PART I

        The Senior Managers of the Company are as follows:

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Item 1.C Auditors

Auditors

        The auditors of the Company's US GAAP accounts for the years ended June 30, 2001, June 30, 2002, June 30, 2003 and June 30, 2004 were Ernst & Young, whose address is 680 George Street, Sydney, NSW 2000, Australia, members of the Australian Institute of Chartered Accountants. The Company's financial statements for the year ended June 30, 2000 are unaudited, as more fully described in item 3.5 of this Registration Statement, as are the financial statements for the six months ended December 31, 2004 and 2003, respectively. Ernst & Young are the Company's current auditors, an appointment ratified at the Annual General Meeting held on November 28, 2003.

Item 2. Offer Statistics And Expected Timetable

        Not applicable.

Item 3. Key Information

Item 3.A Selected Financial Data

        The following selected financial data for the four years ended June 30, 2004 are derived from the audited consolidated financial statements of Genetic Technologies Limited, prepared in accordance with United States generally accepted accounting principles ("US GAAP"). The selected financial data for the year ended June 30, 2000 is derived from unaudited financial statements prepared in accordance with US GAAP. The financial data for the six month periods ended December 31, 2004 and 2003 are derived from unaudited financial statements. The unaudited financial statements include all adjustments, consisting of normal recurring accruals, which Genetic Technologies Limited considers necessary for a fair presentation of the financial position and the results of operations for these periods.

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        Operating results for the six month period ended December 31, 2004 are not necessarily indicative of the results to be expected for the entire year ended June 30, 2005, or any future period. The data should be read in conjunction with the consolidated financial statements, related notes and other financial information included herein.

        The acquisition of GeneType AG by the Company in 2000 was accounted for under US GAAP as a reverse acquisition for financial reporting purposes. Accordingly, the summary financial data set forth below is that of GeneType (the legal acquiree), with the results of operations of Genetic Technologies (the legal acquiror) included from the effective date of its acquisition (September 30, 2000).

CONSOLIDATED PROFIT AND LOSS STATEMENT

        All amounts are in U.S. dollars as of December 31 or June 30 as noted (except for per share data).

        Refer page 5.

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5

(a)

Converted at A$1.00=US$0.7337, except for assets and liabilities which were converted at A$1.00=US$0.7805

(b)

Converted at A$1.00=US$0.6872, except for assets and liabilities which were converted at A$1.00=US$0.6952

(c)

Converted at A$1.00=US$0.7132, except for assets and liabilities which were converted at A$1.00=US$0.6952

(d)

Converted at A$1.00=US$0.5850, except for assets and liabilities which were converted at A$1.00=US$0.6710

(e)

Converted at A$1.00=US$0.5236, except for assets and liabilities which were converted at A$1.00=US$0.5628

(f)

Converted at A$1.00=US$0.5372, except for assets and liabilities which were converted at A$1.00=US$0.5100

(g)

Converted at A$1.00=US$0.6287, except for assets and liabilities which were converted at A$1.00=US$0.5971

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(a)

The average of the exchange rates on the last day of each month during the financial period.

Item 3.C Reasons for the Offer and Use of Proceeds

        Not applicable.

Item 3.D Risk Factors

        Before you purchase our ADSs, you should be aware that there are risks, including those described below. You should consider carefully these risk factors together with all of the other information contained elsewhere in this Registration Statement before you decide to purchase our ADSs.

Risks Related to Us

         Our stock price is volatile and can fluctuate significantly based on events not in our control and general industry conditions. As a result the value of your investment may decline significantly.

        The biotechnology sector seems particularly vulnerable to abrupt changes in investor sentiment. Stock prices of companies in the biotechnology industry, including ours, can swing dramatically, with

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little relationship to operating performance. Our stock price may be affected by a number of factors including, but not limited to:

•

product development events,



•

the outcome of litigation,



•

decisions relating to intellectual property rights,



•

the entrance of competitive products/technologies into our market,



•

new medical discoveries



•

the establishment of strategic partnerships and alliances



•

changes in reimbursement policies or other practices related to the pharmaceutical industry or



•

other industry and market changes or trends.

        Since June 30, 2002, the price of our Ordinary Shares has ranged from a low of A$0.18 to a high of A$0.87 per share. Further fluctuations are likely to occur due to events not within our control and general market conditions affecting the biotechnology sector or the stock market generally. The most significant such event of which we have knowledge took place in August 2003 after a television report in Australia on our company was broadcast. That week the price of our shares increased from A$0.58 to A$0.87 on a volume of 26,000,000 shares traded, which was exceptionally high for us. The share price subsequently retreated.

        In addition, low trading volume may increase the volatility of the price of our ADSs. Trading volume in our Ordinary Shares on other markets has not been historically high, and trading volume of our ADSs on the NASDAQ SmallCap Market may also be low. Further, because each of our ADSs represents 30 of our Ordinary Shares, trading volume in our ADSs may be lower than that for our Ordinary Shares. A thin trading market could cause the price of our ADSs to fluctuate significantly more than the stock market as a whole. For example, trades involving a relatively small number of our ADSs may have a greater impact on the trading price for our ADSs than would be the case if their trading volume were higher.

        The following chart graphically illustrates the fluctuation in the price of our shares over the last four years:

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The fact that we do not expect to pay cash dividends may lead to decreased prices for our stock.

        We have never paid a cash dividend on our Ordinary Shares and we do not anticipate paying any cash dividend in the foreseeable future. We intend to retain future cash earnings, if any, for reinvestment in the development and expansion of our business. Whether we pay cash dividends in the future will be at the discretion of our board of directors and will be dependent on our financial condition, results of operations, capital requirements and any other factors our board of directors decides is relevant. As a result, an investor will only recognize an economic gain on an investment in our stock from an appreciation in the price of our stock.

You may have difficulty in effecting service of legal process and enforcing judgments against us and our management.

        We are a public company limited by shares, registered and operating under the Australian Corporations Act 2001. All of our directors and officers named in this Registration Statement reside outside the U.S. Substantially all or a substantial portion of the assets of those persons are located outside the U.S. As a result, it may not be possible to effect service on such persons in the U.S. or to enforce, in foreign courts, judgments against such persons obtained in U.S. courts and predicated on the civil liability provisions of the federal securities laws of the U.S. Furthermore, substantially all of our directly owned assets are outside the U.S., and, as such, any judgment obtained in the U.S. against us may not be collectible within the U.S. There is doubt as to the enforceability in the Commonwealth of Australia, in original actions or in actions for enforcement of judgments of U.S. courts, of civil liabilities predicated solely upon federal or state securities laws of the U.S., especially in the case of enforcement of judgments of U.S. courts where the defendant has not been properly served in Australia.

Because we are not required to provide you with the same information as an issuer of securities based in the United States, you may not be afforded the same protections or information you would have if you invested in a United States public corporation.

        We are exempt from certain provisions of the Securities Exchange Act of 1934, as amended, commonly referred to as the Exchange Act, that are applicable to U.S. public companies, including (i) the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q or current reports on Form 8-K; (ii) the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act; and (iii) the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time. The exempt provisions would be available to you if you invested in a U.S. corporation.

        However, in line with the Australian Stock Exchange regulations, we will disclose our semi annual results, which are required to have a limited review semi-annually and be fully audited annually. The information, which may have an effect on the stock price on the Australian Stock Exchange, will also be disclosed immediately in the public media and to the Australian Stock Exchange. Other relevant information pertaining to our company or us will also be disclosed in line with the Australian Stock Exchange regulations and information dissemination requirements for listed companies. We will provide our semi-annual results and other material information that we make public in Australia in the U.S. under the cover of SEC Form 6-K. Nevertheless, you may not be afforded the same protections or information, which would be made available to you, were you investing in a United States public corporation because the Form 10-Q and Form 8-K requirements are not applicable to us.

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If a public market does not develop for our ADSs, your ability to resell your ADSs could be negatively affected. This would be so because there would be limited buyers for your interests.

        There has been no public market for the ADSs and there has been virtually no trading in our ADSs through the pink sheets after establishment of our Level I ADR Program. We expect to list the ADSs on the NASDAQ SmallCap Market after this Registration Statement becomes effective. An active trading market for the ADSs, however, may not develop or be maintained after listing. If an active trading market is not developed and maintained, the liquidity and trading prices of the ADSs could be negatively affected.

Holders of ADSs may have limited rights relative to holders of our Ordinary Shares in certain circumstances.

        The rights of holders of ADSs with respect to voting of Ordinary Shares and the right to receive certain distributions may be limited in certain respects by the deposit agreement entered into by us and The Bank of New York. For example, although ADS holders are entitled under the deposit agreement, subject to any applicable provisions of Australian law and of our constitution, to instruct the depositary as to the exercise of the voting rights pertaining to the Ordinary Shares represented by the American Depositary Shares, and the depositary has agreed that it will try, as far as practical, to vote the Ordinary Shares so represented in accordance with such instructions, ADS holders may not receive notices sent by depositary in time to ensure that the depositary will vote the Ordinary Shares. This means that holders of ADSs may not be able to exercise their right to vote. In addition, under the deposit agreement, the depositary has the right to restrict distributions to holders of the ADSs in the event that it is unlawful or impractical to make such distributions. We have no obligation to take any action to permit distributions to holders of our American Depositary Receipts, or ADRs. As a result, holders of ADRs may not receive distributions made by us. For further information about the rights and limitations on rights applicable to holders of our ADRs, please see Item 12D of this Registration Statement entitled "American Depositary Shares".

Our company has a history of losses and we expect to continue to incur losses.

        Genetic Technologies Limited was founded in 1987. We have incurred operating losses in every year of our existence. We incurred net losses of $3,222,179 for the year ended June 30, 2002, net loss of $960,395 for the year ended June 30, 2003 and net losses of $4,816,726 for the year ended June 30, 2004, and a net loss of $413,190 for six months ended December 31, 2004, which losses are continuing. As of December 31, 2004, we have accumulated losses of $7,652,354. We have not achieved profitability and expect to continue to incur net losses. The extent of future losses and the time required to achieve profitability is highly uncertain.

Risks Related to our Industry

        The sales cycle for our testing products and license generation is lengthy. As a result, we may expend substantial funds and management effort with no assurance of successfully selling our products or services or granting new licenses.

        Our ability to obtain customers for our genetic testing products and services depends in significant part upon the perception that our products and services can help accelerate efforts in genomics. The sales cycle is typically lengthy. Our sales effort requires the effective demonstration of the benefits of our products and services to and significant training of many different departments within a potential customer. In addition, we sometimes are required to negotiate agreements containing terms unique to each customer. With respect to license generation, it is common for negotiations with licensees to take many months before a license is eventually granted. Our business could be adversely affected if we expend money without any return.

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If our competitors develop more effective products, our results of operations and financial condition could be affected.

        We are subject to limited competition from biotechnology and diagnostic companies, academic and research institutions and government or other publicly-funded agencies that are pursuing products and services that are substantially similar to our proposed testing products and services, or which otherwise address the needs of our customers and potential customers. Our competitors in the testing market include private and public sector enterprises in Australia and elsewhere. Many of the organizations competing with us have significantly greater experience in financial, research and development, manufacturing, marketing, sales, distribution, technical and regulatory matters than we do. In addition, many current and potential competitors have greater name recognition and more extensive collaborative relationships. Because of our patents, we have virtually no competition in the licensing area.

        Our competitive position in the testing area is based upon our ability to:

•

create and maintain scientifically-advanced technology and proprietary products and processes;



•

attract and retain qualified personnel;



•

obtain patent or other protection for our products and processes;



•

obtain required government approvals on a timely basis; and



•

successfully market products.

        If we are not successful in meeting these goals, our business could be hurt. Similarly, our competitors may succeed in developing technologies, products or procedures that are more effective than any that we are developing or that would render our technology and products obsolete, noncompetitive or uneconomical.

        For a full discussion of competition see Item 4.B, "Competition".

We rely heavily upon our patents and proprietary technology and any future claims that our patents are invalid could seriously affect our licensing business, and adversely affect our revenues and our financial condition.

        We rely upon our portfolio of patent rights, patent applications and exclusive licenses to patents and patent applications relating to genetic technologies. We expect to aggressively patent and protect our proprietary technologies. However, we cannot be sure that any additional patents will be issued to us as a result of our domestic or foreign patent applications or that any of our patents will withstand challenges by others. Patents issued to or licensed by us may be infringed or third parties may independently develop either the same or similar technology. Similarly, our patents may not provide us with meaningful protection from competitors, including those who may pursue patents which may prevent, limit or interfere with our products or will require licensing and the payment of significant fees or royalties by us to such third parties in order to enable us to conduct our business. We may sue or be sued by third parties regarding patents and other intellectual property rights. These suits are costly and would divert funds and management and technical resources from our operations.

