ANNUAL REPORT 2008

GENETIC TECHNOLOGIES LIMITED ACN 009 212 328

CONTENTS
LETTER FROM THE CHAIRMAN	2
LETTER FROM THE CEO	3
FIVE YEAR FINANCIAL HISTORY	4
DIRECTORS’ REPORT	6
CORPORATE GOVERNANCE STATEMENT	21
FINANCIAL STATEMENTS	24
DIRECTORS’ DECLARATION	66
AUDITOR’S INDEPENDENCE DECLARATION	67
AUDITOR’S REPORT	68
ASX ADDITIONAL INFORMATION	70
COMPANY DIRECTORY	72

LETTER FROM THE CHAIRMAN

Dear shareholders,

During the 2008 fi nancial year, Genetic Technologies Limited continued to make considerable progress on a number of fronts.

Consolidated gross revenues and other income rose to a record high of $16.0 million, representing a 4.3% increase over the fi gures for the previous year, driven by a 25.6% increase in revenues generated from its genetic testing activities, an 88.2% increase in interest received, offset by a 4.5% fall in revenues from the Company’s licensing program. Importantly, the Company generated positive net cash fl ows from operations during 2008 of $423,000, the second consecutive year that positive cash fl ows have been generated.

During the year, the range of tests offered by the Company continued to expand, particularly in the area of canine testing, and new marketing initiatives were introduced to further promote the Company’s services. The acquisition by the Company of Frozen Puppies Dot Com Pty. Ltd. in July 2008 has already assisted the Company to increase its share of this important market. Further, in January 2008, the Company announced the execution of a three-year forensic DNA testing agreement with the New South Wales Police Force under which a signifi cant number of samples have now been received.

GTG also continues to fund four research and development projects which have the potential to generate further valuable intellectual property for the Company. It is hoped that two of these projects will proceed to the next phase during the coming year and, if successful, the commercial prospects for these projects could be substantial.

On 18 September 2008, the Board of GTG received a Notice of Intention to Move a Resolution from a substantial shareholder seeking to remove a majority of Directors from the Board, and to appoint one new Director. The substantial shareholder is Mervyn Jacobson ApS, the holder of 49 million shares in GTG, which is an entity associated with GTG Non-Executive Director, Dr. Mervyn Jacobson.

The Directors who are sought to be removed are the Managing Director Michael Ohanessian, independent Non-Executive Directors John Dawkins AO, Dr. Leanne Rowe AM and David Carruthers, and myself. The person who is sought be appointed as a Director is Grahame Leonard.

The two resolutions put forward by Mervyn Jacobson ApS will be incorporated into the Notice for the 2008 Annual General Meeting and both resolutions will be put before the shareholders at the meeting to be held at 10.00 am on Wednesday, 19 November 2008. The Notice, together with a detailed Explanatory Memorandum, will be mailed to all shareholders on or about 17 October 2008. Please read this document carefully. The Board urges you to complete and lodge a proxy if you are unable to attend the Meeting in person.

Typically, in previous years, the Company’s Annual Reports have provided considerable information about its activities and set out the plans which the Company has for the future. However, given the signifi cant uncertainty caused by the current situation, the Board does not believe it is appropriate for the Company to produce such a detailed Annual Report this year.

Accordingly, following this letter are the statutory fi nancial documents in respect of the year ended 30 June 2008 which the Company is legally bound to disclose to all shareholders.

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HENRY BOSCH AO

Non-Executive Chairman

Melbourne, 10 October 2008

LETTER FROM THE CEO

Dear shareholders,

This past year at Genetic Technologies has been a period of great change. The Company’s leadership passed from the founder to a new generation in late September 2007 which provided an opportunity for renewal of the strategic direction.

First and foremost was to redefi ne the business model. The process of developing a new strategic direction to create long term shareholder wealth was well advanced by the end of the 2008 fi scal year. I am very proud of the achievements of the Genetic Technologies’ team in such a short period of time and am confi dent that shareholders will soon see the fruits of the important changes we have made.

The core objective of the new strategic direction was to build the sustainable part of our business in the area of service delivery. In fi scal 2007, our service business accounted for 22% of turnover with the balance coming from licensing of our ‘non-coding’ DNA patents. While historically the licensing income has been an important mainstay of our business, attention is now being turned to building a sustainable revenue base with our testing business.

The fi rst tenet of our strategy therefore has been to signifi cantly expand our service business. On this score, we have managed to increase service revenue by 26% for the year compared to an average growth rate over the previous 5 years of 18%. All aspects of our service business experienced growth with the highlight being the 3 year forensics contract with NSW Police. I am proud to report that we have consistently met all the challenging performance criteria set by the client and made a small but important contribution to

The second aspect of the strategy has been to reduce overhead and operating costs to improve margins and position ourselves for profi table growth. I am pleased to report that the team has made some dramatic operational improvements such that the DNA testing business delivered its fi rst positive gross margin outcome during the June quarter. These improvements have also enabled us to improve our customer service by reducing the time taken to provide results for DNA testing. Efforts to improve asset utilisation were also advanced as we endeavour to improve overall productivity.

Another important strategic change has been the way we manage our R&D program. We have implemented a disciplined project management system including a strong commercial focus on business outcomes to all our R&D efforts. While the results will take time to crystallise, the foundations we have laid will signifi cantly improve the long term prospects of our R&D program.

For the second consecutive year, the Company generated revenues in excess of $10 million from the licensing of its non-coding patents. Efforts to secure further licenses to this valuable technology will continue in the coming year.

More recently, several important initiatives have been implemented to build upon our excellent customer franchise in the pedigree canine market such as the launch of our new dog breed identifi cation test, our entry into the China market and the acquisition of Frozen Puppies Dot Com.

Fiscal 2008 has provided us with a solid foundation from which to expand our service income. I am confi dent that the new strategic direction will enable us to build a sustainable, profi table and growing business while we continue to exploit our intellectual property and execute effectively with our R&D plans.

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MICHAEL B. OHANESSIAN

Chief Executive Officer

Melbourne, 10 October 2008

FIVE-YEAR FINANCIAL HISTORY

During the 2008 fi nancial year, Genetic Technologies Limited and its subsidiaries generated consolidated gross revenues and other income of approximately $16.0 million, representing a 4.3% increase over the preceding year. Importantly, the Company generated positive net cash fl ows from operations during 2008 of $423,000, the second consecutive year that positive cash fl ows have been generated. The consolidated loss for the Group of $5.45 million included net non-cash items of $6.49 million, principally comprising amortisation, depreciation and impairment losses.

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YEARS ENDED 30 JUNE 2004 2005 2006 2007 2008
Total revenue and income ($m) 4.46 10.39 10.76 15.32 15.98
– Licensing revenue ($m) 0.39 6.57 6.69 11.34 10.83
– Testing revenue ($m) 2.06 2.39 2.55 3.12 3.92
Net profi t/(loss) after tax ($m) (10.70) (10.82) (7.92) (4.35) (5.45)
Net cash fl ows from/(used in) operations ($m) (5.28) (5.79) (5.96) 2.60 0.42
Shareholders’ equity ($m) 34.22 37.68 30.24 26.10 20.79
Net tangible assets ($m) 10.26 17.22 13.47 13.89 14.50
Market capitalisation ($m) 106.85 123.21 126.84 52.55 32.62
Number of shareholders 4,380 4,020 3,745 3,319 3,113
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FIVE-YEAR FINANCIAL HISTORY

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TOTAL REVENUE LICENSING REVENUE TESTING REVENUE NET PROFIT/(LOSS) NET CASH FLOWS
AND INCOME ($ millions) ($ millions) AFTER TAX FROM OPERATIONS
($ millions) ($ millions) ($ millions)
16 $15.98 12 4.0 $3.92 3
’04’05 ’06’07 ’08
$10.83 0
3.5 2
-1
12 9 3.0 -2 1
0.42
-3 0 ’04’05 ’06
2.5 ’07 ’08
-4
-1
8 6 2.0 -5
-2
-6 -$5.45
1.5
-7 -3
4 3 1.0
-8 -4
0.5 -9
-5
-10
0 0 0.0 -6
’04’05 ’06’07 ’08 ’04’05 ’06’07 ’08 ’04’05 ’06’07 ’08 -11
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SHARE PRICE

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GTG ASX ($0.06) XJO ASX (4,619)
0.800
6,600
0.750
0.700 6,300
0.650 6,000
0.600 5,700
0.550
0.500 5,400
0.450 5,100
0.400
4,800
0.350
0.300 4,500
0.250 4,200
0.200
3,900
0.150
0.100 3,600
MAR 2004 SEP 2004 MAR 2005 SEP 2005 MAR 2006 SEP 2006 MAR 2007 SEP 2007 MAR 2008 OCT 2008
Genetic Technologies S&P ASX 200
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GTG ASX ($0.06)
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SHAREHOLDERS’ NET TANGIBLE MARKET NUMBER OF
EQUITY ASSETS CAPITALISATION SHAREHOLDERS
($ millions) ($ millions) ($ millions)
40 18 135 4,500
35
15 $14.50
108 3,600
30
3,113
12
25
81 2,700
$20.79
20 9
54 1,800
15
6
10 $32.62
27 900
3
5
0 0 0 0
’04’05 ’06’07 ’08 ’04’05 ’06’07 ’08 ’04’05 ’06’07 ’08 ’04’05 ’06’07 ’08
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2008 TOTAL REVENUE AND INCOME (Millions of dollars)

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$1.23
Licensing (67%)
Testing (25%)
Other (8%)
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2008 TESTING REVENUE (Thousands of dollars)

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$1,115 $674
$644
$1,304 $182
Paternity (34%)
Medical testing (28%)
Forensics (17%)
Dogs (16%)
Other (5%)
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2008 TOTAL EXPENSES (Thousands of dollars)

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$4,861
$4,755
$2,378
$6,569
$1,600
$1,268
Employee expenses (31%)
Other expenses (23%)
Amortisation/depreciation (22%)
Impairment write-downs (11%)
Testing expenses (7%)
Research and trial expenses (6%)
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DIRECTORS’ REPORT

The Directors submit their Report for the year ended 30 June 2008.

DIRECTORS

The names and details of the Directors of Genetic Technologies Limited who held office during the 2008 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. Michael Ohanessian who was appointed to the Board and as Chief Executive Officer on 24 September 2007 and Dr. Leanne Rowe AM who was appointed to the Board on 16 April 2008. Dr. Mervyn Jacobson retired as Chief Executive Officer on 24 September 2007 but remains on the Board as a Non-Executive Director.

Names, qualifications, experience and special responsibilities

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

Mr. Bosch, 77, 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 is a Foundation Fellow of the Australian Institute of Company Directors and an Adjunct Professor at RMIT University, which awarded him an Honorary Doctorate of Business in 2006. Mr. Bosch was made an Officer of the Order of Australia in January 1991.

Michael B. Ohanessian , BEng (Hons), MBA ( Chief Executive Officer )

Mr. Ohanessian, 44, was appointed to the Board and as its Chief Executive Officer on 24 September 2007 and also serves as a member of the Company’s Corporate Governance Committee. Most recently, he served for seven years as Chief Executive Officer of Vision Biosystems, a division of former ASX-listed Vision Systems Limited, where he led a strategic restructure of the Vision Biosystems business, involving the acquisition of a large UK-based reagents operation, and played a key part in successfully transforming it into a world leader in the immunohistochemistry market. In early 2007, Vision Biosystems was acquired by a competitor in a transaction which established an enterprise value for the business of approximately $700 million. Prior to his role at Vision Biosystems, Mr. Ohanessian worked for the Boston Consulting Group where, over a period of four years, he gained considerable experience in a variety of industries, finally focussing on biotechnology. Before that, he worked at Mobil Oil for nine years after completing a Bachelor of Engineering degree with honours at the University of Melbourne. Mr. Ohanessian also holds an MBA from Melbourne Business School.

Fred Bart , ( Non-Executive )

Mr. Bart, 53, 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, both ASX-listed companies, 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, 60, 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 2008

DIRECTORS (cont.)

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

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

Mr. Dawkins, 61, 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 a number of companies including Chairman of Elders Rural Bank and Retail Energy Market Company and on the Boards of ASX-listed companies Integrated Legal Holdings Limited and MGM Wireless Limited. 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.

Dr. Mervyn Jacobson , MBBS ( Non-Executive )

Dr. Jacobson, 66, 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 appointed to the Company’s Board of Directors in May 2000, and served as its Executive Chairman from August 2000 until November 2005 and as its Chief Executive Officer until September 2007. He also serves on the Company’s Corporate Governance Committee and is Chairman of its Canadian-listed subsidiary, Gtech International Resources Limited. Also in 2000, he was appointed by the Governor of Colorado to the Governor’s Advisory Council in Biotechnology. He was also a founding Director of the Colorado Biotechnology Association and XY, Inc., a biotechnology company in Colorado. 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. In 2005, Dr. Jacobson was appointed to the Advisory Board of the Institute for the Breeding of Rare and Endangered African Mammals, headquartered in Edinburgh, Scotland. In 2008, he was promoted to its Board of Directors and Board of Trustees. Dr. Jacobson is also a member of the Australian Institute of Company Directors.

Dr. Leanne Rowe AM , MD, MB, BS, FRACGP, Dip. RACOG, FAICD ( Non-Executive )

Dr. Rowe, 51, was appointed to the Board of Directors on 16 April 2008. She currently serves as Deputy Chancellor of Monash University, one of Australia’s leading universities, and is an immediate past Chairman of the Royal Australian College of General Practitioners, an organisation representing Australian General Practice with a membership of over 15,000 GPs. Dr. Rowe also serves on the Boards of various companies including GMHBA Ltd., a Private Health Fund, where she consults on a number of preventive health programs relating to diabetes, heart disease and cancer in regional areas of Australia. Other board and high level committee positions have included the Victorian Medical Women’s Society and Victorian Health Minister’s Council on Medical Workforce. Dr. Rowe currently serves as a health consultant working with a number of Melbourne based consultancy companies evaluating national programs and is leading a national initiative on medical workplace violence across all medical organisations. She is also an Adjunct Associate Professor at the University of Sydney, has previously held a wide range of roles in the field of medical education and has written numerous publications. In addition to her current roles, Dr. Rowe has extensive past experience across a variety of areas in medicine and surgery, including community medicine, adolescent health, emergency medicine and postnatal care. She was made a Member of the Order of Australia in June 2007.

Company Secretary

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

Mr. Howitt, 44, was appointed as the group’s first full-time Chief Financial Officer on 1 June 2004 and as its 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 several 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 subsequent 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.

DIRECTORS’ REPORT (cont.)

DIRECTORS (cont.)

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 the Company are as follows:

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OPTIONS OVER
DIRECTOR ORDINARY SHARES ORDINARY SHARES
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Henry Bosch AO	245,406	–
Michael B. Ohanessian	70,000	3,650,602
Fred Bart1	25,918,214	–
David Carruthers	150,000	–
John S. Dawkins AO	–	–
Dr. Mervyn Jacobson2	150,931,900	–
Dr. Leanne Rowe AM	–	–

[1] Mr. Bart also controls 88,500 common shares in Gtech International Resources Limited, a subsidiary of the Company.

[2] Dr. Jacobson also controls 522 ordinary shares in ImmunAid Pty. Ltd., a subsidiary of the Company.

EARNINGS PER SHARE

Basic loss per share (cents per share) (1.5) Diluted loss per share (cents per share) (1.5)

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:

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Genetic Technologies Limited
75.8% 69.2% 100% 100% 100% 100% 100% 100%
Gtech International ImmunAid RareCellect GeneType Genetic Technologies Frozen Puppies GeneType GeneType
Resources Limited Pty. Ltd. Pty. Ltd. Pty. Ltd. Corporation Pty. Ltd. Dot Com Pty. Ltd. AG Corporation
50.1%
AgGenomics
Pty. Ltd.
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Frozen Puppies Dot Com Pty. Ltd. was acquired on 22 July 2008, i.e. after balance date (refer Note 40) and its results have therefore not been included in the Financial Report as at 30 June 2008.

Nature of operations and principal activities

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

The provision of genetic testing services;
Licensing of the Company’s intellectual property; 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.

GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2008

CORPORATE INFORMATION (cont.)

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 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.

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 2008 financial year, Genetic Technologies Limited and its subsidiaries generated consolidated gross revenues and other income of approximately $16.0 million, representing a 4.3% increase over the corresponding figures for the 2007 year. The overall increase of $660,000 was due principally to a 25.6% increase in revenues generated from its genetic testing activities and an 88.2% increase in interest received, offset by a 4.5% fall in revenues from the Company’s licensing program.

In January 2008, the Company announced the execution of a three-year forensic DNA testing agreement with the New South Wales Police Force. Under the agreement, GTG conducts forensic DNA analysis on ‘volume crime’ samples such as break and enter, malicious damage, motor vehicle theft, and theft of items from motor vehicles. The awarding of the contract follows the successful completion of a trial which the Company undertook for NSW Police in 2006 and is the first time in Australia that a Police Force has entered a long-term arrangement to outsource its forensic DNA testing requirements. Since then, the Company has received a growing number of samples from NSW Police and believes that its accredited high throughput laboratory has the capacity to expand its forensics business further.

Importantly, for the second consecutive year, the Company generated positive net cash flows from operations during the 2008 financial year. The consolidated cash receipts from operations, other income and interest exceeded $14 million, with net cash inflows from operations of approximately $423,000. Cash and cash equivalents held by the Group as at 30 June 2008 were approximately $13.4 million, or almost $413,000 less than at the same time last year.

The consolidated loss after tax for the Group of $5.45 million included net non-cash items of approximately $6.49 million, comprising amortisation of patents ($3.54 million), impairment losses ($2.38 million), depreciation of plant and equipment ($1.22 million), net foreign exchange losses ($0.25 million) and share-based payments expense ($0.16 million), partially offset by non-cash revenues generated from the Applera settlement ($1.06 million, comprising equipment credits of $662,000 and reagent credits of $394,000) (refer Note 30 for further details).

