|SECURITIES AND
      EXCHANGE COMMISSIONWashington, D.C. 20549FORM
    40-F
|---------------------------------------------------------------------------
|(Check One)                                                                
|                                                                           
|or                                                                         
|·                                                                          

|CAE
      INC.(Exact name of Registrant as
      specified in its charter)                                                                                                                                                                                                                                                                                       
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Canada(Province or
      Other Jurisdiction ofIncorporation or Organization)                                                                                                                                                                                                                                                                                     
|Suite 3060, Royal
      Bank Plaza, South Tower, Toronto, Ontario, M5J
      2J1416-865-0070(Address and Telephone Number of
      Registrant's principal executive office)CT Corporation
      System, 111 Eighth Avenue, 13th Floor, 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                                                                                                                                                                              
|Common
      Shares,including associated Common Sharepurchase rights pursuant
      to the Registrant'sShareholder Rights Plan, which purchase rights
      will trade together with the Common Shares 
|Securities registered or
      to be registered pursuant to Section 12(g) of the Act:  
      none                                                                                                     
|Securities for which
      there is a reporting obligation pursuant to Section 15(d) of the
      Act:   none                                                                                          
|For annual reports,
      indicate by check mark the information filed with this
      form:·   Annual Information
      Form                             ·  
      Audited Annual Financial Statements

Indicate the number of outstanding
shares of each of the issuer's classes of capital or common stock as of the
close of the period covered by the annual report: 219,661,178.Indicate
by check mark whether the registrant by filing the information contained in this
form is also thereby furnishing the information to the Commission pursuant to
Rule 12g3-2(b) under the Securities Exchange Act of 1934 (the "Exchange Act").
If "Yes" is marked, indicate the file number assigned to the registrant in
connection with such rule.    Yes
                 No  
·Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13(d) or 15(d) of the Exchange Act
during the proceeding 12 months (or for such shorter period that the registrant
has been required to file such reports); and (2) has been subject to such filing
requirements in the past 90 days.Yes   ·
                   
No



---

CAE ANNUAL INFORMATION FORM
page.01



|[CAE
      LOGO]                 
|---------------------------------
|ANNUAL
      INFORMATION FORM2003
|August 8, 2003                   



---

CAE ANNUAL INFORMATION FORM
page.02



|TABLE OF
      CONTENTS
|-----------------------
|ITEM 1                 
|ITEM
      2           
|ITEM
      3           
|ITEM
      4           
|ITEM
      5           
|ITEM
      6           
|ITEM 7                 
|ITEM 8                 
|ITEM 9                 
|SCHEDULE "A"           



---

CAE ANNUAL INFORMATION FORM
page.03



INFORMATION INCORPORATED BY
REFERENCE

The Company's Review of Operations and
Management's Discussion and Analysis and its consolidated financial statements
for the year ended March 31, 2003, and the notes thereto (the "Consolidated
Financial Statements") appear on pages 34 to 50 and pages 51 to 97 respectively
in the Annual Report to Shareholders for the year ended March 31, 2003 (the
"Annual Report"). The Consolidated Financial Statements were prepared in
accordance with accounting principles generally accepted in Canada (";Canadian
GAAP";). For a discussion of the principal difference between Canadian GAAP and
the accounting principles generally accepted in the United States, see note 22
to the Consolidated Financial Statements. The information contained therein is
specifically incorporated by reference into this Annual Information Form. Any
parts of the Annual Report not specifically incorporated by reference do not
form part of this Annual Information Form. Unless otherwise noted,
all dollar references in this Annual Information Form are expressed in Canadian
dollars.References to fiscal 2003 refer to the period from April 1,
2002 to March 31, 2003, references to fiscal 2002 refer to the period from April
1, 2001 to March 31, 2002, and references to fiscal 2001 refer to the period
from April 1, 2000 to March 31, 2001.This Annual Information Form
contains forward-looking statements with respect to CAE and its subsidiaries
based on assumptions that CAE considers reasonable at the time they were
prepared. These forward-looking statements, by their nature, necessarily involve
risks and uncertainties that could cause actual results to differ materially
from those contemplated by the forward-looking statements. CAE cautions the
reader that the assumptions regarding future events, many of which are beyond
the control of CAE and its subsidiaries, may ultimately prove to be incorrect.
Factors that could cause actual results or events to differ materially from
current expectations are discussed on pages 48-50 of the Annual
Report.



---

CAE ANNUAL INFORMATION FORM
page.04



ITEM 2 - CORPORATE STRUCTURE OF CAE

2.1   Name and
Incorporation

|March 17, 1947: | CAE Inc. (the "Company" or
      "CAE") was incorporated under the name Canadian Aviation Electronics Ltd.
      under the laws of Canada by letters patent.
|--------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------
|July 5, 1965:   | The name of the Company was
      changed to CAE Industries Ltd.                                                                                            
|August 3, 1977: | The Company was continued under
      the Canada Business Corporations Act (the "CBCA") by certificate of
      continuance.                                
|June 10, 1993:  | The Company changed its name to
      its present one, CAE Inc.                                                                                             

In 1979, the articles of the Company
were amended to change its authorized share capital to an unlimited number of
common shares. Each issued and outstanding Class A and Class B share was
redesignated and changed into three common shares.In 1981, the Company's
articles were again amended to subdivide the issued and outstanding common
shares on a three-for-one basis, and to authorize an unlimited number of
preferred shares, issuable in series, with such rights, privileges, restrictions
and conditions as the directors of the Company may determine by resolution. The
articles were amended further in 1984 and 1986, in each case to subdivide the
issued and outstanding common shares on a two-for-one basis.On June 9,
1995, the Company's articles were amended to authorize the directors to appoint
additional directors in accordance with the provisions of the CBCA.On
April 1, 2001, the Company was amalgamated with CAE Electronics Ltd., its
wholly-owned subsidiary.The Company's registered offices are located at
Suite 3060, Royal Bank Plaza, Toronto, Ontario, M5J 2J1, telephone:(416)
865-0070, fax:(416) 865-0337.

2.2   Inter-corporate
Relationships

The direct and indirect subsidiaries
and other ownership interests of the Company are set out in Schedule ";A";
hereto.

ITEM 3 - GENERAL DEVELOPMENT OF THE
BUSINESS

3.1(a)   General

Following incorporation in 1947, CAE's
primary business focused on the repair and overhaul of electronic and
electro-mechanical equipment, as well as the design and installation of
telecommunication and navigational systems. By the early 1950s, the Company had
started to pursue new areas of opportunity in the design, development and
manufacture of flight, radar and weapons simulators for Canadian defense
requirements. A few years later, CAE began its commercial flight simulation
activities.



---

CAE ANNUAL INFORMATION FORM
page.05



From the 1960s on, the Company embarked
on a program of growth and diversification. CAE acquired several new businesses,
both in its traditional aerospace and electronics market segment and in several
industrial technology segments. The industrial technology businesses provided a
number of diverse engineered products and services for industries worldwide,
chiefly those involved in fiber processing technologies (forest products, pulp
and paper), cleaning technologies (automotive parts, medical equipment and
electronic food processing), and railway technologies and services.The
strategy was significantly changed in fiscal 2000, with the focus turned to the
Company's core strengths and key opportunities.Over the last three
years, CAE executed this strategy, divesting itself of its non-core businesses
and transforming from being primarily a manufacturer of simulation and controls
equipment to also being a provider of fully integrated training in its three
core businesses: Civil Simulation and Training, Military Simulation and Training
and Marine Controls. The Company is leveraging its technology, expertise and
customer relationships acquired in supplying high quality simulation equipment
and services to develop integrated training solutions for military forces,
commercial airlines, business aircraft operators, aircraft manufacturers and
marine vessel operators. Training solutions are customized to meet customers'
varied needs for a range of equipment, facilities, training materials, support
services and personnel.

3.1(b)   History

The transformation of CAE began in
fiscal 2000.In February 2000, the Company announced a "Repositioning for
Value" strategy intended to improve shareholder value. The strategy, developed
from an intensive review of CAE's core strengths and an analysis of key
opportunities, had three main elements:

|Focus: | Divesting non-core businesses
      and concentrating on three high growth, high margin businesses: Commercial
      Simulation and Training, Military Simulation and Controls, and Forestry
      Systems.
|------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Fix:   | A combination of integration,
      consolidation and productivity measures intended to reduce costs, increase
      efficiency, and enhance CAE's competitiveness.                                        
|Grow:  | A series of growth initiatives
      enabling CAE to expand the scope of its core
  businesses.                                                                                                            

The first two elements of this strategy
have been substantially completed, while significant progress has been achieved
in implementing the third element in markets adversely affected over the past
year by war, disease and terrorism.



---

CAE ANNUAL INFORMATION FORM
page.06



Focus

In the first quarter of fiscal 2001,
the Company sold substantially all the assets of its Energy Control Systems
business to SNC-Lavalin Group Inc.On December 18, 2001, the Board of
Directors approved a plan to divest CAE's Forestry Systems business segment to
further sharpen the Company's focus.On February 28, 2002, the Company
completed the sale of two of CAE's Cleaning Technologies operations. The Company
sold CAE Ransohoff Inc., of Cincinnati, Ohio and CAE Ultrasonics, Inc., of
Jamestown, New York, to the former management of these operations. On
March 28, 2002, CAE completed the sale of its fiber screening business to the
Advanced Fiber Technologies Income Fund.On June 28, 2002, CAE completed
the sale of CAE Cleaning Technologies plc, another of CAE's Cleaning
Technologies operations, to the same former management group which previously
purchased CAE Ransohoff Inc. and CAE Ultrasonics, Inc.On August 16,
2002, CAE completed the sale of its sawmill businesses to COE Manufacturing
Company.On April 30, 2003, CAE completed the sale of the operations of
CAE Beyss GmbH, another of CAE's Cleaning Technologies businesses, to Bavaria
Industriekapital AG. On May 6, 2003, CAE completed the sale of its wood
products business to Carmanah Design and Manufacturing Inc., a TD Capital
company.On June 24, 2003, CAE signed an agreement to sell to Cold Jet,
Inc. the operations of CAE Alpheus Inc., a small Cleaning Technologies business
in the US. Once this transaction closes (expected in August 2003), CAE's
focus-driven divestiture program of the past three years will be
completed.

Fix

Through a combination of divestments
and consolidations, the Company reduced the number of profit centers from 21 to
3, signifying most dramatically how the Company changed the manner in which it
manages its businesses.CAE's Operations and Engineering groups are
reducing the cost and production time of commercial simulators while
simultaneously improving the product quality.CAE is investing in
software and hardware innovations that will sustain its leading edge
technologies as well as complement its training services for CAE training
centers and other customers. Examples of such innovation are the Company's next
generation simulators, Sim XXI, currently in production, its SimFinity
leading-edge simulation-based courseware, its Tropos and Medallion-S image
generators and its STRIVE software development framework to test, model and
design military systems during their planning and acquisition phases.



---

CAE ANNUAL INFORMATION FORM
page.07



Major corporate functions - finance,
human resources, communications and business development - are now fully
integrated into the businesses.Specific productivity goals and cost
containment measures are in place each year for each profit center.

Grow

The most significant growth initiatives
stem from CAE's investment in pilot training, its increased access to the US and
European military markets, and its expansion of the Marine Controls product
offering to include the commercial marine sector.During fiscal 2003, CAE
completed the integration of its four strategic acquisitions made in the prior
year:

- BAE SYSTEMS Flight Simulation and Training Inc. (now called
  CAE USA Inc.) located in Tampa, Florida, which has a well-established position
  in the US defense market for the manufacture of transport and helicopter
  simulation equipment and has significant training and support service
  activities for the US military market.

- Valmarine AS of Norway (now called CAE Valmarine AS), the
  global leader for marine control systems for the commercial
  market.

- the Netherlands based Schreiner Aviation Training B.V. (now
  called CAE Aviation Training B.V.), which provides simulator and ground school
  civil aviation training through its long-established training centers in
  Amsterdam and Maastricht, The Netherlands, Brussels, Belgium and Dallas,
  Texas.

- SimuFlite Training International Inc. (now called CAE
  SimuFlite Inc.) in Dallas, Texas, the world's second largest provider of
  business aviation training. At the end of fiscal 2003, SimuFlite had 28 full
  flight simulators mainly serving the business aircraft market (the largest
  addressable or outsourced aviation training market in the world). CAE views
  this market segment as one with solid growth potential. It is also a market
  specifically suited to CAE's new, next generation simulator -Sim
  XXI.

In addition to acquisitions, CAE's move
into civil aviation and training was further accelerated in fiscal 2003 with the
following training center initiatives:

- CAE and Airbus entered into a ten-year renewable co-operation
  agreement to develop a global network of training centers with the largest
  fleet of Airbus full flight simulators in the world and offering the highest
  quality of Airbus flight crew training. Under this agreement, CAE is providing
  equipment, facilities and advanced training technologies while Airbus is
  providing its courseware and training expertise. The result is a worldwide
  global network of training centers combining the Miami Airbus facilities with
  those of CAE in Denver and Toronto, as well as the Toulouse Airbus facilities
  with those of CAE in Madrid, Brussels, Rome, Dubai, Singapore and Sao Paulo.
  CAE is responsible for adding flight simulators and related training
  technologies in line with Airbus standards and expanding the global network
  according to market demand. This network is offering the whole range of
  integrated training solutions, from simulator availability to complete
  training for initial, recurrent, transition and specialty
  training.