        We have relationships with a number of academic consultants who are not employed by us. Accordingly, we have limited control over their activities and can expect only limited amounts of their time to be dedicated to our activities. These persons may have consulting, employment or advisory arrangements with other entities that may conflict with or compete with their obligations to us. Our consultants typically sign agreements that provide for confidentiality of our proprietary information and results of studies. However, in connection with every relationship, we may not be able to maintain the confidentiality of our technology, the dissemination of which could hurt our competitive position and

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results of operations. To the extent that our scientific consultants develop inventions or processes independently that may be applicable to our proposed products, disputes may arise as to the ownership of the proprietary rights to such information, and we may not win those disputes.

If we are unable to protect our proprietary methods and technologies, we may not be able to commercialize products or services.

        Our commercial success will depend, in large part, on our ability to obtain patent protection on many aspects of our business, including the products, methods and services we develop. Patents issued to us may not provide us with substantial protection or be commercially beneficial to us. The issuance of a patent is not conclusive as to its validity or its enforceability.

        In addition, our patent applications or those we have licensed, may not result in issued patents. If our patent applications do not result in issued patents, our competitors may obtain rights to commercialize our discoveries which would harm our competitive position.

        We also may apply for patent protection on novel genetic variations in known genes and their uses, as well as novel uses for previously identified genetic variations discovered by third parties. In the latter cases, we may need a license from the holder of the patent with respect to such genetic variations in order to make, use or sell any related products. We may not be able to acquire such licenses on terms acceptable to us, if at all.

        Certain parties are attempting to rapidly identify and characterize genes and genetic variations through the use of sequencing and other technologies. To the extent any patents are issued to other parties on such partial or full-length genes or genetic variations or uses for such genes or genetic variations, the risk increases that the sale of products or services developed by us or our collaborators may give rise to claims of patent infringement against us. Others may have filed and, in the future, are likely to file patent applications covering many genetic variations and their uses. Any such patent application may have priority over our patent applications and could further require us to obtain rights to previously issued patents covering genetic variations. Any license that we may require under any such patent may not be made available to us on commercially acceptable terms, if at all.

        We may be sued for infringing on the intellectual property rights of others. We could also become involved in interference proceedings in the United States Patent and Trademark Office to determine the relative priority of our patents or patent applications and those of the other parties involved in the interference proceeding. Intellectual property proceedings are costly, and could affect our results of operations. These proceedings can also divert the attention of managerial and technical personnel. If we do not prevail in any intellectual property proceeding, in addition to any damages we might have to pay, we could be required to stop the infringing activity, or obtain a license to or design around the intellectual property in question. In interference proceedings, our patent rights could be invalidated and the scope of our patents could be limited. If we are unable to obtain licenses to intellectual property rights that we need to conduct our business, or are unable to design around any third party patent, we may be unable to sell some of our products, which will result in reduced revenue.

        We have in the past and may in the future become a party to litigation involving patents and intellectual property rights. We currently have pending litigation involving Applera Corporation, the outcome of which remains uncertain. We may in the future receive claims of infringement of intellectual property rights from other parties. If we do not prevail in any future legal proceedings, we may be required to pay significant monetary damages. In addition, we could also be enjoined from use of certain processes or prevented from selling certain configurations of our products or services that were found to be within the scope of the patent claims. In the event we did not prevail in any future proceeding, we would either have to obtain licenses from the other party, avoid certain product configurations or modify some of our products, services and processes to design around the patents. Licenses could be costly or unavailable on commercially reasonable terms. Designing around patents or

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focusing efforts on different configurations could be time consuming, and we would have to remove some of our products or services from the market while we were completing redesigns. Accordingly, if we are unable to settle future intellectual property disputes through licensing or similar arrangements, or if any such future disputes are determined adversely to us, our ability to market and sell our products and services could be seriously harmed. This would in turn reduce demands for our products and harm our financial condition and results of operations.

        In addition, in order to protect or enforce our patent rights or to protect our ability to operate our business, we may need to initiate other patent litigation against third parties. These lawsuits could be expensive, take significant time, and could divert management's attention from other business concerns. These lawsuits could result in the invalidation or limitation in the scope of our patents or forfeiture of the rights associated with our patents. We may not prevail in any such proceedings and a court may find damages or award other remedies in favor of our opposing party in any of these suits. During the course of any future proceedings, there may be public announcements of the results of hearings, motions and other interim proceedings or developments in the litigation. Securities analysts or investors may perceive these announcements to be negative, which could cause the market price of our stock to decline.

We may be subject to professional liability suits; our insurance may not be sufficient to cover damages. If this occurs, our business and financial condition may be negatively affected.

        Our business exposes us to potential liability risks that are inherent in the testing, manufacturing, marketing and sale of genetic tests. The use of our products and product candidates, whether for clinical trials or commercial sale, may expose us to professional liability claims or product recall and possible adverse publicity. We may be subject to claims resulting from incorrect results of analysis of genetic variations or other screening tests performed using our products. Litigation of these claims can be costly. We could expend significant funds during any litigation proceeding brought against us. Further, if a court were to require us to pay damages to a plaintiff, the amount of such damages could significantly harm our financial condition. Although we have public and products liability insurance coverage under broadform liability and professional indemnity policies, for an aggregate amount of A$60,000,000, the level or breadth of our coverage may not be adequate to fully cover potential liability claims. To date we have not been subject to claims, or ultimately liability, in excess of the amount of our coverage. In addition, we may not be able to obtain additional professional liability coverage in the future at an acceptable cost. A successful claim or series of claims brought against us in excess of our insurance coverage and the effect of professional liability litigation upon the reputation and marketability of our technology and products, together with the diversion of the attention of key personnel, could negatively affect our business.

We use potentially hazardous materials, chemicals and patient samples in our business and any disputes relating to improper handling, storage or disposal of these materials could be time consuming and costly.

        Our research and development, production and service activities involve the controlled use of hazardous laboratory materials and chemicals, including small quantities of acid and alcohol, and patient tissue and blood samples. We do not knowingly deal with infectious samples. We, our collaborators and service providers are subject to stringent Australian federal, state and local laws and regulations governing occupational health and safety standards, including those governing the use, storage, handling and disposal of these materials and certain waste products. However, we could be liable for accidental contamination or discharge or any resultant injury from hazardous materials, and conveyance, processing, and storage of and data on patient samples. If we, our collaborators or service providers fail to comply with applicable laws or regulations, we could be required to pay penalties or be held liable for any damages that result and this liability could exceed our financial resources. Further,

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future changes to environmental health and safety laws could cause us to incur additional expense or restrict our operations. We have never had a reportable injury through the date of this Registration Statement.

        In addition, our collaborators and service providers may be working with these types of hazardous materials, including hazardous chemicals, in connection with our collaborations. In the event of a lawsuit or investigation, we could be held responsible for any injury caused to persons or property by exposure to, or release of, these patient samples that may contain viruses and hazardous materials. The cost of this liability could exceed our resources. While we maintain broadform liability insurance coverage for these risks, in the amount of up to A$40,000,000, the level or breadth of our coverage may not be adequate to fully cover potential liability claims. To date we have not been subject to claims, or ultimately liability, in excess of the amount of our coverage. Our broadform insurance coverage also covers us against losses arising from an interruption of our business activities as a result of the mishandling of such materials. We also maintain workers' compensation insurance, which is mandatory in Australia, covering all of our workers in the event of injury.

We depend on the collaborative efforts of our academic and corporate partners for research, development and commercialization of some of our products. A breach by our partners of their obligations, or the termination of the relationship, could deprive us of valuable resources and require additional investment of time and money.

        Our strategy for research, development and commercialization of some of our products involves entering into various arrangements with academic and corporate partners and others. As a result, our strategy depends, in part, upon the success of these outside parties in performing their responsibilities. Our collaborators may also be our competitors. We cannot control the amount and timing of resources that our collaborators devote to performing their contractual obligations and we have no certainty that these parties will perform their obligations as expected or that any revenue will be derived from these arrangements.

        If our collaborators breach or terminate their agreement with us or otherwise fail to conduct their collaborative activities in a timely manner, the development or commercialization of the product candidate or research program under such collaborative arrangement may be delayed. If that is the case, we may be required to undertake unforeseen additional responsibilities or to devote unforeseen additional funds or other resources to such development or commercialization, or such development or commercialization could be terminated. The termination or cancellation of collaborative arrangements could adversely affect our financial condition, intellectual property position and operations. In addition, disagreements between collaborators and us could lead to delays in the collaborative research, development, or commercialization of certain products or could require or result in formal legal process or arbitration for resolution. These consequences could be time-consuming and expensive and could have material adverse effects on us.

        Other than our contractual rights under our license agreements, we may be limited in our ability to convince our licensees to fulfill their obligations. If our licensees fail to act promptly and effectively, or if a dispute arises, it could have a material adverse effect on our results of operations and the price of our Ordinary Shares and ADSs.

        We rely upon scientific, technical and clinical data supplied by academic and corporate collaborators, licensors, licensees, independent contractors and others in the evaluation and development of potential therapeutic methods. There may be errors or omissions in this data that would materially adversely affect the development of these compounds.

        We may seek additional collaborative arrangements to develop and commercialize our products in the future. We may not be able to negotiate acceptable collaborative arrangements in the future, and if negotiated we have no certainty that they will be on favorable terms or will be successful. In addition,

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our collaborative partners may pursue alternative technologies or develop alternative compounds independently or in collaboration with others as a means of developing treatments for the diseases targeted by their collaborative programs with us. If any of these events occurs, the progress of our company could be adversely affected and our results of operations and financial condition could suffer.

Problems associated with international business operations could affect our ability to license our technology and our results of operations.

        We seek to license our intellectual property on a global scale, including eventually in countries such as China that are considered to provide significantly less protection to intellectual property than the United States and Australia. In addition, a number of other risks are inherent in international transactions and commerce, including political and economic instability, foreign currency exchange fluctuations and changes in tax laws. For example, in fiscal year 2003 we sustained foreign exchange losses of over $500,000 primarily due to the appreciation in the value of the Australian Dollar compared to the U.S. Dollar and the impact on our cash deposits denominated in U.S. Dollars.

Government regulation of genetic research or testing may adversely affect the demand for our products and impair our business and operations.

        Apart from accreditation, we are generally not subject to regulation. Federal, state and local governments, however, may adopt regulations relating to the conduct of genetic research and genetic testing. These regulations could limit or restrict genetic research activities as well as genetic testing for research or clinical purposes. In addition, if state and local regulations are adopted, these regulations may be inconsistent with, or in conflict with, regulations adopted by other state or local governments. Regulations relating to genetic research activities could adversely affect our ability to conduct our research and development activities. Regulations restricting genetic testing could adversely affect our ability to market and sell our products and services. Accordingly, any regulations of this nature could increase the costs of our operations or restrict our ability to conduct our testing business and might adversely affect our operations and financial condition.

        In Australia, there is no law that prohibits the performing a paternity test by using just a sample from a father and child. In March 2003, the Australian Law Reform Commission (ALRC) released its report into Human Genetic Testing in Australia. In relation to paternity testing, it made various recommendations, the most significant of which was that the testing of a child without the knowledge or consent of both parents should be made illegal. Even though this report was released over two years ago, it is expected that the Government will eventually accept and pass legislation to enforce the ALRC recommendations. When passed, this will have a negative impact on our revenue, as father/child testing is a substantial and growing market. However, another of the ALRC recommendations was that Human DNA parentage testing only be performed in an accredited laboratory. If this recommendation is accepted, then the three non-accredited providers will either have to comply or cease trading.

Ethical and other concerns surrounding the use of genetic information may reduce the demand for our products and services.

        Public opinion regarding ethical issues related to the confidentiality and appropriate use of genetic testing results may influence governmental authorities to call for limits on, or regulation of the use of, genetic testing. In addition, such authorities could prohibit testing for genetic predisposition to certain conditions, particularly for those that have no known cure. Furthermore, adverse publicity or public opinion relating to genetic research and testing, even in the absence of any governmental regulation, could reduce the potential markets for our products, which could materially and adversely affect our revenues.

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        Although we are a leader in the field of genetics in Australia, we do not undertake any activities in the contentious areas of cloning, stem cell research or other gene-altering areas. As such, many of the ethical issues that may be relevant to other participants in the genetics industry are not applicable to us.

Licensing

        The patenting of genes and issues surrounding access to genetic knowledge are subjects of extensive and ongoing public debate in many countries. In recent times for example, the Australian Law Reform Commission has conducted two inquiries into the social uses of genetic information. Although we do not own any patents over genes, the patents we hold over uses of non-coding DNA have a broad scope and these have also been the subject of debate and some criticism in the media. A risk we may face is that individuals or organisations in any of the countries in which these patents have issued could potentially take legal action to seek their amendment, revocation or invalidation.

