EX-99.1 2 a11-24999_3ex99d1.htm EX-99.1

Exhibit 99.1

GENETIC TECHNOLOGIES LIMITED

A.B.N. 17 009 212 328

ASX Appendix 4E

Preliminary Final Report

for the year ended

30 JUNE 2011

GENETIC TECHNOLOGIES LIMITED

ASX Appendix 4E — 30 June 2011

ASX APPENDIX 4E

The following information for Genetic Technologies Limited (“GTG” and the “Company”) is provided under Listing Rule 4.3A of the Listing Rules of the Australian Securities Exchange (“ASX”). The financial information provided in this Appendix 4E covers the consolidated Group, comprising Genetic Technologies Limited (the parent entity) and all entities that the Company controlled from time to time during the year and at the reporting date (30 June 2011). The date of this Appendix 4E is 25 August 2011.

1. The reporting period covers the financial year ended 30 June 2011 (“Reporting Period”). The previous corresponding period is the financial year ended 30 June 2010 (“Previous Period”).

2. Results for announcement to the Market:

		Reporting Period		Movement from Previous Period
2.1	Consolidated revenue from ordinary activities	$	18,275,701	Increased by $9,620,426	Increased by 111%
2.2	Consolidated profit from ordinary activities after tax attributable to Members of the Company	$	901,341	Increased by $10,256,550	See note below
2.3	Consolidated profit for the Reporting Period attributable to Members of the Company	$	910,002	Increased by $10,253,768	See note below
2.4	No dividends were paid during the Reporting Period nor are any proposed.
2.5	There is no record date for determining dividend entitlements.
2.6	All matters pertaining to the figures above are described elsewhere in this Appendix 4E.

Note: no percentage movements have been reported as a profit was generated during the Reporting Period whilst a loss was incurred during the Previous Period. As such, percentage comparisons are meaningless.

3. The audited Consolidated Statement of Comprehensive Income for the consolidated Group covering the Reporting Period and the Previous Period is provided on page 24 of the attached Financial Report.

4. The audited Consolidated Balance Sheet for the consolidated Group covering the Reporting Period and the Previous Period is provided on page 25 of the attached Financial Report.

5. The audited Consolidated Statement of Cash Flows for the consolidated Group covering the Reporting Period and the Previous Period is provided on page 26 of the attached Financial Report.

6. A Statement of Changes in Equity Statement covering the Reporting Period and the Previous Period is provided on page 27 of the attached Financial Report. A Statement of Accumulated Losses covering the Reporting Period and the Previous Period is attached as Note 23 on page 47 of the attached Financial Report.

7. No dividends were paid during the Reporting Period or the Previous Period, nor are any proposed as at the date of this Appendix 4E.

8. The Company does not have a Dividend Reinvestment Plan as at the date of this Appendix 4E.

9. The consolidated net tangible assets as at the end of the Reporting Period were 1.26 cents per share. The corresponding figure as at the end of the Previous Period was 1.03 cents per share.

10. On 1 June 2011, a former subsidiary, Frozen Puppies Dot Com Pty. Ltd., was deregistered. This company had been dormant following the termination of its former business in 2010.

11. During the Reporting Period, the consolidated Group held no interests in any associated entities.

12. Apart from the information contained in the attached Financial Report and elsewhere in this Appendix 4E, there is no other significant information needed by an investor to make an informed assessment of the Company’s financial performance and financial position as at the Reporting Date.

13. The Company is not a foreign entity.

14. Commentary on the financial results

Overview

During the 2011 financial year, Genetic Technologies Limited and its subsidiaries generated consolidated gross revenues from continuing operations and other revenue of $18.3 million, representing a 111% increase over the corresponding figure for the 2010 year of $8.7 million. This result was largely due to a 266% increase in revenues from the Company’s out-licensing activities, which saw 11 new licenses granted during the year, partially off-set by a 6% fall in revenues from the Company’s genetic testing business as a result of certain divestments and restructures made during the year which improved net earnings.

The increase in gross revenues, together with savings made from an ongoing cost reduction / containment program, delivered the Company’s maiden profit for the 2011 financial year. After adjusting for various non-cash items, including amortisation and depreciation ($617,000) and impairment losses and other write-downs ($269,000), the net profit after tax of $901,000 delivered positive net cash flows from operations of $2.2 million and an increase in total cash reserves of $1.8 million. As at 30 June 2011, the Group’s total cash reserves had increased to $5.1 million, up 54% from the balance held at the beginning of the year.

In July 2011, the Company completed a successful private placement of 60 million ordinary shares to sophisticated and institutional investors at an issue price of $0.195 per share. The total net funds generated from the placement, after the payment of associated costs, of $10.9 million together with the Company’s existing cash reserves resulted in an increase in the Group’s total cash reserves to in excess of $15 million as at 31 July 2011.

Operations

Considerable work was undertaken during the year to prepare the Company’s BREVAGenTM breast cancer risk test for its US launch, which occurred in mid June 2011.

After an extensive analysis of the various testing options available for the BREVAGenTM test in both the US and elsewhere, a decision was taken to utilise the Company’s existing laboratory in Fitzroy, Victoria to serve the international markets. It is anticipated that the additional volume of tests from the US market will help to generate material improvements in both efficiency and profitability of the Company’s Australian laboratory. Having the laboratory approved for the testing of samples from the US involved the preparation and submission of a detailed validation package to the Centers for Medicare and Medicaid Services (“CMS”) who would review the package with a view to granting the laboratory certification under the Clinical Laboratory Improvement Amendments of 1988 (“CLIA”).

The Company’s submission to CMS was lodged in October 2010 with CLIA certification subsequently being received in April 2011. The Company’s laboratory is the only such laboratory in Australia to receive such certification and is one of only a handful around the world that is accredited to serve the global genetic services market. Having obtained CLIA certification, the Company can offer high-complexity medical testing services to US patients via its wholly-owned US subsidiary Phenogen Sciences Inc. and may also add further cancer management products to its test menu without need for further detailed regulatory applications.

Concurrently with the completion of tasks associated with the certification process, Phenogen Sciences Inc. leased premises in Charlotte, North Carolina from which the US BREVAGenTM business is now based. Staff were then hired to support the establishment of the US sales operations as well as to attend to the systems required to receive US samples and to address the logistics of receiving and logging the samples.

In the months immediately preceding the launch of the BREVAGenTM test in June 2011, eight experienced Regional Business Managers were recruited to form the first members of the Phenogen Sciences US sales force. These individuals are based in the US States of Texas (two), Washington, Connecticut, Ohio, Illinois, North Carolina and Missouri from where they service these and the surrounding States.

Integral to the success of the BREVAGenTM test, continuing discussions have been held in the US with prominent key opinion leaders (“KOLs”) in order to refine messaging and to identify KOLs who can aid in the development and implementation of further clinical studies and trials necessary for the wide scale roll-out of the test. It was helpful in this regard that, in October 2010, the prestigious Journal of the National Cancer Institute published a peer reviewed article favourably supporting the BREVAGenTM test, particularly for women at intermediate risk.

To assist in the management of the BREVAGenTM roll-out in the US, the Company has identified and appointed a number of key US-based partner suppliers and a considerable amount of work has been undertaken in the critical areas of reimbursement and payer strategy and management.

In Australia, GTG continues to promote its brand, products and services to the medical oncology market through attendance at five Australasian medical conferences ranging from general oncology at MOGA and COSA to specialist conferences covering breast cancer (kConfab and ASBD) and gastro-intestinal cancer (AGITG). The purpose of this work is to identify key contacts and secure customer introductions as well as to inform clinicians of the latest developments in molecular testing that are available to them.

Reaction to the Company’s approaches has been favourable and often reflected in the theme for the conference. For example, at MOGA, the theme of personalised medicine coincided with the recent launch of a number of tests offered by Genetic Technologies. Of major interest is the test for the cancer of unknown primary (“CUP”), which is now being sold by the Company, and a test used to identify Mesothelioma which is aimed at the legal market. Outside Australia, the Company was successful in securing a contract with the Malaysian Breast Cancer Centre (CARIF) for the exclusive provision of BRCA testing.

In the paternity area, GTG was again successful in renewing its two-year contract with Queensland Legal Aid Department and has established business relationships with a number of other State Government legal aid departments. Additional paternity work has also been sourced from a distributor operating in Western Europe.

In the human forensics area, the conclusion of a successful three year contract with NSW Police resulted in an invitation to take up a fourth year option extending work into complex volume crime (“CVC”). New processes, coupled with the subsequent unbudgeted test volume in the second half of the year resulted in turnaround times 40 percent faster than stipulated in the contract. Genetic Technologies’ reputation in this field continues to grow with work also now being received from the private legal market.

In the Company’s animal testing business, a new online animal forensics program has been developed. This accredited course is aimed at veterinarians and council rangers who have to deal with animal attacks. A first of its kind for Australia, it recognises the increasing number of animal, mainly dog, related cases showing up in an increasingly urbanised environment.

Also in the animal area, GTG’s presence was extended further around Asia, with established customers in Japan and China’s breeder markets becoming more fully engaged including an agreement with the largest canine breed club, the China Kennel Union (“CKU”). GTG secured a multi-year contract to market tests to the CKU’s 176,000 members with all tests being processed in the Company’s Fitzroy laboratory. A distribution agreement with Plaridel has also secured business in the Philippines as has an agreement with the Singapore Kennel Club for genetic testing on behalf of their members.

In Australia/New Zealand, a sales network has been established to conduct DNA clinics at prominent dog shows across the country to increase awareness and sales. An agreement with Gribbles Veterinary Pathology has enabled tests to be marketed to veterinarian practices, complimenting the Company’s current breeder-specific sales channels.

Licensing

During the 2011 year, the Company continued to actively pursue the assertion of its non-coding DNA technologies in the USA in collaboration with its Colorado-based law firm Sheridan Ross PC. The initial patent infringement suit filed in April 2010 against nine parties in the US District Court, Western District of Wisconsin was successfully concluded in April 2011 with all suits being concluded prior to proceeding to trial.

In January 2011, a second US infringement suit was filed, this time against six parties associated with Sonic Healthcare Limited, in the US District Court, Western District of Texas. As at the date of this Appendix 4E, settlement negotiations continue. In May 2011, a third US infringement suit was filed by the Company, this time against ten parties in the US District Court, District of Colorado. Subsequent to filing the case, a Settlement and License Agreement was executed between the Company and Navigenics Inc. Settlement negotiations with several of the other parties to the Colorado case have commenced. This program continues to be a valuable source of capital for the Company and has become for more predictable in recent years.

All three patent infringement suits are being prosecuted by Sheridan Ross PC, who has in the past successfully asserted and defended GTG’s intellectual property rights globally and has assembled a team of six partners and associates to support the case. Importantly, the Company has put in place arrangements pursuant to which it believes that the costs associated with the patent infringement suit should not have a material adverse impact on its finances.

In addition to the Company’s licensing activities in the USA, the Company continues to actively pursue licenses in Europe. This program is prosecuted via the highly diligent and professional activities of the Company’s expert IP licensing advisors and its in-house licensing team. During the 2011 financial year, a total of three new licenses were granted to European-based companies generating considerable revenues for the Company. These licenses were material in size and contributed to the strong financial results for the year. Discussions with a number of other such parties continue.

15. The financial information contained in this Preliminary Final Report is based on the attached Financial Report for the year ended 30 June 2011 which has been audited by PricewaterhouseCoopers, the Company’s auditor.

16. Not applicable.

17. The Audit Report contained in the attached Financial Report for the year ended 30 June 2011 contains no qualifications.

GENETIC TECHNOLOGIES LIMITED

A.B.N. 17 009 212 328

Financial Report

for the year ended

30 JUNE 2011

GENETIC TECHNOLOGIES LIMITED

2011 Financial Report

CORPORATE INFORMATION

Directors
Sidney C. Hack (Non-Executive Chairman)
Tommaso Bonvino (Non-Executive)
Dr. Malcolm R. Brandon (Non-Executive)
Huw D. Jones (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:	info@gtglabs.com

Postal address		Company website
P.O. Box 115		www.gtglabs.com
Fitzroy Vic. 3065
Australia

Banker (Australia)		Banker (USA)
National Australia Bank Limited		Bank of America, N.A.
Level 2, 151 Rathdowne Street		155 Town Centre Drive
Carlton Vic. 3053		Mooresville NC 28117
Australia		USA

Auditor		Stock Exchanges
PricewaterhouseCoopers		Australian Securities Exchange	NASDAQ Capital Market
Chartered Accountants		Code: GTG	Ticker: GENE
Freshwater Place		Stock Exchange Centre	The NASDAQ Stock Market
2 Southbank Boulevard		2 The Esplanade	One Liberty Plaza, 165 Broadway
Southbank Vic. 3006		Perth W.A. 6000	New York NY 10006
Australia		Australia	USA

Share Register
Computershare Investor Services Pty. Ltd.
Yarra Falls, 452 Johnston Street
Abbotsford Vic. 3067
Australia

Telephone:	+61 3 9415 5000
Facsimile:	+61 3 9473 2500
Website:	www.computershare.com

DIRECTORS’ REPORT

The Directors submit their Report for the year ended 30 June 2011.

DIRECTORS

The names and details of the Directors of Genetic Technologies Limited who held office during the 2011 financial year and until the date of this Report are stated below, as are the periods during which they served.

Directors in office as at the date of this Report

Sidney C. Hack, CPA (Non-Executive Chairman)

In office from 1 July 2010 up to the date of this Report

Mr. Hack, 73, was appointed to the Board on 19 November 2008 and was appointed as its Chairman on 24 November 2009. He also serves as Chairman of both the Company’s Audit Committee and its Corporate Governance Committee. He is a Certified Practising Accountant and Registered Company Auditor and retired in 2006 after serving 30 years as a senior partner of Hack Anderson & Thomas, Chartered Accountants. Mr. Hack has extensive experience in large company audits, financial planning and taxation and has served on various other Boards during his career.

Tommaso Bonvino, FAICD (Non-Executive)

In office from 1 July 2010 up to the date of this Report

Mr. Bonvino, 50, was appointed to the Board on 25 November 2009 and also serves as a member of the Company’s Corporate Governance Committee. He has over 27 years experience in consumer marketing and product development and has managed companies for various Italian, Spanish and French firms, distributing and marketing goods throughout South-East Asia. He has established strong bilateral trade relationships between Australian and European companies in the technology and consumer goods sectors. Mr. Bonvino is also currently a non-executive Director of the Melbourne Recital Centre, a Fellow of the Australian Institute of Company Directors and was the former Managing Director and Chief Executive Officer of IM Medical Ltd., an ASX-listed company committed to the use of innovative technology to promote health and well being.

Dr. Malcolm R. Brandon, BScAgr, PhD (Non-Executive)

In office from 1 July 2010 up to the date of this Report

Dr. Brandon, 64, was appointed to the Board on 5 October 2009 and also serves as a member of the Company’s Audit Committee. He has spent his career in the biotech and life sciences sector where he has over 35 years experience in commercially focused research and development and in building successful companies which have commercialised a wide range of technologies. As the founding director of the Centre for Animal Biotechnology, a research arm within the University of Melbourne Veterinary Science School, he was responsible for fund raising and the development of many agricultural technologies and products. Dr. Brandon was a co-founder and Director of Stem Cell Sciences Ltd. and Smart Drug Systems Inc. and is the Chairman of genetics and artificial animal breeding company Clone International which uses cloning technologies to breed elite cattle, sheep and horses and to preserve the genetics of elite animals.

Huw D. Jones, BEng (Hons), MBA (Non-Executive)

In office from 1 July 2010 up to the date of this Report

Mr. Jones, 48, was appointed to the Board on 19 November 2008. He also serves as a member of the Company’s Audit Committee and its Corporate Governance Committee. He has 20 years’ experience in international sales and marketing in the health care industry and is a former Managing Director of Datex-Ohmeda, Australasia and a former Executive Director and CEO of Aeris Environmental Ltd.

Company Secretary

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

In office from 1 July 2010 up to the date of this Report

Mr. Howitt, 47, was appointed as the group’s Chief Financial Officer on 1 June 2004 and as its Company Secretary on 30 June 2005. During his 20-plus year career, he has served as CFO and Company Secretary for a number of companies, listed on both the ASX and foreign stock exchanges. His wide experience covers all facets of financial management and control across various industries, including resources and technology, having been instrumental in the successful development, patenting and commercialisation of several innovative technologies. He has played key roles in the raising of bank debt and equity capital and the management of complex due diligence programs and has worked as a senior Taxation Consultant for Ernst & Young and in the investment banking industry.

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

As at the date of this Report, the following Director holds an indirect beneficial interest in the shares of the Company:

Huw D. Jones

797,887 shares

Apart from the above, no Director holds any interest in the shares and options of the Company as at the date of this Report.

