SSH COMMUNICATIONS SECURITY CORP STOCK EXCHANGE RELEASE July 21, 2004, at 9:00 a.m. SSH'S INTERIM REPORT FOR JANUARY 1 - JUNE 30, 2004 - Net sales for January-June totaled EUR 4.2 million, down 44.9 percent from the same period of the previous year (EUR 7.7 million in 2003). The net sales for 2004 are not comparable to the figure for 2003 due to the sale of the OEM business. - The first quarter of 2004 was the first period to consist solely of SSH Tectia business. Compared to this period, consolidated net sales increased by 53.7%. - Operating loss for January-June totaled EUR -3.8 million (EUR -3.2 million). - During the second quarter, SSH concluded with an US system integrator its largest agreement in the company's 9 year history. - As of the beginning of the year, SSH has applied the International Financial Reporting Standards (IFRS), instead of the Finnish Accounting Standards. More detailed information on the adoption of IFRS was given in a stock exchange release dated March 18, 2004. KEY FIGURES 4-6/ 4-6/ 1-6/ 1-6/ 1-12/ 2004 2003 2004 2003 2003 Net sales, EUR million 2.6 4.1 4.2 7.7 13.9 Net sales, change % -37.5 -1.2 -44.9 -10.0 -17.6 Operating profit/loss, -1.7 -1.3 -3.8 -3.2 5.2 EUR million % of net sales -65.7 -31.2 -89.8 -42.1 37.5 Operating profit/loss, -31.7 81.7 17.4 -67.0 136.9 change % Profit/loss before -1.5 -1.0 -3.5 -3.1 5.5 extraordinary items and taxes, EUR million % of net sales -57.3 -24.6 -83.2 -40.9 40.0 Number of employees 106 133 106 133 104 at period-end Earnings per share, EUR -0.13 -0.11 0.20 Shareholders' 1.35 1.19 1.48 equity/share, EUR NET SALES Consolidated net sales for January-June totaled EUR 4.2 million (EUR 7.7 million), down by 44.9 percent, year on year. Compared to the net sales of products belonging to the SSH Tectia solution during the same period of the previous year, EUR 4.4 million, net sales fell by about 4 percent. During Q2, SSH continued the systematic implementation of its strategy based on its Tectia solution. The primary target groups for the SSH Tectia solution are large enterprises, financial institutions, and government agencies. These customer groups accounted for the majority of SSH's sales during the second quarter. Compared to the first quarter of 2004, net sales grew by 53.7 percent, from EUR 1.7 million to EUR 2.6 million. Net sales of EUR 2.6 million equal the net sales of products belonging to SSH's Tectia business during the corresponding period in 2003, even though the value of the US dollar against the euro has dropped by almost 11 percent since then. Most SSH invoicing is done in US dollars. RESULTS AND EXPENSES The operating loss the period January-June was EUR -3.8 million (EUR - 3.2 million). The net loss was EUR -3.5 million (EUR -3.1 million). The company's second-quarter cost structure included exceptional non- recurring expenses arising from the establishment of new offices in Germany and the UK and costs related to recruitment. Salary expenses were increased by the using of holiday pay reserve for 2004 mostly during the third quarter and not the second as in 2003. Operating loss for the second quarter was EUR -1.7 million (EUR -1.3 million) and overall loss was EUR -1.5 million (EUR -1.0 million). During the period under review, fixed costs fell further compared with the first half of 2003. The result of the first half of 2003 was still weakened by costs arising from the closure of the Kuopio office, and the costs of the OEM business. Year on year, fixed expenses decreased by about EUR 1.4. million, half of them stemming from payroll costs and half from other costs. Research and development expenses for January-June totaled EUR 2.2 million (EUR 2.9 million). Sales and marketing expenses totaled EUR 4.4 million (EUR 4.8 million). Administrative expenses totaled EUR 1.3 million (EUR 1.6 million). Research and development expenses for the second quarter were EUR 1.1 million (EUR 1.2 million). Sales and marketing expenses totaled EUR 2.4 million (EUR 2.3 million). Sales and marketing expenses were increased during