2011 Annual Report

IN THE DEPTHS OF SOUND

0 20 HZ

WE AT SENNHEIsER FIRMLY BELIEVE THAT OUR CUsTOMERs NOT ONLY wANT TO HEAR sOUNDs, THEY wANT TO FEEL THEM As wELL.

ne Sunday in midsummer 1883, meteorologists across the globe made a most extraordinary discovery. It was August 26 and barometers around the world recorded the same phenomenon. All within a short period of time. Over and over again. What had happened? A wave had traveled the Earth. The Krakatoa volcano near Sumatra had exploded and it was so loud it could be heard 4,800 kilometers away. The sound continued on from there, radiating out as inaudible waves and circling the planet again and again. It was likely the rst simultaneous, worldwide registration of the phenomenon we call infrasound, or sound below the threshold of human hearing. When we speak of sound, we usually think of acoustic sound; perhaps an echo. But that is sound we can hear. As an audio specialist, we want to break this stereotype. In our last trilogy of annual reports, Seeing, Feeling and Tasting Sound, we began introducing you to some unusual perspectives. Now, in the rst part of our new trilogy In the Depths of Sound, marvel as we explore infrasonic frequencies from 0-20 Hz; sounds that are almost imperceptible to the human ear. Next year, we will continue with the Heart of Sound (20-20,000 Hz). To finish our trilogy, we will soar to the Heights of Sound (20,000-200,000 Hz), another range we

arent able to hear. Ultrasound emits the most extreme vibrations and though our ears may not register it as it silently passes by, not so the moth. So, whats in store for us in In the Depths of Sound? To start off, a bit of audible sound and vibrations. Even the German polymath Hermann von Helmholtz knew that all sounding bodies are understood in shivers. He made the observation that strong tones make us feel the whir of the air surrounding us. But, that is not always possible. Some frequencies are so low that we can only record them using state-of-theart technology. For instance, X-ray telescopes and infrared cameras or our headphones and microphones. Many of our high-end models register frequencies in the depth of the infrasonic range. Why, you might ask, when we cant even hear these frequencies at all? We at Sennheiser rmly believe that our customers not only want to hear sounds, they want to feel them as well. Our goal is to achieve perfection in mapping the entire frequency range in the utmost detail. I hope you enjoy being In the Depths of Sound.

Prof. Dr. Jrg Sennheiser

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MANAGEMENT BOARD

Peter Claussen President Integrated Systems

Daniel Sennheiser President, Strategy and Finance

WE ARE SHAPING TODAY THE AUDIO wORLD OF TOMORROw THIS IS THE DEMAND wE PLACE ON OURSELVES EVERY DAY

Peter Callan President Consumer Electronics

Volker Bartels President, Corporate Services, and Speaker of the Executive Management Board Dr. Heinrich Esser President, Professional Systems

Paul Whiting President, Global Sales

Dr. Andreas Sennheiser President, Supply Chain

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0-20 Hz DIVE IN
0.00000000 00000016 Hz
The LOWeST nOTe in The UniveRSe
An astronomer explains how he discovers sound waves a million times below the threshold of human hearing.

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CONTENTS

The viBeS OF The CiTY

Locating a hum moving through the earth. Is mans hearing better than ever thought before?

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In The deeP, The SeA SinGS
Silent waters? Think again! The sea is resonating with strange music. A British researcher attends a whale concert.

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The PSYChOACOUSTiCS OF SOUnd ART

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The heARTBeAT OF MOnSTeR STORMS
Positioned on top of the Zugspitze and ready to save the world. An illustration of the prophets who listen to storms and earthquakes.

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NeW YORK PLAYS BASS
Smooth operator: Studio interview with Stuart Matthewman, producer and songwriter for Sade.

Kristen Roos installations delve into the supernatural. The Canadian conjures up spirits in his machines.

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0-20 Hz
The FABULOUS WORLd OF ULTRASOUnd
We cant hear it, but we can feel it. An essay on the mystery of frequencies below 20 Hz.

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eXeCUTive MAnAGeMenT BOARd

SennheiSeR MOBiLe AUGMenTed ReALiTY EXPeRienCe The AUGMenTed ReALiTY

AUGm ENtED rEAlit Y
of the articles in this annual report. Stories labeled with the augmented reality symbol offer additional multimedia. Heres how: Go to the Android Market or Apple App Store and download the free App Layer onto your smartphone. Start the application on your mobile phone.  Hold the camera of your mobile phone over the motif so that it completely covers the picture.

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AUThORS & ARTiSTS

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MASTheAd & COnTACT

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2011 FinAnCiAL RePORT

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0 20 Hz

ESSAY

MEasURiNG thE

iNaUDiBlE WORlD

We may not be able to hear sound frequencies below 20 Hz, but we can feel them. Sometimes they rob us of sleep, sometimes they drive us into a frenzy and sometimes they save our lives. An essay on infrasound.

o use a metaphor, sound like light can be visible or invisible; it can be audible or sneak by completely unnoticed. Whereas one listener might find a sound loud, another may not. At the other end of the spectrum, an animal can hear sounds that would go completely undetected by the human ear, such as a rogue wave, miles out at sea. Infrasound and ultrasound are just such sounds. Simply put, acoustics is the study of sound. Its scientists, or acousticians, measure how sound waves are generated, transmitted and received. An acoustics engineer then uses this information, for instance, to improve the sound quality of a concert hall. To decrease the noise level in a building, he can lower the level to reduce generation, put barriers in place to hinder transmission, and increase background noise or suggest earplugs to block out reception. Sometimes, an acoustician is simply interested in studying the loss of generation and reception in order to predict the strength of generation. Psychoacoustics studies the psychological and physiological responses associated with sound its emotions and associations to better understand how sound is perceived. For instance, what is it about the sound of a Harley that makes it seem powerful or expensive?

To unravel this mystery, the acoustician may have to factor in inaudible components such as its vibrations and very lowfrequency sounds. It may seem like a paradox after all, acoustics is generally involved in measuring sounds we can actually hear but infrasonic and ultrasonic acoustics measures sounds that have little or no acoustic perception, generally those within the frequency range of 20 Hz to 20 KHz (cycles per second). Frequencies outside this range are either ultrasonic (above 20 KHz) or infrasonic (below 20 Hz) and though generally considered inaudible, this is open to debate. For instance, the frequency range of infrasound can vary according to its intensity and rate, and factors such as age, gender and noise exposure can also play a role. Infrasound is often accompanied by audible sound emitted from the same source. Lets take the boom box car as a case in point. The reason we can hear it coming down the road for miles is that air does not absorb low-frequency sounds as well as it does high-frequency sounds. Thats also why a plane produces white sound (a mixture of sound waves over a wide frequency) when ying directly overhead, and more bass (low frequency) as it moves away. Low-frequency sounds not only travel further through air than high-frequency sounds, they penetrate physical structures. The reason why a plane ying over your house will sound very low and rumbling is because the building has ltered out the middle- and high-frequency sounds. Although virtually inaudible, infrasound and infrasound vibrations can have a dramatic physical impact. As intensity and frequency increases, infrasound and its vibrations can cause symptoms similar to what divers call the rapture of the deep: nausea, dizziness, a loss of equilibrium and disorientation, impaired judgment, speech and vision. Infrasound can also increase blood pressure and heart rate, or give an adrenaline rush. Theres good reason why national and international standards have been put in place to specify permissible levels of whole-body vibration and infrasound. Tossing and turning at night? Could be infrasound. For instance, research is being conducted on the infrasonic effect of wind generation. Though initial findings would

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AUGm ENtED REalit Y

ESSAY

HD 700
The HD 700 uses its amazing frequency range to paint soundscapes on widescreen. Sennheiser HD 700 Reference Audiophile Headphones

AUThOR STeVeN J. ORFIeLd

9.4
argue that the impact is likely low, there is some evidence that wind farms may cause insomnia. We went to the Metrodome in Minneapolis to better understand the effects of subwoofers and their lowfrequency sounds at major concert venues. Pink Floyd and the Steve Miller Band, for instance, have their sound cranked up as high as 130 dBA peak. The tremendous volume makes it hard to hear so the musicians have to rely on feedback to feel the low-frequency sounds so that they can stay together. And its the infrasound and vibration blasting from the subwoofers that makes the crowd feel the music. Animals are tremendously sensitive to sound, and there are some fascinating studies being carried out in order to understand acoustic communication between mammals. Elephants and whales, for instance, can hear over immense distances. Following the Indonesian tsunami in 2004, researchers wanted to find out whether the elephants were able to sense the coming disaster and then communicate it onward as they tried to break free of their chains. Important research on the impact of infrasound that is generated by naval submarines on whales has

found that infrasound can impair whales hearing. In building acoustics, we normally measure frequencies between 100 Hz and 5,000 Hz. My company tests the Sound Transmission Class (STC) of all types of architectural materials from walls, to doors, windows, building faades and special barriers. Even though our own state-ofthe-art, 200-cubic-meter reverberation chamber is accredited to 80 Hz, thats still way above the infrasound range. Clearly, new procedures are needed to measure infrasound in buildings. Scientists and governments have long been looking into whether infrasound can be used to detect weather patterns and predict natural disasters, such as volcanoes and tsunamis. By studying the invisible in this case, the inaudible we might better understand our environment and save lives.

Steven J. Oreld is the founder of Oreld Laboratories (OL) in Minneapolis, USA. OL provides design, research and testing services for the architectural and research communities. OL designed the rst American Sound Quality analysis system, which included evaluation of major professional audio headphones. After conducting thorough tests, OL decided to use Sennheiser headphones for all its studies on sound. Currently, Oreld is using the new Sennheiser HD 700 whose specially tuned, highefciency converters deliver high sound-pressure levels and a vented magnet system that minimizes air turbulence and, with it, distortion. The American is also known for his anechoic chamber, which was awarded The Quietest Place on Earth by the 2005 Guinness Book of World Records. The sound level in this chamber is -9.4 dBA.

Frequency response Transducer principle Total harmonic distortion Weight

8-44,000 Hz (-3 dB) Dynamic, open 0.03 % (1kHz, 1Vrms) 270 g

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0.0000000000000016 Hz

The so-called Perseus

BLACK-hOLE ACOUSTICS

Cluster is around 250 million light-years away from Earth and comprises 1,000 galaxies.

LOWESt SOUND

THE DAY I HEARD tHE SOUND iN tHE UNiVERSE

0.0000 00000000 0016

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British-born Andrew Fabian is one of the foremost astronomers in the world. His specialty? Listening to the murmurs of the universe and observing its black holes. In doing so, he has discovered sound waves a million times below the limits of the human ear.

s an X-ray astronomer, Im interested in studying processes in the universe that release tremendous amounts of energy energy whose electromagnetic radiation is dispersed across the universe to be recorded on Earth after its long cosmic journey. Though it might seem similar to the study of stars, there is a huge difference between stars and the heavenly bodies I observe. The radiation sources I study have temperatures in excess of 1,000 times that of stars. Using the law of physics, we know the radiation they emit also has a frequency of more than 1,000 times that of stars. Whereas the electromagnetic waves emitted from a stars hot surface make it possible for us to admire them against the dark expanse of the universe, the shift in frequencies takes black holes out of the visible spectrum and into the range of invisible X-rays. One possible source of such X-ray radiation is giant gas clouds, which become extremely hot as they are drawn into black holes. Black holes are the remnants of stars that, after having consumed all their combustible fuel, collapse under their own weight, as it were, into an extremely concentrated mass. If the same thing happened to the Earth, we would have to squeeze it into a ball with a diameter of less than two centimeters! Such an extremely concentrated object has an incredibly powerful gravitational pull, sucking in anything that wanders by never to be seen again.

Such is the case with electromagnetic radiation and light. Nothing is emitted from a black hole. As a gas cloud approaches a black hole, its gas particles reach a very high velocity and begin to collide violently against each other, creating temperatures in the tens of millions, which are then emitted as X-ray radiation. These X-rays, however, are absorbed by the upper layers of the atmosphere and so never reach the Earths surface. What that means for astronomers is that we are only able to observe X-ray sources from outer space for instance, with the help of satellite telescopes. The most powerful X-ray telescope right now is Chandra, which was deployed by a NASA space shuttle in 1999. The Chandra is equipped with the most accurate mirrors ever polished, at the time costing some 400 million dollars. By directing X-ray radiation onto a detector, much like the sensors of a video camera, the Chandra has helped us learn some truly amazing things about the universe in recent years. One of them is that black holes emit an extremely low murmur. The most powerful source of X-ray radiation observed so far is a cluster of galaxies in the constellation of Perseus. Some 250 million light years away from Earth, Perseus is made up of thousands of galaxies immersed in a hot gas cloud. At the center of the Perseus Cluster is a black

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0.0000000000000016 Hz
In outer space, a

BLACK-hOLE ACOUSTICS

powerful bass drones: with the help of the space telescope Chandra, it was possible to detect sound waves from a supermassive black hole

1. Chandra is the most powerful X-ray telescope of all time 2. Shock waves in the Perseus Galaxy Cluster

hole that constantly pulls in gas from the cloud. As the gas plunges disk-like into the black hole, two jets of matter shoot out in the opposite direction. The exchange can force a part of the gas cloud outwards, creating two giant bubbles, each roughly the size of our Milky Way. The Chandra gives us a front-row seat on the action. As the hot gas in the cluster begins to emit a very bright X-ray radiation, the bubbles appear as two dark circles. The bubbles grow larger with time. After, say, ten million years, they detach and move away from the black hole. Just like air bubbles in an aquarium: as its aeration system pumps air into the water, it forms bubbles that grow, eventually detach and rise to the surface. Every time one of these giant cosmic bubbles detaches, it acts like a gigantic loudspeaker, sending out a spherically shaped shock wave into the surrounding gas a shock wave that decays further out into sound waves. Sound, after all, is nothing other than a pressure oscillation in a material medium of which air is but one example. Of course we cant hear these sounds on Earth: most of the universe is a void and so does not carry sound. However, we are able to record the shock waves at the Chandra Observatory. Density is higher in areas with higher pressure, resulting in more X-ray radiation. Thats why satellite pictures taken of black holes reveal bright circular structures similar to the concentric ripples that form on a ponds surface when you throw a stone into the pond.

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award. Fabian has been working in close collaboration with NASA and its Chandra mission for many years.
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BLACK HOLES CAN SING. THEY CREAtE tHE LOWESt tONE EVER MEASURED IN tHE UNIVERSE.

And what is the frequency of these sound waves? A bubble that detaches only once every ten million years or so has an extremely low frequency. To give an example, lets use Middle C as a reference point. A Middle C generates 262 shock waves per second. Based on our readings, we can conclude the tone generated by these space bubbles is something like 57 octaves lower than Middle C. More precisely, they produce a B-at with the unimaginably low frequency of 0.0000000000000016 Hz the lowest note ever registered in the universe. Other than setting such outer-worldly records, our observations have high scientic value. For instance, we are now able to explain why gas clouds in the Perseus Cluster remain hot. Over the course of time, after having expended so much X-ray radiation, gas clouds should have cooled down. However, with sound waves continuously replenishing their energy, the cloud temperature remains high. Our findings have other practical implications. For instance, cold gas clouds should give COSMIC EVENTS birth to new stars; however, this is prevented by the heat generated by sound waves. In other words, if it werent for sound waves, there The 64-year-old Brit Andrew C. Fawould be many more stars and bian has witnessed sights most galaxies illuminating the universe, Earth-dwellers might consider inmaking the skies a lot brighter! conceivable. A professor of astronomy and head of the X-Ray AstronSound waves help us resolve these omy Group at the University of types of cosmological questions. Cambridge, he has received numerLiterally speaking, its enough to ous scientic awards, including a make you open your eyes and Gold Medal from the Royal Astronomical Society its highest your ears.

0.1 Hz

EARLY WARNING

LISTENING TO THE
They are the superheroes of meteorology. From atop a high mountain, the German Aerospace Center warns the world of storms.

STORMS HEARTBEAT

0.1

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0.1 Hz

EARLY WARNING

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10Hz

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UNDERWATER HITS

LONESOME SINGERS

OF THE ATLANTIC

In the dark abysses of the sea, whales send out low-frequency sounds that can be heard halfway across the ocean basin. British biologist Oliver Boisseau sails the Atlantic in search of these wondrous sounds and to protect their leviathan vocalists.

10

A LOVE SONG
hertz: thats how deep the booming bellow of the male humpback whale can reach. During mating season, the males use the power of song to woo the females they fancy. That makes the male whales sea leviathans, up to 15 meters in length and severely scarred true virtuosos of the ocean. They compose songs using up to 622 sounds, spanning an impressive range of ten to 8,000 Hz.

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UNDERWATER HITS

WALE

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SOME WHALE sPECIEs HAVE NEVER BEEN sEEN ALIVE BY HUMANs. ONLY THEIR CALLs REACH Us.

enturies ago and late at night, as rum-sodden sailors lay in an exhausted stupor in the ships hold, listening to the planks creaking and the wind whistling through them, the strange sounds coming from the depths of the sea must have been horrifying. For these superstitious sea dogs, there was only one logical explanation behind the melancholy groans that seemed to reverberate as if from some supreme soundboard: it must be a chorus of seamen, sobbing from their watery graves. Riddled with fear, some nights the sounds were almost too much to bear. Worse yet was the knocking. The spirits had more on their minds than singing their hair-raising song of woe. They wanted in. Sporting oval, wire-framed glasses and an ordinary, no-nonsense haircut, English marine biologist Oliver Boisseau, 36, seems well so normal. That is until he begins to revel in telling horror stories of the deep seas. His haunting tales, however, do serve a purpose. Recounting such old sea lore is an excellent illustration of mans ignorance of these, his most favorite of creatures the ancient masters of the sea. It wasnt until the 1930s, when dolphins rst went on show in aquariums, that man began to observe marine mammals; it took another 10 or 20 years before science slowly began to get itself into the act. But it wasnt until a good 40 years ago that man began to analyze the whales poignant sounds. And as understanding grew, so too the realization that the ghostly seamans lament were actually poetic songs used by some species of whales to woo their female mates. The songs broadcast relevant and detailed information as to their size, strength and matrimonial intentions. And the knocking sounds? A special sonar toothed whales use to locate their prey. Though research in this eld is still in its infancy, there is another reason why so little is known about whales. Most of them tend to keep out of sight, preferring

to romp about in the unfathomable expanses of the ocean. Relatively easy to spot are the large baleen whales. As Captain Ahab in Moby-Dick would say, There she blows! The white whale. And indeed, a huge fountain of water shoots into the air as they exhale; a sight Boisseau can see for miles. Its a completely different story for the most mysterious of these large marine mammals: the beaked whale. Though they make up almost 25 percent of the approximately 80 whale species, only four species have been studied in any detail. For some beaked whale species, the only proof of their existence is their skeletal remains. But how many are there? A question still in search of an answer, it will take more listening in on the deep to t the different pieces of the puzzle together. At 18, when Boisseau nished school, he took a year off to do voluntary service. With his brother already working with wild animals in Africa, Boisseau was looking for something completely different to do. And so began his love affair with marine mammals. Over the course of the year, Boisseau worked on whale-watching boats off the Azores and assisted American doctoral candidates with their research. The subject was always dolphins and whales. But it wasnt until fourteen years 1. The 36-year-old marine biollater, in 2008, that Boisseau nally ogist Oliver Boisseau on the deck spotted a live beaked whale. Surely of the research ship Song of a bafing fascination given that the the Whale.2. Screams, piping, object of his obsession remains so whimpers and grunts: humpback whales sing their songs in elusive. verses of diverse sounds. Today, a Ph.D. himself, Boisseau conducts his own months-long expeditions, now considered the most important in the eld of whale research. At the end of March 2012 and sponsored by the environmental-protection-organization International Fund for Animal Welfare, Boisseau set sail to observe the Atlantics blue,

WHALES GET AIR ON THE SURFACE AND PUMP IT FROM LARYNX TO LUNGS OR VICE VERSA.

10Hz

UNDERWATER HITS

Whale there she blows!

Whales are rarely as easy to spot as this one shown here.

1. The crew lowers the 400-meter-long cable into the water. The hydrophone is attached to the end of the cable. 2. The expeditions also serve to protect the endangered nback whales. 3. In summer 2012, Boisseau sailed to Iceland via the Azores and the east coast of the USA.

n and sei whales. This summer, he and his team will be traveling from the Azores, a major intersection for whale trafc, to the American East Coast and the last of the North Atlantic white whales, and then on to Iceland. Laid back and easygoing, his boyish looks seem out of place for a doctor of marine biology. But whether standing on the deck of the Song of the Whale with his binoculars in hand or sitting in front of LCD monitors where green, blue and red curves itter across the screen seemingly at random, his meditative calm and patient determination never falter. In contrast to his usual T-shirt or solid-colored hoodie, Boisseau sports state-of-the-art headgear: black Sennheiser HD 280 Pro headphones. The headphones are as indispensible to his work as are his computers and binoculars. Not only do they offer uncompromising quality, spare parts are available anywhere in the world and they are extremely robust. The environment onboard a ship is absolutely unforgiving. Sea water sloshes around, equipment gets dropped or slammed against the walls, says Boisseau. Completing his equipment is a 400-meter (1,300 ft), thumbs-width cable tted with two microphones, a depth gauge and direction sensor, which is lowered into the water

and pulled behind the research ship. Though these hydrophones or as Boisseau calls them, my window into the underwater world have been around for decades, they are still the best technology around for localizing whale songs. The Song of the Whale is a modern 21-meter (70-foot) boat that is powered by both motor and sails and packed with scientic instruments. Its hull is painted sea blue; its superstructure and sails are brilliant white. Working onboard in a mix of scientic research and animal preservation, Oliver Boisseau and his team of marine biologists listen to the whales and photograph the few less timid specimens, such as the sperm whale. Since sperm whales are uniquely identifiable by their characteristic markings and scarring on head, body and tail n, their course can be tracked and each whale can be positively identied. This helps them prove that whales spotted off the mid-Atlantic islands of the Azores were recently sighted off the coast of Norway. Once their migratory patterns have been established, the scientists put on their animal-advocacy hats. The Song of the Whale is headed for Iceland this summer to promote a ban on whal-

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Augmented realit Y

UNDERWATER HITS

HD 280 PRO
Sturdy companion for loud environments. A favorite of researchers, DJs and sound technicians. Sennheiser HD 280 PRO Dynamic stereo headphones Frequency response 825,000 Hz Pick-up pattern Dynamic, closed Total harmonic 0.1 % distortion Weight 220 g
1. On board, Boisseau listens to the depths with his Sennheiser HD 280 2. The research ship is equipped with the mostmodern technology 3. Blue whales communicate with each other over thousands of kilometers, using infrasound noises

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he has been traveling the world with the IFAW research ship Song of the Whale.

ing. Using the argument, for instance, that the Azores have built a whole tourist industry based on whale-watching, they plan to make a case that there are more humane ways to cash in on whales. For animal rights activists, the often sensationalized, brutal whale hunt is just one of the whales many tribulations. Incredibly sensitive hearing makes them particularly vulnerable to noise. Noise is as irritating to a whale as blinding lights would be to us when we try to read or drive a car, explains Boisseau. The steady increase in shipping, the noise from pipelines and drilling platforms, the infernally loud acoustic cannons used to conduct seismic studies of the ocean oor, not to mention the sonar used by different militaries to scan the oors of 80 percent of the worlds oceans are pure torture to whales. The noise causes them to lose their bearings, and drives them away from traditional feeding and mating grounds. In the worst-case scenario, noise can even kill them. Whales are so susceptible to noise that beached whales A GAME OF PATIENCE are often found to have suffered cereyears long, the marine biologist bral or inner-ear hemorrhaging. Its a and bioacoustician tragic development that some species Oliver Boisseau could have died out before we ever traveled the oceans before he caught sight of one of the extreme- have a chance to get to know them, ly rare beaked whale. Boisseau resays Boisseau. ceived his Ph.D. from the University The team has another special of Otago, New Zealand. Since 2004, project planned for this years expedi-

tion. Using the latest software, they will be able to record frequencies below 20 Hz. Though usually inaudible to the human ear, infrasound can have a negative impact on peoples moods and psyches. Not so for other animals, such as giraffes and elephants, which use these frequencies to their own advantage. Whales use frequencies as low as 10 Hz; though n whales tend to use frequencies around 20 Hz and blue whales, 16 Hz. The sounds carry over truly mind-boggling distances. Boisseau gushes, A sound transmitted off the coast of Africa can theoretically be picked up in the Caribbean. Male humpback whales are the masters of these infrasound concerts. Recent studies show that, during the mating season, the male humpback whale uses up to 622 sounds to compose distinct, multi-strophic songs. And the frequency range 7 to 8,000 Hz is staggering. Life on the the Song can be lonely. Day in day out, nothing but blue water. Nothing to hear, let alone anything to see. Its a seemingly endless waiting game. While the crew switches out at regular intervals, Boisseau remains on board, watching, listening, waiting until nally he hears the groan, cry and knocking that terrorized seamen of yore. The song of the whale.

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BASS SCHOOL

110

SMOOTH OPERATOR
million: thats how many albums Stuart Matthewman has sold with the band Sade alone. Other successes for the producer and multiinstrumentalist include soundtracks to lms such as The Astronaut Farmer and Indecent Proposal. As Cottonbelly, Matthewman plays jazz and reggae. Whatever the genre, the power of deep tones fascinates him as does musics ability to make people laugh.

COMPLETELY CHANGED

BASS IT MY LIFE

When Stuart Matthewman, aka Cottonbelly, makes music, you dont just feel it. In an interview in his New York studio, the Brit talks about how his fascination with low tones converted him from punk to reggae and how he uses psychoacoustics to inspire his listeners.

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15 Hz 0,1 Hz

BASS SCHOOL

RUBRIK

1. Cottonbelly sets up his Sennheiser MD 421 microphone. 2. The sound of Manhattan surrounds him with every step he takes.

tuart Matthewman hit the international music scene in 1984, when Sade Adu, the most successful British artist of all time, made her debut album Diamond Life. Since then, he has worked with Sade and her band as (co-)producer, songwriter, saxophonist and guitarist. Matthewman also performs under the pseudonym Cottonbelly. His latest work, Twin Danger, which he produced, is soon to be released. In addition, Matthewman composes film soundtracks. The Englishman has been living in New York since the mid-80s. We visited him in his small recording studio on the 6th floor of a large office building right in the middle of Manhattan. Matthewman: Welcome to my studio. Were on 29th Street in Manhattan. Sometimes, you can hear the sirens of police cars and ambulances. It adds to the vibe of New York City. Apart from my studio, there are only ofces in this building: management companies and lawyers. I try to keep quiet during the day and ratch it up at night. So far, nobodys complained. But my musics good, right? So why would anyone complain? (Laughs) Schnell: Youre a Brit - why did you move to New York? I grew up in Hull, a small town in northern England. In 1980, I moved to London. I didnt have any money and moved from squat to squat. Back then, I was so broke that I was actually stealing food. Luckily during my rst year in London, I met Sade and the rest of the band. After we got a record deal, we were on the road all the time and were often in New York. I fell in love with the city and stayed on. Everything I need is right here in New York. The transformation from struggling musician to selling millions of records as part of Sades band went pretty quick. It was luck and determination. The most important thing as a musician, or as an artist in general, is to not have a backup plan. You have to know what you want. You cannot have a second job or you will never follow through.

By now, youve worked with Sade for almost 30 years. We take off for ten years here and there to do other stuf f. (laughs). We wouldnt have lasted 30 years together if we didnt have room to do our own thing. What other projects are you currently involved in? I write music for movies. Scoring lms has a very different dynamic from writing songs because youre writing for specific scenes to help the audience understand them. My alter ego, Cottonbelly, dubs music, and produces and remixes for other artists like Janet Jackson and Gregory Isaacs. My latest project is called Twin Danger. A jazz project (dont be scared, its good!) with an amazing singer from New York named Vannessa Bley. Weve got something very cool going on. That will be happening soon. Do you use Sennheiser microphones for your productions? For recording the tom-toms on this drum kit here in the back, I generally use the Sennheiser MD 421. It sounds warm and round. For my Saxophone, I use a Sennheiser clipon microphone both live and in the studio. Also, I have two Neumann KM 184s. They are amazing for drum recordings as overheads on the hi-hat and they are great for recording the acoustic guitar. I use them all the time. Do you record your music in this small studio? I do. Since its so small, I usually use headphones to mix the music. I dont trust the sound of this room, but I trust the sound of the Sennheiser HD 640. Theyre great! You hear a lot of low end and theyre not too bright. You need a very natural sound for mixing and the HD 640s have a very accurate bass and high end. Also, I love to walk through the madness of New York or ride on the subway with headphones on. Does Sade record her vocals in this studio? No, but she also uses Sennheiser equipment. For her vocals in the studio, she uses the Neumann U 87 Ai. When we play

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I LOVE TO WALK THROUGH THE MADNESS OF NEW YORK OR JUST SiT ON THE SUBWAy.