EARNINGS PER SHARE

Basic earnings per share (cents per share)	0.22
Diluted earnings per share (cents per share)	0.22

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:

On 1 June 2011, former subsidiary Frozen Puppies Dot Com Pty. Ltd. was deregistered.

Nature of operations and principal activities

The principal activity of the entities within the Group during the financial year was the provision of genetic testing services. The Company also conducted out-licensing of its intellectual property relating to “non-coding DNA” and research and development in the areas of genetics and related fields.

During the 2011 financial year, the Company terminated its reproductive services business. Also during the current year, the Company’s US subsidiary, Phenogen Sciences Inc., established a sales and distribution operation based in Charlotte, North Carolina from which the Group’s BREVAGenTM breast cancer risk test will be sold into the US marketplace.

Apart from these changes, there have been no significant changes in the nature of the Group’s activities during the financial year.

CORPORATE INFORMATION

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 AG had been formed in 1989 by Dr. Mervyn Jacobson and Dr. Malcolm Simons after they met and resolved to test the hypothesis that the non-coding or “junk” regions of DNA were in reality not “junk”, but a valuable and highly ordered reservoir of useful genetic information, a fact which had been overlooked by the scientific community up until that time. As a result of the acquisition of GeneType AG, the Company changed its business from mining to biotechnology and changed its name to Genetic Technologies Limited.

The Company has since established a fee-for-service genetic testing business that has become the largest non-government operation of its type in Australia. The business performs a wide variety of genetic tests on humans and animals which includes human diagnostics, forensics and animal pedigree tests. With the acquisition by the Company in April 2010 of the BREVAGenTM breast cancer risk test from the US, the Company launched its first test into a global market in June 2011.

The Company also conducts a successful out-licensing program in respect of its non-coding DNA technology and supports two distinct research projects.

Operating results for the year

Overview

Operations

Considerable work was undertaken during the year to prepare the Company’s BREVAGenTM breast cancer risk test for its US launch, which occurred in mid June 2011.

Reaction to the Company’s approaches has been favourable and often reflected in the theme for the conference. For example, at MOGA, the theme of personalised medicine coincided with the recent launch of a number of tests offered by Genetic Technologies. Of major interest, is the test for the cancer of unknown primary (“CUP”), which is now being sold by the Company, and a test used to identify Mesothelioma which is aimed at the legal market. Outside Australia, the Company was successful in securing a contract with the Malaysian Breast Cancer Centre (CARIF) for the exclusive provision of BRCA testing.

Licensing

In January 2011, a second US infringement suit was filed, this time against six parties associated with Sonic Healthcare Limited, in the US District Court, Western District of Texas. As at the date of this Report, settlement negotiations continue. In May 2011, a third US infringement suit was filed by the Company, this time against ten parties in the US District Court, District of Colorado. Subsequent to filing the case, a Settlement and License Agreement was executed between the Company and Navigenics Inc. Settlement negotiations with several of the other parties to the Colorado case have commenced. This program continues to be a valuable source of capital for the Company and has become for more predictable in recent years.

Review of financial condition

Capital structure

As at the date of this Report, the Company had a total of 464,605,152 fully paid ordinary shares on issue, all of which were listed on the Australian Securities Exchange, and on the NASDAQ Capital Market in the USA via the Company’s American Depositary Receipts. Also at that date, there were 19,650,000 unissued ordinary shares in the Company under option. On 27 July 2011, a total of 60,000,000 ordinary shares were issued by the Company by way of private placement at a price of $0.195 in cash (refer Note 35). As at the date of this Report, no ordinary shares were subject to voluntary escrow.

Treasury and related policies

The Company has in place a formal Cash Management Policy. The Company follows industry accepted leading practice by investing the Company’s cash assets in a range of short to medium term interest-bearing deposits with appropriately rated financial institutions.

Cash provided by operations

During the financial year, the consolidated net cash flows from operations were approximately $2.23 million. This result compared favourably to the net cash flows used in operations from the prior financial year of $4.30 million. Overall, the Group’s consolidated cash assets increased by approximately $1.80 million during the 2011 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”). As at 30 June 2011, the total outstanding liability in respect of this facility was $67,878 (refer Note 27). As at 30 June 2011, the Company had a corporate credit card facility with St. George Bank (a division of Westpac Banking Corporation), which had a total credit limit of $145,000. As at that date, a total liability of $18,786 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 overview 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 recent years, the Company has expanded its risk management activities with the establishment of a Risk Management Committee which meets to evaluate risks faced by the business and reports its findings back to the Audit Committee.

Statement of compliance

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

ENVIRONMENTAL REGULATION

The Company is not aware of any breaches of any environmental regulation during the 2011 financial year.

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

On 13 July 2010, the Company announced that it had granted a total of 12,000,000 options over ordinary shares in the Company to members of its Senior Leadership team. The options were issued pursuant to the Company’s Employee Share Option Plan, which was approved by shareholders on 19 November 2008, and each option entitles the holders to acquire one ordinary share in the Company at a price of $0.045 at any time up to, and including, 8 May 2015. The exercise price represented a 25% premium to the volume weighted average price of the Company’s shares on the ASX for the 20 trading days preceding the date on which the options were granted.

On 20 January 2011, the Company announced that it had filed a further patent infringement law suit in the USA, this time in the US District Court, Western District of Texas, Austin Division. The action followed the successful initial patent infringement law suit which GTG had filed in the US District Court, Western District of Wisconsin, in relation to infringement of the Company’s non-coding patents. The counterparties to the new action were companies associated with Sonic Healthcare Limited.

On 3 February 2011, GTG granted a further 500,000 options over ordinary shares in the Company to a senior employee. Each option, which was granted at nil cost, entitles the holder to acquire one ordinary share in the Company at a price of $0.045 at any time up to, and including, 30 September 2015.

On 13 April 2011, the Company announced that it had successfully concluded the first patent infringement law suit it had instigated in the US District Court, Western District of Wisconsin against nine US companies in February 2010.

On 27 April 2011, Company announced that it had gained certification of its Australian laboratory under the US Clinical Laboratories Improvements Amendments, as regulated by the Centers for Medicare and Medicaid in Baltimore, Maryland. This certification, which enables the Company to accept and test samples from US residents, was the culmination of preparations required for the US launch of the Company’s BREVAGenTM breast cancer risk test.

On 26 May 2011, Company announced that it had filed a third patent infringement law suit in the US District Court, District of Colorado, asserting infringement of its primary non-coding patent against ten parties including Agilent Technologies Inc., Bristol-Myers Squibb Company, GlaxoSmithKline PLC and Pfizer Inc.

Also on 26 May 2011, the Company granted a further 4,800,000 options over ordinary shares in the Company to a number of employees, including its newly-recruited US sales staff. Each option, which was granted at nil cost, entitles the holder to acquire one ordinary share in the Company at a price of $0.19 at any time up to, and including, 31 March 2016.

On 1 June 2011, former subsidiary Frozen Puppies Dot Com Pty. Ltd. was deregistered.

During the 2011 financial year, Genetic Technologies Limited executed Settlement and License Agreements in respect of the Company’s non-coding technologies with Monsanto Company, Beckman Coulter Inc. / Clinical Data Inc., Interleukin Genetics Inc., Innogenetics NV, Pioneer Hi-Bred International Inc., Qiagen NV, Sunrise Medical Laboratories, Orchid Cellmark Inc., ViennaLab Diagnostics GmbH, PIC USA Inc. and Navigenics Inc.

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 27 July 2011, the Company announced that it had issued by way of private placement a total of 60,000,000 ordinary shares in the Company to institutional and sophisticated investors in the USA and Australia. The placement, in which the shares were issued at a price of $0.195 each, raised a total of $11,700,000 in cash, before the payment of associated expenses of $767,919. All of the shares were issued in accordance with ASX Listing Rule 7.1 and, as such, shareholder approval for the placement was not required. Proceeds from the placement will be used to fund acquisition growth in the molecular diagnostics field focusing on women’s cancer and management, and to accelerate the roll-out of the Company’s lead cancer risk test BREVAGenTM in the USA.

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

LIKELY DEVELOPMENTS AND EXPECTED RESULTS

During the 2012 financial year, the Group will focus on the expansion of its genetic testing business, with emphasis on the sale of oncology-related tests and, in particular, the sale and distribution of the BREVAGenTM breast cancer risk test in the US through its wholly-owned subsidiary, Phenogen Sciences Inc.

Further, the Company, in conjunction with its US partner, will pursue its patent infringement suit in the United States in an effort to secure additional licenses to its proprietary non-coding technologies. Finally, the Company will continue its efforts to advance the commercialisation opportunities for its RareCellect and ImmunAid research projects.

SHARE OPTIONS

Unissued shares under option

As at the reporting date, there were 19,650,000 unissued ordinary shares in the Company under option. During the year ended 30 June 2011, a total of 17,300,000 options to acquire ordinary shares in the Company were granted. All options were granted at nil cost to the holders. Refer Note 25 to the attached financial statements for further details regarding the outstanding options.

Shares issued as a result of the exercise of options

During the 2011 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 2011 financial year, a total of 950,000 options that had previously been issued to employees lapsed. Of this number, a total of 200,000 options were forfeited, whilst the remaining 750,000 options expired. 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.

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 in his or her capacity as a Director or Officer to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the insurance provided 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.

REMUNERATION REPORT

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 six 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, Chief Financial Officer and Company Secretary, Chief Operating Officer, General Manager US Operations, VP Sales and Marketing and VP Legal and Corporate Development. There were six Executive positions within the Group during the 2011 financial year.

Details of Key Management Personnel

Directors	Executives
Sidney C. Hack (Non-Executive Chairman)	Dr. Paul D.R. MacLeman (Chief Executive Officer)
Tommaso Bonvino (Non-Executive)	Thomas G. Howitt (Chief Financial Officer and Company Secretary)
Dr. Malcolm R. Brandon (Non-Executive)	Alison J. Mew (Chief Operating Officer)
Huw D. Jones (Non-Executive)	Lewis J. Stuart (General Manager US Operations)
	Gregory J. McPherson (VP Sales and Marketing)
	Dr. David J. Sparling (VP Legal and Corporate Development)

Note: Mr. Stuart was appointed as General Manager of Phenogen Sciences Inc., the Company’s wholly-owned US subsidiary, on 5 July 2010.

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 Leadership Team. The Committee is chaired by Mr. Sidney Hack and has as its members Mr. Tommaso Bonvino and Mr. Huw Jones, both of whom are independent directors.

The Corporate Governance Committee has been established to assess the appropriateness of the nature and amount of remuneration paid to Directors and Executives 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 Senior Leadership Team.

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 Executive remuneration is separate and distinct.

During the 2011 financial year, the Company’s remuneration practices have been updated, enhanced and expanded to wherever possible provide a closer link between Executive performance-based remuneration and the overall strategic and financial performance of the Company.

The key performance indicators applicable for all Executives are now more quantifiable and the methods of measurement are better defined. Potential levels of remuneration are linked to each performance indicator based on the pretext that if the performance indicators as defined are met then the business will have more likely achieved certain key financial or strategic objectives. The results of these improvements have been reflected in the performance of the Company in the 2011 year.

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 2007 Annual General Meeting, 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 either of the two sub-committees of the Board.

Executive remuneration

Objective

The Group aims to reward Executives with a level and mix of remuneration which is 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 remuneration comprising base salary and superannuation, various short-term incentives (which are linked to agreed Key Performance Indicators (“KPIs”), as described below under the heading of Variable remuneration), and a long-term option component.

Fixed remuneration

Objective

The Corporate Governance Committee oversees the setting of fixed remuneration on an annual basis. The process consists of a review of Company, divisional and individual performance, relevant comparative remuneration in the market and internally and, where appropriate, external advice on policies and practices. The members of the Committee have 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 a motor vehicle allowance, costs associated with novated motor vehicle leases, vehicle 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 changes to the fixed remuneration of Executives are first approved by the Corporate Governance Committee.

All employee remuneration is evaluated on a regular basis using a set of variables and taking into account the addition of the statutory superannuation contribution. A detailed assessment of existing base salaries is made annually using comparisons against independent market data. This data provides information on salaries and other benefits paid for comparable roles within the biotech and pharmaceutical industries, using third party salary survey data. Annual performance reviews with each employee are based on a rating system which is then used to assess his or her eligibility for salary increases. Other qualitative factors, including the specialised knowledge and experience of the individual and the difficulty of replacing that person, are also taken into account when considering salary adjustments.

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 some Key Influencer employees and is based on both Company and individual performance during a given financial year. STI ranges vary depending on the role, responsibilities and deliverables achieved by each Executive or Key Influencer. Actual STI payments granted to the relevant employee will depend on the extent to which the pre-agreed specific targets are met within a financial year. Specific targets are quantifiable with the agreed method of measurement defined at the beginning of the financial year. The ongoing performance of the Executive or Key Influencer is evaluated regularly during the performance cycle.

Group objectives, and their relative weighting, vary depending on position and responsibility, but in respect of the year ending 30 June 2011 include, amongst other things, the achievement of:

· earnings before interest, tax, depreciation and amortisation (“EBITDA”) and net profit targets where an individual has capacity to impact this result;

· achieving or exceeding revenue targets;

· achieving targets for cost reduction or efficiency gains;

· contributing to business growth and expansion; and

· performance or the delivery of results which exceed agreed 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.

Achievement of an individual’s targets or objectives is documented and assessed by both the individual and his or her direct manager. The individual will participate in an annual performance review and must provide evidence of objectives delivered during the period under review. Each objective is then rated on an achievement scale. Depending on the aggregate of the ratings, the individual may be eligible to receive an STI payment. STI payments are paid in September of each year subject to the completion of the performance review document and the receipt of a satisfactory rating. The Board conducts this process in the case of the CEO.

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 2011, an STI payment of $51,000 was made to the Chief Executive Officer.

Long Term Incentive (“LTI”)

The objective of the Group’s LTI arrangements is to reward Executives in a manner that aligns their 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. Options with a vesting period also serve as a retention tool and may reduce the likelihood of high performing Executives being targeted by other companies.

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 Employee Option Plan. Selected Executives who contribute significantly to the long term profitability of the Company are invited to participate in the Employee Option Plan. 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.

The options, which are granted at no cost, generally have a life of between four and five years and, historically, vest fully by the end of three years from the date on which they are granted. However, in July 2010, a total of 12,000,000 options over ordinary shares in the Company were granted to Executives which vest pro-rata over a period of three years. During the year ended 30 June 2011, a net share-based payments expense of $253,851 was incurred by the Company in respect of options which had previously been granted to selected Executives and other 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, termination 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, Dr. Paul MacLeman, is employed under an employment contract which took effect on 4 May 2009. The key terms and conditions of Dr. MacLeman’s employment arrangements are:

· During the 2011 financial year, Dr. MacLeman received a base salary of $250,000 and statutory superannuation contributions as prescribed under the Superannuation Guarantee legislation. On 22 June 2011, Dr. MacLeman’s annual base salary was increased to $300,000 with effect from 1 July 2011;

· Dr. MacLeman is entitled to receive an STI payment equivalent to a maximum of 30% of his base salary based on achievement of Key Performance Indicators, as agreed with the Board from time to time;

· Dr. MacLeman may resign from his position, and thus terminate the contract, by giving up to five months written notice and the Company may terminate Dr. MacLeman’s contract by providing similar written notice or providing payment in lieu of the notice period; and

· the Company may terminate Dr. MacLeman’s contract at any time without notice if serious misconduct has occurred. Where termination with cause occurs, he is only entitled to receive that portion of remuneration which is fixed and only up to the date of termination. In this instance, all entitlements to both STI and LTI are forfeited and would lapse.

The key provisions contained in the employment contracts for other Key Management Personnel in office at the date of this Report, being Mr. Thomas Howitt, Ms. Alison Mew, Mr. Lewis Stuart, Mr. Greg McPherson and Dr. David Sparling, are:

· the Executive receives a base salary and statutory superannuation contributions, as prescribed under the Superannuation Guarantee legislation, together with certain STI payments based on achievement of Key Performance Indicators, as agreed with the Chief Executive Officer from time to time;

· the Executive may resign from his / her position and 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 both STI and LTI payments are forfeited and will lapse.

