Report of Independent Auditors

To the Shareholders and Board of Directors
Danubius Hotel and Spa Rt.

We have audited the accompanying consolidated balance sheet of Danubius Hotel and Spa Rt. and Subsidiaries ("the Company") as at December 31, 1999, and the related consolidated statements of income, changes in shareholders´ equity and cash flows for the year then ended.

The consolidated balance sheet at December 31, 1998 and the consolidated statements of income, changes in shareholders´ equity and cash flows for each of the two years in the period ended December 31, 1998 were audited by other auditors who issued an unqualified opinion. Such financial statements were prepared in accordance with International Accounting Standards, which were the basis for data included herein.

These financial statements are the responsibility of the Company´s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement whether due to error in the financial statements or anything misleading therein. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the above financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 1999 and the result of its operations, the changes in shareholders´ equity and cash flows of the Company for the year then ended in accordance with International Accounting Standards.

February 28, 2000

KPMG Hungária Kft.