Finally, during the 2008 year, the Company continued to fund four research and development projects, which have the potential to generate further valuable intellectual property for the Company. If successful, the commercial prospects for these projects could be substantial and would provide important additional income in the future.

The Directors believe that the encouraging results for the 2008 financial year validate the strategies now being pursued by the Company and provide a sound platform for further growth and expansion of the Company’s core genetic testing operations during the 2009 financial year. Whilst the Company continues to pursue further licenses to its non-coding technology, the Directors are mindful of the uncertainties of this revenue stream, particularly as the underlying patents have a finite life.

DIRECTORS’ REPORT (cont.)

CORPORATE INFORMATION (cont.)

Review of financial condition

Capital structure

As at the date of this Report, the Company had a total of 374,644,801 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 2008, however 12,254,902 shares were issued by the Company on 22 July 2008 as partial consideration for the acquisition of Frozen Puppies Dot Com Pty. Ltd. (refer Note 40). As at the date of this Report, a total of 13,137,255 ordinary shares were subject to voluntary escrow (refer ASX Additional Information).

Treasury and related policies

During the financial year, the Company introduced a new Cash Management Policy. The Company follows industry accepted best practice by investing the Company’s cash assets in a range of short-term interest-bearing deposits with appropriately rated financial institutions.

Cash from operations

During the financial year, the consolidated net cash flows from operations was approximately $423,000. This result was $2.17 million lower than the operating cash flows from the prior period which revealed net inflows of almost $2.60 million. Overall, the Group’s consolidated cash assets decreased by approximately $413,000 during the 2008 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 2008, the Company had financed the acquisition of laboratory and other equipment under the Facility with a total cost of $1,966,312. As at 30 June 2008, the total outstanding liability in respect of this facility was $298,199 (refer Note 32).

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 $145,000. As at 30 June 2008, a total liability in respect of these credit cards of $32,272 was outstanding.

Risk management

The Group takes a proactive approach to risk management. The Board is responsible for ensuring that risks and 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 Board 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. During the year ended 30 June 2008, the Company expanded its risk management activities with the establishment of a Risk Management Committee which meets on a regular basis and reports its findings back to the Audit Committee.

Employees

The Group employed 60 employees as at 30 June 2008 (2007: 54 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.

LIKELY DEVELOPMENTS AND EXPECTED RESULTS

During the 2009 financial year, the Group will focus on the expansion of its genetic testing business and the continuation of its licensing program, 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.

GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2008

SHARE OPTIONS

Unissued shares under option

As at both the reporting date and the date of this Report, there were 11,175,602 unissued ordinary shares in the Company under option. All options were issued at nil cost to the holders. Refer Note 28 to the attached financial statements for further details regarding the options outstanding.

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 2008 financial year, however, a total of 8,952,500 options that had previously been granted to employees, some of whom have resigned from the Company, lapsed. Of this number, a total of 2,900,000 options were forfeited, whilst the remaining 6,052,500 options expired. In addition, 600,000 options which had been granted to a consultant in respect of the Company’s NASDAQ listing also expired (refer Note 28). Option holders do not have any right, by virtue of their options, to participate in any share issue of the Company or any related body corporate.

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

On 24 September 2007, Mr. Michael Ohanessian was appointed as Chief Executive Officer of the Company. Mr. Ohanessian replaced Dr. Mervyn Jacobson who had retired as Chief Executive Officer and was appointed as a Non-Executive Director on that date.

On 16 April 2008, the Company announced the appointment of Dr. Leanne Rowe AM to the Board of Directors as an additional Non-Executive Director.

During the year ended 30 June 2008, the investigation by the Australian Securities and Investments Commission (‘ASIC’) regarding certain past trading in the Company’s shares continued. The Company continues to cooperate fully with ASIC and still believes that, whilst the investigation does not relate to any suspected wrongdoing by the Company itself, it does relate to the activities of certain former Executives of the Company. As at the date of this Report, the Company is not aware whether any further action will be taken by ASIC in relation to this matter.

During the year ended 30 June 2008, Dr. Mervyn Jacobson acquired a total of 522 ordinary shares in ImmunAid Pty. Ltd., a subsidiary of the Company, representing approximately 4.0% of that company’s total issued capital.

During the year ended 30 June 2008, a total of 9,552,500 options over unissued shares in the Company lapsed. Of this number, a total of 2,900,000 options were forfeited, whilst the remaining 6,652,500 options expired. Also during the 2008 financial year, a total of 8,150,602 options were granted to employees of the Company (refer Note 28).

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

SIGNIFICANT EVENTS AFTER BALANCE DATE

On 22 July 2008, the Company acquired 100% of the issued capital of Frozen Puppies Dot Com Pty. Ltd. (‘FPDC’), Australia’s foremost provider of canine reproductive services. Under the terms of the Agreement between the Company and FPDC, Genetic Technologies Limited (‘GTG’) acquired 100% of the issued share capital of FPDC in return for the issue to the FPDC shareholders of 12,254,902 ordinary shares in GTG and the payment of $153,160 in cash. In other terms of the acquisition, GTG advanced $346,840 in loan funds to FPDC to enable shareholder loans to be repaid and Employment Agreements were executed between the Company and the five principals of FPDC. Voluntary Restriction Agreements were also executed with all former FPDC shareholders. As a result, 80% of the 12,254,902 GTG shares that were issued as part of the acquisition are subject to voluntary escrow and will be released from escrow in four equal tranches after the expiration of 6, 12, 18 and 24 months from the date of issue, respectively.

On 27 August 2008, the Company sold its entire interest in the North Laverton Joint Venture to its partner, Regis Resources Limited (‘Regis’), in return for the payment of $100,000 in cash and 500,000 fully paid ordinary shares in Regis. As part of the sale, the Company will also have returned to it a performance bond which had a face value of $68,917 as at 30 June 2008 (refer Note 12). Further, the Company has been fully indemnified by Regis against any future rehabilitation liabilities which may arise from the exploration activities of the Joint Venture undertaken up until the date of sale. This indemnification will enable the Company, during the financial year ending 30 June 2009, to fully reverse the provision of $94,987 in respect of such liabilities which has been recorded in the Company’s balance sheet as at 30 June 2008 (refer Note 22).

Apart from these transactions, there have been no other significant events which have occurred after balance date.

DIRECTORS’ REPORT (cont.)

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.

REMUNERATION REPORT (AUDITED)

Introduction

This Remuneration Report outlines the Director and Executive remuneration arrangements of Genetic Technologies Limited (the ‘Company’) and its subsidiaries (collectively, the ‘Group’) in accordance with the requirements of the Corporations Act 2001 and its Regulations.

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 four 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 and (former) Chief Scientific Officer. There are only four Executives within the Group. During the 2008 financial year, Dr. Mervyn Jacobson retired as the Company’s Chief Executive Officer. He was replaced by Mr. Michael Ohanessian.

Details of Key Management Personnel

DIRECTORS		EXECUTIVES

Henry Bosch AO (Non-Executive Chairman)		Michael B. Ohanessian (Chief Executive Officer)
Fred Bart (Non-Executive)		Thomas G. Howitt (Chief Financial Officer and Company Secretary)
David Carruthers (Non-Executive)		Ross Barrow (Chief Operating Officer)
John S. Dawkins AO (Non-Executive)		Dr. Gary Cobon (Chief Scientific Officer)
Dr. Mervyn Jacobson (Non-Executive)
Dr. Leanne Rowe AM (Non-Executive)

Notes: Dr. Jacobson retired as Chief Executive Officer on 24 September 2007 and was appointed as a Non-Executive Director on that date.

Dr. Rowe was appointed as a Non-Executive Director on 16 April 2008.

Mr. Ohanessian was appointed as Chief Executive Officer and as an Executive Director on 24 September 2007.

Mr. Barrow was appointed as Chief Operating Officer on 14 April 2008.

Dr. Cobon resigned as Chief Scientific Officer on 28 March 2008.

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. Both Dr. Mervyn Jacobson, the Company’s largest shareholder, and Mr. Michael Ohanessian, the Chief Executive Officer, are not independent.

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.

GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2008

REMUNERATION REPORT (AUDITED) (cont.)

Remuneration strategy

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.

The remuneration strategy is approved by the Corporate Governance Committee.

Remuneration structure

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

The Company’s current remuneration policies provide some degree of linkage between an Executive’s performance based remuneration and the overall financial performance of the Company, particularly in the achievement of divisional revenue targets which, in turn, links to overall Company profitability and indirectly to the Company’s share price. These policies are in the process of being expanded in order to provide stronger linkage between the remuneration of the Company’s Executives and its performance.

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 21 November 2007, when shareholders approved an aggregate remuneration of $500,000 per year.

The amount of aggregate remuneration sought to be approved by shareholders and the manner in which it is apportioned amongst 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 remuneration

Objective

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

reward Executives for Group 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.

DIRECTORS’ REPORT (cont.)

REMUNERATION REPORT (AUDITED) (cont.)

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, divisional 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

Fixed remuneration consists of some or all of the following components:

base salary;
non-monetary benefits which can include motor vehicle allowance, costs associated with novated motor vehicle leases, parking (and associated fringe benefits tax, if applicable); and
superannuation benefits, which includes employer contributions.

With the exception of the employer contributions to superannuation, Executives are given some flexibility to decide the composition of their total fixed remuneration and the allocation between cash and other benefits. It is intended that the manner of payment chosen will be optimal for the recipient without creating any additional cost for the Group.

Fixed remuneration is reviewed annually with reference to individual performance, market benchmarks for individual roles and the overall performance of the Group. Any change to the fixed remuneration of Executives is first approved by the Corporate Governance Committee.

Variable remuneration

Objective

The objective of variable remuneration is to:

align the interests of Executives with those of shareholders;
link Executive rewards to the achievement of strategic goals and performance of the Company; and
ensure that the total remuneration paid by the Company is competitive by market standards.

Short Term Incentive (‘STI’)

STI is an annual plan that applies to Executives and other employees and is based on Group, division and individual performance during the financial year. STI ranges vary depending on the position and responsibility of the Executive. 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.

Group objectives, and their relative weighting, vary depending on position and responsibility, but in respect of the year ended 30 June 2008 included the achievement of:

earnings before interest, tax, depreciation and amortisation (‘EBITDA’) targets;
revenue targets; and
expense performance targets.

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.

Personal and operating objectives vary according to the role and responsibility of the Executive and include objectives such as service delivery to customers, project delivery, compliance outcomes, intellectual property management and various staff management and leadership objectives.

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 during the following reporting period. During the year ended 30 June 2008, STI payments totalling $136,470 were made to Executives and employees of the Company in respect of the 2007 financial year.

GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2008

REMUNERATION REPORT (AUDITED) (cont.)

Variable remuneration (cont.)

Long Term Incentive (‘LTI’)

The objective of the Group’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 long term profitability. Participation in the Group’s LTI program is subject to the approval of the Corporate Governance Committee. There are no specific performance hurdles, apart from vesting provisions, in respect of the LTI grants made to Executives.

LTI grants to Executives are delivered in the form of options over unissued ordinary shares in the Company which are granted under the terms and conditions of the Company’s Staff Share Plan. Selected Executives and other key employees, who contribute significantly to the long term profitability of the Company, are invited to participate in the Staff Share Plan, usually on an annual basis. The remuneration value of these grants varies and is determined with reference to the nature of the individual’s role, as well as his or her individual potential and specific performance.

In respect of options granted during the year ended 30 June 2008 and subsequent years, the options are granted at no cost, have a five-year life and vest fully at the end of three years from the date on which they are granted. During the year ended 30 June 2008, share-based payments expense totalling $164,533 was incurred by the Company in respect of the options granted to selected Executives and other key employees.

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 twelve 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

The Chief Executive Officer, Mr. Michael Ohanessian, is employed under an employment contract which took effect on 24 September 2007. The terms and conditions of Mr. Ohanessian’s appointment were disclosed to the Australian Securities Exchange on 20 September 2007 and are:

Mr. Ohanessian receives a base salary of $300,000 per annum, a motor vehicle allowance of $30,000 per annum, and statutory superannuation contributions as prescribed under the Superannuation Guarantee legislation;
Mr. Ohanessian is also entitled to receive an STI equivalent to a maximum of 40% of his base salary if the Company achieves its budgeted EBITDA (earnings before interest, tax, depreciation and amortisation) in any given financial year;
upon joining the Company, Mr. Ohanessian also received a LTI in the form of 3,650,602 options over unissued shares in the Company (refer to the table below for details of the terms of these options);
Mr. Ohanessian may resign from his position, and thus terminate the contract, by giving 6 months written notice and the Company may terminate Mr. Ohanessian’s contract by providing 12 months written notice or providing payment in lieu of the notice period; and
the Company may terminate Mr. Ohanessian’s contract at any time without notice if serious misconduct has occurred. Where termination with cause occurs, Mr. Ohanessian is only entitled to that portion of remuneration which is fixed and only up to the date of termination. In this instance, all entitlements to STI and LTI would lapse.

The key provisions contained in the employment contracts for other Key Management Personnel, being Mr. Thomas Howitt, Mr. Ross Barrow and Dr. Gary Cobon (up until the date of resignation), are:

the Executive receives a base salary and statutory superannuation contributions, as prescribed under the Superannuation Guarantee legislation, together with certain STI payments, some of which are prescribed and some of which are not;
the Executive may resign from his position and thus terminate the contract by giving up to three months written notice;
the Company may terminate the contract by providing up to three months written notice or payment in lieu of notice; and
the Company may terminate the contract without notice in the event that serious misconduct has occurred. In this instance, all entitlements to STI and LTI would lapse.

There are no employment contracts in place with any Non-Executive Director of the Company.

DIRECTORS’ REPORT (cont.)

REMUNERATION REPORT (AUDITED) (cont.)

Remuneration of Key Management Personnel

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SHORT-TERM POST-EMPLOYMENT LONG-TERM SHARE-BASED
LONG SERVICE
SALARY/FEES OTHER SUPERANNUATION LEAVE OPTIONS TOTALS
YEAR $ $ $ $ $ $
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Name and title of Directors Henry Bosch AO Non-Executive Chairman 2008 2007 Fred Bart Non-Executive Director 2008 2007 David Carruthers Non-Executive Director 2008 2007 John S. Dawkins AO Non-Executive Director 2008 2007 Dr. Mervyn Jacobson Non-Executive Director 2008 2007 Dr. Leanne Rowe AM Non-Executive Director 2008 2007 Robert J. Edge Non-Executive Director 2008 2007 Prof. Deon J. Venter Non-Executive Director 2008 2007 Sub-totals for Directors 2008 2007	126,846 90,000 42,282 30,000 50,000 – 42,282 30,000 138,461 300,000 – – – 11,414 – 17,500	– – – – – – – – – – – – – – – –	– – 3,805 2,700 4,500 18,795 3,805 2,700 – – 11,353 – – 1,027 – 399 23,463 25,621	– – – – – – – – – – – – – – – –	12,921 74,025 – – – – 12,921 74,025 – – – – – – – –	139,767 164,025 46,087 32,700 54,500 18,795 59,008 106,725 138,461 300,000 11,353 – – 12,441 – 17,899 449,176 652,585
	399,871 478,914	– –		– –	25,842 148,050

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Name and title of Executives Michael B. Ohanessian Chief Executive Officer 2008 2007 Thomas G. Howitt Chief Financial Officer and Company Secretary 2008 2007 Ross Barrow Chief Operating Officer 2008 2007 Dr. Gary Cobon Chief Scientific Officer 2008 2007 Geoffrey E. Newing Former Chief Operating Officer 2008 2007 Ian N. Christensen Group General Manager – IP 2008 2007 Sub-totals for Executives 2008 2007 Total remuneration of Key Management Personnel 2008 2007	232,546 – 200,000 190,000 54,006 – 66,047 93,741 – 188,333 – 23,358 552,599 495,432 952,470 974,346	6,706 – 35,000 – – – 82,500 – – 87,500 – – 124,206 87,500 124,206 87,500	20,769 – 21,150 17,100 4,860 – 74,619 80,659 – 16,630 – 1,380 121,398 115,769 144,861 141,390	356 – 8,284 3,881 – – – 877 – – – – 8,640 4,758 8,640 4,758	68,175 – 30,759 35,050 – – – 50,512 – – – – 98,934 85,562 124,776 233,612	328,552 – 295,193 246,031 58,866 – 223,166 225,789 – 292,463 – 24,738 905,777 789,021 1,354,953 1,441,606

Notes: The Company and the Group had only four Executives, as defined, during the year ended 30 June 2008.

The column above entitled ‘Other’ of $124,206 (2007: $87,500) comprises termination benefits of $82,500 (2007: $87,500), bonuses of $35,000 (2007: $nil) and motor vehicle allowances of $6,706 (2007: $nil) (refer notes on the following page).

GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2008

REMUNERATION REPORT (AUDITED) (cont.)

Remuneration of Key Management Personnel (cont.)

The details of those Executives nominated as Key Management Personnel under section 300A of the Corporations Act 2001 have been disclosed in this Report. No other employees of the Company meet the definition of ‘Key Management Personnel’ as defined in AASB 124 Related Party Disclosures, or ‘senior manager’ as defined in the Corporations Act 2001 .