        Furthermore, any time that we initiate legal action against parties that infringe our patents we face a risk that the infringer will defend itself through a counter-claim of patent invalidity. Subsequent legal action could potentially overturn, invalidate or limit the scope of our patents.

        Under the relevant Patent Act in most, if not all, the countries in which our non-coding patents have issued, the relevant judicial system has rights to impose compulsory licensing. The relevant governments typically hold "march-in" rights by which they may unilaterally choose to exploit the technology. To the extent that the Company's non-coding DNA technology is used in the conduct of genetic research, we also face risks, uncertainty and controversy over the licensing of our technology to those conducting research. Whether or not researchers should be exempted from obligations to take licenses to relevant patents is currently the subject of another government inquiry being conducted by the Australian Council for Intellectual Property. We cannot predict the outcome of this enquiry and there is a risk that we may be prevented in the future from asserting the patents to people performing research.

Genetic testing

        There is a risk that a moratorium on genetic testing by the Australian Institute of Sport may impact on the commercialization of our sports performance genetic test for the elite competitor market in Australia. However, this moratorium should not impact our ability to distribute this test throughout the rest of the world. There is also a view held by some elements of the medical and academic communities that the marketing of some of our cancer diagnostic tests is done solely with a commercial objective in mind. In essence, some parties have indicated that, in their view, the risk of inheriting certain types of cancer is too low to warrant an expensive genetic test. Guidelines laid down by the Australian National Health Medical Research Council also prevent us from promoting our testing in a manner which may 'cause any unnecessary alarm'.

        Health care cost containment initiatives could limit the adoption of genetic testing as a clinical tool, which would harm our revenues and prospects.

        In recent years, health care payors as well as federal and state governments have focused on containing or reducing health care costs. We cannot predict the effect that any of these initiatives may have on our business. In particular, gene-based therapeutics, if successfully developed and commercialized, are likely to be costly compared to currently available drug therapies. Health care cost containment initiatives focused either on gene-based therapeutics or on genetic testing could cause the growth in the clinical market for genetic testing to be curtailed or slowed. In addition, health care cost containment initiatives could also cause pharmaceutical companies to reduce research and development spending. In either case, our business and our operating results would be adversely affected. In addition, genetic testing in clinical settings is often billed to third-party payors, including private

16

insurers and governmental organizations. If our current and future clinical products and services are not considered cost-effective by these payors, reimbursement may not be available to users of our products and services. In this event, potential customers would be much less likely to use our products and services, and our business and operating results would be seriously harmed.

ITEM 4. INFORMATION ON THE COMPANY

Item 4.A History and Development of the Company

        We were incorporated under the laws of Western Australia on January 5, 1987 as Concord Mining N.L. On August 13, 1991 we changed our name to Consolidated Victorian Gold Mines N.L. On December 2, 1991 we changed our name to Consolidated Victorian Mines N.L. On March 15, 1995 we changed our name to Duketon Goldfields N.L.

        On October 15, 1999 the type of company was changed from a No Liability Company to a company limited by shares. On August 29, 2000 we changed our name to Genetic Technologies Limited, which is our current name. We were originally incorporated as a mining company and gradually phased out our mining activities and became a biotechnology company with the acquisition of GeneType AG in August 2000. Our Australian company number is ACN 009 212 328. We operate pursuant to our constitution, the Australian Corporations Act, the Australian Stock Exchange Listing Rules and, where applicable, local legislation.

        Our registered office, headquarters, laboratory and main business activities are all located at 60-66 Hanover Street, Fitzroy, Victoria 3065 Australia and our telephone number is 613-9415-1135. We also have a corporate office located at Level 12, Suite 2, 75 Elizabeth Street, Sydney, NSW 2000, Australia and our telephone number at that location is 612-9233-5015. Our website address is www.gtg.com.au. Information on our website and websites linked to it does not constitute part of this Registration Statement.

        GeneType AG was incorporated in Zug, Switzerland in 1989, and was acquired by us on August 29, 2000. GeneType AG had been formed by Dr. Mervyn Jacobson (a medical doctor) and Dr. Malcolm Simons (an immunogeneticist) after they met in Melbourne, Australia, in early 1989, and resolved to test the hypothesis developed by Dr. Simons that the non-coding or "junk" DNA regions in the human, (and in particular, the non-coding DNA of the human HLA gene complex on chromosome 6) was in reality not "junk", but a valuable and highly ordered reservoir of useful genetic information, overlooked by the scientific community up until that time.

        GeneType AG indeed researched and proved that certain motifs or sequence variations (known as "polymorphisms") within the non-coding DNA of these HLA genes could be identified which were clearly not "junk"—and GeneType AG also showed that these polymorphisms were actually linked to particular DNA variations in the coding region (known as "alleles"). Alternatively, some of these non-coding polymorphisms could be linked to groupings of alleles in the coding region (or "haplotypes") of these HLA genes. This was a significant breakthrough and resulted in a first patent filing concerning use of non-coding polymorphisms linked to coding alleles or haplotypes in HLA for analysis purposes. GeneType AG then filed additional patents in relation to use of non-coding polymorphisms for analysis purposes outside of the HLA genes. Later, GeneType AG also filed patents on the use of such non-coding polymorphisms for mapping purposes. These patents were filed in many countries. Subsequently, such patent applications have resulted in issued patents being awarded to GeneType AG in many jurisdictions, creating a potentially valuable business opportunity for GeneType AG. The commercial mission then evolved for GeneType AG to assert its ownership over such patents, by way of out-licensing these inventions and these strategies to others, to allow them to also access this useful and informative genetic information—which GeneType AG had been the first to prove indeed exists within the non-coding DNA of all genes in all multi-cellular species—and so, to then exploit such inventions globally for profit.

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        On August 29, 2000, we acquired 100% of GeneType AG, including all its valuable patents, and we shifted our focus exclusively to the area of biotechnology. We also changed our name to Genetic Technologies Limited. In September 2000 our listing was duly transferred from the mining board of the ASX to the industrial board and our shares were thereafter classified under the industry group "Health and Biotechnology", completing our transformation from a mining and resources company into a biotechnology company. During 2001, we also acquired 10% of the issued and outstanding shares in Cytomation Inc., Fort Collins, Colorado. At that time, Cytomation was a leader in the manufacture and sales of flow cytometers and cell sorters. Also, in December 2001, we acquired an initial shareholding of less than 1% in the issued capital of XY Inc., a company based in Fort Collins, Colorado. In July 2001 we acquired the business of DNA-ID Labs in Perth, Western Australia, as part of our strategy of expanding our paternity testing business in Australia. In March 2002, we formed AgGenomics Pty Ltd, based in Melbourne, in order to expand our genetic service testing into the field of plant genetics. In May 2003, we acquired the fixed assets of the business Genetic Science Services in Melbourne, in order to expand into the field of the genetic testing of animals.

        Since the acquisition of GeneType AG, with the exception of certain minor passive interests, the directors have disposed of all remaining mining interests so that our activities now focus solely on emerging opportunities in the field of biotechnology.

        Our current activities in biotechnology primarily concentrate on three clearly defined areas of activity:

(i)

out-licensing of our non-coding patents globally,



(ii)

building up our existing genetic service-testing business to become the leading genetic testing laboratory in the Asia-Pacific Region, and



(iii)

supporting certain research projects in which the Company is already involved;



(iv)

we also previously had a small portfolio of marketable trading investments, the final sales of which were completed during the year ended 30 June 2004.

        In August 2001, our subsidiary Gtech International Resources Limited sold its remaining interest in the Aurex Project in the Yukon Territory, Canada, to Expatriate Resources Limited in exchange for 600,000 common shares in Expatriate Resources Limited. Gtech International Resources Limited retains a 1.5% net smelter return royalty. In September 2001 we sold all of our shares in Golden Mount NL for A$1.00, with full release of all our performance bonds. In November 2001 we sold our entire shareholding in Cytomation Inc. for $4,816,044 (A$9.2 million), which resulted in a profit to our company of approximately $273,475 (A$500,000). On June 4, 2002 we sold all the shares in Mt Alexander Goldfields NL, the company which owned the other Victorian mining assets, for $157,045 (A$300,000) cash, and we were also granted a full release of all our performance bonds.

        In early calendar year 2002, we commenced the process of out-licensing our non-coding patents—and we announced several early successes. The first license to our non-coding patents was granted to Genetic Solutions Pty Limited of Australia, and soon after, to Nanogen Inc., Sequenom Inc., Perlegen Sciences Inc. and Myriad Genetics Inc. all of the U.S. In the first half of 2003, we granted licenses to Pyrosequencing AB of Sweden, to ARUP and the University of Utah. In the year ended 2004, we granted licenses to the University of Sydney, in Australia, Quest Diagnostics Inc. of USA, King's College London, Vialactia Biosciences (NZ) Limited of New Zealand, University of Technology, Sydney, Australia, TM Bioscience Corporation of Canada, Laboratory Corporation of America Holdings, Colorado State University of USA, C.Y. O'Connor ERADE Village Foundation of Perth, Western Australia, and Ovita Limited of New Zealand. Since June 30, 2004, we have granted licenses to Genzyme Corporation of USA, MetaMorphix Inc. of USA, Bionomics Limited of Adelaide, South Australia and the Australian Genome Research Facility of Brisbane, Queensland. Additional licenses have followed. These licenses are more fully described below under Item 4.B "Business Overview".

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        It is a priority for the company and its advisers to continue to identify additional parties who would benefit from taking a license to the GTG non-coding patents. We are now pursuing negotiations with companies and organizations in the U.S., Europe, Australia, New Zealand, Canada, Japan and South America that would all benefit from taking a license to our non-coding patents or from collaborations with our service testing business, and we are now devoting increasingly significant resources to this steadily growing activity.

Item 4.B Business Overview

        We are a biotechnology company, now pursuing commercial opportunities in three main areas of activity:

(i)

out-licensing our non-coding patents globally,



(ii)

building our genetic service-testing business in the Asia-Pacific Region, and



(iii)

supporting certain research projects in which we are already involved.

Industry Background

        The Human Genome Project (HGP) announced (in 2001) the completion of the first draft of the entire sequence of the human genome. The biotechnology industry is now working to build upon the vast amount of knowledge generated by that program—in order to develop a better understanding of the genetic basis of human health and disease. Increasingly, genetics is being shown to play a key role in the diagnosis and treatment of many diseases in humans, as well as diseases in animals and plants. Our growing understanding of genetics is now providing new information for understanding such predisposing or causative factors in many of these diseases.

        More recently, the successful mapping of the Mouse Genome was published in December, 2002, and this permitted for the first time, a detailed comparison of human genes and mouse genes. One of the key findings that has arisen from this work is the significant role that non-coding regulatory DNA plays in controlling gene function in both human genes and mouse genes. For some scientists, but not for our company, these findings—of the great significance of non-coding regulatory DNA to gene function—were new, significant and totally unexpected.

        A major focus in science is now the identification and analysis of genetic variations and disease-associated genes within the genome. These genetic variations, or polymorphisms, in the DNA sequences vary between individuals. The most common genetic variations are Single Nucleotide Polymorphisms, or SNPs, which are merely a difference in a single nucleotide. The first draft of the human genome identified over 1.4 million SNPs that can be useful as positional signposts for disease-associated DNA sequences in a gene or as markers to map genes along a chromosome. A significant number of these SNPs (perhaps more than 97%) are now known to be non-coding.

Genomics

        A genome is an organism's complete set of DNA and the study of that DNA is called genomics. Genomes vary in size with bacteria displaying the smallest known genome at 600,000 DNA base pairs, while human and mouse genomes have over 3 billion. The DNA of the human genome is organized into 24 distinct chromosomes that contain from 50 million to 250 million base pairs on each chromosome. The DNA on each chromosome contains genes that are specific sequences that encode proteins that actually perform the work within a cell and also make up the cell itself. Surprisingly, only about 2-5% of the human genome is organized into coding DNA, with the remainder being considered to be non-coding DNA. Our patent portfolio is centered on proprietary methods for utilizing the valuable information contained within these non-coding regions.

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Genetic Variability

        Almost 99.9% of an individual's genome is identical to that of every other individual's genome. However, even slight variations in sequence can drastically change how a gene functions. Variations can lead to harmless changes, such as blue eyes instead of brown, or to major diseases such as cancer, cystic fibrosis, or cardiovascular disease. Genetic variations can also be responsible for many of the differences in the ways individuals respond to drug therapies. As a result of this knowledge, routine analysis of SNPs and other genetic variations are expected to play an increasingly important role in the discovery and development of new drugs, as well as in a variety of diagnostic therapeutic and other medical and life science applications. Industry sources estimate there are millions of genetic variations in the human genome, creating demand for products and technologies that can quickly and accurately detect and analyze these variations. It is thought that medicine of the future will be dispensed to a patient based on his or her own specific DNA variations. This type of personalized medicine will require sophisticated genetic tests to determine the genetic make-up of an individual, and it is now recognized that such genetic make-up depends not only on the form of the coding DNA, but also the form of the associated non-coding DNA.

Genetic Tests

        Most genes come in many different forms, called alleles. One or more alleles may be associated with a particular disease state. Genetic testing involves the direct examination of an individual's DNA for a DNA marker associated with the allele of interest. Determination of the particular alleles an individual has within his or her DNA is called genotyping.

        The most commonly tested marker of a particular allele is a SNP. As much as 98% of the human genome is considered to be non-coding DNA, the majority of the identified 1.4 million SNPs are also in non-coding regions of DNA. We believe that a license to our proprietary methods of analyzing non-coding regions of DNA will be absolutely necessary for many of the genetic tests of the future. Similarly, tests for genetic abnormalities or mutations may involve not just individual SNPs, but also groups of SNPs or even larger sequences of DNA, and such abnormal sequences—large or small—may be located either in the coding region alone, or in the non-coding region alone, or in both the coding and non-coding regions of the gene (or genes) under examination. Clearly, the variations within genes that may be responsible for a disease are now known to be much more complicated than was previously understood, and the role of non-coding DNA is now being found to be highly relevant in more and more, diseases. This similarly applies to genetic disorders in animals and in plants. Accordingly, more and more genetic testing will in future look not only at coding variations, but also at the non-coding variations within a particular gene.

Our Patent Portfolio

        The acquisition of GeneType AG gave our company ownership rights to a potentially significant portfolio of issued patents. The major families of patents in the portfolio include:

(a)    Intron sequence analysis;
(b)    Genomic mapping;
(c)    Fetal cell recovery;
(d)    Electrophoresis standards;
(e)    Sports performance;
(f)    Parasitology;
(g)    Ancestral haplotypes for tissue typing;
(h)    Markers for disease; and
(i)    Modulation of the immune system.

        (a)    The Intron Sequence Analysis patents —allow for the detection of specific motifs within the genetic material in the non-coding regions of DNA which have been shown, may be linked to certain

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alleles or haplotypes within the coding region of the gene. In other words, whereas most geneticists previously looked at the genetic information located within the coding region alone, our inventions have provided a means of also looking at additional useful information which is located within the non-coding part of the gene, and which is now known to also be important in influencing gene function—and in particular, protein production. The method is useful for example, in the determination of tissue typing for transplantation in order to test for possible likely acceptance or rejection of bone marrow or tissue grafts. The method is also useful in the detection of genetic changes or mutations in the non-coding region of certain genes associated with a higher incidence of certain genetic diseases, such as cystic fibrosis, susceptibility to breast cancer, multiple sclerosis, Alzheimer's Disease, etc. It is also now known that more than 100 human diseases are associated with genetic changes in the non-coding part of a particular gene and which are linked to the function of the coding part that gene. Similar applications also exist in animals and plants. Several important markers in livestock, for example, have been shown to be located in the non-coding part of the DNA and also linked to particular coding function—for example, marbling or tenderness. It has also been shown that variations in the non-coding DNA of plants can influence function in plants, including the color of flowers and the timing of plant germination and growth.

        (b)    The Genomic Mapping patents —describe methods for analyzing genetic material collected from various selected populations to identify and locate genes and markers of interest, by identifying highly polymorphic sites throughout the genome and particular haplotypes associated with such sites, all based on a reading of sequence information in both the coding and the non-coding portions of the genome.

        (c)    The Fetal Cell Recovery patents —describe a novel and safe method for the isolation and collection of fetal cells from the peripheral blood of a pregnant woman, utilizing various HLA or other markers plus flow cytometry—all without any invasive procedure that might endanger the mother or the child.

        (d)    The Electrophoresis Standards patents— describe a method for identifying band positions in an electrophoretic separation by also including a control, which serves as an internal standard.

        (e)    The Sports Performance patents —describe a method that enables aspects of athletic performance to be predicted based on detection of various forms of the alpha actinin 3 (ACTN3) gene.

        (f)     The Parasitology patents —describe the identification and use of genetic variations within the typically waterborne parasite "Cryptosporidium parvum". This enables more accurate typing of Cryptosporidium organisms which may be important in the management of disease outbreaks.

        (g)    The Ancestral Haplotypes for Tissue Typing patents —describe a method for determining ancestral haplotypes using haplospecific geometric elements within the major histocompatibility complex multi gene cluster and methods of genetic analysis involving the amplification of complimentary duplicons. These patents were acquired from the C.Y. O'Connor ERADE Village Foundation.

        (h)    The Markers for Disease patents —describe a group of patents relating to uses of a group of genetic variations called "variable number tandem repeats" (VNTRs). Particular uses have been found for VNTR's in predicting predisposition to addiction.

        (i)     The Modulation of the Immune System patents —describe various methods aimed at improving the efficacy of cancer therapy and treatment of HIV-AIDS.

        In total, we own 8 issued patents and 12 pending patents in the United States. Reflecting our international business strategy, we have also sought and been granted foreign patents by many major industrialized nations, corresponding to each of the major patents already issued in the United States.

        The many issued, allowed and pending patents claimed by GeneType AG, and which are now owned by our company, distinguish us from competitors by giving us the legal right to claim ownership or proprietary methods and compositions for analysis of DNA using information contained within non-coding regions and for isolation of fetal cells from a maternal blood sample. The methods and

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compositions for analysis of DNA may be used to identify a particular form of a gene or to map the location of a disease-associated gene along a chromosome.

        Generally, United States patents have a term of 17 years from the date of issuance for patents filed with the United States Patent Office prior to June 8, 1995, and 20 years from the application filing date or earlier claimed priority date in the case of patents issued from applications filed on or after June 8, 1995. For applications filed after May 29, 2000, the term is 20 years from the date of filing. A minimum term of 17 years is assured, provided the applicant causes no delays during prosecution. Patents in most other countries have a term of 20 years from the date of filing the patent application. Our issued United States patents will expire between 2009 and 2019. We intend to continue to file patent applications as we develop new products, technologies and patentable enhancements. Prosecution practices have been implemented to avoid any applicant delays that could compromise the 17-year minimum term. There can be no guarantee that such procedures will prevent the loss of a potential patent term. This is particularly true in the short-term as the patent rules implementing the most recent patent term changes are largely new and untested.

        Complex legal and factual determinations and evolving law make patent protection uncertain. As a result, we cannot be certain that patents will be issued from any of our pending patent applications or from applications licensed to us or that any issued patents will have sufficient breadth to offer meaningful protection. In addition, our issued patents may be successfully challenged, invalidated, circumvented or rendered unenforceable so that our patent rights would not create an effective competitive barrier. Moreover, the laws of some foreign countries may not protect our proprietary rights to the same extent as do the United States patent laws.

        In addition to patent protection, we rely on trade secret protection of our intellectual property. We attempt to protect our trade secrets by entering into confidentiality agreements with third parties, employees and consultants. Our employees and consultants are required to sign agreements to assign to us their interests in discoveries, inventions, patents, trademarks and copyrights arising from their work for us. They also are required to maintain the confidentiality of our intellectual property, and refrain from unfair competition with us during their employment and for a certain amount of time after their employment with us, which includes solicitation of our employees and customers. We cannot be certain these agreements will not be breached or invalidated. In addition, third parties may independently discover or invent competing technologies or reverse engineer our trade secrets or other technologies.

        In the future, we may become involved in lawsuits in which third parties file claims asserting that our technologies or products infringe on their intellectual property. We cannot predict whether third parties will assert such claims against us or against the licensors of technologies licensed to us, or our licensees, or whether those claims will hurt our business. We may be forced to defend against such claims, whether they are with or without merit or whether they are resolved in favor of or against our licensors, or us and may face costly litigation and diversion of management's attention and resources. As a result of such disputes, we may have to develop costly non-infringing technologies or enter into licensing agreements. These agreements may oblige us to accept costly terms, which could seriously limit the ability to conduct our operations and affect adversely our financial condition.

        In addition, we may become involved in lawsuits in which third parties file claims asserting that one or more of our patents are invalid. We cannot predict whether third parties will assert such claims against us or against the licensees of such patents, or whether those claims will hurt our business. We may be forced to defend against such claims, whether they are with or without merit or whether they are resolved in favor of or against our licensees, or us and may face costly litigation and diversion of management's attention and resources. During the period from February 2001 through March 31, 2002 we had in place a patent insurance policy, placed with GE Reinsurance Corporation through Dexta Corporation Limited, their managing general agents in Australia. Although the policy was not renewed on its expiry, since we had advised Dexta of 13 companies prior to March 31, 2002 as potential infringers, the majority of our expenses of prosecution of our claims incurred to date have been covered by the policy. Of those 13 so identified, we have secured licenses with six, relinquished our claims against four and commenced proceedings against Applera, Covance and Nuvello, the costs of which were covered. The suits against Covance and Nuvello have since been settled.

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Pathogen genetics and genomics

Out-licensing Our Non-coding Patents Globally

        The Company is currently commercializing and licensing its non-coding patents in the US and elsewhere.

        This strategy was initiated in late 2000, soon after GeneType AG and its patents were acquired by the Company. The first step was to secure patent insurance, which we achieved in early 2001. This meant that if we were forced to take legal action against infringers, under that policy the cost would be largely covered by our underwriter. This policy has since expired.

        Thereafter, we progressively made contact with many companies in the USA and elsewhere, bringing the patents to their attention and indicating how they might benefit from a license to the GTG

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non-coding patents. In late 2002, we hired Ian Christensen to manage the Australian end of the licensing effort and to build our central database of all prospective licensees, globally.

        The plan initially was to grant a limited number of licenses focusing primarily on the up-front fee component, and then to progressively build recurring annuity or royalty component of subsequent licenses.

        When we found some companies that seemed to be clearly infringing our patents while also indicating they would not take a license, we then put them on formal notice under our patent insurance policy. Overall, the strategy has unfolded as planned.

Our Licenses and Commercial Collaborations

        The following section describes our existing commercial and research licenses, our collaborations and our collaborators. We announced our first license to the non-coding patents to the Australian livestock testing firm Genetic Solutions Pty. Limited, in February 2002. Since then, we have formed several collaborations and granted a further 23 licenses.

Commercial Licenses and Collaborations:

        Agriculture Victoria Services Pty. Limited:     On February 28, 2002 our subsidiary GeneType Pty. Limited entered into a joint venture agreement with Agriculture Victoria Services Pty. Limited for the formation of the joint venture company AgGenomics Pty. Limited, to operate a joint venture business in commercial plant genotyping and genomics services. Under the terms of the joint venture agreement we hold 50.1% of the shares of the joint venture company. We have certain obligations under the joint venture agreement to loan money to the joint venture company, which is not expected to exceed A$500,000 at any given time. Agriculture Victoria Services Pty. Limited is not required to provide further funding to the joint venture company. The agreement is terminable by a party in the event of a breach by the other party that is not timely cured or upon the occurrence of an "adverse event" to the company or to either shareholder. Adverse events are insolvency type events or discontinuation of business. In the event of termination the non-defaulting party can require liquidation of the company or purchase the other party's interest, as it chooses.

        Nanogen License:     In April 2002, we granted a license to Nanogen, Inc, of San Diego, USA, who specializes in the development of biochip applications in genetics diagnostics. Nanogen paid us a non-refundable $250,000 and unlisted warrants for a license limited to genetic research and human diagnostics. Specifically, Nanogen receives no rights to the mapping patent nor any applications in animals or plants. Since the date of the initial license, the warrants became "in the money" and we exercised them, acquired Nanogen shares which we disposed of in market transactions for a further $275,000 of other income. The license can be terminated by either party upon any material breach of any term or condition of the agreement not timely cured. We also can terminate the agreement in the event the licensee becomes involved in insolvency proceedings or if it discontinues its business for any reason.

        Sequenom License:     Also in April, 2002, we granted a license to bioinstrument maker Sequenom, Inc., who paid us a non-refundable $500,000 (in cash and shares) for a license to our non-coding analysis and mapping patents. The license can be terminated by either party upon any material breach of any term or condition by the other party which has not been timely cured after notice. We may also terminate the agreement in the event of the bankruptcy of the licensee or discontinuation of their business.

        Perlegen License:     In August 2002, we granted a license to US genome researcher, Perlegen Sciences, Inc., which paid a non-refundable combination of cash and securities worth approximately $598,120 for an exclusive license limited to a specialized field known as "high resolution whole genome

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analysis". Either party can terminate the license agreement upon any material breach of any term or condition by the other party that is not timely cured after notice. We have the right to terminate the agreement, as well, in the event of insolvency of the licensee or if it discontinues it business for any reason.