---

CAE ANNUAL INFORMATION FORM
page.08



- The Denver, Colorado facility became operational in July
  2002. The four-bay center is currently operating four simulators: an Airbus
  A320, two Bombardier CRJ200/700 and a CRJ200. The Denver center is
  strategically located close to the country's sixth busiest airport and is the
  first independent training center in the US for Bombardier CRJ700 regional
  jets. Two dynamic airlines are the anchor tenants in the new facility:
  Frontier Airlines and Air Wisconsin. The two carriers have committed to
  long-term training agreements of 5 years and 15 years, respectively. Other
  current customers include Horizon Air, American Eagle, Midway and over-flow
  training from Mesa Air Group.

- CAE's training facility near Phoenix, Arizona became
  operational in March 2003, and the Company signed a 10-year training contract
  with Mesa Air Group for services at that center. CAE is providing training
  solutions to Mesa, primarily in support of the airline's fleet of Bombardier
  CRJ and Embraer ERJ-145 aircraft. The contract is worth approximately $50
  million, based on expected usage of the simulators. CAE has installed a
  Bombardier CRJ200/700/900 full flight simulator (FFS) and an Embraer ERJ-145
  FFS in the two-bay facility. With this new facility, CAE became the first
  independent training provider for the new CRJ900 regional jet. The contract
  with Mesa also includes CAE's SimFinity CRJ200/700/900 Integrated Procedure
  Trainer, the latest high-fidelity SimFinity three-dimensional training
  solution.

- CAE and China Southern Airlines announced in November 2002
  the formation of a joint venture to provide aviation training solutions for
  Asian carriers. The joint venture company, Zhuhai Xiang Yi Aviation Technology
  Company Limited, is owned 51% by China Southern and 49% by CAE and is
  operating from China Southern's training facility at its Zhuhai flight base in
  Guangdong. It is focused on developing and delivering high technology training
  solutions for aviation, initially offering simulation-based pilot training and
  other technical services for carriers operating Boeing 737NG, 737-300, 777,
  757-200 and Airbus A320 aircraft.

- In operation since June 2002, Emirates-CAE Flight Training
  Center resulted from a July 2001 teaming agreement between Emirates Airline
  and CAE. Currently located in the Dubai Airport Free Zone, the center will
  expand into a new 14 bay-facility in fiscal 2004 that will include Airbus
  A319/A320/A321, Airbus A330/340, Boeing 737 NG/BBJ, Gulfstream IV and
  Gulfstream V FFS. In June 2003, Emirates-CAE Flight Training announced that it
  will add a convertible Hawker 800/800XP FFS to the Dubai facility. The center
  is offering the highest standard in aviation training and facilities in the
  region for both airlines and corporate aircraft operators. It trains pilots to
  European Joint Aviation Authorities (JAA) and UAE GCAA standards on
  CAE-designed FFS. Emirates-CAE Flight Training is equipped with the industry's
  latest integrated training technologies including CAE's SimFinity classroom
  trainer and convertible A320/B737 Integrated Procedures
  Trainer.



---

CAE ANNUAL INFORMATION FORM
page.09



- CAE's Amsterdam center in April 2003 launched maintenance
  training courses using CAE's SimFinity training system, following approval
  from the European JAA. Maintenance training for technicians is a requirement
  of all JAA-regulated countries. This furthers CAE's goal to address a growing
  portion of the total aviation training market - aircraft maintenance. The
  Amsterdam center has signed maintenance training agreements with KLM Royal
  Dutch Airlines, Moscow-based Transaero and Netherlands-based Samco. The highly
  interactive training will use CAE's SimFinity virtual maintenance trainer to
  familiarize students with aircraft systems and teach them procedural and
  troubleshooting skills.

On July 17, 2000, the MSH Aircrew
Training Facility (MSHATF) officially opened at Royal Air Force (RAF) Base
Benson in Oxfordshire. The facility provides training to the RAF and third party
customers on the Eurocopter Puma, Boeing CH-47 Chinook, and EHI EH-101 Merlin
helicopters. The MSHATF is equipped with six CAE-built full mission simulators,
four computer-based training classrooms, and a state-of-the-art tactical control
center to plan and monitor training missions. It is staffed with a team of
highly experienced former military instructors. Of the total initial contract,
valued at £399 million, £274 million ($633 million) is still included in our
backlog, being the ";take or pay'' training commitment of the UK Ministry of
Defence. The balance of the contract consists of subcontract work and third
party financing.During the second quarter of fiscal 2002, the FAST
Consortium, owned half by CAE and half by Alenia Marconi Systems, signed a
contract with the Defence Procurement Agency of the UK Ministry of Defence for
the Astute Class Submarine Training program. This Private Finance Initiative
contract is for the provision of comprehensive training services to the Royal
Navy for 30 years, with an option to renew for an additional 10 years, in the
operation and maintenance of the Astute Class submarines. A new training center
is being built in Scotland to house the simulators and provide
classroom-training facilities. The contract added over $400 million to the
Company's backlog and complements the other growth initiatives in the Marine
Controls segment. Also during the second quarter, Eurofighter Simulation Systems
GmbH selected CAE for visual systems for the Eurofighter EF2000 combat aircraft
Aircrew Synthetic Training Aids program. Valued at over $170 million, the
contract extends over several years, with the first deliveries taking place in
2002.In July 2002, CAE was selected as one of several prime contractors
under the United States Air Force (USAF) Training Systems Acquisition II
contract. This permits CAE to pursue USAF, Air Force Reserve, Air National Guard
and Foreign Military Sale products and services programs. During the fourth
quarter of fiscal 2002, CAE signed a contract with the US Army to be the prime
contractor for the Army Special Operations Forces Aviation Training and
Rehearsal Systems (ASTARS). The initial delivery order, valued at approximately
$50 million, is for the design of the world's first AH/MH-6 Light Assault/Attack
Reconfigurable (LASAR) Combat Mission Simulator to train aircrews of both the
AH-6 and MH-6 helicopters. The helicopter simulator, which will feature a
24-foot dome display, will be used by the US Army 160th Special Operations
Aviation Regiment (SOAR), the elite regiment of soldiers known as the ";Night
Stalkers'', who have played a key role in Afghanistan and Iraq. As prime
contractor for the ASTARS program, CAE is analyzing the training and simulation
needs of the US Army 160th SOAR and assisting in the development of upgrades to
existing systems and new training systems. This contract enhances CAE's
prospects for securing other US military contracts at a time when military
spending is on the rise.



---

CAE ANNUAL INFORMATION FORM
page.10



3.2   Industry Overview and
Trends

The civil, military and marine markets
CAE serves are driven by factors particular to each market. The Company believes
the military market is most influenced by a combination of defense spending and
the nature of military activity. CAE believes the civil market is most affected
by the nature and composition of aircraft fleets, pilot demographics,
certification requirements and market demand for commercial and business air
travel. CAE believes the marine markets the Company targets are, on the naval
side, affected by a combination of defense spending and the nature of naval
activity and on the civil side by the nature and composition of commercial
fleets and market demand for commercial marine shipping and tourism.

3.2(a)   Civil Simulation and
Training

The use of flight simulators in pilot
and crew training is well established within the commercial and business
markets. Increased use of simulators has occurred as a result of the growth in
commercial and business air travel which, in turn, has driven fleet expansion
and increased demand for pilot training. Civil simulator usage has also
increased due to advances in technology that enable increased realism and the
significant cost savings provided by flight simulation training compared to
actual flight time. The use of synthetically-generated reproductions of airport
configurations and use of satellite terrain imagery incorporated into the
simulation further enhance the effectiveness of simulation training. Simulators
are also utilized by pilots to supplement actual flying time to maintain their
certification. Today's most sophisticated civil flight simulators are rated
Level D by the US Federal Aviation Administration or receive similar ratings
from regulatory authorities in other countries, indicating that a pilot can be
certified to fly an aircraft type based solely on simulator training. Flight
simulators also allow pilots to experience and learn emergency procedures that
cannot be practiced safely aboard the actual aircraft.Flight simulation
equipment is purchased by major and regional airlines, aircraft manufacturers
and independent training providers. Simulators are manufactured by a limited
number of companies and are sold based on the criteria of product quality,
service, delivery, supplier reputation, price and life cycle costs. In fiscal
2003, 11 FFS were sold to third parties in the global competed market, in which
contracts are awarded on the basis of a competitive bidding process. Prices for
civil flight simulation equipment can range from up to $1 million for
sophisticated procedure trainers, from US$2 to US$6 million for a flight
training device (FTD's) to US$12 to US$14 million for an FFS.Within the
flight simulation industry, training services is the largest and fastest growing
market segment. The training services market consists of sales of training
equipment, facilities, tools, programs, and instructors designed to enable
pilots to obtain and retain the necessary qualifications to pilot a particular
aircraft, and to enable maintenance workers to inspect, maintain and repair
aircraft. Training is carried out by airlines as well as independent training
providers. Currently, approximately 45% of the FFS in use around the world are
owned and operated by commercial airlines to provide training to their pilots,
with the vast majority owned by large commercial airlines. These large
commercial airlines also use independent training facilities to supplement their
training programs. Ownership of simulators by regional airlines is considerably
less common and virtually not the case for business aircraft operators. As a
result these companies primarily use independent training providers.



---

CAE ANNUAL INFORMATION FORM
page.11



CAE believes the following trends and
developments will continue to drive the civil simulation and training
industry:Effectiveness and Cost Advantages of Simulation-Based
TrainingSimulation-based training is an essential element in civil
pilot and crew training. The realism of the simulated flight experience has made
procedure trainers, fixed training devices and full flight simulators effective
tools for training pilots and crew. Pilots and crew can be trained for a variety
of aircraft, using visualizations of most of the civil airports around the
world, and in varying environmental conditions. The cost savings to aircraft
operators are substantial as costs such as fuel, ground crew and maintenance, as
well as aircraft wear and tear, are avoided. The average cost to train in a FFS
is US$500 an hour, whereas it can cost as much as US$5,000 to US$10,000 to fly
an actual aircraft for an hour. In addition, simulator training minimizes the
risk of accidents and resulting injury to personnel and damage to equipment.
Full flight simulator training users are also accorded more favorable liability
insurance premiums. Simulator-based training also offers considerable
flexibility with respect to the timing and duration of training sessions. In the
past, the use of independent training services was limited by the availability
of convenient training centers. With the development of additional independent
training centers around the world, CAE believes that this historical deterrent
will be addressed. CAE believes that the costs of acquiring and maintaining FFS
will encourage additional usage of independent training providers by commercial
airlines.Pilot Certification and License
RequirementsPiloting an aircraft is a regulated activity requiring
both initial and recurring training to achieve defined levels of competence and
experience. To keep a license to fly an aircraft weighing over 12,500 pounds,
certain regulations require pilots to demonstrate proficiency for that aircraft
type at least once a year. Certification and license requirements can be
satisfied through simulated flight and many pilots elect to do
so.Expansion and Diversification of Aircraft FleetsThe
introduction of new aircraft and expansion and diversification of fleets creates
incremental pilot training requirements. Simulation training is now considered
an essential element in pilot and crew training for the large commercial,
regional and business segments of the market. An experienced pilot typically
needs between 15 and 40 hours on a simulator to learn the intricacies of a new
aircraft. CAE estimates that approximately one simulator is required to support
every 20 commercial aircraft in operation.



---

CAE ANNUAL INFORMATION FORM
page.12



New aircraft deliveries are a major
driver for this market. In ";The World Market for Large Commercial Jet
Transports'', Forecast International/DMS Inc. projects that 6,092 large
commercial jet transports worth some US$558 billion will be produced from 2003
to 2012.Demand for civil air travel and the timing of delivery of new
aircraft were adversely affected by the September 11, 2001 terrorist attacks and
the ensuing war in Afghanistan. In fiscal 2003, that demand and timing was
compounded by the SARS epidemic and the increasing geo-political tensions that
resulted in war on Iraq in March 2003. As a result, aircraft orders suffered and
CAE experienced a reduction in new third party orders for full flight simulators
in the past fiscal year and expects that sales in fiscal 2004 will be at a
similar level. The current market uncertainty caused by these events has had a
very negative effect on commercial airlines, aircraft manufacturers and, by
extension, CAE, which is somewhat dependent on the health and success of those
industries. However, the impact of these events has been less severe on the
demand for flight training services as pilots still need to be
trained.Virtually every business aircraft transaction, whether a new or
after-market transaction, triggers the need for pilot training. Business
aircraft simulation training is primarily provided by independent training
providers. CAE believes that additional demand for business aircraft simulation
training will be driven by growth in new business aircraft sales; 9,769 are
forecast to be produced between 2003 and 2012; and the increase in fractional
ownership and unscheduled charter flights. Long-term growth in civil air travel
will drive increased aircraft deliveries across the spectrum of aviation service
providers and, in turn, the demand for simulation technology and
training.Pilot DemographicsAccording to AIR Inc., a major
pilot recruitment firm, US-established airlines will retire more than 11,000
pilots over the next five years. They also estimate that between 6,500 and 7,500
new pilots will be hired in 2003. As pilots retire, other pilots must be trained
to fly the aircraft. Historically, the major commercial airlines hired a
substantial number of pilots from the military as these pilots retired or
otherwise left military service. In recent years there have been fewer available
military pilots. The relative lack of available military pilots has caused
increased demand for qualified pilots throughout the industry. As a result, the
major airlines have begun to more actively promote pilots to larger aircraft
from within their existing ranks or from regional airlines operating smaller
aircraft. This increased mobility within a fleet results in more pilots needing
to be certified on different aircraft and a corresponding increase in training
requirements.Other FactorsThe September 11, 2001
terrorist attacks had an immediate and severe adverse impact on the passenger
traffic and yields of CAE's customers in the civil airline industry. Even as the
after-effect on the industry of the shock of that event and the subsequent war
in Afghanistan was receding, the more recent SARS epidemic and Iraqi war again
caused a sharp drop-off in commercial travel coupled with higher fuel and other
costs. Civil airline operators have continued to experience significantly lower
revenue and have incurred additional costs for increased security and higher
insurance premiums. Because of these recent events, resulting airline
bankruptcies and funding problems and continuing weak domestic and international
economic conditions, CAE expects that the delivery of new aircraft will continue
to be down through fiscal 2004, which will reduce simulator orders as well. This
will reduce or delay a portion of future revenue.



