**United
      States**


**Securities
      and Exchange Commission,**


Washington,
      D.C. 20549





**FORM
      20-F**





**(Mark
      One)**


o
            REGISTRATION
                STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE
                ACT
                OF 1934


OR


o
            ANNUAL
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934


OR


x
            TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934.


For
      the
      transition period ended: December 31, 2005





Commission
      file number:


**ICON
      public limited company**


.........................................................................................................................................................


(Exact
      name of Registrant as specified in its charter)





Ireland


.........................................................................................................................................................


(Jurisdiction
      of incorporation or organization)





South
      County Business Park, Leopardstown, Dublin 18, Ireland.


.........................................................................................................................................................


(Address
      of principal executive offices)





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


Name
      of
      exchange


Title
      of
      each
      class on
      which
      registered





None





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


Title
      of
      each class





American
      Depository Shares, representing Ordinary Shares, par value €0.06
      each


Ordinary
      Shares, par value €0.06 each





Securities
      for which there is a reporting obligation pursuant to Section 15(d) of the
      Act:


None


(Title
      of
      Class)





Indicate
      the number of outstanding shares of each of the issuer’s classes of capital or
      common stock as of the close of the period covered by the annual report:
      14,018,092 Ordinary Shares.





Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act 1934 during the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days:





Yes......... **X** ...................................  No............................................





Indicate
      by check mark which financial statement item the registrant has elected to
      follow:





Item
      17............................................  Item
      18......... **X** ...................................





**TABLE
      OF CONTENTS**


**General**
              
              1**Cautionary
                  Statement**
              
              1**Part
                  I**Item
                  1.
              Identity
                  of Directors, Senior Management and Advisors
              1Item
                  2.
              Offer
                  Statistics and Expected Timetable
              1Item
                  3.
              Key
                  Information
              2Item
                  4.
              Information
                  on the Company
              8Item
                  5.
              Operating
                  and Financial Review and Prospects
              19Item
                  6.
              Directors,
                  Senior Management and Employees
              29Item
                  7.
              Major
                  Shareholders and Related Party Transactions
              33Item
                  8.
              Financial
                  Information
              35Item
                  9.
              The
                  Offer and the Listing
              36Item
                  10.
              Additional
                  Information
              37Item
                  11.
              Quantitative
                  and Qualitative Disclosures about Market Risk
              43Item
                  12.
              Description
                  of Securities Other than Equity Securities
              43**Part
                  II**Item
                  13.
              Defaults,
                  Dividend Arrearages and Delinquencies
              44Item
                  14.
              Material
                  Modifications to the Rights of Security Holders and Use of
                  Proceeds
              44Item
                  15.
              Controls
                  and Procedures.
              44Item
                  16.
              Reserved
              44**Part
                  III**Item
                  17.
              Financial
                  Statements
              45Item
                  18.
              Financial
                  Statements
              45Item
                  19.
              Financial
                  Statements and Exhibits
              45












**General**
 
 As
        used
        herein, “ICON plc”, the “Company” and “we” or “us” refer to ICON public limited
        company and its consolidated subsidiaries, unless the context requires
        otherwise.
 
 Unless
        otherwise indicated, ICON plc’s financial statements and other financial data
        contained in this Form 20-F are presented in United States dollars (“$”) and are
        prepared in accordance with generally accepted accounting principles in the
        United States (“U.S. GAAP”).
 
 In
        this
        Form 20-F, references to "U.S. dollars", "U.S.$" or "$" are to the lawful
        currency of the United States, references to "pounds sterling", "sterling",
        "£",
        "pence" or "p" are to the lawful currency of the United Kingdom, references
        to
“Israeli Shekels” or “ILS” are to the lawful currency of Israel, references to
“Euro” or “€” are to the European single currency adopted by twelve members of
        the European Union (including the Republic of Ireland, France, Germany Spain
        and
        the Netherlands). ICON publishes its consolidated financial statements in
        U.S.
        dollars.
 
 ICON
        has
        historically prepared its consolidated financial statements on the basis
        of a
        fiscal year beginning on June 1 and ending on May 31. On July 27, 2005 the
        Board
        of Directors of the Company approved a change of the Company’s fiscal year end
        from a twelve-month period ending on May 31 to a twelve-month period ending
        on
        December 31.  The Company is making this change in order to align its
        fiscal year end with the majority of other contract research
        organizations.  As a requirement of this change, the Company is reporting
        results for the seven-month period from June 1, 2005 to December 31, 2005
        as a
        separate transition period in this Transition Report filed on Form 20-F. As
        of January 1, 2006, the Company’s fiscal year will begin on January 1 and
        end on December 31 and its fiscal quarters will end on the last day of March,
        June, September and December of each year.
 
 
 **Cautionary
        Statement**
 
 Statements
        included herein which are not historical facts are forward looking statements.
        Such forward looking statements are made pursuant to the safe harbor provisions
        of the U.S. Private Securities Litigation Reform Act of 1995 (the “PSLRA”). The
        forward looking statements involve a number of risks and uncertainties and
        are
        subject to change at any time. In the event such risks or uncertainties
        materialize, our results could be materially affected. The risks and
        uncertainties include, but are not limited to, dependence on the pharmaceutical
        industry and certain clients, the need to regularly win projects and then
        to
        execute them efficiently, the challenges presented by rapid growth, competition
        and the continuing consolidation of the industry, the dependence on certain
        key
        executives and other factors identified in the Company’s Securities and Exchange
        Commission filings. The Company has no obligation under the PSLRA to update
        any
        forward looking statements and does not intend to do so.
 
 
 **Part
        I**
 
 **Item
        1.** ***Identity of Directors, Senior Management and
        Advisors.***
 
 Not
        applicable.
 
 **Item
        2.** ***Offer
        Statistics and Expected Timetable.***
 
 Not
        applicable.
 
 
  1
  **Item
        3*****.
        Key Information.***
 
 **Selected
        Historical Consolidated Financial Data for ICON plc**
 The
        following selected financial data set forth below are derived from ICON’s
        consolidated financial statements and should be read in conjunction with,
        and
        are qualified by reference to, "Operating and Financial Review and Prospects"
        and ICON's consolidated financial statements and related notes thereto included
        elsewhere in this Form 20-F.
 
 **Year
                  Ended May 31,**
              
              **7
                  monthPeriodended December 31,****2001**
              
              **2002**
              
              **2003**
              
              **2004**
              
              **2005**
              
              **2005****(in
                  thousands, except share and per share data)****Statement
                  of Operations Data:**Gross
                  revenue
              
              $
              151,832
              
              $
              218,842
              
              $
              340,971
              
              $
              443,875
              
              $
              469,583
              
              $275,586Subcontractor
                  costs (1)
              
              
              (35,669
              )
              
              (62,287
              )
              
              (115,246
              )
              
              (146,952
              )
              
              (142,925
              )
              (73,636)Net
                  revenue
              
              
              116,163
              
              
              156,555
              
              
              225,725
              
              
              296,923
              
              
              326,658
              
              201,950Costs
                  and expenses:
                Direct
                  costs
              
              
              63,800
              
              
              83,371
              
              
              122,373
              
              
              162,562
              
              
              179,661
              
              114,004Selling,
                  general and administrative
              
              
              36,312
              
              
              48,951
              
              
              71,118
              
              
              88,807
              
              
              103,784
              
              62,051Depreciation
                  and amortization
              
              
              4,975
              
              
              6,020
              
              
              7,305
              
              
              11,171
              
              
              13,331
              
              8,094Share
                  based compensation (2)
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              6,249Other
                  charges
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              11,275
              
              -Total
                  costs and expenses
              
              
              105,087
              
              
              138,342
              
              
              200,796
              
              
              262,540
              
              
              308,051
              
              190,398Income
                  from operations
              
              
              11,076
              
              
              18,213
              
              
              24,929
              
              
              34,383
              
              
              18,607
              
              11,552Net
                  interest income
              
              
              2,519
              
              
              1,116
              
              
              354
              
              
              288
              
              
              979
              
              1,272Income
                  before provision for income taxes
              
              
              13,595
              
              
              19,329
              
              
              25,283
              
              
              34,671
              
              
              19,586
              
              12,824Provision
                  for income taxes
              
              
              (2,617
              )
              
              (5,129
              )
              
              (7,000
              )
              
              (8,929
              )
              
              (5,852
              )
              (5,396)Minority
                  interest
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (189
              )
              (10)Net
                  income
              
              $
              10,978
              
              $
              14,200
              
              $
              18,283
              
              $
              25,742
              
              $
              13,545
              
              $7,418Net
                  income per
                ordinary
                  share (3):
                Basic
              
              $
              0.97
              
              $
              1.22
              
              $
              1.55
              
              $
              1.94
              
              $
              0.98
              
              $0.53Diluted
              
              $
              0.92
              
              $
              1.16
              
              $
              1.50
              
              $
              1.88
              
              $
              0.96
              
              $0.52Weighted
                  average number
                of
                  ordinary shares outstanding:
                Basic
              
              
              11,292,610
              
              
              11,656,153
              
              
              11,813,788
              
              
              13,267,531
              
              
              13,860,203
              
              13,970,106Diluted
              
              
              11,943,849
              
              
              12,241,820
              
              
              12,181,094
              
              
              13,703,163
              
              
              14,153,445
              
              14,247,542
 
  2
  
 **As
                  of May 31,**
              
              **As
                  of December31,****2001**
              
              **2002**
              
              **2003**
              
              **2004**
              
              **2005**
              
              **2005****(in
                  thousands)****Balance
                  Sheet Data:**Cash
                  and cash equivalents
              
              $
              11,179
              
              $
                  36,291
              $
                  18,311
              $
                  55,678
              $
                  56,341
              $59,509Short
                  term investments
              
              
              35,941
              
              18,551
              -
              23,085
              22,034
              22,809Working
                  capital
              
              
              61,147
              
              72,923
              53,827
              113,813
              125,288
              132,312Total
                  assets
              
              
              128,967
              
              165,794
              235,014
              335,323
              347,553
              349,067Total
                  debt
              
              
              11,518
              
              11,745
              7,126
              -
              -
              4,856Government
                  grants
              
              
              476
              
              962
              1,140
              1,411
              1,257
              1,160Shareholders’
                  equity
              
              $
              86,580
              
              $107,561
              $136,910
              $216,760
              $233,066
              $241,558
 
 
 (1)  Subcontractor
        costs comprise investigator payments and certain other costs reimbursed by
        clients under terms specific to each of ICON's contracts. See Note 2 (d)
        to the
        Audited Consolidated Financial Statements.
 
 (2)  $6.2
        million stock compensation expensed during the period ended December 31,
        2005
        including an expense of $6.0 million recorded in relation to the transfer
        of
        144,000 shares from the founders of the company to the Chief Executive
        Officer.
 
 (3
        )  Net
        income per ordinary share is based on the weighted average number of outstanding
        ordinary shares. Diluted net income per share includes potential ordinary
        shares
        from the exercise of options.
 
 **Risk
        Factors**
 
 ***We
        are dependent on the continued outsourcing of research and development by
        the
        pharmaceutical, biotechnology and medical device
        industries.***
  We
        are
        dependent upon the ability and willingness of the pharmaceutical, biotechnology
        and medical device companies to continue to spend on research and development
        and to outsource the services that we provide. We are therefore subject to
        risks, uncertainties and trends that affect companies in these industries.
        We
        have benefited to date from the tendency of pharmaceutical, biotechnology
        and
        medical device companies to outsource clinical research projects. Any downturn
        in these industries or reduction in spending or outsourcing could adversely
        affect our business. For example, if these companies expanded upon their
        in-house clinical or development capabilities, they would be less likely
        to
        utilize our services. In addition, if governmental regulations were changed,
        they could affect the ability of our clients to operate profitably, which
        may
        lead to a decrease in research spending and therefore this could have a material
        adverse effect on our business.
   3
  
 ***We
        depend on a limited number of clients and a loss of or significant decrease
        in
        business from them could affect our business.***
  We
        have
        in the past and may in the future derive a significant portion of our net
        revenue from a relatively limited number of clients. During the 7 month
        transition period ended December 31, 2005, 39% of our net revenue was derived
        from our top five clients. In the 7 month transition period no client
        contributed more then 10% of net revenues. During the fiscal year ended May
        31,
        2005, 43% of our net revenue was derived from our top five clients. In the
        fiscal year ended May 31, 2005, 12% of our net revenue was from Astra Zeneca
        plc. No other client contributed more then 10% of net revenues. During
        the fiscal year ended May 31, 2004, 40% of our net revenue was derived from
        our
        top five clients. In the fiscal year ended May 31, 2004, 17% of our net revenue
        was from Astra Zeneca plc, no other client contributed more then 10% of net
        revenues. During the fiscal year ended May 31, 2003, 51% of our net revenue
        was
        derived from our top five clients. In fiscal 2003, 21% of our net revenue
        was
        from Astra Zeneca plc, 11% from Sanofi-Synthelabo Inc. and 10% from Pfizer,
        Inc.
  
  ***If
        our clients discontinue using our services, or cancel or discontinue projects,
        our revenue will be adversely affected and we may not receive their business
        in
        the future or may not be able to attract new clients.***
  Our
        clients may discontinue using our services completely or cancel some projects
        either without notice or upon short notice. The termination or delay of a
        large
        contract or of multiple contracts could have a material adverse effect on
        our
        revenue and profitability. Historically, clients have canceled or discontinued
        projects and may in the future cancel their contracts with us for reasons
        including:
  •  the
        failure of products being tested to satisfy safety or efficacy
        requirements;
  •  unexpected
        or undesired clinical results of the product;
  •  a
        decision that a particular study is no longer necessary;
  •  poor
        project performance, insufficient patient enrollment or investigator
        recruitment; or
  •  production
        problems resulting in shortages of the drug.
  If
        we
        lose clients, we may not be able to attract new ones, and if we lose individual
        projects, we may not be able to replace them.
  ***We
        compete against many companies and research institutions that may be larger
        or
        more efficient than we are. This may preclude us from being given the
        opportunity to bid, or may prevent us from being able to competitively bid
        on
        and win new contracts.***
  The
        market for CROs is highly competitive. We primarily compete against in-house
        departments of pharmaceutical companies and other CROs including Quintiles
        Transnational Corporation, Covance Inc., PAREXEL International Corporation,
        Kendle International Inc., Ingenix Inc. (United Health Group Incorporated),
        Omnicare Inc., PRA International Inc., MDS Inc., SFBC International Inc.,
        Charles River Laboratories, Inc. and Pharmaceutical Product Development,
        Inc.
        Some of these competitors have substantially greater capital, research and
        development capabilities and human resources than we do. As a result, they
        may
        be selected as preferred vendors of our clients or potential clients for
        all
        projects or for significant projects, or they may be able to price projects
        more
        competitively than us. Any of these factors may prevent us from getting the
        opportunity to bid on new projects or prevent us from being competitive in
        bidding on new contracts.
   4
  
 ***Our
        quarterly results are dependent upon a number of factors and can fluctuate
        from
        quarter to quarter.***
  Our
        results of operations in any quarter can fluctuate depending upon, among
        other
        things, the number and scope of ongoing client projects, the commencement,
        postponement, variation and cancellation or termination of projects in the
        quarter, the mix of revenue, cost overruns, employee hiring and other factors.
        Our net revenue in any period is directly related to the number of employees
        and
        the percentage of these employees who were working on projects and billed
        to the
        client during that period. We may be unable to compensate for periods of
        underutilization during one part of a fiscal period by augmenting revenues
        during another part of that period. We believe that operating results for
        any
        particular quarter are not necessarily a meaningful indication of future
        results.
  ***Our
        Central Laboratory segment has been loss making and may continue to experience
        losses in the future.***
  Our
        central laboratory has experienced a period of underperformance over the
        past
        number of years. To return this business segment to profitability, we require
        continued strong levels of new business awards and economies of scale in
        the
        usage of both resources and lab inputs. If we do not achieve continued momentum
        in winning new business and if these economies are not attained, then our
        central laboratory may continue to make losses
  ***Approximately
        85% of our net revenue is earned from long-term fixed-fee contracts. We would
        lose money in performing these contracts if the costs of performance exceed
        the
        fixed fees for these projects.***
  Approximately
        85% of our net revenue is earned from long-term fixed-fee contracts. We have
        in
        the past and will continue to bear the risk of cost overruns under these
        contracts. If the costs of performing these projects exceed the fixed fees
        for
        these projects, (for example if we underprice these contracts), if there
        are
        significant cost overruns or if there are unanticipated delays under these
        contracts, our business, financial condition and operating results could
        be
        adversely affected.
  ***If
        we fail to attract or retain qualified staff, our performance may
        suffer.***
  Our
        business, future success and ability to expand operations depends upon our
        ability to attract, hire, train and retain qualified professional, scientific
        and technical operating staff. We compete for qualified professionals with
        other
        CROs, temporary staffing agencies and the in-house departments of
        pharmaceutical, biotechnology and medical device companies. Although we have
        not
        had any difficulty attracting or retaining qualified staff in the past, there
        is
        no guarantee that we will be able to continue to attract a sufficient number
        of
        clinical research professionals at an acceptable cost.
  ***Failure
        to comply with the regulations of the U.S. Food and Drug Administration and
        other regulatory authorities could result in substantial penalties and/or
        loss
        of business.***
  The
        U.S.
        Food and Drug Administration, or FDA, and other regulatory authorities inspect
        us from time to time to ensure that we comply with their regulations and
        guidelines, including environmental and health and safety matters. In addition,
        we must comply with the applicable regulatory requirements governing the
        conduct
        of clinical trials in all countries in which we operate. If we fail to comply
        with any of these requirements we could suffer:
  •  the
        termination of any research;
  •  the
        disqualification of data;
  •  the
        denial of the right to conduct business;
  •  criminal
        penalties; and
  •  other
        enforcement actions.
  
  5
  
 ***Our
        exposure to exchange rate fluctuations could adversely affect our results
        of
        operations.***
  We
        derived approximately 41.4% of our consolidated net revenue in the transition
        period ending December 31, 2005 from our operations outside of the United
        States. Our financial statements are presented in U.S. dollars. Accordingly,
        changes in exchange rates between the U.S. dollar and other currencies in
        which
        we report local results, including the pound sterling and the euro, will
        affect
        the translation of a subsidiary’s financial results into U.S. dollars for
        purposes of reporting our consolidated financial results.
  In
        addition, our contracts with our clients are sometimes denominated in currencies
        other than the currency in which we incur expenses related to such contracts.
        Where expenses are incurred in currencies other than those in which contracts
        are priced, fluctuations in the relative value of those currencies could
        have a
        material adverse effect on our results of operations. We regularly review
        our
        currency exchange exposure and hedge a portion of this exposure using forward
        exchange contracts.
  ***Liability
        claims brought against us could result in payment of substantial damages
        to
        plaintiffs and decrease our profitability.***
  We
        contract with physicians who serve as investigators in conducting clinical
        trials to test new drugs on their patients. This testing creates the risk
        of
        liability for personal injury to or death of the patients. Although
        investigators are generally required by law to maintain their own liability
        insurance, we could be named in lawsuits and incur expenses arising from
        any
        professional malpractice actions against the investigators with whom we
        contract. To date, we have not been subject to any liability claims that
        are
        expected to have a material effect on us.
  Indemnifications
        provided by our clients against the risk of liability for personal injury
        to or
        death of the patients vary from client to client and from trial to trial
        and may
        not be sufficient in scope or amount or the providers may not have the financial
        ability to fulfill their indemnification obligations. Furthermore, we would
        be
        liable for our own negligence and that of our employees.
  In
        addition, we maintain an appropriate level of worldwide
        Professional Liability/Error and Omissions Insurance.
        The amount of coverage we maintain depends upon the nature of the trial.
        We may
        in the future be unable to maintain or continue our current insurance coverage
        on the same or similar terms. If we are liable for a claim that is beyond
        the
        level of insurance coverage, we may be responsible for paying all or part
        of any
        award.
  ***We
        may lose business opportunities as a result of health care reform and the
        expansion of managed care organizations.***
  Numerous
        governments, including the U.S. government and governments outside of the
        U.S.,
        have undertaken efforts to control growing health care costs through
        legislation, regulation and voluntary agreements with medical care providers
        and
        drug companies. If these efforts are successful, pharmaceutical, biotechnology
        and medical device companies may react by spending less on research and
        development and therefore this could have a material adverse effect on our
        business.
  For
        instance, in the past the U.S. Congress has entertained several comprehensive
        healthcare reform proposals. The proposals were generally intended to expand
        healthcare coverage for the uninsured and reduce the growth of total healthcare
        expenditures. While the U.S. Congress has not yet adopted any comprehensive
        reform proposals, members of Congress may raise similar proposals in the
        future.
        We are unable to predict the likelihood that healthcare reform proposals
        will be
        enacted into law.
  In
        addition to healthcare reform proposals, the expansion of managed care
        organizations in the healthcare market may result in reduced spending on
        research and development. Managed care organizations' efforts to cut costs
        by
        limiting expenditures on pharmaceuticals and medical devices could result
        in
        pharmaceutical, biotechnology and medical device companies spending less
        on
        research and development. If this were to occur, we would have fewer business
        opportunities and our revenues could decrease, possibly materially.
  
  6
  
 ***We
        may lose business as a result of changes in the regulatory
        environment***
  Various
        regulatory bodies throughout the world may enact legislation which could
        introduce changes to the regulatory environment for drug development and
        research. The adoption and implementation of such legislation is difficult
        to
        predict and therefore could have a material adverse effect on our
        business.
  ***We
        may not be able to successfully develop and market or acquire new
        services.***
  We
        may
        seek to develop and market new services that complement or expand our existing
        business or expand our service offerings through acquisition. If we are unable
        to develop new services and/or create demand for those newly developed services,
        or expand our service offerings through acquisition, our future business,
        results of operations, financial condition, and cash flows could be adversely
        affected.
  ***We
        rely on third parties for important services.***
  We
        depend
        on third parties to provide us with services critical to our business. The
        failure of any of these third parties to adequately provide the needed services
        could have a material adverse effect on our business.
  ***We
        may make acquisitions in the future, which may lead to disruptions to our
        ongoing business.***
  We
        have
        made a number of acquisitions and will continue to review new acquisition
        opportunities. If we are unable to successfully integrate an acquired company,
        the acquisition could lead to disruptions to the business. The success of
        an
        acquisition will depend upon, among other things, our ability to:
  ·
            assimilate
                the operations and services or products of the acquired company;  ·
            integrate
                acquired personnel;  ·
            retain
                and motivate key employees;  ·
            retain
                customers; and  ·
            minimize
                the diversion of management's attention from other business concerns.  Acquisitions
        of foreign companies may also involve additional risks, including assimilating
        differences in foreign business practices and overcoming language and cultural
        barriers.
  In
        the
        event that the operations of an acquired business do not meet our performance
        expectations, we may have to restructure the acquired business or write-off
        the
        value of some or all of the assets of the acquired business.
  
  7
  **Item
        4** **.** ***Information on the Company.***
 
 **General**
 
 We
        are a
        contract research organization, or CRO, providing clinical research and
        development services on a global basis to the pharmaceutical, biotechnology
        and
        medical device industries. Our focus is on supporting the conduct of clinical
        trials. We have historically done so by providing such services as Phase
        I - IV
        clinical trials management, study design, laboratory services and drug
        development support. We believe that we are one of a select group of CROs
        with
        the capability and expertise to conduct clinical trials in most major
        therapeutic areas on a global basis. As of December 31, 2005, we had
        approximately 3,050 employees and operations in 41 locations in 27 countries,
        including the United States and major markets in Europe and Rest of World.
        For
        the seven month transition period ended December 31, 2005, we derived
        approximately 58.6%, 33.7% and 7.7% of our net revenue in the United States,
        Europe and Rest of World, respectively.
 
 Headquartered
        in Dublin, Ireland, we began operations in 1990 and have expanded our business
        through internal growth and strategic acquisitions.
 
 On
        July
        1, 2004 we acquired 70% of the outstanding share capital of Beacon Bioscience,
        Inc., a leading specialist CRO, which provides a range of medical imaging
        services to the pharmaceutical, biotechnology and medical device
        industries.
 
 On
        December 1, 2004, we acquired the workforce of Biomines Research Solutions
        Private Limited, based in Chennai, India. The workforce is engaged in the
        business of clinical trial data management and statistical analysis services
        and
        has been transferred to our existing Indian operation.
 
 During
        the transition period ended December 31, 2005, we commenced operations in
        Milan,
        Italy; Bangkok, Thailand; Santiago, Chile; and Seoul, South Korea.
 
 On
        July
        27, 2005 our Board of Directors approved a change of our fiscal year end
        from a
        twelve-month period ending on May 31, to a twelve-month period ending on
        December 31. We are making this change in order to align our fiscal year
        end
        with the majority of other contract research organizations. Going forward,
        our
        fiscal quarters will end on the last day of March, June, September and December
        of each year.
 
 ICON
        plc’s principal executive office is located at: South County Business Park,
        Leopardstown, Dublin 18, Republic of Ireland. The contact telephone number
        of
        this office is 353 (1) 291 2000.
 
 **Industry
        Overview**
 
 The
        CRO
        industry provides independent product development services for the
        pharmaceutical, biotechnology and medical device industries. Companies in
        these
        industries outsource product development services to CROs in order to manage
        the
        drug development process more efficiently and to cost-effectively maximize
        the
        profit potential of patent-protected products. The CRO industry has evolved
        since the 1970s from a small number of companies that provided limited clinical
        services to a larger number of CROs that offer a range of services that
        encompass the entire research and development process, including pre-clinical
        development, clinical trials management, clinical data management, study
        design,
        biostatistical analysis, central laboratory and regulatory affairs services.
        CROs are required to provide these services in accordance with good clinical
        and
        laboratory practices, as governed by the applicable regulatory
        authorities.
 
 The
        CRO
        industry is highly fragmented, consisting of several hundred small,
        limited-service providers and a limited number of medium-sized and large
        CROs
        with global operations. Although there are few barriers to entry for small,
        limited-service providers, we believe there are significant barriers to becoming
        a CRO with global capabilities. Some of these barriers include the
        infrastructure and experience necessary to serve the global demands of clients,
        the ability to manage simultaneously complex clinical trials in numerous
        countries, broad therapeutic expertise and the development and maintenance
        of
        the complex information technology systems required to integrate these
        capabilities. In recent years, the CRO industry has experienced consolidation,
        resulting in the emergence of a select group of CROs that have the capital,
        technical resources, integrated global capabilities and expertise to conduct
        multiple phases of clinical trials on behalf of pharmaceutical,
  8
  biotechnology
        and medical device companies. We believe that some large pharmaceutical
        companies, rather than utilizing many CRO service providers, are selecting
        a
        limited number of CROs who are invited to bid for projects. We believe that
        this
        trend will further concentrate the market share among CROs with a track record
        of quality, speed, flexibility, responsiveness, global capabilities and overall
        development experience and expertise.
 
 **Trends
        Affecting the CRO Industry**
 
 CROs
        derive substantially all of their revenue from the research and development
        expenditures of pharmaceutical, biotechnology and medical device companies.
        Based on industry surveys and investment analyst research, we estimate that
        clinical development expenditures outsourced by pharmaceutical and biotechnology
        companies worldwide in 2004 was approximately $12 billion. We believe that
        the
        following trends create further growth opportunities for global CROs, although
        there is no assurance that growth will materialize.
 
 *Increasing
        Drug Development Activity.*
 
 Recent
        improvements in drug discovery and screening technology, biotechnology and
        disease pathology have reduced the time to develop new drug candidates. These
        improvements, combined with the threat of patent expirations on existing
        drugs,
        have led drug developers to increase the rate at which they are creating
        new
        drug candidates for clinical trials. As the number of trials that need to
        be
        performed increases, we believe that drug developers will increasingly rely
        on
        CROs to manage these trials in order to continue to focus on drug discovery.
        In
        addition, as many biotechnology companies do not have a clinical development
        infrastructure, we believe that the services offered by CROs will continue
        to be
        in demand from such companies.
 
 *Pressure
        to Accelerate Time to Markets; Globalization of the Marketplace.*
 
 Reducing
        product development time maximizes the client’s potential period of patent
        exclusivity, which in turn maximizes potential economic returns. We believe
        that
        clients are increasingly using CROs that have the appropriate expertise to
        improve the speed of product development to assist them in improving economic
        returns. In addition, applying for regulatory approval in multiple markets
        and
        for multiple indications simultaneously, rather than sequentially, reduces
        product development time and thereby maximizes economic returns. We believe
        that
        CROs with global operations and experience in a broad range of therapeutic
        areas
        are a key resource to support a global regulatory approval
        strategy.
 
 *Cost
        Containment Pressures.*
 
 Over
        the
        last several years, drug companies have sought more efficient ways of conducting
        business due to margin pressures stemming from patent expirations, greater
        acceptance of generic drugs, pricing pressures caused by the impact of managed
        care, purchasing alliances and regulatory consideration of the economic benefit
        of new drugs. Consequently, drug companies are centralizing research and
        development, streamlining their internal structures and outsourcing certain
        functions to CROs, thereby converting previously fixed costs to variable
        costs.
        The CRO industry, by specializing in clinical trials management, is often
        able
        to perform the needed services with greater focus and at a lower cost than
        the
        client could perform internally.
 
 *Increasing
        Number of Large Long-Term Post-Marketing Studies.*
 
 We
        believe that to establish competitive claims and to encourage drug prescription
        by physicians in some large and competitive categories, more clients need
        to
        conduct outcome studies to demonstrate, for example, that mortality rates
        are
        reduced by certain drugs. To verify such outcomes, very large patient numbers
        are required and they must be monitored over long time periods. We believe
        that
        as these types of studies increase there will be a commensurate increase
        in
        demand for the services of CROs who have the ability to quickly assemble
        large
        patient populations, globally if necessary, and manage this complex process
        throughout its duration.
 
 *Increasing
        Regulatory Demands.*
  9
  
 We
        believe that regulatory agencies are becoming more demanding with regard
        to the
        data required to support new drug approvals and are seeking more evidence
        that
        new drugs are safer and more effective than existing products. As a result,
        the
        complexity of clinical trials and the size of regulatory submissions are
        driving
        the demand for services provided by CROs.
 
 **Company
        Operating Procedures**
 
 We
        have
        developed a unique operating model for clinical trial projects based on a
        "dedicated team approach" in which a team of full time professionals, operating
        out of centralized offices, is assigned exclusively to each project. This
        contrasts with the approach of many competitors whose staff typically work
        on
        multiple projects at once, sometimes operating from non-office bases in remote
        locations and some of whom may be part-time. We believe that our operating
        model
        offers the following advantages:
 
 •
              each
                  client's project receives undivided attention and is executed efficiently
                  as team members do not have conflicting demands;•
              the
                  absence of conflicting demands on the project team also ensures
                  a high
                  quality service;•
              the
                  dedicated team approach allows us to develop strong relationships
                  with our
                  clients and to be more responsive to our clients' needs;•
              focused
                  project teams facilitate efficient supervision of the project,
                  enhance
                  productivity and improve cost control; and•
              less
                  administration is required to co-ordinate assignments, leading
                  to a more
                  streamlined corporate management structure.
 
 We
        believe our dedicated team approach has led to repeat business and an expanding
        client base.
 