Notes: Dr. Jacobson served as the Company’s Chief Executive Officer from 1 July 2007 to 24 September 2007. Dr. Rowe was appointed as a Director of the Company on 16 April 2008. Mr. Edge retired as a Director of the Company on 17 November 2006.
Prof. Venter resigned as a Director of the Company on 23 August 2006.
Mr. Ohanessian was appointed as a Director of the Company and its Chief Executive Officer on 24 September 2007.
Mr. Ohanessian received $6,706 during the year ended 30 June 2008 in respect of a motor vehicle allowance.
Mr. Howitt received an STI payment of $35,000 during the year ended 30 June 2008 in respect of the prior year.
Mr. Barrow was appointed as the Company’s Chief Operating Officer on 14 April 2008.
Dr. Cobon resigned as the Company’s Chief Scientific Officer on 28 March 2008.
Dr. Cobon received $82,500 during the year ended 30 June 2008 in respect of a termination benefit.
Mr. Newing resigned as the Company’s Chief Operating Officer on 1 July 2007.
Mr. Newing received $87,500 during the year ended 30 June 2007 in respect of a termination benefit.
Mr. Christensen resigned as the Company’s Group General Manager – IP on 12 August 2006.

Options granted and vested as part of remuneration during the year ended 30 June 2008

During the year, certain options which had been granted as equity compensation benefits to Executives vested, as disclosed below. The options were granted at no charge and entitle the holder to acquire one fully paid ordinary share in the Company at the respective exercise price.

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NUMBER OF OPTIONS EXERCISE NUMBER FAIR VALUE FINAL
VESTED GRANTED PRICE EXPIRED PER OPTION VESTING DATE
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Name of Directors Henry Bosch AO1 Fred Bart2 John S. Dawkins AO1 Dr. Mervyn Jacobson2 Sub-totals for Directors Name of Executives Michael B. Ohanessian3 Thomas G. Howitt Thomas G. Howitt Thomas G. Howitt4 Ross Barrow5 Dr. Gary Cobon6 Dr. Gary Cobon6 Sub-totals for Executives Totals	125,000 – 125,000 – 250,000 – 187,500 62,500 – – 187,500 – 437,500 687,500	– $0.56 – $0.56 – $0.56 – $0.56 – 3,650,602 $0.17 – $0.48 – $0.53 1,000,000 $0.22 1,000,000 $0.13 – $0.46 500,000 $0.22 6,150,602 6,150,602	(500,000) $0.285 N/A (500,000) N/A N/A (500,000) $0.285 N/A (2,000,000) N/A N/A (3,500,000) – $0.083 24 Sep. 2010 – $0.139 6 Sep. 2008 – $0.197 12 Aug. 2009 – $0.084 23 Oct. 2010 – $0.045 30 June 2011 (750,000) $0.146 N/A (500,000) $0.084 N/A (1,250,000) (4,750,000)

[1] The options which had been granted to Messrs. Bosch and Dawkins expired on 4 December 2007.

[2]

The options which had been granted to Mr. Bart and Dr. Jacobson expired on 30 November 2007.

[3]

The 3,650,602 options which were granted to Mr. Ohanessian were granted on 24 September 2007. They will expire on 24 September 2012 and will vest fully on 24 September 2010.
[4]
The 1,000,000 options which were granted to Mr. Howitt were granted on 23 October 2007. They will expire on 23 October 2012 and will vest fully on 23 October 2010.
[5] The 1,000,000 options which were granted to Mr. Barrow were granted on 30 June 2008. They will expire on 30 June 2013 and will vest fully on 30 June 2010.
[6] The options which had been granted to Dr. Cobon were forfeited on 28 April 2007.

DIRECTORS’ REPORT (cont.)

REMUNERATION REPORT (AUDITED) (cont.)

Options granted and vested as part of remuneration during the year ended 30 June 2007 During the year ended 30 June 2007, certain options which had been granted as equity compensation benefits to Directors and Executives vested, as disclosed below. The options were granted at no charge and entitle the holder to acquire one fully paid ordinary share in the Company at the respective exercise price.

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NUMBER OF OPTIONS EXERCISE NUMBER FAIR VALUE FINAL
VESTED GRANTED PRICE EXPIRED PER OPTION VESTING DATE
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Name of Directors Henry Bosch AO John S. Dawkins AO Robert J. Edge1 Prof. Deon J. Venter2 Sub-totals for Directors Name of Executives Thomas G. Howitt Thomas G. Howitt Geoffrey E. Newing Dr. Gary Cobon Ian N. Christensen3 Sub-totals for Executives Totals	250,000 250,000 125,000 – 625,000 187,500 62,500 187,500 187,500 – 625,000 1,250,000	– $0.56 – $0.56 – $0.48 – N/A – – $0.48 – $0.53 – $0.53 – $0.46 – N/A – –	– $0.285 23 Nov. 2007 – $0.285 23 Nov. 2007 (500,000) $0.311 N/A (1,000,000) N/A N/A (1,500,000) – $0.139 6 Sep. 2008 – $0.197 12 Aug. 2009 – $0.197 12 Aug. 2009 – $0.146 22 June 2010 (300,000) N/A N/A (300,000) (1,800,000)

[1 ] The options which had been granted to Mr. Edge were forfeited on 17 May 2007.

2 The options which had been granted to Prof. Venter were forfeited on 23 September 2007. 3

The options which had been granted to Mr. Christensen were forfeited on 12 September 2006.

Fair values of options

During the year ended 30 June 2008, a total of 8,952,500 options that had previously been issued under the Staff Share Plan to employees, some of whom have since resigned from the Company, lapsed. Of this number, a total of 2,900,000 options were forfeited, whilst the remaining 6,052,500 options expired. The lapsed options had no fair value on the date they lapsed as they were ‘out of the money’. No options were exercised during the year ended 30 June 2008. Approximately, 9.4% of the remuneration paid to Key Management Personnel during the year was in the form of options. Refer Note 36 for details.

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 2008 and 2007.

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2008 2007
Dividend yield – –
Expected volatility and historical volatility 75% N/A
Option exercise prices $0.17 to $0.22 N/A
Weighted average exercise price $0.19 N/A
Risk-free interest rate 5.99% to 6.50% N/A
Expected life of options 3 years to 5 years N/A
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No options were granted during the year ended 30 June 2007.

The resulting weighted average fair values per option for those options vesting on or after 1 July 2008 are:

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WEIGHTED AVE.
NAME OF EXECUTIVE OPTIONS GRANT DATE EXPIRY DATE FAIR VALUE
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Michael B. Ohanessian	3,650,602	24 Sept. 2007	24 Sept. 2012	$0.083
Thomas G. Howitt	187,500	6 Sept. 2004	6 Sept. 2010	$0.139
Thomas G. Howitt	125,000	12 Aug. 2005	12 Aug. 2011	$0.197
Thomas G. Howitt	1,000,000	23 Oct. 2007	23 Oct. 2012	$0.084
Ross Barrow	1,000,000	30 June 2008	30 June 2013	$0.045

GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2008

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:

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DIRECTORS’ MEETINGS COMMITTEES OF THE BOARD
AUDIT CORPORATE GOVERNANCE
ELIGIBLE ATTENDED ELIGIBLE ATTENDED ELIGIBLE ATTENDED
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Henry Bosch AO	11	11	9	9	5	5
Michael B. Ohanessian2	8	8	–	–	3	3
Fred Bart	11	10	–	–	–	–
David Carruthers	11	11	9	9	–	–
John S. Dawkins AO	11	11	9	6	5	5
Dr. Mervyn Jacobson	11	10	–	–	5	4
Dr. Leanne Rowe AM3	2	2	–	–	–	–

[1] During the year ended 30 June 2008, a total of four Unanimous Consent Resolutions of the Directors were also passed.

[2] Mr. Ohanessian was appointed as a Director of the Company on 24 September 2007.

[3] Dr. Rowe was appointed as a Director of the Company on 16 April 2008.

[4]

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:

	AUDIT COMMITTEE	CORPORATE GOVERNANCE COMMITTEE
	PERIOD SERVED	PERIOD SERVED

Henry Bosch AO1	1 July 2007 to 30 June 2008	1 July 2007 to 30 June 2008
Michael B. Ohanessian	Not applicable	26 September 2007 to 30 June 2008
Fred Bart	Not applicable	Not applicable
David Carruthers2	1 July 2007 to 30 June 2008	Not applicable
John S. Dawkins AO	1 July 2007 to 30 June 2008	1 July 2007 to 30 June 2008
Dr. Mervyn Jacobson	Not applicable	1 July 2007 to 30 June 2008
Dr. Leanne Rowe AM	Not applicable	Not applicable

[1 ] Mr. Bosch served as the Chairman of the Corporate Governance Committee for the entire year ended 30 June 2008.

[2 ] Mr. Carruthers served as the Chairman of the Audit Committee for the entire year ended 30 June 2008.

ENVIRONMENTAL REGULATION AND PERFORMANCE

The Group ceased active exploration activities in 1999. As at 30 June 2008, the Group retained a 14.66% (2007: 16.36%) direct equity interest in the North Laverton Joint Venture in Western Australia with Regis Resources Limited (‘Regis’). There are significant environmental regulations under the Western Australia Mining Act 1978 and Environment Protection Act 1986 and license requirements relating to waste disposal, water and air pollution exist in relation to mining activities undertaken by the joint venture. The Directors are not aware of any significant breaches of these regulations during the period covered by this Report. As disclosed in Note 40, however, on 27 August 2008 the Company sold its entire interest in the joint venture to Regis and, as part of this sale, has been fully indemnified by Regis against any future rehabilitation liabilities which may arise from the exploration activities of the joint venture undertaken up until the date of sale.

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 67 of the Financial Report.

Non-audit services

During the financial year, the auditor of Genetic Technologies Limited, Ernst & Young, provided the Company with certain non-audit 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 to the auditors of Genetic Technologies Limited and its subsidiaries:

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CONSOLIDATED
2008 2007
$ $
Audit services
Ernst & Young Australia in respect of:
Audit and review of the Financial Report 177,500 410,274
Other audit firms in respect of:
Audit and review of the Financial Reports of subsidiaries 8,241 9,158
Total remuneration in respect of audit services 185,741 419,432
Non-audit services
Ernst & Young Australia in respect of:
Tax advice and compliance services 38,350 55,095
Total remuneration in respect of non-audit services 38,350 55,095
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Signed in accordance with a resolution of the Directors.

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HENRY BOSCH AO

Non-Executive Chairman

Melbourne, 27 August 2008

GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2008

CORPORATE GOVERNANCE STATEMENT

INTRODUCTION

During the 2008 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, policies 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 eleven 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. The most significant policies are published 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;
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 2008 financial year was completed after the end of the reporting period. Further information is provided in the Remuneration Report on pages 12 to 18 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:

NAME		POSITION

Henry Bosch AO		Non-Executive Chairman
David Carruthers		Non-Executive Director
John S. Dawkins AO		Non-Executive Director
Dr. Leanne Rowe AM		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.

NAME		TERM IN OFFICE

Henry Bosch AO		3 years, 3 months
Michael B. Ohanessian		10 months
Fred Bart		11 years, 11 months
David Carruthers		1 year, 7 months
John S. Dawkins AO		3 years, 10 months
Dr. Mervyn Jacobson		8 years, 1 month
Dr. Leanne Rowe AM		4 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 2008 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

Michael B. Ohanessian

Details of Directors’ attendances at meetings of the Corporate Governance Committee are provided on page 19 of the Directors’ Report.

GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2008

ASX PRINCIPLES AND RECOMMENDATIONS (cont.)

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.

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 19 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.

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

The Company’s Risk and Compliance Policy covers the controls necessary to manage the identified risks. During the 2008 financial year, the Company expanded its risk management activities with the establishment of a Risk Management Committee which meets on a regular basis and reports back to the Audit Committee its findings on the effective management of those risks which have been identified.

The Board has received assurances from the CEO and the CFO that the declaration provided by them in accordance with section 295A of the Corporations Act 2001 is founded on a sound system of risk management and internal control and that the system is operating in all material respects in relation to the financial reporting risks.

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 2008 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, which comprises a majority of Independent Directors, is chaired by an Independent Director. The Charter of the Committee is published on the Company’s website.

During the 2008 financial year, the Board discontinued the practice of granting options over the Company’s shares to Non-Executive Directors. Further work was also undertaken to improve the structure of the Company’s incentive system generally.

FINANCIAL STATEMENTS

INCOME STATEMENTS

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CONSOLIDATED GENETIC TECHNOLOGIES LIMITED
FOR THE YEAR ENDED 30 JUNE NOTES 2008 2007 2008 2007
$ $ $ $
Revenue from operations 4 15,702,336 14,978,819 11,671,628 11,793,729
Other income 5 276,606 340,486 100,000 70,000
Employee benefits expenses 6 (6,568,966) (5,556,644) (2,925,098) (2,422,808)
Amortisation and depreciation expenses 6 (4,755,155) (4,602,992) (1,087,310) (4,432,613)
Impairment losses and other write-downs 6 (2,378,000) (1,306,960) (11,420,045) (4,197,808)
Genetic testing expenses (1,599,644) (1,989,098) – –
–
Contract research and trial expenses (1,267,748) (1,247,775) (44,775)
Royalties, license fees and commissions paid (889,520) (580,122) (869,536) (553,967)
Legal and patent fees (873,854) (748,605) (596,202) (430,238)
Administration expenses (839,226) (901,380) (469,036) (615,169)
Rent and outgoings (533,644) (535,045) – –
Net foreign exchange losses (254,954) (317,317) (261,958) (312,978)
Marketing and promotion expenses (221,644) (437,087) (8,999) (255,054)
Withholding tax (94,524) (264,391) (94,524) (264,391)
Finance costs 6 (66,763) (90,929) (45,546) (73,161)
Other expenses 6 (1,086,938) (1,086,662) (764,332) (773,313)
Loss before income tax (5,451,638) (4,345,702) (6,770,958) (2,512,546)
Income tax expense 7 – – (1,344,005) (1,521,550)
Loss for the year (5,451,638) (4,345,702) (8,114,963) (4,034,096)
Loss is attributable to:
Equity holders of Genetic Technologies Limited (5,446,089) (4,328,543) (8,114,963) (4,034,096)
Minority interest 27 (5,549) (17,159) – –
(5,451,638) (4,345,702) (8,114,963) (4,034,096)
Earnings per share (cents per share)
Basic loss for the year attributable to the ordinary
equity holders of Genetic Technologies Limited 8 (1.5) (1.2)
Diluted loss for the year attributable to the ordinary
equity holders of Genetic Technologies Limited 8 (1.5) (1.2)
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GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2008

BALANCE SHEETS

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CONSOLIDATED GENETIC TECHNOLOGIES LIMITED
AS AT 30 JUNE NOTES 2008 2007 2008 2007
$ $ $ $
ASSETS
Current assets
Cash and cash equivalents 9 12,920,772 13,333,750 11,950,808 12,421,287
Trade and other receivables 10 1,596,738 646,946 398,786 292,292
Prepayments and other assets 11 857,225 543,252 127,455 89,241
Performance bond and deposits 12 519,117 76,898 519,117 76,898
Total current assets 15,893,852 14,600,846 12,996,166 12,879,718
Non-current assets
Deposits 13 – 450,000 – 450,000
Receivables 14 – – 5,517,825 9,177,574
– –
Prepayments 8,698 8,698
Available-for-sale investments 15 207,195 233,330 207,195 233,330
Property, plant and equipment 16 1,703,757 1,944,379 313,887 1,492,225
Intangible assets and goodwill 17 6,289,774 12,211,774 317,833 3,345,833
Other assets 18 – – 451,246 451,246
Total non-current assets 8,200,726 14,848,181 6,807,986 15,158,906
Total assets 24,094,578 29,449,027 19,804,152 28,038,624
LIABILITIES
Current liabilities
Trade and other payables 19 1,786,412 1,563,652 2,297,832 2,191,695
Interest-bearing liabilities 20 111,117 476,989 111,117 476,989
Deferred revenue 21 138,941 321,317 – 216,438
Withholding tax payable 326,361 324,837 326,361 324,837
Provisions 22 684,171 561,968 313,073 268,548
Total current liabilities 3,047,002 3,248,763 3,048,383 3,478,507
Non-current liabilities
Interest-bearing liabilities 23 187,082 46,978 187,082 46,978
Provisions 22 75,421 50,477 11,445 5,467
Total non-current liabilities 262,503 97,455 198,527 52,445
Total liabilities 3,309,505 3,346,218 3,246,910 3,530,952
Net assets 20,785,073 26,102,809 16,557,242 24,507,672
EQUITY
Contributed equity 24 70,243,996 70,243,996 70,243,996 70,243,996
Reserves 25 1,588,804 1,456,895 1,582,037 1,417,504
Accumulated losses 26 (51,189,189) (45,743,100) (55,268,791) (47,153,828)
Parent entity interest 20,643,611 25,957,791 16,557,242 24,507,672
Minority interests 27 141,462 145,018 – –
Total equity 20,785,073 26,102,809 16,557,242 24,507,672
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FINANCIAL STATEMENTS (cont.)

