GENETIC TECHNOLOGIES LIMITED

==> picture [562 x 65] intentionally omitted <==

==> picture [562 x 66] intentionally omitted <==

ASX ANNOUNCEMENT October 15[th] , 2007

2007 Annual Report and Notice of Annual General Meeting

Genetic Technologies Limited (ASX: GTG; NASDAQ GM: GENE) is pleased to release its 2007 Annual Report and Notice of Annual General Meeting. It is anticipated that copies of both documents will be mailed to all shareholders by no later than Friday, October 19[th] , 2007.

As detailed in the attached Notice, the 2007 Annual General Meeting of shareholders will be held at 11.00 am on Wednesday, November 21[st] , 2007 at the following address:

“Treetops”, Melbourne Museum, 11 Nicholson Street, Carlton, Victoria 3053 Australia

FOR FURTHER INFORMATION PLEASE CONTACT

Mr. Thomas G. Howitt Company Secretary Genetic Technologies Limited Phone: +61 3 9415 1135

Genetic Technologies Limited • Website : www.gtg.com.au • Email : [email protected] ABN 17 009 212 328 Registered Office • 60-70 Hanover Street Fitzroy VIC 3065 Australia • Postal Address P.O. Box 115 Fitzroy Victoria 3065 Australia Phone 61 3 9415 1135 • Fax 61 3 9417 2987

==> picture [342 x 342] intentionally omitted <==

THE ARRIVAL OF GENETICS

ANNUAL REPORT 2007

ACN 009 212 328

==> picture [205 x 253] intentionally omitted <==

----- Start of picture text -----

Chairman’s message 2
Key fi nancial data 4
Introducing: Michael Ohanessian 6
CFO’s message 7
Board of Directors 8
GTG at a glance 9
Research 10
Testing 14
Licensing 18
Tribute to Dr. Mervyn Jacobson 22
Patents granted and pending 24
Our role in the community 28
Directors’ Report 30
Corporate Governance Statement 43
Financial Statements 46
Directors’ Declaration 82
Auditor’s Independence Declaration 83
Auditor’s Report 84
ASX Additional Information 86
Glossary 88
----- End of picture text -----

DIRECTORS

Henry Bosch AO Chairman

Michael B. Ohanessian

Fred Bart Non-Executive David Carruthers Non-Executive

John S. Dawkins AO Non-Executive

Dr. Mervyn Jacobson Non-Executive

COMPANY SECRETARY

Thomas G. Howitt

REGISTERED OFFICE

60-66 Hanover Street Fitzroy VIC 3065, Australia Telephone +61 3 9415 1135 Facsimile +61 3 9417 2987 Email [email protected]

POSTAL ADDRESS

P.O. Box 115 Fitzroy VIC 3065, Australia

COMPANY WEBSITE ADDRESS www.gtg.com.au

SHARE REGISTER

Computershare Investor Services Pty. Ltd. Level 2, 45 St. George’s Terrace Perth W.A. 6000, Australia Telephone +61 8 9323 2000 Facsimile +61 8 9323 2033 www.computershare.com.au

AUDITORS

Ernst & Young Chartered Accountants The Ernst & Young Building 8 Exhibition Street Melbourne VIC 3000, Australia

BANKERS

St. George Bank Limited 530 Collins Street Melbourne VIC 3000, Australia KeyBank National Association 1130 Haxton Drive Fort Collins CO 80525, USA

STOCK EXCHANGES Australian Securities Exchange Code: GTG Stock Exchange Centre 2 The Esplanade Perth W.A. 6000, Australia

NASDAQ Global Market Ticker: GENE The NASDAQ Stock Market One Liberty Plaza, 165 Broadway New York NY 10006, USA

GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2007

In 2007

Our revenue was up 42% on the previous year to $15.3 million We generated positive net cash fl ows from o perations for the fi rst time Our DNA testing businesses experienced strong growth, which we expect to continue We have new leadership and are in a strong position for 2008

CHAIRMAN’S MESSAGE

==> picture [146 x 152] intentionally omitted <==

The 2007 financial year has, once again, seen many significant developments at Genetic Technologies Limited.

Importantly, and most recently, the Board has appointed Mr. Michael Ohanessian to the position of Managing Director and Chief Executive Offi cer. This appointment became effective on 24 September 2007 and followed an international search conducted with the assistance of specialist search consultants. The process commenced in March 2007 when the former CEO and founder of the Company, Dr. Mervyn Jacobson, advised the Board to activate an orderly succession plan following his 65th birthday.

The Board is extremely pleased to have secured the services of Mr. Ohanessian, who has an impressive track record of delivering value for shareholders in the fi eld of biotechnology. On behalf of the Directors, I would like to warmly welcome him to the Company.

Special recognition must be given to the outstanding contribution made by Dr. Jacobson during his 18 years as Executive Chairman and later as CEO of the business which has become what is now GTG. Under his leadership, the Company successfully proved the value of so-called ‘junk’ DNA and his vision and hard work has seen GTG become

Chairman’s message

Australia’s largest non-Government genetic testing business. Dr. Jacobson leaves the CEO position having engendered in the Company a strong entrepreneurial spirit and a desire for scientifi c discovery. He will continue to serve the Company as a Non-Executive Director and, drawing on his extensive experience, as a consultant contributing to its licensing program.

In March 2007, we announced that the Australian Securities and Investments Commission (‘ASIC’) had sought information from the Company regarding certain past trading in its shares. The Company has cooperated fully with ASIC and notes that, whilst the information sought does not relate to any suspected wrongdoing by GTG itself, it does relate to the activities of certain Executives of the Company. We understand that the investigation is continuing.

As detailed in the CFO’s message on page 7, 2007 saw further substantial progress in the Company’s fi nancial position. For the fi rst time in its history, GTG generated positive cash fl ows from its operations. This was based on record revenues of more than $15 million, an increase of over 42%. Signifi cant doubledigit growth was recorded in both the licensing and testing businesses, with further growth budgeted for the coming year. If achieved, GTG will deliver a profi t in 2008.

Since the 2006 Annual Report, there have been two other changes to the Board. Mr. Robert Edge retired at the 2006 AGM and on behalf of the Board I would like to thank him for his contribution as a Director and Chairman of the Audit Committee. In February 2007, Mr. David Carruthers was appointed as a Non-Executive Director and has assumed the position of Chairman of the Audit Committee. He brings a great depth of fi nancial experience to the Company and I would like to thank him, together with my other colleagues on the Board, for their diligence and wise counsel during the year.

Prior to the new CEO’s appointment, the Board sought the services of independent consultant Dr. Ian Nisbet as a Strategic Advisor. During his association with GTG, Dr. Nisbet has worked closely with the Management Team to undertake a comprehensive review of the Company’s operations which, in turn, has led to the preparation of a detailed fi ve-year plan outlining numerous strategies for expanding GTG’s businesses. The Board is confi dent that this document will provide a solid platform upon which the new CEO can deliver further improved results. On behalf of the Board, I would like to thank Dr. Nisbet for his contribution.

The GTG Management Team and their staff have continued to make a great contribution to the Company, sometimes under diffi cult circumstances. On behalf of the Board, I thank them for their hard work and dedication.

Henry Bosch AO Chairman

GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2007

A strong performance in 2007

==> picture [502 x 323] intentionally omitted <==

----- Start of picture text -----

Research Testing Licensing
Millions of dollars Millions of dollars
At GTG, we continue
to view our innovative 2007 $11.34
2007 $3.12
research projects as
being fundamental
2006 $2.55
to our long-term 2005 $2.39
success.
2004 $2.06
2005 2006 $6.69
$6.57
2003 $1.63 2003 $5.54
$0.39
2004
----- End of picture text -----

SIGNIFICANT DEVELOPMENTS IN RESEARCH

Considerable progress has been made by the Company during 2007 to advance its various research projects to achieve commercial outcomes.

TESTING REVENUES CONTINUE TO GROW 2007 saw a 22% growth in testing revenues generated by the Company. We expect this trend to continue as we expand into new market segments.

LICENSING REVENUES DRIVE GROWTH

Licensing revenues were up 70% during 2007. We expect the momentum of the licensing program to continue.

$15.32 million, up 42%

In 2007, the Company once again generated further growth – recording historically-high total revenues of $15.32 million.

KEY FINANCIAL DATA

A SIGNIFICANT 42.4% INCREASE IN REVENUES TO $15.3 MILLION
A SIGNIFICANT 22.3% INCREASE IN REVENUES GENERATED FROM GENETIC TESTING ACTIVITIES
FOR THE FIRST TIME, THE COMPANY GENERATED POSITIVE CASH FLOWS FROM OPERATIONS DURING 2007
OPERATING CASH COSTS FELL BY MORE THAN $2.3 MILLION

2007 RESULTS

Five-year history

TOTAL REVENUE AND INCOME (Millions of dollars)

==> picture [18 x 7] intentionally omitted <==

----- Start of picture text -----

$0.86
----- End of picture text -----

==> picture [53 x 25] intentionally omitted <==

----- Start of picture text -----

Licensing (74.0%)
Testing (20.4%)
Other (5.6%)
----- End of picture text -----

==> picture [113 x 154] intentionally omitted <==

----- Start of picture text -----

TESTING REVENUE
(Thousands of dollars)
$917
$658
$1,416
$128
DNA profiling (45.4%)
Medical diagnostics (29.4%)
Animal testing (21.1%)
Other testing (4.1%)
----- End of picture text -----

TOTAL EXPENSES

(Thousands of dollars)

==> picture [53 x 17] intentionally omitted <==

----- Start of picture text -----

$1,989
$1,307
----- End of picture text -----

==> picture [102 x 48] intentionally omitted <==

----- Start of picture text -----

Employee expenses (28.3%)
Amortisation/depreciation (23.4%)
Testing expenses (10.1%)
Impairment write-downs (6.6%)
Other expenses (31.6%)
----- End of picture text -----

==> picture [271 x 221] intentionally omitted <==

----- Start of picture text -----

TOTAL REVENUE AND INCOME LICENSING REVENUE
($ millions) ($ millions)
16 $15.32 12 $11.34
12 9
8 6
4 3
0 0
’03 ’04 ’05 ’06 ’07 ’03 ’04 ’05 ’06 ’07
----- End of picture text -----

==> picture [198 x 54] intentionally omitted <==

==> picture [273 x 226] intentionally omitted <==

----- Start of picture text -----

NET PROFIT/(LOSS) AFTER TAX SHAREHOLDERS’ EQUITY
($ millions) ($ millions)
40
’03 ’04 ’05 ’06 ’07
0
35
-1
-2 30
-3 $26.10
25
-4
-5 -$4.35 20
-6
15
-7
10
-8
-9 5
-10
0
-11 ’03 ’04 ’05 ’06 ’07
----- End of picture text -----

==> picture [198 x 43] intentionally omitted <==

GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2007

==> picture [496 x 114] intentionally omitted <==

----- Start of picture text -----

GTG ASX (0.165) XJO ASX (6480.9) 6,400.00
0.850
0.750 6,000.00
0.650
5,200.00
0.550
0.450 4,400.00
0.350
3,600.00
SHARE PRICE 0.250
0.150 2,800.00
Genetic Technologies
S&P ASX 200 OCT 2002 APR 2003 OCT 2003 APR 2004 OCT 2004 MAR 2005 OCT 2005 MAR 2006 OCT 2006 MAR 2007 SEP 2007
----- End of picture text -----

==> picture [562 x 574] intentionally omitted <==

----- Start of picture text -----

TESTING REVENUE EBITDA NET CASH FLOWS FROM OPERATIONS
($ millions) ($ millions) ($ millions)
3.5
0 ’03 ’04 ’05 ’06 ’07 3 $2.60
$3.12
3.0 -$0.23 2
-1
1
2.5
-2
’03 ’04 ’05 ’06
0
’07
2.0 -3
-1
1.5 -4
-2
-5
1.0 -3
-6 -4
0.5
-7 -5
0.0
-6
’03 ’04 ’05 ’06 ’07 -8
NET TANGIBLE ASSETS MARKET CAPITALISATION
($ millions) ($ millions) NUMBER OF SHAREHOLDERS
18 135 4,500
15
$13.99 108 3,600
3,319
12
81 2,700
9
$59.79
54 1,800
6
27 900
3
0 0 0
’03 ’04 ’05 ’06 ’07 ’03 ’04 ’05 ’06 ’07 ’03 ’04 ’05 ’06 ’07
----- End of picture text -----

INTRODUCING: MICHAEL OHANESSIAN

==> picture [146 x 151] intentionally omitted <==

Introducing: Michael Ohanessian

On 24 September 2007, Michael Ohanessian was appointed Chief Executive Officer. He tells shareholders why he joined GTG.

Q: WHAT ATTRACTED YOU TO GTG?

MO: I am quite attracted to biotechnology to begin with, and GTG in particular has some very interesting intellectual property. Further, it has revenue and is very close to being a profi table business which is very unusual for an Australian biotech company.

The Company has some incredibly interesting genetic-based technology and capabilities. I think what Mervyn did years ago – starting a company on the idea of non-coding DNA – was extraordinary, a tremendous breakthrough. It is very exciting to be involved in a company that has such ubiquitous technology.

I fi nd the testing side of the business attractive as well. The last company I worked for was an in-vitro diagnostic company so it is a space I am both comfortable with and fascinated by. It is a very interesting space and one that I enjoy.

Q: WHAT SKILLS DO YOU BRING TO THE ROLE OF CEO?

MO: I hope to be able to use my strategy skills to build a business model that unlocks the value of our technology and intellectual property assets. Similarly, I’d like to see us also demonstrate an ability

to execute on strategic initiatives and hence create an exciting business that is an attractive investment proposition.

Q: WHAT DO YOU SEE AS YOUR IMMEDIATE PRIORITIES?

MO: I have three. The fi rst priority is a highlevel strategic review of the Company. GTG has many different activities and has done very well to create so many business opportunities, but now we need to take a step back and look at each opportunity strategically. Okay, where does this company now go? We need to develop a strategic direction.

The second priority is to implement a number of short-term initiatives; pushing the revenues along, particularly on the licensing side; growing the high-potential genetic testing business; and, of course, the research projects. I think there may be a lot of quick wins we can start to pursue over the next year or so.

The third priority area relates to the Company’s organisational processes and structure. It has, over the last few years, made some important progress in building up its Board capabilities and corporate governance processes. Going forward, I’d like to see us further develop the Company’s management and organisational capabilities to position the Company for growth. Getting the organisation ready for the challenges ahead will be critical to our ability to execute our strategic plans.

Q: WHAT CHALLENGES DO YOU FORESEE AT THIS EARLY STAGE?

MO: I think one of the challenges is how to effectively leverage the Company’s

achievements to date, especially in the licensing area. Mervyn has done a great job leading the effort to drive the non-coding DNA licensing revenue. Most of that revenue is in the northern hemisphere. The question is how does a company with most of its resources based locally manage to grow its revenues in international markets? It is not an uncommon problem for local biotechnology companies. Building a global footprint while driving our locallybased testing revenue will be a challenge.

Q: WHERE DO YOU SEE THE COMPANY GOING OVER THE NEXT FEW YEARS?

MO: I don’t want to answer too specifi cally until we’ve done the strategic review. Certainly, I’d like to see the Company build a lot more process and more of the transparency that we would expect of a more mature company. I would like to see the Company be a little more predictable in terms of its earnings; I think that has been a challenge for some of our investors. I would like to see us go to the next level in terms of size so we have some economies of scale. The Company has done very well to get to the $15 million mark and to be cash-fl ow positive, but we’ve got to grow to leverage our bottom line.

Q: WHAT IS THE ONE KEY MESSAGE YOU’D LIKE TO COMMUNICATE TO GTG SHAREHOLDERS?

MO: Unraveling the mysteries of the genome will create enormous opportunities for what is today still a very nascent industry. GTG, with its strong intellectual property portfolio and world class testing capability, is uniquely placed to be a key player in this emerging market.

CFO’S MESSAGE

GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2007

==> picture [150 x 151] intentionally omitted <==

CFO’s message

The 2007 year has seen a dramatic improvement in the Company’s financial position, with all key areas delivering positive results.

The 2007 fi nancial year saw Genetic Technologies Limited deliver the largest revenues in the Company’s history and, for the fi rst time, the generation of positive cash fl ows from operations. These impressive results are a validation of the strategies being pursued by the Company and provide a sound platform for further growth and expansion in the 2008 fi nancial year under the leadership of our new

During the year, GTG and its subsidiaries generated consolidated gross revenues and other income of approximately $15.3 million, representing a signifi cant 42.4% increase over the corresponding fi gures for the previous year. The overall increase of more than $4.5 million was due principally to a 69.6% increase in revenues from the Company’s licensing program and a 22.3% increase in revenues generated from its genetic testing activities. Importantly, further

resources are being deployed to extend the reach of the licensing business and the range of tests being offered by the Company, with new marketing initiatives being introduced to further promote the Company’s services.

The cash receipts from operations and interest exceeded $15 million in 2007, with net cash infl ows from operations of approximately $2.6 million. These fi gures compared most favourably to those for the previous year which delivered equivalent cash receipts of $8.5 million and a net cash defi cit from operations of almost $6.0 million. In addition to the increase in cash receipts, operating cash costs incurred during 2007 fell by more than $2.3 million. As a result, the cash reserves held by the Company at the end of the year in review were approximately $13.8 million, or almost $1.9 million more than at the same time last year.

The consolidated loss after tax of $4.3 million included net non-cash items totalling approximately $5.7 million, comprising amortisation and depreciation ($4.6 million), impairment losses and other write-downs ($1.3 million) and unrealised foreign exchange losses and share-based payments expenses ($0.5 million), partially offset by non-cash revenues generated from the Applera settlement ($0.7 million). Encouragingly, the loss was more than $3.5 million less than that for the previous year.

Finally, during 2007 GTG continued to fund a number of research and development projects, which have the potential to generate further valuable intellectual property for the Company. Several of these projects made signifi cant technical advances during the year, with trials now being evaluated in several instances. The outputs from these projects can then be commercially exploited either by outright sale or via some form of testing and/or licensing activity. The Company continues to view this commitment to research as being fundamental to its long-term success.

As in 2006, we have provided (on pages 4 and 5) a fi ve-year history in graphical format of the Company’s key fi nancial data. We trust that this will provide our shareholders and other readers with a greater insight into the Company’s improving fi nancial position and the positive results achieved in the year under review.

Thomas G. Howitt

BOARD OF DIRECTORS

==> picture [159 x 157] intentionally omitted <==

Henry Bosch AO

Mr. Bosch, 76, is a former Chairman of the NCSC, the predecessor of ASIC. He was appointed to the Board on 24 June 2005 and as Chairman on 23 November 2005. He also serves as Chairman of the Company’s Corporate Governance Committee.

==> picture [159 x 157] intentionally omitted <==

David Carruthers

Mr. Carruthers, 59, was appointed to the Board on 26 February 2007 and serves as Chairman of the Company’s Audit Committee. During his career with BP Finance, he was CFO for the global operations based in London and the European Regional CEO based in Brussels.

==> picture [160 x 157] intentionally omitted <==

Michael B. Ohanessian

Mr. Ohanessian, 43, was appointed Chief Executive Offi cer of Genetic Technologies Limited on 24 September 2007. He was formerly the CEO of Vision Biosystems and has also worked for Mobil and Boston Consulting Group.

==> picture [160 x 157] intentionally omitted <==

John S. Dawkins AO

Mr. Dawkins, 60, is a former federal politician and Treasurer of Australia. He was appointed to the Board on 24 November 2004 and serves on both the Audit and Corporate Governance Committees.

==> picture [160 x 157] intentionally omitted <==

Fred Bart

Mr. Bart, 52, served as Chairman of the Company at the time of its acquisition of the GeneType business in 2000 and has been successfully involved in the textile and other industries for the last 25 years.

==> picture [160 x 157] intentionally omitted <==

Dr. Mervyn Jacobson

Dr. Jacobson, 65, is a qualifi ed Medical Practitioner and a co-founder of the company that is now Genetic Technologies. He is the former CEO and serves as a consultant to the Company, leading its licensing program.

GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2007

GTG AT A GLANCE

WHAT WE DO	WHAT WE DO	WHERE WE DO IT	HOW WE DO IT
We support a range of		In addition to the research	The key focus of each
research projects in the field		undertaken by our staff	research project is
of	genetics and other areas.	at our headquarters in	theidentification of a
GTG views this continuing		Melbourne, we have	commercial outcome,
commitment to research as		research collaborations	typically the development of
an investment in the future		with the C.Y. O’Connor	a test, product or process
and fundamental to its		ERADE Village Foundation	which has significant
long-term success. These		in Perth, Western Australia,	market potential. In the
projects have well-defined		as well as universities,	commercialisation phase,
commercialisation plans,		hospitals and major	GTG seeks to either market
clearly identified market		research organisations	the product itself or to
potential and significant		located in other states of	negotiate licensing and
worldwide application.		Australia and overseas.	distribution agreements
			with partners around the
			world.
We offer a wide range of		In our fully accredited	Genetic testing is
genetic testing services		laboratory facilities in	performed by ourhighly
covering humans, animals		Melbourne, Australia,	trained staffusing a
and plants. Our services		our testing services are	range ofstate-of-the art
comprise human diagnostics,		predominantly offered to	technology platforms.
including predisposition		the Asia-Pacific region,	Our high-throughput, low-
to	disease, profiling	where GTG has a number	cost laboratory enables
(identification) and forensics,		of exclusive distribution	the Company to process
as well as personalised		relationships. We also offer	significant numbers
diagnostics including our		paternity testing services	of complex tests cost
ACTN3 SportsGene Test®.		into China, and our ACTN3	efficiently with unmatched
Our animal diagnostics		SportsGene Test®into	turnaround times. Testing
services include tests for		Europe and Japan. Referral	is conducted under strict
parentage, predisposition		testing is also sent to GTG	independent protocols
to	disease, traits and the	via an international genetic	and standards that exceed
maintenance of stud books.		testing network.	world’s best practice.
We own an extensive series of patents covering the		Our recently-expanded licensing program now	The first stage of the process involves the identification of
use of ‘non-coding’ DNA.		includes four teams,	potential licensees. Detailed
These patents, which cover		including three external	dossiers are then prepared
all genes in all species,		licensing contractors, who	and distributed to the
have been granted in		are responsible for initiating,	licensing teams, based on
24 countries. We actively		progressing and completing	their geographical proximity
out-license these patents		negotiations with potential	to the target. Negotiations
around the world, having		licensees. These teams are	are initiated, pursued and
granted approximately 40		based in Australia, USA and	ultimately concluded, with
licenses to date. We believe		Europe.	licenses then being granted.
that there are at least			Consideration received by
400 companies and other			GTG includes a combination
institutions that may yet			of cash, valuable intellectual
require a license to our			property for commercial
non-coding patents.			exploitation and other assets.

RESEARCH

==> picture [58 x 31] intentionally omitted <==

TESTING We offer a wide range of genetic testing services covering humans, animals and plants. Our services comprise human diagnostics, including predisposition to disease, profiling (identification) and forensics, as well as personalised diagnostics including our ACTN3 SportsGene Test[®] . Our animal diagnostics services include tests for parentage, predisposition to disease, traits and the maintenance of stud books.

LICENSING We own an extensive series of patents covering the use of ‘non-coding’ DNA. These patents, which cover all genes in all species, have been granted in 24 countries. We actively out-license these patents around the world, having granted approximately 40 licenses to date. We believe that there are at least 400 companies and other institutions that may yet require a license to our non-coding patents.

OPERATIONS REVIEW

Research: GTG has a longstanding tradition of fundamental research

The Company’s research strategy is aimed at providing a robust foundation for the medium to long term success and growth of the Company. The driving force behind GTG’s research projects is a philosophy of looking outside the box. It is this same approach that saw the Company successfully discover the relevance and value of non-coding DNA years before the broader scientifi c community. Today, GTG is looking at a novel method of pre-natal sampling; new cancer treatments using the body’s immune system; clever ways to kill parasites in livestock; and new genetic matching techniques. In each case, the Company applies cuttingedge science, but tries to examine age-old problems from a unique point of view.

RARECELLECT[®]

RareCellect[®] is a program designed to develop a widely applicable, noninvasive, safe means for isolating foetal cells from a pregnant mother to enable genetic testing of the baby during the early stages of pregnancy.

The requirement for such tests has increased over the past years, particularly since the sequencing of the human genome was completed in 2003.

It is anticipated that the market for such tests will increase rapidly over the forthcoming decade as progressively greater numbers of diseases are linked to mutations of the DNA.

Recent trials were conducted at the Royal Women’s and the Royal Children’s hospitals in Melbourne involving a total of 150 patients, most of whom were women with a high rate of susceptibility to a particular genetic disease due to family histories. These trials successfully demonstrated that the RareCellect technology provided accurate results equivalent to traditional, but more invasive, techniques.

PROJECT UPDATE

During the past 12 months, the protocol for the purifi cation of foetal cells from the blood of pregnant women was developed, a procedure which has since been validated. Current research is focused on optimising the purifi cation procedure in order to routinely isolate signifi cant numbers of cells in a high proportion of women. For example, such variables as the number of weeks following conception, the volume of blood, the number of past pregnancies and the age of the woman are being considered.

Following the use of the RareCellect[®] purifi cation technique, the foetal cells recovered are one thousand times more concentrated in the fi nal preparation than in the mother’s blood. The remaining cells are blood cells derived from the mother. Cells of this purity are then suffi cient to determine whether or not the foetus possesses three copies of a particular chromosome instead of the normal two copies. It is this outcome which is responsible for diseases such as Down’s Syndrome. Unfortunately, however, these cells are not suffi ciently pure to conduct detailed genetic tests involving single base modifi cations.

In order to isolate more highly purifi ed foetal cells, the research program has recently been expanded to include an alternative, non-invasive method, namely foetal cells obtained from cervical mucous. In this instance, a catheter is used to collect mucous from what is referred to as the cervical plug. These foetal cells can then be purifi ed using the same technology as that used for the blood samples. The foetal cells isolated using this technique are approximately 90% pure which is suffi cient to detect single base mutations.

Discussions are also underway with a number of third parties to examine ways in which the commercialisation of this technology can be accelerated.

GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2007

IMMUNAID

The ImmunAid project seeks to improve the effi ciency of treatments for cancer and chronic diseases such as AIDS. The project seeks answers to the question of why the body does not mount a successful immune response against cancer cells or cells infected with a virus leading to chronic disease. It has since been discovered that the immune system does mount a response but that this is subsequently suppressed.

The initial phase of the project was to demonstrate immune involvement in a large number of cancer patients. This has since been completed and we have discovered that the immune system is cycling. This project has formed the basis of fi ve patent applications.

By serially measuring immune markers over intervals of two to three days, it has been discovered that an immune response occurs but is ‘turned off’ before it can effectively overcome the disease. It has also been discovered that the reason for the response being limited is that cells, referred to as T-reg cells, become activated. Given this, it has been proposed that, if the T-reg cells could be rendered inactive, the immune response against the cancer or virally infected cells would effectively deal with the disease.

The next phase of the project has been to develop the theory further. Detailed analysis of the scientifi c literature has demonstrated that approximately 7% of cancer patients treated with standard chemotherapy recover fully from the cancer.

In the remaining cases, there is little effect or, in some cases, the disease actually becomes worse. This is consistent with the ImmunAid hypothesis and coincides with the window of opportunity when the T-reg cells proliferate and are thus vulnerable to chemotherapeutic agents. The key is to determine precisely when that window of opportunity occurs and therefore accurately time the treatments.

PROJECT UPDATE

During 2007, the ImmunAid project has been extended to preliminary trials in patients. A group at an eminent cancer research institute in the United States has commenced a trial measuring immune parameters in patients suffering from melanoma and is treating them at a particular phase in the immune cycle.

Further experiments in Australia directed at demonstrating the ImmunAid cycle in patients with different cancers are also continuing. Ethics approval applications for similar trials to those being conducted in the USA are now being prepared in Australia for submission to the relevant parties. These involve treating late-stage patients suffering from various cancers.

Consideration is also being given to initiating trials in patients suffering from auto-immune diseases. The rationale in this instance is precisely the opposite to that which applies in the treatment of cancer. Auto-immune diseases arise when the immune system is too strong. It is hypothesised that the timing of treatment of individuals suffering from these disorders should coincide with the time when the immune response was proliferating, thereby limiting the autoimmune response. Discussions have been held with researchers specialising in one such disease to fi rst test the hypothesis in such patients. These trials are currently at the planning stage.

Discussions have also been initiated with third parties in relation to potential commercialisation strategies for the ImmunAid project.

==> picture [154 x 161] intentionally omitted <==

OPERATIONS REVIEW RESEARCH

==> picture [155 x 175] intentionally omitted <==

PROJECT UPDATE

PATHOGENS

A priority list of 20 targets has now been identifi ed. One of these proteins has been the subject of the majority of the research to date, as it was shown to be vital to the survival of the parasites. A number of chemicals has been designed to interact with this protein and inactivate it. Some of these chemicals have been shown to have signifi cant effects against two of the major parasitic roundworms of sheep. These developments have been protected by two provisional patent applications.

The annual cost associated with parasitic diseases in sheep and cattle in Australia has been estimated at $1 billion. The diseases are largely controlled by chemicals but there is a growing resistance arising, particularly in the nematode or parasitic worm population. The pathogens project seeks to discover new drug targets for the control of intestinal parasitic diseases in livestock.

GTG has entered into a six-year collaboration with researchers at the University of Melbourne Veterinary School to discover new classes of chemicals. The project is supported by grants from Meat and Livestock Australia and from the Australian Research Council. More recently, a group at the Department of Chemistry at the University of Newcastle, specialising in the development of inhibitors of particular enzymes, has also joined the project.

The project has recently received additional funding from the Australian Research Council to further support an expanded chemical investigation.

Several major pharmaceutical companies active in the fi eld of animal health have been approached to determine their interest in this project. The discussions are continuing. Meat and Livestock Australia is delighted with the progress of the project and is seeking approval to contribute additional funds to the project.

In the fi rst phase of the project, modern genetic techniques have been used to identify proteins essential for the survival of the parasite. Several such targets have been prioritised and their DNA sequences have been compared with that of humans and sheep. The logic behind this approach is that the parasite targets that have the least homology with man or the host will be more environmentally safe.

==> picture [247 x 358] intentionally omitted <==

GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2007

==> picture [27 x 358] intentionally omitted <==

GENOMIC MATCHING TECHNIQUE

A long-standing collaboration between GTG and the C.Y. O’Connor ERADE Village Foundation in Western Australia continues. This Foundation leads the world in the study of a novel genetic structure within the genome of all humans plants and animals. The genome structure is highly conserved throughout evolution suggesting that it fulfi ls a vital function within the organism.

