Equity Compensation

Under the Nonemployee Director Share Purchase Plan, non-employee directors may annually elect to receive Applied common stock in lieu of retainers and/or meeting fees that otherwise would be payable to them in cash for their service on the lead independent directorBoard. Quarterly retainers will receivebe converted into Applied common stock based on the fair market value on the day of the regularly-scheduled quarterly meeting of the Board (or on the final day of a quarterly retainermeeting that takes place over multiple days). Meeting fees that participating directors choose to forego will be converted into Applied common stock based on the fair market value on the day of $7,500.the Board or committee meeting (or on the final day of a meeting that takes place over multiple days). Shares issued will be fully vested and taxable.

Non-employee directors participate in one equity compensation plan, the Employee Stock Incentive Plan. During fiscal 2004,2005, non-employee directors received the following non-qualified stock options:

The annual option grant of 25,000 shares was made only ifBoard, provided that the non-employee director was a member of the Board for the entire fiscal year and was not an employee of Applied or any of its affiliates for any part of that fiscal year.

The exercise price for all options granted to non-employee directors is 100% of the fair market value of the shares on the grant date. The annual option grant of 25,000 shares of common stock to non-employee directors at the end of fiscal 2004 of 25,000 shares of common stock2005 was made on October 29, 200428, 2005 at an exercise price of $16.10$16.36 per share. Assuming continued service on the Board, all options granted to non-employee directors become exercisable in four equal annual installments beginning one year from the date of grant. Exercisability of some or all options may be

accelerated if the director dies or retires. The options expire no later than seven years afterfrom the date of grant (upor up to eight years after the date of grant in the event of the director’s death).

PRINCIPAL STOCKHOLDERS

The following table indicates how much common stock was beneficially owned as of October 31, 2004 by (a) each person known by Applied to own 5% or more of Applied’s common stock, (b) each of the directors, (c) the Chief Executive Officer, each of the other most highly compensated executive officers and a former executive officer as required under SEC rules (collectively, the “named executive officers”), and (d) the current directors and executive officers as a group. In general, “beneficial ownership” refers to shares that an entity or individual has the power to vote or the power to dispose of, and stock options that are exercisable currently or became exercisable within 60 days after October 31, 2004.

(7)	Includes 2,005,848 shares held in family trusts and partnerships, 30,618 shares held for charitable purposes and options to purchase 1,660,000 shares that were exercisable within 60 days after October 31, 2004.

(8)	Includes 320,000 shares held in a foundation for charitable purposes and options to purchase 1,920,000 shares that were exercisable within 60 days after October 31, 2004.

(9)	Includes options to purchase 300,000 shares that were exercisable within 60 days after October 31, 2004.

(10)	Includes options to purchase 430,000 shares that were exercisable within 60 days after October 31, 2004.

(11)	Includes options to purchase 371,000 shares that were exercisable within 60 days after October 31, 2004.

(12)	Includes 6,912 shares held as custodian for, and 400 shares held as joint tenant with, certain of Mr. Bronson’s relatives, 56,752 shares held in a family trust and options to purchase 1,000,000 shares that were exercisable within 60 days after October 31, 2004.

(13)	Includes options to purchase 5,098,850 shares that were exercisable within 60 days after October 31, 2004.

EXECUTIVE COMPENSATION AND RELATED INFORMATION

Summary Compensationdeath.

The following table shows compensation information during each of Applied’s last threefor our non-employee directors for fiscal years for the named executive officers.2005.

SummaryDirector Compensation Table

Option Grants

The following table shows all options to acquire shares of Applied’s common stock granted to the named executive officers during the fiscal year ended October 31, 2004.

Stock Option Grants in Last Fiscal Year

Option Exercises

The following table shows all stock options exercised by the named executive officers during the fiscal year ended October 31, 2004, and the number and value of options they held as of the end of fiscal 2004.

Aggregated Option Exercises in Last Fiscal Year

and Fiscal Year-End Option Values

Human Resources and Compensation Committee Report

The information contained in this report shall not be deemed to be “soliciting material” or “filed” with the SEC or subject to the liabilities of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), except to the extent that Applied specifically incorporates it by reference into a document filed under the Securities Act of 1933, as amended (the “Securities Act”) or the Exchange Act.

Purpose

The Human Resources and Compensation Committee (the “Committee”) oversees the appropriate development of the human capabilitiesAs an executive officer of Applied, Materials. Our Committee and our Board recognize that developing the capabilities of Applied’s executives and employees is vital to Applied’s ability to capitalize on its opportunities and increase long-term stockholder value. Accordingly, the Committee’s most important goal is to oversee Applied’s programs that foster employee and executive development.

The Committee also determines executive compensation and oversees significant employee benefits programs, policies and plans for Applied’s employees and executives. The Committee seeks to compensate and motivate Applied’s Chief Executive Officer, other officers, and key management in a manner consistent with Applied’s business objectives, competitive practices and trends, the requirements of applicable regulatory bodies, Applied’s compensation strategy, and fiduciary and corporate responsibilities, including internal equity considerations. In carrying out its duties, the Committee has consulted with independent compensation consultants and has utilized outside survey data. The Committee’s Charter is attached to this proxy statement as Appendix B and can be found on Applied’s website atwww.appliedmaterials.com/investors/corporate_governance.html.

We describe the primary elements of our executive compensation policies and practices below. We also identify the procedures we use to determine the compensation of Applied’s Chief Executive Officer and our other executive officers.

Committee Membership and Process

Consistent with the listing requirements of the Nasdaq Stock Market, the Committee is comprised entirely of independent directors. The Committee regularly meets without any employees present to discuss executive compensation matters. The Committee consults with independent compensation consultants and uses outside survey data to assist with executive compensation. The Committee has the authority to determine the scope of any consultant’s services and compensation, and retains the right to terminate a consultant’s contract at any time.

Compensation Philosophy.    In developing Applied’s executive compensation policies, our Committee has relied on two principal objectives: (1) attracting, rewarding and retaining our officers and (2) motivating our officers to achieve short-term and long-term corporate goals that enhance stockholder value. Accordingly, our Committee has adopted the following overriding policies:

The Committee strongly believes in pay for performance. During fiscal 2003, Applied’s actual performance versus the targets established by the Committee resulted in no bonuses being paid to our executive officers. In fact, during the three years prior to fiscal 2004, we did not pay bonuses to any of our named executive officers under the Senior Executive Bonus Plan. As a result, during these years total cash compensation for our executive officers was substantially below our targeted level of the 75th percentile.

Total Annual Compensation.    We determine each officer’s target total annual cash compensation (salary and bonus) after reviewing similar compensation information from approximately 20 companies. This group includes a broad range of companies in the high technology industry with whom Applied competes for executive talent. Applied’s goal is to target base pay near the median level. Total cash compensation depends on the achievement of specified performance goals. Achievement of the targeted goals would result in total cash compensation at approximately the market’s 75th percentile.

Senior Executive Bonus Plan.    Bonuses are paid under the Senior Executive Bonus Plan only if performance goals that we set at the beginning of the fiscal year actually are achieved during the year. Accordingly, the actual bonuses paid (if any) will vary depending on actual performance. The Committee can choose a range of performance measures as specified in the plan document that was approved by stockholders. For fiscal 2004, the Committee chose to use two equally weighted performance goals: (1) growth in Applied’s annual revenue, and (2) net income as a percentage of sales. The Committee has chosen to use these goals for a number of years because these two metrics are considered important drivers of long-term stockholder value and strong indicators of financial performance. In addition, for fiscal 2004 the Committee chose additional goals for Mr. Janker, which included other metrics permitted under the plan (including, for example, earnings per share and customer satisfaction).

Following the end of fiscal 2004, the Committee compared Applied’s actual performance to targeted performance for the year and applied the fiscal 2004 bonus formula to this actual performance. In fiscal 2004, revenue increased 79% and net income was 16.9% of sales. This very strong financial performance substantially exceeded the goals we set at the beginning of the fiscal year. Applying this very strong financial performance to the pre-established bonus formula resulted in bonuses that were substantially above target.

The Committee approved a bonus for the President and Chief Executive Officer, Mr. Splinter, for fiscal 2004, as explained under “Compensation of Chief Executive Officer” below.

The Committee also approved an additional bonus outside of the plan for Mr. Janker for fiscal 2004. This bonus generally was calculated under the same terms and conditions as the bonus under the plan, except an additional bonus target and a goal for net income were approved later in fiscal 2004 for Mr. Janker. The majority of Mr. Janker’s bonus was paid under the Senior Executive Bonus Plan formula as established following the end of fiscal 2003.

Short-Term Incentives.    Additionally,our Committee has the power to set target bonuses for each officer (other than named executive officers) based on his or her potential impact on Applied’s operating and financial results and based on market competitive pay practices. The actual bonus that is paid to each officer under the Corporate Executive Incentive Plan depends on the achievement of business unit and financial performance goals and Applied’s overall performance—for example, increasing business unit profitability, customer satisfaction and market share and Applied’s earnings per share. Each year, the Committee adjusts the performance goals in light of general business conditions and Applied’s corporate strategies for the year. For fiscal 2004 our Committee directed Applied’s management to set bonus targets and plan performance goals for each officer using our compensation philosophy. Ms. Handel participated in this plan in fiscal 2004 and subsequently received a bonus, which was substantially above the targeted amount due to the strong financial and operational performance of the Company. Ms. Handel became a participant in the Senior Executive Bonus Plan starting in fiscal 2005.