---

CAE ANNUAL INFORMATION FORM
page.13



The US government has developed
regulations that require any non-US person to apply for permission to enter the
US for the purpose of flight training. These regulations delay and in some
instances prevent the ability of foreign pilots to enter the US for flight
training, which has had a mildly negative near term effect on CAE's training
business in the US. This is being partly offset by relocation of some non-US
pilot training to CAE's flight training centers outside of the US.

3.2(b)   Military Simulation and
Training

Military forces increasingly rely on
sophisticated and interrelated weapons systems and equipment, computer systems,
visual systems and other advanced technologies to operate in a broadening range
of conditions and scenarios. Achieving a high state of operational readiness is
a constant goal and challenge for militaries. Simulators enable military
organizations to achieve their training goals while minimizing the physical use
of expensive systems and equipment. In addition, the use of simulators helps to
avoid injuries to personnel and the loss of equipment due to training accidents.
Simulators allow for the training of tasks and missions that cannot be practiced
in the real world.Flight simulators are used to train pilots to operate
a variety of military aircraft including fighter jets, helicopters and transport
aircraft. Flight simulators permit the crews of military aircraft to coordinate
and improve their essential combat skills in a safe, cost-effective and
realistic range of environments. The simulators enable pilots to realistically
practice both offensive and defensive tactics, such as firing aircraft weapons
systems and avoiding attack from enemy surface and air threats. The immersive
environment provided by simulators allows pilots to train for highly demanding
maneuvers and life threatening scenarios, such as rotor failure, missile impact
or the effects of exceptional turbulence.Simulators for land systems
provide similar advantages. Though land systems equipment is generally less
complex than that found in aircraft and marine vessels, the systems often
operate in conjunction with other equipment in environments involving many
soldiers and various weapons systems.CAE believes the following trends
will continue to drive the development of the military simulation and training
market:Increasing Defense SpendingFollowing the September
11, 2001 terrorist attacks, the US government increased its defense spending.
The fiscal 2003 national defense budget in the US was more than US$382 billion,
which does not include additional funding requested to support the war effort in
Iraq. Over the next six years, the Bush administration has requested national
defense budget increases of more than 30% from current levels, which would
result in the US defense budget totaling more than US$500 billion by 2009. The
US government's defense spending has recently represented about 40-50% of the
world's total defense spending. Military spending is also increasing in Asia,
while defense expenditures are stable in NATO countries other than the US. Apart
from spending on defense, there is an increased emphasis on security in most
Western nations in the face of increased terrorist threats. CAE expects that
some of this spending will address new technologies and training for
counter-terrorism activities. However, the focus of governments on the wars in
Afghanistan and Iraq in 2002-2003 led to delays in the contracting process for
certain expected defense programs, leading in turn to the deferment of expected
revenue opportunities for the Company in fiscal 2003.



---

CAE ANNUAL INFORMATION FORM
page.14



Rapid Evolution of Technology and
WarfareTechnological advances and the changing nature of warfare
have resulted in a rapid evolution of weapons systems and equipment. This has
been illustrated by recent events in Afghanistan and Iraq, where the coalition
forces faced asymmetric threats and where extensive use was made of unmanned air
vehicles (UAV) such as the Predator and Global Hawk. Military forces face a wide
range of operations which are increasingly likely to be asymmetric or involve
operations in urban terrain. In light of these changing circumstances, the key
focus of military forces has evolved towards information dominance linked with
networked weapons systems. These highly technical networked systems lend
themselves to simulation training.Accelerated developments in computer
and visual technologies enable devices of greater fidelity and promote the
proliferation of simulation technologies. In particular, the rapid evolution of
commodity graphics technologies of recent years has substantially redefined the
price/performance envelope of visual equipment. Visual systems provide
simulator-correlated, geo-specific representations of the synthetically
generated environment under a broad range of weather, illumination and other
conditions. Visual database representations can be rapidly synthesized from the
Geographical Information System, including satellite data, and applied to
military mission rehearsal exercises.The introduction of new aircraft
and weapons platforms, as well as upgrades and life extensions to existing
aircraft and weapons platforms, will necessitate new training requirements for
military operators. For example, CAE expects programs in Europe such as the
Eurofighter 2000, the A400M military airlifter, the NH90 helicopters as well as
upgrades for the Tornado tactical aircraft and Lynx helicopter fleets will
create additional flight simulation requirements. The USAF upgrade of its C-130
fleet under the Avionics Modernization Program will also require corresponding
upgrades and new simulators to train aircrews on upgraded aircraft. The USAF's
decision to lease KC-767 tankers from Boeing will produce a need for new
training simulators. Other aircraft such as the F-35 (Joint Strike Fighter) and
Comanche helicopter will also enter service in the US over the next decade and
produce opportunities for training systems.In the summer of 2003, the US
Army released its request for proposals for its next generation training
strategy, Flight School XXI, which calls for extensive integrated simulator
training for aviators before their first combat unit assignments. CAE is leading
a team comprising Boeing and other US companies to bid on this proposal. The US
Army is effecting far-reaching changes to its land forces structure through a
program called the Future Combat System. This program will employ a range of
manned and unmanned vehicles which will generate training requirements as the
equipment is deployed. CAE believes that the Future Combat System will generate
new opportunities to exploit simulation technology in vehicle and system design.
CAE also expects the advent of new digital communications systems and lighter
air mobile forces to create additional training needs for European land
forces.



---

CAE ANNUAL INFORMATION FORM
page.15



Evolving Role of Simulation
TrainingCAE believes that the military will continue to make greater
use of simulation as an effective solution for more frequent and sophisticated
training requirements for several reasons. First, advances in technology have
enhanced the realism that can be achieved in simulation training. As a result,
militaries are more receptive to utilizing this technology. The achieved realism
combined with the development of extensive environment databases offer
militaries the ability to train in situations and conditions either difficult or
impossible to consistently replicate in a physical setting. Second, simulation
training also is more cost effective than training personnel on actual
equipment. Third, simulation training involves less potential for accidents and
resulting injury to personnel and damage to equipment. Finally, CAE believes
simulation will increasingly be used in areas consistent with the Simulation
Based Acquisition initiatives of the US Department of Defense which seek to use
simulation to evaluate competing system designs prior to commitment to full
scale design and development.Increasing Interest of Governments in
Privately Financed Long-Term Training ModelsThe increasing
sophistication of weapons systems has resulted in the need for more
sophisticated training equipment and services. The development, construction and
delivery of these training resources require a high level of specialized
technology and knowledge, and often involve significant expense. The UK
government has increasingly turned to private sector companies to build,
maintain and deliver training equipment and services under long-term financed
arrangements because these companies can deliver an integrated training solution
more quickly and efficiently and at lower cost. CAE is already in full scale
operation in the UK's first military training privately financed initiative, the
Medium Support Helicopter Aircrew Training Facility, and are under contract to
deliver the Astute Class Submarine Training program under private finance. The
UK is currently considering the outsourcing of all undergraduate pilot training
under the Military Flying Training System project. It is reviewing bids on the
Armoured Vehicle Training Service (AVTS) program, which would be a private
financed initiative outsourcing of all training associated with gunnery, tanks
and armored vehicles. The government of Germany is currently seeking tenders for
the NH90 helicopter training programs under this form of procurement and several
other nations are also considering this type of procurement approach.

3.2(c)   Marine Controls

Simulators for submarines and other
naval vessels provide many of the same training advantages as flight simulators.
Crews of submarines are able to coordinate and improve their essential combat
and operational skills, including navigation, weapons deployment, mission skills
and speed in processing critical data in a safe, cost-effective and realistic
range of environments. Such simulators are used to train crews for highly
demanding maneuvers and life threatening scenarios, such as catastrophic
structure failure and missile impact. Other simulators for naval control systems
permit a crew to learn to operate a ship's control systems in a variety of
environments.



---

CAE ANNUAL INFORMATION FORM
page.16



Integrated shipboard control systems
installed on naval and civil ships enable crews to monitor and control the vital
platform machinery and systems such as propulsion, electrical power generation
and distribution, steering, auxiliaries and damage control. The operational
effectiveness of a ship is greatly enhanced by incorporating on-board control
systems training capability. Operators can be continuously trained while at sea
using these systems. This facilitates high levels of fleet readiness to respond
to demands of national security for naval ships and facilitates enhanced
passenger comfort and safety in civil applications such as cruise
liners.CAE delivers power simulator solutions that best suit the
Company's customers' training or engineering needs whether the plant to be
simulated is nuclear, fossil or natural gas fired plant. CAE simulators range
from classroom training simulators to system trainers to full-scale simulators.
Operators can enhance their skills to ensure safer, as well as more efficient
plant operation, thereby addressing the ever-changing demands of both the
marketplace and regulatory bodies.CAE believes the following trends will
continue to drive the development of the marine controls and power
markets:Increasing Complexity of Ship Designs and Reduced
ManpowerCAE believes that new ship designs will continue to steadily
increase in complexity and value with the commensurate demand for more
sophisticated control systems and integration solutions. At the same time, the
need for navies and civil ship owners/operators to reduce operational costs by
reducing manpower on-board ships adds to the demand for complex automation. The
potential reduction of engineering manpower is of particular interest to those
navies that face manpower retention problems due to long periods at sea. The
evolution to ever more complex automation creates both a manufacturing and a
training opportunity for suppliers like CAE.Integrated
ProcurementThere is a trend towards the procurement of larger
turnkey packages of ship controls and associated electronic/electrical systems
by navies, owners of high-end merchant ships and shipbuilders around the world.
This should allow companies with the capability to undertake such larger scale
integration tasks to win contracts of greater value, with the attendant
long-term benefits that will accrue due to the requirement to support these
ships typically for over 20 years.Power Plant
ModernizationsPower plant modernizations and new DCS-based controls
are but some of the changes affecting the need for simulation solutions. The
power industry has also experienced an aging workforce that will ultimately
result in the retirements of numerous experienced power plant personnel. Along
with the exciting technological advances, the power industry is also coming to
grips with the important role that simulation technology will play in both
provision of licensed operator training and "beyond training" uses, including
procedures validation, engineering studies and virtual testing of power plant
updates prior to their actually going into service.



---

CAE ANNUAL INFORMATION FORM
page.17



ITEM 4 - NARRATIVE DESCRIPTION OF THE
BUSINESS

4.1   General

CAE is a world leading designer and
manufacturer of advanced simulation and control equipment and provider of
integrated training solutions for the military, civil aviation and marine
markets. With over 50 years of experience, strong technical capabilities, a
highly trained workforce and a global reach, CAE has built an excellent
reputation and long-standing customer relationships.CAE has delivered
simulation products to the military forces of more than 30 countries. The
Company is the world's leading supplier of civil flight simulators in the
competed market and is the second largest independent provider of civil aviation
and training services based on the number of simulators operated. CAE is a world
leader in the provision of marine automation systems for both naval and
commercial shipping and supplies full scope simulators to support the training
of staff for both nuclear and fossil-fueled power generation plants. CAE also
provides a range of simulation equipment for sea and land-based
activities.CAE also provides a range of technical support services to
civil and military simulator operators, including parts replacement and repairs,
installations, relocations, upgrades and technical training. Customers use the
Company's technical services to answer questions, trouble-shoot and receive
advice. This extends to service visits by CAE's engineers to assist in customer
maintenance and repair activities. Military and civil upgrade services are not
restricted to CAE products; the Company can upgrade most other manufacturers'
simulators. CAE services are offered either in conjunction with a sale of a
simulator, through maintenance contracts or individual purchase orders. CAE
believes that its service business provides opportunities to influence the
upgrade of installed simulators while providing valuable insights into customer
training needs.CAE has a global presence with 6,000 employees at
manufacturing operations and training facilities in 16 countries. CAE reports
results based on three business segments: (i) Civil Simulation and Training
(formerly Commercial Simulation and Training); (ii) Military Simulation and
Training (formerly Military Simulation and Controls); and (iii) Marine Controls
(formerly part of Military Simulation and Controls). The Company's consolidated
revenue, from continuing operations, in fiscal 2002 and 2003 was $1,126.5 and
$1,130.5 million, respectively, and is broken down as follows:

|Revenue by Product Line (%)                 
|--------------------------------------------
|                                            
|Civil Simulation and
            Training   
|Military Simulation and
            Training
|Marine Controls                             
|                                            

|Geographic Distribution of Revenue
        (%)
|----------------------------------------------
|                                              
|Canada                                        
|US                                            
|UK                                            
|Germany                                       
|Other European
          countries            
|Other countries                               
|                                              



---

CAE ANNUAL INFORMATION FORM
page.18



For the fiscal year ended March 31,
2003, sales to customers outside the US and Canada accounted for approximately
63% of CAE's revenue. The Company expects that sales outside the US and Canada
will continue to account for a significant portion of its revenue for the
foreseeable future. As a result, CAE is subject to risks of doing business
internationally, including:

- changes to regulatory
  requirements;
- changes to domestic and foreign
  government policies, including requirements to expend a portion of program
  funds locally and governmental industrial cooperation requirements;
- the complexity and necessity of using
  foreign representatives and consultants;
- imposition of tariffs or embargoes,
  export controls, including US, Canadian and foreign arms export controls,
  currency exchange controls and restrictions, and other trade restrictions
  affecting countries in which CAE sells its products or services;
- the difficulty of managing and
  operating an enterprise spread over various countries;
- compliance with a variety of foreign
  laws; and
- general economic and geopolitical
  conditions, including international hostilities, inflation, trade
  relationships and military and political alliances.