Unlike conventional genetics, where one gene is controlled by one control region, it is believed that these highly conserved genetic regions control several genes at the same time. The extension of this logic suggests that differences in the structures of these regions may be responsible for diseases involving many genes.

The Foundation has developed a methodology for identifying these highly important DNA sequences. The genomic mapping technique (‘GMT’) uses sophisticated computer programs to screen the entire genome of an organism which highlights repeated segments of the genome. Once identifi ed, they can be precisely characterised and prioritised to then be used to investigate their relationship to a range of potential genetic disorders.

This research opens up exciting opportunities in relation to new concepts in genetic testing which include:

identifi cation of disease associations, e.g. blindness in humans;
improved diagnostics for bone marrow transplantation;
identifi cation of aggressive breeds of dogs;
new tests to improve productivity in aquaculture; and
new software to assist in genetic analysis.

==> picture [311 x 208] intentionally omitted <==

There is also a sound basis for believing that this approach might apply equally to human transplants. The collaboration with the Foundation has the potential to lead to a wide range of novel products for subsequent commercialisation by GTG.

PROJECT UPDATE

During the past year, research has focused on the analysis of a large number of samples from patients suffering the mild and severe forms of a disease resulting in blindness (age-related macular degeneration) together with age-matched controls. The results demonstrate that there may be a correlation between the various forms of the disease and the genetic parameters. These developments are being investigated further in collaboration with researchers at Eye Research Australia.

Research has also been initiated to investigate the potential applications of this project in forensics and in increasing the success of transplants for dogs and cats. The market for transplants in cats, in particular, has grown enormously in the US in recent times. Some operations on these animals cost several thousand dollars, despite the relatively low success rate. It is anticipated that, if the donor and recipient were better matched, using DNA sequences identifi ed by the GMT, a far higher proportion of the donors would survive such transplants.

OPERATIONS REVIEW

Testing: The Company has now developed a reputation for highquality genetic testing services.

The last 12 months has seen the Company focus its energies across clearly defi ned areas of commercial interest, confi dent that the foundations established over the past years will continue to deliver expanding revenues as the Company pursues its overall strategic goals.

DNA PROFILING

During the previous fi nancial year, this division performed to expectations. In the coming year, GTG is budgeting for continued growth as the initiatives introduced in the previous fi nancial period start to bear fruit. In addition, GTG plans to expand the range of services offered to export the business beyond the Company’s traditional Australian base.

PATERNITY

GTG continues to operate the largest paternity testing laboratory in Australia. Two years ago, the major pathology companies began offering paternity testing services to their clients, resulting in the loss of referrals from these sources. Competitors also began to heavily discount the price of their services to increase market share. GTG, however, has chosen not to compete on price alone and has therefore maintained healthy margins. To combat this increased level of competition, various marketing initiatives have been introduced to boost GTG’s paternity testing referral base. A major marketing effort was undertaken with the Australian legal profession. The

preliminary data from this campaign has seen an increase in solicitor awareness of GTG and a rebounding of paternity testing numbers from the legal profession.

Internet marketing efforts continue to provide a strong source of paternity testing business to the Company. The Company is now ranked number one or two in major search engine requests for the major category key words. Additional business opportunities on the internet have been identifi ed and will be pursued in the coming period. During the 2008 fi nancial year, GTG is budgeting for modest growth in the Australian market which is becoming increasingly competitive. The Company is also looking at a number of overseas paternity testing opportunities.

FORENSICS

In May 2006, the Company commenced a three month trial to provide forensic testing services on volume crime samples for the New South Wales Police force. The purpose of the trial was to enable the NSW Police to assess the capability of an external organisation, such as GTG, to perform DNA testing

to the required high standard, and for a third party provider to be able to meet the stringent procedures for police evidence. Upon completion of the trial, a report was prepared and submitted to the NSW Cabinet seeking approval to grant a long-term contract. If the NSW Police force chooses to proceed with outsourcing, GTG is well placed to undertake the work. The Company has also developed a government relations strategy to lobby state police forces in other states.

In June 2007, GTG successfully launched its ‘Dog Attack DNA Kit’ together with the City of Port Phillip. This kit is designed to enable council rangers to access the power of DNA technology following dog attack incidents. A detailed description of this project is available on page 28.

The Company has also developed a forensic DNA test for animal DNA that is not currently offered by anyone else. This test could soon provide police and law enforcement agencies with a very important tool for identifying various blood stains at crime scenes.

GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2007

COMMERCIAL ANIMALS

In April 2004, GTG established a livestock DNA business, largely focused on parentage testing for breeders. Since its establishment, the business had continually fallen well short of budget expectations, due in part to the drought. Based on its structure and prospects, it was not expected to break even within the medium term and a strategic decision was made for GTG to dispose of this business. Accordingly, in June 2007, GTG’s parentage testing business for cattle and sheep was sold, though the Company retained its goat and alpaca DNA testing business. To assist in the promotion of this business, GTG has successfully established a relationship with the Australian Alpaca Breeders Association (AABA) and the Company is now providing it with DNA profi ling and parentage testing for its stud book.

CANINE TESTING

The canine DNA testing business continued to deliver strong growth for the year which is expected to continue as increasing resources are allocated to develop and promote GTG’s products. GTG now offers a total of 24 different disease tests which affect over 50 major dog breeds.

GTG’s ability to offer DNA profi ling and parentage verifi cation, together with GTG’s suite of disease tests, enables dog breeders and owners to access a ‘one-stop-shop’ for most of their canine testing needs. Breeders in the US, for example, would have to send their samples to four different labs in order to access the same suite of tests. The Company’s canine sample collection program has also begun to attract international recognition, with

GTG’s protocols being recognised and duplicated by other overseas testing programs, particularly in the US.

In 2007, GTG continued to provide DNA parentage testing services to Greyhounds Australasia for stud book purposes. The Company is investigating opportunities in non-health related canine testing and in the non-pedigree dog markets in Australia and Asia.

PLANTS

In November 2006, GTG’s joint venture company for the provision of plant genetic testing, AgGenomics Pty. Ltd., executed a second collaborative research and development agreement with the national horticulture body, Horticulture Australia Ltd., to continue to develop a range of genetic markers for

==> picture [491 x 201] intentionally omitted <==

----- Start of picture text -----

TESTS DNA PROFILING MEDICAL DIAGNOSTICS TRAITS
HUMAN Paternity Breast and ovarian cancer ACTN3 SportsGene Test [®]
Kinship Colon cancer
Sibship Epilepsy
Twins
Forensics
ANIMAL Paternity Canine disease tests
Stud Books Birds Equine
Breeding Analysis Alpacas
Forensics
PLANT Plant Variety Analysis
----- End of picture text -----

==> picture [489 x 144] intentionally omitted <==

OPERATIONS REVIEW TESTING

the strawberry industry. This project will verify that the markers found in the fi rst project, in just one strawberry variety, can also be applied to other varieties grown in Australia.

In 2003, AgGenomics Pty Ltd developed a variety identifi cation test for wheat. The purpose of the test is to audit crop deliveries and in doing so, confi rm that the correct wheat varieties are being delivered to the silos designated for those varieties. This test has been used by the industry for each harvest since 2003 and will again this year where in excess of 1500 samples are expected to be tested.

HUMAN DISEASE

In late June 2006, the Medical Diagnostics laboratory at Genetic Technologies was granted NATA accreditation (ISO15189) for medical testing. In achieving this important milestone, the Company qualifi ed as an alternative service provider of genetic testing services to many specialist genetics clinics in Australia and New Zealand for whom NATA accreditation is a requirement.

The Company’s NATA accreditation has resulted in an impressive growth in referrals to the Medical Diagnostic laboratory during the 2007 fi nancial year,

with budget targets for all medical tests being exceeded.

GTG was one of the lead sponsors of the 11th International Congress of Human Genetics held in Brisbane in August 2006. The Company’s profi le in the human diagnostics market received a strong boost at the Congress where the Company was also a major exhibitor. The GTG stand was well attended with key staff in attendance to meet with both local and international leaders in the human genetics fi eld. Further to this, Dr. Frank Firgaira, Head of the GTG Medical Diagnostics Laboratory, was an invited speaker at the 76th Annual

To become the biggest and the best provider of genetic testing services in the Asia-Pacifi c region, we believe we need:

BEST RESPONSE QUALITY Decisions using DNA GTG has an analysis can have uncompromising far reaching effects. commitment to GTG ensures that its quality. GTG is NATA customers receive a accredited and rapid turnaround time vigorously embraces for all of its testing all regulatory services. requirements.

==> picture [446 x 104] intentionally omitted <==

----- Start of picture text -----

BEST BEST BEST LARGEST
QUALITY
PEOPLE RESPONSE PROCESSES PRODUCT
RANGE
----- End of picture text -----

==> picture [344 x 65] intentionally omitted <==

----- Start of picture text -----

BEST PEOPLE LARGEST PRODUCT RANGE
DNA analysis requires GTG offers Australia’s
highly trained staff. widest range of genetic
Each member of GTG’s tests across humans,
senior operational staff is animals and plants.
considered to be a leader
in their respective fields.
----- End of picture text -----

GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2007

Scientifi c Congress of the Royal Australasian College of Surgeons where he presented on the Company’s experience with genetic testing for breast and ovarian cancer predisposition in Australia and New Zealand.

In addition to raising the Company’s profi le, GTG has also focused on refi ning laboratory operations to facilitate continued improvement in service provision. Turnaround times for the testing of the BRCA1 and BRCA2 genes involved with Hereditary Breast/Ovarian Cancer Syndrome have decreased impressively from 3 months to less than 8 weeks. This compares favourably to many public hospital laboratories where patients can wait up to 14 months for test results. Furthermore, the GTG laboratory is now offering express gene testing services to clinicians who require urgent test results for decision making in the surgical or therapeutic management of patients.

The laboratory’s strong focus on customer service is attracting business from several government funded familial cancer clinics in Victoria, New South Wales, Queensland and New Zealand. These clinics are using the GTG laboratory to clear testing backlogs in public hospital laboratories and to improve the timely provision of clinical service to patients. In an effort to expand the number of clinics utilising the Company’s Medical Diagnostic service, and ultimately improve service to patients and their families, the Company will continue discussions with key health offi cials, clinical service providers and patient advocate groups during the coming year.

In addition, there is a growing knowledge within neurology circles of the SCN1A epilepsy diagnostic gene testing service offered exclusively by the Company in the Asia-Pacifi c region. This test is promoted worldwide through GTG’s membership of the GENDIA network and is used to confi rm the genetic aetiology of a severe form of childhood epilepsy known as Severe Myoclonic Epilepsy in Infancy, or Dravet’s Syndrome. GTG is currently investigating other potential partners for the sublicensing of this assay in key markets around the world.

Having established GTG’s presence in the medical diagnostic market as a leading service provider, the Company is now looking at strategies for expanding both its range of diagnostic services and the markets in which GTG operates. With well established testing platforms, which are continuously reviewed by scientifi c staff for cost effi ciency, the Company is confi dent in its ability to achieve signifi cant growth in the coming years.

ACTN3 SPORTS GENE TEST[®]

The ACTN3 Sports Gene Test[®] represents a world fi rst in genetic testing for sports performance. The test detects whether individuals have a common genetic variant in the ACTN3 gene which essentially stops the gene being able to produce the alpha-actinin-3 protein in fast twitch muscle fi bres. An individual’s ACTN3 profi le gives an indication of whether the gene is providing an advantage for sprint-power or endurance activity. As such, the Company anticipates that the test will soon become one of the many routine biological measurements applied in modern day sports science for the individualised assessment and management of athletes.

The association with sports performance was originally detected through studies at the University of Sydney involving elite athletes from the Australian Institute of Sport. The association of ACTN3 with sports performance has been confi rmed in subsequent independent studies in elite level athletes. Furthermore, studies looking at the role of ACTN3 in muscle function and sports performance are being conducted all around the world, with the association of ACTN3 with performance being confi rmed in studies of non-elite athletes from various population groups.

GTG continues to provide the test directly in Australia and via a distributor, SportsStyle Co. Ltd. in Japan. In January 2007, the Company began promoting the test in German speaking Europe, which has raised the profi le of the test considerably in this market, including feature articles on international television and various fi tness publications. In conjunction with this process, the past 12 months has seen the Company make contact with numerous groups in the US, Europe, Asia and Australasia to discuss opportunities for the effective distribution and sublicensing of the ACTN3 Sports Gene Test[®] .

OPERATIONS REVIEW

Licensing: delivering on multiple fronts

During the 2007 fi nancial year, the Company’s licensing program generated more than $11.3 million in total revenues, an increase of approximately 70% on the preceding year. To date, the Company has executed some 37 licenses, 31 of which were commercial licenses, with an average total value in excess of $1.5 million per license.

The Company recognises the critical importance of licensing and, as such, is focused on maximising the value of its so-called ‘non-coding patents’ prior to their inevitable expiry. GTG is actively expanding its licensing resources, both in-house (covering the identifi cation of potential licensees) and out-ofhouse (covering contact and license negotiations).

The Company recently appointed the Colorado-based legal fi rm of Hamilton DeSanctis and Cha as new licensing contractors to assist it in the pursuit of licenses in the USA. Both Mr. DeSanctis and Mr. Cha bring substantial experience to the Company’s licensing program, having been previously involved in the Company’s negotiations with Applera Corporation.

As at the date of this Report, the Company is engaged in 39 additional negotiations for the granting of licenses to GTG’s non-coding patents. Due to the broad range of activities covered by GTG’s non-coding patents and the size and complexity of the interested parties, the likely timing of the execution of these licenses is diffi cult to predict as they require a signifi cant amount of time and effort to reach agreement on commercial terms. It is estimated that more than 90% of the time required to secure a new license is spent researching a potential target and generating an agreed term sheet, with the remaining time spent in the drafting and execution of formal documents.

Recognising that the current licensing methodology is time consuming, the Company is currently investigating a number of alternative strategies that may reduce the time required to secure a license and/or signifi cantly increase the average license value. These alternatives are being pursued in parallel with the current licensing strategy.

Whilst the cash payments received by the Company from new licensees are the most obvious and tangible result of the licensing program, there are often other signifi cant, though perhaps lessobvious, benefi ts that are also received by the Company that greatly assist in the expansion of other areas of the Company’s business.

TURNING NON-CODING LICENSES INTO NEW TESTING OPPORTUNITIES

There is a dynamic interaction between licensing negotiations and the creation of new opportunities in genetic testing. Some of the Company’s licensing successes have resulted in GTG acquiring the rights to a number of unique and important genetic tests. Many of the companies that require a license to the GTG non-coding technology are the same innovative companies developing important new genetic tests. Through licensing negotiations, GTG has not only successfully granted non-coding licenses, but has also secured rights to a range of valuable genetic testing intellectual property.

Much of the growth in GTG’s genetic testing business can be directly attributed to the success of its licensing activities. For example, GTG’s Medical Diagnostic laboratory came into existence as a result of the crosslicensing deal between GTG and Myriad Genetics Inc. in the USA. GTG gained access to commercial rights to test for the BRCA genes associated with familial breast and ovarian cancer. Similarly, negotiations that resulted in a license being granted to Optigen LLC have delivered rights to important dog tests.

GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2007

LICENSES GRANTED TO DATE

COMMERCIAL LICENSEES RESEARCH LICENSEES	31. 30. 29. 28. 27. 26. 25. 24. 23. 19-22. 18. 17. 16. 15. 14. 13. 12. 11. 10. 9. 8. 7. 6. 5. 4. 3. 2. 1. 6. 5. 4. 3. 2. 1.	Monsanto Company (swine genetics), USA – August, 2007 Thermo Fisher Scientif c Inc., USA – June, 2007 Monsanto Company (plant genetics), USA – June, 2007 Sciona Inc., USA – February, 2007 Genosense Diagnostics GmbH, Austria – December, 2006 Innogenetics NV, Belgium – June, 2006 Bovigen LLC, USA – June, 2006 Optigen LLC, USA – May, 2006 Applera Corporation, USA – December, 2005 AgResearch/ HortResearch/ Forest Research/ Livestock Improvement Corporation, New Zealand – June, 2005 Australian Genome Research Facility, Australia – January, 2005 Bionomics Limited, Australia – November, 2004 ViaLactia Biosciences, New Zealand – October, 2004 MetaMorphix Inc., USA – October, 2004 Genzyme Corporation, USA – September, 2004 CY O’Connor ERADE Village Foundation, Australia – June, 2004 Ovita Limited, New Zealand – June, 2004 Laboratory Corporation of America Holdings (‘LabCorp’), USA – February, 2004 TM Biosciences Corporation, Canada – December, 2003 Quest Diagnostics Inc., USA – August, 2003 Orchid Biosciences Inc., USA – May, 2003 Association of Regional and University Pathologists (‘ARUP’), USA – March, 2003 Biotage AB (formerly Pyrosequencing AB), Sweden – March, 2003 Myriad Genetics Inc., USA – October, 2002 Perlegen Sciences Inc., USA – August, 2002 Nanogen Inc., USA – April, 2002 Sequenom Inc., USA – April, 2002 Genetic Solutions Pty. Ltd., Australia – November, 2001 Texas A&M University (Merlogen LLC), USA – February, 2007 Colorado State University, USA – May, 2004 University of Technology Sydney, Australia – December, 2003 King’s College London, England – December, 2003 University of Sydney, Australia – July, 2003 University of Utah, USA – April, 2003

OPERATIONS REVIEW LICENSING

==> picture [160 x 244] intentionally omitted <==

==> picture [378 x 235] intentionally omitted <==

==> picture [562 x 22] intentionally omitted <==

----- Start of picture text -----

PATENT STATUS: GRANTED PENDING
----- End of picture text -----

CASE STUDY – MYRIAD GENETICS

In October 2002, GTG secured the rights to a number of predictive medical tests for a range of important diseases, including breast cancer, ovarian cancer, colon cancer, melanoma and hypertension from Myriad Genetics Inc.

These rights came out of successful non-coding licensing negotiations with the company. Myriad Genetics is a biopharmaceutical company focused on the development of novel therapeutic products derived from its proprietary genomic and proteomic technologies.

today, clinicians rely on GTG’s service to help make timely decisions on the best care for patients and their relatives. The Company has achieved these signifi cant milestones through demonstrating its abilities to work with the public providers of these services.

GTG was granted the rights to offer breast and ovarian cancer testing through the Company’s state-of-the-art testing facilities in Melbourne. GTG has turned this cancer gene testing into a profi table and important business unit. Today, GTG completes hundreds of cancer gene tests annually. Importantly, the Company has slashed the turnaround time for this complex test to weeks compared to the many months it takes in the public health system. This accelerated testing has seen the Company help clear testing backlogs in public hospital laboratories and

GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2007

==> picture [562 x 13] intentionally omitted <==

----- Start of picture text -----

COUNTRY WORLD TOTAL COUNTRY WORLD TOTAL
----- End of picture text -----

	COUNTRY	COUNTRY	WORLD	WORLD	TOTAL	TOTAL		COUNTRY	COUNTRY	WORLD	WORLD	TOTAL
Non-coding DNA Intron sequence analysis Genomic mapping Markers of predisposition to addictive states Laboratory Techniques Internal standard for electrophoretic separations Ancestral Haplotypes Genetic analysis Method for determining ancestral haplotypes Methods of genetic analysis involving the amplification of complementary duplicons Identification of ancestral haplotypes and uses thereof Athletic Performance – ACTN3 Sports Gene Test ® ACTN3 genotype screen for athletic performance ImmunAid Project A retroviral immunotherapy Cancer therapy	GRANTED PENDING		GRANTED PENDING							GRANTED PENDING		9 13 8 2 1 26 9 6 1
				PENDING			ImmunAid Project (cont.)	GRANTED	PENDING	GRANTED

	28	2			30		Strategy for retroviral	2	7
	21		1		22		immunotherapy Method of therapy	1			1 1
				1		1			11
							Therapeutic strategy for treating autoimmune and degenerative diseases Pathogens Project		7
	8				8


							Compounds, composition and methods for controlling invertebrate pests		2

	4		1			5
	1					1	Invertebrate control agents,		1
							compositions and methods of use RareCellect ® Project Foetal cell recovery method Maternal antibodies as foetal cell markers to identify and enrich foetal cells from maternal blood Identification of foetal DNA and foetal cell markers in maternal plasma or serum Methods of enriching foetal cells
		4		1	5 1

				1				25		1
								1	7		1
											1

				1	11
		10							5

											1
	4	6		1	11
	2	8		1	11

CASE STUDY – OPTIGEN

In May 2006, GTG secured the exclusive rights to a number of canine disease tests from Optigen LLC. These rights were obtained as a result of the non-coding license negotiations with Optigen.

181

patent fi lings providing potential future licensing opportunities.

Optigen is a US-based company associated with Cornell University. It is located in upstate New York and specialises in genetic diagnostics and information about inherited diseases in purebred dogs. As a result of acquiring these rights, GTG has been able to signifi cantly expand its successful canine DNA testing business. The Optigen tests have delivered a powerful marketing advantage to the GTG canine DNA testing business in the Asia-Pacifi c region and abroad. GTG has become a one-stop-shop, where dog breeders can access disease testing, profi ling and parentage services all under the one roof. GTG’s relationship with Optigen continues to fl ourish, with both companies continuing to work together on a range of related projects.

TRIBUTE TO DR. MERVYN JACOBSON

Dr. Mervyn Jacobson: CEO of GTG from 1989 – 2007

Since founding what is now GTG back in 1989, Dr. Jacobson has steadily built GTG from a small start-up into a leading life science company, especially in the fi elds of genetic testing and advanced genetic research. GTG is now a global public biotech company listed in Australia on the ASX and in USA on the NASDAQ exchange.

In this extended interview, Dr. Jacobson explains why he has now decided to step down as CEO of GTG and why he remains enthusiastic about the Company’s future.

Q: IN MARCH 2007, YOU INFORMED THE MARKET THAT YOU WERE STEPPING DOWN FROM THE ROLE OF CEO. WHY DID YOU DO THIS?

MJ: As GTG has matured, so I see my own role evolving over time. In the early days, from 1989 onwards, our young company required nurturing. Initially, we were totally focused on making scientifi c discoveries and inventions, then with securing patents to such breakthroughs in all key jurisdictions, and ultimately, with deriving commercial benefi ts for GTG from such early insights. Now, some 18 years later, I see my most useful role these days as helping the Company to generate very substantial revenues from the out-licensing of its valuable non-coding patents. Patents are only granted for so many years, and we have to now ‘make hay while the sun shines’. And I intend to help GTG maximise that opportunity.

To me, that is in the best interests of the

Company as a whole. To be clear, I have not left the Company, and I am not planning to leave the Company. I am not walking out. Indeed, I am now working harder than ever in the interests of GTG and its many loyal shareholders, to help increase shareholder value.

A lot of work has already been done in the licensing program, and a momentum has been created. I now want to ensure we consummate as many deals as possible. Finally, we have a winning formula to convert our intellectual property into licenses – and into meaningful revenues.

Q: ARE YOU LOOKING FORWARD TO WORKING WITH THE COMPANY’S NEW CEO?

MJ: I am confi dent that Michael Ohanessian is the right person for GTG at this time – and I think his appointment will be in everyone’s best interest. I want to see him lead the Company, motivate the team, really impassion the team, and get the message out to the market. That would all be great from my personal point of view and would also free me up to do what I want to do over the next few years – to make this Company not only very successful scientifi cally, but also very successful fi nancially.

Q: THE PAST FINANCIAL YEAR SAW SIX LICENSES GRANTED. IS IT GETTING EASIER TO GENERATE NON-CODING LICENSES?

MJ: Not necessarily. Every company has a different response to our patent portfolio. Although I should say it is always pleasing to be contacted by outside companies who suspect they might also need a license from GTG, but this process is just starting. Our licensing strategies are now fi nally working. While the cash infl ows from licensing are steadily growing, I would not say people are necessarily being more cooperative. The fact is, the weight of our past successes cannot be ignored. There have also been multiple legal challenges – and we have prevailed in every case.

Q: WHAT IS ‘THE’ KEY MESSAGE YOU WOULD LIKE TO PASS ON TO GTG INVESTORS?

MJ: GTG’s core competencies are in areas of science that are cutting edge, and to a degree it is high risk, given we try to do things that have never been done before. But on the other hand, it is also high reward. In some ways we are also hamstrung by working within a patent system that moves very slowly.

GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2007

However, living within the realities of that system, we still see new opportunities for making further breakthroughs. There are many biotech companies out there. Most are small. Most are fragile. Most will fail. In our case, we now have multiple cash generating opportunities. And fi nally, for the fi rst time, we are now generating more cash from our own activities than we are spending. There are not too many biotech companies in the world that can boast that.

Q: WHAT DO YOU CONSIDER TO BE YOUR GREATEST ACHIEVEMENT AS CEO?

MJ: In the early days I had faith in the logic that it was worth researching the role of non-coding DNA and investing the necessary funds to see this through. With hindsight, our fi ndings have been monumental. It now turns out many of the major genetic disorders of man and animals can fi nally be explained in terms of abnormalities at a gene level. And in fact, many of those abnormalities are located within the non-coding DNA.

Q: YOU SPEND A LOT OF TIME THINKING ABOUT NATURE AND SCIENTIFIC POSSIBILITIES. WHAT WILL BE THE NEXT BIG RESEARCH BLOCKBUSTER FOR GTG?

MJ: I have a certain humility and

tolerance that tells me we still don’t have all the answers. If we don’t have all the answers, maybe we need to look outside the box once again – particularly in the areas of disease where current treatments are not so effective. Perhaps we are missing something. Maybe what we know today is the truth – it’s just not the whole truth. In several GTG projects we are now looking at old problems in new ways. We are, for example, now looking at new cancer treatments using the body’s own immune system; a novel way of pre-natal sampling; new concepts of genetic matching; and

clever ways to kill parasites in livestock. In every case, we are using cutting edge science, but looking at the problem from a different perspective. My thinking is that if others are not fi nding solutions using traditional methods, perhaps the answer lies somewhere outside the square.

reproduction, and instead of a wallaby mother producing one baby every two years, by our method, we could obtain up to six offspring per year for each fertile female. Fast forward to today, and we now have more than 60 animals, with active breeding programs under way in Adelaide, Healesville, Canberra, and at Little River, near Gippsland. We also just initiated a reintroduction campaign in the Grampians, one of this wallaby’s traditional home sites. Slowly but surely we seem to be making meaningful progress, and this is now being recognised internationally, with our program cited as a world-leading model for other endangered species programs to follow. And for me, it has been a warming and humbling experience – to be told that just perhaps, we have saved a species.

Q: YOU HAVE BEEN A STRONG SUPPORTER OF THE CRITICALLY ENDANGERED BRUSHTAILED ROCK-WALLABY FOR MANY YEARS. TODAY, HOW IS THE SPECIES FARING?