Long-Term Incentive Compensation.    The Committee provides long-term incentive compensation through the award of stock option grants that generally vest over multiple years. Our Committee strongly believes that stock options attract, retain and motivate our officers to achieve Applied’s business goals and create long-term stockholder value. Stock options have always been a major component of Applied’s compensation package for executive officers consistent with practices throughout the semiconductor industry. All Applied stock options have a per share exercise price equal to the fair market value of Applied’s stock on the grant date.

The number of options our Committee grants to each officer and each option’s vesting schedule are determined based on a variety of factors, including (1) the executive’s level of responsibility at Applied, (2) his or her individual performance, and (3) other factors, including independent equity compensation survey data. In fiscal 2004, our Committee relied upon these factors to approve stock option grants for the named executive officers and other senior officers, and for any other individual grants of more than 80,000 shares. All other grants were approved by the President and Chief Executive Officer, Mr. Splinter, after consultation with Human Resources executives, and pursuant to guidelines approved by our Committee.

For fiscal 2005, our Committee approved a change to the vesting schedule for the majority of stock options granted under our broad-based Employee Stock Incentive Plan, which includes grants made to our executive officers. Prior to fiscal 2005, the majority of stock option grants cliff vested after four years, assuming continued employment. For example, a stock option granted in 2004 would not vest until 2008, at which time it would become 100% vested. Most of our new stock option grants will now vest 25% per year over four years. Based on a review of the competitiveness of our equity compensation program, our Committee determined that it was not a market competitive practice to cliff vest stock option grants. In addition, a linear vesting schedule mitigates the impact of stock price volatility as stock options granted over multiple years with different grant prices will be scheduled to vest in one particular year. Our objective of using stock options as a long-term incentive to retain and motivate our employees to achieve long-term stockholder value has not changed.

Stock Ownership Guidelines.    Applied’s Board has adopted stock ownership guidelines to more closely align the interests of our directors and executives with those of our stockholders. The guidelines provide that non-employee directors should maintain an investment level in Applied’s stock equal to five times their annual retainer. The Chief Executive Officer and Chairman of the Board, should maintain an investment level in Applied’s stock equal to five times their annual salary. All other named executive officers should maintain an investment level equal to three times their annual salary. In each case, such investment levels should be achieved within a specified period or, in any event, no later than five years following their election or appointment.

Compensation of Chief Executive Officer.    During fiscal 2004, Mr. SplinterMorgan, received a salary of $900,000. In setting Mr. Splinter’s salary, target bonus and equity compensation grant, our Committee relied on market competitive pay data and the strong belief that the Chief Executive Officer significantly and directly influences Applied’s overall performance. As explained under “Senior Executive Bonus Plan” above, the Committee strongly believes in pay for performance. Under Mr. Splinter’s leadership, Applied substantially exceeded the fiscal 2004 targets that we set for Applied’s annual revenue and net income as a percentage of sales. These very strong results earned Mr. Splinter the maximum bonus permissible$268,077 for fiscal 2004.2005 and a matching contribution of $9,450 made by Applied under the tax-qualified 401(k) Plan, which provides for broad-based employee participation. Mr. Splinter also was granted an option for 1,100,000 shares of common stock in fiscal 2004. This option is scheduled to vest over the next four years, assuming Mr. Splinter remains an employee of Applied.

Tax Deductibility of Executive Compensation.    Under Section 162(m) of the Internal Revenue Code, Applied generally receives a federal income tax deduction for compensation paid toMorgan did not receive any of its named executive officers only if the compensation is less than $1 million during any fiscal yearbonus payments or is “performance-based” under Section 162(m). Both Applied’s Employee Stock Incentive Plan and the Senior Executive Bonus Plan permit our Committee to pay compensation that is “performance-based” and thus fully tax-deductible by Applied. Our Committee currently intends to continue seeking a tax deduction for all of Applied’s executive compensation, to the extent we determine it is in the best interests of Applied. In recent years, Applied has received a full tax deduction for all elements of senior executive compensation, except that Applied received only a partial tax deduction for the restricted stock granted to Mr. Splinter that compensated him for stock options from his former employer that he forfeited by joining Applied. All of the stock options granted to our executive officers qualify under Section 162(m) as performance-based compensation.

This report is submitted by the Human Resources and Compensation Committee.

Steven L. Miller (Chairman)

Herbert M. Dwight, Jr.

Paul R. Low

Willem P. Roelandts

Compensation Committee Interlocks and Insider Participation

During fiscal 2004, none of Applied’s executive officers served on the board of directors of any entities whose directors or officers serve on Applied’s Human Resources and Compensation Committee. No current or past executive officers of Applied or its subsidiaries serve on our Human Resources and Compensation Committee.

Employment Contract and Agreement Related to Termination of Employment

As an inducement to join Applied as President and Chief Executive Officer, on April 21, 2003, Applied entered into an agreement with Michael R. Splinter that provided for the following in Mr. Splinter’s first year of employment: a base salary of $900,000, a target bonus of 175% of the base salary based on the achievement of certain performance measures, 1,200,000 sharesgrants of stock options, and 300,000 shares of restricted stock at $0.01 per share. For years afteror restricted stock units in fiscal 2003,2005. Mr. Splinter’s base salary is subjectMorgan also did not receive the retainer or meeting fees paid to annual review; and his bonus, if any, is based on the achievement of performance measures determined by the Human Resources and Compensation Committee of the Board at the beginning of each fiscal year and under the terms of the Senior Executive Bonus Plan. The agreement also provided for certain relocation benefits, which were furnished during fiscal 2004. Under the agreement, Mr. Splinter will receive certain compensation in the event Applied terminates his employment without cause. Specifically, in that event he would be entitled to receive a lump sum payment equal to his then current annual base salary and 100% of the target bonus for the year of termination, and any stock options that otherwise would have vested in the 12 months following his termination of employment would instead vest on the date of his termination. Also, in the event of termination, Mr. Splinter would resign from the Board, unless requested otherwise. The terms of the agreement were reviewed and approved by the Board.

On November 30, 2004, Applied entered into a written separation agreement with Joseph R. Bronson, former Executive Vice President and Chief Financial Officer of Applied. Mr. Bronson resigned from Applied effective October 22, 2004. The agreement provides in part that, subject to Mr. Bronson’s continuing compliance with the agreement, Applied would (1) pay Mr. Bronson a total of $1,600,000 (payable in four installments through October 31, 2005), and (2) extend until December 20, 2004 the deadline for Mr. Bronson to exercise his Applied stock options that vested prior to his termination of employment. Mr. Bronson agreed not to compete with Applied and not to solicit Applied employees to leave their employment with Applied for a period of one year from the termination date. Mr. Bronson also provided Applied with a general release of all claims related to his employment with Applied.

Certain Relationships and Related Transactions

There were no such reportable relationships or transactions during fiscal 2004.non-employee directors.

ITEM 2—RATIFICATION OF APPOINTMENT OF

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We are asking stockholders to ratify the appointment of KPMG LLP (KPMG)(“KPMG”) as our independent registered public accounting firm for our current fiscal year. Our 20052006 fiscal year began on November 1, 2004October 31, 2005 and will end on October 30, 2005.29, 2006. Although ratification is not legally required, Applied is submitting the appointment of KPMG to our stockholders for ratification as a matterin the interest of good corporate governance. In the event that this appointment is not ratified, the Audit Committee of the Board will reconsider the appointment.

On June 15, 2004, the Audit Committee dismissed PricewaterhouseCoopers LLP (PwC) as Applied’s independent registered public accounting firm. On June 16, 2004, the Audit Committee engaged KPMG as Applied’s new independent registered public accounting firm for the fiscal year ended October 31, 2004. The change in independent registered public accounting firm from PwC to KPMG was reported in a Current Report on Form 8-K dated June 18, 2004.

PwC’s reports on the consolidated financial statements of Applied for the fiscal years 2002 and 2003 contained no adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principle. In connection with its audits of Applied’s consolidated financial statements as of and for the fiscal years ended October 27, 2002 and October 26, 2003 and through June 15, 2004, there were no disagreements with PwC on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of PwC, would have caused PwC to make reference thereto in its reports on the consolidated financial statements for such years. During Applied’s fiscal years ended October 27, 2002 and October 26, 2003 and through June 15, 2004, there were no “reportable events,” as that term is defined in Item 304(a)(1)(v) of Regulation S-K.

The Audit Committee appoints the independent registered public accounting firm annually. Before appointing KPMG as our independent registered public accounting firm for fiscal 2005,2006, the Audit Committee carefully considered thatthe firm’s qualifications. The Audit Committee reviewed and pre-approved audit and permissible non-audit services performed by KPMG in fiscal 2004,2005, as well as the fees paid to KPMG for such services. In its review of non-audit service fees and its appointment of KPMG as Applied’s independent registered public accounting firm, the Audit Committee considered whether the provision of such services is compatible with maintaining KPMG’s independence.

Prior to the appointment of KPMG, neither Applied nor anyone on its behalf consulted KPMG during the last two fiscal years regarding either the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on Applied’s consolidated financial statements, nor had KPMG provided to Applied a written report or oral advice regarding such principles or audit opinion.