The impact of these factors is
difficult to predict and any one or more of these factors could adversely affect
the Company's operations in the future.CAE deals with a variety of goods
and services suppliers across its business segments. It is not dependent on any
single supplier for any key manufacturing components or services. Significant
shortages of goods and services are not expected, and have not been encountered
in the past. However, CAE's products contain sophisticated computer systems that
run on software and operating systems supplied to it by third parties. Such
computer systems and software may not always be available to CAE to license or
purchase. The production of CAE simulators is often dependent upon receipt by
CAE of data, including confidential or proprietary data, concerning the
functions, design and performance characteristics of a product or system, the
performance of which CAE's simulator is intended to simulate. The Company cannot
guarantee that it will be able to obtain such data on reasonable terms, or at
all. Original manufacturers of these products and systems could object to the
simulation by CAE of components of, or the totality of their products or
systems, or could request high license fees that could negatively impact the
Company's profit margins.The following sets out, by business segment,
the locations of CAE's primary subsidiaries and divisions:



---

CAE ANNUAL INFORMATION FORM
page.19



|Civil Simultationand Training                                                                           | Military Simultationand Training                                                                                  | Marine
  Controls                                    
|------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------- | -----------------------------------------------------
|                                                                                                       
|Canada                                                                                                  | Canada                                                                                                            | Canada                                               
|· Montreal, Quebec· Toronto,
      Ontario                                                              | · Montreal,
    Quebec                                                                                            | · Montreal,
    Quebec                               
|                                                                                                       
|United
States                                                                                           | United
States                                                                                                     | United
  States                                      
|· Dallas, Texas· Denver,
      Colorado· Fort Worth, Texas                                              | · Tampa,
Florida                                                                                                  | · Leesburg,
      Virginia                           
|                                                                                                       
|Europe                                                                                                  | Europe                                                                                                            | Europe                                               
|· Amsterdam, The Netherlands·
      Brussels, Belgium· Madrid, Spain· Maastricht, The
      Netherlands | · Burgess Hill, United
      Kingdom· Royal Air Force base,  Oxfordshire, United
      Kingdom· Stolberg, Germany | · Burgess Hill, United
      Kingdom· Drammen, Norway
|                                                                                                       
|Other                                                                                                   | Other                                                                                                             | Other                                                
|· Dubai, United Arab Emirates· Sao
      Paulo, Brazil                                                  | · Adelaide and Silverwater, 
Australia                                                                            | · Bangalore, India                                   

4.2   Civil Simulation and Training

The Company builds civil simulators for
all categories of aircraft including those built by Airbus, Boeing, Bombardier,
Cessna, Dassault, Embraer, Fairchild/Dornier, Gulfstream and Raytheon. CAE also
builds simulators for civil helicopters, including models by Bell Helicopter and
Sikorsky. During fiscal 2003, CAE was awarded 11 of 17 full flight simulator
orders or 65% of the worldwide-competed market (fiscal 2002 - 22 of 26 full
flight simulator orders). CAE also captured 9 of 17 competed visual systems, or
53% of the worldwide competed visual systems market. Since its inception, CAE
has taken orders for approximately 450 full flight simulators and flight
training devices from over 100 commercial airlines, aircraft manufacturers and
external training centers in 38 countries, and to date has delivered about 4320
of them. With half a century of experience in designing and manufacturing full
flight simulators, CAE has established long-standing relationships with leading
commercial airlines throughout the world. CAE believes its ability to maintain
its global leadership is strengthened by the capital and technology intensive
nature of the industry, which creates substantial barriers for new
entrants.In 2001, CAE entered the civil flight training business by
opening its first pilot training center in Sao Paulo, Brazil in April and
launching its Toronto, Canada facility in December. During 2001, the Company
also acquired Schreiner and SimuFlite, adding six new pilot training centers to
its operations. CAE is the world's second largest independent provider of
training services, based on the number of simulators available for third party
training. As at March 31, 2003, CAE had an installed base of 89 civil full
flight simulators in ten countries, located in ten CAE training centers and
eight other locations.



---

CAE ANNUAL INFORMATION FORM
page.20



CAE intends to continue to expand its
global network of strategically located training centers. The Company's practice
is to secure at least one long-term training agreement with a major or regional
airline prior to establishing a new civil training center. CAE's customers at
the commercial aviation training centers include major and regional airlines
that elect to outsource some of the training of their pilots and other crew
members using either the Company's training instructors or their own. The third
party aviation training centers are used by more than 3,000 customers who tend
to use third party training centers as their primary source for simulation
training. By the end of fiscal 2004, CAE expects to have in operation an
installed base of over 100 full flight simulators. CAE will continue to execute
its pilot training strategy, with the focus now ramping up utilization and
increasing yield (through enhanced service offerings) in the training centers
owned or operated by CAE.CAE expects to maintain a commanding leadership
position in civil simulation and visual systems due to a focus on customer
relationships, commitment to innovation and technology, product quality,
reliability and efficiency, and continuing efforts to shorten delivery cycles
through process improvements. CAE expects to increase its advantage in
lead-time, cost, quality and reputation for performance through operational
improvements and research and development programs. Three years ago CAE launched
a large-scale research and development program to improve flight simulator
products. CAE's Sim XXI modular design is the result of the latest
next-generation technologies used to produce high quality high fidelity full
flight simulators. The CAE Sim XXI simulator is easier to assemble, test,
integrate, evaluate, deliver and maintain. In fiscal 2003, CAE entered into
production of these simulators, which are in the process of acceptance testing
by customers. While CAE's Sim XXI simulators were originally targeted at the
regional and business jet training mandates, CAE is extending this technology to
commercial aircraft such as the Boeing 737 NG. CAE's capabilities in
simulation-based interactive learning, including its leading-edge SimFinity
system, will also complement its traditional strength in full flight simulators
and flight training devices. In fiscal 2003 CAE's SimFinity training system
received its first US Federal Aviation Administration acceptance as part of a
Boeing 737NG training program. By using the same high quality simulation
software used in CAE's full flight simulators, CAE's SimFinity training system
is transforming aviation training and offers integrated, efficient and
cost-effective solutions to meet the ever-increasing needs for better, faster
and more interactive training while significantly reducing the need to use
low-level training devices. CAE's SimFinity training system integrates CAE's
newest image generator, Tropos, for high-fidelity visual rendering and an
extensive airport database library. Pilots using CAE's SimFinity training
system are able to practice landing, takeoff and taxiing under different weather
conditions in over 250 airports. Combined with a growing network of training
centers, this complete suite of simulation-based equipment and training products
permits CAE to offer airlines and business jet operators a range of training
solutions.The events of September 11, 2001, the Afghan war, SARs and the
Iraqi war all have had a negative impact on commercial airlines, on aircraft
manufacturers and, by extension, on CAE, which to some degree is dependent on
the health and success of those industries. CAE experienced considerable
softening of near-term demand for civil simulators last year but expects
simulator orders in fiscal 2004 to exceed last year's level.  This
expectation is supported by fiscal 2004 orders secured of nine out of ten
completed FFS orders from April to July 2003, compared with 11 FFS orders for
all of fiscal 2003.  The contracting market for civil simulators last year
led to pricing pressure that CAE expects may continue until the market becomes
more robust. In addition, following the Company's entry into the civil aviation
training market, the market for new simulators for sale to third parties has
been reduced, as CAE now manufactures these for its own use. The growth expected
from training operations, the building of simulators for the Company's training
centers as well as for sale, the introduction of CAE's Sim XXI simulator
design, a continued focus on productivity savings through cycle time reductions
and other cost containment initiatives should position CAE to benefit from the
gradual recovery of the civil airline industry.



---

CAE ANNUAL INFORMATION FORM
page.21



4.3   Military Simulation and Training

CAE is a world leader in the design and
production of military flight simulation equipment. The Company develops
simulation equipment and training for a variety of military aircraft, including
fighter jets, helicopters and transport planes. Its military simulators provide
full combat environments that include interactive enemy and friendly players, as
well as weapons and military sensors. These simulators incorporate highly
realistic visual scenes covering areas as large as whole countries that are able
to show the effects and characteristics of a variety of battlefield features,
including those seen through Infra Red and Low Light Level TV Sensors. CAE has
moved beyond the supply of simulation equipment into the provision of military
training with the Company's Medium Support Helicopter Aircrew Training Facility
in the UK and its C-130 transport plane training facility in Tampa,
Florida.CAE provides simulation equipment and training to the military
forces of more than 30countries, including those of the US. CAE has provided
simulators for a wide range of aircraft and has developed the broadest rotary
wing expertise of any simulator manufacturer. The Company has established a
leading position in Europe in the supply of army command team land-based
training systems, by supplying such systems to the forces of Germany, Austria,
Italy, Norway, Finland and Ireland. The selection of a CAE visual system for the
prestigious Eurofighter program solidly establishes CAE's Medallion visual
system as a premier system for fast jet simulation applications. The Medallion
visual system is also being used to upgrade the US Army's Apache combat mission
simulators, the German Tornado simulators, the Canadian CP140 Patrol Aircraft
simulator and the F-16 Combat Mission Systems for the Emirates.Military
support services include the provision of contractor logistic support,
maintenance services and simulator instruction at over 60 sites worldwide. CAE
provides maintenance support for all of the Canadian Forces flight simulators at
six bases and all but one of the installed flight simulators of the German Army,
Air Force and Navy. In the US, CAE provides a range of services across a wide
number of bases, including the instruction of UAV Predator operators. CAE also
provides a range of support services to facilities in Australia, the UK, the
Netherlands and Italy, as well as mission software support for Canada's CF-18
fighter aircraft.The Company believes that its physical presence in
countries such as the US, Germany and the UK has enabled it to develop strong
relationships and a good reputation with governments and other defense
contractors who are important decision makers regarding defense contracts. In
fiscal 2003, CAE was awarded contracts, among others, by the US Army, German
Army Aviation School, the US Coast Guard, the German Armed Forces, the Dutch
Army School of Artillery, the Royal Air Force of Oman, the Norwegian Armed
Forces, the Canadian Department of National Defence, the Republic of Singapore
Air Force, the UK Royal Navy, the Australian Army, the Royal Australian Navy,
and the Royal Netherlands Air Force. Following CAE's April 2001 acquisition of
BAE SYSTEMS Flight Simulation and Training in Tampa and the subsequent creation
of CAE USA Inc., CAE's ability to win contracts with the US military has been
significantly enhanced with the awarding of prime contractor status under
several omnibus procurement programs.



---

CAE ANNUAL INFORMATION FORM
page.22



CAE will focus on growing its business
with military customers around the world, and particularly in the US. The
Company believes it can capitalize on the experience, expertise and increased
visibility with military customers that it has gained from winning and
performing significant contracts, such as the UK Royal Air Force Medium Support
Helicopter program. CAE will continue its commitment to customer service by
focusing on anticipating and meeting the needs of its military clients for
highly-customized equipment and training. CAE believes its ability, through CAE
USA Inc., to be a prime contractor in the US, in addition to strong supplier
relationships with leading US defense contractors, will enable CAE to further
penetrate the US military simulation and training market. CAE intends to
continue to foster partnerships with key original equipment manufacturers such
as Boeing, with whom it is teamed to pursue the US Army's Flight School XXI
program, Agusta Westland (CAE's partner in the Rotorsim consortium) with whom
CAE has entered into a joint venture to deliver training equipment and services
in support of Agusta Westland aircraft sales worldwide, and Lockheed Martin,
with whom CAE is teamed on the C-130J Maintenance and Aircrew Training System
program for the USAF. CAE is also leading the Landmark consortium, comprising
Westland, Vickers and others, which is bidding on the AVTS program for the UK
Ministry of Defence. CAE is also teaming with Boeing to pursue Canada's CF-18
simulator training equipment program. CAE will continue to pursue opportunities
to provide long-term training services to military organizations, including
leveraging the naval training expertise and experience gained in the UK and
Canada into other markets.The military simulation and training market is
driven by the introduction of new aircraft platforms, upgrades and life
extensions to existing aircraft and a shift to greater use of simulation in
pilot training programs due to the high degree of realism and the significantly
lower cost compared to live training. CAE expects to increase its advantage in
lead-time, cost, quality and reputation for performance through continued
operational improvements and research and development programs. In particular,
CAE launched a research and development program to introduce CAE NeTTS
(Networked Tactical Training Solutions), a new PC-based architecture to address
the requirement for scalable, re-configurable, cost effective training devices.
With a leading-edge technology solution, CAE is well positioned to capitalize on
upcoming international military programs in Canada, the US, Europe, the UK, Asia
and Australia, as well as teaming and/or collaboration arrangements in other
countries.



