


These other nucleic
      acid diagnostic products include HLA sequencing-based typing kits. Transplantation
      of tissues and organs between genetically-unrelated individuals usually
      results in rejection of the donor graft, or tissue, by the
      recipient. This rejection is due to differences in some genes between a
      donor and a recipient. These genes have been mapped to a region of the
      human genome known as HLA. Analysis of HLA genes to match donor-recipient
      pairs with minimal differences in these genes has greatly improved the
      success of transplantation. HLA-typing products detect specific DNA sequences
      in several HLA genes that are known to be involved in transplantation rejection,
      and thus provide useful information regarding the likelihood of transplant
      rejection by a recipient. Celera Diagnostics previously manufactured and
      marketed a research-use-only HLA-typing kit that was included within the
      Abbott alliance, but Celera Diagnostics discontinued this product as of
      the end of our 2005 fiscal year and Abbott has contributed
      a replacement HLA-typing product to the alliance, which is manufactured
      by another company partnered with Abbott. Additional products
      marketed by Abbott that are part of the alliance include another HLA-typing
      product which is CE-marked and is sold in the European Union, several other
      diagnostic products for the detection of viruses such as Hepatitis B virus
      and cytomegalovirus, and the viral load assays described in the following
      paragraph.


The products manufactured
      and marketed by Abbott for the alliance also include an HIV-1 assay
      and an HCV assay, both used for measuring viral load. These assays have
      been developed for use on the Abbott m2000 system, which is a real-time
      PCR instrument coupled with a sample preparation module. The HIV-1 assay
      received CE mark certification for use on the m2000 system in June 2005,
      and the HCV assay received CE mark certification for use on the m2000 system
      in July 2005, and Abbott has begun marketing these assays as diagnostic
      products in the EU. Currently, these products are expected to be the most
      significant products contributed to the alliance by Abbott. While these
      products did not contribute to Celera Diagnostics revenues in our
      2005 fiscal year, Celera Diagnostics expects that sales of these and possibly
      other products marketed by Abbott could contribute significant revenues
      to the alliance in the future, particularly if the products receive clearance
      or approval from the U.S. Food and Drug Administration. The HCV diagnostic
      product marketed by Abbott in the EU, described in this paragraph, is distinct
      from the HCV analyte specific reagents described above that are marketed
      by the alliance in the U.S.


Other Products and
        Services.In addition to the products described above, Celera Diagnostics
        performs contract manufacturing and technology development services in
        collaboration with appropriately licensed clinical laboratories. These
        services are for the development and manufacture of reagents for use
        by the clinical laboratories in the performance


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of clinical testing services.
    Some of these contract manufacturing and technology development services
fall outside of Celera Diagnostics alliance with Abbott Laboratories.

Licensing Programs.In
      June 2004, Celera Diagnostics announced, along with Applied Biosystems,
      a patent license agreement with Cepheid relating to real-time thermal cycler
      instruments for research, diagnostic, and other uses. The terms of the
      agreement require Cepheid to pay Applera a license fee of $11.5 million
      over a two year period, the majority of which relates to the diagnostic
      rights granted to Cepheid and, as applicable, have been or will be recorded
      by Celera Diagnostics. Also, under the terms of the agreement, Cepheid
      is obligated to pay ongoing royalties on sales of its products incorporating
      Applera intellectual property based on the field of use.


Regulation of
          Diagnostic Products


In the U.S. and in
      other countries, diagnostic products are heavily regulated by governmental
      agencies. These requirements vary from country to country. Currently, Celera
      Diagnostics principal markets are the U.S. and the European Union,
      and the regulatory requirements in those jurisdictions are described below.


In the U.S., the Food
      and Drug Administration classifies Celera Diagnostics in vitro diagnostic
      products as devices and the FDAs Center for Devices and
      Radiological Health regulates these products. Although some of the products
      that Celera Diagnostics expects to market may not require regulatory clearance
      or approval, its current business strategy is to develop and market a number
      of products that will be devices and require this clearance
      or approval. For Celera Diagnostics to market its in vitro diagnostic
      products with clinical claims in the U.S., Celera Diagnostics or its collaborators
      generally must first obtain clearance from the FDA pursuant to a process
      known as 510(k) premarket notification, or must obtain FDA approval through
      a more demanding premarket approval, or PMA, process.


In order to obtain
      a 510(k) premarketing clearance, which refers to Section 510(k) of the
      Federal Food, Drug and Cosmetic Act, or FFDCA, Celera Diagnostics or its
      collaborators generally must file a notice with the FDA with clinical data
      demonstrating that the device subject to the notification and its intended
      purpose are substantially equivalent to a diagnostic device
      that is already cleared or approved for marketing by the FDA. The 510(k)
      clearance process usually takes from three to twelve months, but can take
      longer. For example, the FDA may require further information, including
      additional clinical data, to make a determination regarding substantial
      equivalence to a legally marketed device. Celera Diagnostics has
      successfully applied for and received 510(k) clearances for its ViroSeq
      HIV-1 Genotyping System, and a description of the clearances it has received
      is set forth above in Item 1 of this report under the heading BusinessCelera
      Diagnostics, a 50/50 Joint Venture between Applied Biosystems and Celera
      GenomicsCelera Diagnostics Products. From time to time,
      we may publicly refer to special 510(k) clearances from the
      FDA. A special 510(k) clearance is an alternative to the traditional 510(k)
      method of premarket notification. It is the least burdensome mechanism
      for reporting significant modifications to a previously cleared diagnostic
      device and can be used when the modifications do not change the intended
      use of the previously cleared diagnostic device.


If the substantially
      equivalent standard is not met for a 510(k) premarketing clearance,
      a PMA application must be filed pursuant to the FFDCA. The PMA process
      is much more


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demanding than the 510(k)
    premarket notification process. A PMA application, which is intended to demonstrate
    that a device is safe and effective, must be supported by more extensive
    information than required for a 510(k) notification. The PMA application
    process is more costly, lengthy, and uncertain and usually takes one to three
years, but can take longer.

Following FDA clearance
      or approval of a device allowing its commercial distribution, numerous
      regulatory requirements apply, including: the Quality System Regulations,
      which require manufacturers to follow elaborate design, testing, control,
      documentation, and other quality assurance procedures during the manufacturing
      process; labeling regulations; and the Medical Device Reporting regulation,
      which requires that the manufacturers report to the FDA if their device
      may have caused or contributed to a death or serious injury or malfunctioned
      in a way that would likely cause or contribute to a death or serious injury
      if it were to reoccur.


Failure to comply with
      the applicable U.S. regulatory requirements for in vitro diagnostic
      products could result in, among other things, warning letters, fines, injunctions,
      civil penalties, recalls, or seizure of products, total or partial suspension
      of production, the FDAs refusal to grant future premarket clearances
      or approvals, withdrawals of current product applications, and criminal
      prosecution.


In addition, distribution
      and sale of all diagnostic products in the European Union are subject to
      regulatory requirements that became effective on December 7, 2003. Pursuant
      to these requirements, Celera Diagnostics in vitro diagnostic
      products exported to the EU must comply with the In Vitro Diagnostics
      Directive and bear the CE mark. The Directive describes
      criteria that must be met and steps that must be taken for in vitro diagnostic
      products to be qualified for sale in EU countries. The CE mark is a symbol
      indicating that products conform to the essential requirements of the Directive,
      and can be commercially distributed throughout the EU. In order to demonstrate
      compliance, for some products Celera Diagnostics is required to self-certify
      that the products to be marketed meet all of the applicable essential requirements,
      and for other products Celera Diagnostics is required to obtain a CE mark
      registration from a certification organization, referred to as a Notified
      Body, by providing documented evidence that the products to be marketed
      meet all of the applicable essential requirements. Once Celera Diagnostics
      has satisfied the compliance requirements, the CE mark may be affixed on
      the products concerned. However, in order to maintain use of the CE mark
      for some products, Celera Diagnostics will be subject to continuing review
      by the Notified Body, if applicable. During our 2004 fiscal year, Celera
      Diagnostics received CE mark registration from a Notified Body for its
      ViroSeq HIV-1 Genotyping System for use on the ABI PRISM 3100 Genetic Analyzer.
      During our 2005 fiscal year, Celera Diagnostics met the self-certifying
      requirements to CE mark its cystic fibrosis product. Celera Diagnostics
      is in the process of completing, or intends to prepare, required documentation
      for CE marking for some of its other products. However, Celera Diagnostics
      cannot assure that the CE mark registration will be granted for Celera
      Diagnostics other products or that it will maintain its compliance
      with these requirements. Celera Diagnostics failure
      to meet these requirements may prevent it from generating revenue from
      the sale of diagnostic products in the EU.


Marketing and
          Distribution


Celera Diagnostics
      expects that reference laboratories, hospitals, and medical clinics that
      perform diagnostic testing will be the primary users of its products. Celera
      Diagnostics does not expect to develop its own marketing and distribution
      organization for the foreseeable future. Under the terms of its strategic
      alliance with Abbott Laboratories, Abbott will serve as Celera


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Diagnostics exclusive
      worldwidedistributor of nucleic acid-based diagnostic products
      developed under the agreement. The Abbott alliance agreement is discussed
      above in Item 1 of this report under
      the heading BusinessCelera
      Diagnostics, a 50/50 Joint Venture between Applied Biosystems and Celera
      GenomicsAbbott Laboratories Strategic Alliance.

Pursuant to the Abbott
      Laboratories strategic alliance, on October 1, 2002, Abbott commenced the
      marketing, distribution, and end-user sale of most existing Celera Diagnostic
      products. Celera Diagnostics expects that most of its nucleic acid testing
      products for the foreseeable future will be covered by the Abbott agreement
      so long as it remains in effect and will be marketed, distributed, and
      sold through Abbott. However, Celera Diagnostics may develop products not
      covered by the agreement, in which case Celera Diagnostics would have to
      develop its own marketing and distribution capability or find other distributors
      for these products.


Raw Materials


Celera Diagnostics operations
      require a variety of raw materials, such as chemical and biochemical materials,
      and other supplies, some of which are occasionally found to be in short
      supply. Any interruption in the availability of these materials could adversely
      affect Celera Diagnostics operations.


In particular, Celera
      Diagnostics needs access to human tissue and blood samples from diseased
      and healthy individuals, other biological materials, and related clinical
      and other information, which may be in limited supply. Celera Diagnostics
      may not be able to obtain or maintain access to these materials and information
      on acceptable terms, or may not be able to obtain needed consents from
      individuals providing tissue or blood samples. In addition, government
      regulation in the U.S. and foreign countries could result in restricted
      access to, or use of, human tissue or blood samples. If Celera Diagnostics
      loses access to sufficient numbers or sources of tissue or blood samples,
      or if tighter restrictions are imposed on its use of the information generated
      from tissue or blood samples, its business may be harmed.


Patents, Licenses,
          Franchises, and other Intellectual Property


Through its internal
      research programs and collaborative programs, including its use of the
      information derived from the Applera Genomics Initiative, Celera Diagnostics
      anticipates that it will develop an increasing portfolio of intellectual
      property. Celera Diagnostics may use such intellectual property in its
      internal development programs or may license it to third party collaborators,
      customers, or others for some combination of license fees, milestone payments,
      and royalty payments. In addition, Celera Diagnostics alliance with
      Abbott Laboratories provides Celera Diagnostics with rights to some intellectual
      property owned or licensed by Abbott that Celera Diagnostics
      needs for its business and products.


Celera Diagnostics ability
      to compete and to achieve and maintain profitability depends, in part,
      on its ability to protect its proprietary discoveries and technologies
      through obtaining and enforcing patent rights, maintaining its trade secrets,
      and operating without infringing the intellectual property rights of others.
      Celera Diagnostics products are based on complex, rapidly developing
      technologies. Some of these technologies are covered by patents owned by
      Applied Biosystems and Celera Genomics, and other patents are owned by
      third parties and used by Celera Diagnostics under license. Celera Diagnostics ability
      to obtain patent protection for the inventions it makes is uncertain. Celera
      Diagnostics may infringe the intellectual property rights


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of third parties, and
      may become involved in expensive intellectual property legal proceedings
      to determine the scope and validity of its patent rights with respect to
      third parties. To avoid infringing the intellectual property rights of others,
      Celera Diagnostics may need to obtain intellectual property licenses from
  them, but Celera Diagnostics may not be able to obtain theselicenses
  on commercially acceptable terms, or at all. More information about the risk
  factors associated with Celera Diagnostics reliance on intellectual property
  is set forth below in Item 5 of Part II of this report under the heading Market
  for Registrants Common Equity, Related Stockholder Matters and Issuer
  Purchases of Equity SecuritiesForward-Looking Statements and Risk FactorsFactors
  Relating to Celera Diagnostics, a 50/50 Joint Venture between Applied Biosystems
and Celera Genomics.

Celera Diagnostics has filed for patent protection in the U.S. and in some foreign
countries for inventions relating to its diagnostic discoveries, and Celera Diagnostics
expects to continue seeking patent protection for its diagnostic inventions.
Celera Diagnostics failure to receive patent protection for its diagnostic
inventions could adversely affect the commercial value of these discoveries and
could adversely affect its business.


Competition


The diagnostics industry
    in which Celera Diagnostics operates is competitive and evolving. There is
    intense competition among healthcare, biotechnology, and diagnostic companies
    attempting to discover candidates for potential new diagnostic products.
  These companies may:


| | • | develop new diagnostic
    products in advance of Celera Diagnostics or its collaborators;                                                                                                                                                                                                        
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                   
| | • | develop diagnostic
        products which are more effective or more cost-effective than those developed
    by Celera Diagnostics or its collaborators;                                                                                                                                          
| |   |                                                                                                                                                                                                                                                                                                   
| | • | obtain regulatory clearance
        or approval of their diagnostic products more rapidly than Celera Diagnostics
        or its collaborators; or                                                                                                                                                
| |   |                                                                                                                                                                                                                                                                                                   
| | • | obtain patent protection
        or other intellectual property rights that would limit Celera Diagnostics or
        its collaborators ability to develop and commercialize, or their
        customers ability to use, Celera Diagnostics or its collaborators diagnostic
        products.

Celera Diagnostics competes
    with companies in the U.S. and abroad that are engaged in the development
    and commercialization of products and services that provide genetic information.
    These companies may develop products that are competitive with the products
    offered by Celera Diagnostics or its collaborators, such as analyte specific
    reagents or diagnostic test kits that perform the same or similar purposes
    as Celera Diagnostics or its collaborators products. Also, clinical
    laboratories may offer testing services that are competitive with the products
    sold by Celera Diagnostics or its collaborators. For example, a clinical
    laboratory can use either reagents purchased from manufacturers other than
    Celera Diagnostics, or use its own internally developed reagents, to make
    diagnostic tests. If clinical laboratories make tests in this manner for
    a particular disease, they could offer testing services for that disease
    as an alternative to products sold by Celera Diagnostics used to test for
    the same disease. The testing services offered by clinical laboratories may
    be easier to develop and market than test kits developed by


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Celera Diagnostics
      or its collaborators because the testing services are not subject to the
      same clinical validation requirements that are applicable to FDA-cleared
      or approved diagnostic test kits. The diagnostic testing services market
      is dominated by a small number of large clinical testing laboratories, including Laboratory Corporation of America Holdings, Quest Diagnostics Inc., and Specialty Laboratories, Inc.

Also, a substantial portion of all sales of diagnostic products are made to a
small number of clinical reference laboratories, including those identified above,
and therefore Celera Diagnostics expects to rely on these laboratories for a
substantial portion of its sales. Celera Diagnostics inability to establish
or maintain one or more of these laboratories as a customer could adversely affect
its business, financial condition, and operating results.


Environmental Matters


Celera Diagnostics is subject to federal, state, and local laws and regulations
regulating the discharge of materials into the environment, or otherwise relating
to the protection of the environment, in those jurisdictions where Celera Diagnostics
operates or maintains facilities. Celera Diagnostics does not believe that any
liability arising under, or compliance with, environmental laws or regulations
will have a material effect on its business, and no material capital expenditures
are expected for environmental control.


Applera Genomics Initiative

In
      July 2001, we announced a collaboration among Celera Genomics, Applied
      Biosystems, and Celera Diagnostics for commercializing products derived
      from information obtained through analysis of variations in the human genome.
      This collaboration, which we refer to as the Applera Genomics Initiative, was
      commenced primarily to develop a portfolio of validated SNPs to be used
      as the basis for these products. The Applera Genomics Initiative was completed
      during our 2003 fiscal year and was jointly funded by all three business
      segments.


Pursuant to the Applera
    Genomics Initiative, Celera Genomics prioritized and resequenced approximately
    25,000 genes from 39 individuals and a chimpanzee. From this resequencing,
    Celera Genomics identified over 294,000 SNPs in genes, of which we believe
    approximately 75% are novel SNPs not previously identified by other researchers.
    Based on our analysis of the location of these SNPs on the human genome,
    we believe that over 45,000 of the novel SNPs could affect the amount, stability,
    or function of proteins. SNPs that have these properties are referred to
    as functional SNPs and may have the greatest biological and medical
    value. The Applera Genomics Initiative also included Applied Biosystems SNP
    validation studies. SNP validation was performed to confirm that publicly
    available SNPs are true genetic variations rather than sequencing errors,
    and to determine the frequency of SNPs across multiple racial and ethnic
    populations to confirm their utility in life science research.


We believe the SNP information
    that we have generated through the Applera Genomics Initiative is an important
    asset for all three of our business segments. Applied Biosystems is incorporating
    the SNP data into new SNP assay products for the research market. Celera
    Diagnostics is using this information in disease association studies aimed
    at identifying new diagnostic markers. Celera Genomics is using the SNP information
    in its proteomics discovery efforts and may also benefit from therapeutic
    implications of findings from the disease association studies.


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Employees

As of the end of our 2005 fiscal year, we had approximately 4,930 employees allocated
as follows:


|Business/Function  |  | Number
|------------------ |  | ------
|                   |  |       
|Applied Biosystems |  | 4,030 
|Celera Genomics    |  | 480   
|Celera Diagnostics |  | 210   
|Corporate Staff    |  | 210   

In June 2005, Applied Biosystems announced a reduction and rebalancing of its
workforce. Applied Biosystems terminated about 250 positions, primarily in research
and development, marketing, and operations. The number of Applied Biosystems
employees in the table above excludes employees who, as a result of this action,
were terminated or who were employed but not actively working for us as of the
end of our 2005 fiscal year. Approximately 50 additional individuals, included
in the table above, are affected by this action and their employment is expected
to terminate by the end of the first quarter of our 2006 fiscal year.


Our corporate staff provides
    accounting, tax, treasury, legal, information technology, human resources,
    and other shared internal services for Applied Biosystems, Celera Genomics,
    and Celera Diagnostics. None of Applied Biosystems U.S. employees,
    and none of Celera Genomics or Celera Diagnostics employees or
    our corporate staff employees, are subject to collective bargaining agreements.
    We generally consider our relations with our employees to be good.


Financial Information About Industry Segments

A summary of net revenues from external customers and operating income (loss) attributable to each of our industry segments for our fiscal years ended June 30, 2003, 2004 and 2005, is incorporated herein by reference to Note 14 on pages 78 through 90 of our 2005 Annual Report. Total assets as of June 30, 2003, 2004 and 2005 were as follows:


| | • | June 30, 2003: $2,126.7
        million for Applied Biosystems, $1,122.1 million for Celera Genomics,
        $35.9 million for Celera Diagnostics, and $3,257.5 million for Applera
        after the effects of ($27.2) million related to intercompany eliminations;                 
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                         
| | • | June 30, 2004, were
        $1,947.8 million for Applied Biosystems, $1,017.7 million for Celera
        Genomics, $36.9 million for Celera Diagnostics, and $2,972.9 million
        for Applera after the effects of ($29.5) million related to intercompany
        eliminations; and
| |   |                                                                                                                                                                                                                                                                                         
| | • | June 30, 2005, were
        $2,290.1 million for Applied Biosystems, $869.2 million for Celera Genomics,
        $37.1 million for Celera Diagnostics, and $3,164.2 million for Applera
        after the effects of ($32.2) million related to intercompany eliminations.              
| |   |                                                                                                                                                                                                                                                                                         

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Financial Information About Geographic Areas

A summary of net revenues from external customers and long-lived assets attributed
to each of our geographic areas for our 2003, 2004, and 2005 fiscal years is
incorporated herein by reference to Note 14 on pages 78 through 90 of our 2005
Annual Report.


Our consolidated net revenues from external customers in countries other than
the U.S. for our 2002, 2003, and 2004 fiscal years were as follows:


| | • | $891.3 million, or
        50.2% of our consolidated net revenues, for our 2003 fiscal year;    
| | - | ------------------------------------------------------------------------------------------------
| |   |                                                                                                 
| | • | $956.7 million, or
        52.4% of our consolidated net revenues, for our 2004 fiscal year; and
| |   |                                                                                                 
| | • | $1,020.4 million, or
        55.3% of our consolidated net revenues, for our 2005 fiscal year;  

Our manufacturing facilities
    outside the continental U.S. are located in the United Kingdom, Japan, and
  Singapore.


Executive Officers of the Registrant

Information concerning our executive officers is incorporated by reference to
the description in Part III, Item 10 of this report under the	heading Directors
and Executive Officers of the RegistrantIdentification and Business Experience
of Executive Officers on	pages 104 and 105 of
 	this report.


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|Item
    2. | Properties
|----------- | ----------

Applied Biosystems
        Group Facilities

Applied Biosystems headquarters
      are located in leased and owned facilities in Foster City, California.
      Applied Biosystems owns or leases various other facilities worldwide for
      manufacturing, distribution, warehousing, research and development, sales
      and demonstration, service, and administration. The following is a list
      of Applied Biosystems principal and other material operating facilities.
      Except as otherwise noted below, substantially all of the space in these
      facilities is used by Applied Biosystems,and these facilities are
      maintained in good working order.


|Location (Approximate
          Floor Area in Sq. Ft.)      |  | Owned or Leased
          (Expiration Date of Leases)
|----------------------------------------------------------- |  | -----------------------------------------------------
|                                                            |  |                                                      
|Foster City, CA (320,000)  several
        buildings       |  | Leased (several
        leases expiring 2006-2015)   
|Foster City, CA (280,000)  several
        buildings       |  | Owned                                                
|Pleasanton, CA (149,000)  three
        buildings          |  | Owned                                                
|Framingham, MA (140,000)  two
        buildings            |  | Leased (2009)                                        
|Warrington, United
        Kingdom (88,000)  two buildings |  | Owned                                                
|Hayward, CA (66,000)                                        |  | Leased (2009)                                        
|Rotterdam, Netherlands
        (64,000)                     |  | Leased (2010)                                        
|Bedford, MA (59,000)  two
        buildings                |  | Leased (two
        leases expiring 2010 and 2023)   
|Singapore (45,000)                                          |  | Leased (two
        leases expiring 2005 and 2006)   
|Rockville, MD (34,000)                                      |  | Leased (2010)                                        
|Narita, Japan (24,000)                                      |  | Owned                                                

The Pleasanton, California
    facilities listed in the table above are located on an 80-acre property owned
    by Applied Biosystems. The listed facilities include a manufacturing facility
    constructed by Applied Biosystems, as well as two warehouses that Applied
    Biosystems acquired with the property and which it intends use to support
    further construction on the site, if any. Applied Biosystems has also completed
    construction of the shell of another building at the same site comprised
    of approximately 164,000 square feet. Applied Biosystems intends to construct
    improvements needed for occupancy in this other building as additional space
    is needed for its operations or possibly the operations of our other businesses.
    Applied Biosystems may construct additional research and development, manufacturing,
    administrative, or other facilities at this property, up to a maximum of
    approximately 700,000 additional square feet, as may be required for the
    future growth of our businesses.


Applied Biosystems also
    owns or leases several other facilities that have been vacated by Applied
    Biosystems, which are not reflected in the table above. Applied Biosystems
    is seeking to sublease several of these leased facilities. Also, in August
    2005 Applied Biosystems vacated an 81,000 square foot owned facility in San
    Jose, California, and Applied Biosystems is seeking to sell this facility.
    Applied Biosystems also owns approximately 15 acres of undeveloped land in
    Vacaville, California, which it is seeking to sell. In June 2005, Applied
    Biosystems transferred the lease of a Houston, Texas, facility with approximately
    50,000 square feet of space to another company in connection with the sale
    of related assets to that company.


Celera Genomics Group Facilities

Celera Genomics business is primarily located in leased facilities in Rockville,
Maryland, and leased and owned facilities in South San Francisco, California.
The Rockville facilities are used for administrative purposes and to house Celera
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center and proteomics
    operations. The South San Francisco facilities contain Celera Genomics therapeutic
    discovery and development operations and administrative offices. The following
    is a list of Celera Genomics principal and other material operating
    facilities. Except as otherwise noted below, substantially all of the space
    in these facilities is used by Celera Genomics, and these facilities are
    maintained in good working order.

| | Location                                |  | Owned or Leased                
| | --------------------------------------- |  | -------------------------------
| | (Approximate Floor
    Area in Sq. ft.) |  | (Expiration Date
    of Leases)
| |                                         |  |                                
| | Rockville, MD (75,000)                  |  | Leased (2010)                  
| | South San Francisco,
       CA (70,000) |  | Leased (2006)                  
| | South San Francisco,
       CA (44,000) |  | Owned                          
| | South San Francisco,
       CA (14,000) |  | Leased (2006)                  
| | South San Francisco,
       CA (24,000) |  | Leased (2006)                  

Celera Genomics previously
    owned a facility in Rockville, Maryland, that included the leased building
    described above, a second building, and undeveloped land. In April 2005,
    Celera Genomics sold this facility and leased back the building described
    above. This building includes approximately 34,000 square feet of space,
    in addition to the space listed in the table above, which is occupied by
    Applied Biosystems. Celera Genomics is also temporarily leasing a portion
    of the second previously-owned building to facilitate the transition of its
    data center and other related assets out of the building. This transition
    is expected to be completed by the end of 2005.


Celera Genomics also leases
    an 85,000 square foot facility in Pasadena, California. Celera Genomics has
    vacated most of the space in this facility and more than half of the vacatedspace
    has been subleased. Celera Genomics is seeking to sublease the remaining
    vacated space until
the expiration of the lease in 2011.


The owned facility in
    South San Francisco, California, is located on land we lease under a long-term
    ground lease.


Celera Diagnostics
      Facilities

We have leased the following three facilities to serve as the principal facilities
for Celera Diagnostics, which Celera Diagnostics is using as its headquarters
as well as for research and development, manufacturing, and administrative purposes.
These facilities are maintained in good working order.


| | Location                                      |  | Owned or Leased                      
| | --------------------------------------------- |  | -------------------------------------
| | (Approximate Floor
          Area in Sq. ft.) |  | (Expiration Date
          of Leases)
| |                                               |  |                                      
| | Alameda, CA (48,000)                          |  | Leased (2011)                        
| | Alameda, CA (19,000)                          |  | Leased (2011)                        
| | Alameda, CA (8,000)                           |  | Leased (2006)                        

Celera Diagnostics is
    using all of the space in the first facility listed above. Celera Diagnostics
    is using all of the space in the second facility listed above, but the building
    containing this facility includes approximately 9,000 additional square feet
    of vacant space, not reflected in the table above, that Celera Diagnostics
    leases and intends to build out and use by the end of 2005.