CASH FLOW STATEMENTS

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CONSOLIDATED GENETIC TECHNOLOGIES LIMITED
FOR THE YEAR ENDED 30 JUNE NOTES 2008 2007 2008 2007
$ $ $ $
Cash flows provided by operating activities
Receipts from customers 12,961,170 14,541,621 9,542,211 11,061,195
Payments to suppliers and employees (13,642,885) (12,723,248) (5,025,772) (3,409,189)
Interest received 919,447 489,824 889,589 457,039
Other income 217,076 379,978 – 70,501
Finance costs (32,038) (90,929) (32,038) (73,161)
Net cash flows provided by operating activities 9 422,770 2,597,246 5,373,990 8,106,385
Cash flows (used in)/provided by investing activities
Proceeds from the sale of plant and equipment 70,611 – – –
Proceeds from the sale of shares – 332,709 25,391 332,709
Purchases of plant and equipment (118,010) (158,699) (6,835) (22,239)
Advances to unrelated parties – (80,000) – (80,000)
Net cash flows (used in)/provided by investing activities (47,399) 94,010 18,556 230,470
Cash flows used in financing activities
Repayment of hire purchase principal (528,899) (502,505) (528,899) (502,505)
Advances to subsidiaries – – (5,078,303) (5,681,480)
Net cash flows used in financing activities (528,899) (502,505) (5,607,202) (6,183,985)
Net increase/(decrease) in cash and cash equivalents (153,528) 2,188,751 (214,656) 2,152,870
Cash and cash equivalents at beginning of year 13,783,750 11,885,247 12,871,287 10,953,559
Net foreign exchange difference (259,450) (290,248) (255,823) (235,142)
Cash and cash equivalents at end of year 9 13,370,772 13,783,750 12,400,808 12,871,287
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GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2008

STATEMENTS OF CHANGES IN EQUITY

	ATTRIBUTAB	LE TO MEMBERS OF	GENETIC TECHNOLO	GIES LIMITED
CONSOLIDATED	CONTRIBUTED EQUITY $	RESERVES $	ACCUMULATED LOSSES $	PARENT INTERESTS $	MINORITY INTERESTS $	TOTAL EQUITY $
At 30 June 2006 Currency translation differences Loss for the year Total recognised income and expense for the year Share-based payments At 30 June 2007 Currency translation differences Share of issued capital Loss for the year Total recognised income and expense for the year Share-based payments At 30 June 2008	70,243,996 – – – – 70,243,996 – – – – – 70,243,996	1,237,524 (38,535) – (38,535) 257,906 1,456,895 (32,624) – – (32,624) 164,533 1,588,804	(41,414,557) – (4,328,543) (4,328,543) – (45,743,100) – – (5,446,089) (5,446,089) – (51,189,189)	30,066,963 (38,535) (4,328,543) (4,367,078) 257,906 25,957,791 (32,624) – (5,446,089) (5,478,713) 164,533 20,643,611	175,176 (12,999) (17,159) (30,158) – 145,018 (9,161) 11,154 (5,549) (3,556) – 141,462	30,242,139 (51,534) (4,345,702) (4,397,236) 257,906 26,102,809 (41,785) 11,154 (5,451,638) (5,482,269) 164,533 20,785,073
	ATTRIBUTAB	LE TO MEMBERS OF	GENETIC TECHNOLOG	IES LIMITED
GENETIC TECHNOLOGIES LIMITED	CONTRIBUTED EQUITY $	RESERVES $	ACCUMULATED LOSSES $	PARENT INTERESTS $	MINORITY INTERESTS $	TOTAL EQUITY $
At 30 June 2006 Loss for the year Total recognised income and expense for the year Share-based payments At 30 June 2007 Loss for the year Total recognised income and expense for the year Share-based payments At 30 June 2008	70,243,996 – – – 70,243,996 – – – 70,243,996	1,195,632 – – 221,872 1,417,504 – – 164,533 1,582,037	(43,119,732) (4,034,096) (4,034,096) – (47,153,828) (8,114,963) (8,114,963) – (55,268,791)	28,319,896 (4,034,096) (4,034,096) 221,872 24,507,672 (8,114,963) (8,114,963) 164,533 16,557,242	– – – – – – – – –	28,319,896 (4,034,096) (4,034,096) 221,872 24,507,672 (8,114,963) (8,114,963) 164,533 16,557,242

FINANCIAL STATEMENTS (cont.)

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 30 June 2008

1. CORPORATE INFORMATION

The Financial Report of Genetic Technologies Limited (the ‘Company’) for the year ended 30 June 2008 was authorised for issue in accordance with a resolution of the Directors dated 27 August 2008. 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 nature of the Group’s activities and operations during the year ended 30 June 2008 are disclosed in the Directors’ 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

The Financial Report complies with Australian Accounting Standards as issued by the Australian Accounting Standards Board and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board.

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.

Significant accounting estimates

The preparation of financial statements 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 interpretations

In respect of the year ended 30 June 2008, the Group has adopted AASB 7 Financial Instruments; Disclosures , together with all consequential amendments which became applicable on 1 January 2007. The adoption of this standard has only affected the disclosure in these financial statements. There has been no affect on profit and loss or the financial position of the Group. Certain Australian accounting standards and interpretations have been issued or amended that are not mandatory for the 30 June 2008 reporting period. 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 123 (Revised) and AASB 2007-6: Borrowing Costs and consequential amendments to other Australian Accounting Standards
AASB 123 (Revised) is applicable to annual reporting periods beginning on or after 1 January 2009. These amendments to AASB 123 require that all borrowing costs associated with a qualifying asset be capitalised.
AASB 101 (Revised) and AASB 2007-8: Presentation of Financial Statements and consequential amendments to other Australian Accounting Standards
AASB 101 (Revised) and AASB 2007-8 is applicable to annual reporting periods on or after 1 January 2009. This Standard introduces a statement of comprehensive income. Other revisions include impacts on the presentation of items in the statement of changes in equity, new presentation requirements for restatements or reclassifications of items in the financial statements, changes in the presentation requirements for dividends and changes to the titles of the financial statements. These amendments are only expected to affect the presentation of the Group’s Financial Report and will not have a direct impact on the measurement and recognition of amounts disclosed in the Financial Report. The Group has not determined at this stage whether to present a single statement of comprehensive income or two separate statements.

GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2008

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

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

AASB 2008-1: Amendments to Australian Accounting Standard – Share-based Payments: Vesting Conditions and Cancellations
AASB 2008-1 is applicable to annual reporting periods beginning on or after 1 January 2009. The amendments clarify the definition of ‘vesting conditions’, introducing the term ‘non-vesting conditions’ for conditions other than vesting conditions as specifically defined and prescribe the accounting treatment of an award that is effectively cancelled because a non-vesting condition is not satisfied. The Group has share-based payment arrangements that may be affected by these amendments. However, the Group has not yet determined the extent of the impact, if any.
AASB 2008-5 and AASB 2008-6: Improvements to IFRSs
AASB 2008-5 and AASB 2008-6 are applicable to annual reporting periods beginning on or after 1 January 2009 except for amendments to IFRS 5, which are effective from 1 July 2009. The improvements project is an annual project that provides a mechanism for making non-urgent, but necessary, amendments to IFRSs. The IASB has separated the amendments into two parts: Part 1 deals with changes the IASB identified resulting in accounting changes; Part II deals with either terminology or editorial amendments that the IASB believes will have minimal impact. The Group has not yet determined the extent of the impact of the amendments, if any.
AASB 3 (Revised): Business Combinations
AASB 3 (Revised) is applicable to annual reporting periods beginning on or after 1 January 2009. The revised standard introduces a number of changes to the accounting for business combinations, the most significant of which allows entities a choice for each business combination entered into – to measure a non-controlling interest (formerly a minority interest) in the acquiree either at its fair value or at its proportionate interest in the acquiree’s net assets. This choice will effectively result in recognising goodwill relating to 100% of the business (applying the fair value option) or recognising goodwill relating to the percentage interest acquired. The changes apply prospectively.
The Group has entered into a business combination during the financial year ending 30 June 2009 (refer Note 40). However, the Group has not yet assessed the impact of early adoption, including which accounting policy to adopt.
AASB 127 (Revised): Consolidated and Separate Financial Statements
AASB 127 (Revised) is applicable to annual reporting periods beginning on or after 1 January 2009. Under the revised standard, a change in the ownership interest of a subsidiary (that does not result in loss of control) will be accounted for as an equity transaction. If the Group changes its ownership interest in existing subsidiaries in the future, the change will be accounted for as an equity transaction. This will have no impact on goodwill, nor will it give rise to a gain or a loss in the Group’s income statement.
AASB 2008-7: Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate
Amendments to International Financial Reporting Standards is applicable to annual reporting periods ending on or after 1 January 2009. The main amendments of relevance to Australian entities are those made to IAS 27 deleting the ‘cost method’ and requiring all dividends from a subsidiary, jointly controlled entity or associate to be recognised in profit or loss in an entity’s separate financial statements (i.e., parent company accounts). The distinction between pre- and postacquisition profits is no longer required. However, the payment of such dividends requires the entity to consider whether there is an indicator of impairment. AASB 127 has also been amended to effectively allow the cost of an investment in a subsidiary, in limited reorganisations, to be based on the previous carrying amount of the subsidiary (that is, share of equity) rather than its fair value. The application of these amendments will not have any material impact on the Financial Report of the Group and the parent entity. However, if the Group enters into any group reorganisation establishing new parent entities, an assessment will need to be made to determine if the reorganisation meets the conditions imposed to be effectively accounted for on a ‘carry-over basis’ rather than at fair value.
AASB 2008-5 and AASB 2008-6: Australian Accounting Standards arising from the Annual Improvements Project
Amendments to International Financial Reporting Standards is applicable to annual reporting periods ending on or after 1 January 2009. The improvements project is an annual project that provides a mechanism for making non-urgent, but necessary, amendments to IFRSs. The IASB has separated the amendments into two parts: Part 1 deals with changes the IASB identified resulting in accounting changes; and Part II deals with either terminology or editorial amendments that the IASB believes will have minimal impact. The Group has not yet determined the extent of the impact of the amendments, if any.

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

FINANCIAL STATEMENTS (cont.)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

(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.

(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. Information including quoted market prices and details of recent capital raisings is used to determine fair value for these remaining financial instruments. Available-for-sale investments are measured at approximate market value, where fair value cannot be reliably determined.

The carrying values less impairment provision of trade receivables are assumed to approximate their fair values due to their short-term nature.

(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.

The Group elected to early adopt AASB 8: Segment Reporting as from 1 July 2006.

(g) Earnings per share

Basic EPS is calculated as the net loss attributable to members divided by the weighted average number of ordinary shares.

GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2008

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

(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 or receivable 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 Group has no future obligations, income is fixed and determinable, and collection is reasonably assured. The Group does not grant refunds to its customers. Refer also to Note 2(y).

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.

(i) Share-based payment transactions

The Group provides benefits to employees 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 equity-settled 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.

FINANCIAL STATEMENTS (cont.)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

(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-resident subsidiaries have implemented the 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 agreements are recognised as a contribution to (or distribution from) wholly-owned tax subsidiaries.

(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 deducted. 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.

GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2008

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

(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. Such evidence includes an assessment of the debtor’s ability and willingness to pay the amount due. 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 interest rate and credit risk of current receivables are disclosed in Note 38.

(p) Consumables

Consumables principally comprise laboratory and other supplies and are valued at the lower of cost and net realisable value. Consumable costs are recognised as the purchase price of items from suppliers plus freight inwards and any applicable landing charges. Costs are assigned on the basis of weighted average costs.

(q) Restricted security deposits

Restricted security deposits include cash deposits held as security for the performance by the Company of certain contractual obligations.

(r) 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 approximate market value, where fair value cannot be reliably determined.

(s) 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 to 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.

FINANCIAL STATEMENTS (cont.)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

(t) Intangible assets

Patents

Patents held by the Group are used in the licensing, testing and research areas and 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 costs

Costs relating to research activities are expensed as incurred.

(u) 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 .

(v) 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.

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.

(w) 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.

GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2008

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

(x) 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.

(y) 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 licence agreement provides for the payment of regular annuities to the Company and the licencee 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 pro-rata 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.

(z) 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.

FINANCIAL STATEMENTS (cont.)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

(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 28).

(ab) Reclassifications

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

(ac) 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. Any unused sick leave is forfeited and not accumulated at year end. Expenses for non-accumulating sick leave are recognised when the leave is taken during the year and are measured at rates paid or payable.

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.

(ad) 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.

3. SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS

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

(a) Significant 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 34.

Impairment of intangible assets and goodwill

The Group determines whether intangible assets with indefinite useful lives, including goodwill, are impaired on at least a bi-annual basis, in accordance with the accounting policies stated in Notes 2(u) and 2(v). 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 17.

GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2008

3. SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS (cont.)

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

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 considered the recognition of 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.

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

Rehabilitation costs

As disclosed in Notes 31 and 33, the Group held an interest in a mining project as at 30 June 2008. As at that date, the Group had recorded a provision for $94,987 in respect of its share of the estimated rehabilitation costs associated with the project (refer Note 22). The amount of the provision was based on calculations provided to the Group by the project manager. Refer also to Note 40 Subsequent Events.

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CONSOLIDATED GENETIC TECHNOLOGIES LIMITED
2008 2007 2008 2007
$ $ $ $
4. REVENUE
Revenue from operations
License fees received 9,904,191 8,678,084 9,904,191 8,678,084
Rendering of services 3,918,692 3,119,131 – –
Royalties and annuities received 921,076 2,658,995 876,996 2,658,995
Total revenue from operations 14,743,959 14,456,210 10,781,187 11,337,079
Other revenue
Interest received 920,299 488,980 890,441 456,195
Rental recovery 31,945 31,945 – –
Miscellaneous revenue 6,133 1,684 – 455
Total other revenue 958,377 522,609 890,441 456,650
Total revenue 15,702,336 14,978,819 11,671,628 11,793,729
5. OTHER INCOME
Grants received and related income 178,998 315,486 – 70,000
Write-back of provision for diminution of loan 80,000 – 80,000 –
Net gain on disposal of plant and equipment 17,608 – – –
Management fees received – – 20,000 –
Net gain on disposal of business – 25,000 – –
Total other income 276,606 340,486 100,000 70,000
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FINANCIAL STATEMENTS (cont.)

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CONSOLIDATED GENETIC TECHNOLOGIES LIMITED
2008 2007 2008 2007
$ $ $ $
6. EXPENSES
Employee benefits expenses
Wages and salaries 4,255,535 3,573,292 1,383,287 1,125,743
Consulting fees 863,538 792,759 549,742 524,930
Superannuation 368,978 312,730 125,992 101,405
Directors’ fees 316,260 188,674 310,288 183,657
Staff recruitment, training and amenities 255,964 151,636 175,834 104,474
Payroll tax 213,077 174,401 91,035 69,266
Share-based payments expense 164,533 257,906 164,533 221,872
Termination benefits 82,500 87,500 82,500 87,500
Fringe benefits tax 36,841 – 36,841 –
Workers’ compensation costs 11,740 17,746 5,046 3,961
Total employee benefits expenses 6,568,966 5,556,644 2,925,098 2,422,808
Amortisation and depreciation expenses
Patents 3,544,000 3,412,482 650,000 3,544,000
Laboratory equipment 670,417 479,079 – 309,772
Equipment under hire purchase 392,573 537,335 392,573 537,335
Computer equipment 113,129 144,778 39,177 37,167
Office equipment 19,750 14,576 5,560 4,339
Leasehold improvements 15,286 14,742 – –
Total amortisation and depreciation expenses 4,755,155 4,602,992 1,087,310 4,432,613
Finance costs
Other finance costs 34,725 24,540 13,508 6,783
Interest paid 32,038 66,389 32,038 66,378
Total finance costs 66,763 90,929 45,546 73,161
Impairment losses and other write-downs
Impairment loss on patents 2,378,000 1,150,000 2,378,000 1,150,000
Write-down of loans to subsidiaries – – 8,775,000 1,378,450
Write-off of loans to former subsidiaries – – – 1,042,413
Impairment loss on investment in subsidiaries – – 267,045 546,945
Write-down of loans to other parties – 80,000 – 80,000
Write-down of plant and equipment – 76,960 – –
Total impairment losses and other write-downs 2,378,000 1,306,960 11,420,045 4,197,808
Other expenses
Operating lease payments 501,239 445,384 – –
Loss on sale of available-for-sale investments
Proceeds from sale – (332,709) – (332,709)
Less: carrying value at date of sale – 366,016 – 366,016
Loss on sale – 33,307 – 33,307
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GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2008

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CONSOLIDATED GENETIC TECHNOLOGIES LIMITED
2008 2007 2008 2007
$ $ $ $
7. INCOME TAX
Income tax expense
Current tax – – 1,344,005 1,521,550
Deferred tax – – – –
Aggregate income tax expense – – 1,344,005 1,521,550
Reconciliation of income tax expense
to prima facie tax payable
Loss before income tax expense (5,451,638) (4,345,702) (6,770,958) (2,512,546)
Tax at the Australian tax rate of 30% (2007: 30%) (1,635,491) (1,303,711) (2,031,287) (753,764)
Tax effect amounts which are not deductible/(taxable)
in calculating taxable income
Impairment loss on investments in subsidiaries
and write-down of intercompany loan balances – – 2,712,614 890,342
Share-based payments expense 49,360 77,372 49,360 66,562
Research and development expenses (300,000) (206,646) – –
Withholding tax expense 28,357 79,317 28,357 79,317
Other non-deductible items 8,704 26,690 5,881 14,226
(1,849,070) (1,326,978) 764,925 296,683
Tax effect of adjustments relating to temporary differences
Amortisation, impairment and depreciation expenses 1,894,372 1,622,603 1,026,172 1,661,788
Net movements in provisions 44,145 (202,337) 11,718 (217,978)
Settlement proceeds from Applera Corporation (317,141) (342,627) (317,141) (342,627)
Other (5,964) 225,153 (81,840) 99,498
Tax losses now utilised – – (59,829) –
Tax losses not recognised 233,658 24,186 – 24,186
Income tax expense – – 1,344,005 1,521,550
Deferred tax assets
Withholding tax 326,361 324,837 326,361 324,837
Deferred revenue 41,682 96,395 – 64,931
Applera settlement 1,537,010 1,910,790 1,537,010 1,910,790
Intangible assets – – 1,473,068 617,698
Doubtful debts – 24,000 – 24,000
Amortisation of hire purchase assets 392,573 537,335 392,573 537,335
Provisions 227,878 183,733 93,922 82,204
Other – 34,567 – 34,567
Total deferred tax assets 2,525,504 3,111,657 3,822,934 3,596,362
Set-off of deferred tax liabilities pursuant to set-off
provisions (refer below) (223,898) (1,947,198) – –
Deferred tax assets not brought to account (2,301,606) (1,164,459) (3,822,934) (3,596,362)
Total net deferred tax assets – – – –
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FINANCIAL STATEMENTS (cont.)