Representatives of KPMG will be present at the meeting. They will be given an opportunity to make a statement if they desire to do so and will be available to respond to appropriate questions.

Fees Paid to Independent Registered Public Accounting FirmsKPMG LLP

The following table presents fees paid by Applied for professional services rendered by KPMG for the 2004 and 2005 fiscal years, which ended on October 31, 2004 and October 30, 2005, respectively.

Audit Fees consisted of fees for (a) professional services rendered for the annual audit of Applied’s consolidated financial statements, and(b) review of the interim consolidated financial statements included in quarterly reports, and (c) services that are normally provided by the independent registered public accounting firm in connection with statutory and regulatory filings or engagements. Our audit fees increased in fiscal 2005 primarily because fiscal 2005 was the first year in which KPMG conducted compliance testing pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, which included: (1) the required audit of management’s assessment of the effectiveness of internal control over financial reporting, and (2) KPMG’s independent audit of Applied’s internal control over financial reporting.

Audit-Related Fees consisted of fees for assurance and related services that arewere reasonably related to the performance of the audit or review of Applied’s consolidated financial statements and are not reported under “Audit Fees.” These services include employee benefit plan audits, accounting consultations in connection with acquisitions, attest services that are not required by statute or regulation, and consultations concerning financial accounting and reporting standards.

Tax Fees consisted of fees for professional services for tax compliance and review, and tax planning and advice. Tax compliance and review services consisted of federal, state and international tax compliance, assistance with tax audits and appeals, and assistance with customs and duties audits. Tax planning and advice services consisted of expatriateconsultations related to tax servicescompliance matters and other miscellaneous tax consulting and planning.certain international operations.

All Other Fees consisted of fees for services other than the services reported above. Inincurred in fiscal 2004 these fees amounted to 9.6% of all fees paid to KPMG for that year and consisted primarily of payments for fees incurred for non-audit services initiated during fiscal 2003, prior to the time KPMG was appointed as Applied’s independent registered public accounting firm.

Additional No such fees were incurred in fiscal 2004 in connection with Applied’s transition from PwC to KPMG as its independent registered public accounting firm in June 2004.2005.

The Audit Committee has concluded that the provision of the non-audit services listed above is compatible with maintaining the independence of KPMG.

Policy on Audit Committee’s Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm

The Audit Committee pre-approves all audit and permissible non-audit services provided by the independent registered public accounting firm. These services may include audit services, audit-related services and tax services, and may include,as well as, to a very limited extent, specifically designated non-audit services which, in the opinion of the Audit Committee, will not impair the independence of the registered public accounting firm. Pre-approval is generally provided for up to one year, and any pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget. The independent registered public accounting firm and Applied’s management are required to periodically report to the Audit Committee regarding the extent of services provided by the independent registered public accounting firm in accordance with this pre-approval, andincluding the fees for the services performed to date. In addition, the Audit Committee also may as required, also pre-approve particular services on a case-by-case basis.basis, as required.

Audit Committee Report

The information contained in this report shall not be deemed to be “soliciting material” or “filed” with the SEC or subject to the liabilities of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), except to the extent that Applied specifically incorporates it by reference into a document filed under the Securities Act of 1933, as amended (the “Securities Act”) or the Exchange Act.

Composition.The Audit Committee of the Board is composed of the fourfive directors named below. Each member of the Audit Committee meets the independence and financial experience requirements under bothapplicable SEC and Nasdaq rules. In addition, the Board has determined that Philip V. Gerdine is an “audit committee financial expert” as defined by SEC rules.

Responsibilities.    The Audit Committee operates under a written charter that has been adopted by the Board. The charter is reviewed annually for changes, as appropriate. The Audit Committee is responsible for

general oversight of Applied’s auditing, accounting and financial reporting processes, system of internal controls, and tax, legal, regulatory and ethical compliance. Applied’s management is responsible for: (a) maintaining Applied’s books of account and preparing periodic financial statements based thereon; and (b) maintaining the system of internal controls.control over financial reporting. The independent registered public accounting firm is responsible for auditing Applied’s annual consolidated annual financial statements.

Review with Management and Independent Registered Public Accounting Firm.    In this context, the Audit Committee hereby reports as follows:

Based on the review and discussions referred to in paragraphs 1-4 above, the Audit Committee recommended to the Board, and the Board has approved, that the audited consolidated financial statements be included in Applied’s Annual Report on Form 10-K for fiscal 2004,2005 for filing with the SEC.

The Audit Committee has appointed KPMG as Applied’s independent registered public accounting firm for fiscal 20052006 and recommends to stockholders that they ratify the appointment of KPMG as Applied’s independent registered public accounting firm for fiscal 2005.2006.

This report is submitted by the Audit Committee.

Philip V. Gerdine (Chairman)

Michael H. Armacost

Deborah A. Coleman

Charles Y.S. Liu

Gerhard H. Parker

PRINCIPAL STOCKHOLDERS

The following table indicates how many shares of Applied common stock were beneficially owned as of October 30, 2005 by (a) each person known by Applied to own 5% or more of Applied common stock, (b) each of the directors and director nominees, (c) the Chief Executive Officer and each of the next four most highly compensated executive officers as required under SEC rules (collectively, the “named executive officers”), and (d) the current directors and executive officers as a group. In general, “beneficial ownership” refers to shares that an entity or individual has the power to vote or the power to dispose of, and stock options that are exercisable currently or became exercisable within 60 days after October 30, 2005.

(4)

The amended Schedule 13G filed with the SEC by Capital Group International, Inc. on February 11, 2005 indicates that its subsidiary investment management companies collectively have sole power to direct the voting of 101,416,050 shares and disposition of 126,953,170 shares. Capital Group International, Inc. disclaims beneficial ownership of these 126,953,170 shares.

(5)	Includes options to purchase 72,250 shares that were exercisable within 60 days after October 30, 2005.

(6)	Includes 1,987,959 shares held in family trusts and partnerships, 21,926 shares held for charitable purposes and options to purchase 2,890,000 shares that were exercisable within 60 days after October 30, 2005.

(7)	Includes 160,000 shares held in a family foundation for charitable purposes, for which Mr. Morgan disclaims beneficial ownership, and options to purchase 2,420,000 shares that were exercisable within 60 days after October 30, 2005.

(8)	Includes options to purchase 53,350 shares that were exercisable within 60 days after October 30, 2005 and 484 shares held in a family foundation, which is a charitable trust. Dr. Parker disclaims beneficial ownership of the 484 shares held in the family foundation.

(9)	Includes options to purchase 11,250 shares that were exercisable within 60 days after October 30, 2005.

(10)	Includes options to purchase 776,250 shares that were exercisable within 60 days after October 30, 2005.

(11)	Includes options to purchase 475,000 shares that were exercisable within 60 days after October 30, 2005.

(12)	Includes options to purchase 485,500 shares that were exercisable within 60 days after October 30, 2005.

(13)	Includes 2,500 shares held in custodial accounts for the benefit of Dr. Moghadam’s sons, for which Dr. Moghadam disclaims beneficial ownership, and options to purchase 762,500 shares that were exercisable within 60 days after October 30, 2005.

(14)	Includes options to purchase 431,250 shares that were exercisable within 60 days after October 30, 2005.

(15)	Includes options to purchase 10,854,350 shares that were exercisable within 60 days after October 30, 2005.

EXECUTIVE COMPENSATION AND RELATED INFORMATION

Summary Compensation

The following table shows compensation information during each of Applied’s last three fiscal years for the named executive officers.

Summary Compensation Table

(5)

This amount consists of (a) Applied’s matching contribution of $9,225 under the tax-qualified 401(k) Plan, (b) Applied’s payment on behalf of Mr. Splinter of $37,658 for certain relocation and commuting expenses, and $545 for supplemental medical benefits, and (c) the reimbursement to Mr. Splinter of $5,657 for taxes incurred in connection with item (b).

(6)

This amount represents a total of 300,000 shares of Applied common stock granted to Mr. Splinter on May 20, 2003 pursuant to a Restricted Stock Agreement. The value is determined as of the date of grant and based on the per share closing price of Applied common stock on May 20, 2003 ($13.76), less the amount Mr. Splinter paid for the shares. The shares were subject to vesting as follows: 50% on October 1, 2003 and 50% on October 1, 2004. Since the date of grant, Mr. Splinter has had the same rights as any stockholder of Applied with respect to receipt of dividends for these shares.

(7)	This amount consists of Applied’s matching contribution of $9,450 under the tax-qualified 401(k) Plan and a payment of $375 to Dr. Moghadam as part of Applied’s Patent Incentive Award Program.

(8)	Dr. Pinto joined Applied as Senior Vice President, Chief Technology Officer and General Manager New Business and New Products Group in January 2004.

(9)

This amount consists of (a) Applied’s matching contribution of $9,225 under the tax-qualified 401(k) Plan, (b) Applied’s payment on behalf of Dr. Pinto of $85,161 for certain relocation expenses, (c) the reimbursement to Dr. Pinto of $12,459 for taxes incurred in connection with item (b), and (d) a new hire bonus of $150,000.

Option Grants

The following table shows all options to acquire shares of Applied common stock granted to the named executive officers during fiscal 2005, which ended on October 30, 2005.