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Corporate Facilities

Our
      corporate headquarters is located in a facility in Norwalk, Connecticut,
      under a lease that expires in 2011. We lease approximately 51,000 square
      feet at this facility, substantially all of which we use for corporate
      staff and related support functions. This facility is maintained in good
      working order.


We also own another
      facility in Norwalk and Wilton, Connecticut, with an area of approximately
      402,000 square feet. This facility was previously used for our corporate
      headquarters and manufacturing, but is currently vacant. We have contracted
      to sell this facility, and expect the sale to close no later than March
      2006.


|Item
    3. | Legal Proceedings
|----------- | -----------------

We are involved in various lawsuits, arbitrations, investigations, and other legal actions from time to time with both private parties and governmental entities. These legal actions currently involve, for example, commercial, intellectual property, antitrust, environmental, securities, and employment matters. The following is a description of some claims we are currently defending, including some counterclaims brought against us in response to claims filed by us against third parties. We believe that we have meritorious defenses against the claims currently asserted against us, including those described below, and intend to defend them vigorously. However, the outcome of legal actions is inherently uncertain, and we cannot be sure that we will prevail in our defense of claims currently asserted against us. An adverse determination in the cases we are currently defending, particularly the claims against us described
      below under the heading Commercial Litigation, could
      have a material adverse effect on us, Applied Biosystems, Celera Genomics,
  or Celera Diagnostics.


Commercial Litigation

Our
    company and some of our officers are defendants in a lawsuit brought on behalf
    of purchasers of Applera-Celera Genomics stock in our follow-on public offering
    of Applera-Celera Genomics stock completed on March 6, 2000. In the offering,
    we sold an aggregate of approximately 4.4 million shares of Applera-Celera
    Genomics stock at a public offering price of $225 per share. The lawsuit,
    which was commenced with the filing of several complaints in April and May
    2000, is pending in the U.S. District Court for the District of Connecticut,
    and an amended consolidated complaint was filed on August 21, 2001. The consolidated
    complaint generally alleges that the prospectus used in connection with the
    offering was inaccurate or misleading because it failed to adequately disclose
    the alleged opposition of the Human Genome Project and two of its supporters,
    the governments of the U.S. and the U.K., to providing patent protection
    to our genomic-based products. Although Celera Genomics has never sought,
    or intended to seek, a patent on the basic human genome sequence data, the
    complaint also alleges that we did not adequately disclose the risk that
    Celera Genomics would not be able to patent this data. The consolidated complaint
    seeks monetary damages, rescission, costs and expenses, and other relief
    as the court deems proper. On March 31, 2005, the Court certified the case
as a class action.


We are involved in several
      litigation matters with MJ Research, Inc. (acquired by Bio-Rad Laboratories,
      Inc. since the commencement of litigation), which commenced
with our filing


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claims against MJ Research on June 24, 1998, in the U.S. District
    Court for the District of Connecticut based on its alleged infringement of
    some polymerase chain reaction, or PCR, patents. In response to our claims,
    MJ Research filed counterclaims including, among others, allegations that
    we have licensed and enforced these patents through anticompetitive conduct
    in violation of federal and state antitrust laws, that some of our patents
    are unenforceable because of patent misuse, and that some of our patents
    are invalid and unenforceable because of inequitable conduct. MJ Research
    is seeking injunctive relief, monetary damages, costs and expenses, and other
    relief. These matters were adjudicated in part through a jury trial, which
    resulted in a verdict in our favor rendered in April 2004, and the remaining
    issues were resolved through a series of summary judgments granted by the
    District Court in several rulings issued in our favor between December 2004
    and April 2005. As a result, MJ Researchs counterclaims were rejected
    and MJ Research has been held liable to us and Roche Molecular Systems, also
    a party to the litigation, for infringement of U.S. Patent Nos. 4,683,195,
    4,683,202 and 4,965,188 (each relates to PCR process technology) and U.S.
    Patent Nos. 5,656,493, 5,333,675 and 5,475,610 (each relates to thermal cycler
    instrument technology). Further, the infringement of the195,202,188
    and493
    patents was held to be willful. As a result of these decisions in our favor,
    in April 2005, the District Court awarded us and Roche Molecular Systems
    damages of $35.4 million plus reasonable attorneys fees, an enhancement
    of the original damages award granted by the jury in the amount of $19.8
  million. MJ Research has filed a notice of appeal. Additionally,
  on August 30, 2005, the Court issued an order enjoining MJ Research from infringing
  U.S. Patent Nos. 5,333,675, 5,656,493 and 5,475,610.

Subsequent to the filing of our claims against MJ Research which are described in the preceding paragraph, on September 21, 2000, MJ Research filed an action against us in the U.S. District Court for the District of Columbia. This complaint is based on the allegation that the patents underlying our DNA sequencing instruments were improperly obtained because one of the alleged inventors, whose work was funded in part by the U.S. government, was knowinglyomitted
      from the patent applications. Our patents at issue are U.S. Patent Nos.
      5,171,534, entitled Automated DNA Sequencing Technique, 5,821,058,
      entitled Automated DNA Sequencing Technique, 6,200,748, entitled Tagged
      Extendable Primers and Extension Products, and 4,811,218, entitled Real
      Time Scanning Electrophoresis Apparatus for DNA Sequencing. The complaint
      asserts violations of the federal False Claims Act and the federal Bayh
      Dole Act, invalidity and unenforceability of the patents at issue, patent
      infringement, and various other civil claims against us. MJ Research is
      seeking monetary damages, costs and expenses, injunctive relief, transfer
      of ownership of the patents in dispute, and other relief as the court deems
      proper. MJ Research claims to be suing in the name of the U.S. government
      although the government has to date declined to participate in the suit.
      On October 9, 2003, the case against us was dismissed but MJ Research has
filed an appeal.


Promega Corporation
      filed a patent infringement action against Lifecodes Corporation, Cellmark
      Diagnostics, Genomics International Corporation, and us in the U.S. District
      Court for the Western District of Wisconsin on April 24, 2001. The complaint
      alleges that the defendants are infringing Promegas U.S. Patent Nos.
      6,221,598 and 5,843,660, both entitled Multiplex Amplification of
      Short Tandem Repeat Loci, due to the defendants sale of forensic
      identification and paternity testing kits. Promega is seeking monetary
      damages, costs and expenses, injunctive relief, and other relief as the
      court deems proper. The defendants answered the complaint on July 9, 2001,
      and we asserted counterclaims alleging that Promega is infringing our U.S.
      Patent No. 6,200,748, entitled Tagged Extendable Primers and Extension
      Products, due to Promegas sale of forensic identification and
  paternity testing kits. As a result of


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settlement negotiations,
      the case was dismissed without prejudice on October 29, 2002, but could
      be re-filed
    against us if settlement negotiations are not successful.

Beckman Coulter, Inc.
      filed a patent infringement action against us in the U.S. District Court
      for the Central District of California on July 3, 2002. The complaint alleges
      that we are infringing Beckman Coulters U.S. Patent Nos. RE 37,606
      and 5,421,980, both entitled Capillary Electrophoresis Using Replaceable
      Gels, and U.S. Patent No. 5,552,580, entitled Heated Cover
      Device. The allegedly infringing products are Applied Biosystems capillary
      electrophoresis sequencing and genetic analysis instruments, and PCR and
      real-time PCR systems. Since Beckman Coulter filed this claim, U.S. Patent
      No. 5,421,980 has been reissued as U.S. Patent No. RE 37,941, entitled Capillary
      Electrophoresis Using Replaceable Gels. On January 13, 2003, the
      court permitted Beckman Coulter to make a corresponding amendment to its
      complaint. Beckman Coulter is seeking monetary damages, costs and expenses,
      injunctive relief, and other relief as the court deems proper. On February
      10, 2003, we filed our answer to Beckman Coulter's allegations, and counterclaimed
      for declaratory relief that the Beckman Coulter patents underlying Beckman
      Coulters claim are invalid, unenforceable, and not infringed. We
      are seeking dismissal of Beckman Coulters complaint, costs and expenses,
      declaratory and injunctive relief, and other relief as the court deems
  proper.


Genetic
    Technologies Limited filed a patent infringement action against us in the
    U.S. District Court for the Northern District of California on March 26,
    2003. They filed an amended complaint against us on August 12, 2003. The
    amended complaint alleges that we are infringing U.S. Patent No. 5,612,179,
    entitled Intron Sequence Analysis Method for Detection of Adjacent
    and Remote Locus Alleles as Haplotypes, and U.S. Patent No. 5,851,762,
    entitled Genomic Mapping Method by Direct Haplotyping Using Intron
    Sequence Analysis. The allegedly infringing products are cystic fibrosis
    reagent kits, TaqMan® genotyping and gene expression assay
    products for non-coding regions, TaqMan genotyping and gene expression assay
    services for non-coding regions, AmpFLSTR® kits, the SNPlex Genotyping
System, the SNPbrowser tool,
and the Celera Discovery System.
The complaint also alleges that haplotyping analysis performed by our businesses
infringes the patents identified above. Genetic Technologies Limited is seeking
monetary damages, costs, expenses, injunctive relief, and other relief as the
court deems proper.


On-Line Technologies,
      Inc. (since acquired by MKS Instruments, Inc.) filed claims for patent
      infringement, trade secret misappropriation, fraud, breach of contract
      and unfair trade practices against PerkinElmer, Inc., Sick UPA, GmbH, and
      us in the U.S. District Court for the District of Connecticut on or about
      November 3, 1999. The complaint alleged that products called the Spectrum
      One and the MCS100E manufactured by former divisions of Applied Biosystems,
      which divisions were sold to the co-defendants in this case, were based
      on allegedly proprietary information belonging to On-Line Technologies
      and that the MCS100E infringed U.S. Patent No. 5,440,143. On-Line Technologies
      sought monetary damages, costs, expenses, injunctive relief, and other
      relief. On April 2, 2003, the U.S. District Court for the District of Connecticut
      granted our summary judgment motion and dismissed all claims brought by
      On-Line Technologies. On-Line Technologies filed an appeal with the U.S.
      Court of Appeals for the Federal Circuit seeking reinstatement of its claims,
      and on October 13, 2004, the Court of Appeals upheld dismissal of all claims
      except for the patent infringement claim, which will be decided by the
  District Court in subsequent proceedings.


Promega
    Corporation filed an action against us and some of our affiliates and Roche


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Molecular Systems, Inc. and Hoffmann-La Roche, Inc. in the U.S. District
    Court for the Eastern District of Virginia on April 10, 2000. The complaint
    asserts
violations of the federal False Claims Act. On November
    12, 2003, the court issued an order to have the complaint, which had previously
    been sealed, served on us and the other defendants. On February 9, 2004,
    we waived service of the complaint, which initiated our direct involvement
    in the case. The complaint alleges that we and Hoffmann-La Roche overcharged
    the U.S. government for thermal cyclers and PCR reagents. The overcharges
    are alleged to be the result of a licensing program based in part on U.S.
    Patent No. 4,889,818. Promega is asserting that U.S. Patent No. 4,889,818
    was obtained fraudulently and that the licensing program run by us and Hoffmann-La
    Roche is the cause of the alleged overcharging. Promega is seeking monetary
    damages. Promega claims to be suing in the name of the U.S. government although
    the government has to date declined to participate in the suit. On June 29,
    2004, the court granted our motion to dismiss for failure to state a claim
    upon which relief could be granted, but gave Promega the right to file an
    amended complaint. Promega filed an amended complaint on July 13, 2004, and
    we filed another motion to dismiss on August 6, 2004. The court granted our
    second motion and dismissed the case with prejudice on August 20, 2004. Promega
has filed an appeal with the U.S. Court of Appeals for the Fourth Circuit.

Bio-Rad
    Laboratories, Inc. filed a patent infringement, trademark infringement, and
    unfair competition action against us in the U.S. District Court for the Northern
    District of California on December 26, 2002. The complaint alleges that we
    are infringing Bio-Rads U.S. Pat. No. 5,089,011, entitled Electrophoretic
    Sieving in Gel-Free Media with Dissolved Polymers, and infringing Bio-Rad's Bio-Rad trademark.
    They filed a third amended complaint against us on May 30, 2003. The allegedly
    infringing products according to the third amended complaint are instruments
    using, and reagents used for, capillary electrophoresis, and products using
    the BioCAD name. Bio-Rad submitted its final infringement contentions under
    the local court rules on April 22, 2004, and the parties held a court-ordered
    mediation conference on July 19, 2004. Bio-Rad is seeking monetary damages,
    costs, expenses, injunctive relief, and other relief as the court deems proper.


Enzo Biochem, Inc.,
          Enzo Life Sciences, Inc., and Yale University filed a patent infringement
          action against us in the U.S. District Court for the District of Connecticut
          on June 8, 2004. The complaint alleges that we are infringing six patents.
          Four of these patents are assigned to Yale University and licensed
      exclusively to Enzo Biochem, i.e., U.S. Patent No. 4,476,928, entitled Modified
          Nucleotides and Polynucleotides and Complexes Formed Therefrom, U.S.
          Patent No. 5,449,767, entitled Modified Nucleotides and Polynucleotides
          and Methods of Preparing Same, U.S. Patent No. 5,328,824 entitled Methods
          of Using Labeled Nucleotides, and U.S. Patent No. 4,711,955,
          entitled Modified
          Nucleotides and Polynucleotides and Methods of Preparing and Using
          Same. The
          other two patents are assigned to Enzo Life Sciences, i.e., U.S. Patent
          No. 5,082,830 entitled End Labeled Nucleotide Probe and
U.S. Patent No. 4,994,373
entitled Methods and Structures Employing Compoundly  Labeled Polynucleotide
Probes. The allegedly infringing products include Applied Biosystems sequencing
reagent kits, its TaqMan® genotyping and gene expression assays,
and the gene expression microarrays used with its Expression Array System. Enzo
Biochem, Enzo Life Sciences, and Yale University are seeking monetary damages,
costs, expenses, injunctive relief, and other relief as the court deems proper.


Molecular
      Diagnostics Laboratories filed a class action complaint against us and Hoffmann-La
      Roche, Inc. in the U.S. District Court for the District of Columbia on September
      23, 2004. The complaint alleges anticompetitive conduct in connection with
  the sale of Taq


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DNA polymerase and PCR-related
      products. The anticompetitive conduct is alleged to arise from the prosecution
      and enforcement of U.S.
    Patent No. 4,889,818. This patent is assigned to Hoffmann-La Roche, with
    whom we have a commercial relationship covering, among other things, this
    patent and the sale of Taq DNA polymerase. The complaint seeks monetary damages,
    costs, expenses, injunctive relief, and other relief as the court deems proper.
    This case is largely based on the same set of contentions underlying a claim
    filed against us by Promega Corporation in the U.S. District Court for the
    Eastern District of Virginia, which is described above. The Promega claim
    was dismissed in August 2004 for, among other reasons, failure to state a
claim upon which relief could be granted.

We
    filed a patent infringement action against Bio-Rad Laboratories, Inc., MJ
    Research, Inc., and Stratagene Corporation in the U.S. District Court for
    the District of Connecticut on November 9, 2004. The complaint alleges that
    the defendants infringe U.S. Patent No. 6,814,934. The complaint specifically
    alleges that the defendants activities involving instruments for real-time
    PCR detection result in infringement. We are seeking monetary damages, costs,
    expenses, injunctive relief, and other relief as the court deems proper.
    Bio-Rad, MJ Research, and Stratagene have each answered the complaint and
    counterclaimed for declaratory relief that the 934 patent is invalid
    and not infringed. Bio-Rad, MJ Research, and Stratagene are seeking dismissal
    of our complaint, a judgment that the 934 patent is invalid and not
    infringed, costs and expenses, and other relief
as the court deems proper.


Thermo Finnigan LLC
      filed a patent infringement action against us in the U.S. District Court
      for the District of Delaware on December 8, 2004. The complaint alleges
      that we have infringed U.S. Patent No. 5,385,654 as a result of, for example,
      Applied Biosystems commercialization of the ABI PRISM 3700 Genetic
      Analyzer. Thermo Finnigan is seeking monetary damages, costs, expenses,
  and other relief as the court deems proper.


U.S. v. Davis

We are a party to the
    action U.S. v. Davis, pending in the U.S. District Court for the District
    of Rhode Island. We were brought into the case along with numerous other
    companies as a result of a third party complaint filed by United Technologies
    Corporation (UTC) seeking contribution for environmental cleanup
    costs imposed by the U.S. government. In December 1998, the District Court
    found us liable to UTC along with certain, but not all, of the defendants
    in the case. We believe the amount of such liability to be less than $200,000,
    which will be determined when all appeals have been concluded. Both UTC and
    we appealed the District Courts decision. In August 2001, the U.S.
    Court of Appeals for the First Circuit affirmed the District Courts
    decision and remanded the case to the District Court for further proceedings.


Settled Roche Legal
      Proceedings

We
    filed claims against Roche Molecular Systems, Inc., Hoffmann-La Roche, Inc.,
    Roche Probe, Inc., F. Hoffmann-La Roche Ltd., and other potential defendants
    affiliated with the named defendants (Roche) in California Superior
    Court on October 9, 2003. Our complaint asserted, among other things, breach
    of contract and other contract claims against the defendants arising from
    agreements relating to polymerase chain reaction, or PCR, technology rights
    entered into between us and the defendants. Our complaint also asserted various
    tort claims against the defendants, including breach of trust, breach of
    fiduciary duty, and unfair competition, relating to our PCR rights. The defendants acts
    and omissions that formed the basis of the complaint included, among other
    things, the: (i) defendants failure to abide by contractual provisions


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intended to allow us to effectively compete with the defendants with respect
    to (a) sales of diagnostic PCR products and (b) conveyance of diagnostic
PCR rights to third parties; (ii) defendants failure to pay us requisite royalties for sales by them
  of thermal cyclers and other products; (iii) defendants failure to negotiate
  in good faith new agreements directed at modifying the relationship between
  the parties in accordance with principles set forth in an existing letter agreement
  that states the intended framework for the negotiations (the Letter Agreement);
  (iv) defendants failure to provide us with diagnostic PCR rights on a
  nondiscriminatory basis as required by a European Union commission decree;
  (v) defendants failure to comply with their agreement to assign ownership
  to us of some PCR instrument patents and patent applications, and (vi) defendants mishandling
  of the prosecution of patent applications that the defendants were obligated
  to assign to us, in a manner that damaged us and precluded us from obtaining
  the full potential scope of patent protection for our instrument rights. Contemporaneously
  with our filing of this complaint, we also commenced arbitration proceedings
  with the American Arbitration Association against the defendants asserting,
  among other things, patent infringement claims (both direct infringement, contributory
  infringement and infringement by inducing third parties to infringe), breach
  of contract and other contract claims, and tort claims such as breach of fiduciary
  duty, breach of trust, and unfair competition. The arbitration was based on
  our allegation that the defendants (i) had infringed our exclusive rights to
  PCR patents in fields exclusively licensed to us pursuant to agreements with
  the defendants; and (ii) by their acts and omissions, had undermined the value
  of our exclusive PCR rights. In both the legal complaint and the arbitration,
  we were seeking monetary damages, costs, expenses, injunctive relief, and other
relief as the court or arbitrator deems proper.

On December 15, 2003,
    Roche filed a motion in California Superior Court to compel arbitration of
    our state court complaint and to stay the litigation. Concurrently with the
    motion to compel arbitration, Roche also filed with the American Arbitration
    Association its response to our notice of arbitration in which Roche denied
    all of our claims against it. Roches responseincluded
    counterclaims asserting, among other things, that our exclusive patent rights
    under some PCR patents licensed from Roche under an existing distribution
    agreement were converted into nonexclusive rights by the Letter Agreement,
    which was entered into subsequent to the distribution agreement. Roche also
    alleged that (i) we breached our contractual obligation under the Letter
    Agreement, including our obligation to source certain enzymes exclusively
    from Roche; and (ii) we failed to pay Roche the full royalties required pursuant
    to the distribution agreement. In its counterclaim, Roche sought a request
    for declaratory judgment confirming its assertions, interest, costs, and
    other relief as the arbitrator deems proper.


Effective May 6, 2005,
    the parties signed agreements settling these disputes, and they subsequently
    sought dismissal of the litigation and arbitration proceedings. The litigation
    was dismissed on June 10, 2005, and the dismissal of the arbitration was
    confirmed on June 16, 2005. More information about the settlement of these
    disputes is set forth above in Item 1 of this report under the heading BusinessApplied
    Biosystems Group BusinessPatents, Licenses, and Franchises. These
    legal proceedings had involved PCR rights used by Applied Biosystems and
    also rights that Applied Biosystems contributed to Celera Diagnostics.


|Item 4. | Submission of Matters to
    a Vote of Security Holders
|------- | -------------------------------------------------------

Not applicable.


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PART II



|Item 5. | Market for Registrants
          Common Equity, Related Stockholder Matters and Issuer Purchases of
    Equity Securities
|------- | --------------------------------------------------------------------------------------------------------------------------

Information about our
Common Stock and its Holders

Market Information


The principal U.S. market
    where our Applera-Applied Biosystems stock and Applera-Celera Genomics stock
    are traded is the New York Stock Exchange, although our stock is also traded
    on the Pacific Exchange.


Applera-Applied Biosystems
    stock is listed on the New York Stock Exchange under the trading symbol ABI and
    is intended to reflect the relative performance of Applied Biosystems. Applera-Celera
    Genomics stock is listed on the New York Stock Exchange under the trading
    symbol CRA and is intended to reflect the relative performance
    of Celera Genomics. There is no single security that represents our performance
    as a whole, nor is there a separate security traded for Celera Diagnostics.


Holders of Applera-Applied
    Biosystems stock and Applera-Celera Genomics stock are stockholders of Applera.
    Applied Biosystems and Celera Genomics are not separate legal entities, and
    holders of these stocks are stockholders of a single company, Applera. As
    a result, holders of these stocks are subject to all of the risks associated
    with an investment in Applera and all of its businesses, assets, and liabilities,
    including all of the risks described below in this Item 5 under the heading Forward-Looking
    Statements and Risk Factors..


The high and low sales
    prices of Applera-Applied Biosystems stock and Applera-Celera Genomics stock
    for each quarterly period during our 2004 and 2005 fiscal years is incorporated
    herein by reference to Note 11, page 76, of our 2005 Annual Report.


Holders


On August 19, 2005,
    the approximate number of holders of Applera-Applied Biosystems stock was 5,896, and
    the approximate number of holders of Applera-Celera Genomics stock was 6,087.
    The approximate number of holders is based upon the actual number of holders
    registered in our records at such date and does not include holders of shares
    in "street name" or persons, partnerships, associations, corporations, or
    other entities identified in security position listings maintained by depository
    trust companies. The calculation of the market value of shares held by non-affiliates
    shown on the cover of this report was made on the assumption that there were
    no affiliates other than executive officers and directors as of the date
  of calculation.


Dividends


Information regarding
    the amount of quarterly dividends during our 2004 and 2005 fiscal years is
    incorporated herein by reference to Note 11, page 76, of our 2005 Annual
    Report.


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Sale of Unregistered
        Securities


We have not sold any securities
    during our 2005 fiscal year that were not registered under the Securities
    Act of 1933.


Issuer Purchases of Equity Securities


This table provides information regarding our purchases of shares of Applera-Applied
Biosystems stock during the fourth quarter of our 2005 fiscal year.


|Period           | Total
         Numberof SharesPurchased (1) |  | Average
         PricePaid perShare |  | Total Number ofShares Purchasedas Part of
PubliclyAnnounced Plansor Programs |  | Approximate
         Dollar Valueof Shares that
May Yet BePurchased Under
thePlans or Programs
(2)(3)
|---------------- | ------------------------------------------- |  | ----------------------------------- |  | ---------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------
|                 |                                             |  |                                     |  |                                                                              |  |                                                                                                      
|April 1-30, 2005 | 7,335                                       |  | $20.16                              |  | –                                                                            |  | $ –                                                                                                  
|May 1-31, 2005   | –                                           |  | $ –                                 |  | –                                                                            |  | $ –                                                                                                  
|June 1-30, 2005  | 293,734                                     |  | $21.43                              |  | 283,900                                                                      |  | $ –                                                                                                  
|                 |                                             |  |                                     |  |                                                                              |  |                                                                                                      
|Total            | 301,069                                     |  | $21.40                              |  | 283,900                                                                      |  | $ –                                                                                                  
|                 |                                             |  |                                     |  |                                                                              |  |                                                                                                      
|                 |                                             |  |                                     |  |                                                                              |  |                                                                                                      

|(1) | Consists of (a) the shares referred to in footnote (3) below, and (b) shares tendered by employees to cover the exercise of employee stock options and taxes relating to the vesting of restricted stock.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(2) | On July
      27, 2005, Applied Biosystems announced that our Board of Directors has
      authorized the repurchase of up to 19,450,000 shares of Applera-Applied
      Biosystems stock, in addition to the authorization described in footnote
      (3) below. The new authorization has no time restrictions and delegates
      to company management discretion to purchase shares at times and prices
      it deems appropriate through open market purchases, privately negotiated
      transactions, tender offers, exchange offers, or otherwise. It is anticipated
      that repurchases will be made from time to time depending on market conditions
      and will be funded using Applied Biosystems U.S. cash reserves and
      cash generated from domestic operations, as well as funds to be borrowed
    under our revolving corporate credit facility, if and when required.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(3) | We previously announced
      that our Board of Directors has authorized the repurchase of shares of
      Applera-Applied Biosystems stock from time to time to replenish shares
      issued under our various employee stock benefit plans. This authorization
      has no set dollar or time limits and delegates toCompany
      management discretion to purchase shares at times and prices it deems appropriate
      through open market or negotiated purchases. Accordingly, the amounts in
      this column do not reflect this authorization. 283,900 shares of Applera-Applied
      Biosystems stock were purchased under this authorization during the fourth
    quarter of our 2005 fiscal year                                                                                                                                                                                    

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This table provides information
    regarding our purchases of shares of Applera-Celera Genomics stock during
    the fourth quarter of our 2005 fiscal year.


|Period           | Total
         Numberof SharesPurchased (1) |  | Average
         PricePaid perShare |  | Total Number ofShares Purchasedas Part of
PubliclyAnnounced Plansor Programs |  | Approximate
         Dollar Valueof Shares that
May Yet bePurchased Under
thePlans or Programs
(2)
|---------------- | ------------------------------------------- |  | ----------------------------------- |  | ---------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------
|                 |                                             |  |                                     |  |                                                                              |  |                                                                                                   
|April 1-30, 2005 | 6,292                                       |  | $10.20                              |  | –                                                                            |  | $ –                                                                                               
|May 1-31, 2005   | –                                           |  | $ –                                 |  | –                                                                            |  | $ –                                                                                               
|June 1-30, 2005  | 3,278                                       |  | $10.89                              |  | –                                                                            |  | $ –                                                                                               
|                 |                                             |  |                                     |  |                                                                              |  |                                                                                                   
|Total            | 9,570                                       |  | $10.44                              |  | –                                                                            |  | $ –                                                                                               
|                 |                                             |  |                                     |  |                                                                              |  |                                                                                                   
|                 |                                             |  |                                     |  |                                                                              |  |                                                                                                   

|(1) | Consists of shares tendered by employees to cover taxes relating to the vesting of restricted stock.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(2) | We previously
      announced that our Board of Directors has authorized the repurchase of
      shares of Applera-Celera Genomics stock from time to time to replenish
      shares issued under our various employee stock benefit plans. This authorization
      has no set dollar or time limits and delegates to Company management discretion
      to purchase shares at times and prices it deems appropriate through open
      market or negotiated purchases. Accordingly, the amounts in this column
      do not reflect this authorization. No shares of Applera-Celera Genomics
      stock were purchased under this authorization during the fourth quarter
    of our 2005 fiscal year.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

Forward-Looking Statements and Risk Factors

Some statements contained
    in, or incorporated by reference in, this report are forward-looking. Similarly,
    the press releases we issue and other public statements we make from time
    to time may contain language that is forward-looking. These forward-looking
    statements may be identified by the use of forward-looking words or phrases
    such as forecast, believe, expect, intend, anticipate, should, plan, estimate, and potential, among
    others. The forward-looking statements contained in this report are based
    on our current expectations, and those made at other times will be based
    on our expectations when the statements are made. We cannot guarantee that
    any forward-looking statements will be realized.