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CONSOLIDATED GENETIC TECHNOLOGIES LIMITED
2008 2007 2008 2007
$ $ $ $
7. INCOME TAX (cont.)
Deferred tax liabilities
Intangible assets (223,898) (1,947,198) – –
Total deferred tax liabilities (223,898) (1,947,198) – –
Tax losses
Unused tax losses for which no deferred tax asset
has been recognised 19,479,430 19,245,772 18,460,517 17,542,857
Deferred tax asset @ 30% 5,843,829 5,773,732 5,538,155 5,262,857
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Subject to the Group continuing to meet relevant statutory tests, the 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 ended 30 June 2008, Genetic Technologies Limited has assumed $1,344,005 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 2008, 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 (2007: $nil).

8. LOSS PER SHARE

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

	CONSOLIDATED
	2008 $ 2007 $
Loss for the year Loss attributable to minority interests Loss used in calculating loss per share Weighted average number of ordinary shares used in calculating loss per share	(5,451,638) (4,345,702) 5,549 17,159 (5,446,089) (4,328,543) 362,389,899 362,389,899

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 11,175,602 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.

GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2008

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CONSOLIDATED GENETIC TECHNOLOGIES LIMITED
2008 2007 2008 2007
$ $ $ $
9. CASH AND CASH EQUIVALENTS
Reconciliation of cash and cash equivalents
Cash at bank and on hand 5,490,846 11,303,764 4,520,882 10,391,337
Short-term deposits 7,429,926 2,029,986 7,429,926 2,029,950
Current cash and cash equivalents 12,920,772 13,333,750 11,950,808 12,421,287
Current and non-current cash deposits (refer note) 450,000 450,000 450,000 450,000
Total cash and cash equivalents 13,370,772 13,783,750 12,400,808 12,871,287
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Note: As at 30 June 2008 and 2007, cash amounting to $450,000 was 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 Adjust for non-cash items Amortisation and depreciation expenses Share-based payments expense Impairment losses and other write-downs Losses assumed from tax consolidated group Net draw-downs under Applera settlement (Note 30) Net foreign exchange losses Profit/(loss) on sale of assets Adjust for changes in assets and liabilities (Increase)/decrease in trade and other receivables (Increase)/decrease in prepayments (Increase)/decrease in consumables (Increase)/decrease in other financial assets Increase/(decrease) in trade and other payables Increase/(decrease) in accrued expenses Increase/(decrease) in deferred revenue Increase/(decrease) in withholding tax payable Increase/(decrease) in provisions Net cash flows provided by operating activities Financing facilities available As at 30 June 2008, the following financing facilities had been negotiated and were available: Total facilities Hire purchase facility Credit cards Facilities used as at reporting date Hire purchase facility (Note 32) Credit cards Facilities unused as at reporting date Hire purchase facility Credit cards	held on deposit as	security for a bank guarantee (refer Notes 12 and 13). (4,345,702) (8,114,963) (4,034,096) 4,602,992 1,087,310 4,432,613 257,906 164,533 221,872 1,306,960 11,420,045 4,197,808 – 1,344,005 1,521,550 (747,533) (602,395) (747,533) 317,497 261,958 312,977 33,307 – 33,307 753,678 (105,642) 704,722 78,641 (29,516) 103,473 – – – 9,909 6,929 9,909 (22,514) 298,611 1,167,325 175,788 (192,474) 163,154 287,638 (216,438) 182,759 (275,629) 1,524 (275,629) 164,308 50,503 112,174


	(5,451,638)

	4,755,155
	164,533
	2,378,000
	–
	(602,395)
	254,954
	(17,608)

	(948,940)
	(43,608)
	(261,667)
	6,929
	421,704
	(198,944)
	(182,376)
	1,524
	147,147
	422,770	2,597,246 5,373,990 8,106,385
		2,500,000 2,500,000 2,500,000 110,000 145,000 110,000 (523,967) (298,199) (523,967) (19,797) (32,272) (19,797) 1,976,033 2,201,801 1,976,033 90,203 112,728 90,203


	2,500,000
	145,000

	(298,199)
	(32,272)

	2,201,801
	112,728

Non-cash activities

During the financial year, the Group acquired plant and equipment with an aggregate fair value of $333,444 (2007: $40,330) which were financed by means of hire purchase agreements (refer Note 32).

FINANCIAL STATEMENTS (cont.)

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CONSOLIDATED GENETIC TECHNOLOGIES LIMITED
2008 2007 2008 2007
$ $ $ $
10. TRADE AND OTHER RECEIVABLES (CURRENT)
Trade receivables 1,595,438 646,498 397,486 291,844
Accrued interest 1,300 448 1,300 448
Total current trade and other receivables 1,596,738 646,946 398,786 292,292
Note: Trade receivables for both the Group and Genetic Technologies Limited include amounts due in European Euros of EUR 100,000
(2007: EUR 100,000) and US dollars of USD 68,100 (2007: USD 66,348). Refer Note 38 for details of aging, interest rate and credit risks
applicable to trade and other receivables for which, due to their short-term nature, their carrying value approximates their fair value.
11. PREPAYMENTS AND OTHER ASSETS (CURRENT)
Prepayments 595,558 543,252 127,455 89,241
Consumables, at the lower of cost and net realisable value 261,667 – – –
Total current prepayments and other assets 857,225 543,252 127,455 89,241
Note: As at 30 June 2007, no consumables were recognised by the Group.
12. PERFORMANCE BOND AND DEPOSITS (CURRENT)
Deposit for bank guarantee 450,000 – 450,000 –
Performance bond 68,917 76,898 68,917 76,898
Other deposits 200 – 200 –
Total current performance bond and deposits 519,117 76,898 519,117 76,898
Note: As at 30 June 2008, cash amounting to $450,000 was held on deposit as security for a bank guarantee of less than 12 months duration.
Refer Note 38 for details pertaining to the performance bond and other deposits.
13. DEPOSITS (NON-CURRENT)
Deposit for bank guarantee – 450,000 – 450,000
Total non-current deposits – 450,000 – 450,000
Note: As at 30 June 2007, cash amounting to $450,000 was held on deposit as security for a bank guarantee of more than 12 months duration.
14. RECEIVABLES (NON-CURRENT)
Loans to other parties
Loans to unrelated parties – 80,000 – 80,000
Less: provision for impairment – (80,000) – (80,000)
Net loans to unrelated parties – – – –
Loans to subsidiaries
Loans to wholly-owned subsidiaries – – 26,771,275 21,656,024
Less: provision for impairment – – (21,253,450) (12,478,450)
Net loans to wholly-owned subsidiaries – – 5,517,825 9,177,574
Total net non-current receivables (Notes 37 and 38) – – 5,517,825 9,177,574
Reconciliation of provision for impairment
Balance at the beginning of the financial year (80,000) – (12,558,450) (11,100,000)
Add: reversal/(charge) during the year 80,000 (80,000) (8,695,000) (1,458,450)
Balance at the end of the financial year – (80,000) (21,253,450) (12,558,450)
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Note: Refer Note 38 for details of aging, interest rate and credit risks applicable to trade and other receivables for which, due to their shortterm nature, their carrying value approximates their fair value.

GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2008

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CONSOLIDATED GENETIC TECHNOLOGIES LIMITED
2008 2007 2008 2007
$ $ $ $
15. AVAILABLE-FOR-SALE INVESTMENTS
(NON-CURRENT)
Unlisted shares, at fair value 207,195 233,330 207,195 233,330
Total non-current available-for-sale investments 207,195 233,330 207,195 233,330
16. PROPERTY, PLANT AND EQUIPMENT
Laboratory equipment, at cost 3,853,103 3,807,360 – 1,388,697
Less: accumulated depreciation (2,630,340) (2,558,113) – (363,092)
Net laboratory equipment 1,222,763 1,249,247 – 1,025,605
Computer equipment, at cost 726,020 691,950 132,552 128,952
Less: accumulated depreciation (631,150) (518,674) (117,991) (78,814)
Net computer equipment 94,870 173,276 14,561 50,138
Office equipment, at cost 162,912 148,775 22,554 19,317
Less: accumulated depreciation (111,865) (92,115) (13,800) (8,240)
Net office equipment 51,047 56,660 8,754 11,077
Equipment under hire purchase, at cost 1,895,669 1,632,868 1,895,669 1,632,868
Less: accumulated depreciation (1,605,097) (1,227,463) (1,605,097) (1,227,463)
Net equipment under hire purchase 290,572 405,405 290,572 405,405
Leasehold improvements, at cost 92,209 92,209 – –
Less: accumulated depreciation (47,704) (32,418) – –
Net leasehold improvements 44,505 59,791 – –
Total net property, plant and equipment 1,703,757 1,944,379 313,887 1,492,225
Reconciliation of property, plant and equipment
Opening gross carrying amount 5,897,162 5,427,100 3,169,834 2,360,232
Add: additions purchased during the year 1,023,536 946,062 309,968 809,602
Less: disposals made during the year (190,785) (476,000) (1,429,027) –
Closing gross carrying amount 6,729,913 5,897,162 2,050,775 3,169,834
Opening accumulated depreciation (3,952,783) (3,161,313) (1,677,609) (788,996)
Add: depreciation expense charged (1,211,155) (1,190,510) (437,310) (888,613)
Less: disposals made during the year 137,782 399,040 378,031 –
Closing accumulated depreciation (5,026,156) (3,952,783) (1,736,888) (1,677,609)
Total net property, plant and equipment 1,703,757 1,944,379 313,887 1,492,225
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FINANCIAL STATEMENTS (cont.)

16. PROPERTY, PLANT AND EQUIPMENT (cont.)

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

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OPENING NET CLOSING NET
CARRYING ADDITIONS NET DISPOSALS DEPRECIATION CARRYING
ASSET CATEGORY AMOUNT DURING YEAR DURING YEAR EXPENSE AMOUNT
$ $ $ $ $
Consolidated
Laboratory equipment 1,249,247 667,986 (24,053) (670,417) 1,222,763
Computer equipment 173,276 38,282 (3,559) (113,129) 94,870
Office equipment 56,660 14,137 – (19,750) 51,047
Equipment under hire purchase 405,405 303,131 (25,391) (392,573) 290,572
Leasehold improvements 59,791 – – (15,286) 44,505
Totals 1,944,379 1,023,536 (53,003) (1,211,155) 1,703,757
Genetic Technologies Limited
Laboratory equipment 1,025,605 – (1,025,605) – –
Computer equipment 50,138 3,600 – (39,177) 14,561
Office equipment 11,077 3,237 – (5,560) 8,754
Equipment under hire purchase 405,405 303,131 (25,391) (392,573) 290,572
Totals 1,492,225 309,968 (1,050,996) (437,310) 313,887
CONSOLIDATED GENETIC TECHNOLOGIES LIMITED
2008 2007 2008 2007
$ $ $ $
17. INTANGIBLE ASSETS AND GOODWILL
Patents (refer notes below)
Patents, at cost 36,059,673 35,929,621 20,978,600 20,978,600
Less: accumulated amortisation and impairment losses (30,085,287) (24,033,235) (20,660,767) (17,632,767)
Net patents 5,974,386 11,896,386 317,833 3,345,833
Goodwill (refer notes below)
Goodwill, at cost 315,388 315,388 – –
Total net intangible assets and goodwill 6,289,774 12,211,774 317,833 3,345,833
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GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2008

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CONSOLIDATED GENETIC TECHNOLOGIES LIMITED
2008 2007 2008 2007
$ $ $ $
17. INTANGIBLE ASSETS AND GOODWILL (cont.)
Reconciliation of patents
Opening gross carrying amount 35,929,621 36,223,593 20,978,600 20,978,600
Adjust for exchange rate movements 130,052 (293,972) – –
Closing gross carrying amount 36,059,673 35,929,621 20,978,600 20,978,600
Opening accumulated amortisation and impairment losses (24,033,235) (19,764,725) (17,632,767) (12,938,767)
Add: amortisation expense charged (3,544,000) (3,412,482) (650,000) (3,544,000)
Less: impairment loss (refer notes below) (2,378,000) (1,150,000) (2,378,000) (1,150,000)
Adjust for exchange rate movements (130,052) 293,972 – –
Closing accumulated amortisation and impairment losses (30,085,287) (24,033,235) (20,660,767) (17,632,767)
Total net patents 5,974,386 11,896,386 317,833 3,345,833
Reconciliation of goodwill
Opening gross carrying amount 315,388 315,388 – –
Less: write-off of goodwill – – – –
Total net goodwill 315,388 315,388 – –
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Impairment notes

Business combination

The patents and goodwill were purchased as part of various business combinations completed in previous years.

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 and is carried at cost. There is no carrying amount of intangible assets with indefinite useful lives allocated to this segment. In testing goodwill for impairment, the recoverable amount of a CGU is determined based on value-in-use calculations which use cash flow projections and are 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.

Based on Management forecasts, cashflow projections assume testing revenues of $6.7 million for the year ending 30 June 2009. As a key assumption, constant revenue growth of 18% is assumed beyond 2009 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 that 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 which is carried at cost.

Impairment of patents

The impairment loss for 2008 arose in respect of patents held within the research operating segment and resulted from a lack of progress with the research related to the commercialisation of certain applications of the technology covered by these patents. Following a detailed scientific review of the work that had been undertaken in respect of one of the applications of the underlying technology, it was decided during the 2008 financial year to terminate the program. In addition, whilst work continues in respect of the use of the technology in relation to other related areas, the lack of progress made as at balance date gave rise to an impairment charge of $2,378,000 during the year ended 30 June 2008 (refer Note 6).

FINANCIAL STATEMENTS (cont.)

17. INTANGIBLE ASSETS AND GOODWILL (cont.)

Impairment of patents (cont.)

Given that the Company’s previous attempts to commercialise the technology associated with the patents have, so far, not delivered the anticipated revenues due to the factors mentioned previously, the Company believes that it is appropriate to base its assessment of the carrying value of the underlying patents as at 30 June 2008 around a further product based on the technology which has already been successfully completed and from the sale of which revenues have already been generated. Accordingly, the carrying value of the underlying patents as at 30 June 2008 has been based on the anticipated net cash flows that the Company believes will be generated from the future sales of this product.

The cashflow forecasts associated with the impairment assessment of the patents have been projected to 2012, being the first year in which the respective patents will expire, using the Company’s estimated weighted average cost of capital and conservative projections of anticipated sales volumes over the next 4 years. Further, given the competitive advantage afforded to the Company in respect of this product, a termination value has also been included to reflect that sales of the product are expected to continue beyond the date of the patent expiry. The forecasts and associated recoverable amount has been determined by Management taking into account the sales that have been generated to date and the considerable interest arising from pre-launch market analysis.

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. The remaining amortisation period of the patents carried forward is between 2 to 4 years.

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CONSOLIDATED GENETIC TECHNOLOGIES LIMITED
2008 2007 2008 2007
$ $ $ $
18. OTHER ASSETS (NON-CURRENT)
Investments in subsidiaries
Unlisted shares, at cost – – 1,799,746 1,532,701
Less: provision for impairment – – (1,773,035) (1,505,990)
Net unlisted shares – – 26,711 26,711
Investment in listed subsidiary, at cost – – 424,535 424,535
Total investments in subsidiaries (Note 37) – – 451,246 451,246
Total non-current other assets – – 451,246 451,246
Note: During the year, an impairment loss was raised in respect of the additional interest in a non-wholly-owned subsidiary (refer Note 37).
19. TRADE AND OTHER PAYABLES (CURRENT)
Trade payables 1,292,009 852,561 289,841 570,932
Other payables 228,464 246,208 107,896 33,736
Accrued expenses 265,939 464,883 259,775 452,249
Loans from wholly-owned subsidiaries (Note 38) – – 1,640,320 1,134,778
Total current trade and other payables 1,786,412 1,563,652 2,297,832 2,191,695
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Note: Trade payables and other payables for the Group include amounts due in US dollars of USD 134,166 (2007: USD 326,978), European euros of EUR 22,531 (2007: EUR nil), Canadian dollars of CAD 5,211 (2007: CAD 5,438) and Swiss francs of CHF 2,870 (2007: CHF 4,030).

Trade payables and other payables for Genetic Technologies Limited include amounts due in US dollars of USD 100,804 (2007: USD 326,978) and European euros of EUR 22,531 (2007: EUR nil).

Refer Note 38 for details of contractual maturity and management of interest rate, foreign exchange and liquidity risks applicable to trade and other payables for which, due to their short-term nature, their carrying value approximates their fair value.

GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2008

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CONSOLIDATED GENETIC TECHNOLOGIES LIMITED
2008 2007 2008 2007
$ $ $ $
20. INTEREST-BEARING LIABILITIES (CURRENT)
Hire purchase liability (Notes 32 and 38) 111,117 476,989 111,117 476,989
Total current interest-bearing liabilities 111,117 476,989 111,117 476,989
Note: The carrying values of the hire purchase liabilities approximate their fair values. During the current year and prior years, there were no
defaults or breaches of any of the hire purchase agreements.
21. DEFERRED REVENUE (CURRENT)
Genetic testing fees received in advance 138,941 104,879 – –
Annuities received in advance – 216,438 – 216,438
Total current deferred revenue 138,941 321,317 – 216,438
22. PROVISIONS (CURRENT AND NON-CURRENT)
Current provisions
Annual leave 368,492 294,419 122,757 103,960
Long service leave 220,692 189,051 95,329 86,090
Rehabilitation costs 94,987 78,498 94,987 78,498
Total current provisions 684,171 561,968 313,073 268,548
Non-current provisions
Long service leave 75,421 50,477 11,445 5,467
Total non-current provisions 75,421 50,477 11,445 5,467
Total provisions 759,592 612,445 324,518 274,015
Reconciliation of annual leave provision
Balance at the beginning of the financial year 294,419 244,010 103,960 76,142
Add: obligation accrued during the year 272,763 248,391 64,932 74,567
Less: utilised during the year (198,690) (197,982) (46,135) (46,749)
Balance at the end of the financial year 368,492 294,419 122,757 103,960
Reconciliation of long service leave provision
Balance at the beginning of the financial year 239,528 204,127 91,557 85,699
Add: obligation accrued during the year 56,585 35,401 15,217 5,858
Less: utilised during the year – – – –
Balance at the end of the financial year 296,113 239,528 106,774 91,557
Reconciliation of provision for rehabilitation costs
Balance at the beginning of the financial year 78,498 – 78,498 –
Add: costs accrued during the year (Note 31) 16,489 78,498 16,489 78,498
Balance at the end of the financial year 94,987 78,498 94,987 78,498
23. INTEREST-BEARING LIABILITIES (NON-CURRENT)
Hire purchase liability (Notes 32 and 38) 187,082 46,978 187,082 46,978
Total non-current interest-bearing liabilities 187,082 46,978 187,082 46,978
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Note: The carrying values of the hire purchase liabilities approximate their fair values. During the current year and prior years, there were no defaults or breaches of any of the hire purchase agreements.

FINANCIAL STATEMENTS (cont.)

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CONSOLIDATED GENETIC TECHNOLOGIES LIMITED
2008 2007 2008 2007
$ $ $ $
24. 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
2008 2007
SHARES $ SHARES $
Balance at the beginning of the financial year 362,389,899 70,243,996 362,389,899 70,243,996
Add: shares issued during the year – – – –
Balance at the end of the financial year 362,389,899 70,243,996 362,389,899 70,243,996
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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.

Capital management

When managing capital, Management’s objective is to ensure that the Group continues as a going concern and to maintain optimal returns for shareholders and benefits for other stakeholders. Management also aims to maintain a capital structure that ensures the lowest cost of capital for the entity. The Group is not subject to any externally imposed capital requirements.

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CONSOLIDATED GENETIC TECHNOLOGIES LIMITED
2008 2007 2008 2007
$ $ $ $
25. RESERVES
Foreign currency translation (47,930) (15,306) – –
Share-based payments 1,636,734 1,472,201 1,582,037 1,417,504
Total reserves 1,588,804 1,456,895 1,582,037 1,417,504
Reconciliation of foreign currency translation reserve
Balance at the beginning of the financial year (15,306) 23,229 – –
Add: net currency translation loss (32,624) (38,535) – –
Balance at the end of the financial year (47,930) (15,306) – –
Reconciliation of share-based payments reserve
Balance at the beginning of the financial year 1,472,201 1,214,295 1,417,504 1,195,632
Add: share-based payments 164,533 257,906 164,533 221,872
Balance at the end of the financial year 1,636,734 1,472,201 1,582,037 1,417,504
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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 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.

GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2008

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CONSOLIDATED GENETIC TECHNOLOGIES LIMITED
2008 2007 2008 2007
$ $ $ $
26. ACCUMULATED LOSSES
Balance at the beginning of the financial year (45,743,100) (41,414,557) (47,153,828) (43,119,732)
Add: net loss attributable to members of
Genetic Technologies Limited (5,446,089) (4,328,543) (8,114,963) (4,034,096)
Balance at the end of the financial year (51,189,189) (45,743,100) (55,268,791) (47,153,828)
27. MINORITY INTERESTS
Reconciliation of minority interests in subsidiaries
Balance at the beginning of the financial year 145,018 175,176
Add: movements during the year
Less: share of operating losses (5,549) (17,159)
Less: share of movement in reserves (9,161) (12,999)
Net loss attributable to minority interests (14,710) (30,158)
Add: share of issued capital 11,154 –
Balance at the end of the financial year 141,462 145,018
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28. OPTIONS

Options summary

As at 30 June 2008, the following options over ordinary shares in the Company were outstanding.

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WEIGHTED AVE. WEIGHTED AVE.
2008 EXERCISE PRICE 2007 EXERCISE PRICE
Staff Share Plan options 11,175,602 $0.27 11,977,500 $0.52
Other options – – 600,000 $0.70
Total number of options outstanding 11,175,602 $0.27 12,577,500 $0.53
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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 executives, consultants and employees of the Group. The options, which are granted at nil cost, are typically granted for terms of 5 or 6 years and have various vesting periods. The options are not transferable and are not quoted on the Australian Securities Exchange. The options lapse at the earlier of employment termination or 5 or 6 years. As at 30 June 2008, there were 3 executives, 1 consultant and 27 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:

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WEIGHTED AVE. WEIGHTED AVE.
2008 EXERCISE PRICE 2007 EXERCISE PRICE
Balance at the beginning of the financial year 11,977,500 $0.52 14,677,500 $0.52
Add: options granted during the year 8,150,602 $0.19 – –
Less: options forfeited during the year (2,900,000) $0.41 (1,175,000) $0.37
Less: options which expired during the year (6,052,500) $0.57 (1,525,000) $0.39
Balance at the end of the financial year 11,175,602 $0.27 11,977,500 $0.52
Exercisable at the end of the financial year 2,837,500 $0.46 8,577,500 $0.54
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FINANCIAL STATEMENTS (cont.)

28. 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 2008 (2007: $nil). The numbers of Staff Share Plan options outstanding as at 30 June 2008 by ASX code, including the respective dates of expiry and exercise prices, are tabled below. Refer Note 34 for further information. The options listed below are not listed on ASX.

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WEIGHTED AVE. WEIGHTED AVE.
OPTION DESCRIPTION 2008 EXERCISE PRICE 2007 EXERCISE PRICE
GTGAA (expiring 6 September 2010) 750,000 $0.48 750,000 $0.48
GTGAD (expiring 12 August 2011) 700,000 $0.43 850,000 $0.43
GTGAE (expiring 12 August 2011) 250,000 $0.53 1,000,000 $0.53
GTGAF (expiring 23 November 2011) – – 1,000,000 $0.56
GTGAG (expiring 1 February 2012) – – 750,000 $0.46
GTGAH (expiring 31 May 2012) 450,000 $0.40 700,000 $0.40
GTGAI (expiring 30 June 2013) 1,000,000 $0.13 – –
GTGAI (expiring 30 November 2007) – – 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
GTGAO (expiring 30 November 2007) – – 802,500 $0.49
GTGAQ (expiring 20 May 2009) 700,000 $0.44 700,000 $0.44
GTGAS (expiring 20 May 2009) 175,000 $0.38 175,000 $0.38
GTGAU (expiring 17 January 2012) – – 200,000 $0.45
GTGAW (expiring 24 September 2012) 3,650,602 $0.17 – –
GTGAY (expiring 23 October 2012) 2,800,000 $0.22 – –
GTGAZ (expiring 27 February 2010) 200,000 $0.56 200,000 $0.56
GTGAZ (expiring 27 February 2010) 300,000 $0.49 400,000 $0.49
Balance at the end of the financial year 11,175,602 $0.27 11,977,500 $0.52
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Details of the options issued under the Staff Share Plan that are outstanding as at 30 June 2008 are as follows:

OPTION DESCRIPTION VESTING DETAILS

GTGAA (expiring 6 September 2010) GTGAD (expiring 12 August 2011) GTGAE (expiring 12 August 2011) GTGAH (expiring 31 May 2012) GTGAI (expiring 30 June 2013) GTGAK (expiring 11 June 2009) GTGAQ (expiring 20 May 2009) GTGAS (expiring 20 May 2009) GTGAW (expiring 24 September 2012) GTGAY (expiring 23 October 2012) GTGAZ (expiring 27 February 2010)

Vesting fully on 6 September 2008 Vesting fully on 12 August 2009 Vesting fully on 12 August 2009 Vesting fully on 31 May 2010 Vesting fully on 30 June 2011 Options are fully vested as at 30 June 2008 Options are fully vested as at 30 June 2008 Options are fully vested as at 30 June 2008 Vesting fully on 24 September 2010 Vesting fully on 23 October 2010 Options are fully vested as at 30 June 2008

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 on the NASDAQ stock exchange. Under the agreement, the Company agreed to issue 900,000 options at an exercise price of $0.70 to GMCG within three years. During the 2005 financial year, GMCG was entitled to receive 600,000 of the options which were subsequently granted on 27 October 2004. On 7 September 2007, the options expired. The movements in the numbers of these options are as follows:

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WEIGHTED AVE. WEIGHTED AVE.
2008 EXERCISE PRICE 2007 EXERCISE PRICE
Balance at the beginning of the financial year 600,000 $0.70 600,000 $0.70
Less: options which expired during the year (600,000) $0.70 – –
Balance at the end of the financial year – – 600,000 $0.70
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GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2008

29. 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.

Identification of reportable segments

Business segments

Licensing – involves the out-licensing of the Group’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 Group’s corporate activities.

Business segments

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REVENUES AND INCOME AMORTISATION/
SEGMENT SALES OTHER TOTALS RESULTS ASSETS LIABILITIES DEPRECIATION
$ $ $ $ $ $ $
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Licensing 2008 2007 Testing 2008 2007 Research 2008 2007 Corporate 2008 2007 Totals 2008 2007	10,825,267 11,337,079 3,918,692 3,119,131 – – – – 14,743,959 14,456,210	– – 17,608 25,000 210,943 347,431 1,006,432 490,664 1,234,983 863,095	10,825,267 11,337,079 3,936,300 3,144,131 210,943 347,431 1,006,432 490,664 15,978,942 15,319,305	6,000,724 7,229,326 (2,251,040) (3,323,326) (6,000,122) (3,483,985) (3,201,200) (4,767,717) (5,451,638) (4,345,702)	2,447,788 8,846,395 2,892,870 2,246,571 4,817,373 4,012,800 13,936,547 14,343,261 24,094,578 29,449,027	(229,445) (1,194,853) (1,186,880) (964,401) (740,256) (268,185) (1,152,924) (918,779) (3,309,505) (3,346,218)	(2,900,722) (2,770,911) (1,019,958) (946,689) (761,593) (813,760) (72,882) (71,632) (4,755,155) (4,602,992)

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NET CASH FLOWS (USED IN)/PROVIDED BY
IMPAIRMENT LOSSES/ PURCHASES OF OPERATING INVESTING FINANCING
SEGMENT WRITE DOWNS EQUIPMENT ACTIVITIES ACTIVITIES ACTIVITIES
$ $ $ $ $
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Licensing 2008 2007 Testing 2008 2007 Research 2008 2007 Corporate 2008 2007 Totals 2008 2007	– – – (76,960) (2,378,000) (1,150,000) – (80,000) (2,378,000) (1,306,960)	6,030 294 962,904 864,938 5,675 57,030 48,927 23,800 1,023,536 946,062	7,641,118 9,633,894 (1,778,767) (671,312) (2,679,753) (3,407,060) (2,759,828) (2,958,276) 422,770 2,597,246	(6,030) (801) (21,996) (81,853) (5,675) (20,759) (13,698) 197,423 (47,399) 94,010	– – (385,350) (357,275) (106,169) (128,468) (37,380) (16,762) (528,899) (502,505)

Note: Other revenue – corporate includes interest received of $920,299 (2007: $488,980) (refer Note 4). 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 and licensing activities. Canada – is the home of Gtech International Resources Limited.

Switzerland – is the home of GeneType AG.

FINANCIAL STATEMENTS (cont.)

29. SEGMENT INFORMATION (cont.)

Geographic information (cont.)

Revenues are allocated on the basis of the geographical location of the entities which earn them. The following table presents sales and other income and revenue on the basis of geographical locations for the years ended 30 June 2008 and 30 June 2007.

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SEGMENT SALES REVENUE OTHER TOTALS
$ $ $
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Australia 2008 2007 Canada 2008 2007 Switzerland 2008 2007 Totals 2008 2007	14,743,959 14,456,210 – – – – 14,743,959 14,456,210	1,223,833 849,827 11,133 13,261 17 7 1,234,983 863,095	15,967,792 15,306,037 11,133 13,261 17 7 15,978,942 15,319,305

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 . 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.

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 received and finance costs (Notes 4 and 6)
Net gains/(losses) on the sale of available-for-sale investments (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 2008, there were two 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 38.3% of total revenue from operations.

30. 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 executed a number of binding agreements, including a supply agreement, pursuant to which Applera agreed to supply the Company with certain 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. As at 30 June 2007, the Company had drawn down equipment and reagents under the supply agreement with a total value of $2,178,197. During the year ended 30 June 2008, the Company drew down equipment and reagents under the supply agreement with a total value of $1,587,626. Of this amount, a total of $1,057,135 (comprising equipment credits of $662,635 and reagent credits of $394,500) was recognised as income during the year ended 30 June 2008 and disclosed in Note 4 as part of license fees received, whilst the remaining $530,491 represented the balance of certain prepaid service contracts. Accordingly, as at 30 June 2008, the Company had a contingent asset representing remaining credits available to it with a total value of $4,781,677.

31. CONTINGENT LIABILITIES

As at 30 June 2008, the Group had 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 33). Due to the sale of the Company’s interest in the Joint Venture on 27 August 2008, the potential impact of any claim or the claims in aggregate is no longer relevant.

GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2008

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CONSOLIDATED GENETIC TECHNOLOGIES LIMITED
2008 2007 2008 2007
$ $ $ $
32. COMMITMENTS AND CONTINGENCIES
Hire purchase expenditure commitments
Minimum hire purchase payments
– not later than one year 134,027 496,675 134,027 496,675
– later than one year but not later than five years 204,532 49,474 204,532 49,474
– later than five years – – – –
Total minimum hire purchase payments 338,559 546,149 338,559 546,149
Less: future finance charges (40,360) (22,182) (40,360) (22,182)
Present value of hire purchase payments 298,199 523,967 298,199 523,967
Aggregate expenditure commitments comprise:
Current liability (Note 20) 111,117 476,989 111,117 476,989
Non-current liability (Note 23) 187,082 46,978 187,082 46,978
Total hire purchase expenditure commitments 298,199 523,967 298,199 523,967
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’). Since 14 January 2005, the Company has financed the acquisition of
laboratory and office equipment under the Facility with a total value of $1,966,312. Each of the Company’s Australian-resident
subsidiaries has provided a guarantee to the Company in respect of the Facility.
Operating lease expenditure commitments
Minimum operating lease payments
– not later than one year 466,412 418,177 – –
– later than one year but not later than five years 965,825 1,307,963 – –
– later than five years – – – –
Total minimum operating lease payments 1,432,237 1,726,140 – –
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The operating lease relates to office and laboratory premises located in Fitzroy, Victoria that were occupied by the Company during the 2008 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 former Chief Executive Officer and current Non-Executive Director, Dr. Mervyn Jacobson (refer Note 35). GeneType Pty. Ltd. does not have an option to purchase the leased assets at the expiry of the lease period.

Research and development expenditure commitments Minimum research and development payments – not later than one year – later than one year but not later than five years – later than five years Total minimum research and development payments		1,150,000 762,500 1,150,000 700,000 490,000 700,000 – – –

	762,500
	490,000
	–
	1,252,500	1,850,000 1,252,500 1,850,000

On 15 June 2004, the Company entered into a 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 $450,000 remained payable under the Agreement. On 1 April 2008, the Company entered into an Australian Research Council (ARC) Linkage Agreement with the University of Newcastle. The Agreement relates to the synthesis of novel nematocidal compounds and complements an existing ARC Linkage Agreement that the Company has with the University of Melbourne. The Company will contribute $90,000 per annum in cash over a period of three years from 2008 to 2010. As at 30 June 2008, $802,500 remained payable under the Agreement, which included a non-cash in-kind contribution of $532,500.

FINANCIAL STATEMENTS (cont.)

32. COMMITMENTS AND CONTINGENCIES (cont.)

Other capital expenditure commitments

As at 30 June 2008, the Company did not have any other significant contracted capital expenditure commitments.

Other expenditure commitments

As at 30 June 2008, the Company held a 14.66% (2007: 16.36%) direct equity interest in the North Laverton Joint Venture with Regis Resources Limited (‘Regis’) (refer Note 33) which has continuing 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 Regis, the Company is not contributing any funding towards the project, as these costs are met by Regis. As at 30 June 2008, the Company had recorded a provision for $94,987 in respect of its share of the estimated rehabilitation costs associated with the North Laverton project (refer Note 22). The amount of the provision was based on calculations provided to the Company by Regis as project manager. As disclosed in Note 40, however, the Company sold its entire interest in the joint venture to Regis on 27 August 2008 and, as part of this sale, has been fully indemnified by Regis against any future rehabilitation liabilities which may arise from the exploration activities of the joint venture undertaken up until the date of sale. This indemnification will enable the Company, during the year ending 30 June 2009, to fully reverse the provision of $94,987 in respect of such liabilities which had been recorded in the Company’s balance sheet as at 30 June 2008.

33. JOINT VENTURES

The Company holds a direct equity interest in the North Laverton Joint Venture with Regis Resources Limited (‘Regis’) 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 Regis. 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 14.66% as at 30 June 2008 (2007: 16.36%). 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 2008. As disclosed in Note 40, the Company sold its entire interest in the joint venture to Regis on 27 August 2008.

34. EMPLOYEE BENEFITS

Staff Share Plan

On 30 November 2001, the Directors of the Company established a Staff Share Plan. Pursuant to the terms of the Plan, the Directors may, at their discretion, grant options over the ordinary shares in the Genetic Technologies Limited to executives, consultants, employees, and formerly Non-Executive Directors, of the Group as detailed in Note 28. As at 30 June 2008, there were 3 executives, 1 consultant and 27 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 28.