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

Remuneration of Key Management Personnel

		Short-term		Post-employment	Long-term	Share-based
Name and title of	Year	Salary/fees	Other	Superannuation	Long service leave	Options	Totals
		$	$	$	$	$	$
Directors
Sidney C. Hack	2011	24,500	—	51,800	—	—	76,300
Non-Executive Chairman	2010	16,474	—	51,077	—	—	67,551
Tommaso Bonvino	2011	50,000	—	4,500	—	—	54,500
Non-Executive Director	2010	29,935	—	2,694	—	—	32,629
Dr. Malcolm R. Brandon	2011	30,000	—	24,500	—	—	54,500
Non-Executive Director	2010	37,115	—	3,340	—	—	40,455
Huw D. Jones	2011	50,000	—	4,500	—	—	54,500
Non-Executive Director	2010	50,000	—	4,500	—	—	54,500
Fred Bart (note 1)	2011	—	—	—	—	—	—
Ex. Non-Executive Chairman	2010	28,134	—	2,532	—	—	30,666
Sub-totals for Directors	2011	154,500	—	85,300	—	—	239,800
	2010	161,658	—	64,143	—	—	225,801

Executives
Dr. Paul D.R. MacLeman	2011	250,000	51,000	27,090	594	54,450	383,134
Chief Executive Officer	2010	224,653	45,000	24,268	186	—	294,107
Thomas G. Howitt	2011	214,000	—	19,260	7,059	22,688	263,007
Chief Financial Officer and Company Secretary	2010	214,000	—	19,260	5,754	28,257	267,271
Alison J. Mew	2011	171,200	—	15,408	356	22,688	209,652
Chief Operating Officer	2010	133,948	—	12,055	78	—	146,081
Lewis J. Stuart (note 3)	2011	272,937	—	—	—	36,300	309,237
General Manager US ops.	2010	—	—	—	—	—	—
Gregory J. McPherson	2011	175,100	—	15,759	376	22,688	213,923
VP Sales and Marketing	2010	162,371	—	14,613	93	—	177,077
Dr. David J. Sparling	2011	185,400	—	16,686	368	22,688	225,142
VP Legal and Corp. Develop.	2010	115,846	—	10,426	76	—	126,348
Sub-totals for Executives	2011	1,268,637	51,000	94,203	8,753	181,502	1,604,095
	2010	850,818	45,000	80,622	6,187	28,257	1,010,884
Total remuneration of Key Management Personnel	2011	1,423,137	51,000	179,503	8,753	181,502	1,843,895
Total remuneration of Key Management Personnel	2010	1,012,476	45,000	144,765	6,187	28,257	1,236,685

Note: The Company and the Group had six Executives, as defined, during the year ended 30 June 2011.

The column above entitled “Other” of $51,000 (2010: $45,000) comprises bonuses (refer notes below).

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 IAS 24 / (AASB 124) Related Party Disclosures, or “senior manager” as defined in the Corporations Act 2001.

Notes:

(1) Mr. Bart resigned as Chairman of the Company on 24 November 2009.

(2) During the year ended 30 June 2011, Dr. MacLeman received an STI payment of $51,000 (2010: $45,000).

(3) Mr. Stuart was appointed as General Manager of Phenogen Sciences Inc., the Company’s wholly-owned US subsidiary, on 5 July 2010.

Options granted and vested as part of remuneration during the year ended 30 June 2011

During the 2011 financial year, certain options were granted as equity compensation benefits to Executives, as disclosed below. The options were issued at no charge and entitle the holder to acquire one fully paid ordinary share in the Company at the respective exercise price.

	Number of options		Exercise		Number	Fair value		Final
Name of Executive	Vested	Granted	price		expired	per option		vesting date
Dr. Paul D.R. MacLeman	—	3,600,000	$	0.045	—	$	0.02	8 July 2013
Thomas G. Howitt	—	1,500,000	$	0.045	—	$	0.02	8 July 2013
Thomas G. Howitt	1,000,000	—	$	0.22	—	$	0.084	23 October 2010
Thomas G. Howitt	—	—	$	0.48	750,000	$	0.139	Not applicable
Alison J. Mew	—	1,500,000	$	0.045	—	$	0.02	8 July 2013
Lewis J. Stuart	—	2,400,000	$	0.045	—	$	0.02	8 July 2013
Gregory J. McPherson	—	1,500,000	$	0.045	—	$	0.02	8 July 2013
Dr. David J. Sparling	—	1,500,000	$	0.045	—	$	0.02	8 July 2013
Totals	1,000,000	12,000,000			750,000

Options granted and vested as part of remuneration during the year ended 30 June 2010

During the 2010 financial year, certain options which had been granted as equity compensation benefits to Executives vested, as disclosed below. The options were issued at no charge and entitle the holder to acquire one fully paid ordinary share in the Company at the respective exercise price.

	Number of options		Exercise		Number	Fair value		Final
Name of Executive	Vested	Granted	price		expired	per option		vesting date
Thomas G. Howitt	62,500	—	$	0.53	—	$	0.197	12 August 2009
Totals	62,500	—			—

Fair values of options

During the year ended 30 June 2011, a total of 950,000 options that had previously been issued to employees lapsed. Of this number, a total of 200,000 options were forfeited, whilst the remaining 750,000 options expired. The lapsed options had no fair value on the date they lapsed as they were “out of the money”. No options were exercised during the year ended 30 June 2011 (refer Note 25 for details).

On 8 July 2010, a total of 12,000,000 options over ordinary shares in the Company were granted, at no cost, to members of the Company’s Senior Leadership Team. Each option, which entitles the holder to acquire one ordinary share at a cost of $0.045, will expire on 8 May 2015, unless exercised before that date. The options vest in three equal tranches after 12 months, 24 months and 36 months from the date of grant, respectively.

On 26 May 2011, a total of 4,800,000 options over ordinary shares in the Company were granted, at no cost, to Key Influencer employees of the Group. The majority of the options, which entitle the holder to acquire one ordinary share at a cost of $0.19, will expire on 31 March 2016, unless exercised before that date. The majority of the options vest in three equal tranches after 12 months, 24 months and 36 months from the date of grant, respectively.

The resulting weighted average fair values per option for options granted to those Executives nominated as Key Management Personnel vesting on or after 1 July 2011 are:

Name of Executive	Options	Grant date	Expiry date	Weighted ave. fair value
Dr. Paul D.R. MacLeman	3,600,000	8 July 2010	8 May 2015	$	0.0205
Thomas G. Howitt	1,500,000	8 July 2010	8 May 2015	$	0.0205
Alison J. Mew	1,500,000	8 July 2010	8 May 2015	$	0.0205
Lewis J. Stuart	2,400,000	8 July 2010	8 May 2015	$	0.0205
Gregory J. McPherson	1,500,000	8 July 2010	8 May 2015	$	0.0205
Dr. David J. Sparling	1,500,000	8 July 2010	8 May 2015	$	0.0205

AUDITOR INDEPENDENCE AND NON-AUDIT SERVICES

Auditor independence

The Directors have received an independence declaration from PricewaterhouseCoopers, the auditor of Genetic Technologies Limited, as reproduced immediately following the Directors’ Declaration on page 62 of the Financial Report.

Non-audit services

During the 2010 financial year, the auditor of Genetic Technologies Limited, PricewaterhouseCoopers, 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:

	Consolidated
	2011	2010
	$	$
Audit services
PricewaterhouseCoopers in respect of:
Audit of the Company’s Financial Report under the Corporations Act 2001	250,812	271,766
Other audit firms in respect of:
Audit of the Financial Reports of subsidiaries	15,403	17,013
Total remuneration in respect of audit services	266,215	288,779
Non-audit services
PricewaterhouseCoopers in respect of:
Accounting and other services	—	60,000
Other audit firms in respect of:
Tax advice and compliance, accounting and other services	14,388	16,514
Total remuneration in respect of non-audit services	14,388	76,514
Total auditors’ remuneration	280,603	365,293

ROUNDING OF AMOUNTS

The Company is of a kind referred to in Class Order 98/100, issued by the Australian and Securities and Investments Commission, relating to the “rounding off” of amounts in the Directors’ Report. Amounts in the Directors’ Report have been rounded off in accordance with that Class order to the nearest dollar.

DIRECTORS’ MEETINGS

Meeting attendances

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

			Sub-Committees of the Board
	Directors’ meetings		Audit		Corporate Governance
Name of Director	Eligible	Attended	Eligible	Attended	Eligible	Attended
Sidney C. Hack	14	14	2	2	1	1
Tommaso Bonvino	14	14	—	—	1	1
Dr. Malcolm R. Brandon	14	12	2	2	—	—
Huw D. Jones	14	14	2	2	1	1

Sub-committee membership

As at the date of this Report, the Company had two Sub-Committees of the Board of Directors: an Audit Committee and a Corporate Governance Committee. The individuals who served as members of the Sub-Committees during the 2011 financial year were:

	Audit Committee	Corporate Governance Committee
Name of Member	Period served	Period served
Sidney C. Hack	1 July 2010 to 30 June 2011	1 July 2010 to 30 June 2011
Tommaso Bonvino	Not applicable	1 July 2010 to 30 June 2011
Dr. Malcolm R. Brandon	1 July 2010 to 30 June 2011	Not applicable
Huw D. Jones	1 July 2010 to 30 June 2011	1 July 2010 to 30 June 2011

Notes:

(1) In accordance with the Charter, the auditor attended one meeting of the Audit Committee at the request of the Committee.

(2) Mr. Hack served as the Chairman of both Sub-Committees from 1 July 2010 to 30 June 2011.

Signed in accordance with a resolution of the Directors.

SIDNEY C. HACK

Non-Executive Chairman

Melbourne, 24 August 2011

CORPORATE GOVERNANCE STATEMENT

INTRODUCTION

Genetic Technologies Limited and its Board are committed to achieving and demonstrating the highest standards of corporate governance. The Board continues to review its corporate governance framework and practices to ensure they meet the interests of shareholders. The Company and its controlled entities together are referred to as the “Group” in this statement.

A description of the Group’s main corporate governance practices is set out below. All of these practices, unless otherwise stated, were in place for the entire year. They comply with the ASX Corporate Governance Principles and Recommendations (including 2010 Amendments). In most respects, Genetic Technologies Limited complies with the Recommendations however, in several areas, policies and practices are being further developed to bring them more closely into line. As new policies are produced, or as the existing ones are amended, they are 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 completely revised and subsequently approved by the Company’s shareholders in November 2005. All significant policies are published on the Company’s website (www.gtglabs.com).

· 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

Principle 1: Lay solid foundations for management and oversight

The relationship between the Board and Management is critical to the Group’s success. The Directors are responsible to the shareholders for the performance of the Group in both the short and the longer term and seek to balance sometimes competing objectives in the best interests of the Group as a whole. Their focus is to enhance the interests of shareholders and other key stakeholders and to ensure the Group is properly managed. The responsibilities of the Board include:

· providing strategic guidance to the Group, including contributing to the development of and approving the corporate strategy;

· reviewing and approving business plans, the annual budget and financial plans, including available resources and major capital expenditure initiatives;

· overseeing and monitoring:

· organisational performance and the achievement of the Group’s strategic goals and objectives;

· compliance with the Company’s Code of Conduct; and

· progress of major capital expenditures and other significant projects; including any acquisitions or divestments;

· monitoring financial performance, including approval of the annual and half-year financial reports and liaison with the Company’s auditors;

· appointment, performance assessment and, if necessary, removal of the Chief Executive Officer;

· ratifying the appointment and/or removal and contributing to the performance assessment for the members of the Senior Leadership Team;

· ensuring there are effective management processes in place for approving major corporate initiatives;

· enhancing and protecting the reputation of the organisation;

· overseeing the operation of the Group’s system for compliance and risk management reporting to shareholders; and

· ensuring appropriate resources are available to senior Management to enable them to implement the strategies approved by the Board.

Day-to-day management of the Group’s affairs and the implementation of the corporate strategy and policy initiatives are formally delegated by the Board to the Chief Executive Officer and senior executives as set out in the Group’s delegations policies. These delegations are reviewed by the Board on an annual basis.

A performance assessment for members of the Senior Leadership Team last took place in July 2011. The process for these assessments is described in the Remuneration Report on pages 7 to 13 of this Financial Report.

Principle 2: Structure the Board to add value

The Board operates in accordance with the broad principles set out in its Charter which is available from the corporate governance information section of the Company’s website (www.gtglabs.com). The Charter provides details of the Board’s composition and responsibilities.

Board composition

The Charter states that:

· the Board is to be comprised of both executive and non-executive Directors with a majority of non-executive Directors. Non-executive Directors bring a fresh perspective to the Board’s consideration of strategic, risk and performance matters;

· in recognition of the importance of independent views and the Board’s role in supervising the activities of Management, the Chairman must be an independent non-executive Director, the majority of the Board must be independent of Management and all Directors are required to exercise independent judgement and review and constructively challenge the performance of the Senior Leadership Team;

· the Chairman is elected by the full Board and is required to meet regularly with the Chief Executive Officer;

· the Company should, where possible, maintain a mix of Directors on the Board from different genders, age groups, ethnicity and cultural and professional backgrounds who have complementary skills and experience;

· the Board is to establish measurable Board gender diversity objectives and assess annually the objectives and progress made in achieving them; and

· the Board is required to undertake an annual Board performance review and consider the appropriate mix of skills required by the Board to maximise its effectiveness and its contribution to the Group.

The Board seeks to ensure that:

· at any point in time, its membership represents an appropriate balance between directors with experience and knowledge of the Group and directors with an external or fresh perspective; and

· the size of the Board is conducive to effective discussion and efficient decision-making.

Directors’ independence

The Board has adopted specific principles in relation to Directors’ independence. These state that when determining independence, a Director must be a non-executive and the Board should consider whether the Director:

· is a substantial shareholder of the Company or an officer of, or otherwise associated directly with, a substantial shareholder of the Company;

· is, or has been, employed in an executive capacity by the Company or any other Group member within three years before commencing his or her service on the Board;

· within the last three years has been a principal of a material professional adviser or a material consultant to the Company or any other Group member, or an employee materially associated with the service provided;

· is a material supplier or customer of the Company or any other Group member, or an officer of or otherwise associated directly or indirectly with a material supplier or customer;

· has a material contractual relationship with the Company or a controlled entity other than as a Director of the Group; and

· is free from any business or other relationship which could, or could reasonably be perceived to, materially interfere with the Director’s independent exercise of his or her judgement.

Materiality for these purposes is determined on both quantitative and qualitative bases. An amount of over five percent of annual turnover of the Company or Group or five percent of the individual Directors’ net worth is considered material for these purposes. In addition, a transaction of any amount or a relationship is deemed material if knowledge of it may impact the shareholders’ understanding of the Director’s performance.

Recent thinking on corporate governance has introduced the view that a Director’s independence may be perceived to be impacted by lengthy service on the Board. To avoid any potential concerns, the Board has determined that a Director will not be deemed independent if he or she has served on the Board of the Company for more than ten years. The Board will continue to monitor developments on this issue as they arise.

The Board assesses independence each year. To enable this process, the Directors must provide all information that may be relevant to the assessment.

Board members

Details of the members of the Board, their experience, expertise, qualifications, term of office, relationships affecting their independence and their independent status are set out in the Directors’ Report. As at the date of signing the Directors’ Report, all four Directors served as non-executive Directors and none had any relationships which may adversely affect their independence and, as such, they are deemed independent under the principles set out above.

Term of office

The Company’s Constitution specifies that all non-executive Directors must retire from office no later than the third Annual General Meeting (“AGM”) following his or her last election. Where eligible, a Director may stand for re-election.

Chairman and Chief Executive Officer (“CEO”)

The Chair is responsible for leading the Board, ensuring that Directors are properly briefed in all matters relevant to their role and responsibilities, facilitating Board discussions and managing the Board’s relationship with the Company’s senior executives. In accepting the position, the Chairman had acknowledged that it will require a significant time commitment and has confirmed that other positions will not hinder his or her effective performance in that role.

The CEO is responsible for implementing Group strategies and policies. The Board Charter specifies that these are separate roles to be undertaken by separate people.

Induction

The induction provided to new Directors enables them to actively participate in Board decision-making as soon as possible. It ensures that they have a full understanding of the Company’s financial position, strategies, operations, culture, values and risk management policies. It also explains the respective rights, duties, responsibilities, interaction and roles of the Board and the Senior Leadership Team and the Company’s meeting arrangements.

Commitment

The Board held fourteen Board meetings during the 2011 financial year. Non-executive Directors are expected to spend adequate time preparing for and attending Board and Sub-Committee meetings and associated activities. The number of meetings of the Company’s Board of Directors and of each Board Sub-Committee held during the year ended 30 June 2011, and the number of such meetings attended by each Director, is disclosed on page 14.

The commitments of all non-executive Directors are considered by the Corporate Governance Committee prior to the Director’s appointment to the Board and are reviewed each year as part of the annual performance assessment.

Prior to appointment or being submitted for re-election, each non-executive Director is required to specifically acknowledge that they have, and will continue to have, the time available to discharge their responsibilities to the Company.

Conflict of interests

In accordance with the Board Charter, all Directors are required to declare all interests in dealings with the Company and are required to take no part in decisions relating to them. In addition, those Directors are not entitled to receive any papers from the Group pertaining to those dealings. No such declarations were received from any Directors during the 2011 financial year.