Stock Option Grants in Last Fiscal Year

Option Exercises

The following table shows all stock options exercised by the named executive officers during fiscal 2005, which ended on October 30, 2005, and the number and value of the options they held as of the end of fiscal 2005.

Aggregated Option Exercises in Last Fiscal Year

and Fiscal Year-End Option Values

Human Resources and Compensation Committee Report

The information contained in this report shall not be deemed to be “soliciting material” or “filed” with the SEC or subject to the liabilities of Section 18 of the Exchange Act, except to the extent that Applied specifically incorporates it by reference into a document filed under the Securities Act or the Exchange Act.

Purpose

The Human Resources and Compensation Committee (the “Committee”) oversees the development of the human capabilities of Applied Materials. Our Committee and our Board recognize that developing the capabilities of Applied’s executives and employees is vital to Applied’s ability to capitalize on its opportunities and increase long-term stockholder value. Accordingly, the Committee’s most important goal is to oversee Applied’s programs that foster employee and executive development.

The Committee also determines executive compensation and oversees significant employee benefits programs, policies and plans for Applied’s employees and executives. The Committee seeks to compensate and motivate Applied’s Chief Executive Officer, other officers, and key management in a manner consistent with Applied’s business objectives, competitive practices and trends, the requirements of appropriate regulatory bodies, Applied’s compensation strategy, and fiduciary and corporate responsibilities, including internal equity considerations. In carrying out its duties, the Committee has consulted with independent compensation consultants and has utilized outside survey data.

We describe the primary elements of our executive compensation policies and practices below. We also identify the procedures we use to determine the compensation of Applied’s Chief Executive Officer and other executive officers.

Committee Membership and Process

Consistent with Nasdaq listing requirements, the Committee is comprised entirely of independent directors. The Committee regularly meets without any employees or non-independent directors present to discuss executive compensation matters. The Committee has retained the services of independent consultants and uses outside survey data to assist with matters related to executive compensation. The Committee has the authority to determine the scope of any consultant’s services and compensation and retains the right to terminate a consultant’s contract at any time.

Compensation Philosophy.    In developing Applied’s executive compensation policies, our Committee has relied on two principal objectives: (1) attracting, rewarding and retaining officers and (2) motivating our officers to achieve short-term and long-term corporate goals that enhance stockholder value. Accordingly, our Committee has adopted the following overriding policies:

Total Annual Compensation.    We determine each officer’s target total annual cash compensation (salary and bonus) after reviewing similar compensation information from approximately 20 companies. This group includes a broad range of companies in the high technology industry with whom Applied competes for executive talent. Applied’s goal is to target base pay near the median level. Total cash compensation depends on the achievement of specified performance goals. Achievement of the targeted goals would result in total cash compensation at approximately the market’s 65th percentile.

Senior Executive Bonus Plan.    Our Committee developed and approved specific performance targets for use during fiscal 2005 under our stockholder-approved Senior Executive Bonus Plan (the “Plan”). Bonuses are paid under the Plan only if performance goals that we set at the beginning of the fiscal year are achieved. Accordingly, the actual bonuses paid (if any) will vary depending on actual performance. The Committee can choose a range of performance measures as specified in the plan document that was approved by stockholders. The Committee generally has chosen to use two equally weighted performance goals: (1) growth in Applied’s annual revenue, and (2) net income as a percentage of sales. In addition, for fiscal 2005, the Committee chose additional goals for Mr. Janker, which included other metrics permitted under the Plan (including for example, earnings per share and customer satisfaction).

Following the end of fiscal 2005, the Committee compared Applied’s actual performance to targeted performance for the year and applied the fiscal 2005 bonus formula to this actual performance. In fiscal 2005, Applied’s revenue decreased 12.7% compared to fiscal 2004, and net income was 17.3% of sales. Applying the pre-established bonus formula to this financial performance resulted in bonuses that approximated target levels. However, after deliberations, the Committee chose to exercise its power under the Plan to reduce the bonuses that otherwise were payable based on actual performance. The Committee chose to reduce the bonuses by 62% on an overall basis, which was a significant reduction. The Committee chose to make such a large reduction in order to balance the bonus levels under the Plan with bonus levels that were payable for fiscal 2005 under all of the Company’s other bonus plans. The reduction does not reflect a negative view of the executives’ performance by the Committee. The Committee also approved an additional bonus beyond the $66,370 provided by the Plan for Mr. Janker for fiscal 2005. Overall, the combined bonus amounts for the executives on the Plan, including Mr. Janker, were 38% of the combined amounts which would have been paid based upon the Plan formulas and 34.5% of the targeted bonuses for the executives.

Short-Term Incentives.    Additionally, our Committee has the power to set target bonuses for each officer (other than named executive officers) based on his or her potential impact on Applied’s operating and financial results and based on market competitive pay practices. The actual bonus that is paid to each officer under the Corporate Executive Incentive Plan depends on the achievement of business unit and financial performance goals and Applied’s overall performance, for example, increasing business unit profitability, customer satisfaction and market share and Applied’s earnings per share. Each year, we adjust the performance goals in light of general business conditions and our corporate strategies for the year. For fiscal 2005, our Committee directed Applied’s management to set bonus targets and plan performance goals for each officer using our compensation philosophy.

Long-Term Incentive Compensation.    The Committee provides long-term incentive compensation through the award of stock option, restricted stock, and/or restricted stock unit grants that generally vest over multiple years. Our Committee strongly believes that this equity compensation program motivates our officers to maximize stockholder value and to remain employed with Applied despite a very competitive labor market. All Applied stock options have a per share exercise price equal to the fair market value of Applied’s stock on the grant date.

The number of options, restricted stock and/or restricted stock units our Committee grants to each officer and the vesting schedule for each grant is determined based on a variety of factors, including: (1) the executive’s position at Applied, (2) his or her individual performance, and (3) other factors, including independent equity compensation survey data. In fiscal 2005, our Committee relied upon these factors to approve stock option grants for the named executive officers and other senior officers, and for any other individual option grants of more than 80,000 shares. All other grants of options were approved by the President and Chief Executive Officer, Mr. Splinter, after consultation with Human Resources executives, and pursuant to guidelines approved by our Committee. In August 2005, all outstanding, unvested stock options with an exercise price above the then fair market value of Applied’s stock were immediately vested, except for those held by Mr. Splinter and our other most senior executives. As a result, 12% of outstanding stock options were vested.

In order to continue to attract and retain highly skilled employees, our Committee approved for fiscal 2006 changes to the equity program designed to reward Applied’s employees for their hard work and commitment to the long-term success of the Company. Beginning in fiscal 2006, both stock options and restricted stock units were granted. Most employees received restricted stock units. In order to maintain high leverage on Company performance, executives received a combination of stock options and restricted stock unit awards. Stock option grant levels for executives overall were reduced to account for the restricted stock unit awards, but the relative mix of stock options versus restricted stock units is heavily weighted towards stock options for senior executives.

Our objective of using equity as a long-term incentive to retain and motivate our employees to achieve long-term stockholder value has not changed.

Deferred Compensation Plan.    Applied maintains a non-qualified deferred compensation plan, the Applied Materials, Inc. Executive Deferred Compensation Plan (the “EDCP”), which allows eligible employees, including executive officers, to voluntarily defer receipt of the portion of his/her salary above a specified amount and all or a portion of a bonus payment until the date or dates elected by the participant. Amounts credited to the EDCP consist only of cash compensation that has been earned and payment of which has been deferred by the participant. Applied does not make matching or other contributions to the EDCP. The amounts deferred under the EDCP are credited with interest in the sum of (a) the yield-to-maturity of five-year U.S. Treasury notes plus (b) 1.50%.

401(k) Plan.    In addition to the EDCP, Applied maintains the tax-qualified Applied Materials, Inc. Employee Savings and Retirement Plan (the “401(k) Plan”), which provides for broad-based employee participation. Under the 401(k) Plan, all Applied employees are eligible to receive matching contributions from Applied. Applied does not provide defined benefit pension plans or defined contribution retirement plans to its executives or other employees other than: (a) the 401(k) Plan and (b) as legally required in certain international jurisdictions.

Applied does not have employment or severance agreements with its executive officers, except with Mr. Splinter. In connection with his hire, Mr. Splinter was provided with certain severance benefits as discussed under the “Employment Contract” section.

Stock Ownership Guidelines.    The Board has adopted stock ownership guidelines to more closely align the interests of Applied’s directors and named executive officers with those of Applied’s stockholders. The guidelines provide that non-employee directors should maintain an investment level in Applied’s stock equal to five times their annual cash retainer. The Chief Executive Officer and Chairman of the Board should maintain an investment level in Applied’s stock equal to five times their annual salary. Named executive officers other than the Chief Executive Officer should maintain an investment level equal to three times their annual salary. In each case, such investment levels should be achieved within a specified period or, in any event, no later than five years following their election or appointment.

Compensation of Chief Executive Officer.    During fiscal 2005, Mr. Splinter received a salary of $938,077. In setting Mr. Splinter’s salary, target bonus and equity compensation grant, our Committee relied on market competitive pay data and the strong belief that the Chief Executive Officer significantly and directly influences Applied’s overall performance. As explained under “Senior Executive Bonus Plan” above, applying the bonus formula put into place at the beginning of fiscal 2005 to Applied’s actual performance for the year resulted in a bonus approximating the target level for Mr. Splinter for fiscal 2005; however, this bonus was reduced as part of the balancing of multiple bonus plans throughout the Company. Mr. Splinter was granted an option for 705,000 shares of common stock in fiscal 2005.