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 2008 and 2007:

	2008

Dividend yield	–	–
Historic volatility and expected volatility	75%	N/A
Option exercise prices	$0.17 to $0.22	N/A
Weighted average exercise price	$0.19	N/A
Risk-free interest rate	5.99% to 6.50%	N/A
Expected life of an option	3 years to 5 years	N/A

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

The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may also not necessarily be the actual outcome.

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.

GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2008

35. 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 2008:

The Company transferred certain items of laboratory equipment to Genetic Technologies Corporation Pty. Ltd., a subsidiary, for $923,383, being its written down value at the date of transfer (1 July 2007). Further, the Company transferred certain other items of laboratory equipment to GeneType Pty. Ltd., a subsidiary, for $102,222, being its written down value on the same date.
AgGenomics Pty. Ltd., a subsidiary, paid interest to the Company amounting to $31,434 (2007: $26,254) in respect of an outstanding loan between the parties.
ImmunAid Pty. Ltd., a subsidiary, paid management fees to the Company amounting to $20,000 (2007: $nil).

All amounts were charged on commercial, arm’s-length terms and at commercial rates.

Other related party transactions

As at 30 June 2008, a net amount of $5,517,825 (2007: $9,177,574) was receivable by the Company from its various subsidiaries (Note 14). As at the same date, an amount of $1,640,320 (2007: $1,134,778) was payable by the Company to its wholly-owned subsidiaries (Note 19). All such loans are unsecured, generally interest free and there are no fixed terms of repayment.

Also during the year, GeneType Pty. Ltd., a subsidiary, paid a total of $501,239 (2007: $445,384) to Bankberg Pty. Ltd., a company associated with former Chief Executive Officer and current Non-Executive Director, Dr. Mervyn Jacobson, for rent in respect of the office and laboratory premises in Fitzroy, Victoria that are leased by the Group. Further, Genetic Technologies Limited paid a total of $414,133 to Transmedia Inc., another company associated with Dr. Jacobson, in respect of licensing services provided to the Company.

Finally, during the year ended 30 June 2008, Genetic Technologies Limited paid a total of $79,936 to Government Relations Australia Advisory Pty. Ltd., a company associated with Non-Executive Director Mr. John Dawkins AO, in respect of consulting services provided to the Company.

All transactions with Key Management Personnel 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 36 for a description of transactions with Key Management Personnel.

36. KEY MANAGEMENT PERSONNEL DISCLOSURES

Details of Key Management Personnel

Directors

Henry Bosch AO ( Non-Executive Chairman ) Fred Bart ( Non-Executive ) David Carruthers ( Non-Executive ) John S. Dawkins AO ( Non-Executive ) Dr. Mervyn Jacobson ( Non-Executive )

Dr. Leanne Rowe AM ( Non-Executive )

Note: Dr. Jacobson retired as Chief Executive Officer on 24 September 2007 and was appointed as a Non-Executive Director on that date. Dr. Rowe was appointed as a Non-Executive Director on 16 April 2008.

Executives

Michael B. Ohanessian ( Chief Executive Officer ) Thomas G. Howitt ( Chief Financial Officer and Company Secretary ) Ross Barrow ( Chief Operating Officer ) Dr. Gary Cobon ( Chief Scientific Officer )

Note: Mr. Ohanessian was appointed as Chief Executive Officer and as an Executive Director on 24 September 2007.

Mr. Barrow was appointed as Chief Operating Officer on 14 April 2008.

Dr. Cobon resigned as Chief Scientific Officer on 28 March 2008.

FINANCIAL STATEMENTS (cont.)

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CONSOLIDATED GENETIC TECHNOLOGIES LIMITED
2008 2007 2008 2007
$ $ $ $
36. KEY MANAGEMENT PERSONNEL
DISCLOSURES (cont.)
Remuneration of Key Management Personnel
Short-term employee benefits 994,176 974,346 994,176 974,346
Post-employment benefits 144,861 141,390 144,861 141,390
Termination benefits 82,500 87,500 82,500 87,500
Long-term benefits 8,640 4,758 8,640 4,758
Share-based payments 124,776 233,612 124,776 233,612
Total remuneration of Key Management Personnel 1,354,953 1,441,606 1,354,953 1,441,606
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Optionholdings of Key Management Personnel

		N	UMBER OF OPTI	ONS		VEST	ED AS AT YEAR	END
30 JUNE 2008 NAME OF OPTIONHOLDER	OPENING BALANCE	GRANTED	EXERCISED	LAPSED	CLOSING BALANCE	TOTAL	NOT EXERCISABLE	EXERCISABLE
Director Henry Bosch AO Fred Bart David Carruthers John S. Dawkins AO Dr. Mervyn Jacobson Dr. Leanne Rowe AM Executive Michael B. Ohanessian Thomas G. Howitt Ross Barrow Dr. Gary Cobon Geoffrey E. Newing Totals	500,000 500,000 – 500,000 2,000,000 – – 1,000,000 – 750,000 750,000	– – – – – – 3,650,602 1,000,000 1,000,000 500,000 – 6,150,602	– – – – – – – – – – – –	(500,000) (500,000) – (500,000) (2,000,000) – – – – (1,250,000) (750,000) (5,500,000)	– – – – – – 3,650,602 2,000,000 1,000,000 – – 6,650,602	– – – – – – 3,650,602 2,000,000 1,000,000 – – 6,650,602	– – – – – – 3,650,602 1,312,500 1,000,000 – – 5,963,102	– – – – – – – 687,500 – – – 687,500
	6,000,000

		N	UMBER OF OPTI	ONS		VES	TED AS AT YEAR	END
30 JUNE 2007 NAME OF OPTIONHOLDER	OPENING BALANCE	GRANTED	EXERCISED	LAPSED	CLOSING BALANCE	TOTAL	NOT EXERCISABLE	EXERCISABLE
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 –	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
					6,000,000

GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2008

36. KEY MANAGEMENT PERSONNEL DISCLOSURES (cont.)

Shareholdings of Key Management Personnel

30 JUNE 2008 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 Fred Bart David Carruthers John S. Dawkins AO Dr. Mervyn Jacobson Dr. Leanne Rowe AM Executive Michael B. Ohanessian Thomas G. Howitt Ross Barrow Dr. Gary Cobon Totals	185,000 25,918,214 – – 150,931,900 – – – – – 177,035,114	60,406 – 150,000 – – – 70,000 – – – 280,406	– – – – – – – – – – –	– – – – – – – – – –	245,406 25,918,214 150,000 – 150,931,900 – 70,000 – – – 177,315,520
				–

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 (note) Prof. Deon J. Venter (note) Executive Thomas G. Howitt Dr. Gary Cobon Geoffrey E. Newing (note) Ian N. Christensen (note) Totals	185,000 150,931,900 25,918,214 – – – 25,000 – – 213,350 – 177,273,464	– – – – – – – – – 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
				–

Note: Mr. Edge, Prof. Venter, Mr. Newing and Mr. Christensen all retired or resigned during the years ended 30 June 2007 and 2008.

All equity transactions with Key Management Personnel, apart 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 and their related parties

During the year ended 30 June 2008:

GeneType Pty. Ltd. paid a total of $501,239 (2007: $445,384) 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 paid a total of $79,936 (2007: $nil) to Government Relations Australia Advisory Pty. Ltd., a company associated with Mr. John Dawkins AO, in respect of consulting services provided to the Group.
The Company paid a total of $414,133 (2007: $nil) to Transmedia Inc., a company associated with Dr. Mervyn Jacobson, in respect of licensing services provided to the Group.
Dr. Mervyn Jacobson acquired a total of 522 ordinary shares in ImmunAid Pty. Ltd., a subsidiary of the Company. As at 30 June 2008, Dr. Jacobson held a total of 522 ordinary shares in ImmunAid Pty. Ltd., representing approximately 4.0% of that company’s total issued capital.

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

FINANCIAL STATEMENTS (cont.)

37. SUBSIDIARIES

The following diagram is a depiction of the Group structure as at 30 June 2008.

				Genetic Technologies	Genetic Technologies	Genetic Technologies	Limited

	75.8%		69.2%	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

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50.1%
AgGenomics
Pty. Ltd.
GROUP INTEREST (%) NET CARRYING VALUE ($)
NAME OF GROUP COMPANY INCORPORATION DETAILS 2008 2007 2008 2007
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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%
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
69.2%
68.2%
Total carrying value (Note 18)
Entities held by other subsidiaries
AgGenomics Pty. Ltd.
15 February 2002
Victoria, Australia
50.1%
50.1%

1
1
2
2
10
10
26,698
26,698
–
–
424,535
424,535
–
–
451,246
451,246
50
50

During the year ended 30 June 2008, outstanding loans between the Company and ImmunAid Pty. Ltd. were converted into additional equity in that company. The total amount of the loans at the time of the conversions was $278,175. As a result of the conversions, the Company increased its interest in ImmunAid Pty. Ltd. during the year by approximately 1.0% to 69.2%.

38. FINANCIAL RISK MANAGEMENT

The Group’s activities expose it to a variety of financial risks such as market risk (including currency risk and interest rate risk), credit risk and liquidity risk. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group. The Group uses different methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in the case of foreign exchange, interest rate and aging analysis for credit risk.

Risk management is managed by the Group’s Risk Management Committee under guidance provided by the Board of Directors. The Committee identifies and evaluates financial risks in close cooperation with the Group’s operating units. The Board, via its Audit Committee, provides guidance for overall risk management, as well as policies covering specific areas, such as foreign exchange risk, interest rate risk and credit risk.

GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2008

38. FINANCIAL RISK MANAGEMENT (cont.)

The Group’s principal financial instruments comprise cash at bank and on hand, short-term deposits and hire purchase liabilities. 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, interest rate 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.

The Group and Genetic Technologies Limited hold the following financial instruments:

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CONSOLIDATED GENETIC TECHNOLOGIES LIMITED
2008 2007 2008 2007
$ $ $ $
Financial assets
Cash at bank/on hand 5,490,846 11,303,764 4,520,882 10,391,337
Short-term deposits 7,429,926 2,029,986 7,429,926 2,029,950
Trade and other receivables 1,596,738 646,946 5,916,611 9,469,866
Performance bond and deposits 519,117 526,898 519,117 526,898
Available-for-sale investments 207,195 233,330 207,195 233,330
Total financial assets 15,243,822 14,740,924 18,593,731 22,651,381
Financial liabilities
Trade and other payables 1,786,412 1,563,652 2,297,832 2,191,695
Hire purchase liabilities 298,199 523,967 298,199 523,967
Total financial liabilities 2,084,611 2,087,619 2,596,031 2,715,662
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Credit risk

The Group’s credit risk is managed on a Group basis. Credit risk arises from cash and cash equivalents and deposits with banks and financial institutions, as well as credit exposures to customers, including outstanding receivables and committed transactions. If there is no independent rating, the Group assesses the credit quality of the customer, taking into account its financial position, past experience and other factors. Individual risk limits are set based on internal or external ratings. The compliance with credit limits by customers is regularly monitored by Management. Sales to retail customers are required to be settled in cash or using major credit cards, mitigating credit risk. The maximum exposures to credit risk as at 30 June 2008 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. In accordance with the guidelines included in the Group’s Short Term Investment Policy, 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. For banks and financial institutions, only independently-rated parties with a minimum rating of ‘A-1’ are accepted. The Group has also 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 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. For some trade receivables, the Group may also obtain security in the form of guarantees, deeds of undertaking or letters of credit which can be called upon if the counterparty is in default under the terms of the agreement.

Credit risk further arises in relation to financial guarantees given by the Group to certain parties in respect of obligations of its subsidiaries. Such guarantees are only provided in exceptional circumstances.

In assessing the recoverability of intercompany receivables, Genetic Technologies Limited, the parent entity, raises a provision for diminution to ensure that the carrying amount of these receivables does not exceed the net tangible assets of the respective subsidiaries.

FINANCIAL STATEMENTS (cont.)

38. FINANCIAL RISK MANAGEMENT (cont.)

Market risk

Foreign currency risk

The Group and the parent entity operate internationally and are exposed to foreign currency exchange risk, primarily with respect to the US dollar and Canadian dollar, through 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. Foreign exchange risk arises from planned future commercial transactions and recognised assets and liabilities denominated in a currency that is not the entity’s functional currency and net investments in foreign operations. The risk is measured using sensitivity analysis and cash flow forecasting.

The Group has introduced a Foreign Exchange Management Policy which was developed to establish a formal framework and procedures for the efficient management of the financial risks that impact on Genetic Technologies Limited through its activities outside of Australia. The policy governs the way in which the financial assets and liabilities of the Group that are denominated in foreign currencies are managed and any risks are identified and addressed. Under the policy, which is updated on a regular basis, the Group generally retains in foreign currency only sufficient funds to meet the expected expenditures in that currency. Surplus funds, if any, are converted into Australian dollars as soon as practicable after receipt. As at 30 June 2008, the Group and the Company held the following financial assets and liabilities in foreign currencies:

CONSOLIDATED YEAR	UNITED STATES DOLLARS	CANADIAN DOLLARS	EUROPEAN EURO	JAPANESE YEN	SWISS FRANCS
Financial assets Cash at bank/on hand 2008 2007 Trade and other receivables 2008 2007 Available-for-sale investments 2008 2007 Total financial assets 2008 2007 Financial liabilities Trade and other payables 2008 2007 Total financial liabilities 2008 2007	63,212 8,161,046 68,100 66,348 198,120 198,120 329,432 8,425,514 134,166 326,978 134,166 326,978	437,032 459,508 – – – – 437,032 459,508 5,211 5,438 5,211 5,438	– 2,977 100,000 100,000 – – 100,000 102,977 22,531 – 22,531 –	47,350 – – – – – 47,350 – – – – –	7,848 17,630 – – – – 7,848 17,630 2,870 4,030 2,870 4,030
GENETIC TECHNOLOGIES LIMITED YEAR	UNITED STATES DOLLARS	CANADIAN DOLLARS	EUROPEAN EURO	JAPANESE YEN	SWISS FRANCS
Financial assets Cash at bank/on hand 2008 2007 Trade and other receivables 2008 2007 Available-for-sale investments 2008 2007 Total financial assets 2008 2007 Financial liabilities Trade and other payables 2008 2007 Total financial liabilities 2008 2007	62,995 8,161,046 68,100 66,348 198,120 198,120 329,215 8,425,514 100,804 326,978 100,804 326,978	34 34 – – – – 34 34 – – – –	– – 100,000 100,000 – – 100,000 100,000 22,531 – 22,531 –	– – – – – – – – – – – –	– – – – – – – – – – – –

GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2008

38. FINANCIAL RISK MANAGEMENT (cont.)

Foreign currency risk (cont.)

During the year ended 30 June 2008, the Australian dollar/US dollar exchange rate increased by 12.6%, from 0.8491 at the beginning of the year to 0.9562 at the end of the year. During the same period, Australian dollar/Canadian dollar exchange rate increased by 8.1%, from 0.8991 at the beginning of the year to 0.9722 at the end of the year.

Based on the financial instruments held at 30 June 2008, had the Australian dollar weakened/strengthened by 10% against the US dollar with all other variables held constant, the Group’s loss for the year would have been $23,000 lower/$19,000 higher (2007: $1,060,000 lower/$867,000 higher), mainly as a result of changes in the values of cash and cash equivalents which are denominated in US dollars, as detailed in the above tables. The loss for Genetic Technologies Limited for the year would have been $27,000 lower/$22,000 higher (2007: $1,060,000 higher/$867,000 lower) for the same reason.

Based on the financial instruments held at 30 June 2008, had the Australian dollar weakened/strengthened by 10% against the Canadian dollar with all other variables held constant, the Group’s loss for the year would have been $49,000 lower/$40,000 higher (2007: $56,000 lower/$46,000 higher), due to changes in the values of cash and cash equivalents which are denominated in Canadian dollars, as detailed in the above tables. There would be no effect on the loss for Genetic Technologies Limited.

Interest rate risk

The Group’s main interest rate risk arises in relation to its short-term deposits with various financial institutions. If rates were to decrease, the Group may generate less interest revenue from such deposits. However, given the relatively short duration of such deposits, the associate risk is relatively minimal. The Group also has various hire purchase liabilities with fixed interest rates. While these rates do not vary once the contract has been executed, the Group may be subject to interest rate movements if it were to acquire additional assets via similar contracts in the future.

The Group has introduced a Short Term Investment Policy which was developed to efficiently manage the Group’s surplus cash and cash equivalents. In this context, the Group adopts a prudent approach that is tailored to cash forecasts rather than seeking high returns that may compromise access to funds as and when they are required. Under the policy, the Group seeks to deposit its surplus cash in a range of deposits/securities over different time frames and with different institutions in an effort to diversify its portfolio and minimise risk.

On a monthly basis, Management provides the Board with a detailed list of all cash and cash equivalents, showing the periods over which the cash has been deposited, the name and credit rating of the institution holding the deposit and the interest rate at which has been deposited. A comparison of interest rate movements from month to month and a variance to an 11am deposit rate is also provided.

At 30 June 2008, if interest rates had changed by +/- 50 basis points from the year-end rates, with all other variables held constant, the Group’s loss for the year would have been $67,000 lower/higher (2007: $36,000 lower/higher), mainly as a result of higher/lower interest income from cash and cash equivalents. The loss for Genetic Technologies Limited for the year would have been $62,000 lower/higher (2007: $32,000 lower/higher) for the same reason. Consolidated equity for the Group would have been $67,000 higher/lower (2007: $36,000 higher/lower) mainly as a result of an increase/decrease in the fair value of cash and cash equivalents. Equity for Genetic Technologies Limited would have been $62,000 higher/lower (2007: $32,000 higher/lower) for the same reason.

FINANCIAL STATEMENTS (cont.)

