diff --git a/Project.toml b/Project.toml
index 23c392f..3e1f641 100644
--- a/Project.toml
+++ b/Project.toml
@@ -1,6 +1,6 @@
 name = "MAT"
 uuid = "23992714-dd62-5051-b70f-ba57cb901cac"
-version = "0.12.0"
+version = "0.12.1"
 
 [deps]
 CodecZlib = "944b1d66-785c-5afd-91f1-9de20f533193"
diff --git a/src/MAT_v5.jl b/src/MAT_v5.jl
index b25237e..084c8c4 100644
--- a/src/MAT_v5.jl
+++ b/src/MAT_v5.jl
@@ -441,10 +441,20 @@ function getvarnames(matfile::Matlabv5File)
                 error("Unexpected data type")
             end
 
-            read_element(f, matfile.swap_bytes, UInt32)
-            read_element(f, matfile.swap_bytes, Int32)
-            varnames[String(read_element(f, matfile.swap_bytes, UInt8))] = offset
+            flags = read_element(f, matfile.swap_bytes, UInt32)
+            class = flags[1] & 0xFF
+            if class != mxOPAQUE_CLASS
+                read_element(f, matfile.swap_bytes, Int32)
+            end
+
+            varname = String(read_element(f, matfile.swap_bytes, UInt8))
+            if varname == ""
+                # Skip unnamed variable (subsystem)
+                seek(matfile.ios, offset+nbytes+hbytes)
+                continue
+            end
 
+            varnames[varname] = offset
             seek(matfile.ios, offset+nbytes+hbytes)
         end
     end
diff --git a/test/read.jl b/test/read.jl
index 0b2ab64..5f7b8ba 100644
--- a/test/read.jl
+++ b/test/read.jl
@@ -418,3 +418,29 @@ let objtestfile = "char_array_old_null.mat"
     @test haskey(vars, "simple_string")
     @test vars["simple_string"] == "t\0e\0q\0i\0k\0b\0o\0n\0f\0x"
 end
+
+@testset "read variable names" begin
+    let objtestfile = "varnames.mat"
+        file = matopen(joinpath(dirname(@__FILE__), "v7", objtestfile))
+        var_name_dict = keys(file)
+        @test Set(var_name_dict) == Set(["a", "b", "c", "d"])
+
+        @test haskey(file, "a")
+        @test haskey(file, "b")
+        @test haskey(file, "c")
+        @test haskey(file, "d")
+        @test !haskey(file, "e")
+
+        data = read(file, "a")
+        @test data == reshape([1.0; 2.0; 3.0], 3, 1)
+
+        data = read(file, "b")
+        @test data == "hello"
+
+        data = read(file, "c")
+        @test data == "stringstring"
+
+        data = read(file, "d")
+        @test data == reshape([4.0, 5.0, 6.0], 3, 1)
+    end
+end
diff --git a/test/v7/varnames.mat b/test/v7/varnames.mat
new file mode 100644
index 0000000..7f5e765
Binary files /dev/null and b/test/v7/varnames.mat differ