The Private Securities
    Litigation Reform Act of 1995 provides a safe harbor for forward-looking
    statements. In order to comply with the terms of the safe harbor, we note
    that a variety of factors could cause actual results and experience to differ
    materially from anticipated results or other expectations expressed in forward-looking
    statements. We also note that achievement of anticipated results or expectations
    in forward-looking statements is subject to the possibility that assumptions
    underlying forward-looking statements will prove to be inaccurate. Investors
    should bear this in mind as they consider forward-looking statements. The
    risks and uncertainties that may affect the operations, performance, development,
    and results of our business include, but are not limited to, those described
    below under the headings Factors Relating to Applied Biosystems, Factors
    Relating to Celera Genomics, and Factors Relating to Celera Diagnostics,
    a 50/50 Joint Venture between Applied Biosystems and Celera Genomics.


Also, we note that owners
    of Applera-Applied Biosystems stock and Applera-Celera Genomics stock are
    subject to risks arising from their ownership of common stock of a corporation
    with two separate classes of common stock. The risks and uncertainties that
    arise from our capital structure, particularly our two separate classes of
  common stock, include, but


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are not limited to, those
    described below under the heading Risks Relating to a Capital Structure
    with Two Separate Classes of Common Stock.

Factors Relating to Applied Biosystems


| | Rapidly changing
          technology in life sciences could make Applied
Biosystems product line obsolete unless it continues to develop and manufacture
new and improved products and services, and pursue new market opportunities.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

A significant portion of the net revenues for Applied Biosystems each year is
derived from products and services that did not exist in the prior year. Applied
Biosystems products and services are based on complex technology which
is subject to rapid change as new technologies are developed and introduced in
the marketplace. Applied Biosystems future success depends on its ability
to continually improve its current products and services, develop and introduce,
on a timely and cost-effective basis, new products and services that address
the evolving needs of its customers, and pursue new market opportunities that
develop as a result of technological and scientific advances in life sciences.
These new market opportunities may be outside the scope of the groups proven
expertise or in areas which have unproven market demand. For example, Applied
Biosystems has committed significant resources to researching, developing, marketing,
and distributing new products and services designed to integrate laboratory experimentation
with relevant scientific information, and to new Internet web sites devoted to
promoting the groups products and supporting customer research and development
activities. These are emerging business areas for Applied Biosystems, and there
can be no assurance that there will be market acceptance of the utility and value
of these products and services. The inability to gain market acceptance of new
products and services could adversely affect the groups future operating
results. The groups future success also depends on its ability to manufacture
these improved and new products to meet customer demand in a timely and cost-effective
manner, including its ability to resolve in a timely manner manufacturing issues
that may arise from time to time as the group commences production of these complex
products. Unanticipated difficulties or delays in replacing existing products
and services with new products and services or in manufacturing improved or new
products in sufficient quantities to meet customer demand could adversely affect
future demand for the groups products and services and its future operating
results.


| | Applied Biosystems
          relies on third parties for the manufacture of some of its products
          and also for the supply of some components of the products it manufactures
    on its own.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Although Applied Biosystems has contracts with most of these manufacturers and
suppliers, there can be no assurance that their operations will not be disrupted.
Applied Biosystems does not currently have alternative third party manufacturing
or supply arrangements for some of the key products and key components manufactured
or supplied by third parties. Although Applied Biosystems has its own manufacturing
facilities, and believes it might be able to manufacture some of the products
and components currently sourced from third parties, it also believes that it
would take considerable time and resources to establish the capability to do
so. Accordingly, if third party manufacturers or suppliers are unable or fail
to fulfill their obligations
  to Applied Biosystems,
  Applied Biosystems might not be able to satisfy customer demand in a timely
  manner, and its business could be adversely affected.


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A significant portion
        of sales depends on customers capital spending policies that may
        be subject to significant and unexpected decreases.


A significant portion
    of Applied Biosystems instrument product sales are capital purchases
    by its customers. Applied Biosystems customers include pharmaceutical,
    environmental, research, biotechnology, and chemical companies, and the capital
    spending policies of these companies can have a significant effect on the
    demand for Applied Biosystems products. These policies are based on
    a wide variety of factors, including the resources available to make purchases,
    the spending priorities among various types of research equipment, and policies
    regarding capital expenditures during recessionary periods. Any decrease
    in capital spending or change in spending policies of these companies could
    significantly reduce the demand for Applied Biosystems products.


A substantial portion of Applied Biosystems sales is to customers
at universities or research laboratories whose funding is dependent on both the
amount and timing of funding from government sources.


As a result, the timing and amount of revenues from these sources may vary significantly
due to factors that can be difficult to forecast. Research funding for life science
research has increased more slowly during the past several years compared to
previous years and has declined in some countries, and some grants have been
frozen for extended periods or otherwise become unavailable to various institutions,
sometimes without advance notice. Budgetary pressures may result in reduced allocations
to government agencies that fund research and development activities. If government
funding necessary to purchase Applied Biosystems products were to become
unavailable to researchers for any extended period of time, or if overall research
funding were to decrease, the business of Applied Biosystems could be adversely
affected.


Applied Biosystems is currently, and could in the future be, subject to lawsuits,
arbitrations, investigations, and other legal actions with private parties and
governmental entities, particularly involving claims for infringement of patents
and other intellectual property rights, and it may need to obtain licenses to
intellectual property from others.


Applied Biosystems believes that it has meritorious defenses against the claims
currently asserted against it and intends to defend them vigorously. However,
the outcome of legal actions is inherently uncertain, and Applied Biosystems
cannot be sure that it will prevail in any of these actions. An adverse determination
in some of the groups current legal actions, particularly the cases described
below, could have a material adverse effect on our consolidated financial statements.


Applied Biosystems products are based on complex, rapidly developing technologies. These products could be developed without knowledge of previously filed patent applications that mature into patents that cover some aspect of these technologies. In addition, because patent litigation is complex and the outcome inherently uncertain, Applied Biosystems belief
that its products do not infringe the technology covered by valid and enforceable
patents could be successfully challenged by third parties. Applied Biosystems
has from time to time been notified that it may be infringing patents and other
intellectual property rights of others. Also, in thecourse
of its business, Applied Biosystems may from time to time have access to confidential
or proprietary information of third parties, and these parties could bring a
claim against Applied Biosystems asserting that Applied Biosystems had misappropriated
their technologies, which


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though not patented are
    protected as trade secrets, and had improperly incorporated such technologies
    into Applied Biosystems products. Due to these factors, there remains
    a constant risk of intellectual property litigation and other legal actions,
    which could include antitrust claims, affecting the group. Applied Biosystems
    has been made a party to litigation and has been subject to other legal actions
    regarding intellectual property matters, which have included claims of violations
    of antitrust laws. Such actions currently include the legal proceedings described
    in the following paragraph, some of which, if determined adversely, could
    have a material adverse effect on Applied Biosystems. To avoid or settle
    legal claims, it may be necessary or desirable in the future to obtain licenses
    relating to one or more products or relating to current or future technologies,
    and Applied Biosystems cannot be assured that it will be able to obtain these
  licenses or other rights on commercially reasonable terms, or at all.

Several legal actions have been filed against us that could affect the intellectual
property rights of Applied Biosystems and its products and services, including
the following:


| | • | In response to claims
        by us against MJ Research, Inc., MJ Research filed counterclaims against
        us including, among others, allegations that we have licensed and enforced
        some polymerase chain reaction, or PCR, patents through anticompetitive
        conduct in violation of federal and state antitrust laws. These claims
        have been rejected as a result of a jury verdict and a series of summary
        judgment rulings by the court, but MJ Research has filed a notice of
        appeal. Subsequently, MJ Research filed a lawsuit against us based on
        the allegation that four patents underlying Applied Biosystems DNA
        sequencing instruments were invalidly obtained because an alleged inventor,
        whose work was funded in part by the U.S. government, was knowingly omitted
        from the patent applications. MJ Research claims to be suing in the name
        of the U.S. government although the government has to date declined to
        participate in the lawsuit. The case was dismissed but the decision has
        been appealed by MJ Research.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | • | Promega Corporation
        has filed a lawsuit against us alleging that Applied Biosystems, along
        with some other named defendants, is infringing two Promega patents due
        to the sale of forensic identification and paternity testing kits.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | • | Beckman Coulter, Inc.
        has filed a lawsuit against us alleging that Applied Biosystems is infringing
        three Beckman Coulter patents. The allegedly infringing products are
        Applied Biosystems capillary electrophoresis sequencing and genetic
    analysis instruments, and PCR and real-time PCR systems.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | • | Genetic Technologies
        Limited has filed a lawsuit against us alleging that we are infringing
        two of its patents due to the sale of cystic fibrosis reagent kits, some
        of our TaqMan® genotyping
        and gene expression products and services, AmpFLSTR® kits,
        the SNPlex Genotyping
        System, the SNPbrowser tool,
        and the Celera Discovery System. Genetic
        Technologies has also alleged that haplotyping analysis performed by
    our businesses infringes these patents.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | • | Enzo Biochem, Inc.,
        Enzo Life Sciences, Inc., and Yale University have filed a lawsuit against
        us alleging that we are infringing six patents due to the sale ofsequencing reagent kits, TaqMan® genotyping and gene expression
    assays, and the                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

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| |   | gene expression microarrays
    used with the Applied Biosystems Expression Array System.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | • | Bio-Rad Laboratories,
        Inc. has filed a lawsuit against us alleging that we are infringing one
        of its patents due to our sale of instruments using, and reagents used
        for, capillary electrophoresis, and one of its trademarks due to our
    use of the BioCAD name.                                                                                                                                                                                                                                                                              
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | • | Molecular Diagnostics
        Laboratories has filed a class action complaint against us and Hoffmann-La
        Roche, Inc. alleging anticompetitive conduct in connection with the sale
        of Taq DNA polymerase and PCR-related products. The anticompetitive conduct
        is alleged to arise from the prosecution and enforcement of U.S. Patent
        No 4,889,818. This patent is assigned to Hoffmann-La Roche, with whom
        we have a commercial relationship covering, among other things, this
        patent and the sale of Taq DNA polymerase.
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | • | In response to patent
        infringement claims made by us against Bio-Rad Laboratories, Inc., MJ
        Research, Inc. and Stratagene Corporation, Bio-Rad, MJ Research, and
        Stratagene have filed counterclaims seeking declaratory judgments that
        our U.S. Patent No. 6,814,934 in the field of real-time PCR is invalid
    and not infringed.                                                                                                                                                                                                      
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | • | Thermo Finnigan LLC
        has filed a lawsuit against us alleging that we are infringing one of
        its patents as a result of, for example, Applied Biosystems commercialization
    of the ABI PRISM 3700 Genetic Analyzer.                                                                                                                                                                                                                                                                                                                                       

These cases are described
    in further detail above in Part I, Item
3 of this report under the heading Legal ProceedingsCommercial
Litigation.


The cost of litigation and the amount of management time associated with these
cases is expected to be significant. There can be no assurance that these matters
will be resolved favorably; that we will not be enjoined from selling the products
or services in question or other products or services as a result; or that any
monetary or other damages assessed against us will not have a material adverse
effect on the financial condition of our company, Applied Biosystems, Celera
Genomics, or Celera Diagnostics.


Since Applied Biosystems business is dependent on foreign sales, fluctuating
currencies will make revenues and operating results more volatile.


Approximately 55% of Applied Biosystems net revenues for our 2005 fiscal
year were derived from sales to customers outside of the U.S. The majority of
these sales were based on the relevant customers local currency. A significant
portion of the related costs for Applied Biosystems are based on the U.S. dollar.
As a result, Applied Biosystems reported and anticipated operating results
and cash flows are subject to fluctuations due to material changes in foreign
currency exchange rates that are beyond Applied Biosystems control.


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The future growth of Applied Biosystems depends in part on its ability to acquire complementary technologies through acquisitions, investments, or other strategic relationships or alliances, which may absorb significant resources, may be unsuccessful, and could dilute holders of Applera-Applied Biosystems stock.


Acquisitions, investments and other strategic relationships and
  alliances, if pursued, may involve significant cash expenditures, debt incurrence,
  and expenses that could have a material effect on Applied Biosystems financial condition and operating results. If these types of transactions are pursued, it may be difficult for Applied Biosystems to complete these transactions quickly and to integrate these acquired operations efficiently into its current business operations. Potential technological advances resulting from the integration of technologies may not be achieved as successfully or rapidly as anticipated, if at all. Any acquisitions, investments or other strategic relationships and alliances by Applied Biosystems may ultimately have a negative impact on its business and financial condition. In addition, future acquisitions may not be as successful as originally anticipated and may result in impairment charges. We have incurred these charges in recent years in relation to acquisitions. For example, we incurred charges for impairment of goodwill, intangibles and other assets and other charges in the amounts of
 $69.1 million during our 2001 fiscal year, $25.9 million during our 2002 fiscal year, and $4.5 million during our 2005 fiscal year in relation to Celera Genomics acquisition of Paracel, Inc. Similarly, we incurred charges for the impairment of patents and acquired technology in the amount of $14.9 million during our 2004 fiscal year in relation to Applied Biosystems acquisition
  of Boston Probes, Inc. In addition, acquisitions and other transactions may
  involve the issuance of a substantial amount of Applera-Applied Biosystems
  stock without the approval of the holders of Applera-Applied Biosystems stock.
  Any issuances of this nature could be dilutive to holders of Applera-Applied
  Biosystems stock.


Applied Biosystems businesses,
particularly those focused
  on developing and marketing information-based products and services, depend
  on the continuous, effective, reliable, and secure operation of its computer
  hardware, software, and Internet applications and related tools and functions.


Applied Biosystems business requires manipulating and analyzing large amounts
of data, and communicating the results of the analysis to its internal research
personnel and to its customers via the Internet. Also, Applied Biosystems relies
on a global enterprise software system to operate and manage its business. Applied
Biosystems business therefore depends on the continuous, effective, reliable,
and secure operation of its computer hardware, software, networks, Internet servers,
and related infrastructure. To the extent that Applied Biosystems hardware
or software malfunctions or access to Applied Biosystems data by internal
research personnel or customers through the Internet is interrupted, Applied
Biosystems business
could suffer.


Applied Biosystems computer and communications hardware is protected through
physical and software safeguards. However, it is still vulnerable to fire, storm,
flood, power loss, earthquakes, telecommunications failures, physical or software
break-ins, software viruses, and similar events. In addition,
Applied Biosystems online products and services are complex and sophisticated,
and as such, could contain data, design, or software errors that could be difficult
to detect and correct. Software defects could be found in current or future products.
If Applied Biosystems fails to maintain and further develop the necessary computer
capacity and data to support its computational needs and its customers access
to information-based product and service offerings, it could experience a loss
of or delay in revenues or market acceptance. In


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addition, any sustained disruption in Internet access provided by third parties
could adversely affect Applied Biosystems.

Applied Biosystems operations involve the use, manufacture, sale, and
distribution of hazardous materials, and the mishandling of these hazardous materials
could result in substantial liabilities and harm to Applied Biosystems.


Applied Biosystems research and development and manufacturing activities
involve the controlled use of potentially hazardous materials, including biological
materials, chemicals, and various radioactive compounds. Also, some of Applied
Biosystems products are hazardous materials or include hazardous materials.
Applied Biosystems cannot completely eliminate the risk of accidental or other
contamination or injury from these materials, and Applied Biosystems could be
held liable for resulting damages, which could be substantial. Under some laws
and regulations, a party can be subject to strict liability for damages
caused by some hazardous materials, which means that a party can be liable without
regard to fault or negligence. In addition, Applied Biosystems is subject to
federal, state, local, and foreign laws, regulations, and permits governing the
use, storage, handling, and disposal of hazardous materials and specified waste
products, as well as the shipment and labeling of materials and products containing
hazardous materials. If Applied Biosystems fails to comply with any of these
laws, regulations, or permits, we could be subject to substantial fine or penalty,
payment of remediation costs, loss of permits, and/or other adverse governmental
action. Any of these events could have a material adverse effect on Applied Biosystems business
and financial condition.


Earthquakes could disrupt operations in California.


The headquarters and principal
    operations of Applied Biosystems are located in the San Francisco Bay area,
    a region near major California earthquake faults. The ultimate impact of
    earthquakes on Applied Biosystems, its significant suppliers, and the general
    infrastructure is unknown, but operating results could be materially affected
    in the event of a major earthquake.


Applera-Applied Biosystems stock price may be volatile.


The market price of Applera-Applied Biosystems stock has in the past been and
may in the future be volatile due to the risks and uncertainties described in
this section of this report, as well as other factors that may have affected
or may in the future affect the market price, such as:


| | • | conditions and publicity
        regarding the genomics, biotechnology, pharmaceutical, or life sciences
    industries generally;                                                                                                                                                                                      
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                         
| | • | price and volume fluctuations
        in the stock market at large which do not relate to Applied Biosystems operating
    performance; and                                                                                                                                                                            
| |   |                                                                                                                                                                                                                                                                                                                         
| | • | comments by securities
        analysts or government officials, including with regard to the viability
        or profitability of the biotechnology sector generally or with regard
        to intellectual property rights of life science companies, or Applied
    Biosystems ability to meet market expectations.

The stock market has from time to time experienced extreme price and volume fluctuations
that are unrelated to the operating performance of particular companies. In the
past, companies that have experienced volatility have sometimes been the subjects
of securities class


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action litigation. If litigation was instituted on this basis, it could result
in substantial costs and a diversion of managements attention
and resources.

Factors Relating to Celera Genomics


Celera Genomics has incurred net losses to date and may not achieve profitability.


Celera Genomics has
    accumulated net losses of approximately $794 million as of June 30, 2005,
    and expects that it will continue to incur net losses for the foreseeable
    future. These cumulative losses are expected to increase as Celera Genomics
    continues to make investments in new technology and product development,
    including its investments in the discovery and development of therapeutic
    products, as well as investments in diagnostics through Celera Diagnostics,
    its joint venture with Applied Biosystems. Celera Genomics will record all
    initial cash operating losses of Celera Diagnostics up to a maximum of $300
    million, after which any additional operating losses would be shared equally
    by Celera Genomics and Applied Biosystems. However, Applied Biosystems reimburses
    Celera Genomics for all tax benefits generated by Celera Diagnostics to the
    extent such tax benefits are used by Applied Biosystems, and the effect of
    recording Celera Diagnostics operating losses on Celera Genomics net
    losses will be partially offset by this reimbursement. Celera Diagnostics
    has accumulated cash operating losses of approximately $148 million as of
    June 30, 2005. As an early stage business, Celera Genomics faces significant
    challenges in expanding its business operations into the discovery and development
    of therapeutic products. As a result, there is a high degree of uncertainty
    that	Celera Genomics will be able to achieve profitable operations.


| | The marketing
          and distribution agreement with Applied Biosystems may not generate
    significant royalty payments.
| | -----------------------------------------------------------------------------------------------------------------------------

Applied Biosystems became the exclusive distributor of Celera Genomics human
genomic and other biological and medical information under the terms of a marketing
and distribution agreement that was effective in April 2002, the term of which
was originally ten years but which was extended to 15 years in February 2005.
Under the terms of that agreement, Applied Biosystems is obligated to pay a royalty
to Celera Genomics based on sales of some products sold by Applied Biosystems
on and after July 1, 2002. Applied Biosystems has not guaranteed any minimum
royalty payments to Celera Genomics, and the actual amount of royalty payments
to be paid to Celera Genomics depends on Applied Biosystems ability to
successfully commercialize the products subject to the royalty. Applied Biosystems
has not proven its ability to successfully commercialize these products, and
sales of these products may not meet expectations. Such sales will depend on
several factors that are not controlled by Celera Genomics, including general
market conditions, customer acceptance, and the efforts of Applied Biosystems.


| | Celera Genomics ability
          to develop and commercialize proprietary therapeutic products is unproven
    and several of its programs rely on the use of novel discovery methods.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As Celera Genomics expands its business operations in the area of therapeutic
product discovery and development, it faces the difficulties inherent in developing
and commercializing these products. It is possible that Celera
Genomics discovery and development efforts will not result in any commercial
products. Furthermore, Celera Genomics is seeking to identify novel methods of
treating disease through the use of technology in the field of proteomics, the
study of


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proteins. Celera Genomics is also seeking to capitalize on its relationship with
CeleraDiagnostics
by incorporating novel findings arising from Celera
Diagnostics disease association studies into its research. Celera Genomics
is using the results of studies performed by Celera Diagnostics on its own behalf
and also studies performed specifically for Celera Genomics. To our knowledge,
neither of these approaches to therapeutic product discovery and development
has to date been effectively used to develop a therapeutic product that has been
commercialized, and therefore the potential benefit to Celera Genomics of its
use of proteomics technology and Celera Diagnostics disease association
studies is unknown. Also, Celera Diagnostics is not obligated to continue performing
disease association studies on its own or on Celera Genomics behalf, and
if Celera Diagnostics discontinues performing these studies Celera Genomics business
and scientific plan could be adversely affected.

| | For some of Celera
          Genomics research and product development programs, particularly
          its proteomics efforts, Celera Genomics needs access to human and other
          tissue samples from diseased and healthy individuals, other biological
          materials, and related clinical and other information, which may be
    in limited supply.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Celera Genomics may not
    be able to obtain or maintain access to these materials and information on
    acceptable terms, or may not be able to obtain needed consents from individuals
    providing tissue or other samples. In addition, government regulation in
    the U.S. and foreign countries could result in restricted access to, or use
    of, human and other tissue samples. If Celera Genomics loses access to sufficient
    numbers or sources of tissue samples or other required biological materials,
    or if tighter restrictions are imposed on the use of related clinical or
    other information or information generated from tissue samples or other biological
    materials, these research and development programs and Celera Genomics business
    could be adversely affected.


Therapeutic product candidates may never result in a commercialized product.


All of Celera Genomics therapeutic product candidates are in various stages
of research and development and will require significant additional research
and development efforts by Celera Genomics or its collaborators before they can
be marketed. These efforts include extensive preclinical and clinical testing
and lengthy regulatory review for approval by the U.S. Food and Drug Administration
and comparable agencies in other countries. Celera Genomics development
of therapeutic products is highly uncertain and subject to a number of significant
risks. To date, Celera Genomics has not commercialized any therapeutic product
and Celera Genomics does not expect any of its therapeutic product candidates
to be commercially available for a number of years, if ever. Therapeutic product
candidates that appear to be promising at early stages of development may not
be developed into commercial products, or may not be successfully marketed, for
a number of reasons, including:


| | • | Celera Genomics or
        its collaborators may not successfully complete research and development
    efforts;                             
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                              
| | • | Celera Genomics or
        its collaborators may not successfully build the necessary preclinical
    and clinical development organizations;

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| | •                                                                                                                                                                                                                                                                                                      | any therapeutic product
        candidates that Celera Genomics or its collaborators develop may be found
        during preclinical testing or clinical trials to be ineffective or to
    cause harmful side effects;                                        
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                                
| | •                                                                                                                                                                                                                                                                                                      | Celera Genomics or
        its collaborators may fail to obtain required regulatory approvals for
    products they develop;                                                                                                                                   
| |                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                                
| | •                                                                                                                                                                                                                                                                                                      | Celera Genomics or
        its collaborators may be unable to manufacture enough of any potential
    products at an acceptable cost and with appropriate quality;                                                                                             
| |                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                                
| | •                                                                                                                                                                                                                                                                                                      | Celera Genomics or
    its collaborators may fail to build necessary distribution channels;                                                                                                                                                                    
| |                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                                
| | •                                                                                                                                                                                                                                                                                                      | Celera Genomics or
        its collaborators products may not be competitive with other existing
    or future products;                                                                                                                                     
| |                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                                
| | •                                                                                                                                                                                                                                                                                                      | adequate reimbursement
        for Celera Genomics or its collaborators products may not
        be available to healthcare providers and patients from the government
    or insurance companies; and                                                       
| |                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                                
| | •                                                                                                                                                                                                                                                                                                      | Celera Genomics or
        its collaborators may be unable to obtain necessary intellectual property
        protection, or third parties may own proprietary rights that prevent
    Celera Genomics or its collaborators from commercializing their products.
| |                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                                
| | If
          Celera Genomics fails to maintain its existing collaborative relationships
          and enter into new collaborative relationships, or if collaborators
          do not perform under collaboration agreements, development of its therapeutic
    product candidates could be delayed.

Celera Genomics strategy for the discovery, development, clinical testing,
manufacturing and/or commercialization of most of its therapeutic product candidates
includes entering into collaborations with partners. Although Celera Genomics
has expended, and continues to expend, time and money on internal research and
development programs, it may be unsuccessful in creating therapeutic product
candidates that would enable it to form additional collaborations and receive
milestone and/or royalty payments from collaborators.


Each of Celera Genomics existing collaboration agreements may be canceled
under some circumstances. In addition, the amount and timing of resources to
be devoted to research, development, clinical trials and commercialization activities
by Celera Genomics collaborators are not within Celera Genomics control.
Celera Genomics cannot ensure that its collaborators will perform their obligations
as expected. If any of Celera Genomics collaborators terminate their agreements
or otherwise fail to conduct their collaborative activities in a timely manner,
the development or commercialization of therapeutic products may be delayed or
otherwise adversely affected. If in some cases Celera Genomics assumes responsibilities
for continuing programs on its own after termination of a collaboration, Celera
Genomics may be required to devote additional resources to product development
and commercialization or Celera Genomics may need to cancel some development
programs.