Tax Deductibility of Executive Compensation.    Under Section 162(m) of the Internal Revenue Code, Applied generally receives a federal income tax deduction for compensation paid to any of its named executive officers only if the compensation is less than $1 million during any fiscal year or is “performance-based” under Section 162(m). Both Applied’s Employee Stock Incentive Plan and the Senior Executive Bonus Plan permit our Committee to pay compensation that is “performance-based” and thus fully tax-deductible by Applied. Our Committee currently intends to continue seeking a tax deduction for all of Applied’s executive compensation, to the extent we determine it is in the best interests of Applied. All of the stock options granted to our executive officers qualify under Section 162(m) as performance-based compensation. The restricted stock and restricted stock units currently being granted do not qualify as performance-based compensation, but the options we grant to executives do qualify as performance-based compensation under Section 162(m) and such awards constitute the major part of our equity compensation program for senior executives.

This report is submitted by the Human Resources and Compensation Committee.

Willem P. Roelandts (Chairman)

Herbert M. Dwight, Jr.

Paul R. Low

Compensation Committee Interlocks and Insider Participation

During fiscal 2005, none of Applied’s executive officers served on the board of directors of any entities whose directors or officers serve on Applied’s Human Resources and Compensation Committee. No current or past executive officers of Applied or its subsidiaries serve on the Human Resources and Compensation Committee.

Employment Contract

As an inducement to join Applied as President and Chief Executive Officer, on April 21, 2003, Applied entered into an agreement with Michael R. Splinter that provided for the following in Mr. Splinter’s first year of employment: a base salary of $900,000; a target bonus of 175% of the base salary based on the achievement of certain performance measures; 1,200,000 shares of stock options; and 300,000 shares of restricted stock at $0.01 per share. For the years following fiscal 2003, Mr. Splinter’s base salary is subject to annual review, and his bonus, if any, is based on the achievement of performance measures determined by the Human Resources and Compensation Committee of the Board at the beginning of each fiscal year and under the terms of the Senior Executive Bonus Plan. The agreement also provided for certain relocation benefits under Applied’s relocation policy, as amended from time to time. Under the agreement, Mr. Splinter will receive certain compensation in the event Applied terminates his employment without cause. Specifically, in that event he would be entitled to receive a lump sum payment equal to his then current annual base salary and 100% of the target bonus for the year of termination, and any stock options that otherwise would have vested in the 12 months following his termination of employment would instead vest on the date of his termination. Also, in the event of termination, Mr. Splinter would resign from the Board, unless requested otherwise. The terms of the agreement were reviewed and approved by the Board.

None of the other named executive officers has an employment or severance agreement with Applied.

Certain Relationships and Related Transactions

Applied sponsors a relocation policy for the benefit of eligible employees who are newly hired or transfer locations at our request. The relocation benefits offered under the policy generally include, among other benefits, a home sale assistance benefit, which is designed to provide a relocating employee with assistance in selling his or her residence in a prior location. The home sale assistance benefit provides for Applied’s purchase of an employee’s residence if, in accordance with the relocation policy and the specific benefit terms, the employee has made specified efforts to sell the property but has not secured an outsider buyer to purchase it at its appraised value within a 60-day period.

Pursuant to the terms of Applied’s relocation policy and Michael R. Splinter’s hire as our President and Chief Executive Officer, Mr. Splinter was entitled to assistance with his relocation. In accordance with the terms of the home sale assistance benefit, Mr. Splinter made the required efforts to sell his former residence but could not secure an outside buyer within the 60-day period specified in Applied’s relocation policy. After this period, Applied purchased Mr. Splinter’s residence for $1,775,000 in November 2005. As provided in Applied’s relocation policy, the purchase price was determined by averaging the appraised value assigned to the property by two independent real estate valuation experts. The sale of Mr. Splinter’s former residence is currently pending, and Applied will retain all net proceeds upon the completion of the transaction.

STOCK PERFORMANCE GRAPH

The information contained in this Stock Performance Graph section shall not be deemed to be “soliciting material” or “filed” with the SEC or subject to the liabilities of Section 18 of the Exchange Act except to the extent that Applied specifically incorporates it by reference into a document filed under the Securities Act or the Exchange Act.

The following graph compares the five-year cumulative total return for Applied’sApplied common stock, the Standard & Poor’sPoor 500 Index and the RDG Semiconductor Composite Index (a published industry index), each of which assumes an initial value of $100 and reinvestment of dividends. Applied’s stock price performance shown in the following graph is not indicative of future stock price performance. The RDG Semiconductor Composite Index contains 8188 companies in the semiconductor equipment, semiconductor manufacturing and related industries.

OTHER INFORMATION

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires Applied’s directors and executive officers, and holders of more than 10% of Applied’sApplied common stock to file with the SEC reports about their ownership of common stock and other equity securities of Applied. Such directors, officers directors and 10% stockholders are required by SEC regulations to furnish Applied with copies of all Section 16(a) forms they file.

SEC regulations require us to identify in this proxy statementProxy Statement anyone who filed a required report late during the most recent fiscal year. Based on our review of forms we received, or written representations from reporting persons stating that they were not required to file these forms, we believe that during fiscal 2004,2005, all Section 16(a) filing requirements were satisfied on a timely basis.basis, except the Forms 4 to report the automatic annual option grants to certain of Applied’s non-employee directors: Michael H. Armacost, Deborah A. Coleman, Herbert M. Dwight, Jr., Philip V. Gerdine, Paul R. Low, Gerhard H. Parker and Willem P. Roelandts. Such late filings did not result in any liability under Section 16(b) of the Exchange Act.

No Incorporation by Reference

In Applied’s filings with the SEC, information is sometimes “incorporated by reference.” This means that we are referring you to information that has previously been filed with the SEC soand the information should be considered as part of this filing. Based on SEC regulations, the stock performance graph of this proxy statement,Proxy Statement, the “Audit Committee Report” and the “Human Resources and Compensation Committee Report” specifically are not incorporated by reference into any other filings with the SEC. This proxy statementIn addition, this Proxy Statement includes several website addresses. These website addresses are intended to provide inactive, textual references only. The information on these websites is not part of this proxy statement.Proxy Statement.

Stockholder Proposals—20062007 Annual Meeting

Stockholders may present proposals for action at a future meeting if they comply with SEC rules and Applied’s Bylaws. If you would like us to consider including a proposal in our proxy statement next year, it must be received at our offices on or before October 20, 2005.24, 2006. If you intend to submit a proposal at the 20052007 Annual Meeting of Stockholders but do not intend to include the proposal in our proxy statement for that meeting, you must provide appropriate notice to us on or before January 3, 2006.5, 2007. Our Bylaws contain specific requirements regarding a stockholder’s ability to nominate a director or to submit a proposal for consideration at an upcoming meeting. If you would like a copy of the requirements contained in our Bylaws, please contact: Joseph J. Sweeney, Secretary, Applied Materials, Inc., 2881 Scott Boulevard, P.O. Box 58039, M/S 2064, Santa Clara, California 95052-8039.

YOU MAY OBTAIN A COPY OF APPLIED’S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED OCTOBER 31, 200430, 2005 WITHOUT CHARGE BY SENDING A WRITTEN REQUEST TO APPLIED MATERIALS, INC., 3050 BOWERS AVENUE, P.O. BOX 58039, M/S 2038, SANTA CLARA, CALIFORNIA 95052-8039, ATTN: INVESTOR RELATIONS. THE ANNUAL REPORT ON FORM 10-K IS ALSO AVAILABLE ATwww.appliedmaterials.com.

By Order of the Board of Directors

Santa Clara, California

February 17, 2005

Appendix A—Audit Committee Charter

CHARTER OF THE AUDIT COMMITTEE OF

THE BOARD OF DIRECTORS OF APPLIED MATERIALS, INC.

I.    PURPOSE

The primary function of the Audit Committee (the “Committee”) is to assist the Board of Directors (the “Board”) of Applied Materials, Inc. (the “Company”) in fulfilling its oversight responsibilities with respect to: (i) the financial reports and other financial information provided by the Company to its stockholders and others; (ii) the Company’s financial policies and procedures and disclosure controls and procedures; (iii) the Company’s system of internal controls; and (iv) the Company’s auditing, accounting and financial reporting processes. The Committee shall also review and approve related-party transactions (as defined and required by applicable law, including Securities and Exchange Commission (“SEC”) and Nasdaq Marketplace (“Nasdaq”) rules). The Committee further aids the Board in its oversight of the Company’s tax, legal, regulatory and ethical compliance.

In carrying out this function, the Committee shall (i) serve as an independent and objective party to oversee the Company’s financial reporting process and internal control system; (ii) review and evaluate the qualifications and independence of the Company’s independent registered public accounting firm (“independent accountants”); (iii) approve all audit and permissible non-audit services provided by the Company’s independent accountants; (iv) review and evaluate the audit efforts of the Company’s independent accountants and the Internal Auditor; and (v) provide open communication among the independent accountants, financial and senior management, legal counsel, the Internal Auditor, Ombudsman and the Board.

