Letter to Shareholders 18 Feb 08

Dear Shareholder,

Following a flurry of communications at the end of last year and in the early New Year, it is now timely that we update you on the company’s progress, and the situation regarding the Crescent Capital Partners takeover bid.

The most significant event in recent weeks was the announcement that Masthead Portfolios had sold its 19.9 percent shareholding in Abano to Healthcare Industry Limited. That company is owned by interests associated with our clinician equity partners, who own 30% of our subsidiary Bay Audiology, namely Peter Hutson, Anya Hutson and Scott Wright.

The Healthcare Industry purchase was made independently and without endorsement or encouragement by the board of Abano. The Board has no specific position on the purchase, however we can relate to you the general market feedback which the board has received. The purchase of the Masthead shares in Abano by our audiology management is a strong endorsement of Abano’s future prospects and in particular the audiology group which is a key component of our current expansion and growth phase.

Last Friday night, Crescent extended its bid from the original closing date of 29 February 2008 to 14 March 2008, presumably to enable it to continue to review its options given the changed circumstances.

Our advice remains unaltered and that is to not sell to Crescent and to reject its offer.

In respect of the Crescent offer, we can confirm that there has been a very low level of acceptance. At the time of writing this letter, a little under 0.9 percent of the issued shares of Abano Healthcare Group had been placed into the conditional offer, or under 202,000 shares of the 23 million shares on issue.

Your directors believe the company’s performance and prospects are such that there is considerably greater value in Abano shares than the current $5.20 offer from Crescent.

In that connection, you will be aware that for the six months to 30 November 2007 we reported a record result with a 37 per cent increase in net profit after tax of $3.8 million. We will be sending you a copy of the half year report before the end of February 2008.

We would also have liked to be able to include with that report your interim dividend payment. However, under the current Crescent offer, we require Crescent’s approval to pay the dividend and this has not been forthcoming, despite our earlier understanding and several requests.

Due to Crescent not allowing the dividend to be paid, and with the recent share transactions of Crescent and Masthead, a significant value of imputation credits were lost. The Board is mindful of protecting imputation credits and is continuing to work towards paying the interim dividend. The directors have reaffirmed their intention to declare and pay the interim dividend of 8.5 cents a share as soon as the Crescent bid expires. The board expects shareholder dividend returns to increase steeply as the growth phase continues to deliver to the bottom line.

As previously advised, we are in the process of preparing an updated market guidance on the 2008 forecast, following the summer holiday season. We expect to release this at the end of February 2008.

This statement will confirm the trend of strong earnings growth and your directors urge you to await that statement, before making any decisions.

The recent months have been unsettling for the company and its shareholders. I can assure you that the takeover activity has not impacted on the forward progress of Abano and I look forward to confirming that to you in the coming weeks

Kind Regards

Alison Paterson