the second quarter of this year by costs related to the strengthening of sales offices in the UK and Germany. Administrative expenses amounted to EUR 0.6 million (EUR 0.7 million). BALANCE SHEET AND FINANCIAL POSITION SSH's financial position remained solid and strong during the report period. The consolidated balance sheet total on June 30, 2004 stood at EUR 40.3 million (EUR 36.9 million), of which liquid assets accounted for EUR 32.5 million (EUR 29.6 million), or 80.7 percent of the balance sheet total. Except for the subordinated loan of EUR 0.2 million granted by the National Technology Agency (Tekes), the company has no other long-term liabilities. Gearing, or the ratio of net liabilities to shareholders' equity, was -85.4 (-89.8 percent) at the end of the second quarter. Equity ratio on June 30, 2004 was 95.2 percent (92.6 percent). The reported gross capital expenditure for the period totaled EUR 0.2 million (EUR 0.5 million), consisting mainly of software investments. Reported financial income consisted of interest income and profits from the sales of fund units. Financial income and expenses totaled EUR 0.3 million, compared to a year ago when they totaled EUR -0.1 million. Since SSH, under IAS 39, classifies most of its financial assets and other similar assets as available-for-sale assets, it recognizes changes in their value under shareholders' equity. Only after the sale of an asset does the company recognize income in the income statement. During the report period, the company recognized an increase of EUR 0.1 million in the value of its financial assets. Business operations for the period showed a negative cash flow of around EUR 4.3 million, resulting in a negative total cash flow of EUR 4.3 million. Cash flow from investments and financing had only a minor impact on total cash flow. MARKET DEVELOPMENTS During the second quarter, cautious signs of recovery in IT investments continued. The number of invitations to tender, and projects pending among SSH's customers - large enterprises, financial institutions, and government agencies - also continued to grow. SSH Tectia product tests were also launched at a brisk rate, although the conclusion of contracts was a slow process. Legislative reforms on data confidentiality and secure data transfer are taking place both in the USA and Europe. SSH believes that these changes will have positive effects on SSH's operations as customers focus on the secure remote management of their data systems and on solutions for securing their business applications. Further, new legislation requiring tighter control of data access and auditing capabilities fit well with Tectia Manager's control and logging facilities. The number of companies actively testing new data security solutions increased in North America, SSH's main market area. Demand was mainly focused on solutions for secure remote management of network servers and various kinds of data communication equipment. The new SSH Tectia Manager product, which enables centralized management, was well received in the market, and is now being tested by more than 40 customers. SSH Tectia Manager is currently an integral part of almost all large SSH Tectia installations. In Europe, interest in the SSH Tectia solution increased, especially among financial institutions and government agencies. Customers continued to show interest in user authentication solutions, based on Public Key Infrastructure (PKI) as well as in securing their business applications during the second quarter. The most interesting countries in Europe for SSH continue to be Germany, the UK and the Nordic countries. In Asia, financial institutions continued to form the most important target customer group for SSH during the second quarter as well. SSH's Asian customers were primarily interested in the secure remote management of traditional network servers and various kinds of data communication equipment. There was no substantial change in the competitive situation in any geographic market during the period under review. Both in the