38. FINANCIAL RISK MANAGEMENT (cont.)

Interest rate risk (cont.)

The exposure to interest rate risks and the effective interest rates of financial assets and liabilities, both recognised and unrealised, for both the Group and Genetic Technologies Limited are as follows:

CONSOLIDATED YEAR	FLOATING RATE $	FIXED RATE $	CARRYING AMOUNT $ WEIGHTED AVE. EFFECTIVE RATE $ AVE. MATURITY PERIOD DAYS
Financial assets Cash at bank/on hand1 2008 2007 Short-term deposits 2008 2007 Performance bond/deposits 2008 2007 Totals 2008 2007 Financial liabilities Hire purchase liabilities 2008 2007 Totals 2008 2007	5,490,846 11,303,764 – – – – 5,490,846 11,303,764 – – – –	– – 7,429,926 2,029,986 519,117 526,898 7,949,043 2,556,884 298,199 523,967 298,199 523,967	5,490,846 11,303,764 6.33% 2.89% At call At call 7,429,926 2,029,986 7.71% 6.20% 73 90 519,117 526,898 7.86% 6.93% 93 86 13,439,889 13,860,648 298,199 523,967 9.26% 7.17% 914 281 298,199 523,967
GENETIC TECHNOLOGIES LIMITED YEAR	FLOATING RATE $	FIXED RATE $	CARRYING AMOUNT $ WEIGHTED AVE. EFFECTIVE RATE $ AVE. MATURITY PERIOD DAYS
Financial assets Cash at bank/on hand2 2008 2007 Short-term deposits 2008 2007 Performance bond/deposits 2008 2007 Totals 2008 2007 Financial liabilities Hire purchase liabilities 2008 2007 Totals 2008 2007	4,520,882 10,391,336 – – – – 4,520,882 10,391,336 – – – –	– – 7,429,926 2,029,950 519,117 526,898 7,949,043 2,556,848 298,199 523,967 298,199 523,967	4,520,882 10,391,336 6.96% 2.43% At call At call 7,429,926 2,029,950 7.71% 6.20% 73 90 519,117 526,898 7.86% 6.93% 93 86 12,469,925 12,948,184 298,199 523,967 9.26% 7.17% 914 281 298,199 523,967

[1] As at 30 June 2007, the Group held cash and cash equivalents in US dollars of USD 8,161,046. Of this amount, USD 5,490,870 was held on deposit at an interest rate of 1.65%. The remaining USD 2,670,176 was held on deposit at an interest rate of 5.17%. Immediately after 30 June 2007, 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 ($111,117) and between one and five years ($187,082).

GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2008

38. FINANCIAL RISK MANAGEMENT (cont.)

Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and cash equivalents and the availability of funding through an adequate amount of committed credit facilities, such as its hire purchase and credit card facilities. The Group manages liquidity risk by continuously monitoring forecast and actual cash flows and, wherever possible, matching the maturity profiles of financial assets and liabilities. Due to the dynamic nature of the underlying businesses, Management aims to maintain flexibility in funding by keeping committed credit lines available. Surplus funds are generally only invested in instruments that are tradeable in highly liquid markets.

The remaining contractual maturities of the financial liabilities of the Group and Genetic Technologies Limited are:

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CONSOLIDATED GENETIC TECHNOLOGIES LIMITED
2008 2007 2008 2007
$ $ $ $
Financial liabilities
Less than 6 months 1,840,837 1,783,255 2,352,257 2,411,298
6 months to 12 months 56,692 257,415 56,692 257,415
1 year to 5 years 187,082 46,949 187,082 46,949
Greater than 5 years – – – –
Total financial liabilities 2,084,611 2,087,619 2,596,031 2,715,662
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A balanced view of cash inflows and outflows affecting the Group and the Company are summarised in the tables below:

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< 6 MONTHS 6 TO 12 MONTHS 1 TO 5 YEARS [>] 5 YEARS TOTALS
CONSOLIDATED YEAR $ $ $ $ $
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Financial assets Cash at bank/on hand 2008 2007 Short-term deposits 2008 2007 Trade and other receivables 2008 2007 Performance bond and deposits 2008 2007 Available-for-sale investments 2008 2007 Total financial assets 2008 2007 Financial liabilities Trade and other payables 2008 2007 Hire purchase liabilities 2008 2007 Total financial liabilities 2008 2007 Net maturity 2008 2007	5,490,846 11,303,764 7,429,926 2,029,986 1,596,738 646,946 69,117 76,898 – – 14,586,627 14,057,594 1,786,412 1,563,652 54,425 219,603 1,840,837 1,783,255 12,745,790 12,274,339	– – – – – – 450,000 – – – 450,000 – – – 56,692 257,415 56,692 257,415 393,308 (257,415)	– – – – – – – 450,000 207,195 233,330 207,195 683,330 – – 187,082 46,949 187,082 46,949 20,113 636,381	– – – – – – – – – – – – – – – – – – – –	5,490,846 11,303,764 7,429,926 2,029,986 1,596,738 646,946 519,117 526,898 207,195 233,330 15,243,822 14,740,924 1,786,412 1,563,652 298,199 523,967 2,084,611 2,087,619 13,159,211 12,653,305

FINANCIAL STATEMENTS (cont.)

38. FINANCIAL RISK MANAGEMENT (cont.)

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Liquidity risk (cont.)
[<] 6 MONTHS 6 TO 12 MONTHS 1 TO 5 YEARS [>] 5 YEARS TOTALS
GENETIC TECHNOLOGIES LIMITED YEAR $ $ $ $ $
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Financial assets Cash at bank/on hand 2008 2007 Short-term deposits 2008 2007 Trade and other receivables 2008 2007 Performance bond and deposits 2008 2007 Available-for-sale investments 2008 2007 Total financial assets 2008 2007 Financial liabilities Trade and other payables 2008 2007 Hire purchase liabilities 2008 2007 Total financial liabilities 2008 2007 Net maturity 2008 2007	4,520,882 10,391,337 7,429,926 2,029,950 398,786 292,292 69,117 76,898 – – 12,418,711 12,790,477 2,297,832 2,191,695 54,425 219,603 2,352,257 2,411,298 10,066,454 10,379,179	– – – – – – 450,000 – – – 450,000 – – – 56,692 257,415 56,692 257,415 393,308 (257,415)	– – – – – – – 450,000 207,195 233,330 207,195 683,330 – – 187,082 46,949 187,082 46,949 20,113 636,381	– – – – – – – – – – – – – – – – – – – –	4,520,882 10,391,337 7,429,926 2,029,950 398,786 292,292 519,117 526,898 207,195 233,330 13,075,906 13,473,807 2,297,832 2,191,695 298,199 523,967 2,596,031 2,715,662 10,479,875 10,758,145

An analysis of the aging of trade and other receivables and trade and other payables is provided below:

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CONSOLIDATED GENETIC TECHNOLOGIES LIMITED
2008 2007 2008 2007
$ $ $ $
Trade and other receivables
Current (less than 30 days) 1,442,167 481,043 293,786 292,292
31 days to 60 days 23,897 77,764 – –
61 days to 90 days (note) 17,035 60,926 – –
Greater than 90 days (note) 113,639 27,213 5,622,825 9,177,574
Total trade and other receivables (Notes 10 and 14) 1,596,738 646,946 5,916,611 9,469,866
Trade and other payables
Current (less than 30 days) 1,655,450 1,431,817 545,140 1,012,395
31 days to 60 days 7,738 55,131 99 –
61 days to 90 days 1,814 63,448 – 44,523
Greater than 90 days (note) 121,410 13,256 1,752,593 1,134,777
Total trade and other payables (Note 19) 1,786,412 1,563,652 2,297,832 2,191,695
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Note: Trade and other receivables for Genetic Technologies Limited that are greater than 90 days include net amounts receivable from whollyowned subsidiaries of $5,517,825 (2007: $9,177,574) (refer Note 14). Trade and other payables for Genetic Technologies Limited that are greater than 90 days include amounts payable to wholly-owned subsidiaries of $1,640,320 (2007: $1,134,778) (refer Note 19). The loans to and from these subsidiaries are interest free and there are no fixed terms of repayment.

A total of $130,674 in trade and other receivables greater than 60 days is past due, of which a total of $121,540 had been received prior to the date of this Financial Report. The Company considers that the remaining $9,134 is recoverable and not impaired.

GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2008

38. FINANCIAL RISK MANAGEMENT (cont.)

Liquidity risk (cont.)

The Group had access to the following undrawn borrowing facilities as at 30 June 2008:

	FACILITY LIMIT	AMOUNT USED	AMOUNT AVAILABLE
NATURE OF FACILITY	$	$	$

Master Asset Finance Facility	2,500,000	(298,199)	2,201,801
Credit card facility	145,000	(32,272)	112,728

Note: The Master Asset Finance Facility may be drawn at any time and is subject to annual review.

Fair value estimation

As at 30 June 2008, the Group’s financial assets and liabilities have been recognised 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. Consumables : the carrying amount approximates fair value.

Performance bond and deposits : the carrying amount approximates fair value due to their 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.

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CONSOLIDATED GENETIC TECHNOLOGIES LIMITED
2008 2007 2008 2007
$ $ $ $
39. AUDITORS’ REMUNERATION
Audit services
Ernst & Young Australia in respect of:
Audit of the Company’s Financial Report 177,500 410,274 177,500 410,274
Other audit firms in respect of:
Audit of the Financial Reports of subsidiaries 8,241 9,158 – –
Total remuneration in respect of audit services 185,741 419,432 177,500 410,274
Non-audit services
Ernst & Young Australia in respect of:
Tax advice and compliance services 38,350 55,095 38,350 55,095
Total auditors’ remuneration 224,091 474,527 215,850 465,369
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40. SUBSEQUENT EVENTS

On 22 July 2008, the Company acquired 100% of the issued capital of Frozen Puppies Dot Com Pty. Ltd. (‘FPDC’), Australia’s foremost provider of canine reproductive services. Under the terms of the Agreement between, Genetic Technologies Limited (‘GTG’) and FPDC, GTG acquired 100% of the issued share capital of FPDC in return for the issue to the FPDC shareholders of 12,254,902 ordinary shares in GTG and the payment of $153,160 in cash. As part of the acquisition, GTG advanced $346,840 in loan funds to FPDC to enable shareholder loans to be repaid and Employment Agreements were executed between the Company and the principals of FPDC. Voluntary Restriction Agreements were also executed with all FPDC shareholders. As a result, 80% of the 12,254,902 GTG shares that were issued as part of the acquisition are subject to voluntary escrow and will be released in four equal tranches after the expiration of 6, 12, 18 and 24 months from the date of issue.

On 27 August 2008, the Company sold its entire interest in the North Laverton Joint Venture to its partner, Regis Resources Limited (‘Regis’), in return for the payment of $100,000 in cash and 500,000 fully paid ordinary shares in Regis. As part of the sale, the Company will also have returned to it a performance bond which had a face value of $68,917 as at 30 June 2008. Further, the Company has been fully indemnified by Regis against any future rehabilitation liabilities which may arise from the exploration activities of the Joint Venture undertaken up to the date of sale which will enable the Company, during the year ending 30 June 2009, to reverse the provision of $94,987 in respect of such liabilities as at 30 June 2008.

Apart from these transactions, there have been no other significant events which have 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 2008 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 2008.

On behalf of the Board.

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HENRY BOSCH AO

Non-Executive Chairman

Melbourne, 27 August 2008

GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2008

AUDITOR’S INDEPENDENCE DECLARATION

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AUDITOR’S REPORT

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GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2008

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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 29 August 2008.

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 29 August 2008, ranked by size of holding, in each class of shares are as follows:

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RANGE OF SHARES NUMBER OF HOLDERS NUMBER OF SHARES
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1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over Totals	284 974 585 1,056 214 3,113	200,167 2,951,659 4,923,655 35,331,193 331,238,127 374,644,801

The number of shareholders holding less than a ‘marketable parcel’ of shares (being 5,814 shares) is 1,301. The total number of shares held by these shareholders on 29 August 2008 was 3,384,492.

TWENTY LARGEST SHAREHOLDERS

The names of the twenty largest registered shareholders of the Company’s ordinary shares as at 29 August 2008 are:

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RANK NAME OF REGISTERED SHAREHOLDER NUMBER OF SHARES PERCENTAGE HELD
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1 JGT ApS 2 Mervyn Jacobson ApS 3 Lupetto Holdings Limited 4 Security & Equity Resources Limited 5 C.Y. O’Connor ERADE Village Foundation 6 ANZ Nominees Limited 7 Mr. Bernard Stang and Mr. Maurie Stang (superannuation account) 8 Dr. Mervyn Jacobson = 9 Mr. John F. Newell = 9 Mr. Anthony T. Wiseman 11 Citicorp Nominees Pty. Ltd. 12 Mr. Maurie Stang 13 XY, Inc. 14 Mr. Bernard Stang 15 Fodiro Pty. Ltd. 16 Claverdon (Vic) Pty. Ltd. 17 Austock Nominees Pty. Ltd. 18 Kale Capital Corporation Limited 19 Mr. John V. Egan 20 Mr. Maurice Rosenstein Totals	98,000,000 49,000,000 31,480,452 25,918,214 16,666,667 8,285,392 5,100,000 3,931,900 3,921,569 3,921,569 3,785,690 3,550,221 3,340,700 3,332,766 2,886,983 2,110,729 2,100,000 1,790,650 1,764,000 1,687,000 272,574,502	26.16% 13.08% 8.40% 6.92% 4.45% 2.21% 1.36% 1.05% 1.05% 1.05% 1.01% 0.95% 0.89% 0.89% 0.77% 0.56% 0.56% 0.48% 0.47% 0.45% 72.76%

GENETIC TECHNOLOGIES LIMITED ANNUAL REPORT 2008

SUBSTANTIAL SHAREHOLDERS

As at 29 August 2008, 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:

NAME OF SUBSTANTIAL SHAREHOLDER	NUMBER OF SHARES	PERCENTAGE HELD

Dr. Mervyn Jacobson	150,931,900	40.29%
Fred Bart	25,918,214	6.92%

RESTRICTED SECURITIES

As at 29 August 2008, a total of 3,333,333 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. A further

9,803,922 ordinary shares held by the former shareholders of Frozen Puppies Dot Com Pty. Ltd. were also subject to escrow as at that date (refer Note 40).

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).’

COMPANY DIRECTORY

DIRECTORS

Henry Bosch AO Non-Executive Chairman

Michael B. Ohanessian Chief Executive Offi cer Fred Bart Non-Executive

AUDITORS

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

BANKERS

David Carruthers Non-Executive

John S. Dawkins AO Non-Executive

Dr. Mervyn Jacobson Non-Executive

Dr. Leanne Rowe AM Non-Executive

COMPANY SECRETARY

Thomas G. Howitt

REGISTERED OFFICE

60-66 Hanover Street Fitzroy VIC 3065, Australia Telephone +61 3 8412 7000 Facsimile +61 3 8412 7040 Email [email protected]

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

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

Designed and produced by theballgroup.com.au – GTG0005 10/08

Genetic Technologies Limited

60-66 Hanover Street Fitzroy, Victoria 3065 Australia Telephone +61 3 8412 7000 Facsimile +61 3 8412 7040

www.gtg.com.au

AI assistant

GENETIC TECHNOLOGIES LIMITED — Annual Report 2008

65022_rns_2008-10-14_30e77467-0fae-499d-8f05-bf9aeca318c1.pdf

ANNUAL REPORT 2008

CONTENTS

LETTER FROM THE CHAIRMAN

Dear shareholders,

During the 2008 fi nancial year, Genetic Technologies Limited continued to make considerable progress on a number of fronts.

HENRY BOSCH AO

LETTER FROM THE CEO

Dear shareholders,

FIVE-YEAR FINANCIAL HISTORY

FIVE-YEAR FINANCIAL HISTORY

SHARE PRICE

DIRECTORS

Names, qualifications, experience and special responsibilities

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

Michael B. Ohanessian , BEng (Hons), MBA ( Chief Executive Officer )

Fred Bart , ( Non-Executive )

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

DIRECTORS (cont.)

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

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

Dr. Mervyn Jacobson , MBBS ( Non-Executive )

Dr. Leanne Rowe AM , MD, MB, BS, FRACGP, Dip. RACOG, FAICD ( Non-Executive )

Company Secretary

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

DIRECTORS (cont.)

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

EARNINGS PER SHARE

DIVIDENDS

CORPORATE INFORMATION

Corporate structure

Nature of operations and principal activities

CORPORATE INFORMATION (cont.)

Group overview

Operating results for the year

CORPORATE INFORMATION (cont.)

Review of financial condition

Capital structure

Treasury and related policies

Cash from operations

Liquidity and funding

Risk management

Employees

Statement of compliance

LIKELY DEVELOPMENTS AND EXPECTED RESULTS

SHARE OPTIONS

Unissued shares under option

Shares issued as a result of the exercise of options

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

SIGNIFICANT EVENTS AFTER BALANCE DATE

INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS

REMUNERATION REPORT (AUDITED)

Introduction

Details of Key Management Personnel

Corporate Governance Committee

REMUNERATION REPORT (AUDITED) (cont.)

Remuneration strategy

Remuneration structure

Non-Executive Director remuneration

Objective

Structure

Executive remuneration

Objective

Structure

REMUNERATION REPORT (AUDITED) (cont.)

Fixed remuneration

Objective

Structure

Variable remuneration

Objective

Short Term Incentive (‘STI’)

REMUNERATION REPORT (AUDITED) (cont.)

Variable remuneration (cont.)

Long Term Incentive (‘LTI’)

Employment contracts

DIRECTORS’ REPORT (cont.)

REMUNERATION REPORT (AUDITED) (cont.)

Remuneration of Key Management Personnel

GENETIC TECHNOLOGIES LIMITED Annual Report 2008