Report of the Supervisory Board of Danubius Hotels Rt. on the 1999 Balance Sheet of the Company and the Report of the Board of Directors.

The Supervisory Board held its meetings in the years 1999/2000 regularly, according to their schedule. According to the changed organizational structure, the Chairmen of the Supervisory Boards of Danubius Szállodaüzemeltető és Szolgáltató Rt. and Hungária Szálloda-Ingatlankezelő Rt. also attended the meetings. In addition, they also attended the joint meetings of the Supervisory Board.

The Supervisory Board had a quorum at each of its meetings.

The Chairman of the Supervisory Board attended the meetings of the Board of Directors of the Company. The Auditor also attended certain meetings and provided information on his activity.

The Supervisory Board invited the executives of the Company to its meetings, made them report there, and focused on the following:

1. business management activity in 1999
2. performance of the 1999 Business Plan
3. reorganization of the Company
4. internal control and the realization of the findings of the audits
5. observation of legality

The Supervisory Board established that

A. the financial obligations were met as planned
B. the projects and refurbishments were
     proceeding at an appropriate pace

The Supervisory Board deems the financial situ-ation of the Company adequate at the turning date.

The Supervisory Board did not find any measures or events in the operation of the Company that would violate the law or the Statutes during 1999.

The Company by and large attained the objectives set out in the 1999 Business Plan. The results were influenced to various extents by the Kosovo crisis, the effect of the economic and business management changes of reorganization, the staff cuts and reduction of costs, the trends in domestic tourism, a change in the depreciation rate, as well as the other than planned movement of the exchange rate.

Considering the effect of all influencing factors, the Supervisory Board recommends that the business management results of the Company be accepted.

Having examined the 1999 Report of the Company and its annexes, as well as having become familiar with the Auditor´s Report and his verbal additions, the Supervisory Board recommends the General Meeting to accept them with a balance-sheet grand total of HUF 34,362,657,000 and a balance-sheet profit figure of HUF 3,048,549,000.

Having become familiar with the Auditor´s Report, the Supervisory Board recommends that the consolidated report of Danubius Rt. be accepted with a balance-sheet grand total of HUF 41,769,733,000 and a balance-sheet profit figure of HUF 3,092,909,000.

The Supervisory Board agrees with the Annual Report of the Board of Directors and recommends that it be accepted.

The Supervisory Board agrees with the proposal of the Board of Directors for the division of profits.

Dated in Budapest, April 5, 2000.

Gábor Cséti
Chairman of the Supervisory Board