US and Europe, bitter price competition in the markets for secure remote management solutions continued. SALES PERFORMANCE SSH'S NET SALES EUR million 4-6/ 1-3/ 10-12/ 7-9/ 4-6/ 1-12/ 2004 2004 2003 2003 2003 2003 BY SEGMENT * AMER 2.0 1.0 1.6 1.2 1.8 6.5 APAC 0.1 0.2 0.5 0.7 0.7 2.2 EROW 0.5 0.5 0.8 1.4 1.6 5.1 SSH Group total 2.6 1.7 2.9 3.3 4.1 13.9 SSH TECTIA BUSINESS Net Sales** 2.6 1.7 2.3 1.6 2.5 8.3 * The figures for 2003 according to segment are not fully comparable with those for 2004 because they also include the OEM business divested in Q4/2003. ** The SSH Tectia solution was launched during the last quarter of 2003. The net sales figures of previous quarters include the net sales of those products that were integrated as part of the SSH Tectia solution. In line with its long-term strategy, SSH continued its strong sales and marketing efforts in the second quarter. SSH's netsales increased 53.7 % compared to the previous, weaker than expected quarter. In comparison to the corresponding period in the previous year, the net sales of products belonging to the SSH Tectia solution remained unchanged. The sales process of a system-level product for major customers continues to be a long one, but the average size of contracts has continued to grow in accordance with SSH's long-term strategy. The Americas, Asia Pacific, and Europe and Rest of the World accounted for 69.7 percent (49.6 percent), 5.9 percent (12.7 percent) and 24.4 percent (37.7 percent) of reported net sales in the first half of 2004, respectively. The US continued to strengthen its position as SSH's main market area during the report period. Asia Pacific and Europe and Rest of the World experienced a decrease in their share of net sales year on year, as a result of the divestment of the OEM business. SSH is currently taking measures to reinforce and train its sales organization to sell the SSH Tectia solution in these market areas. In June, SSH signed its largest single licensing agreement in the companys's 9 year history. The other contracting party is an US system integrator and the agreement concerns an extensive SSH Tectia solution, including the new SSH Tectia Manager. SSH's solution will be used as part of a large data security solution for the secure management of data communications networks formed by thousands of users and hundreds of network servers. During the first half of the year, SSH concluded 6 customer agreements, each worth more than EUR 100,000, 5 of which were concluded during the second quarter. SSH's ten largest customers accounted for 52.0 percent of reported net sales. The share of SSH's main customer was about 25 percent of net sales during the first half of the year. As the average size of contracts continues to grow, single contracts may also represent a large share of net sales in the future. PRODUCTS AND MARKETING In line with its long-term strategy, SSH continued to focus its sales and marketing efforts during the first half of 2004 with regard to serving large enterprises, financial institutions, and government agencies in the USA, Europe, and Asia. During Q2, SSH sales were boosted by strengthening its network of partners complementing the SSH Tectia solution. In addition, the company exhibited at major trade fairs in the USA, Europe, and Asia. In April, Swisscom Eurospot announced that the SSH Tectia client/server product had passed their compatibility tests along with Check Point and Nortel Networks products. In June, SSH announced that Computer Associates has granted certification to the SSH Tectia Certifier product for compatibility and interoperability with the CA eTrust Admin user administration product. The combination of SSH and CA products makes the administration of PKI certificates part of routine user rights management and, hence, makes the introduction of data security solutions based on electronic certificates considerably easier. In June, SSH also announced that it had concluded a contract on sales and marketing cooperation with SAS Institute, a major supplier of business