The Committee will fulfill its oversight role primarily by carrying out the activities enumerated in Section IV of this Charter.

II.    COMPOSITION

The Committee shall be comprised of three or more directors, as determined by the Board, each of whom shall: (i) be independent as determined in accordance with Nasdaq rules; (ii) meet the criteria for independence set forth in Rule 10A-3 under the Securities Exchange Act of 1934, as amended; and (iii) not have participated in the preparation of the financial statements of the Company or any current subsidiary of the Company at any time during the last three (3) years. All members of the Committee shall be able to read and understand fundamental financial statements, including a company’s balance sheet, income statement and cash flow statement, or meet such other standard required by applicable law (including SEC and Nasdaq rules). At least one member of the Committee shall be an “audit committee financial expert” as defined by SEC rules and “financially sophisticated” as defined by Nasdaq rules. The Committee Chair must have accounting or financial expertise.

III.    MEETINGS

The Committee shall meet regularly, but at least quarterly (or more frequently as appropriate). The quarterly meetings shall include separate executive sessions with management, the Internal Auditor and the independent accountants. The Committee shall report its activities to the Board on a regular basis and shall make such recommendations to the Board as it deems appropriate.

IV.    RESPONSIBILITIES AND DUTIES

The Committee’s role is one of oversight. Company management is responsible for maintaining the Company’s books of account and preparing periodic financial statements based thereon. The independent accountants are responsible for auditing the Company’s annual financial statements.

The Committee shall prepare any report from the Committee that SEC rules require be included in the Company’s periodic SEC reports. The Committee shall review and approve all related-party transactions for

which audit committee approval is required by applicable law (including SEC and Nasdaq rules). The Committee shall be directly responsible for the appointment, compensation and oversight of the work of any independent accountants employed by the Company (including resolution of disagreements between management and such firm regarding financial reporting) for the purpose of preparing or issuing an audit report or related work. Each such firm shall report directly to the Committee.

To fulfill its responsibilities, the Committee will:

Documents/Reports Review

Control Processes

Independent Accountants

The Committee is directly responsible for the appointment, compensation, oversight, evaluation and, when appropriate, replacement of the registered public accounting firm that serves as the Company’s independent accountants. The Committee shall have the sole authority to engage and remove the independent accountants and to approve all audit engagement fees and terms and all non-audit engagements, as may be permissible, with the independent accountants. The independent accountants shall report directly to the Committee.

The Committee will:

Internal Audit

Legal and Ethical Compliance

Other Responsibilities

In addition to the activities described above, the Committee will perform such other functions as necessary or appropriate under law, the Company’s charter and/or Bylaws, and the resolutions and other directives of the Board.

Appendix B—Human Resources and Compensation Committee Charter

CHARTER OF THE HUMAN RESOURCES AND COMPENSATION COMMITTEE

OF THE BOARD OF DIRECTORS OF APPLIED MATERIALS, INC.

I.    PURPOSE

The primary purpose of the Human Resources and Compensation Committee (the “Committee”) is to direct the appropriate development of the human capabilities of Applied Materials, Inc. (the “Company”). The Company’s Board of Directors (the “Board”) and the Committee recognize that developing the capabilities of the Company’s executives and employees is vital to the Company’s ability to capitalize on its opportunities and increase long-term shareholder value. Accordingly, the Committee’s most important goal is to oversee the Company’s programs that foster executive and employee development. In furtherance of its primary goal, the Committee also determines executive compensation and oversees significant employee benefits programs, policies and plans relating to the Company’s executives and employees. As appropriate, the Committee’s activities are reported to the full Board.

II.    COMPOSITION

The Committee shall consist of no fewer than two directors. Each member of the Committee shall be (1) a “non-employee director,” as defined in Rule 16b-3 under the Securities Exchange Act of 1934, as amended, (2) an “outside director,” as defined in Section 162(m) of the Internal Revenue Code of 1986, and (3) an “independent director,” as defined in Rule 4200 of the Nasdaq Marketplace Rules. One member of the Committee shall be the Chairperson. Members of the Committee and its Chairperson shall be appointed annually and may be removed by the Board. Interlocking Committee memberships (e.g., company chief executive officers sitting on each other’s compensation committees) shall be avoided. In the event any one of the appointed Committee members ceases to be a non-employee or outside director, the Board will promptly select another non-employee, outside director to serve on the Committee.

III.    RESPONSIBILITIES AND DUTIES

The Committee has strategic and administrative responsibility on a broad range of overall Company human resources programs, compensation, benefits, and equity plan issues. The Committee evaluates and oversees the Company’s primary strategies for executive and employee development. The Committee seeks to assure that the Chief Executive Officer, other officers, and key management of the Company are compensated and motivated effectively in a manner consistent with competitive practices/trends, the requirements of appropriate regulatory bodies, the compensation strategy of the Company, and fiduciary and corporate responsibility, including internal equity considerations.

In carrying out the purposes set forth above, the Committee shall:

The Committee shall have the authority to invite members of the Company’s management to attend its meetings. However, the Chief Executive Officer shall not be present when his or her compensation is determined. The Committee also shall have the authority to engage its own independent advisors to assist the Committee in carrying out its responsibilities and duties and may invite such advisors to attend Committee meetings. Written minutes of the proceedings of each meeting or consent action of the Committee shall be prepared and circulated to each member of the Committee.

The Committee shall have the authority to delegate any of its responsibilities to subcommittees, as the Committee in its sole discretion may deem appropriate.

IV.    MEETINGS

Committee meetings generally will be held in conjunction with Board meetings. Special meetings of the Committee (in person or telephonic) may be called by the Board Chairperson or by any Committee member.

The Committee shall meet at least annually or more frequently as appropriate.

Appendix C—Corporate Governance and Nominating Committee Charter

CHARTER OF THE CORPORATE GOVERNANCE AND NOMINATING COMMITTEE

OF THE BOARD OF DIRECTORS OF APPLIED MATERIALS, INC.

I.    PURPOSE

The primary function of the Corporate Governance and Nominating Committee (“Committee”) of the Board of Directors (“Board”) of Applied Materials, Inc. (“Company”) is to develop, maintain and oversee the Company’s corporate governance guidelines; oversee the composition, structure and evaluation of the Board and its committees; and assist the Board in identifying individuals qualified to be directors.

II.    COMPOSITION

The Committee shall be comprised of not less than three directors, each of whom shall be independent, as such term is defined by Securities and Exchange Commission (“SEC”) and Nasdaq Marketplace (“Nasdaq”) rules. Members of the Committee shall be appointed and may be removed by the Board. One member of the Committee shall be the Chairperson.

III.    RESPONSIBILITIES AND DUTIES

In carrying out the purposes set forth above, the Committee shall:

Nomination of Directors

Communication with Stockholders

Other Responsibilities

The Committee shall have the authority to delegate any of its responsibilities to subcommittees, as the Committee in its sole discretion may deem appropriate.

The Committee shall have full access to the Company’s management, as necessary or appropriate to carry out these responsibilities.

The Committee shall have the authority to retain independent advisors to assist in carrying out its responsibilities, as the Committee in its sole discretion may deem appropriate. The Committee shall have sole authority to approve the terms of any such engagement, including fees, with funding provided by the Company.

The Committee shall timely report its activities to the Board and make such recommendations to the Board as it deems appropriate.

The Committee shall review this Charter at least annually and recommend any proposed changes to the Board for its approval.

The Committee shall perform any other activities consistent with its Charter, the Company’s Certificate of Incorporation and/or Bylaws, and governing law (including SEC and Nasdaq rules), as the Committee or the Board deems necessary or appropriate.

IV.    MEETINGS

The Committee shall meet at least annually or more frequently as appropriate.

Appendix D—Corporate Governance Guidelines

CORPORATE GOVERNANCE GUIDELINES OF

APPLIED MATERIALS, INC.

I.    INTRODUCTION

The following principles have been adopted by the board of directors (the “Board”) of Applied Materials, Inc. (“Applied” or the “Company”) as the Company’s corporate governance guidelines (“Guidelines”). These Guidelines, along with the Company’s Certificate of Incorporation and Bylaws and the charters of the Board committees, provide the framework for the governance of Applied. The Guidelines are intended to assist the Board in the exercise of its responsibilities. As the operation of the Board is a dynamic process, with the aid of the Corporate Governance and Nominating Committee, these Guidelines will be reviewed periodically and may be changed by the Board from time to time.

II.    ROLE OF THE BOARD AND MANAGEMENT

The Board is elected by the stockholders to oversee management and to assure that the long-term interests of the stockholders are being served. The Board is responsible for oversight of Applied’s business that is conducted by its employees, managers and officers, under the direction of the Chief Executive Officer (“CEO”). Both the Board and management recognize that stockholders’ long-term interests are advanced by responsibly addressing the concerns of other stakeholders essential to the Company’s success, including employees, customers, suppliers, the communities in which Applied does business, the government and the public.

III.    FUNCTIONS OF THE BOARD

The Board reviews reports by management on the performance of the Company, its plans and prospects, as well as issues facing the Company, during its regularly scheduled meetings (typically four per year) and any special meetings. Directors are expected to prepare for, attend and participate in all scheduled Board and applicable committee meetings. In addition to its general oversight of management, the Board also performs a number of specific functions, including:

IV.    SIZE OF BOARD, DIRECTOR QUALIFICATIONS AND SELECTION PROCESS

The Board is responsible for determining the number of directors on the Board based upon the nature and scope of the Company’s operations and the need for diversity of Board views. The Board has currently determined this range to be between 8 and 12 directors and will periodically review the appropriate size of the Board.

The Company’s stockholders elect directors each year at the annual stockholder meeting. The Board will select nominees and recommend them for election by stockholders and fill any vacancies that may arise between annual stockholder meetings. As part of its selection process, the Board may consider recommendations from other sources of director candidates with diverse backgrounds and experience who will enhance the quality of the Board, serve stockholders’ long-term interests and contribute to the Company’s overall corporate goals. The Board may delegate the screening process to the Corporate Governance and Nominating Committee. Stockholders may also propose nominees for consideration by the Corporate Governance and Nominating Committee by submitting the name(s) and supporting information to: Corporate Secretary, Applied Materials, Inc., 2881 Scott Boulevard, P.O. Box 58039, M/S 2064, Santa Clara, CA 95052-8039.

In selecting nominees, the Board will assess the independence, character, and acumen of candidates and will endeavor to collectively establish a number of areas of core competency of the Board, including: business judgment; management; accounting and finance; industry and technology knowledge; understanding of manufacturing; leadership; strategic vision; knowledge of international markets; and marketing. Directors should possess the highest personal and professional ethics, integrity and values, informed judgment, and sound business experience, and be committed to representing the long-term interests of the Company’s stockholders. They must also have an inquisitive and objective perspective, the ability to make independent analytical inquiries, practical wisdom and mature judgment. We endeavor to have a Board representing diverse experience at policy-making levels in various areas that are relevant to the Company’s global activities.

A majority of the directors will be “independent directors” pursuant to Securities and Exchange Commission (“SEC”) and Nasdaq Marketplace (“Nasdaq”) rules. “Independent director” means a person other than an officer or employee of the Company or its subsidiaries, or any other individual having a relationship that, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. To be considered independent, the Board must affirmatively determine that neither the director nor an immediate family member has had any direct or indirect material relationship with the Company within the last three years. Although the majority of directors must be independent, it is recognized that directors who do not meet the independence standards also make valuable contributions to the Board and to the Company by reason of their experience, knowledge and familiarity with the Company.

Directors must be willing to devote sufficient time to carry out their duties and responsibilities effectively, and should be committed to serve on the Board for an extended period of time. Each Board member is expected to ensure that other existing and planned future commitments do not materially interfere with his/her service as an outstanding director. Directors are encouraged to limit the number of other boards (excluding non-profit) on which they serve to ensure that they can meet their commitments to the Company.

The Corporate Governance and Nominating Committee, from time to time, may review the appropriate skills and characteristics required of Board members taking into account the current composition of the Board and the needs of the Company. This assessment should include the areas of core competency established by the Board and should strive for a mix of skills and diverse perspectives (functional, cultural and geographic) that is effective for the Board at that point in time.

The Board anticipates that the Company’s CEO will be nominated annually to serve on the Board and may also serve as Chairman of the Board. The Board may also appoint or nominate certain other members of the Company’s management whose experience and role at the Company are expected to help the Board fulfill its responsibilities.

New Board members will attend a director orientation program provided by the Company that will include written materials, meetings with key management and visits to Company facilities. Each director is also expected to participate in continuing educational programs in order to maintain the necessary level of expertise to perform his or her responsibilities. The Company’s chief legal officer and chief financial officer are responsible for providing the orientation for new directors, and for periodically providing materials or briefing sessions for all directors on subjects that will assist them in discharging their duties.

The Board does not believe that directors who retire or change their principal occupation or business association should necessarily leave the Board. However, upon such an event, the Board, through the Corporate Governance and Nominating Committee, shall review the appropriateness of continued Board membership.

The Board does not believe that arbitrary term limits on directors’ service are beneficial, nor does it believe that directors should expect to be re-nominated as a matter of course. The Board self-evaluation process is an important determinant of Board tenure. Directors will not typically be nominated for election to the Board after they reach the age of 70, which the Board considers to be a generally appropriate retirement age, although the Board may decide to waive this policy in individual cases.

V.    BOARD COMMITTEES

The Board has established the following committees to assist the Board in discharging its responsibilities: (i) Audit; (ii) Corporate Governance and Nominating; (iii) Human Resources and Compensation; (iv) Investment; (v) Stockholder Rights Plan Review; and (vi) Strategy. From time to time, the Board may form a new committee or disband a current committee, depending upon the circumstances.

The charters of the Audit, Corporate Governance and Nominating and Human Resources and Compensation Committees are published on the Applied website(www.appliedmaterials.com), and will be mailed to stockholders on written request. The Board is responsible for the appointment of the chair and members of each committee. The committee chairs report the highlights of their meetings to the Board following each meeting of the respective committees. The committees occasionally hold meetings in conjunction with the Board.

The number, content, frequency, length and agenda of committee meetings and other matters of committee governance will be determined by each committee in light of the authority delegated by the Board to the committee; the chair of each committee is responsible for developing, with input from relevant Company managers, the committee’s agenda and objectives; the committee’s charter, if any, as approved by the Board; and legal, regulatory, accounting or governance principles applicable to that committee’s function. Sufficient time to consider the agenda items will be provided. Materials related to agenda items will be sent to committee members sufficiently in advance of the meeting to allow the members to prepare for discussion of the items at the meeting.

Audit Committee

The Audit Committee oversees the financial reports and other financial information provided by the Company to its stockholders and others, the Company’s financial policies and procedures and disclosure controls and procedures, the Company’s system of internal controls, and the Company’s auditing, accounting and financial reporting processes. The committee also reviews and approves, where appropriate, related-party transactions and appoints and reviews the performance of the independent registered public accounting firm. In addition, the committee further aids the Board in its oversight of the Company’s tax, legal, regulatory and ethical compliance, including oversight of the Ombudsman process as a procedure for receiving, retaining and treating complaints or concerns.

Corporate Governance and Nominating Committee

The Corporate Governance and Nominating Committee assists the Board in developing, maintaining and overseeing the Company’s corporate governance guidelines, oversees the composition, structure and evaluation of the Board and its committees, and assists the Board in identifying individuals qualified to be directors. The committee reviews these guidelines regularly and recommends changes as necessary or appropriate.

Human Resources and Compensation Committee

The Human Resources and Compensation Committee oversees the Company’s programs that foster employee and executive development and retention, determines executive compensation and oversees significant

employee benefits programs, policies and plans relating to the Company’s employees and executives. In addition, the Committee adopts, amends and oversees administration of all equity-related incentive plans and senior executive bonus plans and approves the compensation of members of the Board.

Investment Committee

The Investment Committee reviews and approves the Company’s major investments, including strategies for acquiring or divesting companies, real property, and other assets.

Stockholder Rights Plan Review Committee

The Stockholder Rights Plan Review Committee reviews the Company’s stockholder rights plan (the “Plan”) when and as appropriate, and at least every three years; considers whether the maintenance of the Plan continues to be in the best interests of the Company and its stockholders; and, if it determines that such action is appropriate, recommends changes to the Plan or redemption of rights issued under the Plan.

Strategy Committee

The Strategy Committee reviews the Company’s long-term strategic goals, objectives and plans concerning existing and potential markets, technologies, products, services, and business opportunities and recommends changes, as appropriate. As part of its review, the committee evaluates strategies in an effort to effectively align and maximize the Company’s technological capabilities, and product and service offerings with customers’ needs and market opportunities.

VI.    INDEPENDENCE OF COMMITTEE MEMBERS

The Audit, Corporate Governance and Nominating and Human Resources and Compensation Committees shall consist solely of independent directors. In addition to the requirement that a majority of the Board satisfy the independence standards discussed in Section IV above, members of the Audit Committee must also satisfy additional independence requirements that they not directly or indirectly receive any compensation from the Company other than their directors’ compensation.

VII.    SELECTION OF CHAIRMAN, CEO AND LEAD INDEPENDENT DIRECTOR

The Board is responsible for selecting the Company’s Chairman of the Board, CEO and Lead Independent Director. The Board should make its selections in a manner that is best for the Company under all of the circumstances. The roles of the Chairman and CEO may be separate or combined and the Chairman may be either an employee or non-employee director.

This flexibility allows the Board to select the Company’s CEO and Chairman in the manner that it determines to be in the best interests of the Company’s stockholders. The Board is also responsible for designating an independent director as the Lead Independent Director. The Chairman may act as the Lead Independent Director if the Chairman qualifies as independent. The Lead Independent Director chairs the executive sessions of independent directors, coordinates the activities of the other independent directors, and performs such other duties as deemed necessary by the Board from time to time.

VIII.    EXECUTIVE SESSIONS OF INDEPENDENT DIRECTORS

Independent directors shall meet without the presence of management or the non-independent directors at least twice a year during the regularly scheduled Board meetings. These executive sessions will be called and chaired by the Lead Independent Director.

IX.    SELF-EVALUATION

The Board and each committee will perform an annual self-evaluation. The goal of the self-evaluation is to improve the contributions of the committees and of individual directors to the effectiveness of the Board.

X.    BOARD MEETINGS AND AGENDA

Board meetings are scheduled in advance typically every quarter for a full day. Special meetings may be called as necessary. The meetings are usually held at the Company’s headquarters in Santa Clara, California, but occasionally may be held at another facility in the U.S. or abroad.

Information and data that is important to the Board’s understanding of business to be discussed at a meeting should be distributed in writing to the Board before the Board meets. As a general rule, materials on specific subjects should be sent to Board members in advance so that Board meeting time may focus on discussion and analysis rather than exchange of information. Sensitive subject matters may be discussed at the meeting without written materials being distributed in advance or at the meeting.

The Board shall be responsible for its agenda. The CEO will propose for the Board’s approval key topics to be scheduled and discussed during the course of the next year and the Board will be invited to offer its suggestions. As a result of this process, a schedule of major discussion items for the following year will be established. The Chairman or committee chair, as appropriate, shall determine the nature and extent of information that shall be provided regularly to the directors before each scheduled Board or committee meeting. Directors are urged to make suggestions for agenda items, or additional pre-meeting materials, to the CEO or appropriate committee chair at any time. It is the policy of the Board to review major business operations of the Company on a periodic basis, and to review long-term strategic plans and annual operating plans.

The Board encourages management to schedule managers to present material at Board meetings who: (a) can provide additional insight into the topics being discussed because of personal involvement in these areas; or (b) have future potential that management believes should be given exposure to the Board. The Board welcomes the regular attendance at each Board meeting of non-Board members who are in responsible management positions of the Company.

XI.    ETHICS AND CONFLICTS OF INTEREST

The Board is committed to upholding the highest legal and ethical conduct in fulfilling its responsibilities. The Board expects Applied’s directors, officers and all other members of its workforce to act ethically at all times and to acknowledge their adherence to the policies comprising Applied’s Standards of Business Conduct. The Board oversees the Company’s Ethics Program, which presently includes the Company’s Standards of Business Conduct, an Ombudsman responsible for receiving and investigating complaints and a 24-hour global toll-free hotline.

If a director becomes involved in activities or interests that conflict or appear to conflict with the interests of the Company and these activities result in an actual or potential conflict of interest, the director is required to disclose such conflict promptly to the Board. The Board will determine an appropriate resolution on a case-by-case basis. All directors will recuse themselves from any discussion or decision affecting their personal, business or professional interests. The Board shall resolve any conflict of interest question involving the CEO; and the CEO shall resolve any conflict of interest issue involving any other officer of the Company.

The Company will not make any personal loans or extensions of credit to directors or executive officers. No director (other than employee directors) or family member may provide personal services for compensation to the Company.

XII.    REPORTING CONCERNS TO INDEPENDENT DIRECTORS OR THE AUDIT COMMITTEE

Anyone who has a concern about Applied’s conduct or about its accounting, internal accounting controls or auditing matters may communicate that concern directly to any independent director, the Audit Committee or Ombudsman. Such communications may be confidential or anonymous, and may be e-mailed or submitted in writing to designated addresses, or reported by phone to a confidential, global, toll-free phone number. All such concerns will be forwarded to the appropriate directors for their review, and will be simultaneously reviewed and addressed by Applied’s Ombudsman in the same way that other concerns are addressed by the Company. The status of all outstanding concerns addressed to the independent directors or the Audit Committee will be reported to the directors on a quarterly basis. The independent directors or the Audit Committee may direct special treatment, including the retention of outside advisors or counsel, for any concern addressed to them. The Company’s Standards of Business Conduct prohibit any employee from retaliating or taking any adverse action against anyone for raising or helping to resolve an integrity concern.

XIII.    COMPENSATION OF INDEPENDENT DIRECTORS

The Human Resources and Compensation Committee is responsible for reviewing and approving compensation and benefits, including stock options, for independent directors. In discharging this duty, it shall be guided by three goals: compensation should fairly pay directors for work required on behalf of a company of Applied’s size and scope; compensation should align directors’ interests with the long-term interests of stockholders; and the structure of the compensation should be transparent and easily understandable. At the end of each year, the Human Resources and Compensation Committee shall review independent director compensation and benefits.

XIV.    ANNUAL COMPENSATION REVIEW OF SENIOR EXECUTIVES

The Human Resources and Compensation Committee shall annually review and approve the goals and objectives for compensating the CEO. That committee shall evaluate the CEO’s performance in light of these goals before setting the CEO’s salary, bonus and other incentive and equity compensation. The committee shall also annually review and approve the compensation structure for the Company’s officers, and shall evaluate the performance of the Company’s senior executive officers before approving their salary, bonus and other incentive and equity compensation.

XV.    STOCK OWNERSHIP GUIDELINES

Non-employee directors should maintain an investment level in the Company’s stock equal to five times their annual retainer. The CEO and Chairman should maintain an investment level in the Company’s stock equal to five times their annual salary. All other named executive officers should maintain an investment level equal to three times their annual salary. In each case, such investment levels should be achieved within a specified period or, in any event, no later than five years following their election or appointment.

XVI.    ACCESS TO EMPLOYEES

The Board has complete access to any Applied employee. Independent directors are encouraged to contact employees of the Company with or without senior executives present.

XVII.    ACCESS TO INDEPENDENT ADVISORS

The Board (as an entity) and each of its committees shall have the right at any time to retain independent financial, legal or other advisors, with funding provided by the Company.

XVIII.    MISCELLANEOUS

These Guidelines are in addition to and are not intended to change or interpret any federal or state law, including the General Corporation Law of Delaware.21, 2006

Directions to the Santa Clara Convention CenterApplied Materials Bowers Campus

5001 Great America Parkway,3050 Bowers Avenue, Building 1, Santa Clara, California 95054

DIRECTIONS FROM SAN JOSE:HIGHWAY 101:

DIRECTIONS FROM SAN FRANCISCO:INTERSTATE 280:

DIRECTIONS FROM BERKELEY / OAKLAND:

APPLIED MATERIALS, INC.

2881 SCOTT BLVD.

P.O. BOX 58039, M/S 2064

SANTA CLARA, CA 95052-8039

		YOU CAN VOTE BY TELEPHONE OR BY TELEPHONE OR OVER THE INTERNET QUICK · EASY · IMMEDIATE AVAILABLE 24 HOURS A DAY · 7 DAYS A WEEK APPLIED MATERIALS, INC. encourages you to take advantage of convenient ways to vote. If voting by proxy, you may vote by mail, or choose one of the two methods described below. Your telephone or Internet vote authorizes the named proxies to vote in the same manner as if you marked, signed, and returned your proxy card. To vote by telephone or Internet, please read the 2005 Proxy Statement and then follow these easy steps: VOTE BY INTERNET - www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information. Your vote must be received by 11:59 P.M. Eastern Time on March 22, 2005. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions. Your vote must be received by 11:59 P.M. Eastern Time on March 22, 2005. Have your proxy card in hand when you call and then follow the instructions. Your call is toll-free in the United States and Canada. VOTE BY MAIL QUICK · EASY · CONVENIENT AVAILABLE 24 HOURS A DAY · 7 DAYS A WEEK
APPLIED MATERIALS, INC. 2881 SCOTT BLVD. P.O. BOX 58039, M/S 2064 SANTA CLARA, CA 95052-8039		APPLIED MATERIALS, INC. encourages you to take advantage of convenient ways to vote. If voting by proxy, you may vote by mail, by telephone or over the Internet. Your telephone or Internet vote authorizes the named proxies to vote in the same manner as if you marked, signed, and returned your proxy card. To vote over the Internet, by telephone or by mail, please read the 2006 Proxy Statement and then follow these easy steps:
		VOTE OVER THE INTERNET - www.proxyvote.com
		Use the Internet to transmit your voting instructions and for electronic delivery of information. Your vote must be received by 11:59 P.M. Eastern Time on March 21, 2006. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.
		ELECTRONIC DELIVERY OF FUTURE STOCKHOLDER COMMUNICATIONS
		If you would like to reduce the costs incurred by APPLIED MATERIALS, INC. in mailing proxy materials, you can consent to receive all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access stockholder communications electronically in future years. Once you enroll for electronic delivery, you will receive proxy materials electronically as long as the account remains active or until you cancel your enrollment.
		VOTE BY TELEPHONE - 1-800-690-6903
		Use any touch-tone telephone to transmit your voting instructions. Your vote must be received by 11:59 P.M. Eastern Time on March 21, 2006. Have your proxy card in hand when you call and then follow the instructions. Your call is toll-free in the United States and Canada.
		VOTE BY MAIL
		Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Applied Materials, Inc., c/o ADP, 51 Mercedes Way, Edgewood, NY 11717.

THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.

APPLIED MATERIALS, INC.

THIS PROXY WILL BE VOTED AS SPECIFIED, OR IF NO CHOICE IS SPECIFIED, WILL BE VOTED FOR THE NINE NOMINEES FOR ELECTION AS DIRECTORS (PROPOSAL 1) AND FOR THE RATIFICATION OF THE APPOINTMENT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PROPOSAL 2).

Please sign exactly as your name appears. When shares are held by joint tenants, both should sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. If a corporation, please sign in full corporate name by president or other authorized officer. If a partnership, please sign in partnership name by authorized person.