MJ: The plight of this particular wallaby was brought to my attention a few years ago when there were just 16 left on the planet. It was then already too little, too late. And of those that were left, some were senile and too old to be bred, and some were too young. So we had just four or fi ve female candidates to use as the prospective matriarchs of the future. Happily, I was able to provide a leadership role and some fi nancial support for the project at that critical time. The leadership role was important because the people involved within the program at that time were close to desperation and were about to throw in the towel. The rest is history. We refi ned a method to permit accelerated

==> picture [323 x 218] intentionally omitted <==

PATENTS GRANTED AND PENDING

	REGION/COUNTRY	NUMBERS*	GRANTED	PENDING
NON-CODING DNA
Intron sequence analysis method for detection of adjacent and remote locus alleles as haplotypes Earliestpriority25 August 1989	Australia	AU654111	•
		AU672519	•
	Austria	AT144797	•
	Belgium	EP414469	•
	Canada	CA2023888	•
	Denmark	DK414469	•
	Europe	EP414469	•
	France	EP414469	•
	Germany	DE69029018	•
		DD299319	•
	Great Britain	EP414469	•
	Greece	GR3022410	•
	HongKong	HK1008053	•
	Israel	IL95467	•
	Italy	EP414469	•
	Japan	JP3206812	•
	Liechtenstein	EP414469	•
	Luxemburg	EP414469	•
	Netherlands	EP414469	•
	New Zealand	NZ235051	•
	Singapore	SG47747	•
	South Africa	ZA9006765	•
	Spain	ES2095859	•
	Sweden	EP414469	•
	Switzerland	EP414469	•
	United States	US5192659	•
		US5612179	•
		US5789568	•
	Japan	JP2001309796		•
	United States	US20030119003		•
Genomic mapping method by direct haplotyping using intron sequence analysis Earliestpriority11 July1990	Australia	AU647806	•
	Austria	AT185377	•
	Belgium	EP570371	•
	Canada	CA2087042	•
	Denmark	DK570371	•
	Europe	EP570371	•
	France	EP570371	•
	Germany	DE69131691	•
	Great Britain	EP570371	•
	Ireland	IE912426	•
	Israel	IL98793	•
	Italy	EP570371	•
	Japan	JP3409796	•
	Liechtenstein	EP570371	•
	Luxemburg	EP570371	•
	Netherlands	EP570371	•
	New Zealand	NZ238926	•
	South Africa	ZA9105422	•
	Sweden	EP570371	•
	Switzerland	EP570371	•
	United States	US5851762	•
	World	WO9201066	•
Markers of predisposition to addictive states Earliestpriority8 November 2004	World	WO2006048778		•

*Number refers to either application, publication or patent

GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2007

	REGION/COUNTRY	NUMBERS*	GRANTED	PENDING
LABORATORY TECHNIQUES
Internal standard for electrophoretic separations Earliestpriority11 July1990	Austria	AT159589	•
	Europe	EP466479	•
	France	EP466479	•
	Germany	DE69127999	•
	Great Britain	EP466479	•
	Japan	JP4232850	•
	Sweden	EP466479	•
	United States	US5096557	•
ANCESTRAL HAPLOTYPES
Genetic analysis Earliestpriority1 November 1991	Europe	EP660877	•
	France	EP660877	•
	Germany	DE69232726	•
	Great Britain	EP660877	•
	World	WO9309249	•
Method for determining ancestral haplotypes using haplospecific geometric elements within the major histocompatability complex multigene cluster Earliestpriority1 November 1991	United States	US6383747	•
Methods of genetic analysis involving the amplification of complementary duplicons Earliestpriority16 February2005	Australia	AU2006214800		•
	Europe	EP06704883		•
	Japan	To be advised		•
	United States	To be advised		•
	World	WO2006086846		•
Identification of ancestral haplotypes and uses thereof Earliestpriority24 August 2005	World	WO2007022590		•
ATHLETIC PERFORMANCE – ACTN3 SPORTS GENE TEST®
ACTN3 genotype screen for athletic performance Earliestpriority16 September 2002	Australia	AU2003258390		•
	Canada	CA2499084		•
	China	CN1732270		•
	Europe	EP1546403		•
	India	599/KOLNP/2005		•
	Japan	JP2005538710		•
	New Zealand	NZ538890		•
	Russia	RU2005111236		•
	South Korea	KR20050053670		•
	United States	US2006121478		•
	World	WO2004024947		•

*Number refers to either application, publication or patent

PATENTS GRANTED AND PENDING

	REGION/COUNTRY	NUMBERS*	GRANTED	PENDING
IMMUNAID PROJECT
A retroviral immunotherapy Earliestpriority18 August 2000	Australia	AU2003200583	•	• • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • •
	New Zealand	NZ524280	•
	Singapore	SG95523	•
	South Africa	ZA200301694	•
	Brazil	BR0113354
	Canada	CA2431954
	China	CN1469746
	Europe	EP1311267
	Japan	JP2004506015
	United States	US20030228320
	World	WO0213828
Cancer therapy Earliestpriority14 February2002	Singapore	SG105902	•
	South Africa	ZA200407142	•
	Australia	AU2003203051
	Brazil	BR0307661
	Canada	CA2476366
	China	CN1646155
	Europe	EP1482970
	Japan	JP2005523277
	New Zealand	NZ554840
	United States	US2005180971
	World	WO2003068257
Strategy for retroviral immunotherapy Earliestpriority20 February2002	Singapore	SG105903	•
	South Africa	ZA200407143	•
	Brazil	BR0307868
	Canada	CA2476956
	China	CN1646156
	Europe	EP1482971
	Japan	JP2005526729
	New Zealand	NZ534590
	New Zealand	NZ554839
Method of therapy Earliestpriority24 October 2003	Singapore	SG121609	•
	Australia	AU2004283322
	Brazil	BR0415533
	Canada	CA2543490
	China	CN1898569
	Europe	EP1692516
	Israel	IL175141
	Japan	JP2007509078
	Mexico	PA/a/2006/004522
	Russia	RU2006117793
	Ukraine	UK200605663
	United States	US2007202119
	World	WO2005040816
Therapeutic strategy for treating autoimmune and degenerative diseases Earliestpriority8 September 2004	Australia	AU2005282218
	Canada	CA2579353
	Europe	EP1805510
	Japan	JP2007530544
	New Zealand	NZ553720
	Singapore	SG130540
	United States	US11/574911
	World	WO2006026821

*Number refers to either application, publication or patent

GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2007

	REGION/COUNTRY	NUMBERS*	GRANTED	PENDING
PATHOGENS PROJECT
Compounds, composition and methods for controlling invertebrate pests Earliestpriority15 November 2006	Australia	AU2006906383		•
	Australia	AU2007902820		•
Invertebrate control agents, compositions and methods of use Earliestpriority23 November 2006	Australia	AU200606556		•
RARECELLECT® PROJECT
Foetal cell recovery method Earliestpriority27 March 1990	Australia	AU649027	•
	Austria	AT194166	•
	Belgium	EP521909	•
	Canada	CA2059554	•
	Denmark	DK521909	•
	Europe	EP521909	•
	France	EP521909	•
	Germany	DE69132269	•
	Great Britain	EP521909	•
	Greece	GR3034487	•
	Ireland	IE910996	•
	Israel	IL97677	•
	Italy	EP521909	•
	Japan	JP2965699	•
	Liechtenstein	EP521909	•
	Luxemburg	EP521909	•
	Netherlands	EP521909	•
	New Zealand	NZ237589	•
	Singapore	SG79188	•
	South Africa	ZA9102317	•
	Spain	ES2149760	•
	Sweden	EP521909	•
	Switzerland	EP521909	•
	United States	US5447842	•
		US5153117	•
	World	WO9114768	•
Maternal antibodies as foetal cell markers to identify and enrich foetal cells from maternal blood Earliestpriority30 May2002	Singapore	SG108133	•
	Australia	AU2003229397		•
	Canada	CA2492631		•
	Europe	EP1532453		•
	HongKong	HK1075699		•
	Japan	JP2005528616		•
	New Zealand	NZ537328		•
	United States	US2005287604		•
	World	WO03102595		•
Identification of foetal DNA and foetal cell markers in maternal plasma or serum Earliestpriority5 March 2003	Australia	AU2004217872		•
	Europe	EP1599608		•
	HongKong	HK1079245		•
	New Zealand	NZ542143		•
	United States	US20070134658		•
	World	WO2004078999		•
Methods of enriching foetal cells Earliestpriority11 May2005	World	PCT/AU2006/000617		•

*Number refers to either application, publication or patent

OUR ROLE IN THE COMMUNITY

Our role in the community

WALLABIES JUMP TO FREEDOM

GTG continues to support the Recovery Program to save the endangered Victorian Brush-tailed Rock Wallaby – courtesy of personal donations by former CEO Dr. Mervyn Jacobson. The project reached a signifi cant milestone recently when two captive-bred Brush-tailed Rock Wallabies were released into an ‘acclimatisation’ area at the edge of the Grampians National Park. The two Brush-tailed Rock Wallabies are currently ‘relearning’ how to hunt for food and shelter before the gates to freedom are fl ung open in 2008.

The pair, the fi rst of 20 to enter the acclimatisation area, will soon be genetically screened by GTG. Genetic analysis of the animals will ensure that only the most genetically diverse wallabies are added to wild populations. In turn, this lessens the chance of a disease becoming inbred which could be carried back to the wild population.

The two wallabies recently released into the acclimatisation area were captive bred at Adelaide Zoo and Healesville Sanctuary via a world-fi rst foster wallaby program. The young Brush-tailed Rock Wallabies are removed from their natural mother and placed in the pouch of a surrogate mother – in this case either a Tammar Wallaby or Yellow-footed Rock Wallaby. The original Brush-tailed Rock Wallaby mother then goes into breeding mode again – and instead of having one pouch young per year, is able to have up to six or seven joeys each year.

While the number of Brush-tailed Rock Wallabies declined to as few as 16 animals, there are now more than 50 animals in captivity and 11 pairs in active breeding programs. The Victorian Brush-tailed Rock Wallaby Recovery Team intends to have a viable population of wallabies back in the Grampians by 2010.

GTG’s partners in this project include: Adelaide Zoo, Tidbinbilla Nature Reserve,

Healsville Sanctuary, Waterfall Springs Conservation Park, Parks Victoria and the Department of Sustainability and Environment.

WHO LET THE DOGS OUT?

In June of this year, the Company commenced a three-month trial with the City of Port Phillip for the use of the GTG forensic Dog Attack DNA Kit by council rangers.

City of Port Phillip Councillor Janet Cribbes said the council welcomed the chance to use DNA testing as it can provide the proof positive needed for prosecutions. ‘It’s high time that local government took advantage of this cutting-edge technology,’ she said.

The self-contained DNA collection kit created by GTG contains everything a council needs to collect canine DNA samples at the scene of a dog attack. The kit, which contains swabs, gloves, evidence bags and a specimen phial, has also been designed to meet the evidentiary standards required in Court.

The Company offers the only commercial animal forensics service in Australia and the only NATA accredited facility for canine DNA analysis for criminal or forensic investigations. With more than 100,000 dog attacks occurring in Australia each year, the Company believes there is signifi cant potential in canine DNA forensics.

Dog DNA can be extracted from blood, clothing, skin wounds, dog faeces, or fence palings and gates that may have been bitten during an attack incident. DNA is also incredibly accurate. The chance of a second dog, selected at random from the dog population, having the same DNA profi le as obtained from the crime scene sample would be approximately one in 80 million. DNA analysis is particularly useful when a dog owner refuses to cooperate with investigators or the victim is unable

to identify the dog because there are many dogs roaming around – such as occurs in a park setting.

In launching the kit, Victorian Agriculture Minister Joe Helper said it added to local council’s armoury in the fi ght against irresponsible pet owners. The Company believes the Dog Attack DNA Kit could become an important tool for all local councils. GTG has been approached by other councils in New South Wales and Queensland to similarly launch the kit in their respective states. For more information go to www.dogattack.com.au

==> picture [139 x 122] intentionally omitted <==

CANINE DNA

Canine DNA may be able to help when:

A dog attack victim is unable to identify the exact dog
An attack happens in a park setting when there are multiple dogs
A dog owner refuses to cooperate with council investigations
The owner of the alleged attack dog has multiple dogs of the same breed at their residence
A neighbourhood dog is wrongly accused of being involved in an attack – DNA may be able to exclude the innocent dog
A farmer’s livestock have been attacked by a rogue neighbourhood dog

GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2007

GENETIC TECHNOLOGIES LIMITED STATUTORY REPORTS

YEAR ENDED 30 JUNE 2007

==> picture [178 x 253] intentionally omitted <==

Contents
DIRECTORS’ REPORT	30
CORPORATE GOVERNANCE STATEMENT	43
FINANCIAL STATEMENTS	46
DIRECTORS’ DECLARATION	82
AUDITOR’S INDEPENDENCE DECLARATION	83
AUDITOR’S REPORT	84
ASX ADDITIONAL INFORMATION	86
GLOSSARY	88

DIRECTORS’ REPORT

The Directors submit their Report for the year ended 30 June 2007.

DIRECTORS

The names and details of the Directors of Genetic Technologies Limited in office during the financial year and until the date of this Report are stated below. All Directors were in office for this entire period, with the exception of Mr. David Carruthers who was appointed to the Board on 26 February 2007, Prof. Deon Venter who resigned from the Board on 23 August 2006 and Mr. Robert Edge who retired from the Board on 17 November 2006.

Names, qualifications, experience and special responsibilities

Henry Bosch AO , BA (Hons), MA ( Non-Executive Chairman )

Mr. Bosch, 76, was appointed to the Board on 24 June 2005 and was appointed Non-Executive Chairman of the Board on 23 November 2005. He also serves as Chairman of the Company’s Corporate Governance Committee and as a member of its Audit Committee. He is a former Chairman of the National Companies and Securities Commission, the predecessor of the Australian Securities and Investments Commission, Australia’s principal corporate regulator. He has also served as Chairman of the Working Group on Corporate Practices and Conduct and Chairman of the committee which produced the Australian Standard on corporate governance. He has been chairman, or a director, of over thirty companies and other organisations operating in both the government and private sectors. He has served on a number of audit committees and is an Honorary Fellow of the Institute of Internal Auditors. His extensive business career has spanned the aluminium, steel, man-made fibres and plastics industries in Canada, UK and Australia and included the positions of Marketing Director of John Lysaght (Australia) Ltd. and Managing Director of Nylex Corporation. He was made an Officer of the Order of Australia in January 1991.

Dr. Mervyn Jacobson , MBBS ( Chief Executive Officer )

Dr. Jacobson, 65, is a legally qualified Medical Practitioner. He has more than 35 years experience in developing new medical technology and in bringing new medical and biomedical goods and services to the market, working with biotechnology enterprises in Australia, UK, Switzerland, USA, Canada, Mexico and China. In 1989, he co-founded GeneType AG, the research start-up that subsequently led to the formation of Genetic Technologies Limited. He was also a founding Director of the Colorado Biotechnology Association and also XY, Inc., a biotechnology company in Colorado. In 2000, he was appointed by the Governor of Colorado to the Governor’s Advisory Council in Biotechnology. In June 2004, Dr. Jacobson was appointed Chief Technology Officer of the Scientific Advisory Board of the China National Animal Breeding Stock Export/Import Corporation Limited (CABS) in Tianjin, China. He was appointed to the Company’s Board of Directors in May 2000, and served as its Executive Chairman from August 2000 until November 2005. He also serves on the Company’s Corporate Governance Committee and is Chairman of its Canadian-listed subsidiary, Gtech International Resources Limited. Dr. Jacobson is also a member of the Australian Institute of Company Directors.

Fred Bart , ( Non-Executive )

Mr. Bart, 52, has been involved in the textile industry for the last 25 years as well as being a significant investor in the resource and property sectors in Australia and overseas. He brings to the Company extensive commercial experience from his involvement in the manufacturing and textile industries. He is also Chairman of Electro Optic Systems Holdings Limited and Global Properties Limited and is a member of the Australian Institute of Company Directors. He was appointed to the Board on 26 October 1996 and also serves as a Director of the Company’s Canadian-listed subsidiary, Gtech International Resources Limited.

David Carruthers , BCom, CA, CFTP (Snr.), MAICD Dip. ( Non-Executive )

Mr. Carruthers, 59, was appointed to the Board on 26 February 2007 and serves as Chairman of the Company’s Audit Committee. He has acted as Chief Financial Officer of BP Finance for the global operations based in London and as the European Regional Chief Executive Officer based in Brussels. On returning to Australia, he was Managing Director of Treasury Corporation of Victoria and coordinated the management of $29 billion of privatisation proceeds. More recently, Mr. Carruthers has provided advisory services in financial risk management to clients in the Asia-Pacific region and is currently Head of Corporate Finance, Tristar Corporate Advisors and Chief Financial Officer, Olympus Funds Management. He also serves as a Non-Executive Director and Audit Committee Chairman for Ceramic Fuel Cells Ltd. and as a Non-Executive Director for India Equities Fund Limited, both ASX-listed companies.

GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2007

DIRECTORS (cont.)

Names, qualifications, experience and special responsibilities (cont.)

John S. Dawkins AO , Dip Ag, BEc ( Non-Executive )

Mr. Dawkins, 60, was appointed to the Board on 24 November 2004 and serves on both the Corporate Governance and Audit Committees. Mr. Dawkins holds degrees in Agriculture from Roseworthy College and Economics from the University of Western Australia and, for 18 years, served in the Australian House of Representatives for the Australian Labor Party. Between 1983 and 1993, he served in the Hawke and Keating Governments as Finance Minister, Trade Minister, Employment Education and Training Minister and finally Treasurer. He serves and has served on the Boards of several companies including Chairman of Elders Rural Bank and Retail Energy Market Company. He has consulted to a variety of international organisations including The World Bank Group, the OECD, UNDP, and UNESCO. He is a Patron of the Menzies School of Health Research and for three years was Treasurer of the International Agency for the Prevention of Blindness and for nine years a member of the Board of the Fred Hollows Foundation. He was made an Officer of the Order of Australia in June 2000 and awarded the Centenary Medal in January 2000.

Robert J. Edge , FCA ( Non-Executive )

Mr. Edge was appointed to the Board on 19 April 2004 and retired as a Director on 17 November 2006. He is a Chartered Accountant, Official Liquidator and Tax Agent. Prior to his appointment as a Director of the Company, he was Managing Director of Global Technology Limited. He has been a partner in BDO and Ernst & Young and, as a consultant to Ferrier Hodgson, managed the asset realisation and loans recovery program for the liquidation of Pyramid Building Society and the Farrow Group of Companies.

Prof. Deon J. Venter , MBChB, PhD, MBA ( Executive )

Prof. Venter was appointed to the Board on 17 March 2003 and resigned as a Director on 23 August 2006. He currently serves as Director of Pathology for the hospitals in the Mater Hospitals group in Brisbane, Queensland. He was formerly Head of the Cancer Functional Genomics Laboratory at the Murdoch Children’s Research Institute in Melbourne and Head of the Cancer Epidemiology Program, Department of Pathology at the University of Melbourne. He is a specialist pathologist, a Fellow of the Royal College of Pathologists of Australasia and the author of more than 80 papers on the genetics of cancer.

Company Secretary

Thomas G. Howitt , BCom, CA, FTIA, ACIS, AICPA ( Company Secretary and Chief Financial Officer )

Mr. Howitt, 43, was appointed as the group’s first full-time Chief Financial Officer on 1 June 2004 and as Company Secretary on 30 June 2005. During his 20 year career, he has served as CFO and Company Secretary for a number of companies, listed on both the ASX and foreign stock exchanges. His wide experience covers all facets of financial management and control across a variety of industries, including resources and technology (domestic and international), having been instrumental in the successful development, patenting and commercialisation of several innovative technologies. He has played key roles in the raising of bank debt and equity capital and the management of complex due diligence programs and has worked as a senior Taxation Consultant for Ernst & Young and in the investment banking industry. He also serves as President of the Company’s Canadian-listed subsidiary, Gtech International Resources Limited.

Interests in the shares and options of the Company and related bodies corporate

As at the date of this Report, the interests of the Directors in the shares and options of Genetic Technologies Limited are as follows:

==> picture [484 x 25] intentionally omitted <==

----- Start of picture text -----

OPTIONS OVER
DIRECTOR ORDINARY SHARES ORDINARY SHARES
----- End of picture text -----

Henry Bosch AO	185,000	500,000
Dr. Mervyn Jacobson	150,931,900	2,000,000
Fred Bart1	25,918,214	500,000
David Carruthers	–	–
John S. Dawkins AO	–	500,000

1 Mr. Bart also controls 88,500 common shares in Gtech International Resources Limited.

DIRECTORS’ REPORT (cont.)

EARNINGS PER SHARE

Basic loss per share (cents per share) (1.2) Diluted loss per share (cents per share) (1.2)

DIVIDENDS

No dividends have been paid since the end of the previous financial year, nor have the Directors recommended that any dividend be paid.

CORPORATE INFORMATION

Corporate structure

Genetic Technologies Limited is a company limited by shares that is incorporated and domiciled in Australia. The Company has prepared a consolidated financial report incorporating the entities that it controlled during the financial year, which are outlined in the following illustration of the Group’s corporate structure as at the date of this Report:

==> picture [482 x 143] intentionally omitted <==

----- Start of picture text -----

Genetic Technologies Limited
75.8% 68.2% 100% 100% 100% 100% 100%
Gtech International ImmunAid RareCellect GeneType Genetic Technologies GeneType GeneType
Resources Limited Pty. Ltd. Pty. Ltd. Pty. Ltd. Corporation Pty. Ltd. AG Corporation
50.1%
AgGenomics
Pty. Ltd.
----- End of picture text -----

On 30 June 2006, two of the Company’s former subsidiaries, Silbase Scientific Services Pty. Ltd. and Simons GeneType Diagnostics Pty. Ltd. ceased operations. On 15 July 2007, formal advice was received advising that both companies had been deregistered. As part of this transaction, the shares in Genetic Technologies Corporation Pty. Ltd. that were previously owned by Simons GeneType Diagnostics Pty. Ltd. were transferred to Genetic Technologies Limited. The shares were transferred at cost.

Nature of operations and principal activities

The principal activities of the entities within the Group during the financial year were:

Licensing of the Company’s intellectual property;
The provision of genetic testing services; and
Research and development in the areas of genetics and related fields.

There have been no significant changes in the nature of these activities during the financial year.

Group overview

Genetic Technologies Limited was incorporated in Western Australia on 5 January 1987 as Concord Mining N.L. The Company undertook a series of mining projects and, following several intervening changes, changed its name to Duketon Goldfields N.L. on 15 March 1995. On 15 October 1999, the Company changed its status from a No Liability company to a company limited by shares and, on 29 August 2000, it completed the acquisition of GeneType AG, a Swiss private company. GeneType had been formed in 1989 by Dr. Mervyn Jacobson (CEO) and Dr. Malcolm Simons after they met in 1989 and resolved to test the hypothesis that the non-coding or ‘junk’ DNA regions were in reality not ‘junk’, but a valuable and highly ordered reservoir of useful genetic information, overlooked by the scientific community up until that time. As a result of the GeneType acquisition, the Company changed its business from mining to biotechnology and changed its name to Genetic Technologies Limited.

GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2007

CORPORATE INFORMATION (cont.)

Group overview (cont.)

The considerable ground-breaking research undertaken by GeneType since 1989 now forms an important part of the Company’s significant intellectual property portfolio, including the family of ‘non-coding’ analysis and mapping patents that are the cornerstones of the Company’s licensing business.

The Company has also established a fee-for-service genetic testing business that has since grown to become the largest nongovernment operation of its type in Australia. The business performs a wide variety of genetic tests on humans, plants and animals and includes human diagnostics, forensics and animal pedigree tests.

The Company actively supports research and development in the area of genetics and, as at the date of this Report, supports four distinct projects, each of which is described in detail elsewhere in the Financial Report.

Operating results for the year

During the 2007 financial year, Genetic Technologies Limited and its subsidiaries generated consolidated gross revenues and other income of approximately $15.3 million, representing a significant 42.4% increase over the corresponding figures for the previous year. The overall increase of more than $4.5 million was due principally to a 69.6% increase in revenues from the Company’s licensing program and a 22.3% increase in revenues generated from its genetic testing activities. During the year, the range of tests being offered by the Company continued to expand and a range of new marketing initiatives were introduced to further promote the Company’s services.

Importantly, for the first time in its history, the Company generated positive cash flows from operations during the 2007 financial year. The consolidated cash receipts from operations and interest exceeded $15 million, with net cash inflows from operations of approximately $2.6 million. These figures compared most favourably to those for the previous financial year which delivered equivalent cash receipts of $8.5 million and a net cash deficit from operations of almost $6.0 million. In addition to the increase in cash receipts, operating cash costs incurred during the 2007 year also fell by more than $2.3 million. As a result, the cash and cash equivalents held by the Company as at 30 June 2007 were approximately $13.8 million, or almost $1.9 million more than at the same time last year.

The consolidated loss after tax of $4.3 million included net non-cash items totalling approximately $5.7 million, comprising amortisation of intangible assets ($3.4 million), impairment losses and other write-downs ($1.3 million), depreciation and amortisation of fixed assets ($1.2 million), unrealised foreign exchange losses ($0.3 million), share-based payments expenses ($0.2 million), partly offset by non-cash revenues generated from the Applera settlement ($0.7 million).

Finally, during the 2007 year, the Company continued to fund four research and development projects, which have the potential to generate further valuable intellectual property for the Company. Several of these projects made significant technical advances during the year, with trials now being evaluated in several instances. The outputs from these projects can then be commercially exploited either by outright sale or via some form of testing and/or licensing activity. The Company continues to view this commitment to research as being fundamental to its long-term success.

The Directors believe that the positive results for the 2007 financial year validate the strategies now being pursued by the Company and provide a sound platform for further growth and expansion in the 2008 financial year.

Review of financial condition

Capital structure

As at the date of this Report, the Company had a total of 362,389,899 fully paid ordinary shares on issue. All of these shares were listed on the Australian Securities Exchange, and on the NASDAQ Global Market in the USA via the Company’s American Depositary Receipts. No new shares were issued by the Company during the financial year ended 30 June 2007.

As at 30 June 2007, a total of 6,666,667 ordinary shares were subject to voluntary escrow (refer ASX Additional Information).

Treasury and related policies

During the financial year, the Company introduced a Foreign Exchange Management Policy and, as at balance date, was preparing a Cash Management Policy. The Company follows industry accepted best practice by investing the Company’s cash assets in a diverse range of interest-bearing deposits with several significant financial institutions.

DIRECTORS’ REPORT (cont.)

CORPORATE INFORMATION (cont.)

Review of financial condition (cont.)

Cash used in operations

During the financial year, the consolidated net cash flows provided by operations was approximately $2.6 million. This result was $8.6 million better than the operating cash flows from the prior period which revealed net outflows of almost $6.0 million. Overall, the Group’s consolidated cash assets increased by approximately $1.9 million during the 2007 financial year.

Liquidity and funding

On 14 January 2005, the Company executed a Master Asset Finance Agreement with National Australia Bank Limited in respect of a $2,500,000 asset finance facility (the ‘Facility’). During the period from inception up to 30 June 2007, the Company financed the acquisition of laboratory and other equipment under the Facility at a cost of $1,632,868.

As at the date of this Report, the Company had a credit card facility with St. George Bank Limited with a total credit limit of $110,000, of which $105,000 had been utilised by the Company. As at 30 June 2007, a total liability in respect of these credit cards of $19,797 was outstanding.

Risk management

The Group takes a proactive approach to risk management. The Board is responsible for ensuring that risks, and also opportunities, are identified on a timely basis and that the Group’s objectives and activities are aligned with the risks and opportunities identified by the Board. The Group believes that it is important for all Board members to be a part of this process and the Board takes overall responsibility for the recognition and management of risk. The oversight of the compliance and control mechanisms has been delegated to the Audit Committee through its Charter. The Board believes that the Group is not yet sufficiently large to warrant the appointment of an internal auditor.

Employees

The Group employed 54 employees as at 30 June 2007 (2006: 49 employees).

Statement of compliance

The statement provided to the Board by the Chief Executive Officer and the Chief Financial Officer on the integrity of the financial statements is founded on a sound system of risk management and internal compliance and control.

SHARE OPTIONS

Unissued shares under option

As at both the reporting date and the date of this Report, there were 12,577,500 unissued ordinary shares in the Company under option. All options were issued at nil cost to the holders. Refer Note 22 to the attached financial statements for further details regarding the options outstanding, which have been summarised as follows:

==> picture [484 x 25] intentionally omitted <==

----- Start of picture text -----

AS AT THE DATE AS AT
OF THIS REPORT 30 JUNE 2007
----- End of picture text -----

Staff Share Plan options Other options Total number of options outstanding	11,977,500 600,000 12,577,500	11,977,500 600,000 12,577,500

Shares issued as a result of the exercise of options

During the financial year, no shares were issued as a result of the exercise of any options, nor have any options been exercised since the end of the financial year. During the 2007 year, however, a total of 2,700,000 options that had previously been issued under the Staff Share Plan to employees who have since resigned from the Company lapsed. Of this number, a total of 1,175,000 options were forfeited, whilst the remaining 1,525,000 options expired. Option holders do not have any right, by virtue of the option, to participate in any share issue of the Company or any related body corporate.

GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2007

LIKELY DEVELOPMENTS AND EXPECTED RESULTS

During the 2008 financial year, the Group will continue to focus on the expansion of its licensing and genetic testing businesses, both domestically and in overseas markets. It will also commit resources to the advancement of its four research programs with a view to generating valuable intellectual property for commercial exploitation.

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

On 23 August 2006, Prof. Deon Venter resigned as a Director of the Company.

On 17 November 2006, the Annual General Meeting of the shareholders of the Company was held. In respect of Resolution 2, regarding the re-election of Mr. Robert Edge, Mr. Edge advised the Company prior to the Meeting that he would not be seeking re-election and, accordingly, the resolution was withdrawn. As a result, he retired as a Director of the Company effective from the close of the Meeting.

On 28 December 2006, the Company filed its 2006 Annual Report on Form 20-F with the US Securities and Exchange Commission (‘SEC’). A complete copy of this comprehensive 115-page document can be downloaded either from the Company’s website at www.gtg.com.au or from the SEC website at www.sec.gov.

On 26 February 2007, the Company announced the appointment of Mr. David Carruthers to the Board of Directors as an additional Non-Executive Director.

On 8 March 2007, the Company announced that the Australian Securities and Investments Commission (‘ASIC’) had sought information from the Company regarding certain past trading in its shares. The Company has cooperated fully with ASIC. The Company later clarified to the Market that, whilst the information being sought by ASIC did not relate to any suspected wrongdoing by the Company itself, it did relate to the activities of certain Executives of the Company. As at the date of this Report, the Company understands that the investigation is continuing but it is not aware whether any further action will be taken by ASIC in relation to this matter.

On 29 March 2007, the Company announced that its founder and Chief Executive Officer, Dr. Mervyn Jacobson, had informed the Board that, as he had now reached the age of 65, he wished the Company to activate an orderly succession plan. He intended to retire from his current role as CEO as soon as an appropriate successor is able to assume this position. Dr. Jacobson will continue to actively support the Company’s licensing program even following such an appointment. As at the date of this Report, the search for a new CEO continues.

On 15 May 2007, the Company disposed of its entire direct equity interest in XY, Inc., a company based in Fort Collins, Colorado, USA. The Company received a total of US$274,418 ($332,709) from the sale which resulted in a loss of $33,307.

There were no other significant changes in the state of affairs that are not described elsewhere in this Report.

SIGNIFICANT EVENTS AFTER BALANCE DATE

Between 5 July and 9 July 2007, Dr. Mervyn Jacobson acquired a total of 501 ordinary shares in ImmunAid Pty. Ltd., a subsidiary of the Company, representing approximately 4.4% of that company’s total issued capital. Apart from this transaction, there have been no significant events which have occurred after balance date.

INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS

During the financial year, the Company paid a premium in respect of a contract insuring the Directors and Officers of the Company and any related body corporate against a liability incurred as such a Director or Officer to the extent permitted by the Corporations Act 2001 . The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium. The Company has agreed to indemnify the current Directors, Executive Officers and former Directors against all liabilities to other persons that may arise from their position as Directors or Officers of the Company and its subsidiaries, except where to do so would be prohibited by law. The agreement stipulates that the Company will meet the full amount of any such liabilities, including costs and expenses.

DIRECTORS’ REPORT (cont.)

REMUNERATION REPORT (AUDITED)

This Remuneration Report outlines the Director and Executive remuneration arrangements of Genetic Technologies Limited (the ‘Company’) and its subsidiaries (the ‘Group’) in accordance with the requirements of the Corporations Act 2001 and its Regulations. It also provides the remuneration disclosures required by paragraphs Aus 25.4 to Aus 25.7.2 of AASB 124 Related Party Disclosures , which have been transferred to the Remuneration Report in accordance with Corporations Regulation 2M.6.04.

For the purposes of this Report, Key Management Personnel (‘KMP’) of the Group are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the Company and the Group, directly or indirectly, including any Director (whether executive or otherwise) of the parent company, and includes the five executives in the parent and the Group, as set out below, receiving the highest remuneration.

For the purposes of this Report, the term ‘Executive’ encompasses the Group’s Chief Executive Officer, Company Secretary and Chief Financial Officer, Chief Operating Officer, Chief Scientific Officer and the Group General Manager – Intellectual Property.

Corporate Governance Committee

The Corporate Governance Committee of the Board of Directors of the Company (formerly known as the Nomination and Remuneration Committee) was established on 21 April 2005 and is, amongst other things, responsible for determining and reviewing remuneration arrangements for the Directors, the Chief Executive Officer and the senior management team. The Committee is chaired by Mr. Henry Bosch AO and has as a member Mr. John Dawkins AO, both of whom are independent directors, and Dr. Mervyn Jacobson, the Chief Executive Officer.

The Corporate Governance Committee has been established to assess the appropriateness of the nature and amount of remuneration paid to Directors and senior managers on a periodic basis by reference to relevant employment market conditions, with the overall objective of ensuring maximum shareholder benefit from the retention of a high quality Board and executive team.

Remuneration philosophy

The performance of the Company depends upon the quality of its Directors and Executives. To prosper, the Company must attract, motivate and retain appropriately skilled Directors and Executives.

