The Board and management of Coates have maintained a strong focus on the corporate governance of its activities, which they believe is vital to the well being of the Company and dealing with its stakeholder groups.

Corporate governance has continued to be a key issue within the community. The ASX Corporate Governance Committee released a set of best practice guidelines on 31 March 2003. These 10 Principles are recommendations designed to provide the essential corporate governance for Listed companies and the ASX requires them to report on compliance with the best practice recommendations in the Annual Report.

The areas addressed by the 10 Principles outlined in the ASX recommendations are as follows:

1. Board Charter and its Role to lay a solid foundation for management and oversight
2. Structure of the Board to have effective commitment, size and composition
3. Promote Ethical and Responsible Decision Making
4. Safeguard Integrity of Financial Reporting through independent Directors
5. Timely and Balanced Disclosure of all material matters concerning the Company
6. Shareholder Rights and Communication Strategy for the effective exercise of those rights
7. Risk Oversight and Management to ensure a sound system of risk management
8. Board Performance Review and Disclosure to enhance performance
9. Remuneration Responsibility to fairly reward performance
10. Dealing with Stakeholders to recognise their rights

In order to assist the Company review its performance and practices in this area against the ASX best practice recommendations, the Board established a Corporate Governance Committee in 2003. As part of any governance program, the Committee will review the policies from time to time to ensure they address the needs of our shareholders and other stakeholders.

Details of the corporate governance policies are fully set out on the Company’s website to provide transparency to shareholders – www.coates.com.au (go to Investor Relations).

As previously reported, Coates substantially adopted these recommendations and posted the policies on its website in July 2003.

During 2003/04 the Company created a Nominations Committee and the risk management policies were revised following a review in this area. Throughout the year Coates has monitored its operations and policies in order to strengthen its Corporate Governance framework.

Following the review of all the policies under the 10 Principles in June 2004, which has led to the revision and update of some of the existing policies, Coates has now adopted policies that comply with the ASX recommendations. In respect of Recommendations 7.2, the Company has complied with the ‘Guide to Compliance with ASX Principle 7. Recognise and Manage Risk’ prepared by the Group of 100 and endorsed by the ASX Corporate Governance Council. Coates continues to upgrade these policies should circumstances within the Company change.

Details of the key aspects of the policies under the 10 Principles are set out on the following pages.