Notes to the Consolidated and Separate Annual Financial Statements | Note 17

* the expense is charged to profit and loss R11m (2022: R13m).

Cash-settled grants

Shareholders approved the Share Incentive Scheme (Scheme) on 13 April 2010. Over time, various share grants and options were issued to directors and employees of the Company.

The purpose of the share incentive scheme is to serve as an incentive and reward to employees (including executive directors) of the Company and its subsidiaries for services rendered and to be rendered, aimed at promoting the continued growth of the Company by giving employees an opportunity to acquire shares in the Company and to serve as a retention mechanism for employees whose services are regarded by the Company to be crucial to the future growth and sustainability of the Company's business. The Board grants share options and share grants on the recommendation of the Remuneration Committee.

1m (2022: 1.4m) share grants were forfeited due to performance conditions not being met.

The Monte Carlo option pricing model was used to determine the fair value of the share grants.

The vesting of the grants is based solely on performance measured based on two conditions: 50% based on Merafe's total shareholder return (TSR) and 50% based on HEPS growth.

If Merafe's TSR over the three years places it in one of the top four positions, then 50% of the number of performance shares granted (TSR Portion) will vest in equal proportions on the 3rd, 4th and 5th anniversaries of their grant. If Merafe's TSR over the three years places it in 6th position, then one-third of the TSR Portion will vest in equal proportions on the 3rd, 4th and 5th anniversaries of their grant. If Merafe's performance over the three years lies between any of the above points, then a prorated number of the TSR Portion will vest in equal proportions on the 3rd, 4th and 5th anniversaries of their grant. No share grants will vest for positions seven and less.

Vesting of the other 50% of grant shares will be in accordance with the following policy as determined by the Board:

• The performance shares allocated will be subject to performance against the growth in HEPS measure;
• If performance meets or exceeds the target, i.e. CPI + 2% per annum over the performance period, 100% of shares will vest;
• If performance is at the threshold, i.e. CPI + 1% per annum over the performance period, 50% of shares subject to this measure will vest;
• For performance below the threshold, 0% of shares subject to this measure will vest; and
• Linear vesting will take place between different performance milestones.

In terms of the rules of the Scheme, the Company retains the discretion and the right to settle awards through the issue of new shares or in cash. As at 31 December 2023, the company may still issue 90 777 371 Merafe shares to settle any awards contemplated under the Scheme upon vesting.

Accordingly, the company may still issue up to the maximum number of shares contemplated under the Scheme to settle any awards.

The following assumptions were used in the valuation model:

* The expected volatility of 36.88% (2022: 55.65%) is based on the historic volatility of the Merafe share price over the past five years.

The following share grants relating to employees and executive directors were outstanding at 31 December 2023:

The following share grants relating to executive directors were outstanding at 31 December 2023:

The movement in the number of share grants can be summarised as follows: