21. January 2008.

AN OVERVIEW OF THE PAST YEAR OF THE HEREND PORCELAIN MANUFACTORY

Herend, January 17, 2008

Herend Porcelain Manufactory has been a key factor in creating what is known as “Hungaricum”, a unique speciality, which is now an integral part of the image of Hungary. Herend is a phenomenon to be found on every inhabited continent in approximately sixty countries worldwide. In many countries, it is the porcelain products of Herend and their cultural mission that will have created an overall impression of Hungary, their country of origin. This is a responsibility that all the staff working for the Manufactory has to live up to. Our work has to yield positive results which help preserve the values generated in the period that has elapsed since the foundation over 180 years ago of the Company.

It is our firm belief that Herend will have to stick to all the characteristics that mark its luxury porcelain products, both as a producer and as a seller of those items, by preserving all the traditions of applied arts and industrial history, and as a manufactory by staying in the vanguard of the porcelain business.

An illustration of Herend's cachet in the world of porcelain is a survey conducted last year by the New York-based Luxury Institute, which goes to show that Herend was the top brand in porcelain last year on the US market. The Americans surveyed provided answers ranking 29 world-class porcelain brands according to persistence in the production of high quality items, uniqueness and exclusivity, and the „Luxury Brand Status Index” (LBSI) ranking showed that Herend had no difficulty in breaking away from the pack made up by the likes of Cartier, a Tiffany & Co. and Rosenthal. Not only does the survey reflect recognition of Herend as a world-class contender, it is a recognition of Hungary, too.

Herend has become one of the world's largest manufactories of porcelain products, whether it be in terms of the company's profit earnings, the number of its employees, or the number of its export markets.

Herend is known to be the only remaining “flagship” of a Hungarian movement called Employees' Shared Ownership Programme (MRP). Employees of the Company are company shareholders as well, owning almost 75 per cent of the company's shares. They consider the current ownership structure an asset, which they have no intention of altering. 2007 was illustrative of the Manufactory's ability to operate profitably while preserving the majority ownership of employees with only a minority of shares in state ownership, in a climate of constant economic change, while retaining its ability to respond with flexibility to the challenges generated by the environment. Consequently, the current form of ownership continues to be a successful one in Herend.

The Manufactory was part of a number of successful events during 2007. As a result of our marketing activity, Herend as a product brand has continued to strengthen its foothold on the markets. We continue to be a well-known manufacturer and whenever high quality and luxury porcelain are mentioned, Herend is the word. To own a Herend product is to possess a value, which is some sort of special privilege. Orders from the Palace in Oman in 2007 and 2008, an order for the interior decoration of a castle in the south of France or the survey mentioned earlier on, conducted by the New York based Luxury Institute, all substantiate our claims of appreciation and success.

In 2007, we had a number of successful exhibitions, one of which was held at Tsarskoe Tselo in Saint Petersburg, formerly the summer residence of Russian tsars. The significance of this is best illustrated by the fact that it is a venue where no other Hungarian brand had ever been allowed to participate. Other significant Herend exhibitions were those organised in Genoa, Italy (there were two venues here: Museo Chiessone and Palais Rosso), and at Fortnum & Mason, a department store in London, where the opening ceremony was attended by Prince Charles.

Our achievements in 2007 include success on the diplomacy front. A visit by dr. Karolos Papoulias, president of the Republic of Greece, Katerina Iuschenko, Viktor Iuschenko's wife, the wives of the presidents of the Visegrád Four and Dr. Ottó Habsburg, son of the last Hungarian king, who at 95 was given an anniversary celebration by family members upon his visiting our Company. Another success story of the year was that our Saint Emery porcelain, manufactured specially for the occasion, was handed over as a gift to His Holiness Pope Benedict XVI who took the gift personally.

Here's a list of successful events in 2007 with the Manufactory participating: the Formula One Hungarian Grand Prix, the 182nd Anna Pageant held in Balatonfüred, the Hungarian Derby, the Rubik Cube World Championship, the Miss Hungary Contest, the Baraká First Class Party, where we showed our unique jewel egg. We were part of the Saint Martin Prize, an event held at Pannonhalma, created by the Pannonhalma Arch-Abbey and the Bábolna National Stud Estate to contribute to a better understanding and knowledge of our national heritage and cultural values, while aiming both to exploit and preserve the unique characteristics of the Pannon region in terms of culture and tourism alike. The Saint Martin Prize for 2007 was awarded to singer Márta Sebestyén.

In 2007, we were also one of the participants in a series of cultural events called the Valley of Arts near Kapolcs and were part of what is known as the ‘Night of Museums’ with almost three thousand visitors having visited Herend during a single night. In 2007, we also paid tribute to arts via our Kodály Commemorative Award and to the outstanding representatives of the Hungarian nation throughout the Carpathian Basin via our Chieftain Árpád Principle Commemorative Award.

In 2007, our new artisanship and arts strategy was accepted. What we expect from the new strategy is continuous product development with an artistic edge and a flair for new styles, one that is capable of meeting customer demand at a very high level of quality and by doing so can successfully keep the focus of domestic as well as international attention on Herend. Our colleagues, participating in our recently re-launched “disc master craftsman” and “painter master craftsman” training courses, will have a major role in the implementation of this strategy in the next few years.
The profit earnings for 2007 of Herend Porcelain Manufactory Zrt. were in excess of profits realised during the previous year.

And what better way to wrap up our overview of last year's achievements than to wish a Happy and Successful New Year for 2008 to every visitor browsing the web pages of the New Herend website.

Dr. Attila Simon
CEO