Independent professional advice

All Directors and members of the Board’s two Sub-Committees have the right, in connection with their duties and responsibilities, to seek independent professional advice at the Company’s expense. Prior written approval of the Chairman is required, but such approval will not be unreasonably withheld.

Performance assessment

The Board undertakes an ongoing self-assessment of its collective performance, the performance of the Chairman and of its two Sub-Committees. The assessment also considers the adequacy of the Company’s induction and continuing education processes, access to information and the support provided by the Company Secretary.

Members of the Senior Leadership Team are invited to contribute to this appraisal process. The results and any action plans are documented together with specific performance goals which are agreed for the coming year. The Chairman undertakes an assessment of the performance of individual Directors and meets with each Director to discuss this assessment.

Board Sub-Committees

The Board has established two Sub-Committees to assist in the execution of its duties and to allow detailed consideration of complex issues. The current Sub-Committees of the Board are the Audit and Corporate Governance Committees. Each is comprised entirely of non-executive Directors. The Committee structure and membership is reviewed on an annual basis.

Each Sub-Committee has its own written Charter setting out its role and responsibilities, composition, structure, membership requirements and the manner in which the Sub-Committee is to operate. Both of these Charters are reviewed on an annual basis and are available on the Company’s website. All matters determined by the Sub-Committees are submitted to the full Board as recommendations for Board decisions.

Minutes of Sub-Committee meetings are tabled at the subsequent Board meeting. Additional requirements for specific reporting by the Sub-Committees to the Board are addressed in the Charter of the individual Sub-Committees.

Corporate Governance Committee

The Corporate Governance Committee consists of the following Directors (all of whom are independent):

Sidney C. Hack (Chairman)

Tommaso Bonvino

Huw D. Jones

Details of these Directors’ attendance at meetings of the Committee are set out in the Directors’ Report on page 14.

The Corporate Governance Committee operates in accordance with its Charter which is available on the Company’s website. The main responsibilities of the Committee are to:

· conduct an annual review of the membership of the Board, having regard to present and future needs of the Company and to make recommendations on Board composition and appointments;

· conduct an annual review of, and conclude on the independence of, each Director;

· propose candidates for Board vacancies;

· oversee the annual performance assessment program;

· oversee Board succession, including the succession of the Chairman, and review whether succession plans are in place to maintain an appropriately balanced mix of skills, experience and diversity on the Board; and

· assess the effectiveness of the induction process.

When a new Director is to be appointed, the Committee prepares a Board skills matrix to review the range of skills, experience and expertise on the Board, and to identify its needs. From this, the Committee prepares a short-list of candidates with appropriate skills and experience. A number of channels are used to source candidates to ensure the Company benefits from a diverse range of individuals in the selection process. Where necessary, advice is sought from independent search consultants.

The full Board then appoints the most suitable candidate who must stand for election at the Company’s next AGM. The Committee’s nomination of existing Directors for reappointment is not automatic and is contingent on their past performance, contribution to the Company and the current and future needs of both the Board and Company. The Board and the Committee are also aware of the advantages of Board renewal and succession planning.

Notices of meetings for the election of Directors comply with the ASX Corporate Governance Council’s best practice recommendations.

New Directors are provided with a letter of appointment setting out the Company’s expectations, their responsibilities, rights and the terms and conditions of their employment. All new Directors participate in a comprehensive, formal induction program which covers the operation of the Board and its Sub-Committees and financial, strategic, operations and risk management issues.

Principle 3: Promote ethical and responsible decision making

Code of conduct

The Company has developed a statement of values and a Code of Conduct (the “Code”) which has been fully endorsed by the Board and applies to all Directors. The Code is regularly reviewed and updated as necessary to ensure it reflects the highest standards of behaviour and professionalism and the practices necessary to maintain confidence in the Group’s integrity and to take into account legal obligations and reasonable expectations of the Company’s stakeholders.

In summary, the Code requires that at all times Directors and employees act with the utmost integrity, objectivity and in compliance with the letter and the spirit of the law and company policies.

The purchase and sale of Company securities by Directors and employees is governed by the Securities Trading Policy. Such trading is not permitted during the two-month periods immediately following the end of the Company’s two financial half-years, i.e. after 31 December and 30 June of each year. Any transactions undertaken by Directors outside of these periods must be notified to the Company Secretary in advance.

The Code requires employees who are aware of unethical practices within the Group or breaches of the Company’s Securities Trading Policy to report such breaches in compliance with the Company’s whistleblower program which can be done anonymously.

The Directors are satisfied that the Group has complied with its policies on ethical standards, including trading in the Company’s securities.

Copies of the Code and the Securities Trading Policy are available on the Company’s website.

Diversity policy

The Company values diversity and recognises the benefits it can bring to the organisation’s ability to achieve its goals. Accordingly, the Company is in the process of developing a diversity policy which will outline its diversity objectives in relation to gender, age, cultural background and ethnicity. It will include requirements for the Board to establish measurable objectives for achieving diversity, and for the Board to assess annually both the objectives, and the Company’s progress made in achieving them.

Principle 4: Safeguard integrity in financial reporting

Audit Committee

The Audit Committee consists of the following Directors (all of whom are independent):

Sidney C. Hack (Chairman)

Dr. Malcolm R. Brandon

Huw D. Jones

Details of these Directors’ attendance at meetings of the Committee are set out in the Directors’ Report on page 14.

All members of the Audit Committee are financially literate and have an appropriate understanding of the industry in which the Group operates. One member, Mr. Hack, has relevant qualification and experience by virtue of being a former partner of an accounting firm.

The Audit Committee operates in accordance with a Charter which is available on the Company’s website. The main responsibilities of the Committee are to:

· review, assess and approve the annual full and concise reports, the half-year financial report and all other financial information published by the Company or released to the Market;

· assist the Board in reviewing the effectiveness of the organisation’s internal control environment covering:

· effectiveness and efficiency of operations;

· reliability of financial reporting; and

· compliance with applicable laws and regulations;

· oversee the effective operation of the Company’s risk management framework;

· recommend to the Board the appointment, removal and remuneration of the external auditors, and review the terms of their engagement, the scope and quality of the audit and assess their performance;

· consider the independence and competence of the external auditor on an ongoing basis;

· review and approve the level of non-audit services provided by the Group’s external auditors and ensure that it does not adversely impact on the auditors’ independence;

· review and monitor all related party transactions and assess their propriety; and

· report to the Board on matters relevant to the Committee’s role and responsibilities.

In fulfilling its responsibilities, the Audit Committee:

· receives regular reports from Management and the Company’s external auditors;

· meets with the external auditors at least twice a year, or more frequently if necessary;

· reviews the processes the CEO and CFO have in place to support their certifications to the Board;

· reviews any significant disagreements between the auditors and Management, irrespective of whether they have been resolved; and

· provides the external auditors with a clear line of direct communication at any time to either the Chairman of the Audit Committee or, if necessary, the Chairman of the Board.

The Audit Committee has authority, within the scope of its responsibilities, to seek any information it requires from any employee or external party.

External auditors

The Company and Audit Committee policy is to appoint external auditors who clearly demonstrate quality of service and independence. The performance of the external auditor is reviewed annually and applications for tender of external audit services are requested as deemed appropriate, taking into consideration assessment of performance, existing value and tender costs. PricewaterhouseCoopers (“PwC”) was appointed as the external auditor in 2009. It is PwC’s policy to rotate audit lead engagement partners on listed companies at least every five years.

An analysis of fees paid to the external auditors, including a break-down of fees for non-audit services, is provided in the Directors’ Report and in Note 30 to the financial statements. It is the policy of the external auditors to provide an annual declaration of their independence to the Audit Committee which is reproduced in the Company’s Annual Report.

The external auditor will attend the Company’s AGM and be available to answer shareholder questions about the conduct of the audit and the preparation and content of the audit report.

Principles 5 and 6: Make timely and balanced disclosures and respect the rights of shareholders

Continuous disclosure and shareholder communication

The Company has written policies and procedures on information disclosure that focus on continuous disclosure of any information concerning the Group that a reasonable person would expect to have a material effect on the price of the Company’s securities. These policies and procedures also include the arrangements the Company has in place to promote communication with shareholders and encourage effective participation at general meetings. A summary of these policies and procedures is available on the Company’s website.

The Company Secretary has been nominated as the person responsible for communications with the Australian Securities Exchange (“ASX”). This role includes responsibility for ensuring compliance with the continuous disclosure requirements in the ASX Listing Rules and overseeing and co-ordinating information disclosure to the ASX, analysts, brokers, shareholders, the media and the public.

All information disclosed to the ASX is posted on the Company’s website as soon as it is disclosed to the ASX. When analysts are briefed on aspects of the Group’s operations, the material used in the presentation is released to the ASX and posted on the Company’s website. Procedures have also been established for reviewing whether any price sensitive information has been inadvertently disclosed and, if so, this information is also immediately released to the Market.

The Company’s website also enables users to provide feedback and has an option for shareholders to register their email address for direct email updates on Company matters.

All shareholders are entitled to receive a hard copy of the Company’s Annual and Half-Year Reports which are also available for download on its website.

Principle 7: Recognise and manage risk

The Board is responsible for satisfying itself annually, or more frequently as required, that Management has developed and implemented a sound system of risk management and internal control. Detailed work on this task is delegated to the Audit Committee and reviewed by the full Board.

The Audit Committee is responsible for ensuring there are adequate policies in relation to risk management, compliance and internal control systems. They monitor the Company’s risk management by overseeing Management’s actions in the evaluation, management, monitoring and reporting of material operational, financial, compliance and strategic risks. In providing this oversight, the Committee:

· reviews the framework and methodology for risk identification, the degree of risk the Company is willing to accept, the management of risk and the processes for auditing and evaluating the Company’s risk management system;

· reviews group-wide objectives in the context of the abovementioned categories of corporate risk;

· reviews and, where necessary, approves guidelines and policies governing the identification, assessment and management of the Company’s exposure to risk;

· reviews and approves the delegations of financial authorities and addresses any need to update these authorities on an annual basis; and

· reviews compliance with agreed policies.

The Committee recommends any actions it deems appropriate to the Board for its consideration.

Management is responsible for designing, implementing and reporting on the adequacy of the Company’s risk management and internal control system and has to report to the Audit Committee on the effectiveness of:

· the risk management and internal control system during the year; and

· the Company’s management of its material business risks.

Risk management group

The Company’s risk management policies and the operation of the risk management and compliance system are managed by the Company’s risk management group which consists of senior executives and is chaired by the CFO. The Board receives reports from this group as to the effectiveness of the Company’s management of material risks that may impede or impact on the Company’s ability to meet its business objectives.

Each of the Company’s business units report to the risk management group on the key business risks applicable to their respective areas. The review is undertaken by business unit management. The risk management group then consolidates the business unit reports and recommends any actions to the Board for its consideration.

Corporate reporting

In complying with recommendation 7.3, the CEO and CFO make the following annual certifications to the Board:

· that the Company’s financial reports are complete and present a true and fair view, in all material respects, of the financial condition and operational results of the Company and the Group and are in accordance with relevant accounting standards; and

· that the above statement is founded on a sound system of risk management and internal compliance and control which implements the policies adopted by the Board and that the Company’s risk management and internal compliance and control is operating efficiently and effectively in all material respects in relation to financial reporting risks.

Principle 8: Remunerate fairly and responsibly

All matters pertaining to remuneration of Company Directors and employees are overseen and managed by the Corporate Governance Committee (refer above). Committee members receive regular briefings from an external remuneration expert on recent developments on remuneration and related matters.

Each member of the Senior Leadership Team signs a formal employment contract at the time of their appointment covering a range of matters including their duties, rights, responsibilities and any entitlements on termination. The standard contract refers to a specific formal job description. This job description is reviewed by the Corporate Governance Committee on an annual basis and, where necessary, is revised in consultation with the relevant employee.

Further information on Directors’ and Executives’ remuneration, including principles used to determine remuneration, is set out in the Directors’ Report under the heading “Remuneration Report”. In accordance with Group policy, participants in equity-based remuneration plans are not permitted to enter into any transactions that would limit the economic risk of options or other unvested entitlements.

The Committee also assumes responsibility for overseeing management succession planning, including the implementation of appropriate executive development programs and ensuring adequate arrangements are in place, so that appropriate candidates are recruited for later promotion to senior positions.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 30 June 2011

		Consolidated
	Notes	2011		2010
		$		$
Revenue from continuing operations
Genetic testing services		4,594,960		4,915,528
Less: cost of sales	4	(2,034,916	)	(2,722,975	)
Gross profit from continuing operations		2,560,044		2,192,553
Other revenue	5	13,680,741		3,739,747
Selling and marketing expenses	6	(3,018,947	)	(2,679,979	)
General and administrative expenses	6	(3,696,165	)	(3,196,488	)
Licensing, patent and legal costs	6	(4,097,323	)	(3,923,102	)
Laboratory and research and development costs	6	(4,380,866	)	(6,258,871	)
Finance costs		(81,934	)	(100,422	)
Operating profit / (loss) before income tax expense		965,550		(10,226,562	)
Non-operating income and expenses	7	(85,771	)	425,239
Profit / (loss) from continuing operations before income tax expense		879,779		(9,801,323	)
Net profit from discontinued operation	8	21,562		446,114
Profit / (loss) before income tax expense		901,341		(9,355,209	)
Income tax expense		—		—
Profit / (loss) for the year		901,341		(9,355,209	)
Other comprehensive income / (loss)
Realised gain on sale of available-for-sale investments transferred from reserve		—		(170,000	)
Exchange gains / (losses) on translation of controlled foreign operations	22	(85,079	)	(8,623	)
Exchange gains / (losses) on translation of non-controlled foreign operations	24	(11,585	)	3,404
Other comprehensive income / (loss) for the year, net of tax		(96,664	)	(175,219	)
Total comprehensive profit / (loss) for the year		804,677		(9,530,428	)

Profit / (loss) for the year is attributable to:
Owners of Genetic Technologies Limited		910,002		(9,343,766	)
Non-controlling interests		(8,661	)	(11,443	)
Total profit / (loss) for the year		901,341		(9,355,209	)

Total comprehensive profit / (loss) for the year is attributable to:
Owners of Genetic Technologies Limited		824,923		(9,522,389	)
Non-controlling interests		(20,246	)	(8,039	)
Total comprehensive profit / (loss) for the year		804,677		(9,530,428	)

Earnings per share attributable to owners of the Company:
Basic earnings per share (cents per share)	9	0.22		(2.46	)
Diluted earnings per share (cents per share)	9	0.22		(2.46	)

The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.

CONSOLIDATED BALANCE SHEET

As at 30 June 2011

		Consolidated
	Notes	2011		2010
		$		$
ASSETS
Current assets
Cash and cash equivalents	11	5,104,667		3,306,311
Trade and other receivables	12	674,369		754,657
Prepayments and other assets	13	473,659		369,535
Performance bond and deposits	14	2,649		71,658
Total current assets		6,255,344		4,502,161

Non-current assets
Property, plant and equipment	15	947,500		1,977,826
Intangible assets and goodwill	16	1,719,510		1,799,585
Total non-current assets		2,667,010		3,777,411
Total assets		8,922,354		8,279,572

LIABILITIES
Current liabilities
Trade and other payables	17	1,115,028		1,195,673
Interest-bearing liabilities	18	67,878		382,640
Deferred revenue	19	163,546		194,441
Provisions	20	679,177		706,189
Total current liabilities		2,025,629		2,478,943

Non-current liabilities
Provisions	20	82,730		82,933
Total non-current liabilities		82,730		82,933
Total liabilities		2,108,359		2,561,876
Net assets		6,813,995		5,717,696

EQUITY
Contributed equity	21	72,378,105		72,378,105
Reserves	22	1,697,914		1,529,142
Accumulated losses	23	(67,464,026	)	(68,374,028	)
Parent entity interest		6,611,993		5,533,219
Minority interests	24	202,002		184,477
Total equity		6,813,995		5,717,696

The above consolidated balance sheet should be read in conjunction with the accompanying notes.

