UNITED STATES SECURITIES AND EXCHANGE
COMMISSIONWashington, D.C. 20549



8585 Côte-de-Liesse, Saint-Laurent, Québec,
H4T 1G6514-341-6780(Address and Telephone
Number of Registrants principal executive office)

CT Corporation System, 111 Eighth
Avenue, 13thFloor, New York, NY 10011 (212) 894-8700(Name, Address and Telephone
Number of Agent for Service in the United States)

Securities registered or
      to be registered pursuant to Section 12(b) of the Act:Title of
      Each Class
    Name of Each
      ExchangeOn Which RegisteredCommon
      Shares,
    New York Stock Exchangeincluding
      associated Common Sharepurchase
      rights pursuant to the RegistrantsShareholder
      Rights Plan, which purchase rightswill trade
      together with the Common SharesSecurities registered or
      to be registered pursuant to Section 12(g) of the Act:
    none




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DISCLOSURE CONTROLS AND PROCEDURES

Disclosure controls and procedures are designed to ensure that information required to be disclosed by CAE Inc. (CAE) in reports filed with securities regulatory agencies is recorded, processed, summarized and reported
on a timely basis and is accumulated and communicated to CAEs management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Internal control over financial reporting are procedures designed to provide reasonable assurance that transactions are properly authorized, assets are safeguarded against unauthorized or improper use, and transactions are
properly recorded and reported. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance with respect to the reliability of financial reporting and financial statement preparation. Accordingly,
CAEs management, including our Chief Executive Officer and our Chief Financial Officer, does not expect that CAEs internal control over financial reporting will prevent or detect all error and all fraud.

There has been no change in CAEs internal control over financial reporting during the year ended March 31, 2006 that materially affected, or that is reasonably likely to materially affect, CAEs internal control over
financial reporting.

CAE will continue to periodically review its disclosure controls and procedures and internal control over financial reporting and may make modifications from time to time as considered necessary or desirable. CAE is reviewing its
existing internal control over financial reporting in preparation for the reporting and attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 becoming effective. In connection with such review, modifications were made to
CAEs disclosure controls and procedures and internal control over financial reporting and further modifications will, as appropriate, be made to CAEs disclosure controls and procedures or internal control over financial reporting in the
future.

AUDIT COMMITTEE FINANCIAL EXPERT

CAEs board of directors has determined that it has at least one audit committee financial expert serving on its audit committee. The board of directors has determined that Mr. James F. Hankinson is an audit committee
financial expert and is independent, as that term is defined by the New York Stock Exchanges corporate governance standards applicable to CAE.

The Securities and Exchange Commission (the Commission) has indicated that the designation of a person as an audit committee financial expert does not impose on such person any duties, obligations or liability that are
greater than those imposed on such person as a member of the audit committee and the board of directors in the absence of such designation and does not affect the duties, obligations or liability of any other member of the audit committee or board
of directors.

CODE OF ETHICS

CAE has a code of ethics entitled, Code of Business Conduct.  The Code of Business Conduct applies to all officers andemployees of CAE, including CAEs
principal executive officer, principal financial officer, principal accounting officer, agents, representatives, contractors, suppliers and consultants. The Code of Business Conduct is available at CAEs Internet website, www.cae.com, in the
About CAE - Corporate Governance section. Amendments to the Code of Business Conduct and waivers, if any, for executive officers will be disclosed on CAEs website.

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PRINCIPAL ACCOUNTANT FEES AND
SERVICES

The following PricewaterhouseCoopers LLP
aggregate fees were billed to CAE in each of the years ended March 31, 2006 and
2005 for professional services rendered to CAE:

|Fees                |   | 2006                             |   | 2005
|------------------- | - | -------------------------------- | - | ----
|                    |   | (amounts in CAD$
      millions)
|Audit Fees1         | $ | 2.3                              | $ | 2.3 
|Audit-Related Fees2 |   | 0.3                              |   | 0.7 
|Tax Fees3           |   | 0.6                              |   | 0.3 
|                    |  
|Total               | $ | 3.2                              | $ | 3.3 
|                    |  

1Audit fees
are comprised of fees billed for professional services for the audit of CAEs
annual financial statements and services that are normally provided by PWC in
connection with statutory and regulatory filings.

2Audit-related fees are comprised of fees relating to work performed
in connection with CAEs divestitures.3Tax fees are
related to tax compliance support.

