Abano Directors’ Letter to Shareholders

Directors’ reiterate “Don’t Sell” advice

Dear Shareholder


You will have received a letter from Masthead Portfolios Limited, dated 14 November 2007, extending the closing date of its offer.

Your directors repeat their “Don’t Sell” advice on the revised Masthead partial offer of $5.00 per Abano share.

We have consistently stated that the partial nature of the offer was a material consideration in our earlier rejection of the initial offer from Masthead.

If the offer is successful, there is no certainty that you will be able to sell all of your shares. Indeed, if you accept the offer, you may only be able to sell 38.85% of your shares and you will then be left with the balance of your shares.

The increased price offered by Masthead is still at the lowest point of the $5.00 to $5.80 valuation range in the Ferrier Hodgson Independent Appraisal Report.

In addition, the offer price is significantly below the valuations of external analysts such as ABN Amro Craigs and Forsyth Barr, who have valued the shares at up to $5.65.

Should Masthead succeed, your remaining shares will potentially trade on the market at a price significantly less than the current offer price, given control of Abano will have passed to Masthead. This means that if everyone accepted the offer, you will only be paid the $5.00 for 38.85% of your shares, and the remaining 61.15% of your shares could be worth significantly less.

Remember, a premium for control may only be paid once, and the Masthead offer is only offering this for 38.85% of your shares.

Should you wish to sell your shares, you may be better off selling your shares on the market, as then you will have certainty, and receive the same price for all your shares, not one price for 38.85% and a lower amount for your remaining 61.15%.

If you accept the Masthead offer, there is no certainty that it will succeed. In addition to this, if you accept, you will have limited your options as you will not be able to withdraw that acceptance to consider other offers, should they emerge.

As you have seen by the performance over past few years, Abano is in a growth phase and this has now been acknowledged by the market with the increase in share price over this time. We are continuing to grow significantly, and as you can see from the attached media release, today we announced another audiology acquisition.

I believe we have a strong Board and management. The Board has previously indicated that it believes that the benefits of the current strategy are just starting to emerge and higher values than indicated in the Independent Report will be achievable if the company is successful in implementing its strategic plans and capitalising on the market opportunities it perceives.

Given these factors, the Board continues to strongly advise shareholders to TAKE NO ACTION, and DO NOT ACCEPT THE MASTHEAD OFFER.

Yours sincerely,

Alison Paterson
Abano Healthcare Group Limited