To this end, the Company embodies the following principles in its remuneration framework:

provide competitive rewards to attract high calibre Executives;
wherever possible, link Executive rewards to shareholder value;
ensure that a portion of an Executive’s remuneration is ‘at risk’; and
establish appropriate, demanding performance hurdles for variable Executive remuneration.

Remuneration structure

In accordance with best practice corporate governance, the structure of Non-Executive Director and senior manager remuneration is separate and distinct.

Non-Executive Director remuneration

Objective

The Board seeks to set aggregate remuneration at a level which provides the Company with the ability to attract and retain Directors of the highest calibre, whilst incurring a cost which is acceptable to shareholders.

Structure

The Company’s Constitution and the Listing Rules of the Australian Securities Exchange specify that the aggregate remuneration of Non-Executive Directors shall be determined from time to time by a General Meeting of shareholders. An amount not exceeding the amount determined is then divided between the Directors as agreed. The most recent determination was made at the Annual General Meeting held on 23 November 2005, when shareholders approved an aggregate remuneration of $400,000 per year.

GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2007

REMUNERATION REPORT (AUDITED) (cont.)

Non-Executive Director remuneration (cont.)

The amount of aggregate remuneration sought to be approved by shareholders, the manner in which it is apportioned amongst Directors, and the policy of granting options to Directors, are reviewed annually.

Each Non-Executive Director receives a fee for serving as a Director of the Company. No additional fees are paid to any Director for serving on a committee of the Board.

Executive Director, Company Secretary and Senior Management remuneration

Objective

The Company aims to reward Executives with a level and mix of remuneration commensurate with their positions and responsibilities within the Company and so as to:

reward Executives for Company and individual performance against targets set by reference to suitable benchmarks;
align the interests of Executives with those of the shareholders; and
ensure that the total remuneration paid is competitive by market standards.

Structure

The remuneration paid to Executives is set with reference to prevailing market levels and comprises a fixed salary, various short-term incentives (which are linked to agreed Key Performance Indicators (‘KPIs’), as described below under the heading of Variable Remuneration), and a long-term option component.

Fixed remuneration

Objective

The Corporate Governance Committee oversees the setting of fixed remuneration on an annual basis. The process consists of a review of Company, business unit and individual performance, relevant comparative remuneration in the market and internally and, where appropriate, external advice on policies and practices. As noted above, the Committee has access to external advice independent of Management.

Structure

Executives are given the opportunity to receive their fixed (primary) remuneration in a variety of forms including cash and salary sacrifice to superannuation. It is intended that the manner of payment chosen will be optimal for the recipient without creating any additional cost for the Group.

Variable remuneration – Short Term Incentive (‘STI’)

Objective

The objective of the STI program is to link the achievement of the Group’s operational targets with the remuneration received by the Executives charged with meeting those targets. The total potential STI available is set at a level so as to provide sufficient incentive to the Executive to achieve the operational targets and such that the cost to the Group is reasonable in the circumstances.

Structure

Actual STI payments granted to each Executive depend on the extent to which specific targets set at the beginning of each financial year are met. The targets consist of a number of KPIs covering financial and non-financial, corporate and individual measures of performance. Whilst the Company is still developing a uniform set of KPIs against which the performance of Management can be assessed, such measures which are considered typically include contribution to net profit, customer service, risk management, product management, the delivery of improved efficiencies, and leadership/team contribution. These measures are chosen as they represent the key drivers for the short term success of the business and provide a framework for delivering long term value.

The Corporate Governance Committee continues to develop policies directed at achieving these objectives. Any such STI payments which may be made are delivered as a cash bonus in the following reporting period. There were no STI payments made to any Executive of the Company during the year ended 30 June 2007.

DIRECTORS’ REPORT (cont.)

REMUNERATION REPORT (AUDITED) (cont.)

Variable remuneration – Long Term Incentive (‘LTI’)

Objective

The objective of the Company’s LTI arrangements is to reward Executives in a manner that aligns remuneration with the creation of shareholder wealth. As such, LTI grants are only made to Executives who are able to influence the generation of shareholder wealth and thus have an impact on the Group’s performance against the relevant long term performance hurdle. Structure

LTI grants to Executives are delivered in the form of share options under the Staff Share Plan. Share options are granted to Executives with more than three months service. Options are granted to Executives in line with their respective levels of experience and responsibility and vest in four equal tranches progressively over a period of four years from the date on which they are granted. Typically, the options have a six-year life.

In cases where an Executive ceases employment prior to the vesting of his or her options, the options are forfeited after a prescribed period if they have not been previously exercised. The prescribed period ranges from one to 12 months, depending on the circumstances under which they left the Company, e.g. resignation, retirement or death. In the event of a change of control of the Company, the performance period end date will be brought forward to the date of the change of control and awards will vest over this shortened period.

Employment contracts

There are no employment contracts in place with any Director of the Company. The conditions of employment of Executives are covered by standard letters of employment which outline the key terms of employment including the Executive’s fixed remuneration. It is the Company’s general practice that employment contracts for Executives do not have a fixed term. Further, it is the Company’s policy that employment contracts for Executives contain provisions for termination with notice or payment in lieu thereof and for termination by the Company without notice for serious misconduct and breach of contract. The notice period required to be given by the employee or the Company along with any termination payments to which they may be eligible is generally 3 months. Termination payments for all Executives are expressed in months and calculated by reference to the salary that the Executive would have earned over that time.

Remuneration of Key Management Personnel

YEAR	POST- SHORT-TERM EMPLOYMEN SALARY/FEES SUPERANNUAT $ $	POST- SHORT-TERM EMPLOYMEN SALARY/FEES SUPERANNUAT $ $	LONG-TERM T LONG SERVIC ION LEAVE $	E SHARE-BASE OPTIONS $	D TOTALS $
Name and title of Director Henry Bosch AO Non-Executive Chairman 2007 2006 Dr. Mervyn Jacobson1 Chief Executive Officer 2007 2006 Fred Bart Non-Executive Director 2007 2006 John S. Dawkins AO Non-Executive Director 2007 2006 David Carruthers2 Non-Executive Director 2007 2006 Robert J. Edge3 Non-Executive Director 2007 2006 Prof. Deon J. Venter4 Executive Director 2007 2006 Sub-totals for Directors 2007 2006	90,000 66,637 300,000 300,000 30,000 30,000 30,000 30,000 – – 11,414 30,000 17,500 104,999 478,914 561,636	– – – – 2,700 2,700 2,700 2,700 18,795 – 1,027 2,700 399 9,450 25,621 17,550	– – – – – – – – – – – – – – – –	74,025 55,554 – – – – 74,025 55,554 – – – 51,979 – 47,822 148,050 210,909	164,025 122,191 300,000 300,000 32,700 32,700 106,725 88,254 18,795 – 12,441 84,679 17,899 162,271 652,585 790,095

1 Dr. Jacobson serves as the Company’s CEO. His remuneration is included under the heading of Directors.

2 Mr. Carruthers was appointed as a Director of the Company on 26 February 2007. 3

Mr. Edge retired as a Director of the Company on 17 November 2006.
4
Prof. Venter resigned as a Director of the Company on 23 August 2006.

GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2007

REMUNERATION REPORT (AUDITED) (cont.)

Remuneration of Key Management Personnel (cont.)

YEAR	POST- SHORT-TERM EMPLOYME SALARY/FEES SUPERANNUA $ $	POST- SHORT-TERM EMPLOYME SALARY/FEES SUPERANNUA $ $	LONG-TERM NT LONG SERVIC TION LEAVE $	E SHARE-BASE OPTIONS $	D TOTALS $
Name and title of Executive Thomas G. Howitt Chief Financial Officer and Company Secretary 2007 2006 Geoffrey E. Newing5 Chief Operating Officer 2007 2006 Dr. Gary Cobon Chief Scientific Officer 2007 2006 Ian N. Christensen6 Group General Manager – Intellectual Property 2007 2006 Sub-totals for Executives 2007 2006 Total remuneration of Key Management Personnel 2007 2006	190,000 181,151 275,833 175,690 93,741 101,807 23,358 127,149	17,100 16,304 16,630 13,292 80,659 8,982 1,380 17,929	3,881 1,230 – 225 877 163 – 4,946	35,050 58,524 – 60,297 50,512 4,062 – 9,677	246,031 257,209 292,463 249,504 225,789 115,014 24,738 159,701 789,021 781,428 1,441,606 1,571,523
	582,932 585,797	115,769 56,507	4,758 6,564	85,562 132,560	789,021 781,428
	1,061,846 1,147,433	141,390 74,057	4,758 6,564	233,612 343,469

5 Mr. Newing was appointed as Chief Operating Officer on 24 August 2006 and resigned on 1 July 2007. The salary and fees paid to Mr. Newing of $275,833 includes a termination payment of $87,500.

Mr. Christensen resigned as Group General Manager – Intellectual Property on 12 August 2006.

The details of those Executives nominated as Key Management Personnel under the requirements of AASB 124 have been disclosed in this Report. No other employees of the Company meet the definition of ‘Key Management Personnel’ as described in AASB 124 Related Party Disclosures , or ‘senior manager’ as described in the Corporations Act 2001 .

Options granted and vested as part of remuneration during the year ended 30 June 2007

During the year, certain options which had been granted as equity compensation benefits to Directors and Executives vested, as disclosed below. The options were issued at no charge and entitle the holder to acquire one fully paid ordinary share in the Company at the respective exercise price. The options typically have a life of six years and vest in equal tranches over a four year period from the date on which the options were granted.

==> picture [484 x 29] intentionally omitted <==

----- Start of picture text -----

NUMBER OF OPTIONS EXERCISE NUMBER VALUE PER FINAL
VESTED GRANTED GRANT DATE PRICE LAPSED OPTION VESTING DATE
----- End of picture text -----

250,000 250,000 125,000 –	– 23 Nov. 2005 $0.56 – 23 Nov. 2005 $0.56 – 25 Nov. 2004 $0.48 – – –	– $0.285 23 Nov. 2007 – $0.285 23 Nov. 2007 (500,000) – – (1,000,000) – – (1,500,000) – $0.139 6 Sept. 2008 – $0.197 12 Aug. 2009 – $0.197 12 Aug. 2009 – $0.146 22 June 2010 (300,000) – – (300,000) (1,800,000)
625,000 187,500 62,500 187,500 187,500 – 625,000	– – 6 Sept. 2004 $0.48 – 12 Aug. 2005 $0.53 – 12 Aug. 2005 $0.53 – 22 June 2006 $0.46 – – – –	(1,500,000)
		– – – – (300,000)
		(300,000)
1,250,000	–

DIRECTORS’ REPORT (cont.)

REMUNERATION REPORT (AUDITED) (cont.)

Options granted and vested as part of remuneration during the year ended 30 June 2006

==> picture [484 x 29] intentionally omitted <==

----- Start of picture text -----

NUMBER OF OPTIONS EXERCISE NUMBER VALUE PER FINAL
VESTED GRANTED GRANT DATE PRICE LAPSED OPTION VESTING DATE
----- End of picture text -----

Name of Director Henry Bosch AO Dr. Mervyn Jacobson Fred Bart John S. Dawkins AO Robert J. Edge Prof. Deon J. Venter Sub-totals for Directors Name of Executive Thomas G. Howitt Thomas G. Howitt Geoffrey E. Newing Dr. Gary Cobon Ian N. Christensen Sub-totals for Executives Totals	125,000 500,000 125,000 125,000 125,000 250,000 1,250,000 187,500 – – – 75,000 262,500 1,512,500	500,000 23 Nov. 2005 $0.56 – $0.285 23 Nov. 2007 – 30 Nov. 2001 $0.61 – N/A 30 Nov. 2005 – 30 Nov. 2001 $0.61 – N/A 30 Nov. 2005 500,000 23 Nov. 2005 $0.56 – $0.285 23 Nov. 2007 500,000 25 Nov. 2004 $0.48 – $0.311 25 Nov. 2008 – 20 May 2003 $0.48 – $0.357 20 May 2007 1,500,000 – 6 Sept. 2004 $0.48 – $0.139 6 Sept. 2008 250,000 12 Aug. 2005 $0.53 – $0.197 12 Aug. 2009 750,000 12 Aug. 2005 $0.53 – $0.197 12 Aug. 2009 750,000 22 June 2006 $0.46 – $0.146 22 June 2010 – 20 May 2003 $0.44 – $0.241 20 May 2007 1,750,000 3,250,000

Fair values of options

During the year ended 30 June 2007, a total of 2,700,000 options that had previously been issued under the Staff Share Plan to employees who have since resigned from the Company lapsed. Of this number, a total of 1,175,000 options were forfeited, whilst the remaining 1,525,000 options expired. The lapsed options had no fair value on the date they lapsed as they were ‘out of the money’. No options were granted or exercised during the year. Approximately, 16.2% of the total remuneration paid to Key Management Personnel during the 2007 year was in the form of options. The fair value of each option is estimated on the grant date using a Black-Scholes option-pricing model with the following weighted average assumptions used for grants made during the years ended 30 June 2007, 2006 and 2005.

==> picture [484 x 17] intentionally omitted <==

----- Start of picture text -----

2007 * 2006 2005
----- End of picture text -----

Dividend yield	–	–	–
Expected volatility	N/A	53%	55%
Historical volatility	N/A	53%	55%
Risk-free interest rate	N/A	5.62%	5.21%
Expected life of options	N/A	5 years	5 years

No options were granted during the year ended 30 June 2007.

The expected life of the options is based on historical data and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may also not necessarily be the actual outcome. There were no alterations to the terms and conditions of the options granted as remuneration since their grant date. The maximum grant, which will be payable assuming that all of the unvested options eventually vest, is equal to the number of options granted multiplied by the fair value at the grant date. The minimum grant, which will be payable assuming that none of the unvested options eventually vest, is nil. The resulting weighted average fair values per option for those options vesting on or after 1 July 2007 are:

==> picture [484 x 26] intentionally omitted <==

----- Start of picture text -----

WEIGHTED AVE.
NAME OF DIRECTOR/EXECUTIVE OPTIONS GRANT DATE EXPIRY DATE FAIR VALUE
----- End of picture text -----

Henry Bosch AO	125,000	23 Nov. 2005	23 Nov. 2011	$0.285
John S. Dawkins AO	125,000	23 Nov. 2005	23 Nov. 2011	$0.285
Thomas G. Howitt	375,000	6 Sept. 2004	6 Sept. 2010	$0.139
Thomas G. Howitt	187,500	12 Aug. 2005	12 Aug. 2011	$0.197
Dr. Gary Cobon	562,500	22 June 2006	1 Feb. 2012	$0.146

GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2007

DIRECTORS’ MEETINGS

Meeting attendances

The number of meetings of Directors (including meetings of Committees of Directors) held during the financial year, and the number of such meetings attended by each Director, were as follows:

==> picture [484 x 42] intentionally omitted <==

----- Start of picture text -----

DIRECTORS’ MEETINGS COMMITTEES OF THE BOARD
AUDIT CORPORATE GOVERNANCE
ELIGIBLE ATTENDED ELIGIBLE ATTENDED ELIGIBLE ATTENDED
----- End of picture text -----

Henry Bosch AO	12	12	10	10	3	3
Dr. Mervyn Jacobson	12	12	–	–	3	2
Fred Bart	12	12	–	–	–	–
David Carruthers	5	5	2	2	–	–
John S. Dawkins AO	12	11	10	10	3	2
Robert J. Edge	4	4	2	2	2	2
Prof. Deon J. Venter	1	1	–	–	–	–

Notes:

During the year ended 30 June 2007, a total of four Unanimous Consent Resolutions of the Directors were also passed. Mr. Carruthers was appointed as a Director of the Company on 26 February 2007. Prof. Venter resigned as a Director of the Company on 23 August 2006.

Mr. Edge retired as a Director of the Company on 17 November 2006.

In accordance with the charter, the auditor attended three meetings of the Audit Committee at the request of the Committee.

Committee membership

As at the date of this Report, the Company had an Audit Committee and a Corporate Governance Committee of the Board of Directors (the latter being formerly known as the Nomination and Remuneration Committee).

The individuals who served as members of these Committees during the financial year were:

==> picture [484 x 25] intentionally omitted <==

----- Start of picture text -----

AUDIT COMMITTEE CORPORATE GOVERNANCE COMMITTEE
PERIOD SERVED PERIOD SERVED
----- End of picture text -----

Henry Bosch AO	1 July 2006 to 30 June 2007	1 July 2006 to 30 June 2007
Dr. Mervyn Jacobson	Not applicable	1 July 2006 to 30 June 2007
Fred Bart	Not applicable	Not applicable
David Carruthers	28 February 2007 to 30 June 2007	Not applicable
John S. Dawkins AO	1 July 2006 to 30 June 2007	1 July 2006 to 30 June 2007
Robert J. Edge	1 July 2006 to 17 November 2006	1 July 2006 to 17 November 2006
Prof. Deon J. Venter	Not applicable	1 July 2006 to 23 August 2006

Notes:

Mr. Edge served as the Chairman of the Audit Committee until his retirement from the Board on 17 November 2006. Mr. Dawkins served as the Chairman of the Audit Committee from 18 November 2006 to 27 February 2007. Mr. Carruthers served as the Chairman of the Audit Committee from 28 February 2007 to 30 June 2007. Mr. Bosch served as the Chairman of the Corporate Governance Committee for the entire year ended 30 June 2007.

ENVIRONMENTAL REGULATION AND PERFORMANCE

The Group ceased active mining and exploration activities in previous years. As at the date of this Report, the Group retained a 16.36% (2006: 17.45%) direct equity interest in the North Laverton Joint Venture with Regis Resources N.L. in Western Australia. There are significant environmental regulations under the Western Australia Mining Act 1978 and Environment Protection Act 1986. License requirements relating to waste disposal, water and air pollution exist in relation to mining activities. The Directors are not aware of any significant breaches of these regulations during the period covered by this Report.

DIRECTORS’ REPORT (cont.)

AUDITOR INDEPENDENCE AND NON-AUDIT SERVICES

Auditor independence

The Directors have received an independence declaration from Ernst & Young, the auditor of Genetic Technologies Limited, as reproduced on page 83 of the Financial Report.

Non-audit services

During the financial year, the auditor of Genetic Technologies Limited, Ernst & Young, provided the Company with certain nonaudit services, in addition to its normal audit services. The Directors are satisfied that the provision of non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001 . The nature and scope of each type of non-audit service provided means that audit independence was not compromised.

During the year, the following fees were paid or payable for services provided to the auditor of Genetic Technologies Limited and its subsidiaries:

==> picture [484 x 220] intentionally omitted <==

----- Start of picture text -----

CONSOLIDATED
2007 2006
$ $
Audit services
Ernst & Young in respect of:
Audit and review of the financial report 410,274 403,918
Other audit firms in respect of:
Audit and review of the financial reports of subsidiaries 9,158 8,120
Total remuneration in respect of audit services 419,432 412,038
Non-audit services
Ernst & Young in respect of:
Tax advice and compliance services 55,095 79,120
Total remuneration in respect of non-audit services 55,095 79,120
----- End of picture text -----

Signed in accordance with a resolution of the Directors.

==> picture [144 x 107] intentionally omitted <==

HENRY BOSCH AO

Non-Executive Chairman

Melbourne, 30 August 2007

GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2007

CORPORATE GOVERNANCE STATEMENT

INTRODUCTION

During the 2007 financial year, the Board of Genetic Technologies Limited made a number of amendments to the Company’s policies and practices to strengthen its corporate governance and to bring it more closely into line with the Recommendations of the ASX Corporate Governance Council. Following the release by the Council of the second edition of the Corporate Governance Principles and Recommendations on 2 August 2007, the Company’s governance structure has been further reviewed in the light of the new guidance.

In most respects, Genetic Technologies Limited complies with the Recommendations however, in a number of areas, polices and practices are being developed further to bring them more closely into line. As new policies are produced, or as the existing ones are amended, they will be published on the Company’s website.

As at the date of this Statement, the following twelve Corporate Governance documents had been adopted by the Board, in addition to the Company’s Constitution which was revised and approved by the shareholders of the Company in November 2005. All of these documents are available on the Company’s website: www.gtg.com.au

Board Charter which defines the role of the Board and that of Management;
Audit Committee Charter;
Corporate Governance Committee Charter;
Board Protocol which clarifies the responsibilities of Directors and the Company’s expectations of them;
Code of Conduct, including a Document Retention Policy;
Board Performance Evaluation Policy;
Risk and Compliance Policy;
Continuous Disclosure Policy;
Securities Trading Policy;
Foreign Exchange Management Policy;
Shareholder Communications Policy; and
Whistleblower Policy.

ASX PRINCIPLES AND RECOMMENDATIONS

The following statements relate to the second edition of the Principles and Recommendations that were released by the ASX Corporate Governance Council on 2 August 2007.

Principle 1: Lay solid foundations for management and oversight

The Board of Directors of Genetic Technologies Limited is responsible for the corporate governance of the Group. The Board guides and monitors the business and affairs of Genetic Technologies Limited on behalf of the shareholders by whom they are elected and to whom they are accountable.

The Board Charter and a separate statement of ‘Matters Reserved for the Board’, both of which have been adopted by the Board, meet the definition of ‘good practice’. A formal letter of appointment for new directors has been adopted. The Board protocol is also relevant.

The process for evaluating senior executives is referred to in the Board Charter and developed further in the Corporate Governance Committee Charter. The performance evaluation relating to the 2007 financial year was not completed until after the end of the reporting period and did not include an evaluation of the Chief Executive Officer because of the activation of a succession planning process. Further information is provided in the Remuneration Report on pages 36 to 40 inclusive of the Financial Report.

Principle 2: Structure the Board to add value

Since the completion of the 2006 Corporate Governance Statement, the Company has restructured its Board so that it complies with ASX Recommendations 2.1, 2.2 and 2.3. There is now a majority of Independent Directors on the Board which is chaired by an Independent Chairman.

CORPORATE GOVERNANCE STATEMENT (cont.)

ASX PRINCIPLES AND RECOMMENDATIONS (cont.)

Principle 2: Structure the Board to add value (cont.)

The skills, experience and expertise relevant to the position of director held by each Director in office as at the date of this Statement is included in the Directors’ Report which forms part of the Financial Report. Directors of Genetic Technologies Limited are considered to be independent when they are independent of Management and free from any business or other relationship that could materially interfere with – or could reasonably be perceived to materially interfere with – the exercise of their unfettered and independent judgement.

The independence of each Director has been considered by the Board during the reporting period. In the context of director independence, ‘materiality’ is considered from both the perspective of the Company and individual Directors. Directors holding more than 5% of the Company’s shares are not considered to be independent.

In accordance with the definition of independence above, and the materiality threshold set, the following Directors of Genetic Technologies Limited are considered to be independent:

==> picture [484 x 16] intentionally omitted <==

----- Start of picture text -----

NAME POSITION
----- End of picture text -----

Henry Bosch AO	Non-Executive Chairman
David Carruthers	Non-Executive Director
John S. Dawkins AO	Non-Executive Director

There are procedures in place, as agreed by the Board, to enable Directors, in furtherance of their duties, to seek independent professional advice at the Company’s expense.

The approximate terms in office of each Director in office at the date of this Statement are set out below. Additional details regarding Board appointments are included on the Company’s website.

==> picture [484 x 16] intentionally omitted <==

----- Start of picture text -----

NAME TERM IN OFFICE
----- End of picture text -----

Henry Bosch AO	2 years, 3 months
Dr. Mervyn Jacobson	7 years, 1 month
Fred Bart	10 years, 11 months
David Carruthers	7 months
John S. Dawkins AO	2 years, 10 months

The Board Performance Evaluation Policy is included on the Company’s website. A review, with the assistance of an external consultant, was conducted during the 2006 financial year however, due to several changes in the structure and composition of the Board, no review was conducted during the 2007 financial year.

Corporate Governance Committee

During the 2005 financial year, the Board established a Nomination and Remuneration Committee, which meets at least three times annually to ensure that the Board continues to operate within the established guidelines including selecting candidates for the position of Director. During the 2006 financial year, the role of the Committee was expanded to include matters related to the Company’s Corporate Governance affairs and its name changed to the Corporate Governance Committee to reflect that additional role. The members of the Committee have the right to appoint an independent consultant to attend meetings of the Committee, as appropriate.

As at the date of this Statement, the members of the Corporate Governance Committee were:

Henry Bosch AO ( Chairman )
John S. Dawkins AO
Dr. Mervyn Jacobson

Details of Directors’ attendances at meetings of the Corporate Governance Committee are provided on page 41 of the Directors’ Report.

Principle 3: Promote ethical and responsible decision making

The Company’s Code of Conduct, Whistleblower Policy and Securities Trading Policy are published on its website. The Board considers that the Company complies with this Principle.

GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2007

ASX PRINCIPLES AND RECOMMENDATIONS (cont.)

Principle 4: Safeguard integrity in financial reporting

The Board has established an Audit Committee which operates under a specific Charter approved by the Board. It is the Board’s responsibility to ensure that an effective internal control framework exists within the entity. This includes internal controls to deal with both the effectiveness and efficiency of significant business processes, the safeguarding of assets, the maintenance of proper accounting records, and the reliability of financial information as well as non-financial considerations such as the benchmarking of operational key performance indicators.

The Board has delegated the responsibility for the establishment and maintenance of a framework of internal control and ethical standards for the management of the Group to the Audit Committee. The Audit Committee also provides the Board with assurance regarding the reliability of financial information for inclusion in the financial reports. All members of the Audit Committee are independent Non-Executive Directors.

As at the date of this Statement, the members of the Audit Committee were:

David Carruthers ( Chairman )
Henry Bosch AO

John S. Dawkins AO

Details of Directors’ attendances at meetings of the Audit Committee are provided on page 41 of the Directors’ Report.

Principle 5: Make timely and balanced disclosure

The Board has adopted and published a Continuous Disclosure Policy which was reviewed during the reporting period. No termination arrangements are applicable to the Chief Executive Officer.

Principle 6: Respect the rights of shareholders

The Board has adopted and published a Shareholder Communications Policy and shareholder participation at general meetings of shareholders is encouraged.

Principle 7: Recognise and manage risk

During the 2007 financial year, the Board reviewed and developed the Company’s Risk and Compliance Policy and approved a Foreign Exchange Management Policy and a Business Continuity Policy. A summary of the former is being prepared and will be published on the Company’s website. The Foreign Exchange Management Policy has also been posted.

The revised Risk and Compliance Policy covers the controls necessary to manage the identified risks, some of which are in the process of development. Some reports have also been provided to the Board on the effectiveness of the management of the risks. As at the date of this Statement, Management is preparing a report on the effectiveness of the Company’s management of its material business risks in line with the new statement of good practice.

The Board has received assurances from the CEO and the CFO as required by section 295A of the Corporations Act . As at the date of this Statement, a further assurance in line with the new statement of good practice is being prepared.

Principle 8: Remunerate fairly and responsibly

It is the Company’s objective to provide maximum shareholder benefit from the retention of a high quality Board and executive team by remunerating Directors and key Executives fairly and appropriately with reference to relevant employment market conditions. A full discussion of the Company’s remuneration philosophy and framework and the remuneration received by Directors and Executives during the 2007 financial year is included in the Remuneration Report, which is contained within the Directors’ Report.

The Board has delegated to the Corporate Governance Committee the responsibility for the detailed oversight of remuneration matters. The Committee comprises a majority of Independent Directors and is chaired by an Independent Director. The Charter of the Committee is published on the Company’s website.

During the 2007 financial year, the Board discontinued the practice of granting options to Non-Executive Directors. Further work was also undertaken to improve the structure of the Company’s incentive system generally.

FINANCIAL STATEMENTS

INCOME STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2007 NOTES	CONSOL 2007 $	IDATED 2006 $	GENETIC TECHNO 2007 $	LOGIES LIMITED 2006 $
Revenue from operations 4 Other income 5 Administration expenses Amortisation and depreciation expenses 6 Contract research expenses Employee benefits expenses 6 Finance costs 6 Genetic testing expenses Impairment losses and other write-downs 6 Legal and patent fees Marketing and promotion expenses Net foreign exchange losses Rent and outgoings Royalties, license fees and commissions paid Withholding tax Other expenses 6 Loss before income tax Income tax (expense)/benefit 7 Loss for the year Loss is attributable to: Equity holders of Genetic Technologies Limited Minority interests 25 Earnings per share (cents per share) Basic loss for the year attributable to the ordinary equity holders of Genetic Technologies Limited 8 Diluted loss for the year attributable to the ordinary equity holders of Genetic Technologies Limited 8	14,978,819	10,048,703 708,411 (910,776) (4,817,277) (1,345,916) (5,432,506) (112,082) (2,008,546) (97,500) (1,440,929) (502,353) – (511,050) (177,283) (90,500) (1,218,519)	11,793,729	7,468,144 262,058 (658,655) (4,149,262) (234,299) (2,530,268) (96,810) – (6,220,303) (1,097,818) (286,041) – (19,786) (152,371) (90,500) (1,005,544) (8,811,455) 120,303 (8,691,152) (8,691,152) – (8,691,152)
	340,486		70,000
	(901,380)		(615,169)
	(4,602,992)		(4,432,613)
	(1,247,775)		(44,775)
	(5,556,644)		(2,422,808)
	(90,929)		(73,161)
	(1,989,098)		–
	(1,306,960)		(4,197,808)
	(748,605)		(430,238)
	(437,087)		(255,054)
	(317,317)		(312,978)
	(535,045)		–
	(580,122)		(553,967)
	(264,391)		(264,391)
	(1,086,662)		(773,313)
	(4,345,702)	(7,908,123) –	(2,512,546)
	–		(1,521,550)
	(4,345,702)	(7,908,123)	(4,034,096)
		(7,918,773) 10,650
	(4,328,543)		(4,034,096)
	(17,159)		–
	(4,345,702)	(7,908,123)	(4,034,096)
		(2.2) (2.2)

	(1.2)

	(1.2)

GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2007

BALANCE SHEETS

AS AT 30 JUNE 2007 NOTES	CONSOL 2007 $	IDATED 2006 $	GENETIC TECHNO 2007 $	LOGIES LIMITED 2006 $
ASSETS Current assets Cash and cash equivalents 9 Trade and other receivables 10 Prepayments Performance bond Total current assets Non-current assets Deposits/cash 9 Receivables 11 Prepayments Available-for-sale investments 12 Property, plant and equipment 13 Intangible assets and goodwill 14 Other assets 15 Total non-current assets Total assets LIABILITIES Current liabilities Trade and other payables 16 Interest-bearing liabilities 17 Deferred revenue 18 Withholding tax payable Provisions 19 Total current liabilities Non-current liabilities Interest-bearing liabilities 20 Provisions 19 Total non-current liabilities Total liabilities Net assets EQUITY Contributed equity 21 Reserves 23 Accumulated losses 24 Parent entity interest Minority interests 25 Total equity		11,435,247 1,401,468 587,988 85,963		10,503,559 997,858 158,809 85,963 11,746,189 450,000 7,984,505 42,603 673,595 1,571,236 8,039,833 451,245 19,213,017 30,959,206 861,216 490,379 33,679 600,466 155,162 2,140,902 491,729 6,679 498,408 2,639,310 28,319,896 70,243,996 1,195,632 (43,119,732) 28,319,896 – 28,319,896

	13,333,750		12,421,287
	646,946		292,292
	543,252		89,241
	76,898		76,898
	14,600,846	13,510,666	12,879,718	11,746,189
		450,000 – 42,603 673,595 2,265,787 16,774,256 –		450,000 7,984,505 42,603 673,595 1,571,236 8,039,833 451,245
	450,000		450,000
	–		9,177,574
	8,698		8,698
	233,330		233,330
	1,944,379		1,492,225
	12,211,774		3,345,833
	–		451,246
	14,848,181	20,206,241	15,158,906	19,213,017
	29,449,027	33,716,907	28,038,624	30,959,206
		1,410,378 490,379 33,679 600,466 411,310		861,216 490,379 33,679 600,466 155,162

	1,563,652		2,191,695
	476,989		476,989
	321,317		216,438
	324,837		324,837
	561,968		268,548
	3,248,763	2,946,212	3,478,507	2,140,902
		491,729 36,827		491,729 6,679
	46,978		46,978
	50,477		5,467
	97,455	528,556	52,445	498,408
	3,346,218	3,474,768	3,530,952	2,639,310
	26,102,809	30,242,139	24,507,672	28,319,896
		70,243,996 1,237,524 (41,414,557)		70,243,996 1,195,632 (43,119,732)

	70,243,996		70,243,996
	1,456,895		1,417,504
	(45,743,100)		(47,153,828)
	25,957,791	30,066,963 175,176	24,507,672	28,319,896 –
	145,018		–
	26,102,809	30,242,139	24,507,672

FINANCIAL STATEMENTS (cont.)

CASH FLOW STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2007 NOTES	CONSO 2007 $	LIDATED 2006 $	GENETIC TECHNO 2007 $	LOGIES LIMITED 2006 $
Cash flows (used in)/provided by operating activities Receipts from customers Payments to suppliers and employees Interest received Other income Finance costs Net cash flows (used in)/provided by operating activities 9 Cash flows (used in)/provided by investing activities Proceeds from the sale of plant and equipment Proceeds from the sale of shares Purchases of plant and equipment Advances to unrelated parties Net cash flows (used in)/provided by investing activities Cash flows used in financing activities Repayment of hire purchase principal Advances to subsidiaries Net cash flows used in financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Net foreign exchange difference Cash and cash equivalents at end of year 9		7,537,611 (15,067,011) 926,777 757,383 (112,082)		4,947,241 (7,384,044) 896,439 267,883 (96,810) (1,369,291) 4,469 – (40,617) – (36,148) (450,892) (4,512,339) (4,963,231) (6,368,670) 17,322,229 – 10,953,559
	14,541,621		11,061,195
	(12,723,248)		(3,409,189)
	489,824		457,039
	379,978		70,501
	(90,929)		(73,161)
	2,597,246	(5,957,322)	8,106,385	(1,369,291)
		4,469 – (159,716) –		4,469 – (40,617) –
	–		–
	332,709		332,709
	(158,699)		(22,239)
	(80,000)		(80,000)
	94,010	(155,247)	230,470	(36,148)
		(450,892) –		(450,892) (4,512,339)
	(502,505)		(502,505)
	–		(5,681,480)
	(502,505)	(450,892)	(6,183,985)	(4,963,231)
	2,188,751	(6,563,461) 18,414,017 34,691	2,152,870	(6,368,670) 17,322,229 –
	11,885,247		10,953,559
	(290,248)		(235,142)
	13,783,750	11,885,247	12,871,287

GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2007

STATEMENTS OF CHANGES IN EQUITY

==> picture [484 x 49] intentionally omitted <==

----- Start of picture text -----

ATTRIBUTABLE TO MEMBERS OF GENETIC TECHNOLOGIES LIMITED
CONTRIBUTED ACCUMULATED PARENT MINORITY TOTAL
CONSOLIDATED EQUITY RESERVES LOSSES INTERESTS INTERESTS EQUITY
$ $ $ $ $ $
----- End of picture text -----

70,235,396	779,101	(33,495,784)	37,518,713	164,526	37,683,239 26,548 (7,908,123) (7,881,575) 8,600 431,875 30,242,139 (51,534) (4,345,702) (4,397,236) 257,906 26,102,809
– – – 8,600 – 70,243,996 – – – –	26,548 – 26,548 – 431,875 1,237,524 (38,535) – (38,535) 257,906	– (7,918,773) (7,918,773) – – (41,414,557) – (4,328,543) (4,328,543) –	26,548 (7,918,773) (7,892,225) 8,600 431,875 30,066,963 (38,535) (4,328,543) (4,367,078) 257,906	– 10,650 10,650 – – 175,176 (12,999) (17,159) (30,158) –	26,548 (7,908,123)
					(7,881,575)
					8,600 431,875
					30,242,139
					(51,534) (4,345,702)
					(4,397,236)
					257,906
70,243,996	1,456,895	(45,743,100)	25,957,791	145,018

==> picture [484 x 48] intentionally omitted <==

----- Start of picture text -----

ATTRIBUTABLE TO MEMBERS OF GENETIC TECHNOLOGIES LIMITED
CONTRIBUTED ACCUMULATED PARENT MINORITY TOTAL
GENETIC TECHNOLOGIES LIMITED EQUITY RESERVES LOSSES INTERESTS INTERESTS EQUITY
$ $ $ $ $ $
----- End of picture text -----

70,235,396	782,420	(34,428,580)	36,589,236	–	36,589,236 (8,691,152) (8,691,152) 8,600 413,212 28,319,896 (4,034,096) (4,034,096) 221,872 24,507,672
– – 8,600 – 70,243,996 – – –	– – – 413,212 1,195,632 – – 221,872	(8,691,152) (8,691,152) – – (43,119,732) (4,034,096) (4,034,096) –	(8,691,152) (8,691,152) 8,600 413,212 28,319,896 (4,034,096) (4,034,096) 221,872	– – – – – – – –	(8,691,152)
					(8,691,152)
					8,600 413,212
					28,319,896
					(4,034,096)
					(4,034,096)
					221,872
70,243,996	1,417,504	(47,153,828)	24,507,672	–

FINANCIAL STATEMENTS (cont.)

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 30 June 2007

1. CORPORATE INFORMATION

The Financial Report of Genetic Technologies Limited (the ‘Company’) for the year ended 30 June 2007 was authorised for issue in accordance with a resolution of the Directors dated 29 August 2007. Genetic Technologies Limited is incorporated in Australia and is a company limited by shares. The Company’s ordinary shares are publicly traded on the Australian Securities Exchange under the symbol GTG and, via Level II American Depositary Receipts, on the NASDAQ Global Market under the ticker GENE. The Company’s activities and operations during the year ended 30 June 2007 are disclosed elsewhere in this Financial Report.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of preparation

This general purpose Financial Report has been prepared in accordance with Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Interpretations and the Corporations Act 2001 .

Compliance with IFRS

Australian Accounting Standards include Australian equivalents to International Financial Reporting Standards (AIFRS). Compliance with AIFRS ensures that the consolidated financial statements and notes of Genetic Technologies Limited comply with International Financial Reporting Standards (IFRS). The parent entity financial statements and notes do not comply with IFRS because it has elected to apply the relief provided to parent entities in respect of certain disclosure requirements contained in AASB 132 Financial Instruments: Disclosure and Presentation .

Early adoption of standard

The Group has elected to apply the following pronouncement to the annual reporting period beginning 1 July 2006:

Revised AASB 101 Presentation of Financial Statements (issued October 2006)
This includes applying the pronouncement to the comparatives in accordance with AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors . No adjustments to any financial statements were required for this pronouncement.
AASB 8 Operating Segments (issued February 2007)
This includes applying the pronouncement to the comparatives in accordance with AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors . Resulting from the adoption of AASB 8 Operating Segments , the Group has revised its assessment of operating segments to better reflect the basis of internal reports that are regularly reviewed by the Group’s chief operating decision maker in order to allocate resources to the segment and assess its performance.

Historical cost convention

These financial statements have been prepared under the historical cost convention, as modified by the measurement of certain available-for-sale investments at fair value, where reliably measured.

Critical accounting estimates

The preparation of financial statements in conformity with AIFRS requires the use of certain critical accounting estimates. It also requires Management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in Note 3.

(b) New accounting standards and interpretation

Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2007 reporting periods. The assessment of the impact of these standards and interpretations which are considered to be of relevance to the Group and the parent entity is set out below.

AASB 7 Financial Instruments: Disclosures and AASB 2005 10 Amendments to Australian Accounting Standards [AASB 132, AASB 101, AASB 114, AASB 117, AASB 133, AASB 139, AASB 1, AASB 4, AASB 1023 & AASB 1038]
AASB 7 and AASB 2005 10 are applicable to annual reporting periods beginning on or after 1 January 2007. The Group has not adopted the standards early. Application of the standards will not affect any of the amounts recognised in the financial statements, but will have an impact on the type of information disclosed in relation to the financial instruments of the Group and the parent entity.

GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2007

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

(b) New accounting standards and interpretation (cont.)

AASB-I 10 Interim Financial Reporting and Impairment
AASB-I 10 is applicable to reporting periods commencing on or after 1 November 2006. The Group has not recognised an impairment loss in relation to goodwill, investments in equity instruments or financial assets carried at cost in an interim reporting period. Application of the interpretation will therefore have no impact on the Financial Report of the Group and the parent entity.
AASB 2007-4 Amendments to Australian Accounting Standards arising from ED 151 and Other Amendments [AASB 1, 2, 3, 4, 5, 6, 7, 102, 107, 108, 110, 112, 114, 116, 117, 118, 119, 120, 121, 127, 128, 129, 130, 131, 132, 133, 134, 136, 137, 138, 139, 141, 1023 & 1038]
AASB 2007-4 is applicable for reporting periods commencing on or after 1 July 2007. These amendments arise as a result of the AASB decision that, in principle, all options that currently exist under IFRSs should be included in the Australian equivalents to IFRSs and additional Australian disclosures should be eliminated, other than those now considered particularly relevant in the Australian reporting environment. Application of the standards will not have any material effect on the amounts recognised in the financial statements but these amendments are expected to reduce the extent of some disclosures in the Company’s Financial Report.
AASB Interpretation 11 and AASB 2 – Group and Treasury Share Transactions
AASB Interpretation 11 is applicable for reporting periods commencing on or after 1 March 2007. The Interpretation addresses whether certain types of share-based payment transactions with employees (or other suppliers of good and services) should be accounted for as equity-settled or as cash-settled transactions under AASB 2 Share-based Payments . It also specifies the accounting in a subsidiary’s financial statements for share-based payment arrangements involving equity instruments of the parent. This is consistent with the Group’s existing accounting policies for share-based payments. Application of the interpretation will therefore have no impact on the Financial Report of the Group and the parent entity.

These are the only changes which are expected to be of relevance to the Group.

(c) Basis of consolidation

The consolidated financial statements comprise the financial statements of Genetic Technologies Limited and its subsidiaries (collectively the ‘Group’). The financial statements of subsidiaries are prepared for the same reporting period as the parent, using consistent accounting policies. Adjustments are made to bring into line any dissimilar accounting policies that may exist. All intercompany balances and transactions, including unrealised profits arising from intra-group transactions, have been eliminated in full. Unrealised losses are eliminated unless costs cannot be recovered.

Subsidiaries are consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group. Where there is loss of control of a subsidiary, the consolidated financial statements include the results for the part of the reporting period during which Genetic Technologies Limited has control. Minority interests represent the interests not held by the Group in Gtech International Resources Limited, ImmunAid Pty. Ltd. and AgGenomics Pty. Ltd.

(d) Foreign currency translation

Both the functional and presentation currency of Genetic Technologies Limited and its Australian subsidiaries is the Australian dollar (AUD). Transactions in foreign currencies are initially recorded in the functional currency at the exchange rates ruling at the date of the transaction. Monetary assets and liabilities which are denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance sheet date. All differences are taken to the income statement.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate ruling at the date of the initial transaction. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates ruling at the date when the fair value was determined.

The functional currencies of the Company’s three overseas subsidiaries are as follows:

Gtech International Resources Limited – Canadian dollars (CAD)

GeneType AG – Swiss francs (CHF)

GeneType Corporation – United States dollars (USD)

As at the reporting date, the assets and liabilities of these overseas subsidiaries are translated into the presentation currency of Genetic Technologies Limited at the rate of exchange ruling at the balance sheet date and the income statements are translated at the weighted average exchange rates for the period. The exchange differences arising on the retranslation are taken directly to a separate component of equity. On disposal of a foreign entity, the deferred cumulative amount recognised in equity relating to that particular foreign operation is recognised in the income statement.

FINANCIAL STATEMENTS (cont.)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

(e) Fair value estimation

The fair value of financial instruments that are not traded in an active market (for example, non-listed equity securities classified as available-for-sale assets) is determined using valuation techniques, including the last price at which shares were issued to third parties, where amounts are reliably measured. The Group uses a variety of methods and makes assumptions that are based on market conditions existing at each balance date. Techniques, such as recent quoted market prices and estimated discounted cash flows, are used to determine fair value for these remaining financial instruments. Available-for-sale investments are measured at cost, where fair value cannot be reliably determined.

The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values due to their short-term nature. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments.

(f) Segment reporting

An operating segment is a component of the Group:

that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the Group);
whose operating results are regularly reviewed by the Group’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance; and
for which discrete financial information is available.

(g) Earnings per share

Basic EPS is calculated as net profit attributable to members, adjusted to exclude costs of servicing equity (other than dividends) and preference share dividends, divided by the weighted average number of ordinary shares, adjusted for any bonus element. Diluted EPS is calculated as net profit attributable to members, adjusted for: costs of servicing equity (other than dividends); the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses; and other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential ordinary shares; divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element.

(h) Revenue recognition

Revenues are recognised to the extent that it is probable that the economic benefits will flow to the entity and the revenues can be reliably measured. Revenues are recognised at the fair value of the consideration received net of the amounts of goods and services tax (GST). The following specific recognition criteria must also be met before revenue is recognised:

License fees received

License fee income is recorded on the execution of a binding agreement where the Company has no future obligations, income is fixed and determinable, and collection is reasonably assured. The Company grants no refunds to its customers. Refer also to Note 2(x).

Rendering of services

Revenues from the rendering of services are recognised when the provision of these services is completed and the fee for the services provided is recoverable. Service arrangements are of short duration (in most cases less than three months).

Royalties and annuities received

The Company licenses the use of its patented genetic technologies. Royalties and annuities arising from these licenses are recognised when earned in accordance with the substance of the agreement, in cases where no future performance is required by the Company, and collection is reasonably assured.

Interest received

Revenue is recognised as the interest accrues using the effective interest method. Interest charged on loans to related parties is charged on commercial and arm’s-length terms and conditions.

Research and development grants received

The Company receives non-refundable grants that assist the Company to fund specific research and development projects. These grants generally provide for the reimbursement of approved costs incurred as defined in the various agreements. Government grants are recorded as other income when they become receivable, i.e. when key milestones set within each agreement are achieved and accepted by all parties to the grant, no performance obligation remains and collectibility is reasonably assured.

GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2007

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

(i) Share-based payment transactions

The Group provides benefits to employees (and previously to Directors) of the Group in the form of share-based payment transactions, whereby employees render services and receive rights over shares (‘equity-settled transactions’). There is currently a Staff Share Plan in place to provide these benefits to senior executives, consultants and employees. The cost of these equitysettled transactions is measured by reference to the fair value at the date they are granted. The fair value is determined by an external valuer using a Black-Scholes option pricing model.

In valuing equity-settled transactions, no account is taken of any performance conditions. The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the relevant vesting conditions are fulfilled, ending on the date that the relevant employees become fully entitled to the award (‘vesting date’).

The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects (i) the extent to which the vesting period has expired; and (ii) the number of awards that, in the opinion of the Directors of the Group, will ultimately vest. This opinion is formed based on the best information available at balance date.

No expense is recognised for any awards that do not ultimately vest. Where the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been modified. In addition, an expense is recognised for any increase in the value of the transaction as a result of the modification, as measured at the date of modification. Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were a modification of the original award, as described in the previous paragraph. Where appropriate, the dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share.

(j) Income tax

The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the national income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and unused tax losses.

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that, at the time of the transaction, affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.

Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity.

Tax consolidation legislation

Genetic Technologies Limited and its wholly-owned Australian subsidiaries have implemented tax consolidation legislation. The head entity, Genetic Technologies Limited, and the subsidiaries in the tax consolidated group account for their own current and deferred tax amounts. These tax amounts are measured as if each entity in the tax consolidated group continues to be a stand alone taxpayer in its own right.

In addition to its own current and deferred tax amounts, Genetic Technologies Limited also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from subsidiaries in the tax consolidated group.

Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts receivable from or payable to other entities in the Group. Details about the tax funding agreement are disclosed in Note 7. Any difference between the amounts assumed and amounts receivable or payable under the tax funding agreement are recognised as a contribution to (or distribution from) wholly-owned tax subsidiaries.

FINANCIAL STATEMENTS (cont.)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

(k) Withholding tax

The Group generates revenues from the granting of licenses to parties resident in overseas countries. Such revenues may be subject to the deduction of local withholding tax. In certain cases, these revenues are paid to the Group without appropriate withholding tax having been deduced. Accordingly, the Group recognises a provision in respect of the Directors’ best estimate of the amounts payable.

(l) Other taxes

Revenues, expenses and assets are recognised net of the amount of Goods and Services Tax (GST) except where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet.

Cash flows are included in the cash flow statement on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority are classified as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.

(m) Finance costs

Finance costs are recognised as an expense when incurred.

(n) Cash and cash equivalents

Cash and short-term deposits in the balance sheet comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less. For the purposes of the cash flow statement, cash and cash equivalents consist of cash and cash equivalents as defined above. Cash at bank earns interest at floating rates based on daily bank deposit rates. Short-term deposits are made for varying periods of between one day and three months, depending on the immediate cash requirements of the Group, and earn interest at the respective short-term deposit rates.

(o) Trade and other receivables

Trade receivables, which are non-interest bearing and generally have terms of between 30 to 90 days, are recognised and carried at original invoice amount less an allowance for any uncollectible amounts. An allowance for doubtful debts is made when there is objective evidence that a receivable is impaired. The amount of the allowance/impairment loss is measured as the difference between the carrying amount of the trade receivables and the estimated future cash flows expected to be received from the relevant debtors. No impairment charge has been recognised as an expense for the current year. Details regarding the effective interest rate and credit risk of current receivables are disclosed in Notes 35 and 36.

(p) Restricted security deposits

Restricted security deposits include non-current cash deposits held as security for the Company’s performance of certain contractual obligations.

(q) Investments and other financial assets

All investments are initially recognised at cost, being the fair value of the consideration given plus directly attributable transaction costs. After initial recognition, investments in subsidiaries are carried at cost, less any impairment disclosed in the separate financial statements of Genetic Technologies Limited. Other investments, which are classified as available-for-sale, are measured at fair value if this can reliably be determined or at cost where fair value cannot be reliably determined. Gains or losses on available-for-sale investments are recognised as a separate component of equity until the investment is sold, or otherwise disposed of, or until the investment is determined to be impaired, at which time the cumulative gain or loss previously reported in equity is included in the income statement.

Available-for-sale investments

Available-for-sale investments consist of investments in ordinary shares which have no fixed maturity date or coupon rate. The fair value of the unlisted available-for-sale investments has been estimated using valuation techniques based on assumptions that are not supported by observable market prices or rates. Management believes the estimated fair values (where reliably measured) resulting from the valuation techniques and recorded in the balance sheet are reasonable and the most appropriate at the balance sheet date. Any related changes in fair values are directly recorded in equity. Available-for-sale investments are measured at cost, where fair value cannot be reliably determined.

GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2007

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

(r) Property, plant and equipment

Plant and equipment is stated at cost less accumulated depreciation and any impairment in value. Depreciation is calculated on either a straight-line or diminishing value basis over the estimated useful life of the respective asset as follows:

Laboratory equipment – 3 to 5 years
Computer equipment – 2 to 5 years
Office equipment – 2.5 years
Equipment under hire purchase – 3 years
Leasehold improvements – lease term, being between 4 and 10 years

Costs relating to day-to-day servicing of any item of property, plant and equipment, which may include the cost of small parts, are recognised in profit or loss as incurred. The cost of replacing larger parts of some items of property, plant and equipment are capitalised when incurred and depreciated over the period until their next scheduled replacement.

(s) Intangible assets

Patents

Patents are carried at cost and amortised on a straight-line basis over their useful lives, being from 5 to 10 years. External costs incurred in filing and protecting patent applications, for which no future benefit is reasonably assured, are expensed as incurred.

Research and development costs

Costs relating to research activities are expensed as incurred.

An intangible asset arising from development expenditure on an internal project is recognised only when the Group can demonstrate the technical feasibility of completing the intangible asset so that it will be available for use or sale, its intention to complete and its ability to use or sell the asset, how the asset will generate future economic benefits, the availability of resources to complete the development and the ability to measure reliably the expenditure attributable to the intangible asset during its development. To date, all development costs have been expensed as incurred as the recoverability can not be regarded as assured.

(t) Goodwill

Goodwill on acquisition is initially measured at cost, being the excess of the cost of the business combination over the acquirer’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities. Following its initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is not amortised.

Goodwill is reviewed for impairment at each reporting date, or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. Impairment is determined by assessing the recoverable amount of the cash-generating unit to which the goodwill relates. Where the recoverable amount of the cash-generating unit is less than the carrying amount, an impairment loss is recognised.

Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured on the basis of the relative values of the operation disposed of and the portion of the cash-generating unit retained.

For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the Group are assigned to those units or groups of units. Each unit or group of units to which the goodwill is so allocated represents the lowest level within the Group at which the goodwill is monitored for internal management purposes; and is not larger than an operating segment in accordance with AASB 8 Operating Segments .

(u) Impairment of assets (other than goodwill)

The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, the Group makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of its fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets and the asset’s value-in-use cannot be estimated to be close to its fair value. In such cases, the asset is tested for impairment as part of the cash-generating unit to which it belongs. When the carrying amount of an asset or cash-generating unit exceeds its recoverable amount, the asset or cash-generating unit is considered impaired and is written down to its recoverable amount.

FINANCIAL STATEMENTS (cont.)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

(u) Impairment of assets (other than goodwill) (cont.)

In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Impairment losses relating to operations are recognised in those expense categories consistent with the function of the impaired asset unless the asset is carried at its revalued amount (in which case the impairment loss is treated as a revaluation decrease).

An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in profit or loss unless the asset is carried at revalued amount, in which case the reversal is treated as a revaluation increase. After such a reversal, the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.

(v) Trade and other payables

Trade payables and other payables are carried at amortised cost and represent future liabilities for goods and services provided to the Group prior to the end of the financial year that are unpaid and arise when the Group becomes obliged to make future payments in respect of the purchase of these goods and services. Trade payables and other payables generally have terms of between 30 and 60 days.

(w) Leases and hire purchase agreements

Finance leases and hire purchase agreements, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments.

Lease and hire purchase payments are apportioned between finance charges and a reduction of the associated liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised as an expense in profit or loss. Capitalised leased assets and assets under hire purchase are depreciated over the shorter of the estimated useful life of the asset or the term of the agreement. Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases. Operating lease payments are recognised as an expense in the income statement on a straight-line basis over the lease term.

(x) Deferred revenue

License revenues and annuities

License revenues received in respect of future accounting periods are deferred until the Company has fulfilled its obligations under the terms of the agreement. Where deferred revenue relates to a license agreement with a specific term but the Company has no future performance obligations, the revenue is recognised on a straight-line accruals basis over the term in accordance with the substance of the agreements. Where revenue has been deferred because the Company has future performance obligations, revenue is recognised as the Company’s performance obligations are satisfied. Any costs incurred relating to this future revenue are also deferred.

Where a license agreement provides for the payment of regular annuities to the Company and the licensee has the right to terminate the agreement prior to the payment of those annuities with no penalty, the Company does not recognise revenue until such time as the associated cash payments are received, as it is not considered probable that the benefits of the transaction will flow to the Company until cash collection is made. Where such annuities are paid in advance, the revenue is allocated on a prorata basis with the balance being reflected in the balance sheet as a deferred revenue liability.

Genetic testing revenues

The Company operates testing laboratories which provide genetic testing services. The Company recognises revenue from the provision of testing services when the testing services have been completed. Fees received in advance of the testing process are deferred until such time as the Company completes its performance obligations.

Grant revenues

Government grants are recognised when there is reasonable assurance that the grant will be received and all attaching conditions will be complied with. When the grant relates to an expense item, it is recognised as income over the periods necessary to match the grant on a systematic basis to the costs that it is intended to compensate. When the grant relates to an asset, the fair value is credited to a deferred income account and is released to the income statement over the expected useful life of the relevant asset by equal annual instalments.

GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2007

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

(y) Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Group expects some or all of a provision to be reimbursed, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the income statement net of any reimbursement.

If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.

(z) Employee benefits

Provision is made for employee benefits accumulated as a result of employees rendering services up to the reporting date. These benefits include wages and salaries, annual leave and long service leave. Liabilities arising in respect of wages and salaries, annual leave and any other employee benefits expected to be settled within twelve months of the reporting date are measured at their nominal amounts based on remuneration rates which are expected to be paid when the liability is settled. All other employee benefit liabilities are measured at the present value of the estimated future cash outflow to be made in respect of services provided by employees up to the reporting date using the projected unit credit method.

In determining the present value of future cash outflows, the market yield as at the reporting date on national government bonds, which have terms to maturity approximating the terms of the related liability, are used. Employee benefits expenses and revenues arising in respect of wages and salaries, non-monetary benefits, annual leave, long service leave and other leave benefits; and other types of employee benefits are recognised against profits on a net basis in their respective categories.

(aa) Contributed equity

Issued and paid up capital is recognised at the fair value of the consideration received by the Company. Any transaction costs arising on the issue of ordinary shares are recognised directly in equity as a deduction, net of tax, of the share proceeds received. The Company has a share-based payment option scheme under which options to subscribe for the Company’s shares have been granted to certain executives and other employees (refer Note 22).

(ab) Interest in joint venture operation

The Group’s interest in its joint venture operation is accounted for by recognising the Group’s assets and liabilities from the joint venture, as well as expenses incurred by the Group and the Group’s share of income earned from the joint venture, in the consolidated financial statements.

(ac) Reclassifications

Certain reclassifications have been made in the financial statements to ensure that prior year comparatives conform to current year presentations.

3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

Estimates and judgements are evaluated and are based on historical experience and other factors, including expectations of future events that may have a financial impact on the entity and that are believed to be reasonable under the circumstances.

(a) Critical accounting estimates and assumptions

The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future events. The key estimates and assumptions that have a significant risk of causing a material adjustment to the carrying value of certain assets and liabilities within the next annual reporting period are set out below.

Share-based payments transactions

The Group measures the cost of equity-settled transactions with employees by reference to the value of the equity instruments at the date on which they are granted. The fair value is determined by an external valuer using a Black-Scholes options pricing model, using the assumptions detailed in Note 32.

Available-for-sale investments

The Group holds certain available-for-sale investments (refer Note 12). The carrying value of these investments is based on the most-recent price at which similar securities were issued by the investee.

FINANCIAL STATEMENTS (cont.)

3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (cont.)

(a) Critical accounting estimates and assumptions (cont.)

Impairment of intangible assets and goodwill

The Group determines whether intangible assets with indefinite useful lives, including goodwill, are impaired on at least a biannual basis, in accordance with the accounting policy stated in Notes 2(t) and 2(u). This process requires an estimation to be made of the recoverable amount of the cash-generating units to which the respective assets are allocated. These calculations require the use of assumptions which are detailed in Note 14.

Income and withholding taxes

The Group is subject to income and withholding taxes in both Australia and jurisdictions where it has foreign operations. Significant judgement is required in determining the worldwide provision for income and withholding taxes. There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. Where the final outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current, deferred and withholding tax provisions in the period in which such determination is made (refer Notes 2(j), 2(k) and 2(l)).

In addition, the Group has recognised deferred tax assets relating to carried forward tax losses to the extent there are sufficient taxable temporary differences (deferred tax liabilities) relating to the same taxation authority and the same subsidiary against which the unused tax losses can be utilised. However, utilisation of the tax losses also depends on the ability of the entity to satisfy certain tests at the time the losses are recouped.

Rehabilitation costs

As disclosed in Note 27, the Group holds an interest in a mining project. As at 30 June 2007, the Group had recorded a provision for $78,498 in respect of its share of the estimated rehabilitation costs associated with the project (refer Note 19). The amount of the provision was based on estimated calculations provided to the Group by the project manager. The likelihood of any rehabilitation costs becoming payable by the Group and the associated timing thereof are unknown.

(b) Critical judgements in applying the entity’s accounting policies

Impairment of available-for-sale financial investments

The Group and the parent entity have made a significant judgement about the impairment of available-for-sale investments. The Group follows the guidance of AASB 139 Financial Instruments: Recognition and Measurement on determining when an available-for-sale investment is impaired. This determination requires significant judgement. In making this judgement, the Group evaluates, among other factors, the duration and extent to which the fair value of an investment is less than its cost and the financial health of and near term business outlook for the investee, including factors such as industry and sector performance, changes in technology and operational and financing cash flows. As at 30 June 2007, the fair value of the available-for-sale investments is assessed to be no less than their cost.

	CONSOL 2007 $	IDATED 2006 $	GENETIC TECHNO 2007 $	LOGIES LIMITED 2006 $
4. REVENUE Revenue from operations License fees received Rendering of services Royalties and annuities received Total revenue from operations Other revenue Interest received Rental recovery Miscellaneous revenue Total other revenue Total revenue		5,124,347 2,550,221 1,560,901		5,124,347 – 1,560,901 6,685,248 774,750 – 8,146 782,896 7,468,144

	8,678,084		8,678,084
	3,119,131		–
	2,658,995		2,658,995
	14,456,210	9,235,469	11,337,079	6,685,248
		805,088 – 8,146		774,750 – 8,146
	488,980		456,195
	31,945		–
	1,684		455
	522,609	813,234	456,650	782,896
	14,978,819	10,048,703	11,793,729

GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2007

	CONSOL 2007 $	IDATED 2006 $	GENETIC TECHNO 2007 $	LOGIES LIMITED 2006 $
5. OTHER INCOME Grants received and related income Net gain on disposal of business Net foreign exchange gains Net gain on disposal of plant and equipment Miscellaneous income Total other income 6. EXPENSES Amortisation and depreciation expenses Patents Equipment under hire purchase Laboratory equipment Computer equipment Leasehold improvements Office equipment Total amortisation and depreciation expenses Employee benefits expenses Wages and salaries Consulting fees Superannuation Share-based payments expense Directors’ fees Payroll tax Staff recruitment, training and amenities Termination benefits Workers’ compensation costs Total employee benefits expenses Finance costs Interest paid Bank charges Total finance costs Impairment losses and other write-downs Impairment loss on patents Write-down of loans to other parties (Note 11) Write-down of plant and equipment Write-down of loans to subsidiaries Write-off of loans to former subsidiaries Impairment loss on investment in subsidiaries Write-off of goodwill Total impairment losses and other write-downs Other expenses Loss on sale of available-for-sale investments Proceeds from sale Less: carrying value at date of sale Loss on sale		570,667 – 123,616 2,321 11,807		139,197 – 108,733 2,321 11,807 262,058 3,552,600 510,828 53,320 31,380 – 1,134 4,149,262 985,508 703,215 104,414 413,212 186,636 65,147 61,649 – 10,487 2,530,268 84,704 12,106 96,810 – – – 6,100,000 – 120,303 – 6,220,303 – – –
	315,486		70,000
	25,000		–
	–		–
	–		–
	–		–
	340,486	708,411	70,000
		3,596,320 510,828 564,347 121,099 11,848 12,835


	3,412,482		3,544,000
	537,335		537,335
	479,079		309,772
	144,778		37,167
	14,742		–
	14,576		4,339
	4,602,992	4,817,277	4,432,613
		3,326,462 854,724 343,785 431,875 197,369 168,963 86,114 – 23,214
	3,573,292		1,125,743
	792,759		524,930
	312,730		101,405
	257,906		221,872
	188,674		183,657
	174,401		69,266
	151,636		104,474
	87,500		87,500
	17,746		3,961
	5,556,644	5,432,506	2,422,808
		84,704 27,378
	66,389		66,378
	24,540		6,783
	90,929	112,082	73,161
		– – – – – – 97,500
	1,150,000		1,150,000
	80,000		80,000
	76,960		–
	–		1,378,450
	–		1,042,413
	–		546,945
	–		–
	1,306,960	97,500	4,197,808
		– –

	(332,709)		(332,709)
	366,016		366,016
	33,307	–	33,307

FINANCIAL STATEMENTS (cont.)

	CONSOL 2007 $	IDATED 2006 $	GENETIC TECHNO 2007 $	LOGIES LIMITED 2006 $
7. INCOME TAX Income tax expense Current tax Deferred tax Aggregate income tax expense/(benefit) Reconciliation of income tax expense to prima facie tax payable Loss before income tax expense Tax at the Australian tax rate of 30% (2006: 30%) Tax effect amounts which are not deductible/(taxable) in calculating taxable income Impairment loss on investments in subsidiaries and write-down of intercompany balances Share-based payments expense Research and development expenses Withholding tax expense Other non-deductible items Tax effect of adjustments relating to temporary differences Amortisation and depreciation expenses Net movements in provisions Impairment of investments in subsidiaries Settlement proceeds from Applera Corporation Other Tax losses now utilised Tax losses not recognised Income tax expense/(benefit) Deferred tax assets Tax losses Withholding tax Deferred revenue Applera settlement Intangible assets Doubtful debts Provisions Fixed assets Other Total deferred tax assets Set-off of deferred tax liabilities pursuant to set-off provisions Deferred tax assets not brought to account Net deferred tax assets		– –		(120,303) – (120,303) (8,811,455) (2,643,437) 1,830,000 123,964 – – (41,935) (731,408) 1,196,839 16,297 36,091 2,253,417 – (830,122) (2,061,417) (120,303) – 600,466 – 2,253,417 – – 48,553 – – 2,902,436 (506,755) (2,395,681) –

	–		1,521,550
	–		–
	–	–	1,521,550
		(7,908,123) (2,372,437) – 129,563 (150,000) – 32,972
	(4,345,702)		(2,512,546)
	(1,303,711)		(753,764)

	–		890,342
	77,372		66,562
	(206,646)		–
	79,317		79,317
	26,690		14,226
	(1,326,978)	(2,359,902) 1,042,061 48,874 – 2,253,417 –	296,683	(731,408) 1,196,839 16,297 36,091 2,253,417 –

	1,622,603		1,661,788
	(202,337)		(217,978)
	–		–
	(342,627)		(342,627)
	225,153		99,498
	–	(984,450) –	–	(830,122) (2,061,417)
	24,186		24,186
	–	–	1,521,550
		44,142 600,466 – 2,253,417 – – 134,441 – –
	–		–
	324,837		324,837
	96,395		64,931
	1,910,790		1,910,790
	–		617,698
	24,000		24,000
	183,733		82,204
	537,335		537,335
	34,567		34,567
	3,111,657	3,032,466 (3,032,466) –	3,596,362	2,902,436 (506,755) (2,395,681)
	(1,947,198)		–
	(1,164,459)		(3,596,362)
	–	–	–

GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2007

		CONSOLIDATED	GENETIC TECHNOLOGIES LIMITED	GENETIC TECHNOLOGIES LIMITED
	2007	2006	2007	2006
	$	$	$	$
7. INCOME TAX (cont.)
Deferred tax liabilities
Intangible assets	1,947,198 3,032,466		–	506,755
Tax losses
Unused tax losses for which no deferred tax asset
has been recognised	19,245,772 19,221,586		17,542,857	17,496,000
Deferred tax asset @ 30%	5,773,732 5,766,476		5,262,857	5,248,800

Subject to the Group continuing to meet relevant statutory tests, tax losses are available for offset against future taxable income.

Tax consolidation legislation

Genetic Technologies Limited and its wholly-owned Australian subsidiaries implemented the tax consolidation legislation as from 1 July 2003. The accounting policy in relation to this legislation is set out in Note 2(j).

The entities in the tax consolidated group have entered into a Tax Sharing Agreement which, in the opinion of the Directors, limits the joint and several liabilities of the wholly-owned entities in the case of a default by the head entity, Genetic Technologies Limited.

The entities have also entered into a Tax Funding Agreement under which the wholly-owned entities fully compensate Genetic Technologies Limited for any current tax payable assumed and are compensated by Genetic Technologies Limited for any current tax receivable and deferred tax assets relating to unused tax losses or unused tax credits that are transferred to Genetic Technologies Limited under the tax consolidation legislation. The funding amounts are determined by reference to the amounts recognised in the subsidiaries’ financial statements.

The amounts receivable or payable under the Tax Funding Agreement are due upon receipt of the funding advice from the head entity, which is issued as soon as practicable after the end of each financial year. During the year, Genetic Technologies Limited has assumed $1,521,550 of losses from members of the tax consolidated group. Payment for these amounts has been settled through the intercompany account in accordance with the Tax Funding Agreement.

As at 30 June 2007, there are no unrecognised temporary differences associated with the Group’s investments in subsidiaries or joint venture, as the Group has no liability for additional taxation should unremitted earnings be remitted (2006: $Nil).

8. LOSS PER SHARE

The following reflects the income and share data used in the calculations of basic and diluted loss per share:

	CONSOL 2007 $	IDATED 2006 $
Loss for the year Loss/(profit) attributable to minority interests Loss used in calculating loss per share Weighted average number of ordinary shares used in calculating loss per share	(4,345,702)	(7,908,123) (10,650) (7,918,773) 362,386,940
	17,159
	(4,328,543)
	362,389,899

There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of completion of these financial statements.

None of the 12,577,500 options over ordinary shares are considered to be dilutive for the purposes of calculating diluted loss per share and have therefore been excluded from the weighted average number of shares.

FINANCIAL STATEMENTS (cont.)

	CONSOL 2007 $	IDATED 2006 $	GENETIC TECHNO 2007 $	LOGIES LIMITED 2006 $
9. CASH AND CASH EQUIVALENTS Reconciliation of cash and cash equivalents Cash at bank and on hand 11,303,764 9,147,060 Short-term deposits 2,029,986 2,288,187 Non-current deposits/cash (refer note) 450,000 450,000 Total cash and cash equivalents 13,783,750 11,885,247 Note: As at 30 June 2007, an amount of $450,000 (2006: $450,000) was held on deposit as security for a bank Reconciliation of operating loss Reconciliation of operating loss after income tax to net cash flows (used in) or provided by operating activities is as follows: Operating loss after income tax (4,345,702) (7,908,123) Adjust for non-cash items Amortisation and depreciation expenses 4,602,992 4,817,277 Share-based payments expense 257,906 431,875 Impairment losses and other write-downs 1,306,960 97,500 Losses assumed from tax consolidated group – – Net draw-downs under Applera settlement (747,533) (641,664) Net foreign exchange (gains)/losses 317,497 (17,242) Loss on sale of shares 33,307 – Profit on sale of plant and equipment – (2,321) Adjust for changes in assets and liabilities (Increase)/decrease in trade and other receivables 753,678 (827,298) (Increase)/decrease in accrued interest 844 121,689 (Increase)/decrease in prepayments 78,641 (50,820) (Increase)/decrease in other financial assets 9,065 1,551 Increase/(decrease) in trade and other payables (22,514) (1,476,308) Increase/(decrease) in accrued expenses 175,788 (118,007) Increase/(decrease) in deferred revenue 287,638 (447,799) Increase/(decrease) in withholding tax payable (275,629) (45,355) Increase/(decrease) in provisions 164,308 107,723 Net cash flows (used in)/provided by operating activities 2,597,246 (5,957,322) Financing facilities available As at reporting date, the following financing facilities had been negotiated and were available: Total facilities Hire purchase facility 2,500,000 2,500,000 Credit cards 110,000 110,000 Facilities used as at reporting date Hire purchase facility (Note 27) (523,967) (982,108) Credit cards (19,797) (27,885) Facilities unused as at reporting date Hire purchase facility 1,976,033 1,517,892 Credit cards 90,203 82,115		9,147,060 2,288,187 450,000		8,215,588 2,287,971 450,000 10,953,559 (8,691,152) 4,149,262 413,212 6,220,303 (120,303) (641,664) (17,242) – (2,321) (969,513) 121,689 (40,464) 1,551 (1,544,688) (108,735) (130,406) (45,355) 36,535 (1,369,291) 2,500,000 110,000 (982,108) (27,885) 1,517,892 82,115

	11,303,764		10,391,337
	2,029,986		2,029,950
	450,000		450,000
	13,783,750	11,885,247	12,871,287
			guarantee


	(4,345,702)		(4,034,096)

	4,602,992		4,432,613
	257,906		221,872
	1,306,960		4,197,808
	–		1,521,550
	(747,533)		(747,533)
	317,497		312,977
	33,307		33,307
	–		–

	753,678		704,722
	844		844
	78,641		103,473
	9,065		9,065
	(22,514)		1,167,325
	175,788		163,154
	287,638		182,759
	(275,629)		(275,629)
	164,308		112,174
	2,597,246	(5,957,322)	8,106,385
		2,500,000 110,000 (982,108) (27,885) 1,517,892 82,115


	2,500,000		2,500,000
	110,000		110,000

	(523,967)		(523,967)
	(19,797)		(19,797)

	1,976,033		1,976,033
	90,203		90,203

Non-cash activities

During the financial year, the Group acquired plant and equipment with an aggregate fair value of $40,330 (2006: $81,444) by means of a hire purchase agreement (refer Note 27).

GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2007

	CONSOL 2007 $	IDATED 2006 $	GENETIC TECHNO 2007 $	LOGIES LIMITED 2006 $
10. TRADE AND OTHER RECEIVABLES(CURRENT) Trade receivables Accrued interest Total current trade and other receivables Debtors for both Genetic Technologies Limited and the Group include a Euros of EUR 100,000 (2006: EUR 500,000), and New Zealand dollars of 11. RECEIVABLES(NON-CURRENT) Loans to other parties Loans to unrelated parties Less: provision for impairment Net loans to unrelated parties Loans to subsidiaries Loans to wholly-owned subsidiaries Less: provision for impairment Net loans to wholly-owned subsidiaries Total net non-current receivables (Note 37) 12. AVAILABLE-FOR-SALE INVESTMENTS(NON-CURRENT) Unlisted shares, at fair value Total non-current available-for-sale investments 13. PROPERTY, PLANT AND EQUIPMENT Laboratory equipment, at cost Less: accumulated depreciation Net laboratory equipment Computer equipment, at cost Less: accumulated depreciation Net computer equipment Office equipment, at cost Less: accumulated depreciation Net office equipment Equipment under hire purchase, at cost Less: accumulated depreciation Net equipment under hire purchase Leasehold improvements, at cost Less: accumulated depreciation Net leasehold improvements Total net property, plant and equipment		1,400,176 1,292
	646,498		291,844
	448		448
	646,946	1,401,468	292,292


	80,000		80,000
	(80,000)		(80,000)
	–	–	–	–
		– –		19,084,505 (11,100,000)
	–		21,656,024
	–		(12,478,450)
	–	–	9,177,574	7,984,505
	–	–	9,177,574
		673,595
	233,330		233,330
	233,330	673,595	233,330
		3,023,699 (2,002,074)
	3,807,360		1,388,697
	(2,558,113)		(363,092)
	1,249,247	1,021,625	1,025,605	588,344
	691,950	597,084 (373,896)	128,952	119,786 (41,647)
	(518,674)		(78,814)
	173,276	223,188	50,138	78,139
	148,775	127,796 (77,540)	19,317	6,244 (3,901)
	(92,115)		(8,240)
	56,660	50,256	11,077	2,343
	1,632,868	1,592,538 (690,128)	1,632,868	1,592,538 (690,128)
	(1,227,463)		(1,227,463)
	405,405	902,410	405,405	902,410
	92,209	85,983 (17,675)	–	– –
	(32,418)		–
	59,791	68,308	–	–
	1,944,379	2,265,787	1,492,225

FINANCIAL STATEMENTS (cont.)

	CONSOL 2007 $	IDATED 2006 $	GENETIC TECHNO 2007 $	LOGIES LIMITED 2006 $
13. PROPERTY, PLANT AND EQUIPMENT (cont.) Reconciliation of property, plant and equipment Opening gross carrying amount Add: additions purchased during the year Less: disposals made during the year Closing gross carrying amount Opening accumulated depreciation/amortisation Add: depreciation/amortisation expense charged Less: disposals made during the year Closing accumulated depreciation/amortisation Total net property, plant and equipment		4,548,560 882,825 (4,285)		1,600,792 763,725 (4,285) 2,360,232 (194,471) (596,662) 2,137 (788,996) 1,571,236

	5,427,100		2,360,232
	946,062		809,602
	(476,000)		–
	5,897,162	5,427,100	3,169,834	2,360,232
	(3,161,313)	(1,942,493) (1,220,957) 2,137	(788,996)	(194,471) (596,662) 2,137
	(1,190,510)		(888,613)
	399,040		–
	(3,952,783)	(3,161,313)	(1,677,609)	(788,996)
	1,944,379	2,265,787	1,492,225

Reconciliation of movements in property, plant and equipment by asset category

ASSET CATEGORY	OPENING CARRYING AMOUNT S	OPENING CARRYING AMOUNT S	ADDITIONS DURING YEAR $	ADDITIONS DURING YEAR $	NET DISPOSALS DURING YEAR $	NET DISPOSALS DURING YEAR $	DEPRECIATION/ AMORTISATION EXPENSES $	DEPRECIATION/ AMORTISATION EXPENSES $	CLOSING CARRYING AMOUNT $
Consolidated Laboratory equipment Computer equipment Office equipment Equipment under hire purchase Leasehold improvements Totals Genetic Technologies Limited Laboratory equipment Computer equipment Office equipment Equipment under hire purchase Totals	1,021,625 223,188 50,256 902,410 68,308 2,265,787 588,344 78,139 2,343 902,410 1,571,236		783,660 94,866 20,981 40,330 6,225 946,062 747,033 9,166 13,073 40,330 809,602		(76,960) – – – – (76,960) – – – – –		(479,078) (144,778) (14,577) (537,335) (14,742) (1,190,510) (309,772) (37,167) (4,339) (537,335) (888,613)		1,249,247 173,276 56,660 405,405 59,791 1,944,379 1,025,605 50,138 11,077 405,405 1,492,225



			CONSOL	IDATED		G	ENETIC TECHNO	LO	GIES LIMITED
		2007 $		2	006 $		2007 $		2006 $
14. INTANGIBLE ASSETS AND GOODWILL Patents(refer notes below) Patents, at cost Less: accumulated amortisation and impairment loss Net patents Goodwill(refer notes below) Goodwill, at cost Total net intangible assets and goodwill				36,223,593 (19,764,725)					20,978,600 (12,938,767) 8,039,833 – 8,039,833

		35,929,621				20,978,600
		(24,033,235)				(17,632,767)
		11,896,386		16,458,868		3,345,833			8,039,833
				315,388					–
		315,388				–
		12,211,774		16,774,256		3,345,833

GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2007

	CONSO 2007 $	LIDATED 2006 $	GENETIC TECHN 2007 $	OLOGIES LIMITED 2006 $
14. INTANGIBLE ASSETS AND GOODWILL (cont.) Reconciliation of patents Opening gross carrying amount Add: cost of patents acquired (Note 21) Adjust for exchange rate movements Closing gross carrying amount Opening accumulated amortisation Add: amortisation expense charged Less: impairment loss (refer notes below) Adjust for exchange rate movements Closing accumulated amortisation and impairment loss Total net patents Reconciliation of goodwill Opening gross carrying amount Less: write-off of goodwill Total net goodwill		36,055,878 8,600 159,115		20,970,000 8,600 – 20,978,600 (9,386,167) (3,552,600) – – (12,938,767) 8,039,833 – – –

	36,223,593		20,978,600
	–		–
	(293,972)		–
	35,929,621	36,223,593	20,978,600	20,978,600
	(19,764,725)	(16,009,290) (3,596,320) – (159,115)	(12,938,767)	(9,386,167) (3,552,600) – –
	(3,412,482)		(3,544,000)
	(1,150,000)		(1,150,000)
	293,972		–
	(24,033,235)	(19,764,725)	(17,632,767)	(12,938,767)
	11,896,386	16,458,868	3,345,833
		412,888 (97,500)
	315,388		–
	–		–
	315,388	315,388	–

Impairment notes

Business combination

The patents and goodwill were purchased as part of a business combination.

Impairment of goodwill

Goodwill is allocated to the Group’s cash-generating units (CGUs) on the basis of the appropriate operating segment. The Group’s goodwill has been allocated to the Testing operating segment to which it relates. There is no carrying amount of intangible assets with indefinite useful lives allocated to this segment. The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use cash flow projections based on financial budgets approved by the Board. In performing the value-in-use calculations, the Directors have assumed that the Testing business will begin to generate an operating profit in the next 2 to 3 years based on projected revenue growth. Should this time period be extended beyond 3 years, there is a possibility that the value-in-use may fall below the carrying value of the goodwill.

The cashflow projections assume revenues of $4.5 million in 2008 based on Management forecasts. As a key assumption, constant revenue growth of 18% is assumed beyond 2008 based on the historical five-year average growth rate applicable to the testing business. Expenses are assumed to be relatively constant over time given that significant capacity is available with the existing laboratory equipment and the testing business is relatively capital-intensive. Management has assessed the future cashflows using discount rates ranging between 10% and 25% which result in the recoverable amount exceeding the carrying value of goodwill.

Impairment of patents

The impairment loss arose in respect of patents held within the Research operating segment resulting from slower than expected progress with research related to the potential commercialisation of the technology covered by these patents. Specifically, events during the year contributed to a change in the following key assumptions:

Reduction in the expected future market penetration of developed products;
Reduction in the expected underlying market price; and
Revision of expected overhead costs related to the ongoing research and future commercialisation of these products.

FINANCIAL STATEMENTS (cont.)

14. INTANGIBLE ASSETS AND GOODWILL (cont.)

Impairment notes (cont.)

In conjunction with work performed by an independent valuation expert, an impairment charge of $1,150,000 was calculated by Management and recorded against the carrying value of the respective patents. The recoverable amount of the patents is based on value-in-use calculations. The estimated risk adjusted cashflows were discounted by the risk free rate of 6.5%. The 2007 financial year is the first year in which an indicator of impairment has arisen, requiring an assessment of the recoverable amount of the patents as required by AASB136 .

Cashflow forecasts associated with the impairment assessment of the patents have been projected to 2012, being the year in which the first of the respective patents is due to expire, using the weighted average outcomes arising from different scenarios varying the success rate in penetrating the US market as the key assumption to which the recoverable amount assessment is most sensitive. The forecasts and associated recoverable amount has been determined by an independent valuation expert, taking into account the Company’s contractual future research funding obligations, the current market prices for bone marrow testing kits and the estimated bone marrow transplant market size based on the US national bone marrow registry database. With regards to the assessment of the value-in-use of the patents in the Research operating segment, Management believes that there are no reasonably possible changes in any of the above key assumptions that would cause the carrying value of the patents to materially exceed their recoverable amount.

No other class of asset was impaired following from this exercise. Further, no change in the useful economic life of these patents was noted.

	CONSOL 2007 $	IDATED 2006 $	GENETIC TECHNO 2007 $	LOGIES LIMITED 2006 $
15. OTHER ASSETS(NON-CURRENT) Investments in subsidiaries Unlisted shares, at cost1 – – 1,532,701 Less: provision for impairment – – (1,505,990) Net unlisted shares – – 26,711 Listed shares, at cost – – 424,535 Total investments in subsidiaries (Note 34) – – 451,246 Total non-current other assets – – 451,246 1 An impairment loss has been raised to reduce the carrying values of the various loans to subsidiaries such that they do not assets of the respective subsidiary as at balance date. 16. TRADE AND OTHER PAYABLES(CURRENT) Trade payables 852,561 905,029 570,932 Other payables 246,208 216,254 33,736 Accrued expenses 464,883 289,095 452,249 Loans from wholly-owned subsidiaries (Note 37) – – 1,134,778 Total current trade and other payables 1,563,652 1,410,378 2,191,695		– –		1,106,058 (1,079,348) 26,710 424,535 451,245 451,245 exceed the net 474,328 97,793 289,095 – 861,216

	–		1,532,701
	–		(1,505,990)
	–	–	26,711	26,710
	–	–	424,535	424,535
	–	–	451,246	451,245
	–	–	451,246

	852,561		570,932
	246,208		33,736
	464,883		452,249
	–		1,134,778
	1,563,652	1,410,378	2,191,695

Trade payables and other payables for the Group include amounts due in US dollars of USD 326,978 (2006: USD 50,617), British pounds of GBP Nil (2006: GBP 50,815), European Euros of EUR Nil (2006: EUR 12,047), Swiss francs of CHF Nil (2006: CHF 3,720) and Canadian dollars of CAD Nil (2006: CAD 2,830).

Trade payables and other payables for Genetic Technologies Limited include amounts due in US dollars of USD 326,978 (2006: USD 50,617), British pounds of GBP Nil (2006: GBP 50,815) and European Euros of EUR Nil (2006: EUR 12,047).

GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2007

	CONSO 2007 $	LIDATED 2006 $	GENETIC TECHN 2007 $	OLOGIES LIMITED 2006 $
17. INTEREST-BEARING LIABILITIES(CURRENT) Hire purchase liability (Note 27) Total current interest-bearing liabilities 18. DEFERRED REVENUE(CURRENT) Annuities received in advance Genetic testing fees received in advance Total current deferred revenue 19. PROVISIONS(CURRENT AND NON-CURRENT) Current provisions Annual leave Long service leave Rehabilitation costs Total current provisions Non-current provisions Long service leave Total non-current provisions Total provisions Reconciliation of annual leave provision Balance at the beginning of the financial year Add: obligation accrued during the year Less: utilised during the year Balance at the end of the financial year Reconciliation of long service leave provision Balance at the beginning of the financial year Add: obligation accrued during the year Less: utilised during the year Balance at the end of the financial year Reconciliation of provision for rehabilitation costs Balance at the beginning of the financial year Add: costs accrued during the year (Note 27) Balance at the end of the financial year 20. INTEREST-BEARING LIABILITIES(NON-CURRENT) Hire purchase liability (Note 27) Total non-current interest-bearing liabilities		490,379		490,379 490,379 33,679 – 33,679 76,142 79,020 – 155,162 6,679 6,679 161,841 54,435 64,446 (42,739) 76,142 70,871 14,828 – 85,699 – – – 491,729 491,729
	476,989		476,989
	476,989	490,379	476,989
		33,679 –

	216,438		216,438
	104,879		–
	321,317	33,679	216,438
		244,010 167,300 –


	294,419		103,960
	189,051		86,090
	78,498		78,498
	561,968	411,310	268,548	155,162
		36,827		6,679
	50,477		5,467
	50,477	36,827	5,467	6,679
	612,445	448,137	274,015
		199,115 233,688 (188,793)
	244,010		76,142
	248,391		74,567
	(197,982)		(46,749)
	294,419	244,010	103,960
		141,299 62,828 –
	204,127		85,699
	35,401		5,858
	–		–
	239,528	204,127	91,557
		– –
	–		–
	78,498		78,498
	78,498	–	78,498
		491,729

	46,978		46,978
	46,978	491,729	46,978

FINANCIAL STATEMENTS (cont.)

==> picture [484 x 204] intentionally omitted <==

----- Start of picture text -----

CONSOLIDATED GENETIC TECHNOLOGIES LIMITED
2007 2006 2007 2006
$ $ $ $
21. CONTRIBUTED EQUITY
Issued and paid-up capital
Fully paid ordinary shares 70,243,996 70,243,996 70,243,996 70,243,996
Total contributed equity 70,243,996 70,243,996 70,243,996 70,243,996
Movements in shares on issue
2007 2006
SHARES $ SHARES $
Balance at the beginning of the financial year 362,389,899 70,243,996 362,369,899 70,235,396
Add: shares issued other than for cash (Note 14) - - 20,000 8,600
Balance at the end of the financial year 362,389,899 70,243,996 362,389,899 70,243,996
----- End of picture text -----

Terms and conditions of contributed equity

Ordinary shares have the right to receive dividends as declared and, in the event of winding up the Company, to participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on shares held. Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the Company. Effective 1 July 1998, the Corporations legislation abolished the concepts of authorised capital and par value shares. Accordingly, the Company does not have authorised capital nor par value in respect of its issued capital.

22. OPTIONS

Options summary

As at 30 June 2007, the following options over ordinary shares in the Company were outstanding.

==> picture [484 x 76] intentionally omitted <==

----- Start of picture text -----

WEIGHTED AVE. WEIGHTED AVE.
2007 EXERCISE PRICE 2006 EXERCISE PRICE
Staff Share Plan options 11,977,500 $0.52 14,677,500 $0.52
Other options 600,000 $0.70 600,000 $0.70
Total number of options outstanding 12,577,500 $0.53 15,277,500 $0.52
----- End of picture text -----

The movements in the number of options in each respective class are detailed below.

Unlisted Staff Share Plan options

On 30 November 2001, the Directors of the Company established a Staff Share Plan. Pursuant to the terms of the Plan, the Directors of the Company may, at their discretion, grant options over the ordinary shares in Genetic Technologies Limited to directors, executives, consultants and employees of the Group. The options, which are granted at nil cost, are typically granted for a term of six years. In accordance with the terms of the Plan, options vest in four equal tranches commencing on the first anniversary of a holder’s employment or similar status. The options are not transferable and are not quoted on the Australian Securities Exchange. The options lapse at the earlier of employment termination or six years. As at 30 June 2007, there were 4 directors, 2 executives, 9 consultants and 29 employees who held options that had been granted under the Plan. Options granted under the Plan carry no rights to dividends and no voting rights. The movements in the numbers of Staff Share Plan options are as follows:

==> picture [484 x 125] intentionally omitted <==

----- Start of picture text -----

WEIGHTED AVE. WEIGHTED AVE.
2007 EXERCISE PRICE 2006 EXERCISE PRICE
Balance at the beginning of the financial year 14,677,500 $0.52 12,007,500 $0.54
Add: options granted during the year – – 5,300,000 $0.48
– –
Less: options forfeited during the year (1,175,000) $0.37
Less: options expired during the year (1,525,000) $0.39 (2,630,000) $0.52
Balance at the end of the financial year 11,977,500 $0.52 14,677,500 $0.52
Exercisable at the end of the financial year 8,577,500 $0.54 8,296,250 $0.53
----- End of picture text -----

GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2007

22. OPTIONS (cont.)

Unlisted Staff Share Plan options (cont.)

No funds were raised from the exercise of options granted under the Staff Share Plan during the year ended 30 June 2007 (2006: $Nil). The numbers of Staff Share Plan options outstanding as at 30 June 2007 by ASX code, including the respective dates of expiry and exercise prices, are tabled below. Refer Note 32 for further information.