 
 **Strategy**
 
 We
        believe that our operating model based on dedicated teams differentiates
        us from
        our competition in the CRO industry and enables us to deliver high quality
        services to our clients. Our strategy is to continue to grow by applying
        this
        model to penetrate further our existing client base and add new clients.
        We
        intend to implement our strategy by continuing to deliver high quality services,
        by increasing our geographic presence and by expanding the scale and range
        of
        our services. We intend to supplement our internal growth with strategic
        acquisitions.
  ***Continue
        to Deliver High Quality Services and Customer
        Satisfaction.*** We
        believe that our dedicated team approach allows us to provide high quality,
        timely and cost effective services that are designed to be highly responsive
        to
        our clients’ needs. We believe that the resulting customer satisfaction and
        enhanced reputation in the industry will continue to enable us to penetrate
        our
        existing client base and add new clients. In the transition period ended
        December 31, 2005, approximately 98% of our net revenue was derived from
        second
        or subsequent projects with clients.
  ***Expand
        Geographic Presence.*** We
        believe that the capability to provide our services on a global basis in
        most
        major and developing pharmaceutical markets enhances our ability to compete
        for
        new business from large multinational pharmaceutical, biotechnology and medical
        device companies. We have expanded geographically through the establishment
        of
        41 offices in 27 countries and intend to continue expanding into regions
        that
        have the potential to increase our client base or increase our investigator
        and
        patient populations.
  ***Increase
        Scale and Range of Services.*** We seek
        to enhance our competitive position by increasing the scale and range of
        our
        services. We intend to expand our clinical trials, central laboratory, digital
        imaging, IVRS (interactive voice recognition system), data management,
        statistical and consulting operations in order to capitalize further on the
        outsourcing opportunities currently available from our clients.
   10
  
 **Services**
 
  Consistent
        high quality performance is what we have come to stand for with our clients,
        and
        a large part of our continued success is due to the high quality standards
        we
        have set and delivered on projects to date. The achievement of these quality
        goals is made possible by the implementation and maintenance of an effective
        quality management system, which not only ensures that our business and quality
        objectives are achieved, but which is sufficiently dynamic to rapidly respond
        to
        changes in the clinical research and regulatory environments.
   We
        maintain an integrated quality management system, which is designed to serve
        the
        business needs while complying with Good Clinical Practice (“GCP”) guidelines,
        and which is structured according to the requirements of ISO 9001 international
        standards. The quality management documentation includes over 700 standard
        operating procedures (“SOPs”), working procedures and policies that are
        implemented on a global basis. In addition, our independent quality assurance
        division has the responsibility for assuring that processes conform to
        pre-determined quality, ethical and regulatory standards.
   One
        of
        the driving forces behind our quality performance is management commitment
        to
        the ISO 9000 quality standards. Since 1994 when we were first registered
        to ISO
        9002, we have continued to undergo several quality systems surveillance audits
        each year, in order to maintain global registration. In 2003, we attained
        registration to the new ISO 9001:2000 standard, which includes all of our
        offices and departments.
   This
        global registration is unique in the industry and demonstrates our commitment
        to
        providing exceptional clinical research management services.
  
  
  11
  The
        range
        of clinical research services we provide facilitates the collection, analysis
        and reporting of clinical trials data, which will ultimately become part
        of a
        client's drug registration submission. The range of services is outlined
        below:
  Clinical
        Pharmacology
 
 A
        critical step in the clinical development process is the confirmation of
        safety
        and efficiency in new drug candidates. This is achieved through the execution
        of
        Clinical Pharmacology or Phase I studies. These studies are undertaken to
        determine the metabolic and pharmacological effects of drug candidates in
        healthy volunteers.
 
 Bioanalysis
  Supporting
        the clinical development process, bioanalysis is carried to source the data
        required for pharmacokinetic and pharmacodynamic analysis. Bioanalysis
        quantifies the drug and its major metabolites in samples collected from cell
        culture media, plasma, serum, and urine.
  Pharmacokinetic
        and Pharmacodynamic analysis
 
 Pharmacokinetic
        analysis is carried out to measure the effects of absorption, distribution
        and
        elimination of a drug and its metabolites. Pharmacodynamic analysis assesses
        the
        effects of new drug candidates on the physiology of the body.
 
 Study
        Protocol Preparation
 
 This
        study protocol is the critical document provided to the investigator which
        defines the study and details the procedures which must be followed for the
        proper conduct of the trial. We have extensive experience in preparing study
        protocols in a broad range of therapeutic areas.
 
 Case
        Report Form ("CRF") Preparation
 
 The
        CRF
        is a study specific document in which the investigator records all relevant
        information on a trial patient in accordance with the requirements of the
        protocol. We have the capability of producing CRFs for a wide variety of
        therapeutic indications and in all required languages.
 
 Clinical
        Trial Approvals
 
 Prior
        to
        start-up, all clinical trials must be approved by the relevant government
        agencies, by institutional review boards and ethics committees and by certain
        other bodies in accordance with local requirements. We have extensive experience
        in obtaining such approvals on a multinational basis.
 
 Investigator
        Recruitment
 
 The
        success of a clinical trial is dependent upon finding experienced investigators
        who are capable of performing clinical trials in accordance with the highest
        ethical and scientific standards. We have a database of several thousand
        such
        investigators who are experienced in numerous therapeutic areas and who have
        successfully completed many clinical trials for us.
 
 Study
        Monitoring and Data Collection
 
 As
        patients in a clinical trial are examined and tests are conducted in accordance
        with the study protocol, patient data is recorded on CRFs and laboratory
        reports. In order to ensure accurate results, we provide:
 
 .
              Specially
                  trained monitors who visit sites regularly to ensure that the CRFs
                  are
                  completed correctly and that all data specified in the protocol
                  are
                  collected;.
              Personnel
                  who review CRFs for consistency and accuracy before the data is
                  entered
                  into an electronic database; and.
              Study
                  monitoring and data collection services which comply with the FDA's
                  good
                  clinical practice guide lines and other relevant regulatory
                  requirements.
 
 Patient
        Safety Monitoring
 
 In
        a
        clinical trial, patient safety is paramount. We have teams of trained physicians
        and paramedical staff who review any serious adverse events which may occur
        during a trial and prepare detailed reports of these events on a timely basis
        for the pharmaceutical company and regulatory bodies as required.
 
 Clinical
        Data Managemen t
 
 As
        the
        study progresses, the data from the CRFs is entered into databases that are
        designed in accordance with the specifications of the project and the particular
        needs of the client. We provide:
 
 .
              Personnel
                  who screen the data to detect errors, omissions or other deficiencies
                  prior to data entry;.
              Study
                  specific computer programs which are written in order to validate
                  the
                  data; and.
              The
                  creation of a final database that is electronically transferred
                  to a
                  biostatistical group for subsequent
                  analysis.
  12
  
 
 Biostatistical
        Services
 
 Our
        biostatistical group primarily provides detailed analyses of data generated
        from
        clinical trials. In addition to providing this in-house statistical support,
        our
        biostatisticians assist clients with all phases of drug development through
        biostatistical consulting, database design, data analysis and statistical
        reporting.
 
 Medical
        Reporting
 
 The
        results of the statistical analysis of the data collected during the trial,
        together with other clinical data are included in a final clinical trial
        report,
        which may then become part of the drug registration submission. Our medical
        reporting team prepare this report and may assist in the presentation of
        the
        data in different formats, including for journal publication or for presentation
        to international symposia.
  Central
        Laboratory Services
 
 An
        important element in monitoring patient safety during a clinical trial is
        the
        conduct of various laboratory tests on the patient's blood, urine and other
        bodily fluids at appropriate intervals during the trial. The analysis of
        these
        samples must be standardized and the results must be promptly transmitted
        to the
        investigator. Our central laboratory operation provides:
 
 .
              A
                  broad range of sample analyses;.
              An
                  efficient logistics system to ensure rapid receipt of samples from
                  the
                  investigator;.
              State
                  of the art analytical technology; and.
              Electronic
                  transmission of test results to the
                  investigator.
 
 IVR
        (Interactive Voice Response)
 
 IVR
        systems use the global telecommunication networks to transfer data to a single,
        centrally located database. IVR systems are used in clinical studies primarily
        for study site administration, enrolling and randomizing patients, management
        of
        clinical supplies and collection of patient diaries.
 
 Animal
        Health
 
 The
        Animal Health division of ICON has broad capabilities in clinical research
        for
        the development of drugs, vaccines, and devices for the global animal health
        industry. The combination of expertise and geographical reach puts us in
        the top
        tier of animal CROs globally. This group has been dedicated to animal health
        clinical research for over 10 years and has experience in all target species
        and
        all major pharmacological classes. Capabilities include: complete clinical
        project management; contract monitoring; data management; statistical analysis;
        quality assurance services; final study reports; development consulting;
        and
        post-marketing survey management.
 
 Regulatory
        Consultancy
 
 Medicinal
        products are subject to strict regulatory requirements throughout their
        development, testing and marketing. Authorization by drug regulatory authorities
        is necessary prior to any product being marketed. The regulatory processes
        and
        requirements are lengthy and complex. Our regulatory consultancy division
        provides consultancy on global regulatory requirements during development,
        advises on suitability of client’s documentation for regulatory approvals,
        prepares and submits applications for regulatory approvals and provides post
        licensing regulatory support services.
 
 Strategic
        Drug Development Services
 
 The
        Strategic Development division of ICON has broad expertise and can offer
        a full
        range of global services including regulatory affairs, CMC strategy and
        management, product development strategy, project management though all phases
        of clinical development, product life cycle management, quality, compliance,
        pharmacokinetics, biopharmaceutics, biostatistics, clinical research,
        preclinical research, data management, programming and
        biostatistics.
 
 Digital
        Imaging
 
 Beacon
        Biosciences, Inc., the digital imaging operation of ICON, has a strong
        technology platform, focused on the centralized management, processing and
        reading of digitized medical images generated in clinical trials, including
        X-ray, MRI, CT, PET, Nuclear Medicine and Ultrasound.
  13
  **Organizational
        Structure**
 
 ***Name***
              ***Country
                  of incorporation***
              ***Group
                  ownership***ICON
                  Clinical Research (UK) Limited
              United
                  Kingdom
              100%ICON
                  Clinical Research Inc.
              USA
              100%ICON
                  Clinical Research Limited
              Republic
                  of Ireland
              100%ICON
                  Japan K.K.
              Japan
              100%ICON
                  Clinical Research GmbH
              Germany
              100%ICON
                  Clinical Research Pty Limited
              Australia
              100%ICON
                  Clinical Research S.A.
              Argentina
              100%ICON
                  Clinical Research SARL
              France
              100%ICON
                  Clinical Research Pte.
              Singapore
              100%ICON
                  Clinical Research Israel Limited
              Israel
              100%Medeval
                  Group Limited
              UK
              100%ICON
                  Laboratories, Inc.
              USA
              100%Managed
                  Clinical Solutions, Inc.
              USA
              100%ICON
                  Clinical Research (Canada) Inc.
              Canada
              100%Globomax
                  LLC
              USA
              100%ICON
                  Clinical Research Espana S.L.
              Spain
              100%ICON
                  Clinical Research Kft
              Hungary
              100%Beacon
                  Bioscience, Inc.
              USA
              70%ICON
                  Clinical Research India Private Limited
              India
              100%ICON
                  Clinical Research México, S.A. de C.V.
              Mexico
              100%ICON
                  Pesquisas Clinicas LTDA
              Brazil
              100%
 
 All
        shareholdings comprise ordinary shares.
 
 All
        subsidiary undertakings are involved in the provision of contract research
        services to the pharmaceutical, biotechnology and medical device
        industries.
  14
  **Information
        Systems**
 
 Our
        information technology strategy is built around deploying IT
        systems to enable the delivery of our global  business strategy. The
        focus is to provide ease of access to information for our staff and clients
        globally. Our current information systems are built  on  open
        standards and leading commercial  business applications from
        vendors like Microsoft, Oracle, EMC Documentum and Medidata. All critical
        business systems are formally delivered following a  structured
        project management approach. Critical clinical information systems, 
which manage clinical data,  are validated in accordance with the latest
        FDA regulations and those of other equivalent regulatory bodies throughout
        the
        world.
  In
        Clinical Operations, we  have deployed a suite of software applications
        that assist in the management of our clinical trials activities. These
        software applications are both internally developed and commercially available
        applications from leading vendors in the industry. These include a clinical
        trials management application that tracks all relevant data in a trial and
        automates all management and reporting processes. In our Data Management
        function we have deployed leading clinical data management solutions plus
        Electronic Data Capture (EDC) solutions from leading industry vendors. Our
        state of the art workflow technology allows us to process clinical trials
        data
        seamlessly throughout the company. We have also developed an interactive
        voice response system to increase the efficiency of clinical trials. This
        system
        provides features such as centralized patient randomization, drug inventory
        management, and patient diary collection and provides our clients with a
        fully
        flexible data retrieval solution which can be utilized via telephone, internet
        browser or WAP enabled device.
  Recognising
        that each client has its own requirements and systems, we seek to ensure
        an
        entirely flexible approach to client needs. An example of this flexibility
        includes linking directly to client systems or for a client to have access
        to
        designated ICON systems. Frequently, we have established secure wide area
        network, or WAN, links to the client’s data systems, have trained our staff in
        those systems and have delivered data on-line to the client’s database. We also
        provide secure remote access to our systems for clients to review their study
        information.
  In
        our
        central laboratory, we utilize a comprehensive suite of software, including
        a
        laboratory information management system (LIMS), a kit/sample management
        system
        and a web interface system to allow clients to review results
        online.
  Our
        IT
        systems are operated from two centralised hubs in Philadelphia and Dublin.
        Other
        offices are linked to these hubs through a resilient network that is both
        internally managed and outsourced to a leading telecommunications provider.
        Travelling staff can also access all systems via secure remote dial up
        facilities. A global corporate Intranet portal provides access to all authorized
        data and applications for our internal staff.
  
 **Sales
        and Marketing**
 
 Our
        global sales and marketing strategy is to focus our business development
        efforts
        on pharmaceutical, biotechnology and medical device companies whose development
        projects are advancing. By developing and maintaining close relationships
        with
        our clients, we gain repeat business, can leverage a full service portfolio
        and
        achieve lateral penetration into other therapeutic divisions where applicable.
        Simultaneously, we are actively establishing new client
        relationships.
  While
        our
        sales and marketing activities are carried out locally by executives in each
        of
        our major locations, the sales and marketing process is coordinated centrally. In
        addition, all of our business development professionals, senior executives
        and
        project team leaders share responsibility for the maintenance of key client
        relationships and business development activities.
 
 **Clients**
 
 In
        the
        transition period ended December 31, 2005, revenue was earned from over 300
        clients, including 19 of the top 20 pharmaceutical companies as ranked by
        2004
        revenues.
 
 We
        have
        expanded geographically in order to pursue larger multi-national clinical
        trials
        in markets worldwide and have expanded through acquisition to offer a broader
        range of services. In the transition period ended December 31, 2005, 58.6%
        of
        our net revenue was generated in the United States, 33.7% in Europe and 7.7%
        in
        Rest of World .
  15
  
 We
        have
        in the past and may in the future derive a significant portion of our net
        revenue from a relatively limited number of major projects or clients. During
        the fiscal year ended May 31, 2003, we received 21% of our net revenue from
        Astra Zeneca, 11% from Sanofi-Synthelabo Inc. and 10% from Pfizer. During
        the
        fiscal year ended May 31, 2004, we received 17% of our net revenue from Astra
        Zeneca. In the fiscal year ended May 31, 2005, we received 12% of our net
        revenue from Astra Zeneca. No other client contributed more than 10% of net
        revenues in the fiscal year ended May 31, 2005. In the transition period
        ended
        December 31, 2005, no client contributed more than 10% of net revenues. We
        believe that the importance of certain clients reflects our success in
        penetrating our client base. The loss of, or a significant decrease in business
        from one or more of these key clients could result in a material adverse
        effect .
 
 **Contractual
        Arrangements**
 
 We
        are
        generally awarded contracts based upon our response to requests for proposals
        received from pharmaceutical, biotechnology and medical device industries.
 
 Most
        of
        our revenues are earned from contracts which are fixed price, based on certain
        activity and performance specifications. Consequently, although we typically
        bear the cost of overruns, with certain exceptions, we benefit if our costs
        are
        lower than anticipated. Payment terms usually provide either for payments
        based
        on the achievement of certain identified milestones or activity levels or
        monthly payments according to a fixed payment schedule over the life of the
        contract. Where clients request changes in the scope of a trial or in the
        services to be provided by us, we deal with these by a change order, often
        resulting in additional revenue to us. We also contract on a "fee-for-service,"
        "days worked" or "time and materials" basis, but this accounts for approximately
        15% of revenues.
 
 Contract
        terms may range from one year to several years depending on the nature of
        the
        work to be performed. In most cases, a portion of the contract fee, typically
        10% to 20%, is paid at the time the study or trial is started. The balance
        of
        the contract fee payable is generally payable in installments over the study
        or
        trial duration and may be based on the achievement of certain performance
        targets or "milestones" or, to a lesser extent, on a fixed monthly payment
        schedule. For instance, installment payments may be based on patient enrollment
        or delivery of the database. Reimbursable expenses are typically estimated
        and
        budgeted within the contract and invoiced on a monthly basis. Reimbursable
        expenses include payments to investigators, travel and accommodation costs
        and
        various other direct costs incurred in the course of the clinical trial which
        are fully reimbursable by the client.
 
 Most
        of
        our contracts are terminable immediately by the client with cause in certain
        circumstances and on 30-60 days notice without cause. In the event of
        termination, we are entitled to all sums owed for work performed through
        the
        notice of termination and certain costs associated with termination of the
        study. Some of our contracts provide for an early termination fee. Termination
        or delay in the performance of a contract occurs for various reasons, including,
        but not limited to, unexpected or undesired results, production problems
        resulting in shortages of the drug, adverse patient reactions to the drug,
        the
        client's decision to de-emphasize a particular trial or inadequate patient
        enrollment or investigator recruitment.
 
 
 **Backlog**
 
 Our
        backlog consists of potential net revenue yet to be earned from projects
        awarded
        by clients.
 
 At
        December 31, 2005, we had a backlog of approximately $633 million, compared
        with
        approximately $528 million at May 31, 2005 .
        We
        believe that our backlog as of any date is not necessarily a meaningful
        predictor of future results, due to the potential for cancellation or delay
        of
        the projects underlying the backlog, and no assurances can be given that
        we will
        be able to realize this backlog as net revenue.
 
 
 16
 
 **Competition**
 
 The
        CRO
        industry is highly fragmented, consisting of several hundred small,
        limited-service providers and a limited number of medium-sized and large
        CROs
        with global operations. We primarily compete against in-house departments
        of
        pharmaceutical companies and other CROs with global operations. Some of these
        competitors have substantially greater capital, technical and other resources
        than us. CROs generally compete on the basis of previous experience, the
        quality
        of contract research, the ability to organize and manage large-scale trials
        on a
        global basis, the ability to manage large and complex medical databases,
        the
        ability to provide statistical and regulatory services, the ability to recruit
        suitable investigators, the ability to integrate information technology with
        systems to improve the efficiency of contract research, an international
        presence with strategically located facilities, financial viability, medical
        and
        scientific expertise in specific therapeutic areas and price. We believe
        that we
        compete favorably in these areas. Our principal CRO competitors are Quintiles
        Transnational Corporation, Covance Inc., PAREXEL International Corp., Kendle
        International Inc., Ingenix Inc. (United Health Group Incorporated), Omnicare,
        Inc., PRA International Inc., MDS Inc, SFBC International Inc., Charles River
        Laboratories, Inc. and Pharmaceutical Product Development, Inc. The trend
        toward
        CRO industry consolidation has resulted in heightened competition among the
        larger CROs for clients and acquisition candidates.
 
 **Government
        Regulation**
 
 *Regulation
        of Clinical Trials*
 
 The
        clinical investigation of new drugs is highly regulated by government agencies.
        The standard for the conduct of clinical research and development studies
        is
        good clinical practice, which stipulates procedures designed to ensure the
        quality and integrity of data obtained from clinical testing and to protect
        the
        rights and safety of clinical subjects. While good clinical practice has
        not
        been formally adopted by the FDA or, with certain exceptions, by similar
        regulatory authorities in other countries, some provisions of good clinical
        practice have been included in regulations adopted by the FDA. Furthermore,
        in
        practice, the FDA and many other regulatory authorities require that study
        results submitted to such authorities be based on studies conducted in
        accordance with good clinical practice.
  Regulatory
        authorities, including the FDA, have promulgated regulations and guidelines
        that
        pertain to applications to initiate trials of products, the approval and
        conduct
        of studies, report and record retention, informed consent, applications for
        the
        approval of drugs and post-marketing requirements. Pursuant to these regulations
        and guidelines, service providers that assume the obligations of a drug sponsor
        are required to comply with applicable regulations and are subject to regulatory
        action for failure to comply with such regulations and guidelines. In the
        United
        States and Europe, the trend has been in the direction of increased regulation
        by the applicable regulatory authority. We believe that many pharmaceutical
        companies do not have the resources to comply with all of these regulations
        and
        standards and that this has contributed and will continue to contribute to
        the
        growth of third-party service providers.
  In
        providing our services in the United States, we are obligated to comply with
        FDA
        requirements governing such activities. These include obtaining patient informed
        consents, verifying qualifications of investigators, reporting patients’ adverse
        reactions to drugs and maintaining thorough and accurate records. We must
        maintain source documents for each study for specified periods, and such
        documents may be reviewed by the study sponsor and the FDA during
        audits.
  The
        services we provide outside the United States are ultimately subject to similar
        regulation by the relevant regulatory authority, including the Medicines
        Control
        Agency in the United Kingdom and the Bundesinstitut für Arzneimittel und
        Medizinprodukte in Germany. In addition, our activities in Europe are affected
        by the Committee for Proprietary Medicinal Products of the European Union,
        and
        its successor, the European Medicines Evaluation Agency, which is based in
        London, England.
  We
        must
        also retain records for each study for specified periods for inspection by
        the
        client and by the applicable regulatory authority during audits. If such
        audits
        document that we have failed to comply adequately with applicable regulations
        and guidelines, it could result in a material adverse effect. In addition,
        our
        failure to comply with applicable regulation and guidelines, depending on
        the
        extent of the failure, could result in fines, debarment, termination or
        suspension of ongoing research or the disqualification of data, any of which
        could also result in a material adverse effect.
   17
  
  **New
        Drug Development - An Overview**
 
 Before
        a
        new drug may be marketed, the drug must undergo extensive testing and regulatory
        review in order to determine that the drug is safe and effective. The following
        discussion primarily relates to the FDA approval process. Similar procedures
        must be followed for clinical trials in other countries. The stages of this
        development process are as follows:
  ***Preclinical
        Research (1 to 3.5 years).*** “In
        vitro” (test tube) and animal studies are conducted to establish the relative
        toxicity of the drug over a wide range of doses and to detect any potential
        to
        cause birth defects or cancer. If results warrant continuing development
        of the
        drug, the manufacturer will file for an Investigational New Drug Application,
        or
        IND, upon which the FDA may grant permission to begin human trials.
  ***Clinical
        Trials (3.5 to 6 years)***
  Phase
        I (6 months to 1 year). Basic
        safety and pharmacology testing in 20 to 80 human subjects, usually healthy
        volunteers, includes studies to determine how the drug works, if it is safe,
        how
        it is affected by other drugs, where it goes in the body, how long it remains
        active and how it is broken down and eliminated from the body.
  Phase
        II (1 to 2 years). Basic
        efficacy (effectiveness) and dose-range testing in 100 to 200 patients to
        help
        determine the best effective dose, confirm that the drug works as expected,
        and
        provide additional safety data.
  Phase
        III (2 to 3 years). Efficacy
        and safety studies in hundreds or thousands of patients at many investigational
        sites (hospitals and clinics). These studies can be placebo-controlled trials,
        in which the new drug is compared with a “sugar pill”, or studies comparing the
        new drug with one or more drugs with established safety and efficacy profiles
        in
        the same therapeutic category.
  ***TIND
        (may span late Phase II, Phase III, and FDA review).*** When
        results from Phase II or Phase III show special promise in the treatment
        of a
        serious condition for which existing therapeutic options are limited or of
        minimal value, the FDA may allow the manufacturer to make the new drug available
        to a larger number of patients through the regulated mechanism of a Treatment
        Investigational New Drug, or TIND. Although less scientifically rigorous
        than a
        controlled clinical trial, a TIND may enroll and collect a substantial amount
        of
        data from tens of thousands of patients.
  ***NDA
        Preparation and Submission.*** Upon
        completion of Phase III trials, the manufacturer assembles the statistically
        analyzed data from all phases of development into a single large submission,
        the
        New Drug Application, or NDA, which today comprises, on average, approximately
        100,000 pages.
  ***FDA
        Review & Approval (1 to 1.5 years).*** Data
        from all phases of development (including a TIND) is scrutinized to confirm
        that
        the manufacturer has complied with regulations and that the drug is safe
        and
        effective for the specific use (or “indication”) under study.
  ***Post-Marketing
        Surveillance and Phase IV Studies.*** Federal
        regulation requires the manufacturer to collect and periodically report to
        the
        FDA additional safety and efficacy data on the drug for as long as the
        manufacturer markets the drug (post-marketing surveillance). If the drug
        is
        marketed outside the U.S., these reports must include data from all countries
        in
        which the drug is sold. Additional studies (Phase IV) may be undertaken after
        initial approval to find new uses for the drug, to test new dosage formulations,
        or to confirm selected non-clinical benefits, e.g., increased cost-effectiveness
        or improved quality of life.
  **Potential
        Liability and Insurance**
  We
        contract with physicians who serve as investigators in conducting clinical
        trials to test new drugs on their patients. Such testing creates a risk of
        liability for personal injury to or death of the patients resulting from
        adverse
        reactions to the drugs administered. In addition, although we do not believe
        we
        are legally accountable for the medical care rendered by third party
        investigators, it is possible that we could be subject to claims and expenses
        arising from any professional malpractice of the investigators with whom
        we
        contract. We also could be held liable for errors or omissions in connection
        with the services we perform.
   18
  
  We
        believe that the risk of liability to patients in clinical trials is mitigated
        by various regulatory requirements, including the role of institutional review
        boards and the need to obtain each patient’s informed consent. The FDA requires
        each human clinical trial to be reviewed and approved by the institutional
        review board at each study site. An institutional review board is an independent
        committee that includes both medical and non-medical personnel and is obligated
        to protect the interests of patients enrolled in the trial. After the trial
        begins, the institutional review board monitors the protocol and measures
        designed to protect patients, such as the requirement to obtain informed
        consent.
  We
        further attempt to reduce our risks through contractual indemnification
        provisions with clients and through insurance maintained by clients,
        investigators and us. However, the contractual indemnifications generally
        do not
        protect us against certain of our own actions such as negligence, the terms
        and
        scope of such indemnification vary from client to client and from trial to
        trial, and the financial performance of these indemnities is not secured.
        Therefore, we bear the risk that the indemnity may not be sufficient or that
        the
        indemnifying party may not have the financial ability to fulfill its
        indemnification obligations. We maintain worldwide professional liability
        insurance. We believe that our insurance coverage is adequate. There can
        be no
        assurance, however, that we will be able to maintain such insurance coverage
        on
        terms acceptable to us, if at all. We could be materially adversely affected
        if
        we were required to pay damages or bear the costs of defending any claim
        outside
        the scope of or in excess of a contractual indemnification provision or beyond
        the level of insurance coverage or in the event that an indemnifying party
        does
        not fulfill its indemnification obligations.
  
 **Description
        of Property**
 
 We
        lease
        all but one of our facilities under operating leases.
 
 Our
        principal executive offices are located in South County Business Park,
        Leopardstown, Dublin, Republic of Ireland, where we own an office facility
        of
        approximately 42,000 square feet on approximately two acres. We purchased
        an
        adjoining site during the year bringing the full site size up to four and
        a half
        acres. We have also leased an additional office facility of approximately
        25,000
        square feet in the same business park.
 
 We
        also
        maintain U.S. offices in Chicago, two offices in Philadelphia, Nashville,
        Irvine, San Francisco, Houston, Wilmington, Raleigh, Baltimore, Tampa and
        two
        offices in New York. Our European subsidiaries maintain offices in Southampton,
        Frankfurt, Paris, Moscow, Amsterdam, Marlow, Manchester, Tel Aviv, Stockholm,
        Riga, Budapest, Milan and Barcelona. Our Rest of World offices are located
        in
        Tokyo, Singapore, Sydney, Chennai, Buenos Aires, Johannesburg, Montr è al,
        Hong
        Kong, Mexico City, Taipei, São Paulo, Bangkok, Seoul, and Santiago.
 
 
 **Item
        5****.*****Operating and Financial Review and Prospects.***
 
 The
        following discussion and analysis should be read in conjunction with our
        Consolidated Financial Statements, accompanying notes and other financial
        information, appearing in Item 18. The Consolidated Financial Statements
        have
        been prepared in accordance with accounting principles generally accepted
        in the
        United States.
 
 
 **Overview**
 
 We
        are a
        contract research organization, or CRO, providing clinical research and
        development services on a global basis to the pharmaceutical, biotechnology
        and
        medical device industries. Our focus is on supporting the conduct of clinical
        trials. We have historically done so by providing such services as Phase
        I - IV
        clinical trials management, study design, laboratory services and drug
        development support. We believe that we are one of a select group of CROs
        with
        the capability and expertise to conduct clinical trials in most major
        therapeutic areas on a global basis. As of December 31, 2005, we had
        approximately 3,050 employees  and
        operations in 41 locations in 27 countries, including the United States and
        major markets in Europe and Rest of World. In the transition period ended
        December 31, 2005, 58.6%, 33.7% and 7.7% of our net revenue was derived in
        the
        United States, Europe and Rest of World, respectively. See Note 18 to the
        Consolidated Financial Statements.
  19
  
 Revenue
        consists primarily of fees earned under contracts with third-party clients.
        In
        most cases, a portion of the contract fee is paid at the time the study or
        trial
        is started, often upon the signing of a letter of intent, and the balance
        of the
        contract fee is generally payable in installments over the study or trial
        duration, based on the achievement of certain performance targets or
        "milestones." Revenue for contracts is recognized on the basis of the
        relationship between time incurred and the total estimated duration of the
        trial
        or on a fee-for service basis according to the particular circumstances of
        the
        contract. As is customary in the CRO industry, we subcontract with third
        party
        investigators in connection with clinical trials. All subcontractor costs
        and
        certain other costs where reimbursed by clients, are, in accordance with
        industry practice, deducted from gross revenue to arrive at net revenue.
        As
        these costs vary from contract to contract, we view net revenue as our primary
        measure of revenue growth.
 
 Direct
        costs consist primarily of compensation and associated fringe benefits for
        project-related employees and other direct project driven costs. Selling,
        general and administrative expenses consist of compensation and related fringe
        benefits for selling and administrative employees, professional services,
        advertising costs and all costs related to facilities and information systems.
 
 Our
        backlog consists of potential net revenue yet to be earned from projects
        awarded
        by clients. At December 31, 2005, we had a backlog of approximately $650
        million, compared with approximately $528 million at May 31, 2005. We believe
        that our backlog as of any date is not necessarily a meaningful predictor
        of
        future results, due to the potential for cancellation or delay of the projects
        underlying the backlog, and no assurances can be given that we will be able
        to
        realize this backlog as net revenue.
 
 As
        the
        nature of ICON's business involves the management of projects having a typical
        duration of one to three years, the commencement or completion of projects
        in a
        fiscal year can have a material impact on revenues earned with the relevant
        clients in such years. In addition, as we typically work with some, but not
        all,
        divisions of a client, fluctuations in the number and status of available
        projects within such divisions can also have a material impact on revenues
        earned from such clients from year to year.
 
 Although
        we are domiciled in Ireland, we reports our results in U.S. dollars. As a
        consequence, the results of our non-U.S. based operations, when translated
        into
        U.S. dollars, could be materially affected by fluctuations in exchange rates
        between the U.S. dollar and the currencies of those operations.
 
 In
        addition to translation exposures, we are also subject to transaction exposures
        because the currency in which contracts are priced can be different from
        the
        currencies in which costs relating to those contracts are incurred. We have
        13
        operations operating in U.S. dollars, 6 trading in Euros, 3 in pounds Sterling,
        and 1 each in Australian dollars, Singapore dollars, Yen, Israeli New Shekels,
        Latvian Lats, Swedish Krona, Argentine Peso, South African Rand, Indian Rupee,
        Russian Rouble, Canadian dollar, Hungarian Forint, Hong Kong dollar, Taiwan
        dollar, Mexican Peso, Brazilian Real, Chiliean Peso, South Korean Won and
        Thai
        Baht. Our operations in the United States are not materially exposed to such
        currency differences as the majority of our revenues and costs are in U.S.
        dollars. However, outside the United States the multinational nature of our
        activities means that contracts are usually priced in a single currency,
        most
        often pounds Sterling, U.S. dollars or Euros, while costs arise in a number
        of
        currencies, depending, among other things, on which of our offices provide
        staff
        for the contract, and the location of investigator sites. Although many such
        contracts benefit from some degree of natural hedging due to the matching
        of
        contract revenues and costs in the same currency, where costs are incurred
        in
        currencies other than those in which contracts are priced, fluctuations in
        the
        relative value of those currencies could have a material effect on ICON's
        results of operations. We regularly review our currency exposures and hedge
        a
        portion of these, using forward exchange contracts, where they are not covered
        by natural hedges .
 