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| | If Celera Genomics
          or its collaborators fail to satisfy regulatory requirements for any
          therapeutic product candidate, Celera Genomics or its collaborators
          will be unable to complete the development and commercialization of
    that product.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Celera Genomics is
    currently developing its internal capability to move potential products through
    clinical testing, manufacturing and the approval processes of the U.S. Food
    and Drug Administration, and comparable agencies in other countries. In the
    U.S., either Celera Genomics or its collaborators must show through pre-clinical
    studies and clinical trials that each of Celera	Genomics or its collaborators therapeutic
    product candidates is safe and effective in humans for each indication before
    obtaining regulatory approval from the FDA for the commercial sale of that
    product. Outside of the U.S., the regulatory requirements for commercialization
    vary from country to country. If Celera Genomics or its collaborators fail
    to adequately show the safety and effectiveness of a therapeutic product,
    regulatory clearance or approval could be delayed or denied. The regulatory
    review and approval process can take many years and require substantial expense
    and may not be successful.


Even if Celera Genomics or its collaborators obtain regulatory clearance or approval
for a particular therapeutic product, that product will be subject to risks and
uncertainties relating to regulatory compliance, including post-approval clinical
studies and inability to meet the compliance requirements
of the FDAs Good Manufacturing Practices regulations. In addition, identification
of some adverse side effects after a therapeutic product is on the market or
the occurrence of manufacturing problems could cause subsequent suspension of
product manufacture or withdrawal of approval, or could require reformulation
of a therapeutic product, additional testing, or changes in labeling of the product.
This could delay or prevent Celera Genomics from generating revenues from the
sale of that therapeutic product.


Clinical trials may not be successful.


Numerous unforeseen events during, or as a result of, clinical testing could
delay or prevent commercialization of Celera Genomics or its collaborators therapeutic
product candidates. Many companies in the pharmaceutical and biotechnology industries
have suffered significant setbacks in advanced clinical trials, even after promising
results in earlier studies. The results from pre-clinical studies may be different
from the results that are obtained in clinical trials. Factors that could affect
the success of clinical trials include:


| | • | Celera Genomics' or
        its collaborators product candidates may not prove to be efficacious
    or may cause unacceptable toxicity or other harmful side effects;                                                                                                                                                           
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                   
| | • | negative or inconclusive
        clinical trial results may require Celera Genomics or its collaborators
        to conduct further testing or to abandon projects that appeared promising
    in preliminary studies;                                                                                                            
| |   |                                                                                                                                                                                                                                                                                                                                   
| | • | registration or enrollment
        of patients or other volunteer participants in Celera Genomics' or its
        collaborators clinical testing may be lower than anticipated, resulting
    in delay or cancellation of clinical testing; and                                                                                  
| |   |                                                                                                                                                                                                                                                                                                                                   
| | • | regulators or institutional
        review boards may prevent, delay, suspend, or terminate clinical research
        for various reasons, including noncompliance with regulatory requirements
        or their determination that participating patients or other volunteers
    are being exposed to unacceptable health risks.
| |   |                                                                                                                                                                                                                                                                                                                                   

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If any of these events
    were to occur, significant delays in or termination of Celera Genomics' or
    its collaborators clinical testing may result. Celera Genomics has
    limited experience in conducting clinical trials and may not be able to rapidly
    or effectively continue the further development of its product candidates
    and meet current or future requirements, if any, identified by the U.S. Food
    and Drug Administration. Furthermore, clinical trials planned by Celera Genomics
    or its collaborators may not begin on time, may not be completed on schedule,
    or at all, or may not be sufficient for registration of the candidate compounds
    or to result in approvable products. Also, Celera Genomics' or its collaborators research
    and clinical testing of their therapeutic product candidates may be delayed
    or abandoned if they later discover other compounds that show significantly
    improved safety or efficacy compared to the current product candidates. Any
    of the foregoing events could limit Celera Genomics' ability to generate
    revenues, cause Celera Genomics to incur additional expenses, and adversely
    affect Celera Genomics' financial results.


Clinical trials may take several years or more and can be very expensive.


The length of time for
    clinical trials generally varies substantially according to the type, complexity,
    novelty, and intended use of a product candidate. The duration and costs
    of clinical trials may vary significantly over the life of a project as a
    result of factors relating to the trial, including, among others:


| | • | the number of patients
    or other volunteers that ultimately participate in the trial;
| | - | ----------------------------------------------------------------------------------------
| |   |                                                                                         
| | • | the duration of participant
    follow-up that is appropriate in view of the results;   
| |   |                                                                                         
| | • | the number of clinical
    sites included in the trials; and                            
| |   |                                                                                         
| | • | the length of time
    required to enroll suitable participants.                        
| |   |                                                                                         

Celera Genomics relies on other companies to conduct clinical trials.


Celera Genomics does not
    have the ability to independently conduct clinical trials for its therapeutic
    product candidates, and must rely on other companies, such as contract research
    organizations, medical institutions, clinical investigators, and contract
    laboratories to conduct clinical trials. If these other companies do not
    successfully perform their contractual duties or regulatory obligations or
    meet expected deadlines, if the other companies need to be replaced, or if
    the quality or accuracy of the data they obtain is compromised due to the
    failure to adhere to Celera Genomics' clinical protocols or regulatory requirements
    or for other reasons, Celera Genomics' product development activities and
    clinical trials may be extended, delayed, suspended, or terminated.


| | Celera Genomics relies
          on suppliers for materials needed to manufacture compounds for clinical
    trials.
| | ---------------------------------------------------------------------------------------------------------------------

Celera Genomics relies on other companies to manufacture compounds that will
be tested in Celera Genomics' clinical trials. These manufacturers need access
to raw materials to manufacture those compounds, and Celera Genomics is responsible
for obtaining some of these raw materials from suppliers. Suppliers may not sell
these materials at the time when they are needed or on commercially reasonable
terms. If it becomes necessary to change suppliers for any


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of these materials or if any of suppliers of these materials experience
  a shutdown or disruption in their facilities used to produce these materials,
  due to technical, regulatory, or other problems, it could adversely affect
  a manufacturers ability to manufacture adequate quantities of Celera
  Genomics' compounds. If Celera Genomics or its manufacturers are unable to
  obtain the materials needed for the manufacture of compounds used in Celera
  Genomics' clinical trials, product testing and potential regulatory approval
  could be delayed, adversely impacting Celera Genomics' ability to develop the
  product candidates.

Celera Genomics relies on other companies to manufacture its therapeutic product
candidates.


Celera Genomics currently does not have manufacturing capabilities or experience
necessary to produce materials for pre-clinical testing or clinical trials, including
its cathepsin S compound in late pre-clinical development and its HDAC inhibitor
in Phase I clinical trials. As a result, Celera Genomics must rely on other companies
to produce Celera Genomics' compounds for pre-clinical testing and clinical trials.
These manufacturers must comply with applicable regulatory requirements, including
the U.S. Food and Drug Administrations current Good Manufacturing Practices,
or GMP, regulations. Celera Genomics' current and anticipated future dependence
upon these manufacturers may adversely affect Celera Genomics' ability to develop
and commercialize therapeutic products on a timely and competitive basis. These
manufacturers may not be able to produce material on a timely basis or manufacture
material at the quality level or in the quantity required to meet Celera Genomics'
development timelines and applicable regulatory requirements, including the GMP
regulations, other applicable FDA regulatory requirements, or similar regulations
applicable outside of the U.S. Celera Genomics may not be able to maintain or
renew its existing manufacturing arrangements, or enter into new arrangements,
on a timely basis on commercially acceptable terms, or at all. Celera Genomics'
manufacturers could terminate or decline to renew Celera Genomics' arrangements
based on their own business priorities, at a time that is costly or inconvenient
for Celera Genomics. If Celera Genomics is unable to contract on a timely basis
for the production of materials in sufficient quantity and of sufficient quality
on commercially acceptable terms, Celera Genomics' pre-clinical work or clinical
trials may be delayed or prevented. Additionally, if Celera Genomics is required
to enter into new manufacturing arrangements, it may not be able to obtain approval
from the FDA of any alternate manufacturer in a timely manner, or at all, which
could delay or prevent the clinical development and commercialization of any
related product candidates.


Celera Genomics' collaborations with outside experts may be subject to restriction
and change.


Celera Genomics collaborates with scientific and clinical experts at academic
and other institutions that provide assistance and guidance to Celera Genomics'
research and development efforts. These advisors and collaborators are not Celera
Genomics' employees and may have other commitments that limit their availability
to Celera Genomics. Although they generally agree not to do competing work, if
a conflict of interest arises between their work for Celera Genomics and their
work for another entity, Celera Genomics may lose the services of these experts.
In addition, although Celera Genomics' advisors and collaborators sign agreements
not to disclose Celera Genomics' confidential information, it is possible that
valuable proprietary knowledge may become publicly known or otherwise available
to other parties, including Celera Genomics competitors,
through them.


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The pharmaceutical industry is intensely competitive and evolving.


There is intense competition among pharmaceutical and biotechnology companies attempting to discover candidates for potential new therapeutic products. These companies may:


| | • | develop new therapeutic
    products in advance of Celera Genomics or its collaborators;                                                                                                                  
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                           
| | • | develop therapeutic
        products which are more effective as therapeutics, or more cost-effective
    than those developed by Celera Genomics or its collaborators;                                   
| |   |                                                                                                                                                                                                           
| | • | obtain regulatory approvals
        of their therapeutic products more rapidly than Celera Genomics or its
    collaborators; or                                                                          
| |   |                                                                                                                                                                                                           
| | • | obtain patent protection
        or other intellectual property rights that would limit the ability of
        Celera Genomics or its collaborators to develop and commercialize therapeutic
    products.

Introduction of new products may expose Celera Genomics to product liability
claims.


New products developed by Celera Genomics or its collaborators could expose Celera
Genomics to potential product liability risks that are inherent in the testing,
manufacturing, marketing and sale of human therapeutic products. Product liability
claims or product recalls, regardless of the ultimate outcome, could require
Celera Genomics to spend significant time and money in litigation and to pay
significant damages. Although Celera Genomics expects to seek and maintain product
liability insurance to cover claims relating to the testing and use of therapeutic
products, there can be no assurance that such insurance will be available on
commercially reasonable terms, if at all, or that the amount of coverage obtained
will be adequate to cover losses from any particular claim.


Therapeutics discovery and development is a highly technical field and there
is a competitive market for personnel with the expertise needed for the expansion
of Celera Genomics business operations within this field.


Celera Genomics believes that in order to develop and commercialize therapeutic
products, it will need to continue to recruit and retain scientific and management
personnel having specialized training and/or advanced degrees, or otherwise having
the technical background, necessary for an understanding of therapeutic products.
There is a shortage of qualified scientific and management personnel who possess
this technical background. Celera Genomics competes for these personnel with
other pharmaceutical and biotechnology companies, academic institutions and government
entities. If Celera Genomics is unable to retain and attract qualified scientific
and management personnel, the growth of the
groups business operations in the area of therapeutic product discovery
and development could be delayed or curtailed.


Celera Genomics could incur liabilities relating to hazardous materials that
it uses in its research and development activities.


Celera Genomics research and development activities involve the controlled
use of potentially hazardous materials, including biological materials, chemicals,
and various


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radioactive compounds.
    Celera
Genomics cannot completely
eliminate the risk of accidental or other contamination
or injury from these materials, and Celera Genomics could be held liable for
resulting damages, which could be substantial. Under some laws and regulations,
a party can be subject to strict liability for damages caused by
some hazardous materials, which means that a party can be liable without regard
to fault or negligence. In addition, Celera Genomics is subject to federal, state,
local, and foreign laws, regulations, and permits governing the use, storage,
handling, and disposal of hazardous materials and specified waste products. If
Celera Genomics fails to comply with any of these laws, regulations, or permits,
we could be subject to substantial fine or penalty, payment of remediation costs,
loss of permits, and/or other adverse governmental action. Any of these events
could have a material adverse effect on Celera Genomics business and financial
condition.

Celera Genomics business depends on the continuous, effective, reliable,
and secure operation of its computer hardware, software, and Internet applications
and related tools and functions.


Celera Genomics business requires manipulating and analyzing large amounts
of data, and communicating the results of the analysis to its internal research
personnel via the Internet. Also, Celera Genomics relies on a global enterprise
software system to operate and manage its business. Celera Genomics business
therefore depends on the continuous, effective, reliable, and secure operation
of its computer hardware, software, networks, Internet servers, and related infrastructure.
To the extent that Celera Genomics hardware or software malfunctions or
access to Celera Genomics data by Celera Genomics internal research
personnel through the Internet is interrupted, the groups business could
suffer.


Celera Genomics computer and communications hardware is protected through
physical and software safeguards. However, it is still vulnerable to fire, storm,
flood, power loss, earthquakes, telecommunications failures, physical or software
break-ins, software viruses, and similar events. If Celera Genomics fails to
maintain and further develop the necessary computer capacity and data to support
its therapeutic products discovery and development programs, it could experience
a loss of or delay in revenues. In addition, any sustained disruption in Internet
access provided by third parties could adversely affect Celera Genomics business.


Celera Genomics competitive position depends on maintaining its intellectual
property protection.


Celera Genomics ability to compete and to achieve and maintain profitability
depends, in part, on its ability to protect its proprietary discoveries and technologies
through obtaining and enforcing patent rights, obtaining copyright protection,
maintaining its trade secrets, and operating without infringing the intellectual
property rights of others. Celera Genomics ability to obtain patent protection
for the inventions it makes is uncertain. The patentability of biotechnology
and pharmaceutical inventions involves complex factual, scientific, and legal
questions. As a result, it is difficult to predict whether patents will issue
or the breadth of claims that will be allowed in biotechnology and pharmaceutical
patents. This may be particularly true with regard to the patenting of gene sequences,
gene functions, and genetic variations. In this regard, the U.S. Patent and Trademark
Office has adopted guidelines for use in the review of the utility of inventions,
particularly biotechnology inventions. These guidelines increased the amount
of evidence required to demonstrate utility in order to obtain a patent in the
biotechnology field, making patent protection more difficult to obtain. Also,
Celera Genomics cannot ensure that changes in policies or to laws, or interpretations
of these policies or laws,


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relevant to the patenting
    of biotechnology and pharmaceutical inventions will not adversely affect its
    patent position in the U.S. or other countries. Opposition to the protection
    of these inventions in the U.S. or other countries could result in stricter
    standards for obtaining or enforcing biotechnology or pharmaceutical patent
    rights.

In some instances,
      patent applications in the U.S. are maintained in secrecy until a patent
      issues. In most instances, the content of U.S. and international patent
      applications is made available to the public approximately 18 months after
      the initial filing from which priority is claimed. As a result, Celera
      Genomics cannot be certain that others have not filed patent applications
      for inventions covered by Celera Genomics patent applications or
      that Celera Genomics inventors were the first to make the invention. Accordingly,
      Celera Genomics patent applications may be preempted or Celera Genomics
      may have to participate in interference proceedings before the U.S. Patent
      and Trademark Office. These proceedings determine the priority of invention
      and the right to a patent for the claimed invention in the U.S.


Celera Genomics may
      be dependent on protecting its proprietary databases through copyright
      law to prevent other organizations from taking information from those databases
      and copying and reselling it. Copyright law currently provides uncertain
      protection regarding the copying and resale of factual data. Changes in
      copyright law could either expand or reduce the extent to which Celera
      Genomics and its customers are able to protect their intellectual property.
      Accordingly, Celera Genomics is uncertain as to whether it can prevent
      such copying or resale through copyright law.


Celera Genomics also
      relies on trade secret protection for its confidential and proprietary
      information and procedures, including procedures related to sequencing
      genes and to searching and identifying important regions of genetic information.
      Celera Genomics protects its trade secrets through recognized practices,
      including access control, confidentiality and nonuse agreements with employees,
      consultants, collaborators and customers, and other security measures.
      These confidentiality and nonuse agreements may be breached, however, and
      Celera Genomics may not have adequate remedies for a breach. In addition,
      Celera Genomics trade secrets may otherwise become known or be independently
      developed by competitors.Accordingly,
      it is uncertain whether Celera Genomics reliance on trade secret
      protection will be adequate to safeguard its confidential and proprietary
      information and procedures.


Disputes may arise
      in the future with regard to the ownership of rights to any invention developed
      with collaborators. These and other possible disagreements with collaborators
      could lead to delays in the achievement of milestones or receipt of royalty
      payments or in research, development and commercialization of Celera Genomics products.
      In addition, these disputes could require or result in lawsuits or arbitration.
      Lawsuits and arbitration are time-consuming and expensive. Even if Celera
      Genomics wins, the cost of these proceedings could adversely affect its
      business, financial condition and operating results.


Celera Genomics
        may infringe the intellectual property rights of third parties, may become
        involved in expensive intellectual property legal proceedings, and may
        need to obtain licenses to intellectual property from others.


There has been substantial
      litigation and other legal proceedings regarding patents and other intellectual
      property rights in the biotechnology, pharmaceutical, and diagnostic industries.
      The intellectual property rights of biotechnology companies, including
      Celera Genomics, are generally uncertain and involve complex factual, scientific,
      and legal questions. Celera


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Genomics success
    in therapeutic product discovery and development may depend, in part, on
    its ability to operate without infringing the intellectual
    property rights of others and to prevent others from infringing its intellectual
    property rights.

Celera Genomics may
      initiate proceedings at the U.S. Patent and Trademark Office to determine
      its patent rights with respect to third parties, referred to as interference
      proceedings. Also, Celera Genomics may initiate patent litigation
      to enforce its patent rights or invalidate patents held by third parties.
      These legal actions may similarly be initiated against Celera Genomics
      by third parties alleging that Celera Genomics is infringing their rights.
      The cost to Celera Genomics of any patent litigation or proceedings, even
      if Celera Genomics is successful, could be substantial, and these legal
      actions may absorb significant management time. If infringement claims
      against Celera Genomics are resolved unfavorably to Celera Genomics, Celera
      Genomics may be enjoined from manufacturing or selling its products or
      services without a license from a third party, and Celera Genomics may
      not be able to obtain a license on commercially acceptable terms, or at
      all. Also, Celera Genomics could become subject to significant liabilities
      to third parties if these claims are resolved unfavorably to Celera Genomics.


Ethical, legal,
        and social issues related to the use of genetic information and genetic
        testing may cause less demand for Celera Genomics products.


Genetic testing has
      raised issues regarding confidentiality and the appropriate uses of the
      resulting information. For example, concerns have been expressed regarding
      the use of genetic test results by insurance carriers or employers to discriminate
      on the basis of this information, resulting in barriers to the acceptance
      of genetic tests by consumers. This could lead to governmental authorities
      calling for limits on or regulation of the use of genetic testing or prohibiting
      testing for genetic predisposition to some diseases, particularly those
      that have no known cure. Any of these scenarios could reduce the potential
      markets for products of Celera Genomics.


Celera Genomics
        may pursue acquisitions, investments, or other strategic relationships
        or alliances, which may consume significant resources, may be unsuccessful,
        and could dilute the holders of Applera-Celera Genomics stock.


Acquisitions, investments
      and other strategic relationships and alliances, if pursued, may involve
      significant cash expenditures, debt incurrence, additional operating losses,
      and expenses that could have a material effect on Celera Genomics financial
      condition and operating results. Acquisitions involve numerous other risks,
      including:


| | • | diversion of management
        from daily operations;                                                                                           
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                  
| | • | difficulties integrating
        acquired technologies and personnel into the business of Celera Genomics;                                       
| |   |                                                                                                                                                  
| | • | inability to obtain
        required financing on favorable terms;                                                                               
| |   |                                                                                                                                                  
| | • | entry into new markets
        in which Celera Genomics has little previous experience;                                                          
| |   |                                                                                                                                                  
| | • | potential loss of key
        employees, key contractual relationships, or key customers of acquired
        companies or of Celera Genomics; and

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| |   |                                                                                                    
| | - | ---------------------------------------------------------------------------------------------------
| | • | assumption of the liabilities
        and exposure to unforeseen liabilities of acquired companies.

If these types of transactions
      are pursued, it may be difficult for Celera Genomics to complete these
      transactions quickly and to integrate these acquired operations efficiently
      into its current business operations. Any acquisitions, investments or
      other strategic relationships and alliances by Celera Genomics may ultimately
      have a negative impact on its business and financial condition. In addition,
      future acquisitions may not be as successful as originally anticipated
      and may result in impairment charges. We have incurred these charges in
      recent years in relation to acquisitions. For example, we incurred charges
      for impairment of goodwill, intangibles and other assets and other charges
      in the amounts of $69.1 million during our 2001 fiscal year, $25.9 million
      during our 2002 fiscal year, and $4.5 million during our 2005 fiscal year
      in relation to Celera Genomics acquisition of Paracel, Inc. Similarly,
      we incurred charges for the impairment of patents and acquired technology
      in the amount of $14.9 million during our 2004 fiscal year in relation
      to Applied Biosystems acquisition of Boston Probes, Inc.


In
    addition, acquisitions and other transactions may involve the issuance of
    a substantial amount of Applera-Celera Genomics stock without the approval
    of the holders of Applera-Celera Genomics stock. Any issuances of this nature
    could be dilutive to holders of Applera-Celera Genomics stock.


Earthquakes could disrupt operations in California.


Celera
    Genomics has research and development and administrative facilities in South
    San Francisco, California. South San Francisco is located near major California
    earthquake faults. The ultimate impact of earthquakes on Celera Genomics,
    its significant suppliers, and the general infrastructure is unknown, but
    operating results could be materially affected in the event of a major earthquake.


Applera-Celera Genomics
        stock price may be volatile.


The market price of
      Applera-Celera Genomics stock has in the past been and may in the future
      be volatile due to the risks and uncertainties described in this section
      of this report, as well as other factors that may have affected or may
      in the future affect the market price, such as:


| | • | conditions and publicity
        regarding the genomics, biotechnology, pharmaceutical, or life sciences
        industries generally;                                                                                                                                                                                   
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                          
| | • | price and volume fluctuations
        in the stock market at large which do not relate to Celera Genomics operating
        performance; and                                                                                                                                                                            
| |   |                                                                                                                                                                                                                                                                                                                          
| | • | comments by securities
        analysts or government officials, including with regard to the viability
        or profitability of the biotechnology sector generally or with regard
        to intellectual property rights of life science companies, or Celera
        Genomics ability to meet market expectations.

The stock market has
      from time to time experienced extreme price and volume fluctuations that
      are unrelated to the operating performance of particular companies. In
      the past, companies that have experienced volatility have sometimes been
      the subjects of securities class


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action litigation. If litigation was instituted on this basis, it could result
in substantial costs and a diversion of managements attention
and resources.

| | Our company is
          subject to a class action lawsuit relating to its 2000 offering of
          shares of Applera-Celera Genomics stock that may be expensive and time
    consuming.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Our company and some
      of our officers are defendants in a lawsuit brought on behalf of purchasers
      of Applera-Celera Genomics stock in our follow-on public offering of Applera-Celera
      Genomics stock completed on March 6, 2000. In the offering, we sold an
      aggregate of approximately 4.4 million shares of Applera-Celera Genomics
      stock at a public offering price of $225 per share. The lawsuit was commenced
      with the filing of several complaints in 2000, which have been consolidated
      into a single case which has been certified by the court as a class action.
      The consolidated complaint generally alleges that the prospectus used in
      connection with the offering was inaccurate or misleading because it failed
      to adequately disclose the alleged opposition of the Human Genome Project
      and two of its supporters, the governments of the U.S. and the U.K., to
      providing patent protection to our genomic-based products. Although Celera
      Genomics has never sought, or intended to seek, a patent on the basic human
      genome sequence data, the complaint also alleges that we did not adequately
      disclose the risk that Celera Genomics would not be able to patent this
      data. The consolidated complaint seeks unspecified monetary damages, rescission,
      costs and expenses, and other relief as the court deems proper. Although
      we believe the asserted claims are without merit and intend to defend the
      case vigorously, the outcome of this or any other litigation is inherently
      uncertain. The defense of this case will require management attention and
      resources.


| | Factors
            Relating to Celera Diagnostics, a 50/50 Joint Venture between Applied
    Biosystems and Celera Genomics
| | ----------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                             
| | Celera
          Diagnostics ability to develop and commercialize proprietary
    diagnostic products is unproven.         

Celera Diagnostics faces
      the difficulties inherent in developing and commercializing diagnostic
      products. It is possible that Celera Diagnostics discovery and development
      efforts will not result in any new commercial products or services. In
      particular, Celera Diagnostics and its collaborators are seeking to develop
      new diagnostic products based on information derived from the study of
      the genetic material of organisms, or genomics. This method carries inherent
      risks, as only a limited number of diagnostic products based on genomic
      discoveries have been developed and commercialized to date.


| | Diagnostic product
    candidates may never result in a commercialized product.
| | -------------------------------------------------------------------------------

Most of Celera Diagnostics potential
      diagnostic products are in various stages of research and development and
      will require significant additional research and development efforts by
      Celera Diagnostics or its collaborators before they can be marketed. These
      efforts include extensive clinical testing and may require lengthy regulatory
      review and clearance or approval by the U.S. Food and Drug Administration
      and comparable agencies in other countries. Celera Diagnostics development
      of new diagnostic products is highly uncertain and subject to a number
      of significant risks. Diagnostic product candidates that appear to be promising
      at early stages of development may not be developed into commercial products,
      or may not
be	successfully marketed, for a number of reasons, including:


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| |                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                 
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | •                                                                                                                                                                                                                                      | Celera Diagnostics
        or its collaborators may not successfully complete research and development
    efforts;                                                                                                                             
| |                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                 
| | •                                                                                                                                                                                                                                      | any diagnostic products
        that Celera Diagnostics or its collaborators develop may be found during
    clinical trials to have limited medical value;                                                                                     
| |                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                 
| | •                                                                                                                                                                                                                                      | Celera Diagnostics
        or its collaborators may fail to obtain required regulatory clearances
    or approvals for products they develop;                                                                                                   
| |                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                 
| | •                                                                                                                                                                                                                                      | Celera Diagnostics
        or its collaborators may be unable to manufacture enough of any potential
    products at an acceptable cost and with appropriate quality;                                                                           
| |                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                 
| | •                                                                                                                                                                                                                                      | any diagnostic products
        Celera Diagnostics or its collaborators develop may not be competitive
    with other existing or future products;                                                                                              
| |                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                 
| | •                                                                                                                                                                                                                                      | adequate reimbursement
        for Celera Diagnostics and its collaborators products may
        not be available to physicians or patients from the government or insurance
    companies; and                                               
| |                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                 
| | •                                                                                                                                                                                                                                      | Celera Diagnostics
        may be unable to obtain necessary intellectual property protection, or
        third parties may own proprietary rights that prevent Celera Diagnostics
    or its collaborators from commercializing their products.
| |                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                 
| | If
          Celera Diagnostics or its collaborators fail to satisfy regulatory
          requirements for any diagnostic product candidate, they may be unable
    to complete the development and commercialization of that product.