==> picture [484 x 287] intentionally omitted <==

----- Start of picture text -----

WEIGHTED AVE. WEIGHTED AVE.
2007 EXERCISE PRICE 2006 EXERCISE PRICE
GTGAA (expiring 6 September 2010) 750,000 $0.48 750,000 $0.48
GTGAC (expiring 25 November 2010) – – 500,000 $0.48
GTGAD (expiring 12 August 2011) 850,000 $0.43 950,000 $0.43
GTGAE (expiring 12 August 2011) 1,000,000 $0.53 1,000,000 $0.53
GTGAF (expiring 23 November 2011) 1,000,000 $0.56 1,000,000 $0.56
GTGAG (expiring 1 February 2012) 750,000 $0.46 750,000 $0.46
GTGAH (expiring 31 May 2012) 700,000 $0.40 700,000 $0.40
GTGAI (expiring 30 November 2007) 1,750,000 $0.56 1,750,000 $0.56
GTGAK (expiring 11 June 2009) 200,000 $0.45 200,000 $0.45
GTGAM (expiring 30 November 2007) 2,500,000 $0.61 2,500,000 $0.61
GTGAO (expiring 30 November 2007) 802,500 $0.49 902,500 $0.49
GTGAP (expiring 20 May 2009) – – 1,000,000 $0.48
GTGAQ (expiring 20 May 2009) 700,000 $0.44 1,400,000 $0.44
GTGAS (expiring 20 May 2009) 175,000 $0.38 175,000 $0.38
GTGAU (expiring 17 January 2012) 200,000 $0.45 200,000 $0.45
GTGAZ (expiring 27 February 2010) 200,000 $0.56 400,000 $0.56
GTGAZ (expiring 27 February 2010) 400,000 $0.49 500,000 $0.49
Balance at the end of the financial year 11,977,500 $0.52 14,677,500 $0.52
----- End of picture text -----

Unlisted Other options

On 2 August 2001, the Company announced that it had entered into an agreement with GTH Capital (now GMCG, LLC, ‘GMCG’) of New York, USA to pursue the listing of its Level II American Depositary Receipts (‘ADRs’) on the NASDAQ stock exchange. In accordance with the agreement, the Company agreed to issue 900,000 options at an exercise price of $0.70 to GMCG within three years. The issue of the options, which have a contractual life of six years and which vest on the date of grant, is subject to meeting specified performance criteria in achieving the NASDAQ listing. During 2005, GMCG was entitled to receive 600,000 of the options, based on meeting certain performance criteria, which were subsequently granted on 27 October 2004. In September 2005, the Company achieved the listing of the ADRs. The movements in the numbers of these options are as follows:

==> picture [484 x 73] intentionally omitted <==

----- Start of picture text -----

WEIGHTED AVE. WEIGHTED AVE.
2007 EXERCISE PRICE 2006 EXERCISE PRICE
Balance at the beginning of the financial year 600,000 $0.70 600,000 $0.70
– – – –
Less: options that lapsed during the year
Balance at the end of the financial year 600,000 $0.70 600,000 $0.70
----- End of picture text -----

Unlisted Placement options

On 4 September 2003, the Company completed an institutional placement to raise a total of $10 million by way of a placement of 13,333,333 ordinary shares at an issue price of $0.75 cents each. Under the terms of the placement, subscribers were allotted one free option for each two shares subscribed, which entitled the holder to acquire one ordinary share in the Company at a price of $1.00 at any time up to 30 September 2005. The movements in the numbers of these options are as follows:

==> picture [484 x 74] intentionally omitted <==

----- Start of picture text -----

WEIGHTED AVE. WEIGHTED AVE.
2007 EXERCISE PRICE 2006 EXERCISE PRICE
Balance at the beginning of the financial year – – 6,666,667 $1.00
Less: options that lapsed during the year – – (6,666,667) $1.00
– – – –
Balance at the end of the financial year
----- End of picture text -----

FINANCIAL STATEMENTS (cont.)

	CONSOL 2007 $	IDATED 2006 $	GENETIC TECHNO 2007 $	LOGIES LIMITED 2006 $
23. RESERVES Foreign currency translation Share-based payments Total reserves Reconciliation of foreign currency translation reserve Balance at the beginning of the financial year Add: net currency translation gain (loss) Balance at the end of the financial year Reconciliation of share-based payments reserve Balance at the beginning of the financial year Add: share-based payments Balance at the end of the financial year		23,229 1,214,295		– 1,195,632 1,195,632 – – – 782,420 413,212 1,195,632
	(15,306)		–
	1,472,201		1,417,504
	1,456,895	1,237,524	1,417,504
		(3,319) 26,548
	23,229		–
	(38,535)		–
	(15,306)	23,229	–
		782,420 431,875
	1,214,295		1,195,632
	257,906		221,872
	1,472,201	1,214,295	1,417,504

Nature and purpose of reserves

Foreign currency translation reserve

This reserve is used to record exchange differences arising from the translation of the financial statements of the Company’s foreign subsidiaries.

Share-based payments reserve

This reserve is used to record the value of share-based payments provided to employees and others providing similar services as part of their remuneration.

	CONSOL 2007	IDATED 2006 $	GENETIC TECHNO 2007	LOGIES LIMITED 2006 $
	$		$
24. ACCUMULATED LOSSES Balance at the beginning of the financial year Add: net loss attributable to members of Genetic Technologies Limited Balance at the end of the financial year 25. MINORITY INTERESTS Reconciliation of minority interests in subsidiaries Balance at the beginning of the financial year Add: movements during the year Less: share of operating losses Add: share of movement in reserves Net loss attributable to minority interests Balance at the end of the financial year		(33,495,784) (7,918,773)		(34,428,580) (8,691,152) (43,119,732)
	(41,414,557)		(43,119,732)
	(4,328,543)		(4,034,096)
	(45,743,100)	(41,414,557)	(47,153,828)
		164,526 (12,476) 23,126 10,650 175,176

	175,176

	(17,159)
	(12,999)
	(30,158)
	145,018

GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2007

26. SEGMENT INFORMATION

Identification of reportable segments

The Group has identified its four reportable operating segments based on the similarity of the products produced and sold and/ or the services provided, as these represent the sources of the Group’s major risks and have the greatest effect on the rates of return. The separate groups of similar products and services are then divided into operating businesses, the performances of which are reported to the Chief Executive Officer, the Management team and the Board of Directors on a monthly basis.

Business segments

Licensing – involves the out-licensing of the Company’s ‘non-coding’ technology. Testing – involves the provision of a range of genetic testing services. Research – involves the undertaking of a range of research and development projects in the field of genetics and related areas. Corporate – involves the management of the Company’s corporate activities.

Business segments

	RE	RE	VENUES AND INCO	ME	RESULT $	RESULT $	ASSETS $	ASSETS $	LIABILITIES $	LIABILITIES $	AMORTISATION /DEPRECIATION $
SEGMENT	SALES $		OTHER $	TOTALS $
Licensing 2007 2006 Testing 2007 2006 Research 2007 2006 Corporate 2007 2006 Totals 2007 2006	11,337,079 6,685,248 3,119,131 2,550,221 – – – – 14,456,210 9,235,469		– – 25,000 – 347,431 570,667 490,664 950,978	11,337,079 6,685,248 3,144,131 2,550,221 347,431 570,667 490,664 950,978 15,319,305 10,757,114	7,229,326 1,940,605 (3,323,326) (3,661,081) (3,483,985) (3,849,033) (4,767,717) (2,338,614) (4,345,702) (7,908,123)		8,846,395 12,326,275 2,246,571 2,392,904 4,012,800 5,974,505 14,343,261 13,023,223 29,449,027 33,716,907		(1,194,853) (1,200,967) (964,401) (794,120) (268,185) (574,003) (918,779) (905,678) (3,346,218) (3,474,768)		(2,770,911) (2,945,193) (946,689) (1,006,931) (813,760) (804,776) (71,632) (60,377) (4,602,992) (4,817,277)
			863,095 1,521,645

		IMPAI W	RMENT LOSSES/ RITE DOWNS $	PURCHASES OF EQUIPMENT $			NET CAS	H FLOWS	(USED IN)/PROVIDED BY
SEGMENT						OPERATI ACTIVITI $	NG ES	IN AC	VESTING TIVITIES $	FINANCING ACTIVITIES $
Licensing Testing Research Corporate Totals	2007 2006 2007 2006 2007 2006 2007 2006 2007 2006		– – (76,960) (97,500) (1,150,000) – (80,000) – (1,306,960) (97,500)	294 4,448 864,938 757,646 57,030 81,830 23,800 38,901		9,633,894 3,930,178 (671,312) (2,730,649) (3,407,060) (3,865,291) (2,958,276) (3,291,560) 2,597,246 (5,957,322)			(801) (3,918) (81,853) (34,614) (20,759) (52,129) 197,423 (64,586)	– – (357,275) (332,687) (128,468) (113,896) (16,762) (4,309) (502,505) (450,892)
				946,062 882,825					94,010 (155,247)

Note: There were no intersegment sales.

Geographic information

Australia – is the home country of the parent entity and the location of the Company’s testing facilities. Canada – is the home of Gtech International Resources Limited. Switzerland – is the home of GeneType AG.

Revenues are allocated on the basis of the geographical location of the respective entities which earn them.

FINANCIAL STATEMENTS (cont.)

26. SEGMENT INFORMATION (cont.)

Geographic information (cont.)

The following table presents sales to external customers and certain asset information regarding geographical locations for the years ended 30 June 2007 and 30 June 2006.

==> picture [349 x 47] intentionally omitted <==

----- Start of picture text -----

NON-CURRENT ASSETS
SALES TO EXTERNAL (EXCLUDING FINANCIAL
SEGMENT CUSTOMERS INSTRUMENTS)
$ $
----- End of picture text -----

Australia 2007 2006 Canada 2007 2006 Switzerland 2007 2006 Totals 2007 2006	15,306,037 10,743,804 13,261 11,796 7 1,514 15,319,305 10,757,114	14,614,850 19,532,645 – – 1 1 14,614,851 19,532,646

Segment products and locations

The four principal business segments of the Group are licensing, genetic testing, research and corporate. The principal geographic segment is Australia, with the Company’s headquarters being located in Melbourne in the State of Victoria.

Segment accounting policies

Segment information is prepared in conformity with the accounting policies of the entity as disclosed in Note 2(f) and Accounting Standard AASB 8 Operating Segments , which was adopted by the Group during the year. As a result, the primary reporting segments now reflect more closely the information that Management uses to make decisions about operating matters. Specifically, segment information is disclosed for the licensing, genetic testing and research operations which were previously disclosed within the Biotechnology segment. Comparative information has been restated to reflect this change.

The following items are allocated to the corporate segment as they are not considered part of the core operations of any of the other three segments:

Interest revenue (Note 4)
Net gains/(losses) on the sale of available-for-sale investments (Note 6)
Finance costs (Note 6)
Income tax expense (Note 7)

Major customers

The Group has a number of major customers to which it provides both products and services. During the year ended 30 June 2007, there were five customers from whom the Group generated revenues representing more than 10% of the total consolidated revenue from operations. The most significant of these customers represented approximately 39.4% of total revenue from operations.

GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2007

	CONSOL 2007 $	IDATED 2006 $	GENETIC TECHNO 2007 $	LOGIES LIMITED 2006 $
27. COMMITMENTS AND CONTINGENCIES Hire purchase expenditure commitments Minimum hire purchase payments – not later than one year – later than one year but not later than five years – later than five years Total minimum hire purchase payments Less: future finance charges Present value of hire purchase payments Aggregate expenditure commitments comprise: Current liability (Note 17) Non-current liability (Note 20) Total hire purchase expenditure commitments		544,551 509,936 –		544,551 509,936 – 1,054,487 (72,379) 982,108 490,379 491,729 982,108


	496,675		496,675
	49,474		49,474
	–		–
	546,149	1,054,487 (72,379)	546,149	1,054,487 (72,379)
	(22,182)		(22,182)
	523,967	982,108	523,967
		490,379 491,729
	476,989		476,989
	46,978		46,978
	523,967	982,108	523,967

On 14 January 2005, the Company executed a Master Asset Finance Agreement with National Australia Bank Limited in respect of a $2,500,000 asset finance facility (the ‘Facility’). During the period up to 30 June 2007, the Company financed the acquisition of laboratory and office equipment under the Facility with a total value of $1,632,868. Each of the Company’s Australian-resident subsidiaries has provided a guarantee to the Company in respect of the Facility.

==> picture [484 x 126] intentionally omitted <==

----- Start of picture text -----

CONSOLIDATED GENETIC TECHNOLOGIES LIMITED
2007 2006 2007 2006
$ $ $ $
Operating lease expenditure commitments
Minimum operating lease payments
– –
– not later than one year 418,177 411,501
– –
– later than one year but not later than five years 1,307,963 1,751,482
– – – –
– later than five years
– –
Total minimum operating lease payments 1,726,140 2,162,983
----- End of picture text -----

The operating lease relates to office and laboratory premises located in Fitzroy, Victoria that were occupied by the Company during the 2007 financial year. The lease, which is in the name of GeneType Pty. Ltd. (a wholly-owned subsidiary of the Company), expires on 30 June 2011. GeneType Pty. Ltd. has an option to extend the lease at its expiration for a further ten year period. The premises are owned by Bankberg Pty. Ltd., a company associated with the Company’s Chief Executive Officer, Dr. Mervyn Jacobson (refer Note 37). The lease contains market review clauses in the event that GeneType Pty. Ltd. exercises its option to renew. GeneType Pty. Ltd. does not have an option to purchase the leased assets at the expiry of the lease period.

==> picture [484 x 125] intentionally omitted <==

----- Start of picture text -----

CONSOLIDATED GENETIC TECHNOLOGIES LIMITED
2007 2006 2007 2006
$ $ $ $
Research and development expenditure commitments
Minimum research and development payments
– not later than one year 1,150,000 1,195,268 1,150,000 1,195,268
– later than one year but not later than five years 700,000 1,850,000 700,000 1,850,000
– – – –
– later than five years
Total minimum research and development payments 1,850,000 3,045,268 1,850,000 3,045,268
----- End of picture text -----

On 15 June 2004, the Company entered into a Sponsored Research Agreement with C.Y. O’Connor ERADE Village Foundation in Perth, Western Australia pursuant to which Genetic Technologies Limited will contribute $900,000 per annum towards research for a period of five years, amounting to a total commitment of $4,500,000. The Company will own any intellectual property arising from the research undertaken by the Foundation. As at balance date, an amount of $1,350,000 remained payable under the Agreement.

FINANCIAL STATEMENTS (cont.)

27. COMMITMENTS AND CONTINGENCIES (cont.)

Research and development expenditure commitments (cont.)

On 31 May 2006, the Company entered into an ARC Linkage Agreement with The University of Melbourne pursuant to which Genetic Technologies Limited will contribute $250,000 per annum in cash for a period of three years towards research to target new drugs against parasitic nematodes of animals. As at balance date, an amount of $500,000 remained payable under the Agreement. In addition, a further in-kind contribution of $50,000 per annum for a period of three years will also be made to the project by the Company under the Agreement.

Other capital expenditure commitments

As at 30 June 2007, the Company did not have any other significant contracted capital expenditure commitments.

Other expenditure commitments

As at 30 June 2007, the Company held a 16.36% (2006: 17.45%) direct equity interest in the North Laverton Joint Venture with Regis Resources N.L. (‘Regis’) (refer Note 31). This joint venture has continuing minimal expenditure requirements as prescribed by the Western Australian Mines Department in respect of its prospecting and exploration licenses and mining leases owned by the joint venture. By agreement with the joint venture partner, the Company is not contributing any funding towards the project, as these costs are met by its joint venture partner. As at 30 June 2007, the Company had recorded a provision for $78,498 in respect of its share of the estimated rehabilitation costs associated with the North Laverton project (refer Note 19). The amount of the provision was based on calculations provided to the Company by Regis in its capacity as project manager. The likelihood of any rehabilitation costs becoming payable by the Company and the associated timing thereof are unknown.

28. CONTINGENT ASSETS

On 12 December 2005, the Company announced it had reached a final settlement of its patent dispute with Applera Corporation. As part of the settlement, the parties had executed a number of binding agreements, including a supply agreement, pursuant to which Applera agreed to supply the Company with certain Applera equipment and reagents which the Company uses in its genetic testing business. The total value of these credits was $8,547,500, comprising equipment credits to the value of $4,602,500 and reagent credits to the value of $3,945,000. During the period ended 30 June 2006, the Company had drawn down equipment and reagents under the supply agreement with a total value of $1,036,111. During the year ended 30 June 2007, the Company had drawn down equipment and reagents under the supply agreement with a total value of $1,142,086. Accordingly, as at 30 June 2007, the Company had a contingent asset representing remaining credits available to it with a total value of $6,369,303.

29. CONTINGENT LIABILITIES

The Group has been notified of a number of native title claims under the Commonwealth Native Title Act, 1993, covering exploration tenements in the North Laverton Joint Venture in Western Australia in which the Group has a direct equity interest (refer Note 30). Until further information regarding the claims and the affected area becomes available, the Group will not be in a position to assess the likely effect, if any, of any claim. However, the Directors expect that existing exploration will not be materially affected by any claim or the claims in aggregate.

==> picture [484 x 230] intentionally omitted <==

----- Start of picture text -----

CONSOLIDATED GENETIC TECHNOLOGIES LIMITED
2007 2006 2007 2006
$ $ $ $
30. AUDITOR’S REMUNERATION
Audit services
Ernst & Young in respect of:
Audit of the Company’s financial report 410,274 403,918 410,274 403,918
Other audit firms in respect of:
– –
Audit of the financial reports of subsidiaries 9,158 8,120
Total remuneration in respect of audit services 419,432 412,038 410,274 403,918
Non-audit services
Ernst & Young in respect of:
Tax advice and compliance services 55,095 79,120 55,095 79,120
Total auditor’s remuneration 474,527 491,158 465,369 483,038
----- End of picture text -----

GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2007

31. JOINT VENTURES

The Company holds a direct equity interest in the North Laverton Joint Venture with Regis Resources N.L. in Western Australia. The Company is not contributing any funding towards the project by agreement with the joint venture partner and does not have any involvement in its operations. All liabilities of the joint venture are borne by the joint venture partner. The Company’s investment in the joint venture has been written down to nil. As a result of its election not to contribute its share of expenditures, the Company’s interest in the joint venture was diluted down to 16.36% as at 30 June 2007 (2006: 17.45%). All joint venture interests have been valued at nil and no revenues or expenses have been derived or incurred during the year ended 30 June 2007.

32. EMPLOYEE BENEFITS

Staff Share Plan

As at 30 June 2007, there were 4 Directors, 2 Executives, 9 consultants and 29 employees who held options that had been granted under the Plan. Information regarding the movements in the number of options granted under the Staff Share Plan is set out in Note 22.

The fair value of each option granted under the Staff Share Plan is estimated by an external valuer using a Black-Scholes option-pricing model with the following assumptions used for grants made during the years ended 30 June 2007 and 2006:

==> picture [484 x 72] intentionally omitted <==

----- Start of picture text -----

2007 * 2006
– –
Dividend yield
Historic and expected volatility N/A 53%
Risk-free interest rate N/A 5.62%
Expected life of an option N/A 5 years
----- End of picture text -----

No options were granted during the year ended 30 June 2007.

Superannuation commitments

The Group does not have any defined benefit funds. The Group makes statutory contributions to various superannuation funds on behalf of all employees at a rate of 9% per annum, in addition to making other superannuation contributions as part of salary packaging arrangements with staff. All contributions are expensed when incurred. Contributions made by the Group of up to 9% per annum of employees’ wages and salaries are legally enforceable in Australia.

33. KEY MANAGEMENT PERSONNEL DISCLOSURES

Details of Key Management Personnel

Directors

Henry Bosch AO ( Non-Executive Chairman )

Dr. Mervyn Jacobson ( Chief Executive Officer ) Fred Bart ( Non-Executive )

David Carruthers ( Non-Executive ) John S. Dawkins AO ( Non-Executive )

David Carruthers was appointed as a Director on 26 February 2007.

Prof. Deon Venter resigned as a Director on 23 August 2006.

Robert Edge retired as a Director on 17 November 2006.

Executives

Thomas G. Howitt ( Chief Financial Officer and Company Secretary ) Geoffrey E. Newing ( Chief Operating Officer )

Dr. Gary Cobon ( Chief Scientific Officer )

Ian N. Christensen ( Group General Manager – Intellectual Property )

Geoffrey Newing was appointed as Chief Operating Officer on 24 August 2006 and resigned on 1 July 2007.

Ian Christensen resigned as Group General Manager – Intellectual Property on 11 August 2006.

FINANCIAL STATEMENTS (cont.)

==> picture [484 x 165] intentionally omitted <==

----- Start of picture text -----

CONSOLIDATED GENETIC TECHNOLOGIES LIMITED
2007 2006 2007 2006
$ $ $ $
33. KEY MANAGEMENT PERSONNEL
DISCLOSURES (cont.)
Remuneration of Key Management Personnel
Short-term 974,346 1,147,433 974,346 1,147,433
Post-employment 141,390 74,057 141,390 74,057
– –
Termination payments 87,500 87,500
Long-term 4,758 6,564 4,758 6,564
Share-based 233,612 343,469 233,612 343,469
Total remuneration of Key Management Personnel 1,441,606 1,571,523 1,441,606 1,571,523
----- End of picture text -----

The Company has applied the exemption under Corporations Amendments Regulation 2006 , which exempts listed companies from providing detailed remuneration disclosures in relation to their Key Management Personnel in their annual financial reports by Accounting Standard AASB 124 Related Party Disclosures . These remuneration disclosures are provided in the Remuneration Report section of the Directors’ Report designated as audited.

Option holdings of Key Management Personnel

==> picture [484 x 33] intentionally omitted <==

----- Start of picture text -----

NUMBER OF OPTIONS VESTED AS AT 30 JUNE 2007
30 JUNE 2007 OPENING CLOSING NOT
NAME OF OPTION HOLDER BALANCE GRANTED EXERCISED LAPSED BALANCE TOTAL EXERCISABLE EXERCISABLE
----- End of picture text -----

Director Henry Bosch AO Dr. Mervyn Jacobson Fred Bart David Carruthers John S. Dawkins AO Robert J. Edge Prof. Deon J. Venter Executive Thomas G. Howitt Geoffrey E. Newing Dr. Gary Cobon Ian N. Christensen Totals	500,000 2,000,000 500,000 – 500,000 500,000 1,000,000 1,000,000 750,000 750,000 300,000 7,800,000	– – – – – – – – – – – –	– – – – – – – – – – – –	– – – – – (500,000) (1,000,000) – – – (300,000) (1,800,000)	500,000 2,000,000 500,000 – 500,000 – – 1,000,000 750,000 750,000 – 6,000,000	500,000 2,000,000 500,000 – 500,000 – – 1,000,000 750,000 750,000 – 6,000,000	125,000 – – – 125,000 – – 562,500 562,500 562,500 – 1,937,500	375,000 2,000,000 500,000 – 375,000 – – 437,500 187,500 187,500 – 4,062,500

==> picture [484 x 33] intentionally omitted <==

----- Start of picture text -----

NUMBER OF OPTIONS VESTED AS AT 30 JUNE 2006
30 JUNE 2006 OPENING CLOSING NOT
NAME OF OPTION HOLDER BALANCE GRANTED EXERCISED LAPSED BALANCE TOTAL EXERCISABLE EXERCISABLE
----- End of picture text -----

Director Henry Bosch AO Dr. Mervyn Jacobson Fred Bart John S. Dawkins AO Robert J. Edge Prof. Deon J. Venter Executive Thomas G. Howitt Geoffrey E. Newing Dr. Gary Cobon Ian N. Christensen Totals	– 2,000,000 500,000 – 500,000 1,000,000 750,000 – – 300,000 5,050,000	500,000 – – 500,000 – – 250,000 750,000 750,000 – 2,750,000	– – – – – – – – – – –	– – – – – – – – – – –	500,000 2,000,000 500,000 500,000 500,000 1,000,000 1,000,000 750,000 750,000 300,000 7,800,000	500,000 2,000,000 500,000 500,000 500,000 1,000,000 1,000,000 750,000 750,000 300,000 7,800,000	375,000 – – 375,000 375,000 500,000 812,500 750,000 750,000 75,000 4,012,500	125,000 2,000,000 500,000 125,000 125,000 500,000 187,500 – – 225,000 3,787,500

GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2007

33. KEY MANAGEMENT PERSONNEL DISCLOSURES (cont.)

Shareholdings of Key Management Personnel

30 JUNE 2007 SHARES HELD IN GENETIC TECHNOLOGIES LIMITED	OPENING BALANCE	NUMBER O	F SHARES	ACQUIRED ON EXERCISE OF OPTIONS	CLOSING BALANCE
		BOUGHT	SOLD
Director Henry Bosch AO Dr. Mervyn Jacobson Fred Bart David Carruthers John S. Dawkins AO Robert J. Edge Prof. Deon J. Venter Executive Thomas G. Howitt Dr. Gary Cobon Geoffrey E. Newing Ian N. Christensen Totals	185,000 150,931,900 25,918,214 – – – 25,000 – – 213,350 –	– – – – – – – – – 3,980,650 – 3,980,650	– – – – – – – – – (746,654) – (746,654)	– – – – – – – – – – – –	185,000 150,931,900 25,918,214 – – – 25,000 – – 3,447,346 – 180,507,460
	177,273,464

30 JUNE 2006 SHARES HELD IN GENETIC TECHNOLOGIES LIMITED	OPENING BALANCE	NUMBER O	F SHARES	ACQUIRED ON EXERCISE OF OPTIONS	CLOSING BALANCE
		BOUGHT	SOLD
Director Henry Bosch AO Dr. Mervyn Jacobson Fred Bart John S. Dawkins AO Robert J. Edge Prof. Deon J. Venter Executive Thomas G. Howitt Dr. Gary Cobon Geoffrey E. Newing Ian N. Christensen Totals	185,000 150,200,900 25,918,214 – – – – – – –	– 731,000 – – – 25,000 – – 213,350 – 969,350	– – – – – – – – – – –	– – – – – – – – – – –	185,000 150,931,900 25,918,214 – – 25,000 – – 213,350 – 177,273,464
	176,304,114

All equity transactions with Key Management Personnel, other than those arising from the exercise of options, have been entered into under terms and conditions no more favourable than those which the entity would have adopted if dealing at arm’s length.

Other transactions and balances with Key Management Personnel

During the year ended 30 June 2007:

GeneType Pty. Ltd. paid a total of $445,384 (2006: $399,274) to Bankberg Pty. Ltd., a company associated with Dr. Mervyn Jacobson, for rent in respect of the office and laboratory premises in Fitzroy, Victoria that are leased by the Group.
The Company disposed of its 30,189 common shares in XY, Inc. of which Dr. Mervyn Jacobson was Chairman and CEO.

All transactions with Key Management Personnel are undertaken on normal commercial terms and conditions.

FINANCIAL STATEMENTS (cont.)

34. SUBSIDIARIES

Genetic Technologies Limited 75.8% 68.2% 100% 100% 100% 100%	Genetic Technologies Limited 75.8% 68.2% 100% 100% 100% 100%	Genetic Technologies Limited 75.8% 68.2% 100% 100% 100% 100%	Genetic Technologies Limited 75.8% 68.2% 100% 100% 100% 100%	Genetic Technologies Limited 75.8% 68.2% 100% 100% 100% 100%	Genetic Technologies Limited 75.8% 68.2% 100% 100% 100% 100%	Genetic Technologies Limited 75.8% 68.2% 100% 100% 100% 100%	100%	100%

	75.8%	68.2%	100%	100%	100%	100%
Gtech Inte Resource	rnational s Limited RareCellect Pty. Ltd. ImmunAid Pty. Ltd. Genetic Technologies Corporation Pty. Ltd. GeneType AG GeneType Pty. Ltd.						Gene Corpo	Type ration
AgGenomics Pty. Ltd. 50.1%
NAME OF GROUP COMPANY INCORPORATION DETAILS GROUP INTEREST (%)						NET C	ARRYING VALUE ($)
2007 2006						2007	2006
Entities held directly by parent GeneType Pty. Ltd. 5 September 1990 Victoria, Australia 100% 100% Genetic Technologies Corporation Pty. Ltd. 11 October 1996 N.S.W., Australia 100% N/A Simons GeneType Diagnostics Pty. Ltd. 18 July 1989 Victoria, Australia N/A 100% RareCellect Pty. Ltd. 7 March 2001 N.S.W., Australia 100% 100% GeneType AG 13 February 1989 Zug, Switzerland 100% 100% GeneType Corporation 18 December 1989 California, U.S.A. 100% 100% Gtech International Resources Limited 29 November 1968 Yukon Territory, Canada 75.8% 75.8% ImmunAid Pty. Ltd. (refer note below) 21 March 2001 Victoria, Australia 68.2% 65.0% Total carrying value (Note 15) Entities held by other subsidiaries Silbase Scientific Services Pty. Ltd. 12 November 1997 Victoria, Australia N/A 100% Genetic Technologies Corporation Pty. Ltd. 11 October 1996 N.S.W., Australia N/A 100% AgGenomics Pty. Ltd. 15 February 2002 Victoria, Australia 50.1% 50.1%						1 2 – 10 26,698 – 424,535 –	1 – 1 10 26,698 – 424,535 – 451,245 2 2 50
						451,246
						– – 50

During the year ended 30 June 2007, an outstanding loan between the Company and ImmunAid Pty. Ltd. was converted into additional equity in that company. The amount of the loan at the time of the conversion was $546,945. As a result of the conversion, the Company increased its interest in ImmunAid Pty. Ltd. by approximately 3.2%.

GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2007

35. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Group’s principal financial instruments comprise cash at bank and on hand, short-term deposits and hire purchase contracts. The Group has other financial assets and liabilities, such as trade receivables and payables, which arise directly from its operations. The Group does not typically enter into derivative transactions, such as interest rate swaps or forward currency contracts. It is, and has been throughout the period under review, the Group’s policy that no trading in financial instruments shall be undertaken. The main risks arising from the Group’s financial instruments are credit risk exposures, liquidity risk and foreign currency risk. The policies for managing each of these risks are summarised below.

Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in Note 2.

Credit risk exposures

The Group’s maximum exposures to credit risk as at 30 June 2007 in relation to each class of recognised financial assets is the carrying amount of those assets, as indicated in the balance sheet.

Financial assets included on the balance sheet that potentially subject the Group to concentration of credit risk consist principally of cash and cash equivalents and trade receivables. The Group minimises this concentration of risk by placing its cash and cash equivalents with financial institutions that maintain superior credit ratings in order to limit the degree of credit exposure. The Group has established guidelines relative to credit ratings, diversification and maturities that seek to maintain safety and liquidity. The Group does not require collateral to provide credit to its customers, however, the majority of the Group’s customers are large, reputable organisations and, as such, the risk of credit exposure is limited. The Group has not entered into any transactions that would qualify as a financial derivative instrument.

In addition, receivable balances are monitored on an ongoing basis with the result that the Group’s exposure to bad debts is not significant. Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in Note 2 to the financial statements.

As at 30 June 2007, three customers accounted for 49.7% of the trade receivables of the Group:

==> picture [484 x 95] intentionally omitted <==

----- Start of picture text -----

AMOUNT DUE
(PERCENTAGE OF TOTAL DEBTORS)
NAME OF DEBTOR 2007 2006
$ $
Innogenetics NV 158,740 (23.6%) 859,402 (71.5%)
Australian Taxation Office (net GST receivable) 99,921 (14.8%) 198,353 (14.2%)
Cancer Research Initiatives Foundation 75,850 (11.3%) –
----- End of picture text -----

Liquidity risk

The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of cash at bank, short-term deposits and hire purchase contracts.

Foreign currency risk

The Group is exposed to foreign currency exchange risk through primary financial assets and liabilities. It is the Group’s policy not to hedge these transactions as the exposure is considered to be minimal from a consolidated operations perspective. Further, as the Group incurs expenses payable in US dollars, the financial assets that are held in US dollars provide a natural hedge for the Group.

As at balance date, the Group held cash and cash equivalents in the following foreign currencies:

United States dollars USD 8,161,046 (refer Note 36)
• Canadian dollars CAD 459,508 • Swiss francs CHF 17,630 • European euro EUR 2,977

FINANCIAL STATEMENTS (cont.)

36. FINANCIAL INSTRUMENTS

Interest rate risk

The Group’s exposure to interest rate risks and the effective interest rates of financial assets and financial liabilities, both recognised and unrecognised, as at 30 June 2007, are as follows:

YEAR CONSOLIDATED	FLOATING RATE $	OTHER $	NON-INTEREST BEARING $	TOTAL CARRYING WEIGHTED AVE. AMOUNT EFFECTIVE RATE $ %
Financial assets Cash at bank/on hand1 2007 2006 Short-term deposits 2007 2006 Trade and other receivables 2007 2006 Performance bond 2007 2006 Deposits/cash 2007 2006 Available-for-sale investments 2007 2006 Total financial assets 2007 2006 Financial liabilities Trade and other payables 2007 2006 Hire purchase liabilities2 2007 2006 Total financial liabilities 2007 2006	11,303,764 9,147,060 – – – – – – – – – – 11,303,764 9,147,060 – – – – – –	– – 2,029,986 2,288,187 – – 76,898 85,963 450,000 450,000 – – 2,556,884 2,824,150 – – 523,967 982,108 523,967 982,108	– – – – 646,946 1,401,468 – – – – 233,330 673,595 880,276 2,075,063 1,563,652 1,410,378 – – 1,563,652 1,410,378	11,303,764 2.89% 9,147,060 4.95% 2,029,986 6.20% 2,288,187 5.64% 646,946 N/A 1,401,468 N/A 76,898 5.97% 85,963 5.32% 450,000 6.25% 450,000 5.73% 233,330 N/A 673,595 N/A 14,740,924 14,046,273 1,563,652 N/A 1,410,378 N/A 523,967 7.17% 982,108 7.12% 2,087,619 2,392,486

1 As disclosed in Note 35, the Group held cash and cash equivalents in United States dollars of USD 8,161,046 as at balance date. Of this amount, USD 5,490,870 was held on deposit at an interest rate of 1.65%, whilst the remaining USD 2,670,176 was held on deposit at an interest rate of 5.17%. Subsequent to balance date, a total of USD 7,400,000 was converted into Australian dollars and placed on deposit at an interest rate of 6.35%.

2 All other periods in respect of financial assets are for less than one year. In respect of the hire purchase liability, the interest rates are fixed for the terms of the facility, which is less than one year ($496,675) and between one and five years ($49,474).

Net fair values of financial assets and liabilities

All financial assets and liabilities have been recognised at 30 June 2007 at their net fair values. The following methods and assumptions are used to determine the net fair values of financial assets and liabilities:

Cash and cash equivalents : the carrying amount approximates fair value due to their short term to maturity.

Trade and other receivables : the carrying amount approximates fair value.

Performance bond : the carrying amount approximates fair value due to its short term to maturity.

Unlisted shares : the carrying amount has been written down to recoverable amount which approximates fair value. Trade and other payables : the carrying amount approximates fair value.

Accrued expenses : the carrying amount approximates fair value.

Hire purchase liabilities : the carrying amount approximates fair value.

GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2007

37. RELATED PARTY DISCLOSURES

Ultimate parent

Genetic Technologies Limited is the ultimate Australian parent company. As at the date of this Report, no shareholder controls more than 50% of the issued capital of the Company.

Transactions within the Group

During the year ended 30 June 2007, AgGenomics Pty. Ltd., a subsidiary, paid interest amounting to $26,254 (2006: $24,158) to Genetic Technologies Limited in respect of an outstanding loan between the parties. AgGenomics Pty. Ltd. also paid management fees amounting to $18,000 (2006: $51,003) to GeneType Pty. Ltd., a second subsidiary. All amounts were charged on commercial, arm’s-length terms and at commercial rates.

Other related party transactions

As at 30 June 2007, a net amount of $9,177,574 (2006: $7,984,505) was receivable by Genetic Technologies Limited from its various subsidiaries (Note 11). As at the same date, an amount of $1,134,778 (2006: $Nil) was payable by Genetic Technologies Limited to its wholly-owned subsidiaries (Note 16). All such loans are unsecured, generally interest free and there are no fixed terms of repayment.

Also during the year, GeneType Pty. Ltd. (a wholly-owned subsidiary) paid a total of $445,384 (2006: $399,274) to Bankberg Pty. Ltd., a company associated with Dr. Mervyn Jacobson, for rent in respect of the office and laboratory premises in Fitzroy, Victoria that are leased by the Group.

All transactions with Key Management Personnel, other than those arising from the exercise of options, have been entered into under terms and conditions no more favourable than those which the entity would have adopted if dealing at arm’s length. Please refer to Note 33 for a description of transactions with Key Management Personnel.

38. SUBSEQUENT EVENTS

Apart from this transaction, there have been no significant events which occurred after balance date.

DIRECTORS’ DECLARATION

In accordance with a resolution of the Directors of Genetic Technologies Limited, I state that:

In the opinion of the Directors:
(a) the Financial Report, and the additional disclosures included in the Directors’ Report which are designated as audited, of the Company and the Group are in accordance with the Corporations Act 2001 , including:
- (i) giving a true and fair view of the Company’s and the Group’s financial position as at 30 June 2007 and of their performance for the year ended on that date; and
- (ii) complying with Accounting Standards and the Corporations Regulations 2001 ; and
(b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.
This declaration has been made after receiving the declarations required to be made to the Directors in accordance with section 295A of the Corporations Act 2001 for the financial year ended 30 June 2007.

On behalf of the Board.

==> picture [131 x 96] intentionally omitted <==

HENRY BOSCH AO

Non-Executive Chairman

Melbourne, 30 August 2007

GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2007

AUDITOR’S INDEPENDENCE DECLARATION

==> picture [483 x 683] intentionally omitted <==

AUDITOR’S REPORT

==> picture [477 x 674] intentionally omitted <==

GENETIC TECHNOLOGIES LIMITED

==> picture [477 x 674] intentionally omitted <==

ASX ADDITIONAL INFORMATION

Additional information required by the Listing Rules of the Australian Securities Exchange and not disclosed elsewhere in this Annual Report. The information provided is current as at 31 August 2007.

HOME EXCHANGE

The Company’s ordinary shares are quoted on the Australian Securities Exchange Limited. The Home Exchange is Perth, Western Australia. The ASX code for the Company’s ordinary shares is GTG. The Company also has a listing of Level II American Depositary Receipts (ADRs) on the National Association of Securities Dealers Automated Quotation (‘NASDAQ’) Global Market in the USA. Each ADR comprises 30 fully paid ordinary shares and trades under the ticker symbol GENE.

DISTRIBUTION OF EQUITY SECURITIES

The numbers of shareholders as at 31 August 2007, ranked by size of holding, in each class of shares are as follows:

==> picture [484 x 16] intentionally omitted <==

----- Start of picture text -----

RANGE OF SHARES NUMBER OF HOLDERS NUMBER OF SHARES
----- End of picture text -----

1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over Totals	290 1,049 633 1,144 203 3,319	206,968 3,155,991 5,353,311 38,018,445 315,655,184 362,389,899

The number of shareholders holding less than a ‘marketable parcel’ of shares (being 3,449 shares) is 964. The number of shares held by these shareholders on 31 August 2007 was 1,662,153.

TWENTY LARGEST SHAREHOLDERS

The names of the twenty largest registered shareholders of the Company’s ordinary shares as at 31 August 2007 are:

==> picture [484 x 17] intentionally omitted <==

----- Start of picture text -----

RANK NAME OF REGISTERED SHAREHOLDER NUMBER OF SHARES PERCENTAGE HELD
----- End of picture text -----

1 JGT ApS 2 Mervyn Jacobson ApS 3 Security & Equity Resources Limited 4 Dr. Mervyn Jacobson (trustee account) 5 C.Y. O’Connor ERADE Village Foundation 6 Ms. Gail Bratz 7 ANZ Nominees Limited 8 Mr. Bernard Stang and Mr. Maurie Stang (superannuation account) 9 Dr. Mervyn Jacobson 10 Kale Capital Corporation Limited 11 Mr. Maurie Stang 12 XY, Inc. 13 Citicorp Nominees Pty. Ltd. 14 Mr. Bernard Stang 15 Fodiro Pty. Ltd. 16 Equitas Nominees Pty. Ltd. 17 Ms. Elizabeth Sy 18 J.P. Morgan Nominees Australia Limited 19 Mr. John V. Egan 20 Mr. Maurice Rosenstein Totals	98,000,000 39,800,000 25,918,214 23,123,600 16,666,667 12,342,933 9,352,789 5,100,000 3,931,900 3,861,030 3,808,168 3,610,700 3,575,660 3,332,766 2,886,983 2,550,000 2,314,000 2,137,550 1,935,000 1,687,000 265,934,960	27.04% 10.98% 7.15% 6.38% 4.60% 3.41% 2.58% 1.41% 1.08% 1.06% 1.05% 1.00% 0.99% 0.92% 0.80% 0.70% 0.64% 0.59% 0.53% 0.47% 73.38%

GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2007

SUBSTANTIAL SHAREHOLDERS

As at 31 August 2007, the names of the two substantial shareholders holding shares representing more than 5% of the Company’s total issued capital, who have notified the Company in accordance with section 671B of the Corporations Act 2001 are:

==> picture [484 x 15] intentionally omitted <==

----- Start of picture text -----

NAME OF SUBSTANTIAL SHAREHOLDER NUMBER OF SHARES PERCENTAGE HELD
----- End of picture text -----

Dr. Mervyn Jacobson	150,931,900	41.65%
Fred Bart	25,918,214	7.15%

RESTRICTED SECURITIES

As at 31 August 2007, a total of 6,666,667 ordinary shares held by C.Y. O’Connor ERADE Village Foundation were subject to a voluntary escrow agreement with the Company. Pursuant to the agreement dated 15 June 2004, no more than 20% of the escrowed shares may be sold in any given 12-month period between 12 months and 60 months from 4 December 2004.

VOTING RIGHTS

Article 17 of the Company’s Constitution stipulates the voting rights of Members as follows:

‘Subject to any rights or restrictions for the time being attached to any class or classes of shares and to this Constitution:
(a) On a show of hands every person present in the capacity of a Member or a proxy, attorney or representative (or in more than one of these capacities) has one vote; and
(b) On a poll every person present who is a Member or proxy, attorney or Representative has:
(i) For each fully paid share that the person holds or represents: one vote; and
(ii) For each share other than a fully paid share that the person holds or represents: that proportion of one vote that the amount paid (not credited) on the shares bears to the total amount paid and payable on the share (excluding amounts credited).’

INTERESTS IN MINING TENEMENTS

As at 30 June 2007, the Company held a 16.36% interest in the following mining tenements by virtue of its direct equity interest in the Duketon Belt Joint Venture with Regis Resources N.L. All tenements are situated in the Duketon Greenstone Belt, which is located approximately 100 kilometres north of Laverton, Western Australia.

==> picture [484 x 16] intentionally omitted <==

----- Start of picture text -----

TENEMENT TENEMENT TENEMENT TENEMENT TENEMENT
----- End of picture text -----

E	38/379	M	38/283	M	38/352	M	38/490	M	38/503
L	38/20	M	38/292	M	38/408	M	38/491	M	38/528
L	38/47	M	38/303	M	38/409	M	38/492	M	38/629
L	38/49	M	38/316	M	38/487	M	38/493	M	38/630
M	38/114	M	38/317	M	38/488	M	38/494	M	38/702
M	38/262	M	38/341	M	38/489	M	38/495	M	38/703

In addition, the following reversion tenement applications have been applied for (over the top of the tenements listed above).

==> picture [484 x 16] intentionally omitted <==

----- Start of picture text -----

TENEMENT TENEMENT TENEMENT TENEMENT TENEMENT
----- End of picture text -----

ELA	38/2000	PLA	38/3434	PLA	38/3539	PLA	38/3544	PLA	38/3649
ELA	38/2001	PLA	38/3435	PLA	38/3540	PLA	38/3547	PLA	38/3650
PLA	38/3431	PLA	38/3436	PLA	38/3541	PLA	38/3646	PLA	38/3651
PLA	38/3432	PLA	38/3537	PLA	38/3542	PLA	38/3647	PLA	38/3652
PLA	38/3433	PLA	38/3538	PLA	38/3543	PLA	38/3648

GLOSSARY

ACTN 3 (ALPHA-ACTININ 3) A gene that produces a protein found

ADR (AMERICAN DEPOSITARY RECEIPT) A security listed on NASDAQ comprising 30 ordinary shares in GTG

AMNIOCENTESIS An invasive method for collecting foetal cells from pregnant women

CYO (C.Y. O’CONNOR ERADE VILLAGE FOUNDATION) Perth based collaborators with GTG researching commercial applications of the GMT

DNA (DEOXYRIBONUCLEIC ACID) The complex chemical in each cell of the body which determines individual differences

EBITDA Earnings before interest, tax, depreciation and amortisation

ANKC (AUSTRALIAN NATIONAL KENNEL COUNCIL) An

organisation dedicated to promoting excellence in sound breeding of dogs

EQUINE Pertaining to horses

FOETAL CELLS The cells of an unborn child

ARC (AUSTRALIAN RESEARCH COUNCIL) The organisation which advises the Government on matters relating to science

ARC-LINKAGE GRANT A source of funding for basic research for commercial organisations

GENDIA An international network consisting of more than 50 laboratories (including GTG) that offers more than 1,300 different genetic tests

GENE A region of DNA that controls an hereditary characteristic

ASX OR AUSTRALIAN SECURITIES EXCHANGE Australian Securities Exchange Limited

AUTO-IMMUNE DISEASES A group of diseases caused by an immune response being directed toward a normal body cell

AVIAN Pertaining to birds

GMT (GENOMIC MATCHING TECHNIQUE) A rapid means for analysis of DNA structures invented by CYO

GROUP Genetic Technologies Limited and all of its subsidiaries

IMMUNAID A GTG research project aimed at improving the effi ciency of treatments in cancer and AIDS

BOVINE Pertaining to cattle

BRCA1 AND BRCA2 Genes used to assess the risk of developing familial breast and ovarian cancers

CANINE Pertaining to dogs

CEO

CFO

COMPANY OR GTG Genetic Technologies Limited (ACN 009 212 328)

CURRENCIES USED

AUD or $ Australian dollars, except where specifi cally indicated otherwise

IMMUNE RESPONSE The body’s mechanism for eliminating infections by bacteria or viruses

NASDAQ National Association of Securities Dealers Automated Quotation Stock Exchange

NATA (NATIONAL ASSOCIATION OF TESTING AUTHORITIES, AUSTRALIA) The government body determining standards to which human genetic tests should be performed

NON-CODING The segments of DNA which do not contain information on the structure of proteins

OVINE Pertaining to sheep

PATHOGEN A specifi c causative agent of disease

PROTEIN A string of amino acids determined by a gene

CAD Canadian dollars CHF Swiss francs EUR European euros GBP Pounds sterling NZD New Zealand dollars USD United States dollars

RARECELLECT The Company’s non-invasive process for obtaining foetal cells from pregnant women for genetic testing

SCN1A (SODIUM CHANNEL, NEURONAL 1 ALPHA) A gene responsible for one form of severe (myoclonic) epilepsy of infancy

START AND COMMERCIAL READY Grant schemes supporting early phase commercial research projects

T-REGULATORY CELLS The cells that limit the strength of an immune response to ensure it does not become too severe

CVS (CHORIONIC VILLOUS SAMPLING) An invasive method for collecting foetal cells from pregnant women

Design by theballgroup.com.au – GTG0003 10/07

Genetic Technologies Limited 60-66 Hanover Street Fitzroy, Victoria 3065 Australia Telephone +61 3 9415 1135 Facsimile +61 3 9417 2987 www.gtg.com.au

ANNUAL GENERAL MEETING

==> picture [178 x 235] intentionally omitted <==

Notice is hereby given that the Annual General Meeting of the shareholders of Genetic Technologies Limited A.C.N. 009 212 328 will be held at:

11.00 am on Wednesday, 21 November 2007 at

‘Treetops’ Melbourne Museum, 11 Nicholson Street, Carlton, Victoria 3053 Australia

At the Annual General Meeting, consideration will be given to the following:

To receive and consider the Financial Report, Directors’ Report and Auditor’s Report for the year ended 30 June 2007.

To consider and, if thought fi t, to pass the following resolution as an ordinary resolution:

‘To re-elect Mr. John S. Dawkins AO who retires by rotation in accordance with the Company’s Constitution and being eligible offers himself for re-election as a Director.’

To consider and, if thought fi t, to pass the following resolution as an ordinary resolution:

‘To re-elect Mr. David Carruthers who was appointed to the Board as a casual vacancy on 26 February 2007 and retires in accordance with the Company’s Constitution and being eligible offers himself for re-election as a Director.’

To consider and, if thought fi t, to pass the following resolution as an ordinary resolution:

‘To re-elect Dr. Mervyn Jacobson who was appointed to the Board as a casual vacancy on 24 September 2007 and retires in accordance with the Company’s Constitution and being eligible offers himself for re-election as a Director.’

To consider and, if thought fi t, to pass the following resolution as an ordinary resolution:

‘That the Remuneration Report section of the Directors’ Report for the Company for the year ended 30 June 2007 be adopted.’

To consider and, if thought fi t, to pass the following resolution as an ordinary resolution:

‘That, for the purposes of ASX Listing Rule 10.17, the Company’s Constitution and Section 195(4) of the Corporations Act, the Company approve an increase in the payment of fees to the Non-Executive Directors in respect of each fi nancial year of the Company from a present maximum of $400,000 in aggregate to a maximum of $500,000 in aggregate, to be divided between the Non-Executive Directors in such proportions as the Directors determine and, in default of agreement, equally but with the Non-Executive Chairman receiving three times that of the other Non-Executive Directors.’

Dated this 15th day of October 2007

By order of the Board

Thomas G. Howitt Company Secretary

VOTING EXCLUSION STATEMENT

In relation to Resolution 6, the Chairman will disregard any votes cast on the resolution by or on behalf of any Director and any associate of such person when determining the result of the resolution except where:

the vote is cast by a person as a proxy for a person who is entitled to vote, in accordance with the directions on the Proxy Form, or
it is cast by the Chairman as a proxy for a person who is entitled to vote, in accordance with the directions on the Proxy Form to vote as the proxy decides.

VOTING ENTITLEMENT NOTICE

For the purposes of the Meeting, the Company has determined that shares will be taken to be held by the persons registered as holders 48 hours prior to the meeting. Accordingly, transfers registered after that time will be disregarded in determining entitlements to vote at the Meeting.

PROXIES

A shareholder entitled to attend and vote at the Meeting is entitled to appoint not more than two proxies. Where more than one proxy is appointed, each proxy must be appointed to represent a specifi c proportion of the shareholder’s voting rights. A proxy need not be a shareholder. Proxy Forms must be lodged in accordance with the directions set out on the Proxy Form not later than 48 hours prior to the Meeting.

GENETIC TECHNOLOGIES LIMITED A.C.N. 009 212 328

EXPLANATORY MEMORANDUM

This Explanatory Memorandum has been prepared for the information of shareholders of the Company in connection with the business to be conducted at the Annual General Meeting of shareholders to be held on Wednesday, 21 November 2007.

1. CONSIDERATION OF FINANCIAL STATEMENTS

Please refer to the Annual Report accompanying the Notice of Meeting.

2. RE-ELECTION OF MR. JOHN DAWKINS AO

Mr. Dawkins, 60, retires by rotation in accordance with the Company’s Constitution and being eligible offers himself for re-election.

Mr. Dawkins was appointed to the Board on 24 November 2004 and serves on both the Audit and Corporate Governance Committees. Mr. Dawkins holds degrees in Agriculture from Roseworthy College and Economics from the University of Western Australia and, for 18 years, served in the Australian House of Representatives for the Australian Labor Party. Between 1983 and 1993, he served in the Hawke and Keating Governments as Finance Minister, Trade Minister, Employment Education and Training Minister and fi nally Treasurer. He serves and has served on the Boards of a number of companies including Integrated Legal Holdings Ltd., MGM Wireless Ltd., Elders Rural Bank and Retail Energy Market Company. He has consulted to a variety of international organisations including The World Bank Group, the OECD, UNDP, and UNESCO. He is a Patron of the Menzies School of Health Research and for three years was Treasurer of the International Agency for the Prevention of Blindness and for nine years a member of the Board of the Fred Hollows Foundation. He was made an Offi cer of the Order of Australia in June 2000 and awarded the Centenary Medal in January 2000.

3. RE-ELECTION OF MR. DAVID CARRUTHERS

Mr. Carruthers, 60, retires in accordance with the Company’s Constitution and being eligible offers himself for re-election.

Mr. Carruthers was appointed to the Board on 26 February 2007 and serves as Chairman of the Company’s Audit Committee. Mr. Carruthers was Chief Financial Offi cer of BP Finance for the global operations based in London and the European Regional Chief Executive Offi cer based in Brussels. On returning to Australia, he was Managing Director of Treasury Corporation of Victoria and coordinated the management of $29 billion of privatisation proceeds. More recently, Mr. Carruthers has provided advisory services in fi nancial risk management to clients in the Asia-Pacifi c region. He is currently Head of Corporate Finance, Tristar Corporate Advisors and Chief Financial Offi cer, Olympus Funds Management. He also serves as a Non-Executive Director and Audit Committee Chairman for Ceramic Fuel Cells Ltd., and as a Non-Executive Director for India Equities Fund Limited, both ASX listed companies.

4. RE-ELECTION OF DR. MERVYN JACOBSON

Dr. Jacobson, 65, retires in accordance with the Company’s Constitution and being eligible offers himself for re-election.

Dr. Jacobson is the founder of the Company and served as its Chief Executive from 31 August 2000 until 24 September 2007 when he retired from that position and was appointed as a Non-Executive Director. Dr. Jacobson continues to lead the Company’s licensing program as a consultant.

Dr. Jacobson is a legally qualifi ed Medical Practitioner. He has more than 35 years experience in developing new medical technology and in bringing new medical and biomedical goods and services to the market, working with biotechnology enterprises in Australia, UK, Switzerland, USA, Canada, Mexico and China. In 1989, he co-founded GeneType AG, the research start-up that subsequently led to the formation of Genetic Technologies Limited. He was also a founding Director of the Colorado Biotechnology Association and also XY, Inc., a biotechnology company in Colorado. In 2000, he was appointed by the Governor of Colorado to the Governor’s Advisory Council in Biotechnology.

GENETIC TECHNOLOGIES LIMITED A.C.N. 009 212 328

EXPLANATORY MEMORANDUM (CONT.)

4. RE-ELECTION OF DR. MERVYN JACOBSON (CONT.)

In June 2004, Dr. Jacobson was appointed Chief Technology Offi cer of the Scientifi c Advisory Board of the China National Animal Breeding Stock Export/Import Corporation Limited (CABS) in Tianjin, China. He was appointed to the Company’s Board of Directors in May 2000 and served as its Executive Chairman from August 2000 until November 2005. He also serves on the Company’s Corporate Governance Committee and is Chairman of its Canadian-listed subsidiary, Gtech International Resources Limited. Dr. Jacobson is a member of the Australian Institute of Company Directors.

5. REMUNERATION REPORT

Listed entities are required to put to the vote a resolution that the Remuneration Report section of the Directors’ Report be adopted. This Remuneration Report can be found on pages 36 to 40 of the 2007 Annual Report that accompanies the Notice of Meeting. It sets out a range of matters relating to the remuneration of Directors, the Company Secretary and Senior Executives of the Company. A vote on this resolution is advisory only and does not bind the Directors or the Company.

6. REMUNERATION OF NON-EXECUTIVE DIRECTORS

It is proposed that shareholders approve an increase in the aggregate fees payable to the Non-Executive Directors in respect of each fi nancial year of the Company from the present maximum of $400,000 (as determined in 2005) to a maximum of $500,000 in aggregate, to be divided between the Non-Executive Directors in such proportions as the Directors determine and, in default of agreement, equally but with the Non-Executive Chairman receiving three times that of the other Non-Executive Directors.

As set out in the 2007 Annual Report, during the year ended 30 June 2007, the Non-Executive Directors received aggregate Directors’ fees of $186,636, inclusive of the 9% superannuation guarantee charge.

The reasons for the Board seeking to increase the maximum aggregate remuneration of Non-Executive Directors are as follows:

Recommendation 2.1 of the Principles of Good Corporate Governance and Best Practice Recommendations, as released by the ASX in March 2003 and as updated in August 2007, states that the Board of a listed company should comprise a majority of independent Directors. Since Mr. Michael Ohanessian, as the recently appointed Chief Executive Offi cer would not be considered ‘independent’ for the purposes of the Recommendation, the Board now wishes to appoint an additional Non-Executive Director. In order to attract appropriately qualifi ed candidates, a competitive market-based fee will need to be offered.
Recommendation 8.2 of the Principles of Good Corporate Governance and Best Practice Recommendations states that it is not appropriate for Non-Executive Directors of a listed company to receive options or bonus payments as remuneration. Accordingly, it is proposed that the 3,500,000 options currently held by Non-Executive Directors will be cancelled or will expire before 30 November 2007. In order to compensate these Non-Executive Directors and to ensure consistency in the remuneration paid to all Directors with similar responsibilities, it is proposed that all Non-Executive Directors will be paid the current fee of $50,000 per annum (plus statutory superannuation where appropriate), being an increase from $30,000 per annum, except in the case of the Chairman who will receive $150,000 per annum (being an increase from $90,000 per annum).

If a further independent Director is appointed as stated above, the total annual remuneration to be paid to the current Non-Executive Directors will increase to $400,000 ($150,000 in the case of the Chairman and $50,000 for each of the fi ve other Non-Executive Directors), plus statutory superannuation of 9% of approximately $22,500 (the Company is not required to make statutory superannuation contributions to Mr. Bosch due to his age). Details in relation to the Non-Executive Directors are set out in the Explanatory Memorandum above and in the 2007 Annual Report which accompanies the Notice of Meeting. The Managing Director and Chief Executive Offi cer (Michael Ohanessian) is not entitled to receive remuneration under this resolution for acting in the capacity of a Director.

GENETIC TECHNOLOGIES LIMITED

A.C.N. 009 212 328 60-66 Hanover Street Fitzroy, Victoria 3065 Australia Telephone +61 3 9415 1135 Facsimile +61 3 9417 2987 www.gtg.com.au

AI assistant

GENETIC TECHNOLOGIES LIMITED — Annual Report 2007

65022_rns_2007-10-14_943bafb5-a4be-4afb-b877-39d9de36ac49.pdf

2007 Annual Report and Notice of Annual General Meeting

THE ARRIVAL OF GENETICS

GENETIC TECHNOLOGIES LIMITED

DIRECTORS

COMPANY SECRETARY

REGISTERED OFFICE

POSTAL ADDRESS

SHARE REGISTER

AUDITORS

BANKERS

In 2007

Chairman’s message

A strong performance in 2007

$15.32 million, up 42%

KEY FINANCIAL DATA

2007 RESULTS

Five-year history

Introducing: Michael Ohanessian

Q: WHAT ATTRACTED YOU TO GTG?

Q: WHAT SKILLS DO YOU BRING TO THE ROLE OF CEO?

Q: WHAT DO YOU SEE AS YOUR IMMEDIATE PRIORITIES?

Q: WHAT CHALLENGES DO YOU FORESEE AT THIS EARLY STAGE?

Q: WHERE DO YOU SEE THE COMPANY GOING OVER THE NEXT FEW YEARS?

Q: WHAT IS THE ONE KEY MESSAGE YOU’D LIKE TO COMMUNICATE TO GTG SHAREHOLDERS?

CFO’s message

Henry Bosch AO

David Carruthers

Michael B. Ohanessian

John S. Dawkins AO

Fred Bart

Dr. Mervyn Jacobson

RESEARCH

Research: GTG has a longstanding tradition of fundamental research

RARECELLECT[®]

PROJECT UPDATE

IMMUNAID

PROJECT UPDATE

PROJECT UPDATE

PATHOGENS

GENOMIC MATCHING TECHNIQUE

PROJECT UPDATE

Testing: The Company has now developed a reputation for highquality genetic testing services.

DNA PROFILING

PATERNITY

FORENSICS

COMMERCIAL ANIMALS

CANINE TESTING

PLANTS

HUMAN DISEASE

ACTN3 SPORTS GENE TEST[®]

Licensing: delivering on multiple fronts

TURNING NON-CODING LICENSES INTO NEW TESTING OPPORTUNITIES

LICENSES GRANTED TO DATE

CASE STUDY – MYRIAD GENETICS

CASE STUDY – OPTIGEN

181

Dr. Mervyn Jacobson: CEO of GTG from 1989 – 2007

Q: IN MARCH 2007, YOU INFORMED THE MARKET THAT YOU WERE STEPPING DOWN FROM THE ROLE OF CEO. WHY DID YOU DO THIS?

Q: ARE YOU LOOKING FORWARD TO WORKING WITH THE COMPANY’S NEW CEO?

Q: THE PAST FINANCIAL YEAR SAW SIX LICENSES GRANTED. IS IT GETTING EASIER TO GENERATE NON-CODING LICENSES?

Q: WHAT IS ‘THE’ KEY MESSAGE YOU WOULD LIKE TO PASS ON TO GTG INVESTORS?

Q: WHAT DO YOU CONSIDER TO BE YOUR GREATEST ACHIEVEMENT AS CEO?

Q: YOU SPEND A LOT OF TIME THINKING ABOUT NATURE AND SCIENTIFIC POSSIBILITIES. WHAT WILL BE THE NEXT BIG RESEARCH BLOCKBUSTER FOR GTG?

Q: YOU HAVE BEEN A STRONG SUPPORTER OF THE CRITICALLY ENDANGERED BRUSHTAILED ROCK-WALLABY FOR MANY YEARS. TODAY, HOW IS THE SPECIES FARING?

Our role in the community

WALLABIES JUMP TO FREEDOM

WHO LET THE DOGS OUT?

CANINE DNA

GENETIC TECHNOLOGIES LIMITED STATUTORY REPORTS

Contents

DIRECTORS

Names, qualifications, experience and special responsibilities

Henry Bosch AO , BA (Hons), MA ( Non-Executive Chairman )

Dr. Mervyn Jacobson , MBBS ( Chief Executive Officer )

Fred Bart , ( Non-Executive )

David Carruthers , BCom, CA, CFTP (Snr.), MAICD Dip. ( Non-Executive )

DIRECTORS (cont.)

GENETIC TECHNOLOGIES LIMITED Annual Report 2007