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AuGM ENTED rEALIT Y

BASS SCHOOL

1. The Neumann KM 184s is Matthewmans favorite microphone. 2. Measuring just 15 square meters, Matthewmans studio is a very cozy space.

live, everything is Sennheiser: all the microphones and radio packs everything. Since we dont have any monitors on stage, we use in-ear-headphones from Sennheiser. The bass player also needs to physically feel the low end of his playing. He has a little thing that clips underneath the stage and vibrates the floor so that he actually feels the bass. Is the bass particularly important for Sades music? Our records are very deep. We use a very low bass. Almost no sub-bass, but sounds that can actually be heard and if you have a nice sound system feel. For live performances, we add sub-bass sounds; for instance, for sound effects at the beginning of the show, when you can hear explosions and stuff. We put 16 subwoofers on each side of the stage so that the audience can physically feel the low tones. When Paul [Paul Spencer Denman] plays his bass live, the subwoofers provide a much bigger sound live than what we use for recordings. For us, its essential to have a very separate, clean, low-end bass sound. That reminds me of the low frequencies used in movies. Ultra-low frequencies are used in movies all the time to evoke certain emotions. The big dramatic low bass sounds: Ta ta taaa to arouse fear. Psychoacoustics are able to manipulate the audience. Not just sound, but the music they hear also affects the audience. I have always been interested in how to make an audience laugh or cry. Ever since I was a little kid. You can do that with music. I am fascinated by lm scores that are able to impact how the audience feels about a certain character. In pop, low bass is usually used for positive effects. What drew you to these feel-good low frequencies? When I was 18 or 19, I played in a punk rock band in the north of England. One night, we supported the reggae group Steel Pulse. I managed to get on stage when they were playing and sat behind the drummer. He had two massive subwoofers on either side of him. All we could hear were his drums and the bass, which must have been well under 15 Hz. It was an incredible feeling - one that completely changed my life. The title of Sades album Lovers Rock is also a reference to a 70s reggae genre of the same name. Youre right. Living in London at that time, you heard reggae everywhere. When I was a kid, we went to clubs that played reggae all the time. Often, the rooms were lled just with bass speakers and tweeters. The sound was amazing. It was physically impossible to stand still. The bass was so powerful that you felt sick if you stood still. You just had to dance. The bass took you to another place completely physically and mentally. Is there anyone else in Sade that likes reggae that much? We all like very different kinds of music. Sade really likes hip-hop; Andrew Hale, the keyboardist, likes esoteric dance music. Paul still loves punk and Im into lm music. But, we all love reggae. Reggae is simple; it is stripped down. The music is about getting the soul across instead of musicians who are showing off. You do not listen to a reggae song to be impressed by an amazing guitar solo. What the guitarist does is simple and it sounds RIGHT with the song. That is exactly what were about. Sounding right as a band and not showing off as musicians.

KM 184
On the studio scene, the kidney microphone has long been considered the quality standard. Neumann KM184 small microphone Frequency response 20 20,000 Hz Directional character Kidney Nominal impedance 50 ohms Weight 80 g

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18 Hz

PSYCHOACOUSTICS

THE SOuND FROM

THE UNDERGROuND
able to achieve his vision using tactile contact combined with Sennheiser MKH 8020 microphones. Ross used the ultra-sensitive microphones, which can record frequencies beginning at 10 Hz, to record the machine and electrical rooms hidden in the gallerys basement. The sound rife among archaic-looking gauges and copper coils was rst sculpted and sequenced before being hardwired to the sofas via tactile transducers and speakers. Even though the sofas mufe the noise somewhat, with the help of microphones, the underlying sound is transformed into something more intense than they would have been in situ. The result of the 15-minute-long loops? Think: musical compositions. Theres no doubt that Im turning it into something more pleasing than it actually is, he continues. I think of it as manipulating the drone into a sound that pleases me. For Roos, its the idea of the underground writ large. Reminiscent of the futuristic lm Brazil, these industrial SpIRITUAL SOUND behemoths may look bizarre, haptic adapters, 8 laptop outputs and 2 times 3 subwoofers but in his mind these main 6 empty subway cars. Kristen chines are real beauties. In Roos uses the equipment to his 2007 exhibition Ghost Staconjure up modern-day ghosts. Just as tion, Roos recorded the moan- he does in his project Ghost Station, ing and vibrating of subway the sound artist uses deep bass sounds cars and sequenced them into to keep his audience trembling. We live in a surf of low-frequency waves, says rhythms using subwoofers and

Canadian artist Kristen Roos connects sofas to droning machines and uses subway trains as deep-frequency drums. For him, working with sound is a visual experience.

18

wo black sofas vibrating in the lobby of an art gallery. Though subtle at first, the low-frequency thrum is almost like listening to a lullaby. That is, until an escalating quiver suddenly surprises the people sitting on it. What is that sound? Is it emanating from some machine close by? Is there something wrong with the building? For Kristen Roos, such reactions are music to his ears. The Canadian artist is obsessed with the resonance of these deep sound waves. I love catching people off guard, he admits, and making them think. Take one of his earlier installations, for example: subwoofers rock empty subway trains in a long-abandoned ghost station. Im fascinated by the deep drones, laughs the 36-yearOn the couch with a psycho-acousold as we sit together on tician: Distorting perception and the his latest creation at the sense of uncertainty it evokes are just a Surrey Art Gallery just outfew of the instruments sound magician Kristen Roos likes to play. side Vancouver. They make me feel good. Its very meditative. His curator feels the same. Roos use of infrasound has a decidedly otherworldly effect. The sofas make it tactile, explains Ross Birdwise, but it isnt the same feel as, say, holding an electric toothbrush. You feel the sound. Its ghostly. As if spirits had been released from their graves and have possessed the couch. It all taps into Roos artistic calling: to make the inaudible audible. For his show, Underground, Roos was

the Canadian. Many indigenous peoples believe them to be sounds from the spirit world.

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18 Hz
AuGM ENTED REaLiT y

PSYCHOACOUSTICS

1. In the bowels of the Surrey Art Gallery, the MKH 8020 is used to pick up sound. 2. Roos roams the machine room with microphones in hand in search of infrasound. 3. A ghost stop at the Lower Bay Station in Toronto, Canada.

shaking nuts, bolts and springs on rods hanging from the ceiling to create something akin to an eight-piece drum kit. Bringing sounds that people are usually not even aware of to the surface, he insists, amplies sound and creates a whole new world. Its a world he has longed for all his life. What with cars, hip-hop and the experimental music scene, society is already ooded with lower frequencies. But there is more. Its that depth of sound that attracted the father of one, even as a toddler. I used to press my head up against washing machines and dishwashers, explains the graduate of both Victoria and Concordia Universities. They comforted me. Whatever the reason, over the past 15 years, sound has brought him into collaborations with musicians

and dance troupes and into honing the sounds of the city to produce soundwalks. In the Micro Radio Project he carried out in Quebec City, Roos created a counterpoint between residents voices, and recordings of trains and church bells. Thinking back over his initial irtation with silkscreen, in which he would have to push and pull multiple layers, Roos can see a similarity to using a multitrack to layer sounds. Sound is a visual experience for me, he concludes. Back at the art gallery, were still enjoying the ebb and ow of his installation. Ross plans to take the concept even further in future projects. Repurposing more objects such as a refrigerator that hums rhythmically in tandem with a stove, for instance to explore the tangibility of their seductive and captivating low frequencies. It changes people because all of a sudden they can actually feel something that they have never heard, he says as the sofas leather seats rise as if on cue to punc tuate our conversation.

MKH 8020
The perfect microphone for organ, piano, double bass and possessed machines. Sennheiser MKH 8020 condenser microphone Frequency response 10 60.000 Hz Pick-up pattern omni-directional Nominal impedance 25 Ohm Weight 55 g

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 City as subwoofer: the droning

of trafc, air conditioners and other machines keeps people awake. Especially in the canyons between buildings, such as here in Tokyo, a regular sound wave can occur.

20

20 Hz

NIGHT CONCERT

THE CITY AND ITS

SECRET VIBRATIONS

Its like some mysterious music of the night. Around the world, a deep vibrating bass is robbing people of their sleep. Humming to the beat of air conditioners, cities are the worst offenders. As researchers studying this phenomenon are discovering: our hearing is much more sensitive than we ever realized.

39

20 Hz

NIGHT CONCERT

0.1

t night, when the roaring city traffic comes to a halt and the construction noise dies down. When the worlds metropolitan areas finally turn down the dial on the throbbing street life, most people are sound asleep. Others, however, are being tortured, tossing and turning in bed. Sleepless in the city. Around the world, from San Francisco to Auckland, from Sydney to Calgary, and in congested urban centers like the ve-million-strong Ruhr Valley, theres a deep hum that only 2 to 5% of the population can hear. Like a power drill boring through their heads, an uncomfortable sensation of pressure also builds up in their ears. Some feel a vibration course through their bodies, experience tremendous anxiety and even shortness of breath. Its audience has long known the title of this night music: infrasound. At levels of 20 Hz and below, why are they able to register frequencies so low that, in the eld of acoustics, it would be considered absolutely impossible? Does infrasound really cause such harmful side effects? In the outskirts of a city somewhere between Dortmund and Bochum, a teacher named Anne Friedrich returns to a home she was forced to ee during the night of February 23 last year. She couldnt stand the hum any longer. Prof. Detlef Krah of the University of Wuppertal has attached a microphone to the headboard of her bed and connected it to a sound-level meter. The mic is so sensitive, it can record sounds down to 5 Hz. Every time she hears a low tone that bothers her, she jots it down and then protocols to what extent. Fuelled by his LOW FREQUENCY MICROPHONES scientic curiosity, the profeshertz is the lower sor of communications engithreshold frequency neering is using her bedroom that a high-frequency to conduct research. Is what microphone can meathe teacher hears measurable? sure. Professional Sennheiser microphones of the MKH series work according And if so, when do the sounds to this process, which is today used only appear and at what levels? by Sennheiser. It enables the construction In 2005, the 59-yearof measuring devices for extremely low old teacher with dark curly hair frequencies. Thus, in the 1960s, the low frequency microphone MKH 110 was bought a townhouse in the created. The acoustician Volker Mellert Ruhr Valley. It wasnt until midused this microphone to detect infrasound September 2007 that she was
sources. Its lower threshold frequency was 1 hertz. The sister model, MKH 110-1, can even go as low as 0.1 hertz.

torn from her sleep for the first time. Wummwummwumm, she growls in a low voice. It was like there was a truck parked right in front of the house, and the driver was gunning the engine. Whats more, she could feel vibrations going straight through her. The maddening bass tone is sometimes weaker during the day, but she only completely escapes it when she leaves the house. Odd that none of her neighbors seem to notice. Friedrich had all the building equipment and appliances thoroughly inspected. Nothing. The rst hunch came from a building biologist: infrasound. The teacher points through her front window: There it is. The bane of my life. During the summer of 2007, a new cooling system had been installed in the warehouse across the street and thats exactly when the torturous sounds and physical ailments first appeared. By February 2010, she couldnt deal with the insomnia anymore and fled her home. Today, she only returns to water the plants or let Krah in to take measurements. In Germany, Denmark and Canada, hum hearers are banding together, forming associations, community groups and Internet forums. They are getting environmental authorities and scientists on board, and keeping up with the latest scientic research. Its not just about bringing an end to their suffering. They want people who dont hear the noise to know they arent just some crackpots, imagining sounds that arent there. In the 1990s, the long-suffering residents of Taos, New Mexico were even able to get the U.S. Congress involved in what has become ofcially known as the Taos Hum. But its genesis was just as elusive in Taos as it was in Munich and Bristol: Its like trying to solve a crime, says Krah of his difcult investigation to nd the culprits.

No SoUnD iS More eXtreMe thAn inFrASoUnD. It PASSeS throUgh gLASS UnMUFFLeD.

1. Air conditioners often generate resonances that resemble those of deeply tuned organ pipes 2. Night in Hong Kong: cities in particular are susceptible to infrasound, due to their geometry

Krah has finished studying the measurements he took at Friedrichs house: I registered distinct peaks of 33 dB at vibrations of 20 Hz and 40 Hz. But there were also noise components below 20 Hz. Noises? Frequencies below 20 Hz are generally considered inaudible. Are ofcial reference levels misleading? Krah adds with a sigh: According to DIN 45680, these infrasound values are well below the threshold of perception. Acousticians at a university located in the Danish city of Aarlsborg have come up with the same type of results. They have been conducting measurements in an infrasonic pressure chamber for years, looking to find out how infrasound affects people. Their surprising result, which has been confirmed by many other international studies and experiments, is that people are able to perceive sounds well below the previously dened threshold of 20 Hz. If they are especially sensitive, they even react to frequencies of just a few hertz. Its a bit like the uttering heard when rolling down the window of a moving vehicle. With sounds below 20 Hz, there is no sensation of pitch, but there is a sensation of sound. At least, for some people. Despite all the studies, there are still many open questions and there will have to be more research. Foremost of all: Are there any negative health effects from infrasound? What is the difference between infrasound and the noise caused by high frequencies? Acoustician Volker Mellert of Oldenburg University has been researching infrasound since the 1980s. As he explains: Contrary to high

frequencies, the threshold of perception between barely hearing something and hearing it loudly can be minuscule. Especially at very low frequencies. Thats why frequencies in the infrasonic range can quickly morph into a major annoyance. Mellert discovered how low frequencies can affect the body the hard way. He and his team ran an experiment on themselves. As the 5 Hz emit ting from low-frequency loudspeakers in their anechoic chamber began to generate infrasound, they started to feel an unpleasant sensation of pressure and ran out of the room. They all felt terrible some were even about to pass out. Mellert is convinced that artificial infrasound is more disturbing than the infrasound produced by nature. Machines generate isolated single-frequency sinusoidal low pressure uctuations, which can be very unpleasant. Natural infrasound on the other hand, such as the low-frequency sounds of the ocean or wind (or, as Mellert describes them, broadband) are simply more pleasurable. Infrasonic waves up to 300-meters long can travel almost unimpeded over large spaces. However, unlike highfrequency noise, they are not absorbed by air or insulation. As Prof. Krah describes it, It cuts through glass like a hot knife cuts through butter. In an experimental chamber, Krah demonstrates how infrasonic waves intensify sound pressure. He hooks up his Sennheiser KH 870 subwoofer

40

41

20 Hz

NIGHT CONCERT

1. After dark, for some people, a mysterious night concert begins in the megacities 2. Professor Detlef Krah researches with a Sennheiser KH 870 subwoofer

KH 870
and uses it to emit low frequencies of 20 Hz in the 36 m2 (387 sq. ft.) room; what acousticians call a standing wave quickly forms. All of a sudden, the indicator shoots up to more than 20 dB. Indoors, the pressure level produced by infrasonic waves is much more intense than outdoors. Acoustics expert Rdiger Borgmann, author of a book on infrasound, conrms: With their geometry, cities are especially vulnerable to infrasound because the high reverberant building facades of urban canyons create standing waves. So, too, the bedroom. There are countless sources of articial infrasound in cities: almost every tall ofce building, residential complex, hotel and hospital are equipped with air-conditioning, ventilation systems and pumps. Heap on other factors such as planes, railroads, subways, power stations and all the electrical equipment companies use: As technology increases, so will infrasound, says Borgmann. Infrasound interacts with the solid-state vibrations of cooling equipment and machinery that, at levels below 20 Hz, emit airborne sound. Some researchers believe it even amplies it. The Oldenburg acoustician Mellert once ran a test in which he took repeated measurements of air conditioners in open-space ofces. He found that the long ventilation ducts and shafts used in tall buildings create resonances similar to those of low-register organ pipes, forming a standing wave. Using the Sennheiser high-frequency conThe newest electronics and eight analog channels make for dry bass tones to 18 Hz Neumann KH 870 Active studio subwoofer Free eld frequency response Bass Impedance electrically balanced Weight 18300 Hz, 3 dB 7.1 bass manager with 80 Hz crossover XLR, 8 x 13 kiloohm 47.1 kg

denser microphone MKH 110, we were able to measure sounds waves below 10 Hz, says Mellert. For him, the verdict is still out on whether urban canyons can also produce the same type of standing waves: That needs to be studied further. Back in the Ruhr Valley, Prof. Krah is trying to crack his latest infrasound case. Fitting a tiny Sennheiser MKE-1 onto Friedrichs ear, he hopes to better identify the low-frequency sounds that are causing her so much grief. Krah always comes up with new ideas to catch the culprit. Maybe the key lies in the brain. Thats why he is running a series of EKG tests in his anechoic chamber. He wants to find out whether infrasound alters brain waves. If it does, then he would be able to show how infrasound also impacts people who arent able to hear the hum and nally prove that the vibrating city is not a gment of the imagination. 

42

AUTHORS & ARTISTS

ThouGhts aND EXPEriENCEs oF soME oF our authors aND artists PartiCiPatiNG iN this aNNuaL rEPort

JEKYLL & HYDE Munich photography duo Jekyll & Hyde, who specialize in still life and interactive photography, felt like they had been on a treasure hunt. How could they congruently x-ray the layers of a headphone? Not the usual project, it called for a new approach. In the end, all present were convinced that after a roughly eight-hour x-ray session they would either have super powers or have achieved the maximum recommended lifetime exposure to radiation. Figuratively speaking, however, they couldnt prove either one or the other. Even if they had tried it on themselves, above proof.

JOHANNES KROEMER And VANINA FELDSZTEIN The photographer and lmmaker John Kroemer and Vanina Feldsztein have lived in New York for almost twenty years. Shootings, like the one they did with the Sennheiser musician Stuart Matthewman, are something like the perfect workday. The producer of the music group Sade was cool, nice and accessible and his neighborhood full of surprises: Before the shoot, Kroemer photographed possible locations to take the portraits. On Bleecker Street in NoHo, he snapped a picture of an old man sitting in front of his loft. It wasnt until later that they realized that this man was none other than Robert Frank - the father of modern documentary photography.

CHRISTIAN BUCK Sound waves from the cosmos? Sounds that travel through the void of the universe? Author Christian Buck was immediately on re about this topic after all, in his rst life, the journalist was a physicist and, even as a child, was fascinated by the incomprehensible majesty of the universe. All the more that his interviewee was not only famous, but also had a typical British humor.

LUCY HYSLOP For Lucy Hyslops interview with Kristen Roos, it was a case of artist and writer mutually inspiring each other. After a day spent test driving the rhythmic hum of his new installations in Surrey, British Columbia, our author introduced him to the word thrum, now the working title of his future sound work. For Hyslop following a 20-year career in print from Londons Telegraph Magazine to National Geographic Traveller Roos has inspired her to venture into the world of sound herself as a radio reporter for Monocle 24.

Michael Meier Michael Meier has been publishing comics, illustration books and prints in his own independent publishing house Rotopolpress since 2007. This is also where he produced his rst comic Die Menschenfabrik (The human factory) based on a narrative by Oskar Panizza, for which he was recognized as the best newcomer at the 2009 Frankfurt Book Fair. His second major comic book, The Inferno, has just been published. As a freelance illustrator and cartoonist, Michael Meier has drawn for Ehapa, Le Monde Diplomatique and GQ.

PAUL-PHILIPP HANSKE He wont be able to sleep well said our author Paul Philipp Hanske, who was visiting atmospheric scientists at the environmental research station Schneefernerhaus on the Zugspitze. The altitude of nearly 3,000 meters has the effect that the organism is constantly under strain. It was just the same at night. The lowlander was only able to doze off after three movies and two beers. Down in Munich, Hanske works for the Sddeutsche Zeitung, the Bayerischer Rundfunk, Nido and Arte.

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45

0,1 Hz

MASTHEAD & CONTACT

FINANZBERICHT RUBRIK 2011

FINANcIAl repOrT
mASTHeAD
PubLished bY: Sennheiser electronic GmbH & Co. KG, Wedemark, Germany PubLishers: Burda Creative Group GmbH, Konrad-Zuse-Platz 11, 81829 Munich, Germany, www.burdacreativegroup.com Photos: Cover: Martin Klimas; p. 03 Tom Haller; p. 04-05 Tom Haller (7); p. 08-10 500gls; p. 11 Jekyll & Hyde; p. 12 corbis/ Science Faction, Tony Hallas; p. 14 NASA (2); p. 15 ddp images/AP; p. 16-19 Graphic Novel: Michael Meier; p. 20-21 Avenue Images/Agentur Bilderberg/Reinhard Discherl; p. 22 Olivier Hess; p. 23 gettyimages/Flip Nicklin; p. 24 gettyimages/Hiroya Minakuchi; p. 25 IFAW, Olivier Hess, gettyimages/Tui de Ray; p. 26 Olivier Hess, IFAW, gettyimages/Flip Nicklin; p. 27 Jekyll & Hyde; p. 28-32 Johannes Krmer (6); p. 33 Jekyll & Hyde; p. 34 Angela Fama; p. 36 Angela Fama (2), Sarah Fay; p. 37 Jekyll & Hyde; p. 38-39 gettyimages/Michael Hitochi; p. 41 Look/H + D. Zielske, gettyimages/Imagemore Co.; p. 42 action press/Zuma Press Inc., Albrecht Fuchs; p. 44 Jekyll & Hyde; p. 45 Michael Meier, Benno Snger; p. 50 Tom Haller

2011

SYmbOlS OF eXcelleNce

To date, Sennheiser annual reports have been recognized with 17 Corporate Publishing Awards.

CONTAcT
Sennheiser eLectronic GmbH & Co. KG Am Labor 1, 30900 Wedemark, Germany, www.sennheiser.com Contact for Press reLations and PubLicitY: Global Corporate Public Relations Manager, Edelgard Marquardt, telephone: +49 (0)5130 600-329, e-mail: Edelgard.Marquardt@sennheiser.com

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FINANCIAL REPOrT 2011

FINANCIAL REPOrT 2011

101

musicians from 33 countries uploaded videos on YouTube last year in a bid to join the YouTube Symphony Orchestra. The best of them demonstrated their skills at a concert held in the Sydney Opera House and supported by Sennheiser technology.

CONTENTS
50 52 52 53 63 65 Report of the Supervisory Board Consolidated Management Report 2011 Preliminary Remarks Economic Developments during the 2011 Financial Year Risk Management Outlook for Future Development

26,660,000

46.5
500,000
48

people watched the 2011 Grammy awards on television. Sennheiser endorsees collected the music award in the ve most important categories at the music event. centimeters is the size of the new MKH 8070 shotgun microphone. The microphone made its debut appearance at the American Super Bowl 2011 nals, one of the worlds largest sports events.

66 Consolidated Financial Statements 2011 66 Consolidated Balance Sheet as of December 31, 2011 68 Consolidated Prot and Loss Statement for the Financial Year 2011 70 Notes on Consolidated Financial Statements 2011 74 Statement of Asset Additions and Disposals for the Financial Year 2011 82 Cash Flow Statement for the Financial Year 2011 84 Statement of Shareholders Equity for the Financial Year 2011 86 Independent Auditors Report

1,000 guests can be seated in the theatre of the Mein Schiff 2 cruise

ship renovated in 2011. Sound is carried from the stage to the guests using Sennheiser wireless systems.

MD 421 microphones have been manufactured to date. The classic microphone was launched in 1960 and inducted into the TECnology Hall ofFame in 2011.
49

FINANCIAL REPORT 2011

The management of Sennheiser electronic GmbH & Co. KG have compiled the Consolidated Management Report and the Consolidated Financial Statements for nancial year 2011. These were submitted on time to the Supervisory Board. The Supervisory Board discussed and approved the annual financial statements and the management report. In the nancial year 2011, Sennheiser Beteiligungs GmbH, Wedemark, Germany, was again responsible for the management of Sennheiser electronic GmbH & Co. KG in its capacity as general partner. The registered Presidents of the general partner were Volker Bartels (Corporate Services and Speaker of the Executive Management Board), Dr.Heinrich Esser (Professional Systems), Daniel Sennheiser (Strategy and Finance), Peter Claussen (Integrated Systems as of August 1, 2011) and Dr. Andreas Sennheiser (Supply Chain as of January 1, 2012). In addition to the abovementioned Presidents, further members of the Executive Team were, Peter Callan (Consumer Electronics) and Paul Whiting (Global Sales). The members of the Supervisory Board this year were Dr. Frank Heinricht, Andreas Dornbracht and Johann Soder; Prof. Dr. Jrg Sennheiser again served as Chairman. The Supervisory Board carefully monitored the de velopment of the Sennheiser Group during its regular meetings. Between these meetings, the Supervisory Board was informed by the management about all important decisions, projects and business events, either orally or in writing. 2011 was a year of change at all levels: the transformation of the former organizational structure to a divisional structure developed within the framework of the ACT project. This led to in-depth discussion between the Supervisory Board and the management, focusing on the following topics:  Special attention was paid to optimizing the signicance, consistency and transparency of the nancial gures in the reporting system when adopting the new divisional structure with its redesigned processes. Concentrating on the key aspects and a stringent focus on informative and detailed data quickly resulted in precise demands for the streamlined reporting. One example of this is that prot contributions from individual markets, product categories and major orders are to be made visible and analyzable. The old reporting format will be used for this nancial year to allow us to present clean annual nancial statements; simultaneously, new reporting formats have also been proposed and discussed, with the objective of using these in the following years. The Sennheiser family compiled a family charter over the course of the past two years. This contains key values of the family members as well as the familys clear commitment to the Sennheiser family-owned company and its management. The Supervisory Board very positively acknowledged this important document as it represents a prerequisite for a cooperative spirit between the family and the company clearly showing the mutual responsibilities.

REPOrT OF THE SUPErVIsOrY BOArD

Over the course of the year, the Supervisory Board dealt in depth with the development of our subsidiary in Japan. After preparing three alternative scenarios, a decision was reached together with the management to realign SE Japan with a clear selective, growth-oriented nature. This more clearly denes the opportunities available in Japan for Sennheiser as a premium supplier, allowing them to already be implemented successfully this year. A proposal was made, discussed and resolved to create a risk management function within the Strategy & Finance division aiming to obtain neutral assessment of all markets and future risks. The competencies and reporting lines have been set up, ensuring the independence of this function in the interest of the entire company. This nancial year saw the gradual implementation of the ACT divisionalization project; reports were regularly presented to the Supervisory Board. The project was completed, as planned, at the end of the year thanks to specic and outstanding commitment of all members of the Executive Management Board as well as all other managers involved. This forms a prerequisite to bring the divisional structure to life in the coming nancial year.  Several reports were made on the topic of divisional strategies, which were then discussed in depth; further steps have been taken to bring these strategies to life. The Supervisory Board placed particular emphasis on designing the divisional strategies to comply with the companys overall strategy. The strategies of Consumer Electronics, Integrated Systems and Professional Systems in particular were presented and discussed in detail. The Groups Lighthouse 2016 strategy served as the target and benchmark. The continuous strategy process was initiated in the new structure and will be assessed, developed and carried out at scheduled times. 2011 saw planned turnover and prot far exceeded. The Supervisory Board would like to thank all employees and members of management for this extraordinary success in a year marked by structural change and a difcult global market environment. The Supervisory Board considers our company to be well positioned and prepared to meet the challenges that will face us in coming years. Auditing rm Deloitte & Touche GmbH again audited the Consolidated Management Report and the Consolidated Financial Statements for nancial year 2011. Both have been conrmed unconditionally. The Supervisory Board has ratied the auditors reports, and therefore recommends that the shareholders accept and approve them.