AUDIT COMMITTEE PRE-APPROVAL POLICIES AND
PROCEDURES

CAEs Audit Committee has adopted a pre-approval
policy with respect to permitted non-audit services. Under this policy, subject
to certain conditions, specified audit-related services, tax compliance, audit
services and tax services may be presented to the Audit Committee for
pre-approval as a category of services on an annual or project basis. On a
quarterly basis, management of CAE is required to update the Audit Committee in
respect of the actual amount of fees in comparison to the pre-approved estimate.
All non-audit services not otherwise pre-approved by the Audit Committee must be
pre-approved by the Audit Committee on an individual basis. Non-audit services
may be approved by the Chairman of the Audit Committee, provided that any such
pre-approval is reported to the full Audit Committee at its next meeting. None
of the services described above under the captions Audit-Related Fees or Tax
Fees were approved pursuant by the Audit Committee pursuant to paragraph
(c)(7)(i)(C) of Rule 2-01 of Regulation S-X.

OFF-BALANCE SHEET
ARRANGEMENTS

The disclosure provided under sections 12.9 and
12.10 on pages 54-55 of Exhibit 3, Managements Discussion and Analysis, is
incorporated by reference herein.

CONTRACTUAL OBLIGATIONS

The disclosure provided under section 11.3
Contractual Obligations on page 53 of Exhibit 3, Managements Discussion and
Analysis, is incorporated by reference herein.

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IDENTIFICATION OF THE AUDIT COMMITTEE

CAEs Audit Committee is, as of the date hereof, comprised of the following directors: John A. Craig, Paul Gagné, James F. Hankinson and James W. McCutcheon.  CAE has a separately-designated standing Audit Committee
established in accordance with Section 3(a)(58)(A) of the Exchange Act.

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UNDERTAKING AND CONSENT TO SERVICE OF PROCESS

|A. | Undertaking                                                                                                                                                                                                                                                                                                                                                                                       
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   | CAE Inc. (the Registrant) undertakes to make available, in person or by telephone, representatives to respond to inquiries made by the Commission staff, and to furnish promptly, when requested to do so by the
Commission staff, information relating to: the securities in relation to which the obligation to file an annual report on Form 40-F arises; or transactions in said securities.
|  
|B. | Consent to Service of Process                                                                                                                                                                                                                                                                                                                                                                     
|  
|   | The Registrant has previously filed with the Commission a Form F-X in connection with the Common Shares, including the associated Common Share purchase rights pursuant to the Registrants Shareholder Rights Plan, which
purchase rights trade together with the Common Shares.                                                                                                                 
|  

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SIGNATURES

Pursuant to the requirements of the Exchange Act,
the Registrant certifies that it meets all of the requirements for filing on
Form 40-F and has duly caused this annual report to be signed on its behalf by
the undersigned, thereto duly authorized.

Date: June 28, 2006

CAE INC.

By:       /s/
Hartland Paterson

|Name:  | Hartland J. A. Paterson        
|------ | -------------------------------
|Title: | Vice President, Legal, General 
|       | Counsel and Corporate Secretary

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EXHIBIT INDEX

|Exhibit
      No. | Description                                              
|----------------- | ---------------------------------------------------------
|1                 | Annual
      Information Form dated June 28, 2006        
|                  |                                                          
|2                 | Audited
      annual financial statements for the fiscal 
|                  | year ended March 31, 2006                                
|                  |                                                          
|3                 | Managements Discussion and Analysis for the
      year  
|                  | ended
      March 31, 2006                               
|                  |                                                          
|4                 | Consent
      of PricewaterhouseCoopers LLP              
|                  |                                                          
|5                 | Certificate of Robert E. Brown required by
      Rule    
|                  | 13a-14(a) or Rule 15d-14(a), pursuant to
      Section   
|                  | 302 of
      Sarbanes-Oxley Act of 2002                  
|                  |                                                          
|6                 | Certificate of Alain Raquepas required by Rule
      13a-
|                  | 14(a)
      or Rule 15d-14(a), pursuant to Section 302 of
|                  | Sarbanes-Oxley Act of 2002                               
|                  |                                                          
|7                 | Certificate of Robert E. Brown pursuant to
      18      
|                  | U.S.C.
      Section 1350, as enacted pursuant to Section
|                  | 906 of
      Sarbanes-Oxley Act of 2002                  
|                  |                                                          
|8                 | Certificate of Alain Raquepas pursuant to 18
      U.S.C.
|                  | Section
      1350, as enacted pursuant to Section 906 of
|                  | Sarbanes-Oxley Act of
  2002                             
|                  |                                                          
|9                 | Notice
      and Proxy Informational Circular dated May  
|                  | 17,
      2006 (incorporated by reference to CAEs Form  
|                  | 6-K
      (commission file no. 1-31402) furnished to the 
|                  | Commission on May 31, 2006)                              

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