---

CAE ANNUAL INFORMATION FORM
page.23



4.4   Marine Controls

CAE is a world leader in the supply of
automation and controls systems for the naval and commercial marine markets.
CAE's marine control systems monitor and control propulsion, electrical
steering, ancillary, auxiliary and damage control systems. CAE's Integrated
Platform Management Systems (IPMS) have accumulated over 3.0 million hours of
operational experience and have been or are in the process of being installed on
more than 130 warships (including submarines) of 18 navies around the world,
including those of the US, the UK and Germany. The Company has moved beyond the
supply of marine controls into the provision of naval training services through
its participation in the 30-year UK Royal Navy Astute Class Submarine Training
program. CAE is a leading supplier of maritime mission training
devices.CAE's systems can be provided for new ship classes as well as
retrofitted for existing vessels. The Company also provides full scope IPMS
trainers and software support facilities. CAE was the first company in the world
to provide an integrated On-Board Training System (OBTS) that enables sailors to
train whether at sea or in port. CAE's Battle Damage Control Systems (BDCS)
provides significant improvement to the traditional plotting of damage
assessment information and repair actions with advanced Human-Machine Interface
hardware (consoles) at every damage control station. The OBTS and BDCS along
with other advanced features of CAE's IPMS greatly improve the operational
effectiveness of naval vessels.The Damatic XD ship automation system
sold by CAE Valmarine under license is installed in approximately 450 vessels
worldwide. CAE Valmarine supplies many of the world's cruise lines, passenger
ferries and cargo vessels. Advanced functionality that CAE pioneered in the
naval automation sector, such as its BDCS is now being introduced as Integrated
Safety Management System (ISMS) to CAE Valmarine's customers.Within
CAE's Marine Controls business division, the Company also designs and
manufactures power plant simulators and provides power plant simulator software
upgrades. Power plant training simulators are used by electric utilities to
train operators of power plant control rooms. CAE has supplied power plant
training simulators to utilities around the world. CAE is the sole supplier of
CANDU simulators and control systems to utilities worldwide. In addition, the
Company supplies power plant simulators for pressurized water reactors, boiling
water reactors, and fossil and process simulators.In May 2003, the Omaha
Public Power District of Nebraska selected CAE to refurbish the Fort Calhoun
Simulator. With this contract, CAE becomes the premier supplier of power-plant
simulation technology in the US at the present time.CAE intends to grow
its naval controls business by expanding the scope of its products and services
and to use its technologies and experience in naval control systems to enhance
CAE Valmarine's position as a world leader in commercial marine controls. In
addition, CAE expects that it will be able to exploit its customer-installed
base to enhance CAE's naval simulation and controls equipment and training
services.



---

CAE ANNUAL INFORMATION FORM
page.24



4.5   Discontinued
Operations

On December 18, 2001, the Board of
Directors approved the divestiture of the Forestry Systems segment. Commencing
in the third quarter of fiscal 2002, the results of Forestry Systems were
reported in discontinued operations and combined with the results of the
Cleaning Technologies segment. Prior year amounts have been restated,
accordingly. On August 16, 2002, CAE completed the sale of its sawmill
businesses to COE Manufacturing Company for proceeds of approximately $25
million, plus certain rights to further payment if future earning targets are
attained by the sawmill businesses. The result of this transaction, combined
with an estimate of the net realizable value of the remaining discontinued
operations, contributed to a $13.8 million loss from discontinued operations for
the year ended March 31, 2003. On April 30, 2003, CAE completed the sale of the
operations of CAE Beyss GmbH, another of CAE's Cleaning Technologies businesses,
to Bavaria Industriekapital AG. Because the business had not been profitable for
some time, CAE received nominal consideration and will record an additional
provision of approximately $2 million for disposition-related adjustments. On
May 6, 2003, CAE completed the sale of its wood products business to Carmanah
Design and Manufacturing Inc., a TD Capital company, for proceeds of
approximately $20 million, plus certain rights to further payment if future
earning targets are attained by the wood products business. On June 24, 2003,
CAE signed an agreement to sell to Cold Jet, Inc. the operations of CAE Alpheus
Inc., a small Cleaning Technologies business in the US with an expected
transaction closing in August 2003.

4.6   Research and Development

CAE differentiates itself by providing
superior products and services that rely on the latest, most advanced technology
available. As a result, the Company has a long-standing commitment to research
and development. Each business segment is encouraged to apply research and
development across the whole spectrum of its operations, from product
development to production processes and techniques.An additional part of
CAE's research and development strategy is to participate with several
universities and government agencies in North America and in Europe in specific
research projects. While development is the first priority, applied research is
also vitally important to the Company's future. In addition to the basic
internal research and development, research and development may also be carried
out within customer contracts. This involves the development of technology that
is necessary to complete a contract requirement but is also useful and may be
reapplied by the Company in a broader sense. Certain CAE initiatives also
receive the support of the Canadian government through Technology Partnerships
Canada.Total research and development expenditures include basic
research and development costs as well as program related development costs.
Basic internal research and development expenditures were in excess of $31
million for fiscal 2003, the product portion of which was largely associated
with the development of CAE's Sim XXI simulator, CAE's SimFinity training
system, the CAE NeTTS training system and CAE's Tropos visual system. In
addition to these development activities, basic internal research and
development funds a variety of product enhancement and process improvement
initiatives. Basic research and development expenditure is expected to be at a
similar level in fiscal 2004 and will be primarily focussed on applying CAE's
Sim XXI simulator design and manufacturing techniques to additional simulator
platforms, extending the capabilities of CAE's SimFinity training system ,
enhancing CAE's Medallion-S and Tropos image generators and extending the
capabilities of CAE NeTTS.



---

CAE ANNUAL INFORMATION FORM
page.25



4.7   Employees and Labor Relations

Of the Company's 6,000 employees,
approximately 875 of the employees are unionized, covered by 14 collective
agreements. Four labor contracts were ratified in fiscal 2003 covering 50
employees at our US military training sites. During fiscal 2004, CAE will enter
into negotiations for the renewal of four collective agreements. The three-year
collective agreement for 700 employees in Montreal was renewed for five years in
June 2003. There are no indications that negotiations on upcoming contract
renewals will result in work stoppages. CAE considers employee relations to be
satisfactory.

4.8   Manufacturing

CAE's manufacturing facilities are
located in Montreal, Canada; Tampa, US; Burgess Hill, UK; and Stolberg,
Germany.The manufacturing process for CAE simulators is complex,
involving the coordination of approximately 250,000 parts and millions of lines
of software code. The manufacture of a civil simulator includes five major
stages: design, manufacture and assembly, testing, pack and ship and final test
on-site. This entire process now takes approximately 14 months. Military
simulators are much more complex and unique than civil simulators, and therefore
take more time to design, manufacture and test.Manufacturing is
organized into 12 manufacturing cells comprised of the following three major
disciplines: electronics (printed circuit board assembly), electrical (cables
and harnesses, cabinets and chassis, aircraft instruments and avionics), and
mechanical (welding, sheet metal and machine shop, precision assembly and
hydraulics, structural assembly and final assembly).Most of the raw
materials used in manufacturing (such as sheet metal, wires, cables and
electronic integrated circuits) are available off-the-shelf from multiple
commercial sources. The unique parts are the aircraft parts. These are usually
available from aircraft manufacturers, the resale market, as well as through
simulated part manufacturers.The availability of most parts in a timely
manner facilitates a relatively smooth production flow. Aircraft parts, in some
instances, may be an exception, especially on new aircraft types or those out of
production. The timely delivery of these parts is often the responsibility of
CAE's customers. CAE's contracts normally link these aircraft parts delivery
dates to the simulator delivery schedules. In cases where such aircraft parts
cannot be made available, CAE's customers rely on CAE's ability to make
simulated parts.



---

CAE ANNUAL INFORMATION FORM
page.26



4.9   Competition

The markets in which CAE sells its
products are highly competitive. Certain competitors are also the Company's
customers and suppliers on specific programs. The extent of competition for any
single project generally varies according to the complexity of the product and
the dollar volume of the anticipated award. CAE believes that it competes on the
basis of:

- the performance and flexibility of its
  products;
- reputation for prompt and responsive contract
  performance;
- accumulated technical knowledge and
  expertise;
- breadth of product line; and
- price.

CAE's future success will depend in
large part upon its ability to improve existing product lines and to develop new
products and technologies in the same or related fields.CAE's major
competitors in the military simulation and training market include Lockheed
Martin Corporation, L-3 Communications Corporation, Boeing, NLX Corporation,
Indra Systemas, Alenia Marconi Systems, Thales Training Simulation, Flight
Safety International, Inc. and STN ATLAS Elektronik GmbH. Some of these
competitors are predominantly local (one country or region) competitors. CAE
sometimes partners with these and other competitors to cooperate on program
contracts.CAE's major competitors in the marine controls market include
Lockheed Martin Corporation, Northrop Grumman Corporation (Sperry Marine
Systems), Siemens AG, ABB Asea Brown Boveri Ltd., Vosper Thornycroft Holdings
plc, L-3 Communications Corporation and MTU Elektronik GmbH.CAE's major
competitors in the civil simulation equipment market include Thales Training
Simulation and NLX Corporation. Evans & Sutherland Computer Corporation also
competes for visual systems. The Company's major competitors in civil pilot
training include, FlightSafety International, Inc., Alteon Training L.L.C.
(formerly FlightSafety Boeing Training International), GECAT and PanAm
International Flight Academy Inc.

4.10   Government
Contracts

The majority of CAE's contract revenue
in its military simulation and training and marine controls business segments
result from contracts with militaries or government bodies performed under
predominantly fixed-price contracts with only a small number of cost-plus
contracts.In most instances, under government regulations, certain
costs, including certain financial costs, portions of research and development
costs, lobbying expenses, certain types of legal expenses and certain marketing
expenses related to the preparation of bids and proposals, are not allowed for
pricing purposes and calculation of contract reimbursement rates under
flexibly-priced contracts. Governments also routinely regulate the methods under
which costs are allocated to government contracts. CAE is subject to a variety
of audits performed by government agencies. These include pre-award audits that
are performed at the submission of a proposal to the government. The purpose of
the pre-award audit is to determine the basis of the bid and provide the
information required for the relevant government to effectively negotiate the
contract. During the performance of a contract the government has the right to
request and to examine any labor charges, any material purchase, and any
overhead changes to any contract that is active. Upon a contract's completion,
the government may perform a post award audit of all aspects of contract
performance to insure that the Company has performed in accordance with the
terms of the contract.



---

CAE ANNUAL INFORMATION FORM
page.27



Government contracts are generally, by
their terms, subject to termination by the government either for convenience or
default by the contractor. Fixed-price contracts provide for payment upon
termination for items delivered to and accepted by the government and, if the
termination is for convenience, for payment of fair compensation of work
performed plus the costs of settling and paying claims by terminated
subcontractors, other settlement expenses and a reasonable profit on the costs
incurred. Cost-plus contracts generally provide that, upon termination, the
contractor is entitled to reimbursement of its allowable costs and, if the
termination is for convenience, a total fee proportionate to the percentage of
the work completed under the contract. If a contract termination is for default,
however, typically,

- the contractor may be paid an amount
  agreed upon for completed and partially completed products and services
  accepted by the government;
- the government may not be liable for
  the contractor's costs with respect to unacceptable items, and may be entitled
  to repayment of advance payments and progress payments, if any, related to the
  termination portion of the contract; and
- the contractor may be liable for
  excess costs incurred by the government in procuring undelivered items from
  another source.

In addition to the right of the
government to terminate, government contracts are often conditioned upon the
continuing availability of appropriations. Consequently, at the outset of a
major program, such contracts are usually partially funded and additional monies
are normally committed to the contract by the procuring agency only as
appropriations are made for future fiscal years. Failure to obtain such
appropriations normally results in termination of the contract and compensation
to the contractor at less than the full value of the contract.

4.11   Intellectual
Property

CAE owns certain patents and has filed
applications in respect of additional patents. The Company enters into
agreements containing non-disclosure and confidentiality clauses with third
parties and has similar provisions in place with its employees to protect its
proprietary information and trade secrets. CAE also has internal policies
concerning both ethics and intellectual property which guide its employees in
their dealings with CAE's intellectual property and that of third parties. CAE's
Intellectual Property Committee, comprising some of CAE's most senior
technology-oriented officers, is mandated to oversee the protection, management
and exploitation of the Company's inventions, trade secrets and other
intellectual property. Given the lengthy delay in obtaining patents (during
which some technology may evolve into newer generations), the required detailed
patent application disclosure which may permit competitors to reverse-engineer
an invention, and the cost of maintaining and defending patents, CAE believes
that certain intellectual property is adequately protected by either maintaining
it as a trade secret or selectively disclosing enough of it to forestall anyone
else from subsequently claiming it as their own original innovation.