        Myriad Licenses:     In October, 2002, we announced a licensing agreement with Myriad Genetics, Inc, under which we granted Myriad broad rights to utilize our non-coding patents, in return for which Myriad agreed to pay us a non-refundable $1,000,000 cash, plus future fees on an annual basis in lieu of royalties, plus the rights to bring Myriad's predictive medicine products to Australia and New Zealand. These products include genetic susceptibility tests for breast cancer, ovarian cancer, bowel cancer, melanoma and cardiac risk. These tests, which are now being offered by GTG in Australia, have resulted in the expansion of our existing genetic testing facilities in Melbourne. The license can be terminated by either party upon material breach by the other party that is not cured within 30 days of notice. We also may terminate if the licensee fails to make any payment required by the agreement. Under the second of two agreements we are granted a license to use Myriad's diagnostic services in Australia and New Zealand in exchange for an annual fee. We are obligated to use reasonable efforts to commercialize the licensed diagnostic services in Australia and New Zealand. Under the terms of this agreement we have been granted an option in exchange for upfront payments and a continuing royalty, to expand the license in respect of full sequence testing, which has not been exercised. The term of this agreement extends until 2012. Either party can terminate the agreement upon a material breach not timely cured after notice. In addition, Myriad can terminate if we fail to make any payment required under the agreement.

        Pyrosequencing Licenses:     In March, 2003, we announced a cross-licensing agreement with Pyrosequencing AB, of Sweden (now known as Biotage AB). Pyrosequencing receives a broad non-exclusive license to our non-coding DNA analysis and mapping patents but only when used in combination with Pyrosequencing's "sequencing by synthesis" reagents. In return, we received a non-refundable cash up front payment, plus royalties for the life of the GTG patents, plus three state-of-the-art analytical instruments (Pyrosequencing systems), plus other IP rights and assays from Pyrosequencing. Either party can terminate the agreement upon material breach that is not timely cured by the other party after notice. In addition, either party can terminate the agreement if the other party becomes involved in insolvency proceedings, or if the other party discontinues its business for any reason.

        ARUP License:     In April, 2003, we announced a license to Associated Regional & University Pathologists (ARUP) of Salt Lake City, Utah. ARUP is a sophisticated laboratory system owned by the University of Utah, and the first service provider actually performing human genetic testing to take a license from GTG. The license was granted in return for a one-time non-refundable license issue fee. The license is terminable by a party upon material breach by the other party that is not timely cured after notice. In addition, we have the right to terminate if the licensee becomes involved in an insolvency or discontinues its business for any reason.

        In May, 2003, we had also granted the University of Utah a separate research license to show our support for their leading genetic research program into the non-coding regions of many genomes. This license is terminable upon material breach by the licensee not timely cured after notice.

        Quest License:     In August 2003, we granted a license to our non-coding analysis patents to Quest Diagnostics Inc., based in New Jersey, USA. The terms include a non-refundable signing fee plus ongoing annual payments in lieu of royalties from Quest for services provided by it in genetic laboratory testing in the United States, Canada and Mexico. The license is unilaterally revocable by us if upon notice we have a reasonable belief that the license is being used to assist an unlicensed party to avoid obtaining its own license under the licensed patents. In addition, the license is terminable by one party in the event of a material breach by the other party not cured after notice. Either party also may

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terminate the license in the event of an insolvency event affecting the other party or the discontinuation of business by the other party.

        ViaLactia License:     In September 2003, we reached agreement with ViaLactia Biosciences (NZ) Limited of Auckland, New Zealand regarding the terms of a research and commercial license to the GTG non-coding patents. ViaLactia is a biotechnology company operating as a wholly owned subsidiary of Fonterra, New Zealand's largest dairy cooperative. The license was formally concluded in December 2003. The purpose of the license is to permit ViaLactia to conduct internal research activities and development of applications of our technology in the dairy industry, including new applications concerning dairy cattle, pasture grasses, mice as models for dairy cattle and yeast and bacteria as applied to the dairy industry. The license is terminable by either party upon material default of the other party that is not timely cured, without other penalty.

        C.Y. O'Connor ERADE Village Foundation:     In October 2003 we announced that we had signed heads of agreement to establish a broad strategic alliance with the C.Y. O'Connor ERADE Village Foundation, a leader in biotechnology innovation in Perth, Western Australia. Definitive documentation was concluded in June 2004. Under the terms of the agreement, we acquired all of the Foundation's patents and other intellectual property in the fields of genetics and genomics, including the Foundation's issued U.S. patent 6383747-B1 and foreign equivalents. We expect this extensive package of intellectual property will create additional opportunities for us in support of licensing and service testing. The Foundation acquired a license to our non-coding patents for a fee, so that the net purchase price for us was settled by the issuance of a total of 16,666,667 of our Ordinary Shares to the Foundation based on a market value of A$0.39 per share. The transaction closed in June 2004. Under the arrangement we support the ongoing genetics and genomics programs of the Foundation. Initially, five projects have been selected for priority attention and we will provide A$4.5 million to the Foundation, spread over five years, to help fund such research and development of new intellectual property. The first and second installments of A$450,000 each have already been paid, and we have also supplied a letter of credit for A$450,000 for the term of the agreement. In return, we are the primary commercialization vehicle for all new inventions, patents, intellectual property and business opportunities arising at the Foundation in the field of genetics or genomics. We are also obligated to pay royalties to the Foundation on gross revenue derived from the Foundation IP. We may terminate the license following any breach of the license by the licensee, either party can terminate following a material breach that is not timely cured or following an insolvency event of the other party.

        GENDIA Network:     In November 2003, we announced that we had joined the GENDIA diagnostic genetic testing network as the sole GENDIA affiliated laboratory in Australia and New Zealand. GENDIA is a network of some 20 leading laboratories worldwide who work together and share with each other access to very sophisticated genetic testing procedures. We are the sole GENDIA-affiliated laboratory in Australia and New Zealand.

        TM Bioscience License:     In December 2003, we granted a license to our non coding analysis and mapping patents to TM Bioscience Corporation of Toronto, Canada. The terms provide for a signing fee plus ongoing annual payments as a non-refundable license fee and an annual royalty on licensed products. This was our first commercial license granted to a Canadian company. TM Bioscience is a leading provider of diagnostic kits for human genetic testing, exported globally. The agreement is terminable by a party upon material breach by the other party that is not timely cured, and may be terminated by us in the event of dissolution or sale of the business of the licensee.

        LabCorp License:     In February 2004, we granted a license to our non-coding patents to Laboratory Corporation of America Holdings (known as "LabCorp"), a leading provider of human diagnostic services in the U.S. and Canada. It also performs testing in Europe for other companies, including pharmaceutical companies, for regulatory compliance purposes. The license covers both non-coding analysis patents and non-coding mapping patents, in exchange for a non-refundable signing fee plus

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annual license annuity payments for the life of the patents, through 2015. LabCorp also withdrew a declaratory action in respect of our patents that had been commenced in New Jersey. The license is terminable by either party upon material breach by the other party that is not timely cured. In addition, we are entitled to terminate the agreement in the event that the licensee intentionally and knowingly promotes licensee's reference testing to third party clinical laboratories for the purpose of circumventing the need for such laboratories to license our patents. The licensee is entitled to terminate the agreement at any time upon 30 days' prior written notice (without prejudice to its accrued obligations thereunder) and we can terminate in the event of an insolvency event involving the licensee or discontinuation of its business.

        Ovita License:     In June 2004, we entered into a license agreement with Ovita Limited of New Zealand, granting them a license to our non-coding patents to the extent required in order to commercialize genetic marker tests and pedigree tests and to conduct research and development activities for new applications of our technology in connection with testing of sheep and cattle. The agreement contemplates compensation to us of an initial non-refundable research license fee, an initial non-refundable commercial license fee and a royalty on licensed products made using our patents, payable calculated on gross sales. The license is terminable by a party for material breach that is not cured by the other party, by licensee upon 30 days' written notice to us and by either party in the event of discontinuation of its business, an insolvency event or failure to pay amounts due and owing to the other.

        Genzyme License:     Effective as of September 17, 2004 we granted a license to our non-coding patents to Genzyme Corporation, based in Cambridge, Massachusetts, in order for the licensee to perform preclinical and human research and human genetic testing. The grant of the license is in exchange for a non-refundable license issue fee consisting of a cash component and an in-kind component. The in-kind component consists of a license agreement in respect of patents owned by Johns Hopkins University and licensed by the licensee. In addition, the licensee is obligated to pay to us license annuity fees in lieu of a royalty for each year of the term. Either party can terminate the agreement upon material breach not timely cured, in the event of insolvency of the licensee, or by the licensee at any time upon 30 days' written notice to us.

        MetaMorphix Agreements:     On September 17, 2004 we executed two agreements with MetaMorphix, Inc., based in Maryland and specializing in the genetics and genomics of certain animal species, particularly cattle and dogs. Under the first such agreement we granted a license to use our non-coding patents in order to commercialize applications of DNA/RNA-based diagnostic assays for use in the livestock, aquaculture and companion animal industries. The licensee is obligated to pay us annually increasing license annuity fees in lieu of a royalty, as well as a non-refundable license issue fee. Either party can terminate the agreement upon a material breach not timely cured, or by us upon the licensee's discontinuation of its business for any reason. Under the second license, to which MMI Genomics, Inc. also is a party, we were granted a license to the licensor's patents and associated know-how in order to perform internal DNA-based diagnostic assays for use in our cattle and canine identity and parentage verification services. We are obligated to pay the licensor a non-refundable license fee. The licensor's obligations include ongoing support for the license and know-how. The agreement is terminable by either party upon material default by the other party that is not timely cured, or by the licensor in the event we discontinue our cattle and canine identity and parentage verification genotyping services business for any reason.

        Australian Genome Research Facility License:     Effective December 31, 2004 we entered into a license agreement with Australian Genome Research Facility Ltd. to our non-coding patents pursuant to which AGRF can use the patents on a non-exclusive basis for the purpose of performing genotyping services. The license requires an advance non-refundable license fee and an annual non-refundable annuity for the term of the license in lieu of a royalty, which continues until sooner terminated or the

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licensee no longer utilizes the patent. The agreement is terminable by mutual agreement, or by us in the event of a breach of a term or condition by the licensee or if it is subject to an insolvency event.

        Bionomics Limited License:     Effective November 5, 2004 we entered into two agreements with Bionomics Limited, a public company based in Adelaide, South Australia. Under the first such agreement we granted a non-exclusive, royalty free license to Bionomics to use our non-coding patents in order to (i) perform research and development activities relating to and arising from the identification of genetic factors that may influence epilepsy and (ii) commercialize the results of those research and development activities including, without limitation, epilepsy diagnostic assays. Bionomics paid us a non-refundable license fee on signing. Either party can terminate the agreement upon a material breach not timely cured. Under the second agreement with Bionomics we were granted a license to use certain intellectual property rights, including patent rights and associated know-how, relating to epilepsy gene discoveries and epilepsy diagnostic assays subject to minimum annual royalties. We paid Bionomics a non-refundable license fee. The agreement is terminable by either party upon material default by the other party that is not timely cured.

Research Licenses and Collaborations:

        University of Melbourne:     On January 22, 2003 we entered into a collaborative research agreement with the University of Melbourne, Australia, concerning the so-called "ARC Linkage Project": toward novel approaches for the control of parasitic nematodes via genomics/phenomics. This sets forth the terms of the collaboration between GeneType Pty. Limited and the university for research under an Australian government Research Council Linkage-Project. Under the terms of this agreement GeneType Pty. Limited is obligated to use its best efforts to provide additional funds for the project to make up the projected shortfall as contemplated by the original proposal, over a term of three years.

        Horticulture Australia Limited:     On June 18, 2003, AgGenomics Pty. Limited, a subsidiary of the Company, entered into a three-year Collaborative Research Agreement with Horticulture Australia Limited (HAL) to try and identify a genetic trait for day/night neutrality in strawberries which, if found, could lead to an extension of the cultivation season and consequently higher production. The research program, costing approximately AUD2.1 million ($1.5 million), is funded by HAL as to 45% and AgGenomics as to 55%. Any and all intellectual property generated from the project will be owned in the same proportions.

        University of Sydney License:     In July 2003, we granted a research license to the University of Sydney, in Australia. We subsequently entered into a further agreement (dated September 4, 2003) with the University of Sydney pursuant to which we have the exclusive right to commercialize a new and potentially significant genetic invention made by a professor in the Neurogenetics Research Unit and the University's Faculty of Medicine. This Australian invention is intended to permit an improved understanding of the genetic factors underlying superior athletic and sports performance, based on the presence or absence of a particular gene. Under the terms of this agreement we have agreed to make an upfront payment, to pay a royalty on net sales of the invention by us, a fee on first grant of a patent for the invention or any patent rights in any country and a further payment of part of any consideration of whatever kind received by us under a license of the assigned intellectual property.

