Issue of Performance Rights – Appendix 3B

Name of entity

MGC Pharmaceuticals Ltd

ABN

30 116 800 269

1

+Class of +securities issued or to be issued

1. Performance Rights

2. Performance Rights

3. Performance Rights

2

Number of +securities issued or to be issued (if known) or maximum number which may be issued

1. 12,200,000

2. 10,000,000

3. 4,000,000

3

Principal terms of the +securities (e.g. if options, exercise price and expiry date; if partly paid +securities, the amount outstanding and due dates for payment; if

+convertible securities, the conversion price and dates for conversion)

1. Performance Rights

   • The Performance Rights are subject to vesting milestones, Milestone 1 is continuous service to the Company to 24 February 2017, Milestone 2 is continuous service to the Company to 31 December 2017, Milestone 3 is continuous service to the Company to 31 December 2018

   • Material Terms of the Employee Performance Rights Plan are included in the Notice of Meeting dated 26 August 2016 (Schedule 3)

2. Performance Rights

   • The Performance Rights are subject to vesting milestones, 60% vests at Milestone 1 which is continuous service to the Company to 24 February 2017, 40% vests at Milestone 2 which is continuous service to the Company to 31 December 2017

   • Material Terms of the Employee Performance Rights Plan are included in the Notice of Meeting dated 26 August 2016 (Schedule 3)

3. Performance Rights

   • The Performance Rights are subject to vesting milestones, 60% vests at Milestone 1 which is continuous service to the Company to 31 December 2016, 40% vests at Milestone 2 which is continuous service to the Company to 31 December 2017

   • Full terms are included in the Notice of Annual General Meeting dated 20 October 2016 (Schedule 1)

4

Do the +securities rank equally in all respects from the +issue date with an existing +class of quoted +securities?

If the additional +securities do not rank equally, please state:

• the date from which they do

• the extent to which they participate for the next dividend, (in the case of a trust, distribution) or interest payment

• the extent to which they do not rank equally, other than in relation to the next dividend, distribution or interest payment

No - the Performance Rights will be unlisted. Upon conversion of the Performance Rights new fully paid ordinary shares issued will rank equally in all respects with existing fully paid ordinary shares.

5

Issue price or consideration

1 & 2 Performance Rights issued for attraction, motivation and retention of relevant employees of the Company as set out in the Notice of Meeting dated 26 August 2016

3. Performance Rights issued as part of the remuneration package of director Ross Walker as set out in the Company's Notice of Annual General Meeting dated 20 October 2016

6

Purpose of the issue

(If issued as consideration for the acquisition of assets, clearly identify those assets)

1 & 2 The Performance Rights are being issued to employees of the Company under the terms detailed in the Notice of General Meeting issued on 26 August 2016 (Schedule 3)

3. The Performance Rights are being issued to a director of the Company under the terms detailed in the Notice of Annual General Meeting issued on 20 October 2016 (Schedule 1)

6a

Is the entity an +eligible entity that has obtained security holder approval under rule 7.1A?

If Yes, complete sections 6b - 6h in relation to the +securities the subject of this Appendix 3B, and comply with section 6i

Yes

6b

The date the security holder resolution under rule 7.1A was passed

29 November 2016

6c

Number of +securities issued without security holder approval under rule 7.1

0

6d

Number of +securities issued with security holder approval under rule 7.1A

0

6e

Number of +securities issued with security holder approval under rule 7.3, or another specific security holder approval (specify date of meeting)

4,000,000 Performance Rights

Approved at the Annual General Meeting held 29 November 2016 pursuant to Listing Rule 10.11

6f

Number of +securities issued under an exception in rule 7.2

22,200,000 Performance Rights

Approved at the General Meeting held 27 September 2016 pursuant to Listing Rule 7.2

6g

If +securities issued under rule 7.1A, was issue price at least 75% of 15 day VWAP as calculated under rule 7.1A.3? Include the

+issue date and both values. Include the source of the VWAP calculation.

N/A

6h

If +securities were issued under rule 7.1A for non-cash consideration, state date on which valuation of consideration was released to ASX Market Announcements

N/A

6i

Calculate the entity's remaining issue capacity under rule 7.1 and rule 7.1A - complete Annexure 1 and release to ASX Market Announcements

137,843,978 under rule 7.1 91,895,985 under rule 7.1A

7

+Issue dates

Note: The issue date may be prescribed by ASX (refer to the definition of issue date in rule 19.12). For example, the issue date for a pro rata entitlement issue must comply with the applicable timetable in Appendix 7A.

Cross reference: item 33 of Appendix 3B.

23 December 2016

Number

+Class

8

Number and +class of all +securities quoted on ASX (including the +securities in section 2 if applicable)

702,613,155

13,000,000

91,818,380

Fully Paid Ordinary Shares VHL Ordinary Shares

Listed Options exercisable at

$0.065 expiring 30/06/2019

Number

+Class

63,346,700

140,000,000

30,000,000

70,000,000

58,700,000

4,000,000

8,750,000

4,000,000

1,000,000

500,000

500,000

Fully Paid Ordinary Shares - subject to escrow until 23 February 2018

Fully Paid Ordinary Shares - subject to escrow until 15 February 2017

Performance Shares - subject to escrow until 23 February 2018

Performance Shares - subject to escrow until 15 February 2017

Performance Rights

Unlisted Options exercisable at $0.025 each on or before 30 June 2017

Unlisted Options exercisable at $0.04 each on or before 30 June 2017

Unlisted Options exercisable at $0.20 each on or before 30 June 2017

Unlisted Options exercisable at $0.30 each on or before 23 January 2018

Unlisted Options exercisable at $0.35 each on or before 23 January 2018

Unlisted Options exercisable at $0.40 each on or before 23 January 2018

11

Is security holder approval required?

N/A

12

Is the issue renounceable or non- renounceable?

N/A

13

Ratio in which the +securities will be offered

N/A

14

+Class of +securities to which the offer relates

N/A

15

+Record date to determine entitlements

N/A

16

Will holdings on different registers (or subregisters) be aggregated for calculating entitlements?

N/A

17

Policy for deciding entitlements in relation to fractions

N/A