Celera Diagnostics is
      currently developing its capability to move potential products through
      clinical testing, manufacturing, and the approval processes of the U.S.
      Food and Drug Administration and comparable agencies in other countries.
      In the U.S., either Celera Diagnostics or its collaborators must show through
      pre-clinical studies and clinical trials that each of Celera Diagnostics or
      its collaborators diagnostic product candidates is safe and effective
      for each indication before obtaining regulatory clearance or approval from
      the FDA for the commercial sale of that product as an in-vitro diagnostic
      product with clinical claims. Outside of the U.S., the regulatory requirements
      vary from country to country. If Celera Diagnostics or its collaborators
      fail to adequately show the safety and effectiveness of a diagnostic product,
      regulatory clearance or approval could be delayed or denied. The results
      from pre-clinical studies may be different from the results that are obtained
      in clinical trials. Celera Diagnostics cannot be certain that it or its
      collaborators will show sufficient safety and effectiveness in its clinical
      trials to allow them to obtain the needed regulatory clearance or approval.
      The regulatory review and approval process can take many years and require
      substantial expense and may not be successful. A number of companies in
      the diagnostics industry, including biotechnology companies, have suffered
      significant setbacks in advanced clinical trials, even after promising
      results in earlier studies.


Even
    if Celera Diagnostics or its collaborators obtain regulatory clearance or
    approval for a product, that product will be subject to risks and uncertainties
    relating to regulatory compliance, including post-clearance or approval clinical
    studies and inability to meet the compliance requirements
of the FDAs Quality System Regulations, which relate to


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manufacturing
of diagnostic products. In addition, the occurrence
of manufacturing problems could cause subsequent suspension of product manufacture
or withdrawal of clearance or approval, or could require reformulation of a diagnostic
product, additional testing, or changes in labeling of the product. This could
delay or prevent Celera Diagnostics from generating revenues from the sale of
that diagnostic product.

| | Celera Diagnostics products
    may not be fully accepted by physicians and laboratories.
| | ------------------------------------------------------------------------------------------

Celera Diagnostics growth
      and success will depend on market acceptance by physicians and laboratories
      of its products as clinically useful and cost-effective. Celera Diagnostics
      expects that most of its products will use genotyping and gene expression
      information to predict predisposition to diseases, disease progression
      or severity, or responsiveness to treatment. Market acceptance will depend
      on the widespread acceptance and use by doctors and clinicians of genetic
      testing for these purposes. The use of genotyping and gene expression information
      by doctors and clinicians for these purposes is relatively new. Celera
      Diagnostics cannot be certain that doctors and clinicians will want to
      use
its products designed for these purposes.


Even if genetic testing
      is accepted as a method to manage health care, Celera Diagnostics cannot
      be certain that its products will be accepted in the clinical diagnostic
      market. If genetic testing becomes widely accepted in the clinical diagnostic
      market, Celera Diagnostics cannot predict the extent to which doctors and
      clinicians may be willing to utilize Celera Diagnostics products
      in providing patient care. Doctors and clinicians may prefer competing
      technologies and products that can be used for the same purposes as Celera
  Diagnostics products.


| | Ethical, legal,
          and social issues related to the use of genetic information and genetic
    testing may cause less demand for Celera Diagnostics products.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------

Genetic testing has
      raised issues regarding confidentiality and the appropriate uses of the
      resulting information. For example, concerns have been expressed regarding
      the use of genetic test results by insurance carriers or employers to discriminate
      on the basis of this information, resulting in barriers to the acceptance
      of genetic tests by consumers. This could lead to governmental authorities
      calling for limits on or regulation of the use of genetic testing or prohibiting
      testing for genetic predisposition to some diseases, particularly those
      that have no known cure. Any of these scenarios could reduce the potential
  markets for products of Celera Diagnostics.


| | If insurance companies
          and other third-party payors do not reimburse doctors and patients
          for Celera Diagnostics tests, its ability to sell its products
    to the clinical diagnostics market will be impaired.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Sales of Celera Diagnostics products
      will depend, in large part, on the availability of adequate reimbursement
      to users of those products from government insurance plans, including Medicare
      and Medicaid in the U.S., managed care organizations, and private insurance
      plans. Physicians recommendations to use diagnostic tests, as well
      as decisions by patients to pursue those tests, are likely to be influenced
      by the availability of reimbursement by insurance companies and other third
      party payors. Third-party payors are increasingly attempting to contain
      health care costs by limiting both the extent of coverage and the reimbursement
      rate for testing and treatment products and services. In particular, products
  and services that are


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determined to be investigational in nature or that are not considered reasonably necessary for diagnosis or treatment may be denied reimbursement coverage. In addition, third-party payors are increasingly limiting reimbursement coverage for medical diagnostic products and, in many instances, are exerting pressure on medical suppliers to reduce their prices. Thus, third-party reimbursement may not be consistently available or financially adequate to cover the cost of Celera Diagnostics products. This could limit the ability of Celera Diagnostics to sell its products, cause Celera Diagnostics to reduce the prices of its products, or otherwise adversely affect Celera Diagnostics operating
  results.

Because each third-party payor individually
      approves reimbursement, obtaining these approvals is a time-consuming and
      costly process that requires
      Celera Diagnostics to provide scientific and clinical support for the use
      of each of its products to each payor separately with no assurance that
      such approval
      will be obtained. This process can delay the broad market introduction
      of new products and could have a negative effect on Celera Diagnostics revenues
  and operating results.


| | If Celera Diagnostics
          fails to maintain its existing collaborative relationships and enter
          into new collaborative relationships, or if collaborators do not perform
          under collaboration agreements, development of its diagnostic products
    could be delayed.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Celera Diagnostics strategy
      for the discovery, development, clinical testing, manufacturing and commercialization
      of most of its diagnostic product candidates includes entering into collaborations
      with partners. Although Celera Diagnostics has expended, and continues
      to expend, time and money on internal research and development programs,
      it may be unsuccessful in creating diagnostic product candidates that would
      enable it to form additional collaborations. Celera Diagnostics cannot
      ensure that its collaborators will perform their obligations as expected.
      If any of Celera Diagnostics collaborators terminate or elect to
      cancel their agreements or otherwise fail to conduct their collaborative
      activities in a timely manner, the development or commercialization of
      diagnostics products may be delayed or otherwise adversely affected. If
      in some cases Celera Diagnostics assumes responsibilities for continuing
      programs on its own after termination of a collaboration, Celera Diagnostics
      may be required to devote additional resources to product development and
      commercialization or Celera Diagnostics may need to cancel some development
  programs.


Celera
    Diagnostics has entered into a strategic alliance agreement with Abbott Laboratories
    for the joint discovery, development, manufacturing, and commercialization
    of nucleic acid-based diagnostic products. Although this is a long-term alliance,
    the alliance agreement contains provisions that could result in early termination
    for reasons that include the following: breach by either company; a change
    in control of either company; either companys dissatisfaction with
    the performance of the alliance according to specific timelines for such
    judgments set forth in the alliance agreement; or by either company if the
    other party fails to meet performance criteria applicable to the other party
    set forth in the alliance agreement. In addition, the amount and timing of
    resources to be devoted to research, development, eventual clinical trials
    and commercialization activities by Abbott are not within Celera Diagnostics control.
    Future strategic alliances, if any, with other third parties are likely to
be subject to similar terms and conditions.


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Celera Diagnostics does not have a sales and service capability in the clinical diagnostic market.


Celera Diagnostics currently does not have a sales and service organization. Accordingly, its ability
    to successfully sell its products will depend on its ability to either develop
    a sales and service organization, work with Abbott
    Laboratories under the existing alliance agreement, work with another distributor,
    or pursue a combination of these alternatives. In jurisdictions where Celera
    Diagnostics uses third party distributors, its success will depend to a great
extent on the efforts of the distributors.


Celera Diagnostics has limited manufacturing capability and may
encounter difficulties expanding Celera Diagnostics operations.


Celera Diagnostics has limited commercial manufacturing experience
and capabilities. If product sales increase, Celera Diagnostics will have to
increase the capacity of its manufacturing processes and facilities or rely on
its collaborators, if any. Celera Diagnostics may encounter difficulties in scaling-up
manufacturing processes and may be unsuccessful in overcoming such difficulties.
In such circumstances, Celera Diagnostics ability to meet product demand
may be impaired or delayed.


Celera Diagnostics facilities are subject, on an ongoing basis, to the FDAs Quality System Regulations, international quality standards and other regulatory requirements, including requirements for good manufacturing practices and the State of California Department of Health Services Food and Drug Branch requirements. Celera Diagnostics may encounter difficulties expanding Celera Diagnostics manufacturing
operations in accordance with these regulations and standards, which could result
in a delay or termination of manufacturing or an inability to meet product demand.


Celera Diagnostics manufacturing operations are located in a facility in Alameda, California. Celera Diagnostics expects to operate its manufacturing out of this facility for the foreseeable future, and it does not have alternative production plans in place or alternative facilities available should its existing manufacturing facility cease to function. Accordingly, Celera Diagnostics business
could be adversely affected by unexpected interruptions in manufacturing caused
by events such as labor problems, equipment failures, or other factors, and the
resulting inability to meet customer orders on a timely basis.


Celera Diagnostics research and product development depends
on access to tissue and blood samples from diseased and healthy individuals,
other biological materials, and related clinical and other information, which
may be in limited supply.


Celera Diagnostics may not be able to obtain or maintain access to these
 	    materials and information on acceptable terms, or may not be able to obtain
 	    needed consents from individuals providing tissue or blood samples. In
 	    addition, government regulation in the U.S. and foreign countries could
 	    result in restricted access to, or use of, human tissue or blood samples.
 	    If Celera Diagnostics loses access to sufficient numbers or sources of
 	    tissue or blood samples, or if tighter restrictions are imposed on its
 	    use of the information generated from tissue or blood samples, its business
 	    may be harmed.


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Single suppliers or a limited number of suppliers provide
    key components of Celera Diagnostics products. If these suppliers fail
    to supply these components, Celera Diagnostics may be unable to satisfy product
    demand.


Several key components of Celera Diagnostics products come from, or are manufactured for Celera Diagnostics by, a single supplier or a limited number of suppliers. This applies in particular to components such as enzymes, florescent dyes, phosphoramadites, and oligonucleotides. Celera Diagnostics acquires some of these and other key components on a purchase-order basis, meaning that the supplier is not required to supply Celera Diagnostics with specified quantities over any set period of time or set aside part of its inventory for Celera Diagnostics forecasted requirements. Celera Diagnostics has not arranged for alternative supply sources for some of these components and it may be difficult to find alternative suppliers, especially to replace enzymes and oligonucleotides. Furthermore, in order to maintain compliance with Quality System Regulations, Celera Diagnostics must verify that its suppliers of key components are in compliance with all applicable U.S. Food and
 Drug Administration regulations. Celera Diagnostics believes that compliance with these regulatory requirements would increase the difficulty in arranging for needed alternative supply sources, particularly for components that are from single source suppliers, which means that they are currently the only supplier of custom-ordered components. If Celera Diagnostics product sales increase beyond the forecast levels, or if its suppliers are unable or unwilling to supply it on commercially acceptable terms or comply with regulations applicable to manufacturing of Celera Diagnostics products,
    it may not have access to sufficient quantities of key components on a timely
basis and may be unable to satisfy product demand.


In addition, if any of the components of Celera Diagnostics products
    are no longer available in the marketplace, it may be forced to further develop
    its products or technology to incorporate alternate components. The incorporation
    of new components into its products may require Celera Diagnostics to seek
    clearances or approvals from the FDA or foreign regulatory agencies prior
to commercialization.


Celera Diagnostics operations involve the use, manufacture,
    sale, and distribution of hazardous materials, and the mishandling of these
    hazardous materials could result in substantial liabilities and harm to Celera
    Diagnostics.


Celera Diagnostics research and development and manufacturing activities involve the controlled use of potentially hazardous materials, including biological materials and chemicals. Also, some of Celera Diagnostics products, including products sold through its strategic alliance with Abbott Laboratories, are hazardous materials or include hazardous materials. Celera Diagnostics cannot completely eliminate the risk of accidental or other contamination or injury from these materials, and Celera Diagnostics could be held liable for resulting damages, which could be substantial. Under some laws and regulations, a party can be subject to strict liability for
    damages caused by some hazardous materials, which means that a party can
    be liable without regard to fault or negligence. Furthermore, Celera Diagnostics
    could be held indirectly responsible for contamination or injury arising
    from
    the conduct of Abbott Laboratories in manufacturing, selling, or distributing
    alliance products. In addition, Celera Diagnostics is subject to federal,
    state, local, and foreign laws, regulations, and permits governing the use,
    storage,
    handling, and disposal of hazardous materials and specified waste products,
    as well as the shipment and labeling of materials and products containing
    hazardous materials. If Celera Diagnostics fails to comply with any of these
    laws, regulations,
    or permits, or if Celera Diagnostics is held indirectly responsible for conduct
of Abbott Laboratories found to be non-


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compliant, we could be subject to substantial fine or penalty,
    payment of remediation costs, loss of permits, and/or other adverse governmental
    action. Similar consequences could arise if Celera Diagnostics is held indirectly
    responsible for conduct of Abbott Laboratories found to be non-compliant.
    Any of these events could have a material adverse effect on Celera Diagnostics business
    and financial condition.

Celera Diagnostics business depends on the continuous,
    effective, reliable, and secure operation of its computer hardware, software,
    and Internet applications and related tools and functions.


Celera Diagnostics business requires manipulating and analyzing large amounts of data, and communicating the results of the analysis to its internal research personnel and to its collaborators via the Internet. Also, Celera Diagnostics relies on a global enterprise software system to operate and manage its business. Celera Diagnostics business therefore depends on the continuous, effective, reliable, and secure operation of its computer hardware, software, networks, Internet servers, and related infrastructure. To the extent that Celera Diagnostics hardware or software malfunctions or access to Celera Diagnostics data by Celera Diagnostics internal
 	research personnel or collaborators through the Internet is interrupted,
      its	business could suffer.


Celera Diagnostics computer and communications hardware is protected through physical and software safeguards. However, it is still vulnerable to fire, storm, flood, power loss, earthquakes, telecommunications failures, physical or software break-ins, software viruses, and similar events. If Celera Diagnostics fails to maintain and further develop the necessary computer capacity and data to support its computational needs, its diagnostic product discovery and research efforts, and Celera Genomics and its collaborators therapeutic products discovery and research efforts, it could experience a loss of or delay in revenues. In addition, any sustained disruption in Internet access provided by third parties could adversely affect Celera Diagnostics business.


Celera Diagnostics competitive position depends on maintaining
its intellectual property protection.


Celera Diagnostics ability to compete and to achieve and maintain profitability depends, in part, on its ability to protect its proprietary discoveries and technologies through obtaining and enforcing patent rights, maintaining its trade secrets, and operating without infringing the intellectual property rights of others. Celera Diagnostics ability
to obtain patent protection for the inventions it makes is uncertain. The patentability
of biotechnology inventions involves complex factual, scientific, and legal questions.
As a result, it is difficult to predict whether patents will issue or the breadth
of claims that will be allowed in biotechnology and pharmaceutical patents. This
may be particularly true with regard to the patenting of gene sequences, gene
functions, and genetic variations. In this regard, the U.S. Patent and Trademark
Office has adopted guidelines for use in the review of the utility of inventions,
particularly biotechnology inventions. These guidelines increased the amount
of evidence required to demonstrate utility in order to obtain a patent in the
biotechnology field, making patent protection more difficult to obtain. Also,
Celera Diagnostics cannot ensure that changes in policies or to laws, or interpretations
of these policies or laws, relevant to the patenting of biotechnology inventions
will not adversely affect its patent position in the U.S. or other countries.
Opposition to the protection of these inventions in the U.S. or other countries
could result in stricter standards for obtaining or enforcing biotechnology patent
rights.


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In some instances, patent applications in the U.S. are maintained
in secrecy until a patent issues. In most instances, the content of U.S. and
international patent applications is made available to the public approximately
18 months after the initial filing from which priority is claimed. As a result,
Celera Diagnostics cannot be certain that others have not filed patent applications
for inventions covered by Celera Diagnostics patent applications or that Celera Diagnostics inventors were the first to make the invention. Accordingly, Celera Diagnostics patent
applications may be preempted or Celera Diagnostics may have to participate in
interference proceedings before the U.S. Patent and Trademark Office. These proceedings
determine the priority of invention and the right to a patent for the claimed
invention in the U.S.


Celera Diagnostics also relies on trade secret protection for its
confidential and proprietary information and procedures. Celera Diagnostics protects
its trade secrets through recognized practices, including access control, confidentiality
and nonuse agreements with employees, consultants, collaborators and customers,
and other security measures. These confidentiality and nonuse agreements may
be breached, however, and Celera Diagnostics may not have adequate remedies for
a breach. In addition, Celera Diagnostics trade secrets may otherwise become known or be independently developed by competitors. Accordingly, it is uncertain whether Celera Diagnostics reliance
on trade secret protection will be adequate to safeguard its confidential and
proprietary information and procedures.


Disputes may arise in the future with regard to the ownership of
rights to any invention developed with collaborators. These and other possible
disagreements with collaborators could lead to delays in the achievement of milestones
or receipt of royalty payments or in research, development, and commercialization
of Celera Diagnostics products. In addition, these disputes could require
or result in lawsuits or arbitration. Lawsuits and arbitration are time-consuming
and expensive. Even if Celera Diagnostics wins, the cost of these proceedings
could adversely affect its business, financial condition and operating results.


Celera Diagnostics may infringe the intellectual property rights of third parties, may become involved in expensive intellectual property legal proceedings, and may need to obtain licenses to intellectual property from others.


There has been substantial litigation and other legal proceedings
regarding patents and other intellectual property rights in the biotechnology,
pharmaceutical, and diagnostic industries. The intellectual property rights of
biotechnology companies, including Celera Diagnostics, are generally uncertain
and involve complex factual, scientific, and legal questions. Celera Diagnostics success
in diagnostic discovery and development may depend, in part, on its ability to
operate without infringing the intellectual property rights of others and to
prevent others from infringing its intellectual property rights.


Celera Diagnostics may initiate proceedings at the U.S. Patent
and Trademark Office to determine its patent rights with respect to third parties,
referred to as interference proceedings. Also, Celera Diagnostics may initiate
patent litigation to enforce its patent rights or invalidate patents held by
third parties. These legal actions may similarly be initiated against Celera
Diagnostics by third parties alleging that Celera Diagnostics is infringing their
rights. For example, Genetic Technologies Limited has filed a lawsuit against
us alleging that we are infringing two of its patents due to the sale of cystic
fibrosis reagent kits. This case is described in further detail above in Part
I, Item 3 of this report under the heading Legal ProceedingsCommercial Litigation. The
cost to Celera Diagnostics of any patent litigation or proceedings,


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even if Celera Diagnostics is successful, could be substantial,
    and these legal actions may absorb significant management time. If infringement
    claims against Celera Diagnostics are resolved unfavorably to Celera Diagnostics,
    Celera Diagnostics may be enjoined from manufacturing or selling its products
    or services without a license from a third party, and Celera Diagnostics
    may not be able to obtain a license on commercially acceptable terms, or
    at all.
    Also, Celera Diagnostics could become subject to significant liabilities
    to third parties if these claims are resolved unfavorably to Celera Diagnostics.
    Similarly, contractual disputes related to existing license rights under
    third
    party patents may affect Celera Diagnostics ability to develop, manufacture,
    and sell its products.

Introduction of new products may expose Celera Diagnostics to product liability claims.


New products developed by Celera Diagnostics or its collaborators
could expose Celera Diagnostics to potential product liability risks that are
inherent in the testing, manufacturing, marketing, and sale of human diagnostic
products. In addition, clinicians, patients, third-party payors, and others may
at times seek damages based on testing or analysis errors based on a technicians
misreading of results, mishandling of the patient samples, or similar claims.
Product liability claims or product recalls, regardless of the ultimate outcome,
could require Celera Diagnostics to spend significant time and money in litigation
and to pay significant damages. Although Celera Diagnostics expects to seek and
maintain product liability insurance to cover claims relating to the testing
and use of diagnostic products, there can be no assurance that such insurance
will be available on commercially reasonable terms, if at all, or that the amount
of coverage obtained will be adequate to cover losses from any particular claim.


The diagnostics industry is intensely competitive and evolving.


There is intense competition
    among health care, biotechnology, and diagnostic companies attempting to
    discover candidates for potential new diagnostic products. These companies
    may:


| | • | develop new diagnostic
    products in advance of Celera Diagnostics or its collaborators;                                                                                                                                                                                                    
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                               
| | • | develop diagnostic
        products which are more effective or more cost-effective than those developed
    by Celera Diagnostics or its collaborators;                                                                                                                                      
| |   |                                                                                                                                                                                                                                                                                               
| | • | obtain regulatory clearances
        or approvals of their diagnostic products more rapidly than Celera Diagnostics
    or its collaborators; or                                                                                                                                              
| |   |                                                                                                                                                                                                                                                                                               
| | • | obtain patent protection
        or other intellectual property rights that would limit Celera Diagnostics or
        its collaborators ability to develop and commercialize, or their
        customers ability to use, Celera Diagnostics or its collaborators diagnostic
    products.

Celera Diagnostics competes with companies in the U.S. and abroad
that are engaged in the development and commercialization of products and services
that provide genetic information. These companies may develop products that are
competitive with the products offered by Celera Diagnostics or its collaborators,
such as analyte specific reagents or diagnostic test kits that perform the same
or similar purposes as Celera Diagnostics or its collaborators


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products. Also, clinical
    laboratories may offer testing services that are competitive with the products
    sold by Celera Diagnostics or its collaborators. For example, a clinical
    laboratory can use either reagents purchased from manufacturers other than
    Celera Diagnostics, or use their own internally developed reagents, to make
    diagnostic tests. If clinical laboratories make tests in this manner for
    a particular disease, they could offer testing services for that disease
    as an alternative to products sold by Celera Diagnostics used to test for
    the same disease. The testing services offered by clinical laboratories may
    be easier to develop and market than test kits developed by Celera Diagnostics
    or its collaborators because the testing services are not subject to the
    same clinical validation requirements that are applicable to FDA-cleared
    or approved diagnostic test kits. The diagnostic testing services market
    is dominated by a small number of large clinical testing laboratories, including
    Laboratory Corporation of America Holdings, Quest Diagnostics Inc., and Specialty
Laboratories, Inc.

Also, a substantial portion of all sales of diagnostic products are made to a
small number of clinical reference laboratories, including those identified above,
and therefore Celera Diagnostics expects to rely on these laboratories for a
substantial portion of its sales. Celera Diagnostics inability to establish
or maintain one or more of these laboratories as a customer could adversely affect
its business, financial condition, and operating results.


Earthquakes could disrupt operations in California.


The headquarters and operations of Celera Diagnostics are located in Alameda,
California. Alameda is located near major California earthquake faults. The ultimate
impact of earthquakes on Celera Diagnostics, its significant suppliers, and the
general infrastructure is unknown, but operating results could be materially
affected in the event of a major earthquake.


Risks Relating to a Capital Structure with Two Separate Classes of Common
Stock


Stockholders of Applera Corporation are stockholders of one company and, therefore,
financial effects on one group could adversely affect the other.


Applied Biosystems and
    Celera Genomics are not separate legal entities. As a result, stockholders
    will continue to be subject to all of the risks of an investment in Applera
    Corporation, including Applied Biosystems and Celera Genomics. The risks
    and uncertainties that may affect the operations, performance, development,
    and results of the businesses of Applied Biosystems and Celera Genomics are
    described above. The assets attributed to one group could be subject to the
    liabilities of the other group, even if these liabilities arise from lawsuits,
    contracts, or indebtedness that we attribute to the other group. If we are
    unable to satisfy one groups liabilities out of the assets attributed
    to it, we may be required to satisfy those liabilities with assets attributed
    to the other group.


Financial effects from one group that affect our consolidated results of operations
or financial condition could, if significant, affect the results of operations
or financial condition of the other group and the market price of the common
stock relating to the other group. In addition, net losses of either group and
dividends or distributions on, or repurchases of, either class of common stock
or repurchases of preferred stock will reduce the funds we can pay as dividends
on each class of common stock under Delaware law. For these reasons, stockholders
should read the consolidated financial information with the financial information
we provide for each group.


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The market price of either class of our common stock may not reflect the
  separate performance of the group related to that common stock.


The market price of Applera-Applied
    Biosystems stock and Applera-Celera Genomics stock may not reflect the separate
    performance of the business of the group relating to that class of common
    stock. The market price of either class of common stock could simply reflect
    our performance as a whole, or the market price of either class of common
    stock could move independently of the performance of the business of either
    group. Investors may discount the value of either class of common stock because
    it is part of a common enterprise rather than a stand-alone company.


The market price of either class of our common stock may be affected by factors
that do not affect traditional common stock.


| | •                                                           | The complex
            nature of the terms of Applera-Applied Biosystems stock and Applera-Celera
            Genomics stock may adversely affect the market price of either class
            of common stock.The complex nature of the
            terms of the two classes of common stock, such as the convertibility
            of Applera-Applied Biosystems stock into Applera-Celera Genomics
            stock, or vice versa, and the potential difficulties investors may
            have understanding these terms, may adversely affect the market price
    of either class of common stock.                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | ----------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | •                                                           | The market
            price of Applera-Applied Biosystems stock or Applera-Celera Genomics
            stock may be adversely affected by the fact that holders have limited
            legal interests in the group relating to the class of common stock
            held as a separate legal entity.For example,
            as described in greater detail in the subsequent risk factors, holders
            of either class of common stock generally do not have separate class
            voting rights with respect to significant matters affecting either
            group. In addition, upon our liquidation or dissolution, holders
            of either class of common stock will not have specific rights to
            the assets of the group relating to the class of common stock held
            and will not be entitled to receive proceeds that are proportional
    to the relative performance of that group.                                                                                                                                  
| |                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | •                                                           | The market
            price of Applera-Applied Biosystems stock or Applera-Celera Genomics
            stock may be adversely affected by events involving the group relating
            to the other class of common stock or the performance of the class
            of common stock relating to that group.Events,
            such as earnings announcements or other developments concerning one
            group that the market does not view favorably and which thus adversely
            affect the market price of the class of common stock relating to
            that group, may adversely affect the market price of the class of
            common stock relating to the other group. Because both classes of
            common stock are common stock of Applera Corporation, an adverse
            market reaction to one class of common stock may, by association,
            cause an adverse reaction to the other class of common stock. This
            reaction may occur even if the triggering event was not material
    to us as a whole.
| |                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | Limits
    exist on the voting power of group common stock.
| |                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | •                                                           | Applera-Celera
            Genomics stock may not have any influence on the outcome of stockholder
            voting.Applera-Applied Biosystems stock
            currently has a substantial majority of the voting power of our common
            stock and had approximately82%
    of                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

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| |   | the voting power
        as of September 1, 2005, the record date for our 2005 annual meeting
        of stockholders. Except in limited circumstances where there is separate
        class voting, the relative voting power of the two classes of common
        stock fluctuates based on their relative market values. Therefore, except
        in cases of separate class voting, either class of common stock that
        is entitled to more than the number of votes required to approve any
        stockholder action could control the outcome of the vote even if the
        matter involves a divergence or conflict of the interests of the holders
        of Applera-Applied Biosystems stock and Applera-Celera Genomics stock.
    These matters may include mergers and other extraordinary transactions.                                                                                                                                                                                
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | • | A class of
            group common stock with less than majority voting power can block
            action if a class vote is required. If Delaware
            law, stock exchange rules, or our Board of Directors requires a separate
            vote on a matter by the holders of either Applera-Applied Biosystems
            stock or Applera-Celera Genomics stock, those holders could prevent
            approval of the matter even if the holders of a majority of the total
            number of votes cast or entitled to be cast, voting together as a
            class, were to vote in favor of it. As a result, in cases where holders
            of Applera-Applied Biosystems stock or Applera-Celera Genomics stock
            vote as separate classes on a proposal, the affirmative vote of shares
            representing a majority of one class of common stock will not prevent
            the holders of the other class of common stock from defeating the
    proposal.
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | • | Holders of
            only one class of common stock cannot ensure that their voting power
            will be sufficient to protect their interests.Since
            the relative voting power per share of Applera-Applied Biosystems
            stock and Applera-Celera Genomics stock will fluctuate based on the
            market values of the two classes of common stock, the relative voting
            power of a class of common stock could decrease. As a result, holders
            of shares of only one of the two classes of common stock cannot ensure
    that their voting power will be sufficient to protect their interests.                                                                                                                                                                                                                                                                                                                                                     
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | • | Stockholders
            of either class of common stock will not have some of the stockholder
            rights traditionally associated with common stock.Neither
            Applied Biosystems nor Celera Genomics will have a separate board
            of directors to represent solely the interests of either class of
            common stock as holders of that class. Consequently, there will be
            no board of directors that owes any separate duties to holders of
            one class of common stock as holders of that class. Our Board of
            Directors will act in accordance with its good faith business judgment
            of our best interests, taking into consideration the interests of
            all common stockholders regardless of class or series, which may
            be detrimental to holders of one class of common stock as holders
    of that class.                                                                                       

Stockholders may not
      have any remedies for breach of fiduciary duties if any action by directors
      or officers has a disadvantageous effect on either class of common stock.