---

CAE ANNUAL INFORMATION FORM
page.28



CAE's agreements with Technology
Partnerships Canada restrict CAE's ability to license (other than to customers)
or transfer ownership of intellectual property developed with the program's
support until all funding has been repaid or Technology Partnerships Canada's
consent has been obtained.

4.12   Environment

CAE operations include, and past
operations and those of some past operators at some of the Company's sites have
included, the use, generation, storage, handling and disposal of hazardous
materials which are subject to environmental laws and regulations in the various
countries in which CAE operates or has operated. CAE believes the exposure to
environmental risk to be relatively limited and the Company's operations are in
compliance in all material respects with such environmental laws and
regulations.

4.13   Risk Factors

CAE's sales cycle is often
lengthy and unpredictable, which could result in volatility in its operating
results and the price of its common shares.The sales cycle of
CAE's products and services is lengthy and unpredictable, ranging from 6 to 18
months for civil aviation and civil marine applications and from 6 to 24 months
or longer for military applications. While customers are evaluating CAE's
products and services, the Company may incur expenses and expend management
effort. The result of making these expenditures, with no corresponding revenue
in any given quarter, could further exacerbate fluctuations of its quarterly
operating results and share price volatility.CAE's success depends
on the reliability of its products, the quality of its services and its ability
to adapt to changing customer needs in a timely manner.The civil
aviation, military and marine markets in which CAE operates are characterized by
changes in customer requirements, new aircraft models and marine vessels and
evolving industry standards. CAE's failure to predict accurately the future
needs of its customers and prospective customers and to develop product
enhancements that address evolving standards and technologies may result in the
loss of current customers or negatively affect its revenue and its ability to
secure new customers.A reduction in defense spending could result
in a decrease in CAE's revenue.CAE relies on sales to military
customers around the world to generate a significant portion of its revenue. In
fiscal 2003, such sales by Military Simulation and Training and the government
navy portion of Marine Controls sales accounted for a significant majority of
their revenues. CAE acts as prime contractor or major subcontractor for various
US, European, Canadian and other foreign government programs. The termination of
funding for a government program would result in a loss of anticipated future
revenue attributable to that program which could have a negative impact on CAE's
operations. A significant reduction in military expenditures by countries with
which CAE has contracts could materially adversely affect its sales and
earnings.



---

CAE ANNUAL INFORMATION FORM
page.29



CAE operates in the civil
simulation equipment and training services markets, both of which are heavily
dependent on the airline industry.CAE derives a material portion
of its revenue from the supply of equipment and services to the commercial and
business airline industry. Reduced demand for air transportation has impacted
the operating results of airlines and has lead to a reduction or delay of new
aircraft purchases which CAE would expect to result in reduced simulator orders.
Intense competition in CAE's target markets could limit its
ability to attract and retain customers.The markets in which CAE
sells its simulation and control equipment and training services are highly
competitive. Some of the Company's competitors are larger than CAE and have
greater financial, technical, marketing, manufacturing and distribution
resources. In addition, some competitors have well-established relationships
with aircraft manufacturers, airlines and governments which may give them an
advantage over CAE in winning contracts with these organizations. CAE obtains
most of its contracts through competitive bidding processes that subject the
Company to the risk that it will expend substantial time and effort on proposals
for contracts that may not be awarded to the Company. CAE cannot assure that it
will continue to win competitively awarded contracts at the same rate as in the
past.CAE's use of fixed-price and long-term supply contracts could
subject the Company to losses if there are cost overruns.CAE
provides its products and services primarily through fixed-price contracts that
require the absorption of cost overruns, notwithstanding the difficulty of
estimating all of the costs incurred in performing these contracts and in
projecting the ultimate level of sales that the Company may achieve. In
addition, a number of CAE's contracts to supply simulators to commercial
airlines are long-term agreements for up to 20 years. These agreements establish
the prices for the simulators to be delivered, subject to adjustments for
inflation and cost increases. If these adjustments do not fully offset inflation
or cost increases, CAE's results of operations could be adversely
affected.CAE's government-funded military programs are regulated
and subject to audit.Like most suppliers of products and
services to governments, CAE may be audited and reviewed periodically on some
projects. Adjustments arising from government audits and reviews may have an
adverse effect on results of operations. In addition, some costs may not be
reimbursable or allowed in negotiation of fixed-price contracts. Further, as a
government contractor, CAE may be subject to an increased risk of legal actions
and liabilities which purely private sector companies are not subject to, the
results of which could have a material adverse effect on operations. Failure to
comply with applicable government regulations and requirements could lead to
suspension or being barred from government contracting or subcontracting for a
period of time, which would have a negative impact on CAE's operations and could
have a negative effect on its reputation and ability to procure other government
contracts in the future.



---

CAE ANNUAL INFORMATION FORM
page.30



In the future, CAE may not be
able to obtain financial support for research and development
activities.Some of CAE's research and development initiatives
have been carried out with the financial support of governmental agencies
including amounts from the government of Canada through Technology Partnerships
Canada. If such financial assistance is not available to the Company in the
future, CAE may have to find other financing, which may not be
available.CAE may experience contract cancellations within its
existing backlog of orders.At March 31, 2003, CAE had several
hundred active contracts representing a total order backlog of $2.3 billion. If
certain of the Company's customers become insolvent or experience other
financial difficulties, CAE's revenue would be adversely affected. CAE cannot
assure that its existing backlog will result in sales or that any such sales
will be profitable.CAE's ability to protect its intellectual
property is limited, and competitors may use CAE's technology which could weaken
the Company's competitive position.CAE relies in part on trade
secrets and contractual restrictions, such as confidentiality agreements and
licenses, to establish and protect its proprietary rights. Such reliance may be
insufficient to prevent misappropriation of CAE's technology or deter others
from developing similar technologies. Enforcement of CAE's intellectual property
rights or its ability to acquire them may be unavailable or limited in some
countries.Reliance on the intellectual property of others could
prevent or delay CAE's performance of contracts or negatively impact
margins.CAE's products contain sophisticated computer systems
supplied to the Company by third parties. Such computer systems and software may
not always be available to CAE. The production of CAE's simulators is often
dependent upon receipt of data, including confidential or proprietary data,
concerning the functions, design and performance characteristics of a product or
system, the performance of which the Company's simulator is intended to
simulate. CAE cannot assure that it will be able to obtain such data on
reasonable terms, or at all. Claims by other companies that CAE's
products infringe their proprietary rights could adversely affect the Company's
ability to sell its products and increase its costs.Infringement
claims may be brought against CAE or its customers in the future. CAE may not be
successful in the defense of such claims and may not be able to develop
processes that do not infringe on the rights of third parties or obtain licenses
on commercially acceptable terms, if at all. In addition, any litigation related
to CAE's intellectual property rights could be lengthy and costly and could
adversely affect operations or financial results, whether or not CAE is
successful.



---

CAE ANNUAL INFORMATION FORM
page.31



CAE is subject to the risks of
doing business abroad and currency fluctuations.CAE has
operations in numerous countries and sells its products and services to
customers around the world. For the fiscal year ended March 31, 2003, sales to
customers outside the US and Canada accounted for approximately 63% of revenue.
CAE expects that sales outside the US and Canada will continue to account for a
significant portion of revenue for the foreseeable future. As a result, CAE is
subject to risks of doing business internationally. The majority of CAE's
revenue is not currently denominated in Canadian dollars, and the Company
expects that its revenue will continue to be generated in currencies other than
the Canadian dollar. A substantial portion of operating expenses are payable in
Canadian dollars. Fluctuations in the Canadian dollar exchange rate will impact
results of operations and financial condition from period to period. CAE's
currency hedging activities may not be successful.CAE's union
agreements are subject to renewal, and the Company may be unable to retain
qualified personnel which would harm the ability to carry out its business
strategy.CAE is party to 14 collective bargaining agreements
throughout its business units which are subject to expiration at various times
in the future. If CAE is unable to renew these agreements, or others as they
become subject to renegotiation from time to time, it could result in work
stoppages and other labor disturbances which could have a material adverse
effect on CAE's business. CAE's success depends to a significant degree upon the
continued contributions of its qualified technical personnel and its future
ability to attract and retain highly skilled personnel. Any inability to attract
and retain qualified personnel in the future may seriously harm CAE's business
and results of operations.CAE's debt agreements may restrict its
ability to finance future operations and, if the Company is unable to meet its
financial covenants, could cause CAE's debt to be
accelerated.Both the indenture governing CAE's senior notes and
the terms of CAE's credit facilities contain restrictive covenants. These
restrictions could hurt the Company's ability to finance future operations or
capital needs, or to engage in other business activities that may be in CAE's
interest. In addition, CAE is also required to comply with specified ratios and
tests, including leverage, interest coverage ratios and a consolidated net worth
test. A breach of any of these agreements or inability to comply with the
required financial ratios or limits could result in a default, which would
permit CAE's lenders to declare amounts owed to them due and immediately
payable.CAE's level of debt may adversely affect its financial and
operating activity.CAE incurred indebtedness in connection with
fiscal 2002-2003 acquisitions and CAE's capital expenditures last year continued
at greater than historical levels as the Company executed its business plan. In
the future, CAE may borrow more money, subject to the limitations imposed by
senior notes and credit facilities. CAE's indebtedness may affect the way it
conducts business.



---

CAE ANNUAL INFORMATION FORM
page.32



CAE may be subject to significant
environmental liabilities imposed by environmental laws and regulations or
contractual indemnities.CAE's operations include, and its past
operations and those of some past operators at some of its sites have included,
the use, generation, storage, handling and disposal of hazardous materials. New
laws and regulations, stricter enforcement of existing laws and regulations, the
discovery of previously unknown contamination, the imposition of new clean-up
requirements or claims on indemnities CAE has been given may require the Company
to incur substantial costs in the future which could have a material adverse
effect on its financial condition and results of operations.CAE
may be subject to liability claims arising from casualty
losses.Due to the nature of CAE's business, the Company may be
subject to liability claims arising out of accidents or disasters involving
aircraft, marine vessels or power plants for which CAE has provided training
equipment or services or control systems used by employees operating or
conducting maintenance on such aircraft, marine vessels or power plants,
including claims for serious personal injury or death. CAE cannot be certain
that its insurance coverage will be sufficient to cover one or more substantial
claims.The products CAE manufacture may be subject to warranty or
other claims.The simulators and control systems CAE manufactures
are highly complex and sophisticated and may contain defects that are difficult
to detect and correct. The occurrence of errors and failures in CAE's products
could result in warranty claims or the loss of customers. Correcting such
defects could require significant capital investment. When defective products
are integrated in the customers' equipment, CAE may face product liability
claims based on damages to such equipment. Any claims, errors or failures could
have an adverse effect on operating results and business. CAE cannot be certain
that its insurance coverage will be sufficient to cover one or more substantial
claims.CAE is subject to compliance with regulatory rules imposed
by aviation authorities that may change without notice, resulting in disruptions
to its sales and operations.CAE is subject to compliance with
regulatory rules imposed by aviation authorities that may change without notice,
resulting in disruptions to its sales and operations. Any changes imposed by a
regulatory agency, including changes imposed by aviation authorities such as the
US Federal Aviation Administration to safety standards, could require CAE to
make unplanned modifications to its products and services, or may result in
delays or cancellations of sales. CAE cannot predict the future impact of
changing law or regulation on its operations and any changes could have a
material adverse effect on its results of operations or financial
condition.Sales or licenses of certain CAE products require
regulatory approvals.The sale or license of virtually all of
CAE's products is subject to regulatory controls, including the prohibition of
sales to certain countries, or of certain technology such as military-related
simulators and nuclear power plant system simulators, without an export license
or other approvals. These regulations change with some frequency. CAE cannot
assure that it will be permitted to sell or license certain products to
customers and the Company may lose potential revenue as a result of the
application of such regulations. Failure to comply with any of these regulations
in the countries in which CAE operates could subject the Company to fines and
other material sanctions.