intelligence solutions in Finland. During the first contract period, product marketing cooperation will begin, for example, by organizing joint customer events. During the second quarter, SSH launched its new training services. The courses ensure that the customer gets the full benefit from SSH solutions, and that the introduction of SSH products within the client company is as smooth as possible. The company also launched a new version of the SSH Tectia data security solution during the second quarter. Based on award-winning SHH Secure Shell technology, SSH Tectia is a data security solution for large enterprises. The new version is even easier to integrate with various user data management systems. The SSH Tectia solution enables enterprises to replace conventional, insufficient authentication methods easily and cost-effectively with electronic certificates and strong two-factor authentication. From SSH market research, the relevant data security markets can be roughly divided into three application areas - encryption of data communications, secure remote management, and Public Key Infrastructure. According to SSH's estimation, the size of the market where SSH operates is worth EUR 250 million in 2004. This estimation is based on the reports of international market research agencies and SSH's own research. RESEARCH AND DEVELOPMENT January-June R&D expenses totaled EUR 2.2 million (EUR 2.9 million), accounting for 59.1 percent of net sales (37.3 percent). The main reason for this monetary decline was the divestment of the OEM business in October 2003. The fact that the company closed its Kuopio office and concentrated its product development resources on its Helsinki site in Q1/2003 also had the effect of lowering R&D expenses. In accordance with IAS, SSH capitalizes only product development expenses caused by the commercialization of new products at the end of R&D processes. Such R&D expenses incurred in the first half of 2004 totaled EUR 0.3 million. These capitalized expenses related to the commercialization of the new SSH Tectia Manager solution. SSH will continue to charge the majority of its R&D as expenses. At the end of June, the company held nine patents while 18 were pending. HUMAN RESOURCES AND ORGANIZATION During the second quarter, SSH reinforced its European sales organizations. The UK sales organization is now ready and the strengthening of German sales organization proceeded well. In June, Mr Juha Saksi, M.Sc. (Eng.) and eMBA, was appointed Vice President of Sales, Europe and Asia, and SSH Management Team Member. Prior to joining SSH, Juha Saksi held positions at Okmetic as VP of Sales and Marketing and prior to that at F-Secure as Director of Wireless Security Business. He was also a member of the management team in both companies. In his new position, Saksi has responsibility for the sales of SSH Tectia products in the European and Asian markets, and for sales development in cooperation with SSH's local partners. At the end of June, the Group had 106 employees on its payroll. The number of employees decreased by 27 over the previous year (-20.3 percent). At the end of the period, 39.6 percent of personnel worked in R&D, 42.5 percent in sales and marketing, and 17.9 percent in administration. SHARES, SHAREHOLDING AND CHANGES IN THE GROUP STRUCTURE The reported trading volume of SSH Communications Security Corp shares totaled 5,736,603 (valued at EUR 11,212,741.13), i.e. 20.4 percent of the shares changed hands. The highest quotation was EUR 2.69 and the lowest EUR 1.20. The weighted average share price for the period amounted to EUR 1.95, and the share closed at EUR 1.47 (on June 30, 2004). There was no substantial change in SSH Communications Security Corp's shareholding during the financial year. Applied Computing Research (ACR) Oy holds 60.4 percent of the company's shares. In March, the company announced that the Boards of SSH and Applied Computing Research (ACR) had signed a merger agreement whereby ACR would merge with SSH. At the implementation of the merger, SSH