        King's College License:     In December 2003 we granted a license to our non-coding patents to King's College, London, in the United Kingdom. Under the terms of the license, King's College will be able to apply the GTG non-coding patents to its internal research programs. King's College is considered a leader in the field of researching the genetic basis of various psychiatric and psychological disorders, including schizophrenia, anxiety/depression and certain attention deficit disorders. Future commercial applications arising from research at King's College would require an additional commercial license from us. In March 2004 we initiated a joint research project in the United Kingdom to explore the functionality of certain non-coding DNA elements, initially with special focus on the

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genetics of breast cancer susceptibility and the genetics of certain neuro-psychiatric conditions, such as schizophrenia. The project was funded by us for a further period of six months, in an amount of GBP53,000 that was paid in two installments. In May 2005, we extended the project for the period from June 1, 2005 to December 31, 2005 and agreed to fund the costs incurred by King's College during that period up to a maximum amount of GBP51,360. The license is terminable by either party upon any material breach not timely cured, without penalty.

        University of Technology, Sydney:     Effective December 23, 2003 we entered into a non-commercial research license with the University of Technology, Sydney, to permit the University to conduct internal research activities to research, identify, map and develop tests for genetic markers and genes of interest. Either party has the right to terminate the agreement upon the occurrence of a material breach that is not timely cured, without other penalty.

        Colorado State University:     Effective May 14, 2004 we entered into a non-commercial research license with the Colorado State University. This is a royalty-free license to permit the University to conduct research in exchange for a nominal licensing fee.

        In addition to the above agreements, we continue to negotiate licensing terms to grant licenses to our non-coding patents to many companies—large and small, and also to many government and private institutes, in many countries.

        To facilitate these negotiations, we are also building a database of all prospective licensees, who we believe would benefit from a license to our non-coding patents. As at August 2004, we had identified more than 2,100 parties that warranted closer scrutiny. Of these, we have so far found evidence of probable infringement in relation to almost 500 of these. Negotiations have now commenced with more than 70 of these parties.

        We continue to believe that a large number of biotechnology companies, service providers, IT companies and researchers will need to take a license to our proprietary methods in order to commercialize their own technologies. As our resources permit, we plan to allocate progressively more effort towards these licensing activities. However, apart from the many parties now negotiating with us in good faith, we have also found a few who seemed determined to use our patents without our approval. After suitable notices and warnings, we decided the time had come to initiate appropriate action against such infringers.

        On March 26, 2003, we initiated legal action in the USA against three publicly-traded US companies for patent infringement. Two of these cases, against Nuvello and Covance, have been settled. The legal costs arising from the legal action taken against these three infringing companies have to date largely been covered by our patent insurance policy. See Item 8.A, "Litigation and Other Proceedings."

(ii)   Building the Genetic Testing Business

Background and History of the Paternity Testing Business

        In the early 1990's, GeneType AG established a small service-testing laboratory in Melbourne, Australia, initially to show-case its non-coding inventions, and also to generate some revenue to help support and fund its ambitious research program in those early days. Following the acquisition of several other small DNA testing laboratories in Australia, GeneType AG consolidated the business into becoming the largest provider of disputed paternity DNA testing services in Australia.

        In December 1997, GeneType AG formed a partnership with Curtin University, based in Perth, Australia, to offer DNA paternity tests in Western Australia. This partnership continues today, with the University helping us collect specimens and sending them to Melbourne, where the actual testing is performed in the genetic testing laboratory at our Fitzroy headquarters.

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        Then in August 2000, we acquired 100% of GeneType AG, including control over all its patents and its disputed paternity DNA service testing business.

        Later, in July 2001, we acquired the paternity testing business of DNA-ID Labs, another small testing laboratory based in Perth. Overall, we acquired several small businesses—some in Sydney, plus two based in Perth and one based in Melbourne, eventually making our service testing laboratory based in Melbourne the leading provider of disputed paternity testing services in Australia.

        We now have extensive experience in providing DNA-based individuality testing for the resolution of disputed paternity, the determination of familial relationships for immigration purposes and for forensic stain analysis.

        The most common type of DNA testing is paternity testing—where we determine the father of a given child. In order to perform this test we take a sample from the mother, alleged father and child. The test can also be performed without the mother's sample but this makes the analysis somewhat more complex and the price increases accordingly.

        Other types of tests we can offer include:

•

Y chromosome testing—determines if two males come from the same paternal line, i.e. have a common father or grandfather.



•

Mitochondrial DNA testing—determines if two people come from the same maternal line.



•

Sibship testing—determines if people are full siblings, i.e. have the same mother and father.



•

Maternity testing—determines the mother of a given child.



•

DNA typing—reveals the DNA makeup of an individual.



•

Grandparent analysis—determines the grandparents of a given child. This is mainly used when the father of a child is deceased and a will is being contested.



•

Antenatal DNA testing—determines the father of an as-yet unborn child.



•

Semen analysis—determines if semen is present on, for example, an article of clothing. If it is, we can DNA type this sample and compare it to a reference sample.

        We issue reports for the Family Court in Australia and provide similar services internationally for the Department of Immigration and Multicultural and Indigenous Affairs (DIMIA). We are one of only two DNA testing laboratories in Australia recognized by DIMIA to provide DNA tests for immigration purposes.

        We are one of only three laboratories worldwide used by Kenyon Corporation, believed to be the world's largest disaster management company. We perform the full range of DNA tests required by Kenyon for purposes of crash victim identification, and provide cover for the region controlled by Kenyon Australia. The boundaries of this region are determined by the north and south pole, to the west by India, and to the east by Fiji. Since the relationship was established with Kenyon over two years ago, no airline serviced by Kenyon has had one of its planes crash in our region.

        Over time, we have gained a reputation as a leading genetic testing laboratory, and progressively, we have started to receive specimens for testing from other countries, mostly from countries in the Asia-Pacific region, but also from as far away as USA and UK. In addition, we received requests to perform tests outside of human paternity, and this has caused us to consider and now plan a significant expansion of our testing services.

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Expansion of DNA Testing Services Beyond Paternity Testing

         (1)     Plant Testing —in March 2002, we formed a joint venture with the Victorian (Australia) State Government's Department of Primary Industry, for the purpose of providing a high throughput genotyping service for plant testing—in order to help plant breeders identify the genes responsible for the detection of commercially relevant traits, such as resistance to disease, accelerated growth and the improvement of crop yields. A new company, AgGenomics Pty Ltd, was formed—with Genetic Technologies Limited ("GTG") as the majority stockholder and the State agency as the minority partner. AgGenomics is located at the Plant Biotechnology Centre at La Trobe University, in Melbourne. In June, 2003, AgGenomics announced it had entered into a 2 year A$2.1 million program with Horticulture Australia to identify genetic markers in strawberries. AgGenomics will also receive 55% of any intellectual property developed during the life of this project after contributing A$1,165,757 to acquire the IP.

         (2)     Animal Testing —in May 2003, we acquired the assets of Genetic Science Services to expand the range of tests we can offer to include relevant genetic testing in animals—for example, progeny testing in horses, dogs, deer, sexing in birds, and animal disease identification and susceptibility testing for a range of animals, including exotic and zoo animals. This acquisition will also allow GTG to support research projects involving, for example, the Australian fur seal, and possibly the platypus and various frogs and reptiles.

         (3)     Cancer Susceptibility Testing —the strategic alliance with Myriad delivered to GTG exclusive rights for Australia and New Zealand to perform DNA susceptibility testing for a range of cancers, initially for breast cancer and ovarian cancer, and later, for bowel cancer, melanoma and cardiac risk. Professor Deon Venter joined the Board of Directors of GTG in April 2003, with special responsibility to oversee the establishment and operation of the new cancer susceptibility testing facility at GTG. In June, 2003, this facility was granted provisional accreditation. In addition, Dr. Frank Firgaira joined GTG as Head of Molecular Diagnostics—Cancer Susceptibility Testing. This area of testing continues to build momentum, with new equipment arriving, new employees joining the company and new technology becoming available exclusively to us, such that the Australian community now has access to some of the latest technologies available for genetic testing. First testing has now begun, with referrals having already been received from both medical specialists and hospitals.

         (4)     Forensic Testing —it may be surprising to many people that there has historically been no independent (as contrasted with State Government Police or Health laboratories) forensic testing laboratory in Australia. GTG has now obtained formal forensics accreditation from NATA, the National Association of Testing Authorities in Australia, and is currently the only independent forensics laboratory in the country.

         (5)     Athletic Performance Testing —the Company acquired the commercial rights from the University of Sydney for a genetic test capable of determining whether or not athletes possess a predisposition for speed or endurance events. We now offer this test on a commercial basis.

(iii) Our Support for Five Significant Research Projects

        We strongly support research and development. Indeed, Genetic Technologies had its foundation as a research company when it was established some 16 years ago. Since then, the Company has consistently pursued research and, following its Australian listing in 2000, when additional working capital became available, its research activities were significantly expanded.

        We currently support five major research programs, details of which have been provided below. Some projects have arisen from new inventions made by the Company while some have been made by others who have approached the Company seeking collaboration and support for their activities.

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        By its very nature, research is unpredictable and involves a considerable element of risk. Such risks may relate to scientific concepts, the implementation of the science, the protection of any inventions made and the success or otherwise in persuading others to respect the intellectual property acquired or created by the Company.

        Specifically, patents filed may not issue or may later be challenged by others. Even if patents issue, the methods described may, with time, be superceded by other alternative methods which may prove to be commercially more attractive. Even if patents issue and the methods developed are successfully reduced to practice and can be shown to be commercially relevant, there is still no assurance that other parties will respect the patents or will take licenses to use the intellectual property. In such circumstances, it is possible that legal action will be necessary to enforce the Company's rights. Such action, in turn, raises a new series of risks including potentially significant legal costs and uncertain outcomes.

        To the extent that delays are encountered in concluding the research projects, additional costs are likely to be incurred. Further, the projected revenues from the projects will also be deferred, potentially impacting on the Company's liquidity. In such cases, the Company may seek to partner with outside parties, who will contribute to the costs of research in return for an interest in the project, or the Company may seek to raise additional working capital from the Market.

        In a worst case scenario, if the Company's research projects do not achieve their scientific objectives, the projects may well be closed down with no valuable intellectual property having been created.

(a)   RareCellect®

        Our subsidiary GeneType AG holds issued patents on a method for the recovery of fetal cells circulating in the peripheral blood of a pregnant woman. These patents, with an earliest priority date of March 27, 1990, have been granted or allowed in most countries where filed, including the US, United Kingdom, France, Germany, Australia, and Japan. In March 2001, RareCellect Limited was incorporated by us in Australia for the purpose of performing additional research and development of the method and overseeing its eventual commercialization.

        Approximately 0.65% of live births are affected by major chromosomal abnormalities, including trisomy 21 (Down's Syndrome, 0.12%). Prenatal screening for such disorders is now widely available in developed countries, but is neither standardized nor universal. Even the best prenatal screening regimens fail to detect 5% of Down's cases, and suffers from false positive rates of about 5%. When screening based on past obstetric history or advanced maternal age indicates an increased risk of fetal genetic defects, the pregnant woman is generally subjected to a further, invasive procedure—amniocentesis, chorionic villus sampling (CVS), or fetal blood sampling—in order to obtain fetal cells for definitive prenatal diagnosis. Such procedures are not without risk, resulting in miscarriage rates from 0.5 to 2.0% above the expected background rate, and can lead to congenital abnormalities when performed too early in gestation.

        It has long been generally recognized that a simple, universally applicable, non-invasive means of obtaining fetal cells for prenatal diagnosis would represent a major advance over existing practice and would be widely adopted throughout the developed world. RareCellect seeks to develop such a method.

        It is well-known that fetal cells, including trophoblasts, lymphocytes, and erythroblasts, circulate in the peripheral blood of pregnant women, in some cases as early as five weeks' gestation. Although these cells are rare, only 1 per 10 ⁶ to 10 ⁷ maternal nucleated cells, it is possible to isolate them from venous blood samples. To date, no group has been able to achieve this with the reliability necessary for a routine clinical test. Reasons for this failure have included the lack of markers capable of adequately

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discriminating fetal from adult cells and limitations on the speed at which the required number of cells can be processed.

        The GTG patents for fetal cell recovery describe a method that, in principle, should have the requisite power to reliably discriminate fetal from maternal cells. The method makes use of the HLA system of cell-surface molecules. The genes that encode these molecules show great variability (i.e., are highly polymorphic) in all human populations and are co-dominantly expressed. Provided that enough different types of HLA molecules can be interrogated, the probability that maternal and fetal cells share exactly the same complement of HLA molecules can be made very small. Recent advances in flow cytometry (cell sorter) instrumentation have now made feasible examination of enough peripheral blood cells in a sample to identify the very rare fetal cells.

        In addition to the patent filed by us in relation to HLA markers, we have also filed a subsequent patent based on other non-HLA markers.