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 30 June 2011

		Consolidated
	Notes	2011		2010
		$		$
Cash flows from / (used in) operating activities
Receipts from customers		18,009,739		9,265,671
Payments to suppliers and employees		(15,910,103	)	(14,150,281	)
Interest received		200,023		216,549
Interest paid		(81,934	)	(42,128	)
Net cash flows from / (used in) operating activities in continuing operations		2,217,725		(4,710,189	)
Net cash flows from / (used in) operating activities in discontinued operations		15,554		407,309
Net cash flows from / (used in) operating activities	11	2,233,279		(4,302,880	)

Cash flows from / (used in) investing activities
Proceeds from the sale of plant and equipment		144,708		4,977
Purchases of plant and equipment		(139,678	)	(144,796	)
Proceeds from the sale of available-for-sale investments		—		295,195
Purchase of assets associated with BREVAGenTM breast cancer risk test		—		(952,480	)
Purchase of non-coding patents		—		(242,379	)
Net cash flows from / (used in) investing activities		5,030		(1,039,483	)

Cash flows from / (used in) financing activities
Repayment of hire purchase principal		(314,762	)	(225,407	)
Net proceeds from the issue of shares		—		1,011,650
Net cash flows from / (used in) financing activities		(314,762	)	786,243
Net increase / (decrease) in cash and cash equivalents		1,923,547		(4,556,120	)
Cash and cash equivalents at beginning of year		3,306,311		7,826,902
Net foreign exchange difference		(125,191	)	35,529
Cash and cash equivalents at end of year	11	5,104,667		3,306,311

The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 30 June 2011

	Attributable to Members of Genetic Technologies Limited
Consolidated	Contributed equity	Reserves		Accumulated losses		Parent interests		Minority interests		Total equity
	$	$		$		$		$		$
Balance at 30 June 2009	71,285,663	1,701,899		(59,030,262	)	13,957,300		154,745		14,112,045
Total comprehensive loss	—	(178,623	)	(9,343,766	)	(9,522,389	)	(8,039	)	(9,530,428	)
Transactions with owners in their capacity as owners
Contributions of equity	1,092,442	—		—		1,092,442		—		1,092,442
Share-based payments	—	5,866		—		5,866		—		5,866
Share of issued capital	—	—		—		—		37,771		37,771
	1,092,442	5,866		—		1,098,308		37,771		1,136,079
Balance at 30 June 2010	72,378,105	1,529,142		(68,374,028	)	5,533,219		184,477		5,717,696
Total comprehensive loss	—	(85,079	)	910,002		824,923		(20,246	)	804,677
Transactions with owners in their capacity as owners
Share-based payments	—	253,851		—		253,851		—		253,851
Share of issued capital	—	—		—		—		37,771		37,771
	—	253,851		—		253,851		37,771		291,622
Balance at 30 June 2011	72,378,105	1,697,914		(67,464,026	)	6,611,993		202,002		6,813,995

The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 30 June 2011

1. CORPORATE INFORMATION

The Financial Report of Genetic Technologies Limited (the “Company”) for the year ended 30 June 2011 was authorised for issue in accordance with a resolution of the Directors dated 24 August 2011. 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 Capital Market under the ticker GENE. The nature of the Group’s activities and operations during the year ended 30 June 2011 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 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 the available-for-sale investments at fair value.

Critical 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 critical to the financial statements, are disclosed in Note 3.

(b) New accounting standards and interpretations

In respect of the year ended 30 June 2011, the Group has assessed all new accounting standards mandatory for adoption during the current year, noting no new standards which would have a material affect on the disclosure in these financial statements. There has been no affect on the profit and loss or the financial position of the Group. Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2011 reporting periods.

The Group’s and the parent entity’s assessment of the impact of these new standards and interpretations is set out below.

· AASB 9 Financial Instruments, AASB 2009-11 Amendments to Australian Accounting Standards arising from AASB 9 and AASB 2010-7 Amendments to Australian Accounting Standards arising from AASB 9 (December 2010) (effective from 1 January 2013)

AASB 9 Financial Instruments addresses the classification, measurement and derecognition of financial assets and financial liabilities. The standard is not applicable until 1 January 2013 but is available for early adoption. When adopted, the standard will affect the Group’s accounting for its available-for-sale financial assets, since AASB 9 only permits the recognition of fair value gains and losses in other comprehensive income if they relate to equity investments that are not held for trading. Fair value gains and losses on available-for-sale debt investments will therefore have to be recognised directly in profit or loss. There will be no impact on the Group’s accounting for financial liabilities, as the new requirements only affect the accounting for financial liabilities that are designated at fair value through profit or loss and the group does not have any such liabilities. The derecognition rules have been transferred from AASB 139 Financial Instruments: Recognition and Measurement and have not been changed. The Group has not yet decided when to adopt AASB 9.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

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

· Revised AASB 124 Related Party Disclosures and AASB 2009-12 Amendments to Australian Accounting Standards (effective from 1 January 2011)

In December 2009, the AASB issued a revised AASB 124 Related Party Disclosures. It is effective for accounting periods beginning on or after 1 January 2011 and must be applied retrospectively. The amendment clarifies and simplifies the definition of a related party and removes the requirement for government-related entities to disclose details of all transactions with the government and other government-related entities. The Group will apply the amended standard from 1 July 2011. When the amendments are applied, the Group will need to disclose any transactions between its subsidiaries and its associates. However, there will be no impact on any of the amounts recognised in the financial statements.

· AASB 2009-14 Amendments to Australian Interpretation — Prepayments of a Minimum Funding Requirement (effective from 1 January 2011)

In December 2009, the AASB made an amendment to Interpretation 14 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction. The amendment removes an unintended consequence of the interpretation related to voluntary prepayments when there is a minimum funding requirement in regard to the entity’s defined benefit scheme. It permits entities to recognise an asset for a prepayment of contributions made to cover minimum funding requirements. The Group does not make any such prepayments. The amendment is therefore not expected to have any impact on the Group’s financial statements. The Group intends to apply the amendment from 1 July 2011.

· AASB 1053 Application of Tiers of Australian Accounting Standards and AASB 2010-2 Amendments to Australian Accounting Standards arising from Reduced Disclosure Requirements (effective from 1 July 2013)

On 30 June 2010, the AASB officially introduced a revised differential reporting framework in Australia. Under this framework, a two-tier differential reporting regime applies to all entities that prepare general purpose financial statements. Genetic Technologies Limited is listed on the ASX and is not eligible to adopt the new Australian Accounting Standards — Reduced Disclosure Requirements. The two standards will therefore have no impact on the financial statements of the entity.

· AASB 2010-6 Amendments to Australian Accounting Standards — Disclosures on Transfers of Financial Assets (effective for annual reporting periods beginning on or after 1 July 2011)

Amendments made to AASB 7 Financial Instruments: Disclosures in November 2010 introduce additional disclosures in respect of risk exposures arising from transferred financial assets. The amendments will particularly affect entities that sell, factor, securitise, lend or otherwise transfer financial assets to other parties. They are not expected to have any significant impact on the Group’s disclosures. The Group intends to apply the amendment from 1 July 2011.

· AASB 2010-8 Amendments to Australian Accounting Standards — Deferred Tax: Recovery of Underlying Assets (effective from 1 January 2012)

In December 2010, the AASB amended AASB 112 Income Taxes to provide a practical approach for measuring deferred tax liabilities and deferred tax assets when investment property is measured using the fair value model. AASB 112 requires the measurement of deferred tax assets or liabilities to reflect the tax consequences that would follow from the way management expects to recover or settle the carrying amount of the relevant assets or liabilities, that is through use or through sale. The amendment introduces a rebuttable presumption that investment property which is measured at fair value is recovered entirely by sale. The Group will apply the amendment from 1 July 2012 and is currently evaluating the impact of the amendment.

(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. (refer Note 31).

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

(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 statement of comprehensive income.

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 five overseas subsidiaries are as follows:

Gtech International Resources Limited — Canadian dollars (CAD)

Genetic Technologies (Beijing) Limited — Chinese yuan (CNY)

GeneType AG — Swiss francs (CHF)

GeneType Corporation — United States dollars (USD)

Phenogen Sciences Inc. — 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 statement of comprehensive income is 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 statement of comprehensive income.

(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 investments) 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 various 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. In cases where fair value cannot be reliably determined, available-for-sale investments are measured at approximate market value.

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

(f) Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing the performance of the operating segments, has been identified as the Chief Executive Officer.

(g) Earnings per share

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

(h) Parent entity financial information

The financial information for the parent entity, Genetic Technologies Limited, as disclosed in Note 33, has been prepared on the same basis as the consolidated financial statements, except as set out below:

Investments in, and loans to, subsidiaries

Investments in subsidiaries are accounted for at cost in the financial statements of Genetic Technologies Limited. Loans to subsidiaries are written down to their recoverable value as at balance date.

Financial guarantees

As at balance date, the parent entity had agreed to fund by way of loan all of the operating expenses of ImmunAid Pty. Ltd. (a subsidiary) up to, and including, 30 September 2011 and that it would not seek repayment of the loan during that period.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

(i) 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(z).

Rendering of services

Revenues from the rendering of services are recognised when the services are provided 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 non-Government grants that assist it to fund specific research and development projects. These grants generally provide for the reimbursement of approved costs incurred as defined in the various agreements.

(j) Share-based payment transactions

The Group provides benefits to Group employees in the form of share-based payment transactions, whereby employees render services and receive rights over shares (“equity-settled transactions”). There is currently an Employee Option Plan in place to provide these benefits to executives and employees and the cost of these transactions is measured by reference to the fair value at the date they are granted.

The fair value of options granted is determined by Cape Leveque Securities Pty. Ltd., an independent valuer, using a Black-Scholes option pricing model. Cape Leveque Securities Pty. Ltd. has consented to having its name included in this Report.

In valuing equity-settled transactions, no account is taken of any non-market 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 appropriate, the dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share.

The Company’s policy is to treat the share options of terminated employees as forfeitures.

(k) Finance costs

Finance costs are recognised as an expense when incurred.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

(l) 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.

Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.

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 10. 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.

(m) Withholding tax

The Group generates revenues from the granting of licenses to parties resident in overseas countries. Such revenues may, in certain circumstances, be subject to the deduction of local withholding tax.

(n) 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.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

(o) Cash and cash equivalents

Cash and cash equivalents 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 six months, depending on the immediate cash requirements of the Group, and earn interest at the respective short-term deposit rates.

(p) 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. Details regarding interest rate and credit risk of current receivables are disclosed in Note 34.

(q) Inventories

Inventories principally comprise laboratory and other supplies and are valued at the lower of cost and net realisable value. Inventory 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.

(r) Restricted security deposits

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

(s) 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 statement of comprehensive income.

Available-for-sale investments

Available-for-sale investments consist of investments in ordinary shares which have no fixed maturity date or coupon rate. After initial recognition, available-for-sale securities are measured at fair value with gains or losses being recognised as a separate component of equity until such time as the investment is either derecognised or is determined to be impaired, at which time the cumulative gain or loss previously recognised in equity is recognised in profit or loss. The fair values of investments that are actively traded in organised financial markets are determined by reference to the quoted market bid prices applicable as at the close of business on the balance sheet date.

The fair value of 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.

(t) 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 / veterinary 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.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

(u) 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 and development costs

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

(v) 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 IFRS 8 (AASB 8) Operating Segments.

(w) 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 so, the carrying amount of the asset is increased to its recoverable amount. The 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 it reverses a decrement previously charged to equity, 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.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

(x) 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.

(y) 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 financed 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 statement of comprehensive income on a straight-line basis over the lease term.

(z) 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.

Where a licence agreement provides for the payment of regular annuities to the Company and the licensee has the right to terminate the agreement prior to the payment of those annuities with no penalty, the Company does not recognise revenue until such time as the associated cash payments are received, as it is not considered probable that the benefits of the transaction will flow to the Company until the 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 and reproductive services revenues

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

Grant revenues

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 statement of comprehensive income over the expected useful life of the relevant asset by equal annual instalments.

(aa) 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 statement of comprehensive income 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.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

(ab) 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 outflows to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. 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.

(ac) 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 plan under which options to subscribe for the Company’s shares have been granted to certain executives and other employees (refer Note 28).

(ad) Reclassifications

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

(ae) Business combinations

The acquisition method of accounting is used to account for all business combinations, including business combinations involving entities or businesses under common control, regardless of whether equity instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred also includes the fair value of any contingent consideration arrangement and the fair value of any pre-existing equity interest in the subsidiary. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. On an acquisition-by-acquisition basis, the Group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net identifiable assets.

The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the Group’s share of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the subsidiary acquired and the measurement of all amounts has been reviewed, the difference is recognised directly in profit or loss as a bargain purchase.

Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions.

3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

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

(a) Critical accounting estimates and assumptions

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

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(v) and 2(w). This process requires an estimation to be made of the recoverable amount of the cash-generating units to which the respective assets are allocated.

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(l), 2(m) and 2(n)).

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.

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 independent valuer using a Black-Scholes options pricing model.

Useful lives of assets

The estimation of the useful lives of assets has been based on historical experience as well as lease terms (for leased equipment) and patent terms (for patents). In addition, the condition of the assets is assessed at least annually and considered against the remaining useful life and adjustments to useful lives are made when considered necessary.

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

Research and development costs

An intangible asset arising from development expenditure on an internal project is recognised only when the Group can demonstrate the technical feasibility of completing the intangible asset so that it will be available for use or sale, its intention to complete and its ability to use or sell the asset, how the asset will generate future economic benefits, the availability of resources to complete the development and the ability to measure reliably the expenditure attributable to the intangible asset during its development.

To date, all development costs have been expensed as incurred as their recoverability cannot be regarded as assured. In addition to the costs incurred by the Company’s research and development group, costs of clinical and other trials are also included. The costs of research and development are expensed in full in the period in which they are incurred. The Group will only capitalise its development expenses when the specific milestones are met and when the Group is able to demonstrate that future economic benefits are probable.

4. COST OF SALES

	Consolidated
	2011	2010
	$	$
Inventories used	860,078	982,481
Direct labour costs	782,875	1,054,569
Depreciation expense	252,090	450,234
Inventories written off	139,873	235,691
Total cost of sales	2,034,916	2,722,975

5. OTHER REVENUE

License fees received	12,315,060	2,058,303
Royalties and annuities received	1,365,681	1,681,444
Total other revenue	13,680,741	3,739,747

6. OTHER EXPENSES

Amortisation of intangible assets	77,575	2,821,002
Depreciation of fixed assets	287,205	435,094
Employee benefits expenses	5,435,053	5,945,605
Net impairment of plant and equipment	268,264	493,061
Net impairment of other assets	741	1,293,472

7. NON-OPERATING INCOME AND EXPENSES

Interest received	200,023		211,431
Net loss on disposal of plant and equipment	(217,737	)	(6,904	)
Net foreign exchange gains / (losses)	(68,057	)	10,517
Net profit on disposal of available-for-sale investments	—		210,195
Total non-operating income and expenses	(85,771	)	425,239

8. NET PROFIT FROM DISCONTINUED OPERATION

Revenue from reproductive services	66,054		890,030
Less: cost of sales	(44,492	)	(443,916	)
Total net profit from discontinued operation	21,562		446,114

During the 2010 financial year, the Company’s reproductive services business was terminated following a decision to realign the business and to focus on the provision of animal genetic tests, rather than the services that were acquired as part of the acquisition of the Frozen Puppies business in 2008. As a result, Frozen Puppies Dot Com Pty. Ltd. was deregistered on 1 June 2011.

9. PROFIT / (LOSS) PER SHARE

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

	2011	2010
	$	$
Profit / (loss) for the year attributable to the owners of Genetic Technologies Limited	910,002	(9,343,766	)
Weighted average number of ordinary shares used in calculating loss per share	404,605,152	380,965,204

None of the 19,650,000 (2010: 3,300,000) options outstanding as at the reporting date are considered to be dilutive for the purposes of calculating diluted earnings per share and have therefore been excluded from the weighted average number of shares.

10. INCOME TAX

	Consolidated
	2011		2010
	$		$
Reconciliation of income tax expense to prima facie tax payable
Profit / (loss) before income tax expense	901,341		(9,355,209	)
Tax at the Australian tax rate of 30% (2010: 30%)	270,402		(2,806,563	)
Tax effect amounts which are not deductible / (taxable) in calculating taxable income
Net impairment losses and other write-downs	80,701		535,960
Share-based payments expense	76,155		1,760
Research and development expenses	(312,438	)	(445,951	)
Withholding tax expense	18,000		19,165
Other non-deductible items	2,930		3,330
	135,750		(2,692,299	)
Tax effect of adjustments relating to temporary differences
Amortisation and depreciation expenses	185,061		1,111,899
Net movements in provisions	(8,164	)	386,783
Settlement proceeds from Applera Corporation	(157,911	)	(183,426	)
Tax losses utilised	(154,736	)	—
Tax losses not recognised	—		1,377,043
Income tax expense	—		—
Income tax expense
Current tax	—		—
Deferred tax	—		—
Aggregate income tax expense	—		—
Deferred tax assets
Deferred revenue	49,064		58,332
Applera settlement	581,510		739,421
Intangible assets	515,853		927,311
Doubtful debts	17,010		30,750
Provisions	228,572		236,737
Total deferred tax assets	1,392,009		1,992,551
Deferred tax assets on temporary differences not brought to account	(1,392,009	)	(1,992,551	)
Total net deferred tax assets	—		—
Tax losses
Unused tax losses for which no deferred tax asset has been recognised	31,690,991		32,206,778
Potential tax benefit @ 30%	9,507,297		9,662,033

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

As at balance date, there are unconfirmed tax losses with a benefit of approximately $9,507,297 (2010: $9,662,033) that have not been recognised as a deferred tax asset to the Group. These unrecognised deferred tax assets will only be obtained if:

(a) The Group companies derive future assessable income of a nature and amount sufficient to enable the benefits to be realised;

(b) The Group companies continue to comply with the conditions for deductibility imposed by the law; and

10. INCOME TAX (cont.)

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(l).