---

CAE ANNUAL INFORMATION FORM
page.33



ITEM 5 - SELECTED CONSOLIDATED FINANCIAL
INFORMATION

5.1   Annual Information

The following summary of financial
information has been drawn from the consolidated financial statements of the
Company presented in accordance with Canadian GAAP and covers the three most
recently completed financial years.

|Twelve Months Ended
      March 31(in millions of Canadian dollars, except per share
      amounts)
|---------------------------------------------------------------------------------------------------
|                                                                                                   
|                                                                                                   
|                                                                                                   
|Continuing Operations                                                                              
|Revenue                                                                                            
|Earnings (note
    2)                                                                              
|Earnings per share
      (notes 2 & 3)                                                             
|Net earnings (note 2)                                                                              
|Net earnings per share (note 2 &
      3)                                                          
|Total assets (note 2)                                                                              
|Total long-term debt, net of cash
      (note 2)                                                   
|Shareholders' equity (note
    2)                                                                  
|Dividends per share                                                                                

Notes:

|(1) | The results for the year ended
      March 31, 2002 include the results of BAE SYSTEMS Flight Simulation and
      Training Inc. from April 2, 2001, Valmarine AS from August 1, 2001,
      Schreiner Aviation Training B.V. from August 24, 2001, and SimuFlite
      Training International, Inc. from December 31, 2001. These acquisitions
      affect the comparability of the fiscal 2003 and fiscal 2002 results with
      fiscal year 2001.On December 18, 2001, the Board of Directors
      approved a plan to divest the Forestry Systems business segment. As a
      result of the divestitures, the consolidated financial statements for
      fiscal year 2001 have been reclassified to reflect the results of
      operations for the Forestry group as discontinued operation.In
      addition to the above restatement, in February 2000 the Company announced
      its intention to divest its Cleaning Technologies and Energy Control
      Systems businesses. The Company completed the sale of its Energy Control
      Systems business and has substantially completed the sale of CAE's
      Cleaning Technologies operations.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



---

CAE ANNUAL INFORMATION FORM
page.34



|(2) | (2) In fiscal 2003, the new
      accounting standard for foreign currency translation was retroactively
      adopted. In addition, in fiscal 2003, the amortization period for Civil
      simulation equipment located in its various training centers was changed
      from 20 to 25 years. This change, which is a better approximation of the
      useful life of the simulators, is consistent with industry practices and
      with some of the long-term financing arrangements completed to date for
      such assets. The change in estimated useful life reduced amortization
      expense by approximately $3.7 million on a year-to-year
      basis.During fiscal 2003, the estimated return on assets for CAE's
      defined benefit pension plan was reduced to 6.5% from 9%. As a result,
      CAE's fiscal 2003 pension expense increased by $5.4 million as compared to
      fiscal 2002.In fiscal 2002, the new accounting standard for
      goodwill and intangibles was adopted. Giving effect to the standard,
      adjusted net earnings and diluted net earnings per share for fiscal year
      2001 was $0.52. In fiscal 2001, the new accounting standard for income
      taxes and employee future benefits was adopted. See note 1 to the
      consolidated financial statements for details.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(3) | Conversion of all outstanding
      stock options would not materially dilute earnings per
  share.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

5.2   Dividends

Quarterly cash dividends of $0.025 per
common share were declared during fiscal 2001 and for the last three-quarters of
fiscal 2000.On June 20, 2001, the Board of Directors declared a 100%
stock dividend in respect of CAE's common shares, effectively achieving a
two-for-one split of outstanding common shares. CAE's common shares commenced
trading on a split basis on July 5, 2001 on The Toronto Stock Exchange. CAE
ascribed essentially no monetary value to the stock dividend.Commencing
with the dividend payable on September 28, 2001, CAE raised the quarterly
dividend to $0.03 per common share. The Company currently intends to maintain
the quarterly dividend of $0.03 per common share. However, any decision to
declare and pay dividends in the future will be made at the discretion of the
Board of Directors, after taking into account the financial results, capital
requirements and other factors the directors may deem relevant.CAE
permits its shareholders to elect to receive common share dividends in lieu of
cash dividends. During fiscal 2001, 2002 and 2003, CAE issued 34,410, 17,605 and
54,622 common shares, respectively, as share dividends.

ITEM 6 - REVIEW OF OPERATIONS AND MANAGEMENT'S
DISCUSSION AND ANALYSIS

The information that appears under the
heading ";Review of Operations and Management's Discussion and Analysis"; on pages
34 - 50 inclusive of the Annual Report is incorporated herein by
reference.



---

CAE ANNUAL INFORMATION FORM
page.35



ITEM 7 - MARKET FOR SECURITIES

The outstanding common shares of the
Company are listed and posted for trading on The Toronto Stock Exchange under
the symbol "CAE" and on the New York Stock Exchange under the symbol "CGT".

ITEM 8 - DIRECTORS AND OFFICERS

The directors of the Company are
elected at each annual meeting of shareholders and hold office until the next
annual meeting of shareholders or until their successors are elected or
appointed. The names and municipalities of residence of the directors and
officers of the Company, the positions and offices held by them in the Company,
and their respective principal occupations for the last five years are set forth
below. In addition to fulfilling all statutory requirements, the Board of
Directors oversees and reviews: (i) the strategic and operating plans and
financial budgets and the performance against these objectives; (ii) the
principal risks and the adequacy of the systems and procedures to manage these
risks; (iii) the compensation and benefit policies; (iv) management development
and succession planning; (v) business development initiatives; (vi) the
communications policies and activities, including shareholder communications;
(vii) the integrity of internal controls and management information systems;
(viii) the monitoring of the corporate governance system; and (ix) the
performance of the President and Chief Executive Officer.The Committees
of the Board of Directors are the Audit Committee, the Governance Committee, the
Compensation Committee and the Executive Committee.

DIRECTORS

|Name and Municipality
      ofResidence andYear first became a director | Principal
      Occupation                                                                                                                                                                                                                                                                                                                                                                                              
|----------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                       
|DEREK H. BURNEY,
      O.C.Toronto, Ontario(1999)                       | President and Chief Executive
      Officer of the Company and is a member of the Executive Committee. Mr.
      Burney is also a director of Shell Canada Limited and Quebecor World Inc.
      Formerly, Mr. Burney was Chairman and Chief Executive Officer of Bell
      Canada International Inc. (1993-October 1999). Prior thereto, he was
      Canada's Ambassador to the United States of America from
  1989.



---

CAE ANNUAL INFORMATION FORM
page.36



|Name and Municipality
      ofResidence andYear first became a director | Principal
      Occupation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|----------------------------------------------------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                       
|JOHN A. (IAN)
      CRAIGOttawa, Ontario(2000)                          | Business consultant and was
      formerly Chief Marketing Officer of Nortel Networks Corporation. Mr. Craig
      is also a director of Bell Canada International Inc., Arris Group Inc. and
      the Ottawa Heart Institute. Mr. Craig is a member of the Audit
      Committee.                                                                                                                                                                                                                                                                                                                              
|                                                                       
|RICHARD J. CURRIE,
      C.M.Toronto, Ontario(2001)                     | Non-executive Chairman of BCE
      Inc. He was a director of George Weston Limited from 1975 to 2002 and
      President from 1996 to 2002. He was a director of Loblaw Companies Limited
      from 1973 to 2001 and President from 1976 to 2001. He is a director of
      Staples Inc. Mr. Currie is Past Chairman of the Richard Ivey School of
      Business at The University of Western Ontario and has served on the
      Visiting Committee to the Harvard Business School. He is presently
      Chancellor of the University of New Brunswick. Mr. Currie is a member of
      the Audit Committee.
|                                                                       
|R. FRASER ELLIOTT, C.M.,
      Q.C.Toronto, Ontario(1951)               | Senior partner in the legal firm
      of Stikeman Elliott LLP (Toronto). Mr. Elliott is also a director of the
      Toronto General & Western Hospital Foundation. Mr. Elliott is a member
      of the Executive Committee.                                                                                                                                                                                                                                                                                                                                                                                   



---

CAE ANNUAL INFORMATION FORM
page.37



|Name and Municipality
      ofResidence andYear first became a director | Principal
      Occupation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|----------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                       
|H. GARFIELD EMERSON,
      Q.C.Toronto, Ontario(1992)                   | National Chairman and a senior
      partner of the legal firm of Fasken Martineau DuMoulin LLP. Mr. Emerson is
      the Chairman of Rogers Communications Inc., Vice-Chairman of Rogers
      Wireless Communications Inc. and a director of Canada Deposit Insurance
      Corporation, University of Toronto Asset Management Corporation,
      Wittington Investments, Limited and Sunnybrook & Women's College
      Health Sciences Centre. Mr. Emerson is also the Chair of the Sunnybrook
      & Women's Foundation. He was formerly President and Chief Executive
      Officer of NM Rothschild & Sons Canada Limited, investment bankers.
      Mr. Emerson is a member of the Governance Committee.
|                                                                       
|ANTHONY S. FELL,
      O.C.Toronto, Ontario(2000)                       | Chairman of RBC Dominion
      Securities Inc. Mr. Fell is also a director of BCE Inc., Chairman of
      Munich Reinsurance Company of Canada, a director of Loblaw Companies
      Limited, and Chairman of the Board of Trustees of University Health
      Network. Mr. Fell is the Chairman of the Governance
Committee.                                                                                                                                                                                                                                                                                                                                                                                     
|                                                                       
|THE HONOURABLE JAMES A.
      GRANT, P.C., Q.C.Montreal, Quebec(1991)   | Partner in the legal firm of
      Stikeman Elliott LLP (Montreal). Mr. Grant is a director of Canadian
      Imperial Bank of Commerce, Shire Pharmaceuticals Group plc and various
      charitable and social organizations. Mr. Grant is a member of the
      Compensation Committee and the Executive Committee.                                                                                                                                                                                                                                                                                                                                                                                            
|                                                                       
|JAMES F.
      HANKINSONToronto, Ontario(1995)                          | Business consultant and was
      formerly President and Chief Executive Officer of New Brunswick Power
      Corporation. He is also a director of Maple Leaf Foods Inc. Mr. Hankinson
      is the Chairman of the Audit Committee and a member of the Governance
      Committee.                                                                                                                                                                                                                                                                                                                                                                                                                              



---

CAE ANNUAL INFORMATION FORM
page.38



|Name and Municipality
      ofResidence andYear first became a director | Principal
      Occupation                                                                                                                                                                                                                                                                                                                                                                                                                                               
|----------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                       
|E. RANDOLPH (RANDY) JAYNE
      IITysons Corner, Virginia(2001)         | Senior Partner in Heidrick &
      Struggles International, Inc., an executive search firm (1996-present),
      and is a Founder and the Global Managing Partner of that firm's
      Semiconductor, Hardware and Systems Specialty Practice. Prior to this, he
      served as President of Instituform MidAmerica (1993-1994) and as a senior
      executive in McDonnell Douglas Corporation (1987-1993). Mr. Jayne is a
      member of the Compensation Committee.
|                                                                       
|JAMES W. MCCUTCHEON,
      Q.C.Toronto, Ontario (1979)                  | Counsel to the law firm of
      McCarthy T ́trault. Mr. McCutcheon is a director of Dominion of Canada
      General Insurance Company, Empire Life Insurance Company (Chairman
      1991-1997), Guardian Capital Group Limited and Noranda Inc. Mr. McCutcheon
      is a member of the Audit Committee.                                                                                                                                                               
|                                                                       
|LAWRENCE N.
      STEVENSONToronto, Ontario(1998)                       | Chief Executive Officer of Pep
      Boys, a NYSE-listed US automotive services company. Mr. Stevenson was
      formerly President & Chief Executive Officer of Pathfinder Capital
      Inc. and also was Chief Executive Officer of Chapters and Chapters Online
      Inc. Mr. Stevenson is also a director of SNC-Lavalin Group Inc. and Sobeys
      Inc. Mr. Stevenson is Chairman of the Compensation Committee.                                                 
|                                                                       
|LYNTON R. WILSON,
      O.C.Oakville, Ontario (1997)                    | Chairman of the Board of the
      Company, Chairman of the Executive Committee and is a member of the
      Compensation and the Governance Committees. Mr. Wilson is the Chairman of
      Nortel Networks Corporation and is also a director of DaimlerChrysler AG
      and DaimlerChrysler Canada Inc.                                                                                                                                                              



---

CAE ANNUAL INFORMATION FORM
page.39



OFFICERS WHO ARE NOT DIRECTORS

|Name and Municipality
      ofResidence   | Office held with CAE and
      PrincipalOccupation(1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|----------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                         
|DONALD W.
      CAMPBELLOttawa, Ontario   | Group President, Military
      Simulation and Training; formerly Executive Vice President, Military
      Simulation and Training 2000 to 2002; Deputy Minister of Foreign Affairs
      and Prime Minister's Personal Representative for Economic Summit, 1997 to
      2000; Ambassador to Japan, 1997.                                                                                                                                                                                                                                                                                               
|                                         
|GARY R. SCOTTBaie
      D'Urfe, Quebec    | Group President, Civil
      Simulation and Training since 2002. Formerly, President of FlightSafety
      Boeing Training International from 2000 to 2002; Vice President Finance
      and Business Strategy for Boeing Commercial Airplanes' Commercial Aviation
      Services from 1999 to 2000; Vice President Business Strategy for Boeing
      Commercial Airplanes during 1999; Vice President and Chief Operating
      Officer, Boeing Enterprises during 1998; and Vice President and General
      Manager of Boeing Commercial Airplanes Group's 737/757 Programs from 1996
      to 1998.
|                                         
|PAUL G.
      RENAUDMississauga, Ontario  | Executive Vice President, Chief
      Financial Officer and Secretary; formerly Vice President Finance, Chief
      Financial Officer and Secretary, 1997 to 2000.                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                         
|RASHID A.
      KHANSt-Lazare, Quebec     | Executive Vice President, Marine
      Controls; formerly Vice President and General Manager, Marine Systems, CAE
      Electronics Ltd., 1998 to 2000; Director Marine Control Systems and Power
      Plant Simulation, CAE Electronics Ltd., 1997 to 1998.                                                                                                                                                                                                                                                                                                                                            
|                                         
|R. HANI
      MACRAMALLAHMontreal, Quebec | Executive Vice President,
      Operations; formerly Vice President, Operations, CAE Electronics Ltd.,
      1997 to 2000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                               



---

CAE ANNUAL INFORMATION FORM
page.40



OFFICERS WHO ARE NOT DIRECTORS

|Name and Municipality
      ofResidence       | Office held with CAE and
      PrincipalOccupation(1)                                                                                                                                                                                                                                                
|--------------------------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                             
|HARTLAND J.A.
      PATERSONWestmount, Quebec | Vice President, Legal and
      General Counsel, 2001 to present; formerly Vice President, Legal and
      Regulatory of Cable & Wireless PLC (Japan), 1999 to 2001; Director
      Legal Affairs of Cable & Wireless PLC (Caribbean) from 1997 to
      1999.                                       
|                                             
|JEAN-FRANCOIS
      THIBODEAULaval, Quebec    | Vice President and Treasurer,
      2001 to present; formerly Treasurer of G.T.C. Transcontinental Group Ltd.,
      1999 to 2001; Director of Finance and Treasury of Provigo, 1997 to
      1999.                                                                                                  
|                                             
|ALINE
      BELANGERMontreal, Quebec          | Corporate Controller, 2002 to
      present; formerly Director of Finance for Civil Simulation and Training,
      2000 to 2002; Director of Financial Reporting and Analysis for Bell Canada
      International, 1999 to 2000; Principal Consultant for
      PricewaterhouseCoopers, 1997 to 1999.
|                                             
|                                             
|(1)                                           | Where the
            date 1998 appears, it signifies the beginning of the last five years
            and not necessarily the date upon which the individual commenced the
            relevant position or
  occupation.                                                                           

The directors and senior officers of
the Company as a group as at the date hereof beneficially own, directly or
indirectly, or exercise control or direction over 9,572,664 common shares, which
represents 4.4 % of the Company's outstanding common shares.