shall issue 16,942,487 new shares of SSH for the current shareholders of ACR, Mr. Tatu Ylönen and Mr. Tero Kivinen, as a consideration of the merger. The amount of these shares equals the amount of shares of SSH currently owned by ACR. The shares owned by ACR will be transferred to SSH's ownership. The Annual General Meeting of SSH on April 27, 2004 approved in accordance with the proposal of the Board of Directors the merger plan between ACR and SSH, the increase of the share capital required by the merger as well as the merger of ACR to SSH. The General Meeting decided also on the conditional nullification of own shares being transferred from ACR to SSH as a consequence of the merger, as well as on the decrease of the tied equity. The General Meeting decided also to decrease the premium fund and to transfer a total of EUR 15,000,000 to the fund belonging to free equity. To carry out the transfer permission granted by the registration authority will be needed. The process of getting the permission is proceeding in schedule. The key objective of this merger is to streamline the corporate structure and enhance the transparency of SSH's shareholding. The plan is to implement the merger on October 31, 2004. SHARE CAPITAL AND BOARD AUTHORIZATIONS The company's registered share capital on June 30, 2004 came to EUR 841,974.30, consisting of 28,065,810 shares. During the period under review, share capital was increased once. This increase was based on the subscription of the new shares under SSH's stock-option scheme. On the basis of the 1999 stock-option scheme, a total of 330,000 new SSH shares were subscribed, with the result that the company's share capital increased by EUR 9,900. SSH's AGM of April 27, 2004 authorized the Board to decide to increase share capital through a rights issue and/or grant stock options or issue bonds with warrants, or convertible bonds, in such a way that the resultant share capital may increase by a maximum of EUR 165,000. The authorization has not been applied. PROSPECTS The growth of net sales during the second quarter gives SSH a good basis for the rest of 2004. During the rest of the year, SSH will continue to place particular emphasis on expanding its SSH Tectia business and catering for the needs of the company's selected customer segments: large enterprises, financial institutions, and government agencies. The reinforcement of SSH's sales organization in Germany will be completed at the end of the summer. In addition to this, product development and technical customer service in Finland will be developed. The company will continue to develop new forms of cooperation with its current customers. SSH is geared up for sharp competition, ready to strengthen its position across all markets. A number of legislative programs are underway both in the USA and Europe, which will impact the way enterprises implement and manage their data security and data systems. The development of the SSH Tectia product concept has considered the impacts of these legislative changes so as to allow customers to adapt to the new requirements as easily as possible. The management of SSH believes that these amendments to the legislation will have a positive effect on the demand for the SSH Tectia solution. Despite the subtle signs of optimism, markets are still looking challenging for the near future. However, as markets continue to perk up and customer companies put their investments into action, SSH will retain a sound basis for increasing its net sales. SSH maintains its estimation for net sales for the whole year 2004 to be between EUR 10 million and EUR 12 million. The company's management expects that the SSH Tectia solution, including the new products SSH Tectia Manager and SSH Tectia Connector, which were well received by the markets, will make it possible to increase the average size of contracts while contributing towards achieving SSH's revenue target for the year. Company's management estimates that the operating results for the full fiscal year 2004 will be negative. PROFIT