 We
        have
        received capital and revenue grants from Forbairt, an Irish government agency.
        We record capital grants as deferred income, which are credited to income
        on a
        basis consistent with the depreciation of the relevant asset. Grants relating
        to
        operating expenditures are credited to income in the period in which the
        related
        expenditure is charged. The capital grant agreements provide that in certain
        circumstances the grants received may be refundable in full. These circumstances
        include sale of the related asset, liquidation of ICON or failing to comply
        in
        other respects with the grant agreements. The operating expenditure grant
        agreements provide for repayment in the event of a downsizing calculated
        by
        reference to any reduction in
  20
  employee
        numbers. We have not recognized any loss contingency having assessed as remote
        the likelihood of these events arising. Up to December 31, 2005, we have
        received $2,429,981 and $1,806,126 under capital grants and operating grants,
        respectively. Pursuant to the terms of the grant agreements we are restricted
        from distributing some of these amounts by way of dividend or otherwise.
 
 As
        we
        conduct operations on a global basis, our effective tax rate has depended
        and
        will depend on the geographic distribution of our revenue and earnings among
        locations with varying tax rates. ICON's results of operations therefore
        may be
        affected by changes in the tax rates of the various jurisdictions. In
        particular, as the geographic mix of our results of operations among various
        tax
        jurisdictions changes, our effective tax rate may vary significantly from
        period
        to period.
 
 **Operating
        Results**
 
 The
        following table sets forth for the periods indicated certain financial data
        as a
        percentage of net revenue and the percentage change in these items compared
        to
        the prior comparable period. The trends illustrated in the following table
        may
        not be indicative of future results.
  **May
                  31,**
                **2004**
              
              **May
                  31,**
                **2005**
              
              **Transition
                  Period 2005**
              
              **June
                  1, 2004**
                **to
                  May 31, 2005**
              
              **June
                  1, 2005**
                **to
                  Dec 31, 2005****Percentage
                  of Net Revenue**
              
              **Percentage
                  Increase/ (Decrease)**Net
                  revenue
              
              100.0%
              
              100
              %
              
              100
              %
              
              10.0
              %
              
              (38.2
              %)Costs
                  and expenses:
                Direct
                  costs
              
              54.7%
              
              55.0
              %
              
              56.5
              %
              
              10.5
              %
              
              (36.5
              %)Selling,
                  general and administrative
              
              29.9%
              
              31.8
              %
              
              30.7
              %
              
              16.9
              %
              
              (40.2
              %)Depreciation
                  and amortization
              
              3.8%
              
              4.1
              %
              
              4.0
              %
              
              19.3
              %
              
              (39.1
              %)Share
                  based compensation
              
              -
              
              -
              
              
              3.1
              %
              
              -
              
              
              100
              %Other
                  charges
              
              -
              
              3.4
              %
              
              -
              
              
              100.0
              %
              
              (100
              %)Income
                  from operations
              
              11.6%
              
              5.7
              %
              
              5.7
              %
              
              (45.9
              %)
              
              (37.6
              %)
 
 ***Seven
        Month Transition Period Ended December 31, 2005 Compared to Fiscal Year Ended
        May 31, 2005***
 
 *Note:
        Results below compare a 7 month accounting period ended Dec 31, 2005 to a
        12
        month accounting period ended May 31, 2005.*
 
 Net
        revenue decreased by $124.8 million, or 38.2%, from $326.7 million to $201.9
        million.  Revenues
        in the United States, Europe and the Rest of World fell by 36.6%, 44.1% and
        14.9% respectively. In the transition period to December 31, 2005, net revenue
        from our central laboratory business decreased by 28.6% from $25.5 million
        to
        $18.2 million, while our clinical research segment declined by 39.0% from
        $301.2
        million to $183.8 million over the prior period. If the figures above were
        analyzed with a comparative period, they would show a general improvement
        through a combination of increased business from existing clients, business
        won
        from new clients, increased use of outsourcing by the pharmaceutical,
        biotechnology and medical device industries, an underlying increase in research
        and development spending and consolidation in the CRO industry.
   21
  
  Direct
        costs decreased by $65.7 million, or 36.5%, from $179.7 million to $114.0
        million. Direct costs as a percentage of net revenue increased from 55.0%
        in the
        twelve months to May 31, 2005 to 56.5% in the 2005 transition period ending
        December 31, 2005. A comparative period analysis shows an increase in direct
        costs primarily due to increased staff numbers needed to support increased
        project related activity.
  Selling,
        general and administrative expenses decreased by $41.7 million, or 40.2%,
        from
        $103.8 million to $62.1 million. As a
        percentage of net revenue, selling, general and administrative expenses,
        decreased from 31.8% in
        the
        twelve months to May 31, 2005 to
        30.7% for
        the
        transition period ended December 31, 2005 .
        A
        comparative period analysis shows an increase in SG&A costs due to the
        continued expansion of our operations.
 
 Depreciation
        and amortization expense decreased by $5.2 million, or 39.1%, from $13.3
        million
        to $8.1million. As
        a
        percentage of net revenue, depreciation and amortization decreased from 4.1%
        of
        net revenues in the twelve
        months to May 31, 2005, to
        4.0%
        for the transition
        period ended December 31, 2005. A comparative period analysis shows an increase
        in depreciation as a result of continued investment in facilities and
        information technology to support the growth in activity and in providing
        for
        future capacity.
 
 In
        the
        transition period an amount of $6.2 million was expensed in relation to share
        based compensation (See Item 7: Major Shareholders and Related Party
        Transactions).
 
 The
        principal items classified as other charges in the year ended May 31, 2005
        were
        asset impairments, computer software write-off and lease termination and
        exit
        costs.
 
 Income
        from operations decreased by $7.0 million, or 37.6%, from $18.6 million to
        $11.6
        million. As a percentage of net revenue, income from operations remained
        static
        at 5.7% of net revenues for
        the transition
        period ended December 31, 2005 when compared to the twelve months to May
        31,
        2005. For the transition period ended December 31, 2005, losses from operations,
        as a percentage of net revenue for the central laboratory decreased to 16.7%,
        from 59.9%, in the twelve month period ending May 31, 2005. The loss for
        the
        year to May 31, 2005 included the effects of other charges. The central
        laboratory constitutes approximately 9.0% of our business revenues. Operating
        margins for our clinical research segment remained the same at 11.3% in the
        transition period ended December 31, 2005 as the twelve month period ending
        May
        31, 2005.
 
 Net
        interest income for the transition period ended December 31, 2005, was $1.3
        million, an increase of $0.3 million on the year ended May 31, 2005. Higher
        interest rates in the 2005 transition period over fiscal 2005 contributed
        to the
        increased interest income.
 
 ICON
        plc’s effective tax rate for the transition period ended December 31, 2005, was
        42.0% compared with 29.9% for the year ended May, 31, 2005.
 
 *Fiscal
        Year Ended May 31, 2005 Compared to Fiscal Year Ended May 31,
        2004*
 
 Net
        revenue increased by $29.7 million, or 10.0%, from $296.9 million to $326.7
        million.  This
        improvement arose through a combination of increased business from existing
        clients, business won from new clients and revenues from acquisitions not
        included in the comparative period. The additional revenues from acquisitions
        amounted to $9.1 million for the fiscal year ended May 31, 2005. Including
        the
        impact of acquisition, revenues in the United States, Europe and the Rest
        of
        World grew by 0.9%, 20.1% and 73.5%, respectively. In the twelve months to
        May
        31, 2005, net revenue from our central laboratory business decreased by 5.2%
        from $26.9 million to $25.5 million while our clinical research segment grew
        by
        11.5% from $270.0 million to $301.2 million over the comparable period. The
        decrease in net revenue in our central laboratory segment is primarily due
        to
        lower testing volumes in fiscal 2005. The growth in net revenue in our clinical
        research segment is due to the expansion of our services to both existing
        and
        new clients, increased use of outsourcing by the Pharmaceutical, Biotechnology
        and Medical Device industries, an underlying increase in research and
        development spending and consolidation in the CRO industry.
   22
  
  Direct
        costs increased by $17.1 million, or 10.5%, from $162.6 million to $179.7
        million, primarily due to increased staff numbers needed to support increased
        project related activity and increased costs arising from acquisitions amounting
        to $4.3 million. Direct costs as a percentage of net revenue increased from
        54.7% in the twelve months to May 31, 2004 to 55.0% in fiscal 2005.
  Selling,
        general and administrative expenses increased by $15.0 million, or 16.9%,
        from
        $88.8 million to $103.8 million. The
        increase in costs is due to the continued expansion of our operations and
        additional selling, general and administrative costs from acquisition of
        $3.3
        million not included in the comparative period.  As
        a
        percentage of net revenue, selling, general and administrative expenses,
        increased from 29.9% in
        the
        twelve months to May 31, 2004 to
        31.8% for
        the
        fiscal year ended May 31, 2005 .
 
 Depreciation
        and amortization expense increased by $2.1 million, or 19.3%, from $11.2
        million
        to $13.3 million. This
        increase is due to the continued investment in facilities and information
        technology to support the growth in activity and in providing for future
        capacity and increased costs arising from acquisition of $0.4
        million . As
        a
        percentage of net revenue, depreciation and amortization increased from 3.8%
        of
        net revenues in the twelve
        months to May 31, 2004, to
        4.1%
        for the fiscal
        year ended May 31, 2005.
  Other
        charges of $11.3 million were incurred during the year ended May 31, 2005.
        The
        principal items classified as other charges include asset impairments, computer
        software write-off and lease termination and exit costs, as outlined in Note
        15
        to the Consolidated Financial Statements.
 
 Income
        from operations decreased by $15.8 million, or 45.9%, from $34.4 million
        to
        $18.6 million, including acquisitions. As a percentage of net revenue, income
        from operations decreased from 11.6% for the twelve months to May 31, 2004
        to
        5.7% of net revenues for
        the fiscal
        year ended May 31, 2005. For the fiscal year 2005, losses from operations,
        as a
        percentage of net revenue for the central laboratory increased to 59.9%,
        or
        25.6% excluding other charges, from 12.2%, in fiscal 2004 due to an expanded
        cost base. The central laboratory constitutes approximately 7% of our business
        revenues. Operating margins for our clinical research segment decreased from
        13.9% in the twelve months to May 31, 2004, to 11.3% for the fiscal year
        ended
        May 31, 2005.
 
 Net
        interest income for the year ended May 31, 2005, was $1.0 million, an increase
        of $0.7 million on the year ended May 31, 2004. Higher average level of funds
        invested and higher interest rates in fiscal 2005 over fiscal 2004 contributed
        to the increased interest income.
 
 ICON
        plc’s effective tax rate for the year ended May 31, 2005, was 29.9% compared
        with 25.8% for the comparable period last year. The increase in the effective
        rate was primarily due to a change in the geographic distribution of pre-tax
        earnings.
 
 *Fiscal
        Year Ended May 31, 2004 Compared to Fiscal Year Ended May 31,
        2003*
 
 Net
        revenue increased by $71.2 million, or 31.5%, from $225.7 million to $296.9
        million.  This
        improvement arose through a combination of increased business from existing
        clients, business won from new clients and revenues from acquisitions not
        included in the comparative period. The additional revenues from these
        acquisitions (BPA, MCS, Medeval and GloboMax) amounted to $24.5 million for
        the
        fiscal year ended May 31, 2004. Including the impact of acquisitions, revenues
        in the United States, Europe and the Rest of World grew by 16.8%, 65.6% and
        76.4% respectively. In the twelve months to May 31, 2004, net revenue from
        our
        central laboratory business grew by 2.8% from $26.2 million to $26.9 million
        while our clinical research segment grew by 35.3% from $199.6 million to
        $270.0
        million over the comparable period. The growth in net revenue in our clinical
        research segment and central laboratory is due to the expansion of our services
        to both existing and new clients, increased use of outsourcing by the
        Pharmaceutical, Biotechnology and Medical Device industries, an underlying
        increase in research and development spending and consolidation in the CRO
        industry.
  Direct
        costs increased by $40.2 million, or 32.8%, from $122.4 million to $162.6
        million, primarily due to increased staff numbers needed to support increased
        project related activity and increased costs arising from the acquisitions
        amounting to $13.2 million. Direct costs as a percentage of net revenue
        increased from 54.2% in the twelve months to May 31, 2003 to 54.7% in fiscal
        2004.
   23
  
  Selling,
        general and administrative expenses increased by $17.7 million, or 24.9%,
        from
        $71.1 million to $88.8 million. The
        increase in costs is due to the continued expansion of our operations and
        additional selling, general and administrative costs from acquisitions of
        $9.5
        million not included in the comparative period.  As
        a
        percentage of net revenue, selling, general and administrative expenses,
        decreased from 31.5% in
        the
        twelve months to May 31, 2003 to
        29.9% for
        the
        fiscal year ended May 31, 2004 .
 
 Depreciation
        expense increased by $3.9 million, or 52.9%, from $7.3 million to $11.2 million. This
        increase is due to the continued investment in facilities and information
        technology to support the growth in activity and in providing for future
        capacity and increased cost arising from acquisitions of $0.6
        million . As
        a
        percentage of net revenue, depreciation increased from 3.3% of net revenues
        in
        the twelve
        months to May 31, 2003 to
        3.8%
        for the fiscal
        year ended May 31, 2004.
 
 Income
        from operations increased by $9.5 million, or 37.9%, from $24.9 million to
        $34.4
        million, including acquisitions. This improvement is due to increased levels
        of
        activity carried out across the Company together with the acquisitions of
        BPA,
        MCS, Medeval and GloboMax. As a percentage of net revenue, income from
        operations increased from 11.0% for the twelve months to May 31, 2003 to
        11.6%
        of net revenues for
        the fiscal
        year ended May 31, 2004. For the fiscal year 2004, income from operations,
        as a
        percentage of net revenue for the central laboratory fell to 12.2% from 0.4%
        in
        fiscal 2003 due to an expanded cost base. The central laboratory constitutes
        approximately 9% of our business. Operating margins for our clinical research
        segment increased from 12.4% in the twelve months to May 31, 2003, to 13.9%
        for
        the fiscal year ended May 31, 2004 due principally to improved staff utilization
        and enhanced leverage of our overhead costs.
 
 Net
        interest income for the year ended May 31, 2004, was $0.3 million, a decrease
        of
        $0.1 million on the equivalent period last year due primarily to lower then
        average interest rates during the current fiscal year .
 
 ICON's
        effective tax rate for the year ended May 31, 2004, was 25.8% compared with
        27.7% for the comparable period last year. The decrease in the effective
        rate
        was primarily due to a change in the geographic distribution of pre-tax
        earnings.
 
 **Liquidity
        and Capital Resources**
 
 The
        CRO
        industry generally is not capital intensive. Since our inception, we have
        financed our operations and growth primarily with cash flows from operations,
        net proceeds of $49.1 million raised in our initial public offering in May
        1998
        and net proceeds of $44.3 million raised in our public offering in August
        2003.
        Our principal cash needs are payment of salaries, office rents, travel
        expenditures and payments to investigators. The aggregate amount of employee
        compensation, excluding stock compensation expense, paid by us and our
        subsidiaries for three years ended May 31, 2003, 2004 and 2005 and the seven
        month transition period ending December 31, 2005, amounted to $135.2 million,
        $174.5 million, $194.1 million and $121.4 million, respectively. Investing
        activities primarily reflect capital expenditures for facilities, information
        systems enhancements, the purchase of short-term investments and
        acquisitions.
 
 Our
        clinical research and development contracts are generally fixed price with
        some
        variable components and range in duration from a few months to several years.
        Revenue from contracts is generally recognized as income on the basis of
        the
        relationship between time incurred and the total estimated contract duration
        or
        on a fee-for-service basis. The cash flow from contracts typically consists
        of a
        down payment of between 10% and 20% paid at the time the contract is entered
        into, with the balance paid in installments over the contract's duration,
        in
        some cases on the achievement of certain milestones. Accordingly, cash receipts
        do not correspond to costs incurred and revenue recognized on contracts.
  As
        of
        December 31, 2005, our working capital was $132.3 million, compared to $125.3
        million at May 31, 2005 and $113.8 million at May 31, 2004. The most significant
        influence on our operating cash flow is revenue outstanding, which comprises
        accounts receivable and unbilled revenue, less payments on account. The dollar
        values of these amounts and the related days revenue outstanding can vary
        due to
        the achievement of contractual milestones, including contract signing, and
        the
        timing of cash receipts. The number of days revenue outstanding was 65 days
        at
        December 31, 2005, 63 days at May 31, 2005 and 60 days at May 31, 2004.
  24
  
 Net
        cash
        provided by operating activities was $13.8 million in the transition period
        ended December 31, 2005, compared with $25.2 million in fiscal year ended
        May
        31, 2005, $43.6 million in the fiscal year ended May 31, 2004 and $21.5 million
        in the fiscal year ended May 31, 2003.
 
 Net
        cash
        used in investing activities was $16.3 million in the transition period ended
        December 31, 2005, compared with $25.7 million in the year ended May 31,
        2005,
        $47.3 million in the year ended May 31, 2004 and $35.3 million in the year
        ended
        31, 2003. The decrease in net cash used in the 2005 transition period ended
        December 31, 2005 over the year ending May 31, 2005, is due principally to
        the
        purchase of subsidiary undertakings in the year ended May 31, 2005.
 
 Net
        cash
        provided by financing activities was $6.6 million in the transition period
        ended
        December 31, 2005, compared with $0.9 million in year ended May 31, 2005,
        $42.5
        million in the fiscal year ended May 31, 2004 and net cash used in investing
        activities of $4.6 million in the fiscal year ended May 31, 2003. The increase
        in cash provided by financing activities in the transition period over the
        year
        ended May 31, 2005, is the draw down of bank overdraft in the transition
        period.
 
 As
        a
        result of these cash flows, cash and cash equivalents increased by $3.2 million
        in the transition period ended December 31, 2005, compared to $0.6 million
        in
        the year ended May 31, 2005, $37.4 million in the year ended May 31, 2004
        and a
        decrease of $18 million in the year ended May 31, 2003.
 
 On
        July
        3, 2003, we entered into a facility agreement (the "Facility Agreement")
        for the
        provision of a term loan facility of U.S.$40 million, multi-currency overdraft
        facility of $5 million and revolving credit facility of $15 million (the
        "Facilities") with The Governor and Company of the Bank of Ireland and Ulster
        Bank Ireland Limited (the “Banks”). Our obligations under the Facilities are
        secured by certain composite guarantees and indemnities and pledges in favour
        of
        each of the banks. This facility bears interest at an annual rate equal to
        the
        Banks’ Prime Rate plus three quarters of one percent. ICON and its subsidiaries
        are entitled to make borrowings under a term loan facility of $40 million
        and a
        multi currency overdraft facility of $5 million. As at December 31, 2005,
        the
        full amount of the term loan facility was available to be drawn down and
        $0.1
        million of the multi currency overdraft was available to be drawn down. ICON
        Clinical Research, Inc. (a subsidiary of ICON plc) is entitled to make
        borrowings under a revolving credit facility of $15 million. As at December
        31,
        2005, the full amount of this facility was available to be drawn
        down.
  We
        entered into an overdraft agreement with Allied Irish Banks, plc (“AIB”) whereby
        we guarantee any overdraft of our subsidiary ICON Clinical Research GmbH
        up to
        an amount €120,000 (U.S.$142,128). As of December 31, 2005, the full facility
        was available to be drawn down.
  On
        July
        1, 2004, we completed the acquisition of 70% of Beacon Biosciences, Inc.
        for an
        initial cash consideration of U.S.$9.9 million.
  On
        December 1, 2004, we acquired the workforce of Biomines Research Solutions
        Private Limited for a total cash consideration of U.S. $0.25
        million. The
        workforce is engaged in the business of clinical trial data management and
        statistical analysis services and has been transferred to our existing Indian
        operation.
  
  25
  
 **Contractual
        obligations table**
 
 The
        following table represents our contractual obligations and commercial
        commitments as of December 31, 2005:
   **Payments
                    due by
                    period****Less
                    than
                    1**
                **1
                    to 3**
                **3
                    to 5**
                **More
                    than****Total**
                **year**
                **years**
                **years**
                **5
                    years**
 ****
 Capital
                  Lease Obligations
              
              $
              0.4
              
              $
              0.2
              
              $
              0.2
              
              $
              -
              
              $
              -Bank
                  credit lines and loans facilities
              
              
              4.9
              
              
              4.9
              
              
              -
              
              
              -
              
              
              -Operating
                  lease Obligations
              
              
              140.6
              
              
              21.4
              
              
              33.0
              
              
              28.5
              
              
              57.7Purchase
                  Obligations (1)
              
              
              2.5
              
              
              2.5
              
              
              -
              
              
              -
              
              
              -Total
                  (U.S.$ in millions)
              
              $
              148.4
              
              $
              29.0
              
              $
              33.2
              
              $
              28.5
              
              $
              57.7
 
 (1)
        This
        figure may be payable under earn out clauses included in an acquisition
        undertaken in a prior period.
 
 We
        expect
        to spend approximately $35 million in the next twelve months on further
        investments in information technology, the expansion of existing facilities
        and
        the addition of new offices  and
        expect to increase this level of spending in subsequent years. We believe
        that
        we will be able to fund our additional foreseeable cash needs for the next
        twelve months from cash flow from operations and existing cash balances.
        In the
        future, we will consider acquiring businesses to enhance our service offerings
        and global presence. Any such acquisitions may require additional external
        financing and we may from time to time seek to obtain funds from public or
        private issues of equity or debt securities. There can be no assurance that
        such
        financing will be available on terms acceptable to us.
 
 **Critical
        Accounting Policies**
 
 The
        preparation of consolidated financial statements in accordance with generally
        accepted accounting principles in the United States requires management to
        make
        estimates and assumptions that affect the reported amounts of assets and
        liabilities at the date of the financial statements and the reported amounts
        of
        revenues and expenses during the reported period.
  We
        base
        our estimates and judgements on historical experience and on the other factors
        that we believe are reasonable under current circumstances. Actual results
        may
        differ from these estimates if these assumptions prove to be incorrect or
        if
        conditions develop other than as assumed for the purposes of such estimates.
        The
        following is a discussion of the accounting policies used by us, which we
        believe are critical in that they require estimates and judgements by
        management.
  ***Revenue
        Recognition***
  Significant
        management judgements and estimates must be made and used in connection with
        the
        recognition of revenue in any accounting period. Material differences in
        the
        amount of revenue in any given period may result if these judgements or
        estimates prove to be incorrect or if management’s estimates change on the basis
        of development of the business or market conditions. To date there has been
        no
        material differences arising from these judgements and estimates.
 
 We
        earn
        revenues by providing a number of different services to our clients. These
        services include clinical trials management, biometric activities, consulting
        and laboratory services. We recognize biometric, consulting and laboratory
        revenues on a fee-for-service basis. Our laboratory service contracts are
        multiple element arrangements, with laboratory kits and laboratory testing
        representing the contractual elements. We determine the fair values for these
        elements, each of which can be sold separately, based on objective and reliable
        evidence of their respective fair values. Our laboratory contracts entitle
        us to
        receive non-refundable set up fees and we allocate such fees as additional
        consideration to the contractual elements based on the proportionate fair
        values
        of the elements. We recognize revenues for the elements on the basis of the
        number of deliverable units completed in a period.
  26
  
 
 We
        recognize clinical trials revenue on the basis of the relationship between
        time
        incurred and the total estimated duration of the contract as this represents
        the
        most accurate pattern over which our contractual obligations are fulfilled.
        We
        invoice our customers upon achievement of specified contractual milestones.
        This
        mechanism, which allows us to receive payment from our customers throughout
        the
        duration of the contract, is not reflective of revenue earned. We recognize
        revenues over the period from the awarding of the customer’s contract to study
        completion and acceptance. This requires us to estimate total expected revenue,
        time inputs, contract costs, profitability and expected duration of the clinical
        trial. These estimates are reviewed periodically and, if any of these estimates
        change or actual results differ from expected results, then an adjustment
        is
        recorded in the period in which they become readily estimable.
 
 If
        we do
        not accurately estimate the resources required or the scope of the work to
        be
        performed, or do not manage our projects properly within the planned cost
        or
        satisfy our obligations under the contracts, then future results may be
        significantly and negatively affected.
 
 ***Goodwill***
  The
        principal judgements and uncertainties affecting our accounting for goodwill
        relate to carrying values. The carrying values of purchased goodwill are
        assessed annually, using discounted cash flows and net realizable values.
        The
        estimates and judgements used to assess carrying values include those relating
        to commercial risk, revenue and cost projections, our intention with respect
        to
        the acquired goodwill, the impact of competition, the impact of any
        reorganization or change of our business focus, the level of third party
        interest in our operations and market conditions.
 
 If
        the
        implied fair value of reporting unit goodwill is lower then its carrying
        amount,
        goodwill is impaired and written down to its implied fair value. If we were
        to
        use different estimates or judgements, particularly with respect to expected
        revenue and cost projections or the impact of any reorganisation or change
        of
        business focus, a material impairment charge to the statement of operations
        could arise. We believe that we have used reasonable estimates and judgements
        in
        assessing the carrying value of our goodwill. For
        further information, refer to Note 15 to the Consolidated Financial
        Statements.
  
 **Inflation**
 
 We
        believe that the effects of inflation generally do not have a material adverse
        impact on our operations or financial conditions.
 
 **New
        Accounting Pronouncements**
 
 In
        March
        2005, the Financial Accounting Standards Board (FASB) issued FASB Interpretation
        No. 47.  In accordance with FASB Interpretation 47 companies must recognise
        a liability for the fair value of a legal obligation to perform asset-retirement
        activities that are conditional on a future event if the amount can be
        reasonably estimated.  The Interpretation provides guidance on whether the
        fair value is reasonably estimable.  The premise underlying the
        Interpretation is a need for more uniform application of Statement 143
        "Accounting for Asset Retirement Obligations".  Companies must adopt the
        Interpretation no later than the end of the fiscal year ending after December
        15, 2005.  We do not expect the impacts of adopting FASB Interpretation No
        47 to be material.
 
 In
        December 2004, the FASB issued Statement No. 123R, "Share-Based Payment” - An
        Amendment of FASB Statements No. 123 and 95 (“SFAS No.123R”), which is effective
        for public companies in periods beginning after June 15, 2005. We will implement
        the proposed standard on January 1, 2006. The cumulative effect of adoption,
        if
        any, applied on a modified prospective basis, would be measured and recognized
        on March 31, 2006. SFAS No. 123R addresses the accounting for transactions
        in
        which an enterprise receives goods and services in exchange for: (a) equity
        instruments of the enterprise; or (b) liabilities that are based on the fair
        value of the enterprise’s equity instruments or that may be settled by the
        issuance of such equity instruments. SFAS No. 123R eliminates the ability
        to
        account for share-based compensation transactions using APB 25, and generally
        would require instead that such transactions be accounted for using a fair-value
        based method. Equity classified awards are measured at grant date at fair
        value
        and are not subsequently re-measured. Liability classified awards are
        re-measured at fair value at each balance sheet date until the awards are
        settled. We are currently evaluating option valuation methodologies and
        assumptions in light of SFAS No. 123R related to employee stock options.
        Current
        estimates of option values using the Black-Scholes method (as reported) may
        not
        be indicative of results from valuation methodologies ultimately
        adopted.
  27
  
 
 In
        November 2004, the FASB issued statement No. 151, "Inventory Costs, an amendment
        of ARB No. 43, Chapter 4" (“SFAS No. 151”), which is effective for public
        companies prospectively for inventory costs incurred in periods beginning
        after
        June 15, 2005. This Statement amends the guidance in ARB No. 43, Chapter
        4
“Inventory Pricing”, to clarify that accounting for abnormal amounts of idle
        facility expense, freight, handling costs and wasted material (spoilage)
        should
        be recognized as a current period change and to require the allocation of
        fixed
        production overhead to the costs of conversion based on normal capacity of
        the
        production facilities. We do not expect that the adoption of SFAS No. 151
        will
        have a material impact on our financial position or results of operations.
 
 In
        December 2004, the FASB issued Statement No. 153, “Exchanges of Nonmonetary
        assets - an amendment of APB Opinion No. 29” (“SFAS No. 153”), which is
        effective for public companies in periods beginning after June 15, 2005.
        The
        guidance in APB opinion No. 29, Accounting for Nonmonetary Transactions,
        is
        based on the principle that exchanges of nonmonetary assets should be measured
        based on the fair value of the assets exchanged. The guidance in that Opinion,
        however, included certain exceptions to that principle. This statement amends
        Opinion 29 to eliminate the exception for nonmonetary exchanges of similar
        productive assets and replaces it with a general exception for exchanges
        of
        nonmonetary assets that do not have commercial substance. A nonmonetary exchange
        has commercial substance if the future cash flows of the entity are expected
        to
        change significantly as a result of the exchange. We do not expect that the
        adoption of SFAS No. 153 will have a material impact on our financial position
        or results of operations.
 
 In
        November 2003 and March 2004, the Emerging Issues Task Force (EITF) reached
        partial consensus on EITF 03-1, “The Meaning of Other-Than-Temporary Impairment
        and its Application to Certain Investments,” (“EITF 03-1”). EITF 03-1 addresses
        the meaning of other then temporary impairment and its application to
        investments classified as either available-for-sale or held-to-maturity under
        SFAS 115, “Accounting for Certain Investments in Debt and Equity Securities” and
        investments accounted for under the cost method. The EITF agreed on certain
        quantitative and qualitative disclosures about unrealised losses pertaining
        to
        securities classified as available-for-sale or held-to-maturity. In addition,
        EITF 03-1 requires certain disclosures about cost method investments. The
        recognition and measurement provisions of EITF 03-1 have been deferred until
        additional guidance is issued.
  28
  
 **Item
        6****.*****Directors, Senior Management and Employees.***
 
 **Directors
        and Senior Management**
 
 The
        following table and accompanying biographies set forth certain information
        concerning each of ICON plc’s directors, officers and other key employees as of
        December 31, 2005.
 
 **Name**
              **Age**
              **Position**Dr.
                  John Climax (1)
              53
              Chairman
                  of the BoardPeter
                  Gray (1)
              51
              Chief
                  Executive Officer, DirectorCiaran
                  Murray
              43
              Chief
                  Financial OfficerSean
                  Leech (1)
              35
              Executive
                  Vice President Corporate and Organization DevelopmentDr.
                  Ronan Lambe (1)
              66
              DirectorThomas
                  Lynch (2)(3)(4)
              49
              DirectorEdward
                  Roberts (2)(3)(4)
              71
              DirectorShuji
                  Higuchi
              65
              DirectorDr.
                  Bruce Given (2)(3)(4)
              51
              DirectorWilliam
                  Taaffe
              57
              President
                  Corporate DevelopmentDr.
                  John Hubbard
              49
              President
                  and Chief Operating Officer, ICON Clinical Research -
                  U.S.Dr.
                  Peter Sowood
              52
              President
                  of ICON Clinical Research - EuropeRobert
                  Scott-Edwards
              52
              President
                  of ICON LaboratoriesDr.
                  Dan Weng
              43
              President
                  of ICON Clinical Research - Rest of WorldDr.
                  Thomas Frey
              53
              President
                  Strategic Drug DevelopmentJosephine
                  Coyle
              48
              Vice
                  President for Corporate Quality
                  Assurance
 
 (1)  Executive
        Officer of the Company.
 (2)  Member
        of
        Compensation Committee.
 (3)  Member
        of
        Audit Committee.
 (4)
            Member
                of Nomination Committee. 
 *Dr.
        John Climax* ,
        one of
        the Company’s co-founders, has served as a director of the Company and its
        subsidiaries since June 1990. Dr. Climax served as Chief Executive Officer
        from
        June 1990 to October 2002 and was appointed Chairman of the Board in November
        2002. Dr. Climax has over 20 years of experience in the contract research
        industry in both Europe and the United States. Dr. Climax received his primary
        degree in pharmacy in 1977 from the University of Singapore, his masters
        in
        applied pharmacology in 1979 from the University of Wales and his PhD. in
        pharmacology from the National University of Ireland in 1982.
 