Stockholders may not have
    any remedies if any action or decision of our Board of Directors or officers
    has a disadvantageous effect on Applera-Applied Biosystems stock or Applera-Celera
    Genomics stock compared to the other class of common stock. Cases in Delaware
    involving tracking stocks have established that decisions by directors or
    officers involving differing treatment of tracking stocks are judged under
  the principle known as the


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business judgment
    rule unless
self-interest is shown.

In addition, principles
    of Delaware law established in cases involving differing treatment of two
    classes of common stock or two groups of holders of the same class of common
    stock provide that a board of directors owes an equal duty to all stockholders
    regardless of class or series. Absent abuse of discretion, a good faith business
    decision made by a disinterested and adequately informed Applera Corporation
    Board of Directors, Board of Directors committee, or officer with respect
    to any matter having different effects on holders of Applera-Applied Biosystems
    stock and holders of Applera-Celera Genomics stock would be a defense to
    any challenge to the determination made by or on behalf of the holders of
  either class of common stock.


Stock ownership could cause directors and officers to favor one group over
the other.


As a policy, our Board
      of Directors periodically monitors the ownership of shares of Applera-Applied
      Biosystems stock and Applera-Celera Genomics stock by our directors and
      senior officers as well as their option holdings and other benefits so
      that their interests are not misaligned with the two classes of common
      stock and with their duty to act in the best interests of us and our stockholders
      as a whole. However, because the actual stock market value of their interests
      in Applera-Applied Biosystems stock and Applera-Celera Genomics stock could
      vary significantly, it is possible that they could favor one group over
      the other as a result of their common stock holdings, options and other
      benefits. As of August 19, 2005, our directors and executive officers held
      shares of Applera-Applied Biosystems stock and Applera-Celera Genomics
      stock representing approximately equal percentages of the total shares
      outstanding of Applera-Applied Biosystems stock and Applera-Celera Genomics
      stock. The stock market value of these shares will vary with fluctuations
      in the market price of Applera-Applied Biosystems stock and Applera-Celera
      Genomics stock. However, the market capitalization of Applied Biosystems
      is substantially greater than that of Celera Genomics and, therefore, the
      market value of Applera-Applied Biosystems stock held by our directors
      and senior officers was significantly higher than the market value of Applera-Celera
      Genomics stock held by them on that date.


Numerous potential
        conflicts of interest exist between the classes of common stock that
        may be difficult to resolve by our Board of Directors or that may be
        resolved adversely to one of the classes.


| | • | Allocation
                  of corporate opportunities could favor one group over the other.Our
                  Board of Directors may be required to allocate corporate opportunities
                  between Applied Biosystems and Celera Genomics. In some cases,
                  our directors could determine that a corporate opportunity,
                  such as a business that we are acquiring or a new business,
                  should be shared by the groups or be allocated to one group
                  over the other. Any decisions could favor one group to the
          detriment of the other.                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | • | Applied
                  Biosystems and Celera Genomics may compete with each other
                  to the detriment of their businesses.The
                  existence of two separate classes of common stock will not
                  prevent Applied Biosystems and Celera Genomics from competing
                  with each other. Any competition between Applied Biosystems
                  and Celera Genomics could be detrimental to the businesses
                  of either or both of the groups. Under a Board of Directors policy,
                  the groups will generally not engage in the principal businesses
          of the other, except for joint transactions with each other.

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| |   | However,
          our Chief Executive Officer or Board of Directors will permit indirect
          competition between the groups, such as
            one group doing business with a competitor of the other group, based
            on his or its good faith business judgment that the competition is
            in our best interests and the best interests of all of our stockholders
            as a whole. In addition, the groups may compete in a business that
    is not a principal business of the other group.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | • | Our Board
            of Directors may pay more or less dividends on group common stock
            than if that group were a separate company.Subject
            to the limitations referred to below, our Board of Directors has
            the authority to declare and pay dividends on Applera-Applied Biosystems
            stock and Applera-Celera Genomics stock in any amount and could,
            in its sole discretion, declare and pay dividends exclusively on
            Applera-Applied Biosystems stock, exclusively on Applera-Celera Genomics
            stock, or on both, in equal or unequal amounts. Our Board of Directors
            is not required to consider the amount of dividends previously declared
            on each class, the respective voting or liquidation rights of each
            class, or any other factor. The performance of one group may cause
            our Board of Directors to pay more or less dividends on the common
            stock relating to the other group than if that other group were a
            stand-alone company. In addition, Delaware law and our certificate
            of incorporation impose limitations on the amount of dividends that
    may be paid on each class of common stock.                                                                
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | • | Proceeds of
            mergers or consolidations may be allocated unfavorably.
            Our Board of Directors will determine how consideration to be received
            by holders of common stock in connection with a merger or consolidation
            involving us is to be allocated among holders of each class of common
            stock. This percentage may be materially more or less than that which
            might have been allocated to the holders had our Board of Directors
    chosen a different method of allocation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | • | Holders of
            either class of common stock may be adversely affected by a conversion
            of group common stock.Our Board of Directors
            could, in its sole discretion and without stockholder approval, determine
            to convert shares of Applera-Applied Biosystems stock into shares
            of Applera-Celera Genomics stock, or vice versa, at any time, including
            when either or both classes of common stock may be considered to
            be overvalued or undervalued. If our Board of Directors chose to
            issue Applera-Celera Genomics stock in exchange for Applera-Applied
            Biosystems stock, or vice versa, the conversion would dilute the
            interests in us of the holders of the class of common stock being
            issued in the conversion. If our Board of Directors were to choose
            to issue Applera-Celera Genomics stock in exchange for Applera-Applied
            Biosystems stock, or vice versa, the conversion could give holders
            of shares of the class of common stock being converted a greater
            or lesser premium than any premium that was paid or might be paid
            by a third-party buyer of all or substantially all of the assets
    of the group whose stock is converted.
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | • | Cash proceeds
            of newly issued Applera-Celera Genomics stock in the future could
            be allocated to Applied Biosystems.If and
            to the extent Applied Biosystems holds Celera Genomics Designated
            Shares at the time of any future sale of Applera-Celera Genomics
            stock, our Board of Directors could allocate some or all of the proceeds
            of that sale to Applied Biosystems in consideration of a reduction
            in the number of these shares. Celera Genomics Designated Shares
    are a type of                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      



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| |                                                                                                                                                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | ----------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                       | authorized shares
        of Applera-Celera Genomics stock. Any decision could favor one group
        over the other group. For example, the decision to allocate the proceeds
        of that sale to Applied Biosystems could adversely affect Celera Genomics ability
        to obtain funds to finance its growth strategies. Applied Biosystems
        does not hold any Celera Genomics Designated Shares as of the date of
        this report. Celera Genomics Designated Shares could be issued in the
        future if our Board of Directors determines that Celera Genomics requires
        additional capital to finance its business and that Applied Biosystems
    should supply that capital.
| |                                                                                                                                                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | Our
          Board of Directors may change its management and allocation policies
    without stockholder approval to the detriment of either group.

Our Board of Directors
      may modify or rescind our policies with respect to the allocation of corporate
      overhead, taxes, debt, interest, and other matters, or may adopt additional
      policies, in its sole discretion without stockholder approval. A decision
      to modify or rescind these policies, or adopt additional policies, could
      have different effects on holders of Applera-Applied Biosystems stock and
      holders of Applera-Celera Genomics stock or could result in a benefit or
      detriment to one class of stockholders compared to the other class. Our
      Board of Directors will make any decision in accordance with its good faith
      business judgment that the decision is in our best interests and the best
  interests of all of our stockholders as a whole.


| | Either Applied
          Biosystems or Celera Genomics may finance the other group on terms
    unfavorable to either group.
| | ----------------------------------------------------------------------------------------------------------------------------

From time to time, we
      anticipate that we will transfer cash and other property between groups
      to finance their business activities. When this occurs, the group providing
      the financing will be subject to the risks relating to the group receiving
      the financing. We will account for those transfers in one of the following
  ways:


| | • | as a reallocation of
    pooled debt or preferred stock;                                       
| | - | -----------------------------------------------------------------------------------------------
| |   |                                                                                                
| | • | as a short-term or
    long-term loan between groups or as a repayment of a previous borrowing;
| |   |                                                                                                
| | • | as an increase or decrease
    in Celera Genomics Designated Shares; or                        
| |   |                                                                                                
| | • | as a sale of assets
    between groups.                                                        

Our Board of Directors
      has not adopted specific criteria for determining when it will account
      for the transfer of cash or other property as a reallocation of pooled
      debt or preferred stock, a loan or repayment, an increase or decrease in
      Celera Genomics Designated Shares, or a sale of assets. These determinations,
      including the terms of any transactions accounted for as debt, may be unfavorable
      to either the group transferring or receiving the cash or other property.
      Our Board of Directors expects to make these determinations, either in
      specific instances or by setting generally applicable policies, after considering
      the financing requirements and objectives of the receiving group, the investment
      objectives of the transferring group, and the availability, cost, and time
      associated with alternative financing sources, prevailing interest rates,
      and general economic conditions.


We
    cannot assure stockholders that any terms that we fix for debt will approximate
    those that could have been obtained by the borrowing group if it were a stand-alone
company.


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| | Celera Genomics
    could incur a higher tax liability than if it were a stand-alone taxpayer.
| | ----------------------------------------------------------------------------------------------

Our tax allocation policy
      provides that some tax benefits that cannot be used by the group generating
      those benefits but can be used on a consolidated basis are to be transferred,
      without reimbursement, to the group that can use the benefits. Any tax
      benefits that are transferred from Celera Genomics to Applied Biosystems
      will not be carried forward to reduce Celera Genomics future tax
      liability. As a result of this policy, Celera Genomics generated tax benefits
      of $28.1 million in our 2003 fiscal year, $12.3 million in our 2004 fiscal
      year, and $51.1 million in our 2005 fiscal year that were utilized by Applied
      Biosystems with no reimbursement to Celera Genomics. This and future use
      by Applied Biosystems, without reimbursement, of tax benefits generated
      by Celera Genomics could result in Celera Genomics paying a greater portion
      of the total corporate tax liability over time than would have been the
  case if Celera Genomics were a stand-alone taxpayer.


| | Holders of group
          common stock may receive less consideration upon a sale of assets than
    if the group were a separate company.
| | -------------------------------------------------------------------------------------------------------------------------------------------

Our certificate of incorporation
      provides that if a disposition of all or substantially all of the assets
  of either group occurs, we must, subject to some exceptions:


| | • | distribute to holders
        of the class of common stock relating to that group an amount equal to
    the net proceeds of such disposition; or 
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                   
| | • | convert at a 10% premium
        the common stock relating to that group into shares of the class of common
    stock relating to the other group.

If the group subject
      to the disposition were a separate, independent company and its shares
      were acquired by another person, some of the costs of that disposition,
      including corporate level taxes, might not be payable in connection with
      that acquisition. As a result, if the group subject to the disposition
      were a stand-alone company, stockholders of that group might receive a
      greater amount than the net proceeds that would be received by those stockholders
      if the assets of that group were sold and the proceeds distributed to those
      stockholders. In addition, we cannot assure stockholders that the net proceeds
      per share of the common stock relating to that group will be equal to or
      more than the market value per share of that common stock prior to or after
  announcement of a disposition.


| | Our capital structure
          and variable vote per share may discourage acquisitions of a group
    or a class of common stock.
| | ----------------------------------------------------------------------------------------------------------------------------------

A potential acquirer
      could acquire control of us by acquiring shares of common stock having
      a majority of the voting power of all shares of common stock outstanding.
      This majority could be obtained by acquiring a sufficient number of shares
      of both classes of common stock or, if one class of common stock has a
      majority of the voting power, only shares of that class since the relative
      aggregate voting power of the two classes of common stock fluctuates based
      on their relative aggregate market values. Currently, Applera-Applied Biosystems
      stock has a substantial majority of the voting power. As a result, it might
      be possible for an acquirer to obtain control by purchasing only shares
  of Applera-Applied Biosystems stock.


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| | Decisions by our
          Board of Directors and officers that affect market values could adversely
    affect voting and conversion rights.
| | ---------------------------------------------------------------------------------------------------------------------------------------------

The relative voting
      power per share of each class of common stock and the number of shares
      of one class of common stock issuable upon the conversion of the other
      class of common stock will vary depending upon the relative market values
      of Applera-Applied Biosystems stock and Applera-Celera Genomics stock.
      The market value of either or both classes of common stock could be adversely
      affected by market reaction to decisions by our Board of Directors or management
      that investors perceive as affecting differently one class of common stock
      compared to the other. These decisions could involve changes to our management
      and allocation policies, transfers of assets between groups, allocations
      of corporate opportunities and financing resources between groups, and
  changes in dividend policies.


| | Provisions governing
          common stock could discourage a change of control and the payment of
    a premium for stockholders shares.
| | -------------------------------------------------------------------------------------------------------------------------------------------

Our stockholder rights
      plan could prevent stockholders from profiting from an increase in the
      market value of their shares as a result of a change in control of us by
      delaying or preventing a change in control. The existence of two classes
      of common stock could also present complexities and may pose obstacles,
      financial and otherwise, to an acquiring person. In addition, provisions
      of Delaware law and our certificate of incorporation and bylaws may also
  deter hostile takeover attempts.


|Item
    6. | Selected Financial
    Data
|----------- | ---------------------------

We incorporate herein by reference pages 19 and 20 of our 2005 Annual Report.


|Item
    7. | Management's Discussion
          and Analysis of Financial Condition andResults
    of Operations
|----------- | --------------------------------------------------------------------------------------------------

We incorporate herein by reference pages 21 through 46 of our 2005 Annual Report.


|Item
    7A. | Quantitative and
    Qualitative Disclosures about Market Risk
|------------ | --------------------------------------------------------------

We incorporate herein by reference page 44 of our 2005 Annual Report.


|Item
    8. | Financial Statements
    and Supplementary Data
|----------- | -----------------------------------------------

The following financial
      statements and the supplementary financial information included in our
      2005 Annual Report are incorporated herein by reference: the Consolidated
      Financial Statements and the report thereon of PricewaterhouseCoopers LLP
      dated  August 31, 2005, on pages 47 through 92 of our 2005 Annual Report,
      including Note 11, page 76, which contains unaudited quarterly financial
      information.


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|            |                                                                                                
|----------- | -----------------------------------------------------------------------------------------------
|Item
    9. | Changes
            in and Disagreements with Accountants on Accounting
andFinancial Disclosure

Not applicable.


|Item
    9A. | Controls and Procedures
|------------ | -----------------------

Disclosure Controls
      and Procedures

We
    are responsible for maintaining adequate disclosure controls and procedures
    as defined by the Securities and Exchange Commission in its Rules 13a-15(e)
    and 15d-15(e) under the Securities Exchange Act of 1934. Generally, these
    are controls and procedures designed to ensure that the information required
    to be disclosed in the reports that we file or submit under the Securities
    Exchange Act is recorded, processed, summarized, and reported within the
    time periods specified in the SECs rules and forms. Our management,
    with the participation of our Chief Executive Officer and Chief Financial
    Officer, evaluated the effectiveness of these disclosure controls and procedures
    as of the end of our 2005 fiscal year, the period covered by this report.
    Based on that evaluation, our Chief Executive Officer and Chief Financial
    Officer have concluded that our disclosure controls and procedures are effective
    to achieve their stated purpose. However, there is no assurance that our
    disclosure controls and procedures will operate effectively under all circumstances.


Internal Control Over Financial Reporting

General.We are responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined by the Securities and Exchange Commission in its Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. Generally, internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.


Managements
  Report on Internal Control Over Financial Reporting.Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our internal control over financial reporting as of the end of our 2005 fiscal year, the period covered by this report. The report of our management on internal control over financial reporting, based on this evaluation, appears on page 91 of our 2005 Annual Report. The management report is incorporated into this report by reference.


Attestation Report of our Registered Public Accounting Firm.The
        report of our independent registered public accounting firm on our managements
        assessment of the effectiveness of our internal control over financial
        reporting appears on page 92 of our 2005 Annual Report. The attestation
report is incorporated into this report by reference.


Changes in Internal Control Over Financial Reporting.Based
        on our managements review of internal control over financial reporting
        as described above, we have determined that no changes were made to our
  internal control over financial reporting during the fourth fiscal


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quarter of
  our 2005 fiscal year that have materially affected, or are reasonably likely
  to materially affect, our internal control over financial reporting.

|Item
    9B. | Other Information
|------------ | -----------------

Not applicable.


PART III

|Item
    10. | Directors and
    Executive Officers of the Registrant
|------------ | ------------------------------------------------------

Identification and Business Experience of Directors

With
    respect to the identification and business experience of our directors and
    persons nominated to become directors, we incorporate herein by reference
    the information contained in pages 2426
    of our 2005 Proxy Statement under the heading Proposal 1Election
    of Directors.


Identification and Business Experience of Executive Officers

The following is a list
      of our executive officers, identifying as of September 8, 2005, their:
      ages; corporate offices presently held and year first elected to those
  offices; and other positions currently held.


|Name                         | Age | Present Corporate Offices (Year First Elected)                                                | Other Positions Currently Held                                              
|---------------------------- | --- | --------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------
|Robert
    F.G. Booth, Ph.D. | 51  | Vice President (2002)                                                                         | Chief
    Scientific Officer, Celera Genomics Group                         
|Catherine
    M. Burzik      | 54  | Senior
    Vice President, and President, Applied Biosystems Group (2004)                     | Not applicable                                                              
|Ugo D. DeBlasi               | 43  | Vice President and Controller (2003)                                                          | Not applicable                                                              
|Dennis
    A. Gilbert, Ph.D. | 47  | Vice President (2004)                                                                         | Vice President-Research
    and Chief Scientific Officer, Applied Biosystems
|Barbara J. Kerr              | 59  | Vice President, Human Resources (2000)                                                        | Not applicable                                                              
|Sandeep Nayyar               | 45  | Assistant Controller (2002)                                                                   | Vice President, Finance,
    Applied Biosystems Group                       
|Kathy P. Ordoñez             | 54  | Senior Vice President,
    and President, Celera Genomics Group and Celera Diagnostics (2002) | Not applicable                                                              
|William B. Sawch             | 50  | Senior Vice President
    (1997) and General Counsel (1993)                                   | Not applicable                                                              
|Tony L. White                | 59  | Chairman, President,
    and Chief Executive Officer (1995)                                   | Not applicable                                                              
|Dennis L. Winger             | 57  | Senior Vice President
    and Chief Financial Officer (1997)                                  | Not applicable                                                              

Each of the executive
      officers identified above was most recently elected to the corporate offices
      identified above by our Board of Directors in August 2005. The term of
      each officer will continue until their successors have been duly elected
      or, if earlier, their death, resignation, or removal. Each of the executive
  officers has been employed by us or a subsidiary in one or more


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executive or managerial
    capacities for at least the past five years, with the exception of Dr. Booth,
Ms. Burzik, Dr. Gilbert, Mr. Nayyar, and Ms. Ordoñez.

Dr. Booth was elected
      Vice President on August 15, 2002. Prior to our employment of him in August
      2002, Dr. Booth was employed by Hoffmann-La Roche, a leading international
      healthcare company, where he held a series of executive positions over 13
      years, including most recently as Senior Vice President responsible for all
      research and early development of inflammatory, viral, respiratory, and bone
      disease products from January 1996 to August 2002.


Ms. Burzik was first elected
      as Vice President on September 2, 2003, and was elected to her current position
      of Senior Vice President, and President, Applied Biosystems Group, on August
      20, 2004. Prior to our employment of her in September 2003, she was employed
      by Johnson & Johnson, a leading international provider of health care
      products, where she was President of its Ortho-Clinical Diagnostics, Inc.
      subsidiary from 1998 to 2003, and General Manager of its Critikon, Inc. business
      from 1997 to 1998. Prior to that, Ms. Burzik was employed by Eastman Kodak
      Company, a leading international provider of imaging products and services,
      where she held various operations and marketing positions over 20 years.
      These positions included most recently Vice President, Corporate Marketing
      from 1996 to 1997, and Chief Executive Officer and President of its former
      subsidiary Kodak Health Imaging Systems, Inc.


Dr. Gilbert was elected
      Vice President on November 18, 2004. Dr. Gilbert was first employed by us
      in 1994 as a research scientist, and since then he has held positions of
      increasing responsibility at Applera, including most recently Vice President,
      Advanced Research and Technology at Applied Biosystems. Prior to that he
      held various other management positions within Applera businesses, including
      Vice President, Genomics Applications at Applied Biosystems and Vice President,
      Gene Discovery at Celera Genomics.


Mr. Nayyar was elected
      Assistant Controller on April 5, 2002. Prior to our employment of him in
      October 2001, Mr. Nayyar was employed by Quantum Corporation, a data storage
      company, where he was Vice President of Finance for the Hard Disk Drive Group
      from 2000 to 2001, Vice President, Finance for the High-end Storage Division
      from 1998 to 2000, Director of Finance for the Corporate Finance Group from
      1997 to 1998, and Controller for the High Capacity Storage Group from 1994
      to 1997.


Ms. Ordoñez was
      first elected to serve as a corporate officer on December 1, 2000, and was
      elected to her current position of Senior Vice President, and President,
      Celera Genomics Group and Celera Diagnostics on August 15, 2002. Prior to
      our employment of her in December 2000, Ms. Ordoñez was employed by
      Hoffmann-La Roche, a leading international healthcare company, where she
      was President and Chief Executive Officer of Roche Molecular Systems from
      1991 to 2000.


Family Relationships

To the best of our knowledge
      and belief, there is no family relationship between any of our directors,
      executive officers, or persons nominated or chosen by us to become a director
      or an executive officer.


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Involvement in Certain Legal Proceedings

To the best of our knowledge
      and belief, none of our directors, persons nominated to become directors,
      or executive officers has been involved in any proceedings during the past
      five years that are material to an evaluation of the ability or integrity
      of such persons to be our directors or executive officers.


Audit Committee and Audit Committee Financial Expert

We have a separately
      designated standing audit committee established in accordance with Section
      3(a)(58)(A)
      of the Securities Exchange Act of 1934. We have named that committee our Audit/Finance
      Committee. The members of that committee as of the date of this report
      are Richard H. Ayers, Robert H. Hayes (co-chair), Theodore E. Martin, and
      James R. Tobin (co-chair). Our Board of Directors has determined that our
      Audit/Finance Committee has three audit committee financial experts as
      that term has been defined by the Securities and Exchange Commission in
      Item 401(h) of its Regulation S-K, constituting all members of the Committee
      except
      Robert H. Hayes. The designation of members of our Audit/Finance Committee
      as audit committee financial experts does not impose on those
      members any duties, obligations, or liabilities that are greater than are
      generally imposed on them as members of our Audit/Finance Committee and
      Board of Directors, and does not affect the duties, obligations, or liabilities
      of any other member of our Audit/Finance Committee or Board of Directors.
      All of the members of our Audit/Finance Committee, including those that
      our
      Board of Directors have determined are audit committee financial experts,
      are independent as that term has been defined by the SEC in
      Item 7(d)(3)(iv) of Schedule 14A. Additional information regarding our
      Audit/Finance
      Committee is incorporated by reference to the information contained in
      pages4 and 5
      of our 2005 Proxy Statement under the heading Board of Directors
      and CommitteesBoard CommitteesAudit/Finance
        Committee.


Recommendation of Nominees to our Board of Directors

Information concerning
      our procedures by which security holders may recommend nominees to our Board
      of Directors is incorporated herein by reference to the information contained
      in pages5 and 6 of
      our 2005 Proxy Statement under the heading Board of Directors and CommitteesBoard CommitteesNominating/Corporate
      Governance Committee.


Section 16(a) Beneficial Ownership Reporting Compliance

Information concerning
      compliance with Section 16(a) of the Securities Exchange Act of 1934 is
      incorporated herein by reference to the information contained in page 11
      of our 2005 Proxy Statement under the heading Ownership of Company
      StockSection
      16(a) Beneficial Ownership Reporting Compliance.


Code of Ethics

We have adopted a code
      of ethics that applies to our officers, directors, and employees. Our code
      of ethics, which we refer to as our Code of Business Conduct and Ethics, was
      designed to comply with the definition of code of ethics adopted
      by the Securities and Exchange Commission as applicable to our Chief Executive
      Officer (our principal executive officer), our Chief Financial Officer (our
      principal financial officer), and our Controller (our principal accounting
      officer). This definition is contained in Item 406(b) of the SECs


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Regulation S-K. Our code
    of ethics was also designed to meet the code of business conduct and ethics
    requirements promulgated by the New York Stock Exchange, which requirements
are set forth in Section 303A.10 of the NYSE Listed Company Manual.

Our Code of Business
      Conduct and Ethics is posted on our Applera, Applied Biosystems, and Celera
      Genomics
      Internet websites. Also, we intend to post any amendments to or waivers
      from the code that are applicable to our officers or directors on these
      Internet
      websites as required to satisfy SEC and New York Stock Exchange disclosure
      requirements applicable to amendments and waivers. This information can
      be accessed on our websites free of charge as described in Part I of this
      report
      on pages 2 and 3 under the heading BusinessCompany OverviewAvailable
      Information. In addition, you can obtain this information free of
      charge by calling our corporate Secretary at 203-840-2000 or by making
      a request
      in writing mailed to: Applera Corporation, Attention: Secretary, Applera
    Corporation, 301 Merritt 7, P.O. Box 5435, Norwalk, CT 06856-5435.


|Item
    11. | Executive
    Compensation
|------------ | --------------------------

We
      incorporate herein by reference the information contained in pages 1223
      of our 2005 Proxy Statement under the heading Executive Compensation.