Wedemark, Germany, May 14, 2012

Prof. Dr. Jrg Sennheiser, Chairman of the Supervisory Board of Sennheiser electronic GmbH & Co. KG

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CONSOLIDATED MANAGEMENT REPORT 2011

CONSOLIDATED MANAGEMENT REPORT 2011

CONSOLIDATED MANAGEMENT REPORT 2011

PRELIMINARY REMARKS
As a parent company, Sennheiser electronic GmbH & Co. KG is obliged to draw up consolidated nancial statements. The companys production sites are located in Wennebostel (Germany), Tullamore (Ireland) and Albuquerque (New Mexico, USA). While Wennebostel chiey manufactures wireless and wired microphones and microphone capsules, monitoring systems and headsets, the plant in Albuquerque concentrates on wireless microphones and monitoring systems. The Tullamore facility manufactures headsets and headset transducers. The company has a branch ofce in Singapore that manages the functions of product management, marketing, purchasing and part of product development for the consumer electronics area. Besides the parent company Sennheiser electronic GmbH & Co. KG, the Sennheiser Group includes six subsidiaries within Germany and 18 subsidiaries abroad, as well as the joint venture Sennheiser Communications A/S, based in Copenhagen, Denmark.

a downgrading of US government bonds by a leading ratings agency. The debt crisis once again put pressure on the euro in the second half of the year. Currency values in many countries, especially in Eastern Europe, which again added fuel to the debate regarding a currency war with protectionist government measures, fell in response to the agging global economy and concerns surrounding the public nances of industrialized countries, the economies of which are marked by weaker growth. The global economy will again weaken in 2012, although the extent of the downturn is associated with considerable risks. The slump in consumer demand in most industrialized countries, in combination with scal austerity programs and a lack of condence in the decisions being made by those in power, makes the economic uncertainty expected for 2012 appear extraordinarily high. According to calculations by IHS Global Insight, the global economy is likely to grow by 2.7% in 2012, down from that seen in 2011 (3.0%). Had the Japanese economy not recovered following the tsunami, thereby giving growth a boost, global growth in 2012 would have been even lower. The risk of a worldwide recession has increased slightly but remains moderate. This is based on the assumption that the high level of growth experienced in China does not come to a sudden and abrupt end and that the crisis in the Eurozone does not then bring about the collapse of the European Economic Community. While US economic growth will remain relatively weak, Europe, and the Eurozone in particular, will nd it very difcult to avoid sliding into a mild recession. The debt crisis will continue to plague the nancial markets in 2012, with the risk of Greece exiting the EEC rising considerably. However, the collapse of the entire Eurozone remains unlikely.
[OuTLOOk]

ECONOMIC DEVELOPMENTS DURING THE 2011 FINANCIAL YEAR

Overall Business Developments and Development of the Industry

THe EURoPeAN UNioN

The economic recovery from the nancial market crisis observed in Europe since mid-2009 peaked at the beginning of 2011 but weakened gradually over the course of the year. Gross domestic product in the European Union, and particularly in the Eurozone, in all likelihood declined in the closing quarter. This development in 2011 is due in part to the above-mentioned economic slowdowns in the USA as well as in key emerging markets, especially China and Brazil. Most European countries also changed from a course of expansive scal policies in 2009/10 resulting from various aid programs and the acceptance of recession-triggered tax revenue shortfalls to ones of consolidation in order to get a handle on extensive budget decits. The main cause of all this, however, is the deepening Eurozone debt crisis. Nevertheless, it should be remembered that the European economy was in the grips of a mild recession at the turn of the year. This is due, on the one hand, to increased efforts by most European countries to cut budget decits and introduce structural reforms in a bid to improve competitiveness. On the other hand however, there is a relatively high level of distrust among banks, many of which are being forced to strengthen their equity bases by mid-2012 in response to EU banking supervisory authorities requirements. This will at the very least hamper lending in Europe in 2012.
[DEVELOPMENT]

2011 GLobAL ECoNoMY

[DEVELOPMENT]

Global economic growth slowed considerably in 2011. Recovery has been muted by structural weaknesses, especially in terms of debt and high unemployment prevalent in many industrialized nations, as well as natural disasters and political crises. The Japanese economy has now recovered following the slump in production in the second quarter, while the downfall of regimes in North Africa only slightly impacted the global economy. Overall, the world remains divided into the fast-growing emerging markets and the sluggish economies of the Western industrialized countries. In global terms, price ination peaked in 2011 although signicant ination risks remain in the fast-growing emerging markets. Central banks worldwide are using declining price ination and the dampened economic outlook to loosen the scal reins in the second half of the year. The scal policy pursued by the US Federal Reserve remained expansive, which likely weakened the US dollar, although it did prot from its status as a global and reserve currency despite

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CONSOLIDATED MANAGEMENT REPORT 2011

The disparities regarding economic developments in Europe identied in 2010 worsened in 2011. While countries such as Germany, Austria, Finland, Belgium, Luxembourg and, to some extent, France and the Netherlands, enjoyed robust economic growth, the economies in Southern Europe stagnated or were even already in the grips of recession, as was the case with Greece and Portugal. The main reasons for the widening gap are increasing differences in competitiveness, as revealed by the 2008/09 nancial crisis, as well as varying levels of public nance consolidation needs.
[OuTLOOk]

German industry capacity utilization saw above-average growth until mid-2011 and only fell slightly in recent months. Macroeconomic indicators, such as the purchasing managers index or the Ifo business climate index, fell by less than half that seen in 2008/09. This means that the German economy overall started 2012 relatively robust. The expected slight GDP decline in the winter half of 2011/12 will cause average growth rates to plummet from the 3.0% seen in 2011 to only 0.2% in 2012, but this oversubscribes forecasted growth momentum losses. Assuming that the Eurozone will not see a completely disordered insolvency and/or Greece leaving the euro, the region is likely to once again experience a recovery from the second quarter of 2012. This will be due in part to the expected renewed increase in growth rates in the USA and key emerging markets. Private spending may cool but is not expected to crash. There are also no signs of a sudden deterioration in the labor market or rapidly falling pay deals. On the other hand, the German government has already indicated that it would increasingly subsidize short-time working, an extremely successful instrument introduced following the shock of the Lehman collapse, in the event of an unexpected renewed slump on the labor market. This would mean a stabilization of expected income as well as a boost to consumer spending. Even if investments in 2012 were to weaken for a time, this would be nowhere near as bad as the collapse seen in 2009. The same also applies to exports, meaning that the worst that could happen is that net exports have a moderately dampening inuence on GDP growth.
[OuTLOOk]

The development of the Eurozone government debt crisis is the decisive uncertainty factor for 2012. In spite of some encouraging developments at the end of 2011 a greater willingness to reform following changes in government in Greece, Spain and Italy; and falling government bond yields in the case of Spain and Italy the bankruptcy of the Greek state cannot be completely excluded. On the other hand, there were signs in 2011 of stronger US economic growth as well as at least a stabilization of the business climate and consumer condence in Europe. The declining ination at present, which also allows the ECB to further loosen the scal reins, is also expected to give the European economy a boost. However, IHS Global Insight believes that this will only prevent the recession from deepening.

GeRMANY
[DEVELOPMENT]

Germanys economy posted above-average performance in 2011; however, not even Germany was able to completely avoid the downward spiral resulting from a weakening of global economic momentum and the exacerbation of the European government debt crisis. The rst quarter was very strong (up 1.3% year on year), due in part to a mild winter, although the following two quarters saw signicantly weaker growth averaging at 0.4%. Despite this, the German economy demonstrated remarkable resistance, with the domestic economy and exports also proving to be of note. Although the pace of export growth slowed in the course of the year as against 2010 and at the beginning of 2011, the third quarter still saw 8.0% year-on-year growth. In addition, export growth pretty much kept pace with import growth, meaning that exports ultimately made a positive contribution to GDP. At the same time, investments continued to grow, at least until the third quarter; private spending in 2011 grew by almost as much as in 2006 (approximately 1.5%), outpacing every year since 2001. This relative strength, which is also reected in consumer condence and still remained above the long-term average at the end of 2011, lies in the exceptionally robust labor market. The latest data for December shows falling unemployment gures and rising employment and vacancies. There have to date been no signs of wage growth easing.

THe SitUAtioN oF tHe ELeCtRiCAL ANd ELeCtRoNiCs INdUstRY iN GeRMANY

2011 saw the continuation of the previous years strong recovery following the 2009 collapse. As a result, the ZVEI estimated that the real output of the German electrical and electronics industry rose by a further 13% in 2011, after growth of 13.8% in 2010 and a 20.3% decline in 2009. Turnover, which had slumped by more than 20% in 2009, has not yet returned to pre-crisis levels. There was also a relative shift in focus towards domestic customers, as turnover from business with foreign customers fell from 17% in 2010 to 6.0% in the period from January to November 2011; turnover from business with domestic customers also declined, from 10% to 8.0%. Falling growth rates for incoming orders and turnover show that output growth is likely to weaken further in the coming months. The above-average weakening of sales outside Germany against sales in Germany in 2011 is due to the declining pace of growth in the (Asian) emerging markets as well as the government debt crisis in
[DEVELOPMENT]

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CONSOLIDATED MANAGEMENT REPORT 2011

the Eurozone. The noticeable drop in the value of the euro observed since September 2011 will give exports a boost from 2012 on. Capacity utilization in the electrical and electronics industry, which rose from a low of 70% in mid-2009 to a cyclical high of 86.3% in July 2011, has fallen slightly recently to 85.2% (as of October 2011). This level of capacity utilization is therefore approximately midway between the record value of 88% seen in 2008 and the long-term average of 83%.
[OuTLOOk]

TURNOVER
( Millions)

Change from previous year, in percent 500 400 300 200 100 0 2007 2008 2009 2010 2011 395.3 385.8 2.4% 389.9 +1.1% 531.4 +13.5% 468.2 +20.1%

The sub-index of the Ifo Business Climate Index for the electrical and electronics industry fell in December 2011. After having reached its highest level since German reunication at the beginning of 2011, expectations for the next six months and from midyear also diminished the assessment of current conditions. In December 2011, 10% of companies expected an increase in business activities, 61% believed that business activities would remain unchanged and 29% projected business to decline in the coming six months. Remarkably, the assessments of current conditions at the end of the year were still very positive and not much down from boom year 2007. Added to this was an improvement in December on November. All told for 2012, the most recent decline in incoming orders and overall negative expectations most likely mean that output will see a much reduced increase as against 2011. ZVEI forecasts output growth of 5.0% in 2012 after 14% in 2011. This is entirely realistic given standard lag effects and the strong level of incoming orders seen until mid-2011; however, this can only be the case if the government debt crisis in the Eurozone does not experience a serious escalation in the form of Greece becoming insolvent or the country even exiting the Eurozone. However, in the medium term, the lack of engineers resulting from demographic factors will exacerbate, which will likely have a limited impact on order acceptance and therefore on turnover growth.

tURNoveR bY RegioN
( Millions)

Change from previous year, in percent 500 400 300 200 100 0 2009 2010 Americas 2011 2009 2010 EMEA 99.3 125.6 133.6
Germany 88.7 (16.7%)

Asset, FiNANCiAL ANd OPeRAtiNg PositioN

Turnover and Operating Position of the Sennheiser Group
[DEVELOPMENT]

41.9 +14.8%

The Sennheiser Group closed nancial year 2011 with total turnover of 531.4 million and successful turnover growth of 14% against 2010. Although the increasing strength of the euro against the US dollar over the course of the year pushed turnover growth in the Americas region down to only 6%, this trend was offset to a signicant degree by above-average growth of 15% in EMEA. In particular, the Northern and Eastern European sales regions saw above-average growth of 22% and 52% respectively. Although turnover growth was low overall, the extraordinary developments in the APAC region of 22% also made a signicant contribution to Sennheisers turnover growth. In terms of the distribution of percentile, turnover growth posted by the individual product segments, the Sennheiser Communications business division as well as professional headphones and wireless microphones played a vital role with average growth of more than 20%.

8.0 +6.4% 282.9 246.5

324.8

13.3 +22.3%

44.0 2009

59.7 2010 APAC

73.0

2011

2011

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CONSOLIDATED MANAGEMENT REPORT 2011

CONSOLIDATED MANAGEMENT REPORT 2011

tURNoveR bY PRodUCt gRoUP

in %

Wireless Microphones 26.4%

Sennheiser Communications 9.2% Wired Microphones 7.4% Audiology 6.0% Professional Headsets 4.8% Georg Neumann 3.6% Integrated Systems 3.3% Other 6.4%

While pension obligation rose by a moderate 2.5 million to 64.7 million following the adjustments made in previous year in connection with the Accounting Law Modernization Act (BilMoG), total provisions rose by 3.1 million. The signicantly improved results for the year meant, in particular, rises in equity due to the increase in the balance sheet prot to 68.2 million, as well as increased liabilities to shareholders to 144.0million.
Financial Position

Cash ow from current business activities came to 65.5 million (compared with 23.2 million in the previous year) and covered the Groups investment and nancing activities. Cash and cash equivalents went up by 47.1million to 75.5 million.

Headphones 32.9%

PURCHAsiNg
Restocking times have now stabilized, albeit at a very high level, following the global supply crisis last year. Pressure was put on the procurement market by the disaster in Fukushima, Japan, as well as by the oods in Thailand. Production failures by suppliers were offset to a signicant degree by making increasing use of alternative suppliers, meaning that the Sennheiser Group experienced no noticeable production failures.
[DEVELOPMENT IN 2011]

At 58.6 million, results from ordinary activities are up a signicant 53.3% on the previous year. At 2.6 million, results from ordinary activities in the year under review were impacted by higher as the usual level of amortization of current assets. This effect, as well as the 5.7 million increase in personnel costs, was more than offset by a 12.1 million decline in material costs as well as the 1.1 million fall in other operating expenses, with the result that EBIT in relation to turnover for 2011 amounted to 12%.
[OuTLOOk]

The procurement situation started to stabilize from the end of the third quarter. The planned procurement budget for 2011 was undercut slightly despite the signicant increase in the procurement of electronic components on the over-priced broker market as well as disproportionate price increases for so-called rare earth elements. The percentage of purchases made in the US dollar zone fell slightly year on year to approximately 73%. Procurement costs are expected to continue to rise; electricity, raw materials and wages tend to go up over the long term. Wage costs on the Chinese labor market in particular will double in the coming 4 to 5 years. Political instability and social crises in some key raw materials countries lend additional momentum to this trend and may also result in sporadic supply problems. We will prepare for this eventuality accordingly by making advance plans and by further expanding our range of alternative sources.
[OuTLOOk]

For 2012, we expect that the divisional reorganization of the Sennheiser Group completed last year into the Consumer Electronics, Professional Systems and Integrated Systems business divisions will continue to enhance Sennheisers customer orientation. We expect turnover and results to continue on this course in the medium term despite rising market uncertainty.
Asset Position

The balance sheet total increased from 278.0 million in the previous year to 315.1 million in 2011, primarily on account of a rise in current receivables as well as cash and cash equivalents. The extremely positive development experienced by the company over the course of 2011 helped to reduce the value of inventories from 87.8million in the previous year to 80.2 million.

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CONSOLIDATED MANAGEMENT REPORT 2011

PRodUCtioN CoMPANies
[DEVELOPMENT]

The B2C project in Europe for Sennheiser France S.A.R.L. was completed in September 2011. French customers are now largely supplied directly from the central warehouse in Osnabrck. The share of B2C deliveries for Sennheiser Electronic Asia Pte Ltd. from the central warehouse in Hong Kong was increased further, which then reduced delivery transport and handling costs even more. Turnover-related logistics costs fell by 20% year on year by signicantly cutting consumer product air freight, cheaper freight rates as well as additional cost cutting. This year we aim to optimize processes once the central warehouse structure and the relating distribution structure have been implemented. The key objectives here are improving product availability and delivery reliability as well as increasing supply chain efciency.
[OuTLOOk]

The production site in Wennebostel posted a 21% yearon-year jump in turnover in 2011 as against 2010. This increase was mainly the result of increased turnover from wireless microphones in almost all product lines. 2011 was highlighted by optimization. The locations competitiveness was improved for the long term using instruments such as CIP workshops, value ow analyses and shop oor management. The go-ahead was given for an effective system of performance indicators (KPI) to optimize production controlling, as well as to make utilization and cost deviations transparent. The Irish Sennheiser site in Tullamore saw sales of headphones rise. This, together with a decline in the sales of acoustic transducers, resulted in a slight drop in turnover overall as against 2010. Sennheiser Consumer Electronics GmbHs sites in Tullamore and Singapore together posed a decline in turnover of 23%; this was as a result of a targeted and structured reduction in headphone inventories following a buildup in 2010. The key innovation at the Tullamore site in 2011 was the 24/7 shift pattern introduced for the so-called CAM (Chassis Assembly Machine), used for the fully automated production of high-grade headphone transducer chasses. While the KH 120 speaker was added to the production range at Tullamore, manufacturing continues to focus on headphone transducers and headphones. The site in Albuquerque, New Mexico, USA was marked in 2011 by the switch from direct deliveries to the American Sennheiser Electronic Corporation subsidiaries to supplying logistics company Sennheiser Logistics Services GmbH (SLS) from the warehouse in Chicago. Sennheiser developed its own lean management roadmap in New Mexico, increasing the efciency of material ow by adjusting the site layout. Annual turnover remained stable.

