38 Service cost....................................................................................................................... ¥ 1,080 ¥ 1,042 $ 9,000 Interest cost ...................................................................................................................... 739 862 6,158 Expected return on plan assets.......................................................................................... (365) (544) (3,042) Amortization of transitional obligation .............................................................................. 808 808 6,733 Recognized actuarial loss .................................................................................................. 308 78 2,567 Net periodic benefit costs.................................................................................................. ¥ 2,570 ¥ 2,246 $ 21,416 Millions of Yen 2003 2002 Thousands of U.S. Dollars 2003 Discount rate .................................................................................................................... 1.5% 2.5% Expected rate of return on plan assets............................................................................... 2.5% 3.5% Recognition period of actuarial gain/loss ........................................................................... 12 years 13 years Amortization period of transitional obligation ................................................................... 15 years 15 years 2003 2002 Assumptions used for the years ended March 31, 2003 and 2002, are set forth as follows: The components of net periodic benefit costs for the years ended March 31, 2003 and 2002, are as follows: 10. SHAREHOLDERS’ EQUITY Japanese companies are subject to the Japanese Commercial Code (the "Code") to which certain amendments became effective from October 1, 2001. The Code was revised whereby common stock par value was elim- inated resulting in all shares being recorded with no par value and at least 50% of the issue price of new shares is required to be recorded as common stock and the remaining net proceeds as additional paid-in capital. The Code permits Japanese companies, upon approval of the Board of Directors, to issue shares to existing share- holders without consideration as a stock split. Such issuance of shares generally does not give rise to changes within the sharehold- ers’ accounts. The revised Code also provides that an amount at least equal to 10% of the aggregate amount of cash dividends and certain other appropriations of retained earnings associated with cash outlays applicable to each period shall be appropriated as a legal reserve (a component of retained earnings) until such reserve and additional paid-in capital equals 25% of common stock. The amount of total additional paid-in capital and legal reserve that exceeds 25% of the common stock may be available for dividends by resolution of the shareholders. In addition, the Code permits the transfer of a portion of additional paid-in capital and legal reserve to the common stock by resolution of the Board of Directors. The revised Code eliminated restrictions on the repurchase and use of treasury stock allowing Japanese companies to repurchase treasury stock by a resolution of the shareholders at the general shareholders meeting and dispose of such treasury stock by resolu- tion of the Board of Directors beginning April 1, 2002. The repur- chased amount of treasury stock cannot exceed the amount avail- able for future dividend plus the amount of common stock, addi- tional paid-in capital or legal reserve to be reduced in the case where such reduction was resolved at the general shareholders meeting. At the general shareholders meeting held on June 28, 2001, the shareholders approved a transfer of ¥23,654 million from additional paid-in capital as a reduction in accumulated deficit in order to improve the financial stability of the Company. The Company has stock option plan which provides for granting options to the Company’s directors, officers and key employees to purchase aggregate 7,896 shares of the Company’s stock in the period from July 1, 2004 to June 30, 2009. The options will be granted at an exercise price of ¥233 ($1.94) per share. 11. GAIN ON DISCHARGE OF LIABILITIES A new restructuring plan was introduced in 2000. It consists of the three major initiatives. They are; (1) financial restructuring to reinforce the Company’s financial position and structure, (2) business plan focusing on the core business areas, and (3) streamlining the