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 respective 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.

As at 30 June 2011, there are no unrecognised temporary differences associated with the Group’s investments in subsidiaries, as the Group has no liability for additional taxation should unremitted earnings be remitted (2010: $nil).

11. CASH AND CASH EQUIVALENTS

	Consolidated
	2011	2010
	$	$
Reconciliation of cash and cash equivalents
Cash at bank and on hand	1,985,257	1,773,152
Short-term deposits	3,119,410	1,533,159
Total cash and cash equivalents	5,104,667	3,306,311

Note: As at 30 June 2011, cash amounting to $80,911 was held on deposit as security for the Group’s hire purchase obligations (2010: $418,733) (refer Note 27).

Reconciliation of profit / (loss) for the year

Reconciliation of profit / (loss) for the year after income tax to net cash flows used in operating activities is as follows:

Profit / (loss) for the year after income tax	901,341		(9,355,209	)
Adjust for non-cash items
Amortisation and depreciation expenses	616,870		3,706,330
Share-based payments expense	253,851		5,866
Net impairment losses and other write-downs	269,005		1,786,533
Net loss on disposal of plant and equipment	217,737		6,904
Net foreign exchange losses / (gains)	68,057		(10,517	)
Net profit on disposal of available-for-sale investments	—		(210,195	)
Adjust for changes in assets and liabilities
(Increase) / decrease in trade and other receivables	80,288		1,074,582
(Increase) / decrease in prepayments / other assets	(104,124	)	77,290
(Increase) / decrease in other financial assets	69,009		(71,458	)
Increase / (decrease) in trade and other payables	(80,645	)	(962,884	)
Increase / (decrease) in deferred revenue	(30,895	)	(34,567	)
Increase / (decrease) in provisions	(27,215	)	(315,555	)
Net cash flows provided by / (used in) operating activities	2,233,279		(4,302,880	)

Non-cash activities

During the financial year, the Group acquired plant and equipment with an aggregate fair value of $nil (2010: $213,275) by means of hire purchase agreements.

11. CASH AND CASH EQUIVALENTS (cont.)

	Consolidated
	2011		2010
	$		$
Financing facilities available
As at 30 June 2011, the following financing facilities had been negotiated and were available:
Total facilities
Hire purchase facility	2,500,000		2,500,000
Credit cards	145,000		147,000
Facilities used as at reporting date
Hire purchase facility (refer note below)	(67,878	)	(382,640	)
Credit cards	(18,786	)	(29,123	)
Facilities unused as at reporting date
Hire purchase facility	2,432,122		2,117,360
Credit cards	126,214		117,877

Hire purchase facility

As at 30 June 2011, the Company had breached one of the covenants of the Master Asset Finance Facility which governs the hire purchase agreements. Subsequent to balance date, National Australia Bank Limited provided the Company with a letter waiving its right to take any further action in respect of the breach. As a result of the breach, however, all liabilities in respect of the hire purchase agreements as at 30 June 2011 have been classified as current liabilities in the balance sheet.

12. TRADE AND OTHER RECEIVABLES (CURRENT)

	Consolidated
	2011		2010
	$		$
Trade receivables	718,070		833,243
Less: provision for doubtful debts	(56,700	)	(102,500	)
Net trade receivables	661,370		730,743
Other receivables	12,999		23,914
Total current net trade and other receivables	674,369		754,657

Note: Trade and other receivables for the Group include amounts due in US dollars of USD 113,276 (2010: USD 119,677), European Euros of EUR 90,105 (2010: EUR 90,000), Chinese yuan of CNY nil (2010: CNY 56,259) and Swiss francs of CHF nil (2010: CHF 550).

Refer Note 34 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.

13. PREPAYMENTS AND OTHER ASSETS (CURRENT)

Prepayments	191,047	113,568
Inventories at the lower of cost and net realisable value	282,612	255,967
Total current prepayments and other assets	473,659	369,535

14. PERFORMANCE BOND AND DEPOSITS (CURRENT)

Performance bond	2,449	71,235
Other deposits	200	423
Total current performance bond and deposits	2,649	71,658

15. PROPERTY, PLANT AND EQUIPMENT

	Consolidated
	2011		2010
	$		$
Laboratory / veterinary equipment, at cost	4,301,671		5,800,013
Less: accumulated depreciation	(2,822,791	)	(3,804,498	)
Less: impairment loss	(751,325	)	(448,527	)
Net laboratory / veterinary equipment	727,555		1,546,988
Computer equipment, at cost	615,420		697,641
Less: accumulated depreciation	(519,625	)	(636,022	)
Net computer equipment	95,795		61,619
Office equipment, at cost	211,065		199,741
Less: accumulated depreciation	(145,205	)	(144,925	)
Less: impairment loss	—		(10,613	)
Net office equipment	65,860		44,203
Equipment under hire purchase, at cost	1,282,389		2,017,271
Less: accumulated depreciation	(1,228,071	)	(1,690,651	)
Less: impairment loss	(10,000	)	(31,087	)
Net equipment under hire purchase	44,318		295,533
Leasehold improvements, at cost	108,212		114,665
Less: accumulated depreciation	(94,240	)	(82,348	)
Less: impairment loss	—		(2,834	)
Net leasehold improvements	13,972		29,483
Total net property, plant and equipment	947,500		1,977,826
Reconciliation of property, plant and equipment
Opening gross carrying amount	8,829,331		8,647,873
Add: additions purchased during the year	369,809		358,071
Less: disposals made during the year	(2,680,383	)	(176,613	)
Closing gross carrying amount	6,518,757		8,829,331
Opening accumulated depreciation	(6,851,505	)	(5,637,848	)
Add: disposals made during the year	2,087,807		164,732
Less: depreciation expense charged	(539,295	)	(885,328	)
Less: impairment losses	(268,264	)	(493,061	)
Closing accumulated depreciation	(5,571,257	)	(6,851,505	)
Total net property, plant and equipment	947,500		1,977,826

15. PROPERTY, PLANT AND EQUIPMENT (cont.)

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

	Opening				Depreciation		Closing
	net carrying	Additions	Net disposals		expense and		net carrying
Asset category	amount	during year	during year		impairment loss		amount
	$	$	$		$		$
Laboratory / veterinary equipment	1,546,988	231,708	(459,942	)	(591,199	)	727,555
Computer equipment	61,619	86,109	(4,668	)	(47,265	)	95,795
Office equipment	44,203	45,480	(16,292	)	(7,531	)	65,860
Equipment under hire purchase	295,533	—	(103,693	)	(147,522	)	44,318
Leasehold improvements	29,483	6,512	(7,981	)	(14,042	)	13,972
Totals	1,977,826	369,809	(592,576	)	(807,559	)	947,500

Impairment loss

The total plant and equipment impairment loss for the 2011 financial year was $268,264 (2010: $493,061). This loss comprised items of equipment acquired under the Supply Agreement with Applera Corporation ($373,677) (“Applera”), offset by write-backs of items of equipment associated with the Company’s reproductive services business ($105,413).

The impairment charges relating to the equipment acquired under the Supply Agreement with Applera arose following an exchange of surplus laboratory equipment with an Australian-based subsidiary of Applera.

As at balance date, the Company believes that the carrying values of the remaining items of plant and equipment of $947,500 is appropriate.

16. INTANGIBLE ASSETS AND GOODWILL

	Consolidated
	2011		2010
	$		$
Patents
Patents, at cost	36,538,523		36,417,619
Less: accumulated amortisation	(32,639,674	)	(32,441,195	)
Less: impairment losses	(3,528,000	)	(3,528,000	)
Total net patents	370,849		448,424
Other intangible assets
Assets associated with BREVAGenTM breast cancer risk test, at cost	1,033,273		1,033,273
Total net other intangible assets	1,033,273		1,033,273
Goodwill
Goodwill, at cost	358,012		1,625,115
Less: accumulated amortisation	(42,624	)	(42,624	)
Less: impairment losses	—		(1,264,603	)
Total net goodwill	315,388		317,888
Total net intangible assets and goodwill	1,719,510		1,799,585

16. INTANGIBLE ASSETS AND GOODWILL (cont.)

	Consolidated
	2011		2010
	$		$
Reconciliation of patents
Opening gross carrying amount	36,417,619		36,319,304
Add: additions purchased during the year (refer note)	—		242,379
Adjust for exchange rate movements	120,904		(144,064	)
Closing gross carrying amount	36,538,523		36,417,619
Opening accumulated amortisation and impairment losses	(35,969,195	)	(33,292,255	)
Add: amortisation expense charged	(77,575	)	(2,821,004	)
Adjust for exchange rate movements	(120,904	)	144,064
Closing accumulated amortisation and impairment losses	(36,167,674	)	(35,969,195	)
Total net patents	370,849		448,424
Reconciliation of other intangible assets
Opening gross carrying amount	1,033,273		—
Add: acquisition of BREVAGenTM breast cancer risk test (refer note)	—		1,033,273
Total net other intangible assets	1,033,273		1,033,273
Reconciliation of goodwill
Opening gross carrying amount	1,625,115		1,625,115
Less: goodwill written off	(1,267,103	)	—
Closing gross carrying amount	358,012		1,625,115
Opening accumulated amortisation and impairment losses	(1,307,227	)	(42,624	)
Add: goodwill written off	1,264,603		—
Less: impairment losses	—		(1,264,603	)
Closing accumulated amortisation and impairment losses	(42,624	)	(1,307,227	)
Total net goodwill	315,388		317,888

Acquisition of BREVAGenTM breast cancer risk test

On 14 April 2010, the Company acquired various intangible assets from California-based Perlegen Sciences Inc. (“Perlegen”), the majority of which relate to a proprietary genetic breast cancer risk test called BREVAGenTM. The carrying value of the assets acquired from Perlegen, which also equates to cost, is dissected as follows:

		$
Intangible assets related to the BREVAGenTM test		1,033,273
Non-coding patents		242,379
Total value of assets acquired from Perlegen		1,275,652

In assessing the correct accounting treatment for the acquisition of the BREVAGenTM assets, consideration was given to the factors for determining a business combination in accordance with IFRS 3R.

As the BREVAGenTM assets were acquired in an arm’s-length transaction and the forecast revenues from the sale of the BREVAGenTM test demonstrate the likely use of the assets, there is no indication of impairment as at 30 June 2011. Certain royalties, representing a fixed percentage of future sales of the BREVAGenTM test, will be payable by the Company to Perlegen and other parties.

17. TRADE AND OTHER PAYABLES (CURRENT)

	Consolidated
	2011	2010
	$	$
Trade payables	653,046	680,377
Other payables	301,018	228,899
Accrued expenses	160,964	286,397
Total current trade and other payables	1,115,028	1,195,673

Note: Trade payables and other payables for the Group include amounts due in US dollars of USD 217,168 (2010: USD 97,957), Chinese yuan of CNY 68,158 (2010: CNY 50,508), Canadian dollars of CAD 22,539 (2010: CAD 9,326), European euros of EUR 17,250 (2010: EUR 45,187), Swiss francs of CHF 3,290 (2010: CHF 3,190), New Zealand dollars of NZD 136 (2010: NZD 39) and Pounds Sterling of GBP nil (2010: GBP 3,729).

Refer Note 34 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.

18. INTEREST-BEARING LIABILITIES (CURRENT)

Hire purchase liability (Notes 27 and 34)		67,878		382,640
Total current interest-bearing liabilities		67,878		382,640

Note: The carrying values of the hire purchase liabilities approximate their fair values. As at 30 June 2011, the Company had breached one of the covenants of the Master Asset Finance Facility which governs the hire purchase agreements. Subsequent to balance date, National Australia Bank Limited provided the Company with a letter waiving its right to take any further action in respect of the breach. As a result of the breach, however, all liabilities in respect of the hire purchase agreements as at 30 June 2011 have been classified as current liabilities in the balance sheet.

19. DEFERRED REVENUE (CURRENT)

Genetic testing fees received in advance	159,001	192,841
Reproductive service fees received in advance	4,545	1,600
Total current deferred revenue	163,546	194,441

20. PROVISIONS (CURRENT AND NON-CURRENT)

Current provisions
Annual leave	417,603		442,108
Long service leave	261,574		264,081
Total current provisions	679,177		706,189
Non-current provisions
Long service leave	82,730		82,933
Total non-current provisions	82,730		82,933
Total provisions	761,907		789,122
Reconciliation of annual leave provision
Balance at the beginning of the financial year	442,108		396,198
Add: obligation accrued during the year	403,929		383,883
Less: utilised during the year	(428,434	)	(337,973	)
Balance at the end of the financial year (note)	417,603		442,108

20. PROVISIONS (CURRENT) (cont.)

	Consolidated
	2011		2010
	$		$
Reconciliation of long service leave provision
Balance at the beginning of the financial year	347,014		338,133
Add: obligation accrued during the year	60,342		54,401
Less: utilised during the year	(63,052	)	(45,520	)
Balance at the end of the financial year (note)	344,304		347,014
Reconciliation of withholding tax
Balance at the beginning of the financial year	—		370,346
Add: obligation accrued during the year	—		—
Less: reversal of provision	—		(370,346	)
Balance at the end of the financial year	—		—

Note: The current provisions for annual leave and long service leave include a total amount of $417,603 (2010: $442,475) in respect of obligations which, based on historical evidence, the Company estimates will be settled more than 12 months from balance date.

21. CONTRIBUTED EQUITY

Issued and paid-up capital
Fully paid ordinary shares	72,378,105	72,378,105
Total contributed equity	72,378,105	72,378,105

Movements in shares on issue

	Shares	$
Year ended 30 June 2011
Balance at the beginning of the financial year	404,605,152	72,378,105
Add: shares issued during the year	—	—
Balance at the end of the financial year	404,605,152	72,378,105
Year ended 30 June 2010
Balance at the beginning of the financial year	374,644,801	71,285,663
Add: shares issued during the year for cash (net of associated costs)	27,940,530	1,011,650
Add: shares issued during the year other than for cash	2,019,821	80,792
Balance at the end of the financial year	404,605,152	72,378,105

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.

Capital management

When managing capital, Management’s objective is to ensure that the Group continues as a going concern as well as 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 available to the entity.

22. RESERVES

	Consolidated
	2011		2010
	$		$
Foreign currency translation	(155,040	)	(69,961	)
Share-based payments	1,852,954		1,599,103
Net unrealised gains reserve	—		—
Total reserves	1,697,914		1,529,142
Reconciliation of foreign currency translation reserve
Balance at the beginning of the financial year	(69,961	)	(61,338	)
Add: net currency translation loss	(85,079	)	(8,623	)
Balance at the end of the financial year	(155,040	)	(69,961	)
Reconciliation of share-based payments reserve
Balance at the beginning of the financial year	1,599,103		1,593,237
Add: share-based payments expense	253,851		5,866
Balance at the end of the financial year	1,852,954		1,599,103
Reconciliation of net unrealised gains reserve
Balance at the beginning of the financial year	—		170,000
Less: reversal of reserve	—		(170,000	)
Balance at the end of the financial year	—		—

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.

Net unrealised gains reserve

This reserve is used to record movements in the fair value of available-for-sale investments.

23. ACCUMULATED LOSSES

	Consolidated
	2011		2010
	$		$
Balance at the beginning of the financial year	(68,374,028	)	(59,030,262	)
Add: net profit / (loss) attributable to members of Genetic Technologies Limited	910,002		(9,343,766	)
Balance at the end of the financial year	(67,464,026	)	(68,374,028	)

24. MINORITY INTERESTS

	Consolidated
	2011		2010
	$		$
Reconciliation of minority interests in subsidiaries
Balance at the beginning of the financial year	184,477		154,745
Add: movements during the year
Less: share of operating losses	(8,661	)	(11,443	)
Less: share of movement in reserves	(11,585	)	3,404
Net loss attributable to minority interests	(20,246	)	(8,039	)
Add: share of issued capital	37,771		37,771
Balance at the end of the financial year	202,002		184,477

25. OPTIONS

As at 30 June 2011, the following options over ordinary shares in the Company were outstanding.