QUALitY MANAgeMeNt
The adjustment to the organizational structure in line with the redened structure in 2010 was successfully completed in 2011. The approach selected for the project to use employees initiative to clarify interfaces and responsibilities was a resounding success. Some of the modications to the organizational structure undertaken during the course of the year support the initiated process and the willingness to strive for continuous improvement. The certication of the quality management system pursuant to ISO 9001 since 1994 was successfully maintained. Our certicate was renewed following an audit carried out in February 2012. Despite already possessing much experience with this management system, the change in certication partner after many years of positive and successful cooperation with the previous provider revealed new aspects and ideas of how to continue to improve our processes and procedures. We will assess the form and function of our process documentation in the course of introducing and disseminating the idea of lean management within our company. The realignment to be implemented will result in leaner documentation, consequently designed to deliver added value for those both involved in and responsible for the processes. It will also avoid unnecessary work.
[OuTLOOk] [DEVELOPMENT]

[OuTLOOk]

The sites in Wennebostel, Tullamore and Albuquerque have been part of the Supply Chain Division organizational structure since 2011. The division will formulate a multi-year strategy in 2012 and increase efciency and output in the medium term using protable and innovative projects. Technical measures to modernize the manufacturing of microphones and high-quality headphones were implemented in 2012. A more precise manufacturing cost analysis will uncover immediate optimization potential using the performance indicators.

LogistiCs
[DEVELOPMENT]

Last year saw the construction of the central warehouse and associated distribution logistics completed. The central warehouse in Chicago was incorporated into SLS at the beginning of the second quarter. Ever since, the US B2B and B2C market has largely been supplied by SLS from Chicago.

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CONSOLIDATED MANAGEMENT REPORT 2011

HUMAN ResoURCes
ENTwICkLuNG [DEVELOPMENT]

ReseARCH ANd deveLoPMeNt (R&D)

The year opened with the launch of the sophisticated CXC 700 travel earphones, the rst Sennheiser travel line model equipped with digital NoiseGard technology. In order to improve everyday listening pleasure, a total of seven new models were added to the HD 200 and 400 series, while the earphones IE 60 and IE 80 from the Professional earphone series, which were presented at the IFA 2011 in Berlin, were aimed at demanding users. The digital RS 220 headphones, which set new sound quality standards for wireless audio transmission, were also presented at the IFA. The lineup of Sennheiser Communications Bluetooth headsets was boosted in 2011 with the addition of the awarding-winning VMX 200 model. Other new products launched for VoIP applications were then joined at the end of the year by X 320, a headset designed together with professional gamers especially for long Xbox gaming sessions. The award-winning DECT wireless series DW Ofce, launched in 2010, was upgraded in 2011 especially for certied version of Microsoft Lync (Soft Phone). This strategic partnership with Microsoft is a Sennheiser Communications milestone and opens up new Unied Communications channels and business areas. The wired Circle CC&O headset range was presented at the end of the year; this was met with a very enthusiastic response from our sales partners.
2,117 +7.1% 2,132 +0.7% 2,117 0.7% 2,183 +3.1%
Germany 54%

The Sennheiser Groups average stafng level rose by 3.1% in 2011 to 2,183 employees. This included 75 trainees (compared with 67 in the previous year). At the end of the year, the number of Sennheiser Group employees came to 2,248 (previous year: 2,140). On average, 54% of all employees were working for companies within Germany and 46% for companies abroad. Personnel costs rose by 4.1% in comparison with the previous year. This increase was in part due to the increased number of employees and in part to higher variable remuneration on account of the companys success. On average, 30 temporary workers were employed in manufacturing over the course of 2011 in light of the continued improvements in the business situation. A works agreement was also drawn up. The agreement almost places temporary workers on an equal footing with Sennheiser employees on the basis of an equal pay scheme.
eMPLoYees

Change from previous year, in percent 2,500 2,000 1,500 1,000 500 0 2007 2008 2009 2010 2011 1,006

1,976

1,177

At the time of the American NAMM music trade fair in January 2011, Sennheiser had already added the MK4 large-diaphragm microphone, a high-quality recording microphone, to its portfolio for professional users. In time for the German equivalent of Prolight + Sound in April 2011, Sennheiser added new versions of the successful evolution-wireless production family in the attractive 1.8 GHz frequency range to its wireless communi cations systems. The two shotgun microphones MKH 8060 and 8070 series were presented for the rst time in March at the broadcast NAB trade fair in Las Vegas; their natural sound mean that these come highly recommended for use at sports events and lm productions as either analog or digital microphones. A Neumann microphone interface is now available in the form of the DMI-2 portable that supports digital microphones and allows the set up to be changed directly at the units themselves. In 2011, Neumann also presented the KH 120, the rst product with a new range of Neumann studio monitors. The KH 120 embodies state-of-the-art acoustic and electronic simulation and measuring technologies, opening up what is a new and very promising market for Sennheiser. Sennheiser presented a new pilot headset for the aviation market with fully adaptive digital noise canceling technology in the form of the S1 Digital at the Oshkosh ight trade fair in summer 2011. Essential functions have been added to the ADN discussion and conference system in the Integrated Systems portfolio since November 2011. The portfolio has now been rounded off. This system allows up to 400 people to participate in conferences, which are then saved electronically.

Abroad 46%

INvestMeNts
Sennheiser electronic GmbH & Co. KG invested 6.5 million in 2011. 0.3 million of investments in tangible assets were for technical equipment and machinery and 3.7 million for furniture and equipment. The subsidiaries primarily invested in the following: 0.9 million for tangible and intangible assets at the Irish production site, 1.7 million at the Singapore site and 0.3 million at the US production site.

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CONSOLIDATED MANAGEMENT REPORT 2011

RISK MANAGEMENT
Sennheiser has a controlling system that monitors and manages all business processes within the Group. It quickly and effectively counteracts deviations. The transparency of structures and processes was increased in 2011 as a result of a Group-wide divisional reorganization. This went hand in hand with the development of strategic and operational planning and reporting tools which will continue to be developed in the future for analyzing and assessing medium- and long-term opportunities and risks. In nancial year 2011, Sennheiser made better use than most of positive worldwide economic developments and continued its growth trend from the previous year. But the future growth of the Sennheiser Group will still depend on the economic changes around the world. In order to disperse risks, the Sennheiser Group will continue to focus on different business areas. Increased investments in brand development, particularly in North America and Asia, will help to reduce the companys dependence on the general economic situation. Liquid resources, inasmuch as they are not required by subsidiaries for daily business, are concentrated in the parent company on the basis of a cash pooling program. Cash and cash equivalents are deposited with several banks and are mainly denominated in euros. As in the past, Sennheiser implemented a conservative investment strategy with the aim of minimizing default risks in 2011. Fluctuations of Sennheisers most important trading currencies once again had a signicant impact on business developments in 2011. The high percentage of turnover generated in US dollars again created currency risks in 2011. These were successfully offset by concluding an increasing number of purchases in the US dollar zone, a strategy that the company has been continuously employing for years. Sennheiser counteracts the general default risk with not only effective customer management, but also an overall broadly diversied customer structure. The globally valid property, liability and transport insurance policy covers the interests of the entire Group, including all afliated companies. A Group-wide insurance policy is also in place to protect against reciprocal risks within the Sennheiser Group and against consequential damages caused by defaulting suppliers. The brand and product piracy risk has become a permanent threat for renowned manufacturers in the wake of globalization. Sennheiser cooperates with lawyers and authorities to effectively curb this risk. The implemented measures include crackdowns, seizing of products by customs, shutting down trade stalls and legal action against parties in breach of industrial property rights. In 2011, Sennheiser again increased its cooperation with competitors, especially in Asia, to increase the effectiveness of these measures.

The re-allocation of the majority of UHF frequencies for new digital applications (DVB-H, wireless broadband Internet, etc.) and the resulting threat to the frequency resources that have traditionally been used by professional wireless microphone and monitoring systems has already started. The implementation process is still in its infancy and will take many years in Germany and across all of Europe. The attempt of large companies to establish cognitive devices for the transfer of data that use the UHF band poses a further risk to the uninterrupted use of this frequency range for wireless production tools. For some years now, Sennheiser has been preparing for the restriction of the UHF spectrum to provide its customers with disruption-free productions and therefore safe investments in the future. These measures include the development of cognitive technologies and the lobbying of the negative impact of these developments to decision-makers in politics and administration.

OUTLOOK fOR FUTURE DEVELOPMENT

The restructuring of Sennheiser Group into seven divisions was completed in nancial year 2011. Internal processes and systems have also been following this new way of thinking since January 1, 2012. This changeover saw the renaming of the Installed Sound division to Integrated Systems, the move following efforts to reect the new status quo. The Executive Management Board has been complete since mid-2011 when Peter Claussen was appointed President, Integrated Systems Division. The new organization will increase the focus on customer benets and specic requirement, thereby forming the basis for future growth, a stable operating position as well as for exibility in more volatile markets. The company expects to further increase its turnover in the coming nancial years. The new organizational structure in particular will generate additional protability.

Wennebostel, Germany, March 31, 2012

The Executive Management Board

Volker Bartels
President, Corporate Services, and Speaker of the Executive Management Board

Dr. Heinrich Esser

President, Professional Systems

Daniel Sennheiser
President, Strategy and Finance

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CONSOLIDATED FINANcIAL STATEMENTS 2011

CONSOLIDATED FINANcIAL STATEMENTS 2011

CONSOLIDATED FINANcIAL STATEMENTS 2011

CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 2011

ASSETS
2011 () A. Fixed assets I. Intangible Assets 1.  Concessions, industrial property rights and similar rights 2. Goodwill 3. Down payments II. Tangible Assets 1. R  eal estate, equivalent titles and buildings, including buildings on non-owned land 2. Technical equipment and machinery 3. Other plant, furniture and equipment 4. Down payments and plants under construction III. Financial Assets 1. Shares in associated companies 2. Shareholdings 3. Loans 4. Indemnity claims 13,250.00 3,350.00 8,801.74 1,427,416.85 1,452,818.59 45,746,700.56 B. Current assets I. Stocks 1. Raw materials and supplies 2. Work in process 3. Finished products and merchandise 4. Down payments II. Trade and Other Receivables 1. Trade receivables 2. Other receivables III. Trade Investments Other securities IV. Cash and Cash Equivalents C.Accruals and Deferrals D.Deferred Taxes 291.73 70,997,234.11 255,280,074.63 3,045,044.43 11,068,816.55 315,140,636.17 0 33,717 212,268 2,901 14,566 278,005 E.Accruals and Deferrals 19,252.25 315,140,636.17 91 278,005 93,333,225.36 10,707,702.00 104,040,927.36 86,864 3,879 90,743 18,141,160.84 13,351,597.24 48,666,082.55 82,780.80 80,241,621.43 17,751 13,127 56,930 0 87,808 D.Liabilities 1. Liabilities to credit institutions 2. Advance payments received for orders 3. Trade payables 4. Liabilities to shareholders 5. Liabilities to associated companies 6. Other liabilities 353,374.08 347,908.23 27,604,198.27 101,589,931.33 3,223.12 14,055,426.32 143,954,061.35 197 369 26,882 82,322 3 19,337 129,110 13 3 9 1,528 1,553 48,270 C. Provisions 1. Pension provisions 2. Tax provisions 3. Other provisions 64,689,596.00 3,885,527.51 34,177,716.84 102,752,840.35 62,214 3,398 34,101 99,713 B.Special Items 172,254.00 178 4,806,468.62 14,898,011.44 18,211,208.84 1,872,881.31 39,788,570.21 4,959 III. Expenses from Currency Translation 16,983 17,505 2,258 41,705 V. Balancing Item for Shares of Other Shareholders 481,689.14 68,242,228.22 482 48,913 IV. Balance Sheet Profit 70,991,360.03 53,425 8,454,752.32 10,218 3,008,118.56 1,202,463.17 294,730.03 4,505,311.76 3,201 1,811 0 5,012 II. Retained Earnings 23,931.37 24 PREVIOUS YEAR ( IN THOUSANDS) A.Equity I. Fixed Capital 1. General partners share 2. Limited partners share 0.00 5,200,000.00 5,200,000.00 0 5,200 5,200

LIABILITIES
2011 () PREVIOUS YEAR ( IN THOUSANDS)

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CONSOLIDATED FINANcIAL STATEMENTS 2011

CONSOLIDATED FINANcIAL STATEMENTS 2011

CONSOLIDATED PrOfIT AND LOSS STATEMENT fOr ThE FINANcIAL YEAr 2011
2011 () 1.Sales 2. Reduction ()/increase of the inventory of finished and semi-finished products 3.Other own work capitalized 4.Other operating income 5. Raw materials and consumables a) Expenditure on raw materials and supplies and on bought-in goods b) Expenditure on bought-in services 6. Personnel costs a) W  ages and salaries b) Social charges and expenditure on pensions and assistance 7.Amortization and depreciation on a) i ntangible assets and tangible assets b) current assets exceeding the usual depreciation 8.Other operating expenses 9.Income from trade investments 10.Other interest and similar income 11.Interest and related expenses 12. Result of ordinary activities 13.Extraordinary expenditures/extraordinary result 14.Taxes on income and profits 15.Other taxes 16.Net profit for the year (of which attributable to minority shareholders) 13,834,188.96 2,585,265.19 16,419,454.15 143,889,634.75 63,553,791.81 24.00 358,597.33 5,267,940.11 4,909,318.78 58,644,473.03 0.00 12,483,747.95 478,695.25 45,682,029.83 3,006,873.61 14,248 0 14,248 144,978 43,009 0 105 4,856 4,751 38,258 8,599 5,657 403 23,599 3,259 120,644,062.09 24,025,585.97 144,669,648.06 117,797 21,211 139,008 180,075,623.13 4,515,761.38 184,591,384.51 193,253 3,454 196,707 531,441,113.47 8,039,812.68 1,331,588.86 524,732,889.65 28,391,023.63 553,123,913.28 PREVIOUS YEAR ( IN THOUSANDS) 468,234 26,087 2,660 496,981 40,969 537,950

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NOTES ON CONSOLIDATED FINANcIAL STATEMENTS 2011

NOTES ON CONSOLIDATED FINANcIAL STATEMENTS 2011

NOTES ON CONSOLIDATED FINANcIAL STATEMENTS

Full Consolidation Sennheiser electronic GmbH & Co. KG, Wennebostel, Germany Georg Neumann Gesellschaft mit beschrnkter Haftung, Berlin, Germany K+H Vertriebs- und Entwicklungsgesellschaft mbH, Wedemark, Germany Sennheiser Consumer Electronics GmbH, Wedemark, Germany Sennheiser New Mexico LLC, Albuquerque, USA Sennheiser Manufacturing USA Corp., Albuquerque, USA Sennheiser Bondholding Company LLC, Albuquerque, USA Sennheiser Global Operations GmbH, Wedemark, Germany Sennheiser Audio OOO, Moscow, Russia Sennheiser Belux B.V.B.A., Zellik, Belgium Sennheiser (Canada) Inc., Point Claire, Canada Sennheiser Electronic Asia Pte Ltd., Singapore Sennheiser Electronic Corporation, Old Lyme, USA

SIZE OF HOLDING (IN%)

CURRENCY

ShArES Of EQUITY (IN THOUSANDS) 5,200 800 1 25 1 12,191 1 5,000

2 2

NOTES ON CONSOLIDATED FINANcIAL STATEMENTS AS Of DEcEMbEr 31, 2011

100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 53.0 50.0

EUR EUR EUR EUR USD USD USD EUR RUB EUR CAD USD USD CNY INR EUR HKD JPY MXN EUR DKK GBP CHF EUR EUR DKK

A. GeNeRal
The Consolidated Financial Statements 2011 were prepared in accordance with the German Commercial Code (HGB). The company is required by Section 264a of the German Commercial Code (HGB) in conjunction with Section 290 HGB to prepare consolidated nancial statements and a consolidated management report.

3,500 3,340 150 230 338 2 6,856 70,000 305 10 90,000 215 182 1,000 210 100 25 1 1,000 2,000

B. RePORtiNg ENtitY
Included in the consolidated nancial statements are the parent company Sennheiser electronic GmbH & Co. KG, Wennebostel, the six Sennheiser Group subsidiaries in Germany and 18 in other countries, as well as the joint venture Sennheiser Communications A/S based in Copenhagen, Denmark. All subsidiaries are majority owned with the exception of Sennheiser Communications A/S, where the holding is 50%. The following table provides an overview of all consolidated subsidiary companies:

Sennheiser Electronics (Beijing) Co. Ltd., Beijing, China Sennheiser Electronics India Private Limited, Haryana, India Sennheiser France S.A.R.L., Ivry sur Seine, France Sennheiser Hong Kong Ltd., Hong Kong, China Sennheiser Japan K.K., Tokyo, Japan Sennheiser Mexico S.A. de C.V., Mexico City, Mexico Sennheiser Nederland B.V., Almere, Netherlands Sennheiser Nordic A/S, Copenhagen, Denmark Sennheiser UK Ltd., High Wycombe, Great Britain Sennheiser Innovation (Schweiz) AG, Zurich, Switzerland Sennheiser Logistics Services GmbH, Wedemark, Germany Sennheiser Vertrieb und Service GmbH & Co. KG, Hanover, Germany Partial Consolidation Sennheiser Communications A/S, Copenhagen, Denmark

1 Prot and loss transfer agreement with Sennheiser electronic GmbH & Co. KG, Wennebostel, Germany 2 Contained in the annual accounts of Sennheiser New Mexico LLC, Albuquerque, USA

The equity gures shown here represent the shareholder equity as presented in the balance sheet as of December 31, 2011. In accordance with Section 296, subsection 2, HGB, the subsidiary SVS Beteiligungs GmbH, Hanover, Germany, with a holding of 53%, is recognized at acquisition cost rather than being fully consolidated, because it is of minor signicance.

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NOTES ON CONSOLIDATED FINANcIAL STATEMENTS 2011

NOTES ON CONSOLIDATED FINANcIAL STATEMENTS 2011

C. PRiNciPles OF CONsOliDatiON
The accounting and valuation principles used throughout the Group correspond to those applied in the annual nancial statements of the parent company and to the consolidating accounting standards laid down under commercial law (Section 308, subsections 1 and 2 HGB). For the individual annual nancial statements included in this report, the common balance sheet date is December 31, 2011. The individual annual nancial statements denominated in foreign currencies were translated in accordance with Section 308a HGB. With the exception of equity, items were converted at the mean exchange rate. Equity, with the exception of the results for the year, is calculated using historic exchange rates. Conversion of the prot and loss items is on the basis of weighted average exchange rates. The currency conversion differences resulting from the conversion of equity capital at historic exchange rates and the conversion of the Prot and Loss Statement at average exchange rates are shown in the equity capital as not affecting the operating results. Foreign exchange losses or gains contained in the individual nancial statements included in the consolidation are recognized as affecting the net income reported for the year. The following rates of exchange were employed for the currency conversion of the individual nancial statements of foreign subsidiaries:
CODE Average as of Dec. 31, 2011 Foreign currency/ 01. US dollar 02. Canadian dollar 03. Pound sterling 04. Mexican peso 05. Hong Kong dollar 06. Danish krone 07. Russian ruble 08. Indian rupee 09. Japanese yen 10. Chinese yuan 11. Swiss franc USD CAD GBP MXN HKD DKK RUB INR JPY CNY CHF 0.71985 0.72597 1.15281 0.05769 0.09247 0.13424 0.02437 0.01531 0.00906 0.11198 0.81191 RATE OF EXCHANGE End of year on Dec. 31, 2011 Foreign currency/ 0.77286 0.75672 1.19717 0.05540 0.09949 0.13451 0.02394 0.01455 0.00998 0.12257 0.82264

Capital consolidation for company acquisitions on or before December 31, 2009, was based on the book value method. If this capital consolidation leads to a positive gain, it is depreciated on a linear basis over a useful life of four years. The negative difference from capital consolidation was assigned to balance sheet prot. Offsetting was undertaken on the basis of assigned values at the time of share purchase. Receivables and payables involving the consolidated companies themselves are the subject of set-off. Internal sales and other internal income within the Group are offset against the corresponding expenses. Interim prots from nished goods and raw materials are charged against net income. Interim prots relating to xed assets are charged against net income.

D. NOtes ON tHe CONsOliDateD BalaNce SHeet

Intangible assets are valued at acquisition cost and are subject to scheduled linear depreciation over a useful life between three and six years. Goodwill is generally amortized over a period of four years using the straight-line method. The valuation of tangible assets is based on acquisition and/or production costs, subject to scheduled depreciation over a useful life of two to 14 years for furniture and equipment as well as technical equipment and machinery, and 50 years for buildings. Movable xed assets are always depreciated on a linear or declining balance basis; depending on the useful life of the assets in question, a switch will be made to the linear method when most appropriate. For the companies in Germany, in keeping with tax regulation changes that took effect on January 1, 2008, collective items were established for minor assets as dened by Section 6, subsection 2a, of the German Income Tax Act (EStG). These collective items are written off at a rate of 20% per year in the year of acquisition and in the subsequent four nancial years. In companies outside Germany, minor assets are written off in full in the year of acquisition and are shown as disposals in the same year. Interests in subsidiaries not fully consolidated and in associated companies are shown on the assets side of the balance sheet at acquisition cost. Other loans are shown at acquisition cost. Indemnity claims from life insurance concluded for the coverage of pension obligations are recognized at the tax asset value, which equates to the acquisition cost and the fair value. Indemnity claims protected from the claims of all other creditors were offset against the corresponding pension obligations.

The average exchange rates were determined using weighted monthly average rates on the basis of the Sennheiser Groups turnover development. Here, the monthly average exchange rates represent a monthly average based on the daily rates. This method was adopted in order to approximate the transaction-related exchange rates within the Group as closely as possible.

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NOTES ON CONSOLIDATED FINANcIAL STATEMENTS 2011

Fixed assets are shown in the table on the next two pages.

STATEMENT Of ASSET ADDITIONS AND DISpOSALS fOr ThE FINANcIAL YEAr 2011
() Jan. 1, 2011 I. Intangible Assets 1. C  oncessions, industrial property rights and similar rights 2. Goodwill 3. Down payments II. Tangible Assets 1. R  eal estate, equivalent titles and buildings, including buildings on non-owned land 2. Technical equipment and machinery 3. Other plant, furniture and equipment 4. Down payments and plants under construction III. Financial Assets 1. Shares in associated companies 2. Shareholdings 3. Loans 4. Indemnity claims 13,250.00 3,350.00 8,972.17 1,527,451.19 1,553,023.36 164,383,844.66 0.00 0.00 21.21 0.00 21.21 1,041,540.17 0.00 0.00 8,201.73 0.00 8,201.73 12,299,468.49 0.00 0.00 8,393.38 100,034.34 108,427.72 8,588,863.17 0.00 0.00 0.00 0.00 0.00 0.00 13,250.00 3,350.00 8,801.73 1,427,416.85 1,452,818.58 169,135,990.15 0.00 0.00 0.00 0.00 0.00 116,113,856.38 0.00 0.00 0.00 0.00 0.00 1,025,845.49 0.00 0.00 0.00 0.00 0.00 13,834,188.96 0.00 0.00 0.00 0.00 0.00 7,584,601.23 0.00 0.00 0.00 0.00 0.00 123,389,289.60 13,250.00 3,350.00 8,801.73 1,427,416.85 1,452,818.58 45,746,700.55 13 3 9 1,528 1,553 48,270 6,511,946.33 53,299,733.53 72,245,332.96 2,258,215.65 134,315,228.47 65,459.88 387,517.34 465,340.65 543.55 918,861.42 45,996.75 1,243,126.51 7,862,382.84 1,464,824.58 10,616,330.68 0.00 95,872.69 5,183,374.09 432,570.98 5,711,817.76 0.00 254,198.18 1,163,933.31 1,418,131.49 0.00 6,623,402.96 55,088,702.87 76,553,615.67 1,872,881.31 140,138,602.81 1,553,283.62 36,316,224.28 54,740,736.37 0.00 92,610,244.27 38,402.10 337,128.45 533,681.55 0.00 909,212.10 225,248.62 3,630,576.00 7,839,597.93 0.00 11,695,422.55 0.00 93,237.30 4,771,609.02 0.00 4,864,846.32 1,816,934.34 40,190,691.43 58,342,406.83 0.00 100,350,032.60 4,806,468.62 14,898,011.44 18,211,208.84 1,872,881.31 39,788,570.21 4,959 16,983 17,505 2,258 41,705 23,825,199.09 4,690,393.74 0.00 28,515,592.83 121,285.30 1,372.24 0.00 122,657.54 1,380,206.05 0.00 294,730.03 1,674,936.08 2,149,804.33 618,813.36 0.00 2,768,617.69 0.00 0.00 0.00 0.00 23,176,886.11 4,072,952.62 294,730.03 27,544,568.76 20,624,104.71 2,879,507.40 0.00 23,503,612.11 115,679.31 954.08 0.00 116,633.39 1,529,925.08 608,841.33 0.00 2,138,766.41 2,100,941.55 618,813.36 0.00 2,719,754.91 20,168,767.55 2,870,489.45 0.00 23,039,257.00 3,008,118.56 1,202,463.17 294,730.03 4,505,311.76 3,201 1,811 0 5,012 Currency differences ACQUISITION AND PRODUCTION COSTS Additions Disposals Transfers Dec. 31, 2011 Jan. 1, 2011 Currency differences Additions ACCUMULATED DEPRECIATION Disposals Dec. 31, 2011 Dec. 31, 2011 NET BOOK VALUES Previous year ( in thousands)

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NOTES ON CONSOLIDATED FINANcIAL STATEMENTS 2011

Inventories are separately valued at acquisition cost, subject to allocated surcharges and discounts for incidental acquisition costs and acquisition cost reductions, or at production cost in accordance with Section 255, subsection2 HGB. Production costs include individual costs as well as pro-rata allocated material overheads, production overheads and depreciation insofar as it is related to production. The lower of cost or market principle is applied. Marketability discounts, taking product releases into account, were applied as required and retrograde valuation was followed. Trade and other receivables are shown at nominal value. Any necessary itemized and general provisions are set aside for bad and doubtful debts. Receivables denominated in foreign currencies were converted at the mean exchange rate on the balance sheet date. Of the trade receivables, an amount of 750,000 (62,000 in the previous year) have a remaining term to maturity of more than one year. Of the other receivables, an amount of 803,000 (233,000 in the previous year) have a remaining term to maturity of more than one year. Other trade investments are valued at acquisition cost. Cash and cash equivalents are valued at nominal value. Accruals and deferrals on the assets side of the balance sheet are stated in the amount of expenditure for the period following the balance sheet date. Deferred taxes result from temporary differences between balance sheet items under commercial law and for tax purposes, as well as consolidation entries. In case of temporary differences arising from consolidation entries, an average tax rate of 25% (previous year: 25%) was applied. In determining deferred taxes arising from temporary differences between balance sheet items under commercial law and for tax purposes, local tax rates between approximately 8% and 43% were applied. Deferred taxes continue to be accrued on losses carried forward. On the balance sheet date, the deferred taxes on losses carried forward were 1.975 million (previous year: 2.980 million). The remaining deferred tax assets of 10.016 million result from differences in xed assets and inventories, receivables, liabilities and provisions. Deferred tax liabilities of 797,000 mainly relate to differences in xed assets. In accordance with the accounting policy choice under Section 274, subsection 1, sentence3 HGB, only the net amount of deferred taxes is reported. Offsetting results in net deferred tax assets of 11.069 million. The xed capital is shown at the nominal amount of the parent companys general and limited liability capital. The balance sheet prot includes a prot brought forward of 53.425 million. The consolidation operations affecting net income are shown in the prot brought forward as at the end of the previous year. The difference shown on the liabilities side of the balance sheet arising from the capital consolidation has arisen through prot retentions by subsidiaries prior to initial consolidation and therefore has the nature of prot brought forward. The net prot of the parent company and the proportion of the consolidated net prot owing to minority shareholders are credited to the company clearing accounts and are thus not included in the balance sheet prot.

Special items contain the investment subsidies and advance payments granted to Sennheiser Consumer Electronics GmbH, Branch Ireland, Tullamore, Ireland, by the Industrial Development Agency for establishing the Irish production facility. The amortization of this special item for investment allowances on xed assets corresponds to the scheduled depreciation on the subsidized xed assets. Under the terms of the contract, liability for part repayment of the allowances received may arise in certain circumstances. In accordance with the Accounting Law Modernization Act (BilMoG), pension provisions were generally valued according to the projected unit credit method (PUC method) at an interest rate of 5.14% (5.16% in the previous year), a pay trend of 2.5% and a pension trend of 1.5% annually. The interest rate is based on the average market interest rate for the last seven years determined by the Deutsche Bundesbank, which is derived under the assumption of a remaining term of 15 years. The actuarial tables 2005 G by Klaus Heubeck were applied. In accordance with Section 246, subsection 2, sentence 2 HGB, the tax asset values (55,000), equating to the acquisition cost and the fair value, from reinsurance that are protected from the claims of all other creditors and serve exclusively to meet pension obligations or similar long-term commitments were offset against said obligations (55,000). Pension provisions include provisions for obligations to previous members of the Executive Team of 3.127 million (previous year: 2.930 million). In the nancial result, income of 2,000 from fund assets (2,000 in the previous year) was offset against interest expense of 2,000 resulting from imputed interest on pension obligations (2,000 in the previous year). The allocation of tax provisions and other provisions is at the discharge amount in accordance with sound business judgment and takes into account all recognizable risks from pending contracts and uncertain liabilities. Interest on other provisions with a term of more than one year is calculated at rates of interest as published by Deutsche Bundesbank. Ination is set at 1.69%. The interest rate for 2011 applied to discounting provisions amounts to between 3.94 and 4.86% depending on the remaining term. Provisions with remaining terms of less than one year are not discounted. Liabilities are valued at their repayment and/or discharge amount. They are as follows:

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NOTES ON CONSOLIDATED FINANcIAL STATEMENTS 2011

( IN THOUSANDS) Total Dec. 31, 2011 Liabilities to credit institutions Advance payments received for orders Liabilities to shareholders Trade payables Liabilities to associated companies Other liabilities 353 348 101,590 27,604 3 14,056 143,954 Previous year 197 369 82,322 26,882 3 19,337 129,110 Dec. 31, 2011 353 348 101,590 27,604 3 13,678 143,576 Up to one year Previous year 197 369 82,322 26,882 3 19,153 128,926

REMAINING TERM More than five years Dec. 31, 2011 0 0 0 0 0 0 0 Previous year 0 0 0 0 0 0 0

The EMEA region stands for the economic area that includes Europe, the Middle East and Africa. Of the European sales, 88.696 million (previous year: 79.596 million) were earned in Germany. Other operating income includes 6,000 (7,000 in the previous year) from the dissolution of the special items for investment allowances on xed assets. Other operating income also includes income unrelated to the accounting period amounting to 2.625 million (875,000 in the previous year), which mainly resulted from the release of provisions and reserves for bad debts. Currency translation gains amounted to 22.235 million (36.898 million in the previous year). Personnel costs include pension expenses in the amount of 4.036 million (previous year: 2.644 million). On the annual average, the company had a staff of 2,183 employees (previous year: 2,117), of whom 75 (previous year: 67) were trainees.

Other liabilities include tax liabilities in the amount of 4.702 million (previous year: 4.901 million) and social security liabilities of 1.465 million (previous year: 1.103 million). No warranties or other safeguards exist.

E. NOtes ON tHe CONsOliDateD PROFit aND LOss StateMeNt

Within Germany

( MILLIONS) Abroad

2011 1,177 1,006 2,183

PREVIOUS YEAR 1,153 964 2,117

Sales are structured as follows:

( MILLIONS) Headphones Wireless Microphones Sennheiser Communications Wired Microphones Audiology Professional Headsets Georg Neumann Integrated Systems Other Products Sales 2011 174.6 140.2 49.0 39.4 31.9 25.8 19.1 17.5 33.9 531.4 PREVIOUS YEAR 163.4 119.6 37.7 34.8 30.9 20.9 16.7 15.6 28.6 468.2

These gures include the full number of employees in the partially consolidated Sennheiser Communications A/S (89, compared with 83 in the previous year). Amortization of current assets to the extent that this exceeds that normal for the company relate to inventory provisions. Other operating expenses include expenses not related to the accounting period in the amount of 1.709 million (previous year: 1.086 million), which are mainly the result of reserves for bad debts. Other operating expenses also include the auditors fee for the audit of the consolidated nancial statements for nancial year 2011 in the amount of 398,000, consisting of 269,000 for the audit, 1,000 for other audit services, 56,000 in tax consultancy fees and 72,000 for other services. Currency translation losses amounted to 22.066 million (35.325 million in the previous year). Interest income includes proceeds from discounting provisions in the amount of 50,000 (35,000 in the previous year). Interest expense includes expenditures for imputed interest on provisions in the amount of 3.313 million (3.195 million in the previous year). Income taxes include expenses from deferred taxes in the amount of 3.476 million.

Sales broken down into geographical markets are as follows:

( MILLIONS) Americas APAC EMEA Sales 2011 133.6 73.0 324.8 531.4 PREVIOUS YEAR 125.6 59.7 282.9 468.2

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NOTES ON CONSOLIDATED FINANcIAL STATEMENTS 2011

F. FiNaNcial ObligatiONs
Other financial obligations

Regarding disclosure, the following subsidiaries in the legal form of a limited company or partnership within the meaning of Section 264a HGB have made use of the exemption rule in accordance with Section 264, sub section3, and Section 264b HGB: Georg Neumann Gesellschaft mit beschrnkter Haftung, Berlin, Germany, K + H Vertriebs- und Entwicklungsgesellschaft mbH, Wedemark, Germany, Sennheiser Consumer Electronics GmbH, Wedemark, Germany, Sennheiser Logistics Services GmbH, Wedemark, Germany, Sennheiser Vertrieb und Service GmbH & Co. KG, Hanover, Germany. The parent company, in the form of a limited company within the meaning of Section 264a HGB, makes use of the exemption rule in accordance with Section 264b HGB as the parent company producing the nancial statements.

On the balance sheet date, there were rent and leasing obligations in the amount of 30,548 million. There were also vehicle leasing liabilities in the amount of 773,000 and an obligation to order of 41.733 million. In addition, there are liabilities of 934,000 resulting from hardware and software maintenance contracts.

G. OtHeR StatUtORY INFORMatiON

The unlimited partner of the parent company is Sennheiser Beteiligungsgesellschaft mit beschrnkter Haftung, Wedemark, whose subscribed capital amounts to 30,000. The management of Sennheiser electronic GmbH & Co. KG is the responsibility of Sennheiser Beteiligungs gesellschaft mit beschrnkter Haftung, Wedemark. The following persons were appointed as Presidents, collectively representing Sennheiser Beteiligungsgesellschaft mit beschrnkter Haftung, Wedemark: Volker Bartels, Hanover, Germany, President, Corporate Services, and Speaker of the Executive Management Board (EMB) Dr. Heinrich Esser, Wedemark, Germany, President, Professional Systems Daniel Sennheiser, Zurich, Switzerland, President, Strategy and Finance Peter Claussen, Burgwedel, President, Integrated Systems (effective August 1, 2011) Dr. Andreas Sennheiser, Isernhagen, President, Supply Chain (effective January 1, 2012) During the year under review, the members of the Supervisory Board were: Prof. Dr. Jrg Sennheiser, Chairman, Wedemark, Germany, Dr. Frank Heinricht, Chairman of the Management of Heraeus Holding GmbH, Hanau, Germany, Andreas Dornbracht, Managing Director of Aloys F. Dornbracht GmbH & Co. KG Armaturenfabrik, Iserlohn, Germany, Johann Soder, Director of Technology of SEW-EURODRIVE GmbH & Co. KG, Bruchsal, Germany. Total remuneration of the members of the Executive Team came to 1.463 million (2.159 million in the previous year) and that of the Supervisory Board to 348,000 (348,000 in the previous year).

Wennebostel, Germany, March 31, 2012 Sennheiser electronic GmbH & Co. KG The Executive Management Board

Volker Bartels
President, Corporate Services, and Speaker of the Executive Management BoardExecutive Mange

Dr. Heinrich Esser

President, Professional Systems

Daniel Sennheiser
President, Strategy and Finance

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NOTES ON CONSOLIDATED FINANcIAL STATEMENTS 2011

CASh FLOw STATEMENT fOr ThE FINANcIAL YEAr 2011

( IN THOUSANDS) Results of the year, including the shares of profits of minority shareholders Depreciation on items of fixed assets Depreciation on current assets exceeding the usual depreciation Increase in medium- and long-term provisions Decrease in indemnity claims Changes in the special items Rate fluctuations relating to fixed assets Cash earnings according to DVFA/SG principles Increase in short-term provisions Loss from the disposals of items or fixed assets Increase () in inventories, trade receivables and other assets that are not allocated to the investment or financing activities Increase in trade payables and other liabilities that are not allocated to the investment or financing activities Cash flow from current business activities

2011 45,682 13,834 2,585 2,071 100 6 423 63,843 969 278 45 417 65,462

PREVIOUS YEAR 32,198 14,248 0 2,571 124 7 1,533 47,601 12,269 186 44,436 7,526 23,146 Investments () in tangible assets Investments () in intangible assets Investments () in financial assets Cash flow from investment activities

( IN THOUSANDS) Payment received from disposals of items of fixed assets

2011 626 10,616 1,675 8 11,673

PREVIOUS YEAR 349 10,740 1,455 2 11,848

Other changes in shareholders funds excluding net profits for the year Cash flow from financing activities Changes in cash and cash equivalents Change in cash and cash equivalents resulting from foreign exchange and valuation effects Cash and cash equivalents at the start of the period Cash and cash equivalents at the end of the period COMPOSITION OF FINANCIAL FUNDS Cash and cash equivalents Ongoing obligations () to credit institutions Receivables from the cash pool Obligations from the cash pool () 70,997 353 4,919 41 75,522 33,717 197 0 5,110 28,410 7,084 46,705 407 28,410 75,522 2,592 8,706 631 19,073 28,410

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NOTES ON CONSOLIDATED FINANcIAL STATEMENTS 2011

STATEMENT Of ShArEhOLDErS EquITy fOr ThE FINANcIAL YEAr 2011

() Shares Balancing item from the foreign currency conversion 10,218,364.00 0.00 0.00 1,763,611.68 1,763,611.68 8,454,752.32 12,426,088.89 0.00 0.00 0.00 2,207,724.89 2,207,724.89 10,218,364.00 Cumulative Other Group Result Group equity capital generated 48,115,771.56 25,108,963.51 42,675,156.22 0.00 42,675,156.22 65,681,964.27 42,318,546.63 14,566,847.66 23,931.37 20,340,141.22 0.00 20,340,141.22 48,115,771.56 Other neutral transactions 5,333,327.13 0.00 0.00 0.00 0.00 5,333,327.13 5,333,327.13 0.00 0.00 0.00 0.00 0.00 5,333,327.13 Minority capital/equity 481,689.14 3,006,873.61 3,006,873.61 0.00 3,006,873.61 481,689.14 470,000.00 3,258,594.67 11,689.14 3,258,594.67 0.00 3,258,594.67 481,689.14 PARENT COMPANY MINORITY SHAREHOLDERS

General partners deposit Status as of Dec. 31, 2010 Credit to shareholder settlement accounts Group net profit for the year Other group result Total group result Status as of Dec. 31, 2011 Previous year Status as of Dec. 31, 2009 Credit to shareholder settlement accounts Other changes Group net profit for the year Other group result Total group result Status as of Dec. 31, 2010 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Limited partners deposit 5,200,000.00 0.00 0.00 0.00 0.00 5,200,000.00 5,200,000.00 0.00 0.00 0.00 0.00 0.00 5,200,000.00

Equity 48,430,734.69 25,108,963.51 42,675,156.22 1,763,611.68 44,438,767.90 67,760,539.08 40,425,784.87 14,566,847.66 23,931.37 20,340,141.22 2,207,724.89 22,547,866.11 48,430,734.69

Group equity 48,912,423.83 28,115,837.12 45,682,029.83 1,763,611.68 47,445,641.51 68,242,228.22 40,895,784.87 17,825,442.33 35,620.51 23,598,735.89 2,207,724.89 25,806,460.78 48,912,423.83

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INDEpENDENT AuDITOrS REpOrT

We have audited the consolidated nancial statements comprising the consolidated balance sheet, the consolidated prot and loss statement, the notes on the consolidated nancial statements, the consolidated cash ow statement and the consolidated statement of shareholders equity and the consolidated management report of Sennheiser electronic GmbH & Co. KG, Wennebostel, Germany, for the nancial year from January 1 to December 31, 2011. The maintenance of the books and records and the preparation of the consolidated nancial statements and consolidated management report in accordance with German commercial law are the responsibility of the parent Companys management. Our responsibility is to express an opinion on the consolidated nancial statements and the consolidated management report based on our audit. We conducted our audit of the consolidated nancial statements in accordance with Section 317 HGB and German generally accepted standards for the audit of nancial statements promulgated by the Institut der Wirtschafts prfer (German Institute of Auditors). Those standards require that we plan and perform the audit such that misstatements materially affecting the presentation of the net assets, nancial position and results of operations in the consolidated nancial statements in accordance with German principles of proper accounting and in the consolidated management report are detected with reasonable assurance. Knowledge of the business activities and the economic and legal environment of the company and expectations as to possible misstatements are taken into account in the determination of audit procedures. The effectiveness of the accounting-related internal control system and the evidence supporting the disclosures in the books and records, the consolidated nancial statements and the consolidated management report are examined primarily on a test basis within the framework of the audit. The audit includes assessing the annual nancial statements included in the consolidated nancial statements, the denition of the reporting entity, the accounting and consolidation principles used and signicant estimates made by the management, as well as evaluating the overall presentation of the consolidated nancial statements and consolidated management report. We believe that our audit provides a reasonable basis for our opinion. Our audit has not led to any reservations. In our opinion, based on the ndings of our audit, the consolidated nancial statements of Sennheiser electronic GmbH & Co. KG, Wennebostel, Germany, comply with the legal requirements and give a true and fair view of the net assets, nancial position and results of operations of the company in accordance with German principles of proper accounting. The consolidated management report is consistent with the consolidated nancial statements and, as a whole, provides a suitable view of the companys position and accordingly presents the opportunities and risks of future development.

NOTES ON CONSOLIDATED FINANcIAL STATEMENTS 2011

Hanover, April 17, 2012 Deloitte & Touche GmbH Audit Firm

Prof. Dr. Beine Wirtschaftsprfer [German Public Auditor]

Ziegenbein Wirtschaftsprfer [German Public Auditor]

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COVER PHOTO
To visualize infrasound, artist Martin Klimas used vibrating pigments on a loudspeaker membrane. Infrasound has frequencies below 20 Hz. That is outside the threshold of human hearing.

080895 Printed in Germany