Ann: Appendix 3Y - Change of Director's Interest Notice x 2, page-29

The delays in the Varma deal are probably a negative factor on the SP, but MXC has many Pharma projects underway, and the MGC Derma division also has a significant number of development and marketing avenues which it is pursuing. Varma is just one of Derma's prospective earners.

Having experienced tactics of certain companies in certain Asian countries in the past, I came to the conclusion that some (but certainly not all) Asian businesses utilise tactics similar to those of the current North Korean leader - make promises, then renege on the promises or change the parameters, then go back to the original agreement, and then repeat the process. It's like a game of one-upmanship, trying to get a win of some sort or gain ascendancy over the other party. I'm not saying that is what is occurring here, but it's a possibility.

I certainly haven't given up on the Varma deal, but one thing that does concern me about it, having watched the way that certain things have been done without the expected outcome, I'm hoping that MGC Derma have adequately protected their intellectual property rights. If Varma come out with a similar product or products without input supply from MGC Derma, there could be some work for the legal team.

As for the transfer of directors' shares from Direct to Indirect, one way of looking at that could be a big positive for shareholders. If the directors have transferred their shares to a holding vehicle which has greater avenues for tax minimisation, it could indicate that they are expecting to make significant income and/or capital gain from their shares. If they do, that would mean that all shareholders should benefit.