	2011	Weighted ave. exercise price		2010	Weighted ave. exercise price
Unlisted employee options (refer below)	19,650,000	$	0.11	3,300,000	$	0.33

On 30 November 2001, the Directors of the Company established a Staff Share Plan. On 19 November 2008, the shareholders of the Company approved the introduction of a new Employee Option Plan. Under the terms of the respective Plans, the Directors of the Company may grant options over ordinary shares in Genetic Technologies Limited to executives, consultants and employees of the Group. The options, which are granted at nil cost, are not transferable and are not quoted on ASX. As at 30 June 2011, there were 6 executives and 23 employees who held options that had been granted under the Plans. Options granted under the Plans carry no rights to dividends and no voting rights. The movements in the number of options granted under the Plans are as follows:

	2011		Weighted ave. exercise price		2010		Weighted ave. exercise price
Balance at the beginning of the financial year	3,300,000		$	0.33	4,400,000		$	0.34
Add: options granted during the year	17,300,000		$	0.09	—		—
Less: options forfeited during the year	(200,000	)	$	0.22	(600,000	)	$	0.26
Less: options expired during the year	(750,000	)	$	0.48	(500,000	)	$	0.52
Balance at the end of the financial year	19,650,000		$	0.11	3,300,000		$	0.33
Exercisable at the end of the financial year	2,350,000		$	0.29	2,825,000		$	0.34

No funds were raised from the exercise of options granted under the Staff Share Plan during the year ended 30 June 2011 (2010: $nil). The numbers of options outstanding as at 30 June 2011 by ASX code, including the respective dates of expiry and exercise prices, are tabled below. Refer Note 28 for further information. The options tabled below are not listed on ASX.

Option description	2011	Weighted ave. exercise price		2010	Weighted ave. exercise price
GTGAA (expiring 6 September 2010)	—	—		750,000	$	0.48
GTGAD (expiring 12 August 2011)	250,000	$	0.43	250,000	$	0.43
GTGAE (expiring 12 August 2011)	250,000	$	0.53	250,000	$	0.53
GTGAH (expiring 31 May 2012)	150,000	$	0.40	150,000	$	0.40
GTGAI (expiring 8 May 2015)	12,000,000	$	0.045	—	—
GTGAK (expiring 30 September 2015)	500,000	$	0.045	—	—
GTGAW (expiring 31 March 2016)	4,500,000	$	0.19	—	—
GTGAW (expiring 31 May 2012)	300,000	$	0.19	—	—
GTGAY (expiring 23 October 2012)	1,700,000	$	0.22	1,900,000	$	0.22
Balance at the end of the financial year	19,650,000	$	0.11	3,300,000	$	0.33

26. SEGMENT INFORMATION

Identification of reportable segments

The Group has identified three reportable 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 products and services are then divided into operating businesses, the performances of which are reported to the Chief Executive Officer, the Senior Leadership Team and the Board of Directors on a monthly basis. The segments are reported in a manner that is consistent with the internal reporting provided to the chief operating decision maker. The Group also separately reports the corporate headquarter function to clearly identify costs associated with that function. The corporate function is not considered to be an operating or reportable segment. The Group’s three operating segments can be described as follows:

Operations — involves the provision of a range of genetic testing services.

Licensing — involves the out-licensing of the Group’s “non-coding” technology.

Research — involves the undertaking of a range of research and development projects in the field of genetics and related areas.

The Corporate disclosures below include all revenues, costs, assets and liabilities associated with the headquarter function.

Business segments

		Revenues and income					Profit / (loss)
Segment		Sales	Other		Totals		after tax
		$	$		$		$
Operations (continuing)	2011	4,594,960	—		4,594,960		(4,017,757	)
	2010	4,915,528	—		4,915,528		(5,166,294	)
Licensing	2011	—	13,680,741		13,680,741		9,583,419
	2010	—	3,739,747		3,739,747		(186,856	)
Research	2011	—	—		—		(1,041,461	)
	2010	—	—		—		(1,576,503	)
Sub-total	2011	4,594,960	13,680,741		18,275,701		(4,524,201	)
	2010	4,915,528	3,739,747		8,655,275		(6,929,653	)
Corporate	2011	—	(85,771	)	(85,771	)	(3,644,422	)
	2010	—	425,239		425,239		(2,871,670	)
Totals	2011	4,594,960	13,594,970		18,189,930		879,779
	2010	4,915,528	4,164,986		9,080,514		(9,801,323	)

					Amortisation		Impairment		Purchases of
Segment		Assets	Liabilities		/depreciation		losses/write downs		equipment
		$	$		$		$		$
Operations (continuing)	2011	2,946,818	(1,035,198	)	(469,383	)	(269,005	)	341,549
	2010	3,885,395	(1,646,160	)	(783,826	)	(1,786,533	)	345,801
Licensing	2011	557,866	(189,704	)	(29,960	)	—		1,545
	2010	674,373	(274,602	)	(2,771,907	)	—		6,477
Research	2011	79,781	(42,517	)	(87,799	)	—		—
	2010	165,523	(81,442	)	(111,412	)	—		—
Sub-total	2011	3,584,465	(1,267,419	)	(587,142	)	(269,005	)	343,094
	2010	4,725,291	(2,002,204	)	(3,667,145	)	(1,786,533	)	352,278
Corporate	2011	5,337,889	(840,940	)	(29,728	)	—		26,715
	2010	3,554,281	(559,672	)	(39,185	)	—		5,793
Totals	2011	8,922,354	(2,108,359	)	(616,870	)	(269,005	)	369,809
	2010	8,279,572	(2,561,876	)	(3,706,330	)	(1,786,533	)	358,071

Notes: Other revenues and income - corporate includes interest received of $200,023 (2010: $211,431).

Expenses - corporate includes employee benefits expenses of $1,808,821 (2010: $1,649,169).

Assets - corporate includes cash of $5,104,667 (2010: $3,306,311).

Liabilities - corporate includes trade and other payables of $627,608 (2010: $373,043) and provisions of $213,334 (2010: $173,607).

There were no intersegment sales.

26. SEGMENT INFORMATION (cont.)

Geographic information

Australia — is the home country of the parent entity and the location of the Company’s genetic testing and licensing operations.

USA — is the home of Phenogen Sciences Inc. and GeneType Corporation.

China — is the home of Genetic Technologies (Beijing) Limited.

Canada — is the home of Gtech International Resources Limited.

Switzerland — is the home of GeneType AG.

Geographic segments

		Revenues and income					Profit / (loss)
Segment		Sales	Other		Totals		after tax
		$	$		$		$
Australia	2011	4,591,389	13,583,021		18,174,410		2,473,786
	2010	4,834,035	4,164,896		8,998,931		(9,511,225	)
USA	2011	—	66,595		66,595		(1,412,164	)
	2010	—	—		—		(118,429	)
China	2011	3,571	(54,646	)	(51,075	)	(132,774	)
	2010	81,493	90		81,583		(105,068	)
Canada	2011	—	—		—		(35,819	)
	2010	—	—		—		(47,325	)
Switzerland	2011	—	—		—		(13,250	)
	2010	—	—		—		(19,276	)
Totals	2011	4,594,960	13,594,970		18,189,930		879,779
	2010	4,915,528	4,164,986		9,080,514		(9,801,323	)

					Amortisation		Impairment		Purchases of
Segment		Assets	Liabilities		/depreciation		losses /write downs		equipment
		$	$		$		$		$
Australia	2011	8,420,967	352,832		(596,416	)	(263,099	)	303,526
	2010	7,795,180	(1,759,575	)	(3,686,873	)	(1,786,533	)	339,793
USA	2011	187,807	(2,005,722	)	(10,575	)	—		66,283
	2010	—	(407,148	)	—		—		—
China	2011	271	(323,256	)	(9,879	)	(5,906	)	—
	2010	105,420	(294,230	)	(19,457	)	—		18,278
Canada	2011	302,968	(21,775	)	—		—		—
	2010	375,305	(10,383	)	—		—		—
Switzerland	2011	10,341	(110,438	)	—		—		—
	2010	3,667	(90,540	)	—		—		—
Totals	2011	8,922,354	(2,108,359	)	(616,870	)	(269,005	)	369,809
	2010	8,279,572	(2,561,876	)	(3,706,330	)	(1,786,533	)	358,071

Included in the above figures are the following intersegment balances and transactions:

	Consolidated
	2011	2010
	$	$
Loan payable (USA) and loan receivable (Australia)	1,851,870	407,148
Loan payable (China) and loan receivable (Australia)	633	633
Loan payable (Switzerland) and loan receivable (Australia)	106,170	87,109
Accounts payable (China) and accounts receivable (Australia)	312,689	276,135
Foreign exchange gain (USA) and foreign exchange loss (Australia)	67,041	—
Cost of sales (China) and sales (Australia)	389	6,702
Management fees paid (China) and management fees received (Australia)	19	331

26. SEGMENT INFORMATION (cont.)

Segment products and locations

The three principal business segments of the Group are operations, licensing and research. 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 and Accounting Standard IFRS 8 (AASB 8) Operating Segments which was adopted by the Company in 2009. As a result, the primary reporting segments now reflect more closely the information that Management uses to make decisions about operating matters. Interest received and finance costs are allocated under the heading Corporate as they are not part of the core operations of any other segment.

Major customers

The Group has a number of major customers to which it provides both products and services. During the year ended 30 June 2011, there were two customers from whom the Group generated revenues representing more than 10% of the total consolidated revenue from operations. During the year ended 30 June 2010, there were no such customers.

27. COMMITMENTS AND CONTINGENCIES

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”). Each of the Company’s Australian-resident subsidiaries has provided a guarantee to the Company in respect of the Facility. Refer Note 18 in respect of a breach of the Facility’s terms.

	Consolidated
	2011		2010
	$		$
Hire purchase expenditure commitments
Minimum hire purchase payments
- not later than one year	53,008		259,597
- later than one year but not later than five years	17,981		152,954
- later than five years	—		—
Total minimum hire purchase payments	70,989		412,551
Less: future finance charges	(3,111	)	(29,911	)
Present value of hire purchase payments	67,878		382,640
Aggregate expenditure commitments comprise:
Current liability (Note 18)	67,878		382,640
Operating lease expenditure commitments
Minimum operating lease payments
- not later than one year	354,192		459,193
- later than one year but not later than five years	432,051		723,103
- later than five years	—		—
Total minimum operating lease payments	786,243		1,182,296

As at 30 June 2011, the above operating leases related to the following premises that are currently occupied by the Group:

Location	Landlord	Use	Date of expiry of lease	Minimum payments
60-66 Hanover Street Fitzroy, Victoria 3065 Australia	Crude Pty. Ltd.	Office and laboratory	30 September 2013	$	746,496
9115 Harris Corners Parkway, Suite 320 Charlotte, North Carolina 28269 USA	New Boston Harris Corners LLC	Office	31 October 2012	$	39,747
			Total	$	786,243

Apart from the above, there were no other commitments or contingencies as at 30 June 2011.

28. EMPLOYEE BENEFITS

Employee options

On 8 July 2010, a total of 12,000,000 options over ordinary shares in the Company were granted, at no cost, to members of the Company’s Senior Leadership Team. Each option, which entitles the holder to acquire one ordinary share at a cost of $0.045, will expire on 8 May 2015, unless exercised before that date. On 3 February 2011, a further 500,000 similar options were granted.

On 26 May 2011, a total of 4,800,000 options over ordinary shares in the Company were granted, at no cost, to a number of employees, including those employed by its subsidiary, Phenogen Sciences Inc. Each option, which entitles the holder to acquire one ordinary share at a cost of $0.19, will expire no later than 31 March 2016, unless exercised before that date.

The majority of above options granted during the 2011 financial year vest in three equal tranches after 12 months, 24 months and 36 months from the date of grant, respectively. As at 30 June 2011, there were 6 executives and 23 employees who held options that had been granted under the Plans. There were no options granted during the year ended 30 June 2010.

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.

29. 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 2011, various transactions within the Group occurred, as listed below. All amounts were charged on commercial, arm’s-length terms and at commercial rates.

· AgGenomics Pty. Ltd., a subsidiary, paid interest to the Company amounting to $12,523 (2010: $12,302) in respect of an outstanding loan between the parties.

· ImmunAid Pty. Ltd., a subsidiary, paid management fees to the Company amounting to $22,500 (2010: $45,000).

· Genetic Technologies (Beijing) Limited (“GTBL”), a subsidiary, paid management fees to Genetic Technologies Corporation Pty. Ltd. (“GTC”) of $19 (2010: $331). GTBL also purchased testing services from GTC at a cost of $389 (2010: $6,702).

Other related party transactions

During the year ended 30 June 2011, the Company and GeneType Pty. Ltd., a subsidiary, collectively paid a total of $84,583 (2010: $579,806) to Bankberg Pty. Ltd. (“Bankberg”), a company associated with a former Director and majority shareholder of the Company, Dr. Mervyn Jacobson, for rent and its share of body corporate expenses in respect of the office and laboratory premises in Fitzroy, Victoria that are leased by the Group. On 20 August 2010, Bankberg Pty. Ltd. sold the Fitzroy premises to an unrelated third party (refer Note 27).

During the year ended 30 June 2011, the Company paid a total of $50,000 (2010: $50,000) to Dr. Jacobson in respect of an administrative allowance associated with his role as the Company’s Vice President Global Licensing and Intellectual Property. Also during the year, Genetic Technologies Limited paid a total of $924,679 (2010: $238,100) to Transmedia Inc., another company associated with Dr. Jacobson, in respect of commissions paid in relation to licensing services provided to the Company and reimbursement of associated travel expenses of $152,033 (2010: $153,151). During the 2011 financial year, Dr. Jacobson also served as Chief Executive Officer of ImmunAid Pty. Ltd., a subsidiary. He received no compensation in respect of this role.

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 below for a description of transactions with Key Management Personnel.

29. RELATED PARTY DISCLOSURES (cont.)

Details of Key Management Personnel

Directors	Executives

Sidney C. Hack (Non-Executive Chairman)	Dr. Paul D.R. MacLeman (Chief Executive Officer)
Tommaso Bonvino (Non-Executive)	Thomas G. Howitt (Chief Financial Officer and Company Secretary)
Dr. Malcolm R. Brandon (Non-Executive)	Alison J. Mew (Chief Operating Officer)
Huw D. Jones (Non-Executive)	Lewis J. Stuart (General Manager US operations)
	Gregory J. McPherson (VP Sales and Marketing)
	Dr. David J. Sparling (VP Legal and Corporate Development)

Notes: Mr. Stuart was appointed as General Manager of Phenogen Sciences Inc., the Company’s wholly-owned US subsidiary, on 5 July 2010.

	Consolidated
	2011	2010
	$	$
Remuneration of Key Management Personnel
Short-term employee benefits	1,474,137	1,057,476
Post-employment benefits	179,503	144,765
Share-based payments	181,502	28,257
Long-term benefits	8,753	6,187
Total remuneration of Key Management Personnel	1,843,895	1,236,685

Optionholdings of Key Management Personnel

30 June 2011

	Opening	Number of options				Closing	Vesting as at year end
Name of optionholder	balance	Granted	Exercised	Lapsed		balance	Exercisable	Not exercisable
Executive
Dr. Paul D.R. MacLeman	—	3,600,000	—	—		3,600,000	—	3,600,000
Thomas G. Howitt	2,000,000	1,500,000	—	(750,000	)	2,750,000	1,250,000	1,500,000
Alison J. Mew	—	1,500,000	—	—		1,500,000	—	1,500,000
Lewis J. Stuart	—	2,400,000	—	—		2,400,000	—	2,400,000
Gregory J. McPherson	—	1,500,000	—	—		1,500,000	—	1,500,000
Dr. David J. Sparling	—	1,500,000	—	—		1,500,000	—	1,500,000
Totals	2,000,000	12,000,000	—	(750,000	)	13,250,000	1,250,000	12,000,000

Notes: Mr. Stuart became a member of Key Management Personnel during the year ended 30 June 2011.

The heading “Lapsed” includes options which expired.

30 June 2010

	Opening	Number of options			Closing	Vesting as at year end
Name of optionholder	balance	Granted	Exercised	Lapsed	balance	Exercisable	Not exercisable
Executive
Dr. Paul D.R. MacLeman	—	—	—	—	—	—	—
Thomas G. Howitt	2,000,000	—	—	—	2,000,000	250,000	1,750,000
Alison J. Mew	—	—	—	—	—	—	—
Gregory J. McPherson	—	—	—	—	—	—	—
Dr. David J. Sparling	—	—	—	—	—	—	—
Totals	2,000,000	—	—	—	2,000,000	250,000	1,750,000

Notes: Ms. Mew, Mr. McPherson and Dr. Sparling became members of Key Management Personnel during the year ended 30 June 2010.

29. RELATED PARTY DISCLOSURES (cont.)

Shareholdings of Key Management Personnel

30 June 2011

Shares held in Genetic	Opening	Number of shares		Acquired on	Closing
Technologies Limited	balance	Bought	Sold	exercise of options	balance
Director
Sidney C. Hack	—	—	—	—	—
Tommaso Bonvino	—	—	—	—	—
Dr. Malcolm R. Brandon	—	—	—	—	—
Huw D. Jones	—	797,887	—	—	797,887
Executive
Dr. Paul D.R. MacLeman	—	—	—	—	—
Thomas G. Howitt	—	—	—	—	—
Alison J. Mew	—	—	—	—	—
Lewis J. Stuart	—	—	—	—	—
Gregory J. McPherson	—	—	—	—	—
Dr. David J. Sparling	—	—	—	—	—
Totals	—	797,887	—	—	797,887

During the year ended 30 June 2010, no members of Key Management Personnel bought, sold or held a beneficial interest in any shares in the Company.