AND LOSS ACCOUNT EUR million 4-6/ 4-6/ 1-6/ 1-6/ 1-12/ 2004 2003 2004 2003 2003 Net sales 2.6 4.1 4.2 7.7 13.9 Purchasing and production 0.0 -1.2 -0.1 -2.0 -2.5 costs Gross profit 2.5 2.8 4.1 5.7 11.3 Other operating income 0.0 0.2 0.0 0.3 11.3 Costs Product development -1.1 -1.2 -2.2 -2.9 -5.2 Sales and marketing -2.4 -2.4 -4.4 -4.8 -9.6 Administration -0.7 -0.7 -1.3 -1.6 -2.6 Operating profit/loss -1.7 -1.3 -3.8 -3.2 5.2 Financial income and expenses 0.2 0.3 0.3 0.1 0.4 Profit/loss before taxes -1.5 -1.0 -3.5 -3.1 5.5 a Taxes 0.0 0.0 0.0 0.0 0.0 Net profit/loss for the -1.5 -1.0 -3.5 -3.1 5.5 period a) Taxes are proportionate to the net profit for the period, and no deferred tax assets are recorded for the accrued loss. 1-6/ 1-6/ 1-12/ 2004 2003 2003 Earnings per share, EUR -0.13 -0.11 0.20 Earnings per share (diluted), -0.12 -0.11 0.19 EUR BALANCE SHEET EUR million June June Dec. 30, 30, 31, 2004 2003 2003 ASSETS Fixed and non-current assets Tangible assets 0.4 0.8 0.5 Intangible assets 1.1 0.9 1.2 Deferred tax assets 0.2 0.2 0.2 Total long-term assets 1.7 1.9 2.0 Inventories and current assets Inventories 0.0 0.6 0.0 Short-term receivables 6.1 4.8 5.2 Short-term investments 30.6 25.3 33.8 Liquid assets 2.0 4.6 2.9 Total short-term liabilities 38.6 35.2 41.9 Total assets 40.3 37.2 43.8 LIABILITIES AND SHAREHOLDERS' EQUITY Shareholders' equity 37.8 32.9 41.1 Long-term liabilities Long-term financial 0.2 0.2 0.2 liabilities Total long-term liabilities 0.3 0.2 0.2 Short-term liabilities 2.2 4.0 2.4 Total liabilities and 40.3 37.2 43.8 shareholders' equity STATEMENT ON CHANGES IN SHAREHOLDERS' EQUITY Share Issue Revalua Transl Retained Total capital premium tion ation earnings fund* and differ other ence EUR million funds Shareholders' 0.8 53.0 0.0 -0.3 -17.5 36.0 equity Jan. 1, 2003 Change 0.0 -13.6 0.3 -0.2 10.5 Shareholders' 0.8 39.3 0.3 -0.5 -7.0 32.9 equity June 30, 2003 Change 0.0 0.0 -0.3 0.2 8.3 Shareholders' 0.8 39.3 0.0 -0.4 1.3 41.1 equity Dec. 31, 2003 Change 0.0 0.1 0.1 0.1 Net loss -3.5 Shareholders' 0.8 39.4 0.1 -0.3 -2.2 37.8 equity June 30, 2004 * Transfer to the retained loss account has resulted in a reduction in the share premium fund. STATEMENT OF SOURCES AND USES OF FUNDS EUR million 1-6/ 1-6/ 1-12/ 2004 2003 2003 Cash flow from business operations -4.3 -4.5 3.3 Cash flow from investments -0.1 -0.5 -1.0 Cash flow from financing 0.1 0.3 0.0 Change/addition(+). extraction (-) -4.2 -4.7 2.3 of funds Funds at the beginning of the 36.7 34.7 34.7 fiscal year Adjustment for translation 0.0 -0.1 -0.2 difference b Funds at the end of the fiscal 32.5 29.8 36.7 year b) liquid assets consist of cash in hand and at bank, as well as other securities. NET SALES PER SEGMENT EUR million 4-6/ 4-6/ 1-6/ 1-6/ 1-12/ 2004 2003 2004 2003 2003 AMER 2.0 1.8 2.9 3.8 6.5 APAC 0.1 0.7 0.3 1.0 2.2 EROW 0.5 1.6 1.0 2.9 5.1 SSH Group total 2.6 4.1 4.2 7.7 13.9 OPERATING PROFIT/LOSS BY SEGMENT EUR million 4-6/ 4-6/ 1-6/ 1-6/ 1-12/ 2004 2003 2004 2003 2003 AMER 1.0 -0.2 1.1 0.1 1.0 APAC 0.0 0.2 0.1 0.1 0.7 EROW -0.4 0.5 -0.6 0.9 11.3 Common Group expenses* -2.2 -1.8 -4.3 -4.3 -7.8 SSH Group total -1.7 -1.3 -3.8 -3.2 5.2 * Common Group expenses include the Group's administration expenses (e.g. Management, Finance) and headquarters' Product Management and R&D expenses. The profit from the sale of the OEM business has been divided into these segments. FINANCIAL INDICATORS 1-6/ 1-6/ 1-12/ 2004 2003 2003 Net sales, MEUR 4.2 7.7 13.9 Operating loss, MEUR -3.8 -3.2 5.2 Operating loss, % of net sales -89.8 -42.1 37.5 Profit before extraordinary -3.5 -3.1 5.5 items and taxes, EUR million Profit before extraordinary -83.2 -40.9 40.0 items and taxes, % of net sales Result before taxes, MEUR -3.5 -3.1 5.5 Result before taxes,% of net -83.2 -40.9 40.0 sales Return on investment, % 15.0 Return on equity, % 14.4 Interest-bearing net -32.3 -29.6 -36.5 liabilities, MEUR Equity ratio, % 95.2 92.6 94.7 Gearing, % -85.4 -89.9 -88.7 Gross capital expenditure, MEUR 0.2 0.5 0.8 % of net sales 4.8 6.6 6.2 R&D expenses, MEUR 