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Directors’ letter to shareholders 11 October 07

Response to partial takeover offer from Masthead Portfolios Limited.

Dear Shareholder

PARTIAL TAKEOVER OFFER FROM MASTHEAD PORTFOLIOS LIMITED

THERE IS NO BENEFIT IN ACCEPTING THE PARTIAL TAKEOVER OFFER EARLY – THE BOARD ADVISES YOU TO DO NOTHING UNITL YOU RECEIVE OUR RECOMMENDATION

Abano yesterday received notice of despatch of a partial takeover offer from Masthead Portfolios Limited.

As previously advised, the Abano Board has appointed Ferrier Hodgson & Co to provide a report on the merits of the offer and the Board will provide its own written statement to shareholders. These documents will be incorporated in the Target Company Statement that will be sent to shareholders within the next 10 days.

As announced on 8 October 2007, the Abano Board has received approaches from other parties expressing interest in Abano. In circumstances where the Board considers it to be in the interests of the company and its shareholders, the Board has and will allow suitable parties to undertake due diligence for the purposes of preparing alternative propositions.

As you will be aware, Abano has recently released updated market guidance including revised forecasts which reflect the significant improvement in the performance of the company in the current financial year. A copy of the market guidance is enclosed with this letter.

There is no benefit to Abano shareholders in accepting the Masthead offer early as the offer cannot be closed early or withdrawn (except in the unlikely event the Takeovers Panel so agrees), and the offer price cannot be reduced. Once given, your acceptance cannot be withdrawn (unless Masthead defaults under the offer), the offer could be extended and you will not be able to accept any alternative offer which may emerge. Shareholders who accept the offer will not be paid unless and until the offer is unconditional and the extent of any required scaling becomes clear.

Given these factors, the Board strongly advises shareholders to TAKE NO ACTION and NOT TO MAKE ANY DECISION TO ACCEPT THE OFFER until they receive a copy of Abano’s Target Company Statement.

Yours sincerely
ABANO HEALTHCARE GROUP LIMITED

Alison Paterson
Chairman

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