        In 2001, GTG began recruiting a team of scientists dedicated to this project. A high-speed cell sorter, "MoFlo", manufactured by Cytomation Inc., (Colorado, USA) was initially installed in refurbished laboratories in Melbourne, Australia. Extensive testing of commercially-available anti-HLA antibody reagents was then conducted.

        In early 2003, Dr. Ralph Bohmer arrived in Australia from the US to lead this project. Dr. Bohmer has also brought additional new concepts that could support this project, and provisional patents on these new inventions have recently been filed.

        In 2004, Dr Richard Allman was recruited from the UK to assist with project leadership, in particular, with flow cytometry. Significant advances have been made as summarised below:

        The proposed project outcome is a new, non-invasive pre-natal genetic test. Revenues from the project will be generated from a mixture of licence fees, royalties and direct, fee-for-service genetic testing.

        Using GTG's patented HLA method, fetal cells can now be reproducibly and routinely isolated from maternal blood. A new and novel, direct cell labelling and sorting procedure has been developed and a patent application is in preparation. It is anticipated that the combination of the HLA method and the new, novel method will allow optimisation of the isolation procedure to increase the number and speed of fetal cell retrieval and validate a gender-independent cell labelling protocol.

        Incremental advances in these areas are expected over the next 24 months at a burn rate of approximately $450,000 per annum.

        Partnering to access clinical specimens and enable side-by-side clinical comparison of the new technique with existing methods will be required. It is anticipated that the clinical analysis and test validation would take around 24 months at a cost of approximately $150,000 per annum for a local partner. Suitable partners include a Melbourne-based hospital network and, potentially, large US genetics companies. Such clinical work is expected to commence within 12 months.

        The key risk for this project is the time required in optimisation to enhance sample throughput to a commercially viable rate. Obviously, delays to achieving such optimisation would result in a longer lead time to commercial revenues and extended cash burn on research.

        Provided there are no major technical problems, we estimate that the first material revenues will be received in 2007/2008.

        Markets and competition:     there are some four million pregnancies per year in the U.S. alone. It is already the case that some form of antenatal screening is provided for most pregnancies in developed countries. The trend towards increasing numbers of women becoming pregnant later in life is resulting in an increasing risk of chromosomal aberrations in these pregnancies. Given the expense,

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inconvenience, and inaccuracy of current screening strategies, and the risks associated with subsequent invasive diagnostic procedures, it seems probable that a reliable, accurate, non-invasive, and relatively inexpensive diagnostic test would be rapidly adopted.

        This conclusion has, of course, been reached by a number of other parties. There are currently several competing groups actively pursuing different methods for the isolation of fetal cells from maternal blood, including academic centers in many countries—U.S., United Kingdom, Japan, China, Italy, Singapore, Finland, Germany, Netherlands, France—and commercial organizations, e.g. IQ Corporation, Vysis, Roche Diagnostics, Paragon Genetics and Niagen Genetics. In 1995, the U.S. National Institutes of Health began funding of the large, collaborative National Institute of Child Health and Fetal Cell Isolation Study (NIFTY) trial, still on-going. Despite numerous optimistic claims made in the past, it does not appear that a fully satisfactory solution has been found or commercialized yet.

        The method being developed by us has attracted widespread interest in relation to collaborative research and development, clinical trials and future commercialization. At least two major diagnostic companies have expressed interest in the project. During the coming year, the Company is likely to pursue discussions with these parties regarding the sharing of development costs and future licensing rights.

        Government regulation:     clinical testing in most developed countries is subject to extensive regulatory scrutiny, the nature of which varies from one country (and sometimes state) to another. In Australia, accreditation of laboratories offering pathology services is granted by the Health Insurance Commission, based on a report of assessment by the National Association of Testing Authorities (NATA). In addition, in the State of Victoria, where the Company has its headquarters, accreditation may also be obtained from the Pathology Services Accreditation Board, again subject to favorable assessment by NATA. In the U.S., laboratories are currently certified by the College of American Pathologists and the Health Care Financing Administration, under the authority of the Clinical Laboratory Improvement Amendments of 1988. However, there are currently moves to introduce an additional level of regulation for entities offering genetic testing, probably under the auspices of the FDA. Both the Clinical Laboratory Improvement Advisory Committee and the Secretaries Advisory Committee on Genetic Testing have recently held hearings and/or issued reports. In Australia, the Australian Law Reform Commission and the Australian Health Ethics Committee of the National Health and Medical Research Council have recently issued a major issues paper, "Protection of Human Genetic Information". It is anticipated that the field of genetic testing will be progressively subject to increasing levels of governmental regulation in most countries.

(b)   ImmunAid

        ImmunAid Pty Ltd (currently 65% owned by GTG) was formed in March 2001 in Victoria, Australia, with GTG owning 60% and the scientists working on the project owning 40%. We acquired a further 5% interest in the company, following the conversion of loans made to it by GTG into shares. The objective of ImmunAid was to test a novel concept for treating HIV/AIDS, with the initial work being performed at University of Western Australia. The concept was initially tested in a mouse model with mice that had been infected with the murine AIDS (MAIDS) virus. This is an effective model to investigate mechanisms of retrovirus-induced immunodeficiency because the MAIDS virus causes pathology with a number of features similar to human AIDS. The early results in mice were subsequently described by the scientist in charge as being "remarkable".

        The method has been protected by the filing of an Australian provisional patent application. In August 2001 this was converted to a full PCT patent application. A preliminary search by the Australian Patent Office has failed to reveal any prior art.

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        We then funded a further one-year program of laboratory research at the University of Western Australia in the amount of approximately $250,000 with the work commencing in May 2001. The work built on the earlier research (performed in the same laboratory) and sought a more detailed understanding of the treatment mechanism and also to extend it to cancer. The results achieved in the mouse model were both remarkable and compelling. Based upon the results, in February 2002, two additional provisional patent applications were filed to further refine the invention and extend its use to the treatment of cancer. In October 2003 ImmunAid filed a further provisional patent to cover the novel concept that the immune system cycles as part of its response to viral infection or cancerous cell growth. The original provisional applications are progressively being converted to definitive patent filings which are progressing through the PCT examination process.

        The principal research activity for ImmunAid is being conducted at the University of Western Australia, Department of Microbiology. The latest project commenced in January 2005 and will conclude July 2005 at a cost of approximately $40,000. In general terms, ImmunAid's proprietary theory seeks to define the critical time to treat HIV/cancer with antimitotic drugs. If successful, the final commercial outcome is expected to be a diagnostic kit for use by clinicians to time therapeutic treatment for maximum effect.

        The project will be reviewed in the second half of calendar 2005 to determine if the current human monitoring program may proceed to human intervention trials. Cost and duration of the project will depend upon the size of the study and availability for recruitment of suitable patients. ImmunAid has already established a network of cooperative cancer and HIV clinicians that would be suitable to participate in such an evaluation. Estimated budget and timetable for the initial trials: $120,000 over 12 months. We note that other parties have expressed interest to participate in the ImmunAid project.

(c)   Pathogen Genomics and Genetics Program (PGGP)

        In March 2001 we entered into a Collaborative Research Agreement (CRA) with the University of Melbourne (Department of Veterinary Science) to conduct applied research on methods for the diagnosis and control of infectious diseases in animals and humans. Two scientists were employed via the university and work commenced in mid-2001 under the direction of Associate Professor Robin Gasser. Prof. Gasser is the author of more than 120 papers in international peer-reviewed journals, mainly in classical and molecular parasitology.

        A substantial portion of the costs associated with this project are paid for by interested third parties, including relevant industry bodies.

        A summary of the project's development costs, outcomes and further plans is summarized below:

PGGP 1 (undertaken between April 2001 and March 2003)— Cryptosporidium

Total estimated costs paid by the Company: $400,000

        Gasser et al developed a new, DNA-based test to identify and sub-type Cryptosporidium species and sub-species. Independent validation of sensitivity and specificity was conducted by Robin Gasser and Rachel Chalmers (PHLS Cryptosporidium Reference Unit, Swansea UK) post our funding. Collectively, the Company and Gasser have transferred the Crypto test from gels to capillary instruments. Accordingly, we are now able to offer the test directly. Marketing of this test is in progress. First revenues from the deployment of the test are expected to be received during the year ending June 30, 2006.

PGGP 2 (now being undertaken between January 2003 and March 2006)— Trichostrongylus vitrinus

Total estimated costs to be paid by the Company: $450,000

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        The planned outcome is characterisation and isolation of gene/protein targets within the parasite that, when disrupted, are lethal. Historically, vaccines directed towards disrupting parasite proteins have not been effective. The most likely product to arise from this research therefore is a compound, anthelmintic. The market for such compounds is vast, for example, Merck's Ivermectin and analogues. The continued reduction in efficacy of existing anthelmintics, due to parasite resistance, provides a growing market opportunity for the introduction of alternative, improved compounds. Subject to successful completion of the project, first revenues are likely to arise, from either licensing of the resulting technology or the sale of the project, during the 2006 calendar year.

Proposed PGGP 3

        To capitalise upon our investment to date, the Company will continue to support the project to achieve identification, characterisation and isolation of additional compound targets.

        It is estimated that the project will require a minimum of between $150,000 and $200,000 per annum for 3 years to support new target identification by the University of Melbourne and around $80,000 per target to conduct assay development and high through-put screening (HTS) of a compound library.

(d)   C.Y. O' Connor ERADE Village Foundation

        In June 2004, we entered into a series of agreements with the C.Y. O'Connor ERADE Village Foundation, incorporating the Immunogenetics Research Foundation and the Institute of Molecular Genetics and Immunology (the "Foundation") under which (i) we acquired the entire patent estate of the Foundation in the field of genetics and genomics in return for shares in the Company, (ii) we granted a license to the Foundation to utilize our non-coding patents, and (iii) we agreed to provide research funding to the Foundation for a period of five years to develop novel, high-value genetic tests for commercialization by us.

        The research program was formed upon the acquisition by the Company of all the genetics and genomics intellectual property generated by the Foundation, which showed great promise in a number of important areas, including improved tissue typing and transplantation techniques in human bone marrow transplantation, plus an extensive range of new opportunities in the field of human genetics and animal genetics, including cattle, horses, dogs and fish.

        GTG will also own any and all intellectual property generated by the Foundation as part of the agreement between the parties.

        A summary of the research focus is as follows:

        July 2004-June 2009 at approximately $700,000 per annum.

        A series of projects that aim to develop new genetic tests for animals and humans using patented, haplotype block technology. These projects include (i) complement regulation in humans, which might explain the genetic basis of recurrent spontaneous abortion, (ii) canine hip dysplasia in dogs, which in turn has led to an improved way of performing DNA typing in dogs, (iii) a new DNA method for identifying the precise species of origin of ancient or recent DNA, (iv) several projects which have started to research the genetic basis of certain animal issues, including polling in cattle and sheep, black wool in merino sheep, meat tenderness and innate immunity, (v) performance in race horses and fecundity in several species, (vi) computational genomics, to develop a new user interface to process vast amounts of data in super-rapid time and the application of the GMT invention in new areas, such as atherosclerosis and Alzheimer's disease, and (vii) new methods for aquaculture brood-stock selection to overcome certain emerging problems in commercial acquaculture.

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        Success of this research to date has already resulted in new methods that could save lives in human bone marrow transplantation and have already resulted in a new genetic test which can determine susceptibility to recurrent spontaneous abortion in humans and also in certain livestock species. Other projects, while still at an early stage of development, have already demonstrated exciting new findings which readily justify this innovative program. As additional research projects commence, sources of required biological materials will be identified and sample libraries assembled.

        Representatives from the Company and the Foundation have recently met with external parties to identify potential commercial partners to advance these projects and discussions are continuing. Subject to these negotiations, first commercial outputs may be received during the second half of the 2005 calendar year.

        Additional products are likely to be developed and offered to the market progressively during the life of the program. Some of these inventions could have significant value—both in terms of saving lives and in generating new sources of revenue for the Company.

(e)   King's College, London

        The purpose of this work is to establish the importance of the type of DNA sequence known as VNTRs (Variable Number Tandem Repeat polymorphisms) in human and animal diseases and to secure appropriate IP relating to these repeats. VNTRs show different sequence properties from person to person, and are thought to be involved in predisposing some individuals to a range of diseases, such as cancer and dementia. Therefore, the ability to identify the VNTRs associated with diseases, and thus use them as a diagnostic test, and, possibly a target for disease treatment or prevention, is a logically desirable goal for us. This project (currently being carried out at King's College, London, under the auspices of Dr. Gerome Breen), has developed new ways of identifying novel VNTRs in humans, as well as methods for highlighting which of these may be involved in disease states. Work is ongoing, and is now focused on the identification of polymorphisms of potential diagnostic use, some of which may be or indicate "drugable" targets. This data will be used to progress our intellectual property position on VNTRs for clinical diagnostics and treatment.

The research is in Discovery phase, that is, continuing the development of research-based investigations into broadening the utility of the project across the scope of human and animal diseases. Estimated timing of the project is between 1 and 2 years at a cost of between $60,000 and $120,000 per year. The project is due to conclude in December 2006.

We consider that there are minimal risks of not completing development to a point where an informed decision can be made whether to implement all or parts of the projects as a range of genetic tests.

Material net cash inflows from significant projects are expected to commence post 2006.

Competition

Licensing

        Our licensing business principally covers two families of "non-coding" patents. As we are the sole owners of these patents there is, by definition, no direct competition in this activity. However, to some degree, there are alternate technologies in the market place which can be used to perform genetic analysis and genomic mapping and so in this regard we do face indirect competition and a potential risk of technological obsolescence. A more serious risk of obsolescence comes from the inevitable expiry of our patents in 2016, at which time our ability to generate license revenues from these particular patents will cease. It is anticipated that over time, however, licensing of additional patents filed by the Company in other areas of genetics will replace revenues currently generated from the licensing of the non-coding patents.

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Genetic testing—paternity

        The size of the Australian DNA paternity testing market can only be estimated. The tests are outside the Medicare regime and hence no central records are kept. Our best estimate is that the total size of the market is about 6,000 tests per year which, if correct, would give the Company approximately a 50 percent total market share. There are presently 9 other organisations that offer these tests in Australia. All are NATA accredited, except the last three, Gene-E, DNA Solutions and DNA Bioscience. A brief outline on each is listed below.

DNAlabs

        This is our largest competitor and is a wholly-owned subsidiary of Sydney IVF. It obtains paternity testing referrals exclusively from Mayne Limited which has the largest share of the Australian pathology market.

Sonic Health Care

        A division of Sonic, the second largest pathology provider in Australia. The laboratory is Sydney-based and was established by the ex-head of DNAlabs. Once accreditation was granted in July 2003 the referrals which the Company had previously received from Sonic ceased.

Gribbles

        The third largest pathology provider in Australia, which entered the paternity testing market in late 2003, and is aggressively pricing their service in order to increase market share.

Victorian Institute of Forensic Medicine

        This is the Coroner's laboratory in Victoria. We know from their annual report that for the last 5 years their workload has been relatively static at 150 cases per annum.

John Tonge Centre

        This is the Coroner's laboratory in Queensland. They are NATA accredited but do not offer the test commercially.

Medvet Science Pty. Ltd.

        This laboratory is based in South Australia and its major shareholder is the State Government. Prior to the entry of Gribbles, it had a monopoly in S.A. and also controls the market in the Northern Territory and Tasmania.

Gene-E

        This Victorian based company was established in early 2001. The company does not have a laboratory in Australia and all of its samples are sent to the US for processing. People obtain information from Gene-E by calling a 1300 number and listening to a recorded message. The company specialises in mail order testing. The parties can order a sample collection kit, but only after they listen to and pay for the recorded message.

DNA Solutions

        This company was established about 5 years ago and sells its services over the internet. DNA Solutions is the only non accredited provider which has its own laboratory. Their business is generated

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via the web and they have sites in various countries. Based on recent press reports, they perform 800 cases per annum but a substantial number of these are received from offshore.

DNA-Bioscience

        An internet based company which plans to commence trading in May 2005.

        Sonic and Mayne are the two largest pathology companies in Australia. Throughout Australia, Mayne refers exclusively to DNALabs. In Victoria, NSW and WA, Sonic refer exclusively to their own laboratories. The Australian market for paternity testing is now saturated and, since the entry of two of the three major pathology companies in the later part of 2003, our ability to generate growing revenues from this market has reduced. As of April 2005, our market share appears to have stabilized.

Genetic testing—diagnostics

        As the sole licensee in Australia for the test for the predisposition for familial breast cancer, we don't have any commercial competitors in this area. However, the test is provided by the pathology departments of certain public hospitals. They are not true competitors in that the numbers of such tests that can be performed is restricted due to limited Government funding. Further, the hospitals use strict patient selection criteria such that only the top 10% of highest risk patients are tested.

Genetic testing—forensics

        Forensic DNA testing is defined to include DNA tests, the results of which can be relied upon as evidence in a court of law. To meet the strict standards of court evidence, forensic testing can only be conducted through NATA accredited laboratories that have been approved for forensics work. We are the only non-government owned, NATA accredited forensics laboratory in Australia. At the moment, virtually all forensic testing is conducted through state government owned laboratories. These laboratories have substantial backlogs and for this reason do not generally undertake private DNA forensic tests. As such, we are the only accredited laboratory currently providing forensic testing to the public. To resolve the backlog problem, one state (Queensland) has already suggested that it plans to outsource the testing of 10,000 samples to the private sector. As GTG is the only non-government laboratory in Australia, we expect to be considered favorably when tenders are called for this and other government-referred work.

Genetic testing—animals

        We offer a DNA testing service across a number of animal species, particularly with respect to establishing an animal's pedigree and parentage. This test is common across animal species and is not proprietary. Accordingly, any laboratory that can provide a DNA parentage/pedigree test is able to enter this market. Other than ourselves, there are currently five other laboratories offering material levels of DNA service testing for animals.

        Queensland University currently offers testing across animal species but particularly horses, where it is currently the preferred laboratory for stud book recording. Queensland University also provides a DNA service testing for dogs and cattle.

        Genetic Solutions currently offering a range of genetic tests for the cattle industry. Genetic Solutions is a smaller laboratory which has indicated that it may extend its testing services to sheep.

        AgResearch research laboratory in New Zealand used by Ovita, a company specializing in providing sheep herd management systems that includes a genetic breeding scoring system. Ovita has indicated that it would like to expand its services into the cattle industry.

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Commonwealth Scientific and Industrial Research Organization (CSIRO)

        A government instrumentality that is primarily a research institute.

Maxxam Analytics Inc.

        A company based in Canada that is the sole provider to the Australian Harness Racing Council.

        Some of major pathology companies in Australia already have vet pathology businesses and almost all have expertise in human DNA profiling. We expect that they will enter the animal testing market in the medium term.

Genetic testing—plants

        There are no material levels of commercial DNA service tests conducted in Australia for plants, other than commissioned research conducted by public authorities (such as universities and CSIRO) or by commercial organisations that internally conduct DNA tests as part of the ordinary course of their operations. In recognition of this, we established AgGenomics Pty Ltd, a joint venture between ourselves and the Victorian State Government. The joint venture is controlled by GTG (owning 50.1%). The commercial goal of AgGenomics is to offer the following services to plant breeders and researchers:

•

High throughput extraction of plasmid DNA and genomic DNA;



•

High throughput DNA sequencing;



•

High throughput genotyping; and



•

SNP discovery and analysis.

        AgGenomics has focused on the commercial species of greatest value to the Australian economy and also species where the most substantial funding has been invested, including wheat, barley, canola, cotton, vegetable brassicas (e.g. cabbage, cauliflower, brussel sprouts and broccoli) and wine grapes. To date, AgGenomics has completed a number of commercial projects for some of these sectors.

        In Australia we have two major competitors. The first is Southern Cross University, which specialises in tropical fruits and rice but, as they are highly specialized and do not match AgGenomics testing capacity, they are not seen as a major threat. The second, South Australian Research & Development Institute (SARDI), is seen as our major threat as in the next few years there is a reasonable expectation that they will have the capacity to match AgGenomics. In addition to this, their expertise in plants is similar to ours.

        Whilst we have few domestic competitors, our major commercial threat comes from offshore laboratories based in the US, England and Korea. These laboratories have a significantly higher throughput than AgGenomics and by and large enjoy greater economies of scale, thereby reducing their production costs. To date, a few large Australian plant sequencing contracts have been lost offshore in cases where the client simply requires the return of the genetic data and does not require our expertise in its interpretation.

Genetic testing—sports performance

        GTG owns the worldwide marketing rights to the ACTN3 sports gene test. This unique genetic test, which focuses on the ACTN3 gene, is the subject of granted patents and cannot be offered by any other party within the patent territories. As such, GTG has no competitors for this genetic test. As the ACTN3 sports gene test provides an indication of an individual's predisposition to sports/power sport performance as opposed to endurance sport performance, there are a range of other tests, genetic and non genetic that may also indicate a predisposition to particular sporting performance. None of these

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however specifically relate to a genetic test on the ACTN3 gene which, scientifically, has shown a very high correlation to sports performance.

Research

        The only area of research currently being carried out by the Company that is highly competitive relates to the RareCellect project. The examination of fetal cells for early detection of fetal diseases and genetic abnormalities is undertaken in approximately one out of every thirty pregnant women. Currently, fetal cells are obtained by invasive procedures such as amniocentesis and chorionic villous biopsy. The current procedures present a significant risk of harm to the fetus, particularly after the first trimester of pregnancy. There is, therefore, both a health and economic requirement to provide an efficient and non-invasive method for pre-natal diagnosis of genetic abnormalities.

        We hold worldwide patents concerning a method for the recovery of fetal cells from maternal blood. These fetal cells can then be used to analyze the genetic health of the fetus, without the need to perform the current invasive tests. We are currently conducting pre-clinical research to optimize the fetal cell isolation techniques prior to commercialization. Patent applications have been filed to cover recent inventions in this field.

        Local competition in Australia comes from Monash Medical Centre and Gribbles Pathology . Both of these groups are working on the isolation of placental derived cells (trophoblasts) from cervical mucous samples. Gribbles released a press statement about their technology on March 12, 2005 suggesting imminent commercialization. Similar claims have also appeared in the press over the past year from both Monash University and Gribbles. From a scientific standpoint, trophoblasts are much easier to isolate than fetal cells, however, they are inherently genetically unstable and their reliability for providing prenatal genetic diagnosis remains unproven.

        The development of non-invasive fetal diagnostics is a highly competitive field. Worldwide groups actively pursuing non-invasive fetal cell diagnostics include:

•

Genzyme Inc., USA



•

Roche Diagnostics, USA



•

Aviva Biosciences, USA



•

Hamilton Thorne Research, USA



•

Rubicon Genomics, Inc, USA



•

MOR Research Applications Ltd.



•

Children's Medical Centre—Tuft's University, Boston, USA



•

The Chinese University of Hong Kong



•

Laboratory for Prenatal Medicine, University Women's Hospital, Basle, Switzerland



•

The Jikai University School of Medicine, Tokyo, Japan



•

Imperial College London UK

(this list is not exhaustive and many other academic and commercial research departments are active in this field).

        Concerted public health funding schemes have been operating in both the USA and Europe attempting to contribute to this field over recent years (National Institute of Child Health Fetal Cell Study, USA known by the acronym NIFTY, and a similar concerted action in Europe under the name COPERNICUS funded by the EEC). The majority of competitors now appear to be concentrating their

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efforts towards using free fetal DNA in maternal blood as a source of material for pre-natal diagnostics. The bulk of the competition and innovation in the pre-natal genetic screening market appears to be coming at the testing end of the service, rather than the sample collection and preparation stage, which is the focus of RareCellect. This means that samples of fetal cells prepared using RareCellect technology will be suitable for use by the current and emerging tests for fetal genetic health. Importantly, in the fetal cell isolation area, there are no known competitors who have demonstrated that they have a reproducible and commercially viable process for collecting fetal cells from maternal blood.

Environmental Regulations

        The Company's operations are subject to environmental regulations under Australian State legislation.

        In particular, the Company is subject to the requirements of the Environment Protection Act SA 1993. A license has been obtained under this Act to produce listed waste.

        We have a minority interest of 18.62% in a mining joint venture in Western Australia known as the Duketon Belt Joint Venture which has been fully written off in the Company's accounts. This Joint Venture is on a care and maintenance basis and has only been subject to exploration drilling. We have provided performance bonds of US$26,873 (A$38,655) as at June 30, 2004 and A$87,504 as at the date of registration to the Mines Department in respect of restoration and environmental matters.

        The directors of the Company are not aware of any potential environmental issues in respect of this mining exploration project.

Item 4.C Organizational Structure

        The following table shows the organizational structure of Genetic Technologies and its subsidiaries as at the date of this Registration Statement:

        Genetic Technologies Limited is the holding company of the group, and currently, Genetic Technologies Limited is listed on the Australian Stock Exchange, under the code GTG.

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Item 4.D Property, Plant and Equipment

        GeneType Pty Limited, a wholly-owned subsidiary of the Company, rents the Melbourne laboratory premises located at 60-66 Hanover Street, Fitzroy from Bankberg Pty Limited, a company affiliated with Dr. Mervyn Jacobson. The lease is for 10 years, with an option for renewal for another 10 years, at an annual cost of A$378,212.

        The premises in Sydney are located at Suite 2, Level 12, 75 Elizabeth Street, Sydney. We have entered into a three year lease for such premises. The first year rental is A$64,100, the second year rental is A$66,976 and the third year rental is A$69,655.