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|Item 12. | Security Ownership
          of Certain Beneficial Owners and Management andRelated
    Stockholder Matters
|-------- | -----------------------------------------------------------------------------------------------------------

Securities Authorized for Issuance Under Equity Compensation Plans

The following table provides information about shares of Applera common stock
  that may be issued under our equity compensation plans, including compensation
  plans that were approved by our stockholders as well as compensation plans that
  were not approved by our stockholders. Information in the table is as of the
  end of our 2005 fiscal year.


|                                                                         |                          |                              |     |          |  | Number
    of shares | 
|------------------------------------------------------------------------ | ------------------------ | ---------------------------- | --- | -------- |  | -------------------- | 
|remaining
    available                                                 
|for
    future issuance                                                 
|Number
    of shares to be                                               | Weighted-average         | under
    equity            
|issued
    upon exercise of                                              | exercise
    price of    | compensation
    plans      
|outstanding
    options,                                                 | outstanding
    options, | (excluding
    securities   
|warrants,
    and rights                                                 | warrants,
    and rights | reflected
    in column (a))
|Plan Category                                                            | (a)                      | (b)                          | (c)
|                                                                         |                          |                              |     |          |  |                      | 
|Applera-AppliedBiosystems
    stock                                      |                          |                              |     |          |  |                      | 
|Equity
           compensation 
		   plans
    approved by stockholders  |                          | 35,479,9221                  |     | $30.9027 |  | 12,637,5232          | 
|Equity
           compensationplans
         not approved bystockholders |                          | 03                           |     |          |  |                      | 

|Total                                                                            |  | 35,479,922           |  | $30.9027 |  | 12,637,523 | 
|-------------------------------------------------------------------------------- |  | -------------------- |  | -------- |  | ---------- | 
|***Applera-Celera***Genomics
    stock                                           |  |                      |  |          |  |            | 
|Equity compensation
      plans
    approved by stockholders                     |  | 10,254,
        9524 |  | $18.8438 |  | 7,279,6915 | 
|Equity
         compensation
         plans
    not approved by
    stockholders |  | 77,6166,7            |  | $27.6148 |  | 581,4967   | 
|Total                                                                            |  | 10, 332,568          |  | $18.9096 |  | 7,861,187  | 
|                                                                                 |  |                      |  |          |  |            | 
|                                                                                 |  |                      |  |          |  |            | 

|1 | Represents
        shares of Applera-Applied Biosystems stock issuable upon the exercise
        of options outstanding under the following equity compensation plans:
        The Perkin-Elmer Corporation 1993 Stock Incentive Plan for Key Employees;
        The Perkin-Elmer Corporation 1996 Stock Incentive Plan; The Perkin-Elmer
        Corporation 1997 Stock Incentive Plan; and The Perkin-Elmer Corporation
        1998 Stock Incentive Plan (collectively, theFrozen
        Applera Equity Plans);
        and the Applera Corporation/Applied Biosystems Group Amended and Restated
        1999
Stock Incentive Plan.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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|2 | Represents
          shares of Applera-Applied Biosystems stock issuable pursuant to options
          and other rights authorized for future issuance under the Applera Corporation/Applied
          Biosystems Group Amended and Restated 1999 Stock Incentive Plan and
          the Applera Corporation 1999 Employee Stock Purchase Plan. Also includes
    194,858 shares ofApplera-Applied
    Biosystems stock remaining available for future issuance under the Applera
    Corporation 1993 Director Stock Purchase and Deferred Compensation Plan.                                                                                                                                                                                                                                                              
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|3 | As
        of the end of our 2005 fiscal year, options to purchase 66,494 shares
        of Applera-Applied Biosystems stock were outstanding under the following
        equity compensation plans: the Molecular Informatics, Inc. 1997 Equity
        Ownership Plan; the PerSeptive Biosystems 1992 Stock Plan; and the PerSeptive
        Biosystems 1997 Non-Qualified Stock Option Plan. These options were assumed
        in connection with merger and acquisition transactions. The weighted-average
        exercise price of these options as of such date was $8.1846. No new options
        or other rights to equity compensation will be issued under these equity
        compensation plans, and the options outstanding under these equity compensation
    plans are not reflected in the table above.
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|4 | Represents
        shares of Applera-Celera Genomics stock issuable upon the exercise of
        options outstanding under the Frozen Applera Equity Plans and the Applera
        Corporation/Celera Genomics Group Amended and Restated 1999 Stock Incentive
    Plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|5 | Represents
        shares of Applera-Celera Genomics stock issuable pursuant to options
        and other rights authorized for future issuance under the Applera Corporation/Celera
        Genomics Group Amended and Restated 1999 Stock Incentive Plan and the
        Applera Corporation 1999 Employee Stock Purchase Plan. Also includes
        43,208 shares of Applera-Celera Genomics stock remaining available for
        future issuance under the Applera Corporation 1993 Director Stock Purchase
    and Deferred Compensation Plan.                                                                                                                                                                                                                                                                       

|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|6 | As
          of the end of our 2005 fiscal year, options to purchase 214,182 shares
          of Applera-Celera Genomics stock were outstanding under the following
          equity compensation plans: the Molecular Informatics, Inc. 1997 Equity
          Ownership Plan; the Axys Pharmaceuticals,
Inc.1989 Stock Plan;
the Axys Pharmaceuticals, Inc. 1997 Equity Incentive Plan; the Axys Pharmaceuticals,
Inc. 1997 Non-Officer Equity Incentive Plan; the PerSeptive Biosystems 1992 Stock
Plan; the PerSeptive Biosystems 1997 Non-Qualified Stock Option Plan; and the
Paracel, Inc. Stock Option Plan. These options were assumed in connection with
merger and acquisition transactions. The weighted average exercise price of these
options as of such date was $24.6228. No new options or other rights to equity
compensation will be issued under these equity compensation plans, and the options
outstanding under these equity compensation plans are not reflected in the table
above, except for the Axys Pharmaceuticals, Inc. 1997 Equity Incentive Plan.
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|7 | Represents
        shares of Applera-Celera Genomics stock issuable pursuant to options
        outstanding under the Axys Pharmaceuticals, Inc. 1997 Equity Incentive
        Plan, and shares of Applera-Celera Genomics stock issuable pursuant to
    options and other rights authorized for future issuance under that plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

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The following is a description of the material features of our equity compensation plans that were not approved by our stockholders:


Molecular Informatics, Inc. 1997 Equity Ownership Plan.We assumed this plan in connection with the acquisition of Molecular Informatics, Inc. No new options or other rights to equity compensation will be issued under this plan. As of the end of our 2005 fiscal year, there were options to purchase 5,544 shares of Applera-Applied Biosystems stock and 2,004 shares of Applera-Celera Genomics stock outstanding under this plan. The last of these options that were issued are scheduled to terminate in July 2007.


PerSeptive Biosystems 1992 Stock Plan.We assumed this plan in connection with the acquisition of PerSeptive Biosystems, Inc. No new options or other rights to equity compensation will be issued under this plan. As of the end of our 2005 fiscal year, there were options to purchase 56,334 shares of Applera-Applied Biosystems stock and 18,072 shares of Applera-Celera Genomics stock outstanding under this plan. The last of these options that were issued are scheduled to terminate in July 2007.


PerSeptive Biosystems 1997 Non-Qualified Stock Option Plan.We assumed this plan in connection with the acquisition of PerSeptive Biosystems, Inc. No new options or other rights to equity compensation will be issued under this plan. As of the end of our 2005 fiscal year, there were options to purchase 4,616 shares of Applera-Applied Biosystems stock and 578 shares of Applera-Celera Genomics stock outstanding under this plan. The last of these options that were issued are scheduled to terminate in August 2007.


Paracel, Inc. Stock Option Plan.We assumed this plan in connection with the acquisition of Paracel, Inc. No new options or other rights to equity compensation will be issued under this plan. As of the end of our 2005 fiscal year, there were options to purchase 23,915 shares of Applera-Celera Genomics stock outstanding under this plan. The last of these options that were issued are scheduled to terminate in February 2007.


Axys Pharmaceuticals, Inc. 1989 Stock Plan.We
  assumed this plan in connection with the acquisition of Axys Pharmaceuticals,
  Inc. No new options or other rights to equity compensation will be issued under
    this plan. As of the end of our 2005 fiscal year, there were options to purchase
    35,288 shares of Applera-Celera Genomics stock outstanding under this plan.
    The last of these options that were issued are scheduled to terminate in
May 2009.


Axys Pharmaceuticals, Inc. 1997 Equity Incentive Plan.We
    assumed this plan in connection with the acquisition of Axys Pharmaceuticals,
    Inc. As of the end of our 2005 fiscal year, there were options to purchase
    77,616 shares of Applera-Celera Genomics stock outstanding under this plan.
    The last of these options that were issued are scheduled to terminate in
    November 2011. 581,496 shares of Applera-Celera Genomics stock are authorized
    for future issuance as equity compensation under this plan pursuant to stock
    options, stock awards, and stock purchase awards. Employees and directors
    of and consultants to Axys Pharmaceuticals, one of our a wholly owned subsidiaries,
    and its affiliates are generally eligible for the grant of equity compensation
    under this plan. The exercise price, vesting period, and all other terms
    and conditions of each option granted under this plan will be determined
    by our Management Resources Committee, except that the exercise price may
    not be less than the fair market value on the date of grant, and the term
    of each option may not be more than 10 years. Stock awards and stock purchase
    awards under this plan may be subject to such restrictions as may be determined
    by the Committee and may be subject to repurchase rights in favor of the
    Company. Stock purchase awards under this plan may


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not have a purchase price
      less than the fair market value on the date of the award. This plan expires
      in November 2007, after which no equity compensation may be issued under
      this plan.

Axys Pharmaceuticals, Inc. 1997 Non-Officer Equity Incentive Plan.We assumed this plan in connection with the acquisition of Axys Pharmaceuticals, Inc. No new options or other rights to equity compensation will be issued under this plan. As of the end of our 2005 fiscal year, there were options to purchase 56,709 shares of Applera-Celera Genomics stock outstanding under this plan. The last of these options that were issued are scheduled to terminate in October 2011.


Security Ownership of Certain Beneficial Owners

Information concerning
      the security ownership of certain beneficial owners is incorporated herein
      by reference to the information contained in page9 of
      our 2005 Proxy Statement under the heading Ownership of Company StockGreater
      than 5% Beneficial Owners.


Security Ownership of Management

Information concerning
      the security ownership of management is incorporated herein by reference
      to the information contained in pages10 and 11 of
      our 2005 Proxy Statement under the heading Ownership of Company StockDirectors
      and Executive Officers.


Changes in Control

We know of no arrangements,
      including any pledge by any person of our securities, the operation of which
      may at a subsequent date result in a change in control of Applera.


|Item
    13. | Certain Relationships
    and Related Transactions
|------------ | --------------------------------------------------

Information concerning
      certain relationships and related transactions is incorporated herein by
      reference to the information contained in pages2123 of
  our 2005 Proxy Statement under the heading “Executive Compensation–Employment Agreements
  and Other Relationships.


|Item
    14. | Principal Accountant
    Fees and Services
|------------ | ------------------------------------------

Information
      concerning fees billed by PricewaterhouseCoopers LLP, our independent registered
      public accounting firm, during our 2004 and 2005 fiscal years, and information
      concerning the pre-approval policies and procedures of the Audit/Finance
      Committee of our Board of Directors, is incorporated herein by reference
      to the information contained in pages 26 and 27 of
      our 2005 Proxy Statement under the heading Proposal 2Ratification
      of the Selection of Independent Registered Public Accounting Firm.


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PART IV

|Item
    15. | Exhibits and
    Financial Statement Schedules
|------------ | ----------------------------------------------

Financial Statements

The following financial statements, together with the report thereon of
  PricewaterhouseCoopers LLP dated August 31, 2005,
  appearing in our 2005 Annual Report, are incorporated by reference
  in this report. With the exception of the aforementioned information and that
  which is specifically incorporated in Parts I and II of this report, our 2005
  Annual Report is not to be deemed filed as part of this report.


|                                                                                                 |  | Annual Report
       Page No.
|------------------------------------------------------------------------------------------------ |  | -----------------------------
|                                                                                                 |  |                              
|Consolidated
            Statements of OperationsFiscal years 2003,
    2004, and 2005           |  | 47                           
|                                                                                                 |  |                              
|Consolidated
              Statements of Financial PositionAt June 30, 2004 and 2005             |  | 48                           
|                                                                                                 |  |                              
|Consolidated
              Statements of Cash FlowsFiscal years 2003, 2004, and 2005             |  | 49                           
|                                                                                                 |  |                              
|Consolidated
            Statements of Stockholders EquityFiscal years
    2003, 2004, and 2005 |  | 50                           
|                                                                                                 |  |                              
|Notes
    to Consolidated Financial Statements                                                   |  | 51 - 90                      
|                                                                                                 |  |                              
|Report
    of Management                                                                         |  | 91                           
|                                                                                                 |  |                              
|Report
    of Independent Registered Public Accounting Firm                                      |  | 92                           

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Financial Statement Schedule

The following additional
      financial data should be read in conjunction with the consolidated financial
      statements in our 2005 Annual Report. Schedules not included with this additional
      financial data have been omitted because they are not applicable or the required
      information is shown in the consolidated financial statements or notes thereto.


|                                                                                              | 10-K Page No.
|--------------------------------------------------------------------------------------------- | -------------
|                                                                                              |              
|Report of Independent Registered PublicAccounting
        Firm on Financial StatementSchedule | 121          
|                                                                                              |              
|Schedule II  Valuation and QualifyingAccounts
        and Reserves                           | 122          



|Exhibits |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|-------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Exhibit  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|No.      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|2.1      | Agreement and Plan of Merger dated March 10,
        1999, among The Perkin-Elmer Corporation, a New
        York corporation, The Perkin-Elmer Corporation, a Delaware corporation,
        and PE Merger Corp., a New York corporation
        (incorporated by reference to Exhibit 2.1 to our Registration Statement
        on Form S-4 (No. 333-67797)).                                                                                                                                                                             
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|3.1.1    | Restated Certificate of Incorporation of Applera
        (incorporated by reference to Exhibit 3(i) to our Quarterly
        Report on Form 10-Q for the fiscal quarter ended December 31, 2000 (Commission
        file number 1-4389)).                                                                                                                                                                                                                                                                                                  
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|3.1.2    | Certificate of Designations of Series A Participating
        Junior Preferred Stock and Series B Participating
        Junior Preferred Stock (incorporated by reference to Exhibit A to Exhibit
        4.1 to our Registration Statement on
        Form S-4 (No. 333-67797)).                                                                                                                                                                                                                                                          
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|3.2      | By-laws of Applera (incorporated by reference
        to Exhibit 3.2 to our Registration Statement on Form
        S-4 (No. 333-67797)).                                                                                                                                                                                                                                                                                                                                                                                                   
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|4.1      | Stockholder Protection Rights Agreement dated
        as of April 28, 1999, between Applera and BankBoston,
        N.A. (incorporated by reference to Exhibit 4.1 to our Registration Statement
        on Form S-4 (No. 333-67797)).                                                                                                                                                                                                                                                                                                     
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|4.2      | Amendment to Rights Agreement dated as of April
        17, 2002, among BankBoston, N.A., EquiServe
        Trust Company, N.A., and Applera (incorporated by reference to Exhibit
        4.2 to our Annual Report on Form 10-K
        for the fiscal year ended June 30, 2002 (Commission file number 1-4389)).                                                                                                                                                                                                                         
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|4.3      | Credit Agreement dated as of April 15, 2005,
        among Applera, the initial lenders named therein, Citigroup
        Global Markets Inc., as sole arranger, JPMorgan Chase Bank, N.A., as
        syndication agent, Bank of America,
        N.A. and ABN AMRO Bank N.V., as co-documentation agents, and Citibank,
        N.A., as administrative agent (incorporated by reference to Exhibit 4.1
        to our Current Report on Form 8-K dated
        April 15, 2005, and filed April 20, 2005 (Commission file number 1-4389)).

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|10.1   | The Perkin-Elmer Corporation 1993
        Stock Incentive Plan for Key Employees (incorporated by reference
        to Exhibit 99 to our Registration Statement on Form S-8 (No. 33-50847)).*                                                                                                                                       
|------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                     
|10.2.1 | The Perkin-Elmer Corporation 1996
        Stock Incentive Plan (incorporated by reference to Exhibit 99
        to our Registration Statement on Form S-8 (No. 333-15189)).*                                                                                                                                                        
|       |                                                                                                                                                                                                                                                                                                                                     
|10.2.2 | Form of Non-Qualified Stock Option
        Agreement for executive officers pursuant to The Perkin-Elmer
        Corporation 1996 Stock Incentive Plan.*                                                                                                                                                                            
|       |                                                                                                                                                                                                                                                                                                                                     
|10.2.3 | Form of Incentive Stock Option
        Agreement for executive officers pursuant to The Perkin-Elmer Corporation
        1996 Stock Incentive Plan.*                                                                                                                                                                                
|       |                                                                                                                                                                                                                                                                                                                                     
|10.2.4 | Form of Director Stock Option Agreement
        pursuant to The Perkin-Elmer Corporation 1996 Stock Incentive
        Plan.*                                                                                                                                                                                                        
|       |                                                                                                                                                                                                                                                                                                                                     
|10.3   | The Perkin-Elmer Corporation 1996
        Employee Stock Purchase Plan, as amended October 15, 1998
        (incorporated by reference to Exhibit A to our Proxy Statement for our
        1998 Annual Meeting of Stockholders
        (Commission file number 1-4389)).*                                                           
|       |                                                                                                                                                                                                                                                                                                                                     
|10.4.1 | The Perkin-Elmer Corporation 1997
        Stock Incentive Plan (incorporated by reference to Exhibit 99 to
        our Registration Statement on Form S-8 (No. 333-38713)).*                                                                                                                                                        
|       |                                                                                                                                                                                                                                                                                                                                     
|10.4.2 | Form of Non-Qualified Stock Option
        Agreement for executive officers pursuant to The Perkin-Elmer
        Corporation 1997 Stock Incentive Plan.*                                                                                                                                                                            
|       |                                                                                                                                                                                                                                                                                                                                     
|10.5.1 | The Perkin-Elmer Corporation 1998
        Stock Incentive Plan (incorporated by reference to Exhibit B to
        our Proxy Statement for our 1998 Annual Meeting of Stockholders (Commission
        file number 1-4389)).*                                                                                                        
|       |                                                                                                                                                                                                                                                                                                                                     
|10.5.2 | Form of Director Stock Option Agreement
        pursuant to The Perkin-Elmer Corporation 1998 Stock Incentive
        Plan.*                                                                                                                                                                                                        
|       |                                                                                                                                                                                                                                                                                                                                     
|10.6   | Applera Corporation 1999 Employee
        Stock Purchase Plan, as amended October 21, 2004 (incorporated
        by reference to Annex A to Schedule 14A, filed September 17, 2004, containing
        our definitive Proxy Statement for our
        2004 Annual Meeting of Stockholders (Commission file number
        1-4389)).*
|       |                                                                                                                                                                                                                                                                                                                                     
|10.7.1 | Applera Corporation/Applied Biosystems
        Group 1999 Stock Incentive Plan, as amended through August
        21, 2003 (incorporated by reference to Exhibit 10.7 to our Annual Report
        on Form 10-K for the fiscal year ended
        June 30, 2003 (Commission file number 1-4389)).*                                  
|       |                                                                                                                                                                                                                                                                                                                                     
|10.7.2 | Form of Non-Qualified Stock Option
        Agreement for executive officers pursuant to the Applera Corporation/Applied
        Biosystems Group 1999 Stock Incentive Plan.*                                                                                                                                                        
|       |                                                                                                                                                                                                                                                                                                                                     
|10.7.3 | Form of Incentive Stock Option
        Agreement for executive officers pursuant to the Applera Corporation/Applied
        Biosystems Group 1999 Stock Incentive Plan.*                                                                                                                                                            
|       |                                                                                                                                                                                                                                                                                                                                     
|10.7.4 | Forms of Stock Option Agreements
        for executive officers pursuant to the Applera Corporation/Applied
        Biosystems Group 1999 Stock Incentive Plan, relating to non-qualified options
        issued in conjunction with awards under the Applera Corporation Performance
        Unit Bonus Plan.*                     
|       |                                                                                                                                                                                                                                                                                                                                     
|10.7.5 | Form of Employee Stock Award Agreement
        for executive officers pursuant to the Applera Corporation/Applied
        Biosystems Group 1999 Stock Incentive Plan.*                                                                                                                                                              
|       |                                                                                                                                                                                                                                                                                                                                     
|10.7.6 | Form of Director Stock Option Agreement
        pursuant to the Applera Corporation/Applied Biosystems
        Group 1999 Stock Incentive Plan.*                                                                                                                                                                                    
|       |                                                                                                                                                                                                                                                                                                                                     
|10.7.7 | Forms of Performance Stock Option
	Agreements for executive officers pursuant to the
	Applera Corporation/Applied Biosystems Group 1999 Stock Incentive Plan.*                                                                                                                                                                      
|       |                                                                                                                                                                                                                                                                                                                                     
|10.7.8 | Form of Performance Share Award
        	Agreement for executive officers pursuant to the
	Applera Corporation/Applied Biosystems Group 1999 Stock Incentive Plan.*                                                                                                                                                                 

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|10.8.1  | Applera Corporation/Applied Biosystems
        Group Amended and Restated 1999 Stock Incentive Plan,
        effective October 21, 2004 (incorporated by reference to Annex B to Schedule
        14A, filed September 17, 2004, containing
        our definitive Proxy Statement for our 2004 Annual Meeting of Stockholders
        (Commission file number 1-4389)).*
|------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        |                                                                                                                                                                                                                                                                                                                                                                          
|10.8.2  | Form of Non-Qualified Stock Option Agreement
        for executive officers pursuant to the Applera Corporation/Applied
        Biosystems Group Amended and Restated 1999 Stock Incentive Plan.*                                                                                                                                                                        
|        |                                                                                                                                                                                                                                                                                                                                                                          
|10.8.3  | Form of Incentive Stock Option Agreement for
        executive officers pursuant to the Applera Corporation/Applied
        Biosystems Group Amended and Restated 1999 Stock Incentive Plan.*                                                                                                                                                                            
|        |                                                                                                                                                                                                                                                                                                                                                                          
|10.8.4  | Form of Restricted Stock Bonus Agreement for
        executive officers pursuant to the Applera Corporation/Applied
        Biosystems Group Amended and Restated 1999 Stock Incentive Plan.*                                                                                                                                                                            
|        |                                                                                                                                                                                                                                                                                                                                                                          
|10.8.5  | Form of Director Stock Option Agreement pursuant
        to the Applera Corporation/Applied Biosystems
        Group Amended and Restated 1999 Stock Incentive Plan (incorporated by
        reference to Exhibit 10.6 to our Current
        Report on Form 8-K dated October 21, 2004, and filed October 27, 2004
        (Commission file number 1-4389)).*           
|        |                                                                                                                                                                                                                                                                                                                                                                          
|10.8.6  | Form of Director Stock Award Agreement pursuant
        to the Applera Corporation/Applied Biosystems
        Group Amended and Restated 1999 Stock Incentive Plan (incorporated by
        reference to Exhibit 10.4 to our Current
        Report on Form 8-K dated October 21, 2004, and filed October 27, 2004
        (Commission file number 1-4389)).*            
|        |                                                                                                                                                                                                                                                                                                                                                                          
|10.9.1  | Applera Corporation/Celera Genomics Group 1999
        Stock Incentive Plan, as amended through August
        21, 2003 (incorporated by reference to Exhibit 10.8 to our Annual Report
        on Form 10-K for the fiscal year ended
        June 30, 2003 (Commission file number 1-4389)).*                                                                          
|        |                                                                                                                                                                                                                                                                                                                                                                          
|10.9.2  | Form of Non-Qualified Stock Option Agreement
        for executive officers pursuant to the Applera Corporation/Celera
        Genomics Group 1999 Stock Incentive Plan.*                                                                                                                                                                                                
|        |                                                                                                                                                                                                                                                                                                                                                                          
|10.9.3  | Form of Incentive Stock Option Agreement for
        executive officers pursuant to the Applera Corporation/Celera
        Genomics Group 1999 Stock Incentive Plan.*                                                                                                                                                                                                    
|        |                                                                                                                                                                                                                                                                                                                                                                          
|10.9.4  | Forms of Stock Option Agreements for executive
        officers pursuant to the Applera Corporation/Celera
        Genomics Group 1999 Stock Incentive Plan, relating to non-qualified options issued
        in conjunction with awards under the Applera Corporation Performance
        Unit Bonus Plan.*                                                             
|        |                                                                                                                                                                                                                                                                                                                                                                          
|10.9.5  | Form of Employee Stock Award Agreement for
        executive officers pursuant to the Applera Corporation/Celera
        Genomics Group 1999 Stock Incentive Plan.*                                                                                                                                                                                                      
|        |                                                                                                                                                                                                                                                                                                                                                                          
|10.9.6  | Form of Director Stock Option Agreement pursuant
        to the Applera Corporation/Celera Genomics Group
        1999 Stock Incentive Plan.*                                                                                                                                                                                                                            
|        |                                                                                                                                                                                                                                                                                                                                                                          
|10.9.7  | Form of Scientific Advisory
	Board Stock Option Agreement pursuant to the
	Applera Corporation/Celera Genomics Group 1999 Stock Incentive Plan.*                                                                                                                                                                                                                         
|        |                                                                                                                                                                                                                                                                                                                                                                          
|10.9.8  | Form of Performance Share Award
	Agreement for executive officers pursuant to the
	Applera Corporation/Celera Genomics 1999 Stock Incentive Plan.*                                                                                                                                                                                                                       
|        |                                                                                                                                                                                                                                                                                                                                                                          
|10.10.1 | Applera Corporation/Applied Biosystems Group
        Amended and Restated 1999 Stock Incentive Plan,
        effective October 21, 2004 (incorporated by reference to Annex B to Schedule
        14A, filed September 17, 2004, containing
        our definitive Proxy Statement for our 2004 Annual Meeting of Stockholders
        (Commission file number 1-4389)).*
|        |                                                                                                                                                                                                                                                                                                                                                                          
|10.10.2 | Form of Non-Qualified Stock Option Agreement
        for executive officers pursuant to the Applera Corporation/Applied
        Biosystems Group Amended and Restated 1999 Stock Incentive Plan.*                                                                                                                                                                        
|        |                                                                                                                                                                                                                                                                                                                                                                          
|10.10.3 | Form of Incentive Stock Option Agreement for
        executive officers pursuant to the Applera Corporation/Applied
        Biosystems Group Amended and Restated 1999 Stock Incentive Plan.*                                                                                                                                                                            
|        |                                                                                                                                                                                                                                                                                                                                                                          
|10.10.4 | Form of Restricted Stock Bonus Agreement for
        executive officers pursuant to the Applera Corporation/Applied
        Biosystems Group Amended and Restated 1999 Stock Incentive Plan.*                                                                                                                                                                            