Notes: Mr. Stuart became a member of Key Management Personnel during the year ended 30 June 2011.

Ms. Mew, Mr. McPherson and Mr. Sparling became members of Key Management Personnel during the year ended 30 June 2010.

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

30. AUDITORS’ REMUNERATION

	Consolidated
	2011	2010
	$	$
Audit services
PricewaterhouseCoopers in respect of:
Audit of the Company’s Financial Report under the Corporations Act 2001	250,812	271,766
Other audit firms in respect of:
Audit of the Financial Reports of subsidiaries	15,403	17,013
Total remuneration in respect of audit services	266,215	288,779
Non-audit services
PricewaterhouseCoopers in respect of:
Accounting and other services	—	60,000
Other audit firms in respect of:
Tax advice and compliance, accounting and other services	14,388	16,514
Total remuneration in respect of non-audit services	14,388	76,514
Total auditors’ remuneration	280,603	365,293

31. SUBSIDIARIES

The following diagram is a depiction of the Group structure as at 30 June 2011.

		Group interest (%)				Net carrying value ($)
Name of Group company	Incorporation details	2011		2010		2011	2010
Entities held directly by parent
GeneType Pty. Ltd.	5 September 1990 Victoria, Australia	100	%	100	%	1	1
Genetic Technologies Corporation Pty. Ltd.	11 October 1996 N.S.W., Australia	100	%	100	%	2	2
RareCellect Pty. Ltd.	7 March 2001 N.S.W., Australia	100	%	100	%	10	10
GeneType AG	13 February 1989 Zug, Switzerland	100	%	100	%	6,614	236
GeneType Corporation	18 December 1989 California, U.S.A.	100	%	100	%	—	—
Phenogen Sciences Inc.	28 June 2010 Delaware, U.S.A.	100	%	100	%	11,006	—
Gtech International Resources Limited	29 November 1968 Yukon Territory, Canada	75.8	%	75.8	%	281,193	364,922
ImmunAid Pty. Ltd. (refer note below)	21 March 2001 Victoria, Australia	71.7	%	71.7	%	70	60
Frozen Puppies Dot Com Pty. Ltd. (refer note below)	15 February 2006 N.S.W., Australia	—		100	%	—	—
Total carrying value						298,896	365,231
Entities held by other subsidiaries
AgGenomics Pty. Ltd.	15 February 2002 Victoria, Australia	50.1	%	50.1	%	—	—
Genetic Technologies (Beijing) Limited	25 December 2008 Beijing Municipality, China	100	%	100	%	—	—

Note: During the year ended 30 June 2011, Frozen Puppies Dot Com Pty. Ltd. was deregistered (refer Note 32).

32. CHANGES IN THE COMPOSITION OF THE ENTITY

Deregistration of subsidiary

During the year ended 30 June 2010, a decision was made by the Company to strategically realign its animal business and to focus on the provision of animal genetic tests, rather than the services that were acquired as part of the acquisition of the Frozen Puppies Dot Com business in 2008. As a result, during the 2010 financial year, several impairment charges were raised in relation to:

· certain inventories associated with the Company’s reproductive services business, in the amount of $6,232;

· certain items of plant and equipment associated with the reproductive services business, in the amount of $115,413; and

· goodwill arising from the acquisition of Frozen Puppies Dot Com Pty. Ltd., in the amount of $1,264,603.

Following the disposal of assets related to the reproductive services business during the 2011 financial year, Frozen Puppies Dot Com Pty. Ltd. was subsequently deregistered on 1 June 2011.

33. PARENT ENTITY FINANCIAL INFORMATION

Summary financial information

The individual financial statements for the parent entity, Genetic Technologies Limited, disclose the aggregate amounts set out in the following table.

	Consolidated
	2011		2010
	$		$
Balance sheet
Current assets	4,936,355		3,243,890
Total assets	8,878,935		7,856,620
Current liabilities	9,174,781		7,381,481
Total liabilities	9,275,259		7,609,844
Equity
Contributed equity	72,378,105		72,378,105
Reserves
Share-based payments	1,798,257		1,544,406
Accumulated losses	(74,572,686	)	(73,675,735	)
	(396,324	)	246,776
Loss for the year	(896,951	)	(11,371,189	)
Total comprehensive loss	(896,951	)	(11,371,189	)

Note: The current liabilities of Genetic Technologies Limited exceed its current assets as at 30 June 2011 due to the fact that the asset loans to, and investments in, its subsidiaries have been written down, whilst the loans from the subsidiaries to the parent entity as at that date have not.

Guarantees entered into by the parent entity

Related party information

As at 30 June 2011, $33,113,037 (2010: $30,793,956) was receivable by the Company from its various subsidiaries. As at the same date, an amount of $7,672,892 (2010: $5,626,740) was payable by the Company to its wholly-owned subsidiaries. All such loans are unsecured, generally interest free and there are no fixed terms of repayment.

Financial risk management

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 subsidiaries.

Contingent liabilities and commitments of the parent entity

As at the date of this Report, the parent entity had no contingent liabilities or other commitments.

34. 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.

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 holds the following financial instruments:

	Consolidated
	2011	2010
	$	$
Financial assets
Cash at bank / on hand	1,985,257	1,773,152
Short-term deposits	3,119,410	1,533,159
Trade and other receivables	674,369	754,657
Performance bond and deposits	2,649	71,658
Total financial assets	5,781,685	4,132,626
Financial liabilities
Trade and other payables	1,115,028	1,195,673
Hire purchase liabilities	67,878	382,640
Total financial liabilities	1,182,906	1,578,313

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 2011 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 of 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.

34. FINANCIAL RISK MANAGEMENT (cont.)

Credit risk (cont.)

In addition, receivable balances are monitored on an ongoing basis with the result that the Group’s exposure to bad debts is not significant. As at 30 June 2011, the balance of the Group’s provision for doubtful debts was $56,700 (2010: $102,500), out of a total net receivables balance as at that date of $674,369 (2010: $754,657). 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.

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

	Consolidated
	2011	2010
	$	$
Net trade and other receivables
Current (less than 30 days)	616,550	578,417
31 days to 60 days	21,337	98,533
61 days to 90 days (note)	2,148	10,702
Greater than 90 days (note)	34,334	67,005
Total net trade and other receivables (Note 12)	674,369	754,657
Net trade and other payables
Current (less than 30 days)	1,085,480	1,153,364
31 days to 60 days	28,866	42,309
61 days to 90 days	—	—
Greater than 90 days	682	—
Total net trade and other payables (Note 17)	1,115,028	1,195,673

Notes: Net trade and other receivables for the Group that are greater than 90 days include net amounts receivable from wholly-owned subsidiaries of $2,096,631 (2010: $2,351,077). The loans to and from these subsidiaries are interest free and there are no fixed terms of repayment.

A total of $36,482 in net trade and other receivables greater than 60 days is past due, of which a total of $21,213 had been received prior to the date of this Financial Report. The Company considers that the remaining $15,269 is recoverable and not impaired.

Market risk

Foreign currency risk

The Group operates internationally and is 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 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, predominantly in the United States. 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 associated with that management are identified and addressed. Under the policy, which is updated on a regular basis as circumstances dictate, 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.

34. FINANCIAL RISK MANAGEMENT (cont.)

Market risk (cont.)

As at 30 June 2011, the Group held the following financial assets and liabilities that were denominated in foreign currencies:

Consolidated	Year	USD	CAD	EUR	GBP	CNY	NZD	CHF	SGD
Financial assets
Cash at bank / on hand	2011	437,717	313,637	34,191	1	1,854	1,240	6,626	154
	2010	15,191	335,821	840	206	53,748	941	908	—
Trade and other receivables	2011	113,276	—	90,105	—	—	—	—	—
	2010	119,677	—	90,000	—	56,259	—	550	—
Performance bond / deposit	2011	—	—	—	—	—	—	—	—
	2010	—	—	50,000	—	—	—	—	—
Total financial assets	2011	550,993	313,637	124,296	1	1,854	1,240	6,626	154
	2010	134,868	335,821	140,840	206	110,007	941	1,458	—
Financial liabilities
Trade and other payables	2011	217,168	22,539	17,250	—	68,158	136	3,290	—
	2010	97,957	9,326	45,187	3,729	50,508	39	3,190	—
Total financial liabilities	2011	217,168	22,539	17,250	—	68,158	136	3,290	—
	2010	97,957	9,326	45,187	3,729	50,508	39	3,190	—

Notes:	USD — United States dollars	CAD — Canadian dollars	EUR — European euros	CHF — Swiss francs
	GBP — Great Britain pounds	CNY — Chinese yuan	NZD — New Zealand dollars	SGD — Singapore dollars

During the year ended 30 June 2011, the Australian dollar / US dollar exchange rate increased by 25.0%, from 0.8480 at the beginning of the year to 1.0597 at the end of the year. During the same period, Australian dollar / Canadian dollar exchange rate increased by 15.2%, from 0.8982 at the beginning of the year to 1.0351 at the end of the year.

Based on the financial instruments held at 30 June 2011, had the Australian dollar weakened / strengthened by 10% against the US dollar with all other variables held constant, the Group’s profit for the year would have been $47,000 lower / $58,000 higher (2010: loss $4,000 lower / loss $5,000 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.

Based on the financial instruments held at 30 June 2011, had the Australian dollar weakened / strengthened by 10% against the Canadian dollar with all other variables held constant, the Group’s profit for the year would have been $48,000 lower / $34,000 higher (2010: loss $33,000 lower / loss $40,000 higher), due to changes in the values of cash and cash equivalents which are denominated in Canadian dollars, as detailed in the above tables.

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 a Short Term Investment Policy which was developed to 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 deposits its surplus cash in a range of deposits / securities over different time frames and with different institutions in order 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 2011, if interest rates had changed by +/- 50 basis points from the year-end rates, with all other variables held constant, the Group’s profit for the year would have been $22,000 lower / higher (2010: loss $16,000 lower / higher), as a result of higher / lower interest income from cash and cash equivalents. Consolidated equity for the Group would have been $22,000 higher / lower (2010: $16,000 higher / lower) mainly as a result of an increase / decrease in the fair value of cash and cash equivalents.

34. FINANCIAL RISK MANAGEMENT (cont.)

Market risk (cont.)

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

Consolidated	Year	Floating rate	Fixed rate	Carrying amount	Weighted ave. effective rate		Ave. maturity period days
		$	$	$	%
Financial assets
Cash at bank / on hand	2011	1,985,257	—	1,985,257	1.56	%	At call
	2010	1,773,152	—	1,773,152	1.69	%	At call
Short-term deposits	2011	—	3,119,410	3,119,410	5.92	%	92
	2010	—	1,533,159	1,533,159	5.67	%	92
Performance bond / deposits	2011	—	2,649	2,649	—		At call
	2010	—	71,658	71,658	—		At call
Totals	2011	1,985,257	3,122,059	5,107,316
	2010	1,773,152	1,604,817	3,377,969
Financial liabilities
Hire purchase liabilities (Note 27)	2011	—	70,989	67,878	6.30	%	428
	2010	—	412,551	382,640	8.64	%	575
Totals	2011	—	70,989	67,878
	2010	—	412,551	382,640

Notes: All periods in respect of financial assets are for less than one year.

In respect of the hire purchase liabilities attributable to the Group, the interest rates are fixed for the terms of the facility, which is less than one year ($50,130) and between one and five years ($17,748).

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.

A balanced view of cash inflows and outflows affecting the Group is summarised in the table below:

Consolidated	Year	< 6 months	6 to 12 months	1 to 5 years	> 5 years	Totals
		$	$	$	$	$
Financial assets
Cash at bank / on hand	2011	1,985,257	—	—	—	1,985,257
	2010	1,773,152	—	—	—	1,773,152
Short-term deposits	2011	3,119,410	—	—	—	3,119,410
	2010	1,533,159	—	—	—	1,533,159
Trade and other receivables	2011	674,369	—	—	—	674,369
	2010	754,657	—	—	—	754,657
Performance bond and deposits	2011	2,649	—	—	—	2,649
	2010	71,658	—	—	—	71,658
Total financial assets	2011	5,781,685	—	—	—	5,781,685
	2010	4,132,626	—	—	—	4,132,626

34. FINANCIAL RISK MANAGEMENT (cont.)

Liquidity risk (cont.)

Consolidated	Year	< 6 months	6 to 12 months		1 to 5 years		> 5 years	Totals
		$	$		$		$	$
Financial liabilities
Trade and other payables	2011	1,115,028	—		—		—	1,115,028
	2010	1,195,673	—		—		—	1,195,673
Hire purchase liabilities	2011	26,306	26,702		17,981		—	70,989
	2010	134,326	125,271		152,954		—	412,551
Total financial liabilities	2011	1,141,334	26,702		17,981		—	1,186,017
	2010	1,329,999	125,271		152,954		—	1,608,224
Net maturity	2011	4,640,351	(26,702	)	(17,981	)	—	4,595,668
	2010	2,802,627	(125,271	)	(152,954	)	—	2,524,402

The Group had access to the following undrawn borrowing facilities as at 30 June 2011:

	Facility limit	Amount used		Amount available
	$	$		$
Nature of facility
Master Asset Finance Facility	2,500,000	(67,878	)	2,432,122
Credit card facilities	145,000	(18,786	)	126,214

Note: The Master Asset Finance Facility may be drawn at any time, subject to compliance with applicable banking covenants, and is subject to annual review (refer Note 18 in respect of a breach of the terms of the Facility).

Fair value measurements

The following methods and assumptions are used to determine the 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 its short term to maturity.

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

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

Accrued expenses: the carrying amount approximates fair value.

Hire purchase liabilities: the carrying amount approximates fair value.

35. SUBSEQUENT EVENTS

Apart from this transaction, 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:

1. 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 2011 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; and

(c) Note 2 confirms that the financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board.

2. The Directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer, as required by section 295A of the Corporations Act 2001.

On behalf of the Board.

SIDNEY C. HACK
Non-Executive Chairman

Melbourne, 24 August 2011

Auditors’ Independence Declaration

As lead auditor for the audit of Genetic Technologies Limited for the year ended 30 June 2011, I declare that to the best of my knowledge and belief, there have been:

a)	no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and

b)	no contraventions of any applicable code of professional conduct in relation to the audit.

This declaration is in respect of Genetic Technologies Limited and the entities it controlled during the period.

/s/ Nadia Carlin
Nadia Carlin	Melbourne
Partner	24 August 2011
PricewaterhouseCoopers

PricewaterhouseCoopers, ABN 52 780 433 757

Freshwater Place, 2 Southbank Boulevard, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001

T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au

Liability limited by a scheme approved under Professional Standards Legislation.

Independent auditor’s report to the members of

Genetic Technologies Limited

Report on the financial report

We have audited the accompanying financial report of Genetic Technologies Limited (the company), which comprises the balance sheet as at 30 June 2011, and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year ended on that date, a summary of significant accounting policies, other explanatory notes and the directors’ declaration for Genetic Technologies Limited (the consolidated entity). The consolidated entity comprises the company and the entities it controlled at the year’s end or from time to time during the financial year.

Directors’ responsibility for the financial report

The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error. In Note 2, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements comply with International Financial Reporting Standards.

Auditor’s responsibility

Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.

Our procedures include reading the other information in the Annual Report to determine whether it contains any material inconsistencies with the financial report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

PricewaterhouseCoopers, ABN 52 780 433 757

Freshwater Place, 2 Southbank Boulevard, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001

T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au

Liability limited by a scheme approved under Professional Standards Legislation.

Independence

In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.

Auditor’s opinion

In our opinion:

(a) the financial report of Genetic Technologies Limited is in accordance with the Corporations Act 2001, including:

(i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2011 and of its performance for the year ended on that date; and

(ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; and

(b) the financial report and notes also comply with International Financial Reporting Standards as disclosed in Note 2.

Report on the Remuneration Report

We have audited the remuneration report included in the directors’ report for the year ended 30 June 2011. The directors of the company are responsible for the preparation and presentation of the remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the remuneration report, based on our audit conducted in accordance with Australian Auditing Standards.

Auditor’s opinion

In our opinion, the remuneration report of Genetic Technologies Limited for the year ended 30 June 2011, complies with section 300A of the Corporations Act 2001.

/s/ PricewaterhouseCoopers
PricewaterhouseCoopers

/s/ Nadia Carlin
Nadia Carlin	Melbourne
Partner	24 August 2011