2.2 2.9 5.2 % of net sales 51.9 37.3 37.4 Personnel, on average 108 139 131 Personnel, period-end 106 133 104 PER-SHARE DATA 1-6/ 1-6/ 1-12/ 2004 2003 2003 Earnings per share -0.13 -0.11 0.20 EUR (undiluted) Earnings per share, EUR -0.12 -0.11 0.19 (diluted) Shareholders' equity/share, EUR 1.35 1.19 1.48 No. of shares at period-end, 28 066 27 726 27 736 1,000 Share performance, in EUR Average price 1.95 0.74 1.31 Lowest 1.20 0.61 0.61 Highest 2.69 0.93 2.36 Share price, period-end 1.47 0.67 1.70 Market capitalization, period- 41.8 15.2 47.2 end, MEUR Volume of shares traded, 5.7 2.3 7.6 million Volume of shares traded, 20.4 8.3 27.5 % of total Value of shares traded, MEUR 11.2 1.7 10.0 Price-earnings ratio (P/E) 8.35 CONTINGENT LIABILITIES EUR million June 30, June Dec. 2004 30, 31, 2003 2003 Rental liabilities 0.2 0.8 0.2 Leasing liabilities 0.2 0.3 0.2 Other contingent liabilities 2.4 0.0 2.4 Currency derivatives (not 2.0 0.0 2.0 included in the hedging calculations) The figures are unaudited. NOTES TO THE CONSOLIDATED ACCOUNTS 1. ACCOUNTING PRINCIPLES This interim report has been prepared in accordance with the IAS 34 standard (Interim Reports). 2. RECONCILIATION OF NET PROFIT/LOSS EUR million FAS CHANGE IFRS FAS CHANGE IFRS 4-6/ 4-6/ 1-6/ 1-6/ 2003 2003 2003 2003 Net sales 4.1 4.1 7.7 7.7 Purchasing and -1.2 -1.2 -2.0 -2.0 production costs Gross profit 2.8 2.8 5.7 5.7 Other operating income 0.2 0.2 0.3 0.3 Operating expenses -4.3 -4.3 -9.3 -9.3 Operating profit/loss -1.3 -1.3 -3.2 -3.2 Total financial income 0.3 0.3 0.1 0.1 and expenses Net result for the -1.0 -1.0 -3.1 -3.1 period Earnings per share, -0.11 -0.11 EUR Earnings per share 1.18 0.01 1.19 (diluted), EUR The reconciliation of net profit/loss for the entire fiscal period 2003 is presented in connection with the interim report for the first quarter of 2004, dated April 20, 2004. 3. RECONCILIATION OF BALANCE SHEET EUR million FAS CHANGE IFRSIFRS June 30, June 30, 2003 2003 Long-term assets Tangible assets 0.4 0.5 0.8 Intangible assets 1.3 -0.5 0.9 Deferred tax assets 0.2 0.2 Long-term assets total 1.7 1.9 Short-term assets Deferred tax assets 0.2 -0.2 Inventories 0.6 0.6 Short-term receivables 4.8 4.8 Available-for-sale 25.0 0.3 25.3 assets Trading assets 0.0 Liquid assets 4.6 4.6 Total short-term 35.2 35.2 liabilities Total assets 36.9 37.2 LIABILITIES AND SHAREHOLDERS' EQUITY Shareholders' equity Share capital 0.8 0.8 Share premium fund 41.0 -1.6 39.3 Revaluation reserve 0.2 0.3 Retained profit/loss -9.2 1.6 -7.5 Subordinated loan 0.2 -0.2 Shareholders' equity 32.9 32.9 total Long-term liabilities Provisions 0.0 Deferred tax 0.0 assets Long-term 0.0 0.2 0.2 financial liabilities Total long-term 0.0 0.2 liabilities Short-term liabilities 4.0 4.0 Total liabilities 36.9 37.2 Further information about the transition has been published in a press release dated March 18, 2004. SHAREHOLDERS On June 30, 2004, the company's ten largest shareholders, excluding nominee-registered shares, were as follows: Applied Computing Research (ACR) Oy 60.4 % Assetman Oy 5.0 % Tatu Ylönen Oy 2.3 % Mutual Pension Insurance Company Ilmarinen 1.7 % Promotion Capital I Ky 1.7 % Nixu OyNixu Oy 1.4 % Ylönen TatuYlönen Tatu 1.3 % Jaakonsaari Markus 1.3 % Kaukonen KalleKaukonen Kalle 1.2 % Adams George 1.2 % Total 77.6 % FINANCIAL REPORTING A briefing on this interim report for analysts and the media will be presented at the auditorium on the 1st floor of SSH's head office at Fredrikinkatu 42, Helsinki, on Wednesday, July 21, 2004, starting at 11:00 a.m. The entrance is at the corner of Fredrikinkatu and Malminkatu. SSH Communications Security Corp will release its next interim report for the period January 1 - September 30, 2004, on October 20, 2004. Helsinki, July 21, 2004 SSH COMMUNICATIONS SECURITY CORP Board of Directors Arto Vainio CEO For further information, please contact: Arto Vainio, CEO tel. +358 20 500 7400 Johanna Lamminen, CFO tel. +358 20 500 7419 Kare Laukkanen, Director, IR tel. +358 20 500 7433 Distribution: Helsinki Exchanges Major media