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|10.10.5 | Form of Director Stock Option Agreement pursuant
        to the Applera Corporation/Celera Genomics Group
        Amended and Restated 1999 Stock Incentive Plan (incorporated by reference
        to Exhibit 10.7 to our Current Report
        on Form 8-K dated October 21, 2004, and filed October 27, 2004 (Commission
        file number 1-4389)).*
|------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        |                                                                                                                                                                                                                                                                                                                                                            
|10.10.6 | Form of Director Stock Award Agreement pursuant
        to the Applera Corporation/Celera Genomics Group
        Amended and Restated 1999 Stock Incentive Plan (incorporated by reference
        to Exhibit 10.5 to our Current Report
        on Form 8-K dated October 21, 2004, and filed October 27, 2004 (Commission
        file number 1-4389)).* 
|        |                                                                                                                                                                                                                                                                                                                                                            
|10.11   | The Perkin-Elmer
        Corporation Supplemental Retirement Plan effective as of August 1, 1979,
        as amended through October 1, 1996 (incorporated by reference to Exhibit
        10(22) to our Annual Report on Form 10-K for the fiscal year ended June
    30, 2000 (Commission file number 1-4389)).*                                         
|        |                                                                                                                                                                                                                                                                                                                                                            
|10.12   | The Excess Benefit
        Plan of Applera Corporation, as amended and restated effective July 1,
        2004 (incorporated by reference to Exhibit 10.10 to our Annual Report
        on Form 10-K for the fiscal year ended June 30, 2004 (Commission file
        number 1-4389))
..*                                                                  
|        |                                                                                                                                                                                                                                                                                                                                                            
|10.13   | 1993 Director Stock
        Purchase and Deferred Compensation Plan, as amended through March 17,
        2000 (incorporated by reference to Exhibit 10.1 to our Quarterly Report
        on Form 10-Q for the quarter ended March 31, 2000 (Commission file number
    1-4389)).*                                                                         
|        |                                                                                                                                                                                                                                                                                                                                                            
|10.14.1 | Applera Corporation
        Performance Unit Bonus Plan, as amended through August 21, 2003 (incorporated
        by reference to Exhibit 10.14 to our Annual Report on Form 10-K for the
        fiscal year ended June 30, 2003 (Commission file
number 1-4389)).*                                                                                       
|        |                                                                                                                                                                                                                                                                                                                                                            
|10.14.2 | Forms of Performance
        Unit Agreements for executive officers pursuant to the Applera Corporation
    Performance Unit Bonus Plan.*                                                                                                                                                                                                                  
|        |                                                                                                                                                                                                                                                                                                                                                            
|10.15   | The Estate Enhancement
        Plan of The Perkin-Elmer Corporation (incorporated by reference to Exhibit
        10(22) to our Annual Report on Form 10-K for the fiscal year ended June
    30, 1997 (Commission file number 1-4389)).*                                                                                                                  
|        |                                                                                                                                                                                                                                                                                                                                                            
|10.16   | Applera Corporation
        Deferred Compensation Plan, as amended and restated effective as of January
        1, 2002 (incorporated by reference to Exhibit 10.2 to our Quarterly Report
        on Form 10-Q for the quarter ended December 31, 2001 (Commission file
        number
1-4389)).*                                                         
|        |                                                                                                                                                                                                                                                                                                                                                            
|10.17   | PerSeptive Biosystems,
        Inc. 1992 Stock Plan, as amended January 20, 1997 (incorporated by reference
        to Exhibit 4.1 to the Quarterly Report on Form 10-Q of PerSeptive Biosystems,
        Inc. for the fiscal quarter ended March 29, 1997 (Commission file No.
    0-20032)).*                                                            
|        |                                                                                                                                                                                                                                                                                                                                                            
|10.18   | PerSeptive Biosystems,
        Inc. 1997 Non-Qualified Stock Option Plan, as amended August 21, 1997
        (incorporated by reference to Exhibit 4.1 to the Registration Statement
        on Form S-8 of PerSeptive Biosystems, Inc.
(No. 333-38989)).*                                                                                                 
|        |                                                                                                                                                                                                                                                                                                                                                            
|10.19   | Molecular Informatics,
        Inc. 1997 Equity Ownership Plan (incorporated by reference to Exhibit
        99 to our Registration Statement on Form
S-8 (No. 333-42683)).*                                                                                                                                                                               
|        |                                                                                                                                                                                                                                                                                                                                                            
|10.20   | Paracel, Inc. Stock
        Option Plan (incorporated by reference to Exhibit 10.22 to our Annual
        Report on Form 10-K for the fiscal year ended June 30, 2002 (Commission
    file number 1-4389)).*                                                                                                                                               
|        |                                                                                                                                                                                                                                                                                                                                                            
|10.21   | Axys Pharmaceuticals,
        Inc. 1989 Stock Plan, as amended through May 21, 1997 (incorporated by
        reference to Exhibit 10.2 to Annual Report on Form 10-K of Axys Pharmaceuticals,
        Inc. for the fiscal year ended December 31, 1996 (Commission file number
    0-22788)). *                                                            
|        |                                                                                                                                                                                                                                                                                                                                                            
|10.22   | Axys Pharmaceuticals,
          Inc. 1997 Equity Incentive Plan, as amended through May 14, 2001 (incorporated
          by reference to Exhibit 10.30 to our Registration Statement on Form
          S-8 (No. 333-73980)).*                                                                                                                              
|        |                                                                                                                                                                                                                                                                                                                                                            
|10.23   | Axys Pharmaceuticals,
        Inc. 1997 Non-Officer Equity Incentive Plan, as amended through October
        16, 1998 (incorporated by reference to Exhibit 10.31 to our Registration
        Statement
on Form S-8 (No. 33-73980)).*                                                                                                                     

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|10.24 | Form of notice to
        directors, officers, and other employees regarding January 20, 2005,
        acceleration of stock option vesting, including notice to directors and
        executive officers regarding restrictions imposed on their accelerated
        options (incorporated by reference to Exhibit 10.2 to our Quarterly Report
        on Form 10-Q for the quarter ended December 31, 2004 (Commission file
    number 1-4389)).*
|----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.25 | Form of notice to
        executive officers, and other employees regarding June 2, 2005,
        acceleration of performance unit bonus plan stock option vesting, including
    notice regarding restrictions imposed on their accelerated options.*                                                                                                                                                                                              
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.26 | Employment Agreement
        dated as of September 12, 1995, between Applera and Tony L. White (incorporated
        by reference to Exhibit 10(21) to our Annual Report on Form 10-K for
    the fiscal year ended June 30, 1995 (Commission file number 1-4389)).*                                                                                                                                                                                
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.27 | Amendment dated
        August 17, 2001, to Employment Agreement dated as of September 12, 1995,
        between Applera and Tony L. White (incorporated by reference to Exhibit
        10.l4 to our Annual Report on Form 10-K for the fiscal year ended June
    30, 2001 (Commission file number 1-4389)).*                                                                                                                                     
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.28 | Change of Control
        Agreement dated as of September 12, 1995, between Applera and Tony L.
        White (incorporated by reference to Exhibit 10(16) to our Annual Report
        on Form 10-K for the fiscal year ended June 30, 1995 (Commission file
    number 1-4389)).*                                                                                                                                                                 
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.29 | Employment Agreement
        dated as of November 16, 1995, between Applera and William B. Sawch (incorporated
        by reference to Exhibit 10(16) to our Annual Report on Form 10-K for
    fiscal year ended June 30, 1998 (Commission file number 1-4389)).*                                                                                                                                                                                  
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.30 | Deferred Compensation
        Contract dated as of July 15, 1993, between Applera and William B. Sawch
        (incorporated by reference to Exhibit 10(19) to our Annual Report on
        Form 10-K for the fiscal year ended June 30, 1998 (Commission file number
    1-4389)).*                                                                                                                                                                
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.31 | Letter dated June
        24, 1997, from Applera to Dennis L. Winger (incorporated by reference
        to Exhibit 10(18) to our Annual Report on Form 10-K for the fiscal year
    ended June 30, 1998 (Commission file number 1-4389)). *                                                                                                                                                                                                         
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.32 | Employment Agreement
          dated as of September 25, 1997, between Applera and Dennis L. Winger
          (incorporated by reference to Exhibit 10(17) to our Annual Report on
          Form 10-K for the fiscal year ended June 30, 1998 (Commission file
          number 1-4389)).*                                                                                                                                                         
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.33 | Letter dated August
        21, 2003, from Applera to Dennis L. Winger regarding the letter dated
        June 24, 1997, from Applera to Dennis L. Winger (incorporated by reference
        to Exhibit 10.33 to our Annual Report on Form 10-K for the fiscal year
    ended June 30, 2003 (Commission file number 1-4389)).*                                                                                                                      
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.34 | Employment Agreement
          dated as of December 1, 2000, between Applera and Kathy P. Ordoñez
          (incorporated by reference to Exhibit 10.35 to our Annual Report on
          Form 10-K for the fiscal year ended June 30, 2002 (Commission file
          number 1-4389)).*                                                                                                                                                            
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.35 | Employment Agreement
        dated as of September 2, 2003, between Applera Corporation and Catherine
    M. Burzik.*                                                                                                                                                                                                                                                                                                                               
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.36 | Letter agreement
    dated July 25, 2003, between Applera Corporation and Catherine M. Burzik.*                                                                                                                                                                                                                                                                                                                                                     
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.37 | Employment Agreement
	dated as of September 5, 2000, between Applera Corporation and Barbara J. Kerr.*                                                                                                                                                                                                                                                                                                                                              
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.38 | Employment Agreement
	dated as of December 2, 1996, between Applera Corporation and Ugo D. DeBlasi.*                                                                                                                                                                                                                                                                                                                                                
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.39 | Description of
          fiscal year 2005 incentive compensation program (incorporated by reference
          to Exhibit 10.8 to our Current Report on Form 8-K dated October 21,
          2004, and filed October 27, 2004 (Commission file number 1-4389)).*                                                                                                                                                                                     

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|10.40                                                           | Description of
          Applera Corporation fiscal year 2006 Incentive Compensation Program
          (incorporated by reference to Item 1.01 of our Current Report on Form
          8-K dated August 18, 2005, and filed August24, 2005 (Commission file
          number 1-4389)).*                                                                                                                                                                       
|--------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|10.41.1                                                         | Celera Diagnostics
          Joint Venture Agreement dated as of April 1, 2001, among Applera, its
          Applied Biosystems Group, its Celera Genomics Group, Foster City Holdings,
          LLC, and Rockville Holdings, LLC (incorporated by reference to Exhibit
          10.36 to our Annual Report on Form 10-K for the fiscal year ended June
          30, 2002 (Commission file number 1-4389)).                                                
|                                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|10.41.2                                                         | Amendment, dated
          as of June 22, 2004, to Celera Diagnostics Joint Venture Agreement
          dated as of April 1, 2001, among Applera, its Applied Biosystems Group,
          its Celera Genomics Group, Foster City Holdings, LLC, and Rockville
          Holdings, LLC (incorporated by reference to Exhibit 10.34 to our Annual
          Report on Form 10-K for the fiscal year ended June 30, 2004 (Commission
          file no. 1-4389)).
|                                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|10.42.1                                                         | Celera Genomics/Applied
          Biosystems Marketing and Distribution Agreement dated as of February
          27, 2003, and effective as of April 1, 2002, among Applera, its Applied
          Biosystems group, and its Celera Genomics group (incorporated by reference
          to Exhibit 10.1 to our Quarterly Report on Form 10-Q for the quarter
          ended March 31, 2003 (Commission file no. 1-4389)).                                    
|                                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|10.42.2                                                         | Amended and Restated
          Celera Genomics/Applied Biosystems Marketing and Distribution Agreement
          dated as of June 22, 2004 among Applera, its Applied Biosystems group,
          and its Celera Genomics group (incorporated by reference to Exhibit
          10.36 to our Annual Report on Form 10-K for the fiscal year ended June
          30, 2004 (Commission file no. 1-4389)).                                                      
|                                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|10.42.3                                                         | Amendment, dated
          as of February 4, 2005, to Celera Genomics/Applied Biosystems Marketing
          and Distribution Agreement among Applera, its Applied Biosystems group,
          and its Celera Genomics group (incorporated by reference to Exhibit
          10.1 to our Quarterly Report on Form 10-Q for the quarter ended December
          31, 2004 (Commission file no. 1-4389)).                                                       
|                                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|11                                                              | Computation of
          Net Income (Loss) per Share for the three years ended June 30, 2005
          (incorporated by reference to Note 1 to Consolidated Financial Statements
          of Annual Report to Stockholders for the fiscal year ended June 30,
          2005).                                                                                                                                                                               
|                                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|13                                                              | Annual Report to
        Stockholders for the fiscal year ended June 30, 2005 (to the extent incorporated
    herein by reference).                                                                                                                                                                                                                                                                                                                           
|                                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|21                                                              | List of Subsidiaries.                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|23                                                              | Consent of Independent
          Registered Public Accounting Firm.                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|31.1                                                            | Certification
          of Principal Executive Officer pursuant to Exchange Act Rule 13a-14(a)/15d-14(a),
          as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                     
|                                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|31.2                                                            | Certification
          of Principal Financial Officer pursuant to Exchange Act Rule 13a-14(a)/15d-14(a),
          as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                     
|                                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|32.1                                                            | Certification
          of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
          pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                        
|                                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|32.2                                                            | Certification
          of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
          pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                        
|                                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|*
          Management plan or compensatory plan or arrangement

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SIGNATURES

Pursuant to the requirements
      of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant
      has duly caused this report to be signed on its behalf by the undersigned,
      thereunto duly authorized.


| | APPLERA CORPORATION
| | -------------------
| |                    
| | By                 
| |                    
| |                    

Date: September 8, 2005

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
  has been signed below by the following persons on behalf of the registrant and
  in the capacities and on the dates indicated.


|/s/ Tony L. White                                                                                                  | September
        8, 2005
|------------------------------------------------------------------------------------------------------------------ | -------------------------
|                                                                                                                   |                          
|Tony L. WhiteChairman of the Board of Directors, Presidentand Chief Executive Officer(Principal Executive Officer)
|                                                                                                                   |                          
|/s/ Dennis L. Winger                                                                                               | September
        8, 2005
|                                                                                                                   |                          
|Dennis L. WingerSenior Vice President and Chief Financial Officer(Principal Financial Officer)                    
|                                                                                                                   |                          
|/s/ Ugo D. DeBlasi                                                                                                 | September
        8, 2005
|                                                                                                                   |                          
|Ugo D. DeBlasiVice President and Controller(Principal Accounting Officer)                                         

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|/s/ Richard H. Ayers         | September
        8, 2005
|---------------------------- | -------------------------
|                             |                          
|Richard H. AyersDirector    
|                             |                          
|/s/ Jean-Luc Bélingard       | September
        8, 2005
|                             |                          
|Jean-Luc BélingardDirector  
|                             |                          
|/s/ Robert H. Hayes          | September
        8, 2005
|                             |                          
|Robert H. HayesDirector     
|                             |                          
|/s/ Arnold J. Levine         | September
        8, 2005
|                             |                          
|Arnold J. LevineDirector    
|                             |                          
|/s/ William H. Longfield     | September
        8, 2005
|                             |                          
|William H. LongfieldDirector
|                             |                          
|/s/ Theodore E. Martin       | September
        8, 2005
|                             |                          
|Theodore E. MartinDirector  
|                             |                          
|/s/ Carolyn W. Slayman       | September
        8, 2005
|                             |                          
|Carolyn W. SlaymanDirector  
|                             |                          
|/s/ Orin R. Smith            | September
    8, 2005    
|                             |                          
|Orin R. SmithDirector       
|                             |                          
|/s/ James R. Tobin           | September 8, 2005        
|                             |                          
|James R. TobinDirector      

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMON FINANCIAL STATEMENT SCHEDULE

To the Board of Directors and Stockholders
  of Applera Corporation

Our audits of the consolidated
      financial statements, of managements assessment of the effectiveness
      of internal control over financial reporting and of the effectiveness of
      internal control over financial reporting referred to in our report dated
       August 31, 2005 appearing in the 2005 Annual Report to Stockholders of
      Applera
        Corporation (which report, consolidated financial statements and assessment
        are incorporated by reference in this Annual Report on Form 10-K) also
        included an audit of the financial statement schedule listed in Item
      15(a)(2) of this Form 10-K. In our opinion, this financial statement schedule
      presents
        fairly, in all material respects, the information set forth therein when
        read in conjunction with the related consolidated financial statements.


/s/ PricewaterhouseCoopers LLP
  PricewaterhouseCoopers LLP

Stamford, ConnecticutAugust 31,  2005

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APPLERA CORPORATIONVALUATION AND QUALIFYING ACCOUNTS AND RESERVES 
  FOR THE FISCAL YEARS ENDED JUNE 30, 2003, 2004 AND 2005

|(Amounts in thousands)                      |   |                                   |  
|------------------------------------------- | - | --------------------------------- | -
|                                            |   | ALLOWANCE FOR
  DOUBTFUL ACCOUNTS |  
|                                            |   |                                   |  
|Balance at June 30, 2002                    | $ | 10,950                            |  
|Charged to income in fiscal year 2003       |   | 4,288                             |  
|Deductions from reserve in fiscal year 2003 |   | (4,731                            | )
|                                            |   |                                   |  
|Balance at June 30, 2003                    |   | 10,507                            |  
|Charged to income in fiscal year 2004       |   | 2,866                             |  
|Deductions from reserve in fiscal year 2004 |   | (4,425                            | )
|                                            |   |                                   |  
|Balance at June 30, 2004 (1)                |   | 8,948                             |  
|Charged to income in fiscal year 2005       |   | 130                               |  
|Deductions from reserve in fiscal year 2005 |   | (2,053                            | )
|                                            |   |                                   |  
|Balance at June 30, 2005 (1)                | $ | 7,025                             |  
|                                            |   |                                   |  

|    |                                                                                            
|--- | -------------------------------------------------------------------------------------------
|(1) | Deducted in the Consolidated
    Statements of Financial Position from accounts receivable.

SCHEDULE
II

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EXHIBIT INDEX

|ExhibitNumber |                                                                                                                                                                                                                                                                                                           
|------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|              |                                                                                                                                                                                                                                                                                                           
|10.2.2        | Form of Non-Qualified
        Stock Option Agreement for executive officers pursuant to The Perkin-Elmer
    Corporation 1996 Stock Incentive Plan.                                                                                                                                                       
|              |                                                                                                                                                                                                                                                                                                           
|10.2.3        | Form of Incentive
        Stock Option Agreement for executive officers pursuant to The Perkin-Elmer
    Corporation 1996 Stock Incentive Plan.                                                                                                                                                           
|              |                                                                                                                                                                                                                                                                                                           
|10.2.4        | Form of Director
        Stock Option Agreement pursuant to The Perkin-Elmer Corporation 1996
    Stock Incentive Plan.                                                                                                                                                                                   
|              |                                                                                                                                                                                                                                                                                                           
|10.4.2        | Form of Non-Qualified
        Stock Option Agreement for executive officers pursuant to The Perkin-Elmer
    Corporation 1997 Stock Incentive Plan.                                                                                                                                                       
|              |                                                                                                                                                                                                                                                                                                           
|10.5.2        | Form of Director
        Stock Option Agreement pursuant to The Perkin-Elmer Corporation 1998
    Stock Incentive Plan.                                                                                                                                                                                   
|              |                                                                                                                                                                                                                                                                                                           
|10.7.2        | Form of Non-Qualified
        Stock Option Agreement for executive officers pursuant to the Applera
    Corporation/Applied Biosystems Group 1999 Stock Incentive Plan.                                                                                                                                   
|              |                                                                                                                                                                                                                                                                                                           
|10.7.3        | Form of Incentive
        Stock Option Agreement for executive officers pursuant to the Applera
    Corporation/Applied Biosystems Group 1999 Stock Incentive Plan.                                                                                                                                       
|              |                                                                                                                                                                                                                                                                                                           
|10.7.4        | Forms of Stock Option
        Agreements for executive officers pursuant to the Applera Corporation/Applied
        Biosystems Group 1999 Stock Incentive Plan, relating to non-qualified
        options issued in conjunction with awards under the Applera Corporation
    Performance Unit Bonus Plan.
|              |                                                                                                                                                                                                                                                                                                           
|10.7.5        | Form of Employee
        Stock Award Agreement for executive officers pursuant to the Applera
    Corporation/Applied Biosystems Group 1999 Stock Incentive Plan.                                                                                                                                         
|              |                                                                                                                                                                                                                                                                                                           
|10.7.6        | Form of Director
        Stock Option Agreement pursuant to the Applera Corporation/Applied Biosystems
    Group 1999 Stock Incentive Plan.                                                                                                                                                               
|              |                                                                                                                                                                                                                                                                                                           
|10.7.7        | Forms of Performance Stock Option
	Agreements for executive officers pursuant to the
	Applera Corporation/Applied Biosystems Group 1999 Stock Incentive Plan.                                                                                                                                             
|              |                                                                                                                                                                                                                                                                                                           
|10.7.8        | Form of Performance Share Award
	Agreement for executive officers pursuant to the
	Applera Corporation/Applied Biosystems Group 1999 Stock Incentive Plan.                                                                                                                                                
|              |                                                                                                                                                                                                                                                                                                           
|10.8.2        | Form of Non-Qualified
        Stock Option Agreement for executive officers pursuant to the Applera
        Corporation/Applied Biosystems Group Amended and Restated 1999 Stock
    Incentive Plan.                                                                                                      
|              |                                                                                                                                                                                                                                                                                                           
|10.8.3        | Form of Incentive
        Stock Option Agreement for executive officers pursuant to the Applera
        Corporation/Applied Biosystems Group Amended and Restated 1999 Stock
    Incentive Plan.                                                                                                          
|              |                                                                                                                                                                                                                                                                                                           
|10.8.4        | Form of
        Restricted Stock Bonus Agreement for executive officers pursuant to the
        Applera Corporation/Applied Biosystems Group Amended and Restated 1999
        Stock
    Incentive Plan.                                                                                                  
|              |                                                                                                                                                                                                                                                                                                           
|10.9.2        | Form of Non-Qualified
        Stock Option Agreement for executive officers pursuant to the Applera
    Corporation/Celera Genomics Group 1999 Stock Incentive Plan.                                                                                                                                      
|              |                                                                                                                                                                                                                                                                                                           
|10.9.3        | Form of Incentive
        Stock Option Agreement for executive officers pursuant to the Applera
    Corporation/Celera Genomics Group 1999 Stock Incentive Plan.                                                                                                                                          
|              |                                                                                                                                                                                                                                                                                                           
|10.9.4        | Forms of Stock Option
        Agreements for executive officers pursuant to the Applera Corporation/Celera
        Genomics Group 1999 Stock Incentive Plan, relating to non-qualified options
        issued in conjunction with awards under the Applera Corporation Performance
    Unit Bonus Plan.   
|              |                                                                                                                                                                                                                                                                                                           

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|10.9.5  | Form of Employee
        Stock Award Agreement for executive officers pursuant to the Applera
    Corporation/Celera Genomics Group 1999 Stock Incentive Plan.                                                                                      
|------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        |                                                                                                                                                                                                                                                     
|10.9.6  | Form of Director
        Stock Option Agreement pursuant to the Applera Corporation/Celera Genomics
    Group 1999 Stock Incentive Plan.                                                                                                            
|        |                                                                                                                                                                                                                                                     
|10.9.7  | Form of Scientific Advisory
	Board Stock Option Agreement pursuant to the
	Applera Corporation/Celera Genomics Group 1999 Stock Incentive Plan.                                                                                                     
|        |                                                                                                                                                                                                                                                     
|10.9.8  | Form of Performance Share Award
	Agreement for executive officers pursuant to the
	Applera Corporation/Celera Genomics 1999 Stock Incentive Plan.                                                                                                   
|        |                                                                                                                                                                                                                                                     
|10.10.2 | Form of Non-Qualified
        Stock Option Agreement for executive officers pursuant to the Applera
        Corporation/Applied Biosystems Group Amended and Restated 1999 Stock
    Incentive Plan.                                                
|        |                                                                                                                                                                                                                                                     
|10.10.3 | Form of Incentive
        Stock Option Agreement for executive officers pursuant to the Applera
        Corporation/Applied Biosystems Group Amended and Restated 1999 Stock
    Incentive Plan.                                                    
|        |                                                                                                                                                                                                                                                     
|10.10.4 | Form of
        Restricted Stock Bonus Agreement for executive officers pursuant to the
        Applera Corporation/Applied Biosystems Group Amended and Restated 1999
        Stock
    Incentive Plan.                                            
|        |                                                                                                                                                                                                                                                     
|10.14.2 | Forms of Performance
        Unit Agreements for executive officers pursuant to the Applera Corporation
    Performance Unit Bonus Plan.                                                                                                            
|        |                                                                                                                                                                                                                                                     
|10.25   | Form of notice to
        executive officers and other employees regarding June 2, 2005,
        acceleration of performance unit bonus plan stock option vesting, including
    notice regarding restrictions imposed on their accelerated options.
|        |                                                                                                                                                                                                                                                     
|10.35   | Employment Agreement
        dated as of September 2, 2003, between Applera Corporation and Catherine
    M. Burzik.                                                                                                                                
|        |                                                                                                                                                                                                                                                     
|10.36   | Letter agreement
    dated July 25, 2003, between Applera Corporation and Catherine M. Burzik.                                                                                                                                                      
|        |                                                                                                                                                                                                                                                     
|10.37   | Employment Agreement
         dated as of September 5, 2000, between Applera Corporation and Barbara
        J. Kerr.                                                                                                                               
|        |                                                                                                                                                                                                                                                     
|10.38   | Employment Agreement
         dated as of December 2, 1996, between Applera Corporation and Ugo D.
        DeBlasi.                                                                                                                                 
|        |                                                                                                                                                                                                                                                     
|13      | Annual
        Report to Stockholders for the fiscal year ended June 30, 2005 (to the
    extent incorporated herein by reference).                                                                                                                 
|        |                                                                                                                                                                                                                                                     
|21      | List
    of Subsidiaries.                                                                                                                                                                                                                           
|        |                                                                                                                                                                                                                                                     
|23      | Consent
    of Independent Registered Public Accounting Firm.                                                                                                                                                                                       
|        |                                                                                                                                                                                                                                                     
|31.1    | Certification
        of Principal Executive Officer pursuant to Exchange Act Rule 13a-14(a)/15d-14(a),
    as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                   
|        |                                                                                                                                                                                                                                                     
|31.2    | Certification
        of Principal Financial Officer pursuant to Exchange Act Rule 13a-14(a)/15d-14(a),
    as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                   
|        |                                                                                                                                                                                                                                                     
|32.1    | Certification
        of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
    pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                      
|        |                                                                                                                                                                                                                                                     
|32.2    | Certification
        of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
    pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                      



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