ITEM 9 - ADDITIONAL INFORMATION

The Company will provide to any person or company,
upon request to the Director, Corporate Communications and Investor Relations or
the Secretary of the Company, the documents specified below:

|(a)                                                                                                                                                                                                                                                                             | When the securities of the
      Company are in the course of a distribution under a preliminary short form
      prospectus or a short form prospectus:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                               
|(i)                                                                                                                                                                                                                                                                             | one copy of the annual
            information form of the Company together with one copy of any
            document, or the pertinent pages of any document, incorporated by
            reference in such annual information form;                                                                                                                                                                                                                                                                                                                                                                                                                                          
|(ii)                                                                                                                                                                                                                                                                            | one copy of the
            comparative financial statements of the Company for its most
            recently completed financial year together with the accompanying
            report of the auditors and one copy of the most recent interim
            financial statements of the Company for any period after the end of
            its most recently completed financial
      year;                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                               
|(iii)                                                                                                                                                                                                                                                                           | one copy of the
            information circular in respect of its most recent annual meeting of
            shareholders that involved the election of directors;
        and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|(iv)                                                                                                                                                                                                                                                                            | one copy of any other
            documents which are incorporated by reference into the preliminary
            short form prospectus or the short form prospectus and are not
            required to be provided under (i) to (iii) above;
        or                                                                                                                                                                                                                                                                                                                                                                                                                       
|(b)                                                                                                                                                                                                                                                                             | At any other time, one copy of
      any other document referred to in clauses (i), (ii) and (iii) of paragraph
      (a) above, provided that the Company may require the payment of a
      reasonable charge if the request is made by a person or company who is not
      a security holder of the Company.                                                                                                                                                                                                                                                                                                                                                               
|Name of Subsidiary                                                                                                                                                                                                                                                              | Jurisdiction
    ofIncorporation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                               
|Canada                                                                                                                                                                                                                                                                         
|3985954 Canada
    Inc.                                                                                                                                                                                                                                                         | Canada                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|4025164 Canada
    Inc.                                                                                                                                                                                                                                                         | Canada                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|CAE International
      Holdings Limited                                                                                                                                                                                                                                        | Canada                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|CAE Railway
Ltd.                                                                                                                                                                                                                                                                | Canada                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|CAE Machinery
    Ltd.                                                                                                                                                                                                                                                          | British Columbia                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                               
|United
      States                                                                                                                                                                                                                                                            
|CAE (US) Inc.                                                                                                                                                                                                                                                                   | Delaware                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|CAE (US) LLC                                                                                                                                                                                                                                                                    | Delaware                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|CAE US Services
      Inc.                                                                                                                                                                                                                                                      | Delaware                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|CAE Aviation Training
      Services Inc.                                                                                                                                                                                                                                       | Delaware                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|Flight School Aviation
      Training Services L.L.C.                                                                                                                                                                                                                           | Delaware                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|CAE USA Inc.                                                                                                                                                                                                                                                                    | Delaware                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|Civil Aviation Training
      Solutions Inc.                                                                                                                                                                                                                                    | Florida                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|CAE Center Dallas,
      Inc.                                                                                                                                                                                                                                                   | Texas                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|CAE SimuFlite
    Inc.                                                                                                                                                                                                                                                          | Texas                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                               
|Europe                                                                                                                                                                                                                                                                         
|CAE Center Brussels N.V                                                                                                                                                                                                                                                         | Belgium                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Simubel N.V. (a CAE
      Aviation Training Company)                                                                                                                                                                                                                            | Belgium                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|CAE Beyss
      Grundstucksgesellschaft GmbH                                                                                                                                                                                                                                    | Germany                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|CAE Elektronik
    GmbH                                                                                                                                                                                                                                                         | Germany                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|CAE
      Verwaltungsgesellschaft mbH                                                                                                                                                                                                                                           | Germany                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|CityLine Canadair
      Simulator und Training GmbH (15%)                                                                                                                                                                                                                       | Germany                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|SAGO
      Grunstucks-Verwaltungsgesellschaft mbH (51%)                                                                                                                                                                                                                         | Germany                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|SAGO
      Grunstucks-Verwaltungsgesellschaft mbH & Co. KG (95%)                                                                                                                                                                                                                | Germany                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|ZFB Zentrum f ̈r
      Flugsimulation Berlin GmbH (17%)                                                                                                                                                                                                                          | Germany                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|CAE International Capital
      Management Hungary LLC                                                                                                                                                                                                                          | Hungary                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|CAE Euroco
    S.a.r.l.                                                                                                                                                                                                                                                         | Luxembourg                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|CAE Investment S.a
      r.l.                                                                                                                                                                                                                                                   | Luxembourg                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|B.V. Nationale
      Luchtvaartschool                                                                                                                                                                                                                                           | Netherlands                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|CAE Aviation Training
      B.V.                                                                                                                                                                                                                                                | Netherlands                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|CAE Center Amsterdam
      B.V.                                                                                                                                                                                                                                                 | Netherlands                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|CAE Center Maastricht
      B.V.                                                                                                                                                                                                                                                | Netherlands                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|CAE Flight Crew Training
      B.V.                                                                                                                                                                                                                                             | Netherlands                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|CAE Holdings BV                                                                                                                                                                                                                                                                 | Netherlands                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Name of Subsidiary                                                                                                                                                                                                                                                              | Jurisdiction
    ofIncorporation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                               
|CAE Investments
    BV                                                                                                                                                                                                                                                          | Netherlands                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|CAE Training Aircraft
      B.V.                                                                                                                                                                                                                                                | Netherlands                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|CAE Training
    B.V.                                                                                                                                                                                                                                                           | Netherlands                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|NLS Amsterdam
    B.V.                                                                                                                                                                                                                                                          | Netherlands                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|CAE Holding Norway
      AS                                                                                                                                                                                                                                                     | Norway                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|CAE Navigation
    AS                                                                                                                                                                                                                                                           | Norway                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|CAE Valmarine
AS                                                                                                                                                                                                                                                                | Norway                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Academia Aeronautica De
      Evora S.A.(51%)                                                                                                                                                                                                                                   | Portugal                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|CAE Servicios Globales de
      Instruccion de Vuelo S.L.                                                                                                                                                                                                                       | Spain                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|CAE Holdings
    Ltd.                                                                                                                                                                                                                                                           | United Kingdom                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|Invertron Simulators
      plc                                                                                                                                                                                                                                                  | United Kingdom                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|CAE (UK) plc                                                                                                                                                                                                                                                                    | United Kingdom                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|CAE Aircrew Training
      Services plc (77%)                                                                                                                                                                                                                                   | United Kingdom                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|CVS Leasing Limited
      (13.39%)                                                                                                                                                                                                                                              | United Kingdom                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|Fast Holdings Limited
      (50%)                                                                                                                                                                                                                                               | United Kingdom                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|Fast Training Services
      Limited (50%)                                                                                                                                                                                                                                      | United Kingdom                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|Landmark Operations
      Limited                                                                                                                                                                                                                                               | United Kingdom                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|Landmark Training
      Limited                                                                                                                                                                                                                                                 | United Kingdom                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                               
|Other                                                                                                                                                                                                                                                                          
|CAE Australia Pty
      Ltd.                                                                                                                                                                                                                                                    | Australia                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|CAE Simco (Barbados)
      Ltd.                                                                                                                                                                                                                                                 | Barbados                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|CAE South America Flight
      Training do Brasil Ltda                                                                                                                                                                                                                          | Brazil                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Qindao Fei Sheng
      International Aviation Technology DevelopmentTraining Co.
      Ltd.(33%)                                                                                                                                                                                | China                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Zhuhai Xiang Yi Aviation
      Technology Company Limited                                                                                                                                                                                                                       | China                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|CAE Dubai LLC
    (49%)                                                                                                                                                                                                                                                         | Dubai                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|CAE Electronics Private
      Ltd.                                                                                                                                                                                                                                              | India                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|ISDAT Simulation SDN BHD
      (20%)                                                                                                                                                                                                                                            | Malaysia                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|CAE Aviation Training
      International Ltd.                                                                                                                                                                                                                                  | Mauritius                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|Flight Training Device
      (Mauritius) Limited                                                                                                                                                                                                                                | Mauritius                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                               
|Name of Subsidiary                                                                                                                                                                                                                                                              | Jurisdiction
    ofIncorporation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                               
|United
      States                                                                                                                                                                                                                                                            
|CAE Alpheus
Inc.                                                                                                                                                                                                                                                                | California                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|CAE Railway
Inc.                                                                                                                                                                                                                                                                | Delaware                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|CAE ScreenPlates
      Inc.                                                                                                                                                                                                                                                     | Delaware                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|CAE US Services
      Inc.                                                                                                                                                                                                                                                      | Delaware                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                               
|Europe                                                                                                                                                                                                                                                                         
|CAE ScreenPlates
    SA                                                                                                                                                                                                                                                         | France                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|CAE
      Beteiligungsgesellschaft mbH                                                                                                                                                                                                                                          | Germany                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|CAE
      Grundst ̈cksgesellschaft mbH                                                                                                                                                                                                                                           | Germany                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|CAE ScreenPlates
    AB                                                                                                                                                                                                                                                         | Sweden                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                               
|Other                                                                                                                                                                                                                                                                          
|CAE MRAD Pty
    Ltd.                                                                                                                                                                                                                                                           | Australia                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|CAE Electronics SDN,
      BHD                                                                                                                                                                                                                                                  | Malaysia                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|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 staff of the Securities and Exchange
      Commission ("SEC"), and to furnish promptly, when requested to do so by
      the SEC staff, information relating to the securities in relation to 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 SEC 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.                                                                                                                                                                                                                                                                                                                                                                             
|DISCLOSURE
      CONTROLS AND PROCEDURES                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                               
|A.                                                                                                                                                                                                                                                                              | Evaluation of disclosure
      controls and procedures.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                | Based on their evaluation as of
      the end of the period covered by this report, Registrant's Chief Executive
      Officer and Chief Financial Officer have concluded that the Registrant's
      disclosure controls and procedures as defined in Rule 13a-14(c), 15(c) and
      15(d)-15(e) under the Securities Exchange Act of 1934 (the Exchange Act)
      are effective to ensure that information required to be disclosed by the
      Registrant in reports that it files or submits under the Exchange Act is
      recorded, processed, summarized and reported within the time periods
      specified in Securities and Exchange Commission rules and forms.
|                                                                                                                                                                                                                                                                               
|B.                                                                                                                                                                                                                                                                              | Changes in internal control over
      financial reporting.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                | As of the end of the period
      covered by this report, there were no changes in the Registrant's internal
      control over financial reporting that occurred during the period covered
      by this report that have materially affected or are reasonably likely to
      materially affect the Registrant's internal control over financial
      reporting.                                                                                                                                                                                                                                                                                                           
|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: August 8,
    2003                                                                                                                                                                                                                                                        | CAE INC.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                | By: [Graphic
      Signature]Name: Hartland J.A. PatersonTitle: Vice President,
      Legal and
      General          
      Counsel                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|EXHIBIT
      INDEX                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                               
|Exhibit
      No.                                                                                                                                                                                                                                                               | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                               
|1                                                                                                                                                                                                                                                                               | Audited annual financial
      statements for the fiscal year ended March 31, 2003                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                               
|2                                                                                                                                                                                                                                                                               | Management's Discussion
      and Analysis                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                               
|3                                                                                                                                                                                                                                                                               | Consent of
      PricewaterhouseCoopers LLP                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                               
|4                                                                                                                                                                                                                                                                               | Section 302
      Certifications                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                               
|5                                                                                                                                                                                                                                                                               | Section 906
      Certifications                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|