 *Peter
        Gray* has
        served as the Chief Executive Officer of ICON and its subsidiaries since
        November 2002. He served as the Group Chief Operating Officer of ICON and
        its
        subsidiaries from June 2001, and was Chief Financial Officer from June 1997
        to
        June 2001. He has been a director of the Company since June 1997. Mr. Gray
        has
        over 14 years experience in the pharmaceutical services industry and has
        also
        worked in the engineering and food sectors. Mr. Gray received a degree in
        Law
        from Trinity College Dublin in 1977 and became a chartered accountant in
        1980.
 
 *Ciaran
        Murray* was
        appointed as Chief Financial Officer of ICON and its subsidiaries in October
        2005. Mr. Murray developed his experience in senior financial positions in
        the
        technology and food sectors in such companies as Kraft food and Novell. Prior
        to
        joining ICON, Mr. Murray served as the CFO of Codec Systems a Technology
        company
        headquartered in Ireland from 1999 to 2005. Mr. Murray is a business graduate
        of
        University College Dublin. He trained as a Chartered Accountant with
        PricewaterhouseCoopers and is a fellow of the Institute of Chartered Accountants
        in Ireland.
 
 *Sean
        Leech* has
        served as Executive Vice President Corporate and Organization Development
        since
        October 2005. In this role Mr. Leech is responsible for the strategic
        development as well as acquisition integration for the group. Prior to this
        Mr.
        Leech
  29
  served
        as
        the Chief Financial Officer of ICON and its subsidiaries since June 2001
        and
        previously as Group Vice President of Finance from June 1999. Mr. Leech was
        Group Financial Controller of Jones Group plc, a shipping, manufacturing
        and
        fuel distribution company based in Ireland, from 1997 to 1999. Mr. Leech
        is an
        Associate member of the Chartered Institute of Management
        Accountants.
 
 *Dr.
        Ronan Lambe* ,
        one of
        the Company’s co-founders, served as Chairman of the Board of the Company from
        June 1990 to November 2002. Dr. Lambe has over 23 years of experience in
        the
        contract research industry in Europe. Dr. Lambe attended the National University
        of Ireland where he received his bachelor of science degree in chemistry
        in
        1959, his masters in biochemistry in 1962 and his PhD. in pharmacology in
        1976.
        Dr. Lambe continues to serve as a director of the Company.
 
 *Thomas
        Lynch* has
        served as an outside director of the Company since January 1996. Mr. Lynch
        served as a director of Nanogen Inc., from 1996 to 2000. Mr. Lynch is currently
        the Chairman of Amarin Corporation plc, a director of Royal Opera House (Covent
        Garden) and a non-executive director of the Irish Development Authority.
        In the
        period from May 1993 to July 2004, Mr. Lynch held several senior positions
        in
        Elan Corporation, plc, a specialty pharmaceutical company, including Executive
        Vice President, Chief Financial Officer, Vice Chairman and Senior Advisor
        to the
        Chairman of the Board of Elan Corporation plc. Mr. Lynch was a partner at
        KPMG
        from May 1990 to May 1993.
 
 *Edward
        Roberts* has
        served as an outside director of the Company since February 1998. Mr. Roberts
        was Managing Director of the Pharmaceutical Division of Merck KGaA from 1990
        to
        1998. Prior to that, he held a number of senior management positions with
        Eli
        Lilly International in Europe and the United States. Mr. Roberts has over
        40
        years of experience in the pharmaceutical industry. He has been a partner
        in
        Global Health Care Partners since June 1998, and also serves as Chairman
        of
        Biopartners and Chairman of the Advisory Board of Merz & Co.
        GmbH.
 
 *Mr.
        Shuji Higuchi* has
        served as an outside Director of the Company since September 2004. Dr. Higuchi
        has over 40 years of experience in the pharmaceutical industry. Dr. Higuchi
        is
        currently Director of R&D and Corporate Integration, Kyoto University
        Hospital, Japan. Prior to this Dr. Higuchi has served as President of Takeda
        Pharma GmbH from 1983 to 1992, President of Takeda Europe R&D Centre,
        Frankfurt / London from 1992 to 2002, and served as a Corporate Officer of
        Takeda Chemical Industries Limited, Japan from 1999 to 2002.
 
 *Dr.
        Bruce Given* has
        served as an outside director of the Company since September 2004. Since
        March
        2002, he has served as President and Chief Executive Officer of Encysive
        Pharmaceuticals Inc. Previously, Dr. Given has held various positions in
        Johnson
& Johnson group companies. Dr. Given obtained his doctorate from the
        University of Chicago in 1980.
 
 *William
        Taaffe* has
        served as President Corporate Development since April 2005. Prior to this
        Mr.
        Taaffe served as President and Chief Executive Officer of ICON Clinical Research
        - U.S. since 1993. Mr. Taaffe has over 29 years of experience in the contract
        research and the pharmaceutical industries in Ireland, Canada and the United
        States. Mr. Taaffe received his bachelor of science degree in 1970 from the
        University College Dublin.
 
 *Dr.
        John W. Hubbard* has
        served as President of ICON Clinical Research - U.S. since April 2005 and
        currently also serves as Chief Operating Officer, U.S Operations, a position
        he
        has held since October 1999. Dr. Hubbard has more than 20 years of experience
        in
        pharmaceutical research and development. He has held positions of increasing
        responsibility at Revlon Health Care Group, Hoechst Marion Roussel
        Pharmaceuticals, Parexel International Corporation, and from July 1997 until
        joining ICON, he held the position of Senior Vice President of Clinical Research
        Operations at Clinical Studies, an industry leading site management organization
        and division of Innovative Clinical Solutions, Ltd. Dr. Hubbard received
        a B.S.
        in Psychology/Biology from the University of Santa Clara, a Ph.D. in
        Cardiovascular Physiology from the University of Tennessee, and was a NIH
        Postdoctoral Fellow in Cardiovascular Pharmacology at the University of Texas
        Health Sciences Center.
 
 *Dr.
        Peter Sowood* ,
        has
        served the company as President of ICON Clinical Research Europe since November
        2003. Prior to joining the Company, Dr. Sowood held various positions at
        Covance
        Clinical and Periapproval Services, Ltd., including the position of
        Vice-president Clinical Research. Dr. Sowood was educated at the University
        of
        Cambridge in Medical Sciences and followed on to Oxford University where
        he took
        Medical Degrees before joining the RAF as a Medical Officer. Dr. Sowood obtained
        his PhD in 1988 and MBA in 1993.
  30
  
 *Robert
        Scott-Edwards,* has
        served the company as President of ICON Laboratories since August 2004, having
        previously held the position of Vice President, Sales & Marketing for ICON
        Laboratories since June 2000. Prior to joining ICON, Mr. Scott-Edwards held
        various senior positions at Bristol-Myers Squibb from 1979 through 1997.
        Mr.
        Scott-Edwards began his career in the pharmaceutical industry in 1971 at
        Wyeth.
 
 *Dr.
        Dan Weng* ,
        has
        served as President of ICON Clinical Research Rest of World since April 2004,
        having previously held the position of Senior Vice President - Rest of World
        since joining the Company in January 2003. Dr. Weng previously worked in
        the
        Asia Pacific region for both Pharmanet and Quintiles. Prior to joining the
        CRO
        industry in 1997, Dr. Weng worked in the US at the Harvard Medical School
        and at
        UCSF. Educated as a physician in China, Dr. Weng subsequently obtained an
        MBA
        and a PhD in the UK.
  *Dr.
        Thomas Frey* has
        served as Chief Operating Officer for ICON Clinical Research Europe since
        June
        2001 and previously served as Vice President of ICON Clinical Operations
        Europe
        from January 2000 to May 2001. Dr. Frey has 17 years of experience in
        pharmaceutical research and development. He started his career in 1987 with
        Hoechst Pharmaceuticals. From 1995 to the end of 1999 he was Senior Director
        of
        Clinical Development Europe at Hoechst Marion Roussel. Dr. Frey received
        his
        medical degree in 1980 from the University of Heidelberg.
 
 *Josephine
        Coyle* has
        served as Vice President for Corporate Quality Assurance since April 2000.
        Ms.
        Coyle has held positions of increasing responsibility in ICON since August
        1992
        and previously held the position of director of Quality Assurance.
 
 *Board
        of Directors*
 ICON's
        Articles of Association provide that, unless otherwise determined by ICON
        at a
        general meeting, the number of directors shall not be more than 15 nor less
        than
        3. At each annual general meeting, one third of the directors who are subject
        to
        retirement by rotation, rounded down to the next whole number if it is a
        fractional number, shall retire from office . The
        directors to retire shall be those who have been longest in office, but as
        between persons who became or were last re-appointed on the same day, those
        to
        retire shall be determined, unless otherwise agreed, by lot. Accordingly,
        at the
        annual general meeting of ICON to be held in 2006, it is anticipated that
        two
        directors will retire by rotation and offer themselves for re-election, such
        directors to be determined, unless otherwise agreed, by lot. Any additional
        director appointed by us shall hold office until the next annual general
        meeting
        and will be subject to re-election at that meeting.
 
 *Board
        committees*
 We
        established a compensation committee and an audit committee in 1998 and a
        nominating committee in 2004, all of which are committees of the Board of
        Directors and are composed mainly of non-executive directors of ICON
        plc.
 
 *Compensation
        committee*
 The
        compensation committee comprises Thomas Lynch (Chairman), Edward Roberts
        and Dr.
        Bruce Given. It deals with all aspects of senior executive remuneration.
        The
        committee aims to ensure that remuneration packages are competitive so that
        individuals are appropriately rewarded relative to their responsibility,
        experience and value to ICON.
 
 Annual
        bonuses for executive directors are determined by the committee based on
        the
        achievement of ICON’s objectives.
 
 *Audit
        committee*
 The
        audit
        committee comprises Edward Roberts (Chairman), Thomas Lynch and Dr. Bruce
        Given.
        It reviews the annual report, the quarterly earnings releases, the effectiveness
        of the system of internal controls, reviews the compliance with our ethical
        code
        and legal requirements and approves the appointment and removal of the external
        auditors. It also addresses all issues raised and recommendations made by
        the
        external auditors and pre-approves all auditor services.
 
 *Nomination
        committee*
 The
        Nomination committee comprises Thomas Lynch, Edward Roberts and Dr. Bruce
        Given.
        On an ongoing basis it reviews the membership of the board of directors and
        board committees. It identifies and recommends individuals to fill any vacancy
        that is anticipated or arises on the board of directors. It reviews and
        recommends the corporate governance principles of the Company. The nominating
        committee held no formal meeting in the seven months to December 31,
        2005.
  31
  
 *Executive
        committee*
 The
        Executive Committee comprises Dr. John Climax, Peter Gray, Dr. Ronan Lambe
        and
        Sean Leech who holds the position of Executive Vice President Corporate and
        Organizational Development of the Company. Established in March 2005, this
        Committee is responsible for the direction of the business and affairs of
        the
        Company in intervals between meetings of the Board and exercises business
        judgement to act in what the Committee members reasonably believe to be in
        the
        best interest of the Company and its shareholders. All powers exercised by
        the
        Executive Committee are ratified at board meetings. This Committee convenes
        as
        often as it determines to be necessary or appropriate.
 
 The
        aggregate compensation paid by ICON to all persons who served in the capacity
        of
        director or executive officer in the 2005 transition period (9 persons) was
        approximately $1.3 million, but does not include expenses reimbursed to
        directors and executive officers (including business travel, professional
        and
        business association dues and expenses). As of December 31, 2005, options
        granted to directors and executive officers of ICON to purchase an aggregate
        of
        115,900 of our ordinary shares were outstanding. The options are exercisable
        at
        prices between $18.00 and $35.50 and expire between May 15, 2006 and February
        24, 2013.
 
 In
        addition, our officers are eligible to participate in ICON’s Incentive Share
        Option Scheme. See Note 10 to the Consolidated Financial Statements.
 
 
 **Employees**
 
 We
        employed 3,036, 2,713, 2,432 and 2,280 people for the seven month period
        ending
        December 31, 2005, and the years ended May 31, 2005, May 31, 2004 and May
        31,
        2003 respectively. Our employees are not unionized and we believe that our
        relations with our employees are good.
 
 
 **Share
        Ownership**
 
 The
        following table sets forth certain information regarding beneficial ownership
        of
        our ordinary shares (including ADSs) as of February 27, 2006 by all of our
        current directors and executive officers. Unless otherwise indicated below,
        to
        our knowledge, all persons listed below have sole voting and investment power
        with respect to their ordinary shares, except to the extent authority is
        shared
        by spouses under applicable law.
 
 **Name
                  of Owner or Identity of Group**
              **No.
                  of Shares (1)**
              **Options**Dr.
                  John Climax
              1,476,892
              15,000Dr.
                  Ronan Lambe
              944,470
              7,000Mr.
                  Peter Gray
              178,220
              15,000Mr.
                  Sean Leech
              -
              52,400Mr.
                  Thomas Lynch
              1
              13,500Mr.
                  Edward Roberts
              1
              9,500Mr.
                  Shugi Higuchi
              -
              2,500Dr.
                  Bruce Given
              -
              1,000
 
 (1)
            As
                used in this table, each person has the sole or shared power to vote
                or
                direct the voting of a security, or the sole or shared investment
                power
                with respect to a security (*i.e.*the power to dispose, or direct the disposition, of a security).
                A person
                is deemed as of any date to have "beneficial ownership" of any security
                if
                that such person has the right to acquire such security within 60
                days
                after such date.  32
  
 **Employee
        Share Option Schemes**
 
 On
        January 17, 2003, we adopted the Share Option Plan 2003, or the 2003 Plan,
        pursuant to which the Compensation Committee of the Board may grant options
        to
        employees of the Company or its subsidiaries for the purchase of ordinary
        shares. Each option will be either an incentive stock option, or ISO, described
        in Section 422 of the Code or an employee stock option, or NSO, not described
        in
        Section 422 or 423 of the Code. Each grant of an option under the 2003 Plan
        will
        be evidenced by a Stock Option Agreement between the optionee and the Company.
        The exercise price will be specified in each Stock Option Agreement, however
        option prices for an ISO will not be less than 100% of the fair market value
        of
        an ordinary share on the date the option is granted.
  An
        aggregate of 1.5 million ordinary shares have been reserved under the 2003
        Plan;
        and, in no event will the number of ordinary shares that may be issued pursuant
        to options awarded under the 2003 Plan exceed 10% of the outstanding shares,
        as
        defined in the 2003 Plan, at the time of the grant. Further, the maximum
        number
        of ordinary shares with respect to which options may be granted under the
        2003
        Plan during any calendar year to any employee shall be 100,000 ordinary
        shares.
  No
        options can be granted after January 17, 2013.
  **Executive
        officers and Directors remuneration**
 
 For
        the
        transition period ended December 31, 2005, the total remuneration paid to
        our
        directors and executive officers including salary, bonus, pension and
        benefits-in-kind but excluding stock based compensation (twelve month period
        ended May 31, 2005: $1,867,984), was as follows:
 
 **U.S.$**Dr.
                  John Climax
              426,557Dr.
                  Ronan Lambe
              156,589Mr.
                  Peter Gray
              351,268Mr.
                  Sean Leech
              212,082Mr
                  Ciaran Murray
              78,884Mr.
                  Edward Roberts
              25,000Mr.
                  Thomas Lynch
              17,500Mr.
                  Shugi Higuchi
              13,756Dr.
                  Bruce Given
              17,500**Total**
              **$1,299,136**
 
 
 **Item
        7.** ***Major Shareholders and Related Party Transactions.***
 
 (a) ICON
        plc,
        is not directly or indirectly, owned or controlled by another corporation
        or by
        any government.
 
 (b) The
        following table sets forth certain information regarding beneficial ownership
        of
        ICON's ordinary shares (including ADSs) as of February 27, 2006 (i) by each
        person that beneficially owns more than 5% of the outstanding ordinary shares,
        based upon publicly available information; and (ii) by all of our current
        directors and executive officers as a group. Unless otherwise indicated below,
        to our knowledge, all persons listed below have sole voting and investment
        power
        with respect to their ordinary shares, except to the extent authority is
        shared
        by spouses under applicable law.
 
  33
  
 **Name
                  of Owner or Identity of Group**
              **No.
                  of Shares (1)**
              **Percent
                  of Class**Fidelity
                  Group Companies (4)
              2,098,681
              15.0%Wasatch
                  Group Companies (4)
              1,635,083
              11.7%Dr.
                  John Climax (2)
              1,491,892
              10.6%Dr.
                  Ronan Lambe (3)
              951,470
              6.8%Wellington
                  Management Co. LLP
              887,812
              6.3%Lord
                  Abbott & Co LLC
              884,902
              6.3%Dalton,
                  Greiner, Hartman, Maher & Co. (4)
              753,315
              5.4%All
                  directors and officers as a group (5)
              2,901,604
              20.7%


(1)
              As
                  used in this table, each person has the sole or shared power to
                  vote or
                  direct the voting of a
 security,
        or the sole or shared investment power with respect to a security (i.e.,
        the
        power to dispose,   or
        direct the disposition, of a security). A person is deemed as of any date
        to
        have "beneficial ownership"
 of
        any
        security if that such person has the right to acquire such security within
        60
        days after such date.
 
 (2)
              Includes
                  1,476,852 ADSs held by Poplar Limited, a Jersey company controlled
                  by Dr.
                  Climax, and options to purchase 15,000 ADSs.
 
 (3)
              Includes
                  options to purchase 7,000 ADSs.
 
 (4)
              Neither
                  the Company nor any of its officers, directors or affiliates hold
                  any
                  voting power in this entity.
 
 (5)
              Includes
                  302,020 ordinary shares issuable upon the exercise of stock options
                  granted by the Company.
 **Related
        Parties**


On
        December 6, 2005, Dr. Ronan Lambe and Dr. John Climax gifted 64,000 and
        80 ,000
        ADSs, respectively, to Mr. Peter Gray, the Company’s Chief Executive Officer.
        ICON has accounted for these transfers of equity instruments from shareholders
        to Mr. Gray as share based payment transactions, and recorded a compensation
        expense of $6,023,520 in its Statement of Operations, measured by reference
        to the fair value of the ADSs on the grant date. As this transaction is a
        transfer of already issued stock between officers and directors of the Company,
        the expense recorded had no cash flow impact on the Company and created no
        dilution of ordinary shares outstanding.  The fair value of the ADSs on the
        date of gift was determined by reference to market price.
 
 AGI
        Therapeutics Limited (“AGI”) is a specialty pharmaceutical company focused on
        developing drug therapies for gastrointestinal diseases and disorders. ICON
        is
        engaged in conducting a series of clinical trials on behalf of AGI. In January
        2006, Dr.
        Ronan
        Lambe was appointed a non-executive director of AGI and takes up the position
        of
        non-executive Chairman from February 2006.
 
 Amarin
        Corporation plc ("Amarin") is a neuroscience company focused on the research,
        development and commercialization of drugs for the treatment of central nervous
        system disorders. During the fiscal year ending May 31, 2005, Amarin contracted
        ICON Clinical Research Limited (a wholly owned subsidiary of ICON), to conduct
        a
        clinical trial on its behalf. The total potential value of this study is
        $2.7
        million. As at December 31, 2005, Amarin Investment Holding Company Limited
        (a
        company controlled by Mr. Thomas Lynch), Sunninghill Limited (a company
        controlled by Dr. John Climax) and Dr. Ronan Lambe held 9.7 million, 6.3
        million
        and 1.6 million shares, respectively, in Amarin. These respective holdings
        equate to approximately 12.0%, 8.0% and 2.0%, respectively, of Amarin's issued
        share capital. Thomas Lynch also serves as chairman and non-executive director
        on the Board of Amarin. During the seven month period to December 31, 2005
        the
        company recognized $0.86m revenue relating to the Amarin Contract. At December
        31, 2005, $0.98m was outstanding to be received from Amarin on this
        trial.
 
 On
        February 6, 1998, ICON entered into an Option Agreement (“The Put Option”) with
        Rosa Investment Limited ("Rosa"). Rosa's sole activity was to hold an investment
        in Clear Investments Limited ("Clear"), the sole activity of which was to
        hold
        Mr. Gray's option to exercise 54,000 ordinary shares. Mr. Gray is a director
        of
        Rosa and Clear. Rosa is owned by a trust of which Mr. Gray is a beneficiary.
        On
        April 21, 2004, Mr. Gray acquired Clear from Rosa and exercised the Put Option
        in
  34
  accordance
        with the terms of the Option Agreement. On April 22, 2004, pursuant to the
        Option Agreement, ICON purchased the outstanding share capital in Clear from
        Mr.
        Gray, the consideration for the acquisition being the issuance of 54,000
        fully
        paid up ordinary shares in ICON, to Mr. Gray, such a sale being the economic
        equivalent of Mr. Gray exercising his stock options.
 
 **Item
        8.** ***Financial Information.***
 
 **Financial
        Statements**
 
 See
        item
        18.
 
 **Legal
        Proceedings**
 
 ICON
        is
        not party to any litigation or other legal proceedings that we believe could
        reasonably be expected to have a material adverse effect on our business,
        results of operations and financial condition.
 
 **Dividends**
 
 We
        have
        not paid cash dividends on our ordinary shares and do not intend to pay cash
        dividends on our ordinary shares in the foreseeable future.
  35
  **Item
        9.** ***The Offer and the Listing.***
 
 ICON’s
        ADSs are traded on the Nasdaq National Market under the symbol “ICLR”. Our
        Depository for the ADSs is The Bank of New York. ICON also has a secondary
        listing on the Official List of the Irish Stock Exchange. No securities of
        ICON
        are traded in any other market. The following table sets forth the trading
        price
        for the dates indicated for ICON plc’s ADSs as reported by Nasdaq.
 
 **Year
                  Ending**
              **High
                  Sales Price**
                **During
                  Period**
              **Low
                  Sales Price**
                **During
                  Period**May
                  31, 2000
              $29.00
              $11.87May
                  31, 2001
              $29.75
              $15.00May
                  31, 2002
              $39.58
              $22.93May
                  31, 2003
              $32.87
              $14.88May
                  31, 2004
              $46.05
              $25.87May
                  31, 2005
              $44.92
              $30.26December
                  31, 2005 (7 month transition period)
              $50.49
              $30.10**Quarter
                  Ending**
              **High
                  Sales Price**
                **During
                  Period**
              **Low
                  Sales Price**
                **During
                  Period**May
                  31, 2002
              $34.49
              $23.87Aug
                  31, 2002
              $30.50
              $14.88Nov
                  30, 2002
              $26.00
              $18.99Feb
                  28, 2003
              $32.87
              $22.35May
                  31, 2003
              $30.85
              $21.36Aug
                  31, 2003
              $36.80
              $25.87Nov
                  30, 2003
              $45.04
              $31.20Feb
                  29, 2004
              $46.05
              $33.03May
                  31, 2004
              $43.49
              $29.74Aug
                  31, 2004
              $44.92
              $31.75Nov
                  30, 2004
              $39.39
              $31.04Feb
                  28, 2005
              $38.99
              $33.78May
                  31, 2005
              $38.95
              $30.26Aug
                  31, 2005
              $41.89
              $30.10Nov
                  30, 2005
              $50.49
              $36.36
 
 **Month
                  Ending**
              **High
                  Sales Price**
                **During
                  Period**
              **Low
                  Sales Price**
                **During
                  Period**July
                  31, 2005
              $39.68
              $34.18August
                  31, 2005
              $41.89
              $38.24September
                  30, 2005
              $50.49
              $40.41October
                  31, 2005
              $49.56
              $39.91November
                  30, 2005
              $41.75
              $36.36December
                  31, 2005
              $44.00
              $39.86
 
  36
  
 **Item
        10.** ***Additional Information.***
 
 **Exchange
        Controls and Other Limitations Affecting Security Holders.**
 
 Irish
        exchange control regulations ceased to apply from and after December 31,
        1992.
        Except as indicated below, there are no restrictions on non-residents of
        Ireland
        dealing in domestic securities, which includes shares or depository receipts
        of
        Irish companies such as ICON. Except as indicated below, dividends and
        redemption proceeds also continue to be freely transferable to non-resident
        holders of such securities.
 
 The
        Financial Transfers Act, 1992 gives power to the Minister for Finance of
        Ireland
        to make provision for the restriction of financial transfers between Ireland
        and
        other countries. Financial transfers are broadly defined, and include all
        transfers, which would be movements of capital or payments within the meaning
        of
        the treaties governing the European Communities. The acquisition or disposal
        of
        ADRs representing shares issued by an Irish incorporated company and associated
        payments may fall within this definition. In addition, dividends or payments
        on
        redemption or purchase of shares and payments on a liquidation of an Irish
        incorporated company would fall within this definition. At present, the
        Financial Transfers Act, 1992 prohibits certain financial transfers to (or
        in
        respect of funds held by the government of) the Federal Republic of Yugoslavia,
        Slobodan Milosevic and associated persons, persons indicted by the International
        Criminal Tribunal for the former Yugoslavia, Zimbabwe (including senior members
        of the Zimbabwean government), certain persons or entities relating to Iraq,
        Liberia, Burma/Myanmar, the Republic of Serbia, Democratic Republic of Congo,
        Ivory Coast, Al Qaeda, Osama Bin Laden and the Taliban of
        Afghanistan.
 
 Any
        transfer of, or payment in respect of an ADS involving the government of
        any
        country which is currently the subject of United Nations sanctions, any person
        or body controlled by any of the foregoing, or by any person acting on behalf
        of
        the foregoing, may be subject to restrictions pursuant to such sanctions
        as
        implemented into Irish law. There are no restrictions under ICON's Articles
        of
        Association, or under Irish Law, that limit the right of non-residents or
        foreign owners to hold or vote the ordinary shares.
 
 **Taxation**
 
 **General**
 
 The
        following discussion is based on existing Irish tax law, Irish court decisions
        and the practice of the Revenue Commissioners of Ireland, and the convention
        between the United States and Ireland for the Avoidance of Double Taxation
        and
        the Prevention of Fiscal Evasion with respect to income and capital gains
        (the
        "Treaty"). This discussion does not purport to deal with the tax consequences
        of
        owning the ordinary shares for all categories of investors, some of which
        may be
        subject to special rules. Prospective purchasers of ordinary shares are advised
        to consult their own tax advisors concerning the overall tax consequences
        arising in their own particular situations under Irish law. Each prospective
        investor should understand that future legislative, administrative and judicial
        changes could modify the tax consequences described below, possibly with
        retroactive effect.
  As
        used
        herein, the term "U.S. Holder" means a beneficial owner of ordinary shares
        that
        (i) owns the ordinary shares as capital assets; (ii) is a U.S. citizen or
        resident, a U.S. corporation, an estate the income of which is subject to
        U.S.
        federal income taxation regardless of its source or a trust that meets the
        following two tests: (A) a U.S. court is able to exercise primary supervision
        over the administration of the trust, and (B) one or more U.S. persons have
        the
        authority to control all substantial decisions of the trust; and for purposes
        of
        the discussion under Irish Taxation of U.S. Holders (A) is not a resident
        of, or
        ordinarily resident in, Ireland for the purposes of Irish tax; and (B) is
        not
        engaged in trade or business in Ireland through a permanent establishment.
  AS
        USED
        HEREIN, REFERENCES TO THE ORDINARY SHARES SHALL INCLUDE ADSs REPRESENTING
        SUCH
        ORDINARY SHARES AND ADRs EVIDENCING OWNERSHIP OF SUCH ADSs.
  37
  
 **Irish
        Taxation**
  *Irish
        corporation tax on income*
 ICON
        is a
        public limited company incorporated and resident for tax purposes in Ireland.
 
 For
        Irish
        tax purposes, the residence of a company is in the jurisdiction where the
        central management and control of the company is located. Subject
        to certain exceptions, all Irish incorporated companies are deemed to be
        Irish
        tax resident. Companies which are resident in the Republic of
        Ireland are subject to Irish corporation tax on their total profits (wherever
        arising and, generally, whether or not remitted to the Republic of Ireland).
        The
        question of residence, by virtue of management and control, is essentially
        one
        of fact. It is the present intention of the company's management to continue
        to
        manage and control the company from the Republic of Ireland, so that the
        company
        will continue to be resident in the Republic of Ireland.
 
 The
        standard rate of Irish corporation tax on trading income (with certain
        exceptions) is currently 12.5%.
  
 Patent
        exemption is available to Irish resident companies whose income derives from
        qualifying royalties or license fees paid in respect of qualifying patents.
        The
        main requirement to qualify for the exemption is that the research, planning,
        processing, experimentation, testing, devising, designing, developing or
        similar
        activity leading to the invention which is the subject of the patent is carried
        out in Ireland. Under Irish law, income from such qualifying patents is
        disregarded for taxation purposes. There is no termination date for this
        relief
        specified in the legislation.
 
 To
        the
        extent that the company is involved in the "manufacture" of goods in Ireland,
        income from this activity, in respect of its data processing operations carried
        out in Ireland (which is deemed to be manufacturing for Irish tax purposes)
        ,
        can qualify for a 10% rate of tax. This relief is available until December
        31,
        2010 and thereafter the income will be taxed at the standard rate applicable
        to
        trading income which is currently 12.5%.
 
 Corporation
        tax is charged at the rate of 25% on a company's non-trading income and certain
        types of trading income not eligible for the lower rates discussed above.
 
 Capital
        gains arising to an Irish resident company are liable to tax at 20%. However,
        a
        capital gains tax exemption has been introduced in Ireland in respect of
        disposals of certain shareholdings. The exemption applies with retrospective
        effect to disposals occurring on after February 2, 2004.
 
 The
        exemption from capital gains tax on the disposal of shares by an Irish resident
        company will apply where certain conditions are met. These conditions
        principally are:
 
 ·
            The
                company claiming the exemption must hold (directly or indirectly)
                at least
                5% of the ordinary share capital of the company in which the interest
                in
                which is being disposed of, for a period of at least one year, within
                the
                two year period prior to disposal. 
 ·
            The
                shares being disposed of must be in a company, which at the date
                of
                disposal, is resident in an EU Member State or in a state with which
                Ireland has a double tax agreement. 
 ·
            The
                shares must be in a company which is primarily a trading company
                or else
                the company making the disposal together with its “5% plus subsidiaries”
                should be primarily a trading group. 
 ·
            The
                shares must not derive the greater part of their value from land
                or
                mineral rights in the State. 
 *Taxation
        of Dividends*
 Unless
        exempted, all dividends paid by ICON, other than dividends paid entirely
        out of
        exempt patent income (subject to conditions), will be subject to Irish
        withholding tax at the standard rate of income tax in force at the time the
        dividend is paid, currently 20%. An individual shareholder who is neither
        resident nor ordinarily resident for tax purposes in Ireland, but is resident
        in
        a country with which Ireland has a double tax treaty, which includes the
        United
        States, or in a member state of the European Union, other than Ireland (together
        a “Relevant Territory”), will be exempt from withholding tax provided he or she
        makes the requisite declaration. No dividend withholding tax will apply on
        the
        payment of a dividend from an Irish resident
  38
  company
        to its Irish resident 51% parent company. Where the Irish company receiving
        the
        dividend does not hold at least 51% of the shares of the paying company,
        the
        dividend will be exempt if the Irish corporate shareholder makes the requisite
        declaration.
 
 Non-Irish
        resident corporate shareholders that:
 
 ·
            are
                ultimately controlled by residents of a Relevant
                Territory;  ·
            are
                resident in a Relevant Territory and are not controlled by Irish
                residents;  ·
            have
                the principal class of their shares, or shares of a 75% parent,
                substantially and regularly traded on one or more recognized stock
                exchanges in a Relevant Territory or Territories;
                or  ·
            are
                wholly owned by two or more companies, each of whose principal class
                of
                shares is substantially and regularly traded on one or more recognized
                stock exchanges in a Relevant Territory or
                Territories;  will
        be
        exempt from withholding tax on the production of the appropriate certificates
        and declarations.
  U.S.
        Holders of ordinary shares (as opposed to ADSs: see below) should note, however,
        that these documentation requirements may be burdensome. As described below,
        these documentation requirements do not apply in the case of ADSs.
 
 Special
        arrangements are available in the case of an interest in shares held in Irish
        companies through American depositary banks using ADSs. The depositary bank
        will
        be allowed to receive and pass on a dividend from the Irish company without
        any
        deduction for withholding tax in the following circumstances:
 
 ·
            the
                depositary has been authorized by the Irish Revenue Commissioners
                as a
                qualifying intermediary and such authorization has not expired or
                revoked;
                and either  ·
            the
                depositary bank’s ADS register shows that the beneficial owner has a U.S.
                address on the register; or  ·
            if
                there is a further intermediary between the depositary bank and the
                beneficial owner, where the depositary bank receives confirmation
                from the
                intermediary that the beneficial owner’s address in the intermediary’s
                records is in the U.S.  
  *Income
        Tax*
 Under
        certain circumstances, non-Irish resident shareholders will be subject to
        Irish
        income tax on dividend income. This liability is limited to tax at the standard
        rate and therefore, where withholding tax has been deducted, this will satisfy
        the tax liability.
 
 However,
        a non-Irish resident shareholder will not have an Irish income tax liability
        on
        dividends from the company if the holder is neither resident nor ordinarily
        resident in the Republic of Ireland and the holder is:
 
 ·
            an
                individual resident in the U.S. (or any other country with which
                Ireland
                has concluded a double taxation treaty);  ·
            a
                corporation that is ultimately controlled by persons resident in
                the U.S.
                (or any other country with which Ireland has concluded a double taxation
                treaty);  ·
            a
                corporation whose principal class of shares (or its 75% or greater
                parent’s principal class of shares) is substantially and regularly traded
                on a recognized stock exchange in an EU country or a country with
                which
                Ireland has concluded a double taxation
                treaty;  ·
            a
                corporation resident in another EU member state or in a country with
                which
                Ireland has concluded a double taxation treaty, which is not controlled
                directly or indirectly by Irish residents;
                or   39
  
  ·
            a
                corporation that is wholly owned by two or more corporations each
                of whose
                principal class of shares is substantially and regularly traded on
                a
                recognized stock exchange in an EU country or a country with which
                Ireland
                has concluded a double taxation treaty.  U.S.
        Holders that do not fulfill the documentation requirements or otherwise do
        not
        qualify for the withholding tax exemption may be able to claim treaty benefits
        under the treaty. U.S. Holders that are entitled to benefits under the treaty
        will be able to claim a partial refund of the 20% withholding tax from the
        Irish
        Revenue Commissioners.
 
 *Taxation
        of Capital Gains*
 A
        person
        who is not resident or ordinarily resident in Ireland, has not been an Irish
        resident within the past five years and who does not carry on a trade in
        Ireland
        through a branch or agency will not be subject to Irish capital gains tax
        on the
        disposal of ordinary shares or ADSs, so long as the ordinary shares or ADSs,
        as
        the case may be, are either quoted on a stock exchange or do not derive the
        greater part of their value from Irish land or mineral rights. There are
        provisions to subject a person who disposes of an interest in a company while
        temporarily being non-Irish resident, to Irish capital gains tax. This treatment
        will apply to Irish domiciled individuals -:
 
 ·
            who
                cease to be Irish resident;  ·
            who
                own the shares when they cease to be
                resident;  ·
            if
                there are not more than 5 years of assessment between the last year
                of
                Irish tax residence prior to becoming temporarily non-resident and
                the tax
                year that he/she resumes Irish tax
                residency;  ·
            who
                dispose of an interest in a company during this temporary non-residence;
                and  ·
            the
                interest disposed of represents 5% or greater of the share capital
                of the
                company or is worth at least €500,000.  In
        these
        circumstances the person will be deemed, for Irish capital gains tax purposes,
        to have sold and immediately reacquired the interest in the company on the
        date
        of his or her departure and will be subject to tax at 20% of the taxable
        gain.
 
 *Irish
        Capital Acquisitions Tax*
 Irish
        capital acquisitions tax (referred to as CAT) applies to gifts and inheritances.
 
 Where
        a
        gift or inheritance is taken under a disposition made after December 1, 1999,
        it
        will be within the charge to CAT:
 
 ·
            to
                the extent that the property of which the gift or inheritance consists
                is
                situated in the Republic of Ireland at the date of the gift or
                inheritance; ·
            where
                the person making the gift or inheritance is or was resident or ordinarily
                resident in the Republic of Ireland at the date of the disposition
                under
                which the gift or inheritance is taken; ·
            in
                the case of a gift taken under a discretionary trust where the person
                from
                whom the gift is taken was resident or ordinarily resident in the
                Republic
                of Ireland at the date he made the settlement, or at the date of
                the gift
                or, if he is dead at the date of the gift, at his death;
                or ·
            where
                the person receiving the gift or inheritance is resident or ordinarily
                resident in the Republic of Ireland at the date of the gift or
                inheritance. 
 Where
        a
        gift or an inheritance is taken under a disposition made prior to December
        1,
        1999, CAT is chargeable in the following circumstances:
 ·
            to
                the extent that the property of which the gift or inheritance consists
                is
                situated in the Republic of Ireland at the date of the gift or
                inheritance; ·
            where
                the person making the gift or inheritance is or was domiciled in
                Ireland
                at the date of the disposition under which the gift or inheritance
                is
                taken; ·
            in
                the case of a gift taken under a discretionary trust, where the disponer,
                who is usually the settlor, in relation to that trust was domiciled
                in
                Ireland at the date he made the settlement, or at the date of the
                gift or,
                where the gift is taken after his death, at the date of his
                death.  40
  
 The
        person who receives the gift or inheritance is primarily liable for CAT.
        A
        person is secondarily liable if he is the donor, his personal representative
        or
        an agent, trustee or other person in whose care the property constituting
        the
        gift or inheritance or the income therefrom is placed. Taxable gifts or
        inheritances received by an individual since December 5, 1991 from donors
        in the
        same threshold class are aggregated and only the excess over a specified
        tax-free threshold is taxed. The tax-free
 threshold
        is dependent on the relationship between the donor and the donees and the
        aggregation since December 5, 1991 of all previous gifts and inheritances,
        within the same tax threshold.
 
 The
        tax-free threshold amounts currently in force are:
 ·
            €23,908
                in the case of persons who are not related to one
                another; ·
            €47,815
                in the case of gifts or inheritances received from inter alia a brother
                or
                sister or from a brother or sister of a parent or from a grandparent;
                and ·
            €478,155
                in the case of gifts and inheritances received from a parent (or
                from a
                grandparent by a minor child of a deceased child) and specified
                inheritances received by a parent from a child. 
 Gifts
        and
        inheritances passing between spouses are exempt from CAT.
 
 A
        gift or
        inheritance of ordinary shares or ADSs will be within the charge to Irish
        capital acquisitions tax, notwithstanding that the person from whom or by
        whom
        the gift or inheritance is received is domiciled or resident outside Ireland.
 
 The
        Estate Tax Convention between Ireland and the United States generally provides
        for Irish capital acquisitions tax paid on inheritances in Ireland to be
        credited against U.S. federal estate tax payable in the United States and
        for
        tax paid in the United States to be credited against tax payable in Ireland,
        based on priority rules set forth in the Estate Tax Convention. The Estate
        Tax
        Convention does not apply to Irish capital acquisitions tax paid on
        gifts.
 
 *Irish
        Probate Tax*
 Irish
        probate tax was abolished under the Finance Act, 2001. No probate tax will
        arise
        on any assets passing in respect of a death occurring on or after December
        6,
        2000.
 
 *Irish
        Stamp Duty - Ordinary Shares*
 Irish
        stamp duty, which is a tax on certain documents, including CREST operator
        instructions, is payable on all transfers of the ordinary shares (other than
        between spouses) whenever a document of transfer is executed. Where the transfer
        is attributable to a sale, stamp duty will be charged at a rate of 1%, rounded
        to the nearest Euro. The stamp duty is calculated on the amount or value
        of the
        consideration (i.e. purchase price) or, if the transfer is by way of a gift
        (subject to certain exceptions) or for consideration less than the market
        value,
        on the market value of the shares. Where the consideration for the sale is
        expressed in a currency other than Euro, the duty will be charged on the
        Euro
        equivalent calculated at the rate of exchange prevailing on the date of the
        transfer.
 
 Transfers
        of ordinary shares between associated companies (broadly, companies within
        a 90%
        group relationship, and subject to the satisfaction of certain conditions)
        are
        exempt from stamp duty in the Republic of Ireland. In the case of transfers
        of
        ordinary shares where no beneficial interest passes (e.g. a transfer of shares
        from a beneficial owner to his nominee), no stamp duty arises where the transfer
        contains the appropriate certificate and, in the absence of such certificate,
        a
        flat rate of ࿠€12.70 (the nominal rate) will apply.
 
 *Irish
        Stamp Duty - ADSs Representing Ordinary Shares*
 A
        transfer by a shareholder to the depositary or custodian of ordinary shares
        for
        deposit under the deposit agreement in return for ADSs and a transfer of
        ordinary shares from the depositary or the custodian upon surrender of ADSs
        for
        the purposes of the withdrawal of the underlying ordinary shares in accordance
        with the terms of the deposit agreement will be stampable at the ad valorem
        rate
        if the transfer relates to a sale or contemplated sale or any other change
        in
        the beneficial ownership of such ordinary shares. However, it is not certain
        whether the mere withdrawal of ordinary shares in exchange for ADSs or ADSs
        for
        ordinary shares would be deemed to be a transfer of or change in the beneficial
        ownership which would be subject to stamp duty at the ad valorem rate. Where
        the
        transfer merely relates to a transfer where no change in the beneficial
        ownership in the underlying ordinary shares is effected or contemplated,
        no
        stamp duty arises where the transfer contains the appropriate certificate
        and,
        in the absence of such certificate, the nominal rate stamp duty of €12.70
        applies.
 
 Transfers
        of ADSs are exempt from Irish stamp duty as long as the ADSs are dealt in
        on the
        Nasdaq National Market or any recognized stock exchange in the United States
        or
        Canada.
  41
  
 The
        person accountable for payment of stamp duty is the transferee or, in the
        case
        of a transfer by way of gift, or for a consideration less than the market
        value,
        all parties to the transfer. A late or inadequate payment of stamp duty will
        result in a liability to pay interest, penalties and fines.
 
 **Documents
        on Display**
 
 We
        are
        subject to the informational requirements of the Securities Exchange Act
        of
        1934, as amended, (the “Exchange Act”) and file reports and other information
        with the SEC. You may read and copy any of our reports and other information
        at,
        and obtain copies upon payment of prescribed fees from, the Public Reference
        Room maintained by the SEC at 450 Fifth Street, N.W., Room 1024, Washington,
        D.C. 20549 and at the SEC’s regional office at Northwestern Atrium Center, 500
        West Madison Street, Suite 1400, Chicago, IL 60661. In addition, the SEC
        maintains a Web site that contains reports, proxy and information statements
        and
        other information regarding registrants that file electronically with the
        SEC at
        http://www.sec.gov. The public may obtain information on the operation of
        the
        Public Reference Room by calling the SEC at 1-800-SEC-0330.
 
 We
        “incorporate by reference” information that we file with the SEC, which means
        that we can disclose important information to you by referring you to those
        documents. The information incorporated by reference is an important part
        of
        this report and more recent information automatically updates and supersedes
        more dated information contained or incorporated by reference in this report.
        Our SEC file number for Exchange Act reports is 333-8704.
 
 As
        a
        foreign private issuer, we are exempt from the rules under the Exchange Act,
        prescribing the furnishing and content of proxy statements to
        shareholders.
 
 We
        will
        provide without charge to each person, including any beneficial owner, on
        the
        written or oral request of such person, a copy of any or all documents referred
        to above which have been or may be incorporated by reference in this report
        (not
        including exhibits to such incorporated information that are not specifically
        incorporated by reference into such information). Requests for such copies
        should be directed to us at the following address: ICON plc, South County
        Business Park, Leopardstown, Dublin 18, Ireland, Attention: Ciaran Murray,
        telephone number: (353) 1 291 2000.
 
 
 **Exemptions
        From Corporate Governance Listing Requirements Under the Nasdaq Marketplace
        Rules**
 
 Nasdaq
        may provide exemptions from the Nasdaq corporate governance standards to
        a
        foreign private issuer when those standards are contrary to a law, rule or
        regulation of any public authority exercising jurisdiction over such issuer
        or
        contrary to generally accepted business practices in the issuer’s country of
        domicile, except to the extent that such exemptions would be contrary to
        United
        States federal securities laws. ICON, as a foreign private issuer, was granted
        an exemption in 1998 from provisions set forth in Nasdaq Rule 4350(f), which
        requires each issuer to provide for a quorum in its by-laws for any meeting
        of
        the holders of common stock, which shall in no case be less than 33.33% of
        the
        outstanding shares of the issuer’s outstanding voting stock. ICON’s Articles of
        Association require that only 3 members be present at a shareholder meeting
        to
        constitute a quorum. This quorum requirement is in accordance with Irish
        law and
        generally accepted business practices in Ireland.
  42
  
 **Item
        11*****.
        Quantitative and Qualitative Disclosures about Market
        Risk.***
 
 ***Qualitative
        Disclosure of Market Risk*** .
        The
        principal market risks (i.e. risk of loss arising from adverse changes in
        market
        rates and prices) to which we are exposed are:
 
 ·
            Interest
                rate changes on short term investments (available for sale) in the
                form of
                floating rate notes and medium term minimum “A” rated corporate
                securities, and ·
            Foreign
                currency risk on non-U.S. dollar denominated cash and non-U.S. dollar
                denominated debt. 
 We
        use
        derivative financial instruments solely to hedge exposure to these market
        risks
        and we do not enter into these instruments for trading or speculative
        purposes.
 
 Our
        primary foreign currency exchange risk relates to movements in rates between
        the
        U.S. dollar, Sterling and the Euro. At December 31, 2005, we had cash
        denominated in non-U.S. dollar denominated currencies. In order to reduce
        the
        foreign currency exchange risk, we enter into certain derivative instruments
        to
        reduce our exposure to adverse changes in exchange rates. These financial
        instruments comprise of a series of foreign exchange forward contracts all
        of
        which were settled during the 2005 transition period. At December 31, 2005,
        we
        held no foreign exchange forward contracts.
 
 ***Quantitative
        disclosure of Market Risk*** **.** The
        analysis below presents the sensitivity of the market value, or fair value
        of
        our financial instruments to selected changes in market rates and prices.
        The
        changes chosen represent our view of changes that are reasonable over a one
        year
        period.
 
 The
        hypothetical changes in fair value are estimated based on the same methodology
        used by the third party financial institutions to calculate the fair value
        of
        the original instruments, keeping all variables constant except the relevant
        exchange rate, as the case may be, which has been adjusted to reflect the
        hypothetical change. Fair value estimates by their nature are subjective
        and
        involve uncertainties and matters of significant judgment and therefore cannot
        be determined precisely.
 
 **Foreign
        Currency Exchange Risk**
 
 The
        sensitivity analysis below represents the hypothetical change in fair value
        based on an immediate 10% movement in the exchange rates.
 
 **Fair
                  value at**
                **December
                  31, 2005**
              **Fair
                  value Change +10%**
                **movement
                  in foreign exchange rate**
              **Fair
                  value Change -10%**
                **movement
                  in foreign exchange rate****(in
                  thousands)**
              **(in
                  thousands)**
              **(in
                  thousands)**Non-U.S.
                  Dollar denominated cash
              $12,602
              $1,260
              ($1,260)Non-U.S.
                  Dollar denominated short term debt
              ($4,856)
              ($486)
              $486
 
 
 
 **Item
        12** ***.
        Description of Securities Other than Equity
        Securities.***
 
 Not
        applicable.
 
  43
  
 **Part
        II**
 
 **Item
        13** ***.
        Defaults, Dividend Arrearages and Delinquencies.***
 
 None.
 
 **Item
        14.** ***Material Modifications to the Rights of Security Holders and Use of
        Proceeds.***
 
 None.
 
 **Item
        15.** ***Controls and Procedures***
 
 **(a)
        Evaluation of disclosure controls and procedures** **.**
 
 At
        the
        end of the transition period December 31, 2005, an evaluation was carried
        out
        under the supervision and with the participation of the Company’s management,
        including the Chief Executive Officer (CEO) and the Chief Financial Officer
        (CFO), of the effectiveness of our disclosure controls and procedures. Based
        on
        that evaluation, the CEO and CFO have concluded that the Company’s disclosure
        controls and procedures are effective to ensure that information required
        to be
        disclosed by the Company in reports that it files or submits under the
        Securities Exchange Act of 1934 is recorded, processed, summarized and reported
        within the time periods specified in Securities and Exchange Commission rules
        and forms.
 
 **(b)
        Changes in internal controls.**
 
 There
        were no changes in our internal controls over financial reporting that occurred
        during the period covered by this Form 20-F that have materially affected
        or are
        reasonably likely to materially affect our internal controls over financial
        reporting.
 
 **Item
        16.** ***Reserved.***
 
 **A.
        Audit Committee Financial Expert**
 
 Mr.
        Thomas Lynch acts as an audit committee financial expert serving on our audit
        committee and board of directors. Mr. Lynch is independent and serves as
        one of
        our non-executive directors.
 
 **B.** **Code
        of Ethics**
 
 Our
        Board
        of Directors adopted a code of ethics in 2003 that applies to the Chief
        Executive Officer, the Chief Financial Officer and any persons performing
        similar functions, if any, of the Company.
 
 There
        are
        no material modifications to, or waivers from, the provisions of such code,
        which are required to be disclosed.
 
 This
        code
        is available on our website at the following address:
 
 http://www.iconclinical.com/index.asp?getpage=true&sid=1&ssid=171
 
 **C.
        Principal Accountant Fees and Services**
 
 Our
        principal accountants for the years ended May 31, 2005 and the seven month
        transition period ended December 31, 2005 were KPMG.
 
 The
        table
        below summarizes the fees for professional services rendered by KPMG for
        the
        audit of our annual financial statements for fiscal year ending May 31, 2005
        and
        the seven month 2005 transition period ended December 31, 2005 and fees billed
        for other services rendered by KPMG.
 
 
  44
  
 **12
                  month period endingMay 31, 2005**
              
              **7
                  month transition period ending December 31,
                  2005**(in 
                  thousands)%
              
              
              (in
                  thousands)%Audit
                  fees (1)
              
              $
              719
              
              
              72
              %
              $
              673
              
              
              80
              %Audit
                  related fees (2)
              
              
              6
              
              
              1
              %
              
              21
              
              
              3
              %Tax
                  fees (3)
              
              
              249
              
              
              25
              %
              
              144
              
              
              17
              %All
                  other fees (4)
              
              
              18
              
              
              2
              %
              
              -
              
              
              -Total
              
              $
              992
              
              
              100
              %
              $
              838
              
              
              100
              %
 
 
 (1)
        Audit
        fees include annual audit fees for ICON plc and its subsidiaries.
 
 (2)
        Audit
        related fees principally consisted of fees for financial due diligence services
        and fees for audit of financial statements of employee benefit
        plans.
 
 (3)
        Tax
        fees are fees for tax compliance and tax consultation services.
 
 (4)
        All
        other fees are fees for secretarial assistance rendered by our
        auditors.
 
 The
        Audit
        Committee pre-approves on an annual basis the audit and non-audit services
        provided to ICON plc by its auditors.
 
 Such
        annual pre-approval is given with respect to particular services. The Audit
        Committee, on a case-by-case basis, may approve additional services not covered
        by the annual pre-approval, as the need for such services arises.
 
 **D)
        Exemptions from the Listing Standards for Audit
        Committees.**
 
 Not
        applicable.
 
 **E)
        Purchases of Equity Securities by the Issuer and Affiliated
        Purchasers.**
 
 Not
        applicable.
 
 **Part
        III**
 
 **Item
        17.** ***Financial Statements.***
 
 Not
        applicable.
 
 **Item
        18** ***.
        Financial Statements.***
 
 Reference
        is made to pages 47 to 86 of this Form 20-F.
 
 **Item
        19.** ***Financial Statements and Exhibits.***
 
 Financial
        statements of ICON plc and subsidiaries
 
 Report
        of
        Independent Registered Public Accounting Firm.
 
 Consolidated
        Balance Sheets at May 31, 2004, May 31 2005, and December 31,
        2005.
  45
  
 Consolidated
        Statements of Operations for the years ended May 31, 2003, 2004, 2005 and
        the
        transition period ended December 31, 2005.
 
 Consolidated
        Statements of Shareholders’ Equity and Comprehensive Income for the years ended
 May
        31,
        2003, 2004, 2005 and the transition period ended December 31, 2005.
  Consolidated
        Statements of Cash Flows for the years ended May 31, 2003, 2004, 2005 and
        the
        transition period ended December 31, 2005.
 
 Notes
        to
        the Consolidated Financial Statements.
 
 Exhibits
        of ICON plc and subsidiaries
 
 Significant
        subsidiaries.
 
 Section
        302 certifications.
 
 Section
        906 certifications.
 
  46
  
 REPORT
        OF
        INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 
 To
        the
        Directors and Shareholders of ICON plc
 
 We
        have
        audited the accompanying consolidated balance sheets of ICON plc and
        subsidiaries as of December 31, 2005, May 31, 2005 and May 31, 2004, and
        the
        related consolidated statements of operations, shareholders' equity and
        comprehensive income and cash flows for the seven month period ended December
        31, 2005 and each of the years in the three-year period ended May 31, 2005.
        These consolidated financial statements are the responsibility of the Company's
        management. Our responsibility is to express an opinion on these consolidated
        financial statements based on our audits.
 
 We
        conducted our audits in accordance with auditing standards generally accepted
        in
        Ireland and the standards of the Public Company Accounting Oversight Board
        (United States). Those standards require that we plan and perform the audit
        to
        obtain reasonable assurance about whether the financial statements are free
        of
        material misstatement. An audit includes examining, on a test basis, evidence
        supporting the amounts and disclosures in the financial statements. An audit
        also includes assessing the accounting principles used and significant estimates
        made by management, as well as evaluating the overall financial statement
        presentation. We believe that our audits provide a reasonable basis for our
        opinion.
 
 In
        our
        opinion, the consolidated financial statements referred to above present
        fairly,
        in all material respects, the consolidated financial position of ICON plc
        and
        subsidiaries as of December 31, 2005, May 31, 2005 and May 31, 2004 and the
        consolidated results of their operations and their cash flows for the seven
        month period ended December 31, 2005 and each of the years in the three-year
        period ended May 31, 2005 in conformity with accounting principles generally
        accepted in the United States.
 
 
 KPMG
 Public
        Accounting Firm
 
 Dublin,
        Ireland
 February
        27, 2006
 
 
  47
  **ICON
        plc**
 **CONSOLIDATED
        BALANCE SHEETS**
 
 **May
                  31,**
              
              **May
                  31,**
              
              **December
                  31,****2004**
              
              **2005**
              
              **2005****(in
                  thousands)****ASSETS**Current
                  Assets:Cash
                  and cash equivalents
              
              $
              55,678
              
              $
              56,341
              
              $59,509Short
                  term investments - available for sale (Note 3)
              
              
              23,085
              
              
              22,034
              
              22,809Accounts
                  receivable
              
              
              74,079
              
              
              80,486
              
              71,450Unbilled
                  revenue
              
              
              59,861
              
              
              56,762
              
              62,270Other
                  receivables
              
              
              4,306
              
              
              5,662
              
              6,435Deferred
                  tax asset (Note 14)
              
              
              1,684
              
              
              2,637
              
              1,554Prepayments
                  and other current assets
              
              
              9,468
              
              
              10,717
              
              11,089Total
                  current assets
              
              
              228,161
              
              
              234,639
              
              235,116Other
                  Assets:Property,
                  plant and equipment, net (Note 6)
              
              
              42,936
              
              
              45,286
              
              47,652Goodwill
                  (Note 4)
              
              
              64,226
              
              
              67,440
              
              65,731Non-current
                  deferred tax asset (Note 14)
              
              
              -
              
              
              -
              
              452Intangible
                  assets (Note 5)
              
              
              -
              
              
              188
              
              116Total
                  Assets
              
              $
              335,323
              
              $
              347,553
              
              $349,067**LIABILITIES
                  AND SHAREHOLDERS’ EQUITY**Current
                  Liabilities:Accounts
                  payable
              
              $
              12,801
              
              $
              10,379
              
              $7,575Payments
                  on account
              
              
              61,960
              
              
              52,583
              
              50,211Other
                  liabilities (Note 7)
              
              
              35,091
              
              
              39,890
              
              33,184Deferred
                  tax liability (Note 14)
              
              
              -
              
              
              310
              
              682Bank
                  credit lines and loan facilities
              
              
              -
              
              
              -
              
              4,856Income
                  taxes payable
              
              
              4,496
              
              
              6,189
              
              6,296Total
                  current liabilities
              
              
              114,348
              
              
              109,351
              
              102,804Other
                  Liabilities:Long
                  term government grants (Note 12)
              
              
              1,411
              
              
              1,257
              
              1,160Long
                  term finance leases
              
              
              167
              
              
              248
              
              152Non-current
                  deferred tax liability (Note 14)
              
              
              2,637
              
              
              2,747
              
              2,499Minority
                  interest
              
              
              -
              
              
              884
              
              894Shareholders'
                  Equity:Ordinary
                  shares, par value 6 euro cents per share; 20,000,000 shares
                  authorized,13,838,476
                  shares issued and outstanding at May 31, 2004 and 13,899,096 shares
                  issued
                  and outstanding at May 31, 2005 and 14,018,092 shares issued and
                  outstanding at December 31, 2005 (Note 13)
              
              
              980
              
              
              985
              
              993Additional
                  paid-in capital
              
              
              112,936
              
              
              114,447
              
              123,333Accumulated
                  other comprehensive income
              
              
              9,984
              
              
              11,229
              
              3,409Merger
                  reserve
              
              
              47
              
              
              47
              
              47Retained
                  earnings
              
              
              92,813
              
              
              106,358
              
              113,776Total
                  Shareholders’ Equity
              
              
              216,760
              
              
              233,066
              
              241,558Total
                  Liabilities and Shareholders’ Equity
              
              $
              335,323
              
              $
              347,553
              
              $349,067The
                  accompanying notes are an integral part of these consolidated financial
                  statements.
 
  48
  
 **ICON
        plc**
 **CONSOLIDATED** **STATEMENTS
        OF OPERATIONS**
 
 **Year
                  Ended May 31,**
              
              **Seven
                  Months Ended December 31,****2003**
              
              **2004**
              
              **2005**
              
              **2005****(in
                  thousands, except share per share data)**Revenue:Gross
                  revenue
              
              $
              340,971
              
              $
              443,875
              
              $
              469,583
              
              $
              275,586Subcontractor
                  costs
              
              
              (115,246
              )
              
              (146,952
              )
              
              (142,925
              )
              
              (73,636
              )Net
                  revenue
              
              
              225,725
              
              
              296,923
              
              
              326,658
              
              
              201,950Costs
                  and expenses:Direct
                  costs
              
              
              122,373
              
              
              162,562
              
              
              179,661
              
              
              114,004Selling,
                  general and administrative
              
              
              71,118
              
              
              88,807
              
              
              103,784
              
              
              62,051Depreciation
                  and amortization
              
              
              7,305
              
              
              11,171
              
              
              13,331
              
              
              8,094Stock
                  compensation (Note 11)
              
              
              -
              
              
              -
              
              
              -
              
              
              6,249Other
                  charges (Note 15)
              
              
              -
              
              
              -
              
              
              11,275
              
              
              -Total
                  costs and expenses
              
              
              200,796
              
              
              262,540
              
              
              308,051
              
              
              190,398Income
                  from operations
              
              
              24,929
              
              
              34,383
              
              
              18,607
              
              
              11,552Interest
                  income
              
              
              633
              
              
              490
              
              
              1,208
              
              
              1,294Interest
                  expense
              
              
              (279
              )
              
              (202
              )
              
              (229
              )
              
              (22
              )Income
                  before provision for income taxes
              
              
              25,283
              
              
              34,671
              
              
              19,586
              
              
              12,824Provision
                  for income taxes (Note 14)
              
              
              (7,000
              )
              
              (8,929
              )
              
              (5,852
              )
              
              (5,396
              )Minority
                  interest
              
              
              -
              
              
              -
              
              
              (189
              )
              
              (10
              )Net
                  income
              
              $
              18,283
              
              $
              25,742
              
              $
              13,545
              
              $
              7,418Net
                  income per ordinary share:Basic
              
              $
              1.55
              
              $
              1.94
              
              $
              0.98
              
              $
              0.53Diluted
              
              $
              1.50
              
              $
              1.88
              
              $
              0.96
              
              $
              0.52Weighted
                  average number of ordinary shares outstanding:Basic
                  (note 2)
              
              
              11,813,788
              
              
              13,267,531
              
              
              13,860,203
              
              
              13,970,106Diluted
                  (note 2)
              
              
              12,181,094
              
              
              13,703,163
              
              
              14,153,445
              
              
              14,247,542
 
 
 The
        accompanying notes are an integral part of these consolidated financial
        statements.
 
  49
  
 **ICON
        plc**
 **CONSOLIDATED
        STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME**
 
 **Accumulated****Additional**
              
              **Other****Paid-in**
              
              **Comprehensive**
              
              **Retained**
              
              **Merger****Shares**
              
              **Amount**
              
              **Capital**
              
              **Income**
              
              **Earnings**
              
              **Reserve**
              
              **Total****(in
                  thousands, except share and per share data)****Balance
                  at May 31, 2002**
              
              
              11,798,501
              
              $
              839
              
              $
              60,348
              
              $
              (2,461
              )
              $
              48,788
              
              $
              47
              
              $
              107,561Comprehensive
                  Income:Net
                  income
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              18,283
              
              
              -
              
              
              18,283Currency
                  translation adjustment
              
              
              -
              
              
              -
              
              
              -
              
              
              10,248
              
              
              -
              
              
              -
              
              
              10,248Total
                  comprehensive income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              28,531Exercise
                  of share options
              
              
              39,360
              
              
              2
              
              
              726
              
              
              -
              
              
              -
              
              
              -
              
              
              728Shares
                  issued
              
              
              3,696
              
              
              -
              
              
              77
              
              
              -
              
              
              -
              
              
              -
              
              
              77Share
                  issue costs
              
              
              -
              
              
              -
              
              
              (35
              )
              
              -
              
              
              -
              
              
              -
              
              
              (35
              )Tax
                  benefit on exercise of options
              
              
              -
              
              
              -
              
              
              48
              
              
              -
              
              
              -
              
              
              -
              
              
              48**Balance
                  at May 31, 2003**
              
              
              11,841,557
              
              $
              841
              
              $
              61,164
              
              $
              7,787
              
              $
              67,071
              
              $
              47
              
              $
              136,910Comprehensive
                  Income:Net
                  income
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              25,742
              
              
              -
              
              
              25,742Currency
                  translation adjustment
              
              
              -
              
              
              -
              
              
              -
              
              
              2,197
              
              
              -
              
              
              -
              
              
              2,197Total
                  comprehensive income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              27,939Exercise
                  of share options
              
              
              496,919
              
              
              35
              
              
              5,323
              
              
              -
              
              
              -
              
              
              -
              
              
              5,358Shares
                  issued
              
              
              1,500,000
              
              
              104
              
              
              45,601
              
              
              -
              
              
              -
              
              
              -
              
              
              45,705Share
                  issue costs
              
              
              -
              
              
              -
              
              
              (1,428
              )
              
              -
              
              
              -
              
              
              -
              
              
              (1,428
              )Tax
                  benefit on exercise of options
              
              
              -
              
              
              -
              
              
              2,276
              
              
              -
              
              
              -
              
              
              -
              
              
              2,276**Balance
                  at May 31, 2004**
              
              
              13,838,476
              
              $
              980
              
              $
              112,936
              
              $
              9,984
              
              $
              92,813
              
              $
              47
              
              $
              216,760Comprehensive
                  Income:Net
                  income
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              13,545
              
              
              -
              
              
              13,545Currency
                  translation adjustment
              
              
              -
              
              
              -
              
              
              -
              
              
              1,245
              
              
              -
              
              
              -
              
              
              1,245Total
                  comprehensive income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              14,790Exercise
                  of share options
              
              
              60,620
              
              
              5
              
              
              1,402
              
              
              -
              
              
              -
              
              
              -
              
              
              1,407Share
                  issue costs
              
              
              -
              
              
              -
              
              
              (60
              )
              
              -
              
              
              -
              
              
              -
              
              
              (60
              )Tax
                  benefit on exercise of options
              
              
              -
              
              
              -
              
              
              169
              
              
              -
              
              
              -
              
              
              -
              
              
              169**Balance
                  at May 31, 2005**
              
              
              13,899,096
              
              $
              985
              
              $
              114,447
              
              $
              11,229
              
              $
              106,358
              
              $
              47
              
              $
              233,066
 
 
  50
  **ICON
        plc**
 **CONSOLIDATED
        STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME**
 
 **Accumulated****Additional**
              
              **Other****Paid-in**
              
              **Comprehensive**
              
              **Retained**
              
              **Merger****Shares**
              
              **Amount**
              
              **Capital**
              
              **Income**
              
              **Earnings**
              
              **Reserve**
              
              **Total****(in
                  thousands, except share and per share data)****Balance
                  at May 31, 2005**
              
              
              13,899,096
              
              $
              985
              
              $
              114,447
              
              $
              11,229
              
              $
              106,358
              
              $
              47
              
              $
              233,066Comprehensive
                  Income:Net
                  income
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              7,418
              
              
              -
              
              
              7,418Currency
                  translation adjustment
              
              
              -
              
              
              -
              
              
              -
              
              
              (6,049
              )
              
              -
              
              
              -
              
              
              (6,049
              )Minimum
                  pension liability adjustment
              
              
              -
              
              
              -
              
              
              -
              
              
              (1,771
              )
              
              -
              
              
              -
              
              
              (1,771
              )Total
                  comprehensive income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (402
              )Exercise
                  of share options
              
              
              118,996
              
              
              8
              
              
              1,903
              
              
              -
              
              
              -
              
              
              -
              
              
              1,911Stock
                  compensation expense
              
              
              -
              
              
              -
              
              
              6,249
              
              
              -
              
              
              -
              
              
              -
              
              
              6,249Share
                  issue costs
              
              
              -
              
              
              -
              
              
              (24
              )
              
              -
              
              
              -
              
              
              -
              
              
              (24
              )Tax
                  benefit on exercise of options
              
              
              -
              
              
              -
              
              
              758
              
              
              -
              
              
              -
              
              
              -
              
              
              758**Balance
                  at December 31, 2005**
              
              
              14,018,092
              
              $
              993
              
              $
              123,333
              
              $
              3,409
              
              $
              113,776
              
              $
              47
              
              $
              241,558
 
 The
        accompanying notes are an integral part of these consolidated financial
        statements.
 
 
 
  51
  
 **ICON
        plc**
 **CONSOLIDATED
        STATEMENTS OF** **CASH
        FLOWS**
 
 **Seven
                  Months Ended****Year
                  Ended May 31,**
              
              **December
                  31,****2003**
              
              **2004**
              
              **2005**
              
              **2005****Cash
                  flows from operating activities:**
              
              **(in
                  thousands)**Net
                  income
              
              $
              18,283
              
              $
              25,742
              
              $
              13,545
              
              $7,418Adjustments
                  to reconcile net income to net cashprovided
                  by operating activities:Loss
                  on disposal of property, plant and equipment
              
              
              -
              
              
              222
              
              
              66
              
              43Depreciation
                  and amortization
              
              
              7,305
              
              
              11,171
              
              
              13,331
              
              8,094Amortization
                  of grants
              
              
              (36
              )
              
              (569
              )
              
              (199
              )
              (105)Stock
                  compensation expense
              
              
              -
              
              
              -
              
              
              -
              
              6,249Deferred
                  taxes
              
              
              376
              
              
              985
              
              
              (532
              )
              717Minority
                  interest
              
              
              -
              
              
              -
              
              
              189
              
              10Other
                  Charges
              
              
              -
              
              
              -
              
              
              11,275
              
              -Changes
                  in assets and liabilities:(Increase)/decrease
                  in accounts receivable
              
              
              (23,232
              )
              
              4,089
              
              
              (4,930
              )
              7,487(Increase)/decrease
                  in unbilled revenue
              
              
              (14,480
              )
              
              (15,329
              )
              
              3,071
              
              (6,522)(Increase)/decrease
                  in other receivables
              
              
              7,515
              
              
              4,307
              
              
              1,383
              
              (1,530)(Increase)
                  in prepayments and other current assets
              
              
              (1,965
              )
              
              (778
              )
              
              (994
              )
              (703)Increase/(decrease)
                  in payments on account
              
              
              25,485
              
              
              14,228
              
              
              (9,515
              )
              (1,579)(Decrease)
                  in other liabilities
              
              
              (1,787
              )
              
              (1,654
              )
              
              (446
              )
              (4,324)Increase
                  in income taxes payable
              
              
              253
              
              
              2,237
              
              
              1,420
              
              1,125Increase/(decrease)
                  in accounts payable
              
              
              3,768
              
              
              (1,009
              )
              
              (2,455
              )
              (2,599)Net
                  cash provided by operating activities
              
              
              21,485
              
              
              43,642
              
              
              25,209
              
              13,781**Cash
                  flows from investing activities:**Purchase
                  of property, plant and equipment
              
              
              (15,788
              )
              
              (13,097
              )
              
              (15,595
              )
              (12,128)Purchase
                  of intangible asset
              
              
              -
              
              
              -
              
              
              (250
              )
              -Purchase
                  of subsidiary undertakings and acquisition costs
              
              
              (36,873
              )
              
              (11,258
              )
              
              (10,052
              )
              -Cash
                  acquired with subsidiary undertakings
              
              
              1,910
              
              
              891
              
              
              1,658
              
              -Deferred
                  payments in respect of historical acquisitions
              
              
              (3,078
              )
              
              (1,733
              )
              
              (2,514
              )
              (3,374)Sale
                  of short term investments
              
              
              18,551
              
              
              -
              
              
              12,022
              
              14,016Purchase
                  of short term investments
              
              
              -
              
              
              (23,085
              )
              
              (10,971
              )
              (14,791)Receipt
                  of government grant
              
              
              -
              
              
              945
              
              
              -
              
              -Net
                  cash used in investing activities
              
              
              (35,278
              )
              
              (47,337
              )
              
              (25,702
              )
              (16,277)**Cash
                  flows from financing activities:**(Repayment)/drawdown
                  of bank overdraft
              
              
              (5,319
              )
              
              (7,126
              )
              
              -
              
              4,833Proceeds
                  from exercise of share options
              
              
              693
              
              
              5,358
              
              
              1,407
              
              1,911Proceeds
                  from the issuance of share capital
              
              
              -
              
              
              45,705
              
              
              -
              
              -Share
                  issuance costs
              
              
              -
              
              
              (1,182
              )
              
              (197
              )
              (24)Repayment
                  of other liabilities
              
              
              -
              
              
              (230
              )
              
              (272
              )
              (96)Net
                  cash (used in)/provided by financing activities
              
              
              (4,626
              )
              
              42,525
              
              
              938
              
              6,624Effect
                  of exchange rate movements on cash
              
              
              439
              
              
              (1,463
              )
              
              218
              
              (960)**Net
                  (decrease)/increase in cash and cash equivalents**
              
              
              (17,980
              )
              
              37,367
              
              
              663
              
              3,168Cash
                  and cash equivalents at beginning of year
              
              
              36,291
              
              
              18,311
              
              
              55,678
              
              56,341**Cash
                  and cash equivalents at end of year**
              
              $
              18,311
              
              $
              55,678
              
              $
              56,341
              
              $59,509The
                  accompanying notes are an integral part of these consolidated financial
                  statements.
  52
  **ICON
        plc**
 **NOTES
        TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 
 
 **1.
        Description of business**
 
 ICON
        plc
        and subsidiaries (“The Company”) is a Contract Research Organization (“CRO”)
        providing clinical research and development services on a global basis to
        the
        pharmaceutical, biotechnology and medical device industries. The Company
        specializes in the management, execution and analysis of complex, multinational
        clinical trials in most major therapeutic areas. The Company believes that
        it is
        one of a select group of CROs with the capability and expertise to conduct
        clinical trials on a global basis. As of December 31, 2005, the Company had
        approximately 3,050 employees and operations in 41 locations in 27 countries,
        including the United States and major markets in Europe and Rest of World.
        For
        the transition period ended December 31, 2005, the Company derived approximately
        58.6%, 33.7% and 7.7% of our net revenue in the United States, Europe and
        Rest
        of World, respectively.
 
 ICON plc
        (the "Company") has historically prepared its consolidated financial statements
        on the basis of a fiscal year beginning on June 1 and ending on May 31. On
        July
        27, 2005 the Board of Directors of the Company approved a change of the
        Company’s fiscal year end from a twelve-month period ending on May 31 to a
        twelve-month period ending on December 31.  The Company is making this
        change in order to align its fiscal year end with the majority of other contract
        research organizations.  As a requirement of this change, the Company is
        reporting results for the seven-month period from June 1, 2005 to December
        31,
        2005 as a separate transition period in a Transition Report filed on Form
        20-F. As of January 1, 2006, the Company’s fiscal year will begin on
        January 1 and end on December 31 and its fiscal quarters will end on the
        last
        day of March, June, September and December of each year.
 
 
 **2.
        Significant Accounting Policies**
 
 The
        accounting policies noted below were applied in the preparation of the
        accompanying financial statements of the Company and are in conformity with
        accounting principles generally accepted in the United States.
 
 (a)  Basis
        of
        consolidation
 
 The
        consolidated financial statements include the financial statements of the
        Company and all of its subsidiaries. All significant intercompany profits,
        transactions and account balances have been eliminated. The results of
        subsidiary undertakings acquired in the period are included in the consolidated
        statement of operations from the date of acquisition.
 
 (b)  Use
        of
        estimates
 
 The
        preparation of financial statements in conformity with generally accepted
        accounting principles in the United States requires management to make estimates
        and assumptions that affect the reported amounts of assets and liabilities
        and
        disclosure of contingent assets and liabilities at the date of the financial
        statements and the reported amounts of revenues and expenses during the reported
        period. Actual results could differ from those estimates.
 
 (c)  Revenue
        recognition
 
 The
        Company primarily earns revenues by providing a number of different services
        to
        its customers. These services include clinical trials management, biometric
        activities, consulting and laboratory services. Contracts range in duration
        from
        a number of months to several years.
 
 Clinical
        trials management revenue is earned on the basis of the relationship between
        time incurred and the total estimated duration of the trial. Biometrics revenue
        is recognized on a fee-for-service method on the basis of the number of units
        completed in a period as a percentage of the total number of contracted units.
        Consulting revenue is recognized on a fee-for-service basis as the related
        service is performed. Laboratory service revenue is recognized on a
        fee-for-service basis. The
  53
  Company
        accounts for laboratory service contracts as multiple element arrangements,
        with
        contractual elements comprising laboratory kits and laboratory testing, each
        of
        which can be sold separately. Fair values for contractual elements are
        determined by reference to objective and reliable evidence of their fair
        values.
        Non-refundable set-up fees are allocated as additional consideration to the
        contractual elements based on the proportionate fair values of each of these
        elements. Revenues for contractual elements are recognized on the basis of
        the
        number of deliverable units completed in the period.
 
 Contracts
        generally contain provisions for renegotiation in the event of changes in
        the
        scope, nature, duration, volume of services or conditions of the contract.
        Renegotiated amounts are recognized as revenue by revision to the total contract
        value arising as a result of an authorized customer change order. Provisions
        for
        losses to be incurred on contracts are recognized in full in the period in
        which
        it is determined that a loss will result from performance of the contractual
        arrangement.
 
 The
        difference between the amount of revenue recognized and the amount billed
        on a
        particular contract is included in the balance sheet as unbilled revenue.
        Normally, amounts become billable upon the achievement of certain milestones,
        in
        accordance with pre-agreed payment schedules included in the contract or
        on
        submission of appropriate billing detail. Such cash payments are not
        representative of revenue earned on the contract as revenues are recognized
        over
        the period in which the specified contractual obligations are fulfilled.
        Amounts
        included in unbilled revenue are expected to be collected within one year
        and
        are included within current assets. Advance billings to customers, for which
        revenue has not been recognized, are recognized as payments on account within
        current liabilities.
 
 In
        the
        event of contract termination, if the value of work performed and recognized
        as
        revenue is greater than aggregate milestone billings at the date of termination,
        cancellation clauses ensure that the Company is paid for all work performed
        to
        the termination date.
 
 (d)  Subcontractor
        costs
 
 Subcontractor
        costs comprise investigator payments and certain other costs which are
        reimbursed by clients under terms specific to each contract and are deducted
        from gross revenue in arriving at net revenue. Investigator payments are
        accrued
        based on patient enrollment over the life of the contract. Investigator payments
        are made based on predetermined contractual arrangements, which may differ
        from
        the accrual of the expense. Payments to investigators in excess of the accrued
        expense are classified as prepaid expenses and accrued expense in excess
        of
        amounts paid are classified as accounts payable.
 
 (e)  Direct
        costs
 
 Direct
        costs consist of compensation and associated employee benefits for
        project-related employees and other direct project-related costs.
 
 (f)  Advertising
        costs
 
 All
        costs
        associated with advertising and promotion are expensed as incurred. The
        advertising and promotion expense was U.S.$1,336,000 U.S.$1,596,000 and
        U.S.$2,401,000 for the years ended May 31, 2003, 2004 and 2005 respectively
        and
        U.S.$1,453,000 for the seven month period ended December 31, 2005.
 
 (g)  Foreign
        currencies and translation of subsidiaries
 
 The
        Company's financial statements are prepared in United States dollars.
        Transactions in currencies other than United States dollars are recorded
        at the
        rate ruling at the date of the transactions. Monetary assets and liabilities
        denominated in currencies other than United States dollars are translated
        into
        United States dollars at exchange rates prevailing at the balance sheet date.
        Adjustments resulting from these translations are charged or credited to
        income.
        For the years ended May 31, 2003, 2004 and 2005 amounts charged/(credited)
        to
        income amounted to U.S.$1,968,000, (U.S.$2,445,000) and U.S.$433,000 respectively.
        For the seven month period ended December 31, 2005 amounts charged to income
        amounted to U.S.$408,000.
 
 The
        financial statements of subsidiaries with other functional currencies are
        translated at period end rates for the balance sheet and average rates for
        the
        income statement. Translation gains and losses arising are reported as a
        movement on accumulated other comprehensive income.
  54
  
 (h)  Disclosure
        about fair value of financial instruments
 
 The
        following methods and assumptions were used to estimate the fair value of
        each
        material class of financial instrument:
 
 Cash,
        cash equivalents, unbilled revenue, other receivables, short term investments,
        prepayments and other current assets, accounts receivable, accounts payable,
        investigator payments, payments received on account, accrued liabilities,
        accrued bonuses, bank overdraft and taxes payable have carrying amounts that
        approximate fair value due to the short term maturities of these instruments.
 
 Long-term
        debt and other liabilities carrying amounts approximate fair value based
        on net
        present value of estimated future cash flows.
 
 (i)  Leased
        Assets
 
 Costs
        in
        respect of operating leases are charged to the statement of operations on
        a
        straight line basis over the lease term.
 
 Assets
        acquired under capital finance leases are included in the balance sheet at
        the
        present value of the future minimum lease payments and are depreciated over
        the
        shorter of the lease term and their remaining useful lives. The corresponding
        liabilities are recorded in the balance sheet and the interest element of
        the
        capital lease rental is charged to interest expense.
 
 (j)  Goodwill
 
 Goodwill
        represents the excess of the cost of acquired entities over the net of amounts
        assigned to assets acquired and liabilities assumed. Goodwill is stated net
        of
        any provision for impairment. The Company tests goodwill annually for any
        impairments. The first step is to compare the carrying amount of the reporting
        units’ assets to the fair value of the reporting unit. If the carrying amount
        exceeds the fair value then a second step is completed which involves the
        fair
        value of the reporting unit being allocated to each asset and liability with
        the
        excess being implied goodwill. The impairment loss is the amount by which
        the
        recorded goodwill exceeds the implied goodwill. The Company’s annual test for
        impairment performed for the year ended May 31, 2005 identified an impairment
        charge to be taken against the central laboratory segment. For further
        information, refer to Note 15 to the Consolidated Financial
        Statements.
 
 (k)  Other
        intangible assets
 
 Other
        intangible assets are amortized on a straight line basis over their estimated
        useful life.
 
 (l)  Cash
        and
        cash equivalents
 
 Cash
        and
        cash equivalents include cash and highly liquid investments with initial
        maturities of three months or less and is stated at cost, which approximates
        market value.
 
 (m)  Short
        term investments - available for sale
 
 The
        Company has classified short-term investments as available for sale in
        accordance with the terms of SFAS No.115 “Accounting for Certain Investments in
        Debt and Equity Securities”. Realized gains and losses are determined using
        specific identification. The investments are reported at fair value, with
        unrealized gains or losses reported in a separate component of shareholders’
equity. Any differences between the cost and fair value of the investments
        are
        represented by accrued interest.
 
 (n)  Inventory
 
 Inventory
        is valued at the lower of cost and net market value and after provisions
        for
        obsolescence. Cost in the case of raw materials comprises the purchase price
        and
        attributable costs, less trade discounts. Cost in the case of work in progress
        and finished goods, comprises fixed labor, raw materials costs and attributable
        overheads.
  55
  
 
 (o)  Property,
        plant and equipment
 
 Property,
        plant and equipment are stated at cost less accumulated depreciation.
        Depreciation of property, plant and equipment is computed using the straight
        line method based on the estimated useful lives of the assets as listed below:
 
 
 YearsBuilding
              40Computer
                  equipment and software
              4Office
                  furniture and fixtures
              8Laboratory
                  equipment
              5Motor
                  vehicles
              5
 
 Leasehold
        improvements are amortized using the straight-line method over the estimated
        useful life of the asset or the lease term, whichever is shorter.
 
 (p)  Income
        taxes
 
 The
        Company applies Statement of Financial Accounting Standard ("SFAS") No. 109,
        "Accounting for Income Taxes," which requires the asset and liability method
        of
        accounting for income taxes. Under the asset and liability method of SFAS
        No.
        109, deferred tax assets and liabilities are recognized for the future tax
        consequences attributable to differences between the financial statement
        carrying amounts of existing assets and liabilities and their respective
        tax
        bases and operating loss and tax credit carryforwards. Deferred tax assets
        and
        liabilities are measured using enacted tax rates expected to apply to taxable
        income in the years in which these temporary differences are expected to
        be
        recovered or settled. The effect on deferred tax assets and liabilities of
        a
        change in tax rates is recognised in income in the period that includes the
        enactment date.
 
 (q)  Government
        grants
 
 Government
        grants received relating to capital expenditure are shown as deferred income
        and
        credited to income on a basis consistent with the depreciation policy of
        the
        relevant assets.
 
 Grants
        relating to categories of operating expenditures are credited to income in
        the
        period in which the expenditure to which they relate is charged.
 
 Under
        the
        grant agreements amounts received may become repayable in full should certain
        circumstances specified within the grant agreements occur, including downsizing
        by the Company, disposing of the related assets, ceasing to carry on its
        business or the appointment of a receiver over any of its assets.
 
 The
        Company has not recognized any loss contingency having assessed as remote
        the
        likelihood of these events arising.
 
 (r)  Pension
        costs
 
 The
        Company contributes to defined contribution plans covering all eligible
        employees. The Company contributes to these plans based upon various fixed
        percentages of employee compensation and such contributions are expensed
        as
        incurred.
 
 The
        Company operates, through a subsidiary, a defined benefit plan for certain
        of
        its United Kingdom employees. The Company accounts for the costs of this
        plan
        using actuarial models required by SFAS No.87, “Employers Accounting for
        Pensions”. Disclosures are presented in accordance with the requirements of SFAS
        No.132(R), “Employers’ Disclosures about Pensions and Other Post-retirement
        Benefits”.
 
  56
  (s)  Net
        income per ordinary share
 
 Basic
        net
        income per ordinary share has been computed by dividing net income available
        to
        ordinary shareholders by the weighted average number of ordinary shares
        outstanding during the period. Diluted net income per ordinary share is computed
        by adjusting the weighted average number of ordinary shares outstanding during
        the period for all potentially dilutive ordinary shares outstanding during
        the
        period and adjusting net income for any changes in income or loss that would
        result from the conversion of such potential ordinary shares.
 
 There
        is
        no difference in net income used for basic and diluted net income per ordinary
        share. The reconciliation of the number of shares used in the computation
        of
        basic and diluted net income per ordinary share is as follows:
 
 **Year
                  Ended May 31,**
              **Seven
                  Months Ended December 31,****2003**
              **2004**
              **2005**
              **2005**Weighted
                  average number of ordinary shares
                outstanding
                  for basic net income per ordinary share
              11,813,788
              13,267,531
              13,860,203
              13,970,106Effect
                  of dilutive share options outstanding
              367,306
              435,632
              293,242
              277,436Weighted
                  average number of ordinary shares for
                diluted
                  net income per ordinary share
              12,181,094
              13,703,163
              14,153,445
              14,247,542
 
 
  57
  
 (t)  Stock-based
        compensation
 
 The
        Company accounts for its share options in accordance with the provisions
        of SFAS
        No. 123, “Accounting for Stock-Based Compensation”. SFAS No. 123 allows entities
        to continue to apply the provisions of Accounting Principles Board ("APB")
        Opinion No. 25, “Accounting for Stock Issued to Employees”, and provide pro
        forma net income and pro forma earnings per share disclosures for employee
        stock
        option grants as if the fair-value-based method defined in SFAS No. 123 had
        been
        applied. APB No. 25 permits entities to recognize as expense, over the vesting
        period, the intrinsic value of all stock- based awards determined on the
        measurement date. The Company has elected to apply the provisions of APB
        Opinion
        No. 25 and provide the pro forma disclosure provisions of SFAS No. 123.
 
 The
        following table illustrates the effect on net income and earnings per share
        as
        if the fair value method of SFAS No. 123 had been applied to all outstanding
        and
        unvested stock options in each period.
 
 **Year
                  Ended May 31,**
              
              **SevenMonths
                  Ended December 31,****2003**
              
              **2004**
              
              **2005**
              
              **2005****(in
                  thousands)****(except per share data)**Net
                  income, as reported
              
              $
              18,283
              
              $
              25,742
              
              $
              13,545
              
              $7,418Add:
                  Stock compensation expense
              
              
              -
              
              
              -
              
              
              -
              
              2257,643Deduct:
                  Total stock-based employee compensation expense determined under
                  fair
                  value based method for all awards, net of related tax
                  effects
              
              
              (2,096
              )
              
              (2,358
              )
              
              (2,729
              )
              (1,248)Pro
                  forma net income
              
              $
              16,187
              
              $
              23,384
              
              $
              10,816
              
              $6,395Earnings
                  per share (in $):Basic
                  - as reported
              
              $
              1.55
              
              $
              1.94
              
              $
              0.98
              
              $0.53Basic
                  - pro forma
              
              
              1.37
              
              
              1.76
              
              
              0.78
              
              0.45Diluted
                  - as reported
              
              $
              1.50
              
              $
              1.88
              
              $
              0.96
              
              $0.52Diluted
                  - pro forma
              
              
              1.33
              
              
              1.71
              
              
              0.76
              
              0.45
 
 
 On
        December 6, 2005, Dr. Ronan Lambe and Dr. John Climax gifted 64,000 and 80,000
        ADSs, respectively, to Mr. Peter Gray, the Company’s Chief Executive Officer.
        The Company has accounted for these transfers of equity instruments from
        shareholders to Mr. Gray as share based payment transactions, and recorded
        a
        compensation expense of $6,023,520 in its Statement of Operations, measured
        by reference to the fair value of the ADSs on the grant date. As this
        transaction is a transfer of already issued stock between officers and directors
        of the Company, the expense recorded no cash flow impact on the Company and
        created no dilution of ordinary shares outstanding.  The fair value of the
        ADSs on the date of gift was determined by reference to market
        price.
 
 On
        February 7, 2005, 120,000 share options, with an exercise price of $34.40,
        were
        granted to certain key employees of the Company. These options will vest
        between
        2008 and 2013 subject to the Company’s diluted earnings achieving $4.00 per
        share. If the Company does not achieve diluted earnings of $4.00 per share
        before February 6, 2013, the option grant expires. A stock compensation expense
        of U.S.$225,000 has been recorded during the period in relation to these
        options.
 
  58
  
 (u)  Impairment
        of long-lived assets
 
 Long
        lived assets are reviewed for impairment whenever events or changes in
        circumstances indicate that the carrying amount of an asset may not be
        recoverable. Recoverability of assets to be held and used is measured by
        a
        comparison of the carrying amount of an asset to future undiscounted net
        cash
        flows expected to be generated by the asset. If such assets are considered
        to be
        impaired, the impairment to be recognized is measured by the amount by which
        the
        carrying amount of the assets exceeds the fair value of the assets. Assets
        to be
        disposed of are reported at the lower of the carrying amount or fair value
        less
        selling costs.
 
 
 **3.
        Short term investments - available for sale**
 
 The
        Company has classified its entire investment portfolio comprising floating
        rate
        and medium term minimum “A” rated corporate securities, as available for sale.
        The investments are reported at fair value, with unrealized gains or losses
        reported in a separate component of shareholders’ equity. In the years to May
        31, 2003, 2004 and 2005 and the seven month period ended December 31, 2005
        no
        unrealized gains or losses arose. Any differences between the cost and fair
        value of the investments are represented by accrued interest.
 
 
 
 **4.
        Goodwill**
 
 **May
                  31,**
              
              **May
                  31,**
              
              **December
                  31,****2004**
              
              **2005**
              
              **2005****(in
                  thousands)**Opening
                  Goodwill
              
              $
              45,029
              
              $
              64,226
              
              $
              67,440Arising
                  during the year
              
              
              13,134
              
              
              8,463
              
              
              -Arising
                  on earn-out (prior year acquisitions)
              
              
              3,215
              
              
              1,856
              
              
              -Goodwill
                  impairment (note 15)
              
              
              -
              
              
              (7,017
              )
              
              -Foreign
                  exchange movement
              
              
              2,848
              
              
              (88
              )
              
              (1,709
              )Closing
                  Goodwill
              
              $
              64,226
              
              $
              67,440
              
              $
              65,731
 
 
 
 
 
 The
        distribution of goodwill by business segment was as follows:
  **May 31,**
                **May
                    31,****December
                    31,****2004**
                **2005****2005****(in
                    thousands)**Central
                    laboratory (note 15)
                $
                    7,017
                $-
                $-Clinical
                    research
                57,209
                67,440
                65,731Total
                $64,226
                $67,440
                $65,731
  *(a)
        Acquisition of Medeval Group Ltd*
 
 On
        January 24, 2003, the Company acquired 100% of the outstanding shares of
        Medeval
        Group Limited (“Medeval”), a company based in Manchester, England, for an
        initial cash consideration of Stg£9.5 million (U.S.$15.5 million), excluding
        costs of acquisition which amounted to U.S.$1.0 million. Earn-out provisions
        have been built into the acquisition contract requiring the potential payment
        of
        additional deferred consideration up to a maximum of Stg£4.3 million (U.S.$6.9
        million)
   59
  depending
        on the performance of Medeval over the period to May 31, 2004. Such additional
        consideration has been accounted for as goodwill.
  On
        May
        31, 2003, an amount of Stg£1.4 million (U.S.$2.0 million) was accrued in
        relation to the Medeval acquisition, as the first earn-out target identified
        in
        the acquisition contract was reached on this date. It was provided in the
        applicable acquisition agreement that the form of the earn-out would consist
        of
        cash payable to one specific named selling shareholder, with the balance
        due to
        the other selling shareholders being in the form of guaranteed loan notes.
        These
        guaranteed loan notes have a repayment date of three years from the date
        of
        issue but are exercisable six months from that date. On September 30, 2003,
        Stg£0.472 million (U.S.$0.8 million) was paid in cash to a specific named
        selling shareholder. On the same date, Stg£0.753 million (U.S.$1.403 million) of
        guaranteed loan notes were issued to the remaining selling shareholders and
        were
        included in other liabilities. The guaranteed loan note holders issued
        redemption notices to the Company, which required the Company to redeem all
        the
        guaranteed loan notes on June 30, 2004, in consideration for a cash payment
        of
        Stg£0.753 million (U.S.$1.380 million), the total amount of which was accrued
        at
        May 31, 2004.
  On
        September 30, 2004, cash consideration of Stg£0.54 million (U.S.$0.97 million)
        was paid to a number of the former shareholders of Medeval and guaranteed
        loan
        notes with a value of Stg£1.08 million (U.S.$1.93 million) were issued to the
        remaining selling shareholders. At May 31, 2004, Stg£1.37 million (U.S.$2.5
        million) of this amount had been provided, therefore an additional Stg£0.253
        million (U.S.$0.452 million) was provided and accounted for under goodwill
        as at
        May 31, 2005. These guaranteed loan notes have a repayment date of three
        years
        from the date of issue but are exercisable nine months from the date of issue.
        The guaranteed loan note holders issued redemption notices to the Company,
        which
        required the Company to redeem all the guaranteed loan notes on June 30,
        2005,
        in consideration of a cash payment of Stg£1.08 million (U.S.$1.93 million), the
        total amount of which was accrued for at May 31, 2005.
  The
        acquisition of Medeval has been accounted for as a purchase in accordance
        with
        SFAS No. 141, “Business Combinations”. The following table summarises the fair
        values of the assets acquired and the liabilities assumed at the date of
        acquisition.
  **(in
                  thousands)**Property,
                  plant and equipment
              $1,632Goodwill
              22,824Current
                  assets
              2,738Pension
                  liabilities
              (2,588)Other
                  current liabilities
              (3,113)Purchase
                  Price
              $21,493
 
  The
        results of Medeval have been included in the consolidated financial statements
        from January 24, 2003.
  
  *(b)
        Acquisition of GloboMax LLC*
  On
        September 9, 2003, the Company acquired 100% of the outstanding shares of
        Globomax LLC, based in Maryland, USA, for an initial cash consideration of
        U.S.$10.9 million, excluding costs of acquisition. Earn-out provisions have
        been
        built into the acquisition contract requiring the potential payment of
        additional deferred consideration up to a maximum of U.S.$4.0 million depending
        on the performance of Globomax over the period from date of acquisition to
        May
        31, 2006. Such potential additional consideration will be accounted for as
        goodwill. The total amount of goodwill is expected to be tax
        deductible.
  On
        August
        26, 2005, cash consideration of U.S.$1.4 million was paid to the former
        shareholders of Globomax in respect of the first earn-out target which was
        reached on May 31, 2005, The total amount of this earn-out was accrued at
        May
        31, 2005.
  The
        acquisition of Globomax has been accounted for as a purchase in accordance
        with
        SFAS No. 141, “Business Combinations”. The following table summarises the fair
        values of the assets acquired and the liabilities assumed at the date of
        acquisition.
   60
  
  **(in
                  thousands)**Property,
                  Plant and Equipment
              
              352Goodwill
              
              
              14,538Cash
              
              
              891Other
                  Current Assets
              
              
              2,487Current
                  liabilities
              
              
              (5,539)Purchase
                  Price
              
              
              $12,729
 
  The
        results of Globomax have been included in the consolidated financial statements
        from September 9, 2003.
  *(c)
        Acquisition of Beacon Biosciences, Inc*
  On
        July
        1, 2004, the Company acquired 70% of the outstanding shares of Beacon
        Biosciences, inc. (“Beacon”), based in Pennsylvania, USA, for an initial cash
        consideration of U.S.$9.9 million, excluding costs of acquisition.
  The
        following table summarises the fair values of the assets acquired and the
        liabilities assumed at the date of acquisition.
  **(in
                  thousands)**Property,
                  Plant and Equipment
              
              $792Goodwill
              
              
              8,463Cash
              
              
              1,658Other
                  Current Assets
              
              
              935Current
                  liabilities
              
              
              (718)Long
                  term liabilities
              
              
              (352)10,778Minority
                  Interest
              
              
              (695)Purchase
                  Price
              
              
              $10,083
 
  The
        results of Beacon have been included in the consolidated financial statements
        from July 1, 2004
  
 **5.
        Intangible Assets**
 
 On
        December 1, 2004, the Company acquired the workforce of Biomines Research
        Solutions Private Limited, (“Biomines”), based in Chennai, India, for a cash
        consideration of U.S.$250,000.
  **December
                  1,****2004****(in
                  thousands)**Acquired
                  workforce - intangible asset
              
              
              $250Purchase
                  Price
              
              
              $250
 
 
 The
        cost
        of the acquired workforce is being amortized over 24 months in line with
        the
        life of the non-compete service contracts of the acquired employees.
        U.S.$134,000 has been amortized in the period since the date of acquisition.
 
 
 
  61
  
 **May
                  31,**
              **May
                  31,**
              **December
                  31,****2004**
              **2005**
              **2005****(in thousands)**Cost
              $-
              $250
              $250Accumulated
                  amortization
              -
              (62)
              (134)Net
                  book value
              $-
              $188
              $116
 
 
 **6.
        Property, Plant and Equipment, net**
 
 **May
                  31,**
              **May
                  31,**
              **December
                  31,****2004**
              **2005**
              **2005****(in thousands)****Cost**Land
              $748
              $780
              $3,477Building
              9,502
              11,358
              12,625Computer
                  equipment and software
              42,469
              51,867
              53,768Office
                  furniture and fixtures
              17,071
              20,031
              19,889Laboratory
                  equipment
              5,009
              5,538
              6,820Leasehold
                  improvements
              6,116
              5,684
              5,679Motor
                  vehicles
              37
              39
              7380,952
              95,297
              102,331Less
                  accumulated depreciation and asset write off
              (38,016)
              (50,011)
              (54,679)Property,
                  plant and equipment (net)
              $42,936
              $45,286
              $47,652
 
 
 Total
        cost above at December 31, 2005 includes U.S.$654,000 (May 31, 2005:
        U.S.$725,643, May 31, 2004: U.S.$1,580,127), which relates to assets held
        under
        capital finance leases. Related accumulated depreciation amounted to
        U.S.$346,000 (May 31, 2005: U.S.$305,867, May 31, 2004:
        U.S.$252,039).
 
 
 
 **7.
        Other Liabilities**
 
 **May
                  31,**
              **May
                  31,**
              **December
                  31,****2004**
              **2005**
              **2005****(in thousands)**Accrued
                  liabilities
              $18,483
              $23,183
              $20,232Accrued
                  bonuses
              8,828
              7,331
              4,374Accrued
                  social welfare costs
              1,899
              2,016
              3,124Contingent
                  purchase consideration payable
              2,506
              3,374
              -Short
                  term government grants
              195
              199
              109Accrued
                  pension liability
              2,927
              3,585
              5,152Short
                  term finance leases (note 17)
              253
              202
              193$35,091
              $39,890
              $33,184
 
 
   62
  **8.
        Bank Loans**
 
 The
        Company has short-term bank loan facilities as follows:
  On
        July
        3, 2003, ICON entered into a facility agreement (the "Facility Agreement")
        for
        the provision of a term loan facility of U.S.$40 million, multi-currency
        overdraft facility of $5 million and revolving credit facility of $15 million
        (the "Facilities") with The Governor and Company of the Bank of Ireland and
        Ulster Bank Ireland Limited (the “Banks”). Our obligations under the Facilities
        are secured by certain composite guarantees and indemnities and pledges in
        favour of each of the banks. This facility bears interest at an annual rate
        equal to the Banks’ Prime Rate plus three quarters of one percent. ICON plc and
        its subsidiaries are entitled to make borrowings under a term loan facility
        of
        $40 million and a multi currency overdraft facility of $5 million. As at
        December 31, 2005, the full amount of the term loan facility was available
        to be
        drawn down and $0.1 million of the multi currency overdraft was available
        to be
        drawn down. ICON Clinical Research, Inc. (a subsidiary of ICON plc) is entitled
        to make borrowings under a revolving credit facility of $15 million. As at
        December 31, 2005, the full amount of this facility was available to be drawn
        down.
  The
        Company entered into an overdraft agreement with Allied Irish Banks, plc
        (“AIB”)
        whereby the company guarantees any overdraft of its subsidiary ICON Clinical
        Research GmbH up to an amount €120,000 (U.S.$142,128). As of December 31, 2005,
        the full facility was available to be drawn down.
  
 
 **9.
        Employee Benefits**
 
 Certain
        Company employees are eligible to participate in a defined contribution plan
        (the "Plan"). Participants in the Plan may elect to defer a portion of their
        pre-tax earnings into a pension plan, which is run by an independent party.
        The
        Company matches each participant's contributions up to 6% of the participant's
        annual compensation. Contributions to this plan are recorded, as expense
        in the
        Consolidated Statement of Operations. Contributions for the years ended May
        31,
        2003, 2004, 2005 and the seven month period ending December 31, 2005 were
        U.S.$1,649,793, U.S.$2,297,928, and U.S.$3,443,374, and U.S.$2,112,184
        respectively.
 
 The
        Company's United States operations maintain a retirement plan (the "U.S.
        Plan")
        that qualifies as a deferred salary arrangement under Section 401(k) of the
        Internal Revenue Code. Participants in the U.S. Plan may elect to defer a
        portion of their pre-tax earnings, up to the Internal Revenue Service annual
        contribution limit. The Company matches 50% of each participant's contributions,
        each participant can contribute up to 6% of their annual compensation.
        Contributions to this U.S. Plan are recorded, in the year contributed, as
        an
        expense in the Consolidated Statement of Operations. Contributions for the
        years
        ended May 31, 2003, 2004, 2005 and the seven month period ending December
        31,
        2005 were U.S.$ 1,811,156, U.S.$ 2,389,757, U.S.$2,539,760 and U.S.$1,587,626
        respectively.
 
 One
        of
        the Company’s subsidiaries which was acquired during the 2003 fiscal year,
        Medeval Group Limited, operates a defined benefit pension plan in the United
        Kingdom for its employees. The plan is managed externally and the related
        pension costs and liabilities are assessed in accordance with the advice
        of a
        professionally qualified actuary. Plan assets at May 31, 2004, 2005 and December
        31, 2005 consist of units held in independently administered funds. The pension
        costs of this plan are presented in the following tables in accordance with
        the
        requirements of SFAS No.132(R), “Employees’ Disclosures about Pensions and Other
        Post-retirement Benefits”.
  63
  
 **Change
                  in benefit obligation**
              **May
                  31,**
                **2004**
              **May
                  31,**
                **2005**
              **December
                  31,**
                **2005****(in
                  thousands)**Benefit
                  obligation at beginning of year/period
              $7,207
              $9,056
              $11,323Service
                  cost
              714
              832
              368Interest
                  cost
              388
              559
              350Plan
                  participants’ contributions
              267
              256
              129Benefits
                  paid
              (62)
              (117)
              (93)Actuarial
                  loss
              (385)
              819
              1,874Foreign
                  currency exchange rate changes
              927
              (82)
              (708)**Benefit
                  obligation at end of year/period**
              $9,056
              $11,323
              $13,243
 
 **Change
                  in plan assets**
              **May
                  31,**
                **2004**
              **May
                  31,**
                **2005**
              **December
                  31,**
                **2005****(in
                  thousands)**Fair
                  value of plan assets at beginning of year/period
              $4,378
              $6,129
              $7,354Actual
                  return on plan assets
              291
              371
              342Employer
                  contributions
              657
              765
              808Plan
                  participants’ contributions
              267
              256
              128Benefits
                  paid
              (62)
              (117)
              (93)Foreign
                  currency exchange rate changes
              598
              (50)
              (447)**Fair
                  value of plan assets at end of year/period**
              $6,129
              $7,354
              $8,092
 
 **Funded
                  status**
              **May
                  31,**
                **2004**
              **May
                  31,**
                **2005**
              **December
                  31,**
                **2005****(in
                  thousands)**Funded
                  status
              $(2,927)
              $(3,585)
              $(5,152)Unrecognized
                  net loss
              -
              -
              1,771**Pension
                  liability**
              $(2,927)
              $(3,585)
              $(3,381)
 
 **Amounts
                  recognized in the balance sheet consists of:**
              **May
                  31,**
                **2004**
              **May
                  31,**
                **2005**
              **December
                  31,**
                **2005****(in
                  thousands)**Accrued
                  benefit cost
              $(2,927)
              $(3,585)
              $(5,152)Accumulated
                  other comprehensive income
              -
              -
              1,771**Net
                  amount recognized**
              $(2,927)
              $(3,585)
              $(3,381)
 
 **Information
                  for pension plans with an accumulated benefit obligation in excess
                  of plan
                  assets****May
                  31,**
                **2004**
              **May
                  31,**
                **2005**
              **December
                  31,**
                **2005****(in
                  thousands)**Projected
                  benefit obligation
              $9,056
              $11,323
              $13,243Accumulated
                  benefit obligation
              9,056
              11,323
              13,243Fair
                  value of assets
              6,129
              7,354
              8,092
 
  64
  
 **The
                  net periodic pension cost was comprised of the
                  following:**
              **May
                  31,**
                **2004**
              **May
                  31,**
                **2005**
              **December
                  31,**
                **2005****(in
                  thousands)**Service
                  cost
              $714
              $832
              $368Interest
                  cost
              388
              559
              350Expected
                  return on plan assets
              (329)
              (429)
              (285)**Net
                  periodic pension cost**
              773
              962
              433Amount
                  of curtailment gain recognized
              -
              -
              -Amount
                  of settlement gain recognized
              -
              -
              -Cost
                  of special or contractual termination benefits recognized
              -
              -
              -**Total
                  pension cost**
              $773
              $962
              $433
 
 **Amount
                  included in other comprehensive loss arising from a change in excess
                  of
                  additional minimum pension liability over intangible
                  asset:**
              **May
                  31,**
                **2004**
              **May
                  31,**
                **2005**
              **December
                  31,**
                **2005****(in
                  thousands)**Increase
                  in additional minimum liability
              $257
              $-
              $-
 
 **Weighted
                  average assumptions to determine benefit obligation****May
                  31,**
                **2004**
              **May
                  31,**
                **2005**
              **December
                  31,**
                **2005**Discount
                  rate
              5.8%
              5.4%
              5.0%Rate
                  of compensation increase
              4.5%
              4.1%
              4.4%Expected
                  rate of return on plan assets
              6.5%
              6.5%
              6.0%
 
 The
        assets of the scheme are invested in a unitized with profits policy. The
        expected long-term rate of return on assets of 6.0% was calculated as the
        value
        of the unitized with profits fund after application of a market value reduction
        factor. The underlying asset split of the fund is shown below.
 
 **Asset
                  Category**
              **May
                  31,**
                **2004**
              **May
                  31,**
                **2005**
              **December
                  31,**
                **2005**Equity
              29%
              28%
              30%Bonds
              50%
              51%
              49%Property
              18%
              16%
              18%Cash/
                  other
              3%
              5%
              3%100%
              100%
              100%
 
 The
        accumulated benefit obligation for all defined pension plans was $13.2 million
        at December 31, 2005 (May 2005: $10.9 million, May 2004: $9.1 million). With
        effect from July 1, 2003, the scheme was closed to new entrants. The company
        expects to contribute $1.60 million to its pension fund in the year ending
        December 31, 2006.
  65
  
 The
        following annual benefit payments, which reflect expected future service,
        as
        appropriate, are expected to be paid.
 
 **Estimated
                  Future benefit payments**
              
              
              **(in
                  thousands)**2006
              
              
              $
                  172007
              
              
              172008
              
              
              172009
              
              
              522010
              
              
              52Years
                  2011 - 2015
              
              
              $344
 
 The
        expected cash flows are estimated figures based on the members expected to
        retire over the next 10 years assuming no early retirements plus an additional
        amount in respect of recent average withdrawal experience. At the present
        time
        it is not clear whether annuities will be purchased when members reach
        retirement or whether pensions will be paid each month out of the Scheme
        assets.
        The above cash flows have been estimated on the assumption that pension will
        be
        paid monthly out of the Scheme assets. If annuities are purchased, then the
        expected benefit payments will be significantly different to those shown
        above.
  **Details
        of the Medeval Group Limited pension and life assurance sheme.**
  The
        assets of the Scheme are invested in the Norwich Union With-Profit Fund.
        The aim
        of the With-Profits Fund is to provide good investment returns through steady
        growth over the duration of the policy. Although market fluctuations of
        investment return are evened through the declaration of bonuses, the investment
        objective is to provide payments which reflects the actual investment returns
        achieved by the Scheme over the long term.
  ***Asset
        Allocation***
  **Asset
                  Category**
              
              **December
                  31,**
                **2004**
              **December
                  31,**
                **2005**UK
                  Equities
              
              24%
              24%Overseas
                  Equities
              
              6%
              6%Property
              
              18%
              18%UK
                  Fixed Interest
              
              21%
              21%Corporate
                  Bonds
              
              24%
              24%Overseas
                  Bonds
              
              4%
              4%Cash
              
              3%
              3%Total
              
              100%
              100%
 
  Bonuses
        paid under the Unitised With-Profits policy which is invested in the Norwich
        Union With-Profit Fund consist of regular bonuses and final bonuses which
        are
        explained below in further detail.
  ***Regular
        Bonus***
  Premiums
        paid under the policy are used to buy units which increase in price daily
        in
        line with the current Regular Bonus rate. The Regular Bonus rate is normally
        declared at the end of each calendar year and remains in force until the
        rate is
        amended.
   66
  
  Regular
        Bonuses have been declared at the following levels:
  **Date**
              
              
              **Regular
                  Bonus % per annum**August
                  1, 2002
              
              
              4.8%December
                  31, 2002
              
              
              4.0%December
                  31, 2003
              
              
              4.0%December
                  31, 2004
              
              
              3.0%December
                  31, 2005
              
              
              3.0%
 
  ***Final
        Bonus***
  The
        purpose of the Final Bonus is to enable the investment return provided by
        the
        policy to reflect more closely what has actually been earned over its lifetime.
        Final Bonus is added when units are cashed and is taken into account in
        calculating the market value of the policy. The last units purchased are
        the
        first units cashed. The amount of Final Bonus depends on the year units were
        purchased. A scale of bonus rates is normally declared at the end of each
        calendar year and remains in force until further notice. The scale can be
        altered during the year.
  When
        units are cashed a Market Value Reduction (“MVR”) scale may be applied instead
        of a Final Bonus Scale. This reduction may be applied at any time except
        when
        units are cashed to provide a member’s normal retirement benefits or because of
        a member’s death before retirement.
  A
        MVR is
        applied when the value of the units plus the Final Bonus is significantly
        greater than the value of the underlying investments. It is applied so that
        non-contracted encashments do not result in more than the fair share of the
        fund
        being taken in times of poor performance in the stock market and other asset
        types in which Norwich Union’s With-Profits Fund is invested.
  **Year
                  units purchased**
              
              **Final
                  Bonus**
              **Final
                  Bonus (including MVR)**2002
              
              2%
              2%2003
              
              7%
              7%2004
              
              3%
              3%2005
              
              -%
              -%
 
  ***Overall
        Rate of Return***
  At
        December 31, 2005, UK gilts were yielding around 4.1% per annum. This is
        often
        referred to as the risk free rate of return as UK gilts have a negligible
        risk
        of default and the income payments and capital on redemption are guaranteed
        by
        the UK Government. Overseas bonds have been assumed to produce returns in
        line
        with UK gilts.
  A
        long
        term equity “risk-premium” of 3.5% per annum has been assumed. This being the
        expected long term out-performance of equities over UK gilts. Property has
        been
        assumed to provide a return in line with equities over the long term. A
        outperformance of 1% per annum over the long term for corporate bonds over
        UK
        gilts has been taken into account.
  
   67
  
  The
        expected long term rates of return on different asset classes over the long
        term
        are as follows:
  **Asset
                  Category**
              
              
              **Expected
                  long-term**
                **return
                  per annum**UK
                  equities
              
              
              7.5%Overseas
                  equities
              
              
              7.5%Property
              
              
              7.5%UK
                  Gilts
              
              
              4.1%Overseas
                  bonds
              
              
              4.1%Corporate
                  bonds
              
              
              5.1%Cash
              
              
              4.0%
 
  Applying
        the above expected long term rates of return to the asset distribution of
        the
        With-Profits Fund at December 31, 2005 gives rise to an expected overall
        rate of
        return of scheme assets of around 6.0% per annum.
  
  **10.
        Share Options**
  On
        January 17, 2003, the Company adopted the Share Option Plan 2003 (the “2003
        Plan”) pursuant to which the Compensation Committee of the Board may grant
        options to officers and other employees of the Company or its subsidiaries
        for
        the purchase of ordinary shares. Each option will be either an incentive
        stock
        option, or ISO, as described in Section 422 of the Code or an employee stock
        option, or NSO, as described in Section 422 or 423 of the Code. Each grant
        of an
        option under the 2003 Plan will be evidenced by a Stock Option Agreement
        between
        the optionee and the Company. The exercise price will be specified in each
        Stock
        Option Agreement, however option prices for an ISO will not be less than
        100% of
        the fair market value of an ordinary share on the date the option is
        granted.
  An
        aggregate of 1.5 million ordinary shares have been reserved under the 2003
        Plan;
        and, in no event will the number of ordinary shares that may be issued pursuant
        to options awarded under the 2003 Plan exceed 10% of the outstanding shares,
        as
        defined in the 2003 Plan, at the time of the grant. Further, the maximum
        number
        of ordinary shares with respect to which options may be granted under the
        2003
        Plan during any calendar year to any employee shall be 100,000 ordinary
        shares.
  No
        options can be granted after January 17, 2013.
  68
  
 The
        following table summarizes the transactions for the Company’s share option plans
        for the three year period ended May 31, 2005 and the seven month period ended
        December 31, 2005:
 
 **Options
                  Granted**
                **Prior
                  to**
                **Jan
                  15, 1998**
              
              **Options
                  Granted**
                **Under
                  Plans**
              
              **Number
                  of Shares**
              
              **Weighted
                  Average Exercise Price**Outstanding
                  at May 31, 2002
              
              
              292,030
              
              
              727,590
              
              
              1,019,620
              
              $
              15.85Granted
              
              
              -
              
              
              283,445
              
              
              283,445
              
              $
              27.96Exercised
              
              
              -
              
              
              (39,360
              )
              
              (39,360
              )
              $
              18.51Canceled
              
              
              -
              
              
              (78,060
              )
              
              (78,060
              )
              $
              22.22Outstanding
                  at May 31, 2003
              
              
              292,030
              
              
              893,615
              
              
              1,185,645
              
              $
              18.24Granted
              
              
              -
              
              
              372,926
              
              
              372,926
              
              $
              35.53Exercised
              
              
              (244,960
              )
              
              (251,959
              )
              
              (496,919
              )
              $
              10.78Canceled
              
              
              -
              
              
              (68,080
              )
              
              (68,080
              )
              $
              26.51Outstanding
                  at May 31, 2004
              
              
              47,070
              
              
              946,502
              
              
              993,572
              
              $
              27.90Granted
              
              
              -
              
              
              427,730
              
              
              427,730
              
              $
              34.39Exercised
              
              
              -
              
              
              (60,620
              )
              
              (60,620
              )
              $
              23.11Canceled
              
              
              -
              
              
              (72,440
              )
              
              (72,440
              )
              $
              31.07Outstanding
                  at May 31, 2005
              
              
              47,070
              
              
              1,241,172
              
              
              1,288,242
              
              $
              30.10Exercised
              
              
              (40,000
              )
              
              (78,996
              )
              
              (118,996
              )
              $
              16.07Canceled
              
              
              -
              
              
              (37,100
              )
              
              (37,100
              )
              $
              32.38Outstanding
                  at December 31, 2005
              
              
              7,070
              
              
              1,125,076
              
              
              1,132,146
              
              $
              31.50
 
 None
        of
        the share option grants summarized in the above table resulted in compensation
        expense in the current period, as the option grant price was equal to or
        greater
        than the estimated fair value of ordinary shares on the measurement
        date.
 
 The
        following table summarizes information concerning outstanding and exercisable
        share options as of December 31, 2005:
 
 **Options
                  Outstanding**
              **Options
                  Exercisable****Range**
                **Exercise**
                **Price**
              **Number
                  of**
                **Shares**
              **Weighted**
                **Average**
                **Remaining**
                **Contractual
                  Life**
              **Weighted**
                **Average**
                **Exercise
                  Price**
              **Number
                  of**
                **Shares**
              **Exercise
                  Price**$0.07
              7,070
              0.9
              $0.07
              7,070
              $0.07$15.63
              7,000
              2.4
              $15.63
              7,000
              $15.63$17.00
              1,600
              2.4
              $17.00
              1,600
              $17.00$18.00
              58,010
              1.4
              $18.00
              58,010
              $18.00$21.25
              42,020
              3.4
              $21.25
              22,260
              $21.25$26.50
              8,000
              3.9
              $26.50
              6,000
              $26.50$29.00
              101,100
              4.0
              $29.00
              74,340
              $29.00$28.00
              186,030
              4.9
              $28.00
              58,983
              $28.00$42.71
              1,798
              5.8
              $42.71
              1,798
              $42.71$35.50
              314,538
              6.1
              $35.50
              69,196
              $35.50$34.40
              404,980
              7.1
              $34.40
              22,500
              $34.40$0.07
                  - $42.71
              1,132,146
              5.7
              $31.45
              328,757
              $27.16
 
 Substantially
        all of the options granted at exercise prices from $21.25 to $35.50 vest
        over a
        five year period from the date of grant. All other options have fully vested
        as
        of December 31, 2005.
  69
  
 The
        weighted average fair value of stock options granted during the year ended
        May
        31, 2003, calculated using the Black-Scholes option pricing model, was $15.84
        using the following assumptions; expected dividend yield - 0%, risk free
        interest rate - 3.39%, expected volatility - 50% and expected life - 8
        years.
 
 The
        weighted average fair value of stock options granted during the year ended
        May
        31, 2004, calculated using the Black-Scholes option pricing model, was $24.58
        using the following assumptions; expected dividend yield - 0%, risk free
        interest rate - 4.87%, expected volatility - 50% and expected life - 8
        years.
 
 The
        weighted average fair value of stock options granted during the year ended
        May
        31, 2005, calculated using the Black-Scholes option pricing model, was $17.09
        using the following assumptions; expected dividend yield - 0%, risk free
        interest rate - 4.02%, expected volatility - 50% and expected life - 8
        years.
 
 On
        February 7, 2005, 120,000 share options, with an exercise price of $34.40,
        were
        granted to certain key employees of the Company. These options will vest
        between
        2008 and 2013 subject to the Company’s diluted earnings achieving $4.00 per
        share. If the Company does not achieve diluted earnings of $4.00 per share
        before February 6, 2013, the option grant expires.
 
  70
  
 **11.
        Stock Compensation**
 
 The
        Company accounts for its share options in accordance with the provisions
        of SFAS
        No. 123, “Accounting for Stock-Based Compensation”. SFAS No. 123 allows entities
        to continue to apply the provisions of Accounting Principles Board ("APB")
        Opinion No. 25, “Accounting for Stock Issued to Employees”, and provide pro
        forma net income and pro forma earnings per share disclosures for employee
        stock
        option grants as if the fair-value-based method defined in SFAS No. 123 had
        been
        applied. APB No. 25 permits entities to recognize as expense, over the vesting
        period, the intrinsic value of all stock- based awards determined on the
        measurement date. The Company has elected to apply the provisions of APB
        Opinion
        No. 25 and provide the pro forma disclosure provisions of SFAS No. 123.
 
 The
        following table illustrates the effect on net income and earnings per share
        as
        if the fair value method of SFAS No. 123 had been applied to all outstanding
        and
        unvested stock options in each period.
 
 **Year
                  Ended May 31,**
              **Seven
                  Months Ended December 31,****2003**
              **2004**
              **2005**
              **2005****(in
                  thousands)****(except per share data)**Net
                  income, as reported
              $18,283
              $25,742
              $13,545
              $7,418Add:
                  Stock compensation expense
              -
              -
              -
              2257,643Deduct:
                  Total stock-based employee compensation expense determined under
                  fair
                  value based method for all awards, net of related tax
                  effects
              (2,096)
              (2,358)
              (2,729)
              (1,248)Pro
                  forma net income
              $16,187
              $23,384
              $10,816
              $6,395Earnings
                  per share (in $):Basic
                  - as reported
              $1.55
              $1.94
              $0.98
              $0.53Basic
                  - pro forma
              1.37
              1.76
              0.78
              0.45Diluted
                  - as reported
              $1.50
              $1.88
              $0.96
              $0.52Diluted
                  - pro forma
              1.33
              1.71
              0.76
              0.45
 
 
 On
        December 6, 2005, Dr. Ronan Lambe and Dr. John Climax gifted 64,000 and 80,000
        ADSs, respectively, to Mr. Peter Gray, the Company’s Chief Executive Officer.
        The Company has accounted for these transfers of equity instruments from
        shareholders to Mr. Gray as share based payment transactions, and recorded
        a
        compensation expense of $6,023,520 in its Statement of Operations, measured
        by reference to the fair value of the ADSs on the grant date. As this
        transaction is a transfer of already issued stock between officers and directors
        of the Company, the expense recorded no cash flow impact on the Company and
        created no dilution of ordinary shares outstanding.  The fair value of the
        ADSs on the date of gift was determined by reference to market
        price.
 
 On
        February 7, 2005, 120,000 share options, with an exercise price of $34.40,
        were
        granted to certain key employees of the Company. These options will vest
        between
        2008 and 2013 subject to the Company’s diluted earnings achieving $4.00 per
        share. If the Company does not achieve diluted earnings of $4.00 per share
        before February 6, 2013, the option grant expires. A stock compensation expense
        of U.S.$225,000 has been recorded during the period in relation to these
        options.
 
 
  71
  
 **12.
        Government Grants**
 
 **May
                  31,**
              
              **May
                  31,**
              
              **December
                  31,****2004**
              
              **2005**
              
              **2005****(in thousands)**Received
                  and receivable
              
              $
              2,225
              
              $
              2,225
              
              $
              2,225Less
                  accumulated amortization
              
              
              (849
              )
              
              (1,048
              )
              
              (1,153
              )Foreign
                  exchange translation adjustment
              
              
              230
              
              
              279
              
              
              1971,606
              
              
              1,456
              
              
              1,269Less
                  current portion
              
              
              (195
              )
              
              (199
              )
              
              (109
              )$
              1,411
              
              $
              1,257
              
              $
              1,160
 
 Government
        grants amortized to the profit and loss account amounted to U.S.$36,000,
        U.S.$569,000 and U.S.$199,000 for the years ended May 31, 2003, 2004 and
        2005,
        respectively and U.S.$105,000 for the seven months ended December 31,
        2005.
 
 As
        of
        December 31, 2005 the Company had U.S.$1,351,000 in restricted retained
        earnings, pursuant to the terms of the grant agreements.
 
 **13.
        Share Capital**
 
 ***Ordinary
        Shares***
 Holders
        of ordinary shares will be entitled to receive such dividends as may be
        recommended by the board of directors of the Company and approved by the
        shareholders and/or such interim dividends as the board of directors of the
        Company may decide. On liquidation or a winding up of the Company, the par
        value
        of the ordinary shares will be repaid out of the assets available for
        distribution among the holders of the Company's ADSs and ordinary shares
        not
        otherwise represented by ADRs. Holders of ordinary shares have no conversion
        or
        redemption rights. On a show of hands, every holder of an ordinary share
        present
        in person at a general meeting of shareholders, and every proxy, shall have
        one
        vote, for each ordinary share held with no individual having more than one
        vote.
 
 During
        the year to May 31, 2003, 39,360 options were exercised by employees at an
        average exercise price of U.S.$18.51 per share for total proceeds of U.S.$0.7
        million.
 
 During
        the year to May 31, 2004, a further 496,919 options were exercised by employees
        at an average exercise price of U.S.$10.78 per share for total proceeds of
        U.S.$5.4 million.
  During
        the year to May 31, 2005, a further 60,620 options were exercised by employees
        at an average exercise price of U.S.$23.11 per share for total proceeds of
        U.S.$1.4 million.
 
 During
        the seven month period to December 31, 2005, a further 118,996 options were
        exercised by employees at an average exercise price of U.S.$16.07 per share
        for
        total proceeds of U.S.$1.9 million.
  72
  **14.
        Income Taxes**
 
 The
        U.S.
        based and Irish-based subsidiaries file tax returns in the United States
        and
        Ireland, respectively. The other foreign subsidiaries are taxed separately
        under
        the laws of their respective countries.
 
 The
        components of income before provision for income tax expense are as follows:
 
 **Seven
                  Months****Year Ended**
              **Ended****Year Ended May 31,**
              **December
                  31,****2003**
              **2004**
              **2005**
              **2005****(in thousands)**Ireland
              $8,859
              $12,674
              $13,795
              ($1,470)*United
                  States
              12,230
              9,601
              (9,001)
              2,647Other
              4,194
              12,396
              14,792
              11,647Income
                  before provision for income taxes
              $25,283
              $34,671
              $19,586
              $12,824
 
 *Net
        Income as reported for the seven months ended December 31, 2005 is stated
        inclusive of stock compensation expense of $6.25 million recorded for the
        period
        (see note 11: Stock Compensation).
 
 The
        components of total income tax expense are as follows:
 
 **Seven
                  Months****Year Ended**
              
              **Ended****May 31,**
              
              **December
                  31,****2003**
              
              **2004**
              
              **2005**
              
              **2005****(in thousands)*****Provision
                  for income taxes***
                Current:
                Ireland
              
              $
              1,158
              
              $
              1,365
              
              $
              1,821
              
              $
              401United
                  States
              
              
              4,334
              
              
              3,339
              
              
              1,872
              
              
              1,196Other
              
              
              1,132
              
              
              3,209
              
              
              2,885
              
              
              3,044Total
                  current tax
              
              
              6,624
              
              
              7,913
              
              
              6,578
              
              
              4,641Deferred
                  expenses/(benefit):
                Ireland
                United
                  States
                Other
              
              
              31
                345
                -
              
              
              -
                1,016
                -
              
              
              (128
                16
                (614
              )
                )
              
              6
                475
                274Total
                  deferred tax / (benefit)
              
              
              376
              
              
              1,016
              
              
              (726
              )
              
              755Provision
                  for income taxes
              
              
              7,000
              
              
              8,929
              
              
              5,852
              
              
              5,396Shareholders’
                  equity for compensation expense for tax purposes in excess of amounts
                  recognized for financial reporting purposes
              
              
              (48
              )
              
              (2,276
              )
              
              (169
              )
              
              (758
              )Total
              
              $
              6,952
              
              $
              6,653
              
              $
              5,683
              
              $
              4,638
 
  73
  
 Ireland’s
        statutory income tax rate is 12.5%. Certain activities carried out by the
        Irish
        company, principally data processing services, are taxed at a reduced rate
        of
        10%. The Company’s consolidated effective tax rate differed from the blended
        statutory rate as set forth below;
 
 **Seven
                  Months****Year Ended**
              **Ended****May 31,**
              **December
                  31,****2003**
              **2004**
              **2005**
              **2005****(in thousands)**Taxes
                  at Irish statutory rate of 12.50% (2005:12.5%, 2004: 12.5%, 2003:
                  14.54%)
              $3,676
              $4,334
              $2,448
              $1,603Foreign
                  and other income taxed at higher/(reduced) rates
              1,874
              3,333
              (1,068)
              953United
                  States state tax net of United States Federal benefit and other
                  foreign
                  taxes
              556
              403
              767
              428Movement
                  in valuation allowance
              374
              1,445
              2,473
              2,020Current
                  year under-provision in respect of foreign taxes
              -
              (547)
              -
              -Reversal
                  of prior year over-provision in respect of foreign taxes
              -
              (444)
              (1,319)
              (553)Non
                  deductible expenses
              35
              531
              2,491
              995Other
              485
              (126)
              60
              (50)Total
                  provision for income taxes
              $7,000
              $8,929
              $5,852
              $5,396
 
 The
        tax
        effects of temporary differences that give rise to significant portions of
        deferred tax assets and deferred tax liabilities are presented below:
 
 **Seven
                  Months****Year Ended**
              
              **Ended****May 31,**
              
              **December
                  31,****2004**
              
              **2005**
              
              **2005****(in thousands)**Deferred
                  tax liabilities:
                Property,
                  plant and equipment
              
              $
              2,180
              
              $
              1,914
              
              $
              1,659Goodwill
                  and related assets
              
              
              1,023
              
              
              1,575
              
              
              1,865Accruals
                  to cash method adjustment
              
              
              -
              
              
              310
              
              
              687Other
              
              
              -
              
              
              214
              
              
              359Total
                  deferred tax liabilities
              
              
              3,203
              
              
              4,013
              
              
              4,570Deferred
                  tax assets:Net
                  operating loss carryforwards
              
              
              3,880
              
              
              5,891
              
              
              7,330Property,
                  plant and other equipment
              
              
              -
              
              
              853
              
              
              768Accrued
                  expenses and payments on account
              
              
              1,565
              
              
              4,354
              
              
              4,680Deferred
                  compensation expense
              
              
              166
              
              
              321
              
              
              310Other
              
              
              -
              
              
              451
              
              
              259Total
                  deferred tax assets
              
              
              5,611
              
              
              11,870
              
              
              13,347Valuation
                  allowance for deferred tax assets
              
              
              (3,361
              )
              
              (8,277
              )
              
              (9,952
              )Deferred
                  tax assets recognized
              
              $
              2,250
              
              $
              3,593
              
              $
              3,395Net
                  deferred tax asset / (liability)
              
              $
              (953
              )
              $
              (420
              )
              $
              (1,175
              )
 
  74
  
 U.S.$1.545
        million of the deferred tax asset of U.S.$3.395 million above is non-current.
        U.S.$3.684 million of the deferred tax liability of U.S.$4.570 million is
        non
        current.
 
 At
        December 31, 2005, European subsidiaries had operating loss carryforwards
        for
        income tax purposes that may be carried forward indefinitely, available to
        offset against future taxable income, if any, of approximately U.S.$2.85
        million
 
 At
        December 31, 2005, ICON Laboratory Inc., a U.S. subsidiary had a net operating
        loss carryforwards for U.S. Federal and State income tax purposes, available
        to
        offset against future taxable income if any of approximately U.S.$13.5 million
        for U.S. Federal and U.S.$14.3 million for State income tax, which expire
        between 2021 and 2026.
 
 Of
        the
        U.S.$13.5 million U.S. Federal and U.S.$14.3 million State net operating
        losses,
        approximately U.S.$11.8 million and U.S.$12.6 million respectively will be
        available for offset against future taxable income, if any, of future accounting
        periods. The subsidiary’s ability to use the remaining net operating loss
        carryforward of U.S.$1.7 million for Federal and State taxes is limited to
        U.S.$113,000 per year due to the subsidiary experiencing a change of ownership
        in 2000, as defined by Section 382 of the Internal Revenue Code of 1986,
        as
        amended.
 
 At
        December 31, 2005, Beacon Bioscience Inc., a U.S. subsidiary had a net operating
        loss carryforwards for U.S. Federal and State income tax purposes, available
        to
        offset against future taxable income if any of approximately U.S.$0.6 million
        for U.S. Federal and U.S.$0.4 million for State income tax, which expire
        between
        2009 and 2025.
 
 A
        valuation allowance is provided when it is more likely than not that some
        portion or all of the deferred tax assets will not be realized. The Company
        has
        provided a valuation allowance at December 31, 2005, of U.S.$9,952,000 and
        U.S.$8,277,000, U.S.$3,361,000 and U.S.$1,916,000 at May 31, 2005, 2004 and
        2003
        respectively. This valuation allowance is based on management’s belief that it
        is more likely than not that the European and US entities’ losses and other
        deferred tax assets will not be utilized given their history of operating
        losses. The valuation allowance was U.S.$1.6 million as of June 1, 2002 and
        increased by U.S.$0.3 million, U.S.$1.4 million, U.S.$4.9 million for the
        years
        ended May 31, 2003, 2004 and 2005 respectively and U.S.$1.7 million for the
        seven months ended December 31, 2005. Subsequent recognized tax benefits
        relating to the valuation allowance for deferred tax assets in the amount
        of
        U.S.$800,000 as of May 31, 2005 will be allocated to goodwill and other
        non-current intangible assets.
 
 
 **15.
        Other charges**
 
 The
        principal items classified as other charges include, asset impairments, computer
        software write-off and lease termination and exit costs. These charges were
        expensed to the statement of operations during the year ended May 31,
        2005.
 
 **(in
                  thousands)**(A)
              Goodwill
                  impairment charge
              $7,017(B)
              Computer
                  software write-off
              1,031(C)
              Lease
                  termination and exit costs
              3,227$11,275
 
 (A)  Goodwill
        impairment charge
 
 Under
        SFAS No.142, goodwill and intangible assets with indefinite lives are no
        longer
        amortized, but instead are tested for impairment at least annually. Given
        the
        pattern of operating losses in recent years, slowdown in growth and future
        outlook in our central laboratory reporting unit, management determined that
        the
        carrying value of the reporting unit exceeded its fair value at February
        28,
        2005. After allocating the fair value of the reporting unit to all of the
        assets
        and liabilities of that unit, management determined that the carrying value
        of
        the central laboratory goodwill was impaired. The
        fair
        value of the central laboratory segment was determined using discounted cash
        flows and net realizable values. The
        central laboratory segment was formed by the combination of our existing
        central
        laboratory operation in Dublin, Ireland and by the acquisition in June 2000
        of
        UCT (U.S.) Inc. (“UCT”), a central laboratory company based in New York, USA.
  75
  
 (B)  Computer
        software write-off
 
 This
        charge represents the write off of the carrying value of computer software
        costs, which did not provide a reasonable economic return.
 
 (C)  Lease
        termination and exit costs
 
 This
        charge represents the lease termination and exit costs associated with the
        close
        of a facility in Irvine, California and the termination of two redundant
        leases
        in New York following the relocation of the central laboratory. Total costs
        expected to be incurred in association with these lease termination and exit
        costs have been accrued. Of the total $1.2 million relates to the central
        laboratory segment and $2.1 million to the clinical research segment. During
        the
        seven months ended December 31, 2005, $2.4 million of this was used and the
        excess balance of $0.9 million was released to the income
        statement.
 
 **16.
        Significant Concentrations**
 
 The
        Company does business with most major international pharmaceutical companies.
        As
        at December 31, 2005 the balance for doubtful debts was $670,000 (May 31,
        2005:
        $476,000, May 31, 2004: $355,000). During the period ended December 31, 2005
        an
        additional reserve for doubtful debts of $670,000 was created and $476,000
        was
        used.
 
 **17.
        Commitments and Contingencies**
 
 The
        Company is not party to any litigation or other legal proceedings that the
        Company believes could reasonably be expected to have a material adverse
        effect
        on the Company's business, results of operations and financial condition.
 
 The
        Company has several non-cancelable operating leases, primarily for facilities,
        that expire over the next 10 years. These leases generally contain renewal
        options and require the Company to pay all executory costs such as maintenance
        and insurance. The Company paid U.S.$15,743,000, U.S.$22,179,000 and
        U.S.$26,158,000 in rental expense for the fiscal years ended May 31, 2003,
        2004
        and 2005, respectively and U.S.$14,462,000 for the seven month period ended
        December 31, 2005. Future minimum rental commitments for operating leases
        with
        non-cancelable terms in excess of one year are as follows:
 **Minimum
                  rental payments****(in
                  thousands)**2006
              $21,4102007
              17,7792008
              15,2942009
              14,4032010
              14,056Thereafter
              $57,736
 
 The
        Company has a number of finance leases, primarily over furniture and equipment,
        that expire over the next four years. Future commitments are as follows:
 
 **Lease
                  payments****(in
                  thousands)**2006
              $1932007
              1022008
              692009
              2Thereafter
              -Less
                  future finance charges
              (26)Total
              $340
 
  76
  The
        Company made a number of acquisitions in recent years with earn-out provisions
        built into the purchase contracts, which may require cash payments of
        U.S.$2,500,000 to be made during the year ended December 31,
        2006.
 
 **18.
        Business Segment Information**
  The
        Company operates predominantly in the contract clinical research industry
        providing a broad range of clinical research and integrated product development
        services on a global basis for the pharmaceutical and biotechnology industries.
        The Company’s also has a central laboratory segment primarily based in New York,
        USA. This, together with laboratory services based in Dublin, form the central
        laboratory segment information disclosed below.
 
 The
        Company's areas of operation outside of Ireland principally include the United
        Kingdom, United States, Germany, Australia, Argentina, France, Japan, Israel,
        Singapore, Canada, Sweden, The Netherlands, Latvia, South Africa, India,
        Hong
        Kong, Taiwan, Mexico, Brazil, Russia, Hungary, Spain, Thailand, South Korea,
        Chile and Italy. Segment information for the fiscal years ended May 31, 2003,
        2004 and 2005 and the seven month period ended December 31, 2005 is as follows:
 
 
 a)
        The
        distribution of net revenue by geographical area was as follows:
 
 **Seven
                  Months****Year Ended**
              
              **Ended****May 31,**
              
              **December
                  31,****2003**
              
              **2004**
              
              **2005**
              
              **2005****(in thousands)**Ireland*
              
              $
              26,293
              
              $
              35,109
              
              $
              37,242
              
              $
              19,838Rest
                  of Europe
              
              
              34,727
              
              
              65,930
              
              
              84,140
              
              
              48,206U.S.
              
              
              158,707
              
              
              185,301
              
              
              186,919
              
              
              118,292Other
              
              
              5,998
              
              
              10,583
              
              
              18,357
              
              
              15,614Total
              
              $
              225,725
              
              $
              296,923
              
              $
              326,658
              
              $
              201,950*
                  All sales shown for Ireland are export sales.
 
 
 
 b)
            The
                distribution of net revenue by business segment was as
                follows: 
 **Seven
                  Months****Year Ended**
              
              **Ended****May 31,**
              
              **December
                  31,****2003**
              
              **2004**
              
              **2005**
              
              **2005****(in thousands)**Central
                  laboratory
              
              $
              26,168
              
              $
              26,905
              
              $
              25,499
              
              $
              18,190Clinical
                  research
              
              
              199,557
              
              
              270,018
              
              
              301,159
              
              
              183,760Total
              
              $
              225,725
              
              $
              296,923
              
              $
              326,658
              
              $
              201,950
 
 
 c)
            The
                distribution of income from operations by geographical area was as
                follows: 
 
 
 77
  
 **Seven
                  Months****Year Ended**
              
              **Ended****May 31,**
              
              **December
                  31,****2003**
              
              **2004**
              
              **2005**
              
              **2005****(in thousands)**Ireland
              
              $
              6,532
              
              $
              9,363
              
              $
              6,223
              
              
              ($8,338
              )Rest
                  of Europe
              
              
              1,192
              
              
              10,209
              
              
              14,033
              
              
              10,437U.S.
              
              
              17,091
              
              
              13,023
              
              
              (4,130
              )
              
              5,152Other
              
              
              114
              
              
              1,788
              
              
              2,481
              
              
              4,301Total
              
              $
              24,929
              
              $
              34,383
              
              $
              18,607
              
              $
              11,552
 
 
 
 d)
            The
                distribution of income from operations by business segment was as
                follows: 
 **Seven
                  Months****Year Ended**
              
              **Ended****May 31,**
              
              **December
                  31,****2003**
              
              **2004**
              
              **2005**
              
              **2005****(in thousands)**Central
                  laboratory
              
              $
              115
              
              
              ($3,274
              )
              
              ($15,284
              )
              
              ($3,035
              )Clinical
                  research
              
              
              24,814
              
              
              37,657
              
              
              33,891
              
              
              14,587Total
              
              $
              24,929
              
              $
              34,383
              
              $
              18,607
              
              $
              11,552
 
 
 e)
        The
        distribution of property, plant and equipment, net, by geographical area
        was as
        follows:
 
 **May
                  31,**
              
              **May
                  31,**
              
              **December
                  31,****2004**
              
              **2005**
              
              **2005****(in
                  thousands)**Ireland
              
              $
              18,799
              
              $
              20,471
              
              $
              22,538Rest
                  of Europe
              
              
              7,202
              
              
              7,273
              
              
              6,669U.S.
              
              
              15,935
              
              
              15,927
              
              
              16,720Other
              
              
              1,000
              
              
              1,615
              
              
              1,725Total
              
              $
              42,936
              
              $
              45,286
              
              $
              47,652
 
 
 f)
        The
        distribution of property, plant and equipment, net, by business segment was
        as
        follows:
 
 **May
                  31,**
              
              **May
                  31,**
              
              **December
                  31,****2004**
              
              **2005**
              
              **2005****(in
                  thousands)**Central
                  laboratory
              
              $
              3,989
              
              $
              2,940
              
              $
              3,380Clinical
                  research
              
              
              38,947
              
              
              42,346
              
              
              44,272Total
              
              $
              42,936
              
              $
              45,286
              
              $
              47,652
 
 
 g)
            The
                distribution of depreciation and amortization by geographical area
                was as
                follows:  78
  
 
 **Seven
                  Months****Year Ended**
              
              **Ended****May 31,**
              
              **December
                  31,****2003**
              
              **2004**
              
              **2005**
              
              **2005****(in thousands)**Ireland
              
              $
              2,330
              
              $
              3,710
              
              $
              5,091
              
              $
              3,115Rest
                  of Europe
              
              
              1,138
              
              
              1,842
              
              
              2,157
              
              
              1,210U.S.
              
              
              3,535
              
              
              5,271
              
              
              5,552
              
              
              3,415Other
              
              
              302
              
              
              348
              
              
              531
              
              
              354Total
              
              $
              7,305
              
              $
              11,171
              
              $
              13,331
              
              $
              8,094
 
 
 h)
            The
                distribution of depreciation and amortization by business segment
                was as
                follows: 
 **Seven
                  Months****Year Ended**
              
              **Ended****May 31,**
              
              **December
                  31,****2003**
              
              **2004**
              
              **2005**
              
              **2005****(in thousands)**Central
                  laboratory
              
              $
              732
              
              $
              1,014
              
              $
              995
              
              $
              687Clinical
                  research
              
              
              6,573
              
              
              10,157
              
              
              12,336
              
              
              7,407Total
              
              $
              7,305
              
              $
              11,171
              
              $
              13,331
              
              $
              8,094
 
 
 i)
        The
        distribution of total assets by geographical area was as follows:
 
 **May
                  31,**
              
              **May
                  31,**
              
              **December
                  31,****2004**
              
              **2005**
              
              **2005****(in thousands)**Ireland
              
              $
              76,165
              
              $
              109,596
              
              $
              91,826Rest
                  of Europe
              
              
              115,056
              
              
              79,878
              
              
              81,268U.S.
              
              
              141,104
              
              
              153,577
              
              
              169,799Other
              
              
              2,998
              
              
              4,502
              
              
              6,742Total
              
              $
              335,323
              
              $
              347,553
              
              $
              349,635
 
 
 j)
        The
        distribution of total assets by business segment was as follows:
 
 **May
                  31,**
              
              **May
                  31,**
              
              **December
                  31,****2004**
              
              **2005**
              
              **2005****(in thousands)**Central
                  laboratory
              
              $
              20,343
              
              $
              18,083
              
              $
              17,150Clinical
                  research
              
              
              314,980
              
              
              329,470
              
              
              331,917Total
              
              $
              335,323
              
              $
              347,553
              
              $
              349,067
 
  79
  
 k)
            The
                distribution of capital expenditures by geographical area was as
                follows: 
 **Seven
                  Months****Year Ended**
              
              **Ended****May 31,**
              
              **December
                  31,****2003**
              
              **2004**
              
              **2005**
              
              **2005****(in thousands)**Ireland
              
              $
              6,375
              
              $
              4,812
              
              $
              6,583
              
              $
              6,438Rest
                  of Europe
              
              
              1,686
              
              
              2,167
              
              
              2,168
              
              
              600U.S.
              
              
              7,274
              
              
              5,826
              
              
              5,873
              
              
              4,197Other
              
              
              658
              
              
              160
              
              
              1,053
              
              
              425Total
              
              $
              15,993
              
              $
              12,965
              
              $
              15,677
              
              $
              11,660
 
 
 l)
        The
        distribution of capital expenditures by business segment was as
        follows:
 
 **Seven
                  Months****Year Ended**
              
              **Ended****May 31,**
              
              **December
                  31,****2003**
              
              **2004**
              
              **2005**
              
              **2005****(in thousands)**Central
                  laboratory
              
              $
              1,520
              
              $
              1,552
              
              $
              965
              
              $
              948Clinical
                  research
              
              
              14,473
              
              
              11,413
              
              
              14,712
              
              
              10,712Total
              
              $
              15,993
              
              $
              12,965
              
              $
              15,677
              
              $
              11,660
 
 
 m)
        The
        following table sets forth the clients which represented 10% or more of the
        Company's net revenue in each of the periods set out below.
 
 **Seven
                  Months****Year Ended**
              **Ended****May 31,**
              **December
                  31,****2003**
              **2004**
              **2005**
              **2005**Client
                  A
              10%
              *
              *
              *Client
                  B
              21%
              17%
              12%
              *Client
                  C
              11%
              *
              *
              *
 
 *    
        Net Revenue did not exceed 10%
 
  80
  
 **19.
        Supplemental Disclosure of Cash Flow Information**
 
 **Seven
                  Months****Year Ended**
              
              **Ended****May 31,**
              
              **December
                  31,****2003**
              
              **2004**
              
              **2005**
              
              **2005****(in thousands)**Cash
                  paid for interest
              
              $
              279
              
              $
              202
              
              $
              229
              
              $
              19Cash
                  paid for income taxes
              
              $
              7,186
              
              $
              5,731
              
              $
              5,290
              
              $
              4,794
 
 
 
 **20.
        New Accounting Pronouncements**
  In
        March
        2005, the Financial Accounting Standards Board (FASB) issued FASB Interpretation
        No. 47.  In accordance with FASB Interpretation 47 companies must recognise
        a liability for the fair value of a legal obligation to perform asset-retirement
        activities that are conditional on a future event if the amount can be
        reasonably estimated.  The Interpretation provides guidance on whether the
        fair value is reasonably estimable.  The premise underlying the
        Interpretation is a need for more uniform application of Statement 143
        "Accounting for Asset Retirement Obligations".  Companies must adopt the
        Interpretation no later than the end of the fiscal year ending after December
        15, 2005.  The company does not expect the impacts of adopting FASB
        Interpretation No 47 to be material.
 
 In
        December 2004, the FASB issued Statement No. 123R, "Share-Based Payment -
        An
        Amendment of FASB Statements No. 123 and 95 (“SFAS No.123R”), which is effective
        for public companies in periods beginning after June 15, 2005. The company
        will
        implement the proposed standard on January 1, 2006. The cumulative effect
        of
        adoption, if any, applied on a modified prospective basis, would be measured
        and
        recognized on March 31, 2006. SFAS No. 123R addresses the accounting for
        transactions in which an enterprise receives goods and services in exchange
        for:
        (a) equity instruments of the enterprise; or (b) liabilities that are based
        on
        the fair value of the enterprise’s equity instruments or that may be settled by
        the issuance of such equity instruments. SFAS No. 123R eliminates the ability
        to
        account for share-based compensation transactions using APB 25, and generally
        would require instead that such transactions be accounted for using a fair-value
        based method. Equity classified awards are measured at grant date at fair
        value
        and are not subsequently re-measured. Liability classified awards are
        re-measured at fair value at each balance sheet date until the awards are
        settled. We are currently evaluating option valuation methodologies and
        assumptions in light of SFAS No. 123R related to employee stock options.
        Current
        estimates of option values using the Black-Scholes method (as reported) may
        not
        be indicative of results from valuation methodologies ultimately
        adopted.
 
 In
        November 2004, the FASB issued statement No. 151, "Inventory Costs, an amendment
        of ARB No. 43, Chapter 4" (“SFAS No. 151”), which is effective for public
        companies prospectively for inventory costs incurred in periods beginning
        after
        June 15, 2005. This Statement amends the guidance in ARB No. 43, Chapter
        4
“Inventory Pricing”, to clarify that accounting for abnormal amounts of idle
        facility expense, freight, handling costs and wasted material (spoilage)
        should
        be recognized as a current period change and to require the allocation of
        fixed
        production overhead to the costs of conversion based on normal capacity of
        the
        production facilities. We do not expect that the adoption of SFAS No. 151
        will
        have a material impact on our financial position or results of operations.
 
 In
        December 2004, the FASB issued Statement No. 153, “Exchanges of Nonmonetary
        assets - an amendment of APB Opinion No. 29” (“SFAS No. 153”), which is
        effective for public companies in periods beginning after June 15, 2005.
        The
        guidance in APB opinion No. 29, Accounting for Nonmonetary Transactions,
        is
        based on the principle that exchanges of nonmonetary assets should be measured
        based on the fair value of the assets exchanged. The guidance in that Opinion,
        however, included certain exceptions to that principle. This statement amends
        Opinion 29 to eliminate the exception for nonmonetary exchanges of similar
        productive assets and replaces it with a general exception for exchanges
        of
        nonmonetary assets that do not have commercial substance. A nonmonetary exchange
        has commercial substance if the future cash flows of
  81
  the
        entity are expected to change significantly as a result of the exchange.
        We do
        not expect that the adoption of SFAS No. 153 will have a material impact
        on our
        financial position or results of operations.
 
 In
        November 2003 and March 2004, the Emerging Issues Task Force (EITF) reached
        partial consensus on EITF 03-1, “The Meaning of Other-Than-Temporary Impairment
        and its Application to Certain Investments,” (“EITF 03-1”). EITF 03-1 addresses
        the meaning of other then temporary impairment and its application to
        investments classified as either available-for-sale or held-to-maturity under
        SFAS 115, “Accounting for Certain Investments in Debt and Equity Securities” and
        investments accounted for under the cost method. The EITF agreed on certain
        quantitative and qualitative disclosures about unrealised losses pertaining
        to
        securities classified as available-for-sale or held-to-maturity. In addition,
        EITF 03-1 requires certain disclosures about cost method investments. The
        recognition and measurement provisions of EITF 03-1 have been deferred until
        additional guidance is issued.
 
 **21.
        Related Parties**
 
 
 On
        December 6, 2005, Dr. Ronan Lambe and Dr. John Climax gifted 64,000 and 80,000
        ADSs, respectively, to Mr. Peter Gray, the Company’s Chief Executive Officer.
        The Company has accounted for these transfers of equity instruments from
        shareholders to Mr. Gray as share based payment transactions, and recorded
        a
        compensation expense of $6,023,520 in its Statement of Operations, measured
        by reference to the fair value of the ADSs on the grant date. As this
        transaction is a transfer of already issued stock between officers and directors
        of the Company, the expense recorded no cash flow impact on the Company and
        created no dilution of ordinary shares outstanding.  The fair value of the
        ADSs on the date of gift was determined by reference to market
        price.
 
 AGI
        Therapeutics Limited (“AGI”) is a specialty pharmaceutical company focused on
        developing drug therapies for gastrointestinal diseases and disorders. ICON
        is
        engaged in conducting a series of clinical trials on behalf of AGI. In January
        2006, Dr.
        Ronan
        Lambe was appointed a non-executive director of AGI and takes up the position
        of
        non-executive Chairman from February 2006.
 
 Amarin
        Corporation plc ("Amarin") is a neuroscience company focused on the research,
        development and commercialization of drugs for the treatment of central nervous
        system disorders. During the fiscal year ending May 31, 2005, Amarin contracted
        ICON Clinical Research Limited (a wholly owned subsidiary of the Company),
        to
        conduct a clinical trial on its behalf. The total potential value of this
        study
        is $2.7 million. As at December 31, 2005, Amarin Investment Holding Company
        Limited (a company controlled by Mr. Thomas Lynch), Sunninghill Limited (a
        company controlled by Dr. John Climax) and Dr. Ronan Lambe held 9.7 million,
        6.3
        million and 1.6 million shares respectively in Amarin. These respective holdings
        equate to approximately 12.0%, 8.0% and 2.0% of Amarin's issued share capital.
        Thomas Lynch also serves as chairman and non-executive director on the Board
        of
        Amarin. During the seven month period to December 31, 2005 the company
        recognized $0.86m revenue relating to the Amarin Contract. At December 31,
        2005,
        $0.9m was outstanding to be received from Amarin on this trial.
 
 On
        February 6, 1998, the Company entered into an Option Agreement (“The Put
        Option”) with Rosa Investment Limited ("Rosa"). Rosa's sole activity was to hold
        an investment in Clear Investments Limited ("Clear"), the sole activity of
        which
        was to hold Mr. Gray's option to exercise 54,000 ordinary shares. Mr. Gray
        is a
        director of Rosa and Clear. Rosa is owned by a trust of which Mr. Gray is
        a
        beneficiary. On the April 21, 2004, Mr. Gray subsequently acquired Clear
        from
        Rosa and exercised the Put Option in accordance with the terms of the Option
        Agreement. On April 22, 2004, pursuant to the Option Agreement, the Company
        purchased the outstanding share capital in Clear from Mr. Gray, the
        consideration for the acquisition being the issuance of 54,000 fully paid
        up
        ordinary shares in the Company, to Mr. Gray, such a sale being the economic
        equivalent of Mr. Gray exercising his stock options.
 
  82
  **SIGNATURES**
 
 Pursuant
        to the requirements of Section 12 of the Securities Exchange Act of 1934,
        the
        Registrant certifies that it meets all of the requirements for filing on
        Form
        20-F and has duly caused this transition report to be signed on its behalf
        by
        the undersigned thereunto duly authorized.
 
 
 
 ICON
        public limited company
 
 
 February
                  27, 2006.
              /s/
                  Ciaran Murray____________________________
              ____________________________Date
              Ciaran
                  MurrayChief
                  Financial Officer
 
 
  83
  **Certification
        of Chief Executive Officer**
 **Pursuant
        to Section 302 of**
 **the
        Sarbanes-Oxley Act of 2002**
 
 I,
        Peter
        Gray, certify that:
 
 1.
        I have
        reviewed this transition report on Form 20-F of ICON plc (“the
        registrant”).
 
 2.
        Based
        on my knowledge, this report does not contain any untrue statement of a material
        fact or omit to state a material fact necessary to make the statements made,
        in
        light of the circumstances under which such statements were made, not misleading
        with respect to the period covered by this report;
 
 3.
        Based
        on my knowledge, the financial statements, and other financial information
        included in this report, fairly present in all material respects the financial
        condition, results of operations and cash flows of the registrant as of,
        and
        for, the periods presented in this report;
 
 4.
        The
        registrant's other certifying officer and I are responsible for establishing
        and
        maintaining disclosure controls and procedures (as defined in Exchange Act
        Rules
        13a-15(e) and 15d-15(e)) and have:
  a)
        Designed such disclosure controls and procedures, or caused such disclosure
        controls and procedures to be designed under our supervision, to ensure that
        material information relating to the registrant, including its consolidated
        subsidiaries, is made known to us by others within those entities, particularly
        during the period in which this report is being prepared;
 
 b)
        Evaluated the effectiveness of the registrant's disclosure controls and
        procedures and presented in this report our conclusions about the effectiveness
        of the disclosure controls and procedures, as of the end of the period covered
        by this report based on such evaluation; and
 
 c)
        Disclosed in this report any change in the registrant's internal control
        over
        financial reporting that occurred during the period covered by this report
        that
        has materially affected, or is reasonably likely to materially affect, the
        company’s internal control over financial reporting.
 
 5.
        The
        registrant's other certifying officer and I have disclosed, based on our
        most
        recent evaluation of internal control over financial reporting, to the
        registrant's auditors and the audit committee of registrant's board of directors
        (or persons performing the equivalent functions):
 
 a)
        All
        significant deficiencies and material weaknesses in the design or operation
        of
        internal control over financial reporting which are reasonably likely to
        adversely affect the registrant's ability to record, process, summarize and
        report financial information; and
 
 b)
        Any
        fraud, whether or not material, that involves management or other employees
        who
        have a significant role in the registrant's internal control over financial
        reporting.
 
 Dated:
        February 27, 2006
 
 
 /s/
        Peter
        Gray
 ---------------------------
 Peter
        Gray
 Chief
        Executive Officer
  84
  **Certification
        of Chief Financial Officer**
 **Pursuant
        to Section 302 of**
 **the
        Sarbanes-Oxley Act of 2002**
  I,
        Ciaran
        Murray, certify that:
 
 1.
        I have
        reviewed this transition report on Form 20-F of ICON plc (“the
        registrant”).
 
 2.
        Based
        on my knowledge, this report does not contain any untrue statement of a material
        fact or omit to state a material fact necessary to make the statements made,
        in
        light of the circumstances under which such statements were made, not misleading
        with respect to the period covered by this report;
 
 3.
        Based
        on my knowledge, the financial statements, and other financial information
        included in this report, fairly present in all material respects the financial
        condition, results of operations and cash flows of the registrant as of,
        and
        for, the periods presented in this report;
 
 4.
        The
        registrant's other certifying officer and I are responsible for establishing
        and
        maintaining disclosure controls and procedures (as defined in Exchange Act
        Rules
        13a-15(e) and 15d-15(e)) and have:
  a)
        Designed such disclosure controls and procedures, or caused such disclosure
        controls and procedures to be designed under our supervision, to ensure that
        material information relating to the registrant, including its consolidated
        subsidiaries, is made known to us by others within those entities, particularly
        during the period in which this report is being prepared;
 
 b)
        Evaluated the effectiveness of the registrant's disclosure controls and
        procedures and presented in this report our conclusions about the effectiveness
        of the disclosure controls and procedures, as of the end of the period covered
        by this report based on such evaluation; and
 
 c)
        Disclosed in this report any change in the registrant's internal control
        over
        financial reporting that occurred during the period covered by this report
        that
        has materially affected, or is reasonably likely to materially affect, the
        company’s internal control over financial reporting.
 
 5.
        The
        registrant's other certifying officer and I have disclosed, based on our
        most
        recent evaluation of internal control over financial reporting, to the
        registrant's auditors and the audit committee of registrant's board of directors
        (or persons performing the equivalent functions):
 
 a)
        All
        significant deficiencies and material weaknesses in the design or operation
        of
        internal control over financial reporting which are reasonably likely to
        adversely affect the registrant's ability to record, process, summarize and
        report financial information; and
 
 b)
        Any
        fraud, whether or not material, that involves management or other employees
        who
        have a significant role in the registrant's internal control over financial
        reporting.
 
 Dated:
        February 27, 2006
 
 
 /s/
        Ciaran Murray
 ---------------------------
 Ciaran
        Murray
 Chief
        Financial Officer
  85
  
 **Certification
        Pursuant to 18 U.S.C. Section 1350,**
 **As
        Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
        2002**
 
 
 In
        connection with the Transition Report of ICON plc (the “Company”) on Form 20-F
        for the period ending December 31, 2005, as filed with the Securities and
        Exchange Commission on the date hereof (the “Report”), I, Peter Gray, Chief
        Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as
        adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my
        knowledge:
 
 (1)
        the
        Report fully complies with the requirements of section 13(a) or 15(d) of
        the
        Securities Exchange Act of 1934; and
 (2)
        the
        information contained in the Report fairly presents, in all material respects,
        the financial condition and result of operations of the Company.
 
 Date:  February
        27, 2006
 
 
 /s/
        Peter
        Gray
 _______________________
 Peter
        Gray
 Chief
        Executive Officer
 
 The
        foregoing certification is being furnished solely pursuant to section 906
        of the
        Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter
        63
        of title 18, United States Code) and is not being filed as part of the report
        or
        as a separate disclosure document. A signed original of this written statement
        required by section 906 has been provided to ICON plc
        and
        will be retained by ICON plc and furnished to the Securities and Exchange
        Commission or its staff upon request.
 
 
 **Certification
        Pursuant to 18 U.S.C. Section 1350,**
 **As
        Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
        2002**
  
  In
        connection with the Transition Report of ICON plc (the “Company”) on Form 20-F
        for the period ending December  31, 2005, as filed with the Securities and
        Exchange Commission on the date hereof (the “Report”), I, Ciaran Murray, Chief
        Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as
        adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my
        knowledge:
 (1)
        the
        Report fully complies with the requirements of section 13(a) or 15(d) of
        the
        Securities Exchange Act of 1934; and
 (2)
        The
        information contained in the Report fairly presents, in all material respects,
        the financial condition and result of operations of the Company.
 
 Date:  February
        27, 2006
 
 
 /s/
        Ciaran Murray
 _______________________
 Ciaran
        Murray
 Chief
        Financial Officer
 
 The
        foregoing certification is being furnished solely pursuant to section 906
        of the
        Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter
        63
        of title 18, United States Code) and is not being filed as part of the report
        or
        as a separate disclosure document. A signed original of this written statement
        required by section 906 has been provided to ICON plc
        and
        will be retained by ICON plc and furnished to the Securities and